<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 10, 1998
TESORO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-3473 95-0862768
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
</TABLE>
8700 TESORO DRIVE, SAN ANTONIO, TEXAS 78217-6218
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 210-828-8484
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 10, 1998, Tesoro Petroleum Corporation ("Tesoro" or the "Company")
completed the acquisition (the "Washington Acquisition"), effective August 1,
1998, of all of the outstanding capital stock of Shell Anacortes Refining
Company, an affiliate of Shell Oil Company. The acquisition includes a 108,000
barrel per day refinery located in Anacortes, Washington (on the Puget Sound,
approximately 60 miles north of Seattle) and related assets. The refinery will
operate under the name Tesoro Northwest Company.
Tesoro paid $237 million in cash for the acquisition plus $39.6 million
for estimated working capital, which is subject to post-closing adjustments to
reflect actual net working capital at closing.
To finance the cash consideration paid in the Washington Acquisition and the
acquisition of the Company's Hawaii operations, the Company, among other
things, issued $300 million aggregate principal amount of its 9% Senior
Subordinated Notes due 2008 (the "Notes Offering") in July 1998 through a
private offering eligible for Rule 144A. On August 7, 1998, a Registration
Statement was declared effective by the Securities and Exchange Commission
whereby the Company is offering, upon the terms and subject to the conditions
set forth in the related Prospectus, to exchange $1,000 principal amount of its
registered 9% Senior Subordinated Notes due 2008, Series B (the "Exchange
Notes"), for each $1,000 principal amount of its unregistered and outstanding
9% Senior Subordinated Notes due 2008 (the "Old Notes"). The terms of the
Exchange Notes are identical in all material respects to the terms of the Old
Notes, except as described in the Prospectus.
Concurrent with the Notes Offering, the Company entered into a new senior
credit facility (the "Senior Credit Facility") in the amount of $500 million.
The Senior Credit Facility is comprised of term loan facilities aggregating
$200 million (two $100 million tranches, the "Tranche A Term Loans" and the
"Tranche B Term Loan") and a $300 million revolving credit facility. The Senior
Credit Facility is guaranteed by substantially all of the Company's active
direct and indirect subsidiaries (the "Guarantors") and is secured by
substantially all of the domestic assets of the Company and each of the
Guarantors.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The Audited Financial Statements of Shell Anacortes
Refining Company as of December 31, 1996 and 1997 and
Unaudited Financial Statements of Shell Anacortes
Refining Company as of March 31, 1998 have been
previously filed in the Registrant's Current Report on
Form 8-K dated May 29, 1998 and filed on June 5, 1998.
(b) PRO FORMA FINANCIAL INFORMATION.
Included as Exhibit 99.1 of this Form 8-K are the
unaudited pro forma combined condensed financial
statements of the Company, BHP Petroleum Americas
Refining Inc. and BHP Petroleum South Pacific Inc. and
Shell Anacortes Refining Company as of March 31, 1998
and for the year ended December 31, 1997 and three
months ended March 31, 1998.
(c) EXHIBITS
+99.1 Unaudited Pro Forma Combined Condensed Financial
Statements of the Company, BHP Petroleum Americas
Refining Inc. and BHP Petroleum South Pacific Inc. and
Shell Anacortes Refining Company as of March 31, 1998
and for the year ended December 31, 1997 and three
months ended March 31, 1998.
- ---------------------------
+ Filed herewith.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TESORO PETROLEUM CORPORATION
REGISTRANT
Date: August 11, 1998 By: /s/ JAMES C. REED, JR.
-----------------------------------
James C. Reed, Jr.
Executive Vice President,
General Counsel and Secretary
4
<PAGE> 5
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
+99.1 Unaudited Pro Forma Combined Condensed Financial
Statements of the Company, BHP Petroleum Americas
Refining Inc. and BHP Petroleum South Pacific Inc. and
Shell Anacortes Refining Company as of March 31, 1998
and for the year ended December 31, 1997 and three
months ended March 31, 1998.
- ---------------------------
+ Filed herewith.
5
<PAGE> 1
EXHIBIT 99.1
PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed financial statements give
effect to the following transactions (collectively, the "Transactions"):
(i) On May 29, 1998, Tesoro Petroleum Corporation (the "Company" or
"Tesoro") completed the acquisition (the "Hawaii Acquisition") of all of
the outstanding capital stock of BHP Petroleum Americas Refining Inc. and
BHP Petroleum South Pacific Inc. (together, "BHP Hawaii"), both of which
were affiliates of The Broken Hill Proprietary Company Limited ("BHP").
Tesoro paid $243.5 million in cash at closing for the acquisition,
including $68.5 million for estimated working capital, which is subject to
post-closing adjustments. In addition, Tesoro issued an unsecured,
non-interest bearing promissory note (the "BHP Note") in the amount of $50
million for the Hawaii Acquisition, which is payable in five equal annual
installments, beginning on the eleventh anniversary date of the closing.
(ii) On August 10, 1998, Tesoro completed the acquisition (the
"Washington Acquisition", effective August 1, 1998, and together with the
Hawaii Acquisition, the "Acquisitions") of all of the outstanding capital
stock of Shell Anacortes Refining Company ("Shell Washington"), an
affiliate of Shell Oil Company. Tesoro paid $237 million in cash for the
acquisition plus $39.6 million for estimated working capital, which is
subject to post-closing adjustments to reflect actual net working capital
at closing.
(iii) In conjunction with the Hawaii Acquisition, Tesoro borrowed
funds to finance the cash consideration for the Hawaii Acquisition and
refinance substantially all of its then-existing indebtedness. These
borrowings were financed through term loans and a revolving credit facility
("Interim Credit Facility") which was fully underwritten by Lehman
Commercial Paper Inc., an affiliate of Lehman Brothers Inc. In July 1998,
the Company refinanced all borrowings under the Interim Credit Facility
with net proceeds from the Offerings (as defined below) and borrowings
under the Senior Credit Facility (as defined below).
(iv) On July 2, 1998, and in connection with the Notes Offering (as
defined below) and the Washington Acquisition, the Company entered into a
new senior credit facility (the "Senior Credit Facility") in the amount of
$500 million. The Senior Credit Facility is comprised of term loan
facilities aggregating $200 million (two $100 million tranches, the
"Tranche A Term Loans" and the "Tranche B Term Loan", collectively the
"Term Loans") and a $300 million revolving credit facility (the
"Revolver").
(v) On July 2, 1998, concurrently with the syndication of the Senior
Credit Facility, the Company issued $300 million aggregate principal amount
of 9% Senior Subordinated Notes (the "Notes Offering"). On July 1, 1998,
the Company issued 9,000,000 Premium Income Equity Securities ("PIES"),
representing interests in the Company's Mandatorily Convertible Preferred
Stock, with gross proceeds of $143.4 million (the "PIES Offering"), and
5,000,000 shares of Common Stock, with gross proceeds of $79.7 million
(the "Common Stock Offering," and together with the Notes Offering and
the PIES Offering, the "Offerings"). Upon exercise of the over-allotment
options granted to the underwriters of the Common Stock Offering and PIES
Offering, the Company issued 1,350,000 PIES with gross proceeds of $21.5
million and 750,000 shares of Common Stock with gross proceeds of $11.9
million.
Borrowings under the Senior Credit Facility, together with the net proceeds
from the Offerings, were used to fund the cash purchase price of the Washington
Acquisition, to refinance the Interim Credit Facility (a portion of which was
used to finance the Hawaii Acquisition), to pay certain fees and expenses
related to the Transactions and for general corporate purposes (including
working capital requirements and capital expenditures).
The Acquisitions are being accounted for using the purchase method of
accounting. These unaudited pro forma combined condensed statements have been
prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto, which have been previously
filed with the Securities and Exchange Commission.
The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to
the Transactions as if each had occurred on March 31, 1998. The Unaudited Pro
Forma Condensed Statements of Operations for the year ended December 31, 1997,
and the three months ended March 31, 1998, give effect to the Transactions as if
each had occurred on January 1, 1997. BHP Hawaii's results of operations, which
are reported on a fiscal year ending May 31, have been adjusted to Tesoro's
reporting periods. The estimates of the fair value of BHP Hawaii's and Shell
Washington's assets and liabilities are based on valuations that are
preliminary. Such valuations may be updated with respect to the Hawaii
Acquisition and the Washington Acquisition, and may change from the amounts
shown herein; however, the Company does not expect such changes to be material.
The unaudited pro forma combined condensed financial statements are intended for
informational purposes and are not necessarily indicative of the future
financial position or future results of the combined companies or of the
financial position or the results of operations that would have actually
occurred had the Acquisitions been in effect as of the date or for the periods
presented.
<PAGE> 2
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
BHP SHELL PRO FORMA PRO FORMA
TESORO HAWAII WASHINGTON ADJUSTMENTS COMBINED
-------- -------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................. $ 2,274 $ 2,519 $ 25 $ (2,544)(a) $ 4,975
2,701(b)
Receivables........................................... 64,518 84,304 12,600 (42,372)(a) 119,050
Inventories........................................... 97,793 71,050 41,305 10,891(c) 221,039
Prepayments and other................................. 7,984 3,919 4,349 (688)(d) 15,564
-------- -------- -------- --------- ----------
Total Current Assets........................... 172,569 161,792 58,279 (32,012) 360,628
-------- -------- -------- --------- ----------
Property, Plant and Equipment:
Refining and marketing................................ 368,183 209,804 372,768 (82,572)(e) 868,183
Exploration and production............................ 311,872 -- -- 311,872
Marine services....................................... 48,201 -- -- 48,201
Corporate............................................. 13,802 -- -- 13,802
-------- -------- -------- --------- ----------
742,058 209,804 372,768 (82,572) 1,242,058
Less accumulated depreciation, depletion and
amortization...................................... 317,645 -- 188,127 (188,127)(e) 317,645
-------- -------- -------- --------- ----------
Net Property, Plant and Equipment................... 424,413 209,804 184,641 105,555(e) 924,413
-------- -------- -------- --------- ----------
Other Assets............................................ 38,447 3,295 8,774 47,271(f) 113,871
17,819(g)
(1,735)(d)
-------- -------- -------- --------- ----------
Total Assets................................... $635,429 $374,891 $251,694 $ 136,898 $1,398,912
======== ======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................... $ 44,275 $ 46,831 $ 9,819 $ (3,553)(a) $ 97,372
Accrued liabilities and current income taxes
payable............................................. 30,253 12,901 4,833 9,886(h) 57,873
Current maturities of long-term debt and other
obligations......................................... 11,428 1,003 -- (9,731)(g) 2,700
-------- -------- -------- --------- ----------
Total Current Liabilities...................... 85,956 60,735 14,652 (3,398) 157,945
-------- -------- -------- --------- ----------
Deferred Income Taxes................................... 31,003 -- 25,523 55,065(j) 111,591
-------- -------- -------- --------- ----------
Other Liabilities....................................... 42,821 29,460 14,412 (18,372)(h) 68,321
-------- -------- -------- --------- ----------
Long-Term Debt and Other Obligations, Less Current
Maturities............................................ 136,290 8,433 -- 336,082(g) 480,805
-------- -------- -------- --------- ----------
Notes Payable to Affiliate.............................. -- 145,000 -- (145,000)(a) --
-------- -------- -------- --------- ----------
Stockholders' Equity:
Preferred Stock....................................... -- -- -- 164,954(b) 164,954
Common Stock.......................................... 4,419 8,208 3 958(b) 5,377
(8,211)(k)
Additional paid-in capital............................ 191,000 52,362 181,011 80,540(b) 271,540
(233,373)(k)
Retained earnings..................................... 147,039 70,693 16,093 (86,786)(k) 141,478
(8,178)(g)
2,617(i)
Treasury stock........................................ (3,099) -- -- (3,099)
-------- -------- -------- --------- ----------
Total Stockholders' Equity..................... 339,359 131,263 197,107 (87,479) 580,250
-------- -------- -------- --------- ----------
Total Liabilities and Stockholders' Equity..... $635,429 $374,891 $251,694 $ 136,898 $1,398,912
======== ======== ======== ========= ==========
</TABLE>
<PAGE> 3
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(a) Represents an adjustment to exclude assets and liabilities of BHP Hawaii
and Shell Washington that were not acquired by Tesoro.
(b) Represents an adjustment for the issuance of Mandatorily Convertible
Preferred Stock and Common Stock, the proceeds of which were used to
finance the Transactions.
(c) Represents an adjustment of finished goods inventories to net realizable
value, less an allowance for a normal profit margin, and of raw materials
inventories to replacement cost.
(d) Represents an adjustment to conform the accounting policy for refinery
maintenance costs to that of Tesoro.
(e) Represents an adjustment of property, plant and equipment to fair value.
(f) Represents the excess purchase price over the book value of net assets
acquired.
(g) Represents an adjustment to reflect the $50 million non-interest bearing
BHP Note (discounted at 10%) plus aggregate borrowings of $448 million to
finance the Acquisitions, to refinance existing indebtedness of Tesoro and
to pay related fees, expenses and debt issue costs.
(h) Represents an adjustment to liabilities for certain employee benefits and
for environmental matters taking into effect environmental agreements which
provide for certain environmental indemnifications.
(i) Represents an adjustment to reduce income taxes payable for the tax effect
resulting from charges to earnings related to the refinancing of existing
indebtedness.
(j) Represents an adjustment to record the deferred tax obligations for
differences in book and tax basis for the Washington Acquisition.
(k) Represents the elimination of historical equity of BHP Hawaii and Shell
Washington.
<PAGE> 4
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
BHP SHELL PRO FORMA PRO FORMA
TESORO HAWAII WASHINGTON ADJUSTMENTS COMBINED
-------- ---------- ---------- -------------- -----------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues:
Refining and marketing....... $720,868 $ 946,727 $1,089,918 $ $2,757,513
Exploration and production... 84,798 -- -- 84,798
Marine services.............. 132,251 -- -- 132,251
Other income................. 5,543 211 52 5,806
-------- ---------- ---------- --------- ----------
Total Revenues....... 943,460 946,938 1,089,970 2,980,368
-------- ---------- ---------- --------- ----------
Operating Costs and Expenses:
Refining and marketing....... 687,036 882,104 1,038,085 1,500(a) 2,608,725
Exploration and production... 13,230 -- -- 13,230
Marine services.............. 124,725 -- -- 124,725
Depreciation, depletion and
amortization.............. 45,729 13,762 12,715 (3,543)(b) 70,554
1,891 (c)
Refinery assets writedown.... 88,813 -- (88,813)(d) --
Goodwill write-off........... -- 30,351 -- (30,351)(d) --
-------- ---------- ---------- --------- ----------
Total Operating Costs
and Expenses....... 870,720 1,015,030 1,050,800 (119,316) 2,817,234
-------- ---------- ---------- --------- ----------
Operating Profit (Loss)........ 72,740 (68,092) 39,170 119,316 163,134
General and Administrative..... (13,588) (25,054)(e) (14,277) (52,919)
Interest Expense, Net of
Capitalized Interest......... (6,699) (8,227) (252) 14,291 (f) (52,579)
(51,692)(g)
Interest Income................ 1,597 -- -- 1,597
Other Expense, Net............. (4,930) -- -- (2,894)(h) (7,824)
-------- ---------- ---------- --------- ----------
Earnings Before Income Taxes... 49,120 (101,373) 24,641 79,021 51,409
Income Tax Provision........... 18,435 (27,032) 8,902 19,230(i) 19,535
-------- ---------- ---------- --------- ----------
Earnings Before Extraordinary
Items........................ 30,685 (74,341) 15,739 59,791 31,874
Preferred Dividend............. -- -- -- (11,959)(j) (11,959)
-------- ---------- ---------- --------- ----------
Earnings Before Extraordinary
Items Available for Common
Shares....................... $ 30,685 $ (74,341) $ 15,739 $ 47,832 $ 19,915
======== ========== ========== ========= ==========
Weighted Average Common
Shares -- Basic.............. 26,410 5,750 32,160
======== ========= ==========
Weighted Average Common Shares
and Potentially Dilutive
Common Shares -- Diluted..... 26,868 5,750 32,618
======== ========= ==========
Earnings Before Extraordinary
Items:
Per Share -- Basic........... $ 1.16 $ 0.62
======== ==========
Per Share -- Diluted......... $ 1.14 $ 0.61
======== ==========
</TABLE>
<PAGE> 5
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
BHP SHELL PRO FORMA PRO FORMA
TESORO HAWAII WASHINGTON ADJUSTMENTS COMBINED
-------- --------- ---------- -------------- -----------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues:
Refining and marketing.......... $140,213 $ 210,447 $201,431 $ $ 552,091
Exploration and production...... 22,222 -- 22,222
Marine services................. 32,818 -- 32,818
Other income.................... 786 (3) 30 813
-------- --------- -------- --------- ---------
Total Revenues.......... 196,039 210,444 201,461 607,944
-------- --------- -------- --------- ---------
Operating Costs and Expenses:
Refining and marketing.......... 130,720 191,642 195,685 1,500 (a) 519,547
Exploration and production...... 3,925 -- -- 3,925
Marine services................. 30,597 -- -- 30,597
Depreciation, depletion and
amortization................. 12,944 -- 3,703 2,030 (b) 19,150
473 (c)
Refinery assets writedown....... -- 125,049 -- (125,049)(d) --
-------- --------- -------- --------- ---------
Total Operating Costs
and Expenses.......... 178,186 316,691 199,388 (121,046) 573,219
-------- --------- -------- --------- ---------
Operating Profit (Loss)........... 17,853 (106,247) 2,073 121,046 34,725
General and Administrative........ (3,372) (5,139) (2,512) (11,023)
Interest Expense, Net of
Capitalized Interest............ (2,665) (2,436) (10) 4,708 (f) (13,326)
(12,923)(g)
Interest Income................... 108 -- -- 108
Other Expense, Net................ (1,034) -- -- (703)(h) (1,737)
-------- --------- -------- --------- ---------
Earnings Before Income Taxes...... 10,890 (113,822) (449) 112,128 8,747
Income Tax Provision.............. 4,831 (33,676) (80) 32,774 (i) 3,849
-------- --------- -------- --------- ---------
Earnings Before Extraordinary
Items........................... 6,059 (80,146) (369) 79,354 4,898
Preferred Dividend................ -- -- -- (2,990)(j) (2,990)
-------- --------- -------- --------- ---------
Earnings Before Extraordinary
Items Available for Common
Shares.......................... $ 6,059 $ (80,146) $ (369) $ 76,364 $ 1,908
======== ========= ======== ========= =========
Weighted Average Common Shares -
Basic........................... 26,309 5,750 32,059
======== ========= =========
Weighted Average Common Shares and
Potentially Dilutive Common
Shares -- Diluted............... 26,789 5,750 32,539
======== ========= =========
Earnings Before Extraordinary
Items:
Per Share -- Basic.............. $ 0.23 $ 0.06
======== =========
Per Share -- Diluted............ $ 0.23 $ 0.06
======== =========
</TABLE>
<PAGE> 6
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED MARCH 31, 1998
(a) Represents an adjustment for a Tesoro contract termination.
(b) Represents an adjustment in depreciation expense due to the change in
property, plant and equipment to fair value. Pro forma depreciation is
calculated on the straight-line method over estimated useful lives of 28
years for refineries and five to ten years for machinery, equipment and
buildings.
(c) Represents the amortization of goodwill over 25 years.
(d) Represents elimination of the charge for asset and goodwill impairment
recognized in the BHP Hawaii historical financial statements.
(e) Includes BHP Hawaii employee bonuses of $4 million in the year ended
December 31, 1997, which were awarded based upon the performance of BHP
operations that are not to be acquired by Tesoro.
(f) Represents elimination of interest on BHP Hawaii's obligations that were
not assumed by Tesoro and the elimination of interest on Tesoro's
obligations that were refinanced.
(g) Represents additional interest under the Revolver, the Term Loans, the 9%
Senior Subordinated Notes and accretion of the $50 million BHP Note.
(h) Represents the amortization of debt issuance costs related to the Revolver,
the Term Loans and the 9% Senior Subordinated Notes.
(i) Represents the tax effect of the adjustments above, excluding amortization
of goodwill for the Washington Acquisition.
(j) Represents a 7.25% annual dividend rate on the Mandatorily Convertible
Preferred Stock.
