SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended DECEMBER 31, 1992
Commission File Number 1-959
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
THE LOUISIANA LAND AND EXPLORATION COMPANY
Exact name of registrant as specified in its charter
MARYLAND 72-0244700
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
909 POYDRAS STREET, NEW ORLEANS, LA. 70112
Address of principal executive offices Zip Code
Registrant's telephone number, including area code 504-566-6500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
Capital Stock, $.15 par New York Stock Exchange
value (including Capital Toronto Stock Exchange
Stock Purchase Rights) London Stock Exchange
The Stock Exchanges of Geneva,
Zurich and Basle
8-1/4% Notes due 2002 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
(Continued)PAGE
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. Yes X . No .
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
AGGREGATE
MARKET VALUE AT
CLASS OF VOTING STOCK FEBRUARY 26, 1993
Capital Stock, $.15 par value $1,078,878,000
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
OUTSTANDING AT
CLASS FEBRUARY 26, 1993
Capital Stock, $.15 par value 28,391,532 shares
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II: The Registrant's Annual Report to Shareholders for
1992
Part III: The Registrant's Proxy Statement for its Annual Meeting
of Stockholders to be held on May 13, 1993
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual
Report on Form 10-K for the year ended December 31, 1992 as set
forth in the document transmitted herewith:
Part I, Item 3.......... Legal Proceedings
Part II, Item 5.......... Market for the Registrant's
Common Equity and Related
Stockholder Matters
Part II, Item 6.......... Selected Financial Data
Part II, Item 7.......... Management's Discussion
and Analysis of Financial
Position and Results of
Operations
Part II, Item 8.......... Financial Statements and
Supplementary Data
Part IV, Item 14(a)(1)... Financial Statements and
Supplementary Data
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: October 6, 1993
THE LOUISIANA LAND AND
EXPLORATION COMPANY
By: s/Jerry D. Carlisle
_____________________________
Jerry D. Carlisle
Vice President and Controller
PAGE
ITEM 3. LEGAL PROCEEDINGS.
Information presented in Note 14 under the heading "Notes to
Consolidated Financial Statements" on page 30 of the Company's
Annual Report to Shareholders for 1992 is amended to read as set
forth herein. See also "Environmental Matters" which appears on
page 18 of the Form 10-K of the registrant dated March 11, 1993 and
is incorporated herein by reference.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Information presented under the caption "Capital Stock,
Dividends and Other Market Data" under the heading "Financial
Review" on page 17 of the Company's Annual Report to Shareholders
for 1992 and information presented under the caption "Market Price
and Dividend Data" appearing under the heading "Quarterly Data" on
page 39 of the Company's Annual Report to Shareholders for 1992 are
amended to read as set forth herein.
ITEM 6. SELECTED FINANCIAL DATA.
Information presented under the caption "Selected Financial
Data" under the heading "Highlights" on page 4 of the Company's
Annual Report to Shareholders for 1992 is amended to read as set
forth herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Information presented under the heading "Financial Review" on
pages 12-17 of the Company's Annual Report to Shareholders for 1992
is amended to read as set forth herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of The Louisiana Land
and Exploration Company and Subsidiaries, together with the report
thereon of KPMG Peat Marwick dated February 8, 1993, and the
supplementary data referred to in Item 14(a)(1) hereof, which are
contained in the Company's Annual Report to Shareholders for 1992,
are amended to read as set forth herein. The consolidated
financial statements of MaraLou Netherlands Partnership and
Subsidiary (a 50%-owned affiliate accounted for under the equity
method), together with the report thereon of KPMG Peat Marwick
dated January 29, 1993, as referred to in Item 14(a)(1) hereof, are
incorporated by reference herein.
PAGE
THE LOUISIANA LAND AND EXPLORATION COMPANY
AND SUBSIDIARIES
Financial Statements and Supplementary Data
(Item 14(a)(1))
The following financial statements and supplementary data
which appear on the pages listed below in the Company's Annual
Report to Shareholders for 1992, are amended to read as set forth
herein, except for Unaudited Supplemental Data - Data on Oil and
Gas Activities, which is incorporated by reference herein:
Page(s) in
Annual Report
to Shareholders
Financial Statements:
Consolidated Balance Sheets 18
Consolidated Statements of Earnings (Loss) 19
Consolidated Statements of Stockholders' Equity 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 22-30
Report of Management 31
Independent Auditors' Report 31
Unaudited Supplemental Data:
Data on Oil and Gas Activities 32-34
Quarterly Data 39
The following financial statements of 50% or Less Owned Persons
required by Regulation S-X, Rule 3-09, which appear on the pages
listed below of the Form 10-K of the registrant dated March 11,
1993, are incorporated by reference herein:
Page(s) in
Form 10-K
MaraLou Netherlands Partnership and its wholly-owned consolidated
subsidiary, CLAM Petroleum Company:
Independent Auditors' Report 28
Consolidated Balance Sheets 29
Consolidated Statements of Income 30
Consolidated Statements of Partners' Capital 31-32
Consolidated Statements of Cash Flows 33-34
Notes to Consolidated Financial Statements 35-42
PAGE
SELECTED FINANCIAL DATA
Years ended December 31,:
(Millions of dollars, except per share data)
1992(1) 1991 1990(1) 1989 1988(2),(3)
_______________________________________________________________________________________
Revenues $ 787.4 825.3 874.7 760.6 733.2
Operating profit (loss) $ 49.9 75.2 142.1 118.5 (65.1)
Net earnings (loss) $ (6.8) 20.9 54.9 44.1 (33.3)
Primary and fully diluted
earnings (loss) per share $ (0.24) 0.74 1.94 1.50 (1.08)
Average shares (millions) 28.4 28.3 28.3 29.4 30.9
_______________________________________________________________________________________
Cash flows from operations $ 178.7 209.2 251.9 268.6 228.6
Working capital (deficit):
End of year $ (20.2) 24.2 27.2 (11.7) 21.9
Current ratio .88 1.15 1.17 .94 1.12
_______________________________________________________________________________________
Total assets $1,209.1 1,252.8 1,226.0 1,199.4 1,428.9
Long-term debt $ 343.0 347.3 346.1 366.9 545.6
Stockholders' equity $ 416.6 446.5 448.7 416.2 489.2
Cash dividends per share $ 1.00 1.00 1.00 1.00 1.00
_______________________________________________________________________________________
<F/N>
(1) See Note 3 of "Notes to Consolidated Financial Statements" for an explanation of certain
nonrecurring charges and/or credits.
(2) In 1988, the Company adopted Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes," and recorded the cumulative effect of the accounting
change on all prior years. The cumulative adjustment for prior years increased net
earnings for 1988 by $36.9 million ($1.19 per share).
(3) In 1988, the Company recorded a $54 million charge (net of tax benefits of $27.8 million)
against net earnings to provide for the restructuring of its domestic oil and gas
operations. Also, the Company recorded an $11.7 million charge (net of tax benefits of
$6.0 million) against net earnings as a result of certain litigation ongoing at that
time.
MARKET PRICE AND DIVIDEND DATA
Quarter ended
March 31 June 30 Sept. 30 Dec. 31
_________________________________________________________________________________________
1992:
Capital stock price:
High $33 1/2 37 1/4 40 1/2 38 1/4
Low 25 28 1/2 33 3/4 32 1/2
Cash dividends per share 0.25 0.25 0.25 0.25
_________________________________________________________________________________________
1991:
Capital stock price:
High $43 1/2 43 40 5/8 41 7/8
Low 34 1/4 33 3/4 34 3/8 29 5/8
Cash dividends per share 0.25 0.25 0.25 0.25
_________________________________________________________________________________________
PAGE
MANAGEMENT'S DISCUSSION AND ANALYSIS
_____________________________________________________________________
REVIEW OF OPERATIONS (1992 VS 1991)
Gross revenues in 1992 were down $38 million from the comparable prior
year as higher refining revenues were more than offset by reduced oil
and gas revenues, a decline in crude marketing gains and a lower equity
in the earnings of the Company's 50%-owned affiliate, CLAM Petroleum
Company (CLAM). The reduction in CLAM's earnings resulted from reduced
gas prices and lower gas deliveries due to a major pipeline maintenance
program. These revenue declines more than offset the significant
reductions in operating costs and expenses (before the restructuring
charges) resulting from the Company's cost-cutting efforts.
Nevertheless, the Company generated earnings of $18.9 million before
the inclusion of nonrecurring after-tax items totaling $20.1 million
and an extraordinary loss of $5.6 million on an early retirement of
debt. This represents a decline of 10% from the comparable net
earnings of 1991. The nonrecurring items consisted of $52.4 million
($34.6 million after-tax) for the restructuring of the Company's
domestic oil and gas operations and $3 million ($2 million after tax)
for the uninsured costs associated with a gas well blowout (after being
reduced by $2.5 million in the fourth quarter). The Company also
reduced its litigation accrual for the State gas royalty claim by $25
million ($16.5 million after tax). The inclusion of the nonrecurring
items resulted in a net loss of $6.8 million in 1992.
Oil and Gas Operations
Revenues from oil and gas operations benefitted from rising gas prices
since the 1992 second quarter. Such price gains, however, were offset
by average oil prices that were below those in 1991 and lower oil and
gas volumes. As a result, revenues from oil and gas operations were
$32 million lower than in the prior year. Crude oil revenues were down
$32 million due to lower prices in 1992 ($8 million) and lower volumes
produced ($24 million). Natural gas revenues were over $5 million
higher in 1992 due to price increases ($11 million) but this was offset
to an extent by the elimination of revenues generated in 1992 by the
properties recently sold and reduced volumes.
Crude oil volume declines in 1992 were attributable to an 1,100 barrel
per day (BPD) decline in domestic operations, a 2,100 BPD decline in
North Sea operations and a 200 BPD decline in other foreign operations.
The decline in domestic operations was primarily due to wells shut-in
for maintenance and repairs, hurricane related production interruptions
and natural declines at mature producing properties. These declines
more than offset volumes from new wells coming onstream. In foreign
areas, volumes were down primarily as a result of natural declines.
Domestic natural gas deliveries were down 7% from the prior year period
due to natural declines, hurricane related production interruptions and
elimination of volumes related to the properties recently sold. These
declines more than offset volumes from new wells coming onstream.
PAGE
Lease operating and facility expenses rose above the prior year level
primarily due to increased operating expenses on new and existing
properties and the inclusion of the aforementioned charges associated
with a gas well blowout. These were offset to an extent by lower
workover and repair charges. Depletion, depreciation and amortization
(DD&A) was almost $10 million lower in 1992 due to the elimination of
DD&A on those properties sold and reduced DD&A on mature properties due
to declining production rates. These reductions were partially offset
by the increases in DD&A associated with new producing properties. Dry
holes and exploratory charges were almost $33 million lower than in the
1991 period due to the reduction in exploration activities in both
domestic and foreign areas and a higher exploratory success ratio.
General, administrative and other expenses were reduced 12% in 1992 due
primarily to the cost-cutting efforts associated with the restructuring
program. Although interest incurred in 1992 benefitted from the lower
rates charged on the Company's variable rate debt, interest and debt
expenses were significantly higher in 1992 due primarily to the
reduction in development projects which qualified for interest
capitalization.
Refining and Marketing Operations
Although refined product demand in 1992 improved from the 1991 period,
refining operating results declined by 8% from 1991 due to reduced
margins. Higher revenues from increased sales volumes ($42 million)
were partially offset by lower prices ($31 million) during 1992 as
compared to 1991. However, increased feedstock costs offset the
revenue gains resulting in lower pretax operating profit. Profits from
crude oil marketing activities were also lower than in the prior year
primarily due to higher acquisition costs on crude purchased for resale
relative to final sales prices and the absence of forward sales in
1992.
REVIEW OF OPERATIONS (1991 VS 1990)
Gross revenues in 1991 fell $49 million primarily due to a decline from
oil and gas operations. As a result of events in the Middle East, 1990
posted the highest oil prices realized in recent years. Since the
cessation of hostilities, worldwide oil prices have declined and the
average price for 1991 was 13% lower than the prior year. Also,
natural gas prices were lower due to continued weak demand and surplus
supplies. The volatility of oil and natural gas prices will continue
to significantly affect revenues and earnings. While refined product
prices were higher in 1991, lower sales of refined products in the
second half of the year resulted in a marginal decline in revenues from
refining operations. Marketing operations partially offset the impact
of the lower revenues with a $15 million pretax gain, up $25 million
from the $10 million loss in 1990. Primarily as a result of these
revenue declines, pretax earnings declined over 60% from 1990. The
effective income tax rate for 1991 exceeded the U.S. statutory rate of
34% as a result of the higher rates paid in certain foreign
jurisdictions.
PAGE
During 1990, the Company finalized its restructuring program undertaken
in 1988 with the sale of the last significant property included in the
program, which property had initially been included in the
restructuring program at an estimated gain. The balance in the
restructuring accrual at year-end 1989 was included in other
liabilities until such time as the ultimate outcome of the final
property sale was known. When finalized, the restructuring program
gave rise to a smaller loss than originally estimated. In addition,
the Company favorably settled a potential tax claim. These savings
over the original estimates were offset by an increase in the provision
for the Department of Energy matter with Texaco.
In July 1991, the Company entered into an agreement with Texaco which
resolved all claims and issues related to certain DOE matters. The
settlement involved no cash outlay by either company, but did involve
a reduction of an immaterial amount of future payments to the Company
by Texaco related to the Company's 8-1/3% net profits interest, for
which the Company has no cost basis, on a limited number of the
Company's Louisiana properties. Following the settlement, the
previously established accrual, net of certain litigation expenses, was
retained as a result of loss contingencies associated with the State
of Louisiana gas royalty claim.
Oil and Gas Operations
Oil and gas revenues were down over $75 million from 1990. Liquids
revenues were down over $60 million as a result of lower average
worldwide crude oil prices and reduced volumes. Natural gas revenues
were $12 million lower than in 1990 due to lower domestic gas prices
and slightly lower natural gas deliveries.
Crude oil volume declines in 1991 were attributable to a 600 BPD
decline in domestic operations, a 1,900 BPD decline in North Sea
operations and an 800 BPD decline in other foreign operations. The
decline in domestic operations was primarily due to wells shut-in for
maintenance and repairs and natural declines at mature producing
properties. In foreign areas, volumes were down mainly as a result of
natural declines, field repairs and main-tenance activities and the
impact of pipeline repairs, which more than offset the new wells coming
onstream in Colombia.
Domestic natural gas deliveries were down marginally from the prior
year period. Volume decreases resulted from pipeline curtailments,
natural declines, and wells shut-in for repairs and maintenance, offset
by volumes from new wells coming onstream.
Lease operating and facility expenses were marginally higher in 1991
primarily due to higher operating expenses resulting from new producing
properties onstream and repair charges on older producing properties.
Depletion, depreciation and amortization charges were $5 million higher
in 1991, largely due to a downward revision in proved reserve estimates
at West Delta Block 143, which resulted in a $6 million charge, and new
wells coming onstream. Dry holes and exploratory charges were almost
$2 million higher in 1991 due to the write-off of unsuccessful wells
and related leasehold impairment. Taxes, other than on earnings, were
down $1 million for 1991 due to decreases in value-based severance and
ad valorem taxes. General, administrative and other expenses decreased
almost $7 million in 1991 primarily due to legal fees relating to the PAGE
Texaco litigation being charged to the previous provision made for such
issue. Interest and debt expenses were down $8 million due to the
early redemption during 1990 of $14 million of the 8 1/2% Convertible
Subordinated Debentures due September 1, 2000, lower interest rates on
variable-rate debt and an increase in interest capitalized.
Refining and Marketing Operations
Despite extreme price volatility brought on by the Gulf War, operating
profits from LL&E's refining operations declined only modestly in
1991's first half from the year-earlier period. While refining margins
improved during this period, sales volumes were down substantially from
the extraordinarily high levels in the prior year. However, margins
deteriorated rapidly in 1991's third quarter and continued depressed
in the final quarter of the year. Refining operations ended 1991 with
a marginal decline in revenues as the $47 million added by higher
prices was more than offset by the $49 million revenue decline
occasioned by the lower sales volumes. This resulted in a pretax
operating profit of $11 million, down $6 million from the 1990
operating profit of $17 million. Marketing activities improved
substantially in 1991 following the losses incurred in 1990 as a result
of forward sales prior to the upward spike in crude oil prices caused
by the events in the Middle East. Marketing operations completed the
year with a $15 million gain, compared to the $10 million loss in 1990.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations during 1992 were financed with internally
generated funds; cash flows from operations provided almost $178
million and asset sales added over $48 million. These funds were
applied primarily to capital expenditures, which totaled approximately
$154 million, and cash dividends, which totaled over $28 million.
Total long-term debt at the end of 1992 amounted to $343 million, a
decrease of $5 million from the prior year-end. Cash and equivalents
totaled over $40 million, an increase of $14 million.
On June 17, 1992, the Company registered under the Securities and
Exchange Commission's shelf registration rules $300 million of senior
unsecured debt securities to be issued from time to time on terms to
be then determined. On June 30, 1992, the Company sold $100 million
of 8 1/4% Notes due 2002. Approximately $66 million of the net
proceeds received by the Company was used to repay an installment due
July 23, 1992 under the Term Loan with a group of banks.
The balance of the net proceeds, approximately $33 million after
deducting expenses, was added to the working capital of the Company.
On September 25, 1992, the Company announced the call for early
retirement of the 8-1/2% Convertible Subordinated Debentures due
September 2000. The redemption date was November 3, 1992 and was
completed at a price of 101.66% of principal. The premium, along with
the write-off of unamortized discount, resulted in an extraordinary
loss of $5.6 million, after tax benefits of $2.8 million. The Company
had reserved over 360,000 shares of its capital stock for issuance upon
conversion of these debentures.
PAGE
The Company's restructuring program involved dispositions of selected
properties and staff and cost reductions. The Company will now focus
on its higher performing assets with a staffing level still capable of
seizing opportunities in the present environment and expanding to meet
future needs with a minimum of lead time. The Company completed the
sale of substantially all of the selected properties on August 13, 1992
for a purchase price of $48.1 million. The properties sold pursuant
to this program were located principally in Oklahoma and, in 1991,
generated revenues of approximately $11 million and an operating loss
of approximately $9.5 million. The disposition of these properties
will not adversely affect the Company's future financial position and
results of operations.
The Company expects that its 1993 capital and exploration program,
presently estimated at approximately $170 million, will be financed
substantially by internally generated funds. Such expenditures are
continually reviewed, and revised as necessary, based on perceived
current and long-term economic conditions. External financings are
expected to be used to refinance on a long-term basis the $86.5 million
of debt maturing in 1993.
As explained in Notes 10 and 11 of "Notes to Consolidated Financial
Statements," the Company will adopt in 1993 Statement of Financial
Accounting Standards No. 109 - "Accounting for Income Taxes" and
Statement of Financial Accounting Standards No. 106 - "Employer's
Accounting for Postretirement Benefits Other Than Pensions."
As explained in Note 14 of "Notes to Consolidated Financial
Statements," the State of Louisiana has asserted claims against the
Company in its capacity as sublessor to Texaco of certain State leases,
based upon Texaco's alleged royalty miscalculations. The Company
believes that it has adequately provided for these claims and any
ultimate liability will be funded out of working capital and will not
adversely impact future results of operations or financial position nor
significantly impair the Company's ability to finance its operations.
CAPITAL STOCK, DIVIDENDS AND OTHER MARKET DATA
The Company's capital stock is listed and traded on the New York Stock
Exchange, the Toronto Stock Exchange, the London Stock Exchange and the
Swiss Stock Exchanges (Basle, Geneva and Zurich). As of February 26,
1993, there were 8,631 holders of record. The quarterly market prices
for the past two years and the cash dividends paid in each period are
presented in the table on page 5 herein.
Since 1989, the Company has not purchased shares under its capital
stock repurchase program, which was implemented in 1985. As of
December 31, 1992 the Company has purchased a total of 4,147,732 shares
at an average cost of $33.80 per share, after adjustment for the
reissue of 836,368 shares to the Company's Employee Stock Ownership
Plan (ESOP). Since 1983, the Company has reduced its outstanding
shares by 25.4%. The shares repurchased are being held as treasury
shares which affords the Company greater financial flexibility to
respond to financing and other opportunities that might arise.
PAGE
The Company has arranged financings totaling $24.2 million for its ESOP
and has sold a total of 836,368 shares of treasury stock to the ESOP.
(See Note 7 of "Notes to Consolidated Financial Statements.")
In 1986, the Company's Board of Directors declared a dividend to
shareholders consisting of one Capital Stock Purchase Right on each
outstanding share of capital stock. These rights may cause substantial
ownership dilution to a person or group who attempts to acquire the
Company without approval of the Company's Board of Directors. The
rights should not interfere with a business combination transaction
that has been approved by the Board of Directors. (See Note 12 of
"Notes to Consolidated Financial Statements.")
The Company has reserved 1,998,641 shares of its capital stock for
future grants and exercises of stock options. (See Note 12 of "Notes
to Consolidated Financial Statements.")
NOTE:
The accompanying consolidated financial statements and notes
thereto and the unaudited supplemental data are an integral
part of this discussion and analysis and should be read in
conjunction herewith.
PAGE
CONSOLIDATED BALANCE SHEETS The Louisiana Land and
Exploration Company and
Subsidiaries
December 31, 1992 and 1991
(Millions of dollars)
Assets 1992 1991
_________________________________________________________________________________________
CURRENT ASSETS:
Cash, including cash equivalents (1992-$32.7; 1991-$21.1) $ 40.5 26.7
Accounts and notes receivable, principally trade 74.6 119.3
Income taxes receivable 5.8 6.9
Inventories (note 4) 25.6 23.8
Prepaid expenses 6.3 9.8
_________________________________________________________________________________________
TOTAL CURRENT ASSETS 152.8 186.5
_________________________________________________________________________________________
Investments in affiliates (note 5) 31.1 31.7
Net property, plant and equipment, at cost, under the
successful efforts method of accounting for oil
and gas properties (note 6) 974.2 989.9
Other assets 51.0 44.7
_________________________________________________________________________________________
$ 1,209.1 1,252.8
_________________________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
_________________________________________________________________________________________
CURRENT LIABILITIES:
Current portion of long-term debt (note 7) - .4
Accounts payable and accrued expenses 158.1 144.2
Income taxes payable 6.9 10.0
Deferred income taxes 8.0 7.7
_________________________________________________________________________________________
TOTAL CURRENT LIABILITIES 173.0 162.3
_________________________________________________________________________________________
Deferred income taxes 148.8 133.2
Long-term debt, excluding current portion (note 7) 343.0 347.3
Other liabilities 127.7 163.5
_________________________________________________________________________________________
Contingencies and commitments (notes 9, 11, 12 and 14)
STOCKHOLDERS' EQUITY (NOTES 7 AND 12):
_________________________________________________________________________________________
Capital stock of $.15 par value. Authorized-100,000,000
shares; issued-38,004,537 shares 5.7 5.7
Additional paid-in capital 41.5 41.3
Retained earnings 704.5 739.6
_________________________________________________________________________________________
751.7 786.6
Loans to ESOP (note 7) (11.8) (14.8)
Cost of capital stock in treasury-9,656,167 shares in
1992 and 9,718,025 shares in 1991 (323.3) (325.3)
_________________________________________________________________________________________
TOTAL STOCKHOLDERS' EQUITY 416.6 446.5
_________________________________________________________________________________________
$ 1,209.1 1,252.8
_________________________________________________________________________________________
<F/N>
See accompanying notes to consolidated financial statements.
PAGE
CONSOLIDATED STATEMENTS OF The Louisiana Land and
EARNINGS (LOSS) Exploration Company and
Subsidiaries
Years ended December 31, 1992, 1991 and 1990
(Millions, except per share data)
1992 1991 1990
_________________________________________________________________________________________
REVENUES:
Oil and gas $ 323.9 363.7 417.7
Refined products 441.9 432.8 431.5
Other (interest, 1992-$3.6; 1991-$4.6; 1990-$3.2) 21.6 28.8 25.5
_________________________________________________________________________________________
787.4 825.3 874.7
_________________________________________________________________________________________
COSTS AND EXPENSES:
Lease operating and facility expenses 98.5 96.4 93.3
Refinery cost of sales and operating expenses 424.3 415.1 407.7
Dry holes and exploratory charges 41.5 74.6 72.9
Depletion, depreciation and amortization 106.5 116.3 111.8
Taxes, other than on earnings 24.4 24.5 25.5
General, administrative and other expenses 42.3 48.2 55.1
Interest and debt expenses (note 8) 24.6 16.9 24.8
Restructuring and other nonrecurring
charges/credits (note 3) 27.4 - -
_________________________________________________________________________________________
789.5 792.0 791.1
_________________________________________________________________________________________
Earnings (loss) before income taxes (2.1) 33.3 83.6
Income tax expense (benefit) (note 10) (0.9) 12.4 28.7
_________________________________________________________________________________________
Earnings (loss) before extraordinary item (1.2) 20.9 54.9
Loss on early retirement of debt, net of
income tax benefit (note 7) (5.6) - -
_________________________________________________________________________________________
NET EARNINGS (LOSS) $ (6.8) 20.9 54.9
_________________________________________________________________________________________
Primary and fully diluted earnings (loss) per share
before extraordinary item (0.04) 0.74 1.94
Loss on early retirement of debt (0.20) - -
_________________________________________________________________________________________
PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE $ (0.24) 0.74 1.94
_________________________________________________________________________________________
AVERAGE SHARES 28.4 28.3 28.3
_________________________________________________________________________________________
<F/N>
See accompanying notes to consolidated financial statements.
PAGE
CONSOLIDATED STATEMENTS OF The Louisiana Land and
STOCKHOLDERS' EQUITY Exploration Company and
Subsidiaries
Years ended December 31, 1992, 1991 and 1990
(Millions of dollars, except per share data)
Additional Loans to Treasury stock
paid-in Retained ESOP Number of
capital earnings (Note 7) shares Cost
_________________________________________________________________________________________
Balance at December 31, 1989 $40.3 $720.2 $(19.8) 9,937,325 $(330.2)
Net earnings - 54.9 - - -
Cash dividends ($1.00 per
share) - (28.1) - - -
Repayment of loans to ESOP - - 2.4 - -
Other .4 - - (135,323) 2.9
_________________________________________________________________________________________
Balance at December 31, 1990 40.7 747.0 (17.4) 9,802,002 (327.3)
Net earnings - 20.9 - - -
Cash dividends ($1.00 per
share) - (28.3) - - -
Repayment of loans to ESOP - - 2.6 - -
Other .6 - - (83,977) 2.0
_________________________________________________________________________________________
Balance at December 31, 1991 41.3 739.6 (14.8) 9,718,025 (325.3)
Net loss - (6.8) - - -
Cash dividends ($1.00 per
share) - (28.3) - - -
Repayment of loans to ESOP - - 3.0 - -
Other .2 - - (61,858) 2.0
_________________________________________________________________________________________
Balance at December 31, 1992 $41.5 $704.5 $(11.8) 9,656.167 $(323.3)
_________________________________________________________________________________________
<F/N>
Capital stock of $.15 par value was unchanged during the three-year period ended December
31, 1992.
See accompanying notes to consolidated financial statements.
PAGE
CONSOLIDATED STATEMENTS OF CASH FLOWS The Louisiana Land and
Exploration Company and
Subsidiaries
Years ended December 31, 1992, 1991 and 1990
(Millions of dollars)
1992 1991 1990
_________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (6.8) 20.9 54.9
Adjustments to reconcile to cash flows from
operations:
Restructuring and other nonrecurring charges/
credits 27.4 - -
Loss on early retirement of debt 8.4 - -
Depletion, depreciation and amortization 106.5 116.3 111.8
Deferred income taxes 2.2 4.9 9.6
Dry holes and impairment charges 19.2 50.2 43.2
Other 5.8 7.1 8.4
_________________________________________________________________________________________
162.7 199.4 227.9
Changes in operating assets and liabilities:
Net (increase) decrease in receivables 44.8 (3.4) 16.6
Net increase in inventories (1.8) (3.7) -
Net (increase) decrease in prepaid items 3.4 (15.8) 20.7
Net increase (decrease) in payables (27.0) 24.8 (10.5)
Other (3.4) 7.9 (2.8)
_________________________________________________________________________________________
Net cash flows from operating activities 178.7 209.2 251.9
_________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (153.8) (189.2) (182.9)
Proceeds from asset sales 48.5 2.2 10.3
Other (11.0) 6.3 6.2
_________________________________________________________________________________________
Net cash flows from investing activities (116.3) (180.7) (166.4)
_________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 100.0 - 2.0
Repayments of long-term debt (116.8) (6.0) (37.4)
Dividends (28.3) (28.3) (28.1)
Repayment of loans to ESOP 3.0 2.6 2.4
Other (6.5) - -
_________________________________________________________________________________________
Net cash flows from financing activities (48.6) (31.7) (61.1)
_________________________________________________________________________________________
Increase (decrease) in cash and cash equivalents $ 13.8 (3.2) 24.4
_________________________________________________________________________________________
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Properties acquired through the incurrence
of a short-term liability $ 36.0 - -
_________________________________________________________________________________________
<F/N>
See accompanying notes to consolidated financial statements.
PAGE
NOTES TO CONSOLIDATED FINANCIAL The Louisiana Land and
STATEMENTS Exploration Company and
Subsidiaries
December 31, 1992, 1991 and 1990
__________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Investments in affiliates are accounted for under the equity
method. Certain amounts have been reclassified to conform with the
current period's presentation.
B. Petroleum Operations
The Company uses the successful efforts method of accounting for
its oil and gas operations. The costs of unproved leaseholds are
capitalized pending the results of exploration efforts.
Significant unproved leasehold costs are assessed periodically, on
a property-by-property basis, and a loss is recognized to the
extent, if any, that the cost of the property has been impaired.
The costs of individually insignificant unproved leaseholds
estimated to be nonproductive are amortized over estimated holding
periods based on historical experience. Exploratory dry holes and
geological and geophysical charges are expensed. Depletion of
proved leaseholds and amortization and depreciation of the costs of
all development and successful exploratory drilling are provided
by the unit-of-production method based upon estimates of proved and
proved-developed oil and gas reserves, respectively, for each
property. The estimated costs of dismantling and abandoning
offshore and significant onshore facilities are provided currently
using the unit-of-production method; such costs for other onshore
facilities are insignificant and are expensed as incurred. The
costs of refining and processing equipment and facilities are
depreciated on a straight-line basis over their estimated useful
lives.
The Company uses the entitlement method for recording natural gas
sales revenues. Under the entitlement method of accounting,
revenue is recorded based on the Company's net working interest in
field production. Deliveries of natural gas in excess of the
Company's working interest are recorded as liabilities while under-
deliveries are recorded as receivables.
The Company's anticipated purchases and sales of crude oil and
refined petroleum products and its committed foreign currency
expenditures may be hedged against market risks through the use of
forward/futures contracts. The gains and losses on these contracts
are recognized upon the expiration of the contract and are included
in the valuation of the anticipated transactions being hedged. A
default by a counterparty to a contract would expose the Company to
market risks for the quantity of the contract. There is no
material risk to the Company as a result of these contracts and the
Company does not anticipate nonperformance by any of the
counterparties.
PAGE
C. Functional Currency
The foreign exploration and production operations of the Company's
subsidiaries and its foreign affiliate, CLAM Petroleum Company, are
considered an extension of the parent company's operations. The
assets, liabilities and operations of these companies are therefore
measured using the United States dollar as the functional currency.
As a result, foreign currency translation/transaction adjustments
(which were not material) are included in net earnings.
D. Income Taxes
The Company and its domestic subsidiaries file a consolidated
federal income tax return.
The Company adopted, effective January 1, 1988, Statement of
Financial Accounting Standards No. 96 (SFAS No. 96) - "Accounting
For Income Taxes," issued in December 1987. Under the liability
method specified by SFAS No. 96, the deferred tax liability is
determined based on the difference between the financial statement
and tax bases of assets and liabilities as measured by existing tax
rates which are presumed to be in effect when these differences
reverse. Deferred tax expense is the result of changes in the
liability for deferred taxes. Effective January 1, 1993, the
Company will adopt Statement of Financial Accounting Standard No.
109 (see Note 10).
E. Earnings (Loss) Per Share
Primary earnings (loss) per share are calculated on the weighted
average number of shares outstanding during each period for capital
stock and, when dilutive, capital stock equivalents, which assumes
exercise of stock options. Fully diluted earnings (loss) per share
are calculated on the same basis, but also assumes conversion, when
dilutive, of the convertible subordinated debentures for the period
outstanding prior to the call for redemption on September 25, 1992,
and elimination of the related interest expense, net of income
taxes.
2. CASH FLOWS
All of the Company's cash investments are highly liquid debt
instruments, with maturities of less than three months, and are
considered to be cash equivalents. These cash investments are
carried in the accompanying balance sheets at cost plus accrued
interest, which approximates fair value. Cash flows related to
hedging activities through forward/futures contracts are classified
in the same categories as that from the items being hedged.
3. RESTRUCTURING AND OTHER NONRECURRING CHARGES/CREDITS
During 1990, the Company finalized its restructuring program
undertaken in 1988 with the sale of the last significant property
included in the program, which property had initially been included
in the restructuring program at an estimated gain. The balance in
the restructuring accrual at year-end 1989 was included in other
liabilities until such time as the ultimate outcome of the final
property sale was known. When finalized, the restructuring program
gave rise to a smaller loss than originally estimated. In
addition, the Company favorably settled a potential tax claim.
These savings over the original estimates were offset by an
increase in the provision for the Department of Energy matter with
Texaco.PAGE
In 1992, the Company recorded a charge of $52.4 million (before
income tax benefits of approximately $17.8 million) against
earnings to provide for the restructuring of its oil and gas
operations. This charge included provisions for estimated losses
on the disposition of selected domestic properties of $47.6 million
(both developed and undeveloped) and costs associated with staff
retirements, reductions and related transition expenses of $4.8
million. The Company completed the sale of substantially all of
the selected properties for a purchase price of $48.1 million.
In addition, during 1992, the Company reduced its litigation
accrual for the State gas royalty claim by $25 million (before an
income tax charge of $8.5 million).
4. INVENTORIES
(Millions of dollars) 1992 1991
_________________________________________________________________________________________
Refinery inventories at lower of (last-in,
first-out) cost or market $24.6 23.2
_________________________________________________________________________________________
Repair parts, supplies and other, at lower of
average cost or market 1.0 .6
_________________________________________________________________________________________
$25.6 23.8
_________________________________________________________________________________________
PAGE
5. INVESTMENTS IN AFFILIATES
Investment
% (Millions of dollars)
Investee Industry Location owned 1992 1991
_________________________________________________________________________________________
MaraLou (CLAM
Petroleum Oil &
Company) Gas North Sea 50% $28.3 29.0
_________________________________________________________________________________________
Other Various U.S. Various 2.8 2.7
_________________________________________________________________________________________
$31.1 31.7
_________________________________________________________________________________________
The Company's equity in earnings of affiliates amounted to $6.9
million, $15.0 million and $16.4 million in 1992, 1991 and 1990,
respectively. Cash dividends received from MaraLou/CLAM in 1992,
1991 and 1990 totaled $7.5 million, $18.5 million and $20.0
million, respectively.
The consolidated financial position of MaraLou and its wholly owned
subsidiary, CLAM, as of December 31, 1992 and 1991 and the results
of their operations for each of the years in the three-year period
ended December 31, 1992 are summarized below.
(Millions of dollars) 1992 1991
_________________________________________________________________________________________
Current assets $ 35.1 47.5
_________________________________________________________________________________________
Noncurrent assets 176.7 173.0
_________________________________________________________________________________________
Current liabilities 16.0 44.8
_________________________________________________________________________________________
Noncurrent liabilities 142.4 120.8
_________________________________________________________________________________________
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Gross revenues $ 82.9 111.9 96.5
_________________________________________________________________________________________
Operating profit 42.4 70.5 49.9
_________________________________________________________________________________________
Net earnings 13.8 30.0 32.8
_________________________________________________________________________________________
MaraLou will apply the provisions of SFAS No. 109 (see Note 10) in
1993 without restating prior years' financial statements and has
estimated that adoption of SFAS No. 109 will result in a non-cash
charge to earnings in the first quarter of 1993 of approximately $6
million ($3 million to the Company's equity interest).
The common stock of CLAM is pledged as collateral under a revolving
credit agreement between MaraLou and a group of banks. The credit
agreement is nonrecourse to the partners of MaraLou.
PAGE
6. PROPERTY, PLANT AND EQUIPMENT
(Millions of dollars) 1992 1991
_________________________________________________________________________________________
Petroleum properties:
Proved $1,988.2 1,957.0
_________________________________________________________________________________________
Unproved 78.1 111.5
_________________________________________________________________________________________
Refining and marketing 205.0 174.6
_________________________________________________________________________________________
2,271.3 2,243.1
Other properties 59.3 56.3
_________________________________________________________________________________________
2,330.6 2,299.4
Less accumulated depletion, depreciation and amortization 1,356.4 1,309.5
_________________________________________________________________________________________
$ 974.2 989.9
_________________________________________________________________________________________
7. LONG-TERM DEBT
(Millions of dollars) 1992 1991
_________________________________________________________________________________________
Term Loan with banks (net of unamortized discount of $4.1 in 1992
and $7.7 in 1991) $195.4 257.8
_________________________________________________________________________________________
8-1/4% Notes due 2002 100.0 -
_________________________________________________________________________________________
8-1/2% Convertible Subordinated Debentures (net of unamortized
discount of $8.5 in 1991) - 37.3
_________________________________________________________________________________________
Industrial Development Revenue Refunding Bonds, 1983 Series,
due December 1993, interest at 8.6% 20.5 20.5
_________________________________________________________________________________________
Loan Agreement with banks 15.0 17.0
_________________________________________________________________________________________
Notes payable to bank for financing of leveraged ESOP 11.8 14.8
_________________________________________________________________________________________
Commercial paper notes - -
_________________________________________________________________________________________
Other issues .3 .3
_________________________________________________________________________________________
Total long-term debt 343.0 347.7
Less current portion - .4
_________________________________________________________________________________________
Long-term debt, excluding current portion $343.0 347.3
_________________________________________________________________________________________
The fair value of the Company's long-term debt at December 31, 1992
is estimated to be approximately $364 million based on the quoted
market prices for the same or similar issues or on the current
rates offered to the Company for debt of similar maturities.
Debt maturities for the next five years follows.
(Millions of dollars)
_________________________________________________________________________________________
1993 $ -
_________________________________________________________________________________________
1994 229.2
_________________________________________________________________________________________
1995 12.4
_________________________________________________________________________________________
1996 5.1
_________________________________________________________________________________________
1997 -
_________________________________________________________________________________________
On June 17, 1992, the Company registered under the Securities and
Exchange Commission's shelf registration rules $300 million of
senior unsecured debt securities to be issued from time to time on
terms to be then determined. On June 30, 1992, the Company sold
$100 million of 8-1/4% Notes due 2002.
PAGE
On September 25, 1992, the Company announced the call for early
retirement of the 8-1/2% Convertible Subordinated Debentures due
September 2000. The redemption was completed at a price of 101.66%
of principal and the premium, along with unamortized discount,
resulted in an extraordinary loss of $5.6 million, after tax
benefits of $2.8 million.
The Company's $20 million Loan Agreement with a group of banks is
in the form of a revolving credit loan. The interest rate varies
with time and market conditions and is determined by the banks
subject to certain options chosen in advance by the Company. A
commitment fee of 1/4% is charged on the unused portion of the loan
during the revolving credit period. Borrowings under this
agreement during 1992 and 1991 were at average interest rates of
4.5% and 6.7%, respectively.
In November 1987, the Company created a leveraged employee stock
ownership plan (ESOP) within an existing employee savings plan. To
fund the ESOP, in 1987 and 1988 the Company borrowed $10.2 million
and $14.0 million, respectively, from a bank (unsecured) and loaned
the proceeds to the ESOP. The ESOP then used the proceeds to
acquire shares of the Company's capital stock (374,678 in 1987;
461,690 in 1988) at average market prices of $27.125 and $30.25,
respectively. The capital stock issued was taken from the
Company's treasury at a cost of $30 per share; the differences
between treasury stock cost and value were recorded in additional
paid-in capital. The loans to the ESOP are on substantially the
same terms and conditions as the Company's bank loans and, in
addition, are secured by the Company's capital stock owned by the
ESOP. The ESOP will repay the loans (plus interest) with the
proceeds from the Company's monthly contributions and quarterly
dividends paid on the capital stock. The Company's bank loans will
be similarly repaid monthly through 1995. The interest rates vary
with time and market conditions and are determined by the bank
subject to certain options chosen in advance by the Company. The
average interest rates for both loans in 1992 and 1991 were 3.7%
and 6.1%, respectively.
During 1992, the average monthly balance of commercial paper notes
outstanding was $5.7 million; the maximum amount outstanding during
that period was $27 million. Commercial paper borrowings during
1992 and 1991 were at average interest rates of 4.3% and 6.1%,
respectively. The Company's commercial paper program is supported
by a $100 million revolving line of credit, which requires a
commitment fee of 1/4% per annum. Borrowings under this agreement
may be at fixed or variable interest rates at the option of the
Company and would be due in April 1994. No borrowings have been
made under the line of credit.
The Term Loan is with a group of banks and bears interest at 8.92%
(discounted to yield 10.7%), is unsecured and the balance is
payable in two installments: July 1993 - $66 million; and July
1994 - $133.5 million. The $66 million installment due in July
1993 has been excluded from current liabilities as the Company
intends to refinance the balance due on a long-term basis,
utilizing new debt instruments or the existing revolving line of
credit.
PAGE
The 8.6% Industrial Development Revenue Refunding Bonds, due in
December 1993, have been excluded from current liabilities as the
Company intends to refinance the balance due on a long-term basis,
utilizing new debt instruments or the existing revolving line of
credit.
8. INTEREST AND DEBT EXPENSES
For the years ended December 31, 1992, 1991 and 1990, interest
costs incurred, which were essentially the same as interest
payments, were $37.5 million, $39.5 million and $44.3 million,
respectively, of which $12.9 million, $22.6 million and $19.5
million, respectively, were capitalized as part of the cost of
property, plant and equipment.
Effective June 1992, the Company began participating in interest
rate swaps (which terminate in 1994) having a notational principal
amount totaling $100 million with three banks. Under the
agreements, the Company receives an annual fixed rate of
approximately 5.2% and pays a variable rate based on the six-month
London Interbank Offering Rate (currently approximately 3.3%). The
rates payable are recalculated at June 15 and December 15 of each
year. The amounts received/paid are credited/charged to interest
expense. As of December 31, 1992, the fair value of these swap
agreements is estimated to be approximately $1 million, based on
the discounted cash flows under the agreements.
9. FOREIGN CURRENCY CONTRACTS
The Company hedges its committed British pound expenditures at its
Brae Field complex in the U.K. North Sea through the purchase of
forward contracts. At December 31, 1992, forward contracts
outstanding totaled $37.7 million. The fair value of these
contracts, which represents the Company's cost to offset its
forward position, is estimated to be approximately $2 million as of
December 31, 1992.
PAGE
10. INCOME TAXES
The components of earnings (loss) before income taxes were taxed
under the following jurisdictions:
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Domestic $(15.9) 18.5 32.6
_________________________________________________________________________________________
Foreign 13.8 14.8 51.0
_________________________________________________________________________________________
$ (2.1) 33.3 83.6
_________________________________________________________________________________________
Components of income tax expense (benefit) are as follows:
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Current tax expense (benefit):
Federal $ (7.3) 4.4 3.8
_________________________________________________________________________________________
State .1 (.8) .9
_________________________________________________________________________________________
Foreign 1.3 3.9 14.4
_________________________________________________________________________________________
(5.9) 7.5 19.1
_________________________________________________________________________________________
Deferred tax expense (benefit):
Federal 3.8 6.3 8.5
_________________________________________________________________________________________
Foreign 1.2 (1.4) 1.1
_________________________________________________________________________________________
5.0 4.9 9.6
_________________________________________________________________________________________
$ (0.9) 12.4 28.7
_________________________________________________________________________________________
Tax expense (benefit) differs from the amounts computed by applying
the U.S. federal tax rate to earnings (loss) before income tax.
The reasons for the differences are as follows:
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Computed "expected" tax expense (benefit) $ (.7) 11.3 28.4
_________________________________________________________________________________________
Increases (reductions) in taxes resulting from:
Equity in earnings of foreign affiliates (1.3) (1.2) (5.1)
_________________________________________________________________________________________
Foreign income taxes, net of federal income tax
benefit 3.1 5.0 5.1
_________________________________________________________________________________________
Employee benefit plans (1.2) (2.1) (.7)
_________________________________________________________________________________________
Percentage depletion (.3) (.3) (.2)
_________________________________________________________________________________________
Other (.5) (.3) 1.2
_________________________________________________________________________________________
$ (.9) 12.4 28.7
_________________________________________________________________________________________
PAGE
Deferred tax expense (benefit) includes the following components:
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Restructuring and other special charges $ (1.8) 2.0 (2.5)
_________________________________________________________________________________________
Intangible development and exploration costs 10.1 9.7 9.1
_________________________________________________________________________________________
Interest 2.2 6.1 3.0
_________________________________________________________________________________________
Depreciation (9.8) (7.8) (2.5)
_________________________________________________________________________________________
Depletion .7 1.0 1.0
_________________________________________________________________________________________
Foreign taxes 1.2 (1.4) 1.1
_________________________________________________________________________________________
Equity in earnings of affiliates (.4) 1.8 (.5)
_________________________________________________________________________________________
Alternative minimum tax credit carryforward 2.2 (6.7) -
_________________________________________________________________________________________
Employee benefit plans .1 (2.2) (.3)
_________________________________________________________________________________________
Partnerships - 1.1 1.0
_________________________________________________________________________________________
Other .5 1.3 .2
_________________________________________________________________________________________
$ 5.0 4.9 9.6
_________________________________________________________________________________________
For the years ended December 31, 1992, 1991 and 1990, the Company's
net cash payments (refunds) of income taxes totaled $(.6) million,
$6.5 million and $8.7 million, respectively.
At December 31, 1992 the Company has foreign tax credit
carryforwards for Federal income tax purposes of $6.8 million which
are available through 1997 to offset future Federal income taxes.
In February 1992, Statement of Financial Accounting Standards No.
109 (SFAS No. 109)- "Accounting for Income Taxes" was issued. SFAS
No. 109 supersedes SFAS No. 96, which the Company adopted in 1988.
SFAS No. 109 will be adopted in 1993. For the Company, the most
significant change in SFAS No. 109 as compared to SFAS No. 96 is
that deferred tax assets will now be recognized and measured based
on the likelihood of realization of a tax benefit in future years.
Under SFAS No. 109, deferred tax assets are initially recognized
for differences between the financial statement carrying amounts
and tax bases of assets and liabilities that will result in future
deductible amounts and operating loss and tax credit carryforwards.
A valuation allowance would then be established to reduce that
deferred tax asset if it is more likely than not that the related
tax benefits will not be realized. Under SFAS No. 96, the
recognition of deferred tax benefits was limited to benefits that
would offset deferred tax liabilities and benefits that could be
realized through carryback to recover taxes paid for the current
year or prior years.
Upon adoption in 1993, the Company plans to apply the provisions of
the SFAS No. 109 without restating prior years' financial
statements. It is estimated that adoption of SFAS No. 109 will
result in a reduction of the net deferred tax liability by
approximately $11 million to $14 million and that this will result
in a noncash credit to earnings in the first quarter of 1993.
PAGE
11. RETIREMENT BENEFITS
The Company has a noncontributory defined benefit pension plan
covering all eligible employees, with benefits based on years of
service and the employee's highest three-year average monthly
earnings. The Company's funding policy is intended to provide for
both benefits attributed to service to-date and for those expected
to be earned in the future. Plan assets consist primarily of
stocks, bonds and short-term cash investments. Since the spin-off
of the pension plan of a discontinued subsidiary in 1985 and the
contribution of excess assets remaining after purchasing annuities
for affected employees, the pension plan has not required funding.
As a result of an early retirement incentive program and a
reduction in force in 1992, benefit obligations of $4.2 million
were settled from plan assets, including $1.1 million of early
retirement incentive costs included in the restructuring charge
described in Note 3. The settlement of the pension obligations
related to the restructuring program resulted in a loss of $0.3
million, which was also included in the restructuring charge.
The following tables set forth the plan's funded status and amounts
recognized in the statements of financial position and results of
operations at December 31:
(Millions of dollars) 1992 1991
_________________________________________________________________________________________
Accumulated benefit obligation, including vested benefits
of $10.0 and $9.9 $ 10.4 10.5
_________________________________________________________________________________________
Projected benefit obligation (15.5) (15.5)
Plan assets at fair market value 12.9 17.3
_________________________________________________________________________________________
Plan assets over (under) projected benefit obligation (2.6) 1.8
_________________________________________________________________________________________
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions 4.1 2.9
_________________________________________________________________________________________
Unrecognized net asset being recognized over 15 years (1.4) (2.0)
_________________________________________________________________________________________
Prepaid pension cost $ .1 2.7
_________________________________________________________________________________________
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Net pension expense includes the
following components:
Service cost - benefits earned during the period $ 1.6 1.3 1.3
_________________________________________________________________________________________
Interest cost on projected benefit obligation 1.3 1.0 .9
_________________________________________________________________________________________
Actual gain on plan assets (1.1) (1.9) (.4)
_________________________________________________________________________________________
Net amortization and deferral (.6) .3 (1.3)
_________________________________________________________________________________________
Net pension expense $ 1.2 .7 .5
_________________________________________________________________________________________
Discount rate 9% 9% 9%
_________________________________________________________________________________________
Compensation increase 5% 5% 5%
_________________________________________________________________________________________
_________________________________________________________________________________________
Return on assets 9% 9% 9%
_________________________________________________________________________________________
PAGE
In December 1990, Statement of Financial Accounting Standards No.
106 (SFAS No. 106) - "Employers' Accounting for Postretirement
Benefits Other than Pensions" was issued. While establishing
accounting standards for all forms of postretirement benefits, SFAS
No. 106 focuses principally on postretirement health care benefits.
It will change the Company's current practice of accounting for
postretirement benefits on a pay-as-you-go (cash) basis by
requiring accrual, during the years that the employee renders the
necessary service, of the expected cost of providing those benefits
to an employee and the employee's beneficiaries and covered
dependents. SFAS No. 106 will be adopted in 1993.
Upon adoption in 1993, the Company intends to record a transition
liability of approximately $20.5 million ($13.5 million after
income taxes) as a one-time, noncash charge against earnings in the
first quarter of 1993. In addition, the estimated net periodic
benefit cost applicable to 1993 will be approximately $3 million.
The Company's benefit cost on the pay-as-you-go basis for each of
the years in the three-year period ended December 31, 1992 totaled
$0.9 million, $0.7 million and $0.8 million, respectively.
12. STOCK OPTIONS AND RIGHTS
In May 1988, the 1988 Long-term Stock Incentive Plan (1988 Plan)
was approved by the shareholders to replace the 1982 Stock Option
Plan (1982 Plan). Under the 1988 Plan, the Company may grant to
officers and key employees stock options, stock appreciation
rights, performance shares, performance units, restricted stock or
restricted stock units for up to 1.5 million shares (plus the
22,274 shares not awarded under the 1982 Plan) of the Company's
capital stock. As prescribed by both Plans, stock options are
exercisable at the market price on the date of the grant, generally
over a two-year period at the rate of 50% each year commencing on
the first anniversary of the date of grant; all options expire ten
years from the date of grant. In 1992 and 1991, options for
600,400 shares and 180,900 shares were granted, respectively. The
restricted stock and performance shares awarded under the 1988 Plan
entitle the grantee to the rights of a shareholder, including the
right to receive dividends and to vote such shares, but the shares
are restricted as to sale, transfer or encumbrance. Restricted
stock is issued to the grantee after a one-year waiting period has
expired. In 1992, no awards were granted; in 1991, awards for
restricted stock amounted to 10,610 shares. The performance cycle
consists of a three-year period, beginning with the year of grant,
at the end of which certain performance goals must be attained by
the Company for the unrestricted performance shares to be issued to
the grantee. Awards granted in 1992 and 1991 for performance
shares amounted to 26,600 and 19,400, respectively. Performance
shares issued in 1992 and 1991 amounted to 19,000 shares and 19,734
shares, respectively.
PAGE
In May 1990, the 1990 Stock Option Plan for Non-Employee Directors
(1990 Plan) was approved by the shareholders, under which the
Company will grant stock options to non-employee directors for up
to 150,000 shares of the Company's capital stock. As prescribed by
the 1990 Plan, the options are exercisable at the market price at
the date of grant over a two-year period at the rate of 50% each
year commencing on the first anniversary of the date of grant; all
options expire ten years from the date of grant. Awards for 20,000
shares were granted in both 1992 and 1991.
At December 31, 1992, 279,288 shares of capital stock were reserved
for future grants under all Plans.
Stock options outstanding under the Plans and the changes therein
are presented below for the periods indicated.
Number Option
of shares price range
__________________________________________________________________________________________
Outstanding at December 31, 1990 1,047,962 $21 - 45 1/2
__________________________________________________________________________________________
Granted 232,539 39 11/16 - 40 1/8
__________________________________________________________________________________________
Cancelled (1,500) 31 1/2 - 45 5/16
__________________________________________________________________________________________
Exercised (56,283) 21 - 39 1/2
__________________________________________________________________________________________
Outstanding at December 31, 1991 1,222,718 21 - 45 1/2
__________________________________________________________________________________________
Granted 647,000 29 3/4 - 38 15/16
__________________________________________________________________________________________
Cancelled (97,475) 29 3/4 - 39 11/16
__________________________________________________________________________________________
Exercised (52,890) 21 - 31 1/2
__________________________________________________________________________________________
Outstanding at December 31, 1992 1,719,353 27 1/8 - 45 1/2
__________________________________________________________________________________________
Exercisable at December 31, 1992 1,028,370 27 1/8 - 45 1/2
__________________________________________________________________________________________
Weighted average prices:
Outstanding at December 31, 1992 32 3/4
Exercisable at December 31, 1992 33 5/8
__________________________________________________________________________________________
In 1986, the Company's Board of Directors declared a dividend to
shareholders consisting of one Capital Stock Purchase Right on each
outstanding share of capital stock. A Right will also be issued
with each share of capital stock that becomes outstanding prior to
the time the Rights become exercisable or expire. If a person or
group acquires beneficial ownership of 20% or more, or announces a
tender offer that would result in beneficial ownership of 20% or
more, of the shares of outstanding capital stock, the Rights become
exercisable ten days thereafter and each Right will entitle its
holder to purchase one share of capital stock for $90.
If the Company is acquired in a business combination transaction,
each Right not owned by the 20% holder will entitle its holder to
purchase, for $90, common shares of the acquiring company having a
market value of $180. Alternatively, if a 20% holder were to
acquire the Company by means of a reverse merger in which the
Company and its capital stock survive or were to engage in certain
"self-dealing" transactions, or if a person or group were to
acquire 30% or more of the outstanding capital stock (other than
pursuant to a cash offer for all shares), each Right not owned by
the acquiring person would entitle its holder to purchase, for $90,
capital stock of the Company having a market value of $180. Each
Right can be redeemed by the Company for $.05, subject to the
occurrence of certain events and other restrictions, and expires inPAGE
1996. These Rights may cause substantial ownership dilution to a
person or group who attempts to acquire the Company without
approval of the Company's Board of Directors. The Rights should
not interfere with a business combination transaction that has been
approved by the Board of Directors.
PAGE
13. PETROLEUM SEGMENT INFORMATION
(Millions of dollars) 1992 1991 1990
_________________________________________________________________________________________
Sales to unaffiliated customers:
Domestic $ 686.2 697.8 710.5
North Sea 46.4 64.2 90.6
Other foreign 33.2 34.5 48.1
_________________________________________________________________________________________
765.8 796.5 849.2
Interest and other income 21.6 28.8 25.5
_________________________________________________________________________________________
Total revenues $ 787.4 825.3 874.7
_________________________________________________________________________________________
Earnings (loss) before income taxes:
Operating profit (loss):
Domestic 39.7 67.5 95.8
North Sea 13.1 17.2 37.8
Other foreign (2.9) (9.5) 8.5
_________________________________________________________________________________________
49.9 75.2 142.1
Other income (expense), net (52.0) (41.9) (58.5)
_________________________________________________________________________________________
Earnings (loss) before income taxes $ (2.1) 33.3 83.6
_________________________________________________________________________________________
Identifiable industry assets:
Domestic 705.1 841.3 820.1
North Sea 280.3 245.1 230.4
Other foreign 107.6 64.4 74.5
_________________________________________________________________________________________
1,093.0 1,150.8 1,125.0
Other assets 116.1 102.0 101.0
_________________________________________________________________________________________
Total assets $1,209.1 1,252.8 1,226.0
_________________________________________________________________________________________
Depletion, depreciation and amortization:
Petroleum 101.6 111.5 107.8
Other 4.9 4.8 4.0
_________________________________________________________________________________________
$ 106.5 116.3 111.8
_________________________________________________________________________________________
Capital expenditures:
Exploration:
Domestic 22.7 51.7 72.2
North Sea 3.2 1.5 4.3
Other foreign 12.7 13.5 13.9
_________________________________________________________________________________________
38.6 66.7 90.4
_________________________________________________________________________________________
Development:
Domestic 47.9 52.9 39.8
North Sea 27.9 24.7 19.6
Other foreign 30.5 2.0 3.7
_________________________________________________________________________________________
106.3 79.6 63.1
_________________________________________________________________________________________
Refining and marketing 27.6 15.5 2.7
_________________________________________________________________________________________
172.5 161.8 156.2
Capitalized interest 12.9 22.6 19.5
Other 4.4 4.8 7.2
_________________________________________________________________________________________
$ 189.8 189.2 182.9
_________________________________________________________________________________________
PAGE
14. CONTINGENCIES
Texaco Litigation
In August 1989, the State of Louisiana, in connection with its
claim against Texaco in the Texaco bankruptcy proceedings, filed an
Amended and Restated Objection, Amended and Restated Proof of Claim
and Complaint naming, as class action defendants, all persons
having overriding royalty, working or other mineral interests in
State mineral leases held by Texaco. The State sought cancellation
of certain interests in State mineral leases, including the
interests of class members. The Company was a potential class
member as a result of its ownership of royalty interests in State
mineral leases subleased to Texaco and its ownership of overriding
royalty and working interests in other State leases with Texaco.
In July 1991, the Company entered into an agreement with Texaco
which resolved all claims and issues related to certain Department
of Energy matters. Following this settlement, the previously
established accrual for the DOE matter, net of certain litigation
expenses, was retained with respect to loss contingencies
associated with the State of Louisiana gas royalty claim.
On January 30, 1992, the United States District Court for the
Middle District of Louisiana denied the State's motion to certify
a defendant class and denied the State's motion for summary
judgment, which had sought a declaration that Texaco could not
assume State mineral leases under bankruptcy law. A subsequent
appeal by the State was dismissed.
On January 10, 1992, the Company was served with a Second Amendment
and Supplement to Amended and Restated Objection, Amended and
Restated Proof of Claim and Complaint of the State of Louisiana,
wherein the Company was added as a defendant in its capacity as a
sublessor to Texaco. The State has asserted a monetary claim of
$210.9 million in principal and $264.8 million in interest, plus
penalties, damages equal to double the amount of royalties
allegedly due, and attorneys' fees, against Texaco and the Company
based on Texaco's alleged improper calculation of royalties on six
State leases which Texaco has operated under subleases from the
Company. The monetary amount of the State's claims substantially
exceeds amounts provided in the financial statements. However, the
Company believes the State's claims are significantly overstated.
The State further seeks cancellation of the State mineral leases
subleased to Texaco based on Texaco's alleged conduct in operating
those leases. Lease cancellation is an extraordinary remedy under
Louisiana Law. The Company believes it has contractual and legal
rights to obtain indemnity, reimbursement and damages from Texaco
for any amounts claimed by the State or any other losses sustained
as a result of the State's action. In the opinion of Management,
the ultimate resolution of these claims should not have a material
adverse affect upon the results of operations, cash flows or
financial position of the Company.
Other Litigation
The Company is subject to other legal proceedings, claims and
liabilities, including environmental matters, which arise in the
ordinary course of its business. In the opinion of Management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position of the Company.PAGE
___________________________________________________________________
REPORT OF MANAGEMENT
___________________________________________________________________
The consolidated financial statements of The Louisiana Land and
Exploration Company and subsidiaries and the related information
included in this Annual Report have been prepared by Management in
accordance with generally accepted accounting principles and
include certain estimates and judgments which Management considers
appropriate. To meet its responsibilities for the fair
presentation of consolidated financial statements, Management
maintains a system of internal controls, including internal
accounting controls, considered appropriate in view of the costs
associated with the benefits to be derived. In addition, the Audit
Committee meets periodically with the Company's Management, the
internal auditors and KPMG Peat Marwick, independent auditors, to
review and discuss audit activities and results, internal control
procedures and other matters relative to accounting and financial
reporting.
Based on the results of these procedures, Management is of the
opinion that the system of internal controls in effect during the
year ended December 31, 1992 provided reasonable assurance that all
transactions were executed in accordance with Management's
authorizations, that assets were safeguarded from loss and
unauthorized use and that the accounting records and financial
statements properly reflect the transactions of the Company.
H. Leighton Steward Richard A. Bachmann
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
___________________________________________________________________
INDEPENDENT AUDITORS' REPORT
___________________________________________________________________
The Board of Directors and Stockholders
The Louisiana Land and Exploration Company:
We have audited the accompanying consolidated balance sheets of The
Louisiana Land and Exploration Company and subsidiaries as of
December 31, 1992 and 1991, and the related consolidated statements
of earnings (loss), stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1992.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.PAGE
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of The Louisiana Land and Exploration Company and
subsidiaries as of December 31, 1992 and 1991, and the results of
their operations and their cash flows for each of the years in the
three-year period ended December 31, 1992 in conformity with
generally accepted accounting principles.
s/KPMG Peat Marwick
KPMG Peat Marwick
New Orleans, Louisiana
February 8, 1993
PAGE
QUARTERLY DATA
Statements of Earnings (Loss)
Quarter ended
(Millions, except per share data) March 31 June 30 Sept. 30 Dec. 31
_________________________________________________________________________________________
1992*:
Revenues $182.9 192.3 208.5 203.7
Costs and Expenses 221.9 186.1 196.1 185.4
_________________________________________________________________________________________
Earnings (loss) before income taxes (39.0) 6.2 12.4 18.3
Income tax expense (benefit) (13.1) 1.4 4.2 6.6
_________________________________________________________________________________________
Earnings (loss) before extraordinary item (25.9) 4.8 8.2 11.7
Loss on early retirement of debt - - (5.6) -
_________________________________________________________________________________________
Net earnings (loss) $(25.9) 4.8 2.6 11.7
_________________________________________________________________________________________
Primary and fully diluted earnings (loss)
per share before extraordinary item (0.91) 0.17 0.29 0.41
Loss on early retirement of debt - - (0.20) -
_________________________________________________________________________________________
Primary and fully diluted earnings (loss)
per share $(0.91) 0.17 0.09 0.41
_________________________________________________________________________________________
Average shares 28.3 28.3 28.4 28.4
_________________________________________________________________________________________
1991:
Revenues 186.8 216.6 201.3 220.6
Costs and Expenses 173.1 209.8 197.7 211.4
_________________________________________________________________________________________
Earnings before income taxes 13.7 6.8 3.6 9.2
Income tax expense 5.4 2.3 1.4 3.3
_________________________________________________________________________________________
Net earnings $ 8.3 4.5 2.2 5.9
_________________________________________________________________________________________
Primary and fully diluted earnings per
share $ 0.29 0.16 0.08 0.21
_________________________________________________________________________________________
Average shares 28.3 28.3 28.4 28.3
_________________________________________________________________________________________
<F/N>
* In the first quarter of 1992, the Company recorded a $60.4 million charge (before income
tax benefits of approximately $20.5 million) against earnings to provide for the
restructuring of its oil and gas operations. This charge includes provisions for estimated
losses on the disposition of selected domestic properties of $55.6 million (both developed
and undeveloped) and costs associated with staff retirements, reductions and related
transition expenses of $4.8 million. In addition, the Company reduced its litigation
accrual for the State gas royalty claim by $25 million (before income taxes of $8.5
million). In the third quarter of 1992, the Company completed the sale of the selected
properties for a purchase price of $48.1 million. The transaction resulted in a gain of
approximately $8 million (before income taxes of $2.7 million) which was applied to the
previously recorded restructuring charges. Also in the first quarter of 1992, the Company
recorded a $5.5 million charge (before income tax benefits of $1.9 million) against
earnings to provide for the estimated uninsured losses associated with a gas well blowout.
This charge was reduced by $2.5 million in the fourth quarter.