_________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 1-7555
MOBIL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2850309
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3225 Gallows Road, Fairfax, VA. 22037-0001
(Address of principal executive offices) (Zip Code)
(703) 846-3000
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
The number of shares outstanding of the registrant's common
stock, all of which comprise a single class with a $2.00 par
value, as of July 31, 1995, the latest practicable date, was
395,592,158.
_________________________________________________________________
MOBIL CORPORATION
Form 10-Q
Quarterly Report
June 30, 1995
TABLE OF CONTENTS
________________________________________________________________
PART I - FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements
Consolidated Statement of Income for the
Three and Six Months Ended
June 30, 1994 and 1995 ...................... 1
Consolidated Balance Sheet at December 31,
1994 and June 30, 1995 ...................... 2
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1994 and 1995 ..... 3
Notes to Condensed Consolidated Financial
Statements .................................. 4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition ......... 7
Summarized Financial Data
Mobil Oil Corporation ......................... 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................... 18
Item 2. Changes in Securities ........................... 19
Item 3. Defaults Upon Senior Securities ................. 19
Item 4. Submission of Matters to a Vote of Security
Holders ....................................... 19
Item 5. Other Information ............................... 19
Item 6. Exhibits and Reports on Form 8-K ................ 19
SIGNATURE ................................................. 20
EXHIBIT INDEX ............................................. 21
Exhibit 11. Computation of Earnings per Common Share .... 22
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges ................................... 24
________________________________________________________________
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per-share amounts)
For the Three Months | For the Six Months
Ended June 30, | Ended June 30,
____________________ | __________________
|
1994 1995 | 1994 1995
_______ _______ | _______ _______
Revenues |
Sales and services (a) ................... $16,047 $18,700 | $30,995 $36,102
Income from equity investments, asset |
sales, interest and other .............. 168 149 | 338 374
------- ------- | ------- -------
|
Total Revenues ......................... 16,215 18,849 | 31,333 36,476
------- ------- | ------- -------
Costs and Expenses |
Crude oil, products and operating |
supplies and expenses .................. 8,839 10,598 | 16,934 20,601
Exploration expenses ..................... 108 79 | 190 174
Selling and general expenses ............. 1,344 1,868 | 2,593 3,124
Depreciation, depletion and amortization . 1,034 868 | 1,702 1,537
Interest and debt discount expense ....... 135 117 | 255 232
Taxes other than income taxes (a) ........ 4,155 4,739 | 7,982 8,998
Income taxes ............................. 402 401 | 944 995
------- ------- | ------- -------
Total Costs and Expenses ............... 16,017 18,670 | 30,600 35,661
------- ------- | ------- -------
|
Income Before Change in Accounting |
Principle ................................ 198 179 | 733 815
Cumulative Effect of Change in Accounting |
Principle (c) ............................ - - | (680) -
------- ------- | ------- -------
Net Income ................................. $ 198 $ 179 | $ 53 $ 815
======= ======= | ======= =======
|
Income Per Common Share |
Income before change in accounting |
principle (b) .......................... $ .46 $ .42 | $ 1.77 $ 1.99
Cumulative effect of change in accounting |
principle (c) .......................... - - | (1.71) -
------- ------- | ------- -------
Net Income Per Common Share ................ $ .46 $ .42 | $ .06 $ 1.99
======= ======= | ======= =======
|
Dividends Per Common Share ................. $ .85 $ .925 | $ 1.70 $ 1.775
======= ======= | ======= =======
Notes: |
|
(a) Includes excise and state gasoline |
taxes of ............................. $ 1,871 $ 2,149 | $ 3,587 $ 4,046
|
(b) Based on income before change in |
accounting principle less preferred |
stock dividend requirements of ....... $ 14 $ 14 | $ 29 $ 28
divided by the weighted average |
number of common shares outstanding |
(000's) of ........................... 398,356 395,804 | 398,346 395,823
(c) Reflects adoption, effective January 1, 1994, of a change in the accounting
method used to apply the lower of cost or market test for crude oil and
product inventories.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 1 -
MOBIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In millions)
Dec. 31, June 30,
ASSETS 1994 1995
_______ _______
Current Assets
Cash and cash equivalents ................................ $ 531 $ 408
Accounts and notes receivable ............................ 6,535 6,609
Inventories .............................................. 3,302 3,550
Prepaid expenses and other current assets ................ 618 779
Deferred income taxes .................................... 195 302
------- -------
Total Current Assets ................................... 11,181 11,648
Investments and Long-Term Receivables ...................... 3,802 4,329
Properties, Plants and Equipment ........................... 53,788 55,175
Less: Accumulated Depreciation, Depletion and Amortization . 28,285 29,427
------- -------
Net Properties, Plants and Equipment ....................... 25,503 25,748
Deferred Charges and Other Assets .......................... 1,056 1,094
------- -------
Total Assets ........................................... $41,542 $42,819
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt .......................................... $ 3,013 $ 2,996
Accounts payable ......................................... 4,968 4,947
Accrued liabilities ...................................... 2,659 3,088
Income, excise, state gasoline and other taxes payable ... 2,531 2,861
Deferred income taxes .................................... 247 174
------- -------
Total Current Liabilities .............................. 13,418 14,066
Long-Term Debt ............................................. 4,714 4,672
Reserves for Employee Benefits ............................. 1,520 1,591
Accrued Restoration, Removal and Environmental Costs ....... 1,191 1,221
Deferred Credits and Other Noncurrent Obligations .......... 841 843
Deferred Income Taxes ...................................... 2,639 2,754
Minority Interest in Subsidiary Companies .................. 73 82
------- -------
Total Liabilities ...................................... 24,396 25,229
------- -------
Shareholders' Equity
Preferred stock (ESOP-related) -- shares issued and
outstanding: 95,778 at December 31, 1994 and
94,362 at June 30, 1995 .. ............................. 745 734
Unearned employee compensation (ESOP-related) ............ (472) (441)
Common stock -- $2.00 par value; shares authorized:
600,000,000; shares issued: 442,336,317 at December 31,
1994 and 443,319,108 at June 30, 1995 .................. 885 887
Capital surplus .......................................... 1,325 1,369
Earnings retained in the business ........................ 16,859 16,943
Cumulative foreign exchange translation adjustment ....... (123) 314
Common stock held in treasury, at cost -- shares:
46,349,300 at December 31, 1994 and 47,796,800 at
June 30, 1995 .......................................... (2,073) (2,216)
------- -------
Total Shareholders' Equity ............................. 17,146 17,590
------- -------
Total Liabilities and Shareholders' Equity ................. $41,542 $42,819
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements
MOBIL - 2 -
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
For the Six Months
Ended June 30,
___________________
1994 1995
_______ ______
Cash Flows from Operating Activities
Net Income ......................................... $ 53 $ 815
Adjustments to reconcile to net cash from
operating activities:
Cumulative effect of change in accounting
principle .................................... 680 -
Depreciation, depletion and amortization ....... 1,702 1,537
Deferred income taxes .......................... (303) (175)
Earnings less (greater) than dividends from
equity affiliates ............................ 31 (18)
Exploration expenses (includes noncash
charges: 1994-$15; 1995-$24) ................ 190 174
Gain on sales of properties, plants and
equipment and other assets ................... (71) (33)
Decrease in working capital items .............. 419 206
Other, net ..................................... (41) 57
------- ------
Net Cash from Operating Activities ................... 2,660 2,563
------- ------
Cash Flows from Investing Activities
Capital and exploration expenditures ............... (1,665) (1,778)
Proceeds from sales of properties, plants and
equipment and other assets ....................... 173 217
Payments attributable to investments and
long-term receivables ............................ (60) (134)
------- ------
Net Cash Used in Investing Activities ................ (1,552) (1,695)
------- ------
Cash Flows from Financing Activities
Cash dividends ..................................... (706) (731)
Proceeds from borrowings having original
terms greater than three months .................. 513 1,170
Repayments of borrowings having original
terms greater than three months .................. (659) (1,060)
Decrease in other borrowings ....................... (301) (242)
Proceeds from issuance of common stock ............. 30 46
Purchase of common stock for treasury .............. (38) (143)
------- ------
Net Cash Used in Financing Activities ................ (1,161) (960)
------- ------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents ................................... 50 (31)
------- ------
Net Decrease in Cash and Cash Equivalents ............ (3) (123)
Cash and Cash Equivalents - Beginning of Period ...... 827 531
------- ------
Cash and Cash Equivalents - End of Period ............ $ 824 $ 408
======= ======
_______________________________________________________________________________
Memo item
Net cash from operating activities .................. $ 2,660 $ 2,563
Net cash used in investing activities ............... (1,552) (1,695)
Cash dividends ...................................... (706) (731)
------- -------
Excess of cash from operating activities
over investing activities and dividends ........... $ 402 $ 137
======= =======
______________________________________________________________________________
The accompanying notes are an integral part of these
condensed consolidated financial statements
MOBIL - 3 -
MOBIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Financial Statements
The condensed consolidated financial statements of Mobil Corporation (Mobil)
included herein are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Although certain
information normally included in financial statements prepared in accordance
with generally accepted accounting principles has been condensed or omitted,
Mobil believes that the disclosures are adequate to make the information
presented not misleading. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements,
the notes thereto and the financial statement schedules included or
incorporated by reference in Mobil's Annual Report on Form 10-K
for its fiscal year ended December 31, 1994.
The condensed consolidated financial statements included herein reflect all
normal recurring adjustments that, in the opinion of management, are
necessary for a fair presentaion. The results for interim periods
are not necessarily indicative of trends or of results to be expected for a
full year.
2. Change in Accounting Principle
Effective January 1, 1994, Mobil changed the method of accounting it uses to
apply the lower of cost or market (LCM) test for its crude oil and product
inventories. The LCM test is now measured, and the results are recognized
separately, on a country-by-country basis, and any resulting writedowns to
market are recorded as permanent adjustments to the last-in, first-out (LIFO)
cost of inventory in accordance with Accounting Research Bulletin No. 43,
Chapter 4, "Inventory Pricing". Previously, Mobil aggregated its worldwide
inventories into one pool for the determination of the LCM determination
of the LCM measurement. The $680 million after-tax charge to 1994 first
quarter net income represents the cumulative effect of this accounting change
as of January 1, 1994. The new method of applying the LCM test to the book
value of inventories is preferable because Mobil's financial statements will
better reflect local market conditions and exchange rates in the countries in
which Mobil operates.
3. Restructurings
During the second quarter of 1995, Mobil announced three major restructuring
programs affecting worldwide staff support services, United States (U.S.)
downstream businesses, and European refining operations. The implementation of
these three programs will result in the elimination of approximately 5,200
positions and the closure of certain facilities, the costs of which are
expected to total $789 million ($505 million after-tax), which was charged to
second quarter 1995 income. Of the total pre-tax amount, $575 million was
charged to selling and general expenses, primarily related to employee
separation benefits and facility shutdown expenses. The remaining $214 million
related to asset writedowns and was charged to depreciation, depletion, and
amortization.
MOBIL - 4 -
3. Restructurings - continued
Staff Support Services
Mobil currently employs about 14,500 staff worldwide who provide financial,
computer, employee relations and other support services to the upstream, down-
stream and chemical businesses. Under a plan adopted in the second quarter of
1995, significant changes are being made in the way that these services are
delivered so that the business units are provided with cost competitive
services. This goal will be accomplished through organizational and
operational changes that include establishing regional shared services groups,
outsourcing of services, and providing the business units with the
opportunity to control and direct the level of services they receive. These
changes are expected to result in work force reductions of about 4,000
employees and be completed in 1996.
Of the total $392 million charge for this program, cash outlays are expected
to total $324 million ($234 million after-tax), primarily related to employee
separation benefits. Non-cash costs involving the writedown to estimated
realizable value of surplus facilities and equipment in the U.S. and United
Kingdom are estimated to total $68 million ($52 million after-tax).
U.S. Marketing and Refining
A program to implement work process improvements in U.S downstream businesses,
primarily refining, will reduce marketing and refining staff headcount by
about 700 employees. Implementation of these changes and associated initia-
tives will be substantially completed by the end of the first quarter of 1996.
The total reserve for this program will result in cash outlays of $62 million
($39 million after-tax) and relates to employee separation benefits.
European Refining Operations
Initiatives are being undertaken to improve the profitability of Mobil's
European refining operations. These initiatives entail the closure of the
Woerth refinery in Germany, together with improvements in work processes at
refineries at Coryton, England and Gravenchon, France, and will eliminate
about 500 jobs at the three locations. The closure of the Woerth refinery is
expected to be substantially complete by the end of the second quarter of
1996, while the restructuring programs at the Coryton and Gravenchon refineries
will be implemented in stages prior to year-end 1996.
Cash outlays for this program are expected to total $189 million ($111 million
after-tax), mainly related to employee separation and shutdown expenses. Non-
cash costs for writing off the investment at Woerth total $146 million ($69
million after-tax).
MOBIL - 5 -
4. Supplementary Cash Flow Data
The table below details the components of the line "Decrease in working
capital items" which is shown in the Consolidated Statement of Cash Flows on
page 3. The impact of changes in foreign currency translation rates has been
removed from these amounts. Therefore, these amounts do not agree with the
differences that could be derived from the Consolidated Balance Sheet amounts
shown on page 2.
______________________________________________________________________
(In millions) For the Six Months
Ended June 30,
____________________
1994 1995
_____ _____
Changes in Working Capital Items
(Increases)/decreases
Accounts and notes receivable ................. $(141) $ 95
Inventories ................................... (22) (188)
Prepaid expenses and other current assets ..... (107) (140)
Accounts payable .............................. 217 (178)
Accrued liabilities ........................... 143 395
Income, excise, state gasoline and
other taxes payable ......................... 329 222
----- -----
Decrease in working capital items ............. $ 419 $ 206
===== =====
______________________________________________________________________
MOBIL - 6 -
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
__________________________________________________________________________________
| |
| REPORTED EARNINGS Second Quarter First Six Months |
| (In Millions) ______________ Incr./ _________________ Incr./|
| 1994 1995 (Decr.) 1994 1995 (Decr.)|
| _____ _____ _____ ______ ______ _______ |
| Petroleum Operations |
| E&P - United States ........... $ (64) $ 57 $ 121 | $ 13 $ 139 $ 126 |
| - International ........... 214 241 27 | 472 536 64 |
| ----- ----- ----- | ------ ------ ------- |
| Total E&P ..................... 150 298 148 | 485 675 190 |
| ----- ----- ----- | ------ ------ ------- |
| M&R - United States ........... 39 (17) (56) | 100 (17) (117)|
| - International ........... 150 (115) (265) | 325 31 (294)|
| ----- ----- ----- | ------ ------ ------- |
| Total M&R ..................... 189 (132) (321) | 425 14 (411)|
| ----- ----- ----- | ------ ------ ------- |
| Total Petroleum ................. 339 166 (173) | 910 689 (221)|
| | |
| Chemical ........................ (76) 170 246 | (61) 344 405 |
| Corporate and Other (a) ......... (11) (84) (73) | (24) (80) (56)|
| Net Financing Expense ........... (54) (73) (19) | (92) (138) (46)|
| ----- ----- ----- | ------ ------ ------- |
| Income Before Change in | |
| Accounting Principle .......... 198 179 (19) | 733 815 82 |
| Cumulative Effect of Change in | |
| Accounting Principle (b)....... - - - | (680) - 680 |
| ----- ----- ----- | ------ ------ ------- |
| Net Income ...................... $ 198 $ 179 $ (19) | $ 53 $ 815 $ 762 |
| ===== ===== ===== | ====== ====== ======= |
|__________________________________________________________________________________|
| |
| OPERATING EARNINGS Second Quarter First Six Months |
| (Adjusted for Special Items) ______________ Incr./ ________________ Incr./|
| (In Millions) 1994 1995 (Decr.) 1994 1995 (Decr.)|
| _____ _____ _____ ______ ______ _______ |
| Petroleum Operations | |
| E&P - United States ........... $ 79 $ 109 $ 30 | $ 156 $ 191 $ 35 |
| - International ........... 256 266 10 | 514 561 47 |
| ----- ----- ----- | ------ ------ ------- |
| Total E&P ..................... 335 375 40 | 670 752 82 |
| ----- ----- ----- | ------ ------ ------- |
| M&R - United States ........... 74 87 13 | 135 87 (48)|
| - International ........... 150 153 3 | 325 299 (26)|
| ----- ----- ----- | ------ ------ ------- |
| Total M&R ..................... 224 240 16 | 460 386 (74)|
| ----- ----- ----- | ------ ------ ------- |
| Total Petroleum ................. 559 615 56 | 1,130 1,138 8 |
| | |
| Chemical ........................ 39 186 147 | 54 360 306 |
| Corporate and Other (a) ......... (31) (22) 9 | (44) (18) 26 |
| Net Financing Expense ........... (54) (73) (19) | (92) (138) (46)|
| ----- ----- ----- | ------ ------ ------- |
| Income Excluding Special Items | |
| and Change in Accounting | |
| Principle ..................... 513 706 193 | 1,048 1,342 294 |
| Special Items (table on page 8) . (315) (527) (212) | (315) (527) (212)|
| ----- ----- ----- | ------ ------ ------- |
| Income Before Change in | |
| Accounting Principle........... 198 179 (19) | 733 815 82 |
| Cumulative Effect of Change in | |
| Accounting Principle (b)........ - - - | (680) - 680 |
| ----- ----- ----- | ------ ------ ------- |
| Net Income .......................$ 198 $ 179 $ (19) | $ 53 $ 815 $ 762 |
| ===== ===== ===== | ====== ====== ======= |
|__________________________________________________________________________________|
(a) Corporate and Other includes the results from Real Estate operations,
Mining and Minerals, administrative expenses and other corporate items.
(b) Reflects the impact of the change in the method of applying the lower of
cost or market test for crude oil and product inventories, effective
January 1, 1994.
MOBIL - 7 -
__________________________________________________________________________________
SPECIAL ITEMS Second Quarter First Six Months
(In Millions) ______________ ________________
1994 1995 1994 1995
_____ _____ _____ _____
|
Restructuring Provisions ........... $ (95) $(505) | $ (95) $(505)
Asset Sales ........................ - (22) | - (22)
Asset Writedowns ................... (220) - | (220) -
----- ----- | ----- -----
|
Total Special Items .............. $(315) $(527) | $(315) $(527)
===== ===== ===== =====
__________________________________________________________________________________
__________________________________________________________________________________
REVENUES BY SEGMENT Second Quarter First Six Months
(In Millions) Incr./ Incr./
(Decr.) (Decr.)
1994 1995 % 1994 1995 %
_______ _______ ____ _______ _______ ____
Exploration & Producing ....... $ 1,479 $ 1,748 18 | $ 3,149 $ 3,575 14
Marketing & Refining .......... 13,624 15,559 14 | 26,112 29,889 14
Chemical ...................... 996 1,463 47 | 1,829 2,814 54
Corporate & Other ............. 116 79 (32) | 243 198 (19)
_______ _______ | _______ _______
Total Revenues .............. $16,215 $18,849 16 | $31,333 $36,476 16
======= ======= | ======= =======
__________________________________________________________________________________
CONSOLIDATED RESULTS OVERVIEW
SECOND QUARTER 1995 COMPARED WITH SECOND QUARTER 1994
Consolidated second quarter net income was $179 million, a decrease of
$19 million from the $198 million earned in the second quarter of 1994. Net
income per common share for the second quarter of 1995 was $.42, compared with
$.46 for the second quarter of 1994. This year's second quarter included
special charges of $527 million (including $505 million for the previously
announced restructuring of worldwide staff support services, marketing and
refining operations in the U.S. and refining operations in Europe). Last year's
second quarter included special charges totaling $315 million for North
American property writedowns and worldwide Chemical restructuring. Excluding
the special charges in both periods, second quarter 1995 operating income of
$706 million increased $193 million, or 38%, from the comparable period last
year.
The significant increase in operating income was primarily due to higher
income in the Chemical businesses as a result of improved industry conditions
and better operating performance, including lower costs following
restructuring. In Exploration and Producing, higher worldwide crude oil prices,
up more than $2.00/bbl. from last year's depressed levels, and lower expenses
more than offset the impact of lower natural gas prices in North America and
the United Kingdom. In Marketing and Refining, improved worldwide operating
performance, stronger lube income, and lower expenses more than offset weaker
margins overseas.
MOBIL - 8 -
Consolidated Results Overview - continued
This quarter, following comprehensive reviews, Mobil announced plans for the
realignment of worldwide staff support services and for further restructuring
of marketing and refining in the Unites States. Major European refining
initiatives were also announced, including closure of the Woerth refinery in
Germany and restructuring of Mobil's manufacturing base in Northwest Europe.
These actions should result in a worldwide work force reduction of
approximately 5,200 positions, lower manufacturing costs in Mobil's key U.S.
and Northwest European markets, and savings of over $1 billion annually. In
addition, consistent with Mobil's long-term strategy of focusing investments in
core business areas, a letter of intent was signed for the sale of Mobil's
South Fort Meade phosphate mine in Florida.
Mobil is also taking advantage of attractive opportunities for growth which
are expected to benefit future earnings. Announcements during the second
quarter of 1995 included (1) the acquisition of deep water reserves in the Gulf
of Mexico; (2) a major discovery offshore Nigeria, where Mobil is already the
second largest producer of oil and condensate; (3) successful bids for
exploration rights in the North Sea, both in the Danish sector and the United
Kingdom 16th Round; and (4) the acquisition of Elf Aquitaine's service station
network in The Netherlands.
Worldwide revenues in the second quarter of 1995 of $18,849 million were
$2,634 million higher than revenues in the second quarter of 1994, reflecting
higher worldwide chemical, crude oil and product prices, and higher U.S.
product sales volumes. Crude oil, products and operating supplies and expenses
increased by $1,759 million to $10,598 million due to higher crude and product-
related costs and higher U.S. sales volumes. Exploration expenses decreased $29
million, reflecting reduced activity and a lower cost program, combined with
reduced dry well expenses resulting from greater drilling success than in the
prior year. Selling and general expenses rose $524 million to $1,868 million,
primarily due to special charges for restructuring initiatives. Depreciation,
depletion and amortization expenses were $166 million lower, largely due to
asset writedowns recorded in the second quarter of 1994. Interest and debt
discount expenses decreased $18 million to $117 million, principally reflecting
lower effective interest rates. Taxes other than income taxes increased $584
million to $4,739 million due to higher U.S. sales volumes, currency
translation effects and higher United Kingdom excise tax rates.
Market fundamentals continue to be uncertain and volatile and are likely to
remain so in the near term. Worldwide crude oil prices showed strength early in
the quarter, but weakened in June. Refining margins have remained weak, and
North American natural gas prices have been depressed. In addition, margins in
Chemical, which have been very strong this year, are showing early signs of
weakening from the current relatively high levels.
MOBIL - 9 -
Consolidated Results Overview - continued
FIRST SIX MONTHS 1995 COMPARED WITH FIRST SIX MONTHS 1994
For the first six months of 1995, reported net income was $815 million,
compared with $733 million for the same period of 1994 (excluding the effect of
last year's $680 million charge for the change in accounting principle related
to inventories). First half 1995 net income included special charges of $527
million, primarily for the realignment of worldwide staff support services and
restructuring of marketing and refining operations in the U.S. and refining
operations in Europe. Net special charges totaling $315 million for North
American property writedowns and Chemical restructuring were included in the
comparable period of 1994.
Excluding special items and the accounting change, first half 1995 operating
income of $1,342 million was up $294 million, or 28%, from the comparable
period of 1994. This improvement was mainly due to higher Chemical income, up
$306 million, reflecting better margins and operating performance. In petroleum
operations, income was essentially flat, despite significantly weaker
international refining margins and North American natural gas prices, partly
offset by stronger worldwide crude oil prices. The net unfavorable impact of
these industry fundamentals was wholly offset by benefits from business
initiatives. In particular, expenses in worldwide Marketing and Refining and
U.S. Exploration and Producing were lower, and worldwide lube income in
Marketing and Refining was stronger.
Six month 1995 revenues of $36,476 million were $5,143 million higher than
revenues in the first half of 1994 because of higher worldwide chemical, crude
oil and product prices, higher U.S. product sales volumes and currency
translation effects. Crude oil, products and operating supplies and expenses
increased by $3,667 million to $20,601 million due to increased crude and
product-related costs and higher U.S. sales volumes. Exploration expenses
decreased $16 million to $174 million reflecting reduced activity and a lower
cost program, combined with reduced dry well expenses resulting from greater
drilling success than in the prior year. Selling and general expenses rose $531
million to $3,124 million, primarily due to special charges for restructuring
initiatives. Depreciation, depletion and amortization expenses were $165
million lower largely due to asset writedowns in the second quarter of 1994.
Interest and debt discount expenses decreased $23 million to $232 million,
principally reflecting lower effective interest rates. Taxes other than income
taxes increased $1,016 million to $8,998 million due to higher U.S. sales
volumes, currency translation effects and higher United Kingdom excise tax
rates. Income tax expense increased $51 million over the prior year largely as
a function of higher pre-tax income.
MOBIL - 10 -
Exploration and Producing
_________________________________________________________________________________
Exploration and Producing Second Quarter First Six Months
Selected Operating Data Incr./ Incr./
(Decr.) (Decr.)
1994 1995 Vol. % 1994 1995 Vol. %
_____ _____ ___ __ _____ _____ ______ __
Net Crude Oil and NGL |
Production (TBD) - U.S. 291 285 (6) (2) | 293 287 (6) (2)
- Intl. 549 522 (27) (5) | 558 517 (41) (7)
----- ----- --- | ----- ----- -----
Total .................. 840 807 (33) (4) | 851 804 (47) (6)
===== ===== === | ===== ===== =====
Net Natural Gas |
Production (MMCFD) - U.S. 1,553 1,528 (25) (2) | 1,566 1,511 (55) (4)
- Intl. 2,885 2,954 69 2 | 3,196 3,247 51 2
----- ----- --- | ----- ----- -----
Total .................. 4,438 4,482 44 1 | 4,762 4,758 (4) -
===== ===== === | ===== ===== =====
Natural Gas Sales |
(MMCFD) - U.S. 2,646 3,479 833 31 | 2,686 3,588 902 34
- Intl. 2,908 3,038 130 4 | 3,222 3,334 112 3
----- ----- --- | ----- ----- -----
Total .................. 5,554 6,517 963 17 | 5,908 6,922 1,014 17
===== ===== === | ===== ===== =====
_________________________________________________________________________________
SECOND QUARTER 1995 COMPARED WITH SECOND QUARTER 1994
Exploration and Producing income of $298 million was $148 million higher
than the second quarter of last year. The current quarter included $77 million
of special charges; $55 million related to the restructuring of staff support
services, and $22 million related to losses on U.S. asset sales. Last year's
second quarter included $185 million of special charges resulting from the
writedown of a producing property and the writeoff of certain non-producing
properties, all in North America. Excluding special items, operating income of
$375 million was $40 million higher than last year.
In the U.S., operating income increased $30 million to $109 million, as higher
crude oil prices and lower operating expenses more than offset significantly
lower natural gas prices.
International operating income was $266 million, up $10 million from the prior
year. Higher crude oil and Indonesian LNG prices more than offset lower natural
gas prices in Canada and the United Kingdom and lower liquids volumes. Crude oil
production in Nigeria was lower due to a rupture in the export pipeline, which
was repaired and placed back in operation by the end of July. New capacity to be
streamed later this year will help mitigate this loss in production.
FIRST SIX MONTHS 1995 COMPARED WITH FIRST SIX MONTHS 1994
Exploration and Producing income of $675 million was $190 million higher than
last year. Excluding previously mentioned special items (1995 special charges
of $77 million, 1994 special charges of $185 million), operating income of
$752 million was up $82 million, or 12%, from 1994. Higher worldwide crude oil
prices and lower expenses more than offset the impact of lower natural gas
prices in North America.
MOBIL - 11 -
Marketing and Refining
________________________________________________________________________________
Marketing and Refining Second Quarter First Six Months
Selected Operating Data Incr./ Incr./
(Decr.) (Decr.)
1994 1995 Vol. % 1994 1995 Vol. %
_____ _____ ___ __ _____ _____ ___ __
Petroleum Product
Sales (TBD) - U.S. 1,164 1,255 91 8 | 1,138 1,255 117 10
- Intl. 1,891 1,830 (61) (3)| 1,858 1,862 4 -
----- ----- --- | ----- ----- ---
Total .................. 3,055 3,085 30 1 | 2,996 3,117 121 4
===== ===== === | ===== ===== ===
|
Refinery Runs (TBD) - U.S. 876 884 8 1 | 851 894 43 5
- Intl. 1,246 1,224 (22) (2)| 1,201 1,234 33 3
----- ----- --- | ----- ----- ---
Total .................. 2,122 2,108 (14) (1)| 2,052 2,128 76 4
===== ===== === | ===== ===== ===
________________________________________________________________________________
SECOND QUARTER 1995 COMPARED WITH SECOND QUARTER 1994
Marketing and Refining reported a net loss of $132 million for the second
quarter of 1995 compared with net income of $189 million for the comparable
period last year. Excluding current year special charges of $372 million which
relate to previously mentioned restructuring initiatives, and excluding a
special charge of $35 million for property writedowns in the prior year,
Marketing and Refining operating income of $240 million was $16 million higher
than the previous year.
Operating income in the U.S. was $87 million, up $13 million, reflecting
lower operating expenses, higher sales volumes, and increased lube income, as
well as improved industry margins. These improvements were largely offset by
higher costs this year associated with production of reformulated gasoline.
International operating income was $153 million, up $3 million. Benefits
from ongoing business initiatives, including expense savings in Europe, as
well as the increased contribution from the Singapore refinery upgrade,
offset weaker worldwide refining margins.
FIRST SIX MONTHS 1995 COMPARED WITH FIRST SIX MONTHS 1994
Marketing and Refining income was $14 million, a reduction of $411 million
from the comparable period last year. Excluding the previously noted special
items (charges of $372 million in 1995 and $35 million last year), operating
income of $386 million was $74 million lower than last year. Increased U.S.
gasoline and distillate sales volumes, reduced operating expenses and lower
refinery downtime were more than offset by weaker refining margins and higher
costs this year associated with production of reformulated gasoline.
MOBIL - 12 -
Chemical
SECOND QUARTER AND FIRST SIX MONTH COMPARISONS OF 1995 WITH 1994
Chemical income of $170 million in the second quarter of 1995 increased $246
million compared with the same period in the prior year. Excluding special
charges for restructuring initiatives in both periods ($16 million in 1995 and
$115 million in 1994), operating earnings were $186 million in the current
year, an increase of $147 million over 1994. This improvement reflected better
industry fundamentals in most chemical businesses, particularly polyethylene
resin. Income also benefited from the Singapore petrochemical complex, and from
business initiatives, notably in plastics fabricating and petrochemicals.
In the first six months of 1995, Chemical income was $344 million compared
with a loss of $61 million in the same period last year. Excluding the special
charges referred to above, Chemical operating income of $360 million was $306
million higher than in the previous year. This improvement reflects the same
factors which contributed to the higher operating income in the current
quarter.
Corporate and Other
SECOND QUARTER AND FIRST SIX MONTH COMPARISONS OF 1995 WITH 1994
Corporate and Other expense, excluding special items relating to
restructuring initiatives, was $22 million in the second quarter of 1995,
$9 million lower than in the prior year.
For the first six months of 1995, Corporate and Other expense, excluding
special items, was $18 million, an improvement of $26 million compared with the
prior year, principally reflecting favorable real estate operations due to the
sale of an office complex in Arlington, Virginia.
Net Financing Expense
SECOND QUARTER AND FIRST SIX MONTH COMPARISONS OF 1995 WITH 1994
Net Financing Expense for the second quarter of 1995 was $73 million,
$19 million higher than in the previous year, primarily reflecting higher
financing costs.
For the first six months of 1995, Net Financing Expense was $138 million, up
$46 million from the previous year, for the same reason as noted for the
current quarter.
Accounting Standards
In March, 1995, Financial Accounting Standard (FAS) 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
was issued but adoption is not required until 1996. This new standard requires
that assets be reported at fair value, if the related book values are deemed to
be impaired. The financial reporting impact that will result from the adoption
of FAS 121, currently being reviewed, is not known at this time.
MOBIL - 13 -
DISCUSSION OF FINANCIAL CONDITION
At June 30, 1995, total current assets of $11,648 million were $467 million
higher than at year-end 1994. The increases in accounts and notes receivable,
inventories, prepaid expenses and deferred income tax asset balances partly
reflect currency translation effects arising from the strengthening, relative
to the U.S. dollar, of currencies in the international areas where Mobil
conducts business. Other factors include the impact of higher petroleum
products and petrochemical sales volumes and prices, partly offset by reduced
third party crude oil trade sales volumes and timing of collection of
receivables. Additionally, deferred income tax asset balances were higher due
to increases in book reserves relating to restructuring initiatives.
Investments and long-term receivables increased $527 million, primarily due
to currency translation effects and continuing investment in Qatar LNG
projects.
Net properties, plants and equipment increased $245 million to $25,748
million. Capital expenditures and currency translation effects more than offset
depreciation and asset sales and retirements.
Total current liabilities of $14,066 million at June 30, 1995 increased $648
million from year-end 1994. This increase primarily reflects provision for
restructuring initiatives, higher taxes payable associated with increased sales
volumes and currency translation effects, partly offset by a seasonal decrease
in product purchases and timing of certain payments at year-end 1994.
Total debt of Mobil and its subsidiaries was $7,668 million at June 30, 1995,
down $59 million from year-end 1994. The debt-to-capitalization ratio was 30%
at June 30, 1995, compared with 31% at year-end 1994.
Shareholders' equity rose $444 million during the first six months of 1995,
primarily due to currency translation effects which were noted above. In
addition, earnings retained in the business at June 30, 1995 increased $84
million reflecting net income of $815 million less dividends of $731 million.
During the first six months of 1995, net cash generated from operating
activities was $2,563 million, $137 million more than the cash requirements for
investing activities and dividends. (Refer to table on page 3.)
MOBIL - 14 -
DISCUSSION OF FINANCIAL CONDITION - continued
Worldwide capital and exploration expenditures for the second quarter of 1995
were $960 million, an increase of $13 million from the comparable period last
year. For the first six months of 1995, worldwide capital and exploration
expenditures were $1,778 million, compared with $1,665 million for the year
earlier period.
____________________________________________________________________________
CAPITAL AND EXPLORATION
EXPENDITURES Second Quarter First Six Months
(In Millions)
1994 1995 1994 1995
____ ____ ______ ______
Petroleum Operations |
Exploration & Producing - U.S. ... $141 $150 | $ 240 $ 245
- Intl. .. 280 362 | 481 660
Marketing & Refining - U.S. ... 124 115 | 241 239
- Intl. .. 203 181 | 305 324
Chemical ........................... 54 52 | 119 92
Corporate & Other .................. 37 21 | 89 44
---- ---- | ------ ------
Total Capital Expenditures ..... 839 881 | 1,475 1,604
|
Exploration Expenses - U.S. ... 25 8 | 37 26
- Intl. .. 83 71 | 153 148
---- ---- | ------ ------
Total Exploration Expenses ..... 108 79 | 190 174
---- ---- | ------ ------
Total Capital and |
Exploration Expenditures ... $947 $960 | $1,665 $1,778
==== ==== | ====== ======
____________________________________________________________________________
Return on average shareholders' equity was 10.7% for the twelve month period
ended June 30, 1995, compared with 10.4% for the calendar year 1994 (excluding
the cumulative effect of the change in accounting principle). Return on average
capital employed for the twelve month period ended June 30, 1995 was 8.6%,
compared with 8.4% for the calendar year 1994 (excluding the cumulative effect
of the change in accounting principle).
Whenever external financing is needed, Mobil and its subsidiary companies
have ready access to multiple capital markets, including significant bank
credit lines.
At June 30, 1995, Mobil had effective shelf registration statements on file
with the SEC permitting the offer and sale of $1,815 million of debt
securities. Shelf registrations allowing the issuance of U.S. $911 million of
Euro-Medium-Term Notes and bonds having a principal amount of 30 billion
Japanese yen are also in place.
On August 7, 1995, Mobil Australia Finance Company issued Euro-Medium-Term
Notes in the amount of 3 billion Japanese yen due November 9, 2000.
Additionally, Mobil Australia Finance Company has agreed to issue, on August
22, 1995, Euro-Medium-Term Notes in the amount of 3 billion Japanese yen due
November 20, 2000. Both issues are guaranteed by Mobil.
At June 30, 1995, the Mobil Oil Corporation Employee Stock Ownership Plan
Trust (ESOP Trust) had an effective shelf registration on file with the SEC
permitting the offer and sale of $230 million of debt securities, guaranteed by
Mobil. The proceeds of any debt securities issued by the ESOP Trust thereunder
would be used to refund its existing indebtedness.
MOBIL - 15 -
DISCUSSION OF FINANCIAL CONDITION - continued
CURRENT DEVELOPMENTS
Restructurings
Mobil recorded a special charge in the second quarter of 1995 of $505 million
after-tax to cover costs of employee separation and facility closings for the
restructuring of staff support services, U.S. downstream businesses and
European refining operations. Mobil expects these restructuring programs, when
fully implemented by the end of 1996, to achieve significant annual pre-tax
savings as compared with 1994, as follows: staff support services $750 million,
U.S. downstream $300 million, European refining operations $80 million. Refer
to note 3 in the Notes To Condensed Consolidated Financial Statements on page 4
for further details of these programs and related special charges.
Nigeria
Mobil is the operator of an upstream joint venture with the state-owned
Nigerian National Petroleum Corporation (NNPC). This joint venture produced
about 385 thousand barrels of crude oil and condensate per day (TBD) during the
second quarter of 1995 (Mobil share 154 TBD).
Although there continues to be political uncertainty, to date there has been
minimal impact upon Mobil's Nigerian operations; however, management continues
to monitor the situation.
MOBIL - 16 -
SUMMARIZED FINANCIAL DATA
MOBIL OIL CORPORATION
Summarized financial data for Mobil Oil Corporation, a wholly-owned
subsidiary of Mobil Corporation, follow. Net obligations to Mobil
Corporation amounted to $1,737 million at December 31, 1994, and
$998 million at June 30, 1995.
________________________________________________________________________
(In millions) Dec. 31, June 30,
1994 1995
_______ _______
Current assets .......................... $12,942 $14,298
Noncurrent assets ....................... 25,006 25,727
Current liabilities ..................... (12,398) (13,286)
Long-term debt .......................... (6,639) (6,561)
Deferred credits and other liabilities .. (4,899) (5,202)
Minority interests, primarily
Mobil Corporation ..................... (1,165) (1,212)
------- -------
Net assets .............................. $12,847 $13,764
======= =======
For the Six Months Ended
June 30,
_________________________
1994 1995
_______ _______
Gross revenues .......................... $29,669 $34,700
Income before taxes and change in
accounting principle .................. $ 994 $ 1,108
Income after taxes but before change in
accounting principle .................. $ 366 $ 494
Cumulative effect of change in accounting
principle (a).......................... (680) -
Net income (loss) ....................... $ (314) $ 494
(a) Reflects the adoption, effective January 1, 1994, of a change
in the accounting method used to apply the lower of cost or
market test for crude oil and product inventories.
________________________________________________________________________
MOBIL - 17 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Environmental Litigation.
Mobil periodically receives notices from the Environmental Protection Agency
(EPA) or equivalent agencies at the state level that Mobil is a "potentially
responsible party" under Superfund or equivalent state legislation with respect
to various waste disposal sites. The majority of these sites are either still
under investigation by the EPA or the state agencies concerned, or under
remediation, or both. In certain instances, Mobil and other potentially
responsible parties have been named in court or administrative proceedings by
federal or state agencies seeking the cleanup of these sites. Mobil has also
been named as a defendant in various suits brought by private parties alleging
injury from disposal of wastes at these sites. The ultimate impact of these
proceedings on the business or accounts of Mobil cannot be predicted at this
time due to the large number of other potentially responsible parties and the
speculative nature of cleanup cost estimates, but based on our long experience
in managing environmental matters, we do not anticipate that the aggregate
level of future remediation costs will increase above recent levels so as to
materially and adversely affect our consolidated financial position or
liquidity.
A previously reported proceeding, brought September 23, 1993 by the
Environmental Protection Agency ("EPA") under the Toxic Substance Control Act
and seeking a penalty of $116,000, was settled by the payment of $60,798. The
EPA had alleged that Mobil Oil Corporation violated applicable law and
regulations concerning inspections of PCB transformers and record keeping,
waste storage, handling and notification.
The foregoing proceeding is not of material importance in relation to Mobil's
accounts and is described in compliance with SEC rules requiring disclosure of
such proceedings although not material.
Other Than Environmental Litigation.
Mobil and its subsidiaries are engaged in various litigations and have a
number of unresolved claims pending. While the amounts claimed are substantial
and the ultimate liability in respect of such litigations and claims cannot be
determined at this time, Mobil is of the opinion that such liability, to the
extent not provided for through insurance or otherwise, is not likely to be of
material importance in relation to its accounts.
Mobil has provided in its accounts for items and issues not yet resolved
based on management's best judgement.
The Internal Revenue Service (IRS) has investigated the pricing of Saudi
Arabian crude oil by Mobil and the other Arabian American Oil Co. (Aramco)
shareholder companies during the period 1979-1984. In January 1992, the IRS
assessed a tax deficiency against Mobil of about $300 million on this so-called
"Aramco Advantage" issue for tax years 1980 and 1981. In April 1992, Mobil
filed a petition in the U.S. Tax Court challenging the IRS deficiency notice.
MOBIL - 18 -
Legal Proceedings - continued
If the IRS were ultimately to prevail, tax deductible interest in excess of
$1 billion would also be due. Mobil is presently negotiating with the IRS to
resolve the "Aramco Advantage" and certain other tax issues. If a court trial
is required, final resolution could be several years away. In December 1993,
the U.S. Tax Court held that the IRS had exceeded its authority in making large
adjustments to increase the taxable income of Exxon Corporation and Texaco Inc.
(former Aramco shareholders) on the "Aramco Advantage" issue. It is anticipated
that the IRS will appeal this decision.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of the Shareholders of Mobil Corporation on May 11,
1995, the following matters were voted upon:
A management resolution relating to the approval of the 1995 Mobil incentive
compensation and stock ownership plan was approved with 270,550,258 votes in
favor, 68,396,741 votes against and 5,618,018 votes abstained.
A shareholder resolution relating to limiting authority to issue preferred
stock was defeated with 185,569,941 votes against, 121,220,618 votes in favor
and 7,269,196 votes abstained.
A shareholder resolution relating to limitations on the composition of the
Board was defeated with 283,736,269 votes against, 22,989,671 votes in favor
and 7,342,157 votes abstained.
The text of the above proposals is incorporated by reference to Items 3, 4
and 5 of Mobil's definitive Proxy Statement dated March 20, 1995, filed with
the SEC pursuant to Regulation 14A on March 20, 1995.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
The following exhibits are filed with this report:
11. Computation of Earnings Per Common Share
12. Computation of Ratio of Earnings to Fixed Charges
27. Financial Data Schedule
MOBIL - 19 -
Exhibits and Reports on Form 8-K - continued
Reports on Form 8-K.
Mobil filed the following Form 8-K, Current Reports during and
subsequent to the end of the second quarter:
Date of 8-K Description of 8-K
April 24, 1995 Submitted a copy of the Mobil News Release dated April 24,
1995, reporting estimated earnings for the first quarter
of 1995.
May 1, 1995 Submitted a copy of the Mobil News Release dated May 1,
1995, announcing a major restructuring of the company's
worldwide staff support services.
June 1, 1995 Submitted a copy of the Mobil News Release dated May 31,
1995 announcing the major restructuring of the company's
European refining operations.
July 6, 1995 Submitted a copy of the Mobil Corporation By-Laws, as
amended to June 14, 1995.
July 24, 1995 Submitted a copy of the Mobil News Release dated July 24,
1995, reporting estimated earnings for the second quarter
of 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT MOBIL CORPORATION
BY /S/ROBERT C. MUSSER
-----------------------------
NAME AND TITLE Robert C. Musser, Controller;
Principal Accounting Officer
DATE August 8, 1995
MOBIL - 20 -
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------- ----------------
11. Computation of Earnings Per Electronic
Common Share
12. Computation of Ratio of Earnings Electronic
to Fixed Charges
27. Financial Data Schedule Electronic
MOBIL - 21 -