Exhibit 99.1
Tesoro Reports Second Quarter Earnings, Declares
Quarterly Cash Dividend
SAN ANTONIO--(BUSINESS WIRE)--Aug. 4, 2005--Tesoro Corporation
(NYSE:TSO) today reported net earnings of $183.9 million, or $2.62 per
share, for the second quarter of 2005 compared to net earnings of
$213.1 million, or $3.11 per share, for the second quarter of 2004.
As previously disclosed, results for the second quarter of 2005
include an after-tax charge of $1.8 million, or $0.03 per share to
write-off unamortized debt issuance costs and the prepayment premium
associated with the retirement of the company's $96.0 million Senior
Secured Term Loans. Excluding this special item, net earnings were
$185.7 million, or $2.65 per share.
For the first half of 2005, the company reported net earnings of
$211.6 million, or $3.02 per share, compared to net earnings of $263.5
million, or $3.88 per share, for the first six months of 2004.
Results for the first half of 2005 include after-tax charges of
$8.1 million, or $0.12 per share, for the charges associated with
prepayment of debt as well as expenses related to the termination and
retirement of certain executive officers. This compares to after-tax
charges of $1.2 million, or $0.02 per share, for debt financing costs
incurred in the first half of 2004. Excluding special items, net
earnings for the first half of 2005 were $219.7 million, or $3.14 per
share compared with $264.7 million, or $3.90 per share for the first
six months of 2004.
"Our refining system achieved record throughput rates during the
quarter, even with the Hawaii turnaround," said Bruce A. Smith,
Chairman, President and CEO of Tesoro. "Increased utilization rates,
continued margin strength, and progress in achieving our stated
objectives around earnings initiatives contributed to our solid
results for the quarter. Increases in operating and administrative
expenses, however, reduced operating income year-over-year."
Overall refinery operating expenses were higher year-over-year
mainly due to increased utility rates and throughput volumes, higher
maintenance expenses and employee costs, and allocation of information
technology expenses.
"Over the last twelve months, we have completed major turnaround
work at our Golden Eagle, Anacortes, and Hawaii refineries allowing us
to achieve new milestones in production. Not only did we run at a
record 541,000 barrels per day during the quarter but we set a monthly
throughput record of 564,000 barrels per day in June. We were well
positioned in the second quarter to capture historically strong
margins and we continue to run well and capture today's strong
margins. That's allowing us to generate significant free cash flow,
which should make 2005 another banner year for Tesoro," Smith added.
Quarterly Common Stock Dividend Declared
Tesoro also announced today that its Board of Directors has
declared a cash dividend of $0.05 per share payable on September 15,
2005 to shareholders of record on September 1, 2005.
Public Invited to Listen to Analyst Conference Call via Internet
At 2:00 p.m., CDT, Thursday, August 4, 2005 Tesoro will broadcast,
live, its conference call with analysts regarding second quarter 2005
results. Interested parties may listen to the live conference call
over the Internet by logging on to Tesoro's Internet site at
http://www.tsocorp.com.
Tesoro 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 approximately 500 branded retail stations, of which over 200
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 concern anticipated strong
industry refining margins in 2005 and our expectations to generate
free cash flow. 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 CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
2005 2004 2005 2004
---------- --------- --------- ---------
Revenues $ 4,033.2 $ 3,155.0 $ 7,204.4 $ 5,584.9
Costs and Expenses:
Costs of sales and
operating expenses (a) 3,601.5 2,679.3 6,598.8 4,914.0
Selling, general and
administrative
expenses (a) (b) 48.2 38.7 101.9 69.7
Depreciation and
amortization 42.9 37.8 84.4 74.8
Loss on asset disposals
and impairments 3.9 3.5 5.1 4.1
---------- --------- --------- ---------
Operating Income 336.7 395.7 414.2 522.3
Interest and Financing
Costs, Net (c) (31.7) (40.2) (63.0) (83.1)
---------- --------- --------- ---------
Earnings Before
Income Taxes 305.0 355.5 351.2 439.2
Income Tax Provision 121.1 142.4 139.6 175.7
---------- --------- --------- ---------
Net Earnings $ 183.9 $ 213.1 $ 211.6 $ 263.5
========== ========= ========= =========
Net Earnings Per Share:
Basic $ 2.69 $ 3.26 $ 3.13 $ 4.04
Diluted $ 2.62 $ 3.11 $ 3.02 $ 3.88
Weighted Average
Common Shares:
Basic 68.3 65.3 67.5 65.2
Diluted 70.1 68.6 70.1 68.0
- -------------------
(a) For the three and six months ended June 30, 2005, the Company
allocated certain information technology costs totaling $7.4
million and $13.9 million, respectively, previously reported as
selling, general and administrative expenses, to costs of sales
and operating expenses in order to better reflect costs directly
attributable to our segment operations.
(b) During the six months ended June 30, 2005, the Company recorded
stock-based and other compensation charges totaling $10.5 million
related to the termination and retirement of certain executive
officers.
(c) In April 2005, the Company voluntarily prepaid the remaining $96
million outstanding principal balance of our senior secured term
loans at a prepayment premium of 1%, which resulted in a pretax
charge of $2.9 million consisting of the write-off of unamortized
debt issuance costs and the 1% prepayment premium. During the six
months ended June 30, 2004, the Company recorded pretax financing
expenses of $2.0 million related to amending both the 8% senior
secured notes and the senior secured term loans.
NET EARNINGS ADJUSTED FOR SPECIAL ITEMS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
--------- ------- ------- -------
Net Earnings - U.S. GAAP $ 183.9 $ 213.1 $ 211.6 $ 263.5
Special Items, After-tax:
Termination and retirement
costs (b) - - 6.3 -
Debt prepayment and financing
costs (c) 1.8 - 1.8 1.2
--------- ------- ------- -------
Net Earnings Adjusted for
Special Items $ 185.7 $ 213.1 $ 219.7 $ 264.7
========= ======= ======= =======
Net Earnings Per Share - U.S.
GAAP $ 2.62 $ 3.11 $ 3.02 $ 3.88
Special Items Per Share,
After-tax:
Termination and retirement
costs (b) - - 0.09 -
Debt prepayment and financing
costs (c) 0.03 - 0.03 0.02
--------- ------- ------- -------
Net Earnings Per Share
Adjusted for Special Items $ 2.65 $ 3.11 $ 3.14 $ 3.90
========= ======= ======= =======
- -------------------
Note: The special items present information that the Company
believes is useful to investors. The Company believes that the
special items described above are not indicative of its core
operations.
TESORO CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
-------- -------- ------- -------
Operating Income (Loss)
Refining (d) $ 383.0 $ 427.5 $ 515.7 $ 579.1
Retail (d) (6.9) (1.5) (18.2) (5.7)
-------- -------- ------- -------
Total Segment Operating
Income 376.1 426.0 497.5 573.4
Corporate and Unallocated
Costs (b) (d) (35.5) (26.8) (78.2) (47.0)
Loss on Asset Disposals and
Impairments (3.9) (3.5) (5.1) (4.1)
-------- -------- ------- -------
Operating Income 336.7 395.7 414.2 522.3
Interest and Financing Costs,
Net (c) (31.7) (40.2) (63.0) (83.1)
-------- -------- ------- -------
Earnings Before Income Taxes $ 305.0 $ 355.5 $ 351.2 $ 439.2
======== ======== ======= =======
Depreciation and Amortization
Refining $ 36.6 $ 31.8 $ 71.8 $ 62.8
Retail 4.2 4.4 8.5 8.8
Corporate 2.1 1.6 4.1 3.2
-------- -------- ------- -------
Depreciation and Amortization $ 42.9 $ 37.8 $ 84.4 $ 74.8
======== ======== ======= =======
Capital Expenditures
Refining $ 48.2 $ 28.8 $ 85.2 $ 43.3
Retail 1.3 0.9 1.5 1.0
Corporate 2.7 1.7 29.4 2.0
-------- -------- ------- -------
Capital Expenditures $ 52.2 $ 31.4 $ 116.1 $ 46.3
======== ======== ======= =======
- -------------------
(d) For the three and six months ended June 30, 2005, the Company
allocated certain information technology costs totaling $7.4
million and $13.9 million, respectively, from corporate and
unallocated costs to segment operating income. The $7.4 million
for the three months ended June 30, 2005 included $5.9 million in
refining and $1.5 million in retail. The $13.9 million for the six
months ended June 30, 2005 included $10.8 million in refining and
$3.1 million in retail.
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
June 30, March 31, December 31,
2005 2005 2004
--------- --------- ------------
Cash and Cash Equivalents $ 96.2 $ 89.1 $ 184.8
Total Assets $ 4,487.0 $ 4,391.7 $ 4,075.1
Total Debt $ 1,132.8 $ 1,227.4 $ 1,218.3
Total Stockholders' Equity $ 1,595.8 $ 1,389.4 $ 1,327.1
Total Debt to Capitalization Ratio 42% 47% 48%
Total Debt $ 1,132.8 $ 1,227.4 $ 1,218.3
Less: Cash and Cash Equivalents $ 96.2 $ 89.1 $ 184.8
--------- --------- ------------
Net Debt (e) $ 1,036.6 $ 1,138.3 $ 1,033.5
Total Stockholders' Equity $ 1,595.8 $ 1,389.4 $ 1,327.1
--------- --------- ------------
Net Capitalization (e) $ 2,632.4 $ 2,527.7 $ 2,360.6
Net Debt to Net Capitalization
Ratio (e) 39% 45% 44%
- -------------------
(e) Net debt represents total debt less cash and cash equivalents. Net
capitalization represents the total of net debt and total
stockholders' equity. The Company believes net debt to net
capitalization is useful in measuring our financial leverage. Net
debt to net capitalization should not be considered as an
alternative to debt to capitalization or any measure of financial
leverage presented in accordance with accounting principles
generally accepted in the United States of America. Net debt to
net capitalization may not be comparable to similarly titled
measures used by other companies.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2005 2004 2005 2004
--------- ------- --------- -------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand
barrels per day)
Heavy crude 271.2 290.5 267.0 281.2
Light crude 250.6 225.6 219.6 218.6
Other feedstocks 19.0 21.7 22.5 17.9
--------- ------- --------- -------
Total Throughput 540.8 537.8 509.1 517.7
========= ======= ========= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 257.6 261.8 240.5 253.8
Jet fuel 66.4 64.0 65.6 64.1
Diesel fuel 125.8 115.8 108.5 109.6
Heavy oils, residual
products, internally
produced fuel and other 111.2 115.1 113.5 109.7
--------- ------- --------- -------
Total Yield 561.0 556.7 528.1 537.2
========= ======= ========= =======
Refining Margin
($/throughput bbl) (f)
Gross $ 13.28 $ 13.20 $ 11.00 $ 10.50
Manufacturing cost before
depreciation and
amortization (f) $ 3.36 $ 2.83 $ 3.45 $ 2.85
Segment Operating Income
($ millions)
Gross refining margin
(after inventory
changes) (g) $ 640.2 $ 639.0 $ 1,007.1 $ 987.0
Expenses
Manufacturing costs 165.2 138.3 317.7 268.8
Other operating expenses 48.4 35.0 87.5 64.5
Selling, general and
administrative 7.0 6.4 14.4 11.8
Depreciation and
amortization (h) 36.6 31.8 71.8 62.8
--------- ------- --------- -------
Segment Operating
Income $ 383.0 $ 427.5 $ 515.7 $ 579.1
========= ======= ========= =======
Product Sales (thousand
barrels per day) (i)
Gasoline and gasoline
blendstocks 306.7 307.7 287.3 298.5
Jet fuel 102.2 86.3 99.0 82.9
Diesel fuel 142.4 139.4 132.7 129.6
Heavy oils, residual
products and other 75.6 76.2 72.3 76.1
--------- ------- --------- -------
Total Product Sales 626.9 609.6 591.3 587.1
========= ======= ========= =======
Product Sales Margin
($/barrel) (i)
Average sales price $ 67.06 $ 54.38 $ 63.34 $ 49.86
Average costs of sales 56.14 42.79 53.91 40.44
--------- ------- --------- -------
Product Sales Margin $ 10.92 $ 11.59 $ 9.43 $ 9.42
========= ======= ========= =======
- -------------------
(f) Management uses gross refining margin per barrel to evaluate
performance, allocate resources and compare profitability to other
companies in the industry. Gross refining margin per barrel is
calculated by dividing gross refining margin before inventory
changes by total refining throughput and may not be calculated
similarly by other companies. Management uses manufacturing costs
per barrel to evaluate the efficiency of refinery operations and
allocate resources. Manufacturing costs per barrel may not be
comparable to similarly titled measures used by other companies.
Investors and analysts use these financial measures to help
analyze and compare companies in the industry on the basis of
operating performance. These financial measures should not be
considered as alternatives to segment operating income, revenues,
costs of sales and operating expenses or any other measure of
financial performance presented in accordance with accounting
principles generally accepted in the United States of America.
(g) Gross refining margin is revenues less costs of refining
feedstocks, purchased products, transportation and distribution.
Gross refining margin 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.
(h) Includes manufacturing depreciation and amortization per
throughput barrel of approximately $0.66 and $0.57 for the three
months ended June 30, 2005 and 2004, respectively, and $0.70 and
$0.59 for the six months ended June 30, 2005 and 2004,
respectively.
(i) Sources of total product sales include products manufactured at
the refineries, products drawn from inventory balances and
products purchased from third parties. Total product sales margin
includes margins on sales of manufactured and purchased products
and the effects of inventory changes.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
--------- ------- ------- -------
Refining By Region
California (j)
Throughput (thousand barrels
per day)
Heavy crude 156.2 146.8 150.1 145.5
Light crude 6.1 1.0 3.1 2.5
Other feedstocks 8.2 14.1 6.7 9.5
--------- ------- ------- -------
Total Throughput 170.5 161.9 159.9 157.5
========= ======= ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 100.0 102.6 91.0 100.2
Diesel fuel 51.1 41.4 45.9 39.1
Heavy oils, residual products,
internally produced fuel
and other 28.7 27.1 31.4 27.6
--------- ------- ------- -------
Total Yield 179.8 171.1 168.3 166.9
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 19.23 $ 19.51 $ 18.00 $ 15.42
Manufacturing cost before
depreciation and amortization $ 5.31 $ 4.63 $ 5.42 $ 4.62
Pacific Northwest (Alaska &
Washington) (j)
Throughput (thousand barrels
per day)
Heavy crude 96.4 92.5 88.8 88.5
Light crude 80.3 80.4 61.4 76.6
Other feedstocks 5.6 2.6 11.3 3.9
--------- ------- ------- -------
Total Throughput 182.3 175.5 161.5 169.0
========= ======= ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 77.9 74.3 70.3 71.8
Jet fuel 34.3 30.0 31.2 29.3
Diesel fuel 29.5 28.2 20.6 27.5
Heavy oils, residual products,
internally produced fuel
and other 46.1 47.5 44.8 45.0
--------- ------- ------- -------
Total Yield 187.8 180.0 166.9 173.6
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 12.08 $ 11.98 $ 8.83 $ 9.32
Manufacturing cost before
depreciation and amortization $ 2.42 $ 2.32 $ 2.76 $ 2.35
Mid-Pacific (Hawaii) (j)
Throughput (thousand barrels
per day)
Heavy crude 18.6 51.2 28.1 47.2
Light crude 51.3 34.0 48.7 37.6
--------- ------- ------- -------
Total Throughput 69.9 85.2 76.8 84.8
========= ======= ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 16.3 21.5 17.9 22.3
Jet fuel 20.5 24.0 23.4 24.4
Diesel fuel 10.8 13.3 11.4 14.2
Heavy oils, residual products,
internally produced fuel
and other 23.5 27.6 25.2 25.3
--------- ------- ------- -------
Total Yield 71.1 86.4 77.9 86.2
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 6.71 $ 7.63 $ 5.26 $ 6.09
Manufacturing cost before
depreciation and amortization $ 2.52 $ 1.44 $ 2.06 $ 1.38
- -------------------
(j) During the 2005 second quarter, throughput and yield levels were
reduced at our Hawaii refinery as a result of a scheduled major
maintenance turnaround. Throughput and yield levels were reduced
during the 2005 first quarter at our California and Washington
refineries due to scheduled major maintenance turnarounds and
unscheduled downtime.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
--------- ------- ------- -------
Mid-Continent (North Dakota &
Utah)
Throughput (thousand barrels
per day)
Light crude 112.9 110.2 106.4 101.9
Other feedstocks 5.2 5.0 4.5 4.5
--------- ------- ------- -------
Total Throughput 118.1 115.2 110.9 106.4
========= ======= ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 63.4 63.4 61.3 59.5
Jet fuel 11.6 10.0 11.0 10.4
Diesel fuel 34.4 32.9 30.6 28.8
Heavy oils, residual
products, internally
produced fuel and other 12.9 12.9 12.1 11.8
--------- ------- ------- -------
Total Yield 122.3 119.2 115.0 110.5
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 10.19 $ 10.28 $ 7.82 $ 8.57
Manufacturing cost before
depreciation and
amortization $ 2.48 $ 2.09 $ 2.58 $ 2.21
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
---------- ------ ------- -------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated 213 223 213 223
Branded jobber/dealer 283 317 283 317
---------- ------ ------- -------
Total Stations 496 540 496 540
========== ====== ======= =======
Average Stations (during
period)
Company-operated 214 223 214 224
Branded jobber/dealer 286 320 289 323
---------- ------ ------- -------
Total Average Retail Stations 500 543 503 547
========== ====== ======= =======
Fuel Sales (millions of
gallons)
Company-operated 67.1 72.9 132.1 142.5
Branded jobber/dealer 49.5 55.9 95.5 109.2
---------- ------ ------- -------
Total Fuel Sales 116.6 128.8 227.6 251.7
========== ====== ======= =======
Fuel Margin ($/gallon) (k) $ 0.15 $ 0.14 $ 0.13 $ 0.14
Merchandise Sales ($ millions) $ 35.5 $ 32.5 $ 65.4 $ 60.7
Merchandise Margin ($ millions) $ 9.1 $ 9.1 $ 16.7 $ 16.4
Merchandise Margin % 26% 28% 26% 27%
Segment Operating Loss
($ millions)
Gross Margins
Fuel (l) $ 16.9 $ 18.4 $ 29.8 $ 35.9
Merchandise and other non-
fuel margin 9.9 10.0 18.3 18.2
---------- ------ ------- -------
Total Gross Margins 26.8 28.4 48.1 54.1
Expenses
Operating expenses 21.7 18.3 44.4 36.8
Selling, general and
administrative 7.8 7.2 13.4 14.2
Depreciation and amortization 4.2 4.4 8.5 8.8
---------- ------ ------- -------
Segment Operating Loss $ (6.9) $ (1.5) $ (18.2) $ (5.7)
========== ====== ======= =======
- -------------------
(k) Management uses fuel margin per gallon to compare profitability to
other companies in the industry. Investors and analysts use fuel
margin per gallon to help analyze and compare companies in the
industry on the basis of operating performance. 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.
(l) Includes the effect of intersegment purchases from the refining
segment at prices which approximate market.
CONTACT: Tesoro Corporation, San Antonio
Investors:
A. Pierre Dubois, 210-283-2164
or
Media:
Sarah Simpson, 210-283-2374