SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[(Amendment No. ___)]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
TOSCO CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
December , 1996
Dear Fellow Shareholders:
A Special Meeting of Stockholders is being held on _____________, 1997
for the purpose of increasing the number of authorized shares of Common
Stock of the Company. This will provide the Company sufficient shares to
complete the previously announced acquisition of Unocal's refining and
marketing assets and also provide shares for general corporate purposes.
We believe the planned acquisition of Union 76's refining and
marketing assets represents a unique opportunity for the Company. However,
we need your approval to issue additional shares to complete the
transaction.
An absolute majority of shareholders is needed for us to proceed and
we therefore strongly urge that you consider and approve the attached
proposal promptly.
Thank you for your consideration.
Sincerely,
Thomas D. O'Malley
Chairman & Chief Executive Officer
<PAGE>
TOSCO CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ________, 1997
__________________
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Tosco
Corporation ("Tosco") will be held at the ______________________________ on
_________, 1997 at 9:00 o'clock in the morning for the following purposes:
I. To authorize and approve an amendment to the Articles of
Incorporation of Tosco increasing the number of authorized shares of Common
Stock of Tosco.
II. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Stockholders of record at the close of business on ______________,
1996 shall be entitled to vote at and be present at the meeting.
By order of the Board of Directors,
Wilkes McClave III
Secretary
Dated: ___________, 1996
Stamford, Connecticut
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED IN ORDER TO ASSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING YOU MAY VOTE IN PERSON IF
YOU WISH TO DO SO EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE>
TOSCO CORPORATION
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of Directors of
Tosco Corporation, a Nevada corporation ("Tosco"), for use at a Special
Meeting of Stockholders (the "Special Meeting") to be held on _________,
1997 at 9:00 a.m. at ________________, at which stockholders of record at
the close of business on December __, 1996 shall be entitled to vote. At
the Special Meeting stockholders will be asked to approve an amendment to
the Articles of Incorporation of Tosco increasing the number of authorized
shares of Common Stock of Tosco. The cost of solicitation of proxies will
be borne by Tosco. Tosco may use the services of its Directors, officers,
stockholders of record and others to solicit proxies, personally or by mail
or telephone. Arrangements may also be made with brokerage houses and other
custodians, nominees, fiduciaries and stockholders of record to forward
solicitation material to the beneficial owners of the stock held of record
by such persons. Tosco may reimburse such solicitors for reasonable
out-of-pocket expenses incurred by them in soliciting, but no compensation
will be paid for their services. Tosco has retained Hill and Knowlton, Inc.
to assist in the solicitation of proxies for a fee estimated at $_______
plus out-of-pocket expenses. Any Proxy granted as a result of this
solicitation may be revoked at any time before its exercise by granting a
subsequently dated Proxy, by attending the Special Meeting and voting in
person or by mailing a notice of revocation to Tosco Corporation, 72
Cummings Point Road, Stamford, Connecticut 06902, Attention: Secretary.
The principal executive offices of Tosco are located at 72 Cummings
Point Road, Stamford, Connecticut 06902 and its telephone number is (203)
977-1000.
The date of this Proxy Statement is the approximate date on which this
Proxy Statement and accompanying Proxy were first sent or given to stockholders.
On ________, 1996, Tosco had outstanding and entitled to vote with
respect to all matters to be acted upon at the Special Meeting ______________
shares of Common Stock, par value $.75 per share ("Common Stock"). Each holder
of Common Stock will be entitled to one vote for each share of Common Stock held
by such holder. The presence of holders representing a majority of the
outstanding shares will constitute a quorum at the meeting. Abstentions are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions and broker non-votes are not counted in
determining the votes cast with respect to any of the matters submitted to a
vote of stockholders.
AMENDMENT TO ARTICLES OF INCORPORATION
Pursuant to Article FOURTH of its Articles of Incorporation, Tosco is
presently authorized to issue 50,000,000 shares of Common Stock, par value $.75
per share, of which on the record date, _____________ shares were issued and
outstanding and 2,549,041 shares were held in the treasury. All of Tosco's
unissued shares and treasury shares are reserved for issuance upon exercise of
stock options and conversion of convertible securities. Tosco is also presently
authorized to issue 12,000,000 shares of Preferred Stock, par value $1.00 per
share, of which on the record date, no shares were issued and outstanding. Tosco
proposes to increase the authorized number of shares of Common Stock to
250,000,000 shares, par value $.75 per share.
It is proposed (the "Proposal") to amend the first paragraph of
Article FOURTH of the Articles of Incorporation of Tosco in order to
increase the authorized number of shares of Common Stock of Tosco from
50,000,000 shares, par value $.75 per share, to 250,000,000 shares, par
value $.75 per share, as follows:
"FOURTH: The total authorized capital stock of this
Corporation is One Hundred Ninety-Nine Million, Five Hundred Thousand Dollars
($199,500,000) divided into 250,000,000 shares of Common Stock of the par value
of $.75 per share and 12,000,000 shares of Preferred Stock of the par value of
$1.00 per share."
The authorized number of shares of Preferred Stock will not be
changed as the result of the Proposal. The Board of Directors of Tosco has
unanimously approved the adoption of the Proposal. In order for such
Proposal to be adopted there will be required a vote in favor by the
holders of shares of Common Stock of Tosco carrying a majority of the votes
entitled to be cast at this Special Meeting. The Board of Directors
believes that it would be in the best interests of Tosco to amend Article
FOURTH of the Articles of Incorporation to give effect to the Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AUTHORIZATION AND APPROVAL OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION.
Pursuant to the Articles of Incorporation of Tosco, stockholders
of Tosco have no preemptive rights with respect to the additional shares
being authorized. The Articles of Incorporation do not require further
approval by stockholders prior to the issuance of any additional shares of
Common Stock or Preferred Stock. However, in certain circumstances
(generally relating to the number of shares to be issued and the identity
of the recipients), the rules of the New York Stock Exchange require
stockholder authorization in connection with the issuance of such
additional shares. Subject to the rules of the New York Stock Exchange, the
Board of Directors of Tosco has the sole discretion to issue additional
shares of Common Stock. The issuance of any additional shares of stock will
have the effect of diluting the percentage of stock ownership and voting
rights of the present stockholders of Tosco.
On December 14, 1996, Tosco entered into a definitive Sale and
Purchase Agreement (the "Agreement") with Union Oil Company of California
("Unocal") to acquire Unocal's West Coast petroleum refining, marketing and
related supply and transportation assets for a purchase price of $1.4
billion, plus the value of inventory as of the closing date (the
"Acquisition"). In addition, Unocal will be entitled to receive contingent
participation payments over the next seven years, up to a maximum amount of
$250 million, if the margin on dealer tank wagons exceeds a base index
and/or the differential between California Air Resources Board Phase II
gasoline and conventional gasoline exceeds a base index. For a period of 25
years, Unocal will be responsible for environmental liabilities arising out
of or relating to the period prior to the closing, except that Tosco will
pay the first $7 million of such environmental liabilities each year, plus
40% of any amounts in excess of $7 million per year, with Unocal paying the
remaining 60% each year. The aggregate maximum amount that Tosco may have
to pay in total for 25 years for such environmental liabilities is limited
to $200 million. Environmental liabilities assumed by Tosco pursuant to the
Acquisition will be reserved for at the time of Acquisition.
In connection with the Acquisition, Tosco intends to issue Common Stock
directly to Unocal and/or may publicly sell shares of its Common Stock. If
Tosco's shareholders do not approve the increase in the number of authorized
shares of Common Stock, Tosco may not be able to effectuate the Acquisition.
The assets to be purchased from Unocal include the following: two
petroleum refining systems comprised of four sites in California with an
aggregate throughput capacity of 250,000 barrels per day; a retail gasoline
system which currently sells over 100,000 barrels per day of gasoline and
diesel fuel consisting of approximately 1,350 76-branded gasoline stations,
approximately 1,100 of which are company-controlled; a distribution system
comprised of 13 company-owned oil storage terminals, three modern
American-flag 40,000 deadweight-ton tankers and 1,500 miles of crude oil
and product pipeline; the worldwide rights to the "76" and "Union 76"
brands, together with the distinctive orange ball logo, in the petroleum
refining and marketing businesses; and Unocal's lubricants manufacturing,
distribution and marketing business.
Tosco intends to fund the Acquisition through a combination of
debt and equity, including the possibility of selling Common Stock pursuant
to an underwritten public offering. Tosco presently does not have any
definitive plans or arrangements relating to such financing, although Tosco
is presently contemplating the sale pursuant to Rule 144A or Regulation S
of $600 million of notes having maturities of from 10 to 50 years and the
public sale of up to 9.2 million shares of Common Stock. The terms of the
financing have not been finalized and may be different from those described
herein.
Consummation of the Acquisition is subject to a number of
conditions, including governmental regulatory approvals, approval of the
Proposal by Tosco's stockholders and the satisfaction of conditions
normally contained in transactions of this type. In addition, on January
15, 1997, Tosco must deposit $1.4 billion of value into an escrow account,
of which at least $1 billion must be in cash and the balance may be in the
form of the right to receive Common Stock of Tosco having a value equal to
the difference between $1.4 billion in cash and the amount of cash
deposited in escrow. Tosco will not be required to issue Common Stock
having a value of less than $45 per share. The number of shares of Common
Stock to which Unocal will be entitled will be determined based on the
average Tosco stock prices for the ten days preceding the date Unocal will
be entitled to receive such shares. If the price is below $45 per share,
each of Tosco and Unocal will have specified rights. If Tosco fails to make
the deposit into escrow or if the Proposal is not approved, either party
has the right to terminate the agreement and Unocal would receive a $20
million break-up fee. If Unocal receives shares of Common Stock, it will be
granted registration rights to sell such shares and will enter into an
agreement with Tosco restricting its right to sell such shares or acquire
additional shares, agreeing to vote such shares at all stockholder meetings
in proportion to the votes of other stockholders and undertaking not to
take or influence the control of Tosco. The Acquisition is presently
scheduled to close in the first quarter of 1997.
Tosco believes the Acquisition is in the best interests of Tosco
and its stockholders. In reaching its determination, the Board of Directors
considered a number of factors, including without limitation: the assets
complement Tosco's existing west coast operations; the combination of the
refineries should result in a cost-effective network; Tosco's existing
refinery and transportation system should be enhanced; Tosco will become
the third largest retailer in California; its current retail operations in
the western United States will be enhanced; the Tosco Circle K convenience
store network will be enhanced; and there are significant opportunities for
economies of scale and operating efficiencies, particularly in terms of
integration of office facilities, information systems, management and
computer systems.
The terms of the Acquisition were the result of arms' length
negotiations conducted by representatives of Tosco and Unocal. The
Acquisition will be accounted for by the purchase method of accounting. The
statements contained in this Proxy Statement with respect to the terms of
the Acquisition are subject to the more detailed information set forth in
the Agreement, and are qualified in their entirety by reference thereto.
There is no assurance that the Acquisition will be consummated even if the
Proposal is approved by the stockholders.
Since the stockholders of Tosco will not have the opportunity to
separately vote on the Acquisition, each stockholder's vote on the authorization
to approve the issuance of additional shares of Common Stock could be deemed
such stockholder's right to vote, indirectly, with respect to the Acquisition.
The stockholders of Tosco who vote against the Proposal do not have any
appraisal rights under Nevada law with respect to their shares of Common Stock.
The increased number of authorized shares of Common Stock will be
available for issuance by Tosco, in the discretion of the Board of Directors,
from time to time. The Board of Directors will be able to issue such shares
without the time-consuming and costly need to hold a special meeting of
stockholders, for stock splits, in the acquisition of properties or businesses,
in financing future growth or for other corporate purposes. Except with respect
to the Unocal transaction, Tosco has not entered into any specific agreements or
understandings relating to the issuance of additional shares of Common Stock;
however, Tosco is receptive to all methods of financing which may be reasonably
available and acquisition opportunities which may arise from time to time. The
Board of Directors presently has under consideration a proposal to approve a
stock split of the Common Stock; however, no determination has been made as to
when, or if, such split will occur. The Board of Directors believes that, in the
future, occasions may arise where the time required to obtain stockholder
approval might adversely delay Tosco's ability to enter into a desirable
transaction. Authorized but unissued shares of Common Stock will be issued by
Tosco from time to time as appropriate and opportune situations arise.
DESCRIPTION OF TOSCO CAPITAL STOCK
The summary of the terms of the capital stock of Tosco set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to Tosco's Articles of Incorporation and Bylaws.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Tosco consists of 50 million shares of
Common Stock, and 12 million shares of Preferred Stock. As of ____________, 1996
there were _____________ shares of Common Stock outstanding. Tosco Common Stock
is listed on the NYSE and the Pacific Stock Exchange under the symbol TOS. No
shares of Preferred Stock are outstanding. On December __, 1996, the closing
price of a share of Common Stock on the NYSE was $___.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held and have the sole right and power to vote in all matters on which a vote of
stockholders is taken, except as otherwise provided by statute and subject to
voting rights of any holders of Preferred Stock. Subject to the rights of any
holders of Preferred Stock, the holders of shares of Common Stock are entitled
to receive dividends when, as and if declared by the Board of Directors, out of
funds legally available therefor and to share pro rata in any distribution to
stockholders. Upon liquidation, dissolution, or winding up of Tosco, subject to
the rights of the holders of any shares of Preferred Stock, the holders of
Common Stock are entitled to receive the net assets of Tosco in proportion to
the respective number of shares held by them. The holders of Common Stock do not
have any preemptive right to subscribe for or purchase any shares of any class
of stock. The outstanding shares of Common Stock are not subject to further call
or redemption and all outstanding shares of Common Stock are validly issued,
fully paid and non-assessable.
PREFERRED STOCK
Tosco is authorized to issue 12 million shares of Preferred Stock. Such
shares may be issued from time to time at the discretion of the Board of
Directors, without stockholder approval. The Board of Directors is authorized to
issue such shares in different series and with respect to each series to
determine the dividend rate, the redemption provisions, voting rights,
conversion provisions, liquidation preferences and such other rights and
privileges not in conflict with Tosco's Articles of Incorporation and any
qualifications, limitations or restrictions on such shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At December 31, 1996 to the knowledge of Tosco, from Statements on
Schedule 13G provided to Tosco, beneficial owners of more than 5% of any class
of the outstanding voting securities of Tosco were as follows:
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP * CLASS
<S> <C> <C> <C>
Common Stock Tiger Management Corporation 5,933,900 12.85%
Panther Partners, L.P. shares (1)
Panther Management Company, L.P.
Julian H. Robertson, Jr.
101 Park Avenue
New York, New York 10178
Common Stock FMR Corp. 5,238,672 11.35%
82 Devonshire Street shares (2)
Boston, Massachusetts 02109
- --------------------
* The beneficial owner of such shares reports that it has sole voting and
investment power with respect to such securities, except where
otherwise indicated.
(1) According to a Statement on Schedule 13G filed with the Commission on February 12, 1996, (i) Tiger
Management Corporation, an investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, reported beneficial ownership of 5,580,500 shares; (ii) Panther Partners, L.P., an
investment company registered under Section 8 of the Investment Company Act, reported beneficial
ownership of 313,400 shares; (iii) Panther Management Company, L.P., an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, reported beneficial ownership of 313,400
shares; and (iv) Julian H. Robertson, Jr. reported beneficial ownership of 5,933,900 shares. Julian H.
Robertson, Jr. is the ultimate controlling person of Tiger Management Corporation and Panther Management
Company, L.P. Other persons are known to have the right to receive dividends from, or proceeds from,
the sale of such shares. The interest of one such person, The Jaguar Fund N.V., a Netherlands Antilles
corporation, is more than 5%.
(2) According to a Statement on Schedule 13G filed with the
Commission on December 10, 1996, wholly-owned subsidiaries or
affiliates of FMR Corp. ("Fidelity Funds"), including a
registered investment advisor, own these shares. FMR does not
have the power to vote or direct the voting of shares owned by
the Fidelity Funds, which power resides with Fidelity Funds'
Board of Trustees.
</TABLE>
STOCK OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth the number of shares of Common Stock of
Tosco beneficially owned by each Director, by each of the most highly
compensated executive officers and by all executive officers and Directors as a
group at December 1, 1996, and the percentage of the outstanding shares of
Common Stock so owned by each Director, executive officer, and such group.
Amount and
nature of
beneficial Percent of
Name ownership Class
Jefferson F. Allen 240,349 (1) *
Joseph B. Carr 24,000 (2) *
Patrick M. de Barros 240,554 (3) *
Houston I. Flournoy 24,516 (4) *
Clarence G. Frame 11,216 (5) *
Edmund A. Hajim 30,000 (6) *
Joseph P. Ingrassia 24,500 (7) *
Robert J. Lavinia 147,500 (8) *
Charles J. Luellen 25,000 (9) *
Mark R. Mulvoy 24,000 (10) *
Thomas D. O'Malley 1,589,451 (11) 3.60%
Dwight L. Wiggins 140,000 (12) *
All executive officers
and Directors(19 persons,
including those listed above) 2,987,490 (13) 6.60%
- ----------------------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Consists of 5,349 shares of Common Stock, options to purchase 165,000
shares of Common Stock under the 1989 Stock Incentive Plan (the "1989
Plan"), and options to purchase 70,000 shares of Common Stock under the
1992 Stock Incentive Plan (the "1992 Plan").
(2) Consists of options to purchase 24,000 shares of Common Stock
under the 1989 Plan.
(3) Consists of 216,554 shares of Common Stock owned by a Trust of
which Mr. de Barros is a beneficiary, and options to purchase
18,667 and 5,333 shares of Common Stock under the 1989 Plan and
the 1992 Plan, respectively.
(4) Consists of 516 shares of Common Stock and options to purchase
24,000 shares of Common Stock under the
1989 Plan.
(5) Consists of 11,216 shares of Common Stock.
(6) Consists of 6,000 shares of Common Stock and options to purchase
24,000 shares of Common Stock under the 1989 Plan.
(7) Consists of 500 shares of Common Stock and options to purchase
24,000 shares of Common Stock under the 1989 Plan.
(8) Consists of options to purchase 25,000 and 122,500 shares of
Common Stock under the 1989 Plan and the 1992 Plan, respectively.
(9) Consists of 1,000 shares of Common Stock and options to purchase
24,000 shares of Common Stock under the 1989 Plan.
(10) Consists of options to purchase 24,000 shares of Common Stock
under the 1992 Plan.
(11) Consists of 957,236 shares of Common Stock, options to purchase 350,000
and 100,000 shares of Common Stock under the 1989 Plan and the 1992
Plan, respectively, and 9,999 shares of Common Stock owned by Mr.
O'Malley's wife. In addition, the shares listed in the table include
73,865 shares held by Argus Energy Corporation and 98,351 shares held
by Argus Investments, Inc., of which Mr. O'Malley is the sole
shareholder. Mr. O'Malley disclaims beneficial ownership of the 9,999
shares of Common Stock owned by his wife.
(12) Consists of 2,500 shares of Common Stock and options to purchase
25,000 and 112,500 shares of Common Stock under the 1989 Plan and
the 1992 Plan, respectively.
(13) Consists of 1,407,657 shares of Common Stock and options to
purchase 847,667 and 732,166 shares of Common Stock under the 1989
Plan and the 1992 Plan, respectively.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. has acted as the independent public
accountants of Tosco since 1977. A representative of Coopers & Lybrand L.L.P. is
expected to be present at the Special Meeting with the opportunity to make a
statement if he or she so desires and to respond to appropriate questions.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Tosco's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, and Quarterly Report on Form 10-Q for the nine months ended September
30, 1996, copies of which accompany this Proxy Statement, are incorporated
herein by reference.
All documents filed by Tosco pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") subsequent to
the date of this Proxy Statement and prior to the Special Meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for the purposes of this Proxy Statement to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
Tosco will provide, without charge, to each person to whom a copy of
this Proxy Statement is delivered, upon the written or oral request of such
person and by first class mail or other equally prompt means within one business
day of receipt of such request, a copy of any or all of the documents
incorporated herein by reference (other than exhibits, unless such exhibits are
specifically incorporated herein by reference). Requests should be directed to:
Investor Relations, Tosco Corporation, 72 Cummings Point Road, Stamford,
Connecticut 06902, (203) 977-1000.
Tosco is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy or information statements and
other information with the Commission. Such reports, proxy or information
statements, exhibits and other information filed by Tosco with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth St., N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade Center
(13th Floor), New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and its public reference facilities in New York, New York and
Chicago, Illinois, at prescribed rates. The Commission maintains an Internet web
site that contains reports, proxy and information statements and other
information regarding Issuers who file electronically with the Commission. The
address of that site is http://www.sec.gov. Such reports, proxy or information
statements and other information concerning Tosco can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005 and the Pacific Stock Exchange on which exchanges Tosco's Common
Stock is listed.
FINANCIAL INFORMATION
Financial information for Tosco for the fiscal year ended December 31,
1995, is included in Tosco's Annual Report on Form 10-K, a copy of which
accompanies this Proxy Statement. In addition, attached hereto are (a) the
consolidated balance sheets of 76 Products Company and subsidiaries as of
September 30, 1996 and December 31, 1995 and the related statements of
operations, cash flows and parent investment for the nine months ended September
30, 1996 and for the years ended December 31, 1995 and 1994 and (b) pro forma
combined balance sheet of Tosco at September 30, 1996, pro forma combined
statement of income for the nine months ended September 30, 1996 and year ended
December 31, 1995 and actual and pro forma capitalization at September 30, 1996.
MISCELLANEOUS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the meeting
is that hereinabove set forth. If any other matter or matters are properly
brought before the meeting, or any adjournment thereof, it is the intention of
the persons named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their judgment.
Wilkes McClave
Secretary
Dated: __________, 1996
<PAGE>
TOSCO CORPORATION
PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following pro forma combined balance sheet of Tosco as of September 30,
1996 gives effect to (i) the December 1996 sale of 6 million 5 3/4%
Convertible Preferred Securities and the application of proceeds therefrom,
(ii) the planned issuance of $600 million of __% unsecured term debt and
cash borrowings under a contemplated expansion of Tosco's Revolver (as
defined herein) to fund, by January 15, 1997, a required $1 billion minimum
cash escrow account, (iii) the planned issuance of 9.2 million shares of
Tosco Common Stock and (iv) the consummation of the Unocal transaction. The
pro forma balance sheet assumes that the transactions occurred as of the
balance sheet date.
The pro forma combined statements of income for the nine months ended
September 30, 1996 and the year ended December 31, 1995 reflect the above
transactions as well as the acquisition of the Circle K Corporation
("Circle K"). The pro forma combined statements of income give effect to
the transactions and the Circle K acquisition, completed on May 30, 1996,
as if they occurred at the beginning of the periods presented. The
statements may not be indicative of the results that actually would have
occurred or the results which may be obtained in the future. The 1996 pro
forma combined statement of income does not fully reflect the possible
improvement in operating contribution or the planned reduction in operating
and administrative costs expected from the Circle K acquisition. The pro
forma combined statements of income also do not reflect the improvement in
operating contribution and the reduction in operating and administrative costs
expected from the Unocal transaction.
The information presented herein should be read in conjunction with the
Unaudited Pro Forma Combined Financial Information, including the notes
thereto, appearing elsewhere in this Proxy Statement and the separate
historical consolidated financial statements of Tosco and Unocal which are
included with this Proxy Statement.
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1996, the actual
consolidated capitalization of Tosco, and as adjusted to reflect (i) the
sale of 6,000,000 Convertible Preferred Securities, the application of
proceeds therefrom to the purchase of Convertible Debentures of Tosco, and
the application of the net proceeds from the Convertible Debentures to the
paydown of cash borrowings under Tosco's Revolving Credit Facility
("Revolver") and the retirement of $100 million of First Mortgage Bonds due
March 15, 1997, (ii) the planned issuance of $600 million of unsecured debt
and cash borrowings under a contemplated expansion of Tosco's Revolver to
fund, by January 15, 1997, a required $1 billion minimum cash escrow
account, (iii) the planned issuance of 9.2 million shares of Tosco Common
Stock, and (iv) the consummation of the Unocal transaction. The table
should be read in conjunction with Tosco's consolidated financial
statements and notes thereto included with the Proxy Statement.
<TABLE>
<CAPTION>
September 30, 1996
Actual As Adjusted
(In Thousands)
(Unaudited)
<S> <C> <C>
Long-term debt - collateralized:
Mortgage bonds guaranteed on a collateralized
basis by the Bayway Refining Company $150,000 $150,000
Mortgage bonds collateralized by the Avon Refinery 300,000 200,000
Capital leases 67,656 69,656
Real estate installment purchase 55,306 55,306
Other 5,631 5,631
Long-term debt - uncollateralized:
Revolving credit facility (a) 360,000 707,450
7% Notes due 2000 125,000 125,000
7 5/8% Notes due 2006 240,000 240,000
xxxx % Notes due 2007 200,000
xxxx % Notes due 2027 300,000
xxxx % Notes due 2047 100,000
-- -------- --- -------
Total debt, including current portion 1,303,593 2,153,043
Less current portion (12,766) (12,766)
---- -------- --- --------
Total long-term debt 1,290,827 2,140,277
-- --------- -- ---------
Company-obligated mandatorily redeemable convertible
preferred securities of Tosco Financing Trust holding
solely 5 3/4% convertible junior subordinated debentures of
Tosco (b) 300,000
Shareholders' equity:
Common Stock, $.75 par value, 50,000,000 shares authorized, as adjusted
250,000,000 shares; 46,168,861 shares issued, as adjusted 55,368,861
(including treasury
shares) 34,626 41,526
Capital in excess of par value 963,635 1,626,035
Retained earnings 124,098 124,098
Less Common Stock held in treasury, at cost
(2,549,041 shares) (73,270) (73,270)
-------- --------
Total stockholders' equity 1,049,089 1,718,389
-- --------- -- ---------
Total capitalization $2,339,916 $4,158,666
========== ==========
(a) At September 30, 1996, Tosco's Revolver provided for an extension of up to
$600 million in credit. At that date, Tosco had $360 million of cash
borrowings and outstanding letters of credit of approximately $109 million
under the Revolver. Tosco plans to increase cash and credit availability by
$400 million to $1 billion under a contemplated expansion of the Revolver.
(b) The sole assets of the Trust are 5 3/4% Convertible Debentures of Tosco due
2006 with a principal amount of $300 million due December 15, 2026.
</TABLE>
<PAGE>
Tosco Corporation
Pro-Forma Combined Balance Sheet
As of September 30, 1996
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------------------------
Sale of
Preferred Record
Securities Issue Purchase of
Tosco and Debt Issue Common Unocal Tosco
Historical Payment (a) Debt (b) Stock (c) Assets (d) Pro-Forma
<S> <C> <C> <C> <C> <C> <C>
Cash, cash equivalents,
short-term investments
and deposits $86,882 $86,882
Cash held in escrow $1,000,000 (1,000,000)
Inventories 686,199 400,000 (e) 1,086,199
Other current assets 351,797 351,797
Total current assets 1,124,878 1,000,000 (600,000) 1,524,878
Property and equipment 1,696,693 1,652,000 3,348,693
Intangibles and other
long-term assets 807,501 8,750 8,000 824,251
Total assets $3,629,072 $8,750 $1,008,000 ____________ $ 1,052,000 $5,697,822
========== ====== ========== ============ ============ ==========
Current liabilities $ 952,238 $7,000(f) $959,238
Current maturities of long-
term obligations 12,766 12,766
---------- ------ ---------- ----------- ------------ ----------
965,004 7,000 972,004
Revolver debt 360,000 (191,250) 408,000 (669,300) 800,000 707,450
Long-term debt, including
capitalized leases 930,827 (100,000) 600,000 2,000 1,432,827
Environmental cost liabilities 90,680 193,000(f) 283,680
Other liabilities 233,472 50,000 283,472
Company-obligated mandatorily
redeemable convertible
preferred securities of
Tosco Financing Trust
holding solely 5 3/4%
convertible junior
subordinated debentures
of Tosco 300,000 300,000
Shareholders' equity
Common Stock 34,626 6,900 41,526
Additional paid in capital 963,635 662,400 1,626,035
Retained earnings 124,098 124,098
Reductions from capital (73,270) (73,270)
--------- -------- ---------- ----------- ----------- ----------
1,049,089 669,300 1,718,389
--------- -------- ---------- ----------- ----------- ----------
Total liabilities and equity $3,629,072 $8,750 $1,008,000 ___________ $1,052,000 $5,697,822
========== ====== ========== =========== ========== ==========
Pro-forma adjustments:
(a) In December 1996, Tosco Financing Trust, a
statutory business trust ("Trust"), issued 6,000,000 5 3/4%
Convertible Preferred Securities, including 700,000 to cover
over-allotments (liquidation amount of $50 per Convertible Preferred
Security) representing a preferred undivided interest in the assets of
the Trust. The Trust exists for the sole purpose of issuing common
securities, all of which are owned by Tosco, and the Convertible
Preferred Securities, the proceeds of which were invested in 5 3/4%
Convertible Junior Subordinated Debentures (the "Convertible
Debentures") of Tosco. The Convertible Debentures are subordinate and
junior in right of payment to all liabilities of Tosco and will be
convertible into Tosco Common Stock at the rate of .50633 shares of
Tosco Common Stock for each Convertible Preferred Security (equivalent
to a conversion price of $98.75 per share of Tosco Common Stock). The
pro-forma financial statements reflect the application of the net
proceeds from the Convertible Debentures to the paydown of cash
borrowings under the Revolver and the payment of $100 million of 9%
First Mortgage Bonds due March 15, 1997.
(b) Record, net of estimated costs, (i) the planned issuance of $600
million of __% unsecured term debt, (ii) cash borrowings of $400
million under a contemplated expanded Revolving Credit Facility of $1
billion of cash and credit availability. Under the terms of the
agreement with Unocal, Tosco is required to deposit into escrow by
January 15, 1997, $1.4 billion in value, of which $1.0 billion must be
in cash.
(c) Record planned sale of Tosco Common Stock prior to the
consummation of the Unocal transaction. The pro forma financial
statements assume that Tosco will issue 9,200,000 shares at $75 per
share, net of costs of $20.7 million. The average closing price of
Tosco Common Stock for the period November 18 to December 17 was
$76.00.
(d) Record consummation of the Unocal transaction. The allocation of
the purchase price to the assets and liabilities acquired in the
Unocal transaction is based upon a preliminary evaluation. The
purchase price allocation is expected to be finalized by the end of
1997 based upon appraisals and other evaluations expected to be
completed by that date. The purchase price of the Unocal assets could
be increased by up to $250 million in contingent participation
payments over the next seven years if retail market conditions and/or
California Air Resources Board (CARB) gasoline premiums improve.
(e) Value of inventories expected to be on hand at the consummation of
the Unocal transaction. The actual value of inventories to be
acquired, based on volumes and prices at the purchase date, may vary
significantly from this estimated amount.
(f) Under the purchase agreement, for a period of 25 years, Unocal
will be responsible for environmental liabilities arising out of or
relating to the period prior to closing, except that Tosco will pay
the first $7 million of such environmental liabilities each year, plus
40% of any amounts in excess of $7 million per year, with Unocal
paying the remaining 60% each year. The aggregate maximum amount that
Tosco may have to pay in total for 25 years for such environmental
liabilities is limited to $200 million.
</TABLE>
<PAGE>
Tosco Corporation
Pro-Forma Combined Statement of Income
For the Year Ended December 31, 1995
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Historicals Circle K Unocal
Circle K Pro-Forma Pro-Forma Historical Pro-Forma Pro-Forma
Tosco (Note A) Subtotal Adjustment (Note B) Unocal Adjustment (Note C)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $7,284,051 $3,540,531 $10,824,582 ($526,000)(g) $10,298,582 $4,036,200 (897,700)(i) 13,437,082
Cost of sales
and operating (7,004,501) (2,747,071) (9,751,572) 526,000 (g) (9,813,106) (3,984,100) 897,700 (i)(12,882,506)
expenses (587,534)(h) 17,000 (ii)
Selling, general
and administrative (95,858) (709,559) (805,417) 587,534 (h) (229,332) (107,200) (336,532)
expense (11,449) (i)
Interest expense,
net (56,253) (26,547) (82,800) (29,854) (j) (112,941) (300) (77,330)(iii) (183,166)
(287) (k) (870)(iv)(
___________ ___________ _________ ___________ __________ __________________ _________
(7,156,612) (3,483,177) (10,639,789) 484,410 (10,155,379) (4,091,600) 836,500 (13,410,479)
-------------- -------------- ------------- -------------- --------------------------- ------------ ---------
Income [loss] before
income taxes 127,439 57,354 184,793 (41,590) 143,203 (55,400) (61,200) 26,603
[Provision] credit (50,381) (23,956) (74,337) 11,906 (l) (62,431) 38,000 22,374 (v) (2,057)
for income taxes
-------- -------- -------- - -------- ------ -------- --------- -------
Net income [loss] $77,058 $33,398 $110,456 ($29,684) $80,772 ($17,400)($38,826) $24,546
======= ======= ======== ======= ======== ======== ========= =========
Earnings per share
Primary: $2.06 $1.84(m) $0.46 (vi)
===== ===== =====
Fully diluted: $2.04 $1.83(m) $0.46 (vi)
===== ===== =====
</TABLE>
<PAGE>
Tosco Corporation
ProForma Combined Statement of Income
For the Nine Months Ended September 30, 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Historicals Circle K Unocal
Circle K Pro-Forma Historical Pro-Forma
Tosco (Note D) Subtotal Adjustment Pro-Forma Unocal Adjustment Pro-Forma
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $7,160,151 $1,519,542 $8,679,693 ($218,800)(g) $8,460,893 $3,629,600 ($734,500)(i) $11,355,993
Cost of sales
and operating (6,755,105) (1,217,565) (7,972,670) 218,800 (g) (7,963,692) (3,428,900) 734,500 (i) (10,621,092)
expenses (209,822) 37,000(ii)
Selling, general
and administrative (147,218) (263,636) (410,854) 209,822(h) [205,702] (92,500) (298,202)
expense (4,670)(i)
Interest expense,
net (61,998) (11,324) (73,322) (12,439)(j) (85,881) (900) [55,719](iii) [143,165]
---------- ----------- ---------- ------- --------- --------- --------- ------------
(120)(k) [665](iv)
----- -----
(6,964,321) (1,492,525) (8,456,846) 201,571 (8,255,275) (3,522,300) 715,116 (11,062,459)
----------- ----------- ----------- ------- ----------- ----------- ------- ------------
Income [loss] before
income taxes 195,830 27,017 222,847 (17,229) 205,618 107,300 [19,384] 293,534
Provision for
income taxes (79,733) (11,347) (91,080) 4,961(l) (86,119) (39,600) 4,457(v) [121,263]
-------- -------- -------- --------- -------- -------- --------- ---------
Net income [loss] $116,097 $15,670 $131,767 ($12,268) $119,499 $67,700 [$14,927] $172,271
======== ======= ======== ========= ======== ======= ========== ========
Earnings per share
Primary: $2.86 $2.72(m) $3.24(vi)
===== ======== ==========
Fully diluted: $2.84 $2.70(m) $3.22(vi)
===== ======== ===========
Circle K proforma adjustments:
(g) Remove excise taxes of Circle K included in sales and cost of
sales for consistency of presentation.
(h) Allocate Circle K store operating costs and depreciation and
amortization to cost of sales for consistency of presentation.
(i) Record amortization of $593 million of intangibles (primarily
trademarks) acquired in the purchase of Circle K over 40 years
(the revised useful life over which the intangible assets are
expected to be realized).
(j) Record interest on $435.436 million additional debt incurred to
finance the Circle K acquisition. The Circle K acquisition was
financed by the issuance of $240 million of 7-5/8% senior
unsecured notes due 2006 and cash borrowings under Tosco's
Revolver.
(k) Record amortization of debt financing costs over 10 year term of debt.
(l) Record income taxes on taxable pro forma adjustments at Tosco's
current effective tax rate of 39.5%. No deduction has been taken
on amortization of intangibles which will not be deductible for
income tax purposes.
(m) Pro forma earnings per share are based on the number of common and
common equivalent shares that would have been outstanding had the
Circle K acquisition occurred on January 1, 1995.
Unocal pro-forma adjustments:
(i) Remove excise taxes of Unocal included in sales and cost of sales
for consistency of presentation
(ii) Adjust historical depreciation and amortization based on a
purchase price allocation of $1.650 billion.
(iii) Record interest on 6,000,000 5-3/4% Trust Convertible Preferred
Securities (liquidation $50 per share). Record additional interest
on $1.00 billion of additional indebtedness including $600 million
of unsecured term debt, $400 million of borrowings under an
expanded Revolver as adjusted for repayment of $100 million of 9%
Series A First Mortgage Bonds due March 15, 1997.
(iv) Record amortization of debt financing costs over the
respective debt terms.
(v) Record income taxes on pro forma results of Unocal's operations
at Tosco's current effective tax rate of 39.5%.
(vi) Pro forma earnings per share are based on the number of
common and common equivalent shares that would have been
outstanding had the transaction occurred on January 1, 1995.
Note A- The historical statement of income of Circle K is for the year ended
January 31, 1996.
Note B- The pro-forma income statement does not reflect the improvement in
operating contribution anticipated from the merger or the possible reduction in
operating and administrative costs expected from the consolidation of the
Seattle, Washington office of Tosco with the Phoenix, Arizona office of Circle
K, net of non-recurring costs of consolidation.
Note C- The pro-forma income statement does not reflect the improvement in
operating contribution and cost reductions anticipated from the Unocal
transaction.
Note D - Tosco consummated the purchase of Circle K on May 30, 1996.
Accordingly, the results of operations of Circle K are included in Tosco's
historical statement of income for the nine months ended September 30, 1996
from that date. The separately presented historical results of operations
of Circle K, excluding non-recurring charges, are for the period January 1,
1996 to May 29, 1996.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Union Oil Company of California
We have audited the accompanying consolidated balance sheets of 76 Products
Company and subsidiaries (a division of Union Oil Company of California,
dba Unocal) as of September 30, 1996 and December 31, 1995 and the related
consolidated statements of operations, cash flows and parent company
investment for the nine months ended September 30, 1996 and for the years
ended December 31, 1995 and 1994. These consolidated financial statements
are the responsibility of the 76 Products Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 76
Products Company and subsidiaries as of September 30, 1996 and December 31,
1995, and the results of their operations and their cash flows for the nine
months ended September 30, 1996 and for the years ended December 31, 1995
and 1994 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Newport Beach, California
December 11, 1996
<PAGE>
76 PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 8.0 $ 24.9
Accounts and notes receivable (net) 288.1 252.6
Inventories 254.4 249.3
Other current assets 4.6 4.0
Total current assets 555.1 530.8
Property, plant and equipment at cost 3,466.9 3,330.2
Less accumulated depreciation and amortization (1,338.5) (1,253.0)
Property, plant and equipment (net) 2,128.4 2,077.2
Other assets 52.4 32.4
Total assets $ 2,735.9 $2,640.4
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities:
Trade accounts payable $ 287.4 $ 327.1
Accrued liabilities 10.5 11.7
Taxes payable 76.3 69.5
Other current liabilities 27.0 18.7
Total current liabilities 401.2 427.0
Long-term debt and capital lease obligations 2.6 2.7
Accrued environmental and other deferred liabilities 21.0 26.3
Deferred income taxes 166.7 144.5
Total liabilities 591.5 600.5
Parent company investment
Excess of assets over liabilities 2,144.4 2,039.9
Total liabilities and parent company investment $ 2,735.9 $2,640.4
</TABLE>
<PAGE>
76 PRODUCTS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
REVENUES
Sales and services - unrelated parties* $3,615.5 $ 4,014.9 $ 3,668.5
Sales and services - related parties 14.1 21.3 11.9
Total revenues 3,629.6 4,036.2 3,680.4
COSTS AND EXPENSES
Cost of products sold and operating expenses 2,042.5 2,267.9 1,865.4
Cost of products purchased from related parties 369.3 462.1 425.0
Selling, administrative and general expenses 245.7 310.0 346.0
Excise, property and other operating taxes* 757.0 940.9 931.4
Depreciation and amortization 106.9 110.4 114.2
Interest expense 0.9 0.3 0.3
Income (loss) before provision (benefit) for income taxes 107.3 (55.4) (1.9)
Provision (benefit) for income taxes 39.6 (38.0) (0.2)
NET INCOME (LOSS) $ 67.7 $ (17.4) $ (1.7)
* Includes consumer excise taxes of $ 734.5 $ 897.7 $ 829.9
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
76 PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF PARENT COMPANY INVESTMENT
(DOLLARS IN MILLIONS)
Excess of assets over liabilities at December 31, 1993 $1,618.1
Net loss for the year ended December 31, 1994 (1.7)
Net changes in parent company advances 228.4
--------
Excess of assets over liabilities at December 31, 1994 1,844.8
Net loss for the year ended December 31, 1995 (17.4)
Net change in parent company advances 212.5
--------
Excess of assets over liabilities at December 31, 1995 2,039.9
Net income for the nine months ended September 30, 1996 67.7
Net change in parent company advances 36.8
--------
Excess of assets over liabilities at September 30, 1996 $2,144.4
========
The accompanying notes are an integral part of these
consolidated financial statements
<PAGE>
76 PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 67.7 $ (17.4) $ (1.7)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 106.9 110.4 114.2
Gain on sale of assets (pre-tax) (5.0) (2.2) (0.9)
Expense provisions (Uninsured loss,
environmental and litigation) 28.8 31.8 33.5
Provision (benefit) for deferred income
taxes 22.2 (13.0) (6.4)
Equity in earnings of affiliates, net of dividends 0.7 1.1 (0.1)
Provision for doubtful accounts 2.8 0.3 (1.6)
Changes in operating assets and liabilities:
Decrease (increase) in accounts and notes receivable (38.3) (118.9) (45.4)
Decrease (increase) in inventories (5.0) (16.0) (31.0)
Decrease (increase) in other current assets (0.6) 0.6 4.9
Decrease (increase) in other assets (19.0) 6.0 (0.1)
Increase (decrease) in trade accounts payable (39.7) 105.9 58.2
Increase (decrease) in accrued liabilities (1.2) 0.3 0.9
Increase (decrease) in taxes payable 6.7 9.6 (4.9)
Increase (decrease) in accrued environmental/ other
deferred liabilities (25.7) (39.1) (12.8)
Net cash provided by operating activities 101.3 59.4 106.8
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (157.3) (404.4) (366.8)
Proceeds from sale of assets 6.8 2.6 4.0
(Increase) decrease in investment in joint venture affiliates (1.8) (0.5) 9.7
Net cash used in investing activities (152.3) (402.3) (353.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in other long-term liabilities --- (0.5) ---
Net change in parent company advances 34.1 342.1 261.3
Net cash provided by financing activities 34.1 341.6 261.3
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16.9) (1.3) 15.0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24.9 26.2 11.2
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8.0 24.9 26.2
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 09. 0.3 0.3
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
<PAGE>
NOTE 1 - BUSINESS OPERATIONS AND BASIS OF PRESENTATION
76 Products Company and its consolidated subsidiaries (76 Products or the
Company) operate as a business division of Union Oil Company of California (dba
Unocal) which is also referred to as the parent company. This division is
engaged primarily in the manufacture, purchase, transportation and marketing of
petroleum products in the western United States. Operating assets primarily
consist of three refineries in California, service stations, various terminals,
bulk plants, pipelines, tankers and trucks.
On November 17, 1996, Unocal signed a letter of intent to sell its refining,
marketing and transportation assets to Tosco Corporation. A definitive agreement
has not yet been reached by the parties. The accompanying consolidated financial
statements do not include any adjustments that might result from the proposed
sale.
The accompanying consolidated financial statements are presented as if 76
Products had existed as an entity separate from Unocal, during the periods
presented. They include expenses, net of recoveries, attributable to the Company
that were not recorded in the accounts of the business division. In addition,
they include allocations and estimates of direct and indirect corporate
administrative costs attributable to the Company. The methods by which such
amounts are attributed or allocated are deemed reasonable by management.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Company
include the accounts of subsidiaries more than 50 percent owned. Investments in
affiliates owned 50 percent or less are accounted for by the equity method.
Under the equity method, the investments are stated at cost plus the Company's
equity in undistributed earnings after acquisition. Income taxes estimated to be
payable when earnings are distributed are included in deferred income taxes.
USE OF ESTIMATES The consolidated financial statements are prepared in
conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the amounts of assets
and liabilities and the disclosures of contingent liabilities as of the
financial statement date and the amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS The Company participates in Unocal's centralized
funding and cash management system. Under this system, the Company utilizes
Unocal's banks for cash deposits and withdrawals. Cash equivalents consist of
highly liquid investments, such as time deposits and commercial paper issued by
Unocal. At times, bank balances may be in excess of the federally insured limit.
ACCOUNTS RECEIVABLE AND CREDIT RISK The Company grants credit terms in the
normal course of business to its credit card customers, service station dealers,
airlines and other oil companies. As part of its ongoing control procedures, the
Company monitors the credit worthiness of its customers. The Company requires
collateral from service station dealers to support credit sales. An estimated
provision for returns and credit losses has been provided for in the
consolidated financial statements. There were no significant concentrations of
credit risk at September 30, 1996 and December 31, 1995.
INVENTORIES Crude oil and refined product inventories are valued at the
lower of cost or market. Cost is determined on the last-in, first-out
(LIFO) inventory method. Materials and supplies are valued at cost, not in
excess of market value.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost.
Depreciation and amortization are generally provided using the straight-line
method based on estimated useful lives ranging from 20-30 years for refinery
facilities and from 3-30 years for all other property, plant and equipment.
Replacements and major improvements are capitalized. Expenditures for
maintenance and repairs, including those for refinery turnarounds, are expensed.
Upon retirement of property, plant and equipment, remaining book values are
charged to depreciation expense. Gains or losses on sales of properties are
included in current income.
IMPAIRMENT A long-lived asset is reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of the asset may not
be recoverable. Impairment charges are made for the write-down of long-lived
assets when it is determined that the carrying values of the assets may not be
recoverable.
INCOME TAXES The Company's results of operations are included in the
consolidated U.S. federal and state income tax returns of Unocal. Income taxes
are computed on a separate-return basis using the liability method as prescribed
in Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Any resulting current tax liability or refund is settled with
Unocal through the parent company's investment in 76 Products on a current
basis. Under the liability method, the amount of deferred tax liabilities or
assets at the end of each period is determined using the tax rate expected to be
in effect when taxes are actually paid or recovered. Deferred income taxes are
provided for the estimated income tax effect of temporary differences between
financial reporting and tax bases in assets and liabilities. Deferred tax assets
are also provided for certain tax credit carryforwards. A valuation allowance to
reduce deferred tax assets is established, if appropriate.
For purposes of these separate consolidated financial statements, the
stand-alone tax provision has been reduced by California business tax credits,
which would be utilized in the consolidated return, even where such credits
could not be used by the Company on a separate-return basis.
ENVIRONMENTAL EXPENDITURES Environmental expenditures that create future
benefits or contribute to future revenue generation are capitalized.
Expenditures that relate to existing conditions caused by past operations are
expensed.
Liabilities related to environmental assessments and future remediation
costs are recorded when such liabilities are probable and the amounts can
be reasonably estimated. The Company considers a site to present a probable
liability when an investigation has identified environmental remediation
requirements for which the Company is responsible. Other than for
assessments, the timing of accruing for remediation costs generally
coincides with the Company's completion of investigation or feasibility
work and the recommendation of remedy or commitment to an appropriate plan
of action. Environmental liabilities are not discounted or reduced by
possible recoveries from third parties.
FINANCIAL INSTRUMENTS The Company has only limited involvement with
derivative financial instruments and does not use them for trading
purposes. Gains and losses arising from commodity futures contracts are
deferred and included in the basis of the underlying transactions.
NOTE 3 - RELATED PARTY TRANSACTIONS
For purposes of these separate consolidated financial statements, payables and
receivables related to transactions between 76 Products and Unocal, as well as
liabilities and refunds related to income taxes (See Note 2), are included as a
component of parent company investment. Non-cash transfers of properties between
76 Products and Unocal are offset to the parent company investment account on
the consolidated balance sheets.
NOTE 4 - WRITE-DOWN OF ASSETS
During 1996, the Company wrote off $4.9 for costs related to its Pacific
Pipeline investment and $0.7 related to terminal operations. During 1994, the
Company wrote off $3.7 for certain pipeline related assets and $7.0 for costs
related to the reformulated fuels program at the Company's Los Angeles refinery
due to project modifications.
NOTE 5 - EXCISE, PROPERTY AND OTHER OPERATING TAXES
Taxes other than income taxes consist of the following:
Nine Months
Ended September 30, Years Ended December 31,
1996 1995 1994
Consumer excise taxes $ 734.5 $ 897.7 $ 892.9
Real and personal property taxes 18.5 28.4 23.9
Other taxes and duties 4.0 14.8 14.6
Total $ 757.0 $ 940.9 $ 931.4
<PAGE>
NOTE 6 - INCOME TAXES
The provision (benefit) for income taxes consists of the following:
Nine Months
Ended September 30, Years Ended December 31,
1996 1995 1994
Current
Federal $ 37.6 $ (23.0) $ 6.2
State (20.2) (2.0) -
Total 17.4 (25.0) 6.2
Deferred
Federal (0.6) 14.3 (6.4)
State (a) 22.8 (27.3) -
Total 22.2 (13.0) (6.4)
Total provision (benefit) for
income taxes $ 39.6 $ (38.0) $ (0.2)
========== ========== =========
(a) 1995 includes state business tax credits of $28.0.
The following table is a reconciliation of income taxes at the federal
statutory rates to income taxes as reported in the consolidated statements
of operations:
Nine Months
Ended September 30, Years Ended December 31,
1996 1995 1994
Federal statutory rate 35% 35% 35%
Provision (benefit) for income taxes
on book income at statutory rate $ 37.6 $ (19.4) $ (0.7)
California business tax credits,
net of federal tax effect (18.2)
Other 2.0 (0.4) 0.5
$ 39.6 $ (38.0) $ (0.2)
========== ========== =========
<PAGE>
The Company's net deferred income tax assets (liabilities) consist of the
following:
September 30, December 31,
1996 1995
Deferred tax assets (liabilities)
Properties $ (175.8) $ (168.7)
Inventories (12.0) (12.0)
Other deferred tax liabilities (3.9) (4.0)
Other deferred tax assets 25.0 40.2
--------- -----------
Total $ (166.7) $ (144.5)
========= ============
NOTE 7 - ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
September 30, December 31,
1996 1995
Trade accounts receivable (a) $ 299.3 $ 251.8
Notes receivable 1.7 10.9
Total receivables 301.0 262.7
Less allowance for doubtful acounts (12.9) (10.1)
---------- -----------
Net $ 288.1 $ 252.6
========== ============
(a) Excludes $178.3 of trade accounts receivable that were securitized by
Unocal.
On December 15, 1995 Unocal entered into an agreement to sell, on a
revolving basis, an undivided interest in a defined pool of Unocal's trade
receivables. 76 Products' portion of the defined pool is $178.3. As
collections reduce the amount of receivables included in the pool, Unocal
sells new receivables to bring the amount sold up to $178.3. Under the
terms of the agreement, Unocal retains the risk of credit loss and the
collection and administrative responsibilities for the receivables sold.
The receivable amounts reported in the accompanying consolidated balance
sheets are net of receivables sold.
<PAGE>
NOTE 8 - INVENTORIES
Inventories consist of the following:
September 30, December 31,
1996 1995
Crude oil and other feedstocks $ 41.8 $ 40.1
Refined products 175.1 171.7
Materials and supplied 33.5 34.2
Other 4.0 3.3
--------- -------
Total $ 254.4 $ 249.3
========= ========
The current replacement cost of inventories exceeded the LIFO inventory
value included above by $166.9 and $126.8 at September 30, 1996 and
December 31, 1995, respectively.
NOTE 9 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
September 30, December 31,
1996 1995
Refining $ 2,261.7 $ 2,197.0
Marketing 649.7 605.1
Supply & Transportation 509.0 487.4
Other 46.5 40.7
--------- ---------
3,466.9 3,330.2
Less accumulated depreciation
and amortization (1,338.5) (1,253.0)
---------- ----------
Net $ 2,128.4 $ 2,077.2
NOTE 10 - INVESTMENTS IN AFFILIATES
The Company's investments in joint venture affiliates are $22.7 and $21.6
at September 30, 1996 and December 31, 1995, respectively, and are
classified as other assets on the accompanying consolidated balance sheets.
The net earnings related to these investments are included in sales and
services-related parties on the accompanying consolidated statements of
operations in the amounts of $1.6, $2.4, and $3.5 for the periods ended
September 30, 1996, December 31, 1995, and December 31, 1994, respectively.
NOTE 11- FINANCIAL INSTRUMENTS
The Company uses commodity futures contracts with maturities of one year or
less to hedge the impact of fluctuations in prices of crude oil and refined
products. Realized and unrealized changes in the market value of futures
contracts are deferred until the hedged transaction is recognized. At
September 30, 1996 there were no open futures contracts. At December 31,
1995, contracts covering 75 thousand barrels of crude oil and 4.2 million
gallons of heating oil with a notional amount of $4.0 were outstanding. The
fair values of the contracts, based on quoted market prices, approximate
the notional amount.
NOTE 12 - COMMITMENTS
The Company leases service stations, office space and other assets under
operating leases with terms expiring at various dates through the year
2053. Certain leases contain renewal options, escalation clauses and
require the Company to pay property taxes, insurance and maintenance costs.
Certain service station leases provide for the payment of incremental
rentals, in addition to any established minimums, contingent upon the
achievement of specified levels of sales volumes.
Future minimum rental payments for operating leases, including estimated
amounts for property taxes and maintenance costs under such leases, having
initial or remaining noncancelable lease terms in excess of one year are as
follows:
1996 (4th Qtr) $ 5.3
1997 21.5
1998 19.6
1999 18.0
2000 15.8
2001 12.9
Balance 50.1
------
$143.2
=======
Net operating rental expense included in consolidated earnings is as follows:
Ended September 30, Years Ended December 31,
1996 1995 1994
Fixed rentals $ 19.5 $ 25.1 $ 30.4
Contingent rentals (based primarily 7.0 9.7 10.9
on sales and usage)
Less sublease rental income (12.8) (18.7) (18.1)
-------- -------- --------
Net expense $ 13.7 $ 16.1 $ 23.2
======= ======= ========
Unocal has guaranteed certain obligations of the Company's service station
operators amounting to $7.8 at September 30, 1996. Also, the Company
purchases crude oil from a number of suppliers. During 1996, Unocal sold
certain oil producing properties in California to another company. In
connection with that sale, the Company entered into a purchase agreement to
purchase the crude oil produced by such properties with various expiration
dates through December 31, 1998. During the nine months ended September 30,
1996, such purchases accounted for approximately 12% of total crude
purchases. In addition, the Company entered into a one year crude purchase
contract with another entity effective November 1, 1996 through October 31,
1997, which is expected to approximate 10% of future crude purchases.
NOTE 13 - EMPLOYEE BENEFITS EXPENSES
76 Products' employees are included in the various employee benefit plans
of Unocal. These plans include the Unocal Retirement Plan, employee and
retiree medical, dental and life insurance plans, 401(k) and other such
benefits. For the purposes of these separate consolidated financial
statements, 76 Products Company is considered to be participating in
multiemployer benefit plans.
76 Products' allocated share of employee benefit expenses is $35.2, $46.8
and $46.0 for the nine months ended September 30, 1996 and for the years
ended December 31, 1995 and 1994, respectively. No charges have been made
to 76 Products by Unocal for the qualified Unocal Retirement Plan as the
plan is in an overfunded position for the periods stated above.
NOTE 14 - ACCRUED ENVIRONMENTAL LIABILITIES
At September 30, 1996 and December 31, 1995, the Company had accrued $40.4
and $44.1, respectively, for estimated future environmental liabilities, of
which $22.4 and $18.7 were included in other current liabilities. The
accrued environmental liabilities on the accompanying consolidated balance
sheet included $32.9 for the remediation of retail marketing sites as of
September 30, 1996. Some of the remediation is performed as a result of the
Company's programs to replace underground storage tank systems and upgrade
its service stations. The Company estimates it could incur additional
remediation costs for similar work aggregating approximately $17.6.
NOTE 15 - CONTINGENT LIABILITIES
The Company has certain contingent liabilities with respect to material
existing or potential claims, lawsuits and other proceedings, including
those involving environmental, tax and other matters, certain of which are
discussed more specifically below. The Company accrues liabilities when it
is probable that future costs will be incurred and such costs can be
reasonably estimated. Such accruals are based on developments to date, the
Company's estimates of the outcomes of these matters and its experience in
contesting, litigating and settling other matters. As the scope of the
liabilities becomes better defined, there will be changes in the estimates
of future costs, which could have a material effect on the Company's future
results of operations and financial condition or liquidity.
ENVIRONMENTAL MATTERS The Company is subject to loss contingencies pursuant
to federal, state and local environmental laws and regulations. These
include existing and possible future obligations to investigate the effects
of the release or disposal of certain chemical and mineral substances at
various sites; to remediate or restore these sites; to compensate others
for damage to property and natural resources, for remediation and
restoration costs and for personal injuries; and to pay civil penalties
and, in some cases, criminal penalties and punitive damages. These
obligations relate to sites owned by the Company or others and associated
with past and present operations. Liabilities are accrued when it is
probable that future costs will be incurred and such costs can be
reasonably estimated. However, in many cases, investigations are not yet at
a stage where the Company is able to determine whether it is liable or, if
liability is probable, to quantify the liability or estimate a range of
possible exposure. In such cases, the amount of the Company's liabilities
is indeterminable due to the potentially large number of claimants for any
given site or exposure, the unknown magnitude of possible contamination,
the imprecise and conflicting engineering evaluations and estimates of
proper cleanup methods and costs, the unknown timing and extent of the
corrective actions that may be required, the uncertainty attendant to the
possible award of punitive damages, the recent judicial recognition of new
causes of action, and the present state of the law. As discussed in Note
14, the Company has accrued $40.4 and $44.1 for estimated future
liabilities at September 30, 1996 and December 31, 1995, respectively.
Between August 22 and September 6, 1994, a chemical known as "Catacarb" was
released into the environment at the Company's San Francisco Refinery near
Rodeo, California. Persons in the surrounding area have claimed that they
were exposed to the chemical in varying degrees. As a result, lawsuits have
been filed by or on behalf of all persons, alleged to be approximately
eight thousand, claiming that they or their property were adversely
affected by the releases. Unocal has adequately provided in its accounts
for the Catacarb litigation. Such amounts are not included in 76 Product's
separate consolidated financial statements.
OTHER MATTERS The Company also has certain other contingent liabilities
with respect to litigation, claims and contractual agreements arising in
the ordinary course of business. Although these contingencies could result
in expenses or judgments that, if aggregated and assumed to occur within a
single fiscal year, could be material to the Company's results of
operations, the likelihood of such occurrence is considered remote. On the
basis of management's best assessment of the ultimate amount and timing of
these events, such expenses or judgments are not expected to have a
material adverse effect on the Company's consolidated financial condition
or liquidity.
NOTE 16 - FUTURE ACCOUNTING CHANGE
The Company's key employees receive certain stock-based compensation under
Unocal's Long-Term Incentive Plans of 1991 and 1985. The Financial
Accounting Standards Board has issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 is effective for 1996 financial
statements. Under the new standard, companies must either expense the value
of stock-based compensation or disclose in a footnote what the earnings and
earnings per share would be had the value been expensed.
The Company has adopted the disclosure method and the effect on earnings is
immaterial.
<PAGE>
TOSCO CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
____________________, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TOSCO
CORPORATION.
The undersigned stockholder of Tosco Corporation, a Nevada
corporation, revoking any previous proxies for its shares, hereby appoints
Jefferson F. Allen and Wilkes McClave III, and each of them, the true and
lawful attorneys-in-fact and proxies of the undersigned, each having full
power of substitution, to vote all shares of common stock which the
undersigned is entitled to vote at the Special Meeting of Stockholders of
Tosco Corporation to be held on __________, 1997, and at any adjournments
thereof, on all matters set forth in the Notice of Special Meeting of
Stockholders and the related Proxy Statement dated ____________, 1996 as
follows:
(1) Approval of the amendment to the Articles of Incorporation of
Tosco increasing the number of authorized shares of Common Stock of Tosco.
| | | | | |
FOR the AGAINST the ABSTAIN
Proposal Proposal
THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INSTRUCTIONS
ON THE REVERSE SIDE. IN THE ABSENCE OF SUCH INSTRUCTIONS, THIS PROXY WILL
BE VOTED FOR APPROVAL OF THE AMENDMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and the related Proxy Statement dated
_____________, 1996.
Dated ______________, 1997
------------------------
Signature
------------------------
Signature if held jointly
Please date and sign above exactly as your name or names appear hereon, Joint
owners shall each sign personally. Corporate proxies should be signed in full
corporate name by an authorized officer and attested. Persons signing in a
fiduciary capacity should indicate their full name, in such capacity.
