- - -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 1-7555
MOBIL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2850309
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3225 Gallows Road, Fairfax, VA. 22037-0001
(Address of principal executive offices) (Zip Code)
(703) 846-3000
Registrant's telephone number
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 .
The number of shares outstanding of the registrant's common
stock, all of which comprise a single class with a $1.00 par
value, as of October 31, 1997, the latest practicable date, was
784,412,717.
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<PAGE>
Form 10-Q
Quarterly Report
September 30, 1997
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PART I - FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements
Consolidated Statement of Income for the
Three and Nine Months Ended
September 30, 1996 and 1997 .................. 1
Consolidated Balance Sheet at December 31, 1996
and September 30, 1997 ....................... 2
Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1996 and 1997. 3
Notes to Condensed Consolidated Financial
Statements ................................... 4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition .......... 5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................ 14
Item 2. Changes in Securities ............................ 15
Item 3. Defaults Upon Senior Securities .................. 15
Item 4. Submission of Matters to a Vote of Security
Holders ........................................ 15
Item 5. Other Information ................................ 15
Item 6. Exhibits and Reports on Form 8-K ................. 15
SIGNATURE .................................................. 16
EXHIBIT INDEX .............................................. 17
Exhibit 11. Computation of Earnings per Common Share ..... 18
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges .................................... 20
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per-share amounts)
For the Three Months|For the Nine Months
Ended September 30,|Ended September 30,
--------------------|-------------------
|
1996 1997 | 1996 1997
--------- -------| -------- -------
<S> <C> <C>| <C> <C>
Revenues |
Sales and services (a) .................. $19,852 $15,950| $57,642 $48,257
Income from equity investments, asset |
sales, interest and other ............. 474 447| 904 1,075
------- -------| ------- -------
|
Total Revenues ........................ 20,326 16,397| 58,546 49,332
------- -------| ------- -------
Costs and Expenses |
Crude oil, products and operating |
supplies and expenses ................. 11,788 10,159| 33,687 31,158
Exploration expenses .................... 143 105| 291 262
Selling and general expenses ............ 1,176 1,057| 3,541 2,999
Depreciation, depletion and amortization 645 590| 1,903 1,848
Interest and debt discount expense ...... 119 142| 332 331
Taxes other than income taxes (a) ....... 4,850 2,682| 14,077 7,794
Income taxes ............................ 836 770| 2,427 2,372
------- -------| ------- -------
Total Costs and Expenses .............. 19,557 15,505| 56,258 46,764
------- -------| ------- -------
Net Income ................................ $ 769 $ 892| $ 2,288 $ 2,568
======= =======| ======= =======
|
Net Income Per Common Share (b)(c)......... $ .96 $ 1.12| $ 2.85 $ 3.21
======= =======| ======= =======
|
Dividends Per Common Share (c)............. $ .50 $ .53| $ 1.463 $ 1.59
======= =======| ======= =======
|
|
|
Notes: |
|
(a) Includes excise and state gasoline |
taxes of ............................ $ 2,313 $ 1,486| $ 6,685 $ 4,432
|
(b) Based on net income less preferred |
stock dividend requirements of ...... $ 13 $ 13| $ 40 $ 39
divided by the weighted average |
number of common shares outstanding |
(000's) of (c)....................... 787,850 785,798| 788,442 786,975
(c) Shares outstanding and per share amounts reflect a two-for-one stock split
which had a record date of May 20, 1997. Prior year share numbers and per
share amounts have been restated on a comparable basis.
The accompanying notes are an integral part of these
condensed consolidated financial statements
MOBIL - 1 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOBIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In millions)
Dec. 31, Sep.30,
ASSETS 1996 1997
<S> ------- -------
Current Assets <C> <C>
Cash and cash equivalents ................................ $ 808 $ 1,064
Accounts and notes receivable ............................ 8,192 6,140
Inventories .............................................. 3,017 2,411
Prepaid expenses and other current assets ................ 627 740
Deferred income taxes .................................... 251 245
------- -------
Total Current Assets ................................... 12,895 10,600
Investments and Long-Term Receivables ...................... 5,078 7,786
Properties, Plants and Equipment ........................... 55,127 50,187
Less: Accumulated Depreciation, Depletion and Amortization . 27,648 25,234
------- -------
Net Properties, Plants and Equipment ....................... 27,479 24,953
Deferred Charges and Other Assets .......................... 956 837
------- -------
Total Assets ........................................... $46,408 $44,176
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt .......................................... $ 3,425 $ 3,188
Accounts payable ......................................... 5,935 4,544
Accrued liabilities ...................................... 2,968 2,547
Income, excise, state gasoline and other taxes payable ... 2,615 1,988
Deferred income taxes .................................... 305 257
------- -------
Total Current Liabilities .............................. 15,248 12,524
Long-Term Debt ............................................. 4,450 4,103
Reserves for Employee Benefits ............................. 1,681 1,629
Accrued Restoration, Removal and Environmental Costs ....... 1,240 1,124
Deferred Credits and Other Noncurrent Obligations .......... 1,255 1,480
Deferred Income Taxes ...................................... 3,416 3,665
Minority Interest in Subsidiary Companies .................. 46 114
------- -------
Total Liabilities ...................................... 27,336 24,639
------- -------
Shareholders' Equity
Preferred stock (ESOP-related) -- shares issued and
outstanding: 176,336 at December 31, 1996 and
172,133 at September 30, 1997 .......................... 686 669
Unearned employee compensation (ESOP-related) ............ (365) (338)
Common stock -- $1.00 par value; shares authorized:
1,200,000,000; shares issued: 891,075,610 at
December 31, 1996 and 893,785,571 at September 30, 1997. 891 894
Capital surplus .......................................... 1,468 1,531
Earnings retained in the business ........................ 19,108 20,386
Cumulative foreign exchange translation adjustment ....... (73) (599)
Common stock held in treasury, at cost -- shares:
103,486,700 at December 31, 1996 and 108,854,800 at
September 30, 1997 ..................................... (2,643) (3,006)
------- -------
Total Shareholders' Equity ............................. 19,072 19,537
------- -------
Total Liabilities and Shareholders' Equity ................. $46,408 $44,176
======= =======
(Common and preferred stock data reflect a two-for-one stock split which had a
record date of May 20, 1997. Prior year data have been restated on a comparable
basis.)
The accompanying notes are an integral part of these
condensed consolidated financial statements
MOBIL - 2 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
For the Nine Months
Ended September 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ......................................... $ 2,288 $ 2,568
Adjustments to reconcile to net cash from
operating activities:
Depreciation, depletion and amortization ....... 1,903 1,848
Deferred income taxes .......................... 372 313
Earnings less (greater) than dividends from
equity affiliates ............................ 111 (104)
Exploration expenses (includes noncash
charges: 1996-$16; 1997-$17) ................ 291 262
Gain on sales of properties, plants and
equipment and other assets ................... (311) (289)
Increase in working capital items .............. (470) (19)
Other, net ..................................... (1) 315
------- -------
Net Cash from Operating Activities ................... 4,183 4,894
------- -------
Cash Flows from Investing Activities
Capital and exploration expenditures ............... (3,311) (2,957)
Acquisition of Ampolex Limited, net of cash
acquired ......................................... (1,347) -
Proceeds from sales of properties, plants and
equipment and other assets ....................... 1,005 622
Payments attributable to investments and
long-term receivables ............................ (638) (414)
------- -------
Net Cash Used in Investing Activities ................ (4,291) (2,749)
------- -------
Cash Flows from Financing Activities
Cash dividends ..................................... (1,193) (1,290)
Proceeds from borrowings having original
terms greater than three months .................. 1,038 804
Repayments of borrowings having original
terms greater than three months .................. (744) (1,693)
Increase in other borrowings .......... ............ 1,362 608
Proceeds from issuance of common stock ............. 55 66
Purchase of common stock for treasury .............. (207) (363)
------- -------
Net Cash Provided by (Used in) Financing Activities .. 311 (1,868)
------- -------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents ................................... 5 (21)
------- -------
Net Increase in Cash and Cash Equivalents ............ 208 256
Cash and Cash Equivalents - Beginning of Period ...... 498 808
------- -------
Cash and Cash Equivalents - End of Period ............ $ 706 $ 1,064
======= =======
- - -------------------------------------------------------------------------------
Memo:
Net cash from operating activities .................. $ 4,183 $ 4,894
Net cash used in investing activities ............... (4,291) (2,749)
Cash dividends ...................................... (1,193) (1,290)
------- -------
(Shortfall) excess of cash from operating activities
over investing activities and dividends ............ $(1,301) $ 855
======= =======
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The accompanying notes are an integral part of these
condensed consolidated financial statements
MOBIL - 3 -
</TABLE>
<PAGE>
MOBIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Financial Statements
The condensed consolidated financial statements of Mobil Corporation (Mobil)
included herein are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Although certain
information normally included in financial statements prepared in accordance
with generally accepted accounting principles has been condensed or omitted,
Mobil believes that the disclosures are adequate to make the information
presented not misleading. The condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements, the notes
thereto and the financial statement schedule included or incorporated by
reference in Mobil's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996.
The condensed consolidated financial statements included herein reflect all
normal recurring adjustments that, in the opinion of management, are necessary
for a fair presentation. The results for interim periods are not necessarily
indicative of trends or of results to be expected for a full year.
2. Supplementary Cash Flow Data
The table below details the components of the line "Increase in working
capital items" which is shown in the Consolidated Statement of Cash Flows on
page 3. The impact of changes in foreign currency translation rates has been
removed from these amounts. Therefore, these amounts do not agree with the
differences that could be derived from the Consolidated Balance Sheet amounts
shown on page 2.
--------------------------------------------------------------------------
(In millions) For the Nine Months
Ended September 30,
--------------------
1996 1997 (a)
Changes in Working Capital Items
(Increases)/decreases
Accounts and notes receivable ................. $(501) $ 796
Inventories ................................... (214) (102)
Prepaid expenses and other current assets ..... (40) (180)
Accounts payable .............................. 235 (328)
Accrued liabilities ........................... (1) 43
Income, excise, state gasoline and
other taxes payable ......................... 51 (248)
----- -----
Increase in working capital items ............. $(470) $ (19)
===== =====
--------------------------------------------------------------------------
(a) The effects of the implementation of the Mobil-BP alliance have been
removed from these amounts.
MOBIL - 4 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
-------------------------------------------------------------------------------
REPORTED EARNINGS Third Quarter |First Nine Months
(In millions) ______________ Incr./ |________________ Incr./
(Decr.) | (Decr.)
1996 1997 | 1996 1997
---- ---- ----- ---- ---- -----
Petroleum Operations |
E&P - United States ........ $ 234 $ 160 $ (74) | $ 556 $ 511 $ (45)
- International ........ 303 313 10 | 963 1,114 151
----- ----- ----- | ------ ------ ------
Total E&P .................. 537 473 (64) | 1,519 1,625 106
----- ----- ----- | ------ ------ ------
M&R - United States ........ 83 230 147 | 311 382 71
- International ........ 148 116 (32) | 512 496 (16)
----- ----- ----- | ------ ------ ------
Total M&R .................. 231 346 115 | 823 878 55
----- ----- ----- | ------ ------ ------
Total Petroleum .............. 768 819 51 | 2,342 2,503 161
|
Chemical ..................... 90 155 65 | 225 331 106
Corporate and Financing (a)... (89) (82) 7 | (279) (266) 13
----- ----- ----- | ------ ------ ------
Net Income ................... $ 769 $ 892 $ 123 | $2,288 $2,568 $ 280
===== ===== ===== | ====== ====== ======
-------------------------------------------------------------------------------
OPERATING EARNINGS Third Quarter |First Nine Months
Adjusted for Special Items) ______________ Incr./ |________________ Incr./
(In millions) (Decr.) | (Decr.)
1996 1997 | 1996 1997
---- ---- ----- ---- ---- -----
Petroleum Operations |
E&P - United States ......... $ 152 $ 123 $ (29) | $ 474 $ 474 $ -
- International ......... 270 317 47 | 930 1,118 188
----- ----- ----- | ------ ------ ------
Total E&P ................... 422 440 18 | 1,404 1,592 188
----- ----- ----- | ------ ------ ------
M&R - United States ......... 83 240 157 | 311 392 81
- International ......... 148 209 61 | 512 627 115
----- ----- ----- | ------ ------ ------
Total M&R ................... 231 449 218 | 823 1,019 196
----- ----- ----- | ------ ------ ------
Total Petroleum ............... 653 889 236 | 2,227 2,611 384
|
Chemical ...................... 90 102 12 | 225 278 53
Corporate and Financing (a).... (75) (84) (9) | (234) (268) (34)
----- ----- ----- | ------ ------ ------
Income Excluding Special Items. 668 907 239 | 2,218 2,621 403
Special Items (table on page 6) 101 (15) (116) | 70 (53) (123)
----- ----- ----- | ------ ------ ------
Net Income .................... $ 769 $ 892 $ 123 | $2,288 $2,568 $ 280
===== ===== ===== | ====== ====== ======
-------------------------------------------------------------------------------
(a) Corporate and Financing includes the results from Real Estate operations
and Mining and Minerals (substantially all of these businesses were sold in
1996), corporate administrative expenses, net financing expense and other
items.
MOBIL - 5 -
<PAGE>
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SPECIAL ITEMS Third Quarter | First Nine Months
(In millions) |
1996 1997 | 1996 1997
---- ---- ---- ----
|
Asset Sales ......................... $ 129 140 | $ 129 $ 140
Restructurings ...................... - $ (72) | - (110)
Employee Performance Award .......... - (50) | - (50)
Litigation .......................... - (33) | - (33)
SRP Implementation (a)............... (28) - | $ (59) -
----- ----- | ----- -----
Total Special Items ............... $ 101 $ (15) | $ 70 $ (53)
===== ===== ===== =====
(a) Staff Redesign Project (SRP).
================================================================================
REVENUES BY SEGMENT Third Quarter | First Nine Months
(In millions) Incr./ | Incr./
(Decr.) | (Decr.)
1996 1997 % | 1996 1997 %
---- ---- ----- ---- ---- ----
|
Exploration & Producing . $ 1,974 $ 1,664 (16)(a) | $ 5,815 $ 5,490 (6)(a)
Marketing & Refining .... 17,500 13,762 (21)(b) | 50,138 41,156 (18)(b)
Chemical ................ 768 868 13 | 2,341 2,465 5
Other ................... 84 103 23 | 252 221 (12)
------- ------- | ------- -------
Total Revenues ........ $20,326 $16,397 (19) | $58,546 $49,332 (16)
======= ======= | ======= =======
(a) Reflects the impact of equity accounting for gas marketing activities in
the U.S.
(b) Reflects the impact of equity accounting for M&R European alliance with BP.
- - --------------------------------------------------------------------------------
CONSOLIDATED RESULTS OVERVIEW
THIRD QUARTER 1997 COMPARED WITH THIRD QUARTER 1996
Consolidated third quarter net income was $892 million, an increase of $123
million from the $769 million reported for the third quarter of 1996. Earnings
per common share for the third quarter of 1997 were $1.12, compared with $0.96
for the same quarter of 1996. This year's third quarter net income included net
special charges of $15 million, as gains on various asset sales were more than
offset by restructuring charges, net unfavorable litigation charges and an
accrual for a one-time cash bonus to employees. Third quarter 1996 net income
included net special benefits of $101 million, as gains on asset sales were
partly offset by special charges for implementation of the Staff Redesign
Project. Excluding special items from both periods, third quarter 1997 operating
earnings of $907 million increased $239 million, or 36%.
Mobil's third quarter earnings were higher, reflecting strong volume growth
from initiatives and, in general, strong performance by our business units.
Overall for the quarter, industry factors were somewhat favorable. Downstream
margins in the U.S. and Europe, worldwide aromatics margins and U.S. natural gas
prices were higher, while worldwide crude oil prices and international gas
prices were lower.
In the upstream, despite a significant decrease in crude oil prices, worldwide
earnings were higher. Production increased over 7% in the third quarter and over
5% so far this year, compared with the corresponding periods last year, the
result of Mobil's growth initiatives in Nigeria, Equatorial Guinea, Australia/
Papua New Guinea, Kazakhstan and Qatar.
MOBIL - 6 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
Downstream, Mobil's U.S. marketing and refining business achieved its second
consecutive quarter of record earnings helped by strong margins and excellent
operating performance at our refineries.
In international downstream, European operations continued to benefit from the
alliance with BP. In Asia-Pacific, earnings were up substantially despite the
economic downturn in parts of the region and weakness in industry refining
margins. Earnings benefited from good operating performance, higher sales as a
result of a strong marketing presence and the streaming of a new lubes facility
at Jurong in Singapore.
In Chemical, paraxylene and other aromatics volumes increased, reflecting
capacity increases of nearly 50% since last year. The higher volumes, when
combined with higher margins and improved operating performance, led to
increased earnings this year.
Worldwide revenues in the third quarter of 1997 of $16,397 million were $3,929
million lower than revenues in the third quarter of 1996, reflecting the effect
of the implementation of the Mobil-BP European downstream alliance which is
accounted for on an equity basis. Additionally, worldwide crude oil and
international natural gas prices were lower. Somewhat offsetting these effects
on revenues were higher worldwide sales volumes in most business sectors and
higher U.S. natural gas prices.
Crude oil, products and operating supplies and expenses decreased by $1,629
million to $10,159 million, primarily due to the effects of equity accounting
for the Mobil-BP and Mobil-Shell (California upstream) alliances, and lower
average costs for crude oil, partly offset by higher volume-related expenses and
increased spending for growth programs in new venture areas. Selling and general
expenses decreased $119 million to $1,057 million, primarily due to the effects
of the Mobil-BP alliance, expense reductions associated with cost savings
initiatives and the effects of the divestiture of certain noncore businesses
late last year. These reductions to Selling and general expenses were partly
offset by a reserve for restructuring in Japan and an accrual for the one-time
cash bonus for employees. Depreciation, depletion and amortization expenses
decreased $55 million to $590 million as decreases resulting from equity
accounting for the Mobil-BP and Mobil-Shell alliances were partly offset by the
effects of capital spending. Taxes other than income taxes decreased $2,168
million to $2,682 million, as the effects of the Mobil-BP and Mobil-Shell
alliances were partly offset by the effects of higher worldwide sales volumes.
Income tax expense decreased $66 million to $770 million, mainly due to mix
changes in the sources of earnings and certain favorable tax adjustments.
In February 1997, FAS 128 Earnings Per Share was issued and is effective for
financial statements for periods ending after December 15, 1997. FAS 128
requires disclosure of both earnings per common share and earnings per share
giving effect to all dilutive potential common shares. Had FAS 128 been
effective at September 30, 1997, the dilutive effects on Mobil's earnings per
share would not have been material.
MOBIL - 7 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
FIRST NINE MONTHS 1997 COMPARED WITH FIRST NINE MONTHS 1996
Mobil's consolidated net income for the first nine months of 1997 was $2,568
million, compared with $2,288 million for the same period of 1996. This year's
results included net special charges of $53 million reflecting various
restructuring charges, certain net litigation charges and an accrual for a
one-time cash bonus for employees, partly offset by gains on various asset
sales. Net income for the first nine months of 1996 included net special
benefits of $70 million reflecting gains on asset sales, partly offset by
charges associated with implementing the Staff Redesign Project.
Excluding special items, operating earnings were $2,621 million for the first
nine months of 1997 million, up $403 million, or 18%, from the comparable period
of 1996. The improvement was due to the favorable impacts of worldwide volume
growth in all sectors of the business and contributions from newly formed joint
ventures, notably the Mobil-BP downstream alliance in Europe, partly offset by
higher expenses in new business development areas. Industry fundamentals were
favorable overall. Higher integrated downstream margins in the U.S. and Europe,
increased worldwide natural gas prices and improved polyethylene margins, more
than offset lower Asia-Pacific downstream margins and lower worldwide aromatics
margins.
Nine month 1997 revenues of $49,332 million were $9,214 million lower than
revenues in the same period of 1996 primarily due to the effects of equity
accounting for the Mobil-BP European alliance. Partly offsetting the effects of
the alliance were higher worldwide natural gas prices, higher polyethylene
prices and higher worldwide sales volumes. Additionally, income from equity
investments, mainly in Europe, Kazakhstan and the U.S., was significantly
higher.
Crude oil, products and operating supplies and expenses decreased in the first
nine months of 1997 by $2,529 million to $31,158 million compared with the same
period last year, primarily due to the effects of equity accounting for the
Mobil-BP alliance and lower average costs for crude oil, partly offset by higher
volume-related expenses and increased spending for growth programs in new
venture areas. Selling and general expenses decreased $542 million to $2,999
million, primarily due to the effects of the Mobil-BP alliance, expense
reductions associated with cost savings initiatives and the effects of the
divestiture of certain noncore businesses. These reductions to Selling and
general expenses were partly offset by a reserve for restructuring in Japan and
an accrual for the one-time cash bonus for employees. Depreciation, depletion
and amortization expenses were slightly lower as decreases resulting from equity
accounting for the Mobil-BP European downstream and the Mobil-Shell California
upstream alliances were largely offset by the effects of last year's acquisition
of Ampolex and other capital spending. Taxes other than income taxes decreased
$6,283 million to $7,794 million, as the effects of the alliances were partly
offset by the effects of higher worldwide sales volumes. Income tax expense
decreased somewhat, from $2,427 million to $2,372 million, as the effects of
higher pre-tax income were more than offset by mix changes in the sources of
earnings and certain favorable tax adjustments.
MOBIL - 8 -
<PAGE>
Exploration and Producing
- - --------------------------------------------------------------------------------
Exploration and Producing
Selected Operating Data Third Quarter First Nine Months
Incr./(Decr.) Incr./(Decr.)
1996 1997 Vol. % 1996 1997 Vol. %
Net Crude Oil and NGL |
Production (TBD) - U.S. . 257 246 (11) (4) | 268 243 (25) (9)
- Intl. 594 692 98 16 | 568 673 105 18
----- ----- ----- | ----- ----- -----
Total ................... 851 938 87 10 | 836 916 80 10
===== ===== ===== | ===== ===== =====
Net Natural Gas |
Production (MMCFD) - U.S. . 1,284 1,124 (160)(12) | 1,366 1,156 (210)(15)
- Intl. 2,784 3,092 308 11 | 3,118 3,364 246 8
----- ----- ----- | ----- ----- -----
Total ................... 4,068 4,216 148 4 | 4,484 4,520 36 1
===== ===== ===== | ===== ===== =====
TOTAL NET PRODUCTION (TBDOE). 1,588 1,702 114 7 | 1,648 1,735 87 5
===== ===== ===== | ===== ===== =====
- - --------------------------------------------------------------------------------
THIRD QUARTER 1997 COMPARED WITH THIRD QUARTER 1996
Exploration and Producing income of $473 million was $64 million lower than
the third quarter of last year. This year's results included $33 million of net
special benefits reflecting gains on various asset sales, partly offset by a
litigation charge and accruals for a one-time cash bonus for employees. Last
year's income included $115 million of special benefits from gains on various
asset sales. Excluding special items from both periods, operating earnings were
$440 million this year compared with $422 million in last year's third quarter.
In the United States, operating earnings were $123 million, down $29 million,
primarily due to lower production volumes resulting from asset sales and natural
field declines. The favorable effect of higher natural gas prices was more than
offset by lower crude oil prices.
International operating earnings of $317 million were $47 million higher than
the same quarter last year. Benefits related to higher volumes and lower
exploration expenses were somewhat offset by the impact of lower crude oil and
natural gas prices and higher operating expenses in new venture areas.
FIRST NINE MONTHS 1997 COMPARED WITH FIRST NINE MONTHS 1996
Exploration and Producing income of $1,625 million was $106 million higher
than last year. This year's income included $33 million of net special benefits
while last year's income included $115 million of special benefits (see third
quarter comparison above for details). Excluding special items, this year's
operating earnings of $1,592 million were $188 million higher than last year.
The earnings improvement resulted from the effects of higher worldwide natural
gas prices and higher international production volumes, partly offset by the
effects of lower U.S. production and higher expenses in new venture areas.
Decreases in U.S. production volumes resulted from asset sales and natural field
declines.
MOBIL - 9 -
<PAGE>
Marketing and Refining
- - --------------------------------------------------------------------------------
Marketing and Refining Third Quarter First Nine Months
Selected Operating Data Incr./(Decr.) Incr./(Decr.)
1996 1997 Vol. % 1996 1997 Vol. %
----- ----- --- -- ----- ----- --- --
Petroleum Product
Sales (TBD)(a) - U.S. ... 1,414 1,467 53 4 | 1,340 1,424 84 6
- Intl.(b) 1,990 1,966 (24) (1)| 1,963 1,910 (53) (3)
----- ----- --- | ----- ----- ---
Total .................. 3,404 3,433 29 1 | 3,303 3,334 31 1
===== ===== === | ===== ===== ===
|
Refinery Runs (TBD) |
- U.S. ... 926 1,009 83 9 | 914 950 36 4
- Intl.(b) 1,254 1,294 40 3 | 1,223 1,221 (2) -
----- ----- --- | ----- ----- ---
Total .................. 2,180 2,303 123 6 | 2,137 2,171 34 2
===== ===== === | ===== ===== ===
(a) Includes supply/other sales
(b) Includes Mobil's share for the European alliance with BP. Year-to-date
sales reflect a restatement of first and second quarter European sales.
- - --------------------------------------------------------------------------------
THIRD QUARTER 1997 COMPARED WITH THIRD QUARTER 1996
Marketing and Refining net income was $346 million in the third quarter of
1997 versus last year's income of $231 million. This quarter's results included
special charges of $103 million for restructuring in Europe and Japan, and a
one-time cash bonus for employees. There were no special items in last year's
third quarter. Excluding this year's special charges, operating earnings of $449
million were $218 million higher than last year.
United States operations generated record earnings of $240 million, $157
million higher than last year. The strong results were driven by higher industry
margins, improved refinery performance and increased trade sales volumes.
International earnings of $209 million were $61 million higher than in 1996.
Results in Europe improved due to higher margins and the benefits of the Mobil-
BP alliance. Higher Asia-Pacific earnings reflected higher volumes, higher
margins in aromatics, lower refinery turnaround costs and benefits from the new
lube refinery at Singapore.
FIRST NINE MONTHS 1997 COMPARED WITH FIRST NINE MONTHS 1996
Marketing and Refining net income was $878 million for the first nine months
of 1997 compared with income of $823 million for the same period last year.
Excluding $141 million of special charges this year for implementation costs
related to the Mobil-BP alliance, restructuring in Japan and a one-time cash
bonus for employees, operating earnings of $1,019 million were $196 million
higher than last year. The effects of higher worldwide petroleum product sales
volumes, contributions from the Mobil-BP alliance and improved integrated
margins in the U.S. and Europe were partly offset by lower Asia-Pacific margins
and a higher level of refinery downtime.
MOBIL - 10 -
<PAGE>
Chemical
THIRD QUARTER AND FIRST NINE MONTH COMPARISONS OF 1997 WITH 1996
Chemical income of $155 million was $65 million higher than last year's third
quarter. Excluding $53 million of net special benefits from this year's income
(gains on asset sales and a favorable litigation settlement partly offset by an
accrual for a one-time cash bonus for employees), operating earnings of $102
million were $12 million higher than last year. There were no special items last
year. The improvement reflected higher volumes across all segments of the
business. Other contributing factors were improved margins in paraxylene and
strong performance in oriented polypropylene films.
In the first nine months of 1997, Chemical income was $331 million compared
with $225 million in the same period last year. Excluding $53 million of net
special benefits from this year's income (see details in third quarter
comparison above), operating earnings were $278 million, $53 million higher than
last year. Higher sales volumes, together with improved polyethylene margins and
plant reliability, were partly offset by lower worldwide aromatics margins.
Corporate and Financing
THIRD QUARTER AND FIRST NINE MONTH COMPARISONS OF 1997 WITH 1996
Corporate and Financing expense was $82 million in the third quarter of 1997
compared with $89 million in the same period last year. Excluding $2 million of
net special benefits this year, and $28 million of special charges for
implementation of the Staff Redesign Project last year, third quarter operating
expense of $84 million was $9 million higher than the comparable period last
year. The loss of operating income from certain noncore businesses sold last
year was only partly offset by reduced interest expense related to lower net
debt balances.
For the first nine months of 1997, Corporate and Financing expense was
$266 million, $13 million lower than last year. Excluding $2 million of net
special benefits in 1997 and $59 million of special charges for implementing
the staff Redesign Project in 1996, operating expense of $268 million this
year was $34 million higher than the same period last year. The higher
expenses were primarily due to loss of operating income from certain noncore
businesses sold last year and higher average net debt balances.
DISCUSSION OF FINANCIAL CONDITION
Total current assets as of September 30, 1997 were $10,600 million, a decrease
of $2,295 million from December 31, 1996. Accounts and notes receivable
decreased $2,052 million to $6,140 million, primarily due to the effects of the
implementation of the Mobil-BP European downstream alliance, lower hydrocarbon
prices, lower sales volumes and the sale of certain receivables associated with
the company's credit card operations. Inventories decreased $606 million
primarily due to the effects of the Mobil-BP alliance and currency translation
effects, which were partly offset by volume increases in the United States.
Partly offsetting these net decreases were higher prepaid expenses and a higher
level of cash and cash equivalents.
MOBIL - 11 -
<PAGE>
DISCUSSION OF FINANCIAL CONDITION - continued
Investments and long-term receivables increased $2,708 million, primarily
reflecting Mobil's investment in the European downstream alliance with BP, the
California upstream alliance with Shell and, to a lesser extent, ongoing
investments in various growth areas.
Net properties, plants and equipment decreased $2,526 million to $24,953
million as capital expenditures were more than offset by the effects of equity
accounting for the Mobil-BP European downstream alliance and the Mobil-Shell
California upstream alliance, asset sales and depreciation.
Total debt of Mobil and its subsidiaries was $7,291 million, $584 million
lower than year-end 1996. The debt-to-capitalization ratio was 27% at September
30, 1997, down from 29% at year-end 1996.
Accounts payable decreased $1,391 million, primarily due to the effects of the
implementation of the Mobil-BP downstream alliance, and decreases in hydrocarbon
prices and sales volumes from year-end 1996, partly offset by an accrual for the
one-time cash bonus for employees.
Accrued liabilities decreased $421 million mainly due to the effects of the
Mobil-BP alliance implementation and a payment related to Mobil's pipeline
investment in Kazakhstan, partly offset by a reserve for restructuring in Japan.
Income, excise, state gasoline and other taxes payable decreased $627 million
primarily due to the effects of the Mobil-BP alliance and timing of gasoline tax
payments in Japan.
Shareholders' equity rose $465 million during the first nine months of 1997
primarily due to an increase of $1,278 million in earnings retained in the
business. Largely offsetting the increase in retained earnings was a net charge
to the cumulative foreign exchange translation adjustment account reflecting a
strengthening U.S. dollar, relative to the local currency, in certain countries
in which the company has significant operations ($526 million). Also, the cost
of common stock held in the treasury increased as 5,368,100 shares were
purchased in the open market to offset the dilutive effects of stock options
($363 million).
During the first nine months of 1997, net cash generated from operating
activities was $4,894 million, $855 million higher than the cash requirements
for investing activities and dividends. Refer to the table at the bottom of page
3.
MOBIL - 12 -
<PAGE>
DISCUSSION OF FINANCIAL CONDITION - continued
Total investment spending for the third quarter of 1997 was $1,145 million, a
decrease of $393 million from the comparable period last year. For the first
nine months of 1997, worldwide investment spending was $3,437 million, compared
with $5,222 million for the year-earlier period. Last year's spending was higher
as a result of investments in Ampolex and the Tengiz field.
- - --------------------------------------------------------------------------------
INVESTMENT SPENDING
(In millions) Third Quarter First Nine Months
Capital and Exploration Expenditures 1996 1997 1996 1997
----- ----- ----- -----
Petroleum Operations |
Exploration & Producing - U.S. ... $ 95 $ 117(a)| $ 367 $ 325 (a)
- Intl. .. 2,226(b) 714 | 3,072(b) 1,809
Marketing & Refining - U.S. ... 87 72 | 261 224
- Intl. .. 243 107(a)| 730 351 (a)
Chemical ............................ 92 86 | 223 210
Other ............................... 7 7 | 52 38
------ ------ | ------ ------
Total Capital and Exploration |
Expenditures .................. $2,750 $1,103 | $4,705 $2,957
------ ------ | ------ ------
Cash Investments in Equity Companies. (1,212)(b) 42(a)| 517(b) 480 (a)
------ ------ | ------ ------
Total Investment Spending $1,538 $1,145 | $5,222 $3,437
====== ====== | ====== ======
- - ------------------------------ |
Memo: |
Exploration Expenses charged |
to income, included above |
- U.S. ... $ 6 $ 12 | $ 39 $ 28
- Intl. .. 137 93 | 252 234
------ ------ | ------ ------
Total Exploration Expenses ...... $ 143 $ 105 | $ 291 $ 262
====== ====== | ====== ======
- - --------------------------------------------------------------------------------
(a) Reflects the impact of equity accounting for the E&P California alliance
with Shell and the M&R alliance with BP in Europe.
(b) Reflects a $1,394 million reclassification of spending for the Ampolex
acquisition that was fully consolidated in the third quarter of 1996.
Return on average shareholders' equity was 16.9% for the twelve month period
ended September 30, 1997, compared with 16.0% for the calendar year 1996. Return
on average capital employed for the twelve month period ended September 30, 1997
was 13.1%, compared with 12.7% for the calendar year 1996.
Whenever external financing is needed, Mobil and its subsidiary companies have
ready access to multiple capital markets, including significant bank credit
lines.
At September 30, 1997, Mobil had effective shelf registration statements on
file with the SEC permitting the offer and sale of $1,815 million of debt
securities. Shelf registrations allowing the issuance of U.S. $2 billion of
Euro-Medium-Term Notes and bonds having a principal amount of 30 billion
Japanese yen were also in place.
MOBIL - 13 -
<PAGE>
CURRENT DEVELOPMENTS
On November 12, 1997, Mobil announced that its European fuels and
lubricants partnerships with British Petroleum would begin consultation
on a major rationalization of the lubricant base oil refining business. The
expected cash cost for the restructuring is $150 million. Mobil will record a
provision for its shares of these costs, plus Mobil's share of noncash write-
downs of facilities (which is not expected to be significant), when appropriate.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Environmental Litigation.
Mobil periodically receives notices from the Environmental Protection Agency
(EPA) or equivalent agencies at the state level that Mobil is a "potentially
responsible party" under Superfund or equivalent state legislation with respect
to various waste disposal sites. The majority of these sites are either still
under investigation by the EPA or the state agencies concerned, or under
remediation, or both. In certain instances, Mobil and other potentially
responsible parties have been named in court or administrative proceedings by
federal or state agencies seeking the cleanup of these sites. Mobil has also
been named as a defendant in various suits brought by private parties alleging
injury from disposal of wastes at these sites. The ultimate impact of these
proceedings on the business or accounts of Mobil cannot be predicted at this
time due to the large number of other potentially responsible parties and the
speculative nature of cleanup cost estimates, but based on our long experience
in managing environmental matters, we do not anticipate that the aggregate level
of future remediation costs will increase above recent levels so as to
materially and adversely affect our consolidated financial position or
liquidity.
Other Than Environmental Litigation.
Mobil and its subsidiaries are engaged in various litigations and have a
number of unresolved claims pending. While the amounts claimed are substantial
and the ultimate liability in respect of such litigations and claims cannot be
determined at this time, Mobil is of the opinion that such liability, to the
extent not provided for through insurance or otherwise, is not likely to be of
material importance in relation to its accounts.
Mobil has provided in its accounts for items and issues not yet resolved based
on management's best judgement.
MOBIL - 14 -
<PAGE>
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
The following exhibits are filed with this report:
11. Computation of Earnings Per Common Share
12. Computation of Ratio of Earnings to Fixed Charges
27. Financial Data Schedule (electronic only)
Reports on Form 8-K.
Mobil filed the following Current Reports on Form 8-K during and subsequent
to the end of the third quarter:
Date of 8-K Description of 8-K
July 11, 1997 Submitted amended Certificate of Incorporation of Mobil
Corporation, in effect May 20, 1997, and amended
Certificate of Designation, Preferences and Rights of
Series B ESOP Convertible Preferred Stock of Mobil
Corporation, in effect May 20, 1997.
July 23, 1997 Submitted a copy of the Mobil News Release issued July
23, 1997, reporting Mobil's estimated earnings for the
second quarter of 1997.
October 6, 1997 Submitted documents relating to $36,714,000 of
"Pass Through Certificates" guaranteed by Mobil
Corporation.
October 22, 1997 Submitted a copy of the Mobil News Release issued
October 22, 1997, reporting Mobil's estimated earnings
for the third quarter of 1997.
MOBIL - 15 -
<PAGE>
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.
REGISTRANT MOBIL CORPORATION
BY
/S/ P. J. Antico
NAME AND TITLE P. J. Antico, Principal
Accounting Officer
DATE November 13, 1997
MOBIL - 16 -
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
- - ------- ----------------
11. Computation of Earnings Per Electronic
Common Share
12. Computation of Ratio of Earnings Electronic
to Fixed Charges
27. Financial Data Schedule Electronic
MOBIL - 17 -
<PAGE>
Exhibit 11.
MOBIL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except for per-share amounts;
number of shares in thousands)
For the Three Months
Ended September 30,
--------------------
Primary 1996 1997
- - ------- -------- --------
Net income ............................................. $ 769 $ 892
Less dividends on preferred stock ...................... 13 13
-------- --------
Net income applicable to common shares ................. $ 756 $ 879
======== ========
Weighted average number of primary common shares
Outstanding .......................................... 787,850 785,798
Issuable on assumed exercise of stock options ........ 9,670 12,978
-------- --------
Total ............................................. 797,520 798,776
======== ========
Primary earnings per common share ...................... $ 0.95 $ 1.10
======== ========
Fully Diluted
- - -------------
Net income ............................................. $ 769 $ 892
Less additional contribution to ESOP ................... 4 3
-------- --------
Adjusted net income applicable to common shares ........ $ 765 $ 889
======== ========
Weighted average number of primary common shares ....... 797,520 798,776
Increment to assumed exercise of stock options to
reflect maximum dilutive effect ...................... 247 -
Assumed conversion of preferred stock .................. 17,838 17,213
-------- --------
Total ............................................. 815,605 815,989
======== ========
Fully diluted earnings per common share ................ $ 0.94 $ 1.09
======== ========
- - -----------
This Exhibit is included to show that dilution of earnings per common share is
immaterial and therefore not necessary for presentation on the Consolidated
Statement of Income.
Prior year data have been restated to reflect a two-for-one stock split which
had a record date of May 20, 1997.
MOBIL - 18 -
<PAGE>
Exhibit 11. (concluded)
MOBIL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In millions, except for per-share amounts;
number of shares in thousands)
For the Nine Months
Ended September 30,
Primary 1996 1997
Net income ............................................ $ 2,288 $ 2,568
Less dividends on preferred stock ..................... 40 39
-------- --------
Net income applicable to common shares ................ $ 2,248 $ 2,529
======== ========
Weighted average number of primary common shares
Outstanding ......................................... 788,442 786,975
Issuable on assumed exercise of stock options ....... 9,609 11,430
-------- ---------
Total ........................................... 798,051 798,405
======== ========
Primary earnings per common share...................... $ 2.82 $ 3.17
======== ========
Fully Diluted
Net Income ............................................ $ 2,288 $ 2,568
Less additional contribution to ESOP .................. 14 11
-------- --------
Adjusted net income applicable to common shares ....... $ 2,274 $ 2,557
======== ========
Weighted average number of primary common shares ...... 798,051 798,405
Increment to assumed exercise of stock options to
reflect maximum dilutive effect ..................... 308 1,460
Assumed conversion of preferred stock ................. 17,838 17,213
-------- --------
Total ........................................... 816,197 817,078
======== ========
Fully diluted earnings per common share................ $ 2.79 $ 3.13
======== ========
- - -----------
This Exhibit is included to show that dilution of earnings per common share is
immaterial and therefore not necessary for presentation on the Consolidated
Statement of Income.
Prior year data have been restated to reflect a two-for-one stock split which
had a record date of May 20, 1997.
MOBIL - 19 -
<PAGE>
Exhibit 12.
MOBIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)
Nine
Months
Ended
Year Ended December 31, Sep. 30,
----------------------------------------- --------
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------
Income Before Change in
Accounting Principle(s).. $1,308 $2,084 $1,759 $2,376 $2,964 $2,568
Add:
Income taxes .............. 1,567 1,931 1,919 2,015 3,147 2,372
Portion of rents
representative of
interest factor ......... 319 339 340 368 376 282
Interest and debt
discount expense ........ 612 529(a) 461 467 455 331
Earnings less (greater)
than dividends from
equity affiliates........ 36 265 (40) (51) 153 (104)
------ ------ ------ ------ ------ ------
Income as Adjusted ........ $3,842 $5,148 $4,439 $5,175 $7,095 $5,449
====== ====== ====== ====== ====== ======
Fixed Charges:
Interest and debt
discount expense ........ $ 612 $ 529(a) $ 461 $ 467 $ 455 $ 331
Capitalized interest ...... 42 42 37 47 78 77
Portion of rents
representative of
interest factor ......... 319 339 340 368 376 282
------ ------ ------ ------ ------ ------
Total Fixed Charges ....... $ 973 $ 910 $ 838 $ 882 $ 909 $ 690
====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges ........... 3.9 5.7(a) 5.3 5.9 7.8 7.9
====== ====== ====== ====== ====== ======
Note:
For the years ended December 31, 1992, 1993, 1994, 1995 and 1996 and the nine
months ended September 30, 1997, Fixed Charges exclude $37 million, $31 million,
$37 million, $28 million, $24 million, and $22 million, respectively, of
interest expense attributable to debt issued by the Mobil Oil Corporation
Employee Stock Ownership Plan Trust and guaranteed by Mobil.
(a) Excludes the favorable effect of $205 million of interest benefits from the
resolution of prior-period tax issues.
MOBIL - 20 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS PERIOD ENDED SEPTEMBER 30, 1997 10-Q
This schedule contains summary financial information extracted from
the September 30, 1997 Form 10-Q, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000067182
<NAME> MOBILCORP/JNICHOLS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,064
<SECURITIES> 0
<RECEIVABLES> 6,140
<ALLOWANCES> 0
<INVENTORY> 2,411
<CURRENT-ASSETS> 10,600
<PP&E> 50,187
<DEPRECIATION> 25,234
<TOTAL-ASSETS> 44,176
<CURRENT-LIABILITIES> 12,524
<BONDS> 4,103
0
669
<COMMON> 894
<OTHER-SE> 17,974
<TOTAL-LIABILITY-AND-EQUITY> 44,176
<SALES> 48,257<F1>
<TOTAL-REVENUES> 49,332<F1>
<CGS> 31,158
<TOTAL-COSTS> 33,006
<OTHER-EXPENSES> 8,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 331
<INCOME-PRETAX> 4,940
<INCOME-TAX> 2,372
<INCOME-CONTINUING> 2,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,568
<EPS-PRIMARY> 3.17
<EPS-DILUTED> 3.13
<FN>
<F1>SALES AND TOTAL REVENUES INCLUDE $4,432 MILLION OF EXCISE
AND STATE GASOLINE TAXES
</FN>
</TABLE>
