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 1-8888
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 March 31, 1994--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.
1.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
(millions of dollars)
Three Months
Ended
March 31,
1994 1993
Revenues:
Sales and other operating revenues............. $ 5,251 $ 5,623
Consumer excise taxes.......................... 799 642
Other income................................... 86 31
Total revenues............................. 6,136 6,296
Costs and Expenses:
Purchased crude oil, petroleum
products and merchandise..................... 2,583 2,962
Operating expenses............................. 1,006 1,096
Petroleum exploration expenses,
including exploratory dry holes.............. 105 84
Selling and administrative expenses............ 445 424
Taxes other than income taxes.................. 972 842
Depreciation, depletion, amortization,
and retirements and abandonments............. 459 454
Interest expense............................... 34 55
Total costs and expenses................... 5,604 5,917
Income before income taxes....................... 532 379
Income taxes..................................... 155 102
Net income....................................... $ 377 $ 277
2.
Condensed Consolidated Statement of Financial Position
(millions of dollars)
March 31, December 31,
1994 1993
ASSETS
Current Assets:
Cash and marketable securities--at cost,
which approximates fair value................ $ 548 $ 582
Accounts and notes receivable (less allowances
of $62 at March 31, 1994, and $62 at
December 31, 1993)........................... 2,558 2,443
Inventories.................................... 879 947
Prepaid expenses and income taxes.............. 515 411
Total current assets......................... 4,500 4,383
Investments and Other Assets..................... 1,172 1,027
Properties--at cost, less accumulated
depreciation, depletion and amortization of
$20,995 at March 31, 1994, and $20,589
at December 31, 1993 (The successful efforts
method of accounting is followed for costs
incurred in oil and gas producing activities).. 18,060 18,103
Total assets................................. $23,732 $23,513
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations....... $ 49 $ 51
Short-term obligations......................... 403 652
Accounts payable............................... 1,924 2,056
Accrued liabilities............................ 905 722
Taxes payable (including income taxes)......... 452 495
Total current liabilities.................... 3,733 3,976
Long-Term Obligations:
Debt........................................... 1,977 1,964
Capitalized leases............................. 2 3
1,979 1,967
Deferred Credits and Other Non-Current Liabilities:
Income taxes................................... 2,411 2,372
Other.......................................... 2,099 2,069
4,510 4,441
Shareholder's Equity............................. 13,510 13,129
Total liabilities and shareholder's equity... $23,732 $23,513
3.
Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Three Months
Ended
March 31,
1994 1993
Cash Flows From Operating Activities:
Net income........................................... $ 377 $ 277
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization, and
retirements and abandonments.................... 459 454
Other............................................. (308) (139)
Net cash provided by operating activities........ 528 592
Cash Flows From Investing Activities:
Capital expenditures................................. (414) (514)
Proceeds from dispositions of property and
other assets....................................... 59 136
Other................................................ (8) (32)
Net cash used in investing activities............ (363) (410)
Cash Flows From Financing Activities:
New long-term obligations............................ 65 41
Repayment of long-term obligations................... (15) (287)
Distributions to Amoco Corporation................... - (531)
Increase (decrease) in short-term obligations........ (249) 99
Net cash used in financing activities............ (199) (678)
Decrease in Cash and Marketable Securities............. (34) (496)
Cash and Marketable Securities-Beginning of Period..... 582 975
Cash and Marketable Securities-End of Period........... $ 548 $ 479
4.
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 all petroleum and chemical operating subsidiaries of Amoco except Amoco
Canada Petroleum Company Ltd. ("Amoco Canada"). Amoco guarantees the
outstanding public debt obligations of the Company.
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.
Item 2. Management's Narrative Analysis of Results of Operations
Results of Operations
Net income for the first three months of 1994 totaled $377 million,
compared with $277 million for the like 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 related to the disposition of certain operations.
Excluding these items, earnings declined slightly from $391 million to $377
million. The earnings decrease was primarily attributable to lower
exploration and production earnings mainly reflecting lower crude oil
prices, which averaged $4 to $5 per barrel below the prior year's level.
Partly offsetting were higher chemical and refining, marketing and
transportation earnings as a result of cost-cutting efforts and higher
sales volumes and margins.
Sales and other operating revenues for the first quarter of 1994 were $5.3
billion, 7 percent lower than the $5.6 billion reported in the
corresponding period of 1993. Crude oil revenues of $1 billion were 32
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. Partly offsetting were increased natural gas
and chemical revenues of 32 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 for purified
terephthalic acid ("PTA") and olefins.
Purchased crude oil, petroleum products and merchandise for the first three
months of 1994 totaled $2.6 billion, 13 percent below the comparable 1993
level of $3 billion. The decrease was attributed to lower crude oil prices
5.
and volumes, offset in part by higher natural gas volumes. Operating
expenses of $1 billion for the first quarter of 1994 were 8 percent lower
than the year-ago period, reflecting the absence of charges associated with
the writedown of Congo exploration and production operations. Partly
offsetting were higher production expense related to increased activity in
Europe. Petroleum exploration expenses of $105 million in the current
quarter were $21 million higher than the 1993 level, mainly due to higher
overseas activity. Interest expense for the first quarter of 1994 was $21
million below the corresponding 1993 period, reflecting the effects of 1993
debt refinancing.
The Company and the oil industry will continue to be affected by the 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 Company'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 Amoco announced to its employees that the
organizational structure of Amoco 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 amounted to $528 million in the first
quarter of 1994 compared with $592 million in last year's first quarter.
Working capital totaled $767 million at March 31, 1994, up from $407
million at year-end 1993. The Company's current ratio increased to 1.21 to
1 at March 31, 1994, from 1.10 to 1 at year-end 1993. The Company
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 Company has ready access to
both short-term and long-term debt markets.
The Company's debt to debt-plus-equity was 15.2 percent at March 31, 1994,
compared with 16.8 percent at year-end 1993. The ratio of earnings to
fixed charges was 14.4 to 1 for 1994's first quarter compared with 13.2 to
1 for the year ended December 31, 1993.
The Company believes that its strong financial position will permit it to
finance business needs and opportunities in an orderly manner. Amoco is
rated AAA by Standard & Poor's Corporation. In April 1994, Moody's
Investors Services, Inc. ("Moody's") changed its rating on Amoco's long-
term debt from Aaa to Aa1. The rating change affects the debt issuances of
Amoco Canada that are guaranteed by the Company and Amoco. The decision by
Moody's is not expected to have a material impact on the Company's business
or cost of debt. 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.
6.
Amoco Oil Company, a wholly owned subsidiary of Amoco Corporation and Amoco
Company, 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 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.
Capital and exploration expenditures totaled $519 million for the first
three months of 1994 compared to the $598 million spent during the same
period of 1993. Expenditures for the year 1993 were $3 billion.
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 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
Reference is made to the description of legal proceedings in Part I, Item
3. of the Company'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 Company.
Nine proceedings instituted by governmental authorities are pending or
known to be contemplated against the Company 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 the Company's consolidated cash flows,
financial position or results of operations. The Company estimates that in
the aggregate the monetary sanctions reasonably likely to be imposed from
7.
these proceedings amount to approximately $4.1 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 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
Not applicable.
Item 5. Other Information
Not applicable.
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 the Company and Amoco, 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.
8.
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: May 12, 1994
J. R. Reid
J. R. Reid
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)
9.