Exhibit 99.1
Tesoro Reports Third Quarter Earnings
SAN ANTONIO--(BUSINESS WIRE)--xx--Tesoro Petroleum Corporation
(NYSE:TSO) today reported net earnings of $70.6 million, or $1.09 per
share, for the third quarter of 2003 versus a net loss of $15.8
million, or $0.24 per share, for the third quarter of 2002. Results
for the third quarter include after-tax charges of $4.7 million, or
$0.07 per share, for the loss on the pending sale of the Marine
Service assets and $1.8 million, or $0.03 per share for the
accelerated amortization of debt issuance costs due to the company
prepaying $125 million of debt during the quarter. Excluding these
special items, net earnings for the quarter were $77.1 million, or
$1.19 per share, compared to a net loss excluding special items for
the third quarter of 2002 of $18.8 million, or $0.29 per share.
For the first nine months of 2003, Tesoro reported net earnings of
$84 million, or $1.30 per share, versus a net loss for the first nine
months of 2002 of $89.3 million, or $1.51 per share. Results for the
first nine months of 2003 include after-tax charges of $33.2 million,
or $0.51 per share, for the write-off of the unamortized debt issuance
costs related to the company's previous credit facility and other debt
prepayments, charges for the company's early retirement and severance
program costs in the first quarter of 2003, along with the loss on the
pending sale of the Marine Service assets. Excluding special items,
net earnings were $117.2 million, or $1.81 per share, compared to a
net loss before special items of $81.9 million, or $1.38 per share,
for the first nine months of 2002.
"The reliability of our operations enabled us to benefit from the
seasonally strong gasoline demand and higher margin environment due to
industry supply problems on the West Coast," said Bruce A. Smith,
Chairman, President and CEO of Tesoro. "We did not, however, see the
full benefit of the improved margin environment in the mid-continent
region since our Mandan refinery had a planned maintenance turnaround
for almost the entire month of September."
As previously announced, the company prepaid the remaining balance
of its current asset term loan of approximately $125 million during
the quarter. "Although we have made significant strides this year in
reducing our overall debt, continued debt reduction remains our top
financial priority," stated Smith.
Public Invited to Listen to Analyst Conference Call via Internet
At 2 p.m. CST today, Tesoro will broadcast, live, its conference
call with analysts regarding third quarter 2003 results. Interested
parties may listen to the live conference call over the Internet by
logging on to Tesoro's Internet site at http://www.tesoropetroleum.com
and clicking on the "What's New" section.
Tesoro Petroleum Corporation, a Fortune 500 Company, is an
independent refiner and marketer of petroleum products and provider of
marine logistics services. Tesoro operates six refineries in the
western United States with a combined capacity of nearly 560,000
barrels per day. Tesoro's retail-marketing system includes over 560
branded retail stations; of which over 225 are company operated under
the Tesoro(R) and Mirastar(R) brands.
This news release contains certain statements that are
"forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements contain expectations with
respect to the company's debt reduction initiatives. Factors which may
cause actual results to differ from those forward-looking statements
are described in the company's annual report on Form 10-K and
quarterly reports on Form 10-Q filed with the Securities and Exchange
Commission. The company undertakes no obligation to publicly release
the result of any revisions to any such forward-looking statements
that may be made to reflect events or circumstances that occur, or
which the Company becomes aware of, after the date hereof.
TESORO PETROLEUM CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2003 2002 (a) 2003 2002 (a)
-------- -------- -------- --------
Revenues $ 2,330.0 $ 2,148.5 $ 6,732.5 $ 5,117.9
Costs and Expenses
Costs of sales and
operating expenses 2,096.2 2,059.2 6,206.9 4,954.8
Selling, general and
administrative expenses 28.3 31.5 98.7 103.8
Depreciation and
amortization 36.7 38.2 110.4 92.9
Loss on asset sales (b) 9.2 0.2 10.3 0.5
-------- -------- -------- --------
Operating Income (Loss) 159.6 19.4 306.2 (34.1)
Interest and Financing
Costs, Net (c) (45.9) (43.2) (171.1) (112.3)
-------- -------- -------- --------
Earnings (Loss) Before
Income Taxes 113.7 (23.8) 135.1 (146.4)
Income Tax Provision
(Benefit) 43.1 (8.0) 51.1 (57.1)
-------- -------- -------- --------
Net Earnings (Loss) $ 70.6 $ (15.8) $ 84.0 $ (89.3)
======== ======== ======== ========
Net Earnings (Loss) Per
Share
Basic $ 1.09 $ (0.24) $ 1.30 $ (1.51)
======== ======== ======== ========
Diluted $ 1.09 $ (0.24) $ 1.30 $ (1.51)
======== ======== ======== ========
Weighted Average Common
Shares
Basic 64.6 64.6 64.6 59.2
======== ======== ======== ========
Diluted (d) 64.9 64.6 64.8 59.2
======== ======== ======== ========
Note: Results include the California refinery operations acquired in
May 2002 and interest expense for the related financing.
(a) Certain reclassifications were made to prior period amounts to
conform to current presentation, principally to reclassify
amortization of major maintenance turnaround costs from operating
expenses to depreciation and amortization and to net purchases and
sales considered to be energy trading contracts.
(b) On October 27, 2003, the Company agreed to sell substantially all
of the physical assets of Marine Services for approximately $32
million including inventories, which are estimated to be valued at
$5 million. The Company recorded a pretax estimated loss of $7.6
million, or $0.07 per share, in September 2003, reflecting the
sales value of the assets and estimated selling costs.
(c) The Company wrote-off approximately $2.9 million and $36.2 million
during the three months and nine months ended September 30, 2003,
respectively, of unamortized debt issue costs related to voluntary
prepayments of debt and the replacement of the Company's previous
credit facility with a new credit agreement and term debt during
the 2003 second quarter. The Company also recorded charges of
$12.6 million during the nine months ended September 30, 2002 for
financing costs related to the acquisition of the California
refinery.
(d) The assumed conversion of common stock equivalents produced
anti-dilutive results for the three months and nine months ended
September 30, 2002 and therefore was not included in the dilutive
calculations.
NET EARNINGS (LOSS) ADJUSTED FOR SPECIAL ITEMS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
-------- -------- -------- -------
Net Earnings (Loss) - U.S.
GAAP $ 70.6 $ (15.8) $ 84.0 $ (89.3)
Special Items, Aftertax:
Loss on sale of Marine
Services (b) 4.7 - 4.7 -
Write-off of unamortized debt
issuance cost (c) 1.8 - 22.8 7.6
Early retirement, severance
and integration costs - - 5.7 2.8
LIFO liquidation - (3.0) - (3.0)
-------- -------- -------- -------
Net Earnings (Loss) Adjusted
for Special Items $ 77.1 $ (18.8) $ 117.2 $ (81.9)
======== ======== ======== =======
Net Earnings (Loss) Per Share
- U.S. GAAP $ 1.09 $ (0.24) $ 1.30 $ (1.51)
Special Items Per Share,
Aftertax:
Loss on sale of Marine
Services (b) 0.07 - 0.07 -
Write-off of unamortized debt
issuance cost (c) 0.03 - 0.35 0.13
Early retirement, severance
and integration costs - - 0.09 0.05
LIFO liquidation - (0.05) - (0.05)
-------- -------- -------- -------
Net Earnings (Loss) Per Share
Adjusted for Special Items $ 1.19 $ (0.29) $ 1.81 $ (1.38)
======== ======== ======== =======
Note: The special items present information that the Company believes
is useful to investors, relating to the pending sale of Marine
Services assets, refinancing and prepayments of debt, and severance
and other restructuring costs. Comparable information is provided,
relating to acquisition financing and integration costs and a LIFO
liquidation in 2002. The Company believes that the special items
described above are not indicative of its core operations.
TESORO PETROLEUM CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------- ----------------
2003 2002 2003 2002
--------- --------- -------- -------
Operating Income (Loss)
Refining $ 175.4 $ 33.4 $ 356.9 $ 34.5
Retail 6.6 3.5 8.8 (13.5)
Marine Services 2.1 0.6 4.9 1.2
--------- --------- -------- -------
Total Segment Operating
Income 184.1 37.5 370.6 22.2
Corporate and Unallocated
Costs (e) (15.3) (17.9) (54.1) (55.8)
Loss on asset sales (9.2) (0.2) (10.3) (0.5)
--------- --------- -------- -------
Operating Income (Loss) 159.6 19.4 306.2 (34.1)
Interest and Financing
Costs, Net (c) (45.9) (43.2) (171.1) (112.3)
--------- --------- -------- -------
Earnings (Loss) Before
Income Taxes $ 113.7 $ (23.8)$ 135.1 $(146.4)
========= ========= ======== =======
Depreciation and
Amortization
Refining $ 29.5 $ 30.5 $ 88.9 $ 74.3
Retail 4.7 4.5 14.7 11.8
Marine Services 0.6 0.8 2.0 2.3
Corporate 1.9 2.4 4.8 4.5
--------- --------- -------- -------
Depreciation and
Amortization $ 36.7 $ 38.2 $ 110.4 $ 92.9
========= ========= ======== =======
Capital Expenditures
Refining $ 22.4 $ 42.3 $ 64.8 $ 105.6
Retail 0.3 10.1 0.6 35.5
Marine Services 0.2 0.1 0.6 2.2
Corporate 0.4 1.5 0.9 7.1
--------- --------- -------- -------
Capital Expenditures $ 23.3 $ 54.0 $ 66.9 $ 150.4
========= ========= ======== =======
(e) Corporate and unallocated costs for the nine months ended
September 30, 2003 include $4.7 million in reorganization
costs, primarily a non-cash charge for voluntary early
retirement benefits and severance payments. An additional $4.3
million of reorganization costs were charged to the operating
segments, including $2.6 million in Refining, $1.3 million in
Retail and $0.4 million in Marine Services.
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
September 30, December 31,
2003 2002
--------------- --------------
Total Assets $ 3,675.0 $ 3,758.8
Total Debt $ 1,611.1 $ 1,976.7
Total Stockholders' Equity $ 971.6 $ 887.6
Total Debt to Capitalization Ratio 62% 69%
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
------- ------- ------- -------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand barrels
per day)
Heavy crude 278.9 277.5 284.2 195.5
Light crude 209.0 221.3 188.7 210.9
Other feedstocks 17.5 18.5 16.2 15.6
------- -------- ------- -------
Total Throughput 505.4 517.3 489.1 422.0
======= ======== ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 246.6 259.1 241.4 194.2
Jet fuel 58.5 66.0 56.8 65.7
Diesel fuel 111.0 110.8 105.4 80.4
Heavy oils, residual
products, internally
produced fuel and other 107.8 101.4 104.1 95.0
------- -------- ------- -------
Total Yield 523.9 537.3 507.7 435.3
======= ======== ======= =======
Refining Margin
($/throughput bbl) (f)
Gross $ 8.24 $ 4.56 $ 7.04 $ 4.07
Manufacturing cost before
depreciation and
amortization (g) $ 2.80 $ 2.44 $ 2.83 $ 2.29
Segment Operating Income
($ millions)
Gross refining margin
(after inventory changes)
(h) $ 376.3 $ 216.2 $ 938.8 $ 473.0
Expenses
Manufacturing costs 130.0 116.2 377.8 263.9
Other operating expenses 34.9 27.7 93.8 75.7
Selling, general and
administrative 6.5 8.4 21.4 24.6
Depreciation and
amortization (i) 29.5 30.5 88.9 74.3
------- -------- ------- -------
Segment Operating
Income $ 175.4 $ 33.4 $ 356.9 $ 34.5
======= ======== ======= =======
Product Sales (thousand
barrels per day) (j)
Gasoline and gasoline
blendstocks 288.3 308.2 283.4 257.5
Jet fuel 86.2 104.9 84.2 95.4
Diesel fuel 132.2 128.6 129.1 108.4
Heavy oils, residual
products and other 70.8 81.5 70.2 73.2
------- -------- ------- -------
Total Product Sales 577.5 623.2 566.9 534.5
======= ======== ======= =======
Product Sales Margin
($/barrel) (j)
Average sales price $ 40.45 $ 34.57 $ 39.95 $ 31.51
Average costs of sales 33.47 30.80 33.96 28.28
------- -------- ------- -------
Product Sales Margin $ 6.98 $ 3.77 $ 5.99 $ 3.23
======= ======== ======= =======
(f) Management uses gross refining margin per barrel to compare
profitability to other companies in the industry. Gross refining
margin per barrel is calculated by dividing gross refining margin
by total refining throughput and may not be calculated similarly
by other companies.
(g) Management uses manufacturing costs per barrel to evaluate the
efficiency of refinery operations. Manufacturing costs per barrel
may not be comparable to similarly titled measures used by other
companies.
(h) Gross refining margin is revenues less cost of refining feedstock,
which approximates total Refining segment throughput times gross
refining margin per barrel, adjusted for changes in refined
product inventory due to selling a volume and mix of product that
is different than actual volumes manufactured. Also includes the
effect of intersegment sales to the Retail segment at prices which
approximate market. In addition, during the three months ended
September 30, 2002, certain inventory quantities were reduced,
resulting in the liquidation of applicable LIFO inventory
quantities carried at lower costs. This reduction in LIFO
inventory resulted in a decrease in cost of sales of approximately
$5 million and a decrease in net loss of $3 million for the three
months and nine months ended September 30, 2002.
(i) Includes manufacturing depreciation and amortization per
throughput barrel of approximately $0.55 and $0.51 for the three
months ended September 30, 2003 and 2002, respectively, and $0.58
and $0.54 for the nine months ended September 30, 2003 and 2002,
respectively.
(j) Sources of total product sales include products manufactured at
the refineries, products drawn from inventory balances and
products purchased from third parties. Total product sales margin
included margins on sales of manufactured and purchased products
and the effects of inventory changes.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
-------- -------- -------- -------
Refining By Region
California (k)
Throughput (thousand barrels
per day)
Heavy crude 147.4 153.1 149.3 68.4
Light crude 4.2 - 2.7 -
Other feedstocks 6.3 4.6 6.2 4.8
-------- -------- -------- -------
Total Throughput 157.9 157.7 158.2 73.2
======== ======== ======== =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 97.2 105.0 99.6 49.8
Diesel fuel 40.5 37.1 39.8 15.1
Heavy oils, residual
products, internally
produced fuel and other 29.5 25.2 28.2 13.0
-------- -------- -------- -------
Total Yield 167.2 167.3 167.6 77.9
======== ======== ======== =======
Refining Margin ($/throughput
bbl)
Gross $ 11.19 $ 6.38 $ 10.28 $ 6.76
Manufacturing cost before
depreciation and
amortization $ 4.39 $ 3.91 $ 4.42 $ 4.11
Pacific Northwest (Alaska &
Washington)
Throughput (thousand barrels
per day)
Heavy crude 85.6 80.3 84.3 73.5
Light crude 84.2 81.3 72.9 81.0
Other feedstocks 6.6 9.4 6.3 6.5
-------- -------- -------- -------
Total Throughput 176.4 171.0 163.5 161.0
======== ======== ======== =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 80.3 77.4 74.0 68.1
Jet fuel 26.8 30.3 25.4 29.2
Diesel fuel 32.0 28.8 27.2 24.4
Heavy oils, residual
products, internally
produced fuel and other 42.5 40.6 42.1 43.8
-------- -------- -------- -------
Total Yield 181.6 177.1 168.7 165.5
======== ======== ======== =======
Refining Margin ($/throughput
bbl)
Gross $ 8.04 $ 4.44 $ 6.44 $ 3.98
Manufacturing cost before
depreciation and
amortization $ 2.11 $ 1.79 $ 2.17 $ 2.03
Mid-Pacific (Hawaii)
Throughput (thousand barrels
per day)
Heavy crude 45.9 44.1 50.6 53.6
Light crude 34.5 38.9 26.6 30.9
-------- -------- -------- -------
Total Throughput 80.4 83.0 77.2 84.5
======== ======== ======== =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 20.2 20.3 18.5 20.5
Jet fuel 23.0 26.7 22.9 27.0
Diesel fuel 13.5 13.5 13.5 12.3
Heavy oils, residual
products, internally
produced fuel and other 25.0 23.7 23.4 25.8
-------- -------- -------- -------
Total Yield 81.7 84.2 78.3 85.6
======== ======== ======== =======
Refining Margin ($/throughput
bbl)
Gross $ 4.07 $ 1.76 $ 3.16 $ 2.27
Manufacturing cost before
depreciation and
amortization $ 1.40 $ 1.30 $ 1.40 $ 1.36
(k) Volumes include amounts for the California operations since
acquisition on May 17, 2002 averaged over the periods presented.
Throughput and yield averaged over the 137 days of operation in
2002 were 145,900 bpd and 155,200 bpd, respectively. The
California refinery's throughput and yield levels were reduced
during a scheduled maintenance turnaround in the 2002 second
quarter.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
-------- ------- ------- -------
Mid-Continent (North Dakota &
Utah) (l)
Throughput (thousand
barrels per day)
Light crude 86.1 101.1 86.5 99.0
Other feedstocks 4.6 4.5 3.7 4.3
-------- ------- ------- -------
Total Throughput 90.7 105.6 90.2 103.3
======== ======= ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 48.9 56.4 49.3 55.8
Jet fuel 8.7 9.0 8.5 9.5
Diesel fuel 25.0 31.4 24.9 28.6
Heavy oils, residual
products, internally
produced fuel and other 10.8 11.9 10.4 12.4
-------- ------- ------- -------
Total Yield 93.4 108.7 93.1 106.3
======== ======= ======= =======
Refining Margin
($/throughput bbl)
Gross $ 7.16 $ 4.25 $ 5.75 $ 3.79
Manufacturing cost before
depreciation and
amortization $ 2.59 $ 2.21 $ 2.45 $ 2.17
(l) Throughput and yield levels were reduced during scheduled
maintenance turnarounds at the North Dakota refinery in the 2003
third quarter and at the Utah refinery in the 2003 first quarter.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
-------- ------- ------- -------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated (m) 228 303 228 303
Branded jobber/dealer 336 359 336 359
-------- ------- ------- -------
Total Stations 564 662 564 662
======== ======= ======= =======
Average Stations (during
period)
Company-operated (m) 228 298 229 254
Branded jobber/dealer 342 401 350 439
-------- ------- ------- -------
Total Average Retail
Stations 570 699 579 693
======== ======= ======= =======
Fuel Sales (millions of
gallons)
Company-operated (m) 79.1 126.1 235.8 308.3
Branded jobber/dealer 65.8 96.1 203.0 288.7
-------- ------- ------- -------
Total Fuel Sales 144.9 222.2 438.8 597.0
======== ======= ======= =======
Fuel Margin ($/gallon) (n) $ 0.18 $ 0.14 $ 0.17 $ 0.11
Merchandise Sales
($ millions) $ 32.8 $ 39.1 $ 87.3 $ 93.0
Merchandise Margin
($ millions) $ 9.4 $ 11.3 $ 23.6 $ 25.3
Merchandise Margin % 29% 29% 27% 27%
Segment Operating Income
(Loss) ($ millions)
Gross Margins
Fuel (o) $ 26.7 $ 31.1 $ 74.9 $ 66.7
Merchandise and other non-
fuel margin 10.3 12.4 26.7 29.3
-------- ------- ------- -------
Total gross margins 37.0 43.5 101.6 96.0
Expenses
Operating expenses 18.3 28.7 53.7 72.1
Selling, general and
administrative 7.4 6.8 24.4 25.6
Depreciation and
amortization 4.7 4.5 14.7 11.8
-------- ------- ------- -------
Segment Operating Income
(Loss) $ 6.6 $ 3.5 $ 8.8 $ (13.5)
======== ======= ======= =======
(m) In December 2002, the Company sold 70 company-operated stations
that were acquired with the California refinery.
(n) Fuel margin per gallon is calculated by dividing fuel gross margin
by fuel sales volumes. Fuel margin per gallon may not be
calculated similarly by other companies. Management uses fuel
margin per gallon calculations to compare profitability to other
companies in the industry.
(o) Includes the effect of intersegment purchases from the Refining
segment at prices which approximate market.
CONTACT: Tesoro Petroleum Corp., San Antonio
Investors:
John Robertson, Director, Investor Relations
210-283-2687
or
Media:
Tara Ford, Director, Public Relations, 210-283-2676