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, 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 March 31, 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.
1.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
(millions of dollars)
Three Months
Ended
March 31,
1995 1994
Revenues:
Sales and other operating
revenues.............................. $ 5,809 $ 5,251
Consumer excise taxes................... 808 799
Other income............................ 122 86
Total revenues........................ 6,739 6,136
Costs and Expenses:
Purchased crude oil, natural gas,
petroleum products and merchandise.... 3,023 2,583
Operating expenses...................... 1,001 1,006
Petroleum exploration expenses,
including exploratory dry
holes................................. 99 105
Selling and administrative
expenses.............................. 434 445
Taxes other than income taxes........... 977 972
Depreciation, depletion,
amortization, and retirements
and abandonments...................... 450 459
Interest expense:
Affiliates............................ 123 -
Other................................. 42 34
Total costs and expenses............ 6,149 5,604
Income before income taxes................ 590 532
Income taxes.............................. 144 155
Net income................................ $ 446 $ 377
2.
Condensed Consolidated Statement of Financial Position
(millions of dollars)
March 31, Dec. 31,
1995 1994
ASSETS
Current Assets:
Cash...................................... $ 110 $ 134
Marketable securities--at cost............ 1,181 1,104
Accounts and notes receivable (less
allowances of $18 at March 31, 1995,
and $19 at December 31, 1994)........... 2,683 2,763
Inventories............................... 840 836
Prepaid expenses and income taxes......... 575 562
Total current assets.................... 5,389 5,399
Investments and Other Assets:
Affiliates................................ 796 171
Other..................................... 1,008 914
1,804 1,085
Properties--at cost, less accumulated
depreciation, depletion and amortization
of $21,895 at March 31, 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)..................... 18,076 18,065
Total assets............................ $25,269 $24,549
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations.. $ 24 $ 24
Short-term obligations.................... 208 112
Accounts payable.......................... 1,918 2,217
Accrued liabilities....................... 1,072 1,124
Taxes payable (including income taxes).... 446 665
Total current liabilities............... 3,668 4,142
Long-Term Debt:
Affiliates................................ 4,715 4,104
Other debt................................ 2,128 2,086
6,843 6,190
Deferred Credits and Other Non-Current
Liabilities:
Income taxes.............................. 2,484 2,413
Other..................................... 2,168 2,171
4,652 4,584
Minority interest........................... 6 5
Shareholder's Equity........................ 10,100 9,628
Total liabilities and shareholder's
equity................................ $25,269 $24,549
3.
Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Three Months Ended
March 31,
1995 1994
Cash Flows From Operating Activities:
Net income....................................... $ 446 $ 377
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization, and
retirements and abandonments................ 450 459
Other......................................... (543) (308)
Net cash provided by operating activities.... 353 528
Cash Flows From Investing Activities:
Capital expenditures............................. (434) (414)
Proceeds from dispositions of property and
other assets................................... 39 59
Other............................................ (35) (8)
Net cash used in investing activities........ (430) (363)
Cash Flows From Financing Activities:
New long-term obligations........................ 48 65
Repayment of long-term obligations............... (14) (15)
Increase (decrease) in short-term obligations.... 96 (249)
Net cash used in financing activities........ 130 (199)
Increase (decrease) in Cash & Marketable Securities 53 (34)
Cash and Marketable Securities-Beginning of
Period........................................... 1,238 582
Cash and Marketable Securities-End of Period....... $1,291 $ 548
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 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 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
The Company earned $446 million for the first three months of 1995,
compared with $377 million for the first three months of 1994. The
increase in earnings reflects strong chemical earnings, resulting from
higher volumes and margins in major product lines. Exploration and
production earnings improved primarily reflecting higher crude oil prices,
which in the United States averaged about $3.70 per barrel above last
year's level. Partly offsetting were lower petroleum products earnings
attributable to lower refined product margins.
Sales and other operating revenues totaled $5.8 billion for the first
three months of 1995, 11 percent higher than the $5.3 billion reported in
the corresponding 1994 period. Chemical revenues were higher as a result
of improved volumes and prices for major product lines. Crude oil and
refined product revenues were up 21 percent and 8 percent, respectively,
primarily reflecting higher prices. Partly offsetting were lower natural
gas revenues, down 15 percent due to lower prices.
Purchases of crude oil, natural gas, petroleum products and merchandise
totaled $3 billion for the first three months of 1995, 17 percent higher
than 1994's first three months, primarily attributable to higher crude oil
and refined product purchase prices and volumes, and increased chemical
purchases.
Operating expenses totaled $1 billion for the first quarter of 1995,
slightly below the corresponding 1994 period, reflecting lower oil and gas
production costs offset by increased activity in chemical operations.
Petroleum exploration expenses of $99 million in the first three months of
1995 were 5 percent below the corresponding prior-year period, mainly
attributable to lower dry hole costs overseas. Selling and
5.
administrative expenses of $434 million for the first three months of 1995
were below the 1994 first-quarter expenses, primarily resulting from cost
savings from restructuring efforts, partially offset by unfavorable
currency effects.
Interest expense was $131 million higher during the first three months of
1995 compared with the like 1994 period, primarily 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 price
volatility of crude oil and natural gas. Also affecting chemical and
petroleum products activities are crude oil prices and the overall
industry product supply and demand balance. The Company's future
performance is expected to be impacted by its new organizational structure
and associated savings, ongoing cost reduction programs, the divestment of
marginal properties and underperforming assets, application of new
technologies and new governmental regulation. Amoco's exploration efforts
will continue to target those areas that offer the most potential. Amoco
will also pursue areas that capitalize on its natural gas resources, and
continue to develop its international chemical business.
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 by Amoco. 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 Amoco's accrual totaled $115 million
($75 million after-tax). As of March 31, 1995, the accrual balance for
Amoco associated with restructuring was $110 million ($71 million after-
tax), which was considered adequate for all future severances and other
related activities to which Amoco has committed. Amoco Corporation's
first-quarter 1995 earnings reflected before-tax savings of approximately
$100 million in employment costs and other costs resulting from the
Corporation's restructuring effort.
Amoco's 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 will be divested. Disposition of these
assets, including a hazardous-waste incineration facility, will not have a
material effect on revenues, depreciation or income.
Additional restructuring costs totaling approximately $200 million after-
tax are expected to be incurred by Amoco through 1996, representing costs
6.
for system redesign, relocations, work force consolidation and development
of new processes in support of the restructuring. Costs incurred by Amoco,
primarily for system development and redesign, totaled $17 million after-
tax in the first quarter of 1995.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $353 million in the first
three months of 1995 compared with $528 million in the comparable 1994
period. Working capital totaled $1,721 million at March 31, 1995, up from
$1,257 million at year-end 1994. Consequently, the Company's current
ratio increased to 1.47 to 1 at March 31, 1995, from 1.30 to 1 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 outstanding public
obligations was 18.9 percent at March 31, 1995, compared with 18.8 percent
at year-end 1994. Including debt with affiliates, the ratio was 41.2
percent at March 31, 1995, and 39.6 percent at year-end 1994. The ratio
of earnings to fixed charges on outstanding public obligations was 13.8 to
1 for 1995's first three months compared with 20.4 to 1 for the year ended
December 31, 1994.
The Company believes 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 to permit ready access to capital markets.
Capital and exploration expenditures totaled $533 million for the first
three months of 1995 compared to the $519 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, refining and 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.
7.
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 1994 Annual Report on Form 10-K.
With respect to the contest of the Internal Revenue Service statutory
Notice of Deficiency, trial on the matter was held in April 1995. A
decision is not expected until 1996.
Eleven 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 $5.4 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.
8.
Item 5. Other Information
Amoco Argentina Oil Company ("Amoco Argentina") is a wholly-owned
subsidiary of Amoco International Petroleum Company, which is an indirect
wholly-owned subsidiary of Amoco Company. Summarized financial data for
Amoco Argentina are shown below.
Three Months
Ended March 31,
1995 1994
(millions of dollars)
Revenues............................... $ 61 $ 42
Net income............................. $ 24 $ 18
March 31, Dec. 31,
1995 1994
(millions of dollars)
Current assets......................... $ 108 $ 97
Total assets........................... $ 379 $ 349
Current liabilities.................... $ 58 $ 58
Non-current liabilities................ $ 106 $ 100
Shareholder's equity................... $ 215 $ 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) A current report on Form 8-K dated April 5, 1995,
was filed, to incorporate by reference summarized
financial data for Amoco Argentina Oil Company,
included in Note 22 of Amoco Corporation's
Consolidated Financial Statements.
9.
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, 1995
J. R. Reid
J. R. Reid
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)
10.