<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
------------------
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
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2141 ROSECRANS AVENUE, SUITE 4000, EL SEGUNDO, CALIFORNIA 90245
--------------------------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 726-7600
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 October 31,
1996: 250,414,750
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED EARNINGS UNOCAL CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
-------------------------------------------------------
Dollars in millions except per share 1996 1995 1996 1995
amounts
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues (a) $ 2,531 $ 1,933 $ 7,272 $ 5,997
Interest, dividends and miscellaneous
income 14 50 50 76
Equity in earnings of affiliated
companies 30 20 78 65
Gain on sales of assets 36 2 173 63
- -----------------------------------------------------------------------------------------------
Total revenues 2,611 2,005 7,573 6,201
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 1,152 746 3,142 2,403
Operating expense 442 417 1,315 1,302
Selling, administrative and general
expense 112 108 341 318
Depreciation, depletion and amortization 228 237 724 704
Dry hole costs 53 31 72 50
Exploration expense 33 30 83 85
Interest expense 67 72 215 218
Excise, property and other operating
taxes (a) 271 258 814 759
Distributions on convertible preferred
securities of subsidiary trust 2 - 2 -
- -----------------------------------------------------------------------------------------------
Total costs and other deductions 2,360 1,899 6,708 5,839
- -----------------------------------------------------------------------------------------------
Earnings before income taxes 251 106 865 362
Income taxes 80 47 332 151
- -----------------------------------------------------------------------------------------------
NET EARNINGS $ 171 $ 59 $ 533 $ 211
Dividends on preferred stock - 9 18 27
Non-cash charge related to exchange of
preferred stock 54 - 54 -
- -----------------------------------------------------------------------------------------------
NET EARNINGS APPLICABLE TO COMMON
STOCK $ 117 $ 50 $ 461 $ 184
=======================================================
Earnings per share of common stock
assuming no dilution (b) $ 0.47 $ 0.20 $ 1.86 $ 0.75
========================================================
Earnings per share of common and
equivalent stock assuming
full dilution (c) $ 0.45 $ 0.20 $ 1.83 $ 0.75
========================================================
Cash dividends declared per share of
common stock $ 0.20 $ 0.20 $ 0.60 $ 0.60
- ------------------------------------------------------------------------------------------------
(a) Includes consumer excise taxes of $ 249 $ 228 $ 735 $ 665
(b) Based on net earnings applicable
to common stock divided
by weighted average shares
outstanding (in thousands) 248,668 246,666 248,211 245,754
(c) Based on net earnings applicable
to common stock divided
by weighted average shares
outstanding and common
stock equivalents (in thousands) 263,525 - 262,823 -
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
CONSOLIDATED BALANCE SHEET UNOCAL CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
September December
30 31
------------------------
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 225 $ 94
Accounts and notes receivable 921 920
Inventories
Crude oil 50 48
Refined products 162 161
Agricultural products 35 40
Minerals 21 30
Supplies, merchandise and other 88 81
Deferred income taxes 75 169
Other current assets 35 33
- ------------------------------------------------------------------------------
Total current assets 1,612 1,576
Investments and long-term receivables 1,105 1,101
Properties (net of accumulated
depreciation and other allowances
of $10,910 in 1996 and $11,431 in 1995) 6,949 7,109
Deferred income taxes 27 25
Other assets 116 80
- ------------------------------------------------------------------------------
Total assets $9,809 $9,891
- ------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 873 $ 804
Taxes payable 242 193
Current portion of long-term debt 119 8
and capital lease obligations
Interest payable 46 92
Current portion of environmental 83 83
liabilities
Other current liabilities 94 136
- ------------------------------------------------------------------------------
Total current liabilities 1,457 1,316
Long-term debt and capital lease obligations 2,951 3,698
Deferred income taxes 678 722
Accrued abandonment, restoration and 661 607
environmental liabilities
Other deferred credits and liabilities 729 618
Company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust holding
solely 6-1/4% convertible junior subordinated
debentures of Unocal 522 -
Stockholders' Equity
Preferred stock ($0.10 par value; stated at
liquidation value of $50 per share) 13 513
Common stock ($1 par value) 250 247
Capital in excess of par value 389 319
Foreign currency translation adjustment (12) (10)
Unearned portion of restricted stock issued (15) (13)
Retained earnings 2,186 1,874
- ------------------------------------------------------------------------------
Total stockholders' equity 2,811 2,930
- ------------------------------------------------------------------------------
Total liabilities and equity $9,809 $9,891
- ------------------------------------------------------------------------------
</TABLE>
See Notes to the Consolidated Financial Statements.
3
<PAGE>
CONSOLIDATED CASH FLOWS UNOCAL CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
-------------------
Millions of dollars 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 533 $ 211
Adjustment to reconcile net earnings to
net cash provided by operating activities
Depreciation, depletion and amortization 724 704
Dry hole costs 72 50
Deferred income taxes 48 (21)
Gain on sales of assets (before-tax) (173) (63)
Other 96 (19)
Working capital and other changes related
to operations
Accounts and notes receivable (23) (18)
Inventories 4 18
Accounts payable 69 (53)
Taxes payable 49 (19)
Other (200) (114)
- ----------------------------------------------------------------
Net cash provided by operating
activities 1,199 676
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (includes dry
hole costs) (940) (967)
Proceeds from sales of assets 585 130
- ----------------------------------------------------------------
Net cash used in investing activities (355) (837)
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings 130 949
Reduction of long-term debt and
capital lease obligations (690) (644)
Dividends paid on preferred stock (27) (27)
Dividends paid on common stock (149) (147)
Other 23 50
- ----------------------------------------------------------------
Net cash provided by (used in)
financing activities (713) 181
Increase in cash and cash equivalents 131 20
Cash and cash equivalents at beginning of year 94 148
- ----------------------------------------------------------------
Cash and cash equivalents at end of period $ 225 $ 168
- ----------------------------------------------------------------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 243 $ 225
Income taxes (net of refunds) $ 239 $ 192
</TABLE>
See Notes to the Consolidated Financial Statements.
4
<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. Such financial statements are
presented in accordance with the Securities and Exchange Commission's
(Commission) 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 1995 Annual Report on Form 10-K.
Results for the nine months ended September 30, 1996, are not necessarily
indicative of future financial results.
Certain items in the prior year financial statements have been reclassified
to conform to the 1996 presentation.
(2) For the purpose of this report, Unocal Corporation and its consolidated
subsidiary, Union Oil Company of California (Union Oil), together with the
consolidated subsidiaries of Union Oil, will be referred to as "Unocal" or
"the company".
(3) Earnings per share of common stock assuming no dilution are based on net
earnings less preferred stock dividend requirements and the non-cash charge
related to the exchange of preferred stock, divided by the weighted average
shares of common stock outstanding during each period. The computation of
fully diluted earnings per share assumes the dilutive effect of common stock
equivalents and conversion of Unocal's outstanding convertible preferred
stock and the outstanding Convertible Preferred Securities of a subsidiary
trust (see Note 12). When the computation of fully diluted earnings per
share is antidilutive for any given period presented, the amounts reported
for primary and fully diluted are the same.
(4) As a result of the corporate staff reduction program initiated during the
fourth quarter of 1994, the company recorded in 1994 a pretax charge of $34
million in administrative and general expense for estimated benefits,
primarily termination allowance, to be paid to employees affected by the
program. At September 30, 1996, the amount of unpaid benefits remaining on
the consolidated balance sheet was $7 million. Approximately 30 employees
were terminated during the third quarter of 1996, bringing the total number
of terminated employees to approximately 650.
(5) Capitalized interest totaled $3 million and $9 million for the third
quarters of 1996 and 1995, respectively. For the first nine months of 1996
and 1995 capitalized interest totaled $9 million and $25 million,
respectively.
(6) Cash Flow Information:
UNOCAL SAVINGS PLAN
During the first nine months of 1996 and 1995, shares of Unocal common stock
were purchased by the trustee of the Unocal Savings Plan (the "Plan") either
from Unocal or on the open market as directed by Unocal. The trustee used
Unocal's matching contributions to the Plan to purchase the shares. The
total matching contributions were expensed in Unocal's consolidated earnings
statement. In the consolidated cash flow statements, the portions of the
matching contributions resulting in the issuance of Unocal common stock, as
detailed below, were treated as a noncash transactions since the resulting
effect on cash flow was zero.
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
--------------------
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Shares of Unocal common stock issued (in thousands) 252 700
Fair value of common stock (in millions of dollars) $ 8 $ 20
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
CONVERTIBLE PREFERRED SECURITIES
See Note 12 for discussion of Unocal's third quarter 1996 exchange of 6-1/4
percent Trust Convertible Preferred Securities of a subsidiary trust for
outstanding shares of Unocal's $3.50 Convertible Preferred Stock. The
exchange was treated as a noncash transaction since the resulting effect on
cash flow was zero.
(7) Income Taxes:
The components of pre-tax earnings and the provision for income taxes were
as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
--------------------------------------------------
Millions of dollars 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings (loss) before income taxes:
United States (a) $ 87 $ (7) $ 438 $ (2)
Foreign 164 113 427 364
- ---------------------------------------------------------------------------------------------
Total $ 251 $ 106 $ 865 $ 362
Income Taxes:
Current
Federal $ (4) $ (1) $ 100 $ 15
State 1 - 3 5
Foreign 70 45 182 152
- ---------------------------------------------------------------------------------------------
Total current $ 67 $ 44 $ 285 $ 172
Deferred
Federal $ 7 $ 1 $ 12 $ (18)
State 5 (7) 19 (24)
Foreign 1 9 16 21
- ---------------------------------------------------------------------------------------------
Total deferred $ 13 $ 3 $ 47 $ (21)
- ---------------------------------------------------------------------------------------------
Total income taxes $ 80 $ 47 $ 332 $ 151
</TABLE>
(a) Includes corporate and unallocated expenses.
Reconciliation of income taxes at the federal statutory rate of 35% to tax
provision:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
--------------------------------------------------
Millions of dollars 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings before income taxes $ 251 $ 106 $ 865 $ 362
Tax at federal statutory rate $ 88 $ 37 $ 303 $ 126
Taxes on foreign earnings in excess of
(less than) statutory rate (5) 18 36 52
Dividend exclusion (3) (4) (11) (11)
Deferred California business tax
credits, net of federal tax effect - (5) - (16)
Other - 1 4 -
- ---------------------------------------------------------------------------------------------
Total provision $ 80 $ 47 $ 332 $ 151
</TABLE>
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
(8) Long Term Debt and Credit Agreements:
During the first quarter of 1996, the company issued $100 million of medium-
term notes with interest rates ranging from 5.94 percent to 6.23 percent and
maturity dates ranging from February 2003 to February 2006. The company also
increased its commercial paper borrowings by $44 million.
During the second quarter of 1996, the company reduced long-term debt by
approximately $610 million, primarily with the proceeds from the sale of its
California oil and gas producing properties. Financing activities for the
second quarter of 1996 primarily consisted of: retirement at maturity of the
$110 million Swiss Franc bond issue and the corresponding $65 million
currency swap agreement; and the early redemption of seven pollution control
bond issues totaling $49 million with interest rates ranging from 6-1/8
percent to 7-7/8 percent. The company also reduced its commercial paper
balance by $377 million and terminated its $45 million Netherlands revolving
credit facility.
Third-quarter 1996 financing activities primarily consisted of an additional
borrowing of $20 million on the $250 million Thailand revolving credit
facility and payment of $80 million on the $1.2 billion credit facility. In
addition, the company further reduced its commercial paper balance by $104
million, bringing the outstanding balance to $213 million at September 30,
1996 and terminated its $25 million revolving credit facility with a
Canadian bank.
(9) Financial Instruments
The fair value of the financial instruments described below are based on the
company's outstanding balances at September 30, 1996:
The Deutsche Mark currency swap agreement had a notional value of $110
million and a fair value of approximately $57 million based on dealer
quotes.
There were 17 outstanding currency forward contracts to purchase 26 million
Pounds Sterling for $40 million to hedge a series of known Pounds Sterling
requirements, and the fair market value of the contracts was approximately
$1.3 million in assets.
The floating interest rate on the swap agreement to hedge $25 million of
fixed rate medium-term notes was 5.6 percent, and the fair value was
insignificant, based on quoted market prices of comparable instruments.
The company had outstanding commodity futures contracts covering the sale of
550 thousand barrels of crude oil and 7 billion cubic feet of natural gas
with notional amounts of $11 million and $14 million, respectively. The fair
value of the contracts, based on quoted market prices, was insignificant.
The estimated fair value of the company's long-term debt and capital lease
obligations was $3,140 million. The estimated fair value of the company's
obligated mandatorily redeemable Convertible Preferred Securities was $553
million.
(10) Accrued abandonment, restoration and environmental liabilities:
At September 30, 1996, the company had accrued $500 million for the
estimated future costs to abandon and remove wells and production
facilities. The total costs for abandonments are estimated to be $640
million to $780 million, of which the lower end of the range is used to
calculate the amount to be amortized.
At September 30, 1996, the company's reserve for environmental remediation
obligations totaled $245 million, of which $83 million was included in
current liabilities. The reserve included estimated probable future costs of
$29 million for federal Superfund and comparable state-managed multiparty
disposal sites; $30 million for formerly-operated sites for which the
company has remediation obligations; $67 million for sites related to
businesses or operations that have been sold with contractual remediation or
indemnification obligations; $67 million for company-owned or controlled
sites where facilities have been closed or operations shut down; and
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
$52 million for sites owned and/or controlled by the company and utilized
in its ongoing operations.
(11) Contingent Liabilities:
The company has certain contingent liabilities with respect to material
existing or potential claims, lawsuits and other proceedings, including
those involving environmental, tax and other matters, certain of which are
discussed more specifically below. The company accrues liabilities when it
is probable that future costs will be incurred and such costs can be
reasonably estimated. Such accruals are based on developments to date, the
company's estimates of the outcomes of these matters and its experience in
contesting, litigating and settling other matters. As the scope of the
liabilities becomes better defined, there will be changes in the estimates
of future costs, which could have a material effect on the company's
future results of operations and financial condition or liquidity.
ENVIRONMENTAL MATTERS
The company is subject to loss contingencies pursuant to federal, state
and local environmental laws and regulations. These include existing and
possible future obligations to investigate the effects of the release or
disposal of certain petroleum, chemical and mineral substances at various
sites; to remediate or restore these sites; to compensate others for
damage to property and natural resources, for remediation and restoration
costs and for personal injuries; and to pay civil penalties and, in some
cases, criminal penalties and punitive damages. These obligations relate
to sites owned by the company or others and are associated with past and
present operations, including sites at which the company has been
identified as a potentially responsible party (PRP) under the federal
Superfund laws and comparable state laws. Liabilities are accrued when it
is probable that future costs will be incurred and such costs can be
reasonably estimated. However, in many cases, investigations are not yet
at a stage where the company is able to determine whether it is liable or,
if liability is probable, to quantify the liability or estimate a range of
possible exposure. In such cases, the amounts of the company's liabilities
are indeterminate due to the potentially large number of claimants for any
given site or exposure, the unknown magnitude of possible contamination,
the imprecise and conflicting engineering evaluations and estimates of
proper cleanup methods and costs, the unknown timing and extent of the
corrective actions that may be required, the uncertainty attendant to the
possible award of punitive damages, the recent judicial recognition of new
causes of action, the present state of the law, which often imposes joint
and several and retroactive liabilities on PRPs, and the fact that the
company is usually just one of a number of companies identified as a PRP.
As disclosed in Note 10, at September 30, 1996, the company had accrued
$245 million for estimated future environmental assessment and remediation
costs at various sites where liabilities for such costs are probable. At
those sites where investigations or feasibility studies have advanced to
the stage of analyzing feasible alternative remedies and/or ranges of
costs, the company estimates that it could incur additional remediation
costs aggregating approximately $180 million.
Between August 22 and September 6, 1994, a chemical known as "Catacarb"
was released into the environment at the company's San Francisco Refinery
near Rodeo, California. Persons in the surrounding area have claimed that
they were exposed to the chemical in varying degrees. Since September 22,
1994, forty-eight lawsuits have been filed by or on behalf of all persons,
alleged to be several thousand, claiming that they or their property were
adversely affected by the releases. Forty-four of the lawsuits have been
consolidated in the Superior Court for Contra Costa County. The First
Amended Model Complaint in this consolidated action, filed February 1,
1995, on behalf of individual plaintiffs and purported classes of
plaintiffs, alleges personal injury, emotional distress and increased risk
of future illness on behalf of the named plaintiffs and all persons
present in and around or downwind from the San Francisco Refinery, and
property damage and loss or diminution of property value on behalf of all
owners of real and personal property in the vicinity of the Refinery,
resulting from the release of Catacarb by the Refinery. Certain individual
plaintiffs allege injury from alleged subsequent releases at the Refinery
of hydrogen sulfide and other chemicals. The Model Complaint seeks
compensatory and punitive damages in unspecified amounts, equitable relief
including the creation of a fund for medical monitoring and treatment of
plaintiffs and members of the purported classes, statutory penalties and
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
other relief. The company has reached agreement with plaintiffs to certify a
mandatory non-opt out punitive damages class. Plaintiffs have withdrawn their
class claims for personal injury and property damage. In early November, the
trial court issued an order declining to certify a medical monitoring class.
The court indicated its tentative intention to commence a trial with an
undetermined number of test plaintiffs in June 1997.
TAX MATTERS
In December 1994, the company received a Notice of Proposed Deficiency from
the Internal Revenue Service (IRS) related to the years 1985 through 1987. In
February 1995, the company filed a protest of the proposed tax deficiency with
the Appeals section of the IRS. Discussions with the Appeals Officer are
ongoing, but it appears that two substantial issues may proceed to litigation.
In an effort to resolve these issues without litigation, in October 1996, the
company and the IRS entered into an Agreement to Mediate. While the parties
have selected a mediator, no date for the mediation has been set.
The most significant issue relates to an IRS challenge of a $341 million
deduction taken by the company in its 1985 tax return for amounts paid under a
settlement agreement with Mesa Petroleum, T. Boone Pickens and Drexel Burnham
Lambert, Incorporated, and certain others which ended a hostile takeover
attempt by that group. The IRS contends that the deduction is not allowable
because the payment was related solely to the purchase of the company's common
stock. Although the company did purchase shares under the settlement
agreement, it properly reflected the purchase in its records at the fair
market value of the shares purchased. The deduction at issue relates to that
portion of the payment made under the settlement agreement that exceeded the
value of the shares purchased. The company intends to vigorously dispute the
IRS' assertions in court. If the IRS were ultimately to prevail, the company
would owe $157 million of tax for 1985 plus tax deductible interest estimated
at $295 million as of September 30, 1996. As this matter is not yet before a
court, final resolution of this matter is likely to be several years away.
The second issue relates to an IRS challenge of a continued deferral of
intercompany gains which arose from sales of property between subsidiaries in
1982 and 1983. The IRS contends that the $201 million balance of deferred
gain must be recognized in the company's taxable income for 1985 when the
subsidiaries contributed the property to a wholly owned master limited
partnership. The company intends to vigorously dispute the IRS' assertions in
court. If the IRS were ultimately to prevail, the company would owe $92
million in tax for 1985, but would receive credits or refunds for offsetting
deductions in later years. For 1986 and 1987 the credits or refunds would
total $35 million. In addition to tax, the company would owe tax deductible
interest estimated at $120 million as of September 30, 1996. As this matter
is not yet before a court, final resolution of this matter is likely to be
several years away.
The total amount of tax and interest that the company would be required to pay
if the IRS were ultimately to prevail on both of the issues described in the
two preceding paragraphs is substantially less than the sum of the amounts.
As a result of the interplay of these issues, application of foreign tax
credits and overpayments related to other issues, the total amount of tax and
interest is estimated at $378 million as of September 30, 1996.
The company believes it has adequately provided in its accounts for items and
issues not yet resolved. In the opinion of management, a successful outcome
of the litigation is reasonably likely. However, substantial adverse
decisions could have a material effect on the company's financial condition,
operating results and liquidity in a given quarter and year when such matters
are resolved.
OTHER MATTERS
The company also has certain other contingent liabilities with respect to
litigation, claims and contractual agreements arising in the ordinary course
of business. Although these contingencies could result in expenses or
judgments that could be material to the company's results of operations for a
given reporting period, on the basis of management's best assessment of the
ultimate amount and timing of these events, such expenses or judgments are not
expected to have a material adverse effect on the company's consolidated
financial condition
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
or liquidity.
(12) Convertible Preferred Securities
On September 11, 1996, pursuant to an offer which expired on September 5,
1996, Unocal exchanged 10,437,873 new 6-1/4 percent Trust Convertible
Preferred Securities (the "Preferred Securities") of Unocal Capital Trust,
a Delaware business trust (the "Trust"), for 9,352,962 shares of Unocal's
$3.50 Convertible Preferred Stock (the "Preferred Stock") which were
tendered in response to the offer. Unocal acquired the Preferred
Securities, which have an aggregate liquidation value of $522 million, from
the Trust, together with 322,821 common securities of the Trust, which have
an aggregate liquidation value of $16 million, in exchange for $538 million
principal amount of 6-1/4 percent Convertible Junior Subordinated
Debentures (the "Debentures") of Unocal. The Preferred Securities and
common securities of the Trust represent undivided beneficial interests in
the Debentures, which are the sole assets of the Trust.
The Preferred Securities have a liquidation value of $50 per security and
will be convertible on and after December 10, 1996, into shares of Unocal
common stock at a conversion price of $42.56 per share, subject to
adjustment upon the occurrence of certain events. Distributions on the
Preferred Securities are cumulative from September 5, 1996, at an annual
rate of 6-1/4 percent of their liquidation amount and are payable quarterly
in arrears on March 1, June 1, September 1 and December 1 of each year,
commencing on December 1, 1996, to the extent that the Trust receives
interest payments on the Debentures, which payments are subject to deferral
by Unocal under certain circumstances.
Upon repayment of the Debentures by Unocal, whether at maturity, upon
redemption or otherwise, the proceeds thereof must immediately be applied
to redeem a corresponding amount of the Preferred Securities and the common
securities of the Trust. The Debentures mature on September 1, 2026, and
may be redeemed, in whole or in part, at the option of Unocal, at any time
on or after September 3, 2000, at a redemption price initially equal to
103.75 percent of the principal amount redeemed, declining annually to 100
percent of the principal amount redeemed in 2006, plus accrued and unpaid
interest thereon to the redemption date. The Debentures, and hence the
Preferred Securities, may become redeemable at the option of Unocal upon
the occurrence of certain special events or restructuring transactions.
The Trust is accounted for as a consolidated subsidiary of Unocal, with the
Debentures and payments thereon by Unocal to the Trust eliminated in the
consolidated financial statements. The payment obligations of the Trust
under the Preferred Securities are unconditionally guaranteed by Unocal
(the "Guarantee"). The Guarantee, when taken together with Unocal's
obligations under the Debentures and the indenture pursuant to which the
Debentures were issued and Unocal's obligations under the amended and
restated declaration of trust governing the Trust, provides a full and
unconditional guarantee of the Trust's obligations under the Preferred
Securities.
On September 11, 1996, Unocal called the unexchanged 897,038 shares of the
Preferred Stock for redemption on October 11, 1996. Of these, 632,263
shares were converted into 1,028,058 shares of Unocal common stock in
September and the remaining 264,775 shares were converted into 430,517
shares of common stock in October prior to the redemption date.
(13) Unocal guarantees certain indebtedness of Union Oil. Summarized below is
financial information for Union Oil and its consolidated subsidiaries:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
---------------------------------------------
Millions of dollars 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $2,611 $ 2,005 $7,573 $6,201
Total costs and other deductions, including income taxes 2,438 1,945 7,037 5,989
---------------------------------------------
Net earnings $ 173 $ 60 $ 536 $ 212
- -----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
(13) Union Oil (continued)
<TABLE>
<CAPTION>
At September 30 At December 31
--------------- --------------
Millions of dollars 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Current assets $1,604 $1,576
Noncurrent assets $8,213 $8,328
Current liabilities $1,464 $1,309
Noncurrent liabilities $5,020 $5,645
Shareholder's equity $3,333 $2,950
------------------------------------------------------------
</TABLE>
11
<PAGE>
OPERATING HIGHLIGHTS UNOCAL CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
--------------------------------------------
1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET DAILY PRODUCTION
CRUDE OIL AND CONDENSATE
(THOUSAND BARRELS):
United States (a) 86.1 123.6 98.9 126.4
Foreign:
Far East (b) 82.2 81.9 82.4 84.6
Other 27.2 29.6 27.6 30.3
--------------------------------------------------
Total foreign 109.4 111.5 110.0 114.9
WORLDWIDE 195.5 235.1 208.9 241.3
--------------------------------------------------
NATURAL GAS (MILLION
CUBIC FEET):
United States (a) 1,099 1,077 1,091 1,109
Foreign:
Far East (b) 667 577 626 597
Other 63 55 71 48
--------------------------------------------------
Total foreign 730 632 697 645
WORLDWIDE 1,829 1,709 1,788 1,754
NATURAL GAS LIQUIDS
(THOUSAND BARRELS) (a) 19.3 20.2 19.6 21.4
GEOTHERMAL (MILLION
KILOWATT-HOURS) 21.0 17.7 17.3 16.0
- -------------------------------------------------------------------------------
AVERAGE SALES PRICES
CRUDE OIL AND CONDENSATE
(PER BARREL):
United States $20.01 $14.83 $18.31 $15.17
Foreign:
Far East $18.89 $15.26 $18.32 $16.11
Other $19.89 $15.12 $18.53 $15.84
Total foreign $19.21 $15.21 $18.39 $16.01
WORLDWIDE $19.62 $14.98 $18.34 $15.51
NATURAL GAS (PER THOUSAND
CUBIC FEET):
United States $ 2.09 $ 1.43 $ 2.20 $ 1.49
Foreign:
Far East $ 2.27 $ 2.05 $ 2.23 $ 2.00
Other $ 2.05 $ 1.21 $ 1.82 $ 1.14
Total foreign $ 2.25 $ 1.97 $ 2.18 $ 1.94
WORLDWIDE $ 2.15 $ 1.64 $ 2.20 $ 1.66
(a) Includes production from
California upstream
properties of:
Crude oil and condensate 1.0 28.7 10.9 29.4
Natural gas - 58 17 64
Natural gas liquids - 0.7 0.2 1.1
(b) Includes host country
share in Indonesia of:
Crude oil and condensate 26.4 33.0 26.8 31.7
Natural gas 29 20 26 23
</TABLE>
12
<PAGE>
OPERATING HIGHLIGHTS (continued) UNOCAL CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
--------------------------------------------
1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INPUT TO CRUDE OIL PROCESSING
UNITS (THOUSAND BARRELS DAILY) 229 220 231 207
REFINERY PRODUCTION (THOUSAND
BARRELS DAILY)
EPA Gasoline 31 120 52 107
CARB gasoline 90 - 64 -
Jet fuel, kerosene and 33 29 36 21
heating oil
Diesel fuel 19 14 21 12
CARB diesel 27 27 24 24
Other products
(lubricants, gas oils, etc.) 58 53 61 62
--------------------------------------------
Total 258 243 258 226
PETROLEUM PRODUCT SALES
(THOUSAND BARRELS DAILY)
Primarily sold through
retail channels
EPA Gasoline 27 116 67 116
CARB gasoline 103 - 64 -
Diesel fuel 15 12 14 12
CARB diesel 20 17 16 15
Other products
(includes lube oil,
kerosene and fuel oil) 7 7 7 7
------------------------------------------------
Total 172 152 168 150
Primarily sold through
wholesale or commercial
channels
EPA Gasoline 4 31 9 23
CARB gasoline 21 - 12 -
Jet fuel 38 32 40 29
Diesel fuel 14 14 14 10
CARB diesel 15 11 12 6
Other products (includes
petroleum products, gas
oils, etc.) 34 35 36 42
-------------------------------------------------
Total 126 123 123 110
-------------------------------------------------
Total petroleum
products sales 298 275 291 260
AGRICULTURAL PRODUCTS
PRODUCTION VOLUMES (THOUSAND
TONS)
Ammonia 360 296 1,089 988
Urea 275 242 845 806
Other products 149 169 494 583
AGRICULTURAL PRODUCTS SALES
VOLUMES (THOUSAND TONS)
Ammonia 206 106 574 500
Urea 198 247 779 773
Other products 302 255 971 962
</TABLE>
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 Bylaws of Unocal Corporation, as amended September 30, 1996,
and currently in effect.
11* Unocal Corporation statement regarding computation of earnings
per common share for the three months ended September 30, 1996
and 1995 and for the nine-month periods ended September 30,
1996 and 1995.
12.1 Unocal Corporation statement regarding computation of ratio of
earnings to fixed charges for the nine months ended September
30, 1996 and 1995.
12.2 Unocal Corporation statement regarding computation of ratio of
earnings to combined fixed charges and preferred stock
dividends for the nine months ended September 30, 1996 and
1995.
12.3 Union Oil Company of California statement regarding computation
of ratio of earnings to fixed charges for the nine months ended
September 30, 1996 and 1995.
27 Financial data schedule for the quarter ended September 30,
1996 (included only in the copy of this report filed
electronically with the Commission).
99 Bylaws of Union Oil Company of California, as amended September
30, 1996, and currently in effect.
(b) Reports on Form 8-K
During the third quarter of 1996:
1. Current Report on Form 8-K dated and filed July 25, 1996, for the
purpose of reporting, under Item 5, Unocal's second quarter and
first six months 1996 earnings.
2. Current Report on Form 8-K dated and filed September 3, 1996, for
the purpose of reporting, under Item 5, the exchange and
conversion ratios for the new 6-1/4 percent Trust Convertible
Preferred Securities of Unocal Capital Trust offered by Unocal in
exchange for all of the outstanding shares of its $3.50
Convertible Preferred Stock.
3. Current Report on Form 8-K dated and filed September 6, 1996, for
the purpose of reporting, under Item 5, the acceptance by Unocal
of all shares of its $3.50 Convertible Preferred Stock tendered in
response to its exchange offer.
4. Current Report on Form 8-K dated and filed September 11, 1996, for
the purpose of reporting, under Item 5, the completion of Unocal's
exchange offer and its call for redemption of the remaining shares
of its $3.50 Convertible Preferred Stock.
During the fourth quarter of 1996 to the date hereof:
1. Current Report on Form 8-K dated and filed October 23, 1996, for
the purpose of reporting, under Item 5, Unocal's third quarter and
first nine months 1996 earnings.
* FILED WITH THIS AMENDMENT
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to the report to be signed on its
behalf by the undersigned thereunto duly authorized.
UNOCAL CORPORATION
(Registrant)
Dated: May 23, 1997 By: /s/ CHARLES S. MCDOWELL
-----------------------
Charles S. McDowell
Vice President and Comptroller
(Duly Authorized Officer and
Principal Accounting Officer)
15
<PAGE>
EXHIBIT 11
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
--------------------------------------------------------------------
Dollars and shares in thousands, except 1996 1995 1996 1995
per share amounts
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE ASSUMING NO DILUTION
(A)
Net earnings $170,765 $ 58,672 $532,906 $ 210,753
Preferred stock dividend - (8,969) (17,938) (26,906)
Non-cash charge related to exchange of
preferred stock (54,246) - (54,246) -
--------------------------------------------------------------
Net earnings applicable to common
stock 116,519 49,703 460,722 183,847
Weighted average common stock
outstanding 248,668 246,666 248,211 245,754
- ------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON SHARE $ 0.47 $ 0.20 $ 1.86 $ 0.75
- ------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE ASSUMING FULL
DILUTION
Net earnings $170,765 $ 58,672 $532,906 $210,753
Distribution on preferred securities
(net of tax) 1,720 - 1,720 -
Non-cash charge related to exchange of
preferred stock (54,246) - (54,246) -
--------------------------------------------------------------
Net earnings applicable to common
stock 118,239 58,672 480,380 210,753
Weighted average common stock
outstanding 248,668 246,666 248,211 245,754
Dilutive common stock equivalents 2,162 1,565 1,917 1,512
Conversion of preferred stock (b) 431 16,667 431 16,667
Conversion of preferred securities 12,264 - 12,264 -
--------------------------------------------------------------------
Weighted average common stock and
stock equivalents outstanding 263,525 264,898 262,823 263,933
- ------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON SHARE $ 0.45 $ 0.22 $ 1.83 $ 0.80
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The dilutive effect of common stock equivalents is less than 3 percent.
(b) During 1995, the effect of assumed conversion of preferred stock on
earnings per common stock is antidilutive.
