FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 1-2256
EXXON CORPORATION
_______________________________________________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(972) 444-1000
_________________________________________________________
(Registrant's telephone number, including area code)
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 .
___ __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of June 30, 1998
_______________________________ _______________________________
Common stock, without par value 2,438,406,686
<PAGE>
EXXON CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and six months ended June 30, 1998 and 1997
Condensed Consolidated Balance Sheet 4
As of June 30, 1998 and December 31, 1997
Condensed Consolidated Statement of Cash Flows 5
Six months ended June 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial 9 -14
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15-16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
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<PAGE>
EXXON CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
<S> <C> <C> <C> <C>
REVENUE 1998 1997 1998 1997
_______ _______ _______ _______
Sales and other operating revenue,
including excise taxes $29,132 $33,679 $58,790 $68,399
Earnings from equity interests and other
revenue 494 549 1,064 1,032
______ ______ ______ ______
Total revenue 29,626 34,228 59,854 69,431
______ ______ ______ ______
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 11,390 14,411 23,490 29,838
Operating expenses 2,877 3,275 5,902 6,577
Selling, general and administrative expenses 2,183 2,158 4,194 4,188
Depreciation and depletion 1,390 1,374 2,778 2,769
Exploration expenses, including dry holes 237 141 421 306
Interest expense 65 106 132 182
Excise taxes 3,607 3,689 7,054 7,288
Other taxes and duties 5,534 5,821 10,701 11,384
Income applicable to minority and
preferred interests 65 96 175 203
______ ______ ______ ______
Total costs and other deductions 27,348 31,071 54,847 62,735
______ ______ ______ ______
INCOME BEFORE INCOME TAXES 2,278 3,157 5,007 6,696
Income taxes 658 1,192 1,497 2,556
______ ______ ______ ______
NET INCOME $ 1,620 $ 1,965 $ 3,510 $ 4,140
====== ====== ====== ======
Net income per common share (dollars) $ 0.66 $ 0.79 $ 1.43 $ 1.66
Net income per common share - assuming
dilution (dollars) $ 0.65 $ 0.78 $ 1.41 $ 1.64
Average number common shares outstanding
(millions) 2,443 2,478 2,447 2,481
Average number common shares outstanding -
assuming dilution (millions) 2,475 2,513 2,477 2,513
Dividends per common share $ 0.410 $ 0.410 $ 0.820 $ 0.805
</TABLE>
Net income per common share is based on net income less preferred stock
dividends and the weighted average number of outstanding common shares.
Net income per common share - assuming dilution is based on net income and
the weighted average number of outstanding common shares, including the
additional common shares that would have been outstanding if dilutive
potential common shares (incentive program stock and preferred stock) had
been issued.
<PAGE> -3-
EXXON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
<TABLE>
<CAPTION> June 30, Dec. 31,
1998 1997
______ ______
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,689 $ 4,047
Other marketable securities 21 15
Notes and accounts receivable - net 9,396 10,702
Inventories
Crude oil, products and merchandise 4,383 4,725
Materials and supplies 736 762
Prepaid taxes and expenses 1,055 941
______ ______
Total current assets 18,280 21,192
Property, plant and equipment - net 66,752 66,414
Investments and other assets 8,184 8,458
______ ______
TOTAL ASSETS $93,216 $96,064
====== ======
LIABILITIES
Current liabilities
Notes and loans payable $ 2,557 $ 2,902
Accounts payable and accrued liabilities 13,280 14,683
Income taxes payable 1,695 2,069
______ ______
Total current liabilities 17,532 19,654
Long-term debt 6,927 7,050
Annuity reserves, deferred credits and
other liabilities 25,400 25,700
______ ______
TOTAL LIABILITIES 49,859 52,404
______ ______
SHAREHOLDERS' EQUITY
Preferred stock, without par value:
Authorized: 200 million shares
Outstanding: 2 million shares at June 30, 1998 134
3 million shares at Dec. 31, 1997 190
Guaranteed LESOP obligation (125) (225)
Common stock, without par value:
Authorized: 3,000 million shares
Issued: 2,984 million shares 2,323 2,323
Earnings reinvested 53,713 52,214
Cumulative foreign exchange translation adjustment (1,424) (1,119)
Common stock held in treasury:
546 million shares at June 30, 1998 (11,264)
527 million shares at Dec. 31, 1997 (9,723)
______ ______
TOTAL SHAREHOLDERS' EQUITY 43,357 43,660
______ ______
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $93,216 $96,064
====== ======
</TABLE>
The number of shares of common stock issued and outstanding at June 30, 1998
and December 31,1997 was 2,438,406,686 and 2,456,315,299, respectively.
-4-
<PAGE>
EXXON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
<TABLE>
<CAPTION> Six Months Ended
June 30,
_________________
1998 1997
<S> <C> <C>
_____ _____
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,510 $ 4,140
Depreciation and depletion 2,778 2,769
Changes in operational working capital, excluding
cash and debt (246) (159)
All other items - net (5) 1,369
_____ _____
Net Cash Provided By Operating Activities 6,037 8,119
_____ _____
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (3,744) (3,392)
Sales of subsidiaries and property, plant and equipment 261 165
Other investing activities - net 363 104
_____ _____
Net Cash Used In Investing Activities (3,120) (3,123)
_____ _____
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 2,917 4,996
_____ _____
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 101 330
Reductions in long-term debt (96) (220)
Additions/(reductions) in short-term debt - net (365) 41
Cash dividends to Exxon shareholders (2,013) (2,007)
Cash dividends to minority interests (149) (185)
Changes in minority interests and sales/
(purchases) of affiliate stock (68) (73)
Acquisitions of Exxon shares - net (1,653) (914)
_____ _____
Net Cash Used In Financing Activities (4,243) (3,028)
_____ _____
Effects Of Exchange Rate Changes On Cash (32) 24
_____ _____
Increase/(Decrease) In Cash And Cash Equivalents (1,358) 1,992
Cash And Cash Equivalents At Beginning Of Period 4,047 2,951
_____ _____
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,689 $ 4,943
===== =====
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 1,494 $ 2,087
Cash interest paid $ 468 $ 321
</TABLE>
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<PAGE>
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis Of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be read in
the context of the consolidated financial statements and notes thereto filed
with the S.E.C. in the corporation's 1997 Annual Report on Form 10-K. In the
opinion of the corporation, the information furnished herein reflects all
known accruals and adjustments necessary for a fair statement of the results
for the periods reported herein. All such adjustments are of a normal
recurring nature. The corporation's exploration and production activities
are accounted for under the "successful efforts" method.
During the third quarter of 1997, the corporation increased its ownership in
General Sekiyu K.K. (GSK) from 49.0% to 50.1%. These financial statements
reflect the consolidation of GSK retroactive to the beginning of 1997.
GSK was previously accounted for as an equity company. The January 1, 1997
balance sheet of GSK had total assets of $3.9 billion and total liabilities
of $3.2 billion. Consolidated net income was unchanged as a result of the
restatement of prior quarter statements of income.
2. Recently Issued Statements Of Financial Accounting Standards
In June 1997, the Financial Accounting Standards Board released Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement requires disclosure of certain information
about operating segments and geographic areas of operation. This statement,
which will be adopted in 1998, will not have any effect upon the
corporation's consolidated financial condition or operations.
In June 1998, the Financial Accounting Standards Board released Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement, which must be adopted beginning no later than 2000,
establishes accounting and reporting standards for derivative instruments.
The statement requires that an entity recognize all derivatives as either
assets or liabilities in the financial statements and measure those
instruments at fair value and it defines the accounting for changes in the
fair value of the derivatives depending on the intended use of the
derivative. No decision has been made as to whether the corporation will
adopt this standard before 2000. The effect on the corporation's operating
results subsequent to adoption is not expected to be material. Liquidity and
cash flow will not be affected.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities." The statement requires that
costs of start-up activities and organizational costs be expensed as
incurred. The statement is effective no later than 1999, with earlier
application permitted. The corporation expects that this new requirement
will not materially affect its consolidated financial condition or
operations.
3. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various courts
against Exxon Corporation and certain of its subsidiaries relating to the
accidental release of crude oil from the tanker Exxon Valdez in 1989.
Essentially all of these lawsuits have now been resolved or are subject to
appeal.
-6-
<PAGE>
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On September 24, 1996, the United States District Court for the District of
Alaska entered a judgment in the amount of $5.058 billion in the Exxon Valdez
civil trial that began in May 1994. The District Court awarded approximately
$19.6 million in compensatory damages to fisher plaintiffs, $38 million in
prejudgment interest on the compensatory damages and $5 billion in punitive
damages to a class composed of all persons and entities who asserted claims
for punitive damages from the corporation as a result of the Exxon Valdez
grounding. The District Court also ordered that these awards shall bear
interest from and after entry of the judgment. The District Court stayed
execution on the judgment pending appeal based on a $6.75 billion letter of
credit posted by the corporation. Exxon has appealed the judgment. Exxon has
also appealed the District Court's recent denial of its renewed motion for
new trial. The corporation continues to believe that the punitive damages in
this case are unwarranted and that the judgment should be set aside or
substantially reduced by the appellate courts.
The ultimate cost to the corporation from the lawsuits arising from the Exxon
Valdez grounding is not possible to predict and may not be resolved for a
number of years.
German and Dutch affiliated companies are the concessionaires of a natural
gas field subject to a treaty between the governments of Germany and the
Netherlands under which the gas reserves in an undefined border or common
area are to be shared equally. Entitlement to the reserves is determined by
calculating the amount of gas which can be recovered from this area. Based
on the final reserve determination, the German affiliate has received more
gas than its entitlement. Arbitration proceedings, as provided in the
agreements, have been underway to determine the manner of resolving the
issues between the German and Dutch affiliated companies.
On July 8, 1996, an interim ruling was issued establishing a provisional
compensation payment for the excess gas received. Additional compensation,
if any, remains subject to further arbitration proceedings or negotiation.
Other substantive matters remain outstanding, including recovery of royalties
paid on such excess gas and the taxes payable on the final compensation
amount. The net financial impact on the corporation is not possible to
predict at this time given these outstanding issues. However, the ultimate
outcome is not expected to have a materially adverse effect upon the
corporation's consolidated financial condition or operations.
The U.S. Tax Court has decided the issue with respect to the pricing of crude
oil purchased from Saudi Arabia for the years 1979-1981 in favor of the
corporation. This decision is subject to appeal. Certain other issues for
the years 1979-1988 remain pending before the Tax Court. The ultimate
resolution of these issues is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
Claims for substantial amounts have been made against Exxon and certain of
its consolidated subsidiaries in other pending lawsuits, the outcome of which
is not expected to have a materially adverse effect upon the corporation's
consolidated financial condition or operations.
The corporation and certain of its consolidated subsidiaries are directly and
indirectly contingently liable for amounts similar to those at the prior
year-end relating to guarantees for notes, loans and performance under
contracts, including guarantees of non-U.S. excise taxes and customs duties
of other companies, entered into as a normal business practice, under
reciprocal arrangements.
-7-
<PAGE>
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Additionally, the corporation and its affiliates have numerous long-term
sales and purchase commitments in their various business activities, all of
which are expected to be fulfilled with no adverse consequences material to
the corporation's operations or financial condition.
The operations and earnings of the corporation and its affiliates
throughout the world have been, and may in the future be, affected from
time to time in varying degree by political developments and laws and
regulations, such as forced divestiture of assets; restrictions on
production, imports and exports; price controls; tax increases and
retroactive tax claims; expropriation of property; cancellation of contract
rights and environmental regulations. Both the likelihood of such
occurrences and their overall effect upon the corporation vary greatly
from country to country and are not predictable.
4. Nonowner Changes in Shareholders' Equity
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," was implemented in January 1998. This statement
establishes standards for reporting and display of total nonowner changes in
shareholders' equity. For the corporation, total nonowner changes in
shareholders' equity include net income and the change in the cumulative
foreign exchange translation adjustment component of shareholders' equity.
The total nonowner changes in shareholders' equity for the three months ended
June 30, 1998 and 1997 were $1,344 million and $1,793 million, respectively.
The total nonowner changes in shareholders' equity for the six months ended
June 30, 1998 and 1997 were $3,205 million and $3,071 million, respectively.
This statement did not have any effect on the corporation's consolidated
financial condition or operations.
-8-
<PAGE>
EXXON CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
<TABLE>
<CAPTION>
FUNCTIONAL EARNINGS SUMMARY
Second Quarter First Six Months
_________________ ________________
1998 1997 1998 1997
______ ______ ______ ______
(millions of dollars)
<S> <C> <C> <C> <C>
Petroleum and natural gas
Exploration and production
United States $ 187 $ 335 $ 414 $ 889
Non-U.S. 497 620 1,180 1,510
Refining and marketing
United States 226 162 326 219
Non-U.S. 412 382 908 679
_____ _____ _____ _____
Total petroleum and natural gas 1,322 1,499 2,828 3,297
Chemicals
United States 166 246 398 438
Non-U.S. 129 147 271 265
Other operations 103 127 192 255
Corporate and financing (100) (54) (179) (115)
_____ _____ _____ _____
NET INCOME $1,620 $1,965 $3,510 $4,140
===== ===== ===== =====
</TABLE>
SECOND QUARTER 1998 COMPARED WITH SECOND QUARTER 1997
Exxon Corporation estimated second quarter 1998 net income of $1,620 million,
down 18 percent from the record $1,965 million in second quarter 1997. On a per
share basis, net income declined 16 percent to $0.66 in the second quarter of
1998, reflecting the ongoing share repurchase program.
Exxon's net income of $1.6 billion was down $345 million or 18 percent,
reflecting weaker crude oil prices which on average were about $5 per barrel or
26 percent lower than last year. This year's second quarter results benefited
from higher liquids production, increased petroleum product and chemical sales
volumes, and improved downstream margins.
Crude oil prices generally declined during the quarter and on average were at
their lowest level since third quarter 1986. Liquids production was higher than
second quarter 1997. Natural gas sales declined from 1997's second quarter due
to warmer weather in Europe. In the downstream, petroleum product sales
increased in most geographic areas, establishing a second quarter record.
Earnings were up 17 percent, reflecting higher industry refining margins in the
U.S. and Europe, and the improved retail environment in the U.K. Stronger
results in Latin America helped offset weakness in Asia-Pacific markets.
Chemical earnings were down 25 percent from last year as a result of lower
margins. Worldwide commodity prices declined due to excess industry capacity and
the slowdown in Asian economies. Earnings benefited from record second quarter
sales volumes. Earnings from other operations decreased relative to the prior
year due to lower copper and coal prices.
During the quarter, Exxon continued its active investment program, spending
$2.5 billion on capital and exploration projects.
-9-
<PAGE>
EXXON CORPORATION
OTHER COMMENTS ON SECOND QUARTER COMPARISON
Exploration and production earnings were adversely impacted by
substantially lower crude oil prices which have been under pressure
and generally falling since early in the fourth quarter of 1997,
averaging about $5 per barrel less than in the second quarter of
1997. Natural gas prices were lower overall as the impact of weaker
local currencies and European gas realizations offset improved
North American prices.
Liquids production of 1,613 kbd (thousand barrels per day) was up 2 percent from
last year primarily due to production increases from new developments in the
North Sea and higher Canadian output. Natural gas production of 5,569 mcfd
(million cubic feet per day) was down 1 percent largely due to the impact of
warmer weather in Europe. Sales volumes in the U.S. and Asia-Pacific were
higher.
Earnings from U.S. exploration and production were $187 million compared with
$335 million last year. Outside the U.S., earnings from exploration and
production were $497 million, versus $620 million in the second quarter 1997.
Petroleum product sales of 5,420 kbd increased from last year's record second
quarter with higher volumes in North America, Latin America and Europe
offsetting lower volumes in Asia-Pacific. Downstream earnings benefited from
higher U.S. and European industry refining margins, improvement in the U.K.
retail market, and higher Latin American marketing margins.
In the U.S., refining and marketing earnings were $226 million, up $64 million
from the prior year. Refining and marketing operations outside the U.S. earned
$412 million, an increase of $30 million from 1997.
Chemical earnings were $295 million compared with $393 million in the same
quarter a year ago. Margins were lower due to excess industry capacity for
commodity chemicals. Despite weaker demand in Asia-Pacific, prime product sales
volumes of 4,366 kt (thousand metric tons) established a second quarter record.
Earnings from other operations, including coal, minerals and power, totaled
$103 million, compared to $127 million in the second quarter 1997. Both copper
and international coal prices were lower. Corporate and financing expenses of
$100 million compared with $54 million in the second quarter of last year,
reflecting higher tax-related charges.
During the second quarter of 1998, Exxon purchased 13.6 million shares of its
common stock for the treasury at a cost of $974 million, representing a
continuation of purchases to offset shares issued in conjunction with the
Company's benefit plans and programs, as well as the increased share repurchases
announced in the first quarter of 1997. Shares outstanding were reduced from
2,446.8 million at the end of the first quarter of 1998 to 2,438.4 million at
the end of the second quarter. Purchases are made in open market and negotiated
transactions and may be discontinued at any time.
-10-
<PAGE>
EXXON CORPORATION
FIRST SIX MONTHS 1998 COMPARED WITH FIRST SIX MONTHS 1997
Net income was $3,510 million in the first half of 1998, a decrease of 15
percent from the $4,140 million earned in 1997. On a per share basis, net
income was $1.43 in the first half of 1998 compared to $1.66 in the prior year
period.
Exploration and production earnings declined as a result of lower crude oil
prices which decreased by about $6 per barrel versus 1997. Earnings were also
negatively impacted by lower U.S. and international natural gas prices. Liquids
production of 1,618 kbd was up from 1,604 kbd in the first half of 1997.
Increased production from new developments in the North Sea, and higher volumes
in Canada and Asia-Pacific more than offset lower volumes in the U.S. Worldwide
natural gas production of 6,384 mcfd was down 185 mcfd from 1997 reflecting
warmer weather in Europe.
Earnings from U.S. exploration and production operations for the first six
months were $414 million, a decrease of $475 million from 1997. Outside the
U.S., exploration and production earnings were $1,180 million, down $330 million
from last year.
Petroleum product sales of 5,420 kbd increased 43 kbd over last year, with
volume growth in all major markets except Asia-Pacific. Earnings from U.S.
refining and marketing operations were $326 million, up $107 million from 1997,
reflecting improved industry refining margins, lower planned maintenance
activities, and higher volumes. Outside the U.S., first half 1998 refining and
marketing earnings increased $229 million to $908 million, with higher European
refining margins, a stronger U.K. retail environment, and improved results in
Latin America only partly offset by weakness in Asia-Pacific.
Chemical earnings totaled $669 million in the first half of 1998 compared with
$703 million last year. Industry commodity prices and margins have declined from
last year's levels. Prime product sales volumes of 8,688 kt were up 2 percent
from last year despite weaker demand in Asia-Pacific markets.
Earnings from other operations totaled $192 million, a decrease of $63 million
from the first half of 1997, reflecting significantly lower copper prices, as
well as lower international coal prices. Corporate and financing expenses
increased $64 million to $179 million, reflecting higher tax-related charges.
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<PAGE>
EXXON CORPORATION
Net cash generation before financing activities was $2,917 million in the first
half of 1998 versus $4,996 million in the same period last year. Operating
activities provided net cash of $6,037 million, a decrease of $2,082 million
from 1997's first half, influenced by lower net income and the absence of an
insurance related settlement during the prior year. Investing activities used
net cash of $3,120 million, about the same level as the prior year period.
Net cash used in financing activities was $4,243 million in the first half of
1998 versus $3,028 million for the year-ago period. The increase of $1,215
million reflects higher purchases of shares of Exxon common stock and debt
reductions. During the first half of 1998, a total of 28.6 million shares of
Exxon common stock were acquired for the treasury at a cost of $1,916 million.
Purchases are made in both the open market and through negotiated transactions.
These purchases reflect both the increased repurchases announced in the first
quarter of 1997, as well as purchases to offset shares issued in conjunction
with the Company's benefit plans and programs. Purchases may be discontinued at
any time.
Capital and exploration expenditures in this year's first half were $4,526
million versus $4,005 million a year ago. Capital and exploration
expenditures in 1998, excluding foreign exchange rate fluctuations, are
anticipated to increase about 10 percent over 1997, as attractive investment
opportunities continue to be developed in each of the major business segments.
Total debt of $9.5 billion at June 30, 1998 decreased $0.5 billion from year-end
1997. The corporation's debt to capital ratio was 17.2 percent at the end of the
first six months of 1998, down from 17.8 percent at year-end 1997.
Over the twelve months ended June 30, 1998, return on average shareholders'
equity was 18.0 percent. Return on average capital employed, which includes
debt, was 15.3 percent over the same time period.
Although the corporation issues long-term debt from time to time and maintains
a revolving commercial paper program, internally generated funds cover the
majority of its financial requirements.
Litigation and other contingencies are discussed in note 3 to the unaudited
condensed consolidated financial statements. There are no events or
uncertainties known to management beyond those already included in reported
financial information that would indicate a material change in future operating
results or future financial condition.
The corporation, as part of its ongoing asset management program, continues to
evaluate its mix of assets for potential upgrade. Because of the ongoing nature
of this program, dispositions will continue to be made from time to time which
will result in either gains or losses.
-12-
<PAGE>
EXXON CORPORATION
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define a specific year. Absent corrective actions, a
computer program that has date sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions to various activities and
operations.
The corporation initiated assessments in prior years to identify the work
efforts required to assure that systems supporting the business successfully
operate beyond the turn of the century. The scope of this work effort
encompasses information technology systems and systems utilizing embedded
technology, such as microcontrollers.
Plans for achieving Year 2000 compliance were finalized during 1997, and
implementation work was underway at year-end. The initial phases of this work,
an inventory and assessment of potential problem areas, have been essentially
completed. Modification and testing phases continue, with most required system
modifications to mission critical systems planned for completion by year-end
1998. Attention has also been focussed on compliance attainment efforts of
vendors and others, including key system interfaces with customers and
suppliers. Most key suppliers and business partners have been contacted for
clarification of their Year 2000 plans. Notwithstanding the substantive work
efforts described above, the corporation could potentially experience
disruptions to some aspects of its various activities and operations, including
those resulting from non-compliant systems utilized by unrelated third party
governmental and business entities. Work is underway to develop business
contingency plans in order to attempt to mitigate the extent of potential
disruption to business operations.
Through June 30, 1998, about $100 million of costs had been incurred in the
corporation's efforts to achieve Year 2000 compliant systems. The ultimate
total cost to the corporation of achieving Year 2000 compliant systems is
currently estimated to be $250 to $300 million, primarily over the 1997-1999
timeframe, and is not expected to be a material incremental cost impacting
Exxon's operations, financial condition or liquidity.
-13-
<PAGE>
EXXON CORPORATION
SPECIAL ITEMS
_____________
Second Quarter First Six Months
______________ ________________
1998 1997 1998 1997
____ ____ ____ ____
(millions of dollars)
TOTAL 0 0 0 0
==== ==== ==== ====
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<PAGE>
EXXON CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the six months ended June 30, 1998 does
not differ materially from that discussed under Item 7A of the registrant's
Annual Report on Form 10-K for 1997.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
In accordance with the registrant's 1997 Nonemployee Director Restricted
Stock Plan, a newly elected nonemployee director was granted 4,000 shares
of restricted Common Stock on July 30, 1998. This grant is exempt from
registration under bonus stock interpretations such as the "no-action"
letter to Pacific Telesis Group (June 30, 1992).
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on April 29, 1998, the following
proposals were voted upon:
Concerning Election of Directors
Votes Votes
Nominees for Director Cast for Withheld
_____________________ ________ ________
Michael J. Boskin 2,034,553,999 15,644,555
D. Wayne Calloway 2,034,041,744 16,156,810
Rene Dahan 2,035,294,898 14,903,656
Jess Hay 2,030,934,810 19,263,744
James R. Houghton 2,033,926,072 16,272,482
William R. Howell 2,033,327,157 16,871,397
Reatha Clark King 2,033,862,047 16,336,507
Philip E. Lippincott 2,033,837,482 16,361,072
Harry J. Longwell 2,035,025,458 15,173,096
Marilyn Carlson Nelson 2,034,655,003 15,543,551
Lee R. Raymond 2,033,289,546 16,909,008
Walter V. Shipley 2,034,137,799 16,060,755
Robert E. Wilhelm 2,035,072,830 15,125,724
Concerning Ratification of Independent Accountants
Votes Cast For: 2,031,872,210
Votes Cast Against: 9,606,496
Abstentions: 8,719,848
Broker Non-Votes: N/A
-15-
<PAGE>
EXXON CORPORATION
Concerning Additional Reporting of Political Contributions
Votes Cast For: 94,009,618
Votes Cast Against: 1,587,419,713
Abstentions: 72,784,772
Broker Non-Votes: 295,984,451
Concerning Additional Report on Climate Change
Votes Cast For: 76,297,551
Votes Cast Against: 1,622,746,847
Abstentions: 55,766,985
Broker Non-Votes: 295,387,171
See also pages 2 through 7 and pages 17 through 22 of the registrant's
definitive proxy statement dated March 18, 1998.
Item 5. Other Information
The deadline for notice to Exxon Corporation for proposals for which a
shareholder will conduct his or her own proxy solicitation is
February 1, 1999.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27 - Financial Data Schedule (included only in the electronic
filing of this document).
b) Reports on Form 8-K
The registrant has not filed any reports on Form 8-K during the
quarter.
-16-
<PAGE>
EXXON CORPORATION
FORM 10-Q
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.
EXXON CORPORATION
Date: August 14, 1998 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
-17-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXXON'S
CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998 AND EXXON'S CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998, THAT
ARE CONTAINED IN EXXON'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1998. THE SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,689
<SECURITIES> 21
<RECEIVABLES> 6,621
<ALLOWANCES> 99
<INVENTORY> 5,119
<CURRENT-ASSETS> 18,280
<PP&E> 129,975
<DEPRECIATION> 63,223
<TOTAL-ASSETS> 93,216
<CURRENT-LIABILITIES> 17,532
<BONDS> 6,927
0
134
<COMMON> 2,323
<OTHER-SE> 40,900
<TOTAL-LIABILITY-AND-EQUITY> 93,216
<SALES> 58,790
<TOTAL-REVENUES> 59,854
<CGS> 23,490
<TOTAL-COSTS> 23,490
<OTHER-EXPENSES> 9,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> 5,007
<INCOME-TAX> 1,497
<INCOME-CONTINUING> 3,510
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,510
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.41
</TABLE>
