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 September 30, 1995 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 1-8888
AMOCO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3353184
(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 September 30, 1995--100.
Registrant meets the conditions set forth in General
Instructions H(1)(a) and (b) of Form 10-Q and is therefore
filing this form with reduced disclosure format.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
(millions of dollars)
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Sales and other operating
revenues..................... $ 6,076 $ 6,201 $18,154 $17,502
Consumer excise taxes.......... 859 883 2,502 2,553
Other income................... 127 120 340 682
Total revenues............... 7,062 7,204 20,996 20,737
Costs and Expenses:
Purchased crude oil, natural
gas, petroleum products and
merchandise.................. 3,097 3,335 9,495 9,139
Operating expenses............. 988 1,002 2,955 3,100
Petroleum exploration expenses,
including exploratory dry
holes........................ 105 109 307 365
Selling and administrative
expenses..................... 402 479 1,274 1,426
Taxes other than income taxes.. 1,023 1,046 2,986 3,077
Depreciation, depletion,
amortization, and retirements
and abandonments............. 455 495 1,347 1,423
Interest expense:
Affiliates................... 126 - 374 -
Other........................ 42 22 138 84
Total costs and expenses..... 6,238 6,488 18,876 18,614
Income before income taxes...... 824 716 2,120 2,123
Income taxes.................... 218 228 566 697
Net income...................... $ 606 $ 488 $ 1,554 $ 1,426
Condensed Consolidated Statement of Financial Position
(millions of dollars)
Sept. 30, Dec. 31,
1995 1994
ASSETS
Current Assets:
Cash.................................... $ 116 $ 134
Marketable securities--at cost.......... 456 1,104
Accounts and notes receivable (less
allowances of $18 at September 30,
1995,
and $19 at December 31, 1994)......... 2,943 2,763
Inventories............................. 983 836
Prepaid expenses and income taxes....... 664 562
Total current assets.................. 5,162 5,399
Investments and Other Assets:
Affiliates.............................. 1,397 171
Other................................... 1,301 914
2,698 1,085
Properties--at cost, less accumulated
depreciation, depletion and amorti-
zation of $22,637 at September 30, 1995,
and $21,882 at December 31, 1994 (The
successful efforts method of accounting
is followed for costs incurred in oil
and gas producing activities)........... 18,574 18,065
Total assets.......................... $26,434 $24,549
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations $ 24 $ 24
Short-term obligations.................. 166 112
Accounts payable........................ 2,054 2,217
Accrued liabilities..................... 1,010 1,124
Taxes payable (including income taxes).. 713 665
Total current liabilities............. 3,967 4,142
Long-Term Debt:
Affiliates.............................. 4,715 4,104
Other debt.............................. 2,204 2,086
6,919 6,190
Deferred Credits and Other Non-Current
Liabilities:
Income taxes............................ 2,627 2,413
Other................................... 2,038 2,171
4,665 4,584
Minority Interest....................... 10 5
Shareholder's Equity.................... 10,873 9,628
Total liabilities and shareholder's
equity.............................. $26,434 $24,549
Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Nine Months Ended
September 30,
1995 1994
Cash Flows from Operating Activities:
Net income................................... $ 1,554 $ 1,426
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirement and abandonments........ 1,347 1,423
Other.................................... (799) (232)
Net cash provided by operating
activities........................... 2,102 2,617
Cash Flows From Investing Activities:
Capital expenditures......................... (1,964) (1,427)
Proceeds from dispositions of property and
other assets............................... 111 143
Other........................................ (756) (15)
Net cash used in investing activities.... (2,609) (1,299)
Cash Flows From Financing Activities:
New long-term obligations.................... 230 171
Repayment of long-term obligations........... (112) (46)
Distributions to Amoco Corporation........... (332) (338)
Increase (decrease) in short-term obligations 55 (652)
Net cash used in financing activities.... (159) (865)
(Decrease) increase in Cash and Marketable
Securities................................... (666) 453
Cash and Marketable Securities-Beginning of
Period....................................... 1,238 582
Cash and Marketable Securities-End of Period... $ 572 $ 1,035
Basis of Financial Statement Preparation
Amoco Company (the "Company") is a wholly owned subsidiary of
Amoco Corporation, an Indiana corporation ("Amoco"), and is
the holding company for substantially all petroleum and
chemical operations except Amoco Canada Petroleum Company
Ltd. ("Amoco Canada"). Amoco guarantees the outstanding
public debt obligations of the Company. The Company and
Amoco guarantee the outstanding public notes and debentures
of Amoco Canada.
The condensed financial statements contained herein are
unaudited and have been prepared from the books and records
of the Company. In the opinion of management, the financial
statements reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of the
results for the interim periods. The condensed 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.
In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which will
require the Company to change its method of accounting for
the impairment of value of long-lived assets. The Company
has not fully evaluated the effect of this change in
accounting method, but the effect could be material to income
in the quarter of adoption. Implementation of SFAS No. 121
will occur no later than the quarter ending March 31, 1996.
Item 2. Management's Narrative Analysis of Results of
Operations
Results of Operations
The Company earned $1,554 million for the first nine months
of 1995, compared with $1,426 million for the first nine
months of 1994. Included in 1994 results were after-tax
environmental charges of $32 million and restructuring
charges of $149 million after tax. Of this latter amount,
$51 million related to costs directly associated with
severances of employees expected to occur by year-end 1995.
The remaining $98 million was attributable to various
facility closings and asset dispositions. The 1994 results
also included after-tax benefits of $270 million relating to
final settlements with the Internal Revenue Service ("IRS")
involving crude oil excise taxes ("COET") in the 1980s.
On an adjusted basis, net income for the first nine months of
1995 increased $217 million above 1994's earnings, primarily
reflecting higher chemical earnings and improved overseas
exploration and production ("E&P") earnings. Higher volumes
and margins across most product lines contributed to the
strong chemical earnings. Overseas E&P earnings benefited
from higher crude oil prices and lower exploration and other
expenses. Partially offsetting were lower U.S. E&P earnings,
reflecting lower natural gas prices, and lower petroleum
product results attributable to lower refined product
margins, higher refinery maintenance expense and increased
marketing activity-related expenses.
Earnings for the third quarter of 1995 were $606 million
compared with $488 million for the third quarter of 1994.
The increase was attributable to improved chemical earnings
on the strength of higher margins for most product lines and
higher overseas E&P earnings primarily related to higher
crude oil prices and lower exploration and other expenses.
Sales and other operating revenues totaled $18.2 billion for
the first nine months of 1995, above the $17.5 billion
reported in the corresponding 1994 period. Chemical revenues
increased 15 percent reflecting higher volumes and prices for
most product lines. Depressed natural gas prices lowered
natural gas revenues by 12 percent. Third-quarter 1995
sales and other operating revenues of $6.1 billion decreased
slightly from 1994's third quarter revenues of $6.2 billion.
Crude oil revenues decreased 20 percent due to lower volumes.
Offsetting was an improvement in chemical revenues of 10
percent, resulting from higher prices for most products.
Other income for the first nine months 1995 decreased due to
the absence of the 1994 COET settlement of approximately $400
million.
Operating expenses totaled $3 billion for the first nine
months of 1995, compared with $3.1 billion for the
corresponding 1994 period. Included in the 1994 period were
restructuring charges of $150 million related to various
facility closings and asset dispositions. Exclusive of that
charge, first nine-month operating expenses for 1995 were
essentially level with the comparable 1994 period, as expense
reductions related to restructuring efforts were offset by
higher refinery expenses, reflecting planned and unplanned
maintenance, and an increase in chemical manufacturing
expenses.
Petroleum exploration expenses of $307 million in the first
nine months of 1995 decreased 16 percent compared with the
prior-year period. The decrease was mainly attributable to
lower overseas dry hole costs of approximately $50 million.
Selling and administrative expenses for the first nine months
of 1995 decreased 5 percent compared with the prior-year
period, after adjusting for the 1994 restructuring charges
related to severance costs of $79 million. Third quarter,
1995 selling and administrative expenses decreased 16 percent
from third quarter 1994 reflecting expense reductions related
to restructuring efforts and favorable currency effects.
Interest expense was $428 million higher during the first
nine months of 1995 and $146 million higher for the third
quarter of 1995 compared with 1994, due to interest on
intercompany notes from affiliates. The higher interest
expense with affiliates reflects the 1994 transfer of 95
percent ownership of certain European chemical operations to
Amoco Corporation.
Outlook
The Company and the oil industry will continue to be affected
by the volatility of crude oil and natural gas prices.
Affecting chemical and petroleum product activities are the
overall industry product supply and demand balance. The
Company's future performance is expected to continue to be
impacted by its organizational structure announced in July
1994 and associated savings; ongoing cost reduction programs;
the divestment of marginal properties and underperforming
assets; application of new technologies; and new governmental
regulation.
The Company's E&P exploration efforts will continue to target
those areas that offer the most potential. Amoco will pursue
areas that capitalize on its natural gas resources and
continue to develop internationally. The Company's petroleum
products marketing strategy will continue to emphasize brand
product quality and to grow in the convenience retail
business. The Company is also expanding marketing operations
in Central Europe and Mexico. In order to meet expected
growth in purified terephthalic acid ("PTA") demand, the
Company's chemical segment is expanding its PTA operations in
the United States, Europe and the Asia-Pacific region.
Amoco announced plans to sell the Amoco Motor Club to the
Signature Group, a wholly owned subsidiary of Montgomery Ward,
and a provider of auto club services to members across the
country.
On October 10, 1995, Amoco and Shell Oil Company ("Shell")
announced plans to form a limited partnership combining
exploration and production assets in the greater Permian
Basin area of west Texas and southeast New Mexico. The plan
calls for ownership in the new company to be 65 percent Amoco
and 35 percent Shell, based on the relative value of assets
contributed, and is contingent on the successful completion
of ongoing discussions regarding design, management and
operation of the company. Start up of the partnership is
expected by mid-1996. In this area, Amoco and Shell employ
about 1,300 people operating 12,000 area wells that produce
approximately 210,000 gross barrels of crude oil and 250
million gross cubic feet per day ("mmcfd") of natural gas.
These operations also include plants that process more than
400 mmcfd of natural gas and yield about 33,000 barrels per
day of natural gas liquids.
On November 2, 1995, Amoco announced it is negotiating with
Albemarle Corporation ("Albemarle") on an exclusive basis for
acquisition of Albemarle's olefins and related businesses.
No final agreement has been reached.
Restructuring
In July 1994, Amoco Corporation announced that its
organizational structure was being changed into 17 business
groups with a shared services organization providing support
services. In conjunction with the restructuring, an after-
tax charge of $256 million was accrued in the second quarter
of 1994. Selling and administrative expenses for that period
included charges of $225 million ($146 million after-tax)
related to employee-termination costs associated with the
severance of approximately 3,800 employees expected to occur
by year-end 1995. Since July of last year, charges against
the accrual totaled $137 million ($89 million after-tax). As
of September 30, 1995, the accrual balance associated with
restructuring was $88 million ($57 million after-tax), which
was considered adequate for all future severances and other
related activities to which the Corporation has committed.
First nine-month 1995 earnings reflected before-tax savings
of more than $350 million in employment costs and other costs
resulting from the Corporation's restructuring effort.
The second-quarter 1994 accrual also included charges in
operating expenses of $169 million ($110 million after-tax)
related to a reduction in carrying value of assets that were
to be divested. Disposition of these assets, including the
recently completed sale of a hazardous-waste incineration
facility, will not have a material effect on revenues,
depreciation or income.
At the time of the July 1994 restructuring announcement,
additional restructuring costs totaling approximately $200
million after-tax were expected to be incurred. These
restructuring costs represent charges for system redesign,
relocations, work force consolidation and development of new
processes in support of the restructuring. Since July, 1994,
costs incurred, primarily for system development and
redesign, totaled approximately $70 million after-tax.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $2,102
million in the first nine months of 1995 compared with $2,617
million in the comparable 1994 period. Working capital
totaled $1,195 million at September 30, 1995, compared with
$1,257 million at year-end 1994. The Company's current ratio
was 1.30 to 1 at September 30, 1995 and at year-end 1994. As
a matter of policy, the Company practices asset and liability
management techniques that are designed to minimize its
investment in non-cash working capital. This does not impair
operating capability or flexibility since the Company has
ready access to both short-term and long-term debt markets.
The Company's ratio of debt to debt-plus-equity on public
obligations was 18 percent at September 30, 1995, compared
with 18.8 percent at year-end 1994. Including debt with
affiliates, the ratio was 39.5 percent at September 30, 1995,
and 39.6 percent at year-end 1994. The ratio of earnings to
fixed charges on outstanding public obligations was 13.3 to 1
for 1995's first nine months compared with 20.4 to 1 for the
year ended December 31, 1994.
Amoco announced on April 25, 1995, that it planned to
purchase up to 8.9 million shares of its common stock in
excess of amounts needed for benefit plan purposes. Through
July 31, 1995, 8.9 million shares were acquired by the
Company at a cost of $601 million, completing the stock
repurchase program. Cash Flows from Investing Activities -
Other reflect the effects of the repurchase program.
Investments in affiliates totaled $1,397 million at September
30, 1995. The investments reflect the Company's remaining
interest in certain European chemical operations, of which 95
percent ownership was transferred to Amoco Corporation in
1994. Also reflected were the Company's purchases of Amoco
Corporation common stock.
The Company believes that its strong financial position will
permit it to finance business needs and opportunities in an
orderly manner. To maintain flexibility, a shelf
registration statement for $500 million in debt securities
remains on file with the Securities and Exchange Commission
("SEC") to permit ready access to capital markets. Amoco
Argentina Oil Company ("Amoco Argentina"), an indirect
wholly owned subsidiary of the Company, filed a shelf
registration with the SEC for $200 million in debt
securities, of which $100 million in debt securities were
subsequently issued. Amoco Corporation and Amoco Company
guarantee the securities issued under this registration
statement.
Capital and exploration expenditures totaled $2,271 million
for the first nine months of 1995 compared to the $1,792
million spent during the same period of 1994.
The Company 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 the Company 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 environmental 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
the Company's liquidity or consolidated financial position.
In total, the accrued liability represents a reasonable best
estimate of the Company's remediation liability.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the status of
legal proceedings described Part I, Item 3 of the Company's
1994 Annual Report on Form 10-K and Part II, Item 1 of the
Company's Report on Form 10-Q for the quarterly period ended
March 31, 1995.
Thirteen proceedings instituted by governmental authorities
are pending or known to be contemplated against the Company
and certain of its subsidiaries under federal, state or 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 the Company's liquidity,
consolidated financial position or results of operations.
The Company estimates that in the aggregate the monetary
sanctions reasonably likely to be imposed from these
proceedings amount to approximately $7 million.
The Company has various other suits and claims pending
against it among which are several class actions for
substantial monetary damages which in the Company'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, the Company believes
that, while the aggregate amount could be significant, it
will not be material in relation to its liquidity or 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
Not applicable.
Item 5. Other Information
Summarized financial data for Amoco Argentina are
presented below.
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
(millions of dollars)
Revenues............ $ 67 $ 75 $ 189 $ 155
Net income.......... $ 20 $ 27 $ 64 $ 65
Sept. 30, Dec. 31,
1995 1994
(millions of dollars)
Current assets............... $ 119 $ 97
Total assets................. $ 417 $ 349
Current liabilities.......... $ 51 $ 58
Non-current liabilities...... $ 111 $ 100
Shareholder's equity......... $ 255 $ 191
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.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 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.
Amoco Company
(Registrant)
Date: November 13, 1995
J. R. Reid
J. R. Reid
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)