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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 June 30, 1999
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 July 30, 1999, the
latest practicable date, was 783,084,969.
------------------------------------------------------------
MOBIL CORPORATION
Form 10-Q
Quarterly Report
June 30, 1999
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 and Six Months Ended
June 30, 1998 and 1999 ....................... 1
Consolidated Balance Sheet at December 31, 1998
and June 30, 1999 ............................ 2
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1998 and 1999 ...... 3
Segment Information ............................ 4
Notes to Condensed Consolidated Financial
Statements ................................... 5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition .......... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................ 20
Item 2. Changes in Securities ............................ 21
Item 3. Defaults Upon Senior Securities .................. 21
Item 4. Submission of Matters to a Vote of Security
Holders ........................................ 21
Item 5. Other Information ................................ 22
Item 6. Exhibits and Reports on Form 8-K ................. 22
SIGNATURE .................................................. 23
EXHIBIT INDEX .............................................. 24
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges .................................... 25
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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|For the Six Months
Ended June 30, | Ended June 30,
------------------ | -----------------
1998 1999 | 1998 1999
------- ------- | -------- -------
Revenues |
Sales and services (a) .................$13,023 $13,966 | $26,411 $25,957
Income from equity affiliates .......... 55 120 | 181 203
Income from asset sales, interest |
and other ............................ 155 160 | 271 269
------- ------- | ------- -------
|
Total Revenues ....................... 13,233 14,246 | 26,863 26,429
------- ------- | ------- -------
Costs and Expenses |
Crude oil, products and operating |
supplies and expenses ................ 8,074 8,823 | 16,477 16,233
Exploration expenses ................... 97 130 | 171 221
Selling and general expenses ........... 939 953 | 1,873 1,752
Depreciation, depletion and amortization 621 600 | 1,220 1,197
Interest and debt discount expense ..... 30 77 | 123 159
Taxes other than income taxes (a) ...... 2,438 2,647 | 4,731 5,140
Income taxes ........................... 392 267 | 921 514
------- ------- | ------- -------
Total Costs and Expenses ............. 12,591 13,497 | 25,516 25,216
------- ------- | ------- -------
Net Income ...............................$ 642 $ 749 | $ 1,347 $ 1,213
======= ======= | ======= =======
|
Net Income Per Common Share ..............$ 0.81 $ 0.95 | $ 1.69 $ 1.54
======= ======= | ======= =======
Assuming Dilution ......................$ 0.79 $ 0.93 | $ 1.65 $ 1.51
======= ======= | ======= =======
Dividends Per Common Share ...............$ 0.57 $ 0.57 | $ 1.14 $ 1.14
======= ======= | ======= =======
|
|
|
- -------------- |
|
(a) Includes excise and state gasoline |
taxes of ...........................$ 1,543 $ 1,542 | $ 2,894 $ 2,974
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 1 -
<PAGE>
MOBIL CORPORATION
CONSOLIDATED BALANCE SHEET
(In millions)
Dec. 31, June 30,
ASSETS 1998 1999
------- -------
Current Assets
Cash and cash equivalents ................................ $ 714 $ 693
Accounts and notes receivable ............................ 5,518 5,752
Inventories .............................................. 1,911 2,076
Prepaid expenses and other current assets ................ 520 551
Deferred income taxes .................................... 68 80
------- -------
Total Current Assets ................................... 8,731 9,152
Investments and Long-Term Receivables ...................... 8,490 8,329
Properties, Plants and Equipment ........................... 48,681 49,230
Less: Accumulated Depreciation, Depletion and Amortization . 23,954 24,304
------- -------
Net Properties, Plants and Equipment ....................... 24,727 24,926
Deferred Charges and Other Assets .......................... 806 827
------- -------
Total Assets ........................................... $42,754 $43,234
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt .......................................... $ 3,982 $ 5,425
Accounts payable ......................................... 3,707 3,910
Accrued liabilities ...................................... 2,943 2,574
Income, excise, state gasoline and other taxes payable ... 1,986 1,867
Deferred income taxes .................................... 328 330
------- -------
Total Current Liabilities .............................. 12,946 14,106
Long-Term Debt ............................................. 3,719 3,723
Reserves for Employee Benefits ............................. 2,060 1,964
Accrued Restoration, Removal and Environmental Costs ....... 1,011 1,003
Deferred Credits and Other Noncurrent Obligations .......... 1,021 740
Deferred Income Taxes ...................................... 3,254 3,011
Minority Interest in Subsidiary Companies .................. 373 97
------- -------
Total Liabilities ...................................... 24,384 24,644
------- -------
Shareholders' Equity
Preferred stock (ESOP-related) -- shares issued and
outstanding: 164,986 at December 31, 1998 and
161,111 at June 30, 1999 ............................... 641 626
Unearned employee compensation and benefit
plan trust ............................................. (668) (647)
Common stock -- $1.00 par value; shares authorized:
1,200,000,000; shares issued: 897,947,485 at
December 31, 1998 and 900,417,716 at June 30, 1999 ..... 898 900
Capital surplus .......................................... 1,649 1,721
Earnings retained in the business ........................ 20,534 20,831
Accumulated other nonowners' equity ...................... (1,058) (1,215)
Common stock held in treasury, at cost -- shares:
117,414,000 at December 31, 1998 and June 30, 1999 ..... (3,626) (3,626)
------- -------
Total Shareholders' Equity ............................. 18,370 18,590
------- -------
Total Liabilities and Shareholders' Equity ................. $42,754 $43,234
======= =======
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 Six Months
Ended June 30,
-------------------
1998 1999
------- -------
Cash Flows from Operating Activities
Net Income ......................................... $ 1,347 $ 1,213
Adjustments to reconcile to net cash from
operating activities:
Depreciation, depletion and amortization ....... 1,220 1,197
Deferred income taxes .......................... (37) (211)
Earnings less (greater)than distributions from
equity affiliates ............................ 128 (6)
Exploration expenses (includes noncash
charges: 1998-$11; 1999-$27) ................ 171 221
Gain on sales of properties, plants and
equipment and other assets ................... (64) (50)
Increase in working capital items .............. (1,068) (683)
Other, net ..................................... (48) 7
------- -------
Net Cash from Operating Activities ................... 1,649 1,688
------- -------
Cash Flows from Investing Activities
Capital and exploration expenditures ............... (2,008) (1,808)
Proceeds from sales of properties, plants and
equipment and other assets ....................... 170 72
Payments attributable to investments and
long-term receivables ............................ (247) (333)
------- -------
Net Cash Used in Investing Activities ................ (2,085) (2,069)
------- -------
Cash Flows from Financing Activities
Cash dividends ..................................... (916) (916)
Proceeds from borrowings having original
terms greater than three months .................. 620 968
Repayments of borrowings having original
terms greater than three months .................. (588) (1,196)
Increase in other borrowings ....................... 1,746 1,733
Increase/(decrease)in minority interest ............ 25 (275)
Proceeds from issuance of common stock ............. 58 74
Purchase of common stock for treasury .............. (277) -
------- -------
Net Cash Provided by Financing Activities ............ 668 388
------- -------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents ................................... 5 (28)
------- -------
Net Increase/(Decrease) in Cash and Cash Equivalents . 237 (21)
Cash and Cash Equivalents - Beginning of Period ...... 820 714
------- -------
Cash and Cash Equivalents - End of Period ............ $ 1,057 $ 693
======= =======
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 3 -
<PAGE>
MOBIL CORPORATION
SEGMENT INFORMATION
(In millions)
For the Three Months|For the Six Months
Ended June 30, | Ended June 30,
----------------- | ---------------
1998(1) 1999 | 1998(1) 1999
-------- ------ |-------- ------
Revenues by Segment |
|
Exploration & Producing-- Third Party .. $ 1,472 $ 1,404 |$ 3,075 $ 2,742
-- Intersegment.. 582 871 | 1,327 1,479
Marketing & Refining -- Third Party .. 11,070 12,225 | 22,359 22,478
-- Intersegment.. 105 208 | 351 294
Chemical -- Third Party .. 661 601 | 1,362 1,147
-- Intersegment.. 76 74 | 146 139
Corporate and Other ..................... 30 16 | 67 62
Intersegment Elimination ................ (763) (1,153)| (1,824) (1,912)
------- ------- | ------ -------
|
Total Revenues ....................... $13,233 $14,246 |$26,863 $26,429
======= ======= |======= =======
(1) Prior year data reclassified to conform with current year presentation.
INVESTMENT SPENDING
(In millions) Second Quarter First Six Months
Capital and Exploration Expenditures 1998 1999 1998 1999
----- ----- ----- -----
|
Exploration & Producing - U.S. ... $ 174 $ 69 | $ 272 $ 148
- Intl. .. 765 717 | 1,266 1,385
|
Marketing & Refining - U.S. ... 103 56 | 163 96
- Intl. .. 70 39 | 113 74
|
Chemical ............................ 70 21 | 96 63
|
Other ............................... 70 21 | 98 42
------ ------ | ------ ------
Total Capital and Exploration |
Expenditures .................... $1,252 $ 923 | $2,008 $1,808
------ ------ | ------ ------
Cash Investments in Equity Companies 255 100 | 352 444
------ ------ | ------ ------
Total Investment Spending ........... $1,507 $1,023 | $2,360 $2,252
====== ====== | ====== ======
- ------------------------------ |
Memo: |
Exploration Expenses charged |
to income, included above |
- U.S. ... $ 32 $ 25 | $ 49 $ 48
- Intl. .. 65 105 | 122 173
------ ------ | ------ ------
Total Exploration Expenses ...... $ 97 $ 130 | $ 171 $ 221
====== ====== | ====== ======
Note: Results of operations by segment are presented on page 8.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
MOBIL - 4 -
<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, 1998.
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 Nonowners' Equity
The components of changes in nonowners' equity, net of related tax for the
three months and six months ended June 30, 1998 and 1999, respectively, are as
follows:
- --------------------------------------------------------------------------------
(In millions) Three Months | Six Months
Ended June 30, | Ended June 30,
-------------- --------------
1998 1999 | 1998 1999
------ ------ | ------ ------
Net Income .................................. $ 642 $ 749 | $1,347 $1,213
Foreign currency translation adjustments .... (195) 14 | (173) 157
----- ----- | ----- -----
Changes in nonowners' equity ................ $ 447 $ 763 | $1,174 $1,370
===== ===== | ===== =====
-----------------------------------------------------------------------------
MOBIL - 5 -
<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.
----------------------------------------------------------------------
(In millions) For the Six Months
Ended June 30,
--------------------
1998 1999
Changes in Working Capital Items
(Increases)/decreases
Accounts and notes receivable ................. $ 672 $ (388)
Inventories ................................... (180) (144)
Prepaid expenses and other current assets ..... (57) (36)
Accounts payable .............................. (905) 297
Accrued liabilities ........................... (346) (321)
Income, excise, state gasoline and
other taxes payable ......................... (252) (91)
------- --------
Increase in working capital items ............. $(1,068) $( 683)
======= ========
4. Net Income per Share
(In millions, except for per-share amounts; number of shares in thousands)
For the Three Months
Ended June 30,
--------------------
1998 1999
----- -----
Net Income .............................................. $ 642 $ 749
Less: dividends on preferred stock ...................... 12 12
------- -------
Adjusted net income applicable to common shares ......... $ 630 $ 737
======= =======
Weighted average number of basic common shares
outstanding ........................................... 781,572 775,264
======= =======
Net income per common share ............................. $ 0.81 $ 0.95
======= =======
Net Income .............................................. $ 642 $ 749
Less: additional contribution to ESOP ................... 1 2
Less: Stock Appreciation Rights compensation
(expense) income ................................ - (3)
------- -------
Adjusted net income applicable to common shares ......... $ 641 $ 750
======= =======
Weighted average number of basic common shares
outstanding ........................................... 781,572 775,264
Issuable on assumed exercise of stock options ........... 12,682 15,175
Assumed conversion of preferred stock ................... 16,857 16,156
------- -------
Total .............................................. 811,111 806,595
======= =======
Net income per common share -- assuming dilution ........ $ 0.79 $ 0.93
======= =======
MOBIL - 6 -
<PAGE>
4. Net Income per Share (concluded)
(In millions, except for per-share amounts; number of shares in thousands)
For the Six Months
Ended June 30,
-------------------
1998 1999
----- -----
Net Income .............................................. $ 1,347 $ 1,213
Less: dividends on preferred stock ...................... 25 24
------- -------
Adjusted net income applicable to common shares ......... $ 1,322 $ 1,189
======= =======
Weighted average number of basic common shares
outstanding ........................................... 781,843 774,503
======= =======
Net income per common share ............................. $ 1.69 $ 1.54
======= =======
Net Income .............................................. $ 1,347 $ 1,213
Less: additional contribution to ESOP ................... 3 3
Less: Stock Appreciation Rights compensation
(expense) income ................................ 4 (3)
------- -------
Adjusted net income applicable to common shares ......... $ 1,340 $ 1,213
======= =======
Weighted average number of basic common shares
outstanding ........................................... 781,843 774,503
Issuable on assumed exercise of stock options ........... 11,898 13,956
Assumed conversion of preferred stock ................... 16,929 16,254
------- -------
Total .............................................. 810,670 804,713
======= =======
Net income per common share -- assuming dilution ........ $ 1.65 $ 1.51
======= =======
MOBIL - 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
RESULTS OF OPERATIONS
-------------------------------------------------------------------------------
REPORTED EARNINGS Second Quarter |First Six Months
(In millions) _____________ Incr./ |_________________ Incr./
(Decr.) | (Decr.)
1998 1999 | 1998 1999
---- ---- ----- ---- ---- ------
Exploration & Producing |
-- United States ..........$ 44 $ 82 $ 38 | $ 124 $ 105 $ (19)
-- International .......... 191 419 228 | 501 627 126
----- ----- ----- | ------ ------ ------
Total Exploration & Producing . 235 501 266 | 625 732 107
----- ----- ----- | ------ ------ ------
|
Marketing & Refining |
-- United States .......... 194 198 4 | 280 288 8
-- International .......... 210 122 (88) | 439 323 (116)
----- ----- ----- | ------ ------ ------
Total Marketing & Refining..... 404 320 (84) | 719 611 (108)
----- ----- ----- | ------ ------ ------
|
Chemical ...................... 58 24 (34) | 125 30 (95)
|
Corporate and Financing (a).... (55) (96) (41) | (122) (160) (38)
----- ----- ----- | ------ ------ ------
|
Net Income ....................$ 642 $ 749 $ 107 | $1,347 $1,213 $ (134)
===== ===== ===== | ====== ====== ======
-------------------------------------------------------------------------------
OPERATING EARNINGS Second Quarter |First Six Months
(Adjusted for Special Items)_____________ Incr./ |_________________ Incr./
(In millions) (Decr.) | (Decr.)
1998 1999 | 1998 1999
---- ---- ----- ---- ---- -----
Exploration & Producing |
-- United States ..........$ 44 $ 82 $ 38 | $ 124 $ 105 $ (19)
-- International .......... 191 300 109 | 501 508 7
----- ----- ----- | ------ ------ ------
Total Exploration & Producing . 235 382 147 | 625 613 (12)
----- ----- ----- | ------ ------ ------
|
Marketing & Refining |
-- United States .......... 194 198 4 | 280 288 8
-- International .......... 223 122 (101) | 462 323 (139)
----- ----- ----- | ------ ------ ------
Total Marketing & Refining..... 417 320 (97) | 742 611 (131)
----- ----- ----- | ------ ------ ------
|
Chemical ...................... 58 24 (34) | 125 30 (95)
|
Corporate and Financing (a).... (55) (76) (21) | (122) (133) (11)
----- ----- ----- | ------ ------ ------
Income Excluding Special Items. 655 650 (5) | 1,370 1,121 (249)
|
Special Items (table on page 9) (13) 99 112 | (23) 92 115
----- ----- ----- | ------ ------ ------
Net Income ....................$ 642 $ 749 $ 107 | $1,347 $1,213 $ (134)
===== ===== ===== | ====== ====== ======
-------------------------------------------------------------------------------
(a) Corporate and Financing includes corporate administrative expenses, net
financing expense and other items.
-------------------------------------------------------------------------------
MOBIL - 8 -
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ITEMS Second Quarter | First Six Months
(In millions) ---------------- | ------------------
1998 1999 | 1998 1999
---- ---- ---- ----
|
Deferred Tax Benefit .............. $ - $ 141 | $ - $ 141
Exxon Mobil Merger-Related Costs - (20) | - (27)
Asset Impairment/Write-off - (22) | - (22)
Restructuring ..................... (13) - | (23) -
----- ----- | ----- -----
Total Special Items ............... $ (13) $ 99 | $ (23) $ 92
===== ===== ===== =====
- --------------------------------------------------------------------------------
CONSOLIDATED RESULTS OVERVIEW
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998
Consolidated second quarter net income was $749 million, an increase of $107
million from the $642 million reported for the second quarter of 1998. Earnings
per common share, assuming dilution, for the second quarter of 1999 were $0.93,
compared with $0.79 for the second quarter of 1998. Special items included in
this year's second quarter were a $141 million upstream tax benefit in Indonesia
offset by charges of $22 million for the write-off of an upstream property in
Venezuela and $20 million for costs related to the proposed Exxon Mobil merger.
The second quarter of 1998 included special charges of $13 million for
implementation expenses associated with the Mobil-British Petroleum (BP)
downstream alliance. Excluding special items from both periods, second quarter
1999 operating earnings of $650 million were essentially unchanged from the $655
million earned in the same period last year.
Industry fundamentals lowered this year's second quarter results by about $110
million versus the comparable period last year. Higher crude oil prices were
more than offset by lower worldwide natural gas prices, weaker margins in
refining and marketing, especially in Mobil's international markets, and lower
petrochemical margins. However, Mobil's ongoing self-help programs generated
about $140 million of benefits, thereby offsetting the impact of these
unfavorable industry fundamentals and higher exploration expenses.
The Upstream benefited from higher worldwide crude oil prices and lower
operating expenses. Mobil continued to see the benefits from its refocused
investment program, which resulted in lower new business expenses, and from
asset rationalization synergies, such as the swap done with Arco last year.
These benefits were offset somewhat by higher exploration expenses, lower
natural gas prices and a 3% decline in production versus the second quarter of
last year. Higher volumes from key growth areas in Eastern Canada (Hibernia),
Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more
than offset by the impact of anticipated contractual reductions in Indonesia and
natural field declines in mature areas.
In the Downstream, Mobil's U.S. operations achieved record earnings for the
quarter as benefits from expense initiatives, strong refining performance, sales
volume growth and higher lube income more than offset lower industry margins. In
the international area, earnings declined significantly as refining margins
continued to collapse in the face of product oversupply. Additionally, marketing
margins eroded as product prices lagged the increase in crude oil costs and were
impacted by competitive pressures in several markets. Again, continuing
self-help improvements, particularly in Asia-Pacific, helped offset the
deterioration in industry fundamentals.
MOBIL - 9 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
In Chemical, earnings were down significantly, reflecting lower polyethylene
and paraxylene margins.
Crude oil prices, after deteriorating during the entire year of 1998 and most
of the first quarter of 1999, have recently shown significant improvement.
However, international refining and marketing margins remain depressed, as do
margins for most of Mobil's petrochemical business. Industry fundamentals, as
reflected in these price and margin swings, continue to be unpredictable in the
near term. Therefore, Mobil will continue to focus on self-help initiatives to
sustain and grow earnings.
Worldwide revenues in the second quarter of 1999 of $14,246 million were
$1,013 million higher than revenues in the second quarter of 1998, reflecting
the effects of higher worldwide average crude oil prices and higher overall
worldwide sales volumes. These increases were somewhat offset by the effects of
lower worldwide average natural gas prices, lower petroleum product prices and
lower petrochemical prices.
Crude oil, products and operating supplies and expenses increased by $749
million to $8,823 million, primarily due to higher crude oil prices and higher
overall sales volumes, slightly offset by lower worldwide natural gas prices,
petroleum product prices and petrochemicals prices as well as lower
volume-related expenses. Taxes other than income taxes increased $209 million to
$2,647 million, mainly due to the effects of higher sales volumes, particularly
in the U.S. and Japan. Income tax expense decreased $125 million to $267
million, mainly due to a deferred tax benefit of $141 million related to
recovery of exploration expenses incurred in prior years.
FIRST SIX MONTHS 1999 COMPARED WITH FIRST SIX MONTHS 1998
Mobil's first half 1999 net income was $1,213 million, compared with $1,347
million for the same period in 1998. This year's net income included a $141
million upstream tax benefit related to our operations in Indonesia offset by
special charges of $27 million for costs related to the proposed Exxon Mobil
merger and $22 million for the write-off of an upstream property in Venezuela.
First half 1998 net income included special charges of $23 million for Mobil-BP
European downstream alliance implementation costs.
Excluding special items, first half operating earnings of $1,121 million were
down $249 million, or 18%, from the comparable period in 1998. The decline was
primarily due to lower worldwide natural gas prices, higher exploration
expenses, lower downstream margins in all major markets and lower petrochemicals
margins. Lower expenses, better refinery performance and benefits from self-help
initiatives partly offset the effects of these negative factors.
Six month 1999 revenues of $26,429 million were $434 million lower than
revenues in the same period of 1998 primarily due to the effects of lower
average worldwide natural gas and petroleum product prices. Petrochemical prices
were also lower. These decreases were partly offset by effects of higher
worldwide crude oil prices and overall sales volumes.
MOBIL - 10 -
<PAGE>
CONSOLIDATED RESULTS OVERVIEW - continued
Crude oil, products and operating supplies and expenses decreased by $244
million to $16,233 million, primarily due to lower worldwide natural gas and
petroleum product prices, partially offset by lower volume-related expenses.
Selling and general expenses decreased $121 million to $1,752 million, mainly
due to benefits from cost reduction initiatives. Taxes other than income taxes
increased $409 million to $5,140 million, mainly due to the effects of higher
sales volumes, particularly in the U.S. and Japan. Income tax expense decreased
$407 million to $514 million, due to a lower level of pre-tax income and a
deferred tax benefit of $141 million related to recovery of exploration expenses
incurred in prior years.
MOBIL - 11 -
<PAGE>
Exploration and Producing
- -------------------------
Exploration and Producing
Selected Operating Data Second Quarter First Six Months
----------------------- ---------------------
Incr./(Decr.) Incr./(Decr.)
------------- -------------
1998 1999 Vol. % 1998 1999 Vol. %
---- ---- ---- ---- ---- ---- ----- ---
Net Crude Oil and NGL |
Production (TBD) - U.S. .. 242 243 1 - | 241 243 2 1
- Intl. . 677 705 28 4 | 679 709 30 4
----- ----- ----- | ----- ----- -----
Total .................... 919 948 29 3 | 920 952 32 3
===== ===== ===== | ===== ===== =====
Net Natural Gas |
Production (MMCFD) - U.S. .. 1,119 863 (256)(23)| 1,121 882 (239)(21)
- Intl.(a) 3,074 2,875 (199) (6)| 3,323 3,032 (291) (9)
----- ----- ----- | ----- ----- -----
Total .................... 4,193 3,738 (455)(11)| 4,444 3,914 (530)(12)
===== ===== ===== | ===== ===== =====
TOTAL NET PRODUCTION (TBDOE).. 1,679 1,625 (54) (3)| 1,725 1,661 (64) (4)
===== ===== ===== | ===== ===== =====
- --------------------------------------------------------------------------------
(a) Year-to-date production reflects a downward restatement of Indonesia first
quarter 1998.
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998
Exploration and Producing net income was $501 million in the second quarter of
1999 versus last year's income of $235 million. This quarter's results included
a special deferred tax benefit of $141 million related to the recovery of
exploration expenses incurred in prior years partially offset by a charge of $22
million for the write-off of a property in Venezuela. Last year's income did not
include any specials items. Excluding special items from both years, operating
earnings of $382 million were $147 million higher than last year's $235 million.
In the United States, operating earnings of $82 million increased $38 million
as higher crude oil prices and lower operating expenses were only partially
offset by lower natural gas prices and lower natural gas production.
International operating earnings of $300 million were $109 million higher,
primarily reflecting an increase in crude oil prices and lower operating
expenses. These benefits were partly offset by higher exploration expenses,
lower natural gas prices and lower production. The effects of higher volumes
from the key growth areas in Eastern Canada (Hibernia), Equatorial Guinea,
Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more than offset by the
impact of anticipated contractual reductions in Indonesia, natural field
declines in mature areas and increased maintenance in the North Sea.
FIRST SIX MONTHS 1999 COMPARED WITH FIRST SIX MONTHS 1998
Exploration and Producing net income of $732 million was $107 million higher
than last year. The increase was mainly due to lower operating expenses and a
$141 million deferred tax benefit related to the recovery of exploration
expenses incurred in prior years. This increase was offset somewhat by higher
exploration expenses and lower natural gas prices and production. The effects of
higher liquids volumes from the key growth areas in Eastern Canada (Hibernia),
Equatorial Guinea, Kazakhstan (Tengiz) and Nigeria (Oso NGL project) were more
than offset by the impact on natural gas volumes of anticipated contractual
reductions in Indonesia and natural field declines in mature areas.
MOBIL - 12 -
<PAGE>
Marketing and Refining
- ----------------------
Marketing and Refining Second Quarter First Six Months
Selected Operating Data Incr./(Decr.) Incr./(Decr.)
1998 1999 Vol. % 1998 1999 Vol. %
----- ----- --- -- ----- ----- --- --
Petroleum Product
Sales (TBD)(a) - U.S. ... 1,452 1,537 85 6 | 1,406 1,502 96 7
- Intl.(b) 1,915 1,896 (19) (1)| 1,941 1,958 17 1
----- ----- --- | ----- ----- ---
Total .................. 3,367 3,433 66 2 | 3,347 3,460 113 3
===== ===== === | ===== ===== ===
|
Refinery Runs (TBD) |
- U.S. ... 941 804 (137)(15)| 921 792 (129)(14)
- Intl.(b) 1,230 1,270 40 3 | 1,265 1,294 29 2
----- ----- --- | ----- ----- ---
Total .................. 2,171 2,074 (97) (4)| 2,186 2,086 (100) 5
===== ===== === | ===== ===== ===
(a) Includes supply/other sales
(b) Includes Mobil's share for the European alliance with BP.
- --------------------------------------------------------------------------------
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998
Marketing and Refining net income was $320 million in the second quarter of
1999 versus $404 million for the same period last year. There were no special
items recorded in the second quarter of 1999; however, the second quarter of
1998 included special charges of $13 million for implementation costs related to
the Mobil-BP alliance. Excluding special items, operating earnings of $320
million were $97 million lower than in 1998.
Operating earnings in the United States were $198 million, $4 million higher
than last year's record second quarter results, in spite of the unfavorable
impact of lower industry margins. This quarter's results benefited from lower
operating expenses, continued strong refinery performance, 3% higher gasoline
trade sales and increased lube income.
International operating earnings of $122 million were $101 million lower than
in 1998. In Asia-Pacific and Europe, earnings were lower mainly due to a
significant deterioration in both refining and marketing margins. Earnings
benefited from performance initiatives in all regions and continued strong
refinery performance; however, these were not enough to offset the deterioration
in industry fundamentals.
FIRST SIX MONTHS 1999 COMPARED WITH FIRST SIX MONTHS 1998
Marketing and Refining net income was $611 million for the first six months of
1999 compared with net income of $719 million last year. Excluding $23 million
of special charges in 1998 for implementation costs related to the Mobil-BP
alliance, operating earnings of $611 million were $131 million lower than last
year. Earnings were lower due to the effects of lower international refining and
marketing margins offset somewhat by benefits from performance initiatives.
MOBIL - 13 -
<PAGE>
Chemical
- --------
SECOND QUARTER AND FIRST SIX MONTH COMPARISONS OF 1999 WITH 1998
Chemical net income of $24 million was $34 million lower than last year's
second quarter. In the first six months of 1999, Chemical net income was $30
million compared with $125 million in the same period last year. The decrease in
both periods reflects lower polyethylene and paraxylene margins, partly offset
by the effect of higher volumes and lower operating expenses.
Corporate and Financing
SECOND QUARTER AND FIRST SIX MONTH COMPARISONS OF 1999 WITH 1998
Corporate and Financing net expense was $96 million in the second quarter of
1999 compared with $55 million in the same period last year. For the first six
months of 1999, Corporate and Financing net expense was $160 million, $38
million higher than last year. The increase is mainly due to higher financing
expenses related to an increase in average net debt balances and timing of
expenses.
DISCUSSION OF FINANCIAL CONDITION
Total current assets as of June 30, 1999 were $9,152 million, an increase of
$421 million from December 31, 1998. Accounts and notes receivable increased
$234 million to $5,752 million, primarily due to the effects of higher average
crude oil prices offset somewhat by lower worldwide natural gas, petroleum
products and petrochemical prices and unfavorable currency impacts.
Additionally, inventories were up mainly due to a seasonal build of light
products and gas liquids, partly offset by currency effects.
Total debt of Mobil and its subsidiaries was $9,148 million, $1,447 million
higher than at year-end 1998, reflecting capital expenditures and working
capital requirements. The debt-to-capitalization ratio was 33% at June 30, 1999,
up from 29% at year-end 1998.
Accounts payable increased $203 million primarily due to higher purchase
prices for crude oil offset by lower prices for petroleum products and
unfavorable currency impacts. Income, excise, state gasoline and other taxes
payable decreased $119 million mainly due to timing of payment of Japanese
gasoline taxes.
Shareholders' equity rose $220 million during the first six months of 1999
primarily due to an increase of $297 million in earnings retained in the
business and an increase in capital surplus of $72 million. Partially offsetting
the increase in retained earnings was the reduction in accumulated other
nonowners' equity reflecting a strengthening U.S. dollar in certain countries in
which the company has significant operations ($157 million).
Total investment spending for the second quarter of 1999 was $1,023 million, a
decrease of $484 million from the comparable period last year. For the first six
months of 1999, worldwide investment spending was $2,252 million, compared with
$2,360 million for six months of 1998.
MOBIL - 14 -
<PAGE>
DISCUSSION OF FINANCIAL CONDITION - continued
Return on average capital employed for the twelve-month period ended June 30,
1999 was 6.8%, compared with 7.7% for the calendar year 1998. Return on average
shareholders' equity was 8.2% for the twelve-month period ended June 30, 1999,
compared with 9.0% for the calendar year 1998.
Whenever external financing is needed, Mobil and its subsidiary companies have
ready access to multiple capital markets, including significant bank credit
lines.
Current Developments
In the second quarter of 1999, Mobil production from the Arun and other fields
and facilities in Aceh Province, North Sumatra, Indonesia, averaged 964 million
cubic feet per day of natural gas and 30 thousand barrels per day of condensate
and liquefied petroleum gas. During recent months, there has been renewed
conflict between the Aceh Merdeka (Free Aceh) movement and the military/police
authorities and there have been reported threats to the fields and facilities.
Throughout this period, Mobil's production and operations have remained
unaffected. Mobil continues to monitor developments closely.
Restructuring
In 1998, Mobil implemented new restructuring programs in Australia and New
Zealand, and in Latin America, to integrate fuels and lubes operations. Mobil
recorded a provision of $50 million ($41 million after tax). The balance in the
reserve at June 30, 1999 was $25 million. The reduction was mainly due to cash
outlays.
In 1997, Mobil and BP announced that the alliance would implement a major
restructuring of its lubricant oil refining business. Mobil recorded reserves in
1997 of $86 million ($82 million after tax). The amount remaining in the reserve
at June 30, 1999 was $29 million. The reduction was due to cash outlays.
Also during 1997, Mobil initiated two major cost savings initiatives in
Asia-Pacific, one in Japan in response to the deregulated business environment
and the other in Australia. At that time, Mobil recorded reserves of $172
million ($107 million after tax). The amount remaining in the reserves at June
30, 1999 was $19 million. The reduction was due to cash outlays.
Year 2000 Project
Mobil is engaged in a company-wide effort (Project) to address the issues that
are likely to arise if computer programs and embedded computer chips are unable
to properly recognize dates in and after the year 2000. The Project is focused
on three main areas: the information technology (IT) systems in Mobil's
computers and computer software, including those that are linked to the systems
of third parties; the non-IT systems embedded in equipment that controls or
monitors Mobil's operating assets; and Mobil's business relationships with third
parties (referred to herein as external agents). The thrust of the Project is to
address those of Mobil's IT systems, non-IT systems and relationships with
external agents which Mobil judges to be materially important to Mobil. These
systems or relationships, referred to herein as materially important, are those
MOBIL - 15 -
<PAGE>
Year 2000 Project--continued
whose failure for year 2000 reasons would likely: put the safety of individuals
at risk; lead to damage to property or the environment; put in jeopardy the
value of Mobil's name or intellectual property; or trigger a significant adverse
consequence to Mobil's financial performance or condition.
Project work dealing with IT systems and Project work dealing with non-IT
systems has the following three phases: (1) inventory and assessment:
inventorying all of Mobil's systems (including those that are linked to third
parties), identifying those of Mobil's systems that are not year 2000 compliant,
and making judgments as to which of Mobil's systems (both compliant and
non-compliant) would likely be materially important; (2) strategy and planning:
developing strategies and plans for (a) remediating, upgrading or replacing all
non-compliant systems (except those whose failure would, in Mobil's judgment,
have an insignificant impact on Mobil's operations) and (b) testing all systems
judged to be materially important, and estimating the costs of implementing
these strategies and executing these plans; and (3) execution: implementing the
strategies and executing the plans.
Project work dealing with relationships with external agents has the following
three phases: (1) inventory and assessment: inventorying Mobil's relationships
with external agents and making judgments as to which of those relationships
would likely be materially important; (2) communication and evaluation: sending
letters and questionnaires to those external agents whose relationships are
judged to be materially important to elicit information about the plans and
actions of those external agents to achieve timely year 2000 readiness, and
evaluating the information so obtained; and (3) follow up: contacting external
agents with whom Mobil has already communicated to obtain further assurance that
such external agents will achieve timely year 2000 readiness.
Additional Project work, discussed below, involves identifying scenarios
involving failures for year 2000 reasons of materially important IT and non-IT
systems or materially important relationships with external agents and
developing contingency plans for mitigating the impact of such failures.
The inventory and assessment and the strategy and planning phases of the work
dealing with IT systems are complete. The execution phase of this work involves
both application and infrastructure repair and systems upgrades and
replacements. Application and infrastructure repair involves: the remediation
and testing of non-compliant code; the remediation, replacement and testing of
computing infrastructure and telecommunications devices; and the upgrading and
testing of end user applications. The application and infrastructure repair
work, which is being performed by both Mobil personnel and third parties
specializing in resolving year 2000 issues, is nearly complete, with final
completion expected by September 30, 1999, and Mobil estimates that
approximately 99% of the projects comprising this work had been completed as of
June 30, 1999. The systems upgrade and replacement work consists of the
implementation of a major integrated enterprise software system in North America
(which would have been implemented regardless of year 2000 considerations) and
numerous other systems. The major integrated software system in North America is
complete. Mobil estimates that approximately 91% of the projects comprising the
work to upgrade and replace the other systems had been completed as of June 30,
1999, and all such projects are expected to be essentially completed by
September 30, 1999.
The inventory and assessment and the strategy and planning phases of the work
dealing with non-IT systems are essentially complete.The execution phase of this
work, much of which is being performed by the vendors of the products involved,
MOBIL - 16 -
<PAGE>
Year 2000 Project--continued
is expected to be completed by September 30, 1999, and Mobil estimates that
approximately 91% of the projects comprising this work had been completed as of
June 30, 1999. This brought the percentage of year 2000 compliant non-IT systems
in Mobil's inventory of materially important non-IT systems to approximately 98%
as of that date. The majority of the post-June 30, 1999 work dealing with non-IT
systems is either work whose timing must be coordinated with plant operations or
work to install new upgrades from vendors or to change upgrades previously
provided by vendors.
The inventory and assessment phase of the work dealing with relationships with
external agents is complete. The communication and evaluation phase of this work
is also complete, with all external agents whose relationships Mobil judges to
be materially important having been contacted as of March 31, 1999. The
follow-up phase of this work (which includes contacting again those external
agents from whom responses have not yet been received and developing contingency
plans relating to those external agents whose responses raise issues or who do
not respond) is being undertaken by the business continuity and contingency
planning teams referred to below under "Risks and Contingency Plans." The work
of these teams will continue through the end of 1999.
Cost
The costs associated with the Project (all on a pre-tax basis) are being spent
over a three-year period. There are two categories of these costs: (1) costs
that are being incurred solely to achieve year 2000 compliance and (2) costs
that are being incurred to install new systems that improve business
functionality and in many cases concurrently provide year 2000 compliance. Mobil
estimates that the costs to be incurred solely to achieve year 2000 compliance
will total approximately $185 million (which amount includes about $10 million
for contingencies which will only be spent if unforeseen repairs are required in
late 1999 and/or early 2000), of which the costs of dealing with IT systems are
expected to be about $168 million and the costs of dealing with non-IT systems
are expected to be about $17 million (the costs of dealing with relationships
with external agents are expected to be minimal). As of June 30, 1999, about
$148 million of the total costs estimated to be incurred solely to achieve year
2000 compliance had been expended. Mobil estimates that the costs to be incurred
for new systems that improve business functionality and in many cases
concurrently provide year 2000 compliance will total approximately $280 million,
and as of June 30, 1999, about $255 million of these costs had been expended, of
which $87 million was expensed and approximately $168 million was capitalized.
Bookings of Project expenditures tend to lag completion of Project work, so that
the percentages of the total estimated costs that have actually been expended
are lower than the percentages of the Project work that have actually been
completed.
All Project costs are being funded with cash flows from operations. The $185
million which Mobil estimates will be expended solely to achieve year 2000
compliance represents less than 15% of Mobil's estimated total IT budget for the
period covered by the Project. This entire amount is being expensed as it is
incurred. Of the $280 million which Mobil estimates will be expended on new
systems that improve business functionality and in many cases concurrently
provide year 2000 compliance, approximately $100 million is being expensed and
approximately $180 million is being capitalized.
As a result of the Project, certain IT projects to improve business function-
ality have been reprioritized and accelerated while other such IT projects have
MOBIL - 17 -
<PAGE>
Year 2000 Project--continued
been deferred. As a consequence, expenditures during the period covered by the
Project on IT systems that will improve business functionality will actually be
greater than the expenditures that would have been made on such systems had
there been no Project. Accordingly, the deferral of IT work due to the Project
will not have a material adverse effect on Mobil's results of operations or
financial condition.
Risks and Contingency Plans
The failure or failures for year 2000 reasons of materially important systems
or relationships with external agents could have a material adverse effect on
Mobil's results of operations, liquidity and/or financial condition. For
example, if, for year 2000 reasons, a utility company were to be unable to
supply electricity to a Mobil refinery for an extended period, the refinery
would have to be shut down for that period, which could result in substantial
losses of production, sales and income. Mobil believes that the Project work
described above dealing with materially important IT systems and non-IT systems
will, when completed, serve to reduce very substantially the risk that such
systems will fail for year 2000 reasons. Mobil has no way of ensuring, however,
that external agents whose relationships with Mobil are judged to be materially
important (e.g., utilities, telecommunications providers and transportation
providers) will be timely year 2000 compliant.
The failure or failures of systems for year 2000 reasons could also give rise
to liability to third parties. Mobil has not yet attempted to assess the
potential for such liability, and hence cannot say whether such liability
presents a material risk independent of the risk that such failure or failures
could have a material adverse effect on Mobil's results of operations, liquidity
and/or financial condition.
To minimize the risks associated with the year 2000 issue referred to in the
second preceding paragraph, Mobil has begun work (1) to identify scenarios
involving possible failures for year 2000 reasons of materially important
systems and relationships with external agents and (2) to develop contingency
plans for mitigating the impact of these scenarios. Mobil operates a portfolio
of diverse businesses which have facilities and operations throughout the world
and are managed regionally. Mobil believes that the most reasonably likely worst
case scenarios, should they occur, will be encountered at facilities or
operations located in one or more of these regions. Accordingly, a risk-based
contingency planning process has been developed for execution by each business
unit in its unique operating environment, focusing on its business-specific
risks. Contingency planning project leaders were trained in the process during
the first six weeks of 1999. Teams in the business units are developing and
implementing business continuity and contingency plans with a target completion
date of September 30, 1999. Mobil also plans to adapt its existing crisis
response model to encompass failures for year 2000 reasons of materially
important systems or relationships with external agents, and has undertaken
several exercises to validate the model in the context of Year 2000 crisis
response. Additional exercises are planned for the second half of the year.
The work described in the preceding paragraph will be focused on risks,
scenarios and contingency plans involving materially important systems and
relationships with external agents. There are, however, an almost infinite
number of additional risks which are simply not assessable and for which,
therefore, contingency plans cannot be developed. These are the risks of failure
for year 2000 reasons of one or more systems or relationships with external
agents which, individually, Mobil does not judge to be materially important but
whose failure could trigger a cascade of other failures for year 2000 reasons,
MOBIL - 18 -
<PAGE>
Year 2000 Project--concluded
the combination of which could be materially important or could prevent
Mobil from implementing contingency plans it has developed. Such a
combination of failures could also have a material adverse effect on Mobil's
results of operations, liquidity and/or financial condition.
Forward-Looking Statements Relating to the Year 2000
The foregoing discussion about the year 2000 issue includes a number of
forward-looking statements, which are based on Mobil's best assumptions and
estimates as of the date hereof. These include, without limitation, statements
concerning: Mobil's estimated timetables for completing the not-yet-completed
phases of the Project work; Mobil's estimates of the percentages of the work
that remains to be performed to complete such phases; Mobil's estimated
timetable for identifying scenarios involving possible failures for year 2000
reasons of materially important systems and relationships with external agents
and the development and implementation of contingency plans for mitigating the
impacts of these scenarios; and Mobil's estimates of the costs of (1) completing
the not-yet-completed phases of the Project and (2) identifying possible year
2000 failure scenarios and developing and implementing contingency plans for
mitigating the impacts of these.
Actual results could differ materially from the estimates expressed in such
forward-looking statements, due to a number of factors. These factors, which are
not necessarily all the key factors that could cause such differences, include
the following: Mobil's failure to judge accurately which of Mobil's systems and
relationships with external agents are materially important; Mobil's inability
to obtain and retain the staff and third-party assistance necessary to complete
the not-yet-completed phases of the Project in accordance with Mobil's estimated
timetables; the inability of such staff and third parties (1) to locate and
correct all non-year 2000 compliant computer code in materially important
systems and test such corrected code and (2) to install and test upgrades or new
systems containing year 2000-compliant computer code, all in accordance with
Mobil's estimated timetables; unforeseen costs of completing Project work;
Mobil's inability or failure to identify significant year 2000 issues not now
contemplated; and the failure of external agents to achieve timely year 2000
readiness.
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.
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
MOBIL - 19 -
<PAGE>
Forward-Looking Statements--concluded
- -------------------------------------
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 April 30, 1999, a previously-reported matter, in which the Environmental
Protection Agency of South Australia issued an Information and Summons to Mobil
Refining Australia Pty Ltd alleging the violation of two sections of the
Environmental Protection Act, 1993 of South Australia by reason of a discharge
of a gas, ethyl mercapatan, into the environment, was settled. The maximum
penalty for an offense for a body corporate is Australian dollar(A$)$250,000;
the matter was settled with a payment of a A$24,000 penalty and costs of A$644.
On May 13, 1999, the New Jersey Department of Environmental Protection
("NJDEP") issued an Administrative Order and Notice of Civil Administrative
Penalty Assessment alleging that Mobil Oil Corporation's operations of a
formerly-owned refinery in Paulsboro, New Jersey had violated air permit
conditions. The NJDEP seeks a penalty of $111,600.
On June 30, 1999, the EPA issued a Notice and Finding of Violation which
alleged that Mobil Exploration and Producing U.S. Inc.'s operations of the Aneth
Field in Utah had violated the federal Clean Air Act, including violations of a
Prevention of Significant Deterioration permit and the National Emission
Standards for Hazardous Air Pollution for asbestos. No penalty has yet been
sought but the amount of the penalty that will likely be sought is expected to
exceed $200,000.
On July 8, 1999, the Attorney General of the State of Illinois and the State's
Attorney for Will County, Illinois filed a Complaint and Motion for Immediate
and Preliminary Injunction in the Circuit Court for the Twelfth Judicial
MOBIL - 20 -
<PAGE>
Item 1. Legal Proceedings--concluded
District, Will County, Illinois, Chancery Division, alleging that a July 2, 1999
release of water and gas from the coker unit of Mobil Oil Corporation's Joliet,
Illinois refinery ("Release") violated several provisions of the Illinois
Environmental Protection Act ("Act"), created a public nuisance and violated a
1998 Consent Order. The Court granted Plaintiffs' Motion, which prohibited the
restart of the coker unit. On July 12, 1999, the parties agreed to and the
Court signed an Agreed Order for Preliminary Injunction ("Order") (1) which
allowed the restart of the coker unit and (2) under which Mobil Oil Corporation
agreed to pay (a) up to $50,000 of Plaintiffs' actual oversight costs in
connection with Plaintiffs' response to the Release, (b) the costs charged
by a consultant retained by Plaintiffs ("Consultant") for services to the
date of the entry of the Order, and (c) the costs to be charged by the
Consultant for up to two man-months of services following entry of the Order.
Plaintiffs are seeking (1) up to $50,000 in penalties for each violation of
the Act and the relevant regulations thereunder, (2) an additional penalty
of $10,000, and (3) additional penalties and costs as the Court deems
appropriate.
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.
At the Annual Meeting of the Shareholders of Mobil Corporation on May 27,
1999, the following matters were voted on:
A proposal to approve and adopt the Agreement and Plan of Merger, dated as of
December 1, 1998, among Mobil, Exxon Corporation and a subsidiary of Exxon, was
approved with 613,913,495 votes for, 10,874,343 against, and 3,387,746
abstentions.
MOBIL - 21 -
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders--concluded
Shareholders elected four directors for three-year terms expiring at the
Annual Meeting in 2002 (or until completion of the merger, if earlier). The vote
tabulation for individual directors was:
Directors Shares For Shares Withheld
--------- ---------- ---------------
Charles A. Heimbold, Jr. 691,180,092 8,263,160
Samuel C. Johnson 690,812,605 8,630,647
Helene L. Kaplan 690,798,105 8,645,147
Aulana L. Peters 687,918,444 11,524,808
Shareholders approved and ratified the appointment of Ernst & Young LLP as the
Company's independent auditors by a vote of 693,323,891 for, 2,825,660 against,
and 3,290,272 abstentions.
A shareholder proposal calling for the Board of Directors to adopt a practice
of not voting proxies that are signed but unmarked was defeated with 561,358,775
votes against, 37,054,952 in favor and 29,777,701 votes abstained.
A shareholder proposal calling for the Board of Directors to provide a report
to shareholders on the greenhouse gas emissions from Mobil's own operations was
defeated with 557,660,811 votes against, 30,469,215 votes in favor and
39,998,418 votes abstained.
The text of the above proposals is incorporated by reference to Items 1, 4 and
5 of Mobil's definitive proxy statement dated April 5, 1999, filed with the SEC
pursuant to Regulation 14A on April 8, 1999.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
The following exhibits are filed with this report:
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 second quarter:
Date of 8-K Description of 8-K
---------------- -------------------------------------------------------
June 14, 1999 Submitted a copy of a Form of Sale and Distribution
Agreement and a Form of Fixed Rate Medium-Term Note in
connection with the Registration Statement on Form S-3
(No. 333-67123) of the Mobil Oil Corporation Employee
Stock Ownership Plan Trust.
July 23, 1999 Submitted a copy of the Mobil News Release issued
July 23, 1999, reporting Mobil's estimated earnings
for the second quarter of 1999.
MOBIL - 22 -
<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 August 11, 1999
MOBIL - 23 -
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
- ------- ----------------
12. Computation of Ratio of Earnings Electronic
to Fixed Charges
27. Financial Data Schedule Electronic
MOBIL - 24 -
<PAGE>
Exhibit 12.
MOBIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions)
Six
Months
Ended
Year Ended December 31, June 30,
------------------------------------------ --------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
Income Before Change in
Accounting Principle .... $1,759 $2,376 $2,964 $3,272 $1,704 $1,213
Add:
Income taxes .............. 1,919 2,015 3,147 3,093 1,356 514
Portion of rents
representative of
interest factor ......... 340 368 376 346 317 159
Interest and debt
discount expense ........ 461 467 455 428 451 159
Earnings (greater) less
than distributions from
equity affiliates........ (40) (51) 153 (59) 329 (6)
------ ------ ------ ------ ------ ------
Income as Adjusted ........ $4,439 $5,175 $7,095 $7,080 $4,157 $2,039
====== ====== ====== ====== ====== ======
Fixed Charges:
Interest and debt
discount expense ........ $ 461 $ 467 $ 455 $ 428 $ 451 $ 159
Capitalized interest ...... 37 47 78 101 74 60
Portion of rents
representative of
interest factor ......... 340 368 376 346 317 159
------ ------ ------ ------ ------ ------
Total Fixed Charges ....... $ 838 $ 882 $ 909 $ 875 $ 842 $ 378
====== ====== ====== ====== ====== ======
Ratio of Earnings to
Fixed Charges ........... 5.3 5.9 7.8 8.1 4.9 5.4
====== ====== ====== ====== ====== ======
Note:
For the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and the six
months ended June 30, 1999, Fixed Charges exclude $37 million, $28 million, $24
million, $29 million, $25 million and $16 million, respectively, of interest
expense attributable to debt issued by the Mobil Oil Corporation Employee Stock
Ownership Plan Trust and guaranteed by Mobil.
MOBIL - 25 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ARTICLE 5 FINANCIAL DATA SCHEDULE (FDS) FOR PERIOD ENDED JUNE 30, 1999 10-Q
This schedule contains summary financial information extracted from the June
30, 1999 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 693
<SECURITIES> 0
<RECEIVABLES> 5,752
<ALLOWANCES> 0
<INVENTORY> 2,076
<CURRENT-ASSETS> 9,152
<PP&E> 49,230
<DEPRECIATION> 24,304
<TOTAL-ASSETS> 43,234
<CURRENT-LIABILITIES> 14,106
<BONDS> 3,723
0
626
<COMMON> 900
<OTHER-SE> 17,064
<TOTAL-LIABILITY-AND-EQUITY> 43,234
<SALES> 25,957 <F1>
<TOTAL-REVENUES> 26,429 <F1>
<CGS> 16,233
<TOTAL-COSTS> 17,430
<OTHER-EXPENSES> 5,361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 159
<INCOME-PRETAX> 1,727
<INCOME-TAX> 514
<INCOME-CONTINUING> 1,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,213
<EPS-BASIC> 1.54
<EPS-DILUTED> 1.51
<FN>
<F1> SALES AND TOTAL REVENUES INCLUDE $2,974 MILLION OF EXCISE AND STATE
GASOLINE TAXES
</TABLE>
