UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 MOBIL 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 September 30, 2000
_______________________________ ____________________________________
Common stock, without par value 3,476,189,415
<PAGE>
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and nine months ended September 30, 2000 and 1999
Condensed Consolidated Balance Sheet 4
As of September 30, 2000 and December 31, 1999
Condensed Consolidated Statement of Cash Flows 5
Nine months ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18-19
Item 2. Changes in Securities 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
Index to Exhibits 21
<PAGE> -2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
REVENUE 2000 1999 2000 1999
____ ____ ____ ____
<S> <C> <C> <C> <C>
Sales and other operating revenue,
including excise taxes $57,497 $48,415 $165,706 $128,855
Earnings from equity interests and
other revenue 1,071 571 2,899 2,090
_______ _______ ________ ________
Total revenue 58,568 48,986 168,605 130,945
_______ _______ ________ ________
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 27,927 21,609 79,231 53,061
Operating expenses 4,049 4,557 12,790 12,527
Selling, general and administrative
expenses 3,358 2,753 9,065 9,335
Depreciation and depletion 1,901 1,991 5,968 6,151
Exploration expenses, including dry holes 235 285 611 824
Merger related expenses 372 17 1,104 44
Interest expense 108 157 408 467
Excise taxes 5,319 5,391 16,269 15,491
Other taxes and duties 8,529 8,682 24,235 25,124
Income applicable to minority and
preferred interests 73 52 255 68
_______ _______ ________ ________
Total costs and other deductions 51,871 45,494 149,936 123,092
_______ _______ ________ ________
INCOME BEFORE INCOME TAXES 6,697 3,492 18,669 7,853
Income taxes 2,637 1,304 7,584 2,227
_______ _______ ________ ________
INCOME BEFORE EXTRAORDINARY ITEM 4,060 2,188 11,085 5,626
Extraordinary gain from required
asset divestitures, net of income Tax 430 0 1,415 0
_______ _______ ________ ________
NET INCOME $ 4,490 $ 2,188 $ 12,500 $ 5,626
======= ======= ======== ========
NET INCOME PER COMMON SHARE (DOLLARS)
Before extraordinary gain $ 1.17 $ 0.63 $ 3.19 $ 1.62
Extraordinary gain, net of income tax 0.12 0.00 0.40 0.00
_______ _______ ________ ________
Net Income $ 1.29 $ 0.63 $ 3.59 $ 1.62
======= ======= ======== ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)
Before extraordinary gain $ 1.16 $ 0.62 $ 3.15 $ 1.60
Extraordinary gain, net of income tax 0.12 0.00 0.40 0.00
_______ _______ ________ ________
Net Income $ 1.28 $ 0.62 $ 3.55 $ 1.60
======= ======= ======== ========
DIVIDENDS PER COMMON SHARE $ 0.44 $ 0.42 $ 1.32 $ 1.25
</TABLE>
<PAGE> -3-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
<TABLE>
<CAPTION> Sept. 30, Dec. 31,
2000 1999
ASSETS ________ ________
<S> <C> <C>
Current assets
Cash and cash equivalents $ 6,644 $ 1,688
Other marketable securities 2 73
Notes and accounts receivable - net 21,601 19,155
Inventories
Crude oil, products and merchandise 7,446 7,370
Materials and supplies 1,094 1,122
Prepaid taxes and expenses 2,662 1,733
________ ________
Total current assets 39,449 31,141
Property, plant and equipment - net 90,067 94,043
Investments and other assets 18,736 19,337
________ ________
TOTAL ASSETS $148,252 $144,521
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 6,713 $ 10,570
Accounts payable and accrued liabilities 27,646 25,492
Income taxes payable 5,416 2,671
________ ________
Total current liabilities 39,775 38,733
Long-term debt 7,528 8,402
Annuity reserves, deferred credits and other liabilities 32,838 33,920
________ ________
TOTAL LIABILITIES 80,141 81,055
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (250) (298)
Common stock, without par value:
Authorized: 4,500 million shares
Issued: 4,010 million shares 3,589 3,403
Earnings reinvested 82,959 75,055
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (5,048) (2,300)
Minimum pension liability adjustment (299) (299)
Unrealized gains on stock investments 48 31
Common stock held in treasury:
534 million shares at September 30, 2000 (12,888)
533 million shares at December 31, 1999 (12,126)
________ ________
TOTAL SHAREHOLDERS' EQUITY 68,111 63,466
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $148,252 $144,521
======== ========
</TABLE>
The number of shares of common stock issued and outstanding at
September 30, 2000 and December 31, 1999 were 3,476,189,415 and 3,477,423,323,
respectively.
<PAGE> -4-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
<TABLE>
(CAPTION>
Nine Months Ended
September 30,
_________________
2000 1999
____ ____
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $12,500 $ 5,626
Depreciation and depletion 5,968 6,151
Changes in operational working capital, excluding
cash and debt 1,732 (156)
All other items - net (3,338) (860)
_______ _______
Net cash provided by operating activities 16,862 10,761
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (5,836) (8,214)
Sales of subsidiaries, investments, and property,
plant and equipment 3,714 598
Other investing activities - net 419 (347)
_______ _______
Net cash provided by/(used in) investing activities (1,703) (7,963)
_______ _______
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 15,159 2,798
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 159 555
Reductions in long-term debt (383) (352)
Additions/(reductions) in short-term debt - net (4,093) 1,990
Cash dividends to ExxonMobil shareholders (4,596) (4,363)
Cash dividends to minority interests (178) (148)
Changes in minority interests and sales/(purchases)
of affiliate stock (119) (255)
Net ExxonMobil shares sold/(acquired) (661) (344)
_______ _______
Net cash used in financing activities (9,871) (2,917)
_______ _______
Effects of exchange rate changes on cash (332) 48
_______ _______
Increase/(decrease) in cash and cash equivalents 4,956 (71)
Cash and cash equivalents at beginning of period 1,688 2,386
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,644 $ 2,315
======= =======
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 4,211 $ 1,929
Cash interest paid $ 590 $ 614
</TABLE>
<PAGE> -5-
EXXON MOBIL 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 1999 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.
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." Several requirements of Statement No. 133 were amended in
Statement No. 138 issued in June 2000. The accounting and reporting
standards for derivative instruments established in these statements must
be adopted by Exxon Mobil Corporation beginning no later than
January 1, 2001. These statements require that an entity recognize all
derivatives as either assets or liabilities in the financial statements
and measure those instruments at fair value. These statements also define
the accounting for changes in the fair value of the derivatives based on
the intended use of the derivative. Adoption of these statements is not
expected to have a material effect upon the corporation's operations or
financial condition.
3. Merger of Exxon Corporation and Mobil Corporation
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation
merged with Mobil Corporation so that Mobil became a wholly-owned
subsidiary of Exxon (the "Merger"). At the same time, Exxon changed its
name to Exxon Mobil Corporation.
As a result of the Merger, the accounts of certain refining, marketing and
chemicals operations jointly controlled by the combining companies have
been included in the consolidated financial statements. These operations
were previously accounted for by Exxon and Mobil as separate companies
using the equity method of accounting.
The Merger was accounted for as a pooling of interests. Accordingly, the
consolidated financial statements give retroactive effect to the Merger,
with all periods presented as if Exxon and Mobil had always been combined.
In the third quarter of 2000, in association with the Merger, $372 million
of before tax costs ($230 million after tax) were recorded as merger
related expenses. For the nine months ended September 30, 2000 merger
related expenses totaled $1,104 million before tax ($705 million after
tax).
Charges in the third quarter of 2000 included separation expenses of
approximately $145 million related to workforce reductions (for an
additional 400 employees). During the quarter, 900 employees actually
separated and were paid pursuant to various severance plans.
<PAGE> -6-
The severance reserve balance is expected to be expended in 2000, 2001 and
2002. The following table summarizes the activity in the severance reserve
for the nine months ended September 30, 2000:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
330 659 564 425
4. Extraordinary Gain on Required Asset Divestitures
Third quarter 2000 results included a net after tax gain of $430 million
(including an income tax credit of $41 million), or $0.12 per common
share, from asset divestments that were required as a condition of the
regulatory approval of the Merger. Third quarter divestments included
Exxon's share of Thyssengas GmbH, a gas transmission, distribution and
storage company in Germany, and Mobil's share of Colonial Pipeline Company
in the U.S.
For the nine months ended September 30, 2000, the net after tax gain from
required asset divestitures totaled $1,415 million (net of $583 million of
income taxes). The net after tax gain on required divestments was reported
as an extraordinary item according to accounting requirements for business
combinations accounted for as a pooling of interests.
5. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various
courts against the 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.
The corporation has appealed the judgment. The corporation also appealed
the District Court's denial of its renewed motion for a new trial. The
United States Court of Appeals for the Ninth Circuit heard oral arguments
on the appeals on May 3, 1999. In March 2000, the Ninth Circuit ruled
solely on the issue of the corporation's renewed motion for a new trial
and upheld the District Court's denial of the motion. In July 2000, the
corporation requested the United States Supreme Court review the Court of
Appeals' March decision. On October 2, 2000, the Supreme Court let stand
without comment the Ninth Circuit decision denying the corporation's
renewed motion for a 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.
<PAGE> -7-
On January 29, 1997, a settlement agreement was concluded resolving all
remaining matters between the corporation and various insurers arising
from the Valdez accident. Under terms of this settlement, the corporation
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.
Under the October 8, 1991, civil agreement and consent decrees with the
U.S. and Alaska governments, the corporation has made annual payments
since 1991, which in each of the years 2000, 1999, and 1998, were
$70 million. 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, were conducted to resolve issues concerning
the compensation for the overlifted gas.
By final award dated July 2, 1999, preceded by an interim award in 1996,
an arbitral tribunal established the full amount of the compensation for
the excess gas. This amount has now been paid and a petition to set the
award aside has now been dismissed, rendering the award final in all
respects. Other substantive matters remain outstanding, including
recovery of royalties paid on such excess gas and the taxes payable on
the final compensation amount. 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 the corporation 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.
<PAGE> -8-
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.
6. Nonowner Changes in Shareholders' Equity
The total nonowner changes in shareholders' equity for the three months
ended September 30, 2000 and 1999 were $3,504 million and $2,921 million,
respectively. The total nonowner changes in shareholders' equity for the
nine months ended September 30, 2000 and 1999 were $9,769 million and
$5,244 million, respectively. Total nonowner changes in shareholders'
equity include net income and the change in the cumulative foreign
exchange translation adjustment, the minimum pension liability adjustment
and the unrealized gains on stock investments components of shareholders'
equity.
7. Earnings Per Share
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
__________________ ________________
2000 1999 2000 1999
____ ____ ____ ____
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Income before extraordinary item
(millions of dollars) $4,060 $2,188 $11,085 $5,626
Less: Preferred stock dividends 0 (12) 0 (39)
______ ______ _______ ______
Income available to common shares $4,060 $2,176 $11,085 $5,587
====== ====== ======= ======
Weighted average number of common shares
outstanding (million of shares) 3,479 3,452 3,479 3,451
Net income per common share (dollars)
Before extraordinary item $ 1.17 $ 0.63 $ 3.19 $ 1.62
Extraordinary gain, net of income tax 0.12 0.00 0.40 0.00
______ ______ _______ ______
Net income $ 1.29 $ 0.63 $ 3.59 $ 1.62
====== ====== ======= ======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before extraordinary item
(millions of dollars) $4,060 $2,188 $11,085 $5,626
Adjustment for assumed dilution 2 (1) (8) (1)
______ ______ _______ ______
Income available to common shares $4,062 $2,187 $11,077 $5,625
====== ====== ======= ======
Weighted average number of common shares
outstanding (millions of shares) 3,479 3,452 3,479 3,451
Plus: Issued on assumed exercise of
stock options 42 47 41 44
Plus: Assumed conversion of preferred
stock 0 22 0 23
______ ______ _______ ______
Weighted average number of common shares
outstanding 3,521 3,521 3,520 3,518
====== ====== ======= ======
Net income per common share
- assuming dilution (dollars)
Before extraordinary item $ 1.16 $ 0.62 $ 3.15 $ 1.60
Extraordinary gain, net of income tax 0.12 0.00 0.40 0.00
______ ______ _______ ______
Net income $ 1.28 $ 0.62 $ 3.55 $ 1.60
====== ====== ======= ======
</TABLE>
<PAGE> -9-
8. Disclosures about Segments and Related Information
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
2000 1999 2000 1999
____ ____ ____ ____
<S> <C> <C> <C> <C>
(millions of dollars)
EARNINGS AFTER INCOME TAX
(Before extraordinary item)
Upstream
United States $ 1,215 $ 592 $ 3,181 $ 1,102
Non-U.S. 1,885 937 5,438 2,489
Downstream
United States 392 241 1,168 625
Non-U.S. 501 110 1,092 621
Chemicals
United States 132 199 551 541
Non-U.S. 132 154 395 421
All Other (197) (45) (740) (173)
_______ _______ ________ ________
Corporate Total $ 4,060 $ 2,188 $ 11,085 $ 5,626
======= ======= ======= ========
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 1,341 $ 857 $ 3,532 $ 2,180
Non-U.S. 3,405 3,309 10,520 8,740
Downstream
United States 14,045 11,875 41,162 29,933
Non-U.S. 33,940 28,507 96,728 77,638
Chemicals
United States 2,081 1,782 6,163 4,708
Non-U.S. 2,423 1,835 6,895 4,984
All Other 262 250 706 672
_______ _______ ________ ________
Corporate Total $57,497 $48,415 $165,706 $128,855
======= ======= ======== ========
INTERSEGMENT REVENUE
Upstream
United States $ 2,062 $ 1,127 $ 5,010 $ 2,628
Non-U.S. 4,931 1,969 12,617 5,068
Downstream
United States 1,818 777 3,790 1,843
Non-U.S. 2,957 1,635 7,066 4,076
Chemicals
United States 851 461 2,219 1,265
Non-U.S. 554 361 1,458 946
All Other 53 179 120 511
</TABLE>
<PAGE> -10-
EXXON MOBIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
<TABLE>
<CAPTION> Third Quarter First Nine Months
_____________ _________________
2000 1999 2000 1999
____ ____ ____ ____
<S> <C> <C> <C> <C>
(millions of dollars)
Earnings including merger effects and special items
___________________________________________________
Exploration and production
United States $1,215 $ 592 $ 3,181 $1,102
Non-U.S. 1,885 937 5,438 2,489
Refining and marketing
United States 392 241 1,168 625
Non-U.S. 501 110 1,092 621
Chemicals
United States 132 199 551 541
Non-U.S. 132 154 395 421
Other operations 148 108 394 290
Corporate and financing (115) (136) (429) (419)
Merger expenses (230) (17) (705) (44)
Gain on required asset divestitures 430 0 1,415 0
______ ______ _______ ______
NET INCOME $4,490 $2,188 $12,500 $5,626
====== ====== ======= ======
Net income per common share $ 1.29 $ 0.63 $ 3.59 $ 1.62
Net income per common share
- assuming dilution $ 1.28 $ 0.62 $ 3.55 $ 1.60
Merger effects and special items
________________________________
Exploration and production
Non-U.S. $ 0 $ 0 $ 0 $ 119
Refining and marketing
Non-U.S. 0 0 0 (120)
Merger expenses (230) (17) (705) (44)
Gain on required asset divestitures 430 0 1,415 0
______ ______ _______ ______
TOTAL $ 200 $ (17) $ 710 $ (45)
====== ====== ======= ======
Earnings excluding merger effects and special items
___________________________________________________
Exploration and production
United States $1,215 $ 592 $ 3,181 $1,102
Non-U.S. 1,885 937 5,438 2,370
Refining and marketing
United States 392 241 1,168 625
Non-U.S. 501 110 1,092 741
Chemicals
United States 132 199 551 541
Non-U.S. 132 154 395 421
Other operations 148 108 394 290
Corporate and financing (115) (136) (429) (419)
______ ______ _______ ______
TOTAL $4,290 $2,205 $11,790 $5,671
====== ====== ======= ======
Earnings per common share $ 1.23 $ 0.63 $ 3.39 $ 1.63
Earnings per common share
- assuming dilution $ 1.22 $ 0.62 $ 3.35 $ 1.61
</TABLE>
<PAGE> -11-
THIRD QUARTER 2000 COMPARED WITH THIRD QUARTER 1999
Exxon Mobil Corporation reported record results for the third consecutive
quarter. Excluding merger effects, estimated third quarter 2000 earnings of
$4,290 million ($1.22 per share) increased $2,085 million from the third
quarter of last year. Including net favorable merger effects of $200 million,
estimated net income of $4,490 million ($1.28 per share) increased $2,302
million from the third quarter of last year.
Revenue for the third quarter of 2000 totaled $58,568 million compared with
$48,986 million in 1999. Capital and exploration expenditures of $2,646
million in the third quarter of 2000 were up about 10 percent from the second
quarter and are expected to increase further in the fourth quarter.
Excluding merger effects, ExxonMobil's third quarter 2000 earnings improved
substantially from the same period a year ago, and were a third consecutive
quarterly record. These results continue to reflect historically high crude
oil and natural gas prices and further improvements in operating efficiency.
The combined assets of the new company continue to perform well and financial
results for the upstream and downstream businesses significantly exceeded the
same period last year. As was the case last quarter, the majority of the
improvement in profits came from outside the U.S. and from the upstream
business due to higher crude oil and natural gas prices. These prices, which
are the raw material costs for the downstream and chemicals businesses,
increased at a faster pace than prices in the highly competitive end-user and
consumer markets.
Upstream earnings were $3.1 billion and represented a fourth consecutive
record quarter. Upstream results benefited from higher crude oil prices, which
were up almost $10 per barrel from the third quarter of 1999, reflecting the
continuing impact of tight worldwide crude oil markets. Substantially higher
natural gas prices, particularly in the U.S., also contributed to improved
earnings. Liquids production, excluding the effects of lower entitlements
caused by higher crude prices, was 2 percent higher this quarter, mainly
reflecting new production from fields in the North Sea and Venezuela and
increased production from eastern Canada and Alaska.
Downstream earnings improved from last year's depressed results when business
fundamentals were deteriorating due to product oversupply and the inability of
product prices to keep pace with rising crude costs. However, these conditions
have continued in many markets throughout 2000 and have restrained downstream
profitability. The current quarter's results reflected improved worldwide
refining margins, improved refining performance and lower operating expenses,
partly offset by continued weakness in worldwide marketing margins and adverse
foreign exchange effects. While downstream earnings improved versus the
depressed levels of last year, they were lower than downstream results
achieved in the third quarters of 1997 and 1998.
Chemicals earnings declined, reflecting lower specialty chemical margins due
to the combined effect of rising feedstock and energy costs and adverse
foreign exchange effects. Earnings from other operations improved on higher
copper prices and lower operating expenses.
During the quarter, ExxonMobil continued its active investment program,
spending $2,646 million on capital and exploration projects. Capital
expenditures are expected to continue to increase in the fourth quarter.
On August 1, ExxonMobil announced its intention to purchase shares of its
common stock. During the third quarter the Corporation acquired 11.7 million
shares at a gross cost of $989 million to offset the dilution associated with
benefit plans and programs and to reduce common stock outstanding.
<PAGE> -12-
OTHER COMMENTS ON THIRD QUARTER COMPARISON
Upstream earnings benefited from higher crude oil prices that averaged almost
$10 per barrel more than the third quarter of 1999. Worldwide average natural
gas realizations were over 45 percent higher than last year, partly driven by
much higher U.S. gas prices as a result of growing demand and low industry
inventory levels. Lower exploration expenses also benefited upstream results.
Liquids production of 2,486 kbd (thousands of barrels per day) increased from
2,477 kbd in the third quarter of 1999. Excluding the impact of lower
entitlement volumes that resulted from higher crude prices, liquids volumes
increased 2 percent, reflecting a third full quarter of production from the
Balder and Jotun developments in Norway and the Cerro Negro development in
Venezuela. These increases more than offset the effects of natural field
declines. Third quarter natural gas production of 8,706 mcfd (millions of
cubic feet per day) increased slightly from the prior year due to higher
production in Europe, eastern Canada and Qatar, partly offset by lower
Indonesian volumes.
Earnings from U.S. upstream operations were $1,215 million, an increase of
$623 million from the prior year. Upstream earnings outside the U.S. were
$1,885 million, an increase of $948 million.
Downstream results improved mainly as a result of stronger worldwide refining
margins. Improved refinery performance, including better yields and reduced
downtime, and lower operating expenses also benefited earnings. These
favorable factors were partly offset by continued weakness in worldwide
marketing margins as product prices were not able to keep pace with the rapid
run-up in supply costs during the quarter. Adverse foreign exchange effects
resulting from the strengthening U.S. dollar also lowered earnings from the
prior period. Petroleum product sales were 8,101 kbd compared with 8,879 kbd
in the prior year's third quarter. The reduction was mainly due to the
required divestiture of Mobil's European fuels joint venture and U.S.
marketing and refining assets.
U.S. downstream earnings were $392 million, up $151 million as a result of
higher refining margins, improved operating performance and lower operating
expenses, partly offset by lower marketing margins. Outside of the U.S.,
higher refining margins more than offset the effects of lower marketing
margins and adverse foreign exchange movements. Non-U.S. downstream earnings
of $501 million were $391 million higher than the depressed levels of last
year.
Although total downstream earnings improved from last year's depressed levels,
the corporation had difficulty in recovering the significantly higher crude
oil costs in the market place. Even with these improved results, the U.S.
business made about 4 cents per gallon.
Chemicals earnings were $264 million, down $89 million from the same quarter a
year ago as higher feedstock and energy costs put significant pressure on
margins. Results were also reduced by adverse foreign exchange effects related
to the strengthening of the U.S. dollar. Prime product sales volumes of 6,038
kt (thousands of metric tons) were down from the record level of 6,288 kt last
year, primarily reflecting planned turnarounds.
Earnings from other operations, including coal, minerals and power, totaled
$148 million, compared with $108 million in the third quarter of 1999. Higher
copper prices and lower operating expenses more than offset the impact of
lower coal prices.
Corporate and financing expenses of $115 million compared with $136 million in
the third quarter of 1999. The decrease was driven by a reduction in
administrative expenses as a result of combining Exxon and Mobil headquarters
operations and lower interest expenses due to lower debt levels. These
benefits were partly offset by the effect of higher interest rates and lower
tax-related benefits.
<PAGE> -13-
During the period, the company's operating segments continued to benefit from
reductions in the tax rates of several countries and favorable resolution of
tax-related issues.
Third quarter net income included gains on required asset divestments of
$430 million, offset by $230 million of merger expenses, including
implementation expenses and employee separations.
FIRST NINE MONTHS 2000 COMPARED WITH FIRST NINE MONTHS 1999
Excluding merger effects and special items, earnings of $11,790 million ($3.35
per share) for the first nine months of 2000 increased $6,119 million from the
first nine months of last year. Including net favorable merger effects of $710
million in the current year, net income of $12,500 million ($3.55 per share)
increased $6,874 million.
Upstream earnings increased due to higher crude oil and natural gas
realizations, up about 80 percent and 40 percent, respectively. Liquids
production of 2,525 kbd increased from 2,496 kbd in the first nine months of
1999. Excluding the effects of lower entitlements caused by higher crude
prices, liquids production was 3 percent higher than last year, mainly
reflecting new production from fields in the North Sea and Venezuela and
increased production from eastern Canada and Alaska. These increases more than
offset the effects of natural field declines. Worldwide natural gas production
of 10,016 mcfd was up 228 mcfd reflecting higher production in eastern Canada,
Europe and Qatar, partly offset by lower production in Indonesia. Exploration
expenses were also lower this year.
Earnings from U.S. upstream operations for the first nine months were
$3,181 million, an increase of $2,079 million from 1999. Earnings outside the
U.S. were $5,438 million, $3,068 million higher than last year, excluding
special items from 1999.
Petroleum product sales of 7,970 kbd compared with 8,898 kbd in the first nine
months of 1999. The decrease reflects the effects of the required divestiture
of Mobil's European fuels joint venture and U.S. marketing and refining assets
and lower supply sales in Asia-Pacific as a result of the low margin
environment. Overall, year to date downstream results have been adversely
affected by continued difficulty in recovering the significant increases in
raw material costs. Earnings from U.S. downstream operations were $1,168
million, up $543 million from 1999, reflecting stronger refining margins,
improved operations and lower operating expenses. Excluding special items from
1999, earnings outside the U.S. of $1,092 million were $351 million higher
than last year. The effects of lower marketing margins and volumes were more
than offset by stronger European and Southeast Asian refining margins.
Chemicals earnings totaled $946 million in the first nine months of 2000
compared with $962 million last year. Prime product sales volumes of 19,153 kt
were 3 percent higher than last year. The effects of higher volumes and
stronger industry commodity prices were offset by significant margin pressure
on specialty products and adverse foreign exchange effects.
Earnings from other operations totaled $394 million, an increase of $104
million from the first nine months of 1999, reflecting higher copper prices
and lower operating expenses, partly offset by lower coal prices.
Corporate and financing expenses of $429 million compared with $419 million in
the first nine months of 1999. A reduction in administrative expenses as a
result of combining Exxon and Mobil headquarters operations and lower interest
expense resulting from lower debt levels were offset by the effect of higher
interest rates and lower tax-related benefits.
<PAGE> -14-
MERGER OF EXXON CORPORATION AND MOBIL CORPORATION
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation merged
with Mobil Corporation so that Mobil became a wholly-owned subsidiary of Exxon
(the "Merger"). At the same time, Exxon changed its name to Exxon Mobil
Corporation.
As a result of the Merger, the accounts of certain refining, marketing and
chemicals operations jointly controlled by the combining companies have been
included in the consolidated financial statements. These operations were
previously accounted for by Exxon and Mobil as separate companies using the
equity method of accounting.
The Merger was accounted for as a pooling of interests. Accordingly, the
consolidated financial statements give retroactive effect to the Merger, with
all periods presented as if Exxon and Mobil had always been combined.
In the third quarter of 2000, in association with the Merger, $372 million of
before tax costs ($230 million after tax) were recorded as merger related
expenses. For the nine months ended September 30, 2000 merger related expenses
totaled $1,104 million before tax ($705 million after tax). Additional
severance and implementation expenses will be recognized during 2000 as the
merger implementation program progresses.
Charges in the third quarter of 2000 included separation expenses of
approximately $145 million related to workforce reductions (for an additional
400 employees). During the quarter, 900 employees actually separated and were
paid pursuant to various severance plans.
The severance reserve balance is expected to be expended in 2000, 2001 and
2002. The following table summarizes the activity in the severance reserve for
the nine months ended September 30, 2000:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
330 659 564 425
Merger related expenses are expected to grow to approximately $2.5 billion
before tax on a cumulative basis by 2002. Pre-tax operating synergies
associated with the Merger, including cost savings and efficiency gains, are
expected to reach $4.6 billion per year by 2002. Merger synergy initiatives
are on track and the rate of benefit capture is expected to increase.
Certain property -- primarily refining, marketing, pipeline and natural gas
distribution assets -- must be divested as a condition of the regulatory
approval of the Merger by the U.S. Federal Trade Commission and the European
Commission. Third quarter 2000 results included a net after tax gain of $430
million (including an income tax credit of $41 million), or $0.12 per common
share, from such divestments. Third quarter divestments included Exxon's share
of Thyssengas GmbH, a gas transmission, distribution, and storage company in
Germany, and Mobil's share of Colonial Pipeline Company in the U.S.
<PAGE> -15-
For the nine months ended September 30, 2000, the net after tax gain from
required asset divestitures totaled $1,415 million (net of $583 million of
income taxes) and more than offset the cumulative 2000 merger expenses of $705
million after tax. The net after tax gain on required divestments was reported
as an extraordinary item according to accounting requirements for business
combinations accounted for as a pooling of interests. The remaining required
divestments will occur during the fourth quarter of 2000 and are also expected
to result in a net gain.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generation before financing activities was $15,159 million in the
first nine months of 2000 versus $2,798 million in the same period last year.
Operating activities provided net cash of $16,862 million, an increase of
$6,101 million from the prior year, influenced by higher net income. Investing
activities used net cash of $1,703 million, compared to $7,963 million in the
prior year, reflecting lower additions to property, plant, and equipment and
the proceeds from the asset divestments that were required as a condition of
regulatory approval of the merger.
Net cash used in financing activities was $9,871 million in the first nine
months of 2000 versus $2,917 million in the same period last year. The
increase was driven by debt reductions in the current year period versus debt
increases last year.
Prior to the merger, the corporation purchased shares of its common stock for
the treasury. Consistent with pooling accounting requirements, this repurchase
program was terminated effective with the close of the ExxonMobil merger on
November 30, 1999. On August 1, 2000, the corporation announced its intention
to purchase shares of its common stock. During the third quarter of 2000,
Exxon Mobil Corporation purchased 11.7 million shares of its common stock for
the treasury at a gross cost of $989 million. These purchases were to offset
shares issued in conjunction with company benefit plans and programs and to
reduce the number of shares outstanding. Shares outstanding were reduced from
3,484 million at the end of the second quarter of 2000 to 3,476 million at the
end of the third quarter. Purchases may be made in both the open market and
through negotiated transactions, and may be discontinued at any time.
Revenue for the first nine months of 2000 totaled $168,605 million compared
to $130,945 million in the first nine months of 1999.
Capital and exploration expenditures were $7,294 million in the first nine
months of 2000 compared to $9,850 million last year. The capital and
exploration spending program for 2000 is forecast to be between $11 and $12
billion. Spending over the next several years is projected to be in the $13
billion plus range.
Total debt of $14.2 billion at September 30, 2000 decreased $4.7 billion
from year-end 1999. The corporation's debt to total capital ratio was 16.6
percent at the end of the third quarter of 2000, compared to 22.0 percent at
year-end 1999.
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.
<PAGE> -16-
Litigation and other contingencies are discussed in note 5 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, within the constraints of pooling of interests accounting, which will
result in either gains or losses.
FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future
events or conditions are forward-looking statements. Actual future
results, including synergy benefits from the merger; asset divestment
proceeds; financing sources; the resolution of contingencies; the effect
of changes in prices, interest rates and other market conditions; and
environmental and capital expenditures could differ materially depending
on a number of factors. These factors include management's ability to
implement merger plans successfully and on schedule; the outcome of
commercial negotiations; and other factors discussed above and discussed
under the heading "Factors Affecting Future Results" in Item 1 of
ExxonMobil's most recent Annual Report on Form 10-K.
<PAGE> -17-
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the nine months ended
September 30, 2000 does not differ materially from that discussed
under Item 7A of the registrant's Annual Report on Form 10-K for
1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 19, 2000, a previously reported matter, involving seven
misdemeanor charges based upon allegations of water pollution caused
by pipeline leaks in Harris County, Texas, was resolved. Pursuant to
a plea bargain agreement, Exxon Pipeline Company entered a nolo
contendere plea in Harris County Criminal Court at Law #15 and was
assessed a total penalty of $106,346 (including court costs).
Additionally, the company agreed to make a voluntary contribution of
$70,000 to the Harris County Supplemental Environmental Projects
Fund. The State had originally sought total penalties of $700,000.
As part of the agreement, the Harris County Pollution Control
Division agreed not to bring civil litigation through the Harris
County Attorney's office for the same alleged violations.
On August 10, 2000, the Texas Natural Resource Conservation
Commission commenced a proceeding captioned "In the Matter of an
Enforcement Action Concerning Exxon Mobil Corporation, Air Account
No. JE-0067-I." The action alleges that the corporation failed to
timely install NOx RACT and meet other related requirements at the
Mobil Oil Corporation Beaumont, Texas refinery in violation of the
Texas Health and Safety Code and various Commission rules. The
proceeding seeks an administrative penalty of $234,900. Discussions
with the Commission are ongoing.
On August 17, 2000, a previously reported matter, involving a demand
letter from the California South Coast Air Quality Management
District alleging that Mobil Oil Corporation's Torrance Refinery had
underpaid air emissions fees, was settled by payment of the allegedly
underpaid fees. The District had initially proposed penalties of
approximately $1.4 million. The settlement disposes of the matter
without assessing any penalties.
On August 29, 2000, the Environmental Protection Agency issued a
Notice and Findings of Violation alleging miscellaneous breaches of
federal environmental rules and regulations identified during an
October 1999 multimedia audit of Mobil Oil Corporation's Joliet
Refinery. Although the EPA has not yet made a penalty demand, it is
possible the EPA could seek penalties in excess of the $100,000
reporting threshold.
On September 28, 2000, a Complaint and Consent Order relating to a
previously reported matter was lodged with the U.S. District Court,
Central District of California. In July, 1999, Mobil Oil Corporation
agreed in principle with the U.S. Department of Justice (the "DOJ")
and the U.S. Environmental Protection Agency (the "EPA") to settle
previously reported allegations that the operations of Mobil Oil
Corporation's Torrance, California refinery had violated provisions
of the Clean Air Act, the Clean Water Act, the Emergency Planning and
Community Right to Know Act and the Comprehensive Environmental
Response,
<PAGE> -18-
Compensation and Liability Act. The DOJ and the EPA had
originally sought a penalty of $2.5 million. Mobil Oil Corporation
agreed to pay a civil penalty of $500,000 and to spend an additional
$1 million on various supplemental environmental projects. Entry of
the Order is expected in December 2000.
On October 11, 2000, Mobil Oil Corporation was served in a civil
action by the Santa Barbara District Attorney. The suit, which
follows the issuance of Notices of Violation by the Santa Barbara Air
Pollution Control District, alleges that certain Mobil Oil
Corporation service stations violated California air quality
requirements relating to Stage II vapor recovery systems and seeks
penalties in excess of $1 million.
Refer to the relevant portions of Note 5 on pages 7 through 9 of this
Quarterly Report on Form 10-Q for further information on legal
proceedings.
Item 2. Changes in Securities
In accordance with the registrant's 1997 Nonemployee Director
Restricted Stock Plan, as amended, each incumbent nonemployee
director on September 27, 2000 who was not formerly a nonemployee
director of Mobil Corporation (9 persons) was granted 4,000 shares of
restricted stock October 1, 2000. Additionally, each incumbent
nonemployee director on September 27, 2000 (13 persons) was granted
150 shares of restricted stock on October 1, 2000 pursuant to the
Plan. These grants are exempt from registration under bonus stock
interpretations such as the "no-action" letter to Pacific Telesis
Group (June 30,1992).
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 10(iii)(f) - 1997 Nonemployee Director Restricted Stock Plan,
as amended.
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> -19-
EXXON MOBIL 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 MOBIL CORPORATION
Date: November 13, 2000 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
<PAGE> -20-
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX TO EXHIBITS
10(iii)(f). 1997 Nonemployee Director Restricted Stock Plan, as amended.
27. Financial Data Schedule (included only in the electronic filing
of this document).
<PAGE> -21-
