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 March 31, 1999
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 office) (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 March 31, 1999
_______________________________ ________________________________
Common stock, without par value 2,427,785,417
<PAGE>
EXXON CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three months ended March 31, 1999 and 1998
Condensed Consolidated Balance Sheet 4
As of March 31, 1999 and December 31, 1998
Condensed Consolidated Statement of Cash Flows 5
Three months ended March 31, 1999 and 1998
Notes to Condensed Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
<PAGE> -2-
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
March 31,
__________________
1999 1998
_______ _______
<S> <C> <C>
REVENUE
Sales and other operating revenue,
including excise taxes $26,341 $29,332
Earnings from equity interests and other revenue 543 632
_______ _______
Total revenue 26,884 29,964
_______ _______
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 10,206 12,100
Operating expenses 2,728 2,911
Selling, general and administrative expenses 2,314 2,004
Depreciation and depletion 1,528 1,344
Exploration expenses, including dry holes 130 184
Interest expense 94 32
Excise taxes 3,359 3,447
Other taxes and duties 5,589 5,167
Income applicable to minority and preferred interests (67) 66
_______ _______
Total costs and other deductions 25,881 27,255
_______ _______
INCOME BEFORE INCOME TAXES 1,003 2,709
Income tax charge/(credit) (17) 819
_______ _______
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,020 1,890
Cumulative effect of accounting change - (70)
_______ _______
NET INCOME $ 1,020 $ 1,820
======= =======
NET INCOME PER COMMON SHARE (DOLLARS)
Before cumulative effect of accounting change $ 0.42 $ 0.77
Cumulative effect of accounting change - (0.03)
_______ _______
Net Income $ 0.42 $ 0.74
======= =======
NET INCOME PER COMMON SHARE - ASSUMING DILUTION (DOLLARS)
Before cumulative effect of accounting change $ 0.42 $ 0.76
Cumulative effect of accounting change - (0.03)
_______ _______
Net Income $ 0.42 $ 0.73
======= =======
Dividends per common share $ 0.41 $ 0.41
(/TABLE>
<PAGE> -3-
EXXON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
</TABLE>
<TABLE>
<CAPTION>
March 31, Dec. 31,
1999 1998
________ _______
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,385 $ 1,441
Other marketable securities 20 20
Notes and accounts receivable - net 9,161 9,512
Inventories
Crude oil, products and merchandise 4,263 4,896
Materials and supplies 684 709
Prepaid taxes and expenses 1,196 1,015
_______ _______
Total current assets 16,709 17,593
Property, plant and equipment - net 64,415 65,199
Investments and other assets 9,607 9,838
_______ ______
TOTAL ASSETS $90,731 $92,630
======= =======
LIABILITIES
Current liabilities
Notes and loans payable $ 3,837 $ 4,248
Accounts payable and accrued liabilities 13,670 13,825
Income taxes payable 1,365 1,339
_______ _______
Total current liabilities 18,872 19,412
Long-term debt 4,563 4,530
Annuity reserves, deferred credits and other liabilities 24,294 24,938
_______ _______
TOTAL LIABILITIES 47,729 48,880
_______ _______
SHAREHOLDERS' EQUITY
Preferred stock, without par value:
Authorized: 200 million shares
Outstanding: 1 million shares at Mar. 31, 1999 91
2 million shares at Dec. 31, 1998 105
Guaranteed LESOP obligation (125) (125)
Common stock, without par value:
Authorized: 3,000 million shares
Issued: 2,984 million shares 2,323 2,323
Earnings reinvested 54,598 54,575
Accumulated other nowowner changes in equity
Cumulative foreign exchange translation adjustment (1,316) (641)
Minimum pension liability adjustment (282) (282)
Common stock held in treasury:
556 million shares at Mar. 31, 1999 (12,287)
556 million shares at Dec. 31, 1998 (12,205)
_______ _______
TOTAL SHAREHOLDERS' EQUITY 43,002 43,750
_______ _______
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $90,731 $92,630
======= =======
</TABLE>
The number of shares of common stock issued and outstanding at March 31, 1999
and December 31, 1998 were 2,427,785,417 and 2,427,787,109, respectively.
<PAGE> -4-
EXXON CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
__________________
1999 1998
________ ______
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,020 $ 1,820
Depreciation and depletion 1,528 1,344
Changes in operational working capital, excluding
cash and debt 746 (44)
All other items - net (542) (105)
_______ _______
Net Cash Provided By Operating Activities 2,752 3,015
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (1,836) (1,679)
Sales of subsidiaries and property, plant and equipment 204 125
Other investing activities - net 385 407
_______ _______
Net Cash Used In Investing Activities (1,247) (1,147)
_______ _______
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 1,505 1,868
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 0 127
Reductions in long-term debt 0 (69)
Additions/(reductions) in short-term debt - net (406) (263)
Cash dividends to Exxon shareholders (998) (1,009)
Cash dividends to minority interests (21) (22)
Changes in minority interests and sales/(purchases)
of affiliate stock (26) (32)
Acquisitions of Exxon shares - net (108) (797)
_______ _______
Net Cash Used In Financing Activities (1,559) (2,065)
_______ _______
Effects Of Exchange Rate Changes On Cash (2) (10)
_______ _______
Increase/(Decrease) In Cash And Cash Equivalents (56) (207)
Cash And Cash Equivalents At Beginning Of Period 1,441 4,047
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,385 $ 3,840
======= =======
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 347 $ 565
Cash interest paid $ 60 $ 270
</TABLE>
<PAGE> -5-
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 Securities and Exchange Commission in the corporation's
1998 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 fourth quarter of 1998, Exxon de-consolidated the majority
owned power companies in Hong Kong and China. These financial statements
reflect the de-consolidation of these companies retroactive to January 1,
1998. These affiliates are now accounted for as equity companies in
compliance with the Financial Accounting Standards Board Emerging Issues
Task Force ruling on Issue No. 96-16 which requires equity company
reporting for a majority owned affiliate when minority shareholders
possess the right to participate in significant management decisions.
Exxon's 1998 net income was not affected by the de-consolidation. The
effect on Exxon's January 1, 1998 consolidated balance sheet related to
the de-consolidation was a decrease in total assets of $3.6 billion,
including $4.2 billion of net property, plant and equipment and a decrease
in total liabilities of $3.6 billion, including $2.5 billion of short and
long-term debt.
The American Institute of Certified Public Accountants' Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities", was
implemented in the fourth quarter of 1998, effective as of January 1,
1998. This statement requires that costs of start-up activities and
organizational costs be expensed as incurred. The cumulative effect of
this accounting change on years prior to 1998 was a charge of $70 million
(net of $70 million income tax effect), or $0.03 per common share, that
was reflected in the first quarter of 1998. This new accounting
requirement did not have a significant effect on 1998 income before the
cumulative effect of the accounting change.
2. Recently Issued Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board released Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities
Information." 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. Adoption of this
statement is not expected to have a material effect upon the corporation's
operations or financial condition.
<PAGE> -6-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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 denial of its renewed motion for a new trial. The Ninth
Circuit heard oral arguments on the appeals on May 3, 1999. 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.
On January 29, 1997, a settlement agreement was concluded resolving all
remaining matters between Exxon and various insurers arising from the
Valdez accident. Under terms of this settlement, Exxon received $480
million. Final income statement recognition of this settlement continues
to be deferred in view of uncertainty regarding the ultimate cost to the
corporation of the Valdez accident.
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.
In each of the years 1998, 1997 and 1996, $70 million in payments were
made under the October 8, 1991 civil agreement and consent decree with the
U.S. and Alaska governments. These payments were charged against the
provision that was previously established to cover the costs of the
settlement.
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.
<PAGE> -7-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 operations or financial condition.
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 operations or financial condition.
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.
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
The total nonowner changes in shareholders' equity for the three months
ended March 31, 1999 and 1998 were $345 million and $1,791 million,
respectively. Total nonowner changes in shareholders' equity include net
income and the change in the cumulative foreign exchange translation
adjustment and minimum pension liability adjustment components of
shareholders' equity.
<PAGE> -8-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended
March 31,
__________________
1999 1998
______ ______
<S> <C> <C>
NET INCOME PER COMMON SHARE
Income before cumulative effect of accounting change $1,020 $1,890
(millions of dollars)
Less: Preferred stock dividends (2) (3)
______ ______
Income available to common shares $1,018 $1,887
====== ======
Weighted average number of common shares outstanding 2,428 2,451
(millions of shares)
Net income per common share
Before cumulative effect of accounting change $ 0.42 $ 0.77
Cumulative effect of accounting change - (0.03)
______ ______
Net income $ 0.42 $ 0.74
====== ======
NET INCOME PER COMMON SHARE - ASSUMING DILUTION
Income before cumulative effect of accounting change $1,020 $1,890
(millions of dollars)
Weighted average number of common shares outstanding 2,428 2,451
(millions of shares)
Plus: Issued on assumed exercise of stock options 24 26
Plus: Assumed conversion of preferred stock 3 6
______ ______
Weighted average number of common shares outstanding 2,455 2,483
====== ======
Net income per common share
Before cumulative effect of accounting change $ 0.42 $ 0.76
Cumulative effect of accounting change - (0.03)
______ ______
Net income $ 0.42 $ 0.73
====== ======
</TABLE>
<PAGE> -9-
EXXON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. Disclosures about Segments and Related Information
<TABLE>
<CAPTION> Three Months Ended
March 31,
__________________
1999 1998
_______ _______
<S> <C> <C>
(millions of dollars)
EARNINGS AFTER INCOME TAX
(Before the cumulative effectof accounting changes)
Exploration and Production
United States $ 136 $ 227
Non-U.S. 425 683
Refining and Marketing
United States (28) 100
Non-U.S. 154 496
Chemicals
United States 158 232
Non-U.S. 147 142
All Other 28 10
_______ _______
Corporate Total $ 1,020 $ 1,890
======= =======
SALES AND OTHER OPERATING REVENUE
Exploration and Production
United States $ 482 $ 596
Non-U.S. 1,696 2,295
Refining and Marketing
United States 3,450 4,144
Non-U.S. 18,309 19,275
Chemicals
United States 1,103 1,255
Non-U.S. 1,120 1,557
All Other 181 210
_______ _______
Corporate Total $26,341 $29,332
======= =======
INTERSEGMENT REVENUE
Exploration and Production
United States $ 549 $ 673
Non-U.S. 674 619
Refining and Marketing
United States 223 352
Non-U.S. 443 545
Chemicals
United States 271 369
Non-U.S. 138 191
All Other 28 32
<PAGE> -10-
EXXON CORPORATION
7. Restructuring Charge
In the first quarter of 1999 the company recorded a $120 million after-tax
charge for the restructuring of Japanese refining and marketing operations
in its wholly owned Esso Sekiyu K.K. and 50.1 percent owned General Sekiyu
K.K. affiliates. The restructuring resulted in the reduction of
approximately 700 administrative, financial, logistics and marketing
service employee positions during the quarter. The Japanese affiliates
recorded a combined charge of $216 million (before tax) to selling,
general and administrative expenses for the employee related costs.
General Sekiyu also recorded a $211 million (before tax) charge to
depreciation and depletion for the write-off of costs associated with the
cancellation of a power plant project at the Kawasaki terminal.
<PAGE> -11-
EXXON CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FUNCTIONAL EARNINGS SUMMARY
</TABLE>
<TABLE>
<CAPTION> First Quarter
___________________
1999 1998
____ ____
<S> <C> <C>
(millions of dollars)
Petroleum and natural gas
Exploration and production
United States $ 136 $ 227
Non-U.S. 425 683
Refining and marketing
United States (28) 100
Non-U.S. 154 496
_______ _______
Total petroleum and natural gas 687 1,506
Chemicals
United States 158 232
Non-U.S. 147 142
Other operations 97 89
Corporate and financing (69) (79)
_______ _______
Earnings before accounting changes $ 1,020 $ 1,890
Cumulative effect of accounting change 0 (70)
_______ _______
NET INCOME $ 1,020 $ 1,820
======= =======
</TABLE>
FIRST QUARTER 1999 COMPARED WITH FIRST QUARTER 1998
Exxon Corporation estimated first quarter 1999 net income of $1,020 million.
Net income for the first quarter of 1999 included a $120 million charge for
the restructuring of Japanese operations, while the prior year's quarter
included a $70 million charge relating to an accounting change. Excluding non-
recurring items, first quarter 1999 net income declined 40 percent to $1,140
million or $0.47 per share, compared to $1,890 million or $0.76 per share last
year.
Exxon's first quarter net income was $1.0 billion. After excluding non-
recurring charges in both years, earnings were down $750 million or 40
percent. The decline was driven by continued weakness in crude oil prices
which on average were about $2.75 per barrel or 20 percent lower than last
year's first quarter. Earnings were also adversely affected by lower natural
gas prices, weaker downstream and chemicals margins, and depressed copper and
coal prices.
<PAGE> -12-
EXXON CORPORATION
Crude oil prices continued to run at near 20-year lows for most of the
quarter, reflecting the worldwide surplus in crude oil supplies. Liquids
production was down versus the prior year reflecting natural field declines in
some producing areas and steps to curtail marginal volumes in the recent low
price environment. The first quarter production levels are consistent with the
company's plan for increased liquids volumes in 1999. Higher gas volumes and
reductions in exploration and production expenses partly offset the effects of
lower crude and gas prices and liquids volumes. In the downstream, refining
margins and marketing margins were significantly weaker in most geographic
areas. Partly offsetting the lower margins were higher petroleum product
sales, which achieved the highest first quarter level since 1979. Chemicals
earnings declined 18 percent from last year as a result of lower margins.
Worldwide commodity prices continued at depressed levels due to excess
industry capacity and the slowdown in Asian economies. Earnings from other
operations increased as lower copper and coal prices were offset by higher
production volumes and reduced operating expenses.
OTHER COMMENTS ON FIRST QUARTER COMPARISON
Exploration and production earnings were adversely impacted by lower industry
crude prices which averaged about $2.75 per barrel less than last year.
Average U.S. natural gas prices were down 19 percent and European gas prices
were down 19 percent versus the first quarter of 1998.
Liquids production decreased to 1,564 kbd (thousand barrels per day) compared
to 1,624 kbd in the first quarter 1998, primarily due to natural field
declines and steps to curtail marginal volumes in the current low price
environment. Partly offsetting this was production from new developments in
the U.K. North Sea and Azerbaijan. Natural gas production of 7,533 mcfd
(million cubic feet per day) was up 324 mcfd from 1998 due to colder European
weather.
Earnings from U.S. exploration and production were $136 million compared with
$227 million last year. Outside the U.S., earnings from exploration and
production were $425 million, versus $683 million in the first quarter of
1998.
Petroleum product sales of 5,490 kbd increased 2 percent from last year's
first quarter reflecting improvements in all geographic areas. Refining
margins and marketing margins were much weaker in most markets. Total
downstream results were also adversely affected by higher scheduled refinery
maintenance in the U.S. and Europe.
In the U.S., refining and marketing results were a loss of $28 million, down
$128 million from the prior year. Earnings from refining and marketing
operations outside the U.S. were $274 million after excluding the Japanese
restructuring charge, compared with $496 million in the first quarter of 1998.
<PAGE> -13-
EXXON CORPORATION
Chemicals earnings were $305 million compared with $374 million in the first
quarter of last year. Prime product sales of 4,377 kt (thousand metric tons)
were 3 percent higher than the same period last year primarily reflecting
stronger demand in Europe. Margins were lower as commodity chemical prices
continued at depressed levels and were only partly offset by lower feedstock
costs.
Earnings from other operations totaled $97 million, up from $89 million in the
first quarter of 1998 as higher copper and coal production volumes and lower
operating expenses more than offset the impact of lower copper and coal
prices.
Corporate and financing expenses totaled $69 million compared with $79 million
in the first quarter of last year. During the quarter, the company's operating
segments continued to benefit from lower income tax expense. First quarter
1999 income tax expense was a credit of $17 million compared to a charge of
$819 million in last year's first quarter. This lower income tax expense
reflects pre-tax income that was down significantly from last year and the
impact of lower foreign tax rates, favorable resolution of tax related issues,
foreign exchange impacts on tax liabilities and investment related tax
credits.
Net cash generation before financing activities was $1,505 million in the
first three months of 1999 versus $1,868 million in the same period last year.
Operating activities provided net cash of $2,752 million, a decrease of $263
million from the prior year, influenced by lower net income. Investing
activities used net cash of $1,247 million, $100 million more than a year ago,
reflecting a higher level of capital investment.
Net cash used in financing activities was $1,559 million in the first quarter
of 1999 versus $2,065 million in the same quarter last year, the decrease due
to lower purchases of shares of Exxon common stock. During the first quarter
of 1999, Exxon purchased 2.4 million shares of Exxon common stock for the
treasury at a cost of $170 million, representing a continuation of purchases
to offset shares issued in conjunction with the company's benefit plans and
programs. Purchases are made in open market and negotiated transactions. As a
consequence of the proposed merger of Exxon and Mobil, the repurchase program
to reduce the number of Exxon shares outstanding was discontinued in December
1998.
Revenue for the first quarter of 1999 totaled $26,884 million compared to
$29,964 million in the first quarter 1998.
Capital and exploration expenditures were $2,104 million in the first quarter
1999 compared to $2,023 million in last year's first quarter.
Total debt of $8.4 billion at March 31, 1999 decreased $0.4 billion from year-
end 1998. The corporation's debt to total capital ratio was 15.8 percent at
the end of the first quarter of 1999, compared to 16.2 percent at year-end
1998.
<PAGE> -14-
EXXON CORPORATION
Over the twelve months ended March 31, 1999, return on average shareholders'
equity was 12.9 percent. Return on average capital employed, which includes
debt, was 10.9 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.
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 business information systems, infrastructure, and technical and
field systems, including systems utilizing embedded technology, such as
microcontrollers. The program places particular emphasis on mission critical
systems, defined as those which could have a significant safety, environmental
or financial impact, should Year 2000 issues arise.
Plans for achieving Year 2000 compliance were finalized during 1997, and
implementation work was underway at year-end 1997. The initial phases of this
work, an inventory and assessment of potential problem areas, have been
essentially completed. Modification and testing phases continue, with
over 90 percent of required system modifications to mission critical systems
completed. Some work is continuing into 1999, including final testing of some
systems and scheduled implementation of new systems with Year 2000 impacts.
Attention has also been focused 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 and approximately three-fourths have confirmed that
<PAGE> -15-
EXXON CORPORATION
compliance plans are in place. Follow-up discussions are being held with key
suppliers when necessary to gain satisfaction on their state of readiness.
These reviews will continue through 1999. Testing of critical third party
products and services is underway, including such areas as process control
systems, credit card processing, banking transactions and telecommunications.
Notwithstanding the substantive work efforts described above, the corporation
could potentially experience disruptions to some mission critical operations
or deliveries to customers as a result of Year 2000 issues, particularly in
the first few weeks of the year 2000. Such disruptions could include impacts
from potentially non-compliant systems utilized by suppliers, customers,
government entities or others. Given the diverse nature of Exxon's operations,
the varying state of readiness of different countries and suppliers, and the
interdependence of Year 2000 impacts, the potential financial impact or
liability associated with such disruptions cannot be reasonably estimated.
Exxon operating sites around the world, including those in developing
countries, are working with key suppliers in their respective countries to
address Year 2000 issues. In addition, Year 2000 Business Contingency
Guidelines are being used by all operating organizations and affiliates, and
include specific reference to areas such as transportation, telecommunications
and utility services. Existing site contingency plans are being updated in
order to attempt to mitigate the extent of potential disruption to business
operations. This work is targeted to be essentially complete by mid-1999.
Through March 31, 1999, about $190 million of costs had been incurred in
the corporation's efforts to achieve Year 2000 compliant systems. The total
cost to the corporation of achieving Year 2000 compliant systems is currently
estimated to be $225 to $250 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.
FORWARD-LOOKING STATEMENTS
Statements in this report regarding future events or conditions are forward-
looking statements. Actual results, including projections of liquids
production levels and the impact of the Year 2000 Issue, could differ
materially due to, among other things, factors discussed in this report and in
Item 1 of the corporation's most recent Annual Report on Form 10-K.
<PAGE> -16-
EXXON CORPORATION
SPECIAL ITEMS
_____________
<TABLE>
<CAPTION>
First Quarter
________________
1999 1998
____ ____
<S> <C> <C>
(millions of dollars)
REFINING & MARKETING
Non-U.S.
Restructuring $(120) $ 0
TOTAL INCLUDED IN EARNINGS ______ ______
BEFORE ACCOUNTING CHANGES (120) 0
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 0 (70)
______ ______
TOTAL INCLUDED IN NET INCOME $(120) $ (70)
====== ======
</TABLE>
<PAGE> -17-
EXXON CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the three months ended March 31,
1999 does not differ materially from that discussed under Item 7A of
the registrant's Annual Report on Form 10-K for 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 and the registrant's Annual
Report on Form 10-K for the year ended December 31, 1997, the
Department of Justice, acting on behalf of the Environmental
Protection Agency, filed suit against the registrant's Exxon Company,
U.S.A. division in the U.S. District Court for the Southern District
of Texas. The suit alleged violations of the Clean Air Act at the
registrant's Baytown refinery relating to, among other things,
refinery flares. As reported in the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998, the registrant
agreed to pay a civil penalty of $250,000 to settle this matter. This
penalty was paid in December 1998 and an Order of Dismissal was
entered by the court on January 19, 1999.
On December 30, 1998, the District Attorney of Solano County,
California filed eight related suits against the registrant in the
Superior Court of the State of California, County of Solano. These
suits allege that gasoline and/or diesel fuel has been discharged
from underground storage tanks located at eight service stations into
the drinking water of the State of California. The State has not
proposed a specific penalty, but has requested in its suit that the
registrant pay a civil penalty up to $2,500 per day for each
violation.
Refer to the relevant portions of Note 3 on pages 7 through 8 of this
Quarterly Report on Form 10-Q for further information on legal
proceedings.
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.
<PAGE> -18-
EXXON CORPORATION
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: May 13, 1999
/s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
<PAGE> -19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXXON'S
CONDENSED CONSOLIDATED BALANCE SHEET AT 3/31/99 AND EXXON'S CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED 3/31/99, THAT ARE
CONTAINED IN EXXON'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 3/31/99. THE
SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,385
<SECURITIES> 20
<RECEIVABLES> 6,441
<ALLOWANCES> 98
<INVENTORY> 4,947
<CURRENT-ASSETS> 16,709
<PP&E> 127,667
<DEPRECIATION> 63,252
<TOTAL-ASSETS> 90,731
<CURRENT-LIABILITIES> 18,872
<BONDS> 4,563
0
91
<COMMON> 2,323
<OTHER-SE> 40,588
<TOTAL-LIABILITY-AND-EQUITY> 90,731
<SALES> 26,341
<TOTAL-REVENUES> 26,884
<CGS> 10,206
<TOTAL-COSTS> 10,206
<OTHER-EXPENSES> 4,386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 1,003
<INCOME-TAX> (17)
<INCOME-CONTINUING> 1,020
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,020
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
