Exhibit 99.1
Tesoro Corporation Reports Record 2005 Fourth Quarter and
Full Year Results, Declares Quarterly Cash Dividend
SAN ANTONIO--(BUSINESS WIRE)--Feb. 2, 2006--Tesoro Corporation (NYSE:TSO)
today reported record 2005 fourth quarter net earnings of $69 million, or $0.97
per share compared to breakeven results for the fourth quarter of 2004.
Results for the 2005 fourth quarter included special after-tax charges of
$57 million, or $0.81 per share, for tender and call premiums and the write-off
of unamortized debt issuance costs associated with the company's refinancing of
almost $1 billion of debt. Excluding these special items, fourth quarter
earnings were $126 million, or $1.78 per share.
Fourth quarter results also included other after-tax charges of $18
million, or $0.25 per share, which included a charge of $7 million related to
obsolete refining assets and a $3 million impairment charge for certain retail
assets. Also included is an $8 million charge for the accelerated depreciation
primarily relating to the modification of the fluid coker unit at the company's
Golden Eagle refinery. As previously announced, the existing fluid coker is
being modified to a delayed coker with significant operational and environmental
benefits.
For the full year of 2005, the company reported record net earnings of $507
million, or $7.20 per share, versus net earnings for the full year of 2004 of
$328 million, or $4.76 per share. Excluding special items, full year 2005 net
earnings were $571 million, or $8.11 per share, compared to net earnings of $343
million, or $4.97 per share, for the full year of 2004.
Results for the full year of 2005 included special after-tax charges of $64
million, or $0.91 per share, for tender and call premiums and the write-off of
unamortized debt issuance costs associated with the Company's debt refinancing
and prepayments along with expenses related to the termination and retirement of
certain executive officers. Full year 2004 results included after-tax charges of
$15 million, or $0.21 per share, primarily for debt prepayment and financing
costs along with executive retirement expenses.
"We continued to run our assets very well during the quarter and achieved
record fourth quarter throughput rates of 541,000 barrels per day, allowing us
to capture strong margins and post record fourth quarter results," said Bruce A.
Smith, Chairman, President and CEO of Tesoro.
The absence of any major turnaround activity during the quarter also
contributed to the record run rates, when compared to last year's quarter.
Improved marketing margins further contributed to record results.
"The past year marked a major turning point for Tesoro," said Smith. "We
further optimized our business model, made significant organizational changes
including centralizing our decision-making process and strengthened the talent
and expertise of our management team. With record annual throughput of 530,000
barrels per day, strong margins, and significant free cash flow, we initiated
and then doubled a quarterly dividend, announced a $200 million stock buyback
program, reduced debt by nearly $200 million, and refinanced the majority of our
remaining high-coupon, secured debt with lower-coupon, unsecured debt." The
refinancing and delevering will contribute over $40 million annually to future
cash flows and pre-tax earnings.
"As we look ahead to 2006, we continue to remain focused on safe, reliable,
environmentally sound operations and executing our high-return capital
reinvestment program. Industry fundamentals appear poised to deliver another
year of strong refining margins and we expect to continue to be able to deliver
outstanding results for our shareholders," Smith concluded.
Board Declares Quarterly Dividend
Tesoro announced today that its Board of Directors has approved the regular
quarterly cash dividend of $0.10 per share. The dividend is payable on March 15,
2006 to shareholders of record as of March 1, 2006.
Public Invited to Listen to Analyst Conference Call via Internet
At 3:30 p.m., CT, Thursday, February 2, 2006 Tesoro will broadcast, live,
its conference call with analysts regarding fourth quarter and full year 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 200 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 500 branded retail stations, of
which over 200 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 refining margins in our market areas, our
ability to identify and execute capital projects and improve crude flexibility
at our refineries. 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, completion of capital projects, 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 Years Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
---------- ------- -------- ----------
Revenues $ 4,360 $ 3,389 $ 16,581 $ 12,262
Costs and Expenses:
Costs of sales and
operating expenses (a) 4,036 3,262 15,170 11,229
Selling, general and
administrative
expenses (a) (b) 36 44 179 152
Depreciation and
amortization 58 43 186 154
Loss on asset disposals
and impairments 10 10 19 14
---------- ------- -------- ----------
Operating Income 220 30 1,027 713
Interest and Financing
Costs (c) (117) (32) (211) (171)
Interest Income and Other 9 2 15 5
---------- ------- -------- ----------
Earnings Before Income
Taxes 112 - 831 547
Income Tax Provision 43 - 324 219
---------- ------- -------- ----------
Net Earnings $ 69 $ - $ 507 $ 328
========== ======= ======== ==========
Net Earnings Per
Share:
Basic $ 1.00 $ 0.00 $ 7.44 $ 5.01
Diluted $ 0.97 $ 0.00 $ 7.20 $ 4.76
Weighted Average Common
Shares:
Basic 68.8 66.0 68.1 65.5
Diluted 70.8 70.1 70.4 68.9
- ---------
(a) For the three months and the year ended December 31, 2005, the
Company allocated certain information technology costs totaling
$6 million and $29 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 2005, the Company recorded stock-based and other
compensation charges totaling $11 million related to the
termination and retirement of certain executive officers. Stock
based compensation during the 2004 fourth quarter includes
expenses primarily for stock options associated with the
retirement of certain executive officers totaling $2 million.
(c) During the three months ended December 31, 2005, the Company
incurred pretax charges of $92 million consisting of tender and
call premiums and the write-off of unamortized debt issuance costs
in connection with the refinancing of its 9 5/8% senior
subordinated notes and 8% senior secured notes. In April 2005, the
Company voluntarily prepaid the remaining $96 million outstanding
principal balance of the senior secured term loans at a prepayment
premium of 1%, which resulted in a pretax charge of $3 million
consisting of the write-off of unamortized debt issuance costs and
the 1% prepayment premium. During 2004, the Company wrote off
unamortized debt issuance and discount costs of $9 million and
incurred redemption premiums of $12 million associated with the
voluntary prepayments of the 9% senior subordinated notes and
senior secured term loans. In addition, the Company recorded
charges of $2 million during 2004 for financing costs 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 Years Ended
December 31, December 31,
------------------ ----------------
2005 2004 2005 2004
--------- ------- ------- -------
Net Earnings - U.S. GAAP $ 69 $ - $ 507 $ 328
Special Items, After-tax:
Debt refinancing and prepayment
costs (c) 57 - 58 14
Termination and retirement
costs (b) - 1 6 1
--------- ------- ------- -------
Net Earnings Adjusted for
Special Items $ 126 $ 1 $ 571 $ 343
========= ======= ======= =======
Net Earnings Per Share - U.S.
GAAP $ 0.97 $ 0.00 $ 7.20 $ 4.76
Special Items Per Share,
After-tax:
Debt refinancing and prepayment
costs (c) 0.81 - 0.82 0.20
Termination and retirement
costs (b) - 0.01 0.09 0.01
--------- ------- ------- -------
Net Earnings Per Share
Adjusted for Special Items $ 1.78 $ 0.01 $ 8.11 $ 4.97
========= ======= ======= =======
- ---------------------------
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 Years Ended
December 31, December 31,
------------------ ----------------
2005 2004 2005 2004
--------- ------- ------- -------
Operating Income (Loss)
Refining (d) $ 247 $ 65 $ 1,194 $ 830
Retail (d) (1) 2 (31) (6)
--------- ------- ------- -------
Total Segment Operating Income 246 67 1,163 824
Corporate and Unallocated
Costs (b) (d) (26) (37) (136) (111)
--------- ------- ------- -------
Operating Income 220 30 1,027 713
Interest and Financing
Costs (c) (117) (32) (211) (171)
Interest Income and Other 9 2 15 5
--------- ------- ------- -------
Earnings Before Income Taxes $ 112 $ - $ 831 $ 547
========= ======= ======= =======
Depreciation and Amortization
Refining $ 51 $ 37 $ 160 $ 130
Retail 4 5 17 18
Corporate 3 1 9 6
--------- ------- ------- -------
Depreciation and Amortization $ 58 $ 43 $ 186 $ 154
========= ======= ======= =======
Capital Expenditures
Refining $ 80 $ 86 $ 214 $ 167
Retail 3 1 6 3
Corporate 9 6 42 9
--------- ------- ------- -------
Capital Expenditures $ 92 $ 93 $ 262 $ 179
========= ======= ======= =======
- ----------------------
(d) For the three months and the year ended December 31, 2005, the
Company allocated certain information technology costs totaling
$6 million and $29 million, respectively, from corporate and
unallocated costs to segment operating income. The costs allocated
to the refining segment and retail segment totaled $5 million and
$1 million, respectively, for the three months ended December 31,
2005, and $24 million and $5 million, respectively, for the year
ended December 31, 2005.
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
December 31, December 31,
2005 2004
------------ ------------
Cash and Cash Equivalents $ 440 $ 185
Total Assets $ 5,097 $ 4,075
Total Debt $ 1,047 $ 1,218
Total Stockholders' Equity $ 1,887 $ 1,327
Total Debt to Capitalization Ratio 36% 48%
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------ -----------------
2005 2004 2005 2004
--------- ------- -------- -------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand barrels
per day)
Heavy crude 267 250 265 259
Light crude 259 243 245 241
Other feedstocks 15 18 20 20
--------- ------- -------- -------
Total Throughput 541 511 530 520
========= ======= ======== =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 249 237 248 251
Jet fuel 69 67 68 66
Diesel fuel 127 110 118 110
Heavy oils, residual
products, internally
produced fuel and other 117 117 115 113
--------- ------- -------- -------
Total Yield 562 531 549 540
========= ======= ======== =======
Refining Margin ($/throughput
bbl) (e)
Gross $ 11.19 $ 7.23 $ 11.81 $ 9.12
Manufacturing cost before
depreciation and
amortization (e) $ 3.77 $ 3.37 $ 3.48 $ 3.01
Segment Operating Income
($ millions)
Gross refining margin (after
inventory changes) (f) $ 543 $ 316 $ 2,246 $ 1,706
Expenses
Manufacturing costs 188 159 673 573
Other operating expenses 46 42 182 141
Selling, general and
administrative 6 4 27 22
Depreciation and
amortization (g) 51 37 160 130
Loss on asset disposals and
impairments 5 9 10 10
--------- ------- -------- -------
Segment Operating Income $ 247 $ 65 $ 1,194 $ 830
========= ======= ======== =======
Product Sales (thousand
barrels per day) (h)
Gasoline and gasoline
blendstocks 292 298 294 300
Jet fuel 99 94 101 90
Diesel fuel 137 134 139 133
Heavy oils, residual
products and other 76 101 75 81
--------- ------- -------- -------
Total Product Sales 604 627 609 604
========= ======= ======== =======
Product Sales Margin
($/barrel) (h)
Average sales price $ 72.91 $ 55.40 $ 70.20 $ 52.65
Average costs of sales 64.48 50.09 60.28 44.74
--------- ------- -------- -------
Product Sales Margin $ 8.43 $ 5.31 $ 9.92 $ 7.91
========= ======= ======== =======
- --------------------------
(e) 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.
(f) 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.
(g) Includes manufacturing depreciation and amortization per
throughput barrel of approximately $0.95 and $0.71 for the three
months ended December 31, 2005 and 2004, respectively, and $0.75
and $0.61 for the years ended December 31, 2005 and 2004,
respectively.
(h) Sources of total product sales include products manufactured at
the refineries, products drawn from inventory balances and
products purchased from third parties. Total product sales margin
includes margins on sales of manufactured and purchased products
and the effects of inventory changes.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------- -----------------
2005 2004 2005 2004
--------- -------- ------- --------
Refining By Region
California (i)
Throughput (thousand barrels
per day)
Heavy crude 157 123 151 128
Light crude 4 11 6 14
Other feedstocks 9 9 8 11
--------- -------- ------- --------
Total Throughput 170 143 165 153
========= ======== ======= ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 95 85 93 96
Diesel fuel 54 39 49 38
Heavy oils, residual
products, internally
produced fuel and other 32 28 31 28
--------- -------- ------- --------
Total Yield 181 152 173 162
========= ======== ======= ========
Refining Margin
($/throughput bbl)
Gross $ 15.05 $ 13.40 $ 17.88 $ 13.98
Manufacturing cost before
depreciation and
amortization $ 6.07 $ 6.03 $ 5.56 $ 5.07
Pacific Northwest (Alaska &
Washington) (i)
Throughput (thousand barrels
per day)
Heavy crude 82 97 85 89
Light crude 88 76 78 81
Other feedstocks 3 5 8 4
--------- -------- ------- --------
Total Throughput 173 178 171 174
========= ======== ======= ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 72 74 74 74
Jet fuel 30 32 31 31
Diesel fuel 28 26 25 27
Heavy oils, residual
products, internally
produced fuel and other 47 51 46 47
--------- -------- ------- --------
Total Yield 177 183 176 179
========= ======== ======= ========
Refining Margin
($/throughput bbl)
Gross $ 7.80 $ 5.54 $ 9.68 $ 7.99
Manufacturing cost before
depreciation and
amortization $ 2.97 $ 2.54 $ 2.74 $ 2.38
Mid-Pacific (Hawaii) (i)
Throughput (thousand barrels
per day)
Heavy crude 28 30 29 42
Light crude 62 53 54 42
--------- -------- ------- --------
Total Throughput 90 83 83 84
========= ======== ======= ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 23 19 20 21
Jet fuel 28 24 26 24
Diesel fuel 13 15 12 15
Heavy oils, residual
products, internally
produced fuel and other 27 26 26 26
--------- -------- ------- --------
Total Yield 91 84 84 86
========= ======== ======= ========
Refining Margin
($/throughput bbl)
Gross $ 8.56 $ 3.95 $ 6.25 $ 5.30
Manufacturing cost before
depreciation and
amortization $ 1.61 $ 1.73 $ 1.85 $ 1.51
- ----------------
(i) We experienced reduced throughput and yield levels during
scheduled major maintenance turnarounds for the following
refineries and periods: the Hawaii refinery during the 2005 second
quarter; the California and Washington refineries during the 2005
first quarter; and the California refinery during the 2004 third
and fourth quarters.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------- -----------------
2005 2004 2005 2004
-------- -------- ------- -------
Mid-Continent (North Dakota
& Utah)
Throughput (thousand
barrels per day)
Light crude 105 103 107 104
Other feedstocks 3 4 4 5
-------- -------- ------- -------
Total Throughput 108 107 111 109
======== ======== ======= =======
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 59 59 61 60
Jet fuel 11 11 11 11
Diesel fuel 32 30 32 30
Heavy oils, residual
products, internally
produced fuel and other 11 12 12 12
-------- -------- ------- -------
Total Yield 113 112 116 113
======== ======== ======= =======
Refining Margin
($/throughput bbl)
Gross $ 12.70 $ 4.38 $ 10.10 $ 7.02
Manufacturing cost before
depreciation and
amortization $ 3.25 $ 2.46 $ 2.73 $ 2.28
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
------------------ ----------------
2005 2004 2005 2004
--------- ------- ------- -------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated 210 215 210 215
Branded jobber/dealer 268 292 268 292
--------- ------- ------- -------
Total Stations 478 507 478 507
========= ======= ======= =======
Average Stations (during
period)
Company-operated 210 218 213 222
Branded jobber/dealer 270 305 281 316
--------- ------- ------- -------
Total Average Retail
Stations 480 523 494 538
========= ======= ======= =======
Fuel Sales (millions of
gallons)
Company-operated 59 71 258 290
Branded jobber/dealer 41 51 191 220
--------- ------- ------- -------
Total Fuel Sales 100 122 449 510
========= ======= ======= =======
Fuel Margin ($/gallon) (j) $ 0.27 $ 0.19 $ 0.16 $ 0.16
Merchandise Sales ($
millions) $ 34 $ 31 $ 138 $ 127
Merchandise Margin ($
millions) $ 9 $ 9 $ 36 $ 35
Merchandise Margin % 26% 28% 26% 28%
Segment Operating Income
(Loss) ($ millions)
Gross Margins
Fuel (k) $ 26 $ 23 $ 71 $ 79
Merchandise and other non-
fuel margin 10 10 39 39
--------- ------- ------- -------
Total Gross Margins 36 33 110 118
Expenses
Operating expenses 22 20 90 76
Selling, general and
administrative 6 5 25 26
Depreciation and
amortization 4 5 17 18
Loss on asset disposals and
impairments 5 1 9 4
--------- ------- ------- -------
Segment Operating Income
(Loss) $ (1) $ 2 $ (31) $ (6)
========= ======= ======= =======
- ----------
(j) 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.
(k) 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