Tesoro Corporation (NYSE:TSO) today reported second quarter 2010 net earnings of $67 million, or $0.47 per diluted share compared to a net loss of $45 million, or $0.33 per diluted share for the second quarter of 2009. The 2010 results include one-time net after-tax benefits of $24 million primarily related to changes to our post-retirement benefits programs. The total after-tax impact for the one-time net benefits in the quarter is $0.17 per diluted share.
Second quarter segment operating income was $153 million excluding the special items, compared to $11 million in the second quarter a year ago. The increase in operating income was driven in large part by stronger distillate margins and improved realizations in our marketing channels. These benefits were partially offset by decreased gasoline margins and reduced throughput. The reduction in throughput was primarily a result of the idled Anacortes refinery and the planned full plant turnaround at our Mandan refinery.
For the second quarter, the Tesoro Index was over $1.40 per barrel higher than a year ago, as a result of improved West Coast benchmark diesel margins, which were up 55%. Gasoline margins however fell by 15% versus a year ago. Tesoro benefited from blending ethanol into gasoline as ethanol prices traded on average $0.55 per gallon below California grade gasoline. The second quarter results also reflect improved performance in both our wholesale and retail marketing channels, as spot prices for gasoline and diesel fell more rapidly than wholesale rack or retail street prices during the period.
"We are pleased with our second quarter results, despite the lost opportunity due to the idling of our Anacortes refinery and the full plant turnaround at our Mandan refinery," said Greg Goff, President and CEO of Tesoro. "During the quarter we saw improvements in several key economic indicators, including West Coast port and rail activity. We believe these trends drove diesel margins higher. These increases are not, however, being seen in gasoline margins. While gasoline demand has stabilized, high unemployment in California continues to keep demand low."
Capital Spending and Liquidity
Capital spending, including turnarounds, for the second quarter 2010 was $140 million, and the company anticipates capital spending, including turnarounds, for the full year 2010, to be in the range of $475 to $500 million. The company ended the second quarter with $191 million in cash and remained undrawn with $713 million of availability on the revolving credit facility.
"While we have seen improvements in the market during the second quarter, we continue to plan for a challenging margin environment and are committed to our improvement initiatives. We are implementing changes to our corporate overhead and benefits programs that we expect will strengthen Tesoro and have an immediate and positive impact on cash flow and earnings," said Goff.
When fully implemented by the end of this year, the changes are expected to reduce cash corporate expenses by an estimated $40 to $50 million and reduce post-retirement benefit expenses by another $80 to $90 million, annually. For the second quarter, the net impact of these changes was a $26 million after-tax benefit to earnings.
Washington Refinery
The repair work at the Anacortes refinery is progressing well and we expect that the plant should be operational as early as September. The company continues to work closely with investigators regarding the incident.
Public Invited to Listen to Analyst Conference Call
At 7:30 a.m. tomorrow morning, Tesoro will broadcast, live, its conference call with analysts regarding second quarter 2010 results and other business matters. Interested parties may listen to the live conference call over the Internet by logging on to http://www.tsocorp.com, or via phone by dialing (877) 407-4134 (international dial-in: (201) 689-8430), event ID 00352826. A telephone replay of the call will be available for one week, and may be accessed via phone by dialing (877) 660-6853 (international replay: (201) 612-7415), then entering passcode 352826 and access code 356.
Tesoro Corporation, a Fortune 150 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of approximately 665,000 barrels per day. Tesoro's retail-marketing system includes over 875 branded retail stations, of which over 380 are company operated under the Tesoro®, Shell®, Mirastar® and USA Gasoline™ brands.
This earnings release contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning the market environment, expected corporate expense savings, our expectations about our capital spending, and the completion of repairs at our Anacortes refinery.For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.
TESORO CORPORATION | ||||||||||||||||||||
STATEMENTS OF CONSOLIDATED OPERATIONS | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In millions except per share amounts) | ||||||||||||||||||||
 |  |  |  |  | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
 | 2010 |  |  | 2009 |  |  | 2010 |  |  | 2009 |  | |||||||||
Revenues | $ | 5,143 | $ | 4,181 | $ | 9,750 | $ | 7,461 | ||||||||||||
Costs and Expenses: | ||||||||||||||||||||
Costs of sales | 4,492 | 3,668 | 8,739 | 6,310 | ||||||||||||||||
Operating expenses | 348 | 368 | 721 | 734 | ||||||||||||||||
Selling, general and administrative expenses | 42 | 53 | 109 | 107 | ||||||||||||||||
Depreciation and amortization expense | 108 | 108 | 208 | 213 | ||||||||||||||||
Loss on asset disposals and impairments | Â | 10 | Â | Â | 20 | Â | Â | 32 | Â | Â | 21 | Â | ||||||||
 |  | |||||||||||||||||||
Operating Income (Loss) (a) | 143 | (36 | ) | (59 | ) | 76 | ||||||||||||||
Interest and Financing Costs | (37 | ) | (31 | ) | (74 | ) | (59 | ) | ||||||||||||
Interest Income | - | 2 | - | 3 | ||||||||||||||||
Foreign Currency Exchange Income (Loss) | Â | 1 | Â | Â | (10 | ) | Â | 1 | Â | Â | (10 | ) | ||||||||
 | ||||||||||||||||||||
Earnings (Loss) Before Income Taxes | 107 | (75 | ) | (132 | ) | 10 | ||||||||||||||
Income Tax Provision (Benefit) | Â | 40 | Â | Â | (30 | ) | Â | (44 | ) | Â | 4 | Â | ||||||||
Net Earnings (Loss) | $ | 67 | Â | $ | (45 | ) | $ | (88 | ) | $ | 6 | Â | ||||||||
Net Earnings (Loss) Per Share: | ||||||||||||||||||||
Basic | $ | 0.48 | $ | (0.33 | ) | $ | (0.63 | ) | $ | 0.04 | ||||||||||
Diluted (b) | $ | 0.47 | $ | (0.33 | ) | $ | (0.63 | ) | $ | 0.04 | ||||||||||
Weighted Average Common Shares: | ||||||||||||||||||||
Basic | 140.5 | 138.0 | 140.0 | 137.9 | ||||||||||||||||
Diluted (b) | 142.5 | 138.0 | 140.0 | 139.6 | ||||||||||||||||
 | ||||||||||||||||||||
 | ||||||||||||||||||||
(a) | Includes a $43 million net gain for the three and six months ended June 30, 2010 primarily from the elimination of postretirement life insurance benefits for current and future retirees. | |||||||||||||||||||
(b) | The assumed conversion of common stock equivalents produced anti-dilutive results for the three months ended June 30, 2009 and six months ended June 30, 2010 and was not included in the dilutive calculation. |
TESORO CORPORATION | |||||||||||||||||||||
SELECTED OPERATING SEGMENT DATA | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
 |  |  |  |  |  |  | |||||||||||||||
 | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||
 | 2010 |  |  | 2009 |  |  | 2010 |  |  | 2009 |  | ||||||||||
Operating Income (Loss) | |||||||||||||||||||||
Refining | $ | 150 | $ | 7 | $ | (19 | ) | $ | 184 | ||||||||||||
Retail | Â | 30 | Â | Â | 4 | Â | Â | 54 | Â | Â | (11 | ) | |||||||||
Total Segment Operating Income | 180 | 11 | 35 | 173 | |||||||||||||||||
Corporate and Unallocated Costs | Â | (37 | ) | Â | Â | (47 | ) | Â | (94 | ) | Â | (97 | ) | ||||||||
Operating Income (Loss) | 143 | (36 | ) | (59 | ) | 76 | |||||||||||||||
Interest and Financing Costs | (37 | ) | (31 | ) | (74 | ) | (59 | ) | |||||||||||||
Interest Income | - | 2 | - | 3 | |||||||||||||||||
Foreign Currency Exchange Income (Loss) | Â | 1 | Â | Â | (10 | ) | Â | 1 | Â | Â | (10 | ) | |||||||||
Earnings (Loss) Before Income Taxes | $ | 107 | Â | $ | (75 | ) | $ | (132 | ) | $ | 10 | Â | |||||||||
 | |||||||||||||||||||||
Depreciation and Amortization Expense | |||||||||||||||||||||
Refining | $ | 93 | $ | 90 | $ | 178 | $ | 177 | |||||||||||||
Retail | 10 | 10 | 20 | 19 | |||||||||||||||||
Corporate | Â | 5 | Â | Â | 8 | Â | Â | 10 | Â | Â | 17 | Â | |||||||||
Depreciation and Amortization Expense | $ | 108 | Â | $ | 108 | Â | $ | 208 | Â | $ | 213 | Â | |||||||||
 | |||||||||||||||||||||
Capital Expenditures | |||||||||||||||||||||
Refining | $ | 75 | $ | 88 | $ | 140 | $ | 159 | |||||||||||||
Retail | 2 | 4 | 4 | 9 | |||||||||||||||||
Corporate | Â | - | Â | Â | 15 | Â | Â | - | Â | Â | 27 | Â | |||||||||
Capital Expenditures | $ | 77 | Â | $ | 107 | Â | $ | 144 | Â | $ | 195 | Â | |||||||||
 | |||||||||||||||||||||
BALANCE SHEET DATA | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
 | |||||||||||||||||||||
June 30, | December 31, | ||||||||||||||||||||
 | 2010 |  |  | 2009 |  | ||||||||||||||||
Cash and Cash Equivalents | $ | 191 | $ | 413 | |||||||||||||||||
Total Assets | $ | 8,273 | $ | 8,070 | |||||||||||||||||
Total Debt | $ | 1,845 | $ | 1,841 | |||||||||||||||||
Total Stockholders' Equity | $ | 3,145 | $ | 3,087 | |||||||||||||||||
Total Debt to Capitalization Ratio | 37 | % | 37 | % |
TESORO CORPORATION | ||||||||||||||||||
OPERATING DATA | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
 |  |  |  | |||||||||||||||
 | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||
REFINING SEGMENT | ||||||||||||||||||
Total Refining Segment | ||||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||||
Heavy crude (c) | 193 | 186 | 180 | 184 | ||||||||||||||
Light crude | 251 | 343 | 263 | 332 | ||||||||||||||
Other feedstocks | Â | 30 | Â | 36 | Â | 29 | Â | Â | 35 | |||||||||
Total Throughput | Â | 474 | Â | 565 | Â | 472 | Â | Â | 551 | |||||||||
 | ||||||||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 222 | 286 | 227 | 272 | ||||||||||||||
Jet fuel | 64 | 67 | 67 | 66 | ||||||||||||||
Diesel fuel | 103 | 111 | 98 | 116 | ||||||||||||||
Heavy oils, residual products, internally produced fuel and other | Â | 112 | Â | 133 | Â | 108 | Â | Â | 128 | |||||||||
Total Yield | Â | 501 | Â | 597 | Â | 500 | Â | Â | 582 | |||||||||
 | ||||||||||||||||||
 | ||||||||||||||||||
Gross refining margin ($/throughput bbl) (d) | $ | 12.89 | $ | 8.52 | $ | 9.65 | $ | 10.27 | ||||||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (d) | $ | 5.74 | $ | 4.63 | $ | 5.84 | $ | 4.96 | ||||||||||
 | ||||||||||||||||||
Segment Operating Income (Loss) ($ millions) | ||||||||||||||||||
Gross refining margin (e) | $ | 555 | $ | 438 | $ | 825 | $ | 1,023 | ||||||||||
Expenses | ||||||||||||||||||
Manufacturing costs | 248 | 238 | 500 | 495 | ||||||||||||||
Other operating expenses | 50 | 77 | 122 | 136 | ||||||||||||||
Selling, general and administrative expenses | 7 | 8 | 16 | 12 | ||||||||||||||
Depreciation and amortization expense (f) | 93 | 90 | 178 | 177 | ||||||||||||||
Loss on asset disposals and impairments (g) | Â | 7 | Â | 18 | Â | 28 | Â | Â | 19 | |||||||||
Segment Operating Income (Loss) (h) | $ | 150 | $ | 7 | $ | (19 | ) | $ | 184 | |||||||||
 | ||||||||||||||||||
Refined Product Sales (thousand barrels per day) (i) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 277 | 317 | 281 | 312 | ||||||||||||||
Jet fuel | 97 | 79 | 93 | 78 | ||||||||||||||
Diesel fuel | 113 | 123 | 105 | 121 | ||||||||||||||
Heavy oils, residual products and other | Â | 77 | Â | 88 | Â | 77 | Â | Â | 87 | |||||||||
Total Refined Product Sales | Â | 564 | Â | 607 | Â | 556 | Â | Â | 598 | |||||||||
 | ||||||||||||||||||
Refined Product Sales Margin ($/barrel) (i) | ||||||||||||||||||
Average sales price | $ | 90.91 | $ | 69.63 | $ | 89.03 | $ | 63.15 | ||||||||||
Average costs of sales | Â | 82.00 | Â | 61.80 | Â | 82.40 | Â | Â | 54.06 | |||||||||
Refined Product Sales Margin | $ | 8.91 | $ | 7.83 | $ | 6.63 | Â | $ | 9.09 | |||||||||
 | ||||||||||||||||||
(c) | We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less. | |||||||||||||||||
(d) | Management uses gross refining margin per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate gross refining margin per barrel; different companies may calculate it in different ways. We calculate gross refining margin per barrel by dividing gross refining margin (revenue less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. Management uses manufacturing costs per barrel to evaluate the efficiency of refining operations. There are a variety of ways to calculate manufacturing costs per barrel; different companies may calculate it in different ways. We calculate manufacturing costs per barrel by dividing manufacturing costs by total refining throughput. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America. | |||||||||||||||||
(e) | Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other costs not directly attributable to a specific region. Other costs resulted in a decrease of $2 million for the three ended June 30, 2010 and increases of $4 million and $3 million for the three and six months ended June 30, 2009, respectively. Gross refining margin includes the effect of intersegment sales to the retail segment at prices which approximate market. Gross refining margin approximates total refining throughput times gross refining margin per barrel. | |||||||||||||||||
(f) | Includes manufacturing depreciation and amortization expense per throughput barrel of approximately $2.05 and $1.62 for the three months ended June 30, 2010 and 2009, respectively, and $1.97 and $1.66 for the six months ended June 30, 2010 and 2009, respectively. | |||||||||||||||||
(g) | Includes impairment charges related to our Los Angeles refinery of $20 million for the six months ended June 30, 2010 and $12 million for the three and six months ended June 30, 2009. The three and six months ended June 30, 2010 include a $4 million write-off related to the Washington refinery incident. The loss on asset disposals and impairments is included in refining segment operating income but excluded from the regional operating costs per barrel. | |||||||||||||||||
(h) | Includes a $36 million net gain for the three and six months ended June 30, 2010 primarily from the elimination of postretirement life insurance benefits for current and future retirees. | |||||||||||||||||
(i) | Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. The total refined product sales margins include margins on sales of manufactured and purchased refined products. |
TESORO CORPORATION | ||||||||||||||||||
OPERATING DATA | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
 |  |  |  |  |  |  | ||||||||||||
 | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
 | 2010 |  | 2009 |  | 2010 |  | 2009 | |||||||||||
Refining By Region | ||||||||||||||||||
California (Golden Eagle and Los Angeles) | ||||||||||||||||||
Throughput (thousand barrels per day) (j) | ||||||||||||||||||
Heavy crude (c) | 174 | 173 | 158 | 169 | ||||||||||||||
Light crude | 43 | 57 | 38 | 59 | ||||||||||||||
Other feedstocks | Â | 22 | Â | 21 | Â | 18 | Â | 22 | ||||||||||
Total Throughput | Â | 239 | Â | 251 | Â | 214 | Â | 250 | ||||||||||
 | ||||||||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 132 | 140 | 120 | 136 | ||||||||||||||
Jet fuel | 18 | 20 | 18 | 18 | ||||||||||||||
Diesel fuel | 60 | 50 | 51 | 56 | ||||||||||||||
Heavy oils, residual products, internally produced fuel and other | Â | 50 | Â | 65 | Â | 46 | Â | 62 | ||||||||||
Total Yield | Â | 260 | Â | 275 | Â | 235 | Â | 272 | ||||||||||
 | ||||||||||||||||||
Gross refining margin | $ | 293 | $ | 185 | $ | 425 | $ | 521 | ||||||||||
Gross refining margin ($/throughput bbl) (d) | $ | 13.48 | $ | 8.09 | $ | 10.95 | $ | 11.54 | ||||||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (d) | $ | 7.01 | $ | 6.12 | $ | 7.82 | $ | 6.57 | ||||||||||
 | ||||||||||||||||||
Pacific Northwest (Alaska & Washington) | ||||||||||||||||||
Throughput (thousand barrels per day) (j) | ||||||||||||||||||
Heavy crude (c) | 1 | - | 2 | - | ||||||||||||||
Light crude | 79 | 129 | 94 | 117 | ||||||||||||||
Other feedstocks | Â | 4 | Â | 10 | Â | 7 | Â | 9 | ||||||||||
Total Throughput | Â | 84 | Â | 139 | Â | 103 | Â | 126 | ||||||||||
 | ||||||||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 26 | 64 | 39 | 57 | ||||||||||||||
Jet fuel | 23 | 22 | 26 | 22 | ||||||||||||||
Diesel fuel | 8 | 23 | 12 | 22 | ||||||||||||||
Heavy oils, residual products, internally produced fuel and other | Â | 29 | Â | 34 | Â | 29 | Â | 29 | ||||||||||
Total Yield | Â | 86 | Â | 143 | Â | 106 | Â | 130 | ||||||||||
 | ||||||||||||||||||
Gross refining margin | $ | 98 | $ | 123 | $ | 162 | $ | 206 | ||||||||||
Gross refining margin ($/throughput bbl) (d) | $ | 12.78 | $ | 9.70 | $ | 8.69 | $ | 9.01 | ||||||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (d) | $ | 5.98 | $ | 3.72 | $ | 5.02 | $ | 4.18 | ||||||||||
 | ||||||||||||||||||
 | ||||||||||||||||||
Mid-Pacific (Hawaii) | ||||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||||
Heavy crude (c) | 18 | 13 | 20 | 15 | ||||||||||||||
Light crude | Â | 49 | Â | 53 | Â | 47 | Â | 55 | ||||||||||
Total Throughput | Â | 67 | Â | 66 | Â | 67 | Â | 70 | ||||||||||
 | ||||||||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 16 | 16 | 16 | 17 | ||||||||||||||
Jet fuel | 14 | 17 | 14 | 17 | ||||||||||||||
Diesel fuel | 13 | 10 | 13 | 10 | ||||||||||||||
Heavy oils, residual products, internally produced fuel and other | Â | 25 | Â | 24 | Â | 25 | Â | 27 | ||||||||||
Total Yield | Â | 68 | Â | 67 | Â | 68 | Â | 71 | ||||||||||
 | ||||||||||||||||||
Gross refining margin | $ | 33 | $ | 15 | $ | 33 | $ | 71 | ||||||||||
Gross refining margin ($/throughput bbl) (d) | $ | 5.35 | $ | 2.52 | $ | 2.74 | $ | 5.67 | ||||||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (d) | $ | 2.92 | $ | 3.21 | $ | 2.85 | $ | 2.98 | ||||||||||
 |  |  | - | |||||||||||||||
(j) | We experienced reduced throughput due to scheduled turnarounds at our North Dakota refinery during the 2010 second quarter, Utah in the 2010 first quarter, Alaska during the 2009 second quarter, and Golden Eagle refineries during the 2010 first quarter and 2009 second quarter, and scheduled maintenance at our Washington refinery during the 2009 second quarter. We temporarily shut-down processing at the Washington refinery beginning in April 2010. |
TESORO CORPORATION | |||||||||||||||||
OPERATING DATA | |||||||||||||||||
(Unaudited) | |||||||||||||||||
 |  |  |  |  |  |  |  |  | |||||||||
 | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
 | 2010 |  | 2009 |  | 2010 |  | 2009 | ||||||||||
Mid-Continent (North Dakota & Utah) | |||||||||||||||||
Throughput (thousand barrels per day) (j) | |||||||||||||||||
Light crude | 80 | 104 | 84 | 101 | |||||||||||||
Other feedstocks | Â | 4 | Â | 5 | Â | 4 | Â | 4 | |||||||||
Total Throughput | Â | 84 | Â | 109 | Â | 88 | Â | 105 | |||||||||
 | |||||||||||||||||
Yield (thousand barrels per day) | |||||||||||||||||
Gasoline and gasoline blendstocks | 48 | 66 | 52 | 62 | |||||||||||||
Jet fuel | 9 | 8 | 9 | 9 | |||||||||||||
Diesel fuel | 22 | 28 | 22 | 28 | |||||||||||||
Heavy oils, residual products, internally produced fuel and other | Â | 8 | Â | 10 | Â | 8 | Â | 10 | |||||||||
Total Yield | Â | 87 | Â | 112 | Â | 91 | Â | 109 | |||||||||
 | |||||||||||||||||
Gross refining margin | $ | 133 | $ | 111 | $ | 205 | $ | 222 | |||||||||
Gross refining margin ($/throughput bbl) (d) | $ | 17.38 | $ | 11.29 | $ | 12.80 | $ | 11.71 | |||||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (d) | $ | 4.18 | $ | 3.20 | $ | 4.26 | $ | 3.40 |
TESORO CORPORATION | ||||||||||||||||||||||
OPERATING DATA | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
 |  |  |  |  |  |  |  | |||||||||||||||
 | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||
 | 2010 |  |  | 2009 |  |  | 2010 |  |  | 2009 |  | |||||||||||
RETAIL SEGMENT | ||||||||||||||||||||||
Number of Stations (end of period) | ||||||||||||||||||||||
Company-operated | 383 | 388 | 383 | 388 | ||||||||||||||||||
Branded jobber/dealer | Â | 495 | Â | Â | 490 | Â | Â | 495 | Â | Â | 490 | Â | ||||||||||
Total Stations | Â | 878 | Â | Â | 878 | Â | Â | 878 | Â | Â | 878 | Â | ||||||||||
 | ||||||||||||||||||||||
Average Stations (during period) | ||||||||||||||||||||||
Company-operated | 384 | 388 | 385 | 389 | ||||||||||||||||||
Branded jobber/dealer | Â | 500 | Â | Â | 490 | Â | Â | 499 | Â | Â | 489 | Â | ||||||||||
Total Average Retail Stations | Â | 884 | Â | Â | 878 | Â | Â | 884 | Â | Â | 878 | Â | ||||||||||
 | ||||||||||||||||||||||
Fuel Sales (millions of gallons) | ||||||||||||||||||||||
Company-operated | 265 | 263 | 518 | 513 | ||||||||||||||||||
Branded jobber/dealer | Â | 68 | Â | Â | 80 | Â | Â | 131 | Â | Â | 146 | Â | ||||||||||
Total Fuel Sales | Â | 333 | Â | Â | 343 | Â | Â | 649 | Â | Â | 659 | Â | ||||||||||
 | ||||||||||||||||||||||
Fuel Margin ($/gallon) (k) (l) | $ | 0.22 | $ | 0.16 | $ | 0.23 | $ | 0.14 | ||||||||||||||
Merchandise Sales ($ millions) | $ | 51 | $ | 56 | $ | 97 | $ | 102 | ||||||||||||||
Merchandise Margin ($ millions) | $ | 14 | $ | 14 | $ | 26 | $ | 25 | ||||||||||||||
Merchandise Margin % | 27 | % | 25 | % | 27 | % | 25 | % | ||||||||||||||
 | ||||||||||||||||||||||
Segment Operating Income (Loss) ($ millions) | ||||||||||||||||||||||
Gross Margins | ||||||||||||||||||||||
Fuel (l) | $ | 75 | $ | 55 | $ | 147 | $ | 91 | ||||||||||||||
Merchandise and other non-fuel margin | Â | 21 | Â | Â | 20 | Â | Â | 39 | Â | Â | 37 | Â | ||||||||||
Total Gross Margins | 96 | 75 | 186 | 128 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||
Operating expenses | 50 | 52 | 99 | 102 | ||||||||||||||||||
Selling, general and administrative expenses | 3 | 7 | 9 | 16 | ||||||||||||||||||
Depreciation and amortization expense | 10 | 10 | 20 | 19 | ||||||||||||||||||
Loss on asset disposals and impairments | Â | 3 | Â | Â | 2 | Â | Â | 4 | Â | Â | 2 | Â | ||||||||||
Segment Operating Income (Loss) (m) | $ | 30 | Â | $ | 4 | Â | $ | 54 | Â | $ | (11 | ) | ||||||||||
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(k) | Management uses fuel margin per gallon to compare profitability to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon; different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Investors and analysts use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered an alternative to segment operating income and revenues or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America. | |||||||||||||||||||||
(l) | Includes the effect of intersegment purchases from the refining segment at prices which approximate market. | |||||||||||||||||||||
(m) | Includes a $3 million net gain for the three and six months ended June 30, 2010 primarily from the elimination of postretirement life insurance benefits for current and future retirees. |
TESORO CORPORATION | |||||||||||||||||||
RECONCILIATION TO AMOUNTS REPORTED UNDER US GAAP | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
(In millions) | |||||||||||||||||||
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Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
 | 2010 |  | 2009 |  |  | 2010 |  |  | 2009 |  | |||||||||
 | |||||||||||||||||||
Net Earnings (Loss) | $ | 67 | $ | (45 | ) | $ | (88 | ) | $ | 6 | |||||||||
Add income tax provision (benefit) | 40 | (30 | ) | (44 | ) | 4 | |||||||||||||
Add interest and financing costs | 37 | 31 | 74 | 59 | |||||||||||||||
Less interest income | - | (2 | ) | - | (3 | ) | |||||||||||||
Add depreciation and amortization expense | Â | 108 | Â | 108 | Â | Â | 208 | Â | Â | 213 | Â | ||||||||
Earnings before Interest, Income Taxes, Depreciation | |||||||||||||||||||
and Amortization Expense (EBITDA) (n) | $ | 252 | $ | 62 | Â | $ | 150 | Â | $ | 279 | Â |
 | ||||
SEGMENT OPERATING INCOME ADJUSTED FOR SPECIAL ITEMS | ||||
(Unaudited) | ||||
(In millions) | ||||
 | ||||
Three Months Ended | ||||
June 30, | ||||
2010 | ||||
Total Segment Operating Income | $ | 180 | ||
Special Items, before-tax: | ||||
Cost structure changes | (39 | ) | ||
Washington refinery incident (o) | Â | 12 | Â | |
Segment Operating Income Adjusted for Special Items | $ | 153 | Â | |
 |
NET EARNINGS ADJUSTED FOR SPECIAL ITEMS | Â | Â | Â | Â | Â | Â | Â | Â | ||||||||||||
(Unaudited) | ||||||||||||||||||||
(In millions except per share amounts) | ||||||||||||||||||||
 |  |  |  |  | ||||||||||||||||
Three Months Ended | ||||||||||||||||||||
June 30, | ||||||||||||||||||||
 | 2010 |  | ||||||||||||||||||
Net Earnings - U.S. GAAP | $ | 67 | ||||||||||||||||||
Special Items, After-tax: | ||||||||||||||||||||
Cost structure changes (p) | (26 | ) | ||||||||||||||||||
Washington refinery incident | 7 | |||||||||||||||||||
State income tax audit settlement (q) | Â | (5 | ) | |||||||||||||||||
Net Earnings Adjusted for Special Items | $ | 43 | Â | |||||||||||||||||
 | ||||||||||||||||||||
Net Earnings Per Share - U.S. GAAP | $ | 0.47 | ||||||||||||||||||
Special Items Per Share, After-tax: | ||||||||||||||||||||
Cost structure changes (p) | (0.18 | ) | ||||||||||||||||||
Washington refinery incident | 0.05 | |||||||||||||||||||
State income tax audit settlement (q) | Â | (0.04 | ) | |||||||||||||||||
Net Earnings Per Share Adjusted for Special Items | $ | 0.30 | Â | |||||||||||||||||
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Note: The special items present information that the Company believes is useful to investors. The Company believes that special items are not indicative of its core operations. | ||||||||||||||||||||
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(n) | EBITDA represents earnings before interest and financing costs, interest income, income taxes, and depreciation and amortization expense. We present EBITDA because we believe some investors and analysts use EBITDA to help analyze our cash flows including our ability to satisfy principal and interest obligations with respect to our indebtedness and to use cash for other purposes, including capital expenditures. EBITDA is also used by some investors and analysts to analyze and compare companies on the basis of operating performance and by management for internal analysis and as a component of the fixed charge coverage financial covenant in our credit agreement. EBITDA should not be considered as an alternative to net earnings, earnings before income taxes, cash flows from operating activities or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America. EBITDA may not be comparable to similarly titled measures used by other entities. | |||||||||||||||||||
(o) | Includes the impact of the $4 million write-off and $8 million of other expenses related to the Washington refinery incident. | |||||||||||||||||||
(p) | Represents the consolidated after-tax impact of the $43 million net gain primarily from the elimination of postretirement life insurance benefits for current and future retirees. | |||||||||||||||||||
(q) | Represents the after-tax impact of a favorable settlement of a state income tax audit. | |||||||||||||||||||
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Contacts:
Tesoro Corporation
Investors:
Louie Rubiola, 210-626-4355
Director,
Investor Relations
or
Media:
Lynn Westfall, 210-626-4697
SVP
of External Affairs and Chief Economist