SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994 or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-170-2
AMOCO CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 36-1812780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601
(Address of principal executive offices) (Zip Code)
312-856-6111
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since
last report)
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
Number of shares outstanding as of March 31, 1994--496,505,169.
1.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
(millions of dollars)
Three Months
Ended
March 31,
1994 1993
Revenues:
Sales and other operating revenues............. $ 5,861 $ 6,233
Consumer excise taxes.......................... 799 646
Other income................................... 105 64
Total revenues............................. 6,765 6,943
Costs and Expenses:
Purchased crude oil, petroleum
products and merchandise..................... 2,897 3,233
Operating expenses............................. 1,130 1,248
Petroleum exploration expenses,
including exploratory dry holes.............. 114 92
Selling and administrative expenses............ 466 519
Taxes other than income taxes.................. 991 867
Depreciation, depletion, amortization,
and retirements and abandonments............. 539 542
Interest expense............................... 71 91
Total costs and expenses................... 6,208 6,592
Income before income taxes....................... 557 351
Income taxes..................................... 159 122
Net income....................................... $ 398 $ 229
Weighted average number of shares of common
stock outstanding (in thousands)............... 496,445 496,546
Per Share Data (Based on weighted average
shares outstanding):
Net income....................................... $ .80 $ .46
Cash dividends per share......................... $ .55 $ .55
2.
Consolidated Statement of Financial Position
(millions of dollars)
March 31, December 31,
1994 1993
ASSETS
Current Assets:
Cash............................................. $ 107 $ 103
Marketable securities--at cost,
which approximates fair value.................... 1,031 1,114
Accounts and notes receivable (less allowances
of $65 at March 31, 1994, and $65 at
December 31, 1993)............................. 3,005 3,196
Inventories
Crude oil and products......................... 704 813
Materials and supplies......................... 294 297
Prepaid expenses and income taxes................ 541 571
Total current assets........................... 5,682 6,094
Investments and Other Assets:
Investments and related advances................. 346 318
Long-term receivables and other assets........... 707 705
1,053 1,023
Properties--at cost, less accumulated
depreciation, depletion and amortization of
$23,684 at March 31, 1994, and $23,204
at December 31, 1993 (The successful efforts
method of accounting is followed for costs
incurred in oil and gas producing activities).... 21,317 21,369
Total assets................................... $28,052 $28,486
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations......... $ 51 $ 53
Short-term obligations........................... 741 1,007
Accounts payable................................. 2,281 2,473
Accrued liabilities.............................. 911 974
Taxes payable (including income taxes)........... 798 836
Total current liabilities...................... 4,782 5,343
Long-Term Obligations:
Debt............................................. 4,045 4,034
Capitalized leases............................... 2 3
4,047 4,037
Deferred Credits and Other Non-Current Liabilities:
Income taxes..................................... 3,021 2,995
Other............................................ 2,378 2,425
5,399 5,420
Minority Interest.................................. 21 21
3.
Shareholders' Equity:
Common stock (authorized 800,000,000 shares;
issued and outstanding at March 31, 1994
--496,505,169 shares; December 31, 1993
--496,401,099 shares).......................... 2,151 2,147
Earnings retained and invested in the business... 11,682 11,557
Foreign currency translation adjustment.......... (30) (39)
13,803 13,665
Total liabilities and shareholders' equity..... $28,052 $28,486
3.
Consolidated Statement of Cash Flows
(millions of dollars)
Three Months
Ended
March 31,
1994 1993
Cash Flows From Operating Activities:
Net income......................................... $ 398 $ 229
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization, and
retirements and abandonments................... 539 542
(Increase) decrease in receivables............... (4) 123
Decrease in inventories.......................... 112 15
Decrease in payables and accrued liabilities..... (300) (503)
Deferred taxes and other items................... (28) 143
Net cash provided by operating activities...... 717 549
Cash Flows From Investing Activities:
Capital expenditures............................... (504) (553)
Proceeds from dispositions of property
and other assets................................. 68 135
New investments, advances and business acquisitions (11) (5)
Proceeds from sales of investments................. 175 26
Other.............................................. 2 (20)
Net cash used in investing activities.......... (270) (417)
Cash Flows From Financing Activities:
New long-term obligations.......................... 25 340
Repayment of long-term obligations................. (16) (658)
Cash dividends paid................................ (273) (273)
Issuances of common stock.......................... 4 15
Acquisitions of common stock....................... -- --
Increase (decrease) in short-term obligations...... (266) 138
Net cash used in financing activities.......... (526) (438)
Decrease in Cash and Marketable Securities........... (79) (306)
Cash and Marketable Securities-Beginning of Period... 1,217 1,288
Cash and Marketable Securities-End of Period......... $1,138 $ 982
4.
Basis of Financial Statement Preparation
The consolidated financial statements contained herein are unaudited and
have been prepared from the books and records of Amoco Corporation ("Amoco"
or the "Corporation"). In the opinion of management, the consolidated
financial statements reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of the results for
the interim periods. The consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and notes necessary for a complete
presentation of results of operations, financial position and cash flows in
conformity with generally accepted accounting principles.
Item 2. Management's Discussion and Analysis
Results of Operations
Net income for the first three months of 1994 totaled $398 million, or $.80
per share. This compared with $229 million, or $.46 per share, for the
corresponding 1993 period. Included in first-quarter 1993 earnings were
charges of $170 million associated with the writedown of the Congo
exploration and production operations to current recoverable value. Also
included in first-quarter 1993 results were tax benefits of $56 million
associated with the disposition of certain operations.
Exclusive of these items, earnings improved from $343 million, or $.69 per
share in 1993, to $398 million, or $.80 per share in 1994. The increase in
earnings was primarily attributable to higher chemical and refining,
marketing and transportation earnings as a result of cost-reduction efforts
and higher sales volumes and margins. Partly offsetting were lower
exploration and production earnings primarily reflecting lower crude oil
prices which averaged $4 to $5 per barrel below the prior year's level.
For the 12-month period ended March 31, 1994, return on average
shareholders' equity was 14.9 percent compared with 5.9 percent for the 12
months ended March 31, 1993. Return on average capital employed was 11.5
percent for the 12-month period ended March 31, 1994, compared with 5.1
percent for the corresponding 1993 period.
Sales and other operating revenues for the first quarter of 1994 were $5.9
billion, 6 percent lower than the $6.2 billion reported in the
corresponding period of 1993. Crude oil revenues of $1.3 billion were 28
percent below last year's first quarter mainly as a result of lower prices.
Refined product revenues for the first three months of 1994 decreased 9
percent compared with 1993. Lower prices for all major products more than
offset higher sales volumes. Partially offsetting were increased natural
gas and chemical revenues of 31 percent and 10 percent, respectively,
compared with the prior year. The improvements reflected higher U.S.
natural gas volumes, and higher chemical sales volumes, particularly
purified terephthalic acid ("PTA") and olefins.
Purchased crude oil, petroleum products and merchandise for the first three
months of 1994 totaled $2.9 billion, 10 percent below the comparable 1993
level of $3.2 billion. The decrease was attributed to lower crude oil
prices, offset in part by higher natural gas volumes. Operating expenses
of $1.1 billion for the first quarter of 1994 were 9 percent lower than the
5.
comparable 1993 period, reflecting the absence of charges associated with
the writedown of Congo exploration and production operations. Partly
offsetting were higher production expenses related to increased activity in
Europe. First-quarter 1994 petroleum exploration expenses of $114 million
increased 24 percent above the 1993 level due to higher overseas activity.
Selling and administrative expenses of $466 million for the first three
months of 1994 were 10 percent below the year-ago 1993 period, primarily
reflecting currency gains. Interest expense for the current quarter was
$20 million lower than last year's first quarter, reflecting the effects of
1993 debt refinancing.
U.S. exploration and production earnings of $207 million in the first
quarter of 1994 were 18 percent below the $253 million earned in the first
three months of 1993. The decrease mainly resulted from lower crude oil
and natural gas liquids ("NGL") prices and lower crude oil and natural gas
volumes. Partly offsetting were higher natural gas prices, which increased
approximately $.20 per thousand cubic feet ("mcf") to about $2.00 per mcf,
reflecting a more favorable supply-demand balance. Natural gas production
of 2.4 billion cubic feet per day declined 4 percent from last year. Crude
oil and NGL production of 289,000 barrels per day declined 7 percent as
normal field declines out-paced development efforts.
Exploration and production earnings outside the United States were $61
million in the first quarter of 1994. This compared with earnings of $76
million in the first quarter of 1993, before the $170 million charge
associated with Congo operations. The $15 million decline from a year ago
resulted from lower crude oil prices and higher exploration expenses, which
more than offset increased production and natural gas prices, and higher
currency gains. Natural gas and crude oil production increased outside the
United States primarily reflecting new North Sea production.
Refining, marketing and transportation operations earned $104 million
during the first quarter of 1994, compared with $80 million in the first
quarter of 1993. The increase in earnings primarily resulted from higher
margins and sales volumes.
Chemical earnings of $90 million for the first quarter of 1994 increased
from $54 million earned for the similar 1993 period. The improvement in
1994 first-quarter earnings resulted from higher volumes and margins, and
continued cost-reduction efforts. Worldwide PTA and olefins sales volumes
increased 9 percent and 12 percent, respectively, above last year.
Other operations, which include technology operations, offshore contract
drilling, real estate interests and other activities, incurred a loss of
$20 million in the first quarter of 1994. This compared with a $22 million
loss in the corresponding 1993 period.
Corporate activities, including net interest and general corporate
expenses, incurred net expenses of $44 million for 1994, compared with $42
million for 1993. Included in 1993 results were tax benefits of $56
million associated with the disposition of certain operations. Excluding
these tax benefits, expenses associated with corporate activities were $54
million below the first quarter of 1993, reflecting lower net interest
expense and favorable currency effects.
The Corporation and the oil industry will continue to be affected by the
6.
price volatility of crude oil and natural gas. Also affecting chemical and
refining, marketing and transportation activities are crude oil prices and
the overall industry product supply and demand balance. Amoco's future
performance is expected to be affected by ongoing efforts to reduce costs,
the divestment of marginal properties and underperforming assets, new
technologies and new governmental regulation.
In March 1994, management of the Corporation announced to its employees
that the organizational structure of the Corporation will be changed in an
effort to reduce costs and increase effectiveness. Management currently
anticipates that plans for the new structure will be finalized in the last
half of 1994. At present, the impact of the restructuring has not been
determined.
Liquidity and Capital Resources
Cash flows from operating activities totaled $717 million in the first
three months of 1994 compared with the 1993 level of $549 million. Working
capital of $900 million increased $149 million during the first quarter
from $751 million at December 31, 1993. As a result, the Corporation's
current ratio was 1.19 to 1 at March 31, 1994, up from 1.14 to 1 at year-
end 1993. As a matter of policy, Amoco practices asset and liability
management techniques that are designed to minimize its investment in non-
cash working capital. This does not impair operational capability or
flexibility since the Corporation has ready access to both short-term and
long-term debt markets.
Amoco's debt totaled $4.8 billion at March 31, 1994, compared with $5.1
billion at year-end 1993. Debt as a percent of debt-plus-equity was
25.9 percent at March 31, 1994, compared with 27.1 percent at year-end
1993.
The Corporation believes its strong financial position will permit the
financing of its business needs and opportunities in an orderly manner.
Amoco is rated AAA by Standard & Poor's Corporation. In April 1994,
Moody's Investors Service, Inc. ("Moody's") changed its rating on the
Corporation's long-term debt from Aaa to Aa1. The rating change affects
the debt issuances of Amoco's wholly owned subsidiaries, principally Amoco
Canada Petroleum Company Ltd. and Amoco Company, that are guaranteed by the
Corporation. The decision by Moody's is not expected to have a material
impact on Amoco's business or Amoco's and its subsidiaries' cost of debt.
It is anticipated that ongoing operations will be financed primarily by
internally generated funds. Short-term obligations, such as commercial
paper borrowings, give the Corporation the flexibility to meet short-term
working capital and other temporary requirements. At March 31, 1994, bank
lines of credit available to support commercial paper borrowings amounted
to $490 million, all of which were supported by commitment fees. To
maintain flexibility, a shelf registration statement for $500 million in
debt securities remains on file with the Securities and Exchange Commission
to permit ready access to capital markets.
Amoco Oil Company, a wholly owned subsidiary of Amoco Corporation,
announced in April 1994 that it had signed a letter of intent to negotiate
a contract with subsidiaries of Associates Corporation of North America
("Associates") whereby Associates would issue and process Amoco Oil's
7.
consumer credit cards. Associates would become the grantor of credit,
owner of the receivables and manager of credit risks. In connection with
the transaction, Amoco Oil Company plans to sell certain of its assets
related to consumer credit cards to the Associates.
For the first three months of 1994, capital and exploration expenditures
amounted to $618 million compared with the $645 million spent during the
corresponding period of 1993. Over 70 percent of the total 1994
expenditures has been spent in exploration and production operations.
Amoco previously announced a full-year capital and exploration expenditure
budget of $3 billion for 1994. Capital and exploration spending for the
year 1993 totaled $3.3 billion.
The Corporation has provided in its accounts for the reasonably estimable
future costs of probable environmental remediation obligations relating to
various oil and gas operations, refineries, marketing sites and chemical
locations, including multiparty sites at which Amoco and certain of its
subsidiaries have been identified as potentially responsible parties by the
U.S. Environmental Protection Agency. Such estimated costs will be refined
over time as remedial requirements and regulations become better defined.
However, any additional costs cannot be reasonably estimated at this time
due to uncertainty of timing, the magnitude of contamination, future
technology, regulatory changes and other factors. Although future costs
could have a significant effect on the results of operations in any one
period, they are not expected to be material in relation to Amoco's
liquidity or consolidated financial position. In total, the accrued
liability represents a reasonable best estimate of Amoco's remediation
liability.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the description of legal proceedings in Part I, Item
3. of the Corporation's 1993 Annual Report on Form 10-K. Reference is also
made to the current report on Form 8-K dated April 25, 1994. See Item 6
(b).
With respect to the Rubicon/Amoco Production matter, the case was settled
on April 8, 1994 and has been submitted to the court for dismissal. The
terms of the settlement are confidential, but the settlement did not have a
material adverse effect on the financial position, results of operations or
cash flows of Amoco.
Nine proceedings instituted by governmental authorities are pending or
known to be contemplated against Amoco and certain of its subsidiaries
under federal, state and local environmental laws, each of which could
result in monetary sanctions in excess of $100,000. No individual
proceeding is, nor are the proceedings as a group, expected to have a
material adverse effect on Amoco's consolidated cash flows, financial
position or results of operations. Amoco estimates that in the aggregate
the monetary sanctions reasonably likely to be imposed from these
proceedings amount to approximately $4.1 million.
Amoco has various other suits and claims pending against it among which are
8.
several class actions for substantial monetary damages which in Amoco's
opinion are not meritorious. While it is impossible to estimate with
certainty the ultimate legal and financial liability in respect to these
other suits and claims, Amoco believes that the aggregate amount will not
be material in relation to its consolidated financial position.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on April 26, 1994.
(b) Not applicable.
(c) Six persons nominated by the Board of Directors were elected directors.
Proxies for the meeting were solicited pursuant to Regulation 14A;
there was no solicitation in opposition to management's nominees listed
in the proxy statement. Results of the election were as follows:
Erroll B. Davis, Jr., shares for 417,552,705, shares withheld
4,429,888; Patrick J. Early, shares for 417,370,019, shares withheld
4,612,574; H. Laurance Fuller, shares for 417,379,400, shares withheld
4,603,193; Floris A. Maljers, shares for 417,036,943, shares withheld
4,945,650; Martha R. Seger, shares for 417,529,859, shares withheld
4,452,734; and Richard D. Wood, shares for 416,847,216, shares withheld
5,135,377. Abstentions for the nominees as a group totaled 4,143,563
shares. Results of the concurrence in the appointment of Price
Waterhouse to serve as independent accountants for Amoco and its
subsidiaries for the fiscal year 1994 were as follows: shares for
418,678,051, shares against 1,888,290 and abstentions 1,416,252.
Results of a shareholder proposal relating to elimination of stock
options were as follows: shares for 21,930,771, shares against
353,683,710, abstentions 7,992,851 and broker non-votes 38,375,261.
(d) Not applicable.
9.
Item 5. Other Information
Shown below is summarized financial information as to the assets,
liabilities and results of operations of Amoco's wholly owned
subsidiary, Amoco Company.
Three Months Ended
March 31,
1994 1993
(millions of dollars)
Total revenues (including excise taxes).. $ 6,136 $ 6,296
Operating profit......................... $ 509 $ 430
Net income............................... $ 377 $ 277
March 31, December 31,
1994 1993
(millions of dollars)
Current assets........................... $ 4,500 $ 4,383
Total assets............................. $23,732 $23,513
Current liabilities...................... $ 3,733 $ 3,976
Long-term obligations.................... $ 1,979 $ 1,967
Deferred credits......................... $ 4,510 $ 4,441
Shareholder's equity..................... $13,510 $13,129
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
Number Page
12 Statement Setting Forth Computation of Ratio of
Earnings to Fixed Charges.
(b) Current reports on Form 8-K dated February 8, 1994
and April 25, 1994 were filed. The filing of
February 8, 1994 announced that a judgment was
entered on January 21, 1994 for approximately $413
million in favor of Amoco Chemical Company and
Amoco Reinforced Plastics Company, subsidiaries of
Amoco Corporation, against certain underwriters
and insurance carriers relating to wrongful refusal
to pay for defense and settlement of product
liability lawsuits.
The current report on Form 8-K dated April 25, 1994
announced that a new judgment was entered on April 15,
1994 which revised the January 21, 1994 judgment to
approximately $108 million.
10.
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.
Amoco Corporation
(Registrant)
Date: May 12, 1994
J. R. Reid
J. R. Reid
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)
11.