-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYlHc2GZoqu90NGe7GFvo6VhO2KA10EfRumzh/C+wPtCpx2T78sNk7k6zZufeKSt SqL9wJ+hgnf4JEm7tfApNA== 0000899681-97-000351.txt : 19970815 0000899681-97-000351.hdr.sgml : 19970815 ACCESSION NUMBER: 0000899681-97-000351 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOSCO CORP CENTRAL INDEX KEY: 0000074091 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 951865716 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07910 FILM NUMBER: 97660772 BUSINESS ADDRESS: STREET 1: 72 CUMMINGS POINT RD CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 2039771000 MAIL ADDRESS: STREET 1: 72 CUMMINGS POINT RD CITY: STAMFORD STATE: CT ZIP: 06902 FORMER COMPANY: FORMER CONFORMED NAME: OIL SHALE CORP DATE OF NAME CHANGE: 19760810 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 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 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. [X] Yes [ ] No Registrant's Common Stock outstanding at July 31, 1997 was 156,136,527 shares. TOSCO CORPORATION AND SUBSIDIARIES Index to Financial Statements and Exhibits Filed with the Quarterly Report of Tosco Corporation on Form 10-Q For the Three and Six Month Periods Ended June 30, 1997 Page(s) PART I FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 2 Consolidated Statements of Income for the three and six month periods ended June 30, 1997 and 1996 3 Consolidated Statements of Cash Flows for the six month periods ended June 30, 1997 and 1996 4 Notes to Consolidated Financial Statements 5 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10- 14 PART II OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 15 Exhibit 11 - Computation of Earnings per Share for the three and six month periods ended June 30, 1997 and 1996 16 Exhibit 12 - Ratio of Earnings to Fixed Charges for the three and six month periods ended June 30, 1997 and 1996 17
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Thousands of Dollars, Except Par Value) June 30, December 31, 1997 1996 (Unaudited) ASSETS Current assets: Cash and cash equivalents $40,480 $94,418 Marketable securities and deposits 19,104 35,238 Trade accounts receivable, less allowance for uncollectibles of $15,007 (1997) and $8,291 (1996) 459,644 189,654 Inventories 1,272,475 639,760 Prepaid expenses and other current assets 129,361 55,304 Deferred income taxes 28,121 28,121 ----------- ----------- Total current assets 1,949,185 1,042,495 Property, plant and equipment, net 3,147,420 1,681,877 Deferred turnarounds, net 132,243 63,160 Intangible assets (primarily tradenames), less accumulated amortization of $21,986 (1997) and $12,696 (1996) 623,552 621,226 Other deferred charges and assets 194,156 146,067 ------------ ----------- $6,046,556 $3,554,825 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, accrued expenses, and other liabilities $1,441,166 $ 919,306 Current maturities of long-term debt 13,096 113,200 ------------ ------------ Total current liabilities 1,454,262 1,032,506 Revolving credit facilities 515,000 - Long-term debt 1,420,209 826,832 Accrued environmental costs 276,545 87,363 Deferred income taxes 73,418 80,302 Other liabilities 186,525 157,499 ------------ ------------ Total liabilities 3,925,959 2,184,502 ============= ============= Company-obligated, mandatorily redeemable, convertible preferred securities of Tosco Financing Trust, holding solely 5.75% convertible junior subordinated debentures of Tosco Corporation 300,000 300,000 ------------- ------------- Shareholders' equity: Common stock, $.75 par value, 250,000,000 shares authorized, 177,576,957 (1997) and 138,486,201 (1996) shares issued 133,410 103,865 Additional paid-in capital 2,028,405 963,667 Retained earnings 131,090 77,594 Treasury stock, at cost (472,308) (74,803) ------------- ------------ Total shareholders' equity 1,820,597 1,070,323 ------------- ------------- $6,046,556 $3,554,825 ============= ============== The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Thousands of Dollars, Except Per Share Data) Three Months Ended June 30, Six Months Ended June 30, 1997 1996 1997 1996 Sales $3,196,431 $2,430,740 $5,606,704 $4,450,763 Cost of sales 2,948,053 2,265,495 5,272,538 4,202,907 Consolidation charge 13,500 13,500 Selling, general and administrative expenses 85,019 47,867 136,928 74,937 Interest expense 45,801 20,864 69,944 37,587 Interest income (1,372) (887) (2,141) (1,687) ----------- ------------ ------------ ----------- Income before income taxes and distributions on company-obligated, mandatorily redeemable, convertible preferred securities 118,930 83,901 129,435 123,519 Income taxes 49,295 34,263 53,715 49,915 ------------- ------------- ------------ ----------- Income before distributions on company-obligated, mandatorily redeemable, convertible preferred securities 69,635 49,638 75,720 73,604 Distributions company-obligated, mandatorily redeemable, convertible preferred securities, net of income tax benefit of $1,790 (1997 three months) and $3,579 (1997 six months) 2,523 - 5,046 - ------------- ------------- ------------- ----------- Net income $67,112 $49,638 $70,674 $73,604 ============= ============= ============= ============ Earnings per common and common equivalent share (a): Primary $0.43 $0.41 $0.48 $0.63 ============= ============= ============= ============ Fully diluted $0.43 $0.41 $0.48 $0.62 ============= ============= ============= ============ Weighted average common and common equivalent shares used for computation of earnings per share (a): Primary 156,885,582 120,916,206 146,157,485 117,571,635 =============== ============== ============= ============= Fully diluted 156,885,582 120,967,662 146,189,287 117,900,384 =============== =============== ============= ============== (a) Earnings per share and weighted average shares outstanding reflect the 3-for-1 stock split declared and distributed in February 1997. The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands of Dollars) Six Months Ended June 30, 1997 1996 Cash flows from operating activities: Net income $70,674 $73,604 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant, and equipment 102,451 44,170 Amortization of deferred turnarounds, intangible assets, and other deferred charges 35,030 31,262 Deferred income taxes 22,458 Insurance recoveries (73,000) Changes in operating assets and liabilities, net (43,881) (85,789) Other, net (2,141) 12,821 ------------ --------- Net cash provided by operating activities 89,133 98,526 ------------ --------- Cash flows from investing activities: Purchase of property, plant, and equipment, net (183,896) (78,188) Increase in deferred turnarounds, deferred charges, and other assets (110,690) (51,424) Net change in marketable securities and deposits 2,905 (4,291) Acquisition of BP Northeast refining and marketing assets (55,928) Acquisition of Circle K, net of cash acquired (413,229) Acquisition of Unocal refining, marketing, and related supply and transportation assets, net of cash acquired (1,138,464) ------------- ----------- Net cash used in investing activities (1,430,145) (603,060) ------------- ----------- Cash flows from financing activities: Proceeds from note and debenture offering 600,000 240,000 Proceeds from common stock offering 697,395 Net borrowings under revolving credit facilities 515,000 323,000 Net short-term bank repayments (20,000) Payments under long-term debt agreements (106,898) Repurchase of Unocal Shares (393,708) Dividends paid on common stock (17,178) (12,921) Other, net (7,537) (515) -------------- ------------ Net cash provided by financing activities 1,287,074 529,564 -------------- ------------ Net (decrease) increase in cash and cash equivalents (53,938) 25,030 Cash and cash equivalents at beginning of period 94,418 19,148 -------------- ------------ Cash and cash equivalents at end of period $40,480 $44,178 ============== ============ The accompanying notes are an integral part of these financial statements.
TOSCO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 (All Information is Unaudited) 1. Basis of Presentation The consolidated financial statements of Tosco Corporation and subsidiaries ("Tosco" or the "Company") reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the Company's consolidated financial position, results of operations, and cash flows. Such financial statements are presented in accordance with disclosure requirements established by the Securities and Exchange Commission for Form 10-Q. These unaudited, interim, consolidated financial statements should be read in conjunction with the Company's audited Consolidated Financial Statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. Certain reclassifications have been made to conform prior-period amounts with the current-period presentation. 2. Derivative Accounting Policy The Company utilizes commodity-based derivative instruments, at times and when able, to reduce a portion of its exposure to price volatility. Commodity futures are used to lock in what the Company considers to be acceptable margins between the sales value of refined products produced and the cost of raw materials purchased on a varying percentage of production, generally for periods not exceeding one year. In addition, the Company 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 residual fuels production. Futures and forward contracts are also used to hedge inventories stored for future sale and to hedge against adverse price movements between the cost of foreign and domestic crude oil. Gains and losses related to qualifying hedges are deferred and recognized in cost of sales or as adjustments of the carrying amounts when the underlying transaction occurs. 3. Acquisition On March 31, 1997, the Company acquired Union Oil Company of California's ("Unocal") West Coast petroleum refining, marketing, and related supply and transportation assets (the "Unocal Acquisition") for a purchase price (including liabilities assumed) of approximately $1,400,000,000, plus inventories valued at approximately $400,000,000 and credit card receivables valued at approximately $133,000,000. In addition, Unocal is entitled to receive contingent participation payments over the next seven years, up to a maximum of $250,000,000, if retail market conditions and/or California Air Resources Board ("CARB") gasoline margins improve. For a period of 25 years, Unocal will be responsible for all environmental liabilities arising out of or relating to the period prior to closing, except that the Company will pay the first $7,000,000 of such environmental liabilities each year, plus 40% of any amount in excess of $7,000,000 per year, with Unocal paying the remaining 60% each year. The aggregate maximum amount that the Company may have to pay in total for the 25 year period for such environmental liabilities is limited to $200,000,000. The assets which were acquired from Unocal include two petroleum refining systems, comprised of four sites in California with an aggregate throughput capacity of approximately 250,000 barrels per day; a retail gasoline system, consisting of approximately 1,325 76-branded gasoline stations (approximately 1,100 of which are company-controlled); a distribution system comprised of 13 company-owned oil storage terminals; three modern American-flagged 40,000 deadweight-ton tankers; 1,500 miles of crude oil and product pipeline; the worldwide rights to the "76" and "Union" brands (together with the distinctive orange ball logo) in the petroleum refining and marketing businesses (except for pre-existing license grants relating to 76 Truckstops and to Uno-Ven); and Unocal's lubricants manufacturing, distribution, and marketing business. The purchase price paid pursuant to the Unocal Acquisition consisted of cash and 14,092,482 shares of Tosco Common Stock (the "Unocal Shares") having an aggregate value of $396,880,000. In addition, certain gasoline service stations were purchased directly from Unocal for $235,000,000 by a special purpose entity which leased the service stations to the Company pursuant to a long-term lease. The Unocal Shares were valued at $28.1625 per share, which was the average of the high and low Tosco stock prices for the ten trading days preceding the closing date. The cash portion of Tosco's purchase price, including working capital, was paid to Unocal on April 1, 1997 from a combination of available cash, borrowings under the Revolving Credit Facilities (Note 6), and proceeds from the sale of $600,000,000 of unsecured debt securities (Note 7). In connection with the Unocal Acquisition, the Company and Unocal entered into a Stock Purchase and Shareholder Agreement related to Unocal's disposition of the Unocal Shares. In May 1997, the Company repurchased the Unocal Shares for approximately $393,708,000. The Company indicated, at the time it completed the Unocal Acquisition, that it intended to sell certain non-strategic assets. Through June 30, 1997, approximately $60,000,000 of such assets have been sold, principally oil tankers and a heating oil distributorship. These assets were allocated a purchase cost equal to the net proceeds from the sales. The Unocal Acquisition has been accounted for as a purchase and, accordingly, the acquired assets and liabilities are included in the accompanying June 30, 1997 balance sheet at values based on a preliminary allocation of the purchase price. The purchase price allocation is expected to be finalized by the end of 1997 based upon appraisals and other evaluations currently in process. The preliminary purchase price allocation is summarized below: Thousands of Dollars) Cash and cash equivalents $ 499 Credit card receivables, less allowance for uncollectibles of $4,941 132,959 Inventories 401,394 Prepaid expenses and other current assets 2,530 Property, plant, and equipment 1,397,784 Other deferred charges 23,351 Accrued expenses and other current liabilities (197,674) Accrued environmental costs (190,000) Other liabilities (35,000) ------------ $ 1,535,843 ============= Pro forma results of operations for the six month periods ended June 30, 1997 and 1996, assuming the Unocal Acquisition had occurred at the beginning of each period, are as follows: Six Months Ended June 30, (Thousands of Dollars, Except Share Amounts) 1997 1996 ----- ------ Sales $ 6,561,000 $ 6,320,000 Net income 33,200 105,800 Earnings per common and common equivalent share: Primary 0.20 0.74 Fully diluted 0.20 0.74 The pro forma results of operations are presented for informational purposes only and do not reflect the improvement in operating contribution anticipated from the Unocal Acquisition or the reduction in operating and administrative costs expected from the consolidation of operations. Accordingly, it is not necessarily indicative of the operating results that would have occurred nor of future operating results. 4. Accounts Receivable During May 1997, the Company amended its existing agreement with a financial institution for the sale, on a revolving basis, of an undivided percentage ownership interest in a designated pool of accounts receivable (the "Receivable Transfer Agreement"). This amendment increased the program to $300,000,000 without significantly changing any other provisions. 5. Inventories June 30, December 31, (Thousands of Dollars) 1997 1996 Refineries (LIFO): Raw materials $ 518,655 $ 227,211 Intermediates 173,707 79,831 Finished products 420,484 174,277 Retail (FIFO): Merchandise 117,865 116,618 Gasoline and diesel 39,236 39,681 Other 2,528 2,142 ------------ ------------ $ 1,272,475 $ 639,760 ============= ============ At June 30, 1997, the carrying value of inventories accounted for under the LIFO method exceeded replacement cost. Management believes this decline in replacement cost of inventories is temporary. At December 31, 1996, the replacement cost of such inventories exceeded carrying cost by approximately $177,653,000. 6. Revolving Credit Facilities On January 14, 1997, the Company amended and restated its existing revolving credit agreement (the "Revolving Credit Facility") to increase the maximum borrowing capacity from $600,000,000 to $1,000,000,000. On March 31, 1997, the Company entered into a second revolving credit agreement (the "Additional Credit Facility"). The Additional Credit Facility was scheduled to mature on January 14, 2002 and provided the Company with a $250,000,000 uncollateralized revolving credit facility for working capital and general corporate purposes. On May 15, 1997, the Company terminated the Additional Credit Facility. Utilization of the Revolving Credit Facility was as follows: June 30, December 31, (Thousands of Dollars) 1997 1996 ---------- ------------- Cash borrowings outstanding $ 515,000 $ Letters of credit 68,006 112,113 ----------- ------------ Total utilization 583,006 112,113 Availability 416,994 487,887 ----------- ------------ $ 1,000,000 $ 600,000 7. Long-Term Debt On January 14, 1997, the Company issued $200,000,000 of 7.25% Notes due on January 1, 2007, $300,000,000 of 7.80% Debentures due on January 1, 2027, and $100,000,000 of 7.90% Debentures due on January 1, 2047 (collectively the "Notes and Debentures"). Interest on the unregistered Notes and Debentures is payable each January 1 and July 1, commencing on July 1, 1997. The Notes and Debentures are non-redeemable and uncollateralized. The proceeds from the Notes and Debentures were used to finance a portion of the Unocal Acquisition purchase price. In May 1997, the Company offered to exchange the unregistered Notes and Debentures for fully registered and freely saleable Notes and Debentures having the identical terms, including the same interest rates and maturity dates. The offer is scheduled to expire on August 15, 1997. 8. Capital Stock In January 1997, the Company filed a shelf registration statement providing for the issuance of up to $1,500,000,000 aggregate principal amount of its securities. The securities issued may consist of (1) one or more series of debentures, notes or other uncollateralized forms of indebtedness ("Debt Securities"), (2) shares of its Common Stock, (3) shares of its Preferred Stock, and (4) shares of preferred stock represented by depository shares ("Depository Shares"). The Debt Securities, Common Stock, Preferred Stock, and Depository Shares may be offered, separately or together, in amounts and at prices and terms to be set forth in one or more supplements to the shelf registration statement. On May 1, 1997, the Company issued 25,300,000 shares of Common Stock pursuant to a prospectus supplement to the shelf registration statement. The net proceeds from this Common Stock offering were $697,395,000, based on an offering price of $28.50 per share. The net proceeds were used to repurchase the Unocal Shares ($393,708,000) and repay borrowings under the Revolving Credit Facility and Additional Credit Facility ($303,687,000). At a special meeting of the Company's Shareholders on February 12, 1997, an amendment to the Company's Articles of Incorporation increasing the number of authorized shares of Common Stock from 50,000,000 to 250,000,000 was approved. In February 1997, the Company declared and distributed a 3-for-1 Common Stock split. The number of shares, per share prices, earnings per share, and dividend per share amounts have been restated to reflect the 3-for-1 stock split. The Company's quarterly Common Stock dividend was increased to $.06 per post-split share effective with the first quarter of 1997. 9. Cost of Sales Cost of sales for the three and six month periods ended June 30, 1997 have been reduced by $20,000,000 and $73,000,000, respectively, of insurance coverage accruals related to the unscheduled shutdown of the Bayway Refinery cat cracker and the January 1997 accident at the Avon Refinery hydrocracker. The insurance accruals for damages and business interruption claims are net of deductible amounts and asset write-offs. The Bayway Refinery cat cracker resumed full production in the 1997 first quarter and the Avon Refinery hydrocracker resumed full production in July 1997. 10. Supplemental Cash Flow Information Six Months Ended June 30, (Thousands of Dollars) 1997 1996 ---------- --------- Cash paid during the period for: Interest, net of amounts capitalized $ 49,590 $ 34,645 Income taxes, net of refunds received $ 43,997 $ 16,968 Detail of acquisitions: Fair value of assets acquired $ 1,958,018 $ 1,578,796 Liabilities assumed (422,674) (782,600) Common Stock issued (396,880) (327,039) ------------ ---------- Net cash paid for acquisitions 1,138,464 469,157 Cash acquired in acquisitions 499 41,465 ------------ ------------- Cash paid for acquisitions 1,138,963 $ 510,622 ============ ============= 11. New Accounting Standards During February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 modifies the computation, presentation, and disclosure requirements for earnings per share amounts. The adoption of SFAS No. 128, in the fourth quarter of 1997, is not expected to have a significant impact on Tosco's reported earnings per share. During June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS No. 130") and Statement of Financial Accounting Standards No. 131 established standards for reporting and display of comprehensive income and its components (net income plus all other nonowner changes in equity). SFAS No. 131 established disclosure standards regarding information about operations segments in interim and annual financial statements. Tosco will comply with the expanded disclosure requirements of SFAS No. 130 and SFAS No. 131 with its 1997 annual financial statements. Management's Discussion and Analysis of Financial Condition and Results of Operations. Introduction Management's Discussion and Analysis of Financial Condition and Results of Operations for the three and six month periods ended June 30, 1997 should be read in conjunction with Management's Discussion and Analysis included in Tosco's 1996 Annual Report on Form 10-K. The Annual Report sets forth Selected Financial Data that, in summary form, reviewed Tosco's results of operations and capitalization over the five year period 1992 through 1996. This Management's Discussion and Analysis updates that data. Acquisitions On March 31, 1997, Tosco completed its acquisition of Union Oil Company of California's ("Unocal") West Coast petroleum refining, marketing, and related supply and transportation assets (the "Unocal Acquisition"). The assets acquired from Unocal are comprised of two petroleum refining systems, a retail gasoline system consisting of approximately 1,325 76-branded gasoline service stations, a distribution system comprised of 13 company-owned oil storage terminals, 1,500 miles of crude oil and product pipeline, the world-wide rights to the "76" and "Union" brands, and Unocal's lubricants manufacturing, distribution, and marketing business. Tosco completed its acquisition of The Circle K Corporation ("Circle K") on May 30, 1996 (the "Circle K Acquisition"). Tosco is now the largest independent refiner and marketer of petroleum products in the United States, and is also the nation's largest operator of company-controlled convenience stores.
Results of Operations Three Months Ended June 30, Six Months Ended June 30, (Thousands of Dollars, Except Per Share Data) 1997 1996 1997 1996 ---------- ------- ------- -------- Sales $ 3,196,431 $ 2,430,740 $ 5,606,704 $ 4,450,763 Cost of sales 2,948,053 2,265,495 5,272,538 4,202,907 Consolidation charge 13,500 13,500 Selling, general, and administrative expenses 85,019 47,867 136,928 74,937 Interest expense, net 44,429 19,977 67,803 35,900 -------------- ------------ ------------ ----------- Income before income taxes and distributions on Trust Preferred Securities 118,930 83,901 129,435 123,519 Income taxes 49,295 34,263 53,715 49,915 ------------ ----------- ------------ ---------- Income before disributions on Trust Preferred Securities 69,635 49,638 75,720 73,604 Distributions on Trust Preferred Securities, net of income taxes 2,523 5,046 -------------- ----------- ------------ ---------- Net income $ 67,112 $ 49,638 $ 70,674 $ 73,604 ============== ============ ============ ============ Fully diluted earnings per share (a) $ 0.43 $ 0.41 $ 0.48 $ 0.62 ============== ============ ============ ============ (a) Earnings per share reflect the 3-for-1 stock split declared and distributed in February 1997. Three Months Ended June 30, Six Months Ended June 30, Refining Data Summary (a): 1997 1996 1997 1996 --------- ------- ---------- -------- Average charge barrels input per day (b): Crude oil 761,600 477,200 573,400 474,000 Other feed and blending stocks 94,600 68,400 71,500 67,700 --------- ----------- --------- --------- 856,200 545,600 644,900 541,700 ========== =========== ========== =========== Average barrels of petroleum products produced per day: Clean products (c) 692,300 439,200 516,900 435,900 Other finished products 150,800 100,400 121,000 103,900 ---------- ----------- ---------- ----------- 843,100 539,600 637,900 539,800 =========== ============= =========== ============ Operating margin per charge barrel (d) $ 4.62 $ 5.48 $ 4.75 $ 4.87 =========== ============= =========== ============ (a) The refining data summary presents the operating results of the following refineries: - Bayway Refinery, located on the New York Harbor; - Ferndale Refinery, located on Washington's Puget Sound - Trainer Refinery, located near Philadelphia. - San Francisco Area Refinery System, comprised of the Avon Refinery and the acquired Rodeo-Santa Maria Complex - Los Angeles Refinery System, comprised of the two acquired refineries in Los Angeles The refinery data summary includes the operations of the Rodeo-Santa Maria Complex and the Los Angeles Refinery System subsequent to March 31, 1997 (date acquired) and the Trainer Refinery subsequent to May 8, 1997 (date reopened). (b) A charge barrel is equal to 42 gallons. (c) Clean products are defined as clean transportation fuels (gasoline, diesel, distillates, and jet fuel) and heating oil. Clean product production for the first quarter of 1997 was reduced due to scheduled turnaround maintenance at the Avon Refinery coker unit and the unscheduled shutdowns of the Bayway Refinery cat cracker and Avon Refinery hydrocracker. Clean product production for the second quarter of 1997 was increased due to the refinery acquisitions and the reopening of the Trainer Refinery partially offset by the unscheduled shutdowns. (d) Operating margin per charge barrel is calculated as operating contribution, including insurance recoveries and excluding refinery operating costs, divided by total refinery charge barrels.
Three Months Ended June 30, Six Months Ended June 30, Retail Data Summary (a): 1997 1996 1997 1996 -------- -------- ------ ------- Volume of fuel sold (thousands of gallons) 1,181,479 435,587 1,807,424 715,691 Blended fuel margin (cents per gallon) 14.7 11.8 12.5 10.1 Number of gasoline stations at period end 4,708 3,395 4,708 3,395 Merchandise sales (thousands of dollars) $ 520,963 $ 179,105 $ 983,559 $ 187,082 Merchandise margin (percentage of sales) 29.3% 29.2% 29.5% 29.3% Number of merchandise stores at period end 2,522 2,390 2,522 2,390 Other retail gross profit (thousands of dollars) $ 33,540 $ 10,110 $ 53,174 $ 16,397 (a) The retail data summary includes the operations of The Circle K Corporation subsequent to May 30, 1996 and the Unocal gasoline stations subsequent to March 31, 1997.
1997 SECOND QUARTER COMPARED TO 1996 SECOND QUARTER Tosco earned $67.1 million ($0.43 per fully diluted share) on sales of $3.2 billion for the second quarter of 1997, compared to earnings of $49.6 million ($0.41 per fully diluted share) on sales of $2.4 billion in the corresponding period of 1996. The increase in sales is attributable to the Unocal and Circle K Acquisitions and the reopening of the Trainer Refinery, partially offset by reduced production at the Avon Refinery and lower West Coast product prices. Tosco generated an operating contribution of $248.4 million for the second quarter of 1997 compared to $165.2 million in the corresponding period in 1996. Refining operating contribution decreased by $25 million due to a number of factors (primarily reduced production at the Avon Refinery, lower West Coast refining margins, and start-up costs associated with the Trainer reopening), partially offset by operating contribution from the Unocal assets. The 1997 second quarter refinery operating contribution includes $20 million of insurance recovery accruals related to the Avon hydrocracker. See Note 9 to the Consolidated Financial Statements. Retail operating contribution for the three month period ended June 30, 1997 increased by approximately $108 million compared to the same period in 1996, due to the Circle K and Unocal Acquisitions and improved blended fuel margins. During the second quarter of 1996, Tosco recorded a $13.5 million ($8.1 million after-tax) charge for the consolidation of its marketing division following the Circle K Acquisition. There were no special items in the 1997 second quarter. Selling, general, and administrative expenses for the quarter ended June 30, 1997 increased by $37.2 million compared to the corresponding period in 1996, primarily due to the Unocal and Circle K Acquisitions. Net interest expense for the quarter ended June 30, 1997 increased by $24.5 million compared to 1996. This increase is primarily due to higher debt levels incurred to finance Tosco's expanded operations and acquisitions. Income taxes, including the benefit associated with the distributions on company-obligated, mandatorily redeemable, convertible preferred securities, for the 1997 second quarter were $47.5 million compared to the 1996 second quarter of $34.3 million. Tosco's effective income tax rate increased due to the nondeductibility of the amortization of certain intangible assets acquired in the Circle K Acquisition and a higher effective state income tax rate due to the Unocal Acquisition. Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996 Tosco earned $70.7 million ($0.48 per fully diluted share) on sales of $5.6 billion during the six month period ended June 30, 1997, compared to earnings of $73.6 million ($0.62 per fully diluted share) on sales of $4.5 billion in the corresponding period of 1996. The increase in sales is attributable to the Unocal and Circle K Acquisitions and the reopening of the Trainer Refinery, partially offset by reduced production at the Avon and Bayway Refineries and lower West Coast product prices during the second quarter of 1997. Tosco generated an operating contribution of $334.2 million for the six month period ended June 30, 1997 compared to $247.9 million in the corresponding period in 1996. Refining operating contribution decreased by $46 million due to a number of factors (primarily reduced production at the Avon Refinery, the unscheduled shutdown of the Bayway Refinery cat cracker, unusually mild winter weather on the East Coast during the first quarter of 1997, lower West Coast refining margins, and start-up costs associated with the Trainer reopening), partially offset by operating contribution from the Unocal assets. Lower production at the Avon Refinery was due to the scheduled turnaround of the coker unit and the unscheduled refinery shutdown. Refinery operating contribution for the six month period ended June 30, 1997 includes $73 million of insurance recovery accruals. See Note 9 to the Consolidated Financial Statements. Retail operating contribution for the six month period ended June 30, 1997 increased by approximately $132 million compared to the same period in 1996, due to the Circle K and Unocal Acquisitions and the improved blended fuel margins of the 1997 second quarter. Selling, general, and administrative expenses for the six month period ended June 30, 1997 increased by $62.0 million compared to the corresponding period in 1996, primarily attributable to the Unocal and Circle K Acquisitions. Net interest expense for the six month period ended June 30, 1997 increased by $31.9 million compared to 1996. This increase is primarily due to higher debt levels incurred to finance Tosco's expanded operations and acquisitions. Income taxes, including the benefit associated with the distributions on company-obligated, mandatorily redeemable, convertible preferred securities, for the six month period ended June 30, 1997 were $50.1 million compared to $49.9 million in the corresponding period of 1996. Tosco's effective income tax rate increased due to the nondeductibility of the amortization of certain intangible assets acquired in the Circle K Acquisition and a higher effective state income tax rate due to the Unocal and Circle K Acquisitions. Outlook Results of operations for the balance of 1997 will be primarily determined by the operating efficiency of the refineries, and refining and retail fuel margins. The Avon hydrocracker unit returned to normal operation in July 1997. Accordingly, Tosco's expanded consolidated refining production is expected to be at higher levels for the balance of 1997. Refining and retail fuel margins at the beginning of the third quarter are at satisfactory levels. Merchandise margins also remained consistent. Tosco is not able to predict whether such margins will continue due to the uncertainties associated with the oil markets. Cash Flows As summarized in the Consolidated Statement of Cash Flows, cash and cash equivalents decreased by $54 million during the first six months of 1997 as cash used in investing activities of $1.4 billion exceeded cash provided by operating and financing activities of $89 million and $1.3 billion, respectively. Net cash provided by operating activities of $89 million was from cash earnings of $135 million (net income plus depreciation and amortization less insurance recoveries), net of an increase in net operating assets and liabilities of $44 million, and $2 million from other operating uses. Net cash used in investing activities totaled $1.4 billion due to the Unocal Acquisition ($1.1 billion), capital additions ($184 million), and spending for turnarounds, deferred charges and other assets ($111 million), net of other investing sources of $3 million. Net cash provided by financing activities totaled $1.3 billion as proceeds from the Common Stock offering of $697 million, proceeds from notes and debentures of $600 million, and net borrowings under the Revolving Credit Facilities of $515 million exceeded the repurchase of the Unocal Shares of $394 million, principal payments on long-term debt of $107 million, dividend payments of $17 million, and other financing uses of $8 million. Liquidity At June 30, 1997, liquidity (cash and cash equivalents, current portion of marketable securities, deposits, and unused credit facilities) totaled $477 million, a $140 million decrease from the December 31, 1996 balance of $617 million. Cash and cash equivalents decreased by $54 million, current portion of marketable securities and deposits decreased by $16 million, and unused credit facilities decreased by $71 million. See Note 6 to the Consolidated Financial Statements. In January 1997, Tosco filed a shelf registration statement providing for the issuance of up to $1.5 billion aggregate principal amount of its securities. The securities to be issued may consist of one or more series of debentures, notes or other uncollateralized forms of indebtedness, Common Stock, Preferred Stock, and Preferred Stock represented by depository shares. Such securities may be offered, separately or together, in amounts and at prices and terms to be set forth in one or more supplements to the shelf registration statement. On May 1, 1997, Tosco issued 25,300,000 shares of Common Stock pursuant to a prospectus supplement to the shelf registration statement. The net proceeds from this Common Stock offering were $697 million, based on an offering price of $28.50 per share. The net proceeds were used to repurchase and retire the common stock issued to Unocal ($394 million) and repay borrowings under the Revolving Credit Facilities used to finance the Unocal Acquisition ($304 million). The Revolving Credit Facility, together with funds potentially available from the issuance of securities, provide Tosco with adequate resources to meet its expected liquidity demands, including required debt payments and liquidity requirements associated with the Unocal Acquisition, for at least the next twelve months. See Note 8 to the Consolidated Financial Statements. Capital Expenditures On March 31, 1997, Tosco completed the Unocal Acquisition. In addition, Tosco spent $184 million on budgeted capital projects during the first six months of 1997, primarily at the Avon, Bayway, and Trainer Refineries and for retail assets. Refinery capital spending programs were for the completion of projects to meet reformulated fuel specifications, compliance with environmental regulations and permits, personnel/process safety programs, and operating flexibility and reliability projects. Retail capital spending was focused on integrating operations, enhancing existing sites, and upgrading underground storage tanks. Capitalization At June 30, 1997, total shareholders' equity was $1.8 billion, a $750 million increase from the December 31, 1996 balance of $1.1 billion. This increase was primarily due to the issuance of 25,300,000 shares of Common Stock for $697 million, and net income of $71 million less Common Stock dividends of $17 million. Debt (short-term bank borrowings, current and non-current maturities of long-term debt, and revolving credit facilities) at June 30, 1997 totaled $1.9 billion, an increase of $1 billion from the December 31, 1996 balance of $940 million. This increase was due to Tosco's borrowings to fund the Unocal Acquisition, net of principal payments. The ratio of long-term debt (revolving credit facilities and non-current portion of long-term debt) to total capitalization (revolving credit facilities, non-current portion of long-term debt, Trust Preferred Securities, and total shareholders' equity) increased from 38% at December 31, 1996 to 48% at June 30, 1997. This increase was primarily due to the issuance of $600 million of long-term debt in January 1997 and net borrowings of $515 million under the Revolving Credit Facilities, net of long-term debt payments of $107 million and net proceeds from a Common Stock offering of $697 million. New Accounting Standards During February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS No. 128"). SFAS No. 128 modifies the computation, presentation, and disclosure requirements for earnings per share amounts. The adoption of SFAS No. 128, in the fourth quarter of 1997, is not expected to have a significant impact on Tosco's reported earnings per share. During June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS No. 130") and Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (net income plus all other nonowner changes in equity). SFAS No. 131 establishes disclosure standards regarding information about operating segments in interim and annual financial statements. Tosco will comply with the expanded disclosure requirements of SFAS No. 130 and SFAS No. 131 with its 1997 annual financial statements. PART II OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders On May 15, 1997, an Annual Meeting of Stockholders was held. The table below briefly describes the proposals and the results of the shareholder vote: I. Election of Directors Withhold Names Votes For Authority Jefferson F. Allen 133,835,112 229,184 Patrick M. de Barros 133,837,368 226,928 Wayne A. Budd 133,768,455 295,841 Houston I. Flournoy 133,819,924 244,372 Edmund A. Hajim 133,836,364 227,932 Joseph P. Ingrassia 133,820,769 243,527 Charles J. Luellen 133,826,226 238,070 Eija Malmivirta 133,771,097 293,199 Mark R. Mulvoy 133,823,769 240,527 Thomas D. O'Malley 133,820,853 243,443 II. Ratification of Independent Accountants Votes For Votes Against Abstain Ratification and approval of appointment of Coopers & Lybrand L.L.P. as independent accountants 133,876,019 70,230 118,047 Item 6. Exhibits and Reports on Form 8-K a. Exhibits: 11 - Computation of Earnings Per Share (see page 16) 12 - Ratio of Earnings to Fixed Charges (see page 17) 27 - Financial Data Schedule b. Report on Form 8-K A Report on Form 8-K/A dated June 10, 1997 was filed relating to the acquisition of Union Oil Company of California's West Coast petroleum refining, marketing and related supply and transportation assets on March 31, 1997. This Form 8-K/A reported on Item 2., Acquisition or Disposition of Assets, and on the following financial information under Item 7., Financial Statements, Pro Forma Financial Information and Exhibits: 1. Pro-forma financial information of Tosco Corporation consisting of an unaudited pro-forma combined balance sheet as of March 31, 1997 and an unaudited pro-forma combined income statements for the year ended December 31, 1996 and the three month period ended March 31, 1997 EX-11 2 EXHIBIT 11
TOSCO CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (a) (Unaudited) (Thousands of Dollars, Except Per Share Data) Three Months Ended June 30, Six Months Ended June 30, 1997 1996 1997 1996 Income before distributions on company-obligated, mandatorily redeemable, convertible preferred securities $69,635 $49,638 $75,720 $73,604 Distributions company-obligated, mandatorily redeemable, convertible preferred securities, net of income tax benefit 2,523 - 5,046 - -------- ------- -------- -------- Net income $67,112 $49,638 $70,674 $73,604 PRIMARY EARNINGS PER SHARE Earnings used for computation of primary earnings per share $67,112 $49,638 $70,674 $73,604 Weighted average number of shares outstanding during the period 152,491,892 117,870,768 141,833,861 114,803,490 Assumed conversion of common share equivalents 4,393,690 3,045,438 4,323,624 2,768,145 -------------- ------------ ------------ ------------ Weighted average common and common equivalent shares used for computation of primary earnings per share 156,885,582 120,916,206 146,157,485 117,571,635 -------------- ------------- ------------ ------------ Primary earnings per common and common equivalent share $0.43 $0.41 $0.48 $0.63 ============= ============= ============ ============ FULLY DILUTED EARNINGS PER SHARE (b) Earning used for computation of fully diluted earnings per share $67,112 $49,638 $70,674 $73,604 -------------- ------------- ----------- ------------- Weighted average number of shares outstanding during the period 152,491,892 117,870,768 141,833,861 114,803,490 Assumed conversion of common share equivalents 4,393,690 3,096,894 4,355,426 3,096,894 Weighted average common and common equivalent shares used for computation of fully diluted earnings per share 156,885,582 120,967,662 146,189,287 117,900,384 -------------- ------------- ------------ ------------ Fully diluted earnings per common and common equivalent share $0.43 $0.41 $0.48 $0.62 (a) Earnings per share and weighted average shares outstanding reflect the 3-for-1 stock split declared and distributed in February 1997. (b) Conversion of the company-obligated, mandatorily redeemable, convertible preferred securities is not assumed at June 30, 1997 because its effect on earnings per share is not significant and because the conversion rate, equivalent to a conversion price of approximately $32.92 per Common Stock share, was higher than the average market price of the Common Stock for the three and six month periods ended June 30, 1997.
EX-12 3 EXHIBIT 12
TOSCO CORPORATION AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (Thousands of Dollars, Except Ratio Data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 1997 1996 1997 1996 Income before income taxes $114,618 $83,901 $120,810 $123,519 Fixed charges to be added to income before income taxes: Interest expense, including amortization of debt expenses 45,801 20,864 69,944 37,587 Distributions on company-obligated, mandatorily redeemable, convertible preferred securities 4,312 8,625 Interest factor of rental expense 8,516 6,289 15,691 11,007 --------- --------- --------- --------- Earnings $173,247 $111,054 $215,070 $172,113 ---------- ---------- --------- --------- Fixed charges: Interest expense, including amortization of debt expenses $45,801 $20,864 $69,944 $37,587 Interest capitalized 458 309 707 649 Distributions on company-obligated, mandatorily redeemable, - - convertible preferred securities 4,312 8,625 Interest factor of rental expense 8,516 6,289 15,691 11,007 ----------- ---------- ----------- ---------- Total fixed charges $59,087 $27,462 $94,967 $49,243 ---------- ---------- ----------- --------- Ratio of earnings to fixed charges 2.93 4.04 2.26 3.50 ========== ========= =========== ==========
SIGNATURES Pursuant to the requirements 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. TOSCO CORPORATION Date: August 14, 1997 By: /s/ JEFFERSON F. ALLEN ---------------------- (Jefferson F. Allen) President and Chief Financial Officer By: /s/ ROBERT I. SANTO ---------------------- (Robert I. Santo) Chief Accounting Officer EX-27 4
5 1,000 6-MOS DEC-31-1997 JUN-30-1997 40,480 19,104 474,651 15,007 1,272,475 1,949,185 3,732,050 584,638 6,046,556 1,454,262 350,000 300,000 0 133,410 1,687,187 6,046,556 5,606,704 5,606,704 5,272,538 5,272,538 0 0 69,944 129,435 53,715 75,720 0 0 0 70,674 .48 .48
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