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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 March 31, 1998
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 April 30, 1998, the
latest practicable date, was 781,384,529.
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<PAGE>
MOBIL CORPORATION
Form 10-Q
Quarterly Report
March 31, 1998
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements
Consolidated Statement of Income for the
Three Months Ended March 31, 1997 and 1998 ... 1
Consolidated Balance Sheet at December 31,
1997 and March 31, 1998 ...................... 2
Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 1997 and 1998 ... 3
Notes to Condensed Consolidated Financial
Statements ................................... 4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition .......... 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................... 12
Item 2. Changes in Securities ........................... 13
Item 3. Defaults Upon Senior Securities ................. 13
Item 4. Submission of Matters to a Vote of Security
Holders ....................................... 13
Item 5. Other Information ............................... 13
Item 6. Exhibits and Reports on Form 8-K ................ 14
SIGNATURE ................................................. 15
EXHIBIT INDEX ............................................. 16
Exhibit 11. Computation of Earnings per Common Share .... 17
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges ................................... 18
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per-share amounts)
For the Three Months
Ended March 31,
--------------------
[S] [C] [C]
1997 1998
------ ------
Revenues
Sales and services (a) .................................... $15,935 $13,388
Income from equity affiliates ............................. 102 126
Income from asset sales, interest and other ............... 149 116
------- -------
Total Revenues .......................................... 16,186 13,630
------- -------
Costs and Expenses
Crude oil, products and operating
supplies and expenses ................................... 10,468 8,403
Exploration expenses ...................................... 75 74
Selling and general expenses .............................. 806 934
Depreciation, depletion and amortization .................. 643 599
Interest and debt discount expense ........................ 98 93
Taxes other than income taxes (a) ......................... 2,406 2,293
Income taxes .............................................. 864 529
------- -------
Total Costs and Expenses ................................ 15,360 12,925
------- -------
Net Income .................................................. $ 826 $ 705
======= =======
Net Income Per Common Share ................................. $ 1.03 $ .88
======= =======
Net Income Per Common Share -- assuming dilution ............ $ 1.01 $ .86
======= =======
Dividends Per Common Share .................................. $ .53 $ .57
======= =======
- ----------------
(a) Includes excise and state gasoline
taxes of .............................................. $ 1,422 $ 1,351
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 1 -
<PAGE>
MOBIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In millions)
[S] [C] [C]
Dec. 31, Mar. 31,
ASSETS 1997 1998
Current Assets
Cash and cash equivalents ................................ $ 820 $ 738
Accounts and notes receivable ............................ 5,952 5,457
Inventories .............................................. 2,156 2,236
Prepaid expenses and other current assets ................ 623 816
Deferred income taxes .................................... 171 145
------- -------
Total Current Assets ................................... 9,722 9,392
Investments and Long-Term Receivables ...................... 8,479 8,682
Properties, Plants and Equipment, at cost................... 49,630 49,838
Less: Accumulated Depreciation, Depletion and Amortization . 25,074 25,332
------- -------
Net Properties, Plants and Equipment ....................... 24,556 24,506
Deferred Charges and Other Assets .......................... 802 791
------- -------
Total Assets ........................................... $43,559 $43,371
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt .......................................... $ 2,994 $ 3,949
Accounts payable ......................................... 4,418 3,789
Accrued liabilities ...................................... 2,794 2,580
Income, excise, state gasoline and other taxes payable ... 1,906 1,776
Deferred income taxes .................................... 309 205
------- -------
Total Current Liabilities .............................. 12,421 12,299
Long-Term Debt ............................................. 3,670 3,476
Reserves for Employee Benefits ............................. 1,745 1,710
Accrued Restoration, Removal and Environmental Costs ....... 1,072 1,071
Deferred Credits and Other Noncurrent Obligations .......... 1,274 1,296
Deferred Income Taxes ...................................... 3,535 3,581
Minority Interest in Subsidiary Companies .................. 381 373
------- -------
Total Liabilities ...................................... 24,098 23,806
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Shareholders' Equity
Preferred stock (ESOP-related) -- shares issued and
outstanding: 171,093 at December 31, 1997 and
169,436 at March 31, 1998 .............................. 665 659
Unearned employee compensation (ESOP-related) ............ (329) (320)
Common stock -- $1.00 par value; shares authorized:
1,200,000,000; shares issued: 894,308,872 at December 31,
1997 and 895,717,969 at March 31, 1998 ................. 894 896
Capital surplus .......................................... 1,549 1,585
Earnings retained in the business ........................ 20,661 20,908
Cumulative foreign exchange translation adjustment ....... (821) (799)
Common stock held in treasury, at cost -- shares:
110,945,100 at December 31, 1997 and 113,826,100 at
March 31, 1998 ... ..................................... (3,158) (3,364)
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Total Shareholders' Equity ............................. 19,461 19,565
------- -------
Total Liabilities and Shareholders' Equity ................. $43,559 $43,371
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 2 -
<PAGE>
MOBIL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
For the Three Months
Ended March 31,
-------------------
[S] [C] [C]
1997 1998
------- -------
Cash Flows from Operating Activities
Net Income ......................................... $ 826 $ 705
Adjustments to reconcile to net cash from
operating activities:
Depreciation, depletion and amortization ....... 643 599
Deferred income taxes .......................... (32) (42)
Earnings (greater) less than dividends from
equity affiliates ............................ (34) 13
Exploration expenses (includes noncash
charges: 1997-$11; 1998-$6) ................. 75 74
Gain on sales of properties, plants and
equipment and other assets ................... (48) (33)
Increase in working capital items............... (492) (779)
Other, net (a).................................. (53) 19
------- -------
Net Cash from Operating Activities ................... 885 556
------- -------
Cash Flows from Investing Activities
Capital and exploration expenditures ............... (772) (756)
Proceeds from sales of properties, plants and
equipment and other assets ....................... 81 98
Payments attributable to investments and
long-term receivables ............................ (180) (147)
------- -------
Net Cash Used in Investing Activities ................ (871) (805)
------- -------
Cash Flows from Financing Activities
Cash dividends ..................................... (431) (458)
Proceeds from borrowings having original
terms greater than three months .................. 354 52
Repayments of borrowings having original
terms greater than three months .................. (612) (441)
Increase in other borrowings ....................... 854 1,172
Increase in minority interest (a)................... 28 3
Proceeds from issuance of common stock ............. 46 38
Purchase of common stock for treasury .............. (80) (206)
------- -------
Net Cash Provided by Financing Activities ............ 159 160
------- -------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents ................................... (15) 7
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents . 158 (82)
Cash and Cash Equivalents - Beginning of Period ...... 808 820
------- -------
Cash and Cash Equivalents - End of Period ............ $ 966 $ 738
======= =======
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Memo:
Net cash from operating activities (a)............... $ 885 $ 556
Net cash used in investing activities ............... (871) (805)
Cash dividends ...................................... (431) (458)
------- -------
(Shortfall) of cash from operating activities over
investing activities and dividends ................ $ (417) $ (707)
======= =======
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(a) Prior year data restated to conform with current year presentation.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 3 -
<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, 1997.
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. CHANGES IN NONOWNER EQUITY
Beginning in the first quarter of 1998, compliance with FAS 130, Reporting
Comprehensive Income was required. In accordance with the requirements of this
standard, the components of changes in nonowner equity, net of related tax for
the three months ended March 31, 1997 and 1998 are as follows:
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(In millions) For the Three Months
Ended March 31,
-------------------
1997 1998
------- -------
Net Income .................................... $ 826 $ 705
Foreign currency translation adjustments ...... (305) 22
----- -----
Changes in nonowner equity .................... $ 521 $ 727
===== =====
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MOBIL - 4 -
<PAGE>
3. 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.
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(In millions) For the Three Months
Ended March 31,
--------------------
1997 1998
----- -----
Changes in Working Capital Items
(Increases)/decreases
Accounts and notes receivable ................. $ 618 $ 421
Inventories ................................... (138) (104)
Prepaid expenses and other current assets ..... (182) (202)
Accounts payable .............................. (463) (584)
Accrued liabilities ........................... (114) (200)
Income, excise, state gasoline and
other taxes payable ......................... (213) (110)
----- -----
Increase in working capital items ............. $(492) $(779)
===== =====
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4. Effective January 1, 1998, Mobil adopted Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, which requires the capitalization of certain costs related to the
development or purchase of computer software. Prior to adopting this new policy,
Mobil expensed the cost of all computer software. The impact of adopting SOP
98-1 was not significant.
MOBIL - 5 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
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REPORTED EARNINGS First Quarter
(In millions) _________________ Incr./
1997 1998 (Decr.)
------ ------ ------
Petroleum Operations
E&P - United States ............................ $ 224 $ 80 $(144)
- International ............................ 470 310 (160)
----- ----- -----
Total E&P ...................................... 694 390 (304)
----- ----- -----
M&R - United States ............................ (42) 86 128
- International ............................ 174 229 55
----- ----- -----
Total M&R ...................................... 132 315 183
----- ----- -----
Total Petroleum .................................. 826 705 (121)
Chemical ......................................... 85 67 (18)
Corporate and Financing (a)....................... (85) (67) 18
----- ----- -----
Net Income ....................................... $ 826 $ 705 $(121)
===== ===== =====
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OPERATING EARNINGS First Quarter
(Adjusted for Special Items) _________________ Incr./
(In millions) 1997 1998 (Decr.)
------ ------ ------
Petroleum Operations
E&P - United States ............................ $ 224 $ 80 $ (144)
- International ............................ 470 310 (160)
----- ----- -----
Total E&P ...................................... 694 390 (304)
----- ----- -----
M&R - United States ............................ (42) 86 128
- International ............................ 192 239 47
----- ----- -----
Total M&R ...................................... 150 325 175
----- ----- -----
Total Petroleum .................................. 844 715 (129)
Chemical ......................................... 85 67 (18)
Corporate and Financing (a)....................... (85) (67) 18
----- ----- -----
Operating Income Before Special Items............. $ 844 $ 715 $(129)
Special Items (18) (10) 8
----- ----- -----
Net Income ....................................... $ 826 $ 705 $(121)
===== ===== =====
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(a) Corporate and Financing includes corporate administrative expenses, net
financing expense and other items.
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SPECIAL ITEMS First Quarter
(In millions)
1997 1998
Restructuring ....................................... $ (18) $ (10)
------ ------
Total Special Items ............................... $ (18) $ (10)
====== ======
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MOBIL - 6 -
<PAGE>
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REVENUES BY SEGMENT First Quarter
(In millions) Incr./
(Decr.)
1997 1998 %
Exploration & Producing ........................... $ 2,131 $ 1,587 (26)
Marketing & Refining .............................. 13,203 11,308 (14)
Chemical .......................................... 807 699 (13)
Other ............................................. 45 36 (20)
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Total Revenues .................................. $16,186 $13,630 (16)
======= =======
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CONSOLIDATED RESULTS OVERVIEW
FIRST QUARTER 1998 COMPARED WITH FIRST QUARTER 1997
Consolidated first quarter 1998 net income was $705 million, a decrease of
$121 million from the $826 million reported in the first quarter of 1997. Net
income per common share, assuming dilution, was $0.86, compared with $1.01 in
the first quarter of 1997. This year's first quarter net income included a
special charge of $10 million for on-going restructuring costs associated with
the European downstream alliance with British Petroleum. Last year's first
quarter net income included a charge of $18 million, also for BP alliance
implementation costs. Excluding special items, operating earnings of $715
million decreased $129 million, or 15%, from last year.
Crude oil prices weakened considerably in this year's first quarter, averaging
about $7 per barrel below the same quarter last year. Additionally, natural gas
prices in North America were down substantially as a result of unusually warm
winter weather. Despite these difficult business conditions, Mobil's earnings
held up fairly well due to higher margins in the downstream business and self-
help programs (volume growth, performance improvements and expense control),
which contributed about $100 million in the first quarter.
In the Upstream, Mobil's production grew by 1 percent on a barrel of oil
equivalent basis, primarily from higher volumes in Equatorial Guinea and the
Hibernia field in Canada. In addition, production benefited from the streaming
of the Gobe development in Papua New Guinea, commencement of oil shipments from
Turkmenistan and the effects of a debottlenecking at the Tengiz field in
Kazakhstan. The increase in production occurred despite a pipeline break in
Nigeria, the lack of production from the Griffin platform in Australia, which
was out of service, and lower natural gas production in Europe due to warmer
weather and in the U.S. due to prior-year asset sales and operational problems.
Additionally, production was down in Indonesia and in the United Kingdom. In the
Downstream, trade sales were strong, both in the United States and in the
international area. Chemical reported higher volumes in all businesses.
In addition to growth, self help included benefits in downstream from the BP
alliance in Europe, reduced refinery downtime in the U.S., refinery upgrading
projects in Singapore, Japan and Australia, and restructuring in Japan and
Australia. Asia-Pacific earnings were stronger than they have been for any
quarter since 1995, despite the economic downturn in the region.
Worldwide revenues of $13,630 million were $2,556 million lower than last
year. This decrease was primarily due to the effects of significantly lower
worldwide average crude oil, natural gas and petroleum product prices.
Petrochemical prices were also lower. These decreases were partly offset by the
effects of higher overall volumes. Income from equity affiliates increased
primarily due to higher earnings from the Mobil-BP European alliance, partly
offset by lower income from equity affiliates that were impacted by lower crude
oil, natural gas and petrochemical prices.
MOBIL - 7 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
Crude oil, products and operating supplies and expenses decreased $2,065
million to $8,403 million. The decrease was primarily due to significantly lower
worldwide average crude oil, natural gas and petroleum product prices, partly
offset by higher volume-related expenses and increased spending for growth
programs in new venture areas. Selling and general expenses increased $128
million to $934 million primarily due to timing of recording certain expenses,
partly offset by cost saving initiatives. Depreciation, depletion and
amortization expense was lower mainly due to the effects of equity accounting
for the Aera upstream joint venture with Shell which was implemented in June
1997 and the effects of equity accounting for the Chalmette refinery alliance,
formed late in 1997. Taxes other than income taxes decreased $113 million to
$2,293 million, due to the impact of lower average hydrocarbon sales prices.
Income tax expense decreased $335 million principally due to this quarter's
lower level of pre-tax income and mix changes in the sources of earnings.
Exploration and Producing
Exploration & Producing income of $390 million was $304 million lower than
last year's $694 million, which was a record for a quarter.
In the United States, income of $80 million decreased $144 million.
International income of $310 million was $160 million lower. These results
reflect the significant decline in worldwide crude oil and natural gas prices.
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Exploration and Producing
Selected Operating Data First Three Months
Incr./
(Decr.)
1997 1998 Vol.%
----- ----- --------
Net Crude Oil and NGL Production (TBD)
- U.S. .................................... 235 240 5 2
- Intl. ................................... 653 681 28 4
----- ----- ---
Total ............................... 888 921 33 4
===== ===== ===
Net Natural Gas Production (MMCFD)
- U.S. .................................... 1,208 1,123 (85) (7)
- Intl. ................................... 3,747 3,706 (41) (1)
----- ----- ---
Total ............................... 4,955 4,829 (126) (3)
===== ===== ===
TOTAL NET PRODUCTION (TBDOE) ..................... 1,786 1,796 10 1
===== ===== ===
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MOBIL - 8 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
Marketing and Refining
Marketing & Refining income of $315 million was $183 million higher than
1997. Excluding special restructuring charges of $18 million in 1997 and $10
million in 1998 for implementation costs associated with the European alliance
with BP, operating earnings were $325 million, $175 million higher than last
year.
Operating earnings in the United States were $86 million versus a loss of $42
million in the first quarter of 1997. The improvement was due to higher industry
margins reflecting benefits from falling crude oil prices, lower scheduled and
unscheduled refinery downtime, and reduced operating expenses. Lube earnings
were up, primarily due to higher margins.
International earnings of $239 million were $47 million higher than in 1997.
In Europe, earnings improved due to increased benefits from the BP alliance and
higher integrated margins. Earnings were also higher in Asia-Pacific, reflecting
relatively strong marketing margins, higher trade sales and improved refinery
performance. Additionally, benefits were realized as a result of the streaming
of the Altona FCC, the Japan (Kawasaki) resid upgrader and the Jurong lube
hydrocracker, as well as favorable expense performance.
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Marketing and Refining
Selected Operating Data First Three Months
Incr./
(Decr.)
1997 1998 Vol. %
----- ----- --- --
Petroleum Product Sales (TBD) (a)
- U.S. .................................. 1,358 1,359 1 -
- Intl. (b).............................. 1,940 1,958 18 1
----- ----- ---
Total ............................. 3,298 3,317 19 1
===== ===== ===
Refinery Runs (TBD)
- U.S. .................................. 860 900 40 5
- Intl. (b).............................. 1,236 1,296 60 5
----- ----- ---
Total ............................. 2,096 2,196 100 5
===== ===== ===
(a) Includes supply/other sales.
(b) Includes Mobil's share for the European alliance with BP.
- -------------------------------------------------------------------------------
Chemical
Chemical earnings of $67 million were $18 million lower than last year as a
result of lower polyethylene and paraxylene margins.
Corporate and Financing
Corporate and Financing expenses of $67 million were $18 million lower than in
the first quarter of 1997 primarily due to the timing of expenses and certain
one-time benefits in this year's first quarter.
MOBIL - 9 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
DISCUSSION OF FINANCIAL CONDITION
At March 31, 1998, total current assets of $9,392 million were $330 million
lower than at year-end 1997. Cash and cash equivalents decreased $82 million.
Accounts and notes receivable decreased $495 million to $5,457 million,
primarily due to the effects of lower crude oil, natural gas and petroleum
product prices. These decreases were partly offset by an increase in
Inventories, up $80 million, due to a volume increase resulting from timing of
shipments and $193 million of higher prepaid expenses resulting from an annual
pattern of prepayments made in the first quarter.
Total debt of Mobil and its subsidiaries was $7,425 million at March 31, 1998,
up $761 million from year-end 1997. The debt-to-capitalization ratio was 27% at
March 31, 1998, up from 25% at year-end 1997.
During the first three months of 1998, net cash generated from operating
activities was $556 million, $707 million less than the cash requirements for
investing activities and dividends.
Accounts payable decreased $629 million primarily due to lower purchase prices
for crude oil and petroleum products.
Income, excise, state gasoline and other taxes payable decreased in line with
this year's lower income.
Shareholders' equity rose $104 million during the first three months of 1998.
Earnings retained in the business increased $247 million as income exceeded
common and preferred stock dividends. The cost of common stock held in the
treasury increased as 2,881,000 shares were purchased on the open market to
offset the dilutive effects of the issuance of shares upon exercise of stock
options.
MOBIL - 10 -
<PAGE>
DISCUSSION OF FINANCIAL CONDITION - continued
Total investment spending for the first quarter of 1998 was $853 million, an
increase of $19 million from the comparable period last year.
- -------------------------------------------------------------------------------
INVESTMENT SPENDING
(In millions) First Three Months
Capital and Exploration Expenditures 1997 1998
------ ------
Petroleum Operations
Exploration & Producing - United States .......... $ 72 $ 98
- International .......... 466 501
Marketing & Refining - United States .......... 75 60
- International .......... 94 43
Chemical ............................................... 54 26
Other .................................................. 11 28
------ ------
Total Capital and Exploration Expenditures ............. 772 756
------ ------
Cash Investments in Equity Companies ................... 62 97
------ ------
Total Investment Spending .............................. $ 834 $ 853
====== ======
------------------------------
Memo:
Exploration expenses charged
to income, included above
- United States .......... $ 5 $ 17
- International .......... 70 57
------ ------
$ 75 $ 74
====== ======
- -------------------------------------------------------------------------------
Return on average shareholders' equity, based on net income, was 16.3% for the
twelve month period ended March 31, 1998, compared with 17.0% for the calendar
year 1997. Return on average capital employed, based on net income, for the
twelve month period ended March 31, 1998 was 12.6%, compared with 13.4% for the
calendar year 1997.
Whenever external financing is needed, Mobil and its subsidiary companies have
ready access to multiple capital markets, including significant bank credit
lines.
At March 31, 1998, 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 are also in
place.
Forward-Looking Statements
Written reports and oral statements made from time to time by Mobil contain
"forward-looking statements." Forward-looking statements can be identified by
the fact that they do not relate strictly to historical or current facts and by
their use of words such as "goals," "expects," "plans," "believes," "estimates,"
"forecasts," "projects," "intends" and other words of similar meaning. Such
statements are likely to address Mobil's earnings, return on capital employed,
capital expenditures, debt-to-capitalization ratio, dividend increases, project
implementation, production growth, reserve replacement, sales growth and expense
reductions. They are based on management's then-current information,
assumptions, plans, expectations, estimates and projections about the petroleum
and chemical industries. However, such statements are not guarantees of future
performance, and actual results and outcomes may differ materially from what is
expressed depending on a variety of factors, many of which are outside Mobil's
control.
MOBIL - 11 -
<PAGE>
Forward-Looking Statements -- continued
Among the factors that could cause actual outcomes or results to differ
materially from what is expressed in these forward-looking statements are
changes in the demand for, supply of, and market prices of crude oil, refined
products, natural gas and petrochemicals; changes in refining margins and
marketing margins; success in partnering, in implementing oil, natural gas and
petrochemical projects, and in implementing internal plans; reliability of
operating facilities; effects of environmental regulations; success of
commercial negotiations; and domestic and international political and economic
conditions.
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.
On February 5, 1998, the Pennsylvania Department of Environmental Protection
issued an administrative order alleging that Mobil Oil Corporation had violated
the Pennsylvania Tank Act by knowingly delivering products into unregistered
tanks. Mobil Oil Corporation anticipates that a penalty in the range of $150,000
will be sought. Mobil Oil Corporation has filed an appeal of the order with the
Pennsylvania Environmental Hearing Board.
On March 27, 1998, the EPA filed an administrative complaint with the USEPA
hearing clerk alleging that the operations of Mobil Oil Corporation's Beaumont,
Texas refinery had violated the Clean Air Act by reason of alleged violations of
the New Source Performance Standard ("NSPS") requirements for petroleum storage
tanks and alleged violations of fugitive emission requirements under the NSPS
and the National Emissions Standards for Hazardous Air Pollutants. A penalty of
$158,000 is sought.
On March 2, 1998, Mobil Oil Corporation entered into a settlement agreement
with the District Attorney of Riverside County, California to settle allegations
by the County that the fiber trench systems that underlie Mobil Oil Corporation
service stations in the County failed to comply with the rules therefor. Under
the terms of the settlement agreement, Mobil Oil Corporation paid a penalty of
$200,000, paid an additional $67,000 to cover costs of environmental training,
education and investigations, and agreed to make fiber trench equipment upgrades
that are expected to cost approximately $500,000.
MOBIL - 12 -
<PAGE>
Legal Proceedings -- continued
In a previously-reported proceeding, on March 30, 1998, the EPA filed a
civil action in the U.S. District Court for Utah, Central Division, alleging
that the McElmo Creek and Ratherford production units in Utah, which are
operated by Mobil Oil Corporation and in which Mobil Oil Corporation has an
interest, had violated the Clean Water Act by reason of discharges of produced
water into navigable waters of the United States and had also violated Spill
Prevention Control and Countermeasures Regulations promulgated under the Clean
Water Act. The maximum amount of the penalties sought in the action, based upon
the maximum statutory penalty amounts per alleged violation, is estimated to be
approximately $5.5 million.
The foregoing proceedings are not of material importance in relation to
Mobil's accounts and are described in compliance with SEC rules requiring
disclosure of such proceedings although not material.
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.
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.
MOBIL - 13 -
<PAGE>
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
Reports on Form 8-K.
Mobil filed the following Current Reports on Form 8-K during and subsequent
to the end of the first quarter:
Date of 8-K Description of 8-K
January 28, 1998 Submitted a copy of the Mobil News Release dated January
28, 1998, reporting Mobil's estimated earnings for the
fourth quarter and full year 1997.
February 4, 1998 Submitted a copy of the Mobil News Release announcing that
the Mobil Corporation Board of Directors had elected
Eugene A. Renna President and Chief Operating Officer of
the company, effective March 1, 1998.
April 9, 1998 Submitted a copy of the Mobil Corporation By-Laws, as
amended to February 27, 1998, and restated Financial Data
Schedules for the periods ended December 31, 1995 through
September 30, 1997.
April 22, 1998 Submitted a copy of the Mobil News Release dated April
22, 1998, reporting Mobil's estimated earnings for the
first quarter of 1998.
MOBIL - 14 -
<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/ STEVEN L. DAVIS
NAME AND TITLE Steven L. Davis, Controller;
Principal Accounting Officer
DATE May 13, 1998
MOBIL - 15 -
<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 - 16 -
<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 March 31,
--------------------
1997 1998
-------- --------
Net Income ............................................... $ 826 $ 705
Less: dividends on preferred stock ....................... 13 13
------ ------
Adjusted net income applicable to common shares .......... $ 813 $ 692
====== ======
Weighted average number of basic common shares outstanding 788,149 782,117
======= =======
Net income per common share .............................. $ 1.03 $ .88
====== ======
Net Income ............................................... $ 826 $ 705
Less: additional contribution to ESOP .................... 2 1
Less: Stock Appreciation Rights compensation
(expense) income ................................. (1) 4
------ ------
Adjusted net income applicable to common shares .......... $ 825 $ 700
====== ======
Weighted average number of basic common shares outstanding 788,149 782,117
Issuable on assumed exercise of stock options ............ 10,644 11,373
Assumed conversion of preferred stock .................... 17,502 17,000
------- -------
Total ............................................... 816,296 810,490
======= =======
Net income per common share -- assuming dilution ......... $ 1.01 $ .86
====== ======
MOBIL - 17 -
<PAGE>
Exhibit 12.
MOBIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)
Three
Months
Ended
Year Ended December 31, Mar.31,
------------------------------------------ --------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
Income Before Change in
Accounting Principle .. $2,084 $1,759 $2,376 $2,964 $3,272 $ 705
Add:
Income taxes ............ 1,931 1,919 2,015 3,147 3,093 529
Portion of rents
representative of
interest factor ....... 339 340 368 376 346 87
Interest and debt
discount expense ...... 529(a) 461 467 455 428 93
Earnings less (greater)
than dividends from
equity affiliates...... 265 (40) (51) 153 (59) 13
------ ------ ------ ------ ------ ------
Income as Adjusted ...... $5,148 $4,439 $5,175 $7,095 $7,080 $1,427
====== ====== ====== ====== ====== ======
Fixed Charges:
Interest and debt
discount expense ...... $ 529(a) $ 461 $ 467 $ 455 $ 428 $ 93
Capitalized interest .... 42 37 47 78 101 16
Portion of rents
representative of
interest factor ....... 339 340 368 376 346 87
------ ------ ------ ------ ------ ------
Total Fixed Charges ..... $ 910 $ 838 $ 882 $ 909 $ 875 $ 196
====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges ......... 5.7(a) 5.3 5.9 7.8 8.1 7.3
====== ====== ====== ====== ====== ======
Note:
For the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and the three
months ended March 31, 1998, Fixed Charges exclude $31 million, $37 million, $28
million, $24 million, $29 million and $6 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 - 18 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ARTICLE 5 FINANCIAL DATA SCHEDULE (FDS) FOR PERIOD ENDED MARCH 31, 1998 10-Q
This schedule contains summary financial information extracted from the March
31, 1998 Form 10-Q, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000067182
<NAME> JOYCE NICHOLS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 738
<SECURITIES> 0
<RECEIVABLES> 5,457
<ALLOWANCES> 0
<INVENTORY> 2,236
<CURRENT-ASSETS> 9,392
<PP&E> 49,838
<DEPRECIATION> 25,332
<TOTAL-ASSETS> 43,371
<CURRENT-LIABILITIES> 12,299
<BONDS> 3,476
0
659
<COMMON> 896
<OTHER-SE> 18,010
<TOTAL-LIABILITY-AND-EQUITY> 43,371
<SALES> 13,388<F1>
<TOTAL-REVENUES> 13,630<F1>
<CGS> 8,403
<TOTAL-COSTS> 9,002
<OTHER-EXPENSES> 2,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 1,234
<INCOME-TAX> 529
<INCOME-CONTINUING> 705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705
<EPS-PRIMARY> .88
<EPS-DILUTED> .86
<FN>
<F1> SALES AND TOTAL REVENUES INCLUDE $1,351 MILLION OF EXCISE AND
STATE GASOLINE TAXES
</FN>
</TABLE>
