SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1997.
TOSCO CORPORATION
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(Exact name of registrant as specified in charter)
NEVADA 1-7910 95-1865716
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
72 CUMMINGS POINT ROAD, STAMFORD, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203-977-1000
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(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 31, 1997, Tosco acquired Union Oil Company of California's
("Unocal") West Coast petroleum refining, marketing and related supply and
transportation assets (the "Unocal Acquisition") for a purchase price (including
liabilities assumed) of approximately $1.4 billion, plus inventory preliminarily
valued at approximately $380 million and credit card receivables valued at
approximately $133 million. In addition, Unocal is entitled to receive
contingent participation payments over the next seven years, up to a maximum
amount of $250 million, if the margin on sales to branded dealers exceeds a base
index and/or the differential between California Air Resources Board Phase II
gasoline and conventional gasoline exceeds a base index. For a period of 25
years, Unocal will be responsible for environmental liabilities arising out of
or relating to the period prior to the closing, except that Tosco will pay the
first $7 million of such environmental liabilities each year, plus 40% of any
amounts in excess of $7 million per year, with Unocal paying the remaining 60%
each year. The aggregate maximum amount that Tosco may have to pay in total for
the 25 year period for such environmental liabilities is limited to $200
million.
The assets which were acquired from Unocal include the following: two
petroleum refining systems comprised of four sites in California with an
aggregate throughput capacity of 250,000 barrels per day; a retail gasoline
system, consisting of approximately 1,325 76-branded gasoline stations,
approximately 1,100 of which are company-controlled, which currently sells over
130,000 barrels per day of gasoline and diesel fuel; a distribution system
comprised of 13 company-owned oil storage terminals, three modern American-flag
40,000 deadweight-ton tankers and rights with respect to 1,500 miles of crude
oil and product pipelines; the worldwide rights to the "76" and "Union" brands,
together with the distinctive orange ball logo, in the petroleum refining and
marketing businesses, except for pre-existing license grants relating to 76
Truckstops and to Uno-Ven; and Unocal's lubricants manufacturing, distribution
and marketing business. Tosco sold for $48.5 million in cash the three tankers
it acquired from Unocal.
The purchase price paid pursuant to the Unocal Acquisition consisted of
cash and 14,092,482 shares of Common Stock of Tosco (the "Unocal Shares") having
an aggregate value of approximately $397 million. The Unocal Shares were valued
at $28.1625 per share, which was the average of the high and low Tosco stock
prices for the ten trading days preceding the closing date. The cash portion of
the purchase price for the Unocal Acquisition, including working capital, was
obtained from a combination of available cash, borrowings under the amended and
restated revolving credit agreement (the "New Credit Agreement"), borrowings
under a $250 million credit agreement entered into on March 31, 1997 (the
"Additional Credit Agreement") and proceeds received from the sale of $600
million unsecured term debt securities on January 14, 1997. The New Credit
Agreement and Additional Credit Agreement are each with a group of bank lenders,
for which The First National Bank of Boston acts as agent. Certain gasoline
service stations were purchased directly from Unocal for approximately $235
million by a special purpose entity which leased the service stations to Tosco
pursuant to a long-term operating lease which provides Tosco with the option to
purchase the service stations at agreed upon prices.
In connection with the Unocal Acquisition, Tosco and Unocal entered into a
Stock Purchase and Shareholder Agreement, as amended, relating to Unocal's
disposition and voting of the Unocal Shares. On May 7, 1997, Tosco completed its
public offering of 25,300,000 shares of Common Stock at a price of $28.50 per
share (including 3,300,000 shares issued pursuant to an overallotment option).
Net proceeds of the offering were used to repurchase and retire 14,092,482
shares of Tosco Common Stock issued to Unocal (the "Unocal Stock Repurchase")
and to repay bank borrowings incurred in connection with the Unocal Acquisition.
The Unocal Acquisition has been accounted for as a purchase and,
accordingly, the acquired assets and liabilities are included in the
accompanying March 31, 1997 historical balance sheet of Tosco at values based on
a preliminary allocation of the purchase price. The purchase price allocation is
expected to be finalized by the end of 1997 based upon appraisals and other
evaluations currently in process. The preliminary purchase price allocation is
summarized below:
MARCH 31,
(THOUSANDS OF DOLLARS) 1997
--------------------
Cash and cash equivalents $ 711
Credit card receivables, less
allowance for uncollectibles of $4,941 132,959
Inventories 379,133
Prepaid expenses and other current assets 23,098
Property, plant, and equipment 1,429,734
Accrued expenses and other current liabilities (21,600)
Accrued environmental costs (190,000)
Other liabilities (50,000)
--------------------
$1,704,035
--------------------
The purchase price and all negotiations relating to the Unocal Acquisition
were on an arm's length basis. The assets acquired by Tosco will continue to be
used for the same purposes.
The foregoing description of the Unocal Acquisition is qualified in its
entirety by reference to the complete text of the acquisition agreement which
was filed as an exhibit to Tosco's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
PRO FORMA FINANCIAL INFORMATION
The Pro Forma financial information specified in Article II of Regulation
S-X are attached hereto.
The unaudited pro forma combined balance sheet of Tosco as of March 31,
1997 attached hereto was prepared assuming the Unocal Stock Repurchase had
occurred on March 31, 1997. The unaudited pro forma combined statement of income
for the year ended December 31, 1996 and the three month period ended March 31,
1997 were prepared assuming the acquisition of The Circle K Corporation ("Circle
K"), the Unocal Acquisition, the Financing Transactions (as defined in the pro
forma financial information) and the Unocal Stock Repurchase had occurred at the
beginning of each period presented. The unaudited pro forma combined financial
statements do not purport to represent the actual results of operations of Tosco
had the transactions and events assumed therein in fact occurred on the date
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. They do not reflect the improvement in operating
contribution anticipated from the Circle K acquisition and the Unocal
Acquisition or the reduction in operating and administrative costs expected from
the consolidation of operations. The unaudited pro forma financial information
is based on certain assumptions and adjustments described in the notes thereto
and should be read in conjunction therewith. The information presented herein
should also be read in conjunction with the separate audited historical
financial statements of 76 Products Company, a division of Unocal, as of
December 31, 1996 and for the three years then ended, previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: June 10, 1997
TOSCO CORPORATION
By:/s/ Robert I. Santo
Robert I. Santo
Chief Accounting Officer
<PAGE>
PRO FORMA FINANCIAL INFORMATION
TOSCO CORPORATION
PRO FORMA COMBINED BALANCE SHEET
As of March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
ISSUANCE OF
ASSETS: ACQUISITION COMMON
HISTORICAL PAYMENT STOCK PRO FORMA
--------------------- ----------------- ----------------- -------------
(in thousands,
except per
share data)
<S> <C> <C> <C> <C>
Cash, cash equivalents,
marketable securities and $90,526 ($3,000)(1) $87,526
deposits
Inventories 1,140,994 1,140,994
Other current assets 392,922 392,922
--------------------- ------------------- ------------------- --------------
Total current assets 1,624,442 (3,000) - 1,621,442
Property, plant and equipment 3,137,260 3,137,260
Intangibles and other long-term
assets 871,614 871,614
--------------------- ------------------- ------------------- --------------
Total assets $5,633,316 ($3,000) - $5,630,316
===================== =================== =================== ==============
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Accounts payable, accrued
expenses, and other liabilities $901,918 $901,918
Acquisition payable to Unocal,
net of funds held in escrow of $600,000 697,969 $(565,010)(1) 132,959
Current maturities of long-term
obligations 13,141 13,141
--------------------- ------------------- ------------------- --------------
Total current liabilities 1,613,028 (565,010) - 1,048,018
Revolving credit facilities 276,000 562,010(1) (303,205)(2) 534,805
Long-term debt, including
capitalized leases 1,424,009 1,424,009
Environmental cost liabilities 276,111 276,111
Other liabilities 282,402 282,402
Company-obligated mandatorily
redeemable, convertible
preferred securities of Tosco
Financing Trust holding solely
5.75% convertible junior
subordinated debentures of Tosco 300,000 300,000
Shareholders' equity:
Common Stock $.75 par value,
250,000,000 shares authorized,
152,578,683 shares issued, as
adjusted 177,878,683 114,434 18,975(2) 133,409
Additional paid in capital 1,349,978 677,938(2) 2,027,916
Retained earnings 73,315 73,315
Treasury stock, at cost
7,464,693 shares, as adjusted
21,557,175 (75,961) (393,708)(2) (469,669)
--------------------- ------------------- ------------------- --------------
1,461,766 - 303,205 1,764,971
Total liabilities and equity $5,633,316 ($3,000) - $5,630,316
===================== =================== =================== ==============
(1) The cash portion of Tosco's purchase price including working capital was
paid to Unocal on April 1, 1997 from a combination of available cash and
borrowings under the New Credit Agreement and Additional Credit Agreement.
The remaining balance of the acquisition payable to Unocal of approximately
$133 million consists of credit card receivables which will be paid to
Unocal as collections are received.
(2) Issuance and sale of 25,300,000 shares (including the exercise of the
underwriters' overallotment option of 3,300,000 shares) of Tosco Common
Stock generating net proceeds of approximately $696.9 million (the
"Offering"). The pro forma financial information further reflects the
application of the estimated net proceeds to the repurchase of the Unocal
Shares ($393.7 million) and to repay borrowings under its New Credit
Agreement and Additional Credit Agreement ($303.2 million).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOSCO CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1996
Circle K Unocal
Pro Forma Pro Forma Pro Forma
Tosco Circle K(1) Adjustments Pro Forma(2) Unocal Adjustments Combined(3)
----- ----------- ----------- ------------ ------ ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................. $9,922,611 $1,519,542 ($218,800)(4) $11,223,353 $4,868,700 ($1,011,200)(10) $15,080,853
Cost of sales and
operating expenses.... (9,384,718) (1,217,565) 218,800(4) (10,593,305) (4,708,500) 1,011,200(10) (14,237,605)
(209,822)(5) 53,000(11)
Selling, general
and administrative
expense............... (202,855) (263,636) 209,822(5) (261,154) (127,500) (388,654)
(4,485)(6)
Interest expense, net.. (87,189) (11,324) (12,559)(7) (111,072) (1,200) (59,700)(12) (171,972)
-------- -------- ----------- --------- ------- -------- ----------
Income before income
taxes.................. 247,849 27,017 (17,044) 257,822 31,500 (6,700) 282,622
Provision for income
taxes.................. (101,099) (11,347) 4,961(8) (107,485) (17,600) 2,647(13) (122,439)
-------- -------- ----------- --------- ------- -------- ----------
Income before dividends
on Trust Preferred
Securities............. $146,750 $15,670 ($12,083) $150,337 $13,900 ($4,054) 160,184
Dividends on Trust
Preferred, net of
taxes.................. (464) (464) (464)
-------- -------- ----------- --------- ------- -------- ----------
Net income $ 146,286 $15,670 ($12,083) $149,873 $13,900 ($4,054) $159,720
========== ======== ========== ======== ======= ======== ========
Earnings per share
before extraordinary
item:
Primary............... $ 1.16 $ 1.12(9) $ 1.00(14)
Fully diluted......... $ 1.15 $ 1.11(9) $ .99(14)
---------- ----------- ---------
(1) Tosco consummated the purchase of Circle K on May 30, 1996. Accordingly,
the results of operations of Circle K are included in Tosco's historical
statement of income for the year ended December 31, 1996 from that date.
The separately presented historical results of operations of Circle K,
excluding non-recurring charges, are for the period January 1, 1996 to May
29, 1996.
(2) The pro forma income statement does not reflect the improvement in
operating contribution anticipated from the acquisition of Circle K or the
possible reduction in operating and administrative costs expected from the
consolidation of the Seattle, Washington office of Tosco with the Phoenix,
Arizona office of Circle K, net of non-recurring costs of consolidation.
(3) The pro forma income statement does not reflect the improvement in
operating contribution and cost reductions anticipated from the Unocal
Acquisition.
Circle K pro forma adjustments:
(4) Removes excise taxes of Circle K included in sales and cost of sales for
consistency of presentation.
(5) Reclassifies Circle K store operating costs and depreciation and
amortization to cost of sales for consistency of presentation.
(6) Records amortization of intangibles (primarily trademarks) acquired in the
purchase of Circle K over 40 years (the useful life over which the
intangible assets are expected to be realized).
(7) Records interest on $435.4 million additional debt incurred to finance the
Circle K acquisition. The Circle K acquisition was financed by the issuance
of $240 million of 75/8% senior unsecured notes due 2006 and cash
borrowings under Tosco's then outstanding revolving credit agreement.
Records amortization of debt financing costs of $2.9 million over 10 year
term of debt.
(8) Records income taxes on taxable pro forma adjustments at Tosco's current
effective tax rate of 39.5%. No deduction has been taken on amortization of
intangibles which will not be deductible for income tax purposes.
(9) Pro forma earnings per share are based on the number of common and common
equivalent shares that would have been outstanding had the Circle K
acquisition occurred on January 1, 1996.
Unocal pro forma adjustments:
(10) Removes excise taxes of Unocal included in sales and cost of sales for
consistency of presentation.
(11) Adjusts historical depreciation and amortization based on a purchase price
allocation of $1.430 billion. Records annual rental expense of
approximately $23 million, including amortization of lease transaction
costs, pursuant to a long-term lease of certain service stations purchased
from Unocal by a special purpose entity for approximately $235 million.
(12) Records interest on approximately $900 million of additional indebtedness
including $600 million of unsecured term debt, $392 million of borrowings
under the New Credit Agreement and Additional Credit Agreement as adjusted
for repayment of $100 million of 9% First Mortgage Bonds due March 15, 1997
with interest rates of 7.63%, 5.75% and 9%, respectively (collectively, the
"Financing Transactions"). Records amortization of debt financing costs of
$7.5 million over the weighted average debt terms of 19 years.
(13) Records income taxes on pro forma results of Unocal's operations at Tosco's
current effective tax rate of 39.5%.
(14) Pro forma earnings per share are based on the number of common and
common equivalent shares that would have been outstanding had the Unocal
Acquisition and the Offering occurred on January 1, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOSCO CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 1997
(Unaudited)
Pro Forma Pro Forma
Tosco Unocal Adjustments Combined
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Sales................... $ 2,410,273 $ 1,200,600 $ (246,000)(15) $3,364,873
Cost of sales and
operating expenses...... (2,324,455) (1,232,300) 246,000(15) (3,297,535)
13,250(16)
Selling, general and
administrative
expenses................ (51,909) (31,900) (83,809)
Interest expense, net (23,374) (400) (14,925)(17) (38,699)
------------ --------- --------------- -----------
Income (loss) before
income taxes........... 10,505 (64,000) (1,675) (55,170)
(Provision) credit
for income taxes....... (4,420) 25,200 662(18) 21,442
------------ --------- --------------- -----------
Income (loss) before
dividends on Trust
Preferred Securities... 6,085 (38,800) (1,013) (33,728)
Dividends on Trust
Preferred,
net of taxes........... (2,522) (2,522)
------------ --------- --------------- -----------
Net income (loss)...... $ 3,563 $(38,800) $ (1,013) $ (36,250)
============ ========= ================ ===========
Earnings (loss) per share
Primary................. $ 0.03 $ (0.23)(19)
Fully diluted........... $ 0.03 $ (0.23)(19)
Weighted average shares
used for computation of
earnings (loss) per share
Primary 135,690,782 156,475,830(20)
Fully diluted 135,690,782 156,475,830(20)
Unocal pro forma adjustments:
(15) Removes excise taxes of Unocal included in sales and cost of sales for
consistency of presentation.
(16) Adjusts historical depreciation and amortization based on a purchase price
allocation of $1.430 billion. Records annual rental expense of
approximately $23 million, including amortization of lease transaction
costs, pursuant to a long-term lease of certain service stations purchased
from Unocal by a special purpose entity for approximately $235 million.
(17) Records interest on approximately $900 million of additional indebtedness
including $600 million of unsecured term debt, $392 million of borrowings
under the New Credit Agreement and Additional Credit Agreement as adjusted
for repayment of $100 million of 9% First Mortgage Bonds due March 15, 1997
with interest rates of 7.63%, 5.75% and 9%, respectively (collectively, the
"Financing Transactions"). Records amortization of debt financing costs of
$7.5 million over the weighted average debt terms of 19 years.
(18) Records income taxes on pro forma results of Unocal's operations at Tosco's
current effective tax rate of 39.5%.
(19) Pro forma earnings per share are based on the number of common and common
equivalent shares that would have been outstanding had the Unocal
Acquisition and the Offering occurred on January 1, 1997.
(20) The weighted average shares used for the computation of the pro forma
combined loss per share does not include approximately 4.5 million of stock
option equivalents as the effect would be anti-dilutive.
</TABLE>
