<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
--------------- ------------
Commission file number 1-8483
UNOCAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3825062
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 West Fifth Street, Los Angeles, California 90017
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (213) 977-7600
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[ ]
Number of shares of Common Stock, $1 par value, outstanding as of July 31,
1994: 242,642,330
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
CONSOLIDATED EARNINGS UNOCAL CORPORATION
(Unaudited)
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------------------------
Dollars in millions except per share amounts 1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Revenues
Sales and operating revenues (a) $2,023 $2,041 $3,852 $4,245
Interest, dividends and miscellaneous income 4 20 53 35
Equity in earnings of affiliated companies 28 22 52 44
Gain (loss) on sales of assets (10) 15 4 92
- -----------------------------------------------------------------------------------------
Total revenues 2,045 2,098 3,961 4,416
Costs and Other Deductions
Crude oil and product purchases 783 820 1,394 1,724
Operating expense 400 425 832 839
Selling, administrative and general expense 128 125 248 249
Depreciation, depletion and amortization 267 238 539 472
Dry hole costs 10 10 34 18
Exploration expense 29 28 54 55
Interest expense 67 76 141 157
Excise, property and other operating taxes (a) 265 216 518 492
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Total costs and other deductions 1,949 1,938 3,760 4,006
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Earnings before income taxes 96 160 201 410
Income taxes 46 72 97 181
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Earnings before cumulative effect of
accounting changes 50 88 104 229
Cumulative effect of accounting changes - - - (130)
- -----------------------------------------------------------------------------------------
Net Earnings $ 50 $ 88 $ 104 $ 99
Dividends on preferred stock 9 9 18 18
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Net Earnings Applicable to Common Stock $ 41 $ 79 $ 86 $ 81
========================================
Earnings per share of common stock (b)
Before cumulative effect of accounting
changes $ .16 $ .33 $ .35 $ .88
Cumulative effect of accounting changes - - - (.54)
- -----------------------------------------------------------------------------------------
Net earnings per share $ .16 $ .33 $ .35 $ .34
Cash dividends declared per share of
common stock $ .200 $ .175 $ .400 $ .350
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(a) Includes consumer excise taxes of $ 234 $ 177 $ 457 $ 414
(b) Based on net earnings applicable to
common stock divided by weighted average
shares outstanding (in thousands) 242,210 241,124 241,926 240,981
See Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET UNOCAL CORPORATION
(Unaudited)
June 30 December 31
---------------------
Millions of Dollars 1994 1993
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<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 150 $ 205
Accounts and notes receivable
Trade 892 877
Refundable income taxes 84 114
Inventories
Crude oil 28 44
Refined products 152 146
Chemicals 29 55
Minerals 15 15
Supplies, merchandise and other 76 66
Other current assets 55 56
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Total current assets 1,481 1,578
Investments and long-term receivables 889 847
Properties (net of accumulated depreciation and
other allowances of $12,025 in 1994 and $11,667
in 1993) 6,596 6,723
Other assets 87 106
- ---------------------------------------------------------------------------
Total assets $9,053 $9,254
===========================================================================
Liabilities
Current liabilities
Accounts payable $ 613 $ 735
Taxes payable 172 208
Current portion of long-term debt and
capital lease obligations 55 54
Interest payable 69 92
Other current liabilities 98 107
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Total current liabilities 1,007 1,196
Long-term debt and capital lease obligations 3,444 3,468
Deferred income taxes 828 875
Other deferred credits and liabilities 636 586
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Total liabilities 5,915 6,125
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Stockholders' Equity
Preferred stock ($0.10 par value; stated at 513 513
liquidation value of $50 per share)
Common stock ($1 par value) 242 241
Capital in excess of par value 191 163
Foreign currency translation adjustment (12) (5)
Unearned portion of restricted stock issued (15) (13)
Retained earnings 2,219 2,230
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Total stockholders' equity 3,138 3,129
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Total liabilities and stockholders' equity $9,053 $9,254
===========================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOWS UNOCAL CORPORATION
(Unaudited)
For the Six Months
Ended June 30
--------------------
Millions of Dollars 1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 104 $ 99
Adjustments to reconcile net earnings to
net cash provided by operating activities
Cumulative effect of accounting changes - 130
Depreciation, depletion and amortization 539 472
Dry hole costs 34 18
Deferred income taxes (38) 48
Gain on sales of assets (before-tax) (4) (92)
Other 68 39
Working capital and other changes related
to operations
Accounts and notes receivable 20 117
Inventories 23 (24)
Accounts payable (127) (38)
Taxes payable (36) (140)
Other (55) (136)
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Net cash provided by operating activities 528 493
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (includes dry hole costs) (518) (489)
Proceeds from sales of assets 55 546
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Net cash provided by (used in) investing
activities (463) 57
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings 547 44
Reduction of long-term debt and capital
lease obligations (570) (462)
Dividends paid on preferred stock (18) (18)
Dividends paid on common stock (97) (84)
Other 18 -
- -----------------------------------------------------------------------------
Net cash used in financing activities (120) (520)
Increase (decrease) in cash and cash equivalents (55) 30
Cash and cash equivalents at beginning of year 205 157
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of period $150 $187
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest (net of amount capitalized) $151 $170
Income taxes (net of refunds) $155 $204
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The consolidated financial statements included herein are unaudited
and, in the opinion of management, include all adjustments necessary
for a fair presentation of financial position and results of
operations. All adjustments are of a normal recurring nature, except
for items discussed in Note 4. Such financial statements are presented
in accordance with the Securities and Exchange Commission's disclosure
requirements for Form 10-Q.
These interim consolidated financial statements should be read in
conjunction with the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements filed with the Commission in Unocal
Corporation's 1993 Annual Report on Form 10-K.
Results for the three and six months ended June 30, 1994, are not
necessarily indicative of future financial results.
(2) For the purpose of this report, Unocal Corporation and its consolidated
subsidiary, Union Oil Company of California (Union Oil), will be
referred to as "Unocal" or "the company".
(3) Contingent Liabilities:
The company has received Notices of Proposed Adjustments from the
Internal Revenue Service (IRS) related to a 1985 takeover attempt and
the efforts undertaken to defeat it. These proposed IRS adjustments
would increase the company's 1985 taxable income by up to $607 million,
of which $201 million would result in decreases to taxable income in
subsequent years.
The company believes that it has substantial legal defenses to the IRS
proposed adjustments. Upon receipt of the Notice of Proposed
Deficiency for 1985 (expected October 1, 1994), the company will
protest the proposed adjustments to the Appeals section of the IRS.
In the opinion of management, a successful outcome in these disputes is
reasonably likely. Although considered unlikely, substantial adverse
decisions could have a material effect on the company's operating
results and financial condition in a given year when such matters are
resolved.
(4) 1993 Accounting Changes:
(a) Effective January 1, 1993, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This
accounting standard requires the company to recognize its obligation
to provide postretirement health care benefits and to accrue such
costs rather than recording them on a cash basis. The actuarial
present value of the accumulated postretirement health care
obligation existing at January 1, 1993 was recognized in the
Consolidated Earnings Statement as the cumulative effect of an
accounting change, resulting in a charge to the first quarter 1993
earnings of $192 million before tax ($121 million after tax or 50
cents per common share).
(b) The company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1993. This statement
requires the company to recognize its obligation to provide
benefits, such as workers' compensation and disabled employees'
medical care, to former or inactive employees after employment but
before retirement. The charge to earnings for the cumulative effect
of the company's unfunded obligation prior to 1993, was $14 million
before tax ($9 million after tax or 4 cents per common share).
(5) Capitalized interest totaled $9 million for the second quarter 1994 and
$18 million for the first six months of 1994. For the same periods of
1993, $10 million and $17 million of interest were capitalized,
respectively.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(6) Between March 24 and April 27, 1994, the company issued $179 million in
Medium Term Notes with interest rates ranging from 6.33% to 7.24% and
maturity dates ranging from February 1997 to March 2001. The proceeds
were used to refinance maturing and callable debt.
In August 1994, Union Oil and the company filed a new shelf
registration statement with the Securities and Exchange Commission to
register for offering and sale, from time to time, up to $1 billion of
debt securities of Union Oil, to be guaranteed as to payment by Unocal,
equity securities of Unocal and warrants to purchase such securities.
(7) Certain items in the prior year financial statements have been
reclassified to conform to the 1994 classification.
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<PAGE>
<TABLE>
<CAPTION>
UNOCAL CORPORATION OPERATING HIGHLIGHTS
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------------------------
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
NET DAILY PRODUCTION (a)
Crude oil and condensate (thousand barrels):
United States 139.8 148.2 140.9 150.4
----- ----- ----- -----
Foreign:
Far East 86.3 68.3 81.9 68.6
Other 37.6 28.9 37.7 30.2
----- ---- ----- ----
Total Foreign 123.9 97.2 119.6 98.8
- -----------------------------------------------------------------------------------------
Worldwide 263.7 245.4 260.5 249.2
Natural Gas (million cubic feet):
United States 1,119 916 1,118 918
----- ---- ----- ----
Foreign:
Far East 573 645 581 643
Other 34 47 66 57
---- ---- ---- ----
Total Foreign 607 692 647 700
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Worldwide 1,726 1,608 1,765 1,618
Natural gas liquids (thousand barrels) 21.9 19.6 20.6 19.6
Geothermal (million kilowatt-hours) 20.7 19.5 20.1 20.8
Input to crude oil processing units
(thousand barrels daily) (b) 305 292 300 286
Sales of petroleum products
(thousand barrels daily) (b) 309 331 308 355
AVERAGE SALES PRICES
Crude oil and condensate (per barrel):
United States $13.59 $15.47 $12.03 $14.92
Foreign:
Far East $14.39 $16.31 $13.83 $13.47
Other $14.41 $17.82 $13.28 $17.46
Total Foreign $14.40 $16.82 $13.61 $16.42
- -----------------------------------------------------------------------------------------
Worldwide $13.92 $15.93 $12.64 $15.41
Natural gas (per thousand cubic feet):
United States $1.84 $2.07 $1.96 $1.94
Foreign:
Far East $1.99 $2.10 $2.00 $2.10
Other $1.84 $1.77 $1.79 $1.50
Total Foreign $1.99 $2.09 $1.98 $2.03
- -----------------------------------------------------------------------------------------
Worldwide $1.89 $2.08 $1.97 $1.98
</TABLE>
(a) Includes net profits type agreements on a gross basis.
(b) Includes the company's 50% equity portion of The UNO-VEN Company.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Unocal's net earnings for the second quarter of 1994 were $50 million, or
16 cents per common share, compared with $88 million in the second quarter
of 1993, or 33 cents per common share. For the first six months of 1994,
net earnings were $104 million, or 35 cents per common share. This
compares with six-month 1993 earnings of $99 million, or 34 cents per
common share. The comparability of the company's reported earnings for
these periods is affected by the following special items:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June
-------------------- ------------------
Millions of dollars 1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Special items:
Cumulative effect of accounting changes:
For postretirement benefits (SFAS 106) $ - $ - $ - $(121)
For postemployment benefits (SFAS 112) - - - (9)
Write-down of investment and provision for
abandonment and remediation of the
Guadalupe oil field (4) - (27) -
Litigation - (8) (17) (9)
Mesa settlement - - 24 -
Asset sales (6) 10 2 57
Other (5) (2) (5) (5)
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Total $(15) $ - $(23) $ (87)
</TABLE>
Excluding the special items, second quarter 1994 net earnings were $65
million, or 23 cents per common share, compared with $88 million, or 33
cents per common share, in the second quarter of 1993. The 1994 year-to-
date earnings, excluding special items, were $127 million, or 45 cents per
common share, compared with $186 million, or 70 cents per common share, a
year ago. Both the quarter and year-to-date results reflected the steep
decline in crude oil prices from a year ago, which were partially offset by
higher worldwide crude oil and natural gas production.
The 1994 year-to-date consolidated revenues were $3.96 billion, down from
$4.42 billion in the same period a year ago. Total costs and other
deductions for the six months were $3.76 billion, compared to $4.01 billion
for 1994 and 1993, respectively. The decrease in both revenues and costs
reflects the sale of several businesses during 1993 and the continued phase-
out of Southeastern retail gasoline marketing operations.
PETROLEUM EXPLORATION AND PRODUCTION. Earnings for the second quarter 1994
totaled $79 million, compared with $113 million in 1993. For the six-month
period, earnings were $150 million in 1994, compared with $255 million in
1993. Both the 1994 quarter and six-month periods included special items
related to asset sales and charges for the Guadalupe oil field, while the
1993 periods included net gains from asset sales. Excluding these special
items, petroleum exploration and production second quarter earnings were
$92 million and $122 million in 1994 and 1993, respectively, and the six-
month 1994 earnings were $179 million, compared with $242 million during
the same period a year ago.
The charges for the Guadalupe oil field, located on the central coast of
California, included a provision for the write-down of investment,
abandonment and remediation of the field. The provision covers the
remediation and cleanup efforts currently underway from leaks of a diesel-
like additive, called diluent, that was formerly used to help produce the
heavy crude oil.
The decline in operating earnings was principally due to lower worldwide
crude oil prices. The average sales price for worldwide crude oil in the
second quarter of 1994 was $13.92 per barrel, down from $15.93 per barrel a
year ago. For the six-month period, the 1994 average sales price was
$12.64 versus $15.41 in 1993.
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<PAGE>
The results also reflect the earnings benefit of an increase in the
company's worldwide production of crude oil and natural gas. Although
domestic crude oil production continued to decline mainly due to the asset
divestment program, the decrease was more than offset by increased foreign
production from Indonesia and the Netherlands. Domestic natural gas
production was up 22 percent from a year ago due to the accelerated
development program initiated in 1993. The decrease in foreign gas
production was primarily due to reduced pipeline allocation in Thailand.
REFINING, MARKETING AND TRANSPORTATION. Unocal's refining, marketing and
transportation segment recorded earnings of $38 million in the second
quarter of 1994, compared with $46 million a year ago. Earnings for the
first six months were $79 million, compared with $94 million in 1993.
Excluding the special items, primarily asset sales, the operating earnings
were $37 million and $32 million in the second quarter of 1994 and 1993,
respectively, and the six-month earnings were $78 million in 1994, compared
with $80 million in 1993.
The results for both the six months and second quarter reflected lower
average sales prices for refined products, which were partially offset by
lower raw material costs. Petroleum product sales volumes were 308,000
barrels per day in 1994, down from 355,000 barrels per day in 1993. The
decline was mainly due to the sale of the auto/truckstop system in 1993 and
the continued phase-out of Southeastern retail gasoline marketing.
However, the company's West Coast U.S. petroleum product six-month sales
volumes increased 9 percent in 1994, compared to the same period a year
ago.
The company's equity in earnings from The UNO-VEN Company, a refining and
marketing partnership in the Midwest, is expected to be lower in the third
quarter due to a regularly scheduled maintenance shut-down at its Chicago
Refinery. The work is scheduled to begin in mid-July 1994, with full
production being resumed in early September.
CHEMICALS. Chemicals operations recorded earnings of $13 million for the
second quarter and $22 million for the first six months of 1994. This
compares with $16 million and $28 million for the same periods in 1993,
respectively. The quarter and year-to-date results reflected lower
earnings from the sale of petroleum coke.
GEOTHERMAL. Earnings for the second quarter of 1994 were $9 million, up
from $6 million in 1993. Six-month earnings were $14 million in 1994,
compared with $38 million in 1993. However, the six-month 1993 earnings
included a $26 million after-tax gain in the first quarter from the sale of
the geothermal Imperial Valley (California) assets and other exploration
properties.
CORPORATE AND OTHER. Second quarter 1994 corporate expenses and the
results of other businesses were $89 million, compared with $93 million for
the same period in 1993. For the six-month period, expenses were $161
million in 1994 and $186 million in 1993. Adjusted for special items, net
expense for corporate and other for the second quarter was $86 million in
1994, versus $88 million for the same period a year ago. Six month expenses
were $166 million and $177 million for 1994 and 1993, respectively. The
decreases reflected lower net interest expense.
The 1994 six-month special items included a $24 million benefit from the
settlement of a lawsuit against Mesa Petroleum, resulting from the takeover
attempt in 1985. Additional special items included in the results for each
reporting period are unusual litigation expenses and asset sales.
FINANCIAL CONDITION AND CAPTIAL EXPENDITURES
For the six months of 1994, cash flows from operating activities, including
working capital changes, were $528 million, up from $493 million in 1993.
The increase reflects higher gas revenues and the Mesa lawsuit settlement,
which were largely offset by lower crude oil prices.
Proceeds from asset sales were $55 million for the first six months of
1994, compared to $546 million in the same period a year ago. The 1994
proceeds were mainly from the sale of nonstrategic oil and gas properties,
while 1993 included $224 million from the sale of the company's Imperial
Valley (California) geothermal assets and other geothermal exploration
properties, $177 million from the sale of the national auto/truckstop
network and the balance from the sale of miscellaneous nonstrategic assets,
including oil and gas properties.
-8-
<PAGE>
Capital expenditures for the six-months 1994 totaled $518 million, compared
with $489 million a year ago. The increase primarily reflects refinery
construction to prepare for manufacturing reformulated gasoline.
Consolidated working capital at June 30, 1994 was $474 million, an increase
of $92 million from the 1993 year-end level of $382 million. The company's
total debt was $3,499 million, a decrease of $23 million from the year-end
1993 level.
OTHER MATTERS
The company has received Notices of Proposed Adjustments from the Internal
Revenue Service related to a 1985 takeover attempt and the efforts
undertaken to defeat it. For more information, see Note 3 in the Notes to
Consolidated Financial Statements on page 4 of this report.
OUTLOOK
Worldwide crude oil prices improved during the second quarter and are
expected to remain stable in the third quarter. This improvement combined
with increasing production levels should benefit Unocal in the future. The
demand for natural gas in the United States continues to be strong with the
current supply of natural gas able to meet the demand. Therefore, no
improvement in prices is expected in the third quarter.
The company's worldwide production of natural gas is expected to average
about 1,780 million cubic feet per day during the full-year 1994, up nearly
11 percent from the 1993 level. Crude oil and condensate production is
expected to average 258,000 barrels per day for the full-year 1994, up
nearly 5 percent from 1993.
The company continues to work toward its asset sales targets. Through the
first six months of 1994, the company has realized proceeds of $611 million
(after tax) from asset sales under the program announced in April 1992.
This represents 87 percent of the goal to generate at least $700 million in
after-tax proceeds by May 1994. Although the goal was not met by May 1994,
due mainly to soft market conditions, the company has identified additional
assets that it plans to sell to meet the goal by year-end 1994.
Unocal has recently received expressions of interest from four different
firms in purchasing the company's crude oil and natural gas assets in
California. The company plans to determine if a sales agreement can be
reached that would be in the best interest of Unocal's stockholders. If a
sale is completed, the proceeds would give Unocal additional flexibility
and financial strength to pursue and accelerate development of significant
growth opportunities in Unocal's strategic areas of interest, such as the
Gulf of Mexico and Southeast Asia.
The company recently announced a major reorganization of its corporate
management that would change the operating outlook of the company in the
future. For more detailed information, see the Current Report on Form 8-K
dated and filed June 27, 1994, with the Securities and Exchange Commission.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
1. In June 1994, the EPA filed an administrative complaint
against the company seeking $252,000 in civil penalties for
alleged late filing of certain reports regarding gas processing
plant inventories under the Toxic Substances Control Act
Inventory Update Rule. In light of the ambiguities in the
application of the rule to natural gas streams, the company
intends to appeal this complaint.
2. Unocal and the operator of one of its product terminals are
finalizing negotiations with the California Air Resources Board
regarding prior gasoline additive concentration level
deficiencies (reported in the first quarter 1994 Form 10-Q Legal
Proceedings). Unocal will pay a total civil penalty of $526,666.
3. The State of Arizona filed suit against Unocal in Superior
Court of Maricopa County, Arizona, in April 1994, seeking civil
penalties of $10,000 per day for each underground storage tank
allegedly violating the underground storage tank regulations.
Such penalties could exceed $100,000.
4. The Casmalia waste site in Casmalia, California, should be
added to the list of clean-up sites reported as Item No. 1 in the
1993 Form 10-K Legal Proceedings.
5. Citizens for a Better Environment, et al, v. Union Oil
Company of California, No. C94-0712, filed in federal district
court in San Francisco in March 1994, alleges that as of February
28, 1994, Unocal's refinery at Rodeo, California, was in
violation of the selenium limit in its National Pollutant
Discharge Elimination System permit. By a prior Cease and Desist
Order issued after notice and hearing, the permitting agency, the
California Regional Water Quality Control Board, had deferred to
July 1998 the effective date of the selenium limitation in
question. Unocal denies that the limits asserted by Citizens
have been in effect, and therefore denies any violation.
Unocal's motion to dismiss the Citizens action was denied by the
trial court on July 8, 1994. Unocal believes that the Court's
ruling is in error, and that it conflicts with precedent in two
other federal circuits. In the event that Unocal is unsuccessful
in obtaining interlocutory review of the Court's ruling, the
company could suffer a trial court judgment for penalties in
excess of $100,000. An appeal of any such judgment would be
likely.
6. Settlement discussions on the past cost portion of the
McColl dumpsite litigation (reported as Item No. 5 in the 1993
Form 10-K Legal Proceedings) have been completed. The settlement
is awaiting judicial approval. Unocal's share of the $18 million
settlement is $3,375,000.
7. The company and the State of Ohio negotiated an Agreed
Addendum to the Consent Order for further investigation and
interim remedies at the Ashland Petroleum terminal/refinery site
(reported as Item No. 8 in the 1993 Form 10-K Legal Proceedings).
The Agreed Addendum to the Consent Order was entered effective
April 7, 1994. The State's complaint also seeks past costs,
damages, an injunction ordering clean-up, and civil penalties.
The above items 1, 2, 3, 4 and 5 are in addition to items reported
under Item 3 of Unocal Corporation's Form 10-K for the year ended
December 31, 1993, as amended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 Bylaws of Unocal, as amended July 25, 1994, and
currently in effect (incorporated by reference to
Exhibit 4.2 to the Registration Statement on Form S-3 of
Union Oil Company of California and Unocal, Nos.
33-54861 and 33-54861-01).
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<PAGE>
10 Employment Agreement, effective July 1, 1994, between
Union Oil Company of California and Lawrence M. Higby.
11 Statement re computation of earnings per common share.
12.1 Statement re computation of ratio of earnings to fixed
charges.
12.2 Statement re computation of ratio of earnings to combined
fixed charges and preferred stock dividends.
(b) Reports on Form 8-K
During the second quarter of 1994:
1. Current Report on Form 8-K dated and filed April 25, 1994, for
the purpose of reporting, under Item 5, Unocal's 1994 first
quarter earnings.
2. Current Report on Form 8-K dated and filed June 27, 1994, for
the purpose of reporting, under Item 5, Unocal's
reorganization.
3. Current Report on Form 8-K dated and filed June 28, 1994, for
the purpose of reporting, under Item 5, discussions for the
sale of Unocal's producing assets in California.
During the third quarter of 1994 to date of the filing of this
second quarter Form 10-Q:
1. Current Report on Form 8-K dated and filed July 22, 1994, for
the purpose of reporting, under Item 5, and filing, under Item
7, an opinion of legal counsel concerning the Unocal Profit
Sharing Plan.
2. Current Report on Form 8-K dated and filed July 25, 1994, for
the purpose of reporting, under Item 5, Unocal's 1994 second
quarter and six months earnings.
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<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.
UNOCAL CORPORATION
-------------------
(Registrant)
Dated: August 11, 1994 By: CHARLES S. MCDOWELL
- ---------------------- --------------------
Charles S. McDowell,
Vice President and Comptroller
-12-
EXHIBIT 10
EMPLOYMENT AGREEMENT
Union Oil Company of California ("Unocal") and Lawrence M. Higby
("Employee") hereby agree that Employee shall provide personal services to
Unocal effective July 1, 1994 in accordance with the following terms and
conditions:
1. Employee shall have the title of President, 76 Products
Company and shall function as a group Vice-President responsible
for refining and marketing activities. Employee shall be
assigned such duties and responsibilities as established from
time to time by R. C. Beach, Chief Executive Officer and Chief
Operating Officer of Unocal, or his successor or delegate.
2. Employee shall be compensated for such services at a base
salary of $25,833.38 per calendar month. Employee shall be
eligible for consideration for subsequent salary increases in
accordance with Company practices and standards.
3. The term of this Agreement shall be for a period of three
years beginning July 1, 1994 and ending June 30, 1997 unless
Employee shall die, become unable or unwilling to perform his
duties under this Agreement, resign, or engage in misconduct.
This Agreement shall terminate automatically on June 30, 1997.
However, the obligation of paragraphs 6 and 9 shall survive the
termination of this Agreement.
4. Employee shall be eligible for grants under the Company's
Long-Term Incentive Plan of 1991 in accordance with the terms of
said plan and the practices of the Company. In addition to
grants made at the normal period, the Chief Executive Officer
will recommend to the Compensation Committee of the Board that a
pro-rata grant of stock options and Performance Share Awards be
made to Employee during 1994.
5. Employee shall be an employee of Unocal. As such, Employee
shall be eligible for and subject to Unocal's benefit plans and
employment policies that are generally applicable to Unocal
employees in accordance with the terms of said plans and
policies. Employee shall be subject to all of Unocal's policies
and standards of conduct except as otherwise specifically
provided herein.
<PAGE>
- 2 -
6. Employee recognizes that any business, economic or technical
information pertaining to his assignment and/or the technology of
Unocal Corporation, Union Oil Company of California or of any of
its subsidiaries or affiliates (jointly referred to as "Union")
which is received or developed by Employee in connection with
Employee's work hereunder, or which is otherwise disclosed to
Employee by Union either orally or in writing, is the sole
property of Union. Employee agrees to keep such information
confidential and not to use such information except in the course
of rendering services pursuant to this Agreement. Employee shall
not divulge such information to non-Union personnel, unless
authorized to do so by a writing directed to him by Unocal's
Chief Executive Officer either while performing services
hereunder or thereafter. The foregoing obligation shall not
apply to information which Employee can show either (i) is
already known to Employee from non-Union sources, or (ii) is or
becomes part of the public domain, other than by the wrongful act
of Employee.
7. This Agreement is for Employee's unique personal services
and may not be assigned or delegated by him unless authorized in
writing by the individual designated in Section 1.
8. Employee will be eligible for immediate participation in the
Unocal Incentive Compensation Plan. The "target award" under
said plan shall be 20% of his annual base salary rate for
calendar year 1994. Thereafter, Employee's target award will be
determined in accordance with the terms of said plan and the
practices generally applicable to participants. The actual
payment of any award shall be subject to the general rules of the
plan, including without limitation, achievement of individual
goals, the Company's relative return to shareholders and
satisfaction of the financial criteria of the plan.
9. In the event that the Employee resigns, is terminated for
misconduct, dies or is unable or unwilling to continue to render
the services for which he was retained, no further payments under
this Agreement shall be due. If the Employee is terminated for
any other reason during the term of this Agreement, Employee
shall be entitled to his base salary for the greater of one year
or the remaining term of this Agreement. Employee shall also be
entitled to a supplemental payment so that to the extent he has
elected continued Unocal Medical Plan coverage under COBRA, his
contribution rate will be the same as an active Unocal employee
with the same coverage as Employee. The Employee shall also be
entitled to payment
<PAGE>
- 3 -
of accrued Incentive Compensation Plan and Performance Share
Awards to the extent such payment is consistent with the terms of
said plans.
10. If the Employee remains employed by Unocal or a subsidiary
after June 30, 1997, this Agreement shall not govern the terms of
said employment.
11. Unocal shall retain the right to change Employee's title and
assignment from time to time during the term of this Agreement.
12. This Agreement constitutes the entire Agreement between the
parties relating to the subject of this Agreement. There are no
verbal or written agreements, inducements, statements,
representations, promises or understandings between the parties
except as expressly stated in this Agreement.
13. Neither Unocal nor Employee shall be deemed to have waived
any right available to either party under this Agreement or
applicable law unless such waiver is set forth in a written
document signed by Employee or by Unocal's Chief Executive
Officer and directed to the other party.
14. This Agreement may not be modified except by a written
document signed by Employee and the Chief Executive Officer of
Unocal.
15. The Agreement shall be interpreted in accordance with the
plain meaning of its terms and not strictly for or against any of
the parties hereto.
16. The validity and interpretation of this Agreement and the
legal relationship of the parties to it shall be governed by the
laws of the State of California.
Executed
Agreed to: Agreed to:
/s/LAWRENCE M. HIGBY UNION OIL COMPANY OF CALIFORNIA
-----------------
By: /s/R. C. BEACH
------------------
6/10/94 6/10/94
------- -------
Date Date
EXHIBIT 11
<TABLE>
<CAPTION>
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
For the Three Months For the Six Months
Ended June 30 Ended June 30
--------------------- ------------------
Dollars in millions except per share amounts 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSUMING NO DILUTION:
Net earnings before cumulative effect of
accounting changes $49,559 $88,223 $103,490 $228,416
Preferred stock dividend (8,969) (8,969) (17,938) (17,938)
Cumulative effect of accounting changes - - - (129,594)
- --------------------------------------------------------------------------------------------------
Net earnings applicable to common stock $40,590 $79,254 $ 85,552 $ 80,884
- --------------------------------------------------------------------------------------------------
Weighted average common stock outstanding 242,210 241,124 241,926 240,981
Net earnings per common share:
Before cumulative effect of
accounting changes $ .16 $ .33 $ .35 $ .88
Cumulative effect of accounting changes - - - (.54)
- --------------------------------------------------------------------------------------------------
Net earnings per common share $ .16 $ .33 $ .35 $ .34
- --------------------------------------------------------------------------------------------------
ASSUMING FULL DILUTION:
Net earnings before cumulative effect of
accounting changes $49,559 $88,223 $103,490 $228,416
Cumulative effect of accounting changes - - - (129,594)
- --------------------------------------------------------------------------------------------------
Net earnings $49,559 $88,223 $103,490 $ 98,822
- --------------------------------------------------------------------------------------------------
Fully diluted shares of common stock (a) 260,452 260,090 260,050 259,860
Net earnings per common share:
Before cumulative effect of
accounting changes $ .19 $ .34 $ .40 $ .88
Cumulative effect of accounting changes - - - (.50)
- --------------------------------------------------------------------------------------------------
Net earnings per common share $ .19 $ .34 $ .40 $ .38
- --------------------------------------------------------------------------------------------------
(a) Weighted average common stock outstanding 242,210 241,124 241,926 240,981
Common stock equivalents:
Stock options & performance shares * 1,575 2,299 1,457 2,212
Convertible preferred stock 16,667 16,667 16,667 16,667
- --------------------------------------------------------------------------------------------------
Total 260,452 260,090 260,050 259,860
- --------------------------------------------------------------------------------------------------
* Stock options exclude those at exercise prices in excess of market
value at the end of each period.
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the Six Months
Ended June 30
Dollars in millions 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Earnings before cumulative effect of
accounting changes $104 $229
Provision for income taxes 97 181
---- ----
Earnings subtotal 201 410
Fixed charges included in earnings:
Interest expense 141 157
Interest portion of rentals 28 31
---- ----
Subtotal 169 188
Earnings available before fixed charges $370 $598
===== =====
Fixed charges:
Fixed charges included in earnings $169 $188
Capitalized interest 18 17
----- -----
Total fixed charges $187 $205
===== =====
Ratio of earnings to fixed charges 2.0 2.9
</TABLE>
<PAGE>
EXHIBIT 12.2
<TABLE>
<CAPTION>
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
For the Six Months
Ended June 30
-------------------
Dollars in millions 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Earnings before cumulative effect of
accounting changes $104 $229
Provision for income taxes 97 181
---- ----
Earnings subtotal 201 410
Fixed charges included in earnings:
Interest expense 141 157
Interest portion of rentals 28 31
---- ----
Subtotal 169 188
Earnings available before fixed charges $370 $598
==== ====
Fixed charges and preferred stock dividends:
Fixed charges included in earnings $169 $188
Capitalized interest 18 17
Preferred stock dividends * 29 29
----- -----
Total fixed charges and preferred stock dividends $216 $234
===== =====
Ratio of earnings to fixed charges and
preferred stock dividends 1.7 2.6
* For purposes of this ratio, preferred stock dividends are adjusted to
a pre-tax basis.
</TABLE>
