10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [*] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________________to_______________________ Commission file number 1-7910 TOSCO CORPORATION (Exact name of registrant as specified in its charter) NEVADA 95-1865716 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 72 Cummings Point Road Stamford, Connecticut 06902 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (203) 977-1000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.75 par value New York Stock Exchange Pacific Stock Exchange 9% Series A First Mortgage Bonds due March 15, 1997 New York Stock Exchange 9 5/8% Series B First Mortgage Bonds due March 15, 2002 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. * Yes No The aggregate market value of the voting stock held by non-affiliates of the registrant on February 28, 1995 based on the closing price at which such stock was sold on the New York Stock Exchange on such date was $1,609,814,679. Registrant's Common Stock outstanding at February 28, 1995 was 37,049,859 shares. Portions of registrant's definitive Proxy Statement relating to its 1995 Annual Meeting of Shareholders are incorporated by reference into Part III, as set forth herein. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] TOSCO CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K Items 1 and 2. Business and Properties 1 Introduction 1 Petroleum Refining, Supply, Distribution, and Marketing 1 Other Activities 7 Office Properties 7 Employees 6 Item 3. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 12 Item 6. Selected Financial Data 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 8. Financial Statements and Supplementary Data 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 17 Item 10. Directors and Executive Officers of the Registrant 17 Item 11. Executive Compensation 17 Item 12. Security Ownership of Certain Beneficial Owners and Management 17 Item 13. Certain Relationships and Related Transactions 17 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 18 Index to Consolidated Financial Statements and Financial Statement Schedules.. F-1 PART I Items 1 and 2. Business and Properties INTRODUCTION Tosco Corporation ("Tosco"), through divisions and subsidiaries, is a large independent refiner, wholesaler, and retail marketer of petroleum products, principally on the East and West Coasts of the United States. Tosco has extensive distribution facilities and also engages in related commercial activities throughout the United States and internationally. Following the December 28, 1993 acquisition of British Petroleum's ("BP") petroleum refining and retail marketing system in the Pacific Northwest, Tosco increased its involvement in petroleum marketing. During 1994 Tosco added BP's retail marketing assets in California and Exxon Corporation's retail marketing assets in Arizona. Tosco also acquired the exclusive right to market under the BP brand in nine Western states. Tosco also has interests in oil shale properties in Colorado and Utah. Tosco was incorporated under the laws of the State of Nevada in 1955. Its principal executive offices are located at 72 Cummings Point Road, Stamford, Connecticut 06902 and its telephone number is (203) 977-1000. PETROLEUM REFINING, SUPPLY, DISTRIBUTION, AND MARKETING Refining Tosco, through three major facilities, currently processes approximately 525,000 barrels per day of crude oil and other feedstocks into various petroleum products, consisting chiefly of light transportation fuels (gasoline, diesel and jet fuel) and heating oil. Tosco Refining Company ("Tosco Refining"), a division of Tosco, operates the Avon Refinery ("Avon"), located in the San Francisco Bay Area. The Avon Refinery, the largest independently owned refinery on the West Coast of the United States, with approximately 160,000 barrels per day of crude oil distillation capacity, is technologically complex, with coking, catalytic cracking, hydrocracking and hydrodesulfurizing units to accommodate comparatively lower gravity crude oils. It is capable of processing a broad range of crude oils and other feedstocks into a high percentage of light refined petroleum products, consisting chiefly of transportation fuels. Bayway Refining Company ("BRC"), an indirect subsidiary of Tosco, owens and operates the Bayway Refinery ("Bayway") located in Linden, New Jersey. Bayway is the largest refinery (as measured by distillation capacity) on the U.S. East Coast and can process in excess of 275,000 barrels per day of crude oil and other feedstocks. Its facilities include hydrodesulfurization units and the largest fluid catalytic cracking unit in the world. In addition to producing transportation fuels, Bayway is a principal supplier of heating oil to the U. S. East Coast. It is strategically located on the New York Harbor in a large market area, with ready access to marine, rail, and truck transportation and product distribution pipelines, giving it considerable flexibility to change its raw material input and product output to respond to changing market conditions. Tosco Northwest Company ("Tosco NW"), a division of Tosco, operates the Ferndale Refinery ("Ferndale"), located on Puget Sound, 100 miles north of Seattle. It is connected by the Olympic pipeline to its major retail markets, has crude oil distillation capacity of approximately 90,000 barrels per day and is equipped with thermal catalytic cracking and hydrodesulfurization units, as well as modern marine facilities. The refinery, together with an extensive retail gasoline marketing and distribution system (the "Pacific Northwest Assets") was acquired from BP Exploration & Oil Inc. on December 28, 1993. The table on the following page sets forth quantities of crude oil and feedstocks processed and refined products manufactured at Avon during 1994, 1993 and 1992, at Bayway during 1994 and the period April 8 to December 31, 1993 and at Ferndale during 1994. A barrel is 42 gallons. The Federal Clean Air Act Amendments of 1990 and the laws and regulations of state and local agencies impose certain air quality requirements that have a significant impact on Tosco. These regulations require the sale of reformulated and oxygenated gasoline in areas that do not meet certain air quality standards. Effective January 1, 1995, federal regulations require the sale of reformulated gasoline in the nine U.S. cities with the highest levels of ozone in their air quality, including areas that Tosco sells its gasoline. Tosco made the necessary modifications to comply with this requirement. Effective March 1, 1996, the California Air Resources Board requires the sale of reformulated gasoline in California that meet specifications that are stricter than the federal requirement ("CARB Phase II"). Tosco is making modifications to Avon to comply with these requirements. Raw Material Supply During 1994, Tosco's crude oil and feedstock requirement of approximately 503,000 barrels per day were supplied by third parties. Avon's and Ferndale's requirements were supplied from domestic sources, primartily Californnia and Alaska, while Bayway's crude oil and feedstock requirements were met from both foreign and deomestic sources. An average of approximately 222,000 barrels per day was purchased under term contracts from a variety of domestic sources including Atlantic Richfield Co. ("ARCO"), BP, Texaco Trading and Transportation Inc. ("Texaco Trading"), and Chevron U.S.A., a portion of which was resold. Approximately 96,000 barrels per day of foreign, waterborne crude and feedstock was obtained under contracts with Statoil (Norway), an affiliate of Sinochem, and PetroEcuador. The balance of Tosco's crude oil and feedstock requirement during 1994 (approximately 185,000 barrels per day) was purchased on the spot market, where Tosco purchased a total of approximately 295,000 barrels per day (including 225,000 barrels per day from foreign sources). Tosco resold approximately 18% of its raw material purchases. In October 1986, Tosco entered into an agreement (the "ARCO Exchange Agreement") with ARCO, under which ARCO delivers an average of 50,000 barrels per day of crude oil to the Avon Refinery in exchange for a variable quantity of gasoline based upon the prices of certain crude oils. The ARCO Exchange Agreement has a ten-year initial term, with two five-year renewal options exercisable by ARCO. Under the ARCO Exchange Agreement, Tosco has agreed that in the event it desires to sell the Avon Refinery, Tosco will first offer it for sale to ARCO. If ARCO declines, Tosco will be free for a certain period of time to sell the Avon Refinery for consideration no less favorable to Tosco than was initially offered to ARCO, subject to the effect of possible continuing Tosco obligations of exchange under the ARCO Exchange Agreement. In addition, in any such subsequent sale ARCO has the right to participate in the bidding and to acquire the Avon Refinery if it is the high bidder. In the event conditions change to the extent that one of the parties has sustained significant losses for a substantial period of time, or structural changes make substantial losses likely, the ARCO Exchange Agreement is subject to renegotiation and possible termination. Such possible termination could be material to Tosco, depending on market conditions at the time. In June 1986, Tosco and Texaco Refining & Marketing, Inc. ("Texaco") entered into a crude oil purchase, sale and exchange agreement. This contract was extended in May 1988, in February 1990 and again in April 1992, with Texaco Trading on similar terms. Pursuant to this agreement, Texaco Trading has agreed to supply, and Tosco has agreed to purchase, an average of 35,000 to 40,000 barrels per day of San Joaquin Valley heavy crude oil (subject to certain volume rate changes). Crude oil from the San Joaquin Valley is principally moved to the Avon Refinery via pipelines owned by Texaco. To the extent such pipelines are not available, Tosco's operating results may be materially adversely affected. BRC has several term contracts with foreign suppliers of crude oil and feedstocks and believes that in the event such contracts are terminated, it would be able to replace them in the market without material adverse effect. In connection with BRC's reliance on European sources as its primary suppliers of crude oil, Tosco established a U.K. subsidiary during 1994 for the purpose of obtaining better information and access to the European markets. During 1994, BRC entered into a twelve-year tanker agreement with Neptune Orient Lines, Ltd. of Singapore for the charter of four 100,000 dead weight tons (DWT) crude oil tankers. The tankers will be built to maximize the use of Bayway's dock receiving facilities as well as to meet the requirements of the U.S. Oil Pollution Act of 1990. The first tanker is expected to be delivered in the second half of 1996. BRC also entered into a long-term lease agreement with Statia Terminals for 3,600,000 barrels of crude oil storage in Nova Scotia, Canada. It is expected that the tankers will be utilized to move crude oil from the Nova Scotia storage location to Bayway or in direct shipments to other locations. In conjunction with the purchase of the Ferndale Refinery, Tosco and BP Oil Supply Company entered into, effective as of December 28, 1993 for a term of five years, a crude oil supply agreement under which Tosco has the right to purchase from BP, Alaska North Slope ("ANS") crude oil delivered to the Ferndale Refinery in an amount approximately equivalent to the requirements of that refinery on terms Tosco considers to be favorable. Tosco believes its average crude oil inventory is presently sufficient for normal refinery operations at Avon, Bayway and Ferndale. Tosco's crude oil inventory level is managed in light of market risk, carrying costs, and delivery method. The cost to Tosco of crude oil and other feedstocks depends on many factors, including the terms of purchase, credit and delivery. In general, heavy crude oils are less expensive than lighter crude oils. Thus, if Avon's supply of San Joaquin Valley heavy crude oil is reduced or curtailed, or if its price relative to lighter crude oils increases, Tosco's operations could be adversely affected. If Congress changes present law and allows the export of Alaskan North Slope crude oil, which may affect its price and availability, Tosco could be adversely affected. If Bayway's foreign sources of crude oil or the marine system for delivering crude oil, including required marine insurance for possible marine environmental liabilities, were curtailed, Tosco's operations could be adversely affected. In addition, the loss, or an adverse change in the terms, of certain of the crude oil supply contracts described above or the loss of other sources or means of delivery of crude oil could have a material adverse effect on Tosco's operating results. The volatility of prices and quantities of crude oil that may be purchased on the spot market or pursuant to long and short-term contracts could materially adversely affect Tosco's operating results.
Average Barrels Per Calendar Day Avon Bayway Ferndale Refinery Refinery Refinery Consolidated 1994 1993 1992 1994 1993(1) 1994 1994 1993 Crude oil refined 147,450 158,160 145,250 196,660 196,150 88,840 432,950 354,310 Additional refinery feed and blending stocks 13,140 8,150 7,260 55,560 63,100 1,800 70,500 71,250 Total Input 160,590 166,310 152,510 252,220 259,250 90,640 503,450 425,560 Petroleum products produced: Gasoline 86,020 98,640 92,230 120,580 130,140 39,860 246,460 228,780 Distillates 46,680 38,970 33,920 75,380 76,820 19,150 141,210 115,790 Jet fuel. 420 8,770 7,020 3,790 12,560 7,020 Residual 14,130 11,820 12,450 36,980 29,800 26,060 77,170 41,620 Petroleum coke (fuel oil equiv.) 6,190 7,370 6,720 6,190 7,370 Propane 4,090 4,260 4,360 3,920 10,910 1,480 9,490 15,170 Other 2,240 3,050 1,030 10,600 9,800 (1,880) 10,960 12,850 Total petroleum products produced 159,350 164,110 151,130 256,230 264,490 88,460 504,040 428,600 (1) Operations of the Bayway Refinery for the period April 8, 1993 (date acquired) to December 31, 1993.
Wholesale Marketing and Distribution Tosco sells unbranded refined petroleum products to wholesale purchasers. Tosco's wholesale sales of gasoline and distillates were made to large end users, retailers, independent marketers and jobbers who serve unbranded markets, including the retail, industrial, commercial, agricultural and governmental classes of trade. Sales are also made to other refiners and resellers, both major and independent. Tosco generally sells other petroleum products directly to the ultimate industrial users of such products. Tosco's ability to sell its products on economical terms is dependent in part on the competitive position of its customers in changing and often turbulent markets. During 1994, 1993 and 1992, wholesale gasoline products accounted for approximately 44%, 57% and 68%, respectively, of Tosco's revenues, while during the same periods distillates accounted for approximately 29%, 31%, and 25%, respectively, of Tosco's revenues. Tosco believes that its average inventory of transportation fuels of 10 to 15 days sales is slightly lower than average industry inventories. There were no long-term sales contracts (i.e., in excess of one year) which accounted for more than 10% of Tosco's consolidated revenues. During 1994, 1993 and 1992, Tosco purchased for resale an average of approximately 320,769; 118,610; and 59,100 barrels per day, respectively, of petroleum products from third parties. In September 1994, Tosco entered into a long-term supply agreement with Chevron USA Products Company that will provide Tosco, commencing in 1996, with 30,000 barrels per day of CARB Phase II gasoline in exchange for 30,000 barrels per day of conventional grade gasoline. This agreement has a seven year initial term and continues on an evergreen basis thereafter. Tosco distributes refined petroleum products, principally in the eastern and western United States through an extensive distribution network comprised of 88 terminal locations in 20 states and by means of pipelines, rail tank cars, trucks, ocean-going tankers and barges. A subsidiary of Tosco operates, through a long-term lease, a petroleum products (primarily heating oil) distribution system located on Long Island, New York. In addition, Tosco operates a petroleum storage facility (the Riverhead Terminal) with deep water marine facilities in Eastern Long Island. See Note 14 to the Consolidated Financial Statements. Tosco also engages in commercial activities related to its petroleum refining, distribution, and marketing businesses throughout the United States and internationally. Retail Marketing In 1994, Tosco continued the expansion of its retail petroleum fuel marketing business. Tosco's current sales volume through its retail system is approximately 67,000 barrels per day. On December 28, 1993, Tosco acquired from BP its retail gasoline marketing system in Washington and Oregon. The Northwest system includes approximately 500 retail locations, comprised of 129 company controlled stations, approximately 377 independently owned and operated stations and two distribution terminals. Tosco also acquired the exclusive right to use the BP brand in Washington and Oregon for at least five years. On August 1, 1994, Tosco acquired BP's California retail gasoline marketing system. The California retail system includes approximately 370 retail locations, 130 of which are company controlled, a distribution terminal, and related assets. Pursuant to the acquisition and related agreements, Tosco purchased improvements at the retail service station locations and received noncompetition and expanded trademark licensing agreements. The balance of the California retail assets, primarily land and equipment at retail service station locations, were leased from a special purpose entity which acquired the assets from BP. The trademark licensing agreement extends Tosco's exclusive license to market under the BP brand to seven western states for at least twelve years, adding to its existing license in Washington and Oregon. The previous five year trademark license agreement for Washington and Oregon was also extended to a term of at least twelve years. On December 16, 1994, Tosco completed the transaction for Exxon Company USA's (Exxon) retail gasoline marketing assets in Arizona, which includes 83 company controlled retail locations. The Arizona retail marketing assets, which are operated under the Exxon brand, are leased from a special purpose entity that purchased the assets from Exxon. Tosco also entered into an Exxon branded distributor agreement with a minimum term of seven years. Compliance With Environmental Requirements Tosco is subject to extensive federal, state and local laws and regulations governing releases into the environment and the storage, transportation, disposal and clean-up of hazardous materials, including, but not limited to, the Federal Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, and analogous state and local laws and regulations. See "Legal Proceedings". Environmental compliance has required, and will continue to require, capital expenditures. Tosco spent approximately $17.2 million in 1994 and $13 million in 1993 for such capital expenditures. Tosco currently estimates that capital expenditures for environmental compliance may approximate $16.5 million and $24.7 million for 1995 and 1996, respectively. Such amounts do not include amounts that would be necessary to produce gasoline to meet changing "clean fuels" specifications. During the fourth quarter of 1994, Tosco recorded a $6 million accrual for environmental costs based upon a determination that legal, investigative work and remedial actions, primarily related to previously owned locations, will be required in the future. In July 1993, outstanding litigation concerning environmental issues with respect to the Avon Refinery was settled with certain former owners of the Avon Refinery. Under the settlement, the former owners agreed to pay up to $18 million for one-half of the costs that may be incurred to comply with certain environmental orders and to provide Tosco a $6 million credit for past environmental expenses (which Tosco will use to reduce its one-half share of future expenses). (See "Legal Proceedings".) Because anticipated remedial actions are subject to negotiation with governmental agencies the amount and timing of actual cash expenditures is uncertain. In addition, further investigative work and negotiations with governmental agencies may result in different or additional remedial actions which Tosco cannot presently predict. Governmental regulations are complex and subject to different interpretations. Therefore, future action and regulatory initiatives could result in changes to expected operating permits, additional remedial actions or increased capital expenditures and operating costs that Tosco cannot presently assess with certainty. See Note 15 to the Consolidated Financial Statements. Competition Many of Tosco's competitors are fully integrated companies engaged, on a national and/or international basis, in many segments of the petroleum business, including exploration, production, transportation, refining and marketing, on scales much larger than Tosco. Such competitors may have greater flexibility than Tosco in responding to or absorbing market changes occurring in one or more of such segments. Tosco's petroleum refining and marketing business is not seasonal. Tosco faces strong competition in its market for the sale of refined petroleum products, including gasoline. Such competitors, especially major integrated oil companies, have in the past and may in the future engage in marketing practices that result in profit margin deterioration for Tosco for periods of time, causing an adverse impact on Tosco. The Company does not believe that there is any one or a small number of dominant competitors in the petroleum refining business. The Company does not know its precise competitive position therein. Principal methods of competition are price or service. Tosco believes it is able to compete with respect to these methods because of its facilities and their locations. Tosco must purchase substantially all of its crude oil and feedstock supplies from others, while some of its competitors have proprietary sources of crude oil available for their own refineries. Tosco believes it has a crude oil cost disadvantage to the extent major integrated oil companies have access to proprietary sources of crude oil. However, Tosco has agreements with ARCO, British Petroleum, PetroEcuador, Statoil, Texaco Trading and others to provide Tosco certain amounts of crude oil. Under present market conditions, Tosco does not anticipate difficulty in obtaining necessary crude oil supplies. See "Petroleum Refining, Supply, Distribution and Marketing - Raw Material Supply". Operating Properties Tosco owns the 2,300 acre site on which the Avon Refinery is located and the buildings, tanks, pipelines and related facilities at that refinery. The Avon Refinery, including certain leased facilities, occupies approximately l,400 acres of the site. Of the approximately 900 remaining acres, approximately 400 acres are not subject to encumbrances described below. BRC owns the 1,300 acre site on which the Bayway Refinery and its related facilities are located and Tosco owns the 850 acre site on which the Ferndale Refinery is located. Tosco had available at December 31, 1994, through ownership, lease agreement, exchange or other appropriate arrangement, the use of storage tanks, loading racks, wharves, warehouses and other related assets at approximately 88 terminal distribution locations in 20 states. Tosco believes its refinery-related properties are well-maintained and are suitable and adequate for their purposes. Tosco or its wholly owned subsidiaries own or control by lease approximately 343 retail service stations located in the states of Arizona, California, Oregon and Washington. In addition to marketing transportation fuels (gasoline and diesel) many of the stations have convenience store, car wash, and/or automotive repair facilities. Encumbrances In March 1992, Tosco sold $300 million of First Mortgage Bonds ("Bonds"), comprised of $100 million of 9% Series A Bonds due March 15, 1997 and $200 million of 9-5/8% Series B Bonds due March 15, 2002. Interest on the Bonds is payable each March 15th and September 15th. Each of the issues is non-callable and is collateralized by Tosco's Avon Refinery and certain related assets. In April 1993, Tosco sold $150 million of 8-1/4% First Mortgage Bonds due May 15, 2003 ("Bayway Bonds"). The issue is non-callable, guaranteed by BRC and collateralized by the Bayway Refinery and related assets and a guarantee of Tosco. Interest on the Bonds is payable each May 15th and November 15th. See Note 9 to the Consolidated Financial Statements. On August 1, 1994, Tosco provided Deeds of Trust on the improvements at retail service station locations in California that it acquired from BP to the special purpose entity from whom Tosco leases the land and equipment at those locations. Patents Tosco's patents relating to petroleum operations are not material. OTHER ACTIVITIES Oil Shale Tosco and its wholly owned subsidiary, The Oil Shale Corporation ("Oil Shale"), have interests in oil shale properties aggregating approximately 23,100 net mineral acres in Colorado and 20,525 net mineral acres in Utah. Tracts vary in size from l60 to l7,570 mineral acres. Tosco is also the owner of water rights and certain oil shale processes and technologies. In addition, Oil Shale controls approximately l,900 acres of oil shale properties through unpatented mining claims. (Unpatented properties are those in which the United States Government has not conveyed to others all of its right, title and interest.) Other During 1993, Seminole Fertilizer Corporation, a wholly owned subsidiary of Tosco, sold its principal phosphate fertilizer operating assets to Cargill Fertilizer Inc. ("Cargill"). Seminole's interest in Fort Meade Chemical Products partnership ("FMCP"), which was not included in the sale to Cargill, was sold during the first quarter of 1994. OFFICE PROPERTIES At December 31, 1994 Tosco occupied a total of approximately 208,246 square feet of office space in Concord, California; Linden, New Jersey; London, England; Rancho Cordova, California; Singapore; San Ramon, California; Scottsdale, Arizona; Seattle, Washington; and Stamford, Connecticut. The office space occupied by Tosco is generally suitable and adequate for its purposes. EMPLOYEES At December 3l, 1994 Tosco (including its subsidiaries) had approximately 3,613 employees at various locations, including approximately 395 part-time employees. Approximately 35% of Tosco's employees are represented by labor organizations. The compensation paid to the Company's wholesale sales force is based on the same general components as the Company's compensation to certain other salaried employees, which is salary plus a bonus under cash incentive plans based on results of operations. The compensation paid to retail site managers is based, in part, on commission on non-fuel sales and service station efficiency. The Company does not maintain key person life insurance coverage on its executive officers. Tosco believes that its labor relations with its employees are good. Item 3. Legal Proceedings Tosco's Spokane, Washington terminal is located within a site being investigated by the United States Environmental Protection Agency (the "EPA") and the Washington Department of Ecology (the "WDOE") for suspected hydrocarbon and lead contamination. Tosco has been notified by the WDOE that it, and the major oil company from which it purchased the facility, are included in the list of six parties potentially liable for cleanup of the site under state law. The area identified by the WDOE was included on the Superfund National Priorities List (the "Superfund List"). The source, extent and nature of the contamination have not been determined but are the subject of investigations. Tosco and other potentially liable parties are working with the WDOE with regard to the investigation of the site. The extent of Tosco's liability, if any, is unknown. In 1990 the EPA and the California Regional Water Quality Control Board ("RWQCB") issued Orders ("Orders") identifying suspected releases of hazardous constituents at a number of hazardous waste and solid waste management units on the Avon Refinery property, including several older inactive units which were used by Phillips Petroleum Company ("Phillips"), a former owner, but not by Tosco, and directed Tosco to investigate the identified releases and determine the need for corrective action. In July 1992, the RWQCB issued Waste Discharge Requirements which, among other things, ordered Tosco to submit a plan of corrective action "Corrective Action Plan" to deal with the suspected releases of hazardous waste at the Avon Refinery. The Corrective Action Plan was submitted on January 4, 1993. The RWQCB also issued an Order in June 1990 which required Tosco to expand programs monitoring groundwater quality throughout the Avon Refinery and to investigate the presence of subsurface liquid hydrocarbons. In the third quarter of 1992, Tosco received a "Tentative Order" (later finalized) from the RWQCB that among other things, set a date by which significant amounts of subsurface liquid hydrocarbons were to be removed. Pursuant to a lawsuit that was settled in July 1993, Phillips and Texaco, the former owners of the refinery, for the next four years or until the funds provided under the agreement are expended (whichever is later), will pay up to an aggregate of $18 million for one-half of the costs that may be incurred for compliance with certain environmental orders, and in addition, provide Tosco a $6 million credit for past expenses. After the initial term of the agreement, the parties would be free to reinstate the suit. Tosco has not relinquished any of its rights to make claims for reimbursement for costs incurred after the date of settlement and would not be required to reimburse amounts received under the agreement. On September 4, 1992, Tosco received a Report of Violation ("ROV") from the California Department of Toxic Substances Control ("DTSC"), alleging violations of hazardous waste regulations identified during an inspection of a parcel of land owned by Tosco that was used for petroleum coke storage in connection with operations of Tosco's former Bakersfield Refinery, which was sold in 1986. The ROV, without specifying dates, orders Tosco to comply with various hazardous waste handling practices in connection with the site. Tosco has entered into discussions with DTSC concerning required actions. On July 26, 1994, the Washington Department of Ecology notified Tosco that Tosco, along with approximately 150 other parties, may be a potentially liable person under state law for the environmental clean-up of a site known as Yakima Railroad Area. The source, extent and nature of the contamination has not been determined but is the subject of investigation. The extent of Tosco's liability, if any, is unknown. A refinery in Duncan, Oklahoma, formerly owned by Tosco, is subject to investigation by the Oklahoma Department of Environmental Quality ("ODEQ"). The ODEQ has requested that Tosco participate with the former owner, Sun Company, Inc. (R&M) ("Sun"), from whom Tosco purchased the site, and the current owner, to whom Tosco sold the site, in the investigation and potential remediation of alleged environmental contamination. Tosco is discussing the investigation with the ODEQ. The extent of Tosco's liability, if any, is unknown. On December 6, 1994, Tosco filed a complaint for declaratory relief against Sun (Tosco v. Sun Company, Inc.(R&M), United States District Court, Northern District of California, Case No. 94 4190 FMS), as amended on February 6, 1995, seeking an order determining Tosco's and Sun's rights and legal relations under the Purchase Agreement through which Tosco purchased the Duncan Refinery, relating to the cost for environmental investigation and potential remediation. On November 18, 1992, the RWQCB issued an order against Tosco, Phillips and Wickland Oil Company ("Wickland") as dischargers of waste, including petroleum hydrocarbons, into the soil and groundwater at an oil terminal owned by Wickland. The named parties are required to investigate the site and submit reports for the recovery of hydrocarbons and the remediation of contaminated soil and groundwater. On May 24, 1994, the United States Environmental Protection Agency filed an Administrative Complaint and Opportunity to Request a Hearing and Conference against Tosco alleging that Tosco discharged oil into or upon the surface of the water adjacent to Tosco's Avon refinery and has failed to fully implement its Spill Prevention Control and Counter Measures Plan. On September 27, 1994, the State of California filed a complaint for violation of state law based on the same incident (People of the State of California v. Tosco, Superior Court, County of Contra Costa, California, Case No. C94-04239). These matters have been settled. On June 14, 1994, Lion Oil Company ("Lion") filed a Complaint against Tosco (Lion Oil Company v. Tosco Corporation, United States District Court, Western District of Arkansas, Case No. 94-1072) as amended on August 22, 1994 seeking an order for reimbursement under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), contribution and declaratory relief in connection with the investigation and remediation of alleged environmental contamination of a refinery formerly owned by Tosco located in El Dorado, Arkansas. Tosco sold the property to Lion pursuant to an Asset Purchase & Sale Agreement of March 22, 1985 which included specific provisions limiting Tosco's liability with respect to environmental matters. Tosco filed Answers to the Complaint and Amended Complaint denying generally the allegations made and denying specifically any liability to Lion. Tosco also filed a counter-claim asserting that Lion's suit is a breach of the Asset Purchase and Sale Agreement and if Tosco is liable to Lion in this case, then Lion is liable to Tosco for contribution under federal and state law. The operator of a landfill to which it is alleged Tosco sent hazardous waste has sued numerous alleged waste generators, including Tosco, and municipalities under CERCLA (ACME Landfill Corporation v. Althin CD Medical, Inc. et al., United States District Court, Northern District of California, Case No. C91444268 SBA) to recover the costs for closure/post closure of the site. The source, extent and nature of any contamination is the subject of ongoing discovery. Tosco has sought indemnification from Phillips. The costs of remedial actions are highly uncertain due to, among other items, the complexity and evolving nature of governmental laws and regulations and their interpretations as well as the varying costs and effectiveness of alternative cleanup technologies. However, Tosco presently believes that any cost in excess of the amounts already provided for in the financial statements should not have a materially adverse effect upon Tosco's operations or financial condition. Tosco further believes, as discussed with respect to the Phillips case above, that a portion of future environmental costs, as well as environmental expenditures previously made, will be recovered from other responsible parties under contractual agreements and existing laws and regulations. See Note 15 to the Consolidated Financial Statements. There are various other suits and claims pending against Tosco and its subsidiaries, which in the opinion of Tosco are not material or meritorious or are substantially covered by insurance. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to these suits and claims, Tosco believes the aggregate amount of such liabilities will not result in monetary damages which in the aggregate would be material to the business or operations of Tosco. Item 4. Submission of Matters to a Vote of Security Holders None
Executive Officers of the Registrant Served as an Name Age Officer Since Principal Occupation and Positions Held Thomas D. O'Malley 53 1989 Chairman of the Board and Chief Executive Officer of Tosco since January 1990; President of Tosco since May 1993 and from October 1989 to May 1, 1990; Chairman and Chief Executive Officer of Argus Investments, Inc. since July 1988 and Argus Energy Corporation since December 1987; Vice Chairman of Salomon Inc. from 1983 to December 1986. Jefferson F. Allen 49 1990 Executive Vice President, Chief Financial Officer and Treasurer of Tosco Corporation since June 1990; various positions including Chairman and CEO, with Comfed Bancorp, Inc. and related entities from November 1988 to June 1990; Executive Vice President, Argus Investments during 1988; Senior Vice President, Exploration Management Corporation from 1985 to April 1988. James M. Cleary 49 1987 Senior Vice President, Tosco Corporation since July 1990; President of Tosco Refining Company (a division of Tosco) since May 1990; Senior Vice President of Tosco Refining Company from June 1989 to May 1990; Vice President-Refining of Tosco from January 1987 to June 1989. Various other positions with Tosco since 1980. Robert J. Lavinia 48 1993 Senior Vice President of Tosco Corporation since May 1994; President of Tosco Northwest Company (a division of Tosco) since October 1993; Vice President of Tosco Corporation since 1993 and Executive Vice President of Bayway Refining Company during 1993; President, Tosco Energy Corporation during 1992; prior to 1992, various positions with Phibro Energy for a period in excess of five years; most recently as a Senior Vice President. Dwight L. Wiggins 54 1993 Senior Vice President of Tosco Corporation since May 1994 and Vice President of Tosco Corporation; President of Bayway Refining Company since January 1993; New Jersey Area Manager for Exxon Company U.S.A. 1990 to 1993; Benicia Refinery Manager for Exxon Company 1983 to 1990. Wilkes McClave III 47 1989 Vice President and General Counsel of Tosco and Senior Vice President of Tosco Refining Company (a division of Tosco) since May 1990; Secretary of Tosco since August 1989; Vice President and Secretary of Bayway Refining Company since January 1993 and Tosco Northwest since October 1993; Assistant General Counsel of Tosco from January 1986 to May 1990. George E. Ogden 52 1994 Vice President of Tosco Corporation since May 1994; Vice President of Tosco Refining Company from March 1992 to March 1994. Independent Petroleum Consultant from 1984 to 1992. Peter A. Sutton 49 1992 Vice President of Tosco Corporation since January 1992; Senior Vice President of Tosco Refining Company since May 1990, various other positions with Tosco for a period in excess of five years.
PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Tosco's Common Stock is traded on the New York Stock Exchange ("NYSE") and the Pacific Stock Exchange. Set forth below are the high and low sales prices as reported on the NYSE Composite Tape. Price Range of Common Stock 1994 High Low 1993 High Low 1st Quarter $35 $29 1st Quarter $24 5/8 $18 7/8 2nd Quarter 32 3/8 27 3/8 2nd Quarter 26 22 3/8 3rd Quarter 32 7/8 27 3/8 3rd Quarter 26 5/8 21 3/8 4th Quarter 32 26 3/4 4th Quarter 32 3/4 26 3/8 The number of Tosco shareholders of record on February 28, 1995 was 11,280. Dividend Policy Tosco has paid a regular quarterly cash dividend on its Common Stock since the third quarter of 1989. In the third quarter of 1994 the cash dividend was raised from $.15 to $.16 per share. Pursuant to the terms of Tosco's working capital facility and its bond indentures, dividends on Tosco's Common Stock are permitted to the extent Tosco satisfies certain defined criteria. Continued payment of such quarterly dividend is also subject to profitable results of operations, which are primarily dependent on the continued favorable performance of Tosco's operating facilities and favorable operating margins. There can be no assurance that Tosco will be able to continue payment of such quarterly dividend. Through August 15, 1994, Tosco paid all scheduled dividends on its outstanding preferred stock. In September 1994, substantially all the preferred stock was converted to common stock pursuant to a redemption call by Tosco. For the shares that were redeemed, Tosco paid the accumulated and unpaid dividend from August 16, 1994 to the Redemption Date of September 26, 1994. Item 6. Selected Financial Data The following Selected Financial Data are qualified in their entirety by the more detailed Consolidated Financial Statements and related Notes at the end of this report. The Selected Financial Data for each of the five years ended December 31, 1994 are derived from the Consolidated Financial Statements of Tosco audited by Coopers & Lybrand L.L.P., independent accountants.
TOSCO CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA (a) (Millions of dollars except per share and ratio data) Year Ended December 31, 1994 1993 1992 1991 1990 Results of Operations Sales $6,365.8 $3,559.2 $1,861.0 $1,608.7 $1,854.6 Gross profit on sales 260.4 251.8 132.7 121.2 248.3 Inventory valuation (recovery) writedown (17.7) 17.7 Environmental cost accrual 6.0 25.0 4.0 2.0 Operating contribution 272.1 234.1 107.7 117.2 246.3 Selling, general and administrative expense 84.1 58.2 38.7 30.2 48.1 Interest expense, net 54.2 44.1 18.0 16.5 24.3 Pre-tax income 133.8 131.8 51.0 70.5 173.9 Provision for income taxes (b) 50.0 51.2 20.8 2.4 19.6 Income from continuing operations before other items 83.8 80.6 30.2 68.1 154.3 Discontinued operations, net of income taxes Income (loss) from operations (15.9) 7.3 (31.1) Estimated loss on disposal (105.0) Cumulative effect of accounting changes 16.2 Net income (loss) $ 83.8 $80.6 ($ 74.5) $ 75.4 $123.2 Income (loss) per common and common equivalent share Primary: From continuing operations $ 2.27 $ 2.38 $ .68 $ 2.15 $ 6.81 From discontinued operations (4.08) .24 (1.44) From cumulative effect of accounting changes ___ ___ .55 _____ _____ Net income (loss) $ 2.27 $ 2.38 ($ 2.85) $ 2.39 $ 5.37 Fully Diluted: From continuing operations $ 2.24 $ 2.33 $ .68 $ 2.12 $ 4.94 From discontinued operations (4.08) 23 (1.00) From cumulative effect of accounting changes .55 Net income (loss) $ 2.24 $ 2.33 ($ 2.85) $ 2.35 $ 3.94 Capitalization (at end of period) Total assets $1,797.2 $1,492.9 $ 952.9 $871.0 $ 678.9 Long-term and revolver debt $ 687.4 $ 603.3 $ 356.8 $211.9 $ 202.7 Preferred stock 111.2 111.2 111.2 Common shareholders' equity 575.5 410.4 270.2 385.6 333.3 Total capitalization $1,262.9 $1,124.9 $ 738.2 $ 708.7 $ 536.0 Other Information Ratio of long-term and revolver debt to total capitalization .54 .54 .48 .30 .38 Current ratio 1.8 2.2 2.6 1.6 1.6 Book value per share $ 15.53 $ 12.60 $ 9.10 $ 12.78 $ 11.15 Cash dividends per share $ .62 $ .60 $ .60 $ .60 $ .60 ___________________________________ (a) Reflects Seminole Fertilizer Corporation, acquired on July 1, 1989, as a discontinued operation for all applicable periods. (b) Reflects the provision for income taxes for 1992 - 1994 at regular tax rates pursuant to the provisions of SFAS No. 109 adopted January 1, 1992.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Introduction 1994 was an acceptable year for Tosco. Net income was $83.8 million including a $17.7 million inventory valuation recovery and a $6 million environmental cost accrual. Excluding these non-cash items, Tosco's results for 1994 declined from 1993 due to weak refining margins, reduced production levels, and higher costs. These negative factors overshadowed strong operating results from Tosco's entry into retail marketing and the achievement of investment grade credit ratings on its senior debt.
Results of operations - 1994 For the Year Ended December 31, 1994 1993 (Thousands of Dollars) Sales $ 6,365,757 $3,559,217 Cost of sales 6,105,293 3,307,492 Inventory valuation (recovery) writedown (17,651) 17,651 Environmental cost accrual 6,000 Operating contribution 272,115 234,074 Selling, general, and administrative expense 84,123 58,174 Net interest expense 54,143 44,146 Pre-tax income 133,849 131,754 Provision for income taxes 50,006 51,175 Net income $ 83,843 $ 80,579
Refining Data Summary Year ended December 31, 1994 and 1993 (In thousands of B/D except for refining margins) Avon Bayway(a)(b) Ferndale Consolidated(b) 1994 1993 1994 1993 1994 1994 1993 Crude and other raw materials 160.6 166.3 252.2 259.2 90.6 503.4 425.5 Petroleum products produced: Clean products 132.7 137.6 204.8 213.9 62.8 400.3 351.5 Other finished products 26.7 26.5 51.5 50.5 25.7 103.9 77.0 Total finished products produced 159.4 164.1 256.3 264.4 88.5 504.2 428.5 Refining margin per charge barrel (c) $ 6.79 $8.03 $3.02 $3.47 $4.54 $4.50 $5.60 (a) Bayway's refining margins include the results of hedges on a varying percentage of Bayway's production. (b) Refining margins for the Bayway Refinery for 1994 were adversely impacted because of the scheduled shutdown of the fluid cat cracker during which the volume and mix of finished products produced is not representative of normal operations. (c) As illustrated by the table, refining margins vary significantly by refinery. This variance is due to a number of reasons including marketing conditions in the principal areas served by the refineries, their configuration and complexity (ability to convert raw materials into clean products), and maintenance schedules.
Tosco earned $83.8 million, or $2.24 per fully diluted share, on sales of $6.4 billion for 1994 compared to $80.6 million or $2.33 per fully diluted share, on sales of $3.6 billion for 1993. Earnings per fully diluted share for 1994 fell by $.09 per share while income rose by $3.3 million because of the issuance of 2,990,000 shares of Common Stock in December 1993. Tosco's acquisitions and expanded wholesale operations were the principal reasons for the increase in sales and cost of sales for 1994 compared to 1993. In April 1993, Tosco purchased the Bayway Refinery and related assets from Exxon Corporation. In December 1993, Tosco acquired, through long-term lease, Northville Industries' Long Island, New York oil distribution system and purchased the Ferndale Refinery and retail marketing operations in the Pacific Northwest from BP Exploration & Oil Inc. (BP). In August 1994 and mid-December 1994, Tosco expanded its retail system through the acquisition, under long-term lease arrangements, of the retail marketing operations of BP in Northern California and Exxon in Arizona, respectively. Results of operations for 1994 include the reversal of the $17.7 million ($10.7 million after tax, $.29 per share) writedown of LIFO inventories incurred in 1993 due to the recovery of prices during 1994. Tosco also recorded a $6 million ($3.6 million after tax, $.10 per share) environmental cost accrual for probable investigative and remedial liabilities at former operating locations. See Note 15 to the Consolidated Financial Statements. Tosco generated an operating contribution (income before selling, general and administrative expense, net interest expense and income taxes) for 1994 of $272.1 million from its three refineries and retail marketing operations, an increase of $38.0 million over 1993. Tosco Northwest, whose operations encompass retail marketing operations, the Ferndale Refinery and related commercial activities, produced an operating contribution of $118.6 million in its initial year of operations due to strong retail margins, good production results from the Ferndale Refinery, and good refining margins in the Pacific Northwest. The Ferndale Refinery processed 90,600 barrels per day (B/D) of raw materials for 1994, a 17,100 B/D improvement over 1993 production results under previous management. Refining margins (the difference between the price of refined products produced for sale and raw material costs) were $4.54 for 1994 due to better than anticipated prices, especially for residual fuels, while retail margins averaged $.10 per gallon on sales volumes of 2.1 million gallons per day. Following the completion of the Northern California and Arizona transactions in August and December 1994, respectively, retail margins increased to $.12 per gallon on sales volumes of 2.7 million gallons per day. The Avon Refinery and its related commercial operations experienced a decline in operating contribution from 1993 due to reduced production levels and poor refining margins. Raw material throughput rates for 1994 fell by 5,700 to 160,600 B/D while production of clean transportation fuels (gasoline, diesel, and jet fuel) fell by 4,900 B/D to 132,700 B/D. Scheduled turnaround maintenance on the fluid coker, which was completed during the second quarter of 1994, was the primary reason for the fall in production. Tosco also reduced production levels in early December 1994 in response to poor refining margins and to prepare for an early start of the major upgrade and turnaround of the fluid catalytic cracking unit (cat cracker) which occurred in January 1995. Avon's refining margins for 1994 declined by $1.24 to $6.79, the lowest since 1987. Increases in raw material costs were not matched by increases in product prices because of excess supply, highly competitive markets and the lingering effects of the recession in California, Avon's principal market, which lagged the improvement in the national economy. Bayway's operating contribution for 1994 includes the reversal of the $17.7 million writedown of LIFO inventories recorded in 1993. Excluding the inventory valuation, Bayway's operating contribution for 1994 declined from the approximate nine month operating period of 1993. The decline in operating contribution was primarily due to reduced production, weak refining margins and higher distribution costs. Raw materials processed declined by 7,000 B/D to 252,200 B/D while production of clean products declined by 9,100 B/D to 204,800 B/D due to scheduled turnaround maintenance of the fluid cat cracker, the world's largest and Bayway's principal gasoline production unit, during the third quarter of 1994. Bayway also reduced production runs in early December in response to weak refining margins in the Northeast and to perform some minor but necessary maintenance of production units. Refining margins, including results of hedges designed to lock in a predetermined level of refining margins on a percentage of Bayway's production, averaged $3.02 for the year, a decline of $.45 from 1993. Bayway, like Avon, was not able to match increases in raw material costs with comparable increases in product prices, due to excess supply in highly competitive markets. In addition, fourth quarter margins were negatively impacted by mild winter weather and market uncertainty over the introduction of cleaner burning but higher cost reformulated gasoline (RFG). Certain areas in the Northeast elected to opt out, and were permitted to do so by the federal government, of their voluntary participation in the RFG program (mandated by federal regulations for the largest metropolitan areas of the United States). Operating costs were also impacted by higher distribution costs as Bayway expanded its terminal distribution network and commercial operations. Selling, general and administrative (SG&A) expense for 1994 increased by $25.9 million to $84.1 million due to Tosco's expanded operations. SG&A expense for 1994 was reduced by insurance recoveries of $3.5 million (related to now-settled litigation with the predecessor owners of the Avon Refinery over environmental matters) and $1.0 million (related to a retroactive adjustment of prior year medical costs based on favorable claim experience). See Note 15 to the Consolidated Financial Statements. The increase in net interest expense for 1994 is primarily due to higher levels of debt related to Tosco's acquisitions and their associated working capital requirements and higher short-term interest rates. The provision for income taxes for 1994 reflects a 1.5% reduction in the annual effective income tax rate and recognition of $2.9 million of revised income tax benefits related to Tosco's former activities. The effective rate reduction is attributable to revised state income tax allocation factors and estimated California investment tax credits. The provision for income taxes for 1993 included prior year tax credits of approximately $2.5 million which were finalized in tax returns filed in October 1993. Results of operations - 1993 Tosco's continuing operations earned $80.6 million, or $2.33 per fully diluted share, on sales of $3.56 billion for 1993 as compared to income from continuing operations of $30.2 million, or $.68 per fully diluted share, on sales of $1.86 billion for 1992. Continuing operations exclude the results of Tosco's former phosphate fertilizer operations. Tosco's operating contribution of $234.1 million for 1993 increased by $126.4 million over 1992 due to a $74.8 million increase in operating contribution from Avon and its related commercial activities and an operating contribution of $51.6 million from Bayway and its related commercial activities. Avon's improvement in operating contribution was primarily attributable to record production rates, improved refining margins and lower environmental cost accruals, partially offset by the increased refinery and product distribution costs associated with higher levels of production. Raw material throughput rates averaged a record 166,310 B/D for 1993 (versus 152,510 B/D for 1992) and production of clean transportation fuels also averaged a record 137,610 B/D (versus 126,570 B/D for 1992). Refining margins improved by $.70 to $8.03 per barrel as per barrel costs of raw materials fell by more than the sales value of refined products produced. The improved margins (achieved despite the sluggish economy, especially in California) were assisted by the completion and start up of facilities for the production of low-sulfur, low-aromatic diesel fuel meeting the California Air Resources Board's (CARB) cleaner burning fuel standards effective October 1, 1993. Bayway achieved an operating contribution of $51.6 million, after an inventory writedown of $17.7 million, for the period April 8, 1993 to December 31, 1993 due to strong refinery performance in a period of lackluster margins. Raw material throughput averaged 259,250 B/D while production of clean transportation fuels and total production averaged 213,980 and 264,490 B/D, respectively. Refining margins, including net realized results of hedges, averaged $3.47 per barrel while refinery and distribution expenses together averaged approximately $2.55 per barrel. Consolidated selling, general and administrative expense of $58.2 million for 1993 increased by $19.4 million over 1992 primarily due to the acquisition of Bayway (including approximately $7.5 million of non-recurring costs incurred in establishing commercial, accounting and general and administrative functions at Bayway). Consolidated net interest expense for 1993 of $44.1 million increased by $26.2 million over 1992. Net interest expense for 1992 includes $12.8 million of intercompany interest income from discontinued operations and the writeoff of approximately $3.6 million of deferred financing costs related to previously outstanding indebtedness. Without the effect of these two items, consolidated net interest expense for 1993 increased by $17 million as the costs of higher levels of debt (resulting from the purchase of Bayway and its associated working capital requirements) more than offset the benefits of lower interest rates. The provision for income taxes for 1993 includes the 1% increase in federal income tax rates effective January 1, 1993 as well as tax credits of approximately $2.5 million which were finalized in tax returns filed in October 1993. Results of operations - 1992 Tosco's continuing operations earned $30.2 million, or $.68 per fully diluted share, on sales of $1.86 billion for 1992 as compared to income from continuing operations of $68.1 million, or $2.12 per fully diluted share, on sales of $1.61 billion for 1991. After discontinued operations and the cumulative effect of accounting changes, a net loss of $74.5 million, or $2.85 per fully diluted share, was incurred for 1992. Continuing operations generated an operating contribution of $107.7 million for 1992, a decrease of $9.5 million from 1991. The decrease was attributable to the $25 million environmental cost accrual (an increase of $21 million over the $4 million accrual of 1991) which more than offset the $11.5 million improvement in operating margins. The improvement in operating margins was achieved through the then-record production rates at the Avon Refinery. Raw material throughput rates averaged 152,510 B/D in 1992 (versus 139,980 B/D in 1991), while production of petroleum products increased to 151,130 B/D (versus 137,150 B/D in 1991). Production of clean transportation fuels also achieved then-record levels, increasing from 110,550 B/D to 126,570 B/D for 1992. Despite these record production rates, refining margins declined by $.33 per barrel to $7.33 for 1992. In view of the poor margins, which averaged $6.23 for the fourth quarter, scheduled 1993 maintenance of refinery processing units was accelerated into 1992. Operating results for 1992 were also negatively impacted by higher distribution costs associated with expanded commercial activities and the use of additives and oxygenates in gasoline. Selling, general, and administrative expense for 1992 increased by $8.5 million over 1991 primarily because of higher costs of professional services ($3.6 million, primarily legal costs related to litigation against the predecessor owners of the Avon Refinery concerning environmental issues), workers compensation and general liability insurance ($1.0 million), as well as the full year costs of expanded commercial activities. Net interest expense for 1992 includes the writeoff of approximately $3.6 million of deferred financing costs related to the refinancing of previously outstanding Bank indebtedness. Without the writeoff, net interest expense for 1992 would have been approximately $2.1 million lower than 1991, as the benefits of lower interest rates and higher levels of invested cash more than offset the costs of higher levels of outstanding debt. Tosco recorded a loss of $105 million for the estimated loss on disposition of Seminole Fertilizer Corporation (Seminole) including a provision for estimated future costs and operating results until expected disposition dates. Seminole sold its principal operating assets in April 1993 and entered into an agreement to sell the remainder in the first quarter of 1994. See Note 4 to the Consolidated Financial Statements. Effective January 1, 1992, Tosco adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (electing to prospectively amortize its postretirement benefits obligation) and SFAS No. 109, "Accounting for Income Taxes," and changed its accounting policy for turnaround costs. The cumulative effect of the changes in accounting for income taxes and turnaround costs was $13 million or $.44 per share, and $3.2 million or $.11 per share, respectively. Outlook Results of operations continue to be determined principally by two factors: the operating efficiency of the refineries, and refining and retail marketing margins. Tosco's processing units are periodically shut down for turnaround maintenance as the units reach the end of their normal operating cycle. The scheduled turnarounds of the Avon fluid coker and the Bayway cat cracker, the refineries' principal conversion and gasoline production units, were completed in 1994 and are not expected to undergo turnaround maintenance for three to four years. Avon's cat cracker and the processing units at the Ferndale Refinery were shutdown for turnaround maintenance beginning in January and February 1995, respectively. The Avon cat cracker returned to service in early March and the Ferndale Refinery is scheduled to be back in full operation by April 1995. Significant turnaround activity is not scheduled for the balance of 1995 at the three refineries and, assuming reasonable margins, Tosco expects to operate the refineries at high production levels for the balance of 1995. Tosco is not able to predict the level or trend of refining and retail margins because of uncertainties with oil markets. However, Tosco is not optimistic about the level of refining margins for 1995 despite the strengthened national economy, in light of the present highly competitive market and the increasing costs of complying with government-mandated clean fuel standards. In addition, Congress is expected to reconsider the current ban on exports of crude oil from the Alaska North Slope (ANS) this year. If passed, the legislation would likely lead to higher crude oil costs for Tosco and other domestic refiners. Tosco may not be able to recover these higher crude costs in the market. Given this serious outlook, Tosco has implemented programs to lower operating and SG&A costs and enhance the productivity and reliability of its operations. Tosco's expansion into retail marketing has been successful in providing earnings stability in a period of poor refining margins. Tosco expects to enhance its existing retail assets and continue to pursue acquisitions that allow an attractive rate of return and complement its existing refining and retail systems. Cash flows and liquidity - 1994 As summarized in the Statement of Cash Flows, cash decreased by $31 million during 1994 as cash used in investing activities of $252 million exceeded cash provided by operating and financing activities of $126 million and $95 million, respectively. Cash provided by operating activities of $126 million was from cash earnings of $192 million (net income plus depreciation, amortization, the environmental cost accrual and deferred income taxes minus the inventory valuation recovery), and from other sources of $6 million, partially reduced by an increase in working capital of $72 million. Net cash used in investing activities totaled $252 million, primarily for capital additions and deferred turnaround expenditures of $160 million and $76 million, respectively, increases in other assets of $15 million and a net transfer to Tosco's former fertilizer operations for payment of liabilities of $9 million, partially offset by a $10 million return of Tosco's investment in Continental-Tosco Limited Partnership. Cash generated from financing activities totaled $95 million as net borrowings under the revolving credit facility of $86 million and short-term bank borrowings of $42 million exceeded dividend payments of $28 million and debt and other payments totaling $5 million. Liquidity (as measured by cash, short-term investments and deposits and unused credit facilities) increased by $67 million during 1994 due to an increase of $98 million in unused credit facilities partially offset by a decrease in cash and equivalents of $31 million. Tosco amended its revolving credit facility to support its expanded working capital requirements due to its acquisitions. At December 31, 1994, liquidity totaled $213 million (an amount which Tosco believes is adequate to meet its expected liquidity demands for at least the next twelve months). Capital Expenditures and Capitalization Capital spending programs continue to address compliance with environmental regulations and permits, operating flexibility and reliability, personnel/process safety, reformulated fuel specifications, and most recently, retail expansion and modernization. Tosco spent $160 million on budgeted capital projects in 1994 and accrued approximately $11 million of participation payments based on Tosco's interpretation of its agreement with BP. See Note 2 to the Consolidated Financial Statements. The Avon Refinery underwent several significant upgrades during 1994, including improvements and expansion of its cat feed hydrotreater and alkylation unit, and the Bayway Refinery increased its storage capacity with the construction of two 250,000-barrel crude tanks. Pump credit card readers and convenience store upgrades were implemented to enhance the efficiency and attractiveness of the retail stations. During the second quarter of 1994, Tosco's Board of Directors approved a $25 million project for the refurbishment and improvement of the Avon Refinery's 65,000 B/D cat cracker. This expansion project, which is expected to produce a five percent volume increase in clean transportation fuels, was completed during the scheduled turnaround of the unit in the first quarter of 1995. In 1996, gasoline sold in California must meet new specifications enacted by the California Air Resources Board (CARB) (CARB Phase II gasoline). The Avon Refinery's reformulated gasoline project, budgeted at $100 million, will convert a significant portion of its current production to CARB Phase II gasoline. Tosco entered into a long-term exchange agreement with Chevron USA Products Company which will provide Tosco, commencing in 1996, with 30,000 B/D of CARB Phase II gasoline in exchange for 30,000 B/D of conventional grade gasoline. The product exchange agreement extends to 2003. Tosco expects that the supply of CARB Phase II gasoline from this exchange, and from Tosco's own planned production, will equal approximately 80% of the Avon Refinery's current gasoline production. Tosco's retail capital spending program will focus on building new stations, remodeling existing facilities, and acquiring new locations. Tosco expects to fund its 1995 capital expenditures from cash provided by operations. Tosco may, depending upon market conditions, offer debt securities (to exchange existing debt and/or to pay down cash borrowings under its revolving credit agreement) or expand its revolving credit availability. In 1994, Bayway entered into a twelve-year tanker agreement with Neptune Orient Lines, Ltd. for the charter of four 100,000 DWT crude oil tankers. The tankers will be built to maximize the use of the Bayway Refinery's dock receiving facilities as well as to meet the requirements of the U.S. Oil Pollution Act of 1990. The first tanker is expected to be delivered in the second half of 1996. Bayway also entered into a long-term lease agreement with Statia Terminals for 3,600,000 barrels of crude oil storage in Nova Scotia, Canada. The four tankers will be used to move crude oil from the Nova Scotia storage location to the Bayway Refinery or in direct shipments to other locations. In September 1994, Bayway announced that it had entered into a letter of intent pursuant to which the Huntsman Chemical Corporation (Huntsman) would build an ethylbenzene plant at the Bayway Refinery and purchase feedstocks produced by the Bayway Refinery. In January 1995, Huntsman delayed the proposed construction project. Bayway does not anticipate any significant impact on its results due to this delay. At December 31, 1994, total shareholders' equity was $576 million, an increase from December 31, 1993 of $54 million due to net income ($84 million) less dividend and other payments ($30 million). In September 1994, Tosco increased its quarterly dividend by $.01 per share to $.16 per share. Debt, including current maturities and short-term bank borrowings, increased by $126 million to $730 million at the end of 1994, primarily due to the expansion of Tosco's operations. Impact of Inflation The impact of inflation has been less significant during recent years because of the relatively low rates of inflation experienced in the United States. Raw material costs, energy costs, and labor costs are important components of Tosco's costs. Any or all of these components could be increased by inflation, with a possible adverse effect on profitability, especially in high inflation periods when raw material and energy cost increases generally lead finished product prices. In addition, a rapid escalation of raw material and finished products prices could result in credit restrictions if working capital requirements exceed the maximum availability under Tosco's working capital facilities. Risk Management Tosco uses a variety of strategies to reduce commodity price, interest and operational risks. As discussed in Note 3 to the Consolidated Financial Statements, Tosco, at times and when able, uses futures contracts to lock in what it believes to be favorable margins on a portion of Bayway's production by taking offsetting long (obligation to buy at a fixed price) positions in crude oil and short (obligation to deliver at a fixed price) positions in gasoline and heating oil futures and forward contracts. This strategy hedges Bayway's exposure to fluctuations in refining margins and therefore reduces the volatility of operating results. In addition, Tosco enters into swap contracts with counterparties (typically agreeing to sell at fixed forward prices, and to buy at future variable market prices, stated volumes of residual fuels) to hedge sales prices of the Bayway Refinery's residual fuels production. At December 31, 1994, Bayway had hedged approximately 12% and 6% of its expected first quarter and annual 1995 production, respectively, at acceptable historical margins. Tosco utilizes futures and forward contracts to a lesser extent to hedge inventories stored for future sale and to hedge against adverse price movements between the cost of foreign crude oil that Bayway refines and the cost of domestic crude oil. Tosco manages its interest rate risk by maintaining an appropriate mix of fixed rate and floating rate debt. Currently, floating rate debt, primarily borrowings under the Revolving Credit Facilities which provide up to $450 million of revolving credit availability, is used to finance Tosco's working capital requirements. Existing fixed rate debt consists primarily of $450 million of mortgage bonds issued in 1992 and 1993 to refinance previously outstanding floating rate bank debt and to finance the acquisition of capital assets including the acquisition of the Bayway Refinery. As required by the previously outstanding bank debt agreement, Tosco entered into an interest rate swap agreement which converted a predetermined percentage of floating rate bank term debt ($49.5 million at December 31, 1994) to fixed rate term debt. The interest rate swap expires in the second quarter of 1996. Tosco carries insurance policies on insurable risks, which it believes to be appropriate at commercially reasonable rates. While Tosco believes that it is adequately insured, future losses could exceed insurance policy limits or, under adverse interpretations, be excluded from coverage. Future liability or costs, if any, incurred under such circumstances would have to be paid out of general corporate funds, if available. See Note 3 to the Consolidated Financial Statements for a discussion of Tosco's strategy to reduce credit risk. Item 8.Financial Statements and Supplementary Data The financial statements and supplementary data required by Part II, Item 8, are included in Part IV, as indexed at Item 14(a)(1) and (a)(2). Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant There is hereby incorporated by reference the information appearing under the caption "Nominees for Election" in the registrant's definitive Proxy Statement relating to its 1995 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. See also the information appearing under the caption "Executive Officers of the Registrant" appearing in Part I. Tosco is not aware of any family relationship between any Director or executive officer. Each officer is generally elected to hold office until the next Annual Meeting of the Board of Directors. Item 11. Executive Compensation There is hereby incorporated by reference the information appearing under the caption "Executive Compensation" in the registrant's definitive Proxy Statement relating to its 1995 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. Item 12. Security Ownership of Certain Beneficial Owners and Management There is hereby incorporated by reference the information appearing under the caption "Stock Ownership of Officers and Directors" and "Other Matters - Certain Security Holdings" in the registrant's definitive Proxy Statement relating to its 1995 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. Item 13. Certain Relationships and Related Transactions There is hereby incorporated by reference the information appearing under the caption "Executive Compensation" in the registrant's definitive Proxy Statement relating to its 1995 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. PART IV Item 14. Exhibits, Financial Statement Schedules (a)(1) and (a)(2). Financial Statements and Financial Statement Schedules. The consolidated financial statements and financial statement schedules of Tosco Corporation and subsidiaries, required by Part II, Item 8, are included in Part IV of this report. See Index to Consolidated Financial Statements and Financial Statement Schedules on page F-1. (a)(3). Exhibits. 3(a). Restated Articles of Incorporation of Registrant as currently in effect, including Certificates of Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other Special Rights of Preferred Stock. Incorporated by reference to Exhibit 28.2 to Registrant's Current Report on Form 8-K dated July 29, 1991. 3(b). By-laws of Registrant as currently in effect. Incorporated by reference to Exhibit 3(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(a). Form of Indenture between Registrant and IBJ Schroder Bank and Trust Company, as Trustee, relating to 9% Series A First Mortgage Bonds due March 15, 1997 and 9 5/8% Series B First Mortgage Bonds due March 15, 2002. Incorporated by reference to Exhibit 4.1 to Registration Statement filed by Registrant on Form S-3 dated March 4, 1992. 4(b). Form of Indenture among Registrant, Bayway Refining Company and the First National Bank of Boston, as Trustee, relating to 8 1/4% First Mortgage Bonds due 2003. Incorporated by reference to Exhibit 4.1 to Registration Statement filed by Registrant on Form S-4 dated April 29, 1993. 10(a). Amended and Restated Credit Agreement dated as of April 8, 1993 among Tosco Corporation, Seminole Fertilizer Corporation and Bayway Refining Company, as Borrowers, and the Banks named therein, as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. Incorporated by reference to Exhibit 28 to Registrant's Current Report on Form 8-K dated April 8, 1993. 10(b). Amendatory Agreement No. 1 dated as of June 7, 1993 to Credit Agreement among Tosco Corporation, Seminole Fertilizer Corporation and Bayway Refining Company, as Borrowers, and the Banks named therein, as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. Incorporated by reference to Exhibit 10(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10(c). Amendatory Agreement No. 2 dated as of December 10, 1993 to Credit Agreement among Tosco Corporation, Seminole Fertilizer Corporation and Bayway Refining Company, as Borrowers, and the Banks named therein, as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. Incorporated by reference to Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10(d). Amendatory Agreement No. 3 dated as of March 31, 1994 to Credit Agreement among Tosco Corporation, Seminole Fertilizer Corporation and Bayway Refining company, as Borrowers, and the Banks named therein , as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. 10(e). Amendatory Agreement No. 4 dated as of May 9, 1994 to Credit Agreement among Tosco Corporation, Seminole Fertilizer Corporation and Bayway Refining Company, as Borrowers, and the Banks named therein , as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. 10(f). Amendatory Agreement No. 5 dated as of August 16, 1994 to Credit Agreement among Tosco Corporation, Bayway Refining Company and Tosco Europe Limited, as Borrowers, and the Banks named therein , as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. 10(g). Amendatory Agreement No. 6 dated as of December 28 1994 to Credit Agreement among Tosco Corporation, Bayway Refining Company and Tosco Europe Limited, as Borrowers, and the Banks named therein , as Banks, and The Chase Manhattan Bank (National Association) as Co-Agent, Bank of America National Trust and Savings Association, as Co-Agent and Co-Arranger, and the First National Bank of Boston, as Agent and Arranger. 10(h). Exchange Agreement dated October 2, 1986, between Registrant and Atlantic Richfield Company. Incorporated by reference to Exhibit 10(aa) to Registration Statement filed by Registrant on Form S-1 under the Securities Act of 1933 (No. 33-9578). 10(i) Severance Agreement dated November 15, 1989, between Registrant and James M. Cleary. Incorporated by reference to Exhibit l0(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990. Schedule identifying similar agreement between Registrant, or its subsidiaries, and another employee. Amendments, effective as of January 1 and February 1, 1993, to said Agreements. Incorporated by reference to Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10(j). Severance Agreement dated January 1, 1993 between Registrant and Thomas D. O'Malley including schedule identifying similar agreements between Registrant, or its subsidiaries, and four of its employees. Incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10(k). Indemnification Agreement dated September 30, 1987, between Registrant and James M. Cleary, including schedule identifying similar agreements between Registrant and its Directors and/or officers, together with related Trust Agreement. Incorporated by reference to Exhibit 10(aa) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987. 10(l) Consulting Agreement dated January 1, 1990 between the Registrant and Clarence G. Frame. Incorporated by reference to Exhibit 10(p) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 10(m). Sale and Purchase Agreement for Bayway Refinery and Related Facilities dated December 10, 1992 between Exxon Corporation and Bayway Refining Company. Incorporated by reference to Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(n) Amendment, dated April 30, 1992, to TTTI Buy/Sell Contract No. 35P73, dated February 22, 1990 between Texaco Trading and Transportation Inc. and Tosco Refining Company. Incorporated by reference to Exhibit 10(q) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(o) Amendment, dated April 30, 1992, to TTTI Buy/Sell Contract No. 17P77, dated April 13, 1988 between Texaco Trading and Transportation Inc. and Tosco Refining Company. Incorporated by reference to Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(p). Crude Oil Supply Agreement dated December 28, 1993 between BP Oil Supply Company and Tosco Corporation. Incorporated by reference to Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 10(q). Trademark License Agreement dated December 28, 1993 between British Petroleum Company p.l.c. and Tosco Corporation. Incorporated by reference to Exhibit 10(s) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. Schedule Identifying (i) Amended and Restated Trademark License Agreement between British Petroleum Company p.l.c. and Tosco Corporation dated as of August 1, 1994 and (ii) Trademark License Agreement (California) between BP Oil Marketing Inc. and Tosco Corporation dated as of August 1, 1994. These agreements extended the term of the original agreement and expanded the territory of the original agreement. 11. Statement regarding computation of per share earnings. See Exhibit 11 to Financial Statements (page F-28), as required by Item 8 and appearing in Item 14 hereof. 21. A list of all subsidiaries of the Registrant. 23. Consent of Coopers & Lybrand. 27. Financial Data Schedule 99. Condensed Consolidating Financial Information and Report of Independent Accountants. (b). Reports on Form 8-K None (c). Financial Statement schedules required by Regulation S-X are excluded from the Annual Report to Shareholders by Rule 14a-3(b)(1). See Schedule VIII to the Financial Statements, as required by Item 8, and appearing under Item 14 hereof. TOSCO CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Financial Statement Schedules Filed with the Annual Report of the Company on Form 10-K Year Ended December 31, 1994 Page Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1994 and 1993 F-3 Consolidated Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992 F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 F-5 Consolidated Statement of Common Shareholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 F-7 Notes to Consolidated Financial Statements F-8 to F-26 Financial Statement Schedules: VIII - Valuation and Qualifying Accounts F-27 Financial Exhibits F-28-F-33 Financial statement schedules other than those listed above have been omitted since they are either not required, are not applicable, or the required information is shown in the financial statements and related notes. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors Tosco Corporation We have audited the consolidated financial statements and the financial statement schedule of Tosco Corporation and subsidiaries listed in the index on page F-1 of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tosco Corporation and subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. As discussed in Note 1 to the consolidated financial statements, in 1992 the Company changed its method of accounting for turnarounds, income taxes and postretirement benefits other than pensions. COOPERS & LYBRAND L.L.P. Oakland, California March 3, 1995
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) December 31, 1994 1993 ASSETS Current assets Cash and cash equivalents $ 23,793 $ 55,091 Short-term investments and deposits 30,829 30,035 Trade accounts receivable, less allowance for uncollectibles of $8,392,000 (1994) and $5,091,000 (1993) 291,772 174,285 Inventories 463,637 362,284 Prepaid expenses and other current assets 43,258 44,863 Deferred income taxes 6,160 12,123 Total current assets 859,449 678,681 Property, plant and equipment, net 822,057 715,788 Deferred turnarounds 74,849 24,807 Deferred income taxes 6,998 37,108 Other deferred charges and assets 33,853 36,475 Total assets $ 1,797,206 $1,492,859 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 328,572 $ 223,407 Accrued expenses and other liabilities 151,561 87,623 Total current liabilities 480,133 311,030 Revolver debt 233,000 147,000 Long-term debt 454,429 456,306 Other liabilities 14,338 12,433 Environmental cost liability 35,382 29,440 Net liabilities of discontinued operations 2,526 11,733 Deferred income taxes 1,934 3,273 Shareholders' equity $4.375 Series F Cumulative Convertible Preferred Stock -$1.00 par value - Authorized 2,500,000 shares; issued and outstanding 2,300,000 shares (1993) (liquidation preference of $115,000,000) 111,197 Common shareholders' equity: Common Stock $.75 par value, 50,000,000 shares authorized, 39,598,900 (1994) and 34,811,158 (1993) shares issued 29,702 26,112 Capital in excess of par value 640,078 534,727 Retained earnings (deficit) ( 25,436) ( 81,512) Reductions from capital ( 68,880) ( 68,880) Total common shareholders' equity 575,464 410,447 Total shareholders' equity 575,464 521,644 Total liabilities and shareholders' equity $1,797,206 $1,492,859 The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Thousands of Dollars Except Per Share Data) Year Ended December 31, 1994 1993 1992 Sales $6,365,757 $ 3,559,217 $ 1,860,969 Cost of sales 6,105,293 3,307,492 1,728,305 Inventory valuation (recovery) writedown ( 17,651) 17,651 Environmental cost accrual 6,000 25,000 Selling, general and administrative expense 84,123 58,174 38,728 Interest expense 58,315 48,868 23,941 Interest income ( 4,172) ( 4,722) ( 6,018) 6,231,908 3,427,463 1,809,956 Income from continuing operations before provision for income taxes and cumulative effect of accounting changes 133,849 131,754 51,013 Provision for income taxes 50,006 51,175 20,766 Income from continuing operations before cumulative effect of accounting changes 83,843 80,579 30,247 Discontinued operations, net of income taxes: Loss from operations, net of income taxes of $10,625,000 ( 15,905) Estimated loss on disposal, net of income taxes of $79,531,000 ( 105,000) Loss from discontinued operations ( 120,905) Income (loss) before cumulative effect of accounting changes 83,843 80,579 ( 90,658) Cumulative effect of changes in accounting for: Income taxes Continuing operations 56,000 Discontinued operations ( 43,000) Turnarounds, net of taxes 3,203 Net income (loss) 83,843 80,579 ( 74,455) Preferred stock dividend requirements ( 6,293) ( 10,063) ( 10,063) Income (loss) attributable to common shareholders $ 77,550 $ 70,516 ($ 84,518) Income (loss) per common and common equivalent share: Primary: From continuing operations $ 2.27 $ 2.38 $ .68 From discontinued operations ( 4.08) From cumulative effect of accounting changes .55 Income (loss) per share $ 2.27 $ 2.38 ($ 2.85) Fully diluted: From continuing operations $ 2.24 $ 2.33 $ .68 From discontinued operations ( 4.08) From cumulative effect of accounting changes .55 Income (loss) per share $ 2.24 $ 2.33 ($ 2.85) The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) Year Ended December 31, 1994 1993 1992 Cash flows from operating activities: Net income (loss) $ 83,843 $ 80,579 ($ 74,455) Adjustments to arrive at net cash provided by operating activities: Depreciation and depletion 51,905 35,618 25,740 Write-off of deferred loan costs 3,645 Amortization of deferred items 32,956 29,473 29,323 Inventory valuation (recovery) writedown ( 17,651) 17,651 Environmental cost accrual 6,000 25,000 (Income) loss from discontinued operations 120,905 Cumulative effect of accounting changes ( 16,203) Deferred income taxes 34,734 ( 10,189) 9,044 (Increase) decrease: Trade accounts receivable (117,487) ( 83,431) ( 26,438) Inventories ( 83,702) ( 95,389) ( 7,123) Prepaid expenses and other current assets 1,605 ( 16,020) ( 1,677) Increase (decrease): Accounts payable and accrued liabilities 127,607 151,236 61,578 Other liabilities and deferred gains 3,320 3,676 3,128 Other, net 2,390 ( 532) 2,795 Net cash provided by operating activities 125,520 112,672 155,262 Cash flows from investing activities: Purchase of property, plant and equipment ( 160,119) ( 73,897) ( 69,133) Purchase of Bayway assets, including acquired inventories ( 317,630) ( 17,500) Purchase of Tosco Northwest, including acquired inventories ( 159,981) Increase in deferred turnarounds ( 76,045) ( 5,568) ( 13,928) Increase in deferred charges and other assets ( 15,374) ( 18,087) ( 21,396) Net proceeds from sale of discontinued operations 91,217 Transfers (to) from discontinued operations ( 9,207) 41,791 ( 33,306) Net change in short-term investments and deposits ( 794) 2,181 ( 20,174) Proceeds from (investment in) Continental-Tosco Limited Partnership 9,519 4,880 ( 16,194) Net cash used in investing activities ( 252,020) ( 435,094) ( 191,631) Cash flows from financing activities: Proceeds from Bayway Mortgage Bonds 150,000 First Mortgage Bond Offering Proceeds 300,000 Debt principal payments (186,608) Borrowings under revolver, net 86,000 147,000 Short-term borrowings 41,500 Early retirement of debt ( 50,000) Principal payments under debt agreements ( 2,275) ( 795) ( 5,261) Issuance of long-term debt 1,500 Issuance of Common Stock, net of expenses 88,418 Dividends paid on Preferred and Common Stock ( 27,767) ( 28,056) ( 27,825) Purchase of equity securities ( 14) ( 13,875) Other, net ( 2,256) ( 713) 742 Net cash provided by financing activities 95,202 305,840 68,673 Net increase (decrease) in cash and cash equivalents ( 31,298) ( 16,582) 32,304 Cash and cash equivalents at beginning of year 55,091 71,673 39,369 Cash and cash equivalents at end of year $ 23,793 $ 55,091 $ 71,673 The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Supplemental Disclosures of Cash Flow Information (Thousands of Dollars) Year Ended December 31, 1994 1993 1992 Cash paid during the year: Interest $ 54,059 $ 44,923 $ 24,878 Income taxes $ 9,891 $ 2,576 $ 6,612 The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (Dollar Amounts in Thousands) Reductions from Capital Common Stock Capital in Retained Treasury Stock, Total Common Issued Excess of Earnings at Cost Shareholders' Shares Amount Par Value (Deficit) Shares Amount Other Equity Balance January 1, 1992 31,819,518 $23,865 $449,327 ($ 31,755) 1,930,711 ($ 54,991) ($ 800) $385,646 Net loss (74,455) (74,455) Dividends - Preferred stock ( 10,063) (10,063) Dividends - Common stock ( 17,762) (17,762) Purchase of Common Stock 617,733 (13,875) (13,875) Payment of fractional shares in cash (4,231) (87) ( 87) ESOP note payment 800 800 Exercise of stock options 5,933 4 86 90 Other (62) (61) ( 61) Balance, December 31, 1992 31,821,158 23,869 449,265 (134,035) 2,548,444 ( 68,866) 270,233 Net income 80,579 80,579 Dividends - Preferred stock ( 10,063) ( 10,063) Dividends - Common stock ( 17,993) ( 17,993) Issuance of Common Stock 2,990,000 2,243 86,175 88,418 Purchase of Common Stock 597 ( 14) ( 14) Other ( 713) (713) Balance, December 31,1993 34,811,158 26,112 534,727 ( 81,512) 2,549,041 ( 68,880) 410,447 Net income 83,843 83,843 Dividends - Preferred stock ( 6,293) ( 6,293) Dividends - Common stock ( 21,474) ( 21,474) Exercise of stock options 3,333 2 46 48 Conversion of Series F Preferred Stock 4,784,409 3,588 106,503 110,091 Other (1,198) ( 1,198) Balance, December 31,1994 39,598,900 $29,702 $640,078 ($ 25,436) 2,549,041 ($ 68,880) $ - $575,464 The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Tosco Corporation and its wholly owned subsidiaries (Tosco), including Seminole Fertilizer Corporation (Seminole), a discontinued operation whose principal operating assets were sold in 1993. All significant intercompany accounts and transactions have been eliminated. Nature of Business Tosco is an independent oil refiner and marketer of petroleum products with related distribution facilities and domestic and international commercial activities. Reclassifications Certain previously reported amounts have been reclassified to conform to classifications adopted in 1994. Cash, Cash Equivalents, Short-term Investments and Deposits Cash in excess of operating requirements is invested in certificates of deposit, government securities, commercial paper and other highly liquid investments. Investments with original maturities of more than three months and less than 12 months are classified as short-term investments and carried at cost which approximates market. Tosco purchased director and officer liability insurance coverage from its wholly owned subsidiary Loil Group Ltd. (Loil), with limits of liability coverage of $14,000,000 and $13,200,000 at December 31, 1994 and 1993, respectively (an amount approximately equal to the amount of cash and investments of Loil). The assets of Loil are restricted to payment of defense costs and claims made against the directors and officers of Tosco. At December 31, 1994 the portfolio's carrying value of marketable investments which is considered "available for sale" in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" approximated fair value. Inventories Inventories of raw materials and products are valued at the lower of cost, determined on the last-in, first-out (LIFO) basis, or market. The market value of LIFO inventories is measured on a consolidated basis. Deferred Charges and Turnarounds Financing charges related to the acquisition or refinancing of debt are deferred and amortized over the term of the related debt using the effective interest method. Refinery processing units are periodically shut down for major maintenance (turnarounds). To provide for a better matching of costs with revenues, Tosco changed its accounting for turnaround costs, effective January 1, 1992, to one that results in the deferral and subsequent amortization of turnaround costs incurred on all significant processing units. The cumulative effect of this accounting change was a benefit of $3,203,000 (net of income taxes of $2,138,000) or $.11 per share for 1992. The cost of turnarounds is deferred and amortized on a straight-line basis over the expected period of benefit (the period to the next scheduled shutdown of the unit, which generally ranges from 24 to 48 months). Property, Plant and Equipment Property, plant and equipment, including capitalized interest, are carried at cost less accumulated depreciation. Depreciation and amortization are provided over the estimated useful lives of the respective classes of assets utilizing the straight-line method. Expenditures which materially increase values, change capacities or extend useful lives are capitalized. Routine maintenance, repairs, and replacement costs are expensed. Cost of assets disposed of, less sales proceeds, is charged against accumulated depreciation unless extraordinary in nature or amount. Excise Taxes Excise taxes collected on the sale of products are remitted to governmental agencies and are not included in sales, cost of sales or other expenses. Environmental Costs Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Generally, the timing of these accruals coincides with completion of investigations and other studies or Tosco's commitment to a formal plan of action. Postretirement Benefits Effective January 1, 1992 Tosco adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and elected to prospectively amortize its accumulated postretirement benefits liability. Income Taxes Effective January 1, 1992, Tosco adopted SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income tax liabilities and assets are adjusted for the estimated future tax effects attributable to "temporary differences" (differences between book and tax bases of assets and liabilities) at enacted tax rates. The cumulative effect of this accounting change was a benefit of $13,000,000 or $.44 per share for 1992. Earnings Per Share Primary earnings per share are computed by dividing net income (loss) less preferred stock dividend requirements by the weighted average number of common and common equivalent shares outstanding during the year. Fully diluted earnings per share computations assume, unless the effect is to increase earnings per share or reduce loss per share, that all shares of previously outstanding convertible preferred stock were converted to common stock of Tosco (Common Stock) at the beginning of each period and that no preferred dividends were paid. The weighted average number of shares used in computing earnings per share are as follows: Year Ended December 31 1994 1993 1992 (In Thousands) Primary 34,214 29,679 29,618 Fully Diluted 37,408 34,641 29,618 2. Acquisitions In April 1993, Bayway Refining Company (Bayway), a wholly owned subsidiary of Tosco, acquired the Bayway Refinery and related facilities (Bayway Refinery) from Exxon Corporation. The purchase price of approximately $175,000,000 (excluding acquired inventories of $164,630,000) plus related acquisition costs of $4,056,000 was fully allocated to the acquired assets based upon their fair values. In December 1993, Tosco acquired the Ferndale Refinery, retail marketing assets in the Pacific Northwest, and the right to market under the BP brand for five years (Tosco Northwest) from BP Exploration & Oil Inc. (BP). The purchase price of Tosco Northwest was $125,230,000 (excluding acquired inventories of $39,615,000) plus annual contingent participation payments over the five years following the acquisition of up to $50,000,000 and $100,000,000 based on the performance of the refining and retail marketing segments, respectively. Participation payments of approximately $11,000,000, based upon Tosco's interpretation of the agreement, were accrued for 1994 and recorded as additional fixed asset value. In August 1994, Tosco acquired additional retail marketing assets (primarily a 370 station system with approximately 130 company-controlled stations and a distribution terminal) in Northern California (BP California retail system) in purchase and long-term lease transactions. Tosco purchased improvements at the retail service station locations and entered into long-term operating leases for the balance of the assets, primarily land and equipment, with a special purpose entity which acquired such assets from BP (Note 14). In addition, Tosco entered into a trademark licensing agreement with British Petroleum which expanded Tosco's license to market under the BP brand to seven additional western states for at least twelve years. The previous five year trademark license agreement for Washington and Oregon was also extended to a term of at least twelve years. In December 1994, Tosco acquired Exxon U.S.A.'s retail gasoline marketing assets (83 service station properties) in Arizona in purchase and long-term operating lease transactions similar to those used for the acquisition of the BP California retail system (Note 14). Tosco also entered into an Exxon branded distribution agreement with a minimum term of seven years. 3. Financial Instruments Tosco, at times and when able, uses commodity futures contracts primarily to lock in what it believes to be favorable margins between the sales value of refined products produced and the cost of raw materials purchased, on a varying percentage of Bayway's production, generally for periods not exceeding one year. In addition, Tosco enters into swap and forward contracts with counterparties (typically agreeing to sell at fixed prices and to buy at variable market prices, stated volumes of residual fuels in future periods) to hedge sales prices of Bayway's residual fuels production. Realized gains and losses on liquidated raw material futures contracts are deferred in inventory until the related refined products are sold. Tosco also uses commodity futures contracts to a lesser extent to hedge inventories stored for future sale and to hedge against adverse price movements between the cost of foreign crude oil that Bayway refines and the cost of domestic crude oil. At December 31, 1994, Tosco had, as part of its hedging program, open long (obligation to purchase) and short (obligation to deliver) futures, swap and forward contracts for crude oil and products with a notional value (number of barrels under contract multiplied by the per barrel contract value) of approximately $200,000,000 and $311,000,000, respectively. The unrecognized net loss on open and closed futures and swap contracts of approximately $7,800,000 will be recognized or reversed in 1995 as an offset to realized margins on refined products sold. Pursuant to the requirements of the commodity exchanges, margin deposits for a percentage of the value of the futures contracts have been placed with commodity brokers. The margin deposits are classified as short-term deposits on the balance sheet. Fair Values The carrying value of cash and cash equivalents, short-term investments and deposits, trade accounts receivable, and accounts payable and other current liabilities approximates fair value. Estimated fair values of other financial instruments and their method of determination, are as follows:
December 31, 1994 1993 Carrying Fair Carrying Fair Value Value Value Value (Thousands of Dollars) Mortgage and Exchange Bonds (a) $450,000 $448,578 $450,000 $490,170 Revolving Credit Facilities (b) 233,000 233,000 147,000 147,000 Note collateralized by oil shale properties (c) 5,200 6,306 Interest rate swaps,net asset (liability) (d) 608 (2,690) (a) The fair value of these instruments reflects quoted market prices at the end of each year. (b) Borrowings under the floating rate revolving credit facilities approximate fair value. (c) These instruments are not publicly traded; therefore the fair value is not practicable to estimate. (d) As required by a former loan agreement, Tosco entered into a five year interest rate swap agreement in 1991 which was intended to convert a predetermined percentage of floating rate bank term debt to fixed rate term debt. The notional amount (the amount upon which interest to be paid or received is calculated) of the interest rate swap was $49,500,000 and $63,500,000, at December 31, 1994 and 1993, respectively. Concurrent with the retirement of the floating rate bank term debt, Tosco entered into a second interest rate swap agreement in 1992 pursuant to which Tosco received fixed rate interest and paid floating rate interest. In March 1993, Tosco terminated the second interest rate swap and received $3,200,000 which is being amortized over the term of the agreement. The fair values indicated in the table represent the cost of terminating the first swap, net of the unamortized gain on the second swap.
Credit Risk Financial instruments which potentially subject Tosco to concentrations of credit risk consist principally of temporary cash investments, trade receivables and commodity futures, swap and forward contracts. Tosco does not believe that it has a significant credit risk on its futures, swap and forward contracts. Futures contracts are transacted through the New York Mercantile Exchange (NYMEX) and other large commodity exchanges with established collateral and credit criteria for participants. To reduce credit risk, temporary cash investments are spread among several high quality financial institutions, and Tosco conducts ongoing evaluations of its broad base of customers and counter parties and requires letters of credit or other collateral arrangements as appropriate. 4. Discontinued Operations On May 4, 1993, Seminole completed the sale of its principal operating assets to Cargill Fertilizer Inc. for approximately $127,000,000. The cash proceeds, net of amounts used to extinguish outstanding revolving credit borrowings, of $91,217,000 were paid to Tosco to reduce intercompany debt. A 1992 loss of $105,000,000 was recorded for the estimated loss on sale of Seminole's principal operating assets including its 50% interest in the Fort Meade Chemical Products partnership (FMCP), and a provision for estimated operating losses during the phase-out period.
Net liabilities of the discontinued segment are as follows: December 31, 1994 1993 (Thousands of Dollars) Assets (a) $ 25,015 $ 46,059 Long-term debt (b) ( 15,200) ( 32,982) Other liabilities (c) ( 12,341) ( 24,810) Net liabilities of discontinued operations ($ 2,526) ($ 11,733) (a) Assets include a receivable for income taxes of $12,936,000 and $37,740,000 at December 31, 1994 and 1993, respectively, which will be utilized to reduce Tosco's consolidated tax liability. (b) A subsidiary of Seminole sold its partnership interest in FMCP effective January 1, 1994. Pursuant to the sale agreement, the subsidiary remains obligated for its 50% share of the debt of FMCP. (c) Under the terms of the 1993 sale agreement, Seminole executed promissory notes to Cargill totaling $14,500,000, payable in two equal installments on January 1, 1994 and 1995.
5. Inventories
December 31, 1994 1993 (Thousands of Dollars) Raw materials $ 163,866 $ 131,780 Intermediates 24,603 26,723 Finished products 272,462 202,670 Retail 2,706 1,111 $ 463,637 $362,284 Results of operations for 1994 include the reversal (based on price levels at the end of 1994) of the $17,651,000 market valuation reserve recorded at December 31, 1993. The excess of replacement cost over the value of inventories based upon the LIFO method was $5,821,000 at December 31, 1994.
6. Deferred Charges and Other Assets
December 31, 1994 1993 (Thousands of Dollars) Deferred financing costs $ 15,332 $ 15,223 Service station dealer advances 3,390 Deposits 5,500 Investment in Continental-Tosco Limited Partnership (CT-LP) 216 10,180 Other assets 9,415 11,072 $ 33,853 $ 36,475
7. Property, Plant and Equipment
December 31, Straight-Line 1994 1993 Annual Rate (Thousands of Dollars) Land $ 94,511 $ 90,381 Refineries and related assets 821,517 768,708 4% to 15% Retail marketing and related assets 50,866 30,550 5% to 20% Furniture, fixtures and improvements 31,012 16,815 3% to 33% Transportation equipment 10,120 23,391 4% to 33% Mineral properties, principally oil shale interests (a) 21,815 21,815 Natural gas properties 4,104 4,104 Construction in progress 109,264 45,769 1,143,209 1,001,533 Less accumulated depreciation and amortization 321,152 285,745 $ 822,057 $ 715,788 (a) At cost, net of impairments. Expenditures for maintenance and repairs (excluding the amortization of turnaround costs) were $89,513,000, $74,596,000, and $53,480,000 for 1994, 1993 and 1992, respectively.
8. Accrued Expenses and Other Liabilities
December 31, 1994 1993 (Thousands of Dollars) Accrued taxes other than taxes on income $ 71,964 $ 36,783 Accrued compensation and related benefits 11,570 7,812 Accrued interest 11,958 10,791 Income taxes payable (receivable) ( 9,546) 13,766 Acquisition related liabilities 15,856 10,938 Other accrued costs 7,476 6,746 Short term borrowings (a) 41,500 Current installments of long-term debt 783 787 $ 151,561 $ 87,623 (a) At December 31, 1994 Tosco had short-term lines of credit which provide for cash borrowings for working capital purposes of up to $45,000,000, $41,500,000 of which was outstanding. Of this amount, $22,000,000 was collateralized by certain inventory. Cash borrowings are payable within 90 days and bear interest at alternative rates at Tosco's option. At December 31, 1994 the weighted average interest rate for these credit lines was 6.9%.
9. Long-term Debt
December 31, 1994 1993 (Thousands of Dollars) Collateralized First Mortgage Bonds (a) (c) $ 300,000 $ 300,000 Exchange Bonds (b) (c) 150,000 150,000 Revolving Credit Facilities (c) 233,000 147,000 Note collateralized by oil shale mining properties (d) 5,200 5,647 Uncollateralized 12 1,446 688,212 604,093 Less: Current installments. 783 787 $ 687,429 $ 603,306 (a) In March 1992, Tosco issued $300,000,000 of First Mortgage Bonds (Bonds), comprised of $100,000,000 of 9% Series A Bonds due March 15, 1997 and $200,000,000 of 9-5/8% Series B Bonds due March 15, 2002. Interest on the Bonds is payable each March 15th and September 15th. The Bonds are non-callable and are collateralized by the Avon Refinery and certain related assets. (b) In connection with the acquisition of the Bayway Refinery, Tosco issued in a private placement $150,000,000 of 8-1/4% First Mortgage Bonds due May 15, 2003, guaranteed by Bayway, with interest payable semi-annually on May 15th and November 15th (Bayway Bonds). Proceeds for the sale of the Bayway Bonds, net of $2,325,000 of costs, were contributed as an equity investment to Bayway. The Bayway guarantee is collateralized by the Bayway Refinery and related assets and a guarantee of Tosco. Effective July 7, 1993, the Bayway Bonds were exchanged, pursuant to a registration statement, for a new series of publicly traded 8-1/4% First Mortgage Bonds (Exchange Bonds), the terms of which are substantially identical to the Bayway Bonds. (c) In connection with the acquisition of Tosco Northwest, Tosco amended its revolving credit facility to increase credit availability from $350,000,000 to $450,000,000 (New Revolving Credit Agreement). Cash borrowings under the New Revolving Credit Agreement bear interest, at the option of Tosco, at either the prime rate plus a margin ranging from zero to 1/4%, or at the Eurodollar rate plus a margin ranging from 1% to 1-1/2%. The incremental margin is dependent on the credit rating of the First Mortgage Bonds. A commitment fee of 3/8% per annum on the unused portion of the commitment is also due. The New Revolving Credit Agreement, which expires in April 1997, is collateralized by investments, accounts receivable and inventory. The loan agreements for the Bonds, the Exchange Bonds, and the New Revolving Credit Agreement contain covenants which limit Tosco's ability to incur additional indebtedness, pay dividends, acquire equity securities of Tosco, and make investments in certain subsidiaries and discretionary capital expenditures. In addition, the New Revolving Credit Agreement requires the maintenance of specified ratios and net worth. At December 31, 1994, Tosco was in compliance with all debt covenants. (d) On December 17, 1987, The Oil Shale Corporation, a subsidiary of Tosco, exercised options to acquire certain oil shale mining claims (Ertl and Paraho oil shale properties in Rio Blanco County, Colorado) for a cash payment of $1,150,000 and execution of a promissory note of $11,562,000, payable in fifteen equal annual principal installments beginning on December 17, 1990. The promissory note, with a stated interest rate of 5%, was discounted, based upon long-term market rates, to a value of $6,356,000 at the date of issue.
Future Installments of Long-Term Debt Maturities relating to long-term debt during the next five years are as follows: Years Ending Thousands December 31, of Dollars 1995 $ 783 1996 771 1997 333,771 (a) 1998 771 1999 771 (a) Includes cash borrowings of $233,000,000 at December 31, 1994 under the revolving credit facility and $100,000,000 First Mortgage Bonds. Utilization of Revolving Credit Facility
December 31, 1994 1993 (Thousands of Dollars) Revolving Credit Facility Cash borrowings $233,000 $ 147,000 Letters of credit 58,517 142,177 Total utilization 291,517 289,177 Availability 158,483 60,823 Total credit line $450,000 $ 350,000
10. Capital Stock Series F Preferred Stock In August 1994, Tosco called for the redemption on September 26, 1994 (the Redemption Date) of its shares of $4.375 Series F Cumulative Convertible Preferred Stock (Series F Stock). The redemption price was $53.0625 per share, plus $.486 per share in accumulated and unpaid dividends from August 16, 1994 to the Redemption Date. Of the 2,300,000 shares of Series F Stock outstanding, 2,296,644 shares were converted to shares of Common Stock and 3,356 were redeemed. Common Stock In December 1993, Tosco received net proceeds of $88,418,000 from a public offering of 2,990,000 shares of Common Stock. Dividends paid on Common Stock of $.16 per share for the third and fourth quarters of 1994 reflected an increase of $.01 per share over prior quarterly dividend payments. 11.Stock Options and Shares Reserved For Issuance Tosco had three stock option plans in effect at December 31, 1994: the 1992 Stock Incentive Plan (1992 Plan), the 1989 Stock Incentive Plan (1989 Plan), and the Long Term Incentive Plan of 1979 (as amended) (LTIP). Grants may no longer be made under the LTIP; however, grants previously made may be exercised until they expire or terminate. The 1989 and 1992 Stock Incentive Plans The 1989 and 1992 Stock Incentive Plans provide for the issuance to key employees, consultants, and non-employee directors of a maximum of 1,280,000 and 1,200,000 shares of Common Stock, respectively, in the form of stock options, restricted stock awards and/or stock appreciation rights. Stock options may be granted as "Incentive Stock Options" (as defined by the Internal Revenue Code of 1986), or as nonqualified options, including nonqualified stock options whose purchase price or vesting requirements are based on the employee's achievement of established performance objectives. Options may be exercised only within ten years from the date of grant. The exercise price of nonqualified stock options is determined by the Compensation Committee of the Board of Directors and may be less than the fair value of Common Stock on the date of grant. Awards under the 1989 and 1992 Plan may be granted until March 7, 1999 and March 13, 2002, respectively. Options to acquire an aggregate of 452,000 shares of Common Stock at prices ranging from $29.25 to $31.81 per share (the fair value of Common Stock on the respective dates of grant) were granted during 1994. Subject to the severance agreements with certain employees (Note 15), one-third of the options may be exercised at any time following the first anniversary of the date of grant and an additional one-third after each of the second and third anniversaries.
Year Ended December 31, 1994 1993 1992 Option Price Option Price Option Price Shares Per Share Shares Per Share Shares Per Share Outstanding, beginning of year 1,619,299 $14.38 to $31.37 1,468,099 $11.90 to $28.56 1,003,032 $11.90 to $24.63 Grants - 1992 Plan 287,000 $30.31 to $31.81 542,500 $21.69 to $25.94 193,500 $28.56 Grants - 1989 Plan 165,000 $29.25 24,000 $31.37 324,000 $27.75 to $28.56 Exercised ( 89,533)$14.38 to $28.56 ( 221,633) $18.86 to $23.56 ( 21,933) $11.90 to $28.56 Expired or canceled ( 6,500)$24.25 to $25.94 ( 193,667) $28.44 to $28.56 ( 30,500) $18.75 to $23.56 Outstanding end of year (a) 1,975,266 $14.81 to $31.81 1,619,299 $14.38 to $31.37 1,468,099 $11.90 to $28.56 Exercisable 1,069,600 722,799 550,766 Available for future grant 251,667 697,167 1,009,000 Shares reserved for: Exercise of stock options 2,226,933 2,316,466 2,477,099 Conversion of Convertible Subordinated 8% Debentures 267,558 ConversBion of Series F Stock 4,791,590 4,791,590 Total shares reserved 2,226,933 7,108,056 7,536,247 (a) As of December 31, 1994, the expiration dates of options outstanding range from December 5, 1995 to November 1, 2004. Options to purchase 168,333 shares of Common Stock were granted under the 1992 Plan at $29.19 per share in January 1995.
12. Income Taxes
The provision for income taxes is summarized below: Year Ended December 31, 1994 1993 1992 (Thousands of Dollars) Current: Federal $ 10,774 $ 51,915 $ 9,293 State 7,362 12,096 3,225 Foreign 218 336 Total current 18,136 64,229 12,854 Deferred: Federal 36,073 ( 6,366) 6,546 State ( 1,339) ( 3,823) 1,366 Total deferred 34,734 ( 10,189) 7,912 Adjustments (a) ( 2,864) ( 2,865) Provision for income taxes $ 50,006 $ 51,175 $ 20,766 * * Excluding effect of accounting changes.
A reconciliation of the provision for income taxes to income taxes computed by applying the statutory federal income tax rate to earnings before income taxes is as follows: Year Ended December 31, 1994 1993 1992 (Thousands of Dollars) Computed income taxes at 35% for 1994 and 1993 and 34% for 1992 $ 46,847 $ 46,114 $ 17,344 State income taxes 9,302 11,858 4,591 Federal tax benefit of state income taxes ( 3,279) ( 4,150) (1,560) Foreign and other taxes 218 391 Adjustments (a) ( 2,864) ( 2,865) $50,006 $51,175 $ 20,766* * Excluding effect of accounting changes. (a) The provision for income taxes for 1994 reflects a 1.5% reduction in the effective state income tax rate and recognition of $2,900,000 of revised income tax benefits related to Tosco's former activities. The provision for income taxes for 1993 includes prior year tax credits of approximately $2,500,000 which were finalized in tax returns filed in October 1993.
Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows: Year Ended December 31, 1994 1993 (Thousands of Dollars) Deductible temporary differences: Environmental cost liability ($ 35,382) ($29,440) Inventories ( 22,318) Postretirement benefit obligations other than pensions ( 4,530) ( 3,439) Accrued liabilities deductible for tax when paid ( 29,466) ( 12,200) Deferred state income taxes (a) ( 1,934) ( 3,273) Allowance for bad debts ( 8,392) ( 5,091) Other ( 12,516) ( 9,089) ( 92,220) ( 84,850) Tax carryforwards: Net operating losses (b) (106,834) ( 176,718) Taxable temporary differences: Inventories 20,258 Property, plant and equipment 156,747 156,793 Deferred turnarounds expensed for tax 41,239 7,251 Capital leases for tax 18,206 21,527 Other 4,753 3,872 241,203 189,443 Total temporary differences and carryforwards $ 42,149 ($ 72,125) Federal income taxes at 35% $ 14,752 ($ 25,330) Tax credit carryforwards (b) ( 17,197) ( 14,659) Alternative minimum tax credit carryforwards (c) ( 10,713) ( 9,242) Deferred federal income tax asset ($ 13,158) ($ 49,231) Current deferred ($ 6,160) ($ 12,123) Long-term deferred ( 6,998) ( 37,108) ($ 13,158) ($ 49,231) (a)Deferred state income tax liabilities of $1,934,000 and $3,273,000 in 1994 and 1993, respectively, were provided for temporary differences primarily related to the excess of state tax over book depreciation. (b)The NOLs which expire by 2001 were generated during the four-year period 1983 through 1986 during which Tosco disposed of three refineries and its investments in oil and gas ventures and restructured its operations around the Avon Refinery. Investment tax credit carryforwards expire as follows: $4,334,000 (1997), $8,330,000 (1998), $464,000 (1999), $732,000 (2000), $337,000 (2001), $462,000 (2002) and $2,537,000 (2008). (c)Alternative minimum tax credit (AMT) carryforwards may be carried forward indefinitely.
Tosco believes that it is more likely than not that the federal deferred tax asset will be realized prior to the expiration of the carryforward period based upon the expected continuation of Tosco's profitable results of continuing operations since 1986 and resultant taxable income. 13.Employee Benefit and Incentive Compensation Plans Pension Plans Tosco has non-contributory, defined benefit pension plans covering substantially all of its employees located at the Avon and Bayway Refineries and its union employees at the Ferndale Refinery (collectively, the Plans). The benefits under the Plans generally are based on the employee's years of service and average earnings for the three highest consecutive calendar years of compensation during the ten years immediately preceding retirement. Contributions to the Plans are at least sufficient to meet the minimum funding requirements of applicable laws and regulations but no more than the amount deductible for federal income tax purposes. The assets of the Plans are managed by major financial institutions and invested in high quality equity securities, guaranteed investment contracts, corporate and government debt securities and real estate equity funds. The funded status of the Plans and amounts recognized in Tosco's balance sheet are as follows:
December 31, 1994 1993 (Thousands of Dollars) Actuarial present value of benefit obligations: Vested benefits ($ 36,132) ($35,109) Nonvested benefits ( 1,762) ( 1,056) Accumulated benefit obligations (ABO) ( 37,894) ( 36,165) Plan assets at fair value 47,371 41,920 Plan assets in excess of ABO $ 9,477 $ 5,755 Projected benefit obligations (PBO) for services rendered to date ($60,016) ($65,036) Plan assets at fair value 47,371 41,920 PBO in excess of plan assets ( 12,645) ( 23,116) Prior service cost not yet recognized in net periodic pension cost 10,528 15,240 Unrecognized net loss 781 7,054 Unrecognized net obligation at January 1, 1987 being amortized over 15 years 2,014 2,302 Prepaid pension cost $ 678 $ 1,480 Net pension cost included the following components: Service cost $ 5,284 $ 3,668 Interest 4,283 3,581 Actual return on plan assets ( 450) ( 3,521) Net amortization and deferral ( 1,715) 1,843 Net pension cost $ 7,402 $ 5,571 Major assumptions at year end (a) Assumed discount rate (b) 8-1/4% 7% Assumed rate of future compensation increase 5% 5% Expected rate of return on plan assets 7-1/2% 7-1/2% ____________________ (a) Net pension cost is determined using the assumptions as of the beginning of each respective year. The funded status of the Plans is determined using the assumptions as of the end of each respective year. Net pension cost for 1992 was $2,448,000. (b) The discount rate represents the expected yield on a diversified portfolio of high-grade (AA rated or equivalent) fixed income investments with cash flow streams approximating payments under the Plans. The higher 1994 discount rate is reflective of the rise in interest rates that occurred in 1994.
In connection with Tosco's acquisition of the Bayway and Ferndale refineries, pension coverage was extended to certain acquired employees. Pension benefits granted provide for recognition of past employees' service but benefits accrued through the respective acquisition dates will be paid by their former employers. Benefits are payable at the normal retirement age of 65 with reduced benefits for early retirement (as defined). In 1990, Tosco adopted a Senior Executive Retirement Plan to provide retirement benefits to selected senior executives of Tosco and their beneficiaries. A provision of $1,855,000, $1,267,000 and $1,237,000 was recorded in 1994, 1993 and 1992, respectively. Employee and Retiree Benefit Plans Tosco provides health care and life insurance benefits for all of its employees and postretirement health care and life insurance benefits for certain employees (primarily employees at the Avon Refinery). Beginning January 1, 1988, new employees not employed at the Avon Refinery, including employees acquired in the Bayway and Tosco Northwest acquisition, are not eligible for postretirement benefits. Health care benefits for eligible employees and retirees are provided through insurance companies whose premiums are based on the benefits paid during the year. The health care plans are contributory, with employee/retiree contributions adjusted periodically, and contain other cost-sharing features such as deductibles and coinsurance. The life insurance plans are noncontributory. Tosco elected to prospectively recognize its accumulated postretirement benefits obligation (APBO) other than pensions of $32,661,000 as of January 1, 1992, the effective date of Tosco's adoption of SFAS No. 106. In view of the escalating costs of medical care, Tosco revised its retiree benefit plans in 1993 and 1994 to, among other things, limit its future obligation to absorb health care increases. These revisions as well as favorable changes in experience and cost trends reduced Tosco's APBO to $25,797,000 and $14,209,000 as of December 31, 1993 and 1994, respectively. The total cost of postretirement benefits, including the amortization of the transition obligation, was $2,630,000 for 1994, an increase of $433,000 over the amount which would have been expensed under the pay as you go approach.
The funded status of the postretirement plans and the amounts recognized in Tosco's balance sheet are as follows: December 31, 1994 1993 (Thousands of Dollars) Accumulated postretirement benefit obligation (APBO): Retirees $10,788 $ 18,787 Fully eligible active plan participants 1,418 3,241 Other active plan participants 2,003 3,769 14,209 25,797 Plan assets at fair value (Insurance assets) 5,265 5,580 APBO in excess of plan assets 8,944 20,217 Unrecognized net gain from past experience different from that assumed and from other changes 11,461 31 Unrecognized transition obligation ( 15,875) ( 16,809) Accrued postretirement benefit liability $ 4,530 $ 3,439 Net periodic postretirement benefit cost for 1994 and 1993 includes the following components: Amortization of transition obligation over 20 years $ 934 $ 934 Interest cost on APBO 1,702 1,813 Service cost 330 189 Actual return on life insurance assets 41 ( 411) Net amortization and deferral ( 377) 16 Net postretirement benefit cost 2,630 2,541 Liability at beginning of year 3,439 3,111 Employer payments, net of employee contributions ( 2,197) ( 2,213) Favorable claim expense dividend 658 Accrued postretirement benefit liability $ 4,530 $ 3,439 The following assumptions were used to develop the net postretirement benefit: Discount rate 8-1/4% 7% Current year health care cost trend rate (a) (2.6%) 11% Ultimate health care cost trend rate 5-1/2% 6% Year ultimate trend rate is achieved 2002 2002 Effect of a 1% point increase in the health care cost trend rate APBO $ 881 $ 1,977 Aggregate of service and interest cost $ 136 $ 137 (a) The negative trend rate for 1994 is a result of premium rate reductions. In 1995, the composite rate of increase is assumed to be 7.8%.
The changes in assumptions as well as changes in circumstances and experience resulted in a net gain of $11,461,000 which will be recognized as a reduction in postretirement benefit expense on a straight line basis over the average remaining employee service period of 6 years. Postretirement benefit expense for 1992 was $4,919,000. Savings Plan A savings plan has been established for all eligible employees (Tosco Corporation Capital Accumulation Plan (CAP)) to encourage long-term savings and to provide additional funds for retirement. Participants may make, within certain limitations, voluntary contributions under Section 401(k) of the Internal Revenue Code based upon a percentage of their compensation. Tosco makes matching contributions based upon years of contributory participation (as defined under the CAP) for employees who elect to make certain specified and minimum contributions. In addition, eligible employees receive an additional contribution equal to 5% of their compensation (up to $150,000 in 1994 and 1995) which is intended to replace Tosco's contribution under a terminated pension plan. Participants are immediately vested in both their voluntary and Tosco contributions. Contributions by Tosco to the savings plan for the years ended December 31 were $7,146,000 (1994), $5,524,000 (1993), and $2,379,000 (1992). Management Incentive Plans A Cash Incentive Plan (CIP) was established for members of middle and senior management in 1987. The CIP sets forth awards which are computed as a variable percentage of a participant's base salary, which percentage is dependent upon the pretax income (as defined) of the business unit. Tosco also adopted a bonus plan in 1990 for senior executives who are not participants in the CIP based on Tosco's per share pretax income (as defined). Results of operations for the years ended December 31, 1994, 1993 and 1992 include incentive compensation of $6,800,000, $9,531,000, and $5,616,000 respectively, of which $5,350,000, $7,458,000 and $4,393,000, respectively, were included in selling, general and administrative expense. Employee Stock Ownership Plan (ESOP) In 1992, Tosco's Board of Directors authorized the merger of the ESOP into the CAP. Effective January 1, 1993, contributions of 2% of eligible pay previously made to the ESOP were paid to the CAP for all eligible participants. ESOP expense for 1992 was $516,000. 14. Lease Commitments Tosco distributes petroleum products throughout its marketing areas through a combination of owned and leased terminals. Ten year lease arrangements for two major West Coast product distribution terminals were renewed in 1991 and additional leases for the Riverhead product distribution terminal and Northville Industries oil distribution system, both in Long Island, New York, were added in 1992 and 1993 (for terms of 5-1/2 and 9 years, respectively). Tosco has options to purchase the Riverhead Terminal and the Northville distribution system at their fair market values at the end of their respective leases. Other product distribution terminal leases are generally for short periods of time and continue in effect until canceled by either party with contracted days of notice. The product distribution terminal leases, other than the Long Island leases, are subject to escalation either based on increases in annual average wage rates or as allowed by the Public Utilities Commission (PUC). A portion of the product distribution terminals' storage and handling facilities is subleased to others. In July of 1994, Tosco entered into a five year lease, with options to renew for two additional five year periods, with Statia Terminals for approximately 3,600,000 barrels of storage capacity at Point Tupper, Nova Scotia. The facility will be used primarily to store crude oil destined for the Bayway Refinery. Minimum annual rentals for distribution terminals currently under long-term lease total $23,700,000 for 1995, including approximately $4,400,000 for the Point Tupper facility. Thereafter, annual rentals total $18,900,000, $30,000,000 (including an $11,500,000 payment due at the end of the Riverhead terminal lease), $14,600,000 and $11,300,000 for the years 1996 to 1999, respectively. In conjunction with the acquisition of the BP California retail system in August 1994, Tosco entered into long-term leases with a special purpose entity established to purchase land and equipment in the BP California retail system. The leases provide Tosco with options to purchase at agreed upon contracted values (a) not less than all of the leased assets at annual anniversary dates and (b) a portion of the leased assets for resale to unaffiliated parties at quarterly lease payment dates. Tosco may also cancel the leases at the second through sixth anniversary dates provided that the lessor receives minimum sales values for the leased assets. The purchase option price and guaranteed sales values decline over the applicable periods of the leases. Minimum annual rentals, which vary with a reference interest rate (LIBOR) and assume that Tosco exercises its lease renewal options, approximate $5,300,000 for the first four years, $4,700,000 for the fifth and sixth years, and $3,100,000 for the seventh year. Final payments totaling $55,000,000 are due at the end of the leases. Tosco entered into similar leases in conjunction with the acquisition of Exxon's retail marketing assets in Arizona in December 1994. Minimum annual rentals currently approximate $6,000,000 over the term of the lease with a final payment of $44,000,000 due at the end of the seventh year. In addition, Tosco also assumed existing leases of property, with expiration dates through 2011, and subleases of retail properties, with expiration dates through 1998, in connection with the acquisitions of retail assets in Northern California and Arizona. Tosco leases sulfuric acid and MTBE manufacturing facilities, both located at the Avon Refinery. The leases of the sulfuric acid and MTBE facilities expire in 1998 and 2007, respectively, and the leases may be extended or the facilities purchased at their estimated fair market values at the end of the lease terms. Tosco also leases transportation equipment, including railcars and trucks, as well as computer and office equipment primarily at leased office space at various locations in the United States. Future minimum obligations under non-cancelable operating leases and warehousing agreements at December 31, 1994 were as follows: Years Ending Thousands December 31, of Dollars 1995 $ 57,890 1996 49,432 1997 57,599 1998 35,747 1999 33,033 2000 and subsequent 196,201 429,902 Less future minimum sublease income ( 49,282) Total minimum lease payments $ 380,620
Rental expense, including amounts under non-cancelable operating leases, was as follows: Year Ended December 31, 1994 1993 1992 (Thousands of Dollars) Minimum rental and warehousing charges $54,986 $25,428 $15,644 Contingent rental and warehousing charges (based primarily on throughput) 6,952 4,203 3,494 61,938 29,631 19,138 Rental income on properties subleased to others (21,214)( 3,025) ( 1,493) Net rental expense $ 40,724 $26,606 $17,645
15.Commitments and Contingencies Tosco is subject to extensive federal, state and local regulation of environmental and permitting matters relating to its petroleum refining and marketing operations. These regulations are complex and subject to differing interpretations, and Tosco is currently involved in a number of proceedings and discussions regarding the removal and mitigation of the environmental effects of subsurface liquid hydrocarbons and alleged levels of hazardous waste at the Avon Refinery and other locations, including Tosco's Spokane, Washington terminal which is located in a site on the Superfund National Priorities List. Tosco recorded environmental cost accruals of $6,000,000 and $25,000,000 for 1994 and 1992, respectively, based upon a determination that investigative work and remedial actions would be required. In July 1993, outstanding litigation concerning environmental issues was settled with the predecessor owners of the Avon Refinery (Settlement Agreement). Under the Settlement Agreement, the former owners agreed to pay up to $18,000,000 for one-half of the costs that may be incurred for compliance with certain environmental orders and to provide Tosco with a $6,000,000 credit for past expenses (which Tosco will use to reduce its one-half share of future costs). After the initial term of the Settlement Agreement (the later of four years or until the $36,000,000 shared cost maximum is expended), the parties may elect to continue the Settlement Agreement or to reinstate litigation. Tosco and the former owners have established a committee to review and approve expenditures for environmental investigative and remedial actions at the Avon Refinery. Through December 31, 1994, the committee has spent approximately $1,200,000 on such matters. Remedial actions are subject to negotiation with governmental agencies and therefore the timing and amount of future cash expenditures is uncertain. In addition, further investigative work and negotiations with the governmental agencies may result in additional remedial actions which Tosco cannot presently predict. Tosco has not relinquished its right to make claims for reimbursement of future costs and is not required to reimburse amounts received under the Settlement Agreement. Tosco received $3,474,000 in 1994 in partial settlement of litigation cost reimbursement claims from its insurance carriers and is pursuing additional recoveries and reimbursement under insurance policies in effect during the applicable periods of coverage. By agreement, Exxon is responsible for environmental obligations related to or arising out of its ownership and operation of the Bayway Refinery, as will be set forth in a list to be prepared under administrative consent orders between Exxon and the State of New Jersey. Bayway has the right, for a period of one year following the expected 1997 completion date of such list, to add additional items to the list. Responsibility for clean-up projects thereafter identified will be shared by Exxon and Tosco based on their respective length of ownership. Tosco has also received indemnifications with respect to environmental obligations arising out of or relating to the period prior to the respective acquisition dates of the Ferndale Refinery and retail assets in the Pacific Northwest and Northern California from BP, and the Arizona retail properties from Exxon (Note 2). Environmental exposures are difficult to assess and estimate for numerous reasons including the complexity and differing interpretations of governmental regulations, the lack of reliable data, the number of potentially responsible parties and their financial capabilities, the multiplicity of possible solutions, the years of remedial and monitoring activity required, and the identification of new sites. While Tosco believes that it has adequately provided for environmental exposures, should these matters be resolved unfavorably to Tosco, they could have a material adverse effect on its long-term consolidated financial position and results of operations. There are various other legal proceedings and claims pending against Tosco which are common to its operations. While it is not feasible to predict or determine the ultimate outcome of these matters, it is the opinion of management that these suits will not result in monetary damages which in the aggregate would be material to the business or operations of Tosco. In October 1986, Tosco and Atlantic Richfield Co. (ARCO) entered into an agreement pursuant to which ARCO has agreed for ten years (with two five-year renewal options exercisable by ARCO) to deliver to Tosco an average of 50,000 barrels per day of Alaskan North Slope crude oil in exchange for a quantity of gasoline that is a variable percentage of the amount of crude oil delivered, based upon the prices of certain crude oils (ARCO Exchange Agreement). Under the ARCO Exchange Agreement, Tosco has agreed that in the event it desires to sell the Avon Refinery, Tosco will first offer the Avon Refinery for sale to ARCO. If ARCO declines, Tosco will be free for a certain period of time to sell the Avon Refinery for consideration no less favorable to Tosco than was initially offered to ARCO, subject to the effect of possible continuing Tosco obligations of exchange under the ARCO Exchange Agreement. In addition, in any such subsequent sale ARCO has the right to participate in the bidding and to acquire the Avon Refinery as long as it agrees to pay a specified sum more than any other bidder. The ARCO Exchange Agreement is subject to renegotiation in the event conditions change to the extent that one of the parties has sustained significant losses for a substantial period of time, or structural changes make substantial losses likely. In the event such renegotiation is unsuccessful, the ARCO Exchange Agreement is subject to arbitration and possible termination. Tosco has employment agreements with certain of its executive officers which provide for lump sum severance payments and accelerated vesting of options upon termination of employment under certain circumstances or a change of control, as defined. Tosco's potential obligation to its nine executive officers was $5,486,000 at December 31, 1994. Tosco, in keeping with industry practice, schedules periodic maintenance of major processing units for significant non-routine repairs and replacements as the units reach the end of their normal operating cycles (turnarounds). Unscheduled turnarounds also occur because of operating difficulties or external factors. Throughput and earnings are lowered, and deferred turnaround expenditures increased, during such periods. Tosco's NOL, investment tax and AMT credit carryforwards (Note 12) are subject to various complex tax rules and regulations which may be subject to varying interpretations. These carryforwards may be adversely affected by changes in the rules and regulations or significant changes in the ownership of Tosco or its trade or business. Therefore, the future benefit of these carryforwards, although more likely than not realizable under current rules and regulations, is not assured. Effective December 1993, the date commercial operation of a hydrogen production facility (Hydrogen Plant) commenced, Tosco entered into 15 year agreements to purchase up to 25 million cubic feet per day of hydrogen and steam (Hydrogen Supply Agreement) and to provide utilities, wastewater disposal and other services to the Hydrogen Plant. The Hydrogen Plant, located at the Avon Refinery on property leased from Tosco, is owned and operated by a third party. The Hydrogen Supply Agreement may be modified to provide for higher levels of hydrogen at prices to be negotiated and can be terminated under certain circumstances upon payment of a stipulated fee (which decreases over the term of the agreement). To control costs and improve delivery reliability, Tosco entered into a twelve year time charter agreement with Neptune Orient Lines commencing after completion of construction of four 100,000 DWT crude oil tankers. The first tanker is scheduled to be delivered in June 1996 with the last tanker scheduled for delivery in the first quarter of 1997. The tankers will be used to move crude oil from the Nova Scotia storage location to the Bayway Refinery or in direct shipments to other locations. 16. Quarterly Financial Data (Unaudited)
Thousands of Dollars Except Per Share Data First Second Third Fourth Quarter Quarter Quarter Quarter 1994 Sales $1,495,688 $1,399,761 $1,671,557 $1,798,751 Gross profit on sales 105,497 45,049 48,175 61,743 Inventory valuation recovery 17,651 Environmental cost accrual (6,000) Operating contribution $ 105,497 $ 45,049 $ 48,175 $ 73,394 Income from continuing operations before income taxes $ 65,893 $ 17,534 $ 16,099 $ 34,323 Provision for income taxes 27,026 3,082 6,423 13,475 Net income $ 38,867 $ 14,452 $ 9,676 $ 20,848 Earnings per share: Primary $ 1.11 $ .37 $ .25 $ .56 Fully diluted $ 1.04 $ .37 $ .25 $ .56 Thousands of Dollars Except Per Share Data First Second Third Fourth Quarter Quarter Quarter Quarter 1993 Sales $ 416,136 $956,254 $1,043,673 $1,143,154 Gross profit on sales 41,588 64,321 75,502 70,314 Inventory valuation writedown ( 17,651) Operating contribution $ 41,588 $ 64,321 $ 75,502 $ 52,663 Income from continuing operations before income taxes $ 24,789 $ 37,220 $ 47,348 $ 22,397 Provision for income taxes 9,987 15,079 19,423 6,686 Net income $ 14,802 $ 22,141 $ 27,925 $ 15,711 Earnings per share: Primary $ .42 $ .67 $ .86 $ .43 Fully diluted $ .42 $ .65 $ .81 $ .43
SCHEDULE VIII
TOSCO CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1994, 1993 and 1992 (Thousands of Dollars) Column A Column B Column C Column D Column E Charged Balance at (Credited) to Charged Balance Beginning Costs and to Other at End of Description of Period Expenses Accounts Deductions Period 1994 Allowance for Uncollectible Trade Accounts Receivable $5,091 $3,301 $ - $8,392 1993 Allowance for Uncollectible Trade Accounts Receivable $5,164 $ - $ 73 $5,091 1992 Allowance for Uncollectible Trade Accounts Receivable $5,148 $ 26 $ 10 $ 5,164
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, and the State of California, on March 16, 1995. TOSCO CORPORATION (Registrant) By /s/ THOMAS D. O'MALLEY (Thomas D. O'Malley) Chairman of the Board of Directors, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title /s/ THOMAS D. O'MALLEY Chairman of the Board of March16, 1995 (Thomas D. O'Malley) Directors, President and Chief Executive Officer /s/ JEFFERSON F. ALLEN Principal Financial Officer, March 16,1995 (Jefferson F. Allen) Executive Vice President and Director /s/ ROBERT I. SANTO Principal Accounting Officer March 16, 1995 (Robert I. Santo) Director March 1995 (Joseph B. Carr) /s/ HOUSTON I. FLOURNOY Director March 16, 1995 (Houston I. Flournoy) /s/ CLARENCE G. FRAME Director March 16, 1995 (Clarence G. Frame) /s/ EDMUND A. HAJIM Director March 16, 1995 (Edmund A. Hajim) /s/ JOSEPH P. INGRASSIA Director March 16, 1995 (Joseph P. Ingrassia) /s/ CHARLES J. LUELLEN Director March 16, 1995 (Charles J. Luellen) EX-99 2 Exhibit 10(d) AMENDMENT NO. 3 DATED AS OF MARCH 31, 1994 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 8, 1993 AMENDMENT No. 3 (the "Amendment") dated as of March 31, 1994 by and among TOSCO CORPORATION, a Nevada corporation ("Tosco") and BAYWAY REFINING COMPANY, a Delaware corporation ("Bayway") as co-borrowers (collectively, the "Borrowers"), Seminole Fertilizer Corporation, a Delaware corporation, ("Seminole"), the financial institutions listed on Schedule 1.01(a) to the Credit Agreement referred to below, as in effect immediately prior to the date hereof (the "Existing Banks"), THE SUMITOMO BANK, LIMITED ("Sumitomo" and together with the Existing Banks, the "Banks"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), as co-agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as co-agent and co-arranger, and THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), as agent (in that capacity, the "Agent") and as arranger for the Banks. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement referred to below shall have the same meaning herein as in the Credit Agreement, as amended hereby. WHEREAS, the Borrowers, the Existing Banks, the Co-Agents, the Agent and the FMCP L/C Bank are parties to that certain Credit Agreement dated as of April 8, 1993 (as amended, restated, modified or supplemented and in effect from time to time, the "Credit Agreement"); and WHEREAS, Sumitomo wishes to become a party to the Credit Agreement and the Borrowers, Seminole and the Existing Banks have consented thereto; and WHEREAS, the Borrowers have requested, and the Banks have agreed, that the aggregate commitment of the Banks to extend credit under the Credit Agreement be increased to $400,000,000; NOW, THEREFORE, in consideration of the foregoing premises the parties hereto hereby agree as follows: Section 1. Amendment to Credit Agreement. The Credit Agreement is hereby amended by deleting Schedules 1.01(a) and (b) thereto and replacing it with Schedules 1.01(a) and (b) hereto. Section 2. Assignment and Acceptance. Section 2.1. Assignments. Each of FNBB, BofA and Chase (collectively, the "Assignor Banks" and individually, an "Assignor Bank") hereby sells and assigns to The Sumitomo Bank, Limited ("Assignee Bank") a certain percentage interest in and to all of such Assignor Bank's rights and obligations under the Credit Agreement as of the effective date hereof, including, without limitation, such percentage interest in the Assignor Bank's Commitment as in effect on the effective date hereof, and the outstanding Loans, Letter of Credit Reimbursement Obligations and Acceptance Obligations owing to the Assignor Bank on the effective date hereof, and such percentage interest in the Revolving Credit Note held by the Assignor Bank (such interest being hereinafter referred to as the "Assigned Portion") such that, after giving effect to the assignments contemplated hereby and the increase in the aggregate Commitments of all of the Banks contemplated hereby and as of the effective date hereof, the respective Commitments and Commitment Percentages of the Assignor Banks and the Assignee Bank shall be as set forth on Schedule 1.01(b) to the Credit Agreement, as amended hereby and each Bank shall have that percentage interest in all outstanding Loans, Letter of Credit Reimbursement Obligations and Acceptance Obligations. Notwithstanding any term or provision of Section 10.03 of the Credit Agreement to the contrary, the execution and delivery hereof by the Assignor Banks, the Assignee Bank, the Agent, the FMCP L/C Bank and the Borrowers shall constitute an Assignment and Acceptance delivered in accordance with the Credit Agreement and shall be effective in respect of the assignments contemplated hereby. Section 2.2. Representations and Warranties of Assignor Banks. Each Assignor Bank (i) represents and warrants that as of the date hereof, its Commitment and Commitment Percentage (without giving effect to assignments thereof which have not yet become effective, including, but not limited to, the assignment contemplated hereby) is the amount set forth opposite such Assignor Bank's name under the respective captions "Commitment" and "Commitment Percentage" on Schedule 1.01(b) to the Credit Agreement as in effect prior to the effective date hereof; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any Ancillary Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any Ancillary Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or any of its Subsidiaries or the performance or observance by any Borrower or any of its Subsidiaries of any of its or their obligations under the Credit Agreement or any Ancillary Agreement or any other instrument or document furnished pursuant thereto; and (v) requests that in connection with such assignment and the increase in the aggregate total Commitments of all of the Banks as set forth herein the Agent and the Borrowers exchange the Revolving Credit Notes referred to in Section 2.1 above for new Revolving Credit Notes, each dated the Closing Date, payable to the order of each Assignor Bank and the Assignee Bank in the principal amount of the Commitment set forth opposite such Assignor Bank's name and the Assignee Bank's name on Schedule 1.01(b) to the Credit Agreement as amended hereby. Section 2.3. Representations and Warranties of Assignee Bank. The Assignee Bank represents and warrants (i) that it has received a copy of the Credit Agreement and each Ancillary Agreement, together with copies of the financial statements referred to in Section 4.11 of the Credit Agreement and the most recent financial statements delivered to the Banks pursuant to Sections 5.04(d)(i) and 5.04(e) of the Credit Agreement and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment and Assignment, (ii) that it will, independently and without reliance upon any Assignor Bank or any other Bank or the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any Ancillary Agreement, (iii) that it is an Eligible Assignee and (iv) that the making of Loans by the Assignee Bank will not be unlawful as set forth in Section 2.16 of the Credit Agreement. Section 2.4. Appointment of Agent. The Assignee Bank (i) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the Ancillary Agreements as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, and (ii) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the Ancillary Agreements are required to be performed by it as a Bank. Section 2.5. Respective Rights and Obligations of Assignor Banks and Assignee Bank. As of the Amendment and Assignment Effective Date, (i) each Assignee Bank shall, in addition to any rights and obligations under the Credit Agreement held by it immediately prior to the effective date hereof, have the respective rights and obligations of a Bank under the Credit Agreement and the Ancillary Agreements that have been assigned to it pursuant to this Section 2 and under Sections 2.15 and 2.20 of the Credit Agreement with respect to the applicable Assigned Portion and (ii) each Assignor Bank shall, to the extent provided in this Section 2, relinquish its rights and be released from its obligations under the Credit Agreement and the Ancillary Agreements with respect to the Assigned Portion. Section 2.6. Agent's Duties in Respect of Assignment and Acceptance. From and after the effective date hereof, the Agent shall record the information contained in this Section 2 in the Register and shall make all payments under the Credit Agreement and the Revolving Credit Notes in respect of the interests assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee Bank. The Assignor Banks and Assignee Bank shall make all appropriate adjustments under the Credit Agreement and the Revolving Credit Notes for periods prior to the effective date hereof directly between themselves as directed by the Agent. Section 3. Scope of Amendment. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Section 4. Representations and Warranties. The Borrowers hereby jointly and severally represent and warrant to the Banks, the Agent and the FMCP L/C Bank as follows: (a) Representations and Warranties in Credit Agreement. The representations and warranties of the Borrowers and Seminole contained in the Credit Agreement (i) were true and correct in all material respects when made, and (ii) except to the extent such representations and warranties by their terms are made solely as of a prior date, continue to be true and correct in all material respects on the date hereof. (b) Authority, etc. The execution and delivery by the Borrowers and Seminole of this Amendment and the Revolving Credit Notes and the performance by the Borrowers and Seminole of all of their agreements and obligations under this Amendment and the Revolving Credit Notes are within the corporate authority of each of the Borrowers and Seminole, have been duly authorized by all necessary corporate action on the part of each of the Borrowers and Seminole, and do not and will not (i) contravene any provision of any Borrower's or Seminole's charter, other incorporation papers, by-laws or any stock provision, or any amendment thereof, (ii) conflict with, or result in a breach of any material term, condition or provision of, or constitute a default under or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of the property of any Borrower or Seminole under any agreement, deed of trust, indenture, mortgage or other instrument to which such Borrower or Seminole is a party or by which any of such Borrower's or Seminole's properties are bound, (iii) violate or contravene any provision of any law, regulation, order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official, (iv) require any waiver, consent or approval by any creditor of any Borrower or Seminole which has not been obtained or (v) require any approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency under any provision of any law, except those actions which have been taken or will be taken prior to the date of execution of this Amendment. (c) Enforceability of Obligations. This Amendment, the Credit Agreement as amended hereby, the Revolving Credit Notes delivered in connection herewith and the Loan Documents constitute the legal, valid and binding obligations of the Borrowers and Seminole enforceable against the Borrowers and Seminole in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general applications affecting the rights and remedies of creditors, and (ii) the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceedings for such remedies may be brought. Section 5. Confirmation of Collateral Documents. Each of the Borrowers and Seminole hereby ratify and confirm each of the Collateral Documents and the pledges and security interests created thereby. Each of the Borrower and Seminole hereby further ratify and confirm that the Collateral Documents and the pledges and security interest created thereby secure the Obligations of the Borrowers and Seminole under the Credit Agreement, as amended hereby, and the Revolving Credit Notes. Section 6. Conditions to Effectiveness. The effectiveness of this Amendment No. 3 shall be conditioned upon receipt by the Agent of the following, in form and substance satisfactory to the Banks: (a) this Amendment No. 3, executed by the Borrowers, Seminole, the Banks, the Agent, the Co-Agents and the FMCP L/C Bank; (b) Revolving Credit Notes, substantially in the form of Exhibit D-1 hereto, executed and delivered by the Borrowers and Seminole and payable to the order of each of the Banks in the respective aggregate principal amounts set forth under the caption "Commitment" opposite each such Bank's name on Schedule 1.01(b) hereto; (c) copies, certified by the Secretary of each of the Borrowers and Seminole to be true and complete on the date of execution of this Amendment, of the records of all actions taken by each such Borrower and Seminole as may be required according to the terms of each such Borrower's or Seminole's charter, other incorporation documents and by-laws to authorize (i) the execution and delivery of this Amendment and each of the Revolving Credit Notes by each such Borrower and Seminole and (ii) the performance by each such Borrower and Seminole of all of its agreements and obligations under this Amendment and the Credit Agreement as amended hereby; (d) a certificate of the Secretary of each of the Borrowers and Seminole (i) setting forth the names, incumbency and specimen signatures of those officers of each of the Borrowers and Seminole authorized to execute and deliver this Amendment and the Revolving Credit Notes and (ii) with respect to the Borrowers, stating that there have been no amendments to the charter documents and by-laws of the Borrowers delivered to the Agent and the Banks on April*8, 1993; (e) an opinion of counsel to the Borrowers and Seminole in form and substance satisfactory to the Agent; and (f) fees, payable to the Agent for the account of each Bank, in the amounts separately agreed to by the Borrowers as set forth in certain letters dated March 4, 1994. Section 7. Certain Transitional Arrangements. Section 7.1. Revolving Credit Loans. Effective as of the date hereof, each Bank shall make such dispositions and arrangements with each other Bank with respect to the then outstanding Revolving Credit Loans (the "Loan Adjustment") as shall result in the amount of Revolving Credit Loans owed to each Bank being equal to the product of such Bank's Ratable Portion multiplied by the aggregate Revolving Credit Loans outstanding on the effective date hereof (the "Loan Adjusted Amount"). Upon the occurrence of the Loan Adjustment, the Agent shall amend each Loan Account to reflect such Bank's Loan Adjusted Amount. The Ratable Portion of each Bank shall be adjusted as at the effective date hereof and the Commitment Fee payable for the period during which the Ratable Portion of each Bank was adjusted pursuant hereto shall be allocated among the Banks according to the daily Ratable Portion for each Bank for each day during such period. In the event any of the Revolving Credit Loans are Eurodollar Rate Loans, the Borrowers shall reimburse the Banks for any and all fees, taxes, penalties or other breakage costs incurred in connection with the Loan Adjustment. Section 7.2. Existing Credit Instruments. Effective as of the date hereof, each Bank shall make such dispositions and arrangements with each other Bank with respect to the participations of the Banks in each Credit Instrument then outstanding (the "Credit Instrument Adjustment") as shall result in the participations held by each Bank in each such Credit Instrument being equal to the product of such Bank's Ratable Portion multiplied by the aggregate participations in such Credit Instrument on the date hereof (the "Credit Instrument Adjusted Amount"). All commissions and fees payable to the Banks in connection with such Credit Instruments for the period during which the Ratable Portion of each Bank was adjusted pursuant hereto shall be allocated among the Banks according to the daily Ratable Portion for each Bank for each day during such period. Section 7.3. Return of Old Notes. Promptly after the effective date of this Amendment*No. 3, the Banks will return to the Agent the Revolving Credit Notes previously delivered by the Borrowers and Seminole to the Banks under the Credit Agreement which are superseded by the Revolving Credit Notes delivered to the Banks pursuant to this Amendment. Upon receipt of such superseded Revolving Credit Notes from the Banks, the Agent shall return such Revolving Credit Notes to the Borrowers and Seminole. Section 8. Execution in Counterparts. This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. Section 9. Governing Law. This Amendment shall be construed according to and governed by the laws of The Commonwealth of Massachusetts. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as an agreement under seal as of the date set forth at the beginning of this Amendment. TOSCO CORPORATION By: __________________________________ Title: SEMINOLE FERTILIZER CORPORATION By:___________________________________ Title: BAYWAY REFINING COMPANY By:____________________________________ Title: THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent By:____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent By:____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, individually By:____________________________________ Title: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), individually and as Co-Agent By:____________________________________ Title: ARAB BANKING CORPORATION By:____________________________________ Title: NATIONAL CITY BANK By:____________________________________ Title: THE FUJI BANK, LIMITED By:____________________________________ Title: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By:____________________________________ Title: BANK HAPOALIM B.M. By:____________________________________ Title: By:____________________________________ Title: UNITED JERSEY BANK By:____________________________________ Title: THE YASUDA TRUST AND BANKING CO., LTD. By:____________________________________ Title: THE SUMITOMO BANK, LIMITED By:____________________________________ Title: INTERNATIONALE NEDERLANDEN BANK, N.V., as FMCP L/C Bank By:____________________________________ Title: Exhibit 10(e) AMENDMENT NO. 4 DATED AS OF MAY 9, 1994 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 8, 1993 AMENDMENT No. 4 (the "Amendment") dated as of May 9, 1994 by and among TOSCO CORPORATION, a Nevada corporation ("Tosco") and BAYWAY REFINING COMPANY, a Delaware corporation ("Bayway") as co-borrowers (collectively, the "Borrowers"), Seminole Fertilizer Corporation, a Delaware corporation, ("Seminole"), the financial institutions listed on Schedule 1.01(a) to the Credit Agreement referred to below, as in effect immediately prior to the date hereof (the "Existing Banks"), THE Dai-Ichi Kangyo Bank, LTD. ("Dai-Ichi"), The Sanwa Bank Limited ("Sanwa"), SeaTTLE-first NATIONAL Bank ("Seafirst"), Union Bank ("Union"), Midlantic National Bank ("Midlantic"), National Westminster Bank Plc ("NatWest"), Credit Lyonnais NEW YORK BRANCH ("Lyonnais"), The Sakura Bank, Ltd. ("Sakura"), PNC Bank, NATIONAL ASSOCIATION ("PNC"), Banca di Roma ("di Roma", and together with Dai-Ichi, Sanwa, Seafirst, Union, Midlantic, NatWest, Lyonnais, Sakura and PNC, the "New Banks"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), as co-agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as co-agent and co-arranger, and THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), as agent (in that capacity, the "Agent") and as arranger for the Existing Banks and the New Banks. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement referred to below shall have the same meaning herein as in the Credit Agreement, as amended hereby. The Existing Banks and the New Banks are hereinafter referred to collectively as the "Banks". WHEREAS, the Borrowers, the Existing Banks, the Co-Agents, the Agent and the FMCP L/C Bank are parties to that certain Credit Agreement dated as of April 8, 1993 (as amended, restated, modified or supplemented and in effect from time to time, the "Credit Agreement"); and WHEREAS, the New Banks wish to become parties to the Credit Agreement and the Borrowers, Seminole and the Existing Banks have consented thereto; and WHEREAS, the Borrowers have requested, and the Banks have agreed, that the aggregate commitment of the Banks to extend credit under the Credit Agreement be increased to $450,000,000; NOW, THEREFORE, in consideration of the foregoing premises the parties hereto hereby agree as follows: Section 1. Amendment to Credit Agreement. (a) The Credit Agreement is hereby amended by deleting Schedules 1.01(a) and (b) thereto and replacing it with Schedules 1.01(a) and (b) hereto. (b) Section 2.09(a) of the Credit Agreement is hereby amended by deleting the words "or the amount by which the aggregate Revolving Credit Debt outstanding exceeds the Commitments" found in the ninth, tenth and eleventh lines thereof and replacing them with the words "of the amount by which the Commitments exceed the aggregate Revolving Credit Debt outstanding". (c) For the purposes of the assignments contemplated by this Amendment No. 4, the provisions of Section 10.03(a)(ii)(A) of the Credit Agreement are hereby waived and the parties hereto hereby consent and agree to such assignments. Section 2. Assignment and Acceptance. Section 2.1. Assignments. Each of FNBB, BofA and Chase (collectively, the "Assignor Banks" and individually, an "Assignor Bank") hereby sells and assigns to the New Banks (each an "Assignee Bank" and collectively the "Assignee Banks") a certain percentage interest in and to all of such Assignor Bank's rights and obligations under the Credit Agreement and the Ancillary Agreements as of the effective date hereof, including, without limitation, such percentage interest in the Assignor Bank's Commitment as in effect on the effective date hereof, and the outstanding Loans, Letter of Credit Reimbursement Obligations and Acceptance Obligations owing to the Assignor Bank on the effective date hereof, and such percentage interest in the Revolving Credit Note held by the Assignor Bank (such interest being hereinafter referred to as the "Assigned Portion") such that, after giving effect to the assignments contemplated hereby and the increase in the aggregate Commitments of all of the Banks contemplated hereby and as of the effective date hereof, the respective Commitments and Ratable Portions of the Assignor Banks and the Assignee Banks shall be as set forth on Schedule 1.01(b) to the Credit Agreement, as amended hereby, and each Bank shall have that percentage interest in all outstanding Loans, Letter of Credit Reimbursement Obligations and Acceptance Obligations. Notwithstanding any term or provision of Section 10.03 of the Credit Agreement to the contrary, the execution and delivery hereof by the Assignor Banks, the Assignee Bank, the Agent, the FMCP L/C Bank and the Borrowers shall constitute an Assignment and Acceptance delivered in accordance with the Credit Agreement and shall be effective in respect of the assignments contemplated hereby. Section 2.2. Representations and Warranties of Assignor Banks. Each Assignor Bank (i) represents and warrants that as of the date hereof, its Commitment and Ratable Portion (without giving effect to assignments thereof which have not yet become effective, including, but not limited to, the assignment contemplated hereby) is the amount set forth opposite such Assignor Bank's name under the respective captions "Commitment" and "Ratable Portion" on Schedule 1.01(b) to the Credit Agreement as in effect prior to the effective date hereof; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any Ancillary Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any Ancillary Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or any of its Subsidiaries or the performance or observance by any Borrower or any of its Subsidiaries of any of its or their obligations under the Credit Agreement or any Ancillary Agreement or any other instrument or document furnished pursuant thereto; and (v) requests that in connection with such assignment and the increase in the aggregate total Commitments of all of the Banks as set forth herein the Agent and the Borrowers exchange the Revolving Credit Notes referred to in Section 2.1 above for new Revolving Credit Notes, each dated as of the effective date hereof, payable to the order of each Assignor Bank and each Assignee Bank in the principal amount of the Commitment set forth opposite such Assignor Bank's name and such Assignee Bank's name on Schedule 1.01(b) to the Credit Agreement as amended hereby and each such new note shall be deemed to be a "Revolving Credit Note" under the Credit Agreement. Section 2.3. Representations and Warranties of Assignee Banks. Each Assignee Bank represents and warrants (i) that it has received a copy of the Credit Agreement and each Ancillary Agreement, together with copies of the financial statements referred to in Section 4.11 of the Credit Agreement and the most recent financial statements delivered to the Banks pursuant to Sections 5.04(d)(i) and 5.04(e) of the Credit Agreement and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment and Assignment, (ii) that it will, independently and without reliance upon any Assignor Bank or any other Bank or the Agent or any Co-Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any Ancillary Agreement, (iii) that it is an Eligible Assignee and (iv) that the making of Loans by the Assignee Bank will not be unlawful as set forth in Section 2.16 of the Credit Agreement. Section 2.4. Appointment of Agent. Each Assignee Bank (i) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the Ancillary Agreements as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, and (ii) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the Ancillary Agreements are required to be performed by it as a Bank. Section 2.5. Respective Rights and Obligations of Assignor Banks and Assignee Banks. As of the effective date hereof, (i) each Assignee Bank shall, in addition to any rights and obligations under the Credit Agreement held by it immediately prior to the effective date hereof, have the respective rights and obligations of a Bank under the Credit Agreement and the Ancillary Agreements that have been assigned to it pursuant to this Section 2 and under Sections 2.15 and 2.20 of the Credit Agreement with respect to the applicable Assigned Portion and (ii) each Assignor Bank shall, to the extent provided in this Section 2, relinquish its rights and be released from its obligations under the Credit Agreement and the Ancillary Agreements with respect to the Assigned Portion. Section 2.6. Agent's Duties in Respect of Assignment and Acceptance. From and after the effective date hereof, the Agent shall record the information contained in this Section 2 in the Register and shall make all payments under the Credit Agreement and the Revolving Credit Notes in respect of the interests assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee Banks. The Assignor Banks and the Assignee Banks shall make all appropriate adjustments under the Credit Agreement and the Revolving Credit Notes for periods prior to the effective date hereof directly between themselves as directed by the Agent. Section 3. Scope of Amendment. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Section 4. Representations and Warranties. The Borrowers hereby jointly and severally represent and warrant to the Banks, the Agent and the FMCP L/C Bank as follows: (a) Representations and Warranties in Credit Agreement. The representations and warranties of the Borrowers and Seminole contained in the Credit Agreement (i) were true and correct in all material respects when made, and (ii) except to the extent such representations and warranties by their terms are made solely as of a prior date, continue to be true and correct in all material respects on the date hereof. (b) Authority, etc. The execution and delivery by the Borrowers and Seminole of this Amendment and the Revolving Credit Notes and the performance by the Borrowers and Seminole of all of their agreements and obligations under this Amendment and the Revolving Credit Notes are within the corporate authority of each of the Borrowers and Seminole, have been duly authorized by all necessary corporate action on the part of each of the Borrowers and Seminole, and do not and will not (i) contravene any provision of any Borrower's or Seminole's charter, other incorporation papers, by-laws or any stock provision, or any amendment thereof, (ii) conflict with, or result in a breach of any material term, condition or provision of, or constitute a default under or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of the property of any Borrower or Seminole under any agreement, deed of trust, indenture, mortgage or other instrument to which such Borrower or Seminole is a party or by which any of such Borrower's or Seminole's properties are bound, (iii) violate or contravene any provision of any law, regulation, order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official, (iv) require any waiver, consent or approval by any creditor of any Borrower or Seminole which has not been obtained or (v) require any approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency under any provision of any law, except those actions which have been taken or will be taken prior to the date of execution of this Amendment. (c) Enforceability of Obligations. This Amendment, the Credit Agreement as amended hereby, the Revolving Credit Notes delivered in connection herewith and the Loan Documents constitute the legal, valid and binding obligations of the Borrowers and Seminole enforceable against the Borrowers and Seminole in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general applications affecting the rights and remedies of creditors, and (ii) the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceedings for such remedies may be brought. Section 5. Confirmation of Collateral Documents. Each of the Borrowers and Seminole hereby ratify and confirm each of the Collateral Documents and the pledges and security interests created thereby. Each of the Borrower and Seminole hereby further ratify and confirm that the Collateral Documents and the pledges and security interest created thereby secure the Obligations of the Borrowers and Seminole under the Credit Agreement, as amended hereby, and the Revolving Credit Notes. Section 6. Conditions to Effectiveness. The effectiveness of this Amendment No. 4 shall be conditioned upon receipt by the Agent of the following, in form and substance satisfactory to the Banks: (a) this Amendment No. 4, executed by the Borrowers, Seminole, the Banks, the Agent, the Co-Agents and the FMCP L/C Bank; (b) Revolving Credit Notes, substantially in the form of Exhibit A hereto, executed and delivered by the Borrowers and Seminole and payable to the order of each of the Assignor Banks and each of the Assignee Banks in the respective aggregate principal amounts set forth under the caption "Commitment" opposite each such Bank's name on Schedule 1.01(b) hereto; (c) copies, certified by the Secretary of each of the Borrowers and Seminole to be true and complete on the date of execution of this Amendment, of the records of all actions taken by each such Borrower and Seminole as may be required according to the terms of each such Borrower's or Seminole's charter, other incorporation documents and by-laws to authorize (i) the execution and delivery of this Amendment and each of the Revolving Credit Notes by each such Borrower and Seminole and (ii) the performance by each such Borrower and Seminole of all of its agreements and obligations under this Amendment and the Credit Agreement as amended hereby; (d) a certificate of the Secretary of each of the Borrowers and Seminole (i) setting forth the names, incumbency and specimen signatures of those officers of each of the Borrowers and Seminole authorized to execute and deliver this Amendment and the Revolving Credit Notes and (ii) with respect to the Borrowers, stating that there have been no amendments to the charter documents and by-laws of the Borrowers delivered to the Agent and the Banks on April*8, 1993; (e) an opinion of counsel to the Borrowers and Seminole in form and substance satisfactory to the Agent; and (f) fees, payable to the Agent for the account of each Bank, in the amounts separately agreed to by the Borrowers as set forth in a certain letter dated March*4, 1994. Section 7. Certain Transitional Arrangements. Section 7.1. Revolving Credit Loans. Effective as of the date hereof, each Bank shall make such dispositions and arrangements with each other Bank with respect to the then outstanding Revolving Credit Loans (the "Loan Adjustment") as shall result in the amount of Revolving Credit Loans owed to each Bank being equal to the product of such Bank's Ratable Portion multiplied by the aggregate Revolving Credit Loans outstanding on the effective date hereof (the "Loan Adjusted Amount"). Upon the occurrence of the Loan Adjustment, the Agent shall amend each Loan Account to reflect such Bank's Loan Adjusted Amount. The Ratable Portion of each Bank shall be adjusted as at the effective date hereof and the Commitment Fee payable for the period during which the Ratable Portion of each Bank was adjusted pursuant hereto shall be allocated among the Banks according to the daily Ratable Portion for each Bank for each day during such period. In the event any of the Revolving Credit Loans are Eurodollar Rate Loans, the Borrowers shall reimburse the Banks for any and all fees, taxes, penalties or other breakage costs incurred in connection with the Loan Adjustment. Section 7.2. Existing Credit Instruments. Effective as of the date hereof, each Bank shall make such dispositions and arrangements with each other Bank with respect to the participations of the Banks in each Credit Instrument then outstanding (the "Credit Instrument Adjustment") as shall result in the participations held by each Bank in each such Credit Instrument being equal to the product of such Bank's Ratable Portion multiplied by the aggregate amount available for drawing under such Credit Instrument on the date hereof (the "Credit Instrument Adjusted Amount"). All commissions and fees payable to the Banks in connection with such Credit Instruments for the period during which the Ratable Portion of each Bank was adjusted pursuant hereto shall be allocated among the Banks according to the daily Ratable Portion for each Bank for each day during such period. Section 7.3. Return of Old Notes. Promptly after the effective date of this Amendment*No. 4, the Assignor Banks will return to the Agent the Revolving Credit Notes previously delivered by the Borrowers and Seminole to the Assignor Banks under the Credit Agreement which are superseded by the Revolving Credit Notes delivered to the Assignor Banks pursuant to this Amendment. Upon receipt of such superseded Revolving Credit Notes from the Assignor Banks, the Agent shall return such Revolving Credit Notes to the Borrowers and Seminole. Section 8. Execution in Counterparts. This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. Section 9. Governing Law. This Amendment shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as an agreement under seal as of the date set forth at the beginning of this Amendment. TOSCO CORPORATION By:_________________________________ Title: SEMINOLE FERTILIZER CORPORATION By:___________________________________ Title: BAYWAY REFINING COMPANY By:____________________________________ Title: THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent By:____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, individually and as Co-Agent By:____________________________________ Title: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), individually and as Co-Agent By:____________________________________ Title: ARAB BANKING CORPORATION By:____________________________________ Title: NATIONAL CITY BANK By:____________________________________ Title: THE FUJI BANK, LIMITED By:____________________________________ Title: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By:____________________________________ Title: BANK HAPOALIM B.M. By:____________________________________ Title: By:____________________________________ Title: UNITED JERSEY BANK By:____________________________________ Title: THE YASUDA TRUST AND BANKING CO., LTD. By:____________________________________ Title: THE SUMITOMO BANK, LIMITED By:____________________________________ Title: THE DAI-ICHI KANGYO BANK, LTD. By:____________________________________ Title: THE SANWA BANK LIMITED By:____________________________________ Title: SEATTLE-FIRST NATIONAL BANK By:____________________________________ Title: UNION BANK By:____________________________________ Title: MIDLANTIC NATIONAL BANK By:____________________________________ Title: NATIONAL WESTMINSTER BANK PLC By:____________________________________ Title: CREDIT LYONNAIS NEW YORK BRANCH By:____________________________________ Title: THE SAKURA BANK, LTD. By:____________________________________ Title: PNC BANK, NATIONAL ASSOCIATION By:____________________________________ Title: BANCA DI ROMA By:____________________________________ Title: INTERNATIONALE NEDERLANDEN BANK, N.V., as FMCP L/C Bank By:____________________________________ Title: Exhibit 10(f) AMENDMENT NO. 5 DATED AS OF AUGUST 16, 1994 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 8, 1993 AMENDMENT No. 5 (the "Amendment") dated as of August ___, 1994 by and among TOSCO CORPORATION, a Nevada corporation ("Tosco"), BAYWAY REFINING COMPANY, a Delaware corporation ("Bayway"), and TOSCO EUROPE LIMITED, a limited liability company organized under the laws of England and Wales ("TEL"), as co-borrowers (collectively, the "Borrowers"), Seminole Fertilizer Corporation, a Delaware corporation, ("Seminole"), the financial institutions listed on Schedule 1.01(a) to the Credit Agreement referred to below (the "Banks"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), as co-agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as co-agent and co-arranger, and THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), as the FMCP L/C Bank, as agent (in that capacity, the "Agent") for the Banks and as arranger. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement referred to below shall have the same meaning herein as in the Credit Agreement, as amended hereby. W I T N E S S E T H: WHEREAS, Tosco, Bayway, Seminole, the Banks, the Co-Agents, the Agent and the FMCP L/C Bank are parties to that certain Amended and Restated Credit Agreement dated as of April 8, 1993 (as amended, restated, modified or supplemented and in effect from time to time, the "Credit Agreement"); WHEREAS, Tosco and Bayway have informed the Banks and the Agent that Tosco has formed TEL as a wholly-owned subsidiary and that Tosco and Bayway desire to add TEL as a Borrower under the Credit Agreement and the Loan Documents; and WHEREAS, the Borrowers and Seminole have requested that the Agent and the Banks agree to amend the Credit Agreement (i) to allow the Borrowers to enter into certain transactional lines of credit with various banks and financial institutions and (ii) to make certain other changes thereto; NOW, THEREFORE, in consideration of the foregoing premises the parties hereto hereby agree as follows: Section 1. Amendment to Credit Agreement. Section 1.1. TEL as a Borrower. The Credit Agreement is hereby amended to provide that TEL is a "Borrower" thereunder with all of the rights and obligations appurtenant thereto, including, without limitation, joint and several liability for the Obligations. The Credit Agreement is hereby amended mutatis mutandis as appropriate to reflect the fact that TEL is a "Borrower" thereunder. TEL hereby acknowledges and agrees that upon the effectiveness of this Amendment it shall be jointly and severally liable with Tosco, Bayway and Seminole for the payment and performance of the Obligations upon the terms set forth in the Credit Agreement, including, without limitation, the provisions of Section 2.23 thereof. Section 1.2. Certain Definitions. Section 1.01 of the Credit Agreement is hereby amended by adding the following new definitions in the appropriate place in the alphabetical sequence: "Canadian Security Documents" means (i) the General Assignment of Book Debts, the Pledge Agreement and the Demand Fixed and Floating Debenture, dated as of August 16, 1994, between TEL and the Agent, (ii) the General Assignment of Book Debts, the Pledge Agreement and the Demand Fixed and Floating Debenture, dated as of August 16, 1994, between Bayway and the Agent, and (iii) any other mortgage, pledge, charge or security agreement executed and delivered, or filing made, in connection with the granting, attachment and perfection of security interests by either TEL or Bayway to the Agent, on behalf of the Banks, on such Borrower's assets in Canada. "TEL" means Tosco Europe Limited, a limited liability company organized under the laws of the United Kingdom. "TEL Advance" means any Borrowing that is supported by the TEL Borrowing Base and is requested by Tosco for the purpose of making intercompany loans to TEL. "TEL Borrowing Base" means, at the relevant time of determination, a Borrowing Base calculated as provided in the definition thereof by reference to the assets and obligations of TEL and the Paid but Unexpired Standby Letters of Credit issued for the account of TEL, plus the Available Tosco Excess Amount allocated thereto. "TEL Overadvance Amount" means, at the relevant time of determination, the amount by which (a) the aggregate amount of TEL Revolving Credit Debt, exceeds (b) the TEL Borrowing Base. "TEL Revolving Credit Debt" means at any time, (a) the aggregate principal amount of all TEL Advances outstanding at such time, plus (b) the aggregate principal amount of all Borrowings at such time made pursuant to Article II and issued for the account of or requested by TEL, including, without limitation, (i) all such Borrowings in cash thereunder, (ii) the aggregate principal amount of all such Letter of Credit Reimbursement Obligations outstanding thereunder and (iii) the aggregate principal amount of all such Acceptance Obligations outstanding thereunder. "U.K. Security Documents" means the Debenture, dated as of August*16, 1994, between TEL and the Agent and any other mortgage, pledge, charge or security agreement executed and delivered, or filing made, in connection with the granting, attachment and perfection of security interests by TEL to the Agent, on behalf of the Banks, on its assets in the United Kingdom. Section 1.3. Agency Agreement. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Agency Agreement" in its entirety and replacing it with the following: "Agency Agreement" means an agency agreement made in favor of the Agent, as agent for the Banks, (a) substantially in the form of Exhibit N-1 or Exhibit N-3 attached hereto, by any financial institution in which any Borrower has deposited cash or (b) substantially in the form of Exhibit N-2 attached hereto, by each financial institution in which any Borrower has deposited cash which, upon such deposit, shall become Eligible Margin Deposits. Section 1.4. Available Tosco Excess Amount. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Available Tosco Excess Amount" in its entirety and replacing it with the following: "Available Tosco Excess Amount" means that portion of the Tosco Excess Amount allocated by the Borrowers to the Bayway Borrowing Base or TEL Borrowing Base, as the case may be; provided, that the sum of the Available Tosco Excess Amount allocated to the Bayway Borrowing Base and the TEL Borrowing Base, respectively, will not exceed the Tosco Excess Amount. Section 1.5. Borrowing Base. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Borrowing Base" in its entirety and replacing it with the following: "Borrowing Base" means, as to the Borrowers, at any given time, the sum of the following amounts owned by or reflected on the books of such Borrower at such time: (a) 100% of its Eligible Cash and Eligible Cash Equivalents, (b) 95% of its Eligible Investments, (c) 90% of its Major Oil Company Receivables, (d) 85% of the excess, if any, of its Eligible Receivables over its Major Oil Company Receivables, (e) the lesser of (i) 85% of its Eligible Margin Deposits, or (ii) $50,000,000, (f) 80% of its Eligible Petroleum Inventory, (g) 80% of its Eligible Petroleum Inventory Under Contract, and (h) 100% of its Paid but Unexpired Standby Letters of Credit. Section 1.6. Collateral Documents. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Collateral Documents" in its entirety and replacing it with the following: "Collateral Documents" means, collectively, the Pledge Agreement, the Custody Agreement, the Security Agreement, the Seminole/Ridgewood Pledge Agreement, the Agency Agreements, the Canadian Security Documents, and the U.K. Security Documents. Section 1.7. Eligible Exchange Balances. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Eligible Exchange Balances" in its entirety and replacing it with the following: "Eligible Exchange Balances" means, to the extent not otherwise included in the definition of Eligible Inventory or Eligible Receivables, as to any Borrower and in respect of any Class of Inventory, an amount equal to the difference between (a) the value of any and all products within any Class of Inventory which such Borrower is entitled to receive in connection with Eligible Exchange Transactions, minus (b) the value of any and all products within such Class of Inventory which such Borrower is obligated to deliver in connection with Eligible Exchange Transactions. If the amount set forth in clause (b) above exceeds the amount set forth in clause (a) above, Eligible Exchange Balances shall be expressed as a negative number and if the amount set forth in clause (a) above exceeds the amount set forth in clause (b) above, Eligible Exchange Balances shall be expressed as a positive number. With respect to each Eligible Exchange Transaction included in the calculation of Eligible Exchange Balances, the value of the product subject to such Eligible Exchange Transactions shall be determined on a FIFO basis; after deducting therefrom (x) the value of any product subject to any Eligible Exchange Transaction for which performance has not been made on the date that such performance is due, (y) the amount of all discounts, allowances, rebates, credits and adjustments to such Eligible Exchange Transaction and (z) the amount billed for or representing retainage, if any, with respect to such Eligible Exchange Transaction until all prerequisites to the immediate payment of retainage have been satisfied. Section 1.8. Restricted Investment. Section 1.01 of the Credit Agreement is hereby further amended by amending the definition of "Restricted Investment" by deleting clause (ix) thereof and inserting the following: (ix) investments in respect of intercompany loans made by Tosco to Bayway or TEL in connection with Bayway Advances or TEL Advances, respectively, hereunder. Section 1.9. Restricted Payment. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Restricted Payment" in its entirety and replacing it with the following: "Restricted Payment" means (a) the declaration of any dividend on, or the making of or the incurrence of any liability to make any other payment or distribution in cash or other property or assets in respect of, any Stock of any Borrower other than (i) one payable or paid solely in Stock of such Borrower, and (ii) the payment of any dividends from Seminole, Bayway or TEL to Tosco, or (b) any payment on account of the purchase, redemption, retirement or other acquisition of any of the Stock of any Borrower or any other payment or distribution made in respect thereof, either directly or indirectly, except solely in exchange for Stock of such Borrower. Section 1.10. Revolving Credit Debt. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Revolving Credit Debt" and replacing it with the following: "Revolving Credit Debt" means, at any time, the sum of the Tosco Revolving Credit Debt, plus the TEL Revolving Credit Debt, plus the Bayway Revolving Credit Debt outstanding at such time. Section 1.11. Tosco Revolving Credit Debt. Section 1.01 of the Credit Agreement is hereby further amended by deleting the definition of "Tosco Revolving Credit Debt" and replacing it with the following: "Tosco Revolving Credit Debt means at any time, (a) the aggregate principal amount of all Borrowings at such time made pursuant to Article II and issued for the account of or requested by Tosco, including, without limitation, (i)*all such Borrowings in cash thereunder, (ii) the aggregate principal amount of all such Letter of Credit Reimbursement Obligations outstanding thereunder and (iii)*the aggregate principal amount of all such Acceptance Obligations outstanding thereunder, but not including (b)*the aggregate principal amount of Bayway Advances and TEL Advances outstanding at such time." Section 1.12. Loans. Section 2.01(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (b) Commencing on the Closing Date through and including the Maturity Date, the Borrowers may use the Commitments by (i) borrowing and prepaying Loans, in whole or in part, and reborrowing, (ii) causing Letters of Credit to be issued, and (iii) causing Acceptances to be created, all in accordance with the provisions of this Agreement. In no event shall the Revolving Credit Debt at any time exceed the Credit Limit, determined as of such time, nor shall any Tosco Overadvance Amount, Bayway Overadvance Amount or TEL Overadvance Amount result as a consequence of any Borrowing hereunder. If on any date (x) the Revolving Credit Debt exceeds the Credit Limit, for whatever reason, or (y) a Tosco Overadvance Amount, Bayway Overadvance Amount or TEL Overadvance Amount exists, the Borrowers shall (i) reduce the Revolving Credit Debt to an amount less than or equal to the Credit Limit, (ii) in the case of any Tosco Overadvance Amount, reduce the aggregate Tosco Revolving Credit Debt to an amount less than or equal to the Tosco Borrowing Base, (iii) in the case of any Bayway Overadvance Amount, reduce the aggregate Bayway Revolving Credit Debt to an amount less than or equal to the Bayway Borrowing Base, and (iv) in the case of any TEL Overadvance Amount, reduce the aggregate TEL Revolving Credit Debt to an amount less than or equal to the TEL Borrowing Base, by: (A) depositing Qualifying Investments and/or Cash Equivalents into the Custody Account; and/or (B) repaying amounts outstanding under the Notes, together with all accrued and unpaid interest, commissions and fees with respect thereto to such date; and/or (C) causing Letters of Credit and/or Acceptances to be cancelled and delivering to the Agent the originals of all such Letters of Credit and/or Acceptances marked "cancelled" by the respective beneficiaries thereof, or depositing with the Agent for the benefit of the Banks and the Agent or in the case of FMCP L/C's, the FMCP L/C Bank, as applicable, at once and in full, all sums sufficient to reimburse the Agent or the FMCP L/C Bank for all payments, present or future, contingent or otherwise, that may be required to be made by the Agent or the FMCP L/C Bank or the Banks on account of any Letter of Credit or Acceptance, and such sums shall be deposited (I) in an interest-bearing cash collateral account maintained by the Agent, to be held by the Agent and applied thereby in reduction of any Obligations arising out of any Application, Letter of Credit (other than any FMCP L/C) and/or Acceptance and (II) in a separate interest-bearing cash collateral account maintained by the Agent, to be held by the Agent and applied thereby in reduction of Obligations arising out of any FMCP L/C; provided, however, that, in the case of any Tosco Overadvance Amount, Bayway Overadvance Amount or TEL Overadvance Amount, all such amounts deposited or repaid shall be applied only to the extent necessary to reduce such Tosco Overadvance Amount, Bayway Overadvance Amount or TEL Overadvance Amount, as applicable. Section 1.13. Notice and Method of Borrowing. Section 2.02(a)(v) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (v) if such proposed Borrowing is requested by Tosco, whether such Borrowing (A) shall be supported by the Tosco Borrowing Base and issued for Tosco's own account, or (B) shall be a Bayway Advance or (C) shall be a TEL Advance. Section 1.14. Use of Proceeds. Section 2.03(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (a) Loans, Letters of Credit and Acceptances. Except as provided in Section 2.03(b) hereof, (i) Tosco shall use the proceeds of (A) all TEL Advances solely to provide intercompany loans to TEL, (B) all Bayway Advances solely to provide intercompany loans to Bayway, and (C) all Tosco Revolving Credit Debt solely (I) to repay in full amounts owing to the Withdrawing Banks and to ING Bank as co-agent under the Existing Tosco Credit Agreement in accordance with Sections 3.01 and 11.01 hereof, (II) to provide working capital in the ordinary course of its business, including, without limitation, to fund receivables and the purchases of Inventory, (III) to provide security in connection with its performance and bonding requirements, in the case of each of clauses (i)(C)(I) and (II) hereof, in replacement of and in order to refinance the outstanding Indebtedness under the Existing Tosco Credit Agreement, or (IV) to fund investments in or capital contributions to Bayway in order to finance the acquisition of the Bayway Refinery to the extent permitted by this Agreement, (ii) Bayway shall use the proceeds of all Bayway Revolving Credit Debt solely (A) to provide working capital in the ordinary course of its business, including, without limitation, to fund receivables and the purchases of Inventory, or (B) to provide security in connection with its performance and bonding requirements, and (iii) TEL shall use the proceeds of all TEL Revolving Credit Debt solely (A) to provide working capital in the ordinary course of its business, including, without limitation, to fund receivables and the purchases of Inventory, or (B) to provide security in connection with its performance and bonding requirements. Section 1.15. Letters of Credit. Section 2.04(a)(ii) of the Credit Agreement is hereby amended by deleting from the ninth and tenth line thereof the words "if such Borrower is Tosco or Bayway". Section 1.16. Letter of Credit and FMCP L/C Commissions and Fees. Section 2.07(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (b) All such fees specified in Section 2.07(a)(i) through (iii) inclusive hereof shall be calculated as follows: (i) with respect to Standby Letters of Credit, including, without limitation, FMCP L/C's, such fees shall be calculated based on the maximum drawing amount thereunder during the period commencing on the date of issuance through the expiry date thereof (calculated on the basis of a 360-day year for the actual number of days elapsed) and shall be payable in arrears within seven (7) Business Days after the end of each month during which or any part of which such Standby Letter of Credit or FMCP L/C, as the case may be, is outstanding and (ii) with respect to any Documentary Letter of Credit, such fees shall be calculated based on the maximum drawing amount thereunder during the period commencing on the date of issuance through the date of negotiation or cancellation thereof (calculated on the basis of a 360-day year for the actual number of days elapsed) and shall be payable in arrears within seven (7) Business Days after the end of each month during which or any part of which such Documentary Letter of Credit is outstanding. No later than one (1) Business Day after receipt of such monthly payment, the Agent shall pay to each Bank such Bank's Ratable Portion of all Letter of Credit fees referred to in Section 2.07(a)(i) through (iii) which are received. Notwithstanding any provision contained herein to the contrary, no fees, commissions or other amounts paid as of or prior to the Closing Date in respect of the FMCP L/C existing as of the Closing Date shall be repaid or credited against any amounts otherwise payable pursuant to this Section 2.07. Section 1.17. Commitment Fee. Section 2.09(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (a) Commitment Fee. The Borrowers jointly and severally agree to pay to the Agent, on behalf of each Bank, a commitment fee (the "Commitment Fee") for the period commencing on the date of the Borrowers' acceptance of such Bank's Commitment, as such date is set forth on Schedule 1.01(b) hereto, through and including the Maturity Date, or such earlier date upon which the Borrowers shall terminate the Commitments, in an amount equal to such Bank's Ratable Portion of 3/8 of 1% per annum of the amount by which the Commitments exceed the aggregate Revolving Credit Debt outstanding. The Commitment Fees shall be payable in arrears to the Agent, on behalf of each Bank, in cash on the Closing Date and, thereafter, monthly in arrears within seven (7) Business Days after the end of each month, commencing on the first of such days to occur after the Closing Date, and on the date upon which the Commitments shall terminate. No later than one (1) Business Day after receipt of such monthly payment, the Agent shall pay to each Bank such Bank's Ratable Portion of all Commitment Fees referred to in this Section 2.09(a) which are received. Section 1.18. Optional Prepayments of Loans. Section 2.11 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 2.11.**Optional Prepayments of Loans. The Borrowers may prepay the Notes, in whole or in part, without premium or penalty, upon prior written, telex or telegraphic notice (effective upon receipt) to the Agent, to be received by the Agent not later than 4:00*p.m. Boston, Massachusetts time at least (i) two Business Days', with respect to Base Rate Loans, and (ii) three Business Days', with respect to Eurodollar Rate Loans, preceding the date of the prepayment (whereupon the Agent shall promptly notify the Banks) specifying the date and the amount of such prepayment; provided, however, that any prepayment of the Loans while such Loans bear interest at a rate determined with respect to the Eurodollar Rate shall be made on, and only on, the last day of the relevant Interest Period applicable thereto. On the date of any such prepayment of Eurodollar Loans, the Borrowers shall pay accrued interest to the date of such prepayment on the principal amount so prepaid. On the date of any such prepayment of Base Rate Loans, the Borrowers shall pay accrued interest on the principal amount of any Base Rate Loan so prepaid as provided in Section 2.13(a) hereof, unless such prepayment is a prepayment in full of all Loans outstanding, in which case the Borrowers shall pay, on the date of such prepayment, accrued interest to the date of such prepayment on the principal amount of all Loans, including, without limitation, Base Rate Loans, so prepaid. Partial prepayments hereunder shall be in the principal amount of $1,000,000 or any integral multiple in excess thereof (unless the outstanding principal amount of such Loans is less than $1,000,000, in which case the prepayment shall be in the full amount of such outstanding amount). The Borrowers shall have no right to prepay the principal amount of the Loans other than as provided in this Section 2.11. Section 1.19. Interest. Section 2.13(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (a) Base Rate Election. Unless the Borrowers shall have validly and effectively elected to have Loans made or continued as Eurodollar Rate Loans pursuant to the provisions of this Agreement, at a rate per annum at all times equal to the Base Rate plus the Applicable Margin in effect from time to time, payable monthly in arrears on the first day of each month, and on the Maturity Date. Section 1.20. Interest. Section 2.18(a) of the Credit Agreement is hereby amended by adding the following sentence to the end thereof: Notwithstanding any term or provision of this Agreement to the contrary, the Agent shall have no obligation under any circumstances to pay any Bank such Bank's Ratable Portions of any amounts due and payable under this Agreement, including, without limitation, principal, interest, fees, commissions and any other amounts (collectively, "Payments"), unless and until such time as the Agent shall have received immediately available funds from the Borrowers in an amount equal to such Payments. Section 1.21. Taxes. Section 2.20(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (a) Any and all payments by the Borrowers hereunder or under the Notes or in respect of Letters of Credit including, without limitation, FMCP L/C's shall be made, in accordance with Sections 2.09, 2.10, 2.11, 2.13 and 2.17, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto imposed on it by any jurisdiction, including, without limitation, the United States of America, Canada and the United Kingdom of Great Britain and Northern Ireland (excluding, in the case of each Bank, the FMCP L/C Bank and the Agent, (x) taxes imposed on its income by the jurisdiction under the laws of which such Bank, the FMCP L/C Bank or the Agent (as the case may be) is organized or any political subdivision thereof, (y) franchise taxes measured by income imposed on it by the jurisdiction under the laws of which such Bank, the FMCP L/C Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, (z) if such Bank, the FMCP L/C Bank or the Agent is entitled at such time to a total or partial exemption from withholding that is required to be evidenced by a United States Internal Revenue Service Form 1001 or 4224 or any successor or additional form, taxes imposed on it by reason of any failure of such Bank, the FMCP L/C Bank or the Agent to deliver to the Agent or the Borrowers, from time to time as required by the Agent or the Borrowers, such Form 1001 or 4224 (as applicable) or any successor or additional form, completed in a manner reasonably satisfactory to the Agent or the Borrowers; all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank, the FMCP L/C Bank or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20) such Bank, the FMCP L/C Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions, and (iii) the Borrowers shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law. Section 1.22. Capitalization. Section 4.05 of the Credit Agreement is hereby amended by adding the following new subsection (f) after existing subsection (e): (f) The authorized capitalization of TEL, as of the date hereof, consists of 100 shares of common stock, of which 2 shares of common stock are issued and outstanding. All of such issued and outstanding shares are owned beneficially and of record by Tosco, free and clear of all Liens and encumbrances. Section 1.23. Financial Matters. Section 4.11(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (b) (i) The Company is Solvent and shall remain Solvent immediately following the Borrowings to be made by the Borrowers and the application by the Borrowers of the proceeds of such Borrowings in accordance with Section 2.03 of this Agreement, and (ii) immediately following the Borrowings of such Borrower's Revolving Credit Debt and the application by such Borrower of the proceeds thereof in accordance with Section 2.03 hereof, (A) Bayway is Solvent and shall remain Solvent as determined after excluding from Bayway's liabilities that portion of the Obligations in excess of the Bayway Revolving Credit Debt, and (B) TEL is Solvent and shall remain Solvent as determined after excluding from TEL's liabilities that portion of the Obligations in excess of the of TEL Revolving Credit Debt. Section 1.24. Reports. Section 5.04(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (b) (i) On the Closing Date and, subject to Section 5.04(b)(ii) below, prior to the close of business on the fifteenth day (or, if the fifteenth day is not a Business Day, the first Business Day thereafter) and on the last Business Day of each month thereafter, including the month in which the Closing Date occurs, a report (the "Borrowing Base Report") substantially in the form of Exhibit*L hereto, signed by the Chief Financial Officers of each of the Borrowers, setting forth, on an itemized basis, the Tosco Borrowing Base, the Bayway Borrowing Base and the TEL Borrowing Base as of the close of business on the fifth preceding Business Day and the Borrowing Base computations based thereon, as well as certifications by the Chief Financial Officers of each of the Borrowers that from the date of the most recent Borrowing Base Report previously delivered to the date of the new Borrowing Base Report being delivered with such certification, no Default or Event of Default has occurred. Each Borrowing Base Report shall become effective upon the Agent's receipt thereof and shall remain in effect until the earlier of (A) the receipt by the Agent of the next Borrowing Base Report to be delivered hereunder, and (B) the close of business on the date on which the next Borrowing Base Report is required to be delivered hereunder. (ii) Notwithstanding any provision of Section 5.04(b)(i) to the contrary, if (A) the Tosco Borrowing Base, as set forth in any Borrowing Base Report, is equal to or greater than 125% of the Tosco Revolving Credit Debt outstanding on such date, (B) the TEL Borrowing Base, as set forth in such Borrowing Base Report, is equal to or greater than 125% of the TEL Revolving Credit Debt outstanding on such date, and (C) the Bayway Borrowing Base, as set forth in such Borrowing Base Report, is equal to or greater than 125% of the Bayway Revolving Credit Debt outstanding on such date, then, unless any Borrower has reason to believe that the subsequent Borrowing Base Report otherwise required to be delivered pursuant to this Section 5.04(b) would show that (I) the Tosco Borrowing Base would be less than 125% of the Tosco Revolving Credit Debt outstanding on such date, or (II) the TEL Borrowing Base would be less than 125% of the TEL Revolving Credit Debt outstanding on such date, or (III) the Bayway Borrowing Base would be less than 125% of the Bayway Revolving Credit Debt outstanding on such date, the Borrowers shall be required to deliver a Borrowing Base Report to the Agent only once per month, on the last Business Day of such month. Section 1.25. Material Change in Business. Section 5.11 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 5.11.**Material Change in Business. Tosco's primary business shall continue to be petroleum refining, distribution, wholesale and retail marketing and related businesses (other than oil and gas exploration, natural gas marketing and petroleum trading which does not support the primary refining , distribution and marketing business). Tosco shall notify the Agent promptly (and in any event by no later than the next Business Day) upon (i) any termination of the ARCO Exchange Agreement or any failure of the ARCO Exchange Agreement to be in full force and effect and (ii) any termination of the Exxon Supply Agreement or any failure of the Exxon Supply Agreement to be in full force and effect. Bayway's primary business shall be petroleum refining, distribution, wholesale and retail marketing and related businesses (other than oil and gas exploration, natural gas marketing and petroleum trading which does not support the primary refining, distribution and marketing business). TEL's primary business shall be the purchase and sale of petroleum products as required to support the primary businesses of Tosco and Bayway described in this Section 5.11; provided, however, that in no event shall TEL engage in (i) petroleum trading which does not support the primary refining, distribution and marketing businesses of Tosco and Bayway, (ii) oil and gas exploration or (iii) natural gas marketing. Section 1.26. Application of Proceeds. Section 5.13 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 5.13.**Application of Proceeds. Bayway shall apply the proceeds of all Bayway Advances, TEL shall apply the proceeds of all TEL Advances and each Borrower shall apply the proceeds of all Borrowings made by it in accordance with Section 2.03. Section 1.27. Limitations on Indebtedness. Section 7.01(a) of the Credit Agreement is hereby amended as follows: (a) by deleting subparagraph (iv) thereof in its entirety and replacing it with the following: (iv) intercompany loans by Tosco to Bayway in respect of Bayway Advances or by Tosco to TEL in respect of TEL Advances in accordance with Section 2.03 hereof; (b) by deleting the word "and" from the end of subsection (viii) thereof; (c) by deleting the period at the end of subsection (ix) thereof and inserting the words "; and"; and (d) by inserting after existing subsection (ix) the following new subsection (x): (x) Indebtedness of the Borrowers, in an aggregate amount not to exceed $50,000,000 outstanding at any one time, in respect of transactional lines of credit created for the purpose of financing specific cargoes of Petroleum Inventory or receivables related to specific cargoes of Petroleum Inventory; provided that (i) any such Indebtedness is secured only by the cargo of Petroleum Inventory financed thereby or the receivable relating thereto, (ii) such Petroleum Inventory or receivable is not included in any Borrowing Base, and (iii) the Borrowers shall have provided, prior to or simultaneously with the incurrence of any such Indebtedness, written notice to the Agent and the Banks describing such Indebtedness in sufficient detail to accurately and completely identify such Indebtedness and the cargo of Petroleum Inventory or receivable relating thereto. Section 1.28. Limitations on Liens. Section 7.02 of the Credit Agreement is hereby amended (a) by deleting the word "or" from the end of subsection (m) thereof, (b) by deleting the period at the end of subsection (n) thereof and inserting a semi-colon, and (c) by inserting after existing subsection (n) the following new subsections (o) and (p): (o) on tangible fixed assets (as defined by GAAP) of the Company to secure the obligations of any Borrower owed to a Bank and arising in connection with interest rate protection arrangements entered into by such Borrower with such Bank, including, without limitation, interest rate swaps, caps, collars and floors; provided, however, that (i) the aggregate book value of such tangible fixed assets shall not exceed $50,000,000 and (ii) such tangible fixed assets shall not be Collateral; or (p) created to secure Indebtedness permitted by Section 7.01(a)(x) on those specific cargoes of Petroleum Inventory financed with such Indebtedness and on accounts receivable arising in connection therewith. Section 1.29. Limitations on Restricted Payments, Etc. Section 7.03 of the Credit Agreement is hereby amended by inserting in the twelfth line thereof, after the words "Cargill Fertilizer, Inc.", the words "(or any assignee of Cargill Fertilizer, Inc.)". Section 1.30. Transactions with Affiliates. Section 7.12 of the Credit Agreement is hereby amended by deleting the last three words thereof and replacing them with the words "Tosco, Bayway and TEL". Section 1.31. Events of Default. Section 8.01(a) of the Credit Agreement is hereby amended by (a) deleting the word "or" from the end of subsection (x) thereof, (b) by deleting the semi-colon from the end of subsection (xi) thereof and replacing it with the words "; or" and (c) by inserting the following new subsection (xii) after existing subsection (xi): (xii) Tosco shall cease to own beneficially and of record 100% of the issued and outstanding Stock of TEL; Section 1.32. Amendments and Waivers. Section 10.01(b) of the Credit Agreement is hereby amended by deleting clause (v) thereof in its entirety and replacing it with the following: (v) amend or modify the definition of "Borrowing Base", "Tosco Borrowing Base", "Bayway Borrowing Base" or "TEL Borrowing Base", in each case without the written consent of all the Banks, Section 1.33. Schedules and Exhibits. (a) Schedule 4.01(b) of the Credit Agreement is hereby deleted in its entirety and replaced with Schedule 4.01(b) hereto. (b) Exhibit D-1 to the Credit Agreement is hereby deleted in its entirety and replaced with Exhibit D-1 hereto. (c) Exhibit L to the Credit Agreement is hereby deleted in its entirety and replaced with Exhibit L hereto. (d) Exhibit N-3 hereto is hereby added to the Credit Agreement and made a part thereof. Section 2. Scope of Amendment. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Section 3. Representations and Warranties. The Borrowers and Seminole hereby jointly and severally represent and warrant to the Banks, the Agent and the FMCP L/C Bank as follows: (a) Representations and Warranties in Credit Agreement. The representations and warranties of the Borrowers and Seminole contained in the Credit Agreement (i) were true and correct in all material respects when made, and (ii) except to the extent such representations and warranties by their terms are made solely as of a prior date, continue to be true and correct in all material respects on the date hereof. (b) Authority, etc. The execution and delivery by the Borrowers and Seminole of this Amendment and the performance by the Borrowers and Seminole of all of their agreements and obligations under this Amendment are within the corporate authority of each of the Borrowers and Seminole, have been duly authorized by all necessary corporate action on the part of each of the Borrowers and Seminole, and do not and will not (i) contravene any provision of any Borrower's or Seminole's charter, other incorporation papers, by-laws or any stock provision, or any amendment thereof, (ii) conflict with, or result in a breach of any material term, condition or provision of, or constitute a default under or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of the property of any Borrower or Seminole under any agreement, deed of trust, indenture, mortgage or other instrument to which such Borrower or Seminole is a party or by which any of such Borrower's or Seminole's properties are bound, (iii) violate or contravene any provision of any law, regulation, order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official, (iv) require any waiver, consent or approval by any creditor of any Borrower or Seminole which has not been obtained or (v) require any approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency under any provision of any law, except those actions which have been taken or will be taken prior to the date of execution of this Amendment. (c) Enforceability of Obligations. This Amendment, the Credit Agreement as amended hereby, and the Loan Documents constitute the legal, valid and binding obligations of the Borrowers and Seminole enforceable against the Borrowers and Seminole in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general applications affecting the rights and remedies of creditors, and (ii) the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceedings for such remedies may be brought. (d) No Default or Event of Default. No Default or Event of Default has occurred or is continuing and the effectiveness of this Amendment will not cause any such Default or Event of Default to occur. (e) Address of TEL. The chief executive office of TEL, its principal place of business and the address to which notices to TEL under the Credit Agreement should be sent is as follows: Tosco Europe Limited Sceptre Court, Number 40 Tower Hill London EC3 N4BB England with a copy to Tosco Europe Limited c/o Bayway Refining Company 1400 Park Avenue Linden, NJ 07036 U.S.A. (f) Canadian Taxes of the Borrowers. The Borrowers have no employees within Canada and have no obligation to pay any taxes, imposts or fees, or file returns, to or in connection with (i) the Provincial Tax Commission for the Health Services Tax for Nova Scotia, (ii) the Workers' Compensation Board of Nova Scotia for premiums for workers' compensation, (iii) the Department of Labour (Province of Nova Scotia) for unpaid vacation pay, or (iv) Revenue Canada for withholdings pursuant to the Income Tax Act of Canada, the Unemployment Insurance Act of Canada and the Canada Pension Plan Act. Section 4. Confirmation of Collateral Documents. Each of the Borrowers and Seminole hereby ratify and confirm each of the Collateral Documents and the pledges and security interests created thereby. Each of the Borrowers and Seminole hereby further ratify and confirm that the Collateral Documents and the pledges and security interest created thereby secure the Obligations of the Borrowers and Seminole under the Credit Agreement, as amended hereby. Section 5. Conditions to Effectiveness. The effectiveness of this Amendment No. 5 shall be conditioned upon receipt by the Agent of the following, in form and substance satisfactory to the Banks: (a) this Amendment No. 5, executed by the Borrowers, Seminole, the Banks, the Agent, the Co-Agents and the FMCP L/C Bank; (b) Revolving Credit Notes, substantially in the form of Exhibit D-1 hereto, executed and delivered by the Borrowers and Seminole and payable to the order of each of the Banks in the respective aggregate principal amounts set forth under the caption "Commitment" opposite each such Bank's name on Schedule 1.01(b) to the Credit Agreement; (c) an amendment to the Security Agreement executed by the Borrowers, Seminole and the Agent in form and substance satisfactory to the Agent; (d) an amendment to the Custody Agreement executed by the Borrowers, Seminole and the Agent in form and substance satisfactory to the Agent; (e) an Agency Agreement substantially in the form of Exhibit N-3 hereto executed by TEL and the other parties thereto; (f) each of the U.K. Security Documents executed by the TEL and the Agent; (g) each of the Canadian Security Documents executed by TEL, Bayway and the Agent; (h) a perfection certificate executed by TEL and Bayway in form and substance satisfactory to the Agent; (i) all financing statements, registrations, instruments or other documents necessary to perfect the security interests of the Banks created by the Collateral Documents executed by the Borrowers and duly recorded with the proper authorities; (j) copies, certified by the Secretary (or comparable officer) of each of the Borrowers and Seminole to be true and complete on the date of execution of this Amendment, of the records of all actions taken by each such Borrower and Seminole as may be required according to the terms of each such Borrower's or Seminole's charter, other incorporation documents and by-laws to authorize (i) the execution and delivery of this Amendment, each of the Revolving Credit Notes, and each other document and instrument to be executed and delivered in connection herewith and (ii) the performance by each such Borrower and Seminole of all of its agreements and obligations under this Amendment and the Credit Agreement, as amended hereby; (k) a certificate of the Secretary (or comparable officer) of each of the Borrowers and Seminole (i) setting forth the names, incumbency and specimen signatures of those officers of each of the Borrowers and Seminole authorized to execute and deliver this Amendment, each of the Revolving Credit Notes, and each other document and instrument to be executed and delivered in connection herewith and (ii) setting forth the charter documents and bylaws of each of the Borrowers and Seminole, or, with respect to the Tosco, Bayway and Seminole, stating that there have been no amendments to the charter documents and by-laws of each such Person delivered to the Agent and the Banks on April*8, 1993; (l) a certificate of the Secretary of State (or comparable officer) of the jurisdiction of organization of each of the Borrowers and Seminole as to each such Person's legal existence and corporate good standing; (m) an opinion of United States counsel to the Borrowers and Seminole in form and substance satisfactory to the Agent; (n) an opinion of TEL's counsel in the United Kingdom in form and substance satisfactory to the Agent; (o) an opinion of the Borrowers' counsel in Canada in form and substance satisfactory to the Agent; and (p) any other agreement, document, instrument or financing statement the Agent may, in its sole discretion, reasonably require. Section 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. Section 7. Governing Law. This Amendment shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as an agreement under seal as of the date set forth at the beginning of this Amendment. TOSCO CORPORATION By:__________________________________ Title: BAYWAY REFINING COMPANY By:___________________________________ Title: TOSCO EUROPE LIMITED By:____________________________________ Title: SEMINOLE FERTILIZER CORPORATION By:___________________________________ Title: THE FIRST NATIONAL BANK OF BOSTON, individually, as FMCP L/C Bank and as Agent By:____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, individually and as Co-Agent By:____________________________________ Title: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), individually and as Co-Agent By:____________________________________ Title: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By:____________________________________ Title: THE FUJI BANK, LIMITED By:____________________________________ Title: ARAB BANKING CORPORATION By:____________________________________ Title: NATIONAL CITY BANK By:____________________________________ Title: BANK HAPOALIM B.M. By:____________________________________ Title: By:____________________________________ Title: UNITED JERSEY BANK By:____________________________________ Title: THE YASUDA TRUST AND BANKING CO., LTD. By:____________________________________ Title: THE SUMITOMO BANK, LIMITED By:____________________________________ Title: THE DAI-ICHI KANGYO BANK, LTD. By:____________________________________ Title: THE SANWA BANK LIMITED By:____________________________________ Title: SEATTLE-FIRST NATIONAL BANK By:____________________________________ Title: UNION BANK By:____________________________________ Title: MIDLANTIC NATIONAL BANK By:____________________________________ Title: NATIONAL WESTMINSTER BANK PLC By:____________________________________ Title: CREDIT LYONNAIS NEW YORK BRANCH By:____________________________________ Title: THE SAKURA BANK, LTD. By:____________________________________ Title: PNC BANK, NATIONAL ASSOCIATION By:____________________________________ Title: BANCA DI ROMA By:____________________________________ Title: By:____________________________________ Title: Exhibit 10(g) AMENDMENT NO. 6 DATED AS OF DECEMBER 28, 1994 TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 8, 1993 AMENDMENT No. 6 (the "Amendment") dated as of December 28, 1994 by and among TOSCO CORPORATION, a Nevada corporation ("Tosco"), BAYWAY REFINING COMPANY, a Delaware corporation ("Bayway"), and TOSCO EUROPE LIMITED, a limited liability company organized under the laws of England and Wales ("TEL"), as co-borrowers (collectively, the "Borrowers"), the financial institutions listed on Schedule 1.01(a) to the Credit Agreement referred to below (the "Banks"), THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) ("Chase"), as co-agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as co-agent and co-arranger, and THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), as the FMCP L/C Bank, as agent (in that capacity, the "Agent") for the Banks and as arranger. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement referred to below shall have the same meaning herein as in the Credit Agreement, as amended hereby. W I T N E S S E T H: WHEREAS, Tosco, Bayway, Seminole Fertilizer Corporation, the Banks, the Co-Agents, the Agent and the FMCP L/C Bank are parties to that certain Amended and Restated Credit Agreement dated as of April 8, 1993 (as amended, restated, modified or supplemented and in effect from time to time, the "Credit Agreement"); WHEREAS, Tosco and Bayway have informed the Banks and the Agent that Tosco has formed Tosco Processing & Marketing, Inc. ("TPMI") as a wholly-owned subsidiary of Tosco and that Tosco desires to transfer to TPMI all of the stock that Tosco owns of record in Bayway which constitutes all of the issued and outstanding capital stock of Bayway; and WHEREAS, the Borrowers have requested that the Agent and the Banks agree to amend the Credit Agreement to permit Tosco to transfer to TPMI the stock of Bayway and to make certain other changes; NOW, THEREFORE, in consideration of the foregoing premises the parties hereto hereby agree as follows: Section 1. Amendment to Credit Agreement. Section 1.1. Restricted Subsidiary. Section 1.01 of the Credit Agreement is hereby amended by deleting the definition of "Restricted Subsidiary" in its entirety and replacing it with the following: "Restricted Subsidiary" means, (i) Diablo Service Corporation, a California corporation (ii) Western Hemisphere Corporation, a Delaware corporation, (iii) Tosco International Finance N.V., a Netherlands Antilles corporation and (iv) Tosco Processing & Marketing, Inc., a Delaware corporation. Section 1.2. Limitations on Liens. Section 7.02 of the Credit Agreement is hereby amended by deleting subsection (k) thereof in its entirety and replacing it with the following: (k) on the Stock of Bayway; provided that Tosco shall be the record and beneficial owner of not less than 100% of the issued and outstanding voting Stock of TPMI, free and clear of all Liens, at all times while TPMI owns any Stock of Bayway and further provided that Tosco and TPMI, in aggregate, shall be the record and beneficial owner of not less than 51% of the issued and outstanding voting Stock of Bayway, free and clear of all Liens; Section 1.3. Events of Default. Section 8.01(a) of the Credit Agreement is hereby amended as follows: (a) by deleting subsection (xi) thereof in its entirety and replacing it with the following: (xi) (A) Tosco shall cease to own beneficially and of record 100% of the issued and outstanding Stock of TPMI at any time while TPMI holds any Stock of Bayway or (B) TPMI and Tosco, in aggregate, shall cease to own beneficially and of record at least 51% (or such greater amount as is required to elect a majority of the members of the Board of Directors of Bayway) of the issued and outstanding voting Stock of Bayway. (b) by inserting the following subsection (xiii): (xiii) TPMI shall conduct any business other than holding Stock of Bayway and matters incidental thereto. Section 2. Scope of Amendment. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Section 3. Representations and Warranties. The Borrowers hereby jointly and severally represent and warrant to the Banks, the Agent and the FMCP L/C Bank that (a) no Default or Event of Default has occurred or is continuing and the effectiveness of this Amendment will not cause any such Default or Event of Default to occur; (b) the representations and warranties of the Borrowers and Seminole contained in the Credit Agreement (i) were true and correct in all material respects when made, and (ii) except to the extent such representations and warranties by their terms are made solely as of a prior date, continue to be true and correct in all material respects on the date hereof; (c) the execution and delivery by the Borrowers of this Amendment and the performance by the Borrowers of all of their agreements and obligations under this Amendment are within the corporate authority of each of the Borrowers and have been duly authorized by all necessary corporate actions on the part of the Borrowers; and (d) this Amendment, the Credit Agreement as amended hereby, and the Loan Documents constitute the legal, valid and binding obligations of the Borrowers enforceable against the Borrowers in accordance with their respective terms, provided that (i) enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general applications affecting the rights and remedies of creditors, and (ii) the availability of the remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceedings for such remedies may be brought. Section 4. Confirmation of Collateral Documents. Each of the Borrowers hereby ratify and confirm each of the Collateral Documents and the pledges and security interests created thereby. Each of the Borrowers hereby further ratify and confirm that the Collateral Documents and the pledges and security interest created thereby secure the Obligations of the Borrowers under the Credit Agreement, as amended hereby. Section 5. Conditions to Effectiveness. The effectiveness of this Amendment No. 6 shall be conditioned upon receipt by the Agent of the following, in form and substance satisfactory to the Banks: (a) this Amendment No. 6 executed by the Borrowers, TPMI, the Required Banks and the Agent; and (b) a fee, payable to the Agent for the account of each Bank that executes this Amendment No. 6 by December 28, 1994, in an amount equal to $1,000 per each such Bank. Section 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. Section 7. Governing Law. This Amendment shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as an agreement under seal as of the date set forth at the beginning of this Amendment. TOSCO CORPORATION By:__________________________________ Title: BAYWAY REFINING COMPANY By:___________________________________ Title: TOSCO EUROPE LIMITED By:____________________________________ Title: THE FIRST NATIONAL BANK OF BOSTON, individually, as FMCP L/C Bank and as Agent By:____________________________________ Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, individually and as Co-Agent By:____________________________________ Title: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), individually and as Co-Agent By:____________________________________ Title: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By:____________________________________ Title: THE FUJI BANK, LIMITED By:____________________________________ Title: ARAB BANKING CORPORATION By:____________________________________ Title: NATIONAL CITY BANK By:____________________________________ Title: BANK HAPOALIM B.M. By:____________________________________ Title: By:____________________________________ Title: UNITED JERSEY BANK By:____________________________________ Title: THE YASUDA TRUST AND BANKING CO., LTD. By:____________________________________ Title: THE SUMITOMO BANK, LIMITED By:____________________________________ Title: THE DAI-ICHI KANGYO BANK, LTD. By:____________________________________ Title: THE SANWA BANK LIMITED By:____________________________________ Title: SEATTLE-FIRST NATIONAL BANK By:____________________________________ Title: UNION BANK By:____________________________________ Title: MIDLANTIC NATIONAL BANK By:____________________________________ Title: NATIONAL WESTMINSTER BANK PLC By:____________________________________ Title: CREDIT LYONNAIS NEW YORK BRANCH By:____________________________________ Title: THE SAKURA BANK, LTD. By:____________________________________ Title: PNC BANK, NATIONAL ASSOCIATION By:____________________________________ Title: BANCA DI ROMA By:____________________________________ Title: By:____________________________________ Title: ACKNOWLEDGED AND ACCEPTED BY: TOSCO PROCESSING & MARKETING, INC. By:__________________________________ Title: Exhibit 10(q) Schedule 1.Amended and Restated Trademark License Agreement between British Petroleum Company p.l.c. and Tosco Corporation dated as of August 1, 1994. This Agreement extends the term of the pervious Trademark Agreement for Washington and Oregon from five to twelve years and also extends the trademark license to six additional states: Arizona, Idaho, Montana, New Mexico, Nevada and Utah. 2. Trademark License Agreement (California) between BP Oil Marketing Inc. and Tosco Corporation dated as of August 1, 1994. This Agreement granted Tosco's license to use the BP trademark in the state of California under the same terms and conditions in the Amended and Restated Trademark Agreement. Exhibit 11
TOSCO CORPORATION AND SUBSIDIARIES COMPUTATION OF PER SHARE DATA Thousands of Dollars Except Per Share Data Year Ended December 31, 1994 1993 1992 Net income (loss) $ 83,843 $ 80,579 ($ 74,455) Preferred stock dividends ( 6,293) ( 10,063) (10,063) Net income (loss) attributable to common shareholders for primary earnings per share computations 77,550 70,516 ( 84,518) Addback of dividends on preferred stock for assumed conversion 6,293 10,063 10,063 Net income (loss) attributable to common shareholders for fully diluted earnings per share computations $ 83,843 $ 80,579 ($74,455) Weighted average number of shares outstanding during the period 33,859 29,522 29,618 Stock option equivalents 355 157 Shares and equivalents used for computation of primary earnings per share 34,214 29,679 29,618 Additional stock option equivalents 170 Weighted average potentially dilutive securities for the assumed conversion of preferred stock 3,194 4,792 Shares and equivalents used for computation of fully diluted earnings per share 37,408 34,641 29,618 Earnings (loss) per share: Primary $ 2.27 $ 2.38 ($ 2.85) Fully diluted $ 2.24 $ 2.33 ($ 2.85) (a) (a)Fully diluted earnings per share computations for 1992 did not assume the conversion of stock options or Series F Stock because the effect would have resulted in a lower loss per share.
Exhibit 21 SUBSIDIARIES OF TOSCO CORPORATION AZL Resources, Inc. Arizona-Florida Land & Cattle Company AZCO Capital Corp. N.V. AZCO Properties, Inc. AZL Engineering, Inc. Breckenridge Nordic Village Corporation Tosco Processing & Marketing, Inc. Bayway Refining Company Tosco Pipeline Company Diablo Service Corporation Seminole Fertilizer Corporation Ridgewood Chemical Corporation International Energy Insurance Limited T Northwest Properties I, Inc. T. Northwest Properties II, Inc. The Loil Group Limited The Oil Shale Corporation Tosco (C-TI), Inc. Tosco (C-TLP), Inc. Tosco Corporation (A Delaware Corporation) Tosco Europe Limited Tosco International Finance N.V. Tosco Marketing, Inc. Tosco Northwest, Inc. Avon Marine Corp. Riverhead Marine Corp. Tosco Refining Company, Inc. Tosco Trading, Transportation and Supply, Inc. Tosco (U.K.) Ltd. Toscopetro Corporation EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Tosco Corporation on Form S-8 (File No. 33-39303, File No. 33-51243, and File No. 33-54153) of our report dated March 3, 1995, on our audits of the consolidated financial statements and the financial statement schedule of Tosco Corporation and subsidiaries as of December 31, 1994 and 1993, and for the years ended December 31, 1994, 1993, and 1992, which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Oakland, California March 28, 1995 [TYPE] EX-27 [DESCRIPTION] ART. 5 FDS FOR FORM 10-K [ARTICLE] 5 [MULTIPLIER] 1,000 [PERIOD-TYPE] 12-MOS [FISCAL-YEAR-END] DEC-31-1994 [PERIOD-END] DEC-31-1994 [CASH] 23,793 [SECURITIES] 0 [RECEIVABLES] 291,772 [ALLOWANCES] 8,392 [INVENTORY] 463,637 [CURRENT-ASSETS] 859,449 [PP&E] 822,057 [DEPRECIATION] 51,905 [TOTAL-ASSETS] 1,797,206 [CURRENT-LIABILITIES] 480,133 [BONDS] 0 [COMMON] 29,702 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [OTHER-SE] 545,762 [TOTAL-LIABILITY-AND-EQUITY] 1,797,206 [SALES] 6,365,757 [TOTAL-REVENUES] 6,365,757 [CGS] 6,105,293 [TOTAL-COSTS] 6,105,293 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 58,315 [INCOME-PRETAX] 133,849 [INCOME-TAX] 50,006 [INCOME-CONTINUING] 83,843 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 83,843 [EPS-PRIMARY] 2.27 [EPS-DILUTED] 2.24
EXHIBIT 99 CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND REPORT OF INDEPENDENT ACCOUNTANTS REPORT OF INDEPENDENT ACCOUNTANTS Our report on the consolidated financial statements of Tosco Corporation and subsidiaries is included on page F-2 of this Form 10-K. In connection with our audits of such financial statements, we have also audited Exhibit 99 presented on page F- 30 of this Form 10-K. In our opinion, Exhibit 99 referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included herein. Coopers and Lybrand L.L.P. Oakland, California March 3, 1995 Condensed Consolidating Financial Information The following tables set forth the condensed consolidating financial statements as of December 31, 1994 and 1993 and for the years then ended of Tosco, Bayway and Tosco's other subsidiaries. They are provided to meet the reporting and informational requirements of Bayway as a guarantor of the 8 1/4% First Mortgage Bonds (Bayway Exchange Bonds).
Condensed Consolidating Balance Sheet (Thousands of Dollars) December 31, 1994 Tosco Bayway Minor Subs (Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated Assets Cash and cash equivalents $ 1,524 $ 19,541 $ 2,728 $ 23,793 Short-term investments and deposits 1,470 8,167 21,192 30,829 Other current assets(a) 353,794 413,536 37,497 804,827 Total current assets 356,788 441,244 61,417 859,449 Other assets 655,421 246,158 40,544 ($ 4,366) 937,757 Investment in Bayway and other subsidiaries 218,722 ( 218,722) Intercompany receivables 158,108 ( 158,108) Total assets $1,389,039 $ 687,402 $ 101,961 ($ 381,196) $ 1,797,206 Liabilities and shareholders' equity Current liabilities $ 277,917 $ 142,610 $ 59,606 $ 480,133 Revolver and long-term debt 477,938 205,000 4,491 687,429 Other liabilities 57,720 826 ($ 4,366) 54,180 Intercompany liabilities 149,007 9,101 ( 158,108) Shareholders' equity 575,464 190,785 27,937 ( 218,722) 575,464 Total liabilities and shareholders' equity $1,389,039 $ 687,402 $ 101,961 ($ 381,196) $ 1,797,206 Condensed Consolidating Statement of Income (Thousands of Dollars) For the Year Ended December 31, 1994 Sales $ 2,770,402 $ 3,412,498 $353,783 ($ 170,926) $6,365,757 Cost of sales 2,581,262 3,331,638 351,668 ( 170,926) 6,093,642 Operating contributon 189,140 80,860 2,115 272,115 Selling, general, and administrative expense (b) 56,737 28,453 ( 1,067) 84,123 Interest expense, net 33,736 20,493 ( 86) 54,143 Income before provision for income taxes 98,667 31,914 3,268 133,849 Provision for income taxes 36,109 12,606 1,291 50,006 Net income $ 62,558 $ 19,308 $ 1,977 $ - $ 83,843 (a) The lower of LIFO cost or market value of inventories is measured on a consolidated basis. (b) The condensed consolidating statement of income does not reflect an allocation of a portion of aggregate corporate selling, general and administrative expense of $18,602,000 to Bayway and the Minor Subsidiaries. Tosco may allocate such costs in the future.
Condensed Consolidating Financial Information (continued)
Condensed Consolidating Statement of Cash Flows (Thousands of Dollars) For the Year Ended December 31, 1994 Tosco Bayway Minor Subs (Issuer) (Guarantor) (Non-guarantors) Consolidated Cash flows from operating activities: Net income $ 62,558 $ 19,308 $ 1,977 $ 83,843 Depreciation and amortization 68,203 15,585 1,073 84,861 Deferred income taxes 34,734 34,734 Inventory valuation recovery ( 17,651) ( 17,651) Environmental cost accrual 6,000 6,000 Changes in working capital (27,119) ( 65,857) 20,999 ( 71,977) Other 4,439 1,271 5,710 Net cash provided by (used in) operating activities 148,815 ( 48,615) 25,320 125,520 Cash flows from investing activities: Purchase of property, plant and equipment ( 95,347) ( 44,218) ( 20,554) ( 160,119) Increase in deferred turnarounds, charges and other assets ( 46,411) ( 45,008) ( 91,419) Transfers to discontinued operations ( 9,207) ( 9,207) Intercompany transfers ( 999) 90 909 Proceeds from termination of Continental Tosco Limited Partnership 9,519 9,519 Inter-company dividend 7,167 ( 7,167) Net change in short-term investments and deposits 3,967 ( 1,553) ( 3,208) ( 794) Net cash used in investing activities ( 140,830) ( 90,689) ( 20,501) ( 252,020) Cash flows from financing activities: Short-term borrowings and borrowings (repayments) under revolver, net ( 5,500) 133,000 127,500 Principal payments under debt agreements ( 4) ( 2,271) ( 2,275) Dividends on Preferred and Common Stock ( 27,767) ( 27,767) Other ( 2,256) ( 2,256) Net cash provided by (used in) financing activities( 35,527) 133,000 ( 2,271) 95,202 Net increase (decrease) in cash and cash equivalents ( 27,542) ( 6,304) 2,548 ( 31,298) Cash and cash equivalents at beginning of period 29,066 25,845 180 55,091 Cash and cash equivalents at end of period $ 1,524 $ 19,541 $ 2,728 $ 23,793
Condensed Consolidating Financial Information (continued)
Condensed Consolidating Balance Sheet (Thousands of Dollars) December 31, 1993 Tosco Bayway Minor Subs (Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated Assets Cash and cash equivalents $ 29,066 $ 25,845 $ 180 $ 55,091 Short-term investments and deposits 5,437 6,614 17,984 30,035 Other current assets 258,121 335,316 118 593,555 Total current assets 292,624 367,775 18,282 678,681 Other assets 615,387 172,517 30,640 ($ 4,366) 814,178 Investment in Bayway and other subsidiaries 204,604 (204,604) Intercompany receivables 162,865 1,083 4,67 3 ( 168,621) Total assets $1,275,480 $ 541,375 $ 53,595 ($377,591) $1,492,859 Liabilities and shareholders' equity Current liabilities $ 161,904 $ 147,898 $ 1,228 $ 311,030 Revolver and long-term debt 524,931 72,000 6,375 603,306 Other liabilities 61,245 ($ 4,366) 56,879 Intercompany liabilities 5,756 150,000 12,865 ( 168,621) Shareholders' equity 521,644 171,477 33,127 ( 204,604) 521,644 Total liabilities and shareholders' equity $1,275,480 $ 541,375 $ 53,595 ($ 377,591) $1,492,859 Condensed Consolidating Statement of Income (Thousands of Dollars) For the Year Ended December 31, 1993 Sales $ 1,783,387 $ 1,775,830 $ $ $ 3,559,217 Cost of sales 1,600,937 1,724,206 3,325,143 Operating contribution 182,450 51,624 234,074 Selling, general, and administrative expenses 43,015 15,226 ( 67) 58,174 Interest expense, net 32,612 12,011 ( 477) 44,146 Income before provision for income taxes 106,823 24,387 544 131,754 Provision for income taxes 40,950 10,007 218 51,175 Net income $ 65,873 $ 14,380 $ 326 $ $ 80,579 The condensed consolidating statement of income which includes the operations of Bayway since April 8, 1993, does not reflect an allocation of a portion of aggregate corporate selling, general and administrative expenses of $25,557,000 to Bayway and the Minor Subsidiaries. Tosco may allocate such costs in the future.
Condensed Consolidating Financial Information (continued)
Condensed Consolidating Statement of Cash Flows Thousands of Dollars) For the Year Ended December 31, 1993 Tosco Bayway Minor Subs (Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated Cash flows from operating activities: Net income $ 65,873 $14,380 $ 326 $ 80,579 Depreciation and amortization 57,023 7,668 400 65,091 Deferred income taxes (10,189) (10,189) Inventory valuation writedown 17,651 17,651 Changes in working capital ( 11,376) (31,935) ( 293) ( 43,604) Other 20,644 (17,500) 3,144 Net cash provided by (used in) operating activities 121,975 (9,736) 433 112,672 Cash flows from investing activities: Purchase of property, plant and equipment, net, and acquired inventories (225,361) (326,147) ( 551,508) Increase in deferred turnarounds, charges and other assets ( 22,748) ( 907) ( 23,655) Investment in Bayway Refinery (147,675) 147,675 Intercompany transfers (199,068) 149,574 49,494 Net proceeds from sale of discontinued operations 91,217 91,217 Proceeds from termination of Continental Tosco Limited Partnership 4,880 4,880 Transfers from discontinued operations 41,791 41,791 Net change in short-term investments and deposits 12,927 ( 6,614) ( 4,132) 2,181 Net cash provided by (used in) investing activities ( 448,917) ( 36,419) 50,242 (435,094) Cash flows from financing activities: Proceeds from Bayway Exchange Bonds 150,000 150,000 Borrowings under revolver, net 75,000 72,000 147,000 Early retirement of debt (50,000) ( 50,000) Principal payments under debt agreements ( 24) 771) ( 795) Issuance of Common Stock, net of expenses 88,418 88,418 Dividends on Preferred and Common Stock ( 28,056) ( 28,056) Other ( 727) ( 727) Net cash provided by (used in) financing activities 284,611 72,000 ( 50,771) 305,840 Net increase (decrease) in cash and cash equivalents ( 42,331) 25,845 (96) ( 16,582) Cash and cash equivalents at beginning of period 71,397 276 71,673 Cash and cash equivalents at end of period $29,066 $25,845 $ 180 $ $ 55,091