PROSPECTUS SUPPLEMENT
(To Prospectus dated May 2, 1996)
$240,000,000
Tosco Corporation
7 5/8% NOTES DUE 2006
----------
Interest payable May 15 and November 15
----------
THE 7 5/8% NOTES DUE 2006 (THE "NOTES") WILL BE REDEEMABLE IN WHOLE OR IN PART,
AT THE OPTION OF TOSCO CORPORATION ("TOSCO" OR THE "COMPANY"), AT ANY TIME, AT A
REDEMPTION PRICE EQUAL TO THE GREATER OF (I) 100% OF THEIR PRINCIPAL AMOUNT OR
(II) THE SUM OF THE PRESENT VALUES OF THE REMAINING SCHEDULED PAYMENTS OF
PRINCIPAL AND INTEREST THEREON DISCOUNTED TO THE DATE OF REDEMPTION ON A
SEMI-ANNUAL BASIS (ASSUMING A 360-DAY YEAR CONSISTING OF TWELVE 30-DAY MONTHS)
AT THE TREASURY YIELD (AS DEFINED HEREIN), PLUS IN EACH CASE ACCRUED INTEREST TO
THE DATE OF REDEMPTION. THE NOTES ARE SOMETIMES REFERRED TO HEREIN AS THE
"OFFERED SECURITIES." THE OFFERED SECURITIES WILL BE ISSUED ONLY IN BOOK-ENTRY
FORM THROUGH THE FACILITIES OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY").
SEE "DESCRIPTION OF THE NOTES" HEREIN.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
PRICE 99.892% AND ACCRUED INTEREST
----------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
--------- -------------- -------------
Per Note ................ 99.892% 1.050% 98.842%
Total ................... $239,740,800 $2,520,000 $237,220,800
- ----------
(1) Plus accrued interest from May 15, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(3) Before deducting expenses payable by the Company, estimated at $190,000.
----------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Andrews &
Kurth L.L.P., counsel for the Underwriters. It is expected that delivery of the
Notes will be made on or about May 28, 1996, through the book-entry facilities
of The Depository Trust Company, New York, New York, against payment therefor in
immediately available funds.
----------
MORGAN STANLEY & CO.
Incorporated
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
BA SECURITIES, INC. CHASE SECURITIES INC. FURMAN SELZ LLC
May 22, 1996
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER, AGENT OR DEALER. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE NOTES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Prospectus Supplement Summary ......................................... S- 3
The Company ........................................................... S- 5
Use of Proceeds ....................................................... S- 5
Capitalization ........................................................ S- 6
Selected Consolidated Financial Data .................................. S- 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. S- 8
Description of the Notes .............................................. S-16
Underwriters .......................................................... S-19
PROSPECTUS
Available Information ................................................. 2
Incorporation of Certain Documents by Reference ....................... 3
The Company ........................................................... 4
The Circle K Corporation Acquisition .................................. 4
Recent Developments ................................................... 4
Use of Proceeds ....................................................... 4
Ratio of Earnings to Fixed Charges .................................... 5
Description of Debt Securities ........................................ 5
Plan of Distribution .................................................. 10
Legal Matters ......................................................... 11
Experts ............................................................... 11
----------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements (including the
Notes thereto) incorporated herein by reference.
THE COMPANY
Tosco, through divisions and subsidiaries, is a large independent refiner,
wholesaler, and retail marketer of petroleum products, principally on the East
and West Coasts of the United States. Tosco has extensive distribution
facilities and also engages in related commercial activities throughout the
United States and internationally.
During 1995, Tosco focused its efforts on consolidating its 1993 and 1994
acquisitions of retail marketing assets in the Pacific Northwest, California and
Arizona and expanding both the British Petroleum ("BP") brand in nine western
states and the Exxon brand in Arizona, where Tosco has the right to market under
those brands. Tosco continued to maintain and upgrade its three refineries,
Avon, Bayway and Ferndale, to remain competitive in the domestic refining
markets.
Tosco also has interests in oil shale properties in Colorado and Utah.
THE OFFERING
Securities ............................ $240,000,000 of 7 5/8% Notes due 2006.
Maturity .............................. May 15, 2006.
Interest Payment Dates ................ May 15 and November 15 commencing
November 15, 1996.
Optional Redemption ................... The Notes will be redeemable in whole
or in part, at the option of the
Company, at any time, at a
redemption price equal to the
greater of (i) 100% of their
principal amount or (ii) the sum of
the present values of the remaining
scheduled payments of principal and
interest thereon discounted to the
date of redemption on a semi-annual
basis (assuming a 360-day year
consisting of twelve 30-day months)
at the Treasury Yield (as defined
herein), plus in each case accrued
interest to the date of redemption.
Collateral ............................ None.
Ranking ............................... The Notes will be unsecured senior
obligations of the Company, and will
rank pari passu in right of payment
with all existing and future
unsecured senior indebtedness of the
Company and senior in right of
payment to all existing and future
subordinated indebtedness of the
Company.
At March 31, 1996, the Company had
outstanding $300 million of first
mortgage bonds collateralized by its
Avon Refinery, $150 million of first
mortgage bonds collateralized by its
Bayway Refinery, a revolving credit
facility (the "Credit Agreement") of
up to $450 million collateralized by
accounts receivable, inventory and
investments, and $5 million of other
collateralized debt. As of March 31,
1996, the Company had $159 million
of cash borrowings and outstanding
letters of credit of approximately
$86 million under the Credit
Agreement. In April 1996, the Credit
Agreement was replaced by a $600
million unsecured revolving credit
facility (the "New Credit
Agreement"). See "Recent
Developments" in the accompanying
Prospectus. There is no other
subsidiary debt which is effectively
senior to the Notes.
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Use of Proceeds ....................... To pay a portion of the purchase
price for the acquisition of The
Circle K Corporation; however, if
such acquisition is not consummated,
the net proceeds will be used to
repay indebtedness outstanding under
the New Credit Agreement and for
working capital and general
corporate purposes. See "Use of
Proceeds" below and "The Circle K
Corporation Acquisition" in the
accompanying Prospectus.
Certain Covenants ..................... The Indenture contains certain
covenants that, among other things,
limit the ability of the Company and
its Subsidiaries to (i) incur Debt
collateralized by a lien on a
Principal Property and (ii) enter
into a sale and lease back
transaction, and limit the ability
of the Company's Subsidiaries having
a Principal Property to incur debt
with a maturity greater than twelve
months or issue preferred stock. See
"Description of the Notes."
- --------------------------------------------------------------------------------
S-4
<PAGE>
THE COMPANY
Tosco, through divisions and subsidiaries, is a large independent refiner,
wholesaler, and retail marketer of petroleum products, principally on the East
and West Coasts of the United States. Tosco has extensive distribution
facilities and also engages in related commercial activities throughout the
United States and internationally.
During 1995, Tosco focused its efforts on consolidating its 1993 and 1994
acquisitions of retail marketing assets in the Pacific Northwest, California and
Arizona and expanding both the BP brand in nine western states and the Exxon
brand in Arizona, where Tosco has the right to market under those brands. Tosco
continued to maintain and upgrade its three refineries, Avon, Bayway and
Ferndale, to remain competitive in the domestic refining markets.
On February 16, 1996, Tosco entered into an agreement to acquire by merger
(the "Merger") The Circle K Corporation ("Circle K"), a company which has
approximately 2,500 convenience stores in the United States. See "The Circle K
Corporation Acquisition" in the accompanying Prospectus.
Tosco also has interests in oil shale properties in Colorado and Utah.
Tosco was incorporated under the laws of the State of Nevada in 1955. Its
principal executive offices are located at 72 Cummings Point Road, Stamford,
Connecticut 06902, and its telephone number is (203) 977-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes to
pay a portion of the purchase price for the acquisition of Circle K; however, if
the Circle K acquisition is not consummated, the net proceeds will be used to
repay indebtedness outstanding under the Company's New Credit Agreement and for
working capital and general corporate purposes. The New Credit Agreement matures
in April 2000 and bears interest at a margin over one of several fluctuating
rates. The interest rate on loans under the Credit Agreement averaged 6.9% for
the year ended December 31, 1995 and 6.3% for the quarter ended March 31, 1996.
S-5
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1996, (i) the actual
unaudited consolidated capitalization of Tosco and its subsidiaries and (ii) the
unaudited consolidated capitalization of Tosco and its subsidiaries as adjusted
to reflect (x) the Merger with Circle K, (y) the issuance and sale of the Notes
at a discount totalling $259,000 and (z) the application of the estimated net
proceeds from the sale of the Notes of $237,031,000, after deducting $190,000 of
estimated expenses, to pay a portion of the purchase price for the acquisition
of Circle K. The table assumes that approximately 6,941,000 shares of Tosco
Common Stock will be issued in the Merger at an average price of $47.5125 per
share. If the average price of a share of Tosco Common Stock is $51.00 per
share, approximately 6,467,000 shares of Tosco Common Stock will be issued in
the Merger. The following table should be read in conjunction with Tosco's
Consolidated Financial Statements and related notes which are incorporated
herein by reference.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------
HISTORICAL AS ADJUSTED (C)
---------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents, short-term investments and deposits(a) ............. $ 60,973 $ 67,371
Long-term debt--collateralized:
Revolving credit facilities(b) ............................................ 159,000 417,025
Mortgage bonds guaranteed on a collateralized basis by the
Bayway Refining Company .................................................. 150,000 150,000
Mortgage bonds collateralized by the Avon Refinery ........................ 300,000 300,000
Capital leases ............................................................ -- 72,778
Real estate installment purchase ........................................... -- 56,479
Other ...................................................................... 4,893 5,683
Long-term debt--uncollateralized:
7% Notes, $125 million face amount due 2000 ............................... 125,000 125,000
7 5/8% Notes, $240 million face amount due 2006 ........................... -- 239,741
---------- ----------
Total debt, including current portion ..................................... 738,893 1,366,706
Less current portion ...................................................... 771 25,952
---------- ----------
Total long-term debt ............................................. 738,122 1,340,754
---------- ----------
Shareholders' equity:
Common Stock, $.75 par value, 50,000,000 shares authorized,
39,675,269 shares issued; as adjusted, 46,616,658 shares (including
treasury shares) ........................................................ 29,757 34,963
Capital in excess of par value ............................................ 641,231 965,328
Retained earnings ......................................................... 45,925 45,925
Less common stock held in treasury, at cost (2,549,041 shares) ............ (71,833) (71,833)
---------- ----------
Total shareholders' equity .............................................. 645,080 974,383
---------- ----------
Total capitalization .................................................. 1,383,202 2,315,137
Total capitalization, cash, cash equivalents, short-term
investments and deposits ............................................. $1,444,175 $2,382,508
========== ==========
</TABLE>
- ----------
(a) Includes approximately $14 million of restricted cash held by a
wholly-owned subsidiary of Tosco.
(b) At March 31, 1996, the Credit Agreement provided for an extension of up to
$450 million in credit. At that date, the Company had $159 million of cash
borrowings and outstanding letters of credit of approximately $86 million
under the Credit Agreement.
(c) The as adjusted capitalization of Tosco includes the historical balance
sheet of Circle K as of January 31, 1996.
S-6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company for each of the five years in the period ended December 31, 1995 and for
the three-month periods ended March 31, 1995 and 1996. The selected consolidated
financial data for the interim periods have been derived from the unaudited
interim financial statements and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation. The selected consolidated financial data for the interim periods
are not necessarily indicative of the results to be achieved for the full years.
This table should be read in conjunction with the Company's Consolidated
Financial Statements and related notes incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31,(A) MARCH 31,(A)
-------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT FOR PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Sales ......................................... $1,608.7 $1,861.0 $3,559.2 $6,365.8 $7,284.0 $1,696.3 $2,020.0
======== ======== ======== ======== ======== ======== ========
Gross profit on sales ......................... $ 121.2 $ 132.7 $ 251.8 $ 260.4 $ 284.8 $ 32.1 $ 82.6
Inventory valuation (recovery) writedown ...... 17.7 (17.7)
Restructuring charge .......................... 5.2 2.2
Environmental cost accrual .................... 4.0 25.0 6.0
-------- -------- -------- -------- -------- -------- --------
Operating contribution ........................ 117.2 107.7 234.1 272.1 279.6 29.9 $ 82.6
Selling, general and administrative expense ... 30.2 38.7 58.2 84.1 95.9 22.6 27.1
Interest expense, net ......................... 16.5 18.0 44.1 54.2 56.3 14.5 15.9
-------- -------- -------- -------- -------- -------- --------
Pre-tax income (loss) ......................... 70.5 51.0 131.8 133.8 127.4 (7.2) 39.6
Provision (credit) for income taxes (b) ....... 2.4 20.8 51.2 50.0 50.3 (2.9) 15.7
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations
before other items ........................... 68.1 30.2 80.6 83.8 77.1 (4.3) 24.0
Discontinued operations, net of
income taxes:
Income (loss) from operations ............... 7.3 (15.9)
Estimated loss on disposal .................. (105.0)
Cumulative effect of accounting changes ....... 16.2
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ............................. $ 75.4 $( 74.5) $ 80.6 $ 83.8 $ 77.1 $ (4.3) $ 24.0
======== ======== ======== ======== ======== ======== ========
INCOME (LOSS) PER COMMON AND
common equivalent share
Primary:
From continuing operations ................... $ 2.15 $ .68 $ 2.38 $ 2.27 $ 2.06 $ (.12) $ 0.63
From discontinued operations ................. .24 (4.08)
From cumulative effect of accounting changes . .55
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ............................. $ 2.39 ($ 2.85) $ 2.38 $ 2.27 $ 2.06 $ (.12) $ 0.63
======== ======== ======== ======== ======== ======== ========
Fully-diluted:
From continuing operations ................... $ 2.12 $ .68 $ 2.33 $ 2.24 $ 2.04 $ (.12) $ 0.63
From discontinued operations ................. .23 (4.08)
From cumulative effect of accounting changes . .55
-------- -------- -------- -------- -------- -------- --------
Net income (loss) ............................. $ 2.35 ($ 2.85) $ 2.33 $ 2.24 $ 2.04 $ (.12) $ 0.63
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD)
Total assets .................................. $ 871.0 $ 952.9 $1,492.9 $1,797.2 $2,003.1 $1,872.3 $2,136.4
======== ======== ======== ======== ======== ======== ========
long-term debt ................................ $ 211.9 $ 356.8 $ 603.3 $ 687.4 $ 624.0 $ 727.5 $ 738.1
Preferred stock ............................... 111.2 111.2 111.2
Common shareholders' equity ................... 385.6 270.2 410.4 575.5 627.1 565.0 645.1
-------- -------- -------- -------- -------- -------- --------
Total capitalization .......................... $ 708.7 $ 738.2 $1,124.9 $1,262.9 $1,251.1 $1,292.5 $1,383.2
======== ======== ======== ======== ======== ======== ========
OTHER INFORMATION
Ratio of long-term debt to total
capitalization ............................... .30 .48 .54 .54 0.499 .56 0.53
Current ratio ................................. 1.6 2.6 2.2 1.8 1.3 1.6 1.4
Book value per share .......................... $ 12.78 $ 9.10 $ 12.60 $ 15.53 $ 16.92 $ 15.25 $ 17.38
Cash dividends per share ...................... $ .60 $ .60 $ .60 $ .62 $ 0.64 $ .16 $ 0.16
Ratio of earnings to fixed charges(c) ......... 3.55x 2.71x 3.28x 2.83x 2.49x .61x 2.81x
</TABLE>
- -------------------
(a) Reflects Seminole Fertilizer Corporation as a discontinued operation for
all periods.
(b) Reflects the provision for income taxes at regular tax rates effective
January 1, 1992 pursuant to the provisions of SFAS No. 109.
(c) The ratios of earnings to fixed charges represent the number of times
"fixed charges" were covered by "earnings." "Fixed charges" consist of
interest on outstanding debt, one-third (the proportion deemed
representative of the interest factor) of net rentals and amortization of
debt discount and expense. "Earnings" consist of consolidated income from
operations before income taxes and fixed charges. Earnings for the first
quarter of 1995 were less than fixed charges by approximately $8.2 million.
S-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Tosco earned $24.0 million, or $.63 per fully-diluted share, on sales of
$2.0 billion for the first quarter of 1996, compared to a net loss of $4.3
million, or ($.12) per fully-diluted share, on sales of $1.7 billion for the
first quarter of 1995. The improved results of operations was primarily
attributable to strong East Coast operating margins, lower levels of scheduled
maintenance, and lower cash operating expenses. For the year 1995, Tosco earned
$77.1 million, or $2.04 per fully-diluted share, on sales of $7.3 billion
compared to earnings of $83.8 million, or $2.24 per fully-diluted share, on
sales of $6.4 billion for 1994. Excluding special items, operating results
improved over 1994 despite lower refinery operating margins, primarily as a
result of Tosco's strategy to diversify the Company's base by expanding
downstream into retail operations. In February 1996, Tosco completed the
acquisition of BP's northeast marketing and refining assets ("BP Northeast") and
agreed to acquire Circle K. Tosco also took major steps to move to an unsecured
debt structure. In 1995, Tosco paid down collateralized bank debt from the
proceeds of a $125 million unsecured debt offering and a receivable transfer
agreement. In April 1996, Tosco replaced its former $450 million collateralized
credit facility with a $600 million unsecured revolving credit facility.
Management's discussion and analysis of financial condition and results of
operations contain references to Tosco's Consolidated Financial Statements and
related notes contained in Tosco's Annual Report on Form 10-K for the year ended
December 31, 1995 and Form 10-Q for the quarterly period ended March 31, 1996,
which are incorporated herein by reference.
<TABLE>
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1996
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales (a) ..................................................... $2,020,023 $1,696,319
Cost of sales ................................................. 1,937,412 1,664,173
Restructuring charge .......................................... 2,200
---------- ----------
Operating contribution ........................................ 82,611 29,946
Selling, general, and administrative expense .................. 27,070 22,602
Net interest expense .......................................... 15,923 14,499
---------- ----------
Pre-tax income (loss) ......................................... 39,618 (7,155)
Provision (credit) for income taxes ........................... 15,652 (2,882)
---------- -----------
Net income (loss) ............................................. $ 23,966 $ (4,273)
========== ===========
</TABLE>
- ------------------
(a) The increase in sales for the first quarter of 1996 was primarily due to
higher sales volumes and sales prices. Higher sales volumes were due to
increased commercial activity (in response to higher demands for heating
oil on the East Coast of the United States) and increased refinery
production levels.
REFINING DATA SUMMARY
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS OF BARRELS PER DAY (B/D) EXCEPT FOR OPERATING MARGINS)
<TABLE>
<CAPTION>
AVON BAYWAY FERNDALE CONSOLIDATED
------------------ ------------------ ------------------ ----------------
1996 1995(A) 1996(B) 1995 1996 1995(A) 1996 1995
------ ------- ------- ------ ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude oil ............... 159.8 161.2 227.2 226.3 83.9 56.1 470.9 443.6
Add'l refinery feeds .... 14.5 4.5 50.0 67.7 2.7 2.4 67.2 74.6
----- ----- ----- ----- ---- ---- ----- -----
Total throughout ........ 174.3 165.7 277.2 294.0 86.6 58.5 538.1 518.2
===== ===== ===== ===== ===== ===== ===== =====
Petroleum products
produced:
Clean products(c) ..... 137.5 107.5 233.5 245.8 61.0 36.3 432.0 389.6
Other finished
products ............. 35.7 54.1 50.4 54.4 23.4 13.4 109.5 121.9
----- ------ ------ ------ ------ ------ ------- ------
Total finished products
produced .............. 173.2 161.6 283.9 300.2 84.4 49.7 541.5 511.5
===== ===== ===== ===== ===== ===== ===== =====
Operating margin
per charge barrel
(d)(e) ................ $4.65 $4.54 $4.17 $2.43 $3.67 $2.32 $4.25 $3.09
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
S-8
<PAGE>
- ----------
(a) Avon's cat cracker (the principal gasoline production unit) and the
processing units at the Ferndale Refinery were shut down for scheduled
maintenance during the first quarter of 1995.
(b) Bayway improved its operating margin during the first quarter of 1996 by
reducing the ratio of high-cost, partially refined feedstocks to total
refinery charges, while improving the ratio of higher-valued clean products
to total yields. 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.
(c) Clean products are defined as clean transportation fuels (gasoline, diesel
and jet fuel) and heating oil.
(d) 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.
(e) 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, their
configuration and complexity (ability to convert raw materials into clean
products), and maintenance schedules.
Tosco earned $24.0 million, or $.63 per fully diluted share, on sales of
$2.0 billion for the first quarter of 1996, compared to a net loss of $4.3
million, or ($.12) per fully diluted share, on sales of $1.7 billion for the
first quarter of 1995. Results of operations for the first quarter of 1995
included a restructuring charge of $2.2 million ($1.3 million after-tax, $.04
per share), related to a major expense reduction program at the Avon Refinery.
Tosco generated an operating contribution (income before selling, general
and administrative expense, net interest expense, and income taxes) for the
first quarter of 1996 of $82.6 million, an increase of $50.5 million from 1995.
The increase was primarily attributable to strong operating margins at Bayway,
lower levels of scheduled maintenance at the three refineries and lower cash
operating expenses. Consolidated margins increased $1.16 per barrel to $4.25 per
barrel but varied widely by refinery. Consolidated raw material throughput for
the first quarter of 1996 increased by 19,900 barrels per day (B/D) to 538,100
B/D, and production of clean transportation fuels and heating oil increased by
42,400 B/D to 432,000 B/D over the first quarter of 1995.
Avon's operating margin modestly improved by $.11 per barrel (2%) over
year-ago levels to $4.65 per barrel. Higher production results and improved per
barrel refinery operating costs were nearly offset by lower refining margins, as
finished product price increases lagged higher costs of raw materials. The lag
in product prices was primarily attributable to the destocking of conventional
gasoline inventories to meet the cleaner burning reformulated gasoline standards
of the California Air Resources Board (CARB) effective March 1, 1996 (CARB Phase
II gasoline). Raw material throughput increased by 8,600 B/D to 174,300 B/D and
yields of clean transportation fuels increased by 30,000 B/D to 137,500 B/D.
Avon's fluid catalytic cracker, the refinery's principal gasoline production
unit, was shut down for 55 days during the first quarter of 1995.
Bayway's operating margins for the first quarter of 1996 increased $1.74
per barrel over the comparable 1995 quarter to $4.17 per barrel. Bayway achieved
improved margins despite higher raw material costs, primarily because the cold
winter weather in the Northeast created strong product demand. This was in sharp
contrast to the weak market conditions of the first quarter of 1995 when mild
winter conditions created a surplus of heating oil, and higher production costs
of reformulated gasoline could not be fully recovered in highly competitive
markets.
Ferndale's operating margins improved by $1.35 per barrel to $3.67 per
barrel. The improvement was primarily attributable to the refinery being fully
operational for the first quarter of 1996. Ferndale's processing units were
shutdown for 33 days in the first quarter of 1995 for scheduled turnaround
maintenance.
Retail marketing fuel margins averaged $.08 per gallon for the first three
months of 1996, compared to $.09 for the comparable 1995 quarter. Retail fuel
margins declined because increases in wholesale product costs could not be fully
recovered in higher retail prices. These lower retail margins were partially
offset by increased sales volumes due to the acquisition of BP's Northeast
marketing system in February 1996.
The increase in selling, general, and administrative expense for the first
quarter of 1996 was primarily attributable to Tosco's expanded operations.
S-9
<PAGE>
In 1995, Tosco entered into a three-year agreement with a financial
institution to sell on a revolving basis up to $100 million of an undivided
percentage ownership interest in a designated pool of accounts receivable
(Receivable Transfer Agreement). Costs of the Receivable Transfer Agreement are
included in cost of sales. Interest expense increased in 1996, despite the
reduction in interest costs resulting from the Receivable Transfer Agreement,
due to higher average debt levels and higher price levels of raw materials and
products. The acquisition of BP Northeast marketing and refinery assets was the
principal reason for higher average debt levels. See Notes 2 and 3 to the
Company's Consolidated Financial Statements which are incorporated herein by
reference.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS--1995
FOR THE YEAR ENDED
DECEMBER 31,
------------------------
1995 1994
---------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Sales ........................................................... $7,284,051 $6,365,757
Cost of sales ................................................... 6,999,301 6,105,293
Restructuring charge ............................................ 5,200
Inventory valuation recovery .................................... (17,651)
Environmental cost accrual ...................................... 6,000
---------- ----------
Operating contribution .......................................... 279,550 272,115
Selling, general, and administrative expense .................... 95,858 84,123
Net interest expense ............................................ 56,253 54,143
---------- ----------
Pre-tax income .................................................. 127,439 133,849
Provision for income taxes ...................................... 50,381 50,006
---------- ----------
Net income ...................................................... $ 77,058 $ 83,843
========== ==========
</TABLE>
Tosco earned $77.1 million, or $2.04 per fully diluted share, on sales of
$7.3 billion for 1995, compared to $83.8 million, or $2.24 per fully diluted
share, on sales of $6.4 billion for 1994. Results of operations for 1995 include
a restructuring charge totaling $5.2 million ($3.1 million after tax, $.08 per
share) related to a major expense reduction program at the Avon Refinery.
Results of operations for 1994 include the reversal of 1993's $17.7 million
($10.7 million after tax, $.29 per share) writedown of LIFO inventories, and a
$6 million ($3.6 million after tax, $.10 per share) environmental cost accrual.
See Notes 5 and 15 to the 1995 Consolidated Financial Statements incorporated
herein by reference.
Excluding special items, Tosco generated an operating contribution for 1995
of $285 million, an increase of $24 million over 1994. The increase was
primarily attributable to the excellent production operations of the Avon and
Bayway Refineries, lower production costs, moderately higher East Coast
operating margins, and the strong performance of expanded retail operations,
which more than offset declines in West Coast refinery operating margins and
reduced production from the Ferndale Refinery.
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<PAGE>
<TABLE>
<CAPTION>
REFINING DATA SUMMARY
YEAR ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF B/D EXCEPT FOR OPERATING MARGINS)
AVON BAYWAY FERNDALE CONSOLIDATED
---------------- ----------------- --------------- ---------------
1995(A) 1994(B) 1995(C) 1994(B) 1995(A) 1994 1995 1994
------- ------- ------- ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude and other raw materials ...... 167.7 160.8 291.6 252.3 81.6 90.6 540.9 503.7
===== ===== ===== ===== ==== ==== ===== =====
Petroleum products produced:
Clean products .................... 136.8 132.7 241.5 204.8 54.6 62.8 432.9 400.3
Other finished products ........... 29.8 26.7 55.7 51.5 24.9 25.7 110.4 103.9
Total finished products produced ... 166.6 159.4 297.2 256.3 79.5 88.5 543.3 504.2
Operating margin per charge
barrel ............................ $5.56 $6.23 $2.88 $2.63 $3.25 $3.62 $3.77 $3.96
</TABLE>
- ----------
(a) Avon's cat cracker (the principal gasoline production unit) and the
processing units at the Ferndale Refinery were shut down for scheduled
maintenance during the first quarter of 1995.
(b) Avon's fluid coker (the principal conversion unit) and Bayway's fluid cat
cracker were shut down for scheduled turnaround maintenance in 1994.
(c) Bayway's production results for 1995 reflect the benefit of expanded crude
distillation capacity completed in the third quarter of 1994.
The Avon Refinery's operating contribution declined from 1994 due to poor
operating margins that overshadowed record production. The cat cracker, Avon's
principal gasoline production unit, was shut down for major scheduled
maintenance for 55 days in the first quarter of 1995, negatively impacting clean
product yields for the year. Despite the cat cracker shutdown, raw materials
processed averaged 167,700 B/D, an increase of 6,900 B/D over 1994 and the
highest in Avon's history. Production of clean transportation fuels increased by
4,100 B/D to 136,800 B/D. However, Avon's operating margin per charge barrel
declined by $.67 to $5.56 per barrel for 1995 as excess supply in highly
competitive markets depressed product prices, particularly in the first quarter
of 1995. In response to continuing poor operating margins, Tosco implemented a
restructuring program to reduce costs and increase efficiency. The restructuring
cost of $5.2 million, recorded in the first and second quarters of 1995, was
primarily for the then-anticipated severance costs of approximately 175 people
at the Avon Refinery and related support locations.
Bayway's operating contribution for 1995 improved over 1994 due to record
refinery production rates, higher margins, and lower production costs. Raw
material throughput increased 39,300 B/D to a record 291,600 B/D, while
production of clean transportation fuels and heating oil also increased 36,700
B/D to a record 241,500 B/D. Expanded crude distillation capacity completed in
1994 and record production unit rates of the fluid catalytic cracking unit, the
world's largest and Bayway's principal gasoline production unit, were the
principal reasons for the record production rates. The cat cracker was shut down
for scheduled turnaround maintenance in 1994. Bayway's operating margin per
charge barrel improved $.25 per barrel for the year, primarily during the second
half of 1995 as a result of increased sale prices. Operating margins for the
year were hurt by the exceptionally weak market conditions of the first quarter
of 1995 caused by the combined impact of a surplus of heating oil and poor
gasoline markets. Operating margins improved during the balance of the year as
demand strengthened and uncertainty over the introduction of reformulated
gasoline (RFG) subsided.
Ferndale's operating contribution declined from 1994 primarily because of
poor refining margins and the shutdown of the refinery for 33 days for
turnaround maintenance. Ferndale's operating margin per charge barrel declined
$.37 per barrel and refinery throughput declined 9,000 B/D to 81,600 B/D.
Retail operations generated an operating contribution of $75 million for
1995, an increase of $11 million from 1994. Retail volumes sold increased 18,000
B/D to 68,000 B/D due to the acquisition of retail operations in Northern
California and Arizona from British Petroleum (BP) and Exxon in August 1994 and
December 1994, respectively. Retail gasoline margins remained approximately the
same at $.10 per gallon for 1995 and 1994.
Selling, general, and administrative (SG&A) expense increased by $11.7
million to $95.9 million due to Tosco's expanded retail operations and higher
levels of incentive compensation (due to higher levels of operating income
S-11
<PAGE>
before special items), partially offset by certain benefit recoveries. SG&A
expense for 1994 was reduced by insurance recoveries of $3.5 million (related to
now-settled litigation with the predecessor owners of the Avon Refinery over
environmental matters) and $1.0 million (related to a retroactive adjustment of
prior-year medical costs based on favorable claim experience). See Note 15 to
the 1995 Consolidated Financial Statements incorporated herein by reference.
In June 1995, Tosco entered into the Receivable Transfer Agreement. Costs
of the Receivable Transfer Agreement totaled $3.1 million for six months (less
than interest costs would have been on equivalent cash borrowings under Tosco's
Credit Agreement). Interest expense increased in 1995, despite the reduction in
interest costs resulting from the Receivable Transfer Agreement, due to higher
debt levels related to Tosco's expanded operations.
The provision for income taxes for 1995 increased by $.4 million despite
lower pre-tax income because the tax provision for 1994 included recognition of
revised income tax benefits of $2.9 million related to Tosco's discontinued
fertilizer operations.
ACQUISITIONS
On February 2, 1996, Tosco completed the purchase of the U.S. Northeast
marketing and refining assets from BP for $59 million, 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. The license covers Delaware, Maryland, the
Washington D.C. metropolitan area, Pennsylvania, New Jersey, New York,
Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire and Maine.
Portions of western Pennsylvania and Maryland are excluded. The term of Tosco's
exclusive license in nine Western states was also extended to fifteen years. The
purchase included the 180,000 B/D Marcus Hook Refinery near Philadelphia (which
was taken over in a non-operating mode), petroleum product terminals and certain
associated pipeline interests (some of which are surplus to Tosco's needs and
will be sold). Tosco has also offered to buy BP's one-third interest in the
Harbor pipeline, on which BP's partners have a right of first refusal to acquire
BP's interest. BP retains environmental obligations relating to the Marcus Hook
Refinery and other properties included in the sale. The purchase price was fully
allocated to property, plant, and equipment ($40 million) and trademarks and
licenses ($19 million) based upon their estimated fair values as of the date of
acquisition. A final allocation of the purchase price will be determined by the
end of 1996.
The acquisition of Circle K is expected to be completed at the end of May
1996, subject to approval by Circle K's stockholders. The acquisition will be
financed by the issuance of common stock of Tosco (Common Stock), the planned
sale of $200 million of Notes offered hereby, borrowings under Tosco's $600
million New Credit Agreement and from cash and other credit resources.
The Circle K acquisition will make Tosco the largest operator of
company-owned convenience stores in the United States and will more than double
the Company's present retail gasolines sales volume. Where appropriate, Circle
K's sites will be rebranded to carry the BP brand. Many of Tosco's approximate
140 convenience stores will also be converted to Circle K stores with the BP
gasoline brand. Tosco intends to further expand the Circle K convenience store
chain by exploring opportunities to convert certain Tosco-owned but
dealer-operated sites to company-operated Circle K convenience stores, and to
license existing jobbers with the Circle K brand for their convenience stores.
Tosco expects to achieve significant economies of scale from the Circle K
acquisition. The management of Tosco's current retail operations, presently
located in Seattle, will be combined with Circle K's operations in Phoenix. The
costs of consolidation will be recorded in the second and third quarters as
appropriate. In addition, Tosco's oil industry background and supply system for
gasoline should result in improved purchasing of fuel for the Circle K stores,
while Circle K's marketing expertise and convenience store supply and
distribution system should improve Tosco's convenience store system. After
completion of the integration of Circle K's operations, Tosco expects the Circle
K acquisition to be additive to per share earnings.
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<PAGE>
OUTLOOK
Results of operations are determined by two principal factors: the
operating efficiency of the refineries and refining and retail operating
margins. The first quarter 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 Marcus Hook Refinery is
expected to remain in a non-operating mode in 1996. Tosco is not able to predict
the level or trend of refinery and retail operating margins because of the
uncertainties associated with oil markets. Operating margins at the beginning of
the second quarter of 1996 have improved over first quarter levels primarily
because higher wholesale gasoline prices have outpaced increasing raw material
costs, especially in California. The better margins are due to a variety of
factors, including the completion of destocking of conventional gasoline to meet
CARB Phase II standards and reduced supplies resulting from unscheduled industry
shutdowns of processing units. These improved margins have allowed the partial
recovery of costs of capital investments completed to meet the cleaner burning
fuel standards. Higher wholesale gasoline prices have negatively impacted retail
gasoline margins, as Tosco, as well as other marketers, have not been able to
recover such higher costs in the retail market.
Tosco, and other refiners, made significant capital expenditures to meet
CARB Phase II gasoline standards, effective March 1, 1996. Tosco also entered
into a seven-year arrangement with Chevron U.S.A. Products Company which
provides Tosco 35,000 B/D of CARB Phase II gasoline for 35,000 B/D of
conventional gasoline plus differentials. Tosco is not certain that the higher
cost of CARB Phase II gasoline will be fully recovered in higher sales prices.
In November 1995, the 22-year ban on the export of Alaskan North Slope
(ANS) crude oil, a primary source of raw material for West Coast refineries, was
lifted. This action may lead to higher costs for ANS and other domestic crude
oils.
In January 1996, Atlantic Richfield Company (ARCO) informed Tosco that it
would not extend its ten-year exchange agreement when it expires at the end of
1996. Under the exchange agreement, ARCO presently delivers 50,000 B/D of ANS
crude oil to the Avon Refinery in exchange for a variable quantity of gasoline.
The economic effects of the termination are uncertain. However, Tosco expects to
acquire alternative suppliers and customers (including its own expanded retail
operations) to replace ARCO when the exchange agreement expires.
In view of uncertain operating margins and highly competitive markets,
Tosco is committed to improving its results by lowering costs in all areas of
operation. Restructuring efforts taken in the first half of 1995 produced
reductions in unit operating costs at the Avon Refinery. These efforts are
continuing. West Coast operating and administrative functions were consolidated
in late 1995 and the Company was reorganized into functional organizations
in February 1996. The acquisition of Circle K is also expected to allow further
economies of scale.
CASH FLOWS AND LIQUIDITY--THREE MONTHS ENDED MARCH 31, 1996
As summarized in the Statement of Cash Flows incorporated herein by
reference, cash decreased by $13 million during the first three months of 1996
as cash used in investing activities of $158 million exceeded cash provided by
operations and financing activities of $7 million and $138 million,
respectively.
Cash provided by operating activities of $7 million was from cash earnings
from operations of $68 million (net income plus depreciation, amortization and
deferred income taxes) and other sources of $3 million, offset by an increase in
working capital of $64 million.
Net cash used in investing activities totaled $158 million, primarily for
capital additions of $93 million (including $40 million for the BP Northeast
refining and marketing assets), increases in deferred charges and other assets
of $39 million, and increases in short-term investments and deposits of $26
million. Cash provided by financing activities totalled $138 million, consisting
of net borrowings under short-term bank lines and Tosco's revolving credit
facility of $144 million, partially offset by dividends of $6 million.
Liquidity (as measured by cash, short-term investments and deposits and
unused credit facilities) decreased by $97 million during 1996 due to a decrease
of $110 million in unused credit facilities and a decrease in cash and cash
equivalents of $13 million, partially offset by an increase in short-term
investments and deposits of $26 million. At March 31, 1996, liquidity totaled
$266 million.
Effective April 8, 1996, Tosco entered into the New Credit Agreement,
expiring in April, 2000. The New Credit Agreement provides Tosco with an
unsecured $600 million revolving credit facility, that is available for working
S-13
<PAGE>
capital and general corporate purposes, including the acquisition of Circle K.
Tosco's former $450 million revolving credit agreement was a collateralized loan
agreement, expiring in April 1998, which restricted borrowings to a percentage
of a borrowing base. The New Credit Agreement is a major step in moving Tosco's
capital structure to a fully unsecured basis. The New Credit Agreement and the
Notes offered hereby provide the liquidity needed to complete the acquisition of
Circle K. Tosco believes its cash and available credit resources are adequate to
meets its expected liquidity demands for at least the next twelve months.
CASH FLOWS AND LIQUIDITY--1995
As summarized in the Statement of Cash Flows incorporated herein by
reference, cash decreased by $5 million during 1995 as cash used in investing
and financing activities of $301 million and $111 million, respectively,
exceeded cash provided by operating activities of $407 million.
Cash provided by operating activities of $407 million was from cash
earnings of $226 million (net income plus depreciation, amortization, and
deferred income taxes), plus a decrease in working capital of $180 million, and
$1 million from other sources.
Net cash used in investing activities totaled $301 million, primarily for
capital additions and deferred turnaround expenditures of $203 million and $48
million, respectively, and increases in other assets (primarily trademarks)
of $51 million.
Cash used in financing activities totaled $111 million as net repayments
under short-term bank lines and the Credit Agreement of $210 million, dividend
payments of $24 million, and debt and other payments totaling $2 million
exceeded proceeds from the 7% Notes of $125 million which were issued in July
1995.
Liquidity increased by $150 million during 1995 due to an increase of $156
million in unused credit facilities partially offset by a decrease in cash, cash
equivalents, short-term deposits and investments of $6 million. At December 31,
1995, liquidity totaled $363 million.
CAPITAL EXPENDITURES AND CAPITALIZATION
On February 2, 1996, Tosco completed the purchase of the U.S. Northeast
marketing and refining assets from British Petroleum (BP) for $40 million,
excluding inventories and trademark licenses. Tosco's other capital expenditures
for the first quarter of 1996 of $53 million were for budgeted capital projects,
primarily at the Avon Refinery and retail outlets.
Tosco spent $203 million on budgeted capital projects in 1995. Tosco and BP
also entered into an agreement to settle contingent participation payments
related to the acquisition of BP's Pacific Northwest refining and retail assets
for $35 million. See Note 8 to the Company's 1995 Consolidated Financial
Statements incorporated herein by reference.
A large portion of capital spending on refinery projects was related to the
Avon Refinery's clean fuels program to meet the CARB Phase II specifications.
The multi-year project, which was completed on time and on budget, converts a
significant portion of Avon's gasoline production to CARB Phase II gasoline.
With the exchange of conventional gasoline for CARB Phase II gasoline with
Chevron, approximately 85% of Avon's gasoline production will meet CARB Phase II
specifications. Other refinery capital expenditures continued to address
required environmental and safety programs. The balance of Tosco's refinery
capital investments targeted discretionary low-cost, high-return projects to
lower operating costs, improve refinery throughput or yields, or increase
operating flexibility and reliability. Bayway's fuel products controls were
improved with the installation of a modern "state of the art" refinery control
system. The new computer system, which monitors and directs all refinery
production processes, has resulted in better production levels and yields with
greater reliability, safety and environmental compliance.
Bayway Refining Company has entered into a contract to acquire a Solvent
Deasphalter for approximately $32.5 million, plus the cost of agreed-upon
modifications and interest, at mechanical completion (as defined). Construction
of this unit began in 1995 and mechanical completion is expected in the third
quarter of 1996. Tosco is responsible for other capital improvements to tie in
the Solvent Deasphalter into the Bayway Refinery system, raising the total
expected cost of the unit to approximately $48 million. When completed, this
unit will process approximately 20,000 B/D of lower-valued residual fuel to
produce feedstock for the refinery's fluid catalytic cracker and reduce the
amount of higher-cost, partially refined feedstocks that Bayway currently
purchases from third parties.
S-14
<PAGE>
In May 1995, Tosco announced a three-year, $200 million capital program to
expand its Western retail operations through the development of new, and
enhancement of existing, retail facilities in existing and new markets, the
acquisition of existing stations or systems, and development of new jobber
business. In August 1995, Tosco entered into an agreement to expand an existing
lease facility to finance the acquisition and improvement of up to $15 million
of service station properties in Arizona. At March 31, 1996, Tosco, as agent for
the lessor, had spent approximately $4.4 million but had not yet entered into
leases pending completion of construction. In November 1995, Tosco acquired
under long-term lease the Brown Bear car wash facilities in the Puget Sound
area.
Tosco expects to fund its 1996 capital expenditures for its refineries from
cash provided by operations, available credit, and other resources. In view of
the pending acquisition of Circle K, capital spending for retail operations will
be curtailed and refocused on enhancing existing retail sites and integrating
both operations after the acquisition. To increase financial flexibility and
reduce interest costs, Tosco amended its working capital agreement in April
1995, entered into a Receivable Transfer Agreement in June 1995, and issued $125
million of unsecured 7% notes in July 1995. In April 1996, Tosco entered into
the New Credit Agreement.
At March 31, 1996, total shareholders' equity was $645 million, an increase
from December 31, 1995 of $18 million due to net income ($24 million) less
dividend and other payments of $6 million. Debt, including current maturities
and short-term bank borrowings, increased by $143 million to $788 million at
March 31, 1996.
IMPACT OF INFLATION
The impact of inflation has been less significant during recent years
because of the relatively low rates of inflation experienced in the United
States. Raw material costs, energy costs, and labor costs are important
components of Tosco's costs. Any or all of these components could be increased
by inflation, with a possible adverse effect on profitability, especially in
high inflation periods when raw material and energy cost increases generally
lead finished product prices. In addition, a rapid escalation of raw material
and finished products prices could result in credit restrictions if working
capital requirements exceed the maximum availability under Tosco's working
capital facilities.
RISK MANAGEMENT
Tosco uses a variety of strategies to reduce commodity price, interest and
operational risks.
As discussed in Note 2 to the Company's 1995 Consolidated Financial
Statements incorporated herein by reference, Tosco, at times and when able, uses
futures contracts to lock in what it believes to be favorable margins on a
varying portion of Bayway's production by taking offsetting long (obligation to
buy at a fixed price) positions in crude oil and short (obligation to deliver at
a fixed price) positions in gasoline and heating oil futures and forward
contracts. This strategy hedges Bayway's exposure to fluctuations in refining
margins and therefore reduces the volatility of operating results. In addition,
Tosco enters into swap contracts with counterparties (typically agreeing to sell
at fixed forward prices, and to buy at future variable market prices, stated
volumes of residual fuels) to hedge sales prices of the Bayway Refinery's
residual fuels production. At March 31, 1996, Tosco had hedged approximately 18%
and 9% of Bayway's expected second quarter and remaining 1996 production,
respectively, at acceptable historical margins. Tosco utilizes futures and
forward contracts to a lesser extent to hedge inventories stored for future sale
and to hedge against adverse price movements between the cost of foreign crude
oil that Bayway refines and the cost of domestic crude oil.
Tosco manages its interest rate risk by maintaining a mix of fixed rate and
floating rate debt. Currently, floating rate debt, primarily borrowings under
the $600 million New Credit Agreement, is used to finance Tosco's working
capital requirements. Existing fixed rate debt consists primarily of $125
million unsecured non-callable notes issued in July 1995 to repay indebtedness
under the Credit Agreement and $450 million of mortgage bonds issued in 1992 and
1993 to refinance previously outstanding floating rate bank debt and to finance
the acquisition of capital assets including the acquisition of the Bayway
Refinery. As required by the Credit Agreement as previously in effect, Tosco
entered into an interest rate swap agreement which converted a predetermined
percentage of floating rate bank term debt ($28.3 million at March 31, 1996) to
fixed rate term debt. The interest rate swap expires in the second quarter of
1996.
Tosco carries insurance policies on insurable risks, which it believes to
be at commercially reasonable rates. While Tosco believes that it is adequately
insured, future losses could exceed insurance policy limits or, under adverse
interpretations, be excluded from coverage. Future liability or costs, if any,
incurred under such circumstances would
S-15
<PAGE>
have to be paid out of general corporate funds, if available. For a discussion
of Tosco's strategy to reduce credit risk, see Note 2 to the Company's 1995
Consolidated Financial Statements, incorporated herein by reference.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities set forth in the Prospectus,
to which description reference is hereby made.
The Notes will be unsecured general obligations of the Company and will be
issued under an indenture dated as of May 1, 1996, as supplemented by the
Supplemental Indenture dated as of May 28, 1996 (the "Indenture"), between the
Company and State Street Bank and Trust Company (the "Trustee").
The Notes will be limited to $240,000,000 aggregate principal amount and
will mature on May 15, 2006. Each Note will bear interest from May 15, 1996, or
from the most recent interest payment date to which interest has been paid, at
the rate of 7 5/8% per annum, payable semiannually on May 15 and November 15,
commencing on November 15, 1996, to the person in whose name such Note is
registered at the close of business on the preceding May 1 and November 1,
respectively.
The Notes are redeemable as set forth under "Optional Redemption." The
Notes have no sinking fund provisions.
COVENANTS
The covenants summarized below will be applicable (unless waived or
amended) so long as any of the Debt Securities (as defined in the accompanying
Prospectus) are outstanding.
LIMITATION ON LIENS
The Company will not, and will not permit any Subsidiary to, incur any Debt
secured by a Lien on any Principal Property without making effective provision
for securing all Outstanding Debt Securities of each series having the benefit
of this covenant equally and ratably with such Debt as to such Principal
Property.
The foregoing restrictions will not apply to: (i) Liens existing at the
date of original issuance of the Notes; (ii) any Liens securing Debt owed by the
Company to one or more Subsidiaries of the Company; (iii) Liens on any Principal
Property of a Person existing prior to the time (A) such Person becomes a
Subsidiary of the Company, (B) such Person merges into or consolidates with a
Subsidiary of the Company or (C) another Subsidiary of the Company merges into
or consolidates with such Person (in a transaction in which such Person becomes
a Subsidiary of the Company); (iv) Liens on any Principal Property existing at
the time of acquisition thereof; (v) Liens on any Principal Property to secure
Debt incurred for the purpose of financing all or any part of the purchase price
or the cost of construction or improvement of the Principal Property subject to
such Liens in an aggregate principal amount not to exceed the fair market value
of such property, construction or improvements; (vi) Liens on any Principal
Property of the Company or any Subsidiary in favor of governmental bodies to
secure certain advance or progress payments pursuant to any contract or statute;
and (vii) Liens to secure any extension, renewal, refinancing or refunding (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, of any Debt secured by Liens referred to in the foregoing clauses (i)
through (vi), so long as such Lien does not extend to any other property and the
Debt so secured is not increased.
Notwithstanding the foregoing, the Company or any Subsidiary may incur Debt
secured by Liens which otherwise would be subject to the foregoing restrictions,
in an aggregate amount which, together with all other such Debt outstanding
secured by Liens and all Attributable Debt outstanding in respect of Sale and
Leaseback Transactions (other than as permitted by the first paragraph under the
"Limitation on Sale and Leaseback Transactions" covenant below), does not exceed
10% of Consolidated Net Tangible Assets.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Company will not, and will not permit any Subsidiary to, enter into any
Sale and Leaseback Transaction on any Principal Property (except for a period
not exceeding three years) unless: (i) the Company or such Subsidiary would be
entitled to incur a Lien to secure Debt by reason of the provisions described in
clauses (i) through (vii) of the second paragraph under the "Limitation on
Liens" covenant in an amount equal to the Attributable Debt of such Sale and
Leaseback Transaction without equally and ratably securing all Outstanding Debt
Securities of each series having the benefit of this covenant or (ii) the
Company or such Subsidiary applies within 180 days an amount equal to, in the
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<PAGE>
case of a sale or transfer for cash, the net proceeds (not exceeding the net
book value), and, otherwise, an amount equal to the fair value (as determined by
its Board of Directors), of the property so leased to (A) the retirement of Debt
Securities or other Funded Debt of the Company or such Subsidiary or (B) the
acquisition of property which constitutes a Principal Property.
Notwithstanding the foregoing, the Company or any Subsidiary may enter into
a Sale and Leaseback Transaction which would otherwise be subject to the
foregoing restriction, provided the amount of Attributable Debt in respect of
such Sale and Leaseback Transaction, together with all other such Attributable
Debt outstanding and all Debt outstanding secured by Liens (other than as
permitted by the second paragraph under the "Limitations on Liens" covenant
above), does not exceed 10% of Consolidated Net Tangible Assets.
LIMITATION ON SUBSIDIARY FUNDED DEBT AND PREFERRED STOCK
The Company will not permit any Subsidiary of the Company having a
Principal Property to incur or suffer to exist any Funded Debt or issue any
Preferred Stock except: (i) Funded Debt outstanding under the Bank Credit
Facility; (ii) Funded Debt or Preferred Stock outstanding on the date of
original issuance of the Notes; (iii) Funded Debt or Preferred Stock issued to
and held by the Company or a Subsidiary of the Company; (iv) Funded Debt
incurred or Preferred Stock issued by a Person prior to the time (A) such Person
became a Subsidiary of the Company, (B) such Person merges into or consolidates
with a Subsidiary of the Company or (C) another Subsidiary of the Company merges
into or consolidates with such Person (in a transaction in which such Person
becomes a Subsidiary of the Company); (v) Funded Debt or Preferred Stock
incurred for the purpose of financing all or any part of the purchase price or
the cost of construction of or improvements to the property of the Company or
any of its Subsidiaries in an aggregate principal amount or liquidation
preference, as the case may be, not to exceed the fair market value of such
property, construction or improvements; and (vi) Funded Debt or Preferred Stock
that is exchanged for, or the proceeds of which are used to refinance or refund,
any Funded Debt or Preferred Stock permitted to be outstanding pursuant to
clauses (i) through (v) (or any extension or renewal thereof) in an aggregate
principal amount or liquidation preference, as the case may be (which, in the
case of a Discount Security, shall be the issue price thereof), not to exceed
the principal amount of the Funded Debt or the liquidation preference of the
Preferred Stock, as the case may be, so exchanged, refinanced or refunded
(which, in the case of a Discount Security, shall be the accreted value
thereof).
Notwithstanding the foregoing, the Company's Subsidiaries may incur Funded
Debt and Preferred Stock in an aggregate principal amount and liquidation
preference that does not exceed 10% of Consolidated Net Tangible Assets.
CERTAIN DEFINITIONS. The terms set forth below are defined in the Indenture
as follows (other terms are defined in the accompanying Prospectus and in the
Indenture):
"Attributable Debt" when used in connection with a Sale and Leaseback
Transaction involving a Principal Property shall mean, at the time of
determination, the present value of the total net amount of rent required to be
paid under such lease during the remaining term thereof (including any renewal
term or period for which such lease has been extended), discounted at the rate
of interest set forth or implicit in the terms of such lease or, if not
practicable to determine such rate, the weighted average interest rate per annum
borne by the Debt Securities of each series outstanding pursuant to the
Indenture compounded semi-annually. For purposes of the foregoing definition,
rent shall not include amounts required to be paid by the lessee on account of
insurance, taxes, assessments, utility, operating and labor costs and similar
charges. In the case of any lease which is terminable by the lessee upon the
payment of a penalty, such net amount shall also include the amount of the
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Bank Credit Facility" means the bank facility provided for under the Third
Amended and Restated Credit Agreement, dated as of April 8, 1996, among the
Company and the banks that are or become parties from time to time thereto, as
it may be amended, supplemented or otherwise modified from time to time, and any
successor or replacement bank facility thereto, provided that the aggregate
principal amount of borrowings thereunder does not exceed $600 million.
"Consolidated Net Tangible Assets" means the total of all the assets
appearing on the consolidated balance sheet of the Company and its Subsidiaries,
less the following: (a) liabilities, (b) intangible assets, including, but
without limitation, such items as goodwill, trademarks, trade names, patents and
unamortized debt discount and expense carried as an asset on said balance sheet,
and (c) appropriate adjustment on account of minority interests of other persons
holding stock in any Subsidiary. Consolidated Net Tangible Assets shall be
determined in accordance with generally
S-17
<PAGE>
accepted accounting principles applied on a consistent basis and shall be
determined by reference to the most recent publicly available quarterly or
annual, as the case may be, consolidated balance sheet of the Company.
"Debt" of a Person means, all indebtedness of such Person which is for
money borrowed.
"Funded Debt" means Debt which by its terms matures at, or can be extended
or renewed at the option of the obligor to, a date more than twelve months after
the date of the Debt's creation, including, but not limited to, outstanding
revolving credit loans.
"Incur" means to issue, incur, assume, guarantee, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
the payment of, any Debt.
"Lien" means any mortgage or deed of trust, pledge, assignment, security
interest, lien, charge, or other encumbrance or preferential arrangement
(including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Principal Property" means (i) any refining or processing plant (together
with any pipeline, terminal or other facility related to such refining or
processing plant and necessary for its economic operation) or corporate offices,
in any case owned or leased by the Company or any Subsidiary, or any interest of
the Company or any Subsidiary in such property (in each case including the real
estate related thereto) located within the United States of America and (ii) any
Capital Stock of any Subsidiary that owns, directly or indirectly, a Principal
Property of the type described in clause (i).
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than one year after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other similar amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
OPTIONAL REDEMPTION
The Notes will be redeemable as a whole or in part, at the option of the
Company at any time, at a redemption price equal to the greater of (i) 100% of
their principal amount or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the date of
redemption on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield, plus in each case accrued interest to the
date of redemption (the "Redemption Date").
"Treasury Yield" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected and designated to the Company in writing by an Independent Investment
Banker as having a maturity comparable to the remaining term of the Notes that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the Notes. "Independent Investment
Banker" means Morgan Stanley & Co. Incorporated or, if such firm is unwilling or
unable to select the Comparable Treasury Issue, an independent investment
banking institution of national standing appointed by the Trustee.
"Comparable Treasury Price" means, with respect to any Redemption Date: (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Gov-
S-18
<PAGE>
ernment Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations,
the average of all such Quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any Redemption Date,
the average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. on the third business day preceding such Redemption Date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc., Oppenheimer & Co., Inc. and another Primary Treasury Dealer (as
defined herein) at the option of the Company, provided, however, that if any of
the foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer.
Holders of Notes to be redeemed will receive notice thereof by first-class
mail at least 30 and not more than 60 days prior to the date fixed for
redemption.
If less than all the Notes are to be redeemed, the Trustee will select
Notes for redemption pro rata or by lot. If any Note is to be redeemed in part
only, a new Note or Notes in principal amount equal to the unredeemed principal
portion thereof will be issued.
BOOK-ENTRY PROCEDURES
Upon issuance, all Notes will be represented by a fully registered global
note (the "Global Note"). The Global Note will be deposited with, or on behalf
of, The Depository Trust Company, as Depositary (the "Depositary"), and
registered in the name of the Depositary or a nominee thereof. Unless and until
it is exchanged in whole or in part for Notes in definitive form, the Global
Note may not be transferred except as a whole by the Depositary to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary.
A further description of the Depositary's procedures with respect to the
Global Note is set forth in the Prospectus under "Description of Debt
Securities--Global Security." The Depositary has confirmed to the Company, the
Underwriters and the Trustee that it intends to follow such procedures.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Global Notes will
be made by the Company in immediately available funds.
UNDERWRITERS
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, the respective
principal amounts of the Notes set forth opposite their names below:
PRINCIPAL
AMOUNT
NAME OF NOTES
- ---- ------------
Morgan Stanley & Co. Incorporated ...................... $45,000,000
Donaldson, Lufkin & Jenrette Securities Corporation .... 45,000,000
Lehman Brothers Inc. ................................... 45,000,000
Oppenheimer & Co., Inc. ................................ 45,000,000
BA Securities, Inc. .................................... 20,000,000
Chase Securities Inc. .................................. 20,000,000
Furman Selz LLC ........................................ 20,000,000
------------
Total .............................................. $240,000,000
============
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes is subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all the Notes
offered hereby if any are taken.
S-19
<PAGE>
The Underwriters initially propose to offer all or part of the Notes
directly to the public at the public offering price set forth on the cover page
hereof and all or part to certain dealers at a price which represents a
concession not in excess of .40% of the principal amount of the Notes. Any
Underwriter may allow, and any such dealer may reallow, concessions to certain
other dealers not in excess of .25% of the principal amount of the Notes. After
the initial offering of the Notes, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes, and any such market making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Notes.
The Underwriters and their affiliates engage in transactions with and
perform services for the Company in the ordinary course of business. Certain of
the Underwriters served as underwriters in connection with the Company's
offering of $125 million principal amount of 7% Notes due 2000 completed in July
1995 and received customary compensation with respect thereto. Edmund A. Hajim,
a Director of the Company, is also the Chairman of the Board and Chief Executive
Officer of Furman Selz LLC.
S-20
<PAGE>
PROSPECTUS
$200,000,000
TOSCO CORPORATION
DEBT SECURITIES
--------------
Tosco Corporation ("Tosco" or the "Company") may offer and issue from time
to time up to $200,000,000 in aggregate proceeds of its debt securities each of
which will be a direct, unsecured obligation of Tosco (the "Debt Securities").
The Debt Securities may be offered to the public on terms determined by market
conditions at the time of sale.
The Debt Securities may be issued in one or more series with the same or
various maturities at or above par or with an original issue discount. The
specific designation, aggregate principal amount, authorized denominations,
purchase price, maturity, interest rate (or method of calculation) and time of
payment of interest (if any), any terms for redemption or repurchase, any
listing on a securities exchange or other specific terms of the Debt Securities
in respect of which this Prospectus is being delivered (the "Offered
Securities") are set forth in the accompanying supplement to this Prospectus
(the "Prospectus Supplement"), together with the terms of offering of the
Offered Securities.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------
The Debt Securities may be offered directly, through agents designated from
time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution". Any such agents, dealers or underwriters will be set forth in the
Prospectus Supplement. If an agent of the Company or a dealer or underwriter is
involved in the offering of the Offered Securities, the agent's commission,
dealer's purchase price, underwriter's discount and net proceeds to the Company
will be set forth in, or may be calculated from, the Prospectus Supplement. Any
underwriters, dealers or agents participating in the offering may be deemed
"underwriters" within the meaning of the Securities Act of 1933.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
May 2, 1996
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY OF THE OFFERED SECURITIES IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THIS PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER OR UNDER THE
PROSPECTUS SUPPLEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES SINCE THE RESPECTIVE DATES OF THIS PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT.
-------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as 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 information can be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such materials can also be
inspected at the offices of the New York Stock Exchange, Inc. and the Pacific
Stock Exchange, Inc., on which exchanges the Company's Common Stock is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including the exhibits filed as a part thereof and otherwise incorporated
therein. Copies of the Registration Statement and the exhibits may be inspected,
without charge, at the offices of the Commission, or obtained at prescribed
rates from the Public Reference Section of the Commission at the address set
forth above.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1995
filed on March 20, 1996.
2. Current Report on Form 8-K filed on April 25, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities hereunder 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 Prospectus and the Prospectus
Supplement 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 Prospectus or the Prospectus
Supplement.
The Company will provide a copy of any or all of such documents (exclusive
of exhibits unless such exhibits are specifically incorporated by reference
therein), without charge, to each person to whom this Prospectus is delivered,
upon written or oral request to Joseph Watson, Investor Relations, Tosco
Corporation, 72 Cummings Point Road, Stamford, Connecticut 06902 (telephone
(203) 977-1000).
-------------------
IN CONNECTION WITH THE OFFERING OF THE SECURITIES DESCRIBED IN THE
ACCOMPANYING PROSPECTUS SUPPLEMENT, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
THE COMPANY
Tosco, through divisions and subsidiaries, is a large independent refiner,
wholesaler, and retail marketer of petroleum products, principally on the East
and West Coasts of the United States. Tosco has extensive distribution
facilities and also engages in related commercial activities throughout the
United States and internationally.
During 1995, Tosco focused its efforts on consolidating its 1993 and 1994
acquisitions of retail marketing assets in the Pacific Northwest, California and
Arizona and expanding both the British Petroleum ("BP") brand in nine western
states and the Exxon brand in Arizona, where Tosco has the right to market under
those brands. Tosco continued to maintain and upgrade its three refineries,
Avon, Bayway and Ferndale, to remain competitive in the domestic refining
markets.
Tosco also has interests in oil shale properties in Colorado and Utah.
Tosco was incorporated under the laws of the State of Nevada in 1955. Its
principal executive offices are located at 72 Cummings Point Road, Stamford,
Connecticut 06902 and its telephone number is (203) 977-1000.
THE CIRCLE K CORPORATION ACQUISITION
On February 16, 1996, Tosco agreed to acquire The Circle K Corporation
("Circle K") and to merge Circle K with a subsidiary of Tosco (the "Merger").
Circle K has approximately 2,500 convenience stores in the United States of
which 2,300 are company-owned and operated and 200 are franchised. Approximately
1,900 of the Circle K stores sell gasoline. Completion of the transaction is
subject to the approval of various regulatory authorities, the shareholders of
Circle K, and the satisfaction of certain conditions. It is expected to close
prior to mid-1996. Payment of the total acquisition price of approximately $710
million, not including transaction and certain other costs, presently will
consist of approximately 6.8 million shares of Tosco Common Stock and cash. The
number of shares of Common Stock to be issued is subject to adjustment if the
price of Tosco Common Stock fluctuates outside an agreed range and for shares
issued with respect to stock options held by certain employees of Circle K. Upon
completion of the Merger, Tosco will be the largest operator of company-owned
convenience stores in the United States and Tosco's retail gasoline sales are
expected to increase significantly to approximately 8,000,000 gallons per day. A
large portion of the Circle K system is located in areas where Tosco is licensed
to operate under the BP brand. Tosco intends, where appropriate, to rebrand
certain locations.
RECENT DEVELOPMENTS
Tosco has entered into an amended and restated revolving credit agreement
(the "New Credit Agreement") to replace Tosco's existing revolving credit
agreement. The New Credit Agreement provides Tosco with $600 million of
revolving credit facilities which are available to Tosco for working capital and
general corporate purposes, including the acquisition of Circle K. The New
Credit Agreement converts the existing credit agreement, which was a secured,
working capital revolving loan agreement which permitted borrowings based on a
borrowing base, to an unsecured facility, without any borrowing base. The New
Credit Agreement also substantially modifies the financial covenants to provide
Tosco with more flexibility.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds to Tosco from the sale of the Debt Securities offered hereby will be
used to pay a portion of the purchase price for the acquisition of Circle K. The
balance of the cash portion of the purchase price, including working capital,
for Circle K will come from Tosco's available cash and from borrowings under the
New Credit Agreement. See "Recent Developments." Any remaining proceeds will be
used for general corporate purposes.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
2.49x 2.83x 3.28x 2.71x 3.55x
For the purpose of computing the above ratio of earnings to fixed charges,
earnings consist of consolidated income from operations before income taxes and
fixed charges. Fixed charges consist of interest on outstanding debt, one third
(the proportion deemed representative of the interest factor) of net rentals and
amortization of debt discount and expense.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Securities") and the extent,
if any, to which such general provisions may not apply thereto will be described
in the Prospectus Supplement relating to such Offered Securities.
The Debt Securities are to be issued in one or more series (each such
series a "Series") under an Indenture (the "Indenture") between the Company and
State Street Bank and Trust Company, as Trustee (the "Trustee"). The form of the
Indenture is included as an exhibit to the Registration Statement.
GENERAL
The Indenture does not limit the amount of Debt Securities which can be
issued thereunder and provides that debt securities of any Series may be issued
thereunder up to the aggregate principal amount which may be authorized from
time to time by the Company. The Indenture does not limit the amount of other
indebtedness or securities which may be issued by the Company. All Debt
Securities will be unsecured and will not rank below any other unsecured
indebtedness of the Company. The Trustee will authenticate and deliver Debt
Securities executed and delivered to it by the Company as set forth in the
Indenture.
Reference is made to the Prospectus Supplement for the following and other
possible terms of each Series of the Offered Securities in respect of which this
Prospectus is being delivered: (i) the title of the Offered Securities; (ii) any
limit upon the aggregate principal amount of the Offered Securities; (iii) if
other than 100% of the principal amount, the percentage of their principal
amount at which the Offered Securities will be offered; (iv) the date or dates
on which the principal of the Offered Securities will be payable (or method of
determination thereof); (v) the rate or rates (or method of determination
thereof) at which the Offered Securities will bear interest, if any, the date or
dates from which any such interest will accrue and on which such interest will
be payable, and the record dates for the determination of the holders, to whom
interest is payable; (vi) if other than as set forth herein, the place or places
where the principal of and interest, if any, on the Offered Securities will be
payable; (vii) the price or prices at which, the period or periods within which
and the terms and conditions upon which Offered Securities may be redeemed, in
whole or in part, at the option of the Company; (viii) the obligation, if any,
of the Company to redeem, repurchase or repay Offered Securities, whether
pursuant to any sinking fund or analogous provisions or pursuant to other
provisions set forth therein or at the option of a holder thereof; (ix) the
events of default or covenants relating to the Offered Securities, to the extent
different or in addition to those described herein; (x) whether the Offered
Securities will be issued in certificated and/or book-entry form; (xi) whether
the Offered Securities will be in registered or bearer form and the
denominations thereof; and (xi) any other terms or conditions not inconsistent
with the provisions of the Indenture upon which the Offered Securities will be
offered.
Unless otherwise provided in the Prospectus Supplement relating to any
Offered Securities, principal and interest, if any, will be payable, and the
Debt Securities will be transferable and exchangeable, at the office or offices
or agency maintained by the Company for such purposes, provided that payment of
interest on the Debt Securities will be paid at such place of payment by check
mailed to the persons entitled thereto at the addresses of such persons
appearing on the Security Register. Interest on the Debt Securities will be
payable on any interest payment date to the persons in whose name the Debt
Securities are registered at the close of business on the record date with
respect to such interest payment date.
5
<PAGE>
Unless otherwise set forth in the Prospectus Supplement, Debt Securities
may be issued only in fully registered form in minimum denominations of $1,000
and any integral multiple thereof. Debt Securities may be exchanged for an equal
aggregate principal amount of Debt Securities of the same Series and date of
maturity in such authorized denominations as may be requested upon surrender of
the Debt Securities at an agency of the Company maintained for such purpose and
upon fulfillment of all other requirements of such agent. No service charge will
be made for any transfer or exchange of the Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Debt Securities will bear interest at a fixed rate (a "Fixed Rate
Security") or a floating rate (a "Floating Rate Security"). Debt Securities
bearing no interest or interest at a rate which, at the time of issuance, is
below the prevailing market rate, will be sold at a discount below their stated
principal amount. Special United States federal income tax considerations
applicable to any such discounted Debt Securities or to certain Debt Securities
issued at par which are treated as having been issued at a discount for United
States federal income tax purposes will be described in the applicable
Prospectus Supplement.
The Indenture requires the annual filing by the Company with the Trustee of
a certificate as to compliance with all conditions and covenants contained in
the Indenture.
The Company will comply with Section 14(e) under the Exchange Act, and any
other tender offer rules under the Exchange Act which may then be applicable, in
connection with any obligation of the Company to purchase Offered Securities at
the option of the holders thereof. Any such obligations applicable to a Series
of Debt Securities will be described in the Prospectus Supplement relating
thereto.
Unless otherwise described in a Prospectus Supplement relating to any
Offered Securities, there are no covenants or provisions contained in the
Indenture which may afford the holders of Offered Securities protection in the
event of a highly leveraged transaction involving the Company. Except as
otherwise described in the Prospectus Supplement, any such covenants or
provisions will not be subject to waiver by the Company's Board of Directors
without the consent of the holders of not less than a majority in principal
amount of Debt Securities of each Series as described under "Modification of the
Indenture" below.
GLOBAL SECURITY
Unless otherwise set forth in the Prospectus Supplement, upon issuance,
each series of Debt Securities will be represented by a single global security
(the "Global Security") which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and will be registered in the name
of the Depositary or a nominee of the Depositary.
Upon the issuance of the Global Security, the Depositary or its nominee
will credit on its book-entry registration and transfer system the respective
principal amounts of the individual Debt Securities represented by the Global
Security to the accounts of persons that have accounts with such Depositary
("Participants"). Such accounts shall be designated by the underwriters, if any.
Ownership of beneficial interests in the Global Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in the Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depositary or its nominee (with respect to interests of Participants) and
the records of Participants (with respect to interests of persons who hold
through Participants). The laws of some states require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
the Global Security.
So long as the Depositary, or its nominee, is the registered owner of the
Global Security, the Depositary or the nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities represented by the
Global Security for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in the Global Security will not be entitled to
have any of the individual Debt Securities represented by the Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest (if any) on
individual Debt Securities represented by the Global Security registered in the
name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security.
None of the Company, the Trustee, any Paying
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Agent, or the Securities Registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company has been advised by the Depositary that, upon receipt of any
payment of principal, premium or interest in respect of the Global Security, the
Depositary immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of the Global Security as shown on the records of the Depositary.
Payments by Participants to owners of beneficial interests in the Global
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Such payments will be the responsibility of such Participants.
If the Depositary is at any time unwilling, unable or ineligible to
continue as depositary and a successor depositary is not appointed by the
Company within 90 days, the Company will issue individual Debt Securities in
exchange for the Global Security. In addition, the Company may at any time and
in its sole discretion determine not to have any Debt Securities of a series
represented by one or more Global Securities and, in such event, will issue
individual Debt Securities in exchange for the Global Security for such series.
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in the Global Security may, on terms
acceptable to the Company, the Trustee and the Depositary, receive individual
Debt Securities in exchange for such beneficial interests. In any such instance,
an owner of a beneficial interest in the Global Security will be entitled to
physical delivery of individual Debt Securities equal in principal amount to
such beneficial interest and to have such Debt Securities registered in its
name. Individual Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof.
Except as provided above, owners of beneficial interests in the Global
Security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purposes
under the Indenture. Accordingly, each person owning a beneficial interest in a
Global Security for a series of Debt Securities must rely on the procedures of
the Depositary and, if such person is not a Participant, on the procedures of
the Participant through which such person owns its interest, to exercise any
rights of a holder of such securities under the Indenture. The Depositary may
grant proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the Indenture. The Company
understands that under existing industry practices, in the event that the
Company requests any action of holders or that an owner of a beneficial interest
in the Global Security desires to give or take any action to which a holder is
entitled to give or take under the Indenture, the Depositary would authorize the
Participants holding the relevant beneficial interests to give or take such
action, and such Participants would authorize beneficial owners owning through
such Participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered under the Exchange Act. The Depositary was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
underwriters, if any), banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or the representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant either directly or
indirectly.
COVENANTS
Any applicable covenants with respect to the Offered Securities will be
described in the Prospectus Supplement.
EVENTS OF DEFAULT
As to any Series of Debt Securities, the Indenture defines the following
events as "Events of Default": (a) failure to pay interest on any Debt Security
of such series after the interest becomes due and payable and continuance of
such
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default for a period of 30 days; (b) failure to pay all or any portion of
the principal of any Debt Security of such Series when such principal becomes
due and payable at maturity without any grace period; (c) default in the
performance, or breach, of any other covenant of the Company for the benefit of
the Debt Securities of such Series that continues for a period of 30 days (or
such other period specified in such other document) after written notice of such
default has been given (i) to the Company by the Trustee or (ii) to the Company
and the Trustee by the holders of at least 25% of the Debt Securities of such
Series then outstanding; (d) the occurrence of a default under any indebtedness
aggregating in excess of $10,000,000 (i) resulting from the failure to pay
principal at maturity or (ii) as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity; (e) final
judgments against the Company or any Subsidiary in excess of $10,000,000 which
remain undischarged for 60 days; or (f) certain events of bankruptcy,
insolvency, or reorganization which are voluntary or, if involuntary, continue
for a period of 90 days.
Additional Events of Default may be added for the benefit of holders of
certain Series of Debt Securities which, if added, will be described in the
Prospectus Supplement relating to such Debt Securities. The Indenture provides
that the Trustee shall notify the holders of Debt Securities of each Series of
any continuing default known to the Trustee which has occurred with respect to
that Series within 90 days after the occurrence thereof. The Indenture provides
that notwithstanding the foregoing, except in the case of default in the payment
of the principal of or interest on any of the Debt Securities of such Series the
Trustee may withhold such notice if the Trustee in good faith determines that
the withholding of such notice is in the interests of the holders of Debt
Securities of such Series.
The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (f) above) with respect to any Series of Debt
Securities shall have occurred and be continuing, either the Trustee or the
holders of not less than 25% in aggregate principal amount of Debt Securities of
that Series then outstanding may declare the principal amount of, and accrued
and unpaid interest on, all Debt Securities of that Series to be due and payable
immediately. Upon certain conditions such acceleration may be annulled. The
Indenture provides that if an Event of Default described in clause (f) shall
have occurred and be continuing, the principal amount of (and accrued and unpaid
interest on) all Debt Securities of all Series shall ipso facto become due and
payable immediately, without any declaration or other act on the part of the
Trustee or any holder. Any past defaults and the consequences thereof (except a
default in the payment of principal of or interest on Debt Securities of that
Series) may be waived by the holders of a majority in principal amount of the
Debt Securities of that Series then outstanding. The Indenture also permits the
Company not to comply with certain covenants in the Indenture with respect to
Debt Securities of any Series upon waiver by the holders of a majority in
principal amount of the Debt Securities of such Series then outstanding.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default with respect to any Series of Debt
Securities shall occur and be continuing, the Trustee shall not be under any
obligation to exercise any of the trust powers vested in it by the Indenture at
the request or direction of any of the holders of that Series, unless such
holders shall have offered to the Trustee reasonable security or indemnity. The
holders of a majority in aggregate principal amount of the Debt Securities of
each Series affected and then outstanding shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee under the Indenture or exercising any trust power conferred on the
Trustee with respect to the Debt Securities of that Series; provided that the
Trustee may refuse to follow any direction which is in conflict with any law or
the Indenture and subject to certain other limitations.
No holder of any Debt Securities of any Series will have any right by
virtue or by availing of any provision of the Indenture to institute any
proceeding at law or in equity or in bankruptcy or otherwise upon or under or
with respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given the Trustee written notice of an Event of Default
with respect to Debt Securities of that Series and unless also the holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
that Series shall have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as trustee and the Trustee shall
have failed to institute such proceeding within 60 days after its receipt of
such request, and the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Debt Securities of
that Series a direction inconsistent with such request. However, the right of a
holder of any Debt Security to receive payment of the principal of and any
interest on such Debt Security on or after the due dates expressed in such Debt
Security, or to institute suit for the enforcement of any such payment on or
after such dates, shall not be impaired or affected without the consent of such
holder.
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CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may consolidate with, or sell,
convey or lease all or substantially all of its assets to, or merge with or
into, any other corporation, if (i) either the Company is the continuing
corporation, or the successor corporation is a domestic corporation and
expressly assumes the due and punctual payment of the principal of and interest
on all the Debt Securities outstanding under the Indenture according to their
tenor and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by the
Company and (ii) immediately after such merger or consolidation, or such sale,
conveyance or lease, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have occurred and
be continuing.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture with respect to any Series (except for certain specified
surviving obligations including, among other things, the Company's obligation to
pay the principal of and interest on the Debt Securities of such Series) will be
discharged and cancelled upon the satisfaction of certain conditions, including
the payment of all principal of and interest on all the Debt Securities of such
Series or the deposit with the Trustee of cash or appropriate Government
Obligations or a combination thereof sufficient for such payment or redemption
in accordance with the Indenture and the terms of the Debt Securities of such
Series.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Debt Securities of each Series at the time outstanding
under the Indenture, to execute supplemental indentures adding any provisions
to, or changing in any manner or eliminating any of the provisions of, the
Indenture or any supplemental indenture with respect to the Debt Securities of
such Series or modifying in any manner the rights of the holders of the Debt
Securities of such Series; provided that no such supplemental indenture may (i)
extend the stated maturity of the principal of any Debt Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereof, or reduce any amount payable on
redemption thereof (including any amount with respect to original issue
discount), or reduce the amount of original issue discount security payable upon
acceleration or provable in bankruptcy, or impair or affect the right of any
holder of Debt Securities to institute suit for payment thereof, or, if the Debt
Securities provide therefor, any right of repayment at the option of the holders
of the Debt Securities, without the consent of the holder of each Debt Security
so affected, or (ii) reduce the aforesaid percentage of Debt Securities of such
Series, the consent of holders of which is required for any such supplemental
indenture, without the consent of the holders of all Debt Securities of such
Series so affected. Additionally, in certain prescribed instances, including the
establishment of the forms or terms of Debt Securities of any Series, the
Company and the Trustee may execute supplemental indentures without the consent
of the holders of Debt Securities.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the Debt
Securities of any Series, that the Company may elect either (a) to terminate
(and be deemed to have satisfied) all its obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of the Debt Securities,
to compensate and indemnify the Trustee and to punctually pay or cause to be
paid the principal of, and interest on, all Debt Securities of such Series when
due) ("defeasance") or (b) to be released from its obligations with respect to
such Debt Securities upon the deposit with the Trustee, in trust for such
purpose, of money and/or Government Obligations which through the payment of
principal and interest in accordance with their terms will provide money, in an
amount sufficient (in the opinion of a nationally recognized firm of independent
public accountants) to pay the principal of and interest, if any, on the
outstanding Debt Securities of such Series, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor. Such a trust
may be established only if, among other things, the Company has delivered to the
Trustee an opinion of counsel (as specified in the Indenture) with regard to
certain matters, including an opinion to the effect that the holders of such
Debt Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and discharge and will be subject to
federal income tax on the same amounts and in the same manner and at the same
times as would have been the case if such deposit and
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defeasance had not occurred. The Prospectus Supplement may further describe
these or other provisions, if any, permitting defeasance or covenant defeasance
with respect to the Debt Securities of any Series.
CERTAIN DEFINITIONS
The terms set forth below are defined in the Indenture as follows:
"Government Obligations" means, unless otherwise specified pursuant to the
Indenture, securities which are(i) direct obligations of the United States
government for which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by, or acting as an agency or instrumentality
of, the United States government, the payment of which obligations is
unconditionally guaranteed by the United States government, and which, in either
case, are full faith and credit obligations of the United States government, and
which are not callable or redeemable at the option of the issuer thereof prior
to their stated maturity.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of the
outstanding capital stock (or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, general
partners, managers, managing members, managing partners or trustees thereof or,
if such persons are not elected, to vote on any matter that is submitted to the
vote of all persons holding ownership interests in such entity) is at the time
owned or controlled, directly or indirectly, by (i) the Company, (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
APPLICABLE LAW
The Debt Securities and the Indenture will be governed by, and construed in
accordance with, the laws of the State of New York.
CONCERNING THE TRUSTEE
The Trustee may provide various commercial banking services to the Company
from time to time.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers (through a
specific bidding or auction process or otherwise).
Offers to purchase Debt Securities may be solicited by agents designated by
the Company from time to time. Any such agent involved in the offer or sale of
the Offered Securities will be named, and any commissions payable by the Company
to such agent will be set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as the term is defined in the Securities Act, of the Debt
Securities so offered and sold. Agents may be entitled under agreements which
may be entered into with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and may be
customers of, engaged in transactions with or perform services for the Company
in the ordinary course of business.
If an underwriter or underwriters are utilized in the sale of Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transactions, including
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales of
Offered Securities. The underwriters may be entitled under the relevant
underwriting agreement to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and such
underwriters or their affiliates may be customers of, engage in transactions
with, or perform services for the Company in the ordinary course of business.
If a dealer is utilized in the sale of Offered Securities, the Company will
sell such Debt Securities to the dealer, as principal. The dealer may then
resell such Debt Securities to the public at varying prices to be determined by
such dealer at the time of resale. Dealers may be entitled, under agreements
which may be entered into with the Company, to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act, and
such
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dealers or their affiliates may be customers of, extend credit to or engage in
transactions with, or perform services for the Company in the ordinary course of
business. The name of any dealer and the terms of the transactions will be set
forth in the Prospectus Supplement relating thereto.
Offers to purchase Debt Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional investors
or others. The terms of any such sales, including the terms of any bidding or
auction process, if utilized, will be described in the Prospectus Supplement
relating thereto.
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered are set forth in the Prospectus Supplement.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Debt Securities
offered hereby will be passed upon for the Company by Stroock & Stroock & Lavan
of New York, New York.
EXPERTS
The consolidated balance sheets of Tosco as of December 31, 1995 and 1994,
and the consolidated statements of income, common shareholders' equity (deficit)
and cash flows, and the financial statement schedules, for each of the three
years in the period ended December 31, 1995, incorporated by reference in this
Prospectus, have been incorporated herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The audited consolidated financial statements of Circle K incorporated in
this Prospectus by reference from Tosco's Current Report on Form 8-K filed on
April 25, 1996 have been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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