FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from_____________________________to_____________________________
Commission file number 1-7910
TOSCO CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 95-1865716
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
72 Cummings Point Road
Stamford, Connecticut 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(203)977-1000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
Registrant's Common Stock outstanding at April 30, 1994
was 32,262,117 shares.
TOSCO CORPORATION AND SUBSIDIARIES
Index to Financial Statements and Exhibits
Filed with the Quarterly Report of the Company on Form 10-Q
For the Three Months Ended March 31, 1994
Page(s)
Part I. Financial Information
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 -10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11- 14
Exhibit I - Computation of Earnings Per Share 15
Part II. Other Information 16
The financial statements listed in Part I above reflect all
adjustments (consisting only of normal recurring accruals) which
are, in the opinion of Management, necessary to a fair
presentation of financial position and results of operations.
Such financial statements are presented in accordance with the
Securities and Exchange Commission's disclosure requirements for
Form 10-Q. These unaudited interim consolidated financial
statements should be read in conjunction with the audited
Consolidated Financial Statements (from which the year-end
balance sheet presented herein was derived) and the Notes to
Consolidated Financial Statements filed with the Commission in
Tosco's 1993 Annual Report on Form 10-K.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
March 31, December 31,
ASSETS 1994 1993
(Unaudited)
Current assets
Cash and cash equivalents $ 31,361 $ 55,091
Short-term investments and deposits 38,791 30,035
Trade accounts receivable, less allowance
for uncollectibles of $7,945,000
(1994) and $5,091,000 (1993) 246,178 174,285
Inventories 421,789 363,348
Prepaid expenses and other current assets 42,268 36,180
Deferred income taxes 12,123 12,123
Total current assets 792,510 671,062
Property, plant and equipment, net 717,321 723,265
Deferred turnarounds and charges 38,803 43,661
Deferred income taxes 37,108 37,108
Other assets 14,539 17,763
Total assets $1,600,281 $1,492,859
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 418,332 $ 310,243
Current installments of long-term debt 783 787
Total current liabilities 419,115 311,030
Long-term debt 573,400 603,306
Other liabilities 13,745 12,433
Environmental cost liability 29,440 29,440
Net liabilities of discontinued operations 8,949 11,733
Deferred income taxes 3,273 3,273
Shareholders' equity:
$4.375 Series F Cumulative Convertible
Preferred Stock - $1.00 par value - Authorized
2,500,000 shares; issued and outstanding
2,300,000 shares (liquidation preference
of $115,000,000) 111,197 111,197
Common shareholders' equity:
Common Stock - $.75 par value,
50,000,000 shares authorized,
34,811,158 shares issued 26,112 26,112
Capital in excess of par value 533,681 534,727
Retained earnings (deficit) (49,751) ( 81,512)
Reductions from capital ( 68,880) ( 68,880)
Total common shareholders' equity 441,162 410,447
Total shareholders' equity 552,359 521,644
Total liabilities and shareholders'
equity $1,600,281 $1,492,859
The accompanying notes are an integral part of these financial
statements.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Thousands of Dollars Except Per Share Data
Three Months Ended March 31,
1994 1993
Sales $ 1,495,688 $ 416,136
Cost of sales 1,390,191 374,548
Selling, general and
administrative expenses 27,098 8,826
Interest expense 13,491 8,989
Interest income ( 985) (1,016)
1,429,795 391,347
Income before provision for
income taxes 65,893 24,789
Provision for income taxes 27,026 9,987
Net income 38,867 14,802
Preferred stock dividend
requirements ( 2,516) ( 2,516)
Income attributable to
common shareholders $ 36,351 $ 12,286
Income per common
and common equivalent share:
Primary $ 1.11 $ .42
Fully diluted $ 1.04 $ .42
Dividends per
common share $ . 15 $ .15
The accompanying notes are an integral part of these financial
statements.
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thousands of Dollars
Three Months Ended March 31,
1994 1993
Cash flows from operating activities:
Net income $ 38,867 $ 14,802
Adjustments to arrive at
net cash provided
by (used in) operating activities:
Depreciation and depletion 12,615 6,606
Amortization of deferred items 8,544 8,566
Deferred income taxes 7,252
(Increase) decrease:
Short-term deposits ( 13,659) ( 40,628)
Trade accounts receivable ( 71,893) 9,327
Inventories ( 58,441) 8,750
Prepaid expenses and other
current assets 1,834 ( 873)
Increase (decrease):
Accounts payable and accrued
liabilities 108,089 (30,839)
Other non-current liabilities 1,411 ( 371)
Other ( 2,970) 276
Net cash provided by
(used in ) operating activities 24,397 ( 17,132)
Cash flows from investing activities:
Purchase of property, plant
and equipment ( 14,593) ( 10,817)
Increase in deferred
turnarounds, charges and
other assets ( 5,129) ( 1,730)
Net change in short-term
investments 4,903 11,686
Proceeds from termination of CT-LP 4,848
Net cash used in
investing activities ( 9,971) ( 861)
Cash flows from financing activities:
Repayments under
revolver, net ( 30,000)
Dividends on Preferred ( 4) ( 8)
and Common Stock ( 7,106) ( 6,907)
Other ( 1,046)
Net cash used in
financing activities ( 38,156) ( 6,915)
Net decrease in cash and
cash equivalents ( 23,730) ( 24,908)
Cash and cash equivalents
at beginning of period 55,091 71,673
Cash and cash equivalents at
end of period $ 31,361 $ 46,765
The accompanying notes are an integral part of these financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to the three months ended
March 31, 1994 and 1993 is unaudited.
1. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Tosco Corporation and its wholly owned
subsidiaries (Tosco), including Seminole Fertilizer
Corporation (Seminole), a discontinued operation whose
principal operating assets were sold in 1993.
All significant intercompany accounts and transactions have
been eliminated.
Nature of Business
Tosco is one of the largest independent oil refiners (as
measured by crude distillation capacity), wholesalers and
retail marketers of petroleum products in the United States.
Tosco has extensive distribution facilities and engages in
related commercial activities throughout the United States and
internationally. Tosco also has interests in oil shale
properties in Colorado and Utah.
Reclassifications
Certain previously reported amounts have been reclassified to
conform to classifications adopted in 1994.
Cash, Cash Equivalents, Short-term Investments and Deposits
Tosco invests cash in excess of operating requirements in cash
equivalent short-term time deposits, money market instruments,
government securities and commercial paper. Investments with
original maturities of more than three months are classified
as short-term investments and carried at the lower of cost or
market.
The Loil Group Ltd. (Loil), a wholly-owned subsidiary of
Tosco, has issued director and officer liability insurance
policies to Tosco with limits of liability coverage of
$13,200,000 at March 31, 1994 and December 31, 1993 (an amount
approximately equal to the amount of cash, short-term
investments and marketable securities available to Loil). The
portfolio is restricted to payment of defense costs and claims
made against the directors and officers of Tosco. At March 31,
1994 the portfolio's cost approximated fair value.
Tosco makes use of futures and forward contracts
principally to hedge refining margins on a varying percentage
of the future production of the Bayway Refinery. Futures and
forward contracts are used to lock in margins between the cost of
raw materials purchased and the sales value of refined products
produced, primarily gasoline and heating oil, generally for
periods not exceeding one year. Gains and losses relating to raw
material futures contracts are deferred until the related refined
products are produced.
Pursuant to the requirements of the commodity exchanges,
margin deposits for a percentage of the value of the futures
contracts have been placed with commodity brokers. The margin
deposits are classified as short-term deposits on the balance
sheet.
Inventories
Inventories of raw materials and products are valued at
the lower of cost, determined on the last-in, first-out (LIFO)
basis, or market. The net realizable value of LIFO
inventories is measured by aggregating similar pools on a
consolidated basis.
2.Acquisition of the Bayway Refinery and Tosco Northwest
In April 1993, Tosco acquired the Bayway Refinery and
related assets (Bayway) from Exxon Corporation, and in
December 1993, acquired the Ferndale Refinery and retail
marketing assets in the Pacific Northwest (Tosco Northwest)
from BP Oil Company. The Bayway purchase price of
approximately $175,000,000 plus related acquisition costs of
approximately $4,056,000 was fully allocated to the acquired
assets, based upon their estimated fair values at the date of
acquisition. The funds for the Bayway acquisition were received
from a combination of sources, including an equity contribution
by Tosco (from the net proceeds from the sale of bonds),
intercompany loans and cash borrowings under its revolving
credit facility. The purchase price of Tosco Northwest was
$123,895,000 plus the value of inventory, and a profit
participation of up to $150,000,000 over the five years
following the acquisition. The purchase price has been
preliminarily allocated to the refinery and terminal assets
($47,895,000) and the retail assets acquired ($76,000,000).
A final allocation of the purchase price will be made in
1994 when appraisals and other studies are completed. The
funds for the Tosco Northwest acquisition were received from a
combination of sources, including net proceeds of $88,418,000
received from a public offering of Common Stock, available
cash and funds available under Tosco's revolving credit
facility.
3. Discontinued Operations
A subsidiary of Seminole sold its partnership interest in FMCP
effective January 1, 1994.
Pursuant to the sale agreement, the subsidiary remains
obligated for its 50% share of the debt of FMCP, which at
March 31, 1994 consisted of $20,482,000 of capital lease
obligations. $12,500,000 of bonds were called by the holder
and paid in February 1994.
4. Inventories
March 31, December 31,
1994 1993
(Thousands of Dollars)
Raw materials $ 180,949 $ 130,233
Intermediates 37,127 26,723
Finished products 209,385 205,281
Retail 983 1,111
428,444 363,348
Less LIFO reserve ( 6,655)
$ 421,789 $ 363,348
5. Long-Term Debt
New Credit Agreement
In connection with the acquisition of Tosco Northwest, Tosco
amended its existing credit facility (New Revolving Credit
Facilities) to increase credit availability from $350,000,000
to $400,000,000 at March 31, 1994 and to $450,000 at May 9, 1994.
Cash borrowings under the New Revolving
Credit Facilities continue to bear interest at the option of
Tosco at either the prime rate plus a margin ranging from zero
to 1/4% or at the Eurodollar rate plus a margin ranging from
1% to 1-1/2%. The incremental margin is dependent on the
credit rating of the First Mortgage Bonds. A commitment fee
of 3/8% per annum on the unused portion of the commitment is
also due. The New Credit Agreement is collateralized by
investments, accounts receivable and inventory of Tosco and
Bayway, and expires in April 1997.
Utilization of Working Capital Facilities
March 31, December 31,
1994 1993
(Thousands of Dollars)
Revolving Credit Facilities
Cash borrowings $117,000 $ 147,000
Letters of credit 138,379 142,177
Total utilization 255,379 289,177
Availability 144,621 60,823
Total credit line $400,000 $ 350,000
Interest paid was $16,819,000 and $14,746,000 for the first
three months of 1994 and 1993, respectively.
6. Capital Stock
During the first quarter of 1994, options to purchase 165,000
and 40,000 shares of common stock of Tosco (Common Stock) were
granted at $29.25 and $30.94 per share, respectively.
Quarterly dividends of $1.09375 per share of $4.375 Series F
Cumulative Convertible Preferred Stock and $.15 per share of
Common Stock were paid on February 15, 1994 and March 31, 1994
to shareholders of record on February 4, 1994 and March 21,
1994, respectively.
7. Income Taxes
The provision for income taxes is summarized below:
Three Months Ended March 31,
1994 1993
(Thousands of Dollars)
Federal $ 21,096 $ 7,683
State 5,930 2,222
Foreign 82
Provision for income taxes $ 27,026 $ 9,987
Cash payments of
income taxes $ 833 $ 158
8. Contingencies
Environmental exposures are difficult to assess and estimate
for numerous reasons including the complexity and differing
interpretations of governmental regulations, the lack of
reliable data, the number of potentially responsible parties
and their financial capabilities, the multiplicity of possible
solutions, the years of remedial and monitoring activity
required, and the identification of new sites. Tosco
continues to evaluate, on a quarterly basis, its liability for
environmental costs, net
of liabilities transferred pursuant to the settlement of
outstanding litigation concerning environmental issues with
the predecessor owners of the Avon Refinery. Based upon that
evaluation, Tosco did not revise its
$29,440,000 accrual for environmental costs in the first quarter
of 1994. While Tosco believes that it has adequately provided
for environmental exposures, should matters be resolved
unfavorably to Tosco, they could have a
material adverse effect on its long-term consolidated financial
position and results of operations. Tosco is continuing to
pursue reimbursement of environmental and defense costs under
insurance policies in effect during the applicable periods
of coverage.
9. Condensed Consolidating Financial Information
The following tables set forth the unaudited condensed
consolidating financial statements as of March 31, 1994 and for
the three month period then ended of Tosco, Bayway and Tosco's
other subsidiaries.
They are provided to meet the reporting and informational
requirements of Bayway as a guarantor of the Exchange Bonds.
<TABLE>
<CAPTION>
Condensed Consolidating Balance Sheet
(Thousands of Dollars)
March 31, 1994
Tosco Bayway Minor Subs
(Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 29,923 $ - $ 1,438 $ 31,361
Short-term investments and deposits 2,255 19,538 16,998 38,791
Other current assets 328,403 393,943 12 722,358
Total current assets 360,581 413,481 18,448 792,510
Other assets 609,885 176,445 25,807 ($ 4,366) 807,771
Investment in Bayway and
other subsidiaries 214,113 ( 214,113)
Intercompany receivables 176,061 10,091 5,060 ( 191,212)
Total assets $1,360,640 $ 600,017 $49,315 ($ 409,691) $ 1,600,281
Liabilities and shareholders' equity
Current liabilities $ 216,424 $ 201,262 $ 1,429 $ 419,115
Long-term debt 516,933 50,000 6,467 573,400
Other liabilities 59,773 ($ 4,366) 55,407
Intercompany liabilities 15,151 164,070 11,991 ( 191,212)
Shareholders' equity 552,359 184,685 29,428 ( 214,113) 552,359
Total liabilities and
shareholders' equity $1,360,640 $ 600,017 $49,315 ($ 409,691) $ 1,600,281
Condensed Consolidating Statement of Income
(Thousands of Dollars)
For the Three Months Ended March 31, 1994
Sales $ 612,896 $ 882,792 $ - $ 1,495,688
Cost of sales 543,602 846,589 1,390,191
Operating contribution 69,294 36,203 105,497
Selling, general, and
administrative expenses (a) 17,805 9,669 ( 376) 27,098
Interest expense, net 8,442 4,142 ( 78) 12,506
Income before provision for
income taxes 43,047 22,392 454 65,893
Provision for income taxes 17,842 9,184 27,026
Net income $ 25,205 $ 13,208 $ 454 $ - $ 38,867
(a) The condensed consolidating statement of income does not
reflect an allocation of a portion of aggregate corporate
selling, general and administrative expenses of approximately $5,700,000 to Bayway and the Minor Subsidiaries.
Tosco may allocate such costs in the future.
</TABLE>
Note 8
Condensed Consolidating Financial Information (continued)
<TABLE>
Condensed Consolidating Statement of Cash Flows
(Thousands of Dollars)
For the Three Months Ended March 31, 1994
<CAPTION>
Tosco Bayway Minor Subs
(Issuer) (Guarantor) (Non-guarantors) Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 25,205 $ 13,208 $ 454 $ 38,867
Depreciation, depletion
and amortization 17,608 3,459 92 21,159
Changes in working
capital and short-term
deposits (23,508) ( 10,869) 307 ( 34,070)
Other ( 1,142) ( 77) ( 340) ( 1,559)
Net cash provided by
operating activities 18,163 5,721 513 24,397
Cash flows from
investing activities:
Purchase of property, plant
and equipment, ( 11,350) ( 3,243) ( 14,593)
Increase in deferred
turnarounds, charges
and other assets ( 5,129) ( 5,129)
Intercompany transfers 6,564 ( 6,323) ( 241)
Proceeds from
termination at CT-LP 4,848 4,848
Dividend from Minor Subs to Tosco 4,848 (4,848)
Net change in
short-term investments 3,917 986 4,903
Net cash provided by
(used in) investing
activities ( 1,150) ( 9,566) 745 ( 9,971)
Cash flows from financing
activities:
Repayments under revolver,
net ( 8,000) (22,000) ( 30,000)
Principal payments under debt
agreements ( 4) ( 4)
Dividends on Preferred and
Common Stock ( 7,106) ( 7,106)
Other ( 1,046) ( 1,046)
Net cash
used in
financing activities ( 16,156) ( 22,000) ( 38,156)
Net increase
(decrease) in cash and cash
equivalents 857 ( 25,845) 1,258 ( 23,730)
Cash and cash equivalents
at beginning of period 29,066 25,845 180 55,091
Cash and cash equivalents
at end of period $ 29,923 $ - $ 1,438 $ - $ 31,361
</TABLE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
Management's Discussion and Analysis should be read in
conjunction with Management's Discussion and Analysis included
in Tosco's Annual Report on Form 10-K for 1993. Reference
should also be made to the Financial Statements included in this
Form 10-Q for comparative Balance Sheet and Statement of Income
data.
Tosco's Annual Report sets forth Selected Financial Data
which, in summary form, reviewed Tosco's results of operations
and capitalization over the five-year period 1989-1993. This
Management's Discussion and Analysis updates that data.
<TABLE>
Three Months Ended March 31, 1994
<CAPTION>
Three Months
Tosco Ended
Avon Bayway Northwest Consolidated March 31, 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Sales $ 404,882 $ 882,792 $208,014 $1,495,688 $416,136
Cost of
sales 367,108 846,589 176,494 1,390,191 374,548
Operating
contribution $ 37,774 $ 36,203 $ 31,520 105,497 41,588
Selling, general, and administrative
expense 27,098 8,826
Net interest expense 12,506 7,973
Pre-tax income 65,893 24,789
Provision for income taxes 27,026 9,987
Net income $ 38,867 $ 14,802
</TABLE>
Results of Operations - For the three months ended March 31,
1994
Tosco earned $38.9 million, or $1.04 per fully diluted share,
on sales of $1.496 billion for the first quarter of 1994,
compared to $14.8 million, or $.42 per fully diluted share,
on sales of $416.1 million for the first quarter of 1993.
Tosco's operating contribution (income before selling,
general and administrative expense, net interest expense, and
income taxes) of $105.5 million for the first quarter of 1994
increased by $63.9 million from the comparable quarter of 1993
due to operating contribution of $36.2 and $31.5 million from
Bayway and Tosco Northwest, respectively, partially offset by
a $3.8 million decline in operating contribution from Avon.
The Bayway Refinery and related assets and Tosco Northwest were
acquired on April 8, 1993, and December 28, 1993,
respectively.
Avon and its related commercial activities achieved an
operating contribution of $37.8 million for the first quarter
of 1994, a $3.8 million decline from the comparable 1993
period. The decline in operating contribution was primarily
attributable to higher refinery operating expenses (due to
higher levels of maintenance performed while certain gasoline
production units were temporarily idled for turnaround
maintenance) which was partially offset by improved refining
margins. Crude oil throughput rates averaged 153,300 barrels
per day (B/D) for the first quarter of 1994 (versus the record
163,100 B/D for 1993) due to the scheduled turnaround
maintenance. The decline in crude oil processed was offset by
increased throughput of other refinery feedstocks, which
enabled total refinery production to average 166,300 B/D (a
slight decrease from the 166,700 B/D of 1993). However,
production of clean transportation fuels (gasoline, diesel,
and jet fuel) declined to 132,300 B/D for the first quarter of
1994 (versus the record quarterly production of 138,900 B/D of
the comparable 1993 period). Despite the drop in production
of clean transportation fuels, refining margins (the
difference between the price of refined products produced for
sale and raw material costs) improved by $.24 per barrel to
$7.78 for the first quarter of 1994.
Bayway and related commercial activities achieved an operating
contribution of $36.2 million during the first quarter due to
strong refinery performance despite the
extended periods of severe winter weather in the Northeast.
Raw material throughput averaged 260,900 B/D and production of
clean transportation fuels and total production averaged
211,300 B/D and 267,600 B/D, respectively. Refining margins,
including net realized gains on hedges designed to lock in a
predetermined level of margins on a large percentage of
Bayway's production, averaged $3.77 per barrel.
Tosco Northwest achieved an operating contribution of
$31.5 million during its first quarter under Tosco's
ownership. Raw material throughput at the Ferndale Refinery
averaged 92,800 B/D and production of clean transportation
fuels and total production averaged 60,700 B/D and 90,900 B/D,
respectively, generating refining margins of $4.99 per barrel
for the period. The retail system generated a blended fuel
margin of 8 cents per gallon and maintained historic sales
volumes of approximately 39,000 B/D.
Tosco's consolidated operating contribution was also
enhanced by expanded wholesale operations to take advantage of
favorable commercial opportunities, particularly in the Northeast
sector of the United States. Tosco purchased for resale
approximately 367,500 B/D of finished products in the first
quarter of 1994 (versus 32,800 B/D for 1993).
The increase in consolidated selling, general, and
administrative expense for the first quarter of 1994 was
primarily attributable to the acquisitions of the Bayway
Refinery and the Tosco Northwest assets. In addition, Tosco
recorded a provision for incentive compensation ($5.3 million)
and increased its reserve for potential losses
on trade receivables due to its expanded operations($2.9
million). The increase in consolidated net interest expense was
primarily due to higher levels of debt related to the
acquisitions of the Bayway Refinery and related assets, the
Ferndale Refinery and retail marketing assets, and their
associated working capital requirements.
Outlook
With the acquisitions of Bayway and the Tosco Northwest
assets, Tosco is one of the largest independent oil companies
in the United States, with annual revenue of over
$5 billion. Operating three refineries on the East and West
Coasts of the United States, Tosco now refines and markets
over 500,000 barrels per day of petroleum products, a three-fold
increase over Tosco's pre-acquisition production. Earnings
related to the increased levels of capacity continue to be
determined principally by two factors: the operating efficiency
of the refineries and refining margins. Tosco schedules periodic
maintenance of major processing units for significant non-routine
repairs and maintenance as the units reach the end of their
normal operating cycles. Refining operating performance and
earnings are lowered, and deferred maintenance expenditures
increased, during such periods. The Avon fluid coker, which
underwent scheduled maintenance in April 1994 after a record run
length of 31 months, returned to full operation in May. However,
turnarounds of other major processing units are
expected to occur later in 1994 or in early 1995. Tosco is not
able to predict the level
or trend of refining margins, despite hopeful signs of a
strengthening national economy, because of the uncertainties
associated with oil markets. However, Tosco believes its
acquisitions and diversification into retail marketing are
expected to provide opportunities for increased and less
volatile earnings and cash flow.
Cash flows and liquidity - 1994
Cash flows provided by operating activities were $24.0 million
for the three months ended March 31, 1994. Cash was generated
from operations (net income plus
depreciation and amortization) of $60.0 million partially offset
by a net increase in short-term deposits, working capital and
other liabilities of $36.0 million. Net cash used in
investing activities was $10.0 million, primarily for capital
additions and other assets of $20.0 million, partially offset by
a $5 million
return of Tosco's investment in Continental-Tosco Limited
Partnership, and other short-term investments ($5 million).
Cash used in financing activities was $38 million, consisting
principally of repayments under the new credit facility ($30
million), dividends on common and preferred stock ($7 million)
and other payments of $1 million.
Liquidity (as measured by cash, short-term investments and
deposits and unused credit facilities) increased by $69
million during 1994 due to an increase of $84 million in unused
credit facilities, partially offset by a decrease in cash, and
short-term investments of $15 million. Tosco amended its
revolving credit agreement (New Credit Agreement) to support
the expanded working capital requirements of Tosco due to the
acquisitions of Bayway and Tosco Northwest. At March 31, 1994,
liquidity totaled $215 million (an amount which Tosco believes is
adequate to meet its expected liquidity demands for at least the
next twelve months). See Note 5 to the March 31, 1994
Consolidated Financial Statements.
Capital Expenditures and Capitalization
During the first three months of 1994, Tosco spent $15 million
on budgeted capital projects. Capital spending
programs continued to address compliance with environmental
regulations and permits, operating flexibility and reliability
and personnel/process safety, as well as to meet new federal
and California regulations, adopted in 1992, for fuels that
reduce emissions.
Future levels of capital spending will vary depending upon the
extent to which the Avon Refinery is reconfigured to meet the
more stringent regulations requiring reformulated gasoline to
be sold in California (presently anticipated to be enforced by
CARB by 1996). Tosco has filed for the necessary
permits for construction of the new facilities (which are
anticipated to range in costs from $175 million to $300
million in order to implement the
CARB regulations). However, timely completion of the new
facilities will continue to depend on a reasonable approval
process for these permits and market conditions. Tosco has
advised CARB that significant uncertainty exists concerning
the implementation of their gasoline regulations and has
requested that the timing and substance of the regulations be
reevaluated to avoid serious disruption in the California
gasoline market in 1996.
At March 31, 1994, total shareholder's equity was $552
million, an increase from December 31, 1993 of $30 million due
to net income ($39 million) less dividend and other payments
($9 million). Debt, including current maturities, decreased
by $30 million to $574 million at March 31, 1994.
TOSCO CORPORATION AND SUBSIDIARIES
PART 1 - EXHIBIT I
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In Thousands Except Per Share Data
Three Months Ended March 31,
1994 1993
Net income $ 38,867 $ 14,802
Preferred stock dividends ( 2,516) (2,516)
Net income
attributable to common
shareholders for primary
earnings per share
computations 36,351 12,286
Addback of dividends on
preferred stock
for assumed conversion 2,516 2,516
Net income
attributable to common
shareholders for fully
diluted earnings per
share computations $ 38,867 $ 14,802
Weighted average number of
shares outstanding
during the period 32,262 29,360
Stock option equivalents 415
Shares and equivalents
used for computation
of primary earnings per share 32,677 29,360
Weighted average
potentially
dilutive securities for the
assumed conversion of
preferred stock 4,792
Shares and equivalents
used for computation of
fully diluted earnings
per share 37,469 29,360
Earnings per share:
Primary $ 1.11 $ .42
Fully diluted $ 1.04 $ .42 (a)
(a) Fully diluted earnings per share computations for 1993 did
not assume the conversion of stock options or Series F Stock
because the effect would have been anti-dilutive.
PART II. Other Information
Item 1. Legal Proceedings
On February 7, 1994, following extensive public hearings, the
California Air Resources Board (CARB) granted Tosco a variance
to produce diesel fuel that did not meet certain standards for
aromatic content. The variance was scheduled to expire on the
earlier of July 15, 1994, or upon Tosco' certification of a
qualifying alternative fuel formulation. On March 7, 1994, four
oil companies filed suit against CARB and Tosco (as real party in
interest), challenging CARB's issuance of the variance. (Chevron
USA, Inc., Atlantic Richfield Company, Union Oil company of
California and Texaco Refining and Marketing, Inc. v. California
Air Resources Board. Tosco Refining Company, real party in
interest, California Superior Court, Sacramento County, Case No.
377344). On March 24, 1994, Tosco certified an alternative
diesel fuel formulation, and the variance expired. At a hearing
held on May 13, 1994 in response to a motion for summary
judgment by Tosco, the lawsuit was dismissed as moot.
Item 6. Exhibits
a. Exhibits.
11. Computation of Earnings Per Share (See Part 1. Item 1.)
<PAGE>
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 thereunto duly
authorized.
TOSCO CORPORATION
(Registrant)
Date: May 1994 By:
Jefferson F. Allen
Executive Vice President
and Chief Financial Officer
Robert I. Santo
Chief Accounting Officer
