TOSCO CORPORATION
PRO FORMA COMBINED FINANCIAL STATEMENTS
UNAUDITED
The following pro forma combined balance sheet of Tosco as of December 31,
1995 and the combined statements of operations for the year then ended, give
effect to (i) the purchase of an aggregate of 16,555,852 shares of Circle K
Common Stock following the financing of the estimated cash to be paid pursuant
to the Stock Sale Agreement and (ii) the acquisition of the remaining shares of
Circle K Common Stock pursuant to the Merger Agreement, including shares
expected to be issued upon the exercise of outstanding options. The pro forma
balance sheet assumes that the transactions occurred as of the balance sheet
date. The pro forma combined statement of income gives effect to these
transactions as if they had occurred at the beginning of the period presented.
The pro forma combined financial statements may not be indicative of the results
that actually would have occurred if the Merger had occurred prior to the dates
indicated or the results which may be obtained in the future. The pro forma
combined statement of operations does not reflect the possible improvement in
operating contribution or the planned reduction in operating and administrative
costs expected from the consolidation of the Seattle, Washington office of Tosco
with the Phoenix, Arizona office of Circle K, net of non-recurring costs of
consolidation. The information presented herein should be read in conjunction
with the Unaudited Pro Forma Combined Financial Information, including the notes
thereto, and the separate historical consolidated financial statements of Tosco
and Circle K.
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TOSCO CORPORATION AND THE CIRCLE K CORPORATION
PRO FORMA COMBINED BALANCE SHEET
As of December 31, 1995
(in thousands, except per share amounts)
(Unaudited)
HISTORICAL (NOTE A)
---------------------------------------
TOSCO CIRCLE K CONSOLIDATED PRO FORMA ADJUSTMENTS ELIMINATIONS PRO FORMA
--------- --------- ------------ ---------------------------- ------------ ---------
Cash, cash equivalents,
short-term investments
and deposits ................$ 48,273 $ 31,601 $ 79,874 $ (5,300)(e) $ (19,713)(c) $ 54,861
Other current assets .......... 833,168 225,462 1,058,630 1,058,630
--------- --------- ---------- --------- --------- ----------
Total current assets .......... 881,441 257,063 1,138,504 (5,300) (19,713) 1,113,491
--------- --------- ---------- --------- --------- ----------
Property and equipment ........ 961,418 584,853 1,546,271 1,546,271
Intangibles, net of
accumulated amortization .... 117,959 117,959 1,600 (f) 482,880 (d) 607,239
4,800 (e)
Other long-term assets ........ 160,312 70,954 231,266 2,750 (a) (1,600)(f) 232,416
Investment in Circle K ........ 486,693 (a) 41,701 (c) (291,883)
246,369 (b) (482,880)(d)
---------- ---------- ---------- --------- --------- --------- ----------
Total assets ..................$2,003,171 $1,030,829 $3,034,000 $ 736,912 $ 20,388 $(291,883) $3,499,417
========== ========== ========== ========= ========= ========= ==========
Current liabilities ...........$ 669,520 $ 320,658 $ 990,178 $ 990,178
Current maturities of
long-term obligations ....... 771 25,181 25,952 25,952
--------- --------- ---------- ----------
Total current liabilities ..... 670,291 345,839 1,016,130 1,016,130
--------- --------- ---------- ----------
Long-term obligations ......... 624,036 172,298 796,334 (67,432)(f) 430,305 (a) 1,226,639
67,432 (f)
Other liabilities ............. 81,734 220,809 302,543 302,543
Shareholders' equity
Common stock .................. 29,714 244 29,958 934 (a) 383 (c) (244) 34,920
3,889 (b)
Additional paid in capital .... 640,306 237,939 878,245 58,204 (a) 21,605 (c) (237,939) 962,095
242,480 (b) (500)(e)
Retained earnings ............. 27,903 53,700 81,603 (53,700) 27,903
Reductions from capital ....... (70,813) (70,813) (70,813)
---------- ---------- ---------- --------- --------- --------- ----------
$ 627,110 $ 291,883 $ 918,993 $ 305,507 $ 21,488 $(291,883) $ 954,105
---------- ---------- ---------- --------- --------- --------- ----------
Total liabilities and equity ..$2,003,171 $1,030,829 $3,034,000 $ 238,075 $ 519,225 $(291,883) $3,499,417
========== ========== ========== ========= ========= ========= ==========
- ------------
Pro forma Adjustments:
(a) Records purchase of 16,555,852 shares of Circle K Common Stock from the
Selling Shareholders under the Stock Sale Agreement for $25.825 per share
in cash and approximately 1,245,000 shares of Tosco Common Stock valued at
$3.572 per share of Circle K Common Stock (total value of $29.397 based
upon an assumed Average Tosco Stock Price (as defined in the Merger
Agreement) of $47.5125 per share). Cash proceeds of $427.56 million is
expected to be generated from the issuance of $200 million of term debt,
net of discounts and fees totalling $2.75 million, with the balance from
cash borrowings from Tosco's working capital facility.
(b) Records issuance of approximately 5,185,000 shares of Tosco Common Stock in
exchange for 7,825,715 shares of Circle K Common Stock held by shareholders
other than Selling Shareholders ("Exchanging Shareholders"). Based upon an
assumed Average Tosco Stock Price of $47.5125 per share, the value per
share of Circle K Common Stock to the Exchanging Shareholders is $31.482.
(c) Records projected exercise of options to purchase 1,813,655 shares of
Circle K Common Stock outstanding at January 31, 1996 which are or become
vested prior to the effective time of the Merger and the cancellation for
cash of the remaining 435,913 options which vest at the effective time of
the Merger. The gain on the exercise of vested options (measured by the
difference between the value of Circle K Common Stock at the dates of
exercise and the exercise prices of the underlying options) is expected to
be paid in cash and shares of Circle K Common Stock (the stock portion of
which will be exchanged for Tosco Common Stock). Based on an Average Tosco
Stock Price of $47.5125 per share, the exercise of vested options is
expected to result in the payment of approximately $13.081 million and the
issuance of about 511,000 shares of Tosco Common Stock. The cancellation of
the remaining options is expected to cost approximately $6.63 million.
(d) Records Merger of Circle K with Tosco Acquisition Sub.
(e) Records assumed costs of issuance of Tosco Common Stock ($.5 million) and
other transaction costs of $4.8 million.
(f) Records retirement of $67.432 million of debt of Circle K from cash
borrowings under Tosco's revolving credit facility and the write off of
deferred financing costs related to the debt retired.
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TOSCO CORPORATION AND THE CIRCLE K CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1995
(In thousands, except per share data)
(Unaudited)
HISTORICAL (NOTE A)
----------------------------------------- PRO FORMA
TOSCO CIRCLE K CONSOLIDATED PRO FORMA ADJUSTMENTS (NOTE B)
----------- ---------- ----------- ---------------------------- -----------
Sales ............................... $7,284,051 $3,540,531 $10,824,582 $(526,000)(k) $10,298,582
Cost of sales ....................... (7,004,501) (2,747,071) (9,751,572) $526,000(k) (9,225,572)
Operating and selling, general and
administrative expense ............. (95,858) (709,559) (805,417) (11,787)(g) (817,204)
(32,273)(h) -----------
Interest expense, net ............... (56,253) (26,547) (82,800) (275)(i) (115,348)
---------- ---------- ----------- --------- -------- -----------
(7,156,612) (3,483,177) (10,639,789) (44,335) 526,000 (10,158,124)
---------- ---------- ----------- --------- -------- -----------
Income before income taxes .......... 127,439 57,354 184,793 (570,335) 526,000 140,458
Provision for income taxes .......... (50,381) (23,956) (74,337) 12,856 (j) (61,481)
---------- ---------- ----------- --------- -------- -----------
Income before extraordinary item .... $ 77,058 $ 33,398 $ 110,456 $(557,479) $526,000 $ 78,977
========== ========== =========== ========= ======== ===========
Earnings per share before
extraordinary item:
Primary: .......................... $2.06 $1.36 $1.78 (l)
===== ===== =====
Fully diluted: .................... $2.04 $1.36 $1.77 (l)
===== ===== =====
- --------------------------------
Pro forma adjustments:
(g) Records amortization of $607 million of intangibles over 40 years (the
revised useful life over which the benefit of the intangible assets
are expected to be realized).
(h) Records interest at 7 1/2% on $430.305 million of additional debt
incurred to finance the acquisition.
(i) Records amortization of debt financing costs over assumed 10 year term
of debt.
(j) Records income taxes on taxable pro forma adjustments at Tosco's
current effective tax rate of 39.5%. No deduction has been taken on
amortization of intangibles which will not be deductible for income
tax purposes.
(k) Removes excise taxes of Circle K included in sales and cost of sales
for consistency of presentation.
(l) Pro forma earnings per share are based on the number of common and
common equivalent shares that would have been outstanding had the
Merger occurred on January 1, 1996.
Note A-- The historical balance sheets of Tosco and Circle K are as of December
31, 1995 and January 31, 1996, respectively. The related historical
statements of income of Tosco and Circle K are as of the years ended
December 31, 1995 and January 31, 1996, respectively.
Note B-- The pro forma income statement does not reflect the improvement in
operating contribution anticipated from the Merger or the planned
reduction in operating and administrative costs expected from the
consolidation of the Seattle, Washington office of Tosco with the
Phoenix, Arizona office of Circle K, net of non-recurring costs of
consolidation.
39