Exhibit 99.1
Tesoro Petroleum Corporation Reports Fourth Quarter and Full Year
Results
SAN ANTONIO--(BUSINESS WIRE)--Feb. 3, 2004--Tesoro Petroleum
Corporation (NYSE:TSO) today reported a net loss of $7.9 million, or
$0.12 per share, for the fourth quarter of 2003 compared to a net loss
of $27.7 million, or $0.43 per share, for the fourth quarter of 2002.
Excluding special items, the net loss was $1.5 million, or $0.02 per
share, compared to a net loss excluding special items for the fourth
quarter of 2002 of $15.5 million, or $0.24 per share.
As reported in the attached financial information, results for the
quarter included after-tax charges of $6.4 million, or $0.10 per
share, which were primarily non-cash charges for the termination of
its funded supplemental executive retirement plan (SERP) and an
impairment write-down on certain retail gas stations. Fourth quarter
2002 results included after-tax charges of $12.2 million, or $0.19 per
share, which were charges for a change in income tax rates, an
impairment write-down for the sale of certain retail assets, financing
costs related to the acquisition of Golden Eagle, along with severance
and integration costs.
For the full year of 2003, the company reported net earnings of
$76.1 million, or $1.17 per diluted share, versus a net loss for the
full year of 2002 of $117.0 million, or $1.93 per share. Excluding
special items, full year 2003 net earnings were $115.8 million, or
$1.78 per diluted share, compared to a net loss of $95.5 million, or
$1.58 per share, for the full year of 2002.
As reported in the attached financial information, results for the
full year 2003 included after-tax charges of $39.7 million, or $0.61
per diluted share, for the write-off of unamortized debt issuance
costs, termination of the SERP, charges for early retirement,
severance and integration costs and impairment losses on the sale of
Marine Services and certain retail stations. Full year 2002 results
included net after-tax charges of $21.5 million, or $0.35 per share,
for financing costs related to the acquisition of Golden Eagle,
changes in the income tax rate, an impairment write-down for the sale
of certain retail assets, severance and integration costs and a LIFO
inventory benefit.
"Low seasonal demand for refined products combined with rapidly
rising crude oil prices narrowed margins in all of our refining
regions compared to the third quarter of 2003," said Bruce A. Smith,
Chairman, President and CEO of Tesoro. "The rise in crude oil prices
also negatively impacted margins on certain products, mainly jet fuel,
due to contract pricing lags. In addition, we elected to conduct major
maintenance work at our Golden Eagle and Anacortes refineries, which
further impacted fourth quarter profitability."
"In 2003, Tesoro had many notable successes. We strengthened our
balance sheet by achieving our $500 million debt reduction goal and we
ended the year with $77 million of cash. We negotiated a more
flexible, less expensive credit agreement and rationalized our asset
base by trimming non-core and under-performing assets. In addition,
despite higher utility expenses, we made good progress in right-sizing
our cost structure, and we exercised good capital discipline as we
rationalized our capital expenditures," stated Smith.
"This year, our goal will be to improve the profitability of our
operations by achieving greater operating efficiencies, and from the
benefit of lower interest expense resulting from our debt reduction.
We will also continue to be good capital stewards, without
compromising operating safety or reliability. These factors plus our
expectation of an improved industry margin environment, should enable
us to continue to meet our principal goal of reducing debt," added
Smith.
Public Invited to Listen to Analyst Conference Call via Internet
At 2 p.m., CST, Tuesday, February 3, 2004 Tesoro will broadcast,
live, its conference call with analysts regarding fourth quarter and
full year 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. 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 nearly 560 branded retail stations, of which over 225
are company owned and 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 of
industry refining margins and expectations concerning the company's
operating efficiencies, capital expenditures and debt reduction.
Factors which can cause actual results to differ from these
forward-looking statements include: changes in general economic
conditions, the timing and extent of changes in demand for refined
products, availability and cost of crude oil, other feedstocks or
refined products, throughput and yield levels, disruptions due to
equipment interruptions or failure at our or third-party facilities,
and other factors beyond our control. For more information concerning
these factors and other factors that could cause such a difference,
see our annual report on Form 10-K and quarterly reports on Form 10-Q,
filed with the Securities and Exchange Commission. We undertake 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 we become aware of, after the date
hereof.
TESORO PETROLEUM CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Years
Ended Ended
December 31, December 31,
---------------- ----------------
2003 2002 2003 2002
------- -------- ------- --------
Revenues $2,113.2 $2,001.4 $8,845.7 $7,119.3
Costs and Expenses
Costs of sales and operating
expenses 2,000.9 1,910.9 8,207.8 6,865.7
Selling, general and
administrative expenses (a) 39.3 29.4 138.0 133.2
Depreciation and amortization 37.8 37.8 148.2 130.7
Loss on asset sales and
impairments (b) 6.6 7.9 16.9 8.4
------- ------- ------- -------
Operating Income (Loss) 28.6 15.4 334.8 (18.7)
Interest and Financing Costs,
Net (c) (40.6) (50.3) (211.7) (162.6)
------- ------- ------- -------
Earnings (Loss) Before Income
Taxes (12.0) (34.9) 123.1 (181.3)
Income Tax Provision (Benefit) (4.1) (7.2) 47.0 (64.3)
------- ------- ------- -------
Net Earnings (Loss) $(7.9) $(27.7) $76.1 $(117.0)
======= ======= ======= =======
Net Earnings (Loss) Per Share
Basic $(0.12) $(0.43) $1.18 $(1.93)
Diluted $(0.12) $(0.43) $1.17 $(1.93)
Weighted Average Common Shares
Basic 64.7 64.6 64.6 60.5
Diluted 64.7 64.6 65.1 60.5
- -------------
Note: Results include the California refinery operations acquired in
May 2002 and interest expense for the related financing.
(a) In December 2003, the Company terminated the funded
supplemental executive retirement plan resulting in a
non-cash settlement charge of $6.9 million and a charge of
$1.5 million relating to a plan curtailment contribution.
(b) In October 2003 the Company entered into an agreement to
sell substantially all of the physical assets of Marine
Services for approximately $32 million including inventories.
The Company recorded a pretax loss of $7.6 million during the
2003 third quarter, reflecting the expected loss on this sale.
The sale of the Marine Services assets was completed in
December 2003. In the 2003 fourth quarter, the Company
wrote-off certain refinery assets that were replaced and
recorded an impairment loss on certain retail stations.
The pretax loss on asset sales in 2002 related primarily
to the loss of $4.0 million on a sales/lease-back transaction
for 30 retail stations and a $2.5 million loss in the 2002
fourth quarter on the sale of 70 retail stations in northern
California.
(c) During 2003 the Company wrote-off approximately $36.2
million, pretax, 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.
During the first six months of 2002 the Company also
recorded pretax charges of $12.6 million for financing
costs related to the acquisition of the California refinery.
NET EARNINGS (LOSS) ADJUSTED FOR SPECIAL ITEMS
(Unaudited)
(In millions except per share amounts)
Three Months Years
Ended Ended
December 31, December 31,
--------------- ---------------
2003 2002 2003 2002
------ ------ ------ -------
Net Earnings (Loss) - U.S. GAAP $(7.9) $(27.7) $76.1 $(117.0)
Special Items, Aftertax:
Termination of funded
supplemental executive
retirement plan (a) 5.5 -- 5.5 --
Losses on Marine Services and
Retail asset sales (b) 0.9 4.8 5.7 5.1
Write-off of unamortized debt
issuance cost and other
financing costs (c) -- 0.4 22.8 8.4
Early retirement, severance and
integration costs -- 1.0 5.7 5.0
LIFO inventory liquidation
benefit -- -- -- (3.0)
Income tax rate changes -- 6.0 -- 6.0
------ ------ ------ -------
Net Earnings (Loss) Adjusted for
Special Items $(1.5) $(15.5) $115.8 $(95.5)
====== ====== ====== =======
Net Earnings (Loss) Per Share -
U.S. GAAP $(0.12) $(0.43) $1.17 $(1.93)
Special Items Per Share,
Aftertax:
Termination of funded
supplemental executive
retirement plan (a) 0.09 -- 0.08 --
Losses on Marine Services and
Retail asset sales (b) 0.01 0.07 0.09 0.08
Write-off of unamortized debt
issuance cost and other
financing costs (c) -- 0.01 0.35 0.14
Early retirement, severance and
integration costs -- 0.02 0.09 0.08
LIFO inventory liquidation
benefit -- -- -- (0.05)
Income tax rate changes -- 0.09 -- 0.10
------ ------ ------ -------
Net Earnings (Loss) Per Share
Adjusted for Special Items $(0.02) $(0.24) $1.78 $(1.58)
====== ====== ====== =======
- ------------
Note: The special items present information that the Company believes
is useful to investors. Comparable information is provided for 2002.
The Company believes that the special items described above are not
indicative of its normal ongoing operating results.
TESORO PETROLEUM CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Years
Ended Ended
December 31, December 31,
---------------- ---------------
2003 2002 2003 2002
------- ------ ------- -------
Operating Income (Loss)
Refining $54.2 $38.4 $411.1 $72.9
Retail 6.9 1.2 15.7 (12.3)
Marine Services (b) 1.4 1.1 6.3 2.3
------- ------ ------- -------
Total Segment Operating
Income 62.5 40.7 433.1 62.9
Corporate and Unallocated Costs (d) (27.3) (17.4) (81.4) (73.2)
Loss on asset sales and
impairments (b) (6.6) (7.9) (16.9) (8.4)
------- ------ ------- -------
Operating Income (Loss) 28.6 15.4 334.8 (18.7)
Interest and Financing Costs,
Net (c) (40.6) (50.3) (211.7) (162.6)
------- ------ ------- -------
Earnings (Loss) Before
Income Taxes $(12.0) $(34.9) $123.1 $(181.3)
======= ====== ======= =======
Depreciation and Amortization
Refining $31.5 $29.9 $120.4 $104.2
Retail 4.5 5.1 19.2 16.9
Marine Services -- 0.8 2.0 3.1
Corporate 1.8 2.0 6.6 6.5
------- ------ ------- -------
Depreciation and
Amortization $37.8 $37.8 $148.2 $130.7
======= ====== ======= =======
Capital Expenditures
Refining $32.6 $45.3 $97.4 $150.9
Retail 0.6 5.1 1.2 40.6
Marine Services 0.1 0.3 0.7 2.5
Corporate 0.9 2.4 1.8 9.5
------- ------ ------- -------
Capital Expenditures $34.2 $53.1 $101.1 $203.5
======= ====== ======= =======
- --------------------
(d) Corporate and unallocated costs in 2003 include charges of $8.4
million for the termination of the Company's funded supplemental
executive retirement plan in December 2003 and $4.7 million in
reorganization costs, primarily a non-cash charge for voluntary
early retirement benefits and severance payments in the 2003
first quarter. An additional $4.3 million of reorganization
costs were charged to the operating segments in the 2003 first
quarter, 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)
December 31, December 31,
2003 2002
------------ ------------
Total Assets $3,661.3 $3,758.8
Total Debt $1,608.8 $1,976.7
Total Stockholders' Equity $965.4 $887.6
Total Debt to Capitalization Ratio 62% 69%
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Years
Ended Ended
December 31, December 31,
--------------- ----------------
2003 2002 2003 2002
------- ------ -------- ------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand barrels
per day)
Heavy crude 281.6 262.1 283.6 212.2
Light crude 187.5 187.2 188.4 205.0
Other feedstocks 16.2 24.1 16.2 17.8
------- ------ -------- ------
Total Throughput 485.3 473.4 488.2 435.0
======= ====== ======== ======
Yield (thousand barrels per day)
Gasoline and gasoline
blendstocks 233.5 231.8 239.4 203.7
Jet fuel 64.0 57.5 58.6 63.7
Diesel fuel 95.2 106.0 102.8 86.9
Heavy oils, residual products,
internally produced fuel and
other 112.6 97.1 106.3 95.4
------- ------ -------- ------
Total Yield 505.3 492.4 507.1 449.7
======= ====== ======== ======
Refining Margin
($/throughput bbl) (e)
Gross $ 5.81 $ 5.20 $ 6.73 $ 4.38
Manufacturing cost before
depreciation and
amortization (f) $ 2.93 $ 2.79 $ 2.85 $ 2.43
Segment Operating Income
($ millions)
Gross refining margin
(after inventory changes)(g) $257.2 $226.2 $1,196.0 $699.2
Expenses
Manufacturing costs 130.6 121.6 508.4 385.5
Other operating expenses 35.0 29.1 128.8 104.8
Selling, general and
administrative 5.9 7.2 27.3 31.8
Depreciation and
amortization (h) 31.5 29.9 120.4 104.2
------- ------ -------- ------
Segment Operating
Income $54.2 $38.4 $411.1 $72.9
======= ====== ======== ======
Product Sales (thousand barrels
per day) (i)
Gasoline and gasoline
blendstocks 270.5 283.4 280.2 264.1
Jet fuel 82.1 89.4 83.7 94.5
Diesel fuel 116.3 135.3 125.9 115.1
Heavy oils, residual
products and other 80.1 66.7 72.6 71.6
------- ------ -------- ------
Total Product Sales 549.0 574.8 562.4 545.3
======= ====== ======== ======
Product Sales Margin
($/barrel) (i)
Average sales price $37.92 $34.27 $39.45 $32.25
Average costs of sales 32.82 30.06 33.68 28.75
------- ------ -------- ------
Product Sales Margin $5.10 $4.21 $5.77 $3.50
======= ====== ======== ======
- ----------------
(e) 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.
(f) 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.
(g) 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 2002 third quarter, 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 year ended December
31, 2002.
(h) Includes manufacturing depreciation and amortization per
throughput barrel of approximately $0.62 and $0.61 for the three
months ended December 31, 2003 and 2002, respectively, and $0.59
and $0.56 for the years ended December 31, 2003 and 2002,
respectively.
(i) Sources of total product sales include products manufactured at
the refineries, products drawn from inventory balances and
products purchased from third parties. Total product sales
margin included margins on sales of manufactured and purchased
products and the effects of inventory changes.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Years
Ended Ended
December 31, December 31,
-------------- --------------
2003 2002 2003 2002
------ ------ ------ ------
Refining By Region
California (j)
Throughput (thousand barrels per day)
Heavy crude 142.8 151.2 147.7 89.2
Light crude 0.5 -- 2.1 --
Other feedstocks 7.9 7.0 6.6 5.4
------ ------ ------ ------
Total Throughput 151.2 158.2 156.4 94.6
====== ====== ====== ======
Yield (thousand barrels per day)
Gasoline and gasoline blendstocks 95.2 99.5 98.5 62.3
Diesel fuel 34.5 41.3 38.5 21.7
Heavy oils, residual products,
internally produced fuel and other 31.5 26.5 29.0 16.4
------ ------ ------ ------
Total Yield 161.2 167.3 166.0 100.4
====== ====== ====== ======
Refining Margin ($/throughput bbl)
Gross $7.64 $5.94 $9.63 $6.41
Manufacturing cost before depreciation
and amortization $4.38 $4.25 $4.41 $4.17
Pacific Northwest (Alaska & Washington)
Throughput (thousand barrels per day)
Heavy crude 88.6 73.9 85.4 73.6
Light crude 60.7 57.6 69.8 75.1
Other feedstocks 4.4 13.6 5.9 8.3
------ ------ ------ ------
Total Throughput 153.7 145.1 161.1 157.0
====== ====== ====== ======
Yield (thousand barrels per day)
Gasoline and gasoline blendstocks 67.4 64.8 72.3 67.3
Jet fuel 29.3 25.8 26.4 28.4
Diesel fuel 20.7 22.6 25.6 23.9
Heavy oils, residual products,
internally produced fuel
and other 41.4 37.9 41.9 42.3
------ ------ ------ ------
Total Yield 158.8 151.1 166.2 161.9
====== ====== ====== ======
Refining Margin ($/throughput bbl)
Gross $5.41 $4.46 $6.19 $4.09
Manufacturing cost before
depreciation and amortization $2.52 $2.13 $2.26 $2.05
Mid-Pacific (Hawaii)
Throughput (thousand barrels per day)
Heavy crude 50.2 37.0 50.5 49.4
Light crude 36.8 37.0 29.2 32.5
------ ------ ------ ------
Total Throughput 87.0 74.0 79.7 81.9
====== ====== ====== ======
Yield (thousand barrels per day)
Gasoline and gasoline blendstocks 21.9 18.6 19.3 20.0
Jet fuel 23.8 21.4 23.1 25.6
Diesel fuel 14.7 13.0 13.8 12.5
Heavy oils, residual products,
internally produced fuel and other 27.9 21.8 24.6 24.8
------ ------ ------ ------
Total Yield 88.3 74.8 80.8 82.9
====== ====== ====== ======
Refining Margin ($/throughput bbl)
Gross $3.67 $4.81 $3.30 $2.85
Manufacturing cost before
depreciation and amortization $1.35 $1.51 $1.39 $1.39
- -------------
(j) Volumes for the year ended December 31, 2002 include amounts
for the California operations since acquisition on May 17,
2002 averaged over the full year. Throughput and yield
averaged over the 229 days of operation were 150,800 bpd and
160,000 bpd, respectively. The California refinery's
throughput and yield levels were reduced during a scheduled
maintenance turnaround in the 2002 second quarter.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Years
Ended Ended
December 31 December 31
------------- -------------
2003 2002 2003 2002
----- ----- ----- -----
Mid-Continent (North Dakota & Utah) (k)
Throughput (thousand barrels per day)
Light crude 89.5 92.6 87.3 97.4
Other feedstocks 3.9 3.5 3.7 4.1
----- ----- ----- -----
Total Throughput 93.4 96.1 91.0 101.5
===== ===== ===== =====
Yield (thousand barrels per day)
Gasoline and gasoline blendstocks 49.0 48.9 49.3 54.1
Jet fuel 10.9 10.3 9.1 9.7
Diesel fuel 25.3 29.1 24.9 28.8
Heavy oils, residual products,
internally produced fuel and other 11.8 10.9 10.8 11.9
----- ----- ----- -----
Total Yield 97.0 99.2 94.1 104.5
===== ===== ===== =====
Refining Margin ($/throughput bbl)
Gross $5.47 $5.38 $5.68 $4.17
Manufacturing cost before
depreciation and amortization $2.70 $2.38 $2.52 $2.22
- ------------
(k) Throughput and yield levels were reduced during scheduled
maintenance turnarounds at the North Dakota refinery in
September - October 2003 and at the Utah refinery in the 2003
first quarter.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Years
Ended Ended
December 31, December 31,
--------------- --------------
2003 2002 2003 2002
------ ------ ------ ------
RETAIL SEGMENT
Number of Stations (end of period)
Company-operated 226 234 226 234
Branded jobber/dealer 331 359 331 359
------ ------ ------ ------
Total Stations 557 593 557 593
====== ====== ====== ======
Average Stations (during period)
Company-operated (l) 228 286 229 260
Branded jobber/dealer 333 355 346 419
------ ----- ------ ------
Total Average Retail Stations 561 641 575 679
====== ====== ====== ====
Fuel Sales (millions of gallons)
Company-operated (l) 72.7 109.9 308.5 418.2
Branded jobber/dealer 56.3 83.6 259.3 372.3
------ ------ ------ ------
Total Fuel Sales 129.0 193.5 567.8 790.5
====== ===== ====== ======
Fuel Margin ($/gallon) (m) $0.20 $0.15 $0.18 $0.12
Merchandise Sales
($ millions) (l) $29.1 $33.7 $116.4 $126.7
Merchandise Margin
($ millions) (l) $7.6 $9.5 $31.2 $34.8
Merchandise Margin % 26% 28% 27% 27%
Segment Operating Income (Loss)
($ millions)
Gross Margins
Fuel (n) $26.4 $28.2 $101.3 $94.9
Merchandise and other
non-fuel margin 8.4 10.9 35.1 40.2
------ ------ ------ ------
Total gross margins 34.8 39.1 136.4 135.1
Expenses
Operating expenses (l) 17.1 27.1 70.8 99.2
Selling, general and
administrative 6.3 5.7 30.7 31.3
Depreciation and amortization 4.5 5.1 19.2 16.9
------ ------ ------ ------
Segment Operating Income
(Loss) $6.9 $1.2 $15.7 $(12.3)
====== ====== ====== =======
- -------------
(l) In December 2002, the Company sold 70 company-operated stations
that were acquired in May 2002 with the California refinery.
(m) 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.
(n) Includes the effect of intersegment purchases from the Refining
segment at prices which approximate market.
CONTACT: Tesoro Petroleum Corporation, San Antonio
Investors:
John Robertson, 210-283-2687
or
Media:
Tara Ford, 210-283-2676