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 JUNE 30, 1996
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 July 31, 1996 was 43,618,313 shares.
<PAGE>
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 AND SIX MONTHS ENDED JUNE 30, 1996
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 6-16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 17-22
EXHIBIT I - COMPUTATION OF EARNINGS PER SHARE 23
PART II. OTHER INFORMATION 24
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 1995
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
THOUSANDS OF DOLLARS
JUNE DECEMBER
30, 31,
1996 1995
---------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $44,178 $ 19,148
Short-term investments and deposits 33,416 29,125
Trade accounts receivable, less
allowance for uncollectibles
of $8,487,000 (1996) and $8,523,000 (1995) 205,133 296,768
Inventories 672,487 489,479
Prepaid expenses and other current assets 49,499 42,363
Deferred income taxes 30,517 4,558
---------------- -----------------
TOTAL CURRENT ASSETS 1,035,230 881,441
Property, plant and equipment, net 1,683,124 961,418
Deferred turnarounds 74,505 82,249
Intangibles (primarily tradenames) 610,154 38,731
Other deferred charges and assets 136,205 39,332
---------------- -----------------
TOTAL ASSETS $ 3,539,218 2,003,171
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 529,469 503,900
Accrued expenses and other liabilities 359,153 166,391
---------------- -----------------
TOTAL CURRENT LIABILITIES 888,622 670,291
Revolver debt 368,000 45,000
Long-term debt 933,411 579,036
Other liabilities 156,140 16,916
Environmental cost liability 96,892 34,379
Deferred income taxes 81,836 30,439
SHAREHOLDERS' EQUITY:
Common Stock - $.75 par value, 50,000,000
shares authorized, 46,167,354 (1996) and
39,613,950 (1995) shares issued 34,626 29,714
Capital in excess of par value 963,667 640,306
Retained earnings 88,586 27,903
Treasury stock, at cost (72,562) (70,813)
---------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 1,014,317 627,110
---------------- -----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 3,539,218 2,003,171
================ =================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1996 1995 1996 1995
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
SALES $2,430,740 $1,904,038 $4,450,763 $3,600,357
--------- ---------- ---------- -----------
Cost of sales 2,265,495 1,829,540 4,202,907 3,493,713
Consolidation charge 13,500 3,000 13,500 5,200
Selling, general and administrative expense 47,867 22,294 74,937 44,896
Interest expense 20,864 15,541 37,587 30,939
Interest income (887) (839) (1,687) (1,738)
----------------- ---------------- ----------------- -----------------
2,346,839 1,869,536 4,327,244 3,573,010
----------------- ---------------- ----------------- -----------------
Income before provision for income taxes 83,901 34,502 123,519 27,347
Provision for income taxes 34,263 13,778 49,915 10,896
----------------- ---------------- ----------------- -----------------
NET INCOME $49,638 $ 20,724 $73,604 $16,451
================= ================ ================= =================
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $ 1.23 $ 0.55 $ 1.88 $ 0.44
================= ================ ================= =================
Fully diluted $ 1.23 $ 0.55 $ 1.87 $ 0.44
================= ================ ================= =================
DIVIDENDS PER COMMON SHARE $ 0.16 $ 0.16 $ 0.32 $ 0.32
================= ================ ================= =================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOSCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THOUSANDS OF DOLLARS
Six Months
Ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 73,604 $ 16,451
Adjustments to arrive at net cash provided by
operating activities:
Depreciation 44,170 29,463
Amortization of deferred items and intangibles 31,262 22,417
Deferred income taxes 22,458 7,740
(Increase) decrease:
Trade accounts receivable (Note 3) 142,856 22,240
Inventories (29,416) (16,028)
Prepaid expenses and other current assets 5,970 4,190
Increase (decrease:)
Accounts payable and accrued liabilities (205,199) 149,543
Other 12,821 (9,674)
-------
Net cash provided by operating activities 98,526 226,342
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Circle K, excluding cash -$740,268, net of issuance
of Common Stock -$327,039 (Note 2) (413,229)
Purchase of property, plant and equipment, net (134,116) (92,712)
Increase in deferred turnarounds, charges and other assets (51,424) (50,082)
Net change in short-term investments and deposits (4,291) (7,706)
-------- --------
Net cash used in investing activities (603,060) (150,500)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bond offering 240,000
Borrowings (repayments) under revolver, net 323,000 (32,000)
Short-term bank repayments (20,000) (41,500)
Dividends on Preferred and Common Stock (12,921) (11,858)
Other (515) (1,213)
---------- --------
Net cash provided by (used in) financing activities 529,564 (86,571)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,030 (10,729)
Cash and cash equivalents at beginning of period 19,148 23,793
------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,178 $ 13,064
========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information with respect to the three and six months
ended June 30, 1996 and 1995 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 The
Circle K Company (Circle K) acquired on May 30, 1996 (Note 2).
All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management estimates and assumptions
that affect the reported amounts of assets and liabilities, reported results of
operations, and disclosures of contingent assets and liabilities.
Nature of Business
Tosco is one of the largest independent refiners and 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. With the acquisition of Circle K, Tosco is the
nation's largest operator of convenience stores.
Reclassifications
Certain previously reported amounts have been reclassified to conform to
classifications adopted in 1996.
CASH, CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND DEPOSITS
Cash and cash equivalents include cash items on hand at convenience stores
or in transit. As such, certain balances are not immediately available for
investment. Cash available for investment is invested in certificates of deposit
and other highly liquid investments. Investments with original maturities of
more than three months and less than twelve months are classified as short-term
investments and carried at cost which approximates market. In accordance with
agreements with various state agencies, Circle K maintains cash balances in
excess of outstanding money orders. Checks outstanding in excess of offsettable
cash balances are reclassified and included in accounts payable.
Tosco purchased director and officer liability insurance coverage from
its wholly owned subsidiary Loil Group Ltd. (Loil), with limits of liability
coverage of $14,100,000 at June 30, 1996 (an amount approximately equal to the
amount of cash and investments of Loil). The assets of Loil are restricted to
payment of defense costs and claims made against the directors and officers of
Tosco.
Inventories
Inventories are stated at the lower of cost or market. The last-in,
first-out (LIFO) method is used to determine cost for raw materials and refined
petroleum products. The cost of retail gasoline inventories is primarily
determined by the first-in, first-out (FIFO) method. The cost of store
merchandise inventories is determined by the retail method.
Intangibles
Intangible assets consist principally of values assigned to tradenames.
Other intangible assets include the excess of cost over the assigned value of
net assets acquired (goodwill) in the Circle K acquisition. Tradenames and
goodwill acquired in the Circle K acquisition are being amortized on a
straight-line basis over 40 years. Other tradenames are being amortized over
their respective licensing periods of up to 15 years.
Supplier Advances
Advances received in connection with supplier marketing or display
allowances are amortized to income over the term of the respective arrangement
based upon purchase levels.
Self-Insurance
Tosco is self-insured up to certain limits for worker's compensation,
property damage and general liability claims. Accruals for loss incidences are
made based on claims experience and certain actuarial assumptions followed in
the insurance industry. Due to uncertainties inherent in the estimation process,
actual losses could differ from amounts accrued.
Excise Taxes
Excise taxes collected on behalf of governmental agencies are excluded from
sales, cost of sales or other expenses.
Environmental Costs
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, which do not contribute to current or future revenue
generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated. Generally, the timing of these accruals coincides with completion of
investigations and other studies or a commitment to a formal plan of action.
Estimated reimbursements of remediation costs of petroleum releases from
underground storage tanks are recorded as assets for those states in which trust
fund programs are currently reimbursing applicants and in which future
reimbursement is probable.
2. Acquisitions
Circle K Acquisition
Tosco completed its acquisition of Circle K on May 30, 1996 (Merger Date)
pursuant to an Agreement and Plan of Merger dated as of February 16, 1996, as
amended (Merger Agreement), by and among Tosco, Circle K, and Tosco Acquisition
Sub, Inc., a wholly-owned subsidiary of Tosco (Acquisition Sub). Pursuant to the
Merger Agreement, Acquisition Sub was merged into Circle K and Circle K became a
wholly owned subsidiary of Tosco. Circle K has approximately 2,500 convenience
stores in the United States, 2,300 of which are company operated and
200 are franchised. Approximately 1,900 of the Circle K stores sell gasoline.
The public shareholders of Circle K (Exchanging Shareholders) received
approximately .6162 shares of common stock of Tosco (Common Stock) for each
share of Circle K Common Stock. The number of shares of Common Stock issued was
determined based upon the average of the closing prices of Common Stock during
the ten consecutive trading days ending on May 28, 1996 (Average Tosco Stock
Price) of $51.0875. A total of 5,320,953 shares of Common Stock was issued to
the Exchanging Shareholders.
Concurrently with the execution of the Merger Agreement, Tosco acquired
16,749,996 shares of Circle K Common Stock, (approximately 65% of the
outstanding shares of Circle K) from certain Circle K shareholders (Selling
Shareholders), pursuant to a stock sale agreement between Tosco and the Selling
Shareholders. The Selling Shareholders received approximately $432.6 million and
based upon the Average Tosco Stock Price 1,171,132 shares of Common Stock.
Tosco also purchased, at prevailing market prices, a portion of Circle K
Common Stock issued pursuant to the exercise of vested stock options held by
employees of Circle K. Tosco purchased a total of 394,532 shares for $11,975,000
from the date of the Merger announcement through the Merger Date. In addition,
options to purchase 436,303 shares, the majority of which did not vest prior to
the Merger Date, were canceled for $6,632,000 (equal to the product of such
options multiplied by the excess of $29.00 over the per share exercise prices).
The total consideration for the acquisition consisted of approximately
$451,000,000 of cash, 6,492,085 shares of Common Stock, and certain other costs.
The cash portion of the acquisition was financed by the issuance of $240 million
of 7 5/8% senior unsecured notes due May 15, 2006 and borrowings under Tosco's
revolving credit facility (Note 7).
The acquisition has been accounted for as a purchase. Accordingly, Circle
K's assets and liabilities are included in the accompanying balance sheet at
values based upon a preliminary allocation of the purchase price. The allocation
will be finalized by the end of 1996 based upon appraisals and other evaluations
currently in progress.
The preliminary allocation of the purchase price is summarized as follows:
(Thousands of Dollars)
May 30,1996
------------
Cash $ 41,465
Other current assets 245,032
Property, plant, and equipment 631,760
Other long-term assets 85,375
Intangibles, principally trade names 555,401
Current liabilities ( 443,740)
Long-term debt (a) ( 114,356)
Other non-current liabilities ( 219,204)
-------------
Total $ 781,733
===========
(a) As required by the terms of its Senior Credit Agreement, Circle
K retired debt obligations of $102,503,750 at the Merger Date from available
cash and cash advances from Tosco.
The consolidated results of operations of Tosco include the operations of
Circle K from the Merger Date. Unaudited pro-forma results of operations of
Tosco, assuming the acquisition had occurred on January 1, 1995 are as follows:
<TABLE>
<CAPTION>
Pro-Forma Six Months Pro-Forma Year
Ended June 30, 1996 Ended December 31, 1995
(Thousands of Dollars)
<S> <C> <C>
Sales $ 5,751,608 (a) $ 10,298,582
=============== ============
Net income from continuing
operations 85,067 (a) $ 80,768
=============== ============
Earnings per share
Primary $ 1.91 (a) $ 1.84
=========== =====
Fully diluted 1.91 (a) $ 1.83
========= =====
</TABLE>
(a) The pro forma financial information excludes the pre-tax charge of
$13,500,000 ($8,100,000 after-tax, $.21 per share), recorded in the second
quarter of 1996, for the consolidation of Tosco's marketing division following
the acquisition of Circle K. The costs of consolidation include employee
severance, office lease termination and other costs that are not associated with
or do not benefit activities that will be continued.
The pro forma financial information is presented for informational
purposes only and 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 operations. Accordingly,
it is not necessarily indicative of the operating results that would have
occurred had the acquisition of Circle K been consummated as January 1, 1995,
nor are they necessarily indicative of future operating results.
Northeast marketing and refining assets
On February 2, 1996, Tosco completed the purchase of the U.S. Northeast
marketing and refining assets from British Petroleum (BP) for $59,000,000,
excluding inventories. Under the purchase agreement, Tosco obtained an exclusive
license valid for fifteen years, with various renewal options, to market retail
gasoline and diesel fuels under the BP brand in the U.S. Northeast. The term of
Tosco's exclusive license in nine Western states was also extended to fifteen
years from the closing date. The purchase included the 190,000 B/D Trainer
Refinery near Philadelphia (which was taken over in a non-operating mode) (Note
13), petroleum product terminals and certain associated pipeline interests. In
May 1996, Tosco sold 3 of the terminals acquired which were surplus to Tosco's
needs. Other acquired assets may be sold. BP retains environmental obligations
relating to the Trainer Refinery and other properties included in the sale. The
final allocation of the purchase price will be determined by the end of 1996.
3. Accounts Receivable
In June 1995, Tosco entered into a three year agreement with a financial
institution to sell on a revolving basis up to $100,000,000 of an undivided
percentage ownership interest in a designated pool of accounts receivable
(Receivable Transfer Agreement). The agreement was amended in May 1996 to
increase the program to $175,000,000. As of June 30, 1996 and December 31, 1995,
approximately $174,300,000 and $99,800,000 respectively, of receivables had been
sold.
4. Inventories
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
-------------------------- --------------
Tosco excluding
Circle K Circle K Consolidated
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Raw materials (a) $ 229,207 $ 229,207 $223,795
Intermediates (a) 15,666 15,666 18,147
Refined petroleum products (a) 283,064 283,064 242,558
Retail merchandise 3,892 110,572 114,464 2,851
Retail gasoline/diesel 2,532(a) 25,205 27,737 2,128
Retail other 167 2,182 2,349 -
------------- ----------- ----------- -------
$ 534,528 $ 137,959 $ 672,487 $489,479
========= ========= ========== ========
(a) The excess of replacement cost over the value of inventories based upon the
LIFO method was $109,565,000 and $43,304,000 at June 30, 1996 and December 31,
1995, respectively.
</TABLE>
5. DEFERRED CHARGES AND OTHER ASSETS
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
----------------------------- --------------
Tosco excluding
Circle K Circle K Consolidated
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Deferred financing costs $ 17,355 $ - $ 17,355 $ 15,701
Service station dealer advances 10,607 10,607 9,304
State environmental trust funds
(Note 8) 27,772 27,772
Investment in joint venture (a) 19,120 19,120
Other assets 21,650 39,701 61,351 14,327
------------- ------- ------------ -----------
$ 49,612 $ 86,593 $ 136,205 $ 39,332
=========== ======== ========== ==========
(a) Joint venture with Southguard Corporation under which 164 stores
operate under the Circle K name in Texas and Oklahoma under a franchising
agreement.
</TABLE>
6. Accrued Expenses and Other Liabilities
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
--------------------- -------------
Tosco excluding
Circle K Circle K Consolidated
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Accrued taxes other than taxes on income $ 76,935 $ 34,711 $111,646 $ 64,122
Accrued compensation and related benefits 21,427 29,959 51,386 15,759
Income taxes payable (receivable) 3,569 ( 6,600) ( 3,031) ( 1,943)
Acquisition related liabilities 15,923 8,775 24,698 37,841
Other accrued costs 25,370 25,030 50,400 29,841
Environmental remediation (Note 8) 26,000 26,000
Workers compensation and general liability 5,979 30,082 36,061
Lottery and money order payables 189 48,720 48,909
Short term borrowings (a) 20,000
Current installments of long-term debt 771 12,313 13,084 771
------------- ---------- ---------- ------------
$ 150,163 $208,990 $ 359,153 $166,391
========== ======== ========= ========
(a) Represents unsecured cash borrowings under short-term lines of credit with
interest at alternative rates at Tosco's option.
</TABLE>
7. Long Term Debt
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------------------------ ---------------
Tosco excluding
Circle K Circle K Consolidated
(Thousands of Dollars)
<S> <C> <C> <C> <C>
COLLATERALIZED
First Mortgage Bonds due 3/15/97 (a) $ 100,000 $ 100,000 $ 100,000
First Mortgage Bonds due 3/15/02 200,000 200,000 200,000
First Mortgage Bonds due 5/15/03 150,000 150,000 150,000
Credit Agreement (b) 45,000
Capital Leases (c) $ 69,962 69,962
Real Estate Installment Purchase (d) 55,779 55,779
Other 4,978 776 5,754 4,807
UNCOLLATERALIZED
New Credit Agreement (b) 368,000 368,000
7% Notes due 2000 125,000 125,000 125,000
7-5/8% Notes due 2006 240,000 240,000
------------ --------------- ----------- --------
Total debt, including current portion 1,187,978 126,517 1,314,495 624,807
Less: Current installments 771 12,313 13,084 771
------------ ----------- ----------- ---------
Total long-term debt $1,187,207 $ 114,204 $1,301,411 $ 624,036
========== ========= ========= ==========
(a) The First Mortgage Bonds due March 15, 1997 are classified as long-term
debt because of Tosco's intent and ability to refinance this amount on a
long-term basis.
(b) Effective April 8, 1996, Tosco entered into an amended and restated
revolving credit agreement expiring in April, 2000 (New Credit Agreement). The
New Credit Agreement provides Tosco with an unsecured $600,000,000 revolving
credit facility that is available to Tosco for working capital, and general
corporate purposes, including acquisitions (Note 2). Tosco's former $450,000,000
revolving credit agreement was a collateralized loan agreement, expiring in
April, 1998, which restricted borrowings to a percentage of a borrowing base.
(c) Circle K leases the majority of its stores and certain other properties
and equipment. The store leases generally have initial terms of up to
twenty-five years with one to three five-year renewal options. The net book
value of assets under capital leases approximated the capital lease obligation.
(d) In 2007, Circle K will receive title to approximately 200 convenience stores
which it currently operates in various states. Payments under the agreement have
been discounted at 9%.
</TABLE>
Utilization of Revolving Credit Facilities
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(Thousands of Dollars)
<S> <C> <C>
Revolving credit facilities
Cash borrowings $ 368,000 $ 45,000
Letters of credit 97,462 90,055
----------- ------------
Total utilization 465,462 135,055
Availability 134,538 314,945
Total credit line $ 600,000 $ 450,000
=========== ===========
</TABLE>
Interest paid was $34,645,000 and $24,386,000 for the first six months of
1996 and 1995, respectively.
8. Environmental Liabilities
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------------------------ --------------
Tosco excluding
Circle K Circle K Consolidated
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Environmental liabilities $ 37,913 $ 47,938 (a) $ 85,851 $ 34,379
Environmental remediation settlement (b) 11,041 11,041
------------ --------- --------- ---------
$37,913 $ 58,979 $ 96,892 $ 34,379
======= ======== ======== =========
(a) Long-term portion of environmental remediation costs to remove or
mitigate contamination from underground storage tanks (Note 6). Estimated
future claims for reimbursements of remediation costs from various state trust
fund programs are included in other assets ($27,772,000) and
receivables ($10,000,000).
(b) Settlement agreement with certain state environmental agencies,
pursuant to which Circle K agreed to pay for environmental remediation of
certain former leased stores. Annual payments ranging from approximately
$3,500,000 to $6,000,000 commence July 1996. The present value of the payments
discounted at 9%, is approximately $15,000,000, $4,000,000 of which is included
in current liabilities.
</TABLE>
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 its liability for
environmental costs, net of liabilities transferred pursuant to the settlement
of outstanding litigation with the predecessor owners of the Avon Refinery
concerning environmental issues. While Tosco believes it has adequately provided
for environmental exposures and accruals for trust fund reimbursements, should
these matters be resolved unfavorably, they could have a material adverse effect
on Tosco's long-term consolidated financial position and results of operations.
9. Other Liabilities
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------------------------ -------------
Tosco excluding
Circle K Circle K Consolidated
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Tax settlement (a) $ $ 26,728 $ 26,728$
Contract liability (b) 41,819 41,819
Worker's compensation and
general liability claims 36,102 36,102
Other 25,705 25,786 51,491 16,916
----------- ---------- --------- ---------
$ 25,705 $130,435 $156,140 $ 16,916
========== ======== ======== ========
(a) Tax settlement obligation payable over a six-year term with a balloon
payment of $12,041,000 due in 1999. Interest at 8% is payable annually in
arrears.
(b) Contract liability related to certain obligations with a remaining term
of approximately twenty years.
</TABLE>
10. CAPITAL STOCK
Tosco issued 6,492,085 shares of Common Stock in connection with the
acquisition of Circle K (Note 2).
Quarterly dividends of $.16 per common share were paid on June 28, 1996
to shareholders of record on June 18, 1996.
11. INCOME TAXES
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Federal $ 27,752 $ 10,678 $ 40,651 $ 8,191
State 6,864 2,444 9,637 1,914
Foreign ( 353) 656 ( 373) 791
---------- ----------- ----------- ----------
Provision for income taxes $ 34,263 $ 13,778 $ 49,915 $ 10,896
======== ======== ========= ========
Cash payments (refunds) of income
taxes, net $ 17,734 $ 1,295 $ 16,968 ($ 2,451)
======== ========= ======== =========
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
Three cases have been filed against Circle K in Idaho state courts which
involve former employees who allege discrimination due to their gender and age,
one of which has been granted class certification. Circle K denies such
allegations. The extent of liability, if any, is unknown.
There are various other legal proceedings and claims pending against Tosco
and Circle K which are common to its operations. While it is not feasible to
predict or determine the ultimate outcome of these matters, it is the opinion of
management that these suits will not result in monetary damages which in the
aggregate would be material to the business or operations of Tosco.
13. SUBSEQUENT EVENTS
On July 30, 1996, Tosco announced that if certain conditions are met in
advance, it has a potential plan to modernize and reopen its refinery in
Trainer, Pennsylvania (Note 2). The plan would include a modernization program
of approximately $50,000,000 and a site-wide turnaround of all processing units.
The updated refinery would be reconfigured to operate in the 150,000 B/D range.
The one-year program will proceed only if a satisfactory agreement with
organized labor can be reached promptly and permits from various regulatory
agencies are received.
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 1995. The Annual Report sets forth Selected Financial Data which, in
summary form, reviewed Tosco's results of operations and capitalization over the
five-year period 1991-1995. This Management's Discussion and Analysis updates
that data.
ACQUISITIONS
Tosco completed its acquisition of The Circle K Corporation (Circle K) on
May 30, 1996. Circle K has approximately 2,500 convenience stores in the U.S.,
2,300 of which are company operated. Approximately 1,900 of the Circle
K stores sell gasoline.
On February 2, 1996, Tosco purchased British Petroleum's U.S. Northeast
marketing and refining assets. The assets purchased included an exclusive
fifteen-year BP marketing license in the U.S. Northeast and an extension of
Tosco's existing BP license in nine Western states. Tosco also acquired a
refinery in Trainer, Pennsylvania (which was taken over in a non-operating
mode), petroleum terminals and certain other assets. See Note 2 to the
Consolidated Financial Statements.
Results of Operations - Three Months Ended June 30
Three Months Ended June 30,
1996 1995
---- ----
(Thousands of Dollars)
Sales (a) $ 2,430,740 $1,904,038
Cost of sales 2,265,495 1,829,540
--------- ---------
Operating contribution 165,245 74,498
Consolidation charge 13,500 3,000
Selling, general, and administrative expense 47,867 22,294
Net interest expense 19,977 14,702
---------- ------------
Pre-tax income 83,901 34,502
Provision for income taxes 34,263 13,778
---------- ------------
Net income $ 49,638 $ 20,724
========== ===========
(a) The increase in sales is primarily due to Tosco's acquisitions and higher
petroleum sales prices.
REFINING DATA SUMMARY
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS OF BARRELS PER DAY (B/D) EXCEPT FOR REFINING MARGINS)
<TABLE>
<CAPTION>
Avon Bayway (a) Ferndale Consolidated
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude oil 158.6 148.2 230.1 229.2 88.5 81.0 477.2 458.4
Add'l refinery feeds 15.4 15.3 52.7 65.2 .3 .5 68.4 81.0
---------- -------- --------- ------- --------- ------- -------- -------
Total charges 174.0 163.5 282.8 294.4 88.8 81.5 545.6 539.4
========= ======== ========= ======= ========== ===== ====== ======
Petroleum products produced:
Clean Products (b) 146.2 139.2 232.5 246.0 60.5 55.0 439.2 440.2
Other finished products 19.8 21.5 54.8 54.1 25.8 23.6 100.4 99.2
---------- ------ ------ ------- -------- ----- ------ ------
Total finished products
produced 166.0 160.7 287.3 300.1 86.3 78.6 539.6 539.4
------ ----- ------- ------- -------- ------ ------- ------
Operating margin per charge
barrel (c) (d) $ 9.09 $ 5.16 $ 3.67 $ 3.04 $ 4.18 $ 2.77 $5.48 $ 4.26
========== ======= ======= ======== ======== ======= ======= =======
(a) Bayway's margins include the results of hedges designed to lock in a
predetermined level of operating margins on a varying percentage of Bayway's
production. At June 30, 1996, Tosco had hedged approximately 2% of Bayway's
remaining 1996 production.
(b) Clean products are defined as clean transportation fuels (gasoline, diesel,
and jet fuel) and heating oil.
(c) Per-charge-barrel operating margin is defined as sales minus cost of sales,
excluding refinery operating costs and non-operating items, divided by total
refinery charges.
(d) As illustrated by the table, operating margins vary significantly by
refinery. This variance is due to a number of reasons including marketing
conditions in the principal areas served by the refineries, each refinery's
configuration and complexity (ability to convert raw materials into clean
products), and maintenance schedules.
</TABLE>
Tosco earned $49.6 million, or $1.23 per fully diluted share, on sales of
$2.4 billion for the second quarter of 1996, compared to net income of $20.7
million, or $.55 per fully diluted share, on sales of $1.9 billion for the
second quarter of 1995. Results of operations for the second quarter of 1996
include an after-tax charge of $8.1 million ($.20 per share) for the
consolidation costs of Tosco's marketing division following the acquisition of
Circle K. The costs of consolidation in 1996 include employee severance, office
lease termination, and other costs that are not associated with or do not
benefit activities that will be continued. See Note 2 to the Consolidated
Financial Statements. Results of operations for the second quarter of 1995
included an after-tax charge of $1.8 million related to a major expense
reduction program at the Avon Refinery.
Tosco generated an operating contribution (income before the consolidation
charge, selling, general and administrative expense, net interest expense, and
income taxes) for the second quarter of 1996 of $165.2 million, an increase of
$91.0 million from 1995. The increase was primarily due to good refining margins
and the acquisition of Circle K.
Consolidated margins increased by $1.22 per barrel to $5.48 per barrel due
to increases in sales prices, primarily gasoline, which outpaced higher raw
material costs. The better margins were due to a variety of factors including
reduced supplies resulting from West Cost industry shutdowns of processing units
caused by fires and other unscheduled operating difficulties. Higher operating
margins were aided by higher production results as total raw material charges
increased by 6,200 B/D to a 545,600 B/D. Bayway also improved its operating
margins by reducing its throughput ratio of high-cost, partially refined
feedstocks to total raw material charges.
Retail marketing fuel margins averaged $.12 per gallon for the second
quarter of 1996 compared to $.09 for the second quarter of 1995 and volume sold
increased 45,000 B/D to 115,000 B/D. The increases are primarily due to the May
30th acquisition of Circle K and strong retail margins in June. Merchandise
gross profit (defined as merchandise sales less merchandise cost of sales
excluding store operating expenses) increased $50 million due to the Circle K
acquisition.
The increase in selling, general, and administrative expense for the
second quarter of 1996 is attributable to Tosco's acquisitions and higher levels
of incentive compensation due to higher levels of operating income. Interest
expense increased in 1996, despite the reduction in interest costs resulting
from a receivable transfer agreement, primarily due to higher debt levels
related to Tosco's acquisitions.
<TABLE>
<CAPTION>
Results of Operations - Six Months Ended June 30
Six Months Ended June 30,
1996 1995
---- ----
(Thousands of Dollars)
<S> <C> <C>
Sales $4,450,763 $3,600,357
Cost of sales 4,202,907 3,493,713
----------- -----------
Operating contribution 247,856 106,644
Consolidation charge 13,500 5,200
Selling, general, and administrative expense 74,937 44,896
Net interest expense 35,900 29,201
----------- -------------
Pre-tax income 123,519 27,347
Provision for income taxes 49,915 10,896
----------- ------------
Net income $ 73,604 $ 16,451
========== ============
</TABLE>
<TABLE>
<CAPTION>
REFINING DATA SUMMARY
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS OF B/D EXCEPT FOR REFINING MARGINS)
AVON (a) Bayway Ferndale (a) CONSOLIDATED
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude oil 159.2 154.6 228.6 227.8 86.2 68.6 474.0 451.0
Add'l refinery feeds 14.9 10.0 51.3 66.5 1.5 1.4 67.7 77.9
--------- -------- ------------------ ---------- ------- -------- --------
Total charges 174.1 164.6 279.9 294.3 87.7 70.0 541.7 528.9
======== ======== ======== ======== ========= ======= ======== ======
Petroleum products produced:
Clean Products 141.9 123.3 233.1 246.0 60.9 45.7 435.9 415.0
Other finished products 26.6 37.6 52.6 54.1 24.7 22.1 103.9 113.8
--------- ----- ------ ------- ------- ------- -------- ------
Total finished products
produced 168.5 160.9 285.7 300.1 85.6 67.8 539.8 528.8
========== ====== ======= ====== ========= ======= ======= =======
Operating margin per charge
barrel $ 6.89 $ 4.85 $ 3.91 $ 2.73 $ 3.93 $ 2.58 $4.87 $3.87
========== ======== ======== ======= ========= ====== ====== ======
(a) Avon's catalytic cracker, the refinery's principal gasoline production unit,
and the processing units at the Ferndale Refinery were shutdown for 55 and 33
days, respectively, in the first quarter of 1995 for major scheduled turnaround
maintenance.
</TABLE>
Tosco earned $73.6 million, or $1.87 per fully diluted share, on sales of
$4.5 billion for the first six months of 1996, compared to $16.5 million, or
$.44 per fully diluted share, on sales of $3.6 billion for the first six months
of 1995. Results of operations for the first half of 1996 include an after-tax
consolidation charge of $8.1 million ($.20 per share). Results of operations for
the first half of 1995 include an after-tax restructuring charge of $3.1 million
($.08 per share).
Tosco generated an operating contribution for the first half of 1996 of
$247.9 million, an increase of $141 million from 1995. The increase was
attributable to good refining margins, the acquisition of Circle K
and Bayway's strong first quarter 1996 performance due to the cold winter
weather in the Northeast. Conversely, first quarter 1995 operating contribution
was severely impacted by extremely poor refining margins and extensive scheduled
turnaround maintenance. Retail marketing fuel margins averaged $.10 per gallon
for the first half of 1996 compared to $.09 for the comparable 1995 period.
Retail volumes sold also increased by 26,700 B/D to 94,200 B/D due to
Tosco's acquisitions.
The increase in selling, general, and administrative expense for the first
six months of 1996 versus the comparable period of 1995 was due to Tosco's
expanded operations. The increase in net interest expense for 1996 is primarily
due to higher levels of debt due to Tosco's acquisitions.
OUTLOOK
Results of operations continue to be determined by two factors: the
operating efficiency of the refineries and refining and retail marketing
margins. The first half of 1996 had no major turnaround activity. Assuming
reasonable margins, Tosco presently expects to run its operating refineries at
high production levels for the balance of 1996. The favorable refining margins
and strong retail margins of the second quarter have continued into the third
quarter. However, East Coast refining margins, which deteriorated late in the
second quarter, remain weak. Tosco is not able to predict margins due to
uncertainties associated with oil markets. In view of uncertain operating
margins in highly competitive markets, Tosco is committed to improving its
operating results by lowering costs in all areas.
Tosco's acquisitions of BP's Northeast assets and of Circle K advanced
Tosco's goal of becoming a major gasoline retailer. In addition, the Circle K
acquisition made Tosco the largest operator of convenience stores in the United
States. Tosco expects to achieve significant economies of scale from the Circle
K acquisition and enhanced earnings and cash flows.
Construction on a solvent deasphalting unit (SDA) at the Bayway Refinery is
expected to be completed in August 1996. The SDA will process approximately
20,000 B/D of low-value residual fuel to produce feedstock for the catcracker,
the world's largest and the refinery's principal gasoline manufacturing unit.
The SDA will reduce the amount of high-cost, partially refined feedstocks that
Bayway currently purchases from third parties and improve Bayway's margins. In
addition, the first of four chartered crude oil tankers will begin deliveries of
crude oil in the third quarter. The tankers will transport crude oil from
Bayway's leased deep-water terminal in Nova Scotia, Canada or in direct
shipments from suppliers and should lower shipping costs and the potential for
spills.
On July 30, 1996, Tosco announced that if certain conditions are met in
advance, it has a potential plan to modernize and reopen its refinery in
Trainer, Pennsylvania. The plan would include a modernization program of
approximately $50 million and a site-wide turnaround of all processing units.
The updated refinery would be reconfigured to operate in the 150,000 B/D range.
The one-year program will proceed only if a satisfactory agreement with
organized labor can be reached promptly and permits are received from various
regulatory agencies.
CASH FLOWS AND LIQUIDITY
As summarized in the Statement of Cash Flows, cash increased by $25
million during the first six months of 1996 as cash provided by operating and
financing activities of $98 million and $530 million, respectively, exceeded
cash used in investing of $603 million.
Cash provided by operating activities of $98 million was from cash
earnings from operations of $172 million (net income plus depreciation,
amortization, and deferred income taxes) and an increase in other sources of $13
million offset by an increase in working capital of $87 million.
Net cash used in investing activities totaled $603 million, primarily for
the acquisition of Circle K of $413 million, capital additions of $134 million
(including $40 million for the BP Northeast refining and marketing assets),
increases in deferred charges and other assets of $51 million and increases in
short-term investments and deposits of $4 million.
Cash provided by financing activities totaled $530 million, consisting of
proceeds from Tosco's $240 million bond offering, net borrowings under the
revolving credit facility of $323 million, partially offset by short-term bank
repayments of $20 million, and dividends on common stock and other payments of
$13 million.
Liquidity (as measured by cash, short-term investments and deposits and
unused credit facilities) decreased by $151 million during 1996 due to a
decrease in unused credit facilities of $180 million, partially offset by an
increase of $25 million in cash and cash equivalents and $4 million short-term
investments and deposits. At June 30, 1996, liquidity totaled $212 million (an
amount which Tosco believes is adequate to meet its expected liquidity demands
for at least the next twelve months).
Tosco has the intent and ability to refinance $100 million of First
Mortgage Bonds due March 15, 1997 on a long-term basis.
CAPITAL EXPENDITURES AND CAPITALIZATION
On February 2, 1996, Tosco completed the purchase of BP's U.S. Northeast
marketing and refining assets. On May 30, 1996, Tosco completed its acquisition
of Circle K. Other capital expenditures for the first six months of 1996 of $94
million were for budgeted capital projects, primarily at the Avon Refinery and
retail outlets. Capital spending programs continue to address the completion of
reformulated fuel specifications, compliance with environmental regulations and
permits, operating flexibility and reliability, personnel/process safety, and
retail expansion and modernization. Due to the acquisition of Circle K, capital
spending for retail operations is focused on integrating both operations and
enhancing existing retail sites that can be financed from internal cash flows.
At June 30, 1996, total shareholders' equity was $1.0 billion, an
increase from December 31, 1995 of $388 million due to the issuance of
approximately 6.5 million shares of Common Stock ($327 million) and net income
of $74 million less dividend and other payments of $13 million. Debt, including
current maturities and short-term bank borrowings, increased by $670 million to
$1.3 billion at June 30, 1996 primarily due to the acquisition of Circle K.
TOSCO CORPORATION AND SUBSIDIARIES
PART I - EXHIBIT I
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In Thousands Except Per Share Data
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income $49,638 $20,724 $73,604 $16,451
Weighted average number of shares
outstanding during the period 39,290 37,060 38,268 37,055
Stock option equivalents 1,015 465 923 356
------- ------- ------- -------
Shares used for computation of
primary earnings per share 40,305 37,525 39,191 37,411
Additional stock option equivalents 17 109 37
------- ------- ------- -------
Shares and equivalents used for
computation of fully diluted
earnings per share 40,322 37,525 39,300 37,448
========= ======== ======== =======
Earnings per share:
Primary $ 1.23 $ 0.55 $ 1.88 $ 0.44
======== ======== ======== ======
Fully diluted $ 1.23 $ 0.55 $ 1.87 $ 0.44
======== ======== ======== ======
</TABLE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 19, 1996 the United States Court of Appeals for the Eighth Circuit
issued its decision in the case of Lion Oil Company v. Tosco Corporation (United
States Court of Appeals for the Eighth Circuit, Case No. 95-3270) upholding the
District Court's decision granting Tosco's Motion for Judgement on the Pleading
and dismissing Lion Oil Company's complaint with prejudice. The Circuit Court
affirmed the lower court's finding that Tosco was not liable to Lion Oil for
investigation and remediation of alleged environmental contamination of a
refinery located in El Dorado, Arkansas, formerly owned by Tosco and sold to
Lion Oil in 1985.
A number of cases were filed by former employees against Circle K
Corporation, now a Tosco subsidiary, in Idaho state court alleging
discrimination and termination due to gender and age. (Vernita Bunch and Helen
Lewis v. Circle K Corporation, District Court for the Sixth Judicial District of
the State of Idaho, Case No. CV OC 95-50466, Rhonda Terrell v. Circle K
Corporation, District Court for the Fourth Judicial District of the State of
Idaho, Case No, CV OC 95-00930D and Constance Clark, et al. v. Circle K
Corporation, District Court for the Fourth Judicial District of the State of
Idaho, Case No. CV OC 96-01115D). The Clark case has been certified as a class
action. The extent of liability, if any, is unknown. Discovery is in progress in
all cases.
Item 2. Changes in the Rights of Security Holders
On May 30, 1996 Tosco issued 6,492,085 shares of Common Stock in connection
with the acquisition of Circle K. In addition, Tosco issued $240,000,000 of 7
5/8% senior unsecured notes due 2006 as part of the Circle K acquisition.
Item 4. Submission of Matters to Vote of Security Holders
On May 16, 1996 an Annual Meeting of the Stockholders was held. The table
below briefly describes the proposals and the results of the shareholder vote.
Election of Directors
Names Votes For Withhold Authority
Jefferson F. Allen 31,781,198 48,698
Joseph B. Carr 31,721,630 108,266
Patrick M. DeBarros 31,781,074 48,882
Houston I. Flournoy 31,745,452 84,444
Clarence G. Frame 31,752,835 77,061
Edmund A. Hajim 31,780,773 49,123
Joseph P. Ingrassia 31,744,010 85,886
Charles J. Luellen 31,776,932 52,964
Thomas D. O'Malley 31,779,646 50,250
Ratification and approval Votes For Votes Against Abstain
of appointment of Coopers & Lybrand
as independent accountants 31,796,034 16,492 17,370
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11. Computation of Earnings Per Share (See Part I, Exhibit I).
b. Reports on Form 8-K
A Report on Form 8-K dated April 25, 1996 was filed relating to the merger
of a wholly-owned subsidiary of Tosco with and into the Circle K Corporation
by merger pursuant to an Agreement and Plan of Merger dated February 16, 1996.
This Form 8-K reported the following financial statements under Item 7.
Financial Statements, Pro Forma Financial Information and Exhibits:
1. Audited consolidated financial statements of the
Circle K Corporation and subsidiaries ("Circle K")
as of April 30, 1995 and 1994, and for the year ended
April 30, 1995 and for the period July 27, 1993 (date of inception),
to April 30, 1994, and the consolidated statements of operations,
stockholders' equity and cash flows of Circle K's predecessor
and its subsidiaries for the period May 1, 1993 to
July 26, 1993 and for the year ended April 30, 1993.
2. Unaudited consolidated financial statements of Circle
K as of January 31, 1996 and for the nine months ended
January 31, 1996 and January 31, 1995.
3. Tosco Corporation and Circle K pro forma combined
financial statements (unaudited), consisting of pro
forma combined balance sheet as of December 31, 1995 and
pro forma combined statement of income for the year
ended December 31, 1995.
A Report on Form 8-K dated June 12, 1996 was filed relating to the
completion of Tosco's transaction for the Circle K Corporation pursuant
to an Agreement and Plan of Merger dated February 16, 1996 (Reported as Item 2.
Acquisition or Disposition of Assets). This Form 8-K also reported the following
information under Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits:
Financial Statements
The financial statements of Circle K are incorporated herein by reference
to Tosco's Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 25, 1996.
Pro Forma Financial Information
It is impracticable to file with this Report the pro forma financial
information required to be filed in connection with the Merger pursuant to
Article 11 of Regulation S-X. Such pro forma financial information will be filed
by amendment as soon as practicable and not later than 60 days after this Report
must be filed. The pro forma financial information was subsequently filed on
August 12, 1996 on a Form 8-K/A amending such Form 8-K.
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: August 14, 1996 By:/S/ JEFFERSON F. ALLEN
--------------------------
(Jefferson F. Allen)
Executive Vice President
and Chief Financial Officer
By:/S/ ROBERT I. SANTO
----------------------
(Robert I. Santo)
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 44,178
<SECURITIES> 33,416
<RECEIVABLES> 213,620
<ALLOWANCES> 8,487
<INVENTORY> 672,487
<CURRENT-ASSETS> 1,035,230
<PP&E> 2,105,671
<DEPRECIATION> 422,547
<TOTAL-ASSETS> 3,539,218
<CURRENT-LIABILITIES> 888,622
<BONDS> 450,000
0
0
<COMMON> 34,626
<OTHER-SE> 963,667
<TOTAL-LIABILITY-AND-EQUITY> 3,539,218
<SALES> 4,450,763
<TOTAL-REVENUES> 4,450,763
<CGS> 4,202,907
<TOTAL-COSTS> 4,202,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,587
<INCOME-PRETAX> 123,519
<INCOME-TAX> 49,915
<INCOME-CONTINUING> 73,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,604
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.87
</TABLE>
