FORM 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[*] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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.
* Yes No
Registrant's Common Stock outstanding at April 30, 1995 was
37,049,859 shares.
TOSCO CORPORATION AND SUBSIDIARIES
Index to Financial Statements and Exhibits
Filed with the Quarterly Report of the Company on Form 10-Q
For the Three Months Ended March 31, 1995
Page(s)
Part I. Financial Information
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 11
Exhibit I - Computation of Earnings Per Share 12
Part II. Other Information
The financial statements listed in Part I above reflect all
adjustments (consisting only of normal recurring accruals) which
are, in the opinion of Management, necessary to a fair
presentation of financial position and results of operations.
Such financial statements are presented in accordance with the
Securities and Exchange Commission's disclosure requirements for
Form 10-Q. These unaudited interim consolidated financial
statements should be read
in conjunction with the audited Consolidated Financial
Statements (from which the year-end balance sheet presented
herein was derived) and the Notes to Consolidated Financial
Statements filed with the Commission in Tosco's 1994 Annual
Report on Form 10-K.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
March 31, December 31,
ASSETS 1995 1994
(Unaudited)
Current assets
Cash and cash equivalents $ 33,810 $ 23,793
Short-term investments and deposits 62,446 30,829
Trade accounts receivable, less allowance
for uncollectibles
of $8,622,000 (1995) and $8,392,000 (1994) 261,224 291,772
Inventories 457,492 463,637
Prepaid expenses and other current assets 39,901 43,258
Deferred income taxes 6,160 6,160
Total current assets 861,033 859,449
Property, plant and equipment, net 855,779 822,057
Deferred turnarounds and charges 128,628 94,223
Deferred income taxes 6,998 6,998
Other assets 15,708 14,479
Net assets of discontinued operations 4,120
Total assets $1,872,266 $1,797,206
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 391,826 $ 328,572
Accrued expenses and other liabilities 137,431 151,561
Total current liabilities 529,257 480,133
Revolver debt 273,000 233,000
Long-term debt 454,519 454,429
Other liabilities 14,964 14,338
Environmental cost liability 35,373 35,382
Net liabilities of discontinued operations 2,526
Deferred income taxes 1,934 1,934
Shareholders' equity:
Common shareholders' equity:
Common Stock - $.75 par value, 50,000,000 shares authorized,
39,598,900 shares issued (1995 and 1994) 29,702 29,702
Capital in excess of par value 639,853 640,078
Retained earnings (deficit) ( 37,456)( 25,436)
Reductions from capital 68,880) ( 68,880)
Total common shareholders' equity 563,219 575,464
Total liabilities and shareholders' equity $1,872,266 $1,797,206
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 March 31,
1995 1994
Sales $ 1,696,319 $ 1,495,688
Cost of sales 1,669,373 1,390,191
Selling, general and
administrative expense 22,602 27,098
Interest expense 15,398 13,491
Interest income (899) ( 985)
1,706,474 1,429,795
Income (loss) before provision
for income taxes ( 10,155) 65,893
Provision (credit) for income taxes ( 4,067) 27,026
Net income (loss) ( 6,088) 38,867
Preferred stock dividend
requirements ( 2,516)
Income (loss) attributable
to common shareholders ($ 6,088) $ 36,351
Income (loss) per common and common equivalent share:
Primary ($ . 16) $ 1.11
Fully diluted ($ 16) $ 1.04
Dividends per common share $ .16 $ .15
The accompanying notes are an integral part of these financial
statements.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thousands of Dollars
Three Months Ended March 31,
1995 1994
Cash flows from operating activities:
Net income (loss) ($ 6,088) $ 38,867
Adjustments to arrive at net cash
provided by operating activities:
Depreciation 14,160 12,615
Amortization of deferred items 9,768 8,544
Deferred income taxes 19,871
Restructuring charge 5,200
(Increase) decrease:
Trade accounts receivable 30,548 ( 71,893)
Inventories 6,145 ( 58,441)
Prepaid expenses and other current assets 3,357 1,834
Increase (decrease):
Accounts payable and accrued liabilities 55,924 108,089
Other liabilities and deferred gains 941 1,411
Other ( 2,210) ( 170)
Net cash provided by operating activities 117,745 60,727
Cash flows from investing activities:
Purchase of property, plant and equipment ( 47,882) ( 14,593)
Increase in deferred turnarounds,
charges and other assets ( 43,426) ( 5,129)
Net change in short-term
investments and deposits ( 31,617) ( 8,756)
Proceeds from termination of
Continental-Tosco Limited Partnership 4,848
Transfers to discontinued operations ( 6,646) ( 22,671)
Net cash used in investing activities ( 129,571) ( 46,301)
Cash flows from financing activities:
Borrowings (repayments) under revolver, net 40,000 ( 30,000)
Short-term bank repayments ( 12,000)
Principal payments under debt agreements ( 4)
Dividends on Preferred and Common Stock ( 5,932) ( 7,106)
Other ( 225) ( 1,046)
Net cash provided by (used in)
financing activities 21,843 ( 38,156)
Net increase (decrease) in cash and
cash equivalents 10,017 ( 23,730)
Cash and cash equivalents at beginning of period 23,793 55,091
Cash and cash equivalents at end of period $ 33,810 $ 31,361
The accompanying notes are an integral part of these financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to the three months ended
March 31, 1995 and 1994 is unaudited.
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 1995.
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 at
March 31, 1995 (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 March 31, 1995 the
portfolio's carrying value of marketable investments, considered
"available for sale" in accordance with SFAS No.
115 - "Accounting for Certain Investments in Debt and Equity
Securities" approximated fair value.
Margin Deposits
Pursuant to the requirements of the commodity exchanges,
margin deposits based on 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.
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 net realizable value of LIFO
inventories is measured by aggregating similar pools on a
consolidated basis.
Turnarounds
Refinery processing units are periodically shut down for
major maintenance (turnarounds). 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.)
2 Inventories
March 31, December 31,
1995 1994
(Thousands of Dollars)
Raw materials $ 214,843 $ 163,866
Intermediates 43,248 24,603
Finished products 196,477 272,462
Retail 2,924 2,706
$ 457,492 $ 463,637
The excess of replacement cost over the value of
inventories based upon the LIFO method was $22,705,000 and
$5,821,000 at March 31, 1995 and December 31, 1994,
respectively.
3. Accrued Expenses and Other Liabilities
March 31, December 31,
1995 1994
(Thousands of Dollars)
Accrued taxes other than
taxes on income $ 71,349 $ 71,964
Accrued compensation
and related benefits 11,718 11,570
Accrued interest 7,447 11,958
Income receivable ( 9,867) ( 9,546)
Acquisition related liabilities 15,334 15,856
Other accrued costs 5,967 7,476
Restructuring charge 5,200(a)
Short term borrowings 29,500 41,500
Current installments of
long-term debt 783 783
$ 137,431 $ 151,561
(a) During the first quarter of 1995, in response to continuing poor refining
margins, Tosco announced a restructuring program designed to reduce costs and improve
operating efficiencies. The estimated cost of $5.2 million charged in the first
quarter is primarily for severance costs of approximately 175 employees at the Avon
Refinery and related support locations.
4. Long-Term Debt
March 31, December 31,
1995 1994
(Thousands of Dollars)
Revolving Credit Facilities
Cash borrowings $ 273,000 $ 233,000
Letters of credit 111,554 58,517
Total utilization 384,554 291,517
Availability 65,446 158,483
Total credit line $ 450,000 $ 450,000
Interest paid was $19,194,000 and $16,819,000 for the first
three months of 1995 and 1994, respectively.
5. Capital Stock
During the first quarter of 1995, options to purchase
168,333 shares of common stock of Tosco (Common Stock) were
granted at $29.25. Quarterly dividends of $.16 per share of
Common Stock were paid on March 31, 1995 to shareholders of
record on March 21, 1995.
6. Income Taxes
The provision (credit) for income taxes is summarized
below:
Three Months Ended March 31,
1995 1994
(Thousands of Dollars)
Federal ($ 3,462) $ 21,096
State ( 740) 5,930
Foreign 135
Provision (credit)
for income taxes ($ 4,067) $ 27,026
Cash payments (refunds)
of income taxes, net ($ 3,746) $ 833
7. Contingencies
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. Tosco
continues to evaluate, on a quarterly basis, its liability for
environmental costs, net of liabilities transferred pursuant
to the settlement of outstanding litigation concerning
environmental issues with the predecessor owners of the Avon
Refinery. While Tosco believes that its environmental cost
accrual is adequate, 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.
8. Subsequent Event
Amended Credit Agreement
Tosco amended its existing collateralized credit facility
effective April 7, 1995 (Amended Revolving Credit Facilities).
The amendment provides a one year extension and reduces the
cost of borrowings and credit availability. Cash borrowings
under the Amended Revolving Credit Facilities now bear interest
at the option of Tosco at either of three alternative rates (a
federal funds rate, a Eurodollar rate, or a base rate related to
prime) plus an incremental margin for each rate option. The
incremental margin is dependent on the credit rating of the
First Mortgage Bonds. The Amended Revolving Credit Facilities
now expires in April 1998.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
Management's Discussion and Analysis should be read in
conjunction with Management's Discussion and Analysis included
in Tosco's Annual Report on Form 10-K for 1994. Reference
should also be made to the Financial Statements included in
this Form 10-Q for comparative Balance Sheet and Statement of
Income data.
Tosco's Annual Report sets forth Selected Financial Data
which, in summary form, reviewed Tosco's results of operations
and capitalization over the five-year period 1990-1994. This
Management's Discussion and Analysis updates that data.
Results of Operations - For the three months ended March 31,
1995
Consolidated
Three Months Ended March 31,
1995 1994
(Thousands of Dollars)
Sales (a) $ 1,696,319 $ 1,495,688
Cost of sales 1,664,173 1,390,191
Operating contribution 32,146 105,497
Restructuring charge 5,200
Selling, general, and
administrative expense 22,602 27,098
Net interest expense 14,499 12,506
Pre-tax income (loss) ( 10,155) 65,893
Provision (credit) for
income taxes ( 4,067) 27,026
Net income (loss) ($ 6,088) $ 38,867
(a) The increase in sales for the first quarter of 1995 is
primarily due to the acquisition of additional retail marketing
assets and higher sales prices.
Refining Data Summary
Three Months Ended March 31, 1995 and 1994
(In thousands of B/D except for refining margins)
Avon (a) Bayway (b) Ferndale (c) Consolidated
1995 1994 1995 1994 1995 1994 1995 1994
Crude and other
raw materials 166.5 168.2 294.0 260.9 58.6 92.8 519.1 521.9
Petroleum products
produced:
Clean products 107.5 132.3 245.8 211.3 36.3 60.7 389.6 404.3
Other finished
products 54.1 33.4 54.4 56.3 13.4 30.2 121.9 119.9
Total finished
products produced 161.6 165.7 300.2 267.6 49.7 90.9 511.5 524.2
Refining margin
per charge
barrel (d) $ 5.01 $7.39 $2.55 $3.77 $3.42 $4.99 $3.44 $ 5.15
(a) Avon's 1994 refining margin and raw materials processed were restated to include
the production costs of MTBE.
(b) Bayway's refining margins include the results of hedges on
a varying percentage of Bayway's production.
(c) Ferndale's decline in total charges and production for 1995 is due to the
refinery turnaround.
(d) 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 incurred a net loss of $6.1 million, or ($.16) per
fully diluted share, on sales of $1.7 billion for the first
quarter of 1995, compared to net income of $38.9 million, or
$1.04 per fully diluted share, on sales of $1.5 billion for
the first quarter of 1994. During the first quarter of 1995,
Tosco announced a restructuring program designed to reduce
costs and improve operating efficiencies in response to
continuing poor refining margins. The estimated cost of
approximately $5.2 million includes the severance costs
of Avon employees. Excluding the
nonrecurring charge, 1995's net loss was $3.0 million, ($.08)
per share.
Tosco generated an operating contribution (income before
selling, general and administrative expense, net interest
expense, and income taxes) for the first quarter of 1995 of
$32.1 million, a decrease of $73.4 million from 1994. The
decline was primarily due to extremely poor refining margins
and extensive scheduled turnaround maintenance.
Avon's catalytic cracker, the refinery's principal gasoline
production unit, and the processing units at the Ferndale
Refinery were shutdown for 55 and 33 days, respectively,
during the first quarter of 1995. As a result, raw material
throughput at the Avon and Ferndale Refineries declined by
36,000 barrels per day (B/D) (from 261,000 B/D for 1994 to
225,000 B/D in 1995) and production of clean transportation
fuels (gasoline and distillates) fell by 49,200 B/D (from
193,000 B/D to 143,800 B/D). The decrease in production at
Tosco's West Coast refineries was partially offset by
increased production at the Bayway Refinery. Bayway's raw
material
throughput increased by 33,100 B/D to 294,000 B/D while clean
product production increased by 34,500 B/D to 245,800 B/D, the
highest levels of production achieved under Tosco's ownership.
While Bayway's strong operating performance
mitigated the production declines at Avon and Ferndale, Tosco
was not able to overcome weak refining margins on both coasts
of the United States. Consolidated refining margins declined
by $1.71 (approximately 33%), to $3.44. Exceptionally weak
market conditions resulted from the combined impact of a
surplus of heating oil due to the mild winter on the East
Coast of the United States and poor gasoline markets due to
the industry's inability to recover the higher production cost
of reformulated gasolines in highly competitive markets. The
poor refining results were partially offset by the strong
performance of the retail operations. Retail marketing fuel
margins averaged $.09 per gallon during the first quarter of
1995 compared to $.08 for the first quarter of 1994.
Retail volumes sold also increased by 27,600 B/D to 66,300 B/D
and operating costs increased by $5 million, over the first
quarter of 1994 primarily because of the August
and December 1994 acquisitions of the retail marketing
operations in Northern California and Arizona from BP and
Exxon, respectively.
The decrease in selling, general, and administrative expense
for the first quarter of 1995 is due to significantly lower
provisions for incentive compensation and potential losses on
trade receivables, partially offset by increases in the costs
of Tosco's expanded operations. The increase in net interest
expense was primarily due to higher levels of debt and higher
interest rates.
Outlook
Results of operations continue to be determined by two
factors: the operating efficiency of the refineries and
refining and retail marketing margins. The turnarounds of
Avon's cat cracker and the Ferndale Refinery were completed in
the first quarter and throughput volumes have returned to
normal levels. Significant turnaround activity is not planned
for the balance of 1995 and assuming reasonable margins, Tosco
expects to operate the refineries at high production levels.
Refining margins have also improved over the first quarter
levels but Tosco is not able to predict whether the improved
level will continue. At March 31, 1995, Bayway had locked in
acceptable
refining margins on approximately 37% and 17% of its expected
second quarter and remaining 1995 production, respectively.
In view of uncertain refining margins
and the competitive refining environment, steps have been
taken to reduce operating costs and increase efficiencies.
Tosco's objective is to be the low-cost refiner in each of its
markets to enable Tosco to better withstand difficult times
and ensure increasing profitability in improved markets.
The $5.2 million restructuring charge, which will be paid over
the next 12 months from cash provided from operations, will be
more than offset by the anticipated annual savings of
approximately $10 million. Tosco's expansion into retail
marketing has been successful in
providing earnings in a period of poor refining margins and
Tosco continues to seek opportunities to acquire
additional retail marketing assets that allow an attractive
rate of return and complement its existing refining and retail
systems.
Cash flows and liquidity - 1995
As summarized in the Statement of Cash Flows, cash increased
by $10 million during 1995 as cash provided by operating and
financing activities of $118 million and $22 million,
respectively, exceeded cash used in investing activities of
$130 million. Cash provided by operating activities of $118
million was from cash earnings of $23 million (net loss plus
depreciation, amortization and the restructuring charge) and a
decrease in working capital of $96 million, partially offset by
a decrease from other sources of $1 million.
Net cash used in investing activities totaled $130 million,
primarily for capital additions and deferred turnaround
expenditures of $48 million and $43 million, respectively,
increases in short-term deposits of $32 million and a net
transfer to Tosco's former fertilizer operations for payment
of liabilities of $7 million. Cash generated from financing
activities totaled $22 million as net borrowings under the
revolving credit facility of $40 million exceeded
short-term bank repayments of $12 million and dividend and
other payments totaling $6 million.
Liquidity (as measured by cash, short-term investments and
deposits and unused credit facilities) decreased by $51
million due to a decrease in credit availability of $93
million partially offset by increases in cash and cash
equivalents of $10 million and short-term investments and
deposits of $32 million. At March 31, 1995, liquidity totaled
$162 million (an amount which Tosco believes is adequate to
meet its expected liquidity demands for at least the next
twelve months).
In April 1995, Tosco amended its working capital agreement to
extend its maturity date by one year to April 1998 and reduce
costs. See Note 8 to the March 31, 1995 Consolidated
Financial Statements. Tosco is reviewing other financing
alternatives to improve its financial capacity and flexibility
and further reduce costs.
Capital Expenditures and Capitalization
During the first three months of 1995, Tosco spent $48
million on budgeted capital projects primarily at the Avon
Refinery and the retail outlets. Capital spending
programs continued to address compliance with
reformulated fuel specifications, environmental
regulations and permits, operating flexibility and reliability,
personnel/process safety, and retail expansion and
modernization. Tosco
expects to fund its 1995 capital expenditures from cash
provided by operations and from available credit and other
resources.
At March 31, 1995, total shareholders' equity was $563
million, a decrease from December 31, 1994 of $12 million
due to the loss of $6 million and dividend and other
payments totaling $6 million. Debt, including current
maturities
and short-term bank borrowings, increased by $28 million to
$758 million at March 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act
of 1934, the Registrant has duly caused this amendment to this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
TOSCO CORPORATION
(Registrant)
Date: June 21, 1995
By: /s/ Jefferson F. Allen
Jefferson F. Allen
Executive Vice President
and Chief Financial Officer