UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 14, 2001
PHILLIPS PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-720 73-0400345
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Phillips Building, Bartlesville, Oklahoma 74004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
918-661-6600
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Audited financial statements for Tosco Corporation (Tosco)
for the years ended December 31, 2000 and 1999, are filed
herewith as Exhibit 99.1 and incorporated herein by
reference. Unaudited financial statements for Tosco for the
six-month period ended June 30, 2001, are filed herewith as
Exhibit 99.2 and incorporated herein by reference.
(b) Pro Forma Financial Information.
Basis of Presentation
The following unaudited pro forma financial statements
reflect Phillips' purchase of Tosco for approximately
$7 billion, plus the assumption of approximately $2 billion
of Tosco debt. The acquisition was effective September 14,
2001, and is being accounted for as a purchase business
combination. The following unaudited pro forma financial
information represents the combination of the consolidated
historical financial statements of Phillips and Tosco. The
unaudited pro forma income statement information for the
year ended December 31, 2000, and the six-month period ended
June 30, 2001, was prepared assuming the Tosco acquisition
occurred January 1, 2000. However, during the year ended
December 31, 2000, Phillips and Tosco entered into other
transactions that are not fully reflected in the companies'
historical income statements for the year ended December 31,
2000. Therefore, the pro forma income statement for the
year ended December 31, 2000, has been further adjusted on a
pro forma basis to reflect: (1) Phillips' March 31, 2000,
Duke Energy Field Services, LLC (DEFS) transaction as
reported in Phillips' Current Report on Form 8-K filed on
April 13, 2000; (2) Phillips' acquisition of Atlantic
Richfield Company's (ARCO) Alaskan businesses completed in
two phases on April 26, 2000, and August 1, 2000, as
reported in Phillips' Current Reports on Form 8-K filed on
May 18, 2000, and August 10, 2000; (3) Phillips' July 1,
2000, Chevron Phillips Chemical Company LLC (CPChem)
transaction as reported in Phillips' Current Report on Form
8-K filed on July 14, 2000; and (4) Tosco's August 31, 2000,
disposition of its Avon refinery as reported in its Current
Report on Form 8-K filed on September 15, 2000, as if all
had occurred on January 1, 2000. The unaudited pro forma
balance sheet information at June 30, 2001, was prepared as
if the Tosco transaction had occurred June 30, 2001.
1
This pro forma financial information is not intended to
reflect results from operations or the financial position
which would have actually resulted had the combinations been
effective on the dates indicated. Moreover, this pro forma
information is not intended to be indicative of the results
of operations or financial position which may be achieved in
the future.
This pro forma financial information should be read in
conjunction with the historical financial statements
included in Phillips' Annual Report on Form 10-K for the
year ended December 31, 2000, as amended; the financial
disclosures included in Phillips' Quarterly Report on
Form 10-Q for the six-month period ended June 30, 2001; the
historical Tosco financial statements for the years ended
December 31, 2000, and 1999, included in this Form 8-K/A
filing as Exhibit 99.1; and Tosco's financial disclosures
for the six-month period ended June 30, 2001, included in
this Form 8-K/A filing as Exhibit 99.2. The pro forma
adjustments use estimates and assumptions based on currently
available information. Management believes that the
estimates and assumptions are reasonable, and that the
significant effects of the transactions are properly
reflected. However, actual results may materially differ
from this pro forma financial information.
The preliminary purchase price allocation may be subject to
revision once additional information on the fair value of
Tosco's assets and liabilities becomes available. Actual
purchase accounting adjustments may therefore differ from
the pro forma adjustments presented here.
2
------------------------------------------------------------------------------------------------
Unaudited Pro Forma Phillips Petroleum Company
Statement of Income
Millions of Dollars
--------------------------------------------------------------------
Pro Forma
Pro Forma Adjustments
Adjustments Phillips for Phillips
Phillips/ and Tosco DEFS, CPChem Pro Forma
Year Ended Tosco Pro Forma Alaska, Avon As
December 31, 2000 Phillips Tosco* Transaction Combined Transactions Adjusted
-------- ------- ----------- --------- ------------ ---------
(a)
Revenues
Sales and other operating
revenues $20,835 24,545 - 45,380 (1,652) 43,728
Equity in earnings of
affiliated companies 114 - - 114 117 231
Other revenues 278 51 (21)(j) 308 (33) 275
------------------------------------------------------------------------------------------------
Total Revenues 21,227 24,596 (21) 45,802 (1,568) 44,234
------------------------------------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and
products 12,131 20,809 - 32,940 (1,797) 31,143
Production and operating
expenses 2,166 1,836 81 (b) 4,083 (278) 3,805
Exploration expenses 298 - - 298 21 319
Selling, general and
administrative expenses 636 338 - 974 (122) 852
Depreciation, depletion
and amortization 1,179 354 (19)(b) 1,514 36 1,550
Property impairments 100 - - 100 - 100
Taxes other than income
taxes 468 154 - 622 88 710
Accretion on discounted
liabilities - - 13 (c) 13 - 13
Interest expense 369 198 (19)(d) 548 42 590
Foreign currency
transaction losses 58 - - 58 (1) 57
Preferred dividend
requirements of
capital trusts 53 17 (17)(e) 53 - 53
------------------------------------------------------------------------------------------------
Total Costs and Expenses 17,458 23,706 39 41,203 (2,011) 39,192
------------------------------------------------------------------------------------------------
Income before income taxes 3,769 890 (60) 4,599 443 5,042
Provision for income taxes 1,907 361 (24)(f) 2,244 176 2,420
------------------------------------------------------------------------------------------------
Net Income $ 1,862 529 (36) 2,355 267 2,622
================================================================================================
Net Income Per Share of
Common Stock
Basic $ 7.32 3.66 6.22 (g) 6.93(g)
Diluted 7.26 3.47 6.15 (g) 6.84(g)
------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding
(in thousands)
Basic 254,490 144,500 378,549 (g) 378,549(g)
Diluted 256,326 155,400 383,211 (g) 383,211(g)
------------------------------------------------------------------------------------------------
See Notes to Unaudited Pro Forma Financial Statements.
*Certain amounts have been reclassified to conform to Phillips' presentation.
3
--------------------------------------------------------------------
Unaudited Pro Forma Phillips Petroleum Company
Statement of Income
Millions of Dollars
--------------------------------------------
Pro Forma Phillips
Six Months Ended Adjustments and Tosco
June 30, 2001 Increase/ Pro Forma
Phillips Tosco* (Decrease) Combined
-------- ------- ----------- ---------
Revenues
Sales and other
operating revenues $9,717 13,194 - 22,911
Equity in earnings of
affiliated companies 121 - - 121
Other revenues 31 24 (21)(j) 34
--------------------------------------------------------------------
Total Revenues 9,869 13,218 (21) 23,066
--------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and
products 4,887 10,925 - 15,812
Production and operating
expenses 1,113 1,045 56 (b) 2,214
Exploration expenses 131 - - 131
Selling, general and
administrative expenses 333 243 - 576
Depreciation, depletion
and amortization 651 199 (57)(b) 793
Property impairments 23 - - 23
Taxes other than income
taxes 304 90 - 394
Accretion on discounted
liabilities 4 - 6 (c) 10
Interest expense 166 87 (9)(d) 244
Foreign currency
transaction losses 8 - - 8
Preferred dividend
requirements of
capital trusts 26 2 (2)(e) 26
--------------------------------------------------------------------
Total Costs and
Expenses 7,646 12,591 (6) 20,231
--------------------------------------------------------------------
Income before income
taxes 2,223 627 (15) 2,835
Provision for income
taxes 1,115 254 (6)(f) 1,363
--------------------------------------------------------------------
Net Income $1,108 373 (9) 1,472
====================================================================
Net Income Per Share of
Common Stock
Basic $ 4.33 2.45 3.88(g)
Diluted 4.31 2.39 3.83(g)
--------------------------------------------------------------------
Average Common Shares
Outstanding
(in thousands)
Basic 255,683 152,100 379,742(g)
Diluted 257,337 156,600 384,222(g)
--------------------------------------------------------------------
See Notes to Unaudited Pro Forma Financial Statements.
*Certain amounts have been reclassified to conform to Phillips'
presentation.
4
-----------------------------------------------------------------------
Unaudited Pro Forma Phillips Petroleum Company
Balance Sheet
Millions of Dollars
-----------------------------------------------
Pro Forma Phillips
Adjustments and Tosco
At June 30, 2001 Increase/ Pro Forma
Phillips Tosco* (Decrease) Combined
-------- ----- ----------- ---------
Assets
Cash and cash
equivalents $ 87 42 - 129
Accounts and notes
receivable 1,060 496 163 (b)(h) 1,719
Accounts and notes
receivable--affiliates 148 - - 148
Inventories 533 2,139 219 (b) 2,891
Deferred income taxes 159 - - 159
Prepaid expenses and
other current assets 215 242 - 457
-----------------------------------------------------------------------
Total Current Assets 2,202 2,919 382 5,503
Investments and
long-term receivables 3,292 84 31 (b) 3,407
Properties, plants and
equipment (net) 15,124 5,133 2,596 (b) 22,853
Deferred turnarounds - 174 (174)(b) -
Intangible assets - 643 669 (b) 1,312
Goodwill 12 - 2,081 (b) 2,093
Deferred charges 124 47 (43)(b) 128
-----------------------------------------------------------------------
Total $20,754 9,000 5,542 35,296
=======================================================================
Liabilities
Accounts payable $ 1,624 1,449 - 3,073
Notes payable and
long-term debt due
within one year 4 1 - 5
Accrued income and
other taxes 749 409 49 (b) 1,207
Deferred income taxes - 101 (101)(b) -
Other accruals 403 492 153 (b)(i) 1,048
-----------------------------------------------------------------------
Total Current
Liabilities 2,780 2,452 101 5,333
Long-term debt 6,268 2,130 122 (d) 8,520
Accrued dismantlement,
removal and
environmental costs 819 242 14 (c) 1,075
Deferred income taxes 2,144 424 1,556 (b) 4,124
Employee benefit
obligations 467 89 50 (b) 606
Other liabilities and
deferred credits 574 392 (111)(b)(j) 855
-----------------------------------------------------------------------
Total Liabilities 13,052 5,729 1,732 20,513
-----------------------------------------------------------------------
Company-Obligated
Mandatorily Redeemable
Preferred Securities 650 - - 650
-----------------------------------------------------------------------
Total Common
Stockholders' Equity 7,052 3,271 3,810 (b) 14,133
-----------------------------------------------------------------------
Total $20,754 9,000 5,542 35,296
=======================================================================
See Notes to Unaudited Pro Forma Financial Statements.
*Certain amounts have been reclassified to conform to Phillips'
presentation.
5
-----------------------------------------------------------------
Notes to Unaudited Pro Forma Phillips Petroleum Company
Financial Statements
(a) The Phillips and Tosco pro forma combined income statement
information for the year ended December 31, 2000, has been
further adjusted on a pro forma basis to reflect four
significant transactions that were consummated during 2000:
o The disposition of Phillips' gas gathering, processing
and marketing business, and the simultaneous acquisition
of a 30.3 percent equity interest in DEFS on March 31,
2000;
o The acquisition of ARCO's Alaskan businesses, completed
in two phases on April 26, and August 1, 2000;
o The disposition of Phillips' chemicals business, and the
simultaneous acquisition of a 50 percent equity interest
in CPChem on July 1, 2000; and
o The disposition of Tosco's Avon refinery on August 31,
2000;
as if they had occurred January 1, 2000.
The significant pro forma adjustments that were made for the
DEFS and CPChem transactions were:
o The removal of Phillips' chemical and gas gathering,
processing, and marketing businesses from consolidation;
o The inclusion of Phillips' estimated 50 percent and
30.3 percent equity interest earnings from CPChem and
DEFS, respectively, based on the pro forma financial
results of those two entities prior to their inception;
and
o The amortization of the basis difference between the book
value of Phillips' contributions to DEFS and CPChem, and
its equity in the two entities.
For additional information about these two transactions,
including pro forma financial presentations, see Phillips'
Current Report on Form 8-K filed on April 13, 2000, related
to the DEFS transaction; and Phillips' Current Report on
Form 8-K filed on July 14, 2000, related to the CPChem
transaction.
The significant pro forma adjustments that were made for the
acquisition of ARCO's Alaskan businesses were:
6
o Estimated income statement impacts resulting from the
purchase price allocation to the Alaskan assets and
liabilities--for example, increased depreciation due to
the step-up of the property, plant and equipment to fair-
market value. These preliminary purchase price
allocations continued to be refined during 2000 and into
2001;
o The conforming of ARCO's accounting policies to
Phillips'; and
o An increase in interest expense due to the debt incurred
to partially fund the acquisition.
For additional information on this transaction, including
pro forma financial presentations, see Phillips' Current
Report on Form 8-K filed on May 18, 2000.
The significant pro forma adjustments that were made for the
Avon refinery transaction were:
o The removal of Tosco's ownership, operations and gain
from disposition of the Avon refinery from consolidation;
and
o The reduction of interest expense as a result of reducing
long-term debt collateralized by the Avon refinery.
For additional information on this transaction, including
pro forma financial presentations, see Tosco's Current
Report on Form 8-K filed on September 15, 2000.
(b) The following is the purchase price for Tosco:
Number of shares of Phillips common stock
issued in the exchange................... 124.1 million
Multiplied by Phillips' average stock
price two days before and two days after
the date the merger was announced........ x $55.50
--------
$ 6,886 million
Fair value of Tosco stock options
exchanged for 4.7 million vested Phillips
stock options............................ 153 million
Transaction-related costs.................. 42 million
-------
Purchase price............................. $ 7,081 million
=======
For purposes of this pro forma analysis, the above purchase
price has been allocated based on a preliminary assessment
of the fair value of the assets and liabilities acquired and
was based on Tosco's balance sheet at June 30, 2001. Based
on this pro forma analysis, the allocation of the purchase
price would result in recording $7,729 million of
properties, plants and equipment; $1,312 million of
7
identifiable intangible assets; and $2,081 million of
goodwill. The pro forma income statement adjustments
reflect the estimated effects of depreciating and amortizing
these amounts over their estimated useful lives and the
presentation of turnaround costs as production and operating
expense. Goodwill, land and certain identifiable intangible
assets are not subject to amortization but are periodically
tested for impairment.
Due to the non-taxable nature of this transaction, Tosco's
tax basis in its assets carries over to Phillips. The
difference between the financial and tax bases is estimated
to result in $1,980 million of net deferred tax liabilities
in the purchase price allocation.
(c) Includes the impact of adjusting and discounting Tosco's
environmental liabilities and recording the corresponding
accretion over time.
(d) Reflects the restatement of Tosco debt to fair value and the
corresponding reduction in interest expense as the resulting
premium is amortized.
(e) Reflects the February 2001 conversion of Tosco's company-
obligated, mandatorily redeemable, convertible preferred
securities into 9.1 million shares of Tosco common stock.
(f) Reflects the estimated federal and state income tax effects
of the pro forma adjustments to Tosco's pretax income.
(g) Reflects the exchange of outstanding Tosco common stock, the
issuance of 124.1 million shares of Phillips common stock, and
the effect of Phillips' stock options issued in the exchange.
(h) Includes $150 million receivable for a payment expected to
be received in November 2001 related to the sale of the Avon
refinery in August 2000.
(i) Includes estimated payments under termination and change of
control provisions in Tosco executive compensation and employment
agreements.
(j) Includes the reversal of a deferred gain on Tosco's balance
sheet that is not subject to any future performance requirement,
along with the related amortization of the deferred gain.
8
(c) Exhibits.
Exhibit Number Description
-------------- -----------
23 Consent of PricewaterhouseCoopers LLP.
99.1 Audited financial statements for Tosco
Corporation for the two years ended
December 31, 2000 and 1999.
99.2 Unaudited financial statements for Tosco
Corporation for the six-month period ended
June 30, 2001.
9
SIGNATURE
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 hereunto duly authorized.
PHILLIPS PETROLEUM COMPANY
October 31, 2001 /s/ Rand C. Berney
-----------------------------
Rand C. Berney
Vice President and Controller
10
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
23 Consent of PricewaterhouseCoopers LLP.
99.1 Audited financial statements for Tosco
Corporation for the two years ended
December 31, 2000 and 1999.
99.2 Unaudited financial statements for Tosco
Corporation for the six-month period ended
June 30, 2001.
11