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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, 1995 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 1-8888
AMOCO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3353184
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601
(Address of principal executive offices) (Zip Code)
312-856-6111
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since
last report)
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 outstanding as of June 30, 1995--100.
Registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this form with reduced
disclosure format.
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
(millions of dollars)
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Sales and other operating
revenues..................... $ 6,269 $ 6,050 $12,078 $11,301
Consumer excise taxes.......... 835 871 1,643 1,670
Other income................... 91 476 213 562
Total revenues............... 7,195 7,397 13,934 13,533
Costs and Expenses:
Purchased crude oil, natural
gas, petroleum products and
merchandise.................. 3,375 3,221 6,398 5,804
Operating expenses............. 966 1,092 1,967 2,098
Petroleum exploration expenses,
including exploratory dry
holes........................ 103 151 202 256
Selling and administrative
expenses..................... 438 502 872 947
Taxes other than income taxes.. 986 1,059 1,963 2,031
Depreciation, depletion,
amortization, and retirements
and abandonments............. 442 469 892 928
Interest expense:
Affiliates................... 125 - 248 -
Other........................ 54 28 96 62
Total costs and expenses..... 6,489 6,522 12,638 12,126
Income before income taxes....... 706 875 1,296 1,407
Income taxes..................... 204 314 348 469
Net income....................... $ 502 $ 561 $ 948 $ 938
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Condensed Consolidated Statement of Financial Position
(millions of dollars)
June 30, Dec. 31,
1995 1994
ASSETS
Current Assets:
Cash...................................... $ 94 $ 134
Marketable securities--at cost............ 541 1,104
Accounts and notes receivable (less
allowances of $18 at June 30, 1995, and
$19 at December 31, 1994)............... 2,434 2,763
Inventories............................... 932 836
Prepaid expenses and income taxes......... 551 562
Total current assets.................... 4,552 5,399
Investments and Other Assets:
Affiliates............................... 1,199 171
Other.................................... 1,243 914
2,442 1,085
Properties--at cost, less accumulated
depreciation, depletion and amortization
of $22,272 at June 30, 1995, and $21,882
at December 31, 1994 (The successful
efforts method of accounting is followed
for costs incurred in oil and gas
producing activities)..................... 18,200 18,065
Total assets............................ $25,194 $24,549
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations.. $ 24 $ 24
Short-term obligations.................... 136 112
Accounts payable.......................... 2,050 2,217
Accrued liabilities....................... 1,008 1,124
Taxes payable (including income taxes).... 164 665
Total current liabilities............... 3,382 4,142
Long-Term Debt:
Affiliates................................ 4,715 4,104
Other debt................................ 2,129 2,086
6,844 6,190
Deferred Credits and Other Non-Current Liabilities:
Income taxes.............................. 2,510 2,413
Other..................................... 2,178 2,171
4,688 4,584
Minority Interest........................... 7 5
Shareholder's Equity........................ 10,273 9,628
Total liabilities and shareholder's
equity................................ $25,194 $24,549
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Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Six Months Ended
June 30,
1995 1994
Cash Flows From Operating Activities:
Net income.................................... $ 948 $ 938
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization, and
retirements and abandonments............. 892 928
Other...................................... (573) (670)
Net cash provided by operating activities 1,267 1,196
Cash Flows From Investing Activities:
Capital expenditures.......................... (1,115) (919)
Proceeds from dispositions of property and
other assets................................ 59 109
Other......................................... (540) 7
Net cash used in investing activities..... (1,596) (803)
Cash Flows From Financing Activities:
New long-term obligations..................... 72 144
Repayment of long-term obligations............ (38) (38)
Distributions to Amoco Corporation............ (332) (338)
Increase (decrease) in short-term obligations. 24 (328)
Net cash used in financing activities..... (274) (560)
Decrease in Cash and Marketable Securities...... (603) (167)
Cash and Marketable Securities-Beginning of
Period........................................ 1,238 582
Cash and Marketable Securities-End of Period.... $ 635 $ 415
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Basis of Financial Statement Preparation
Amoco Company (the "Company") is a wholly owned subsidiary of Amoco
Corporation, an Indiana corporation ("Amoco"), and is the holding company
for substantially all petroleum and chemical operations except Amoco
Canada Petroleum Company Ltd. ("Amoco Canada"). Amoco guarantees the
outstanding public debt obligations of the Company. The Company and Amoco
guarantee the outstanding public notes and debentures of Amoco Canada,
except for the 7 3/8 percent Subordinated Exchangeable Debentures.
The condensed financial statements contained herein are unaudited and have
been prepared from the books and records of the Company. In the opinion
of management, the financial statements reflect all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
statement of the results for the interim periods. The condensed financial
statements have been prepared in accordance with the instructions to Form
10-Q and, therefore, do not include all information and notes necessary
for a complete presentation of results of operations, financial position
and cash flows in conformity with generally accepted accounting
principles.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which will require the Company to change its method of accounting for
the impairment of value of long-lived assets. The Company has not fully
evaluated the effect of this change in accounting method, but the effect
could be material to income in the quarter of adoption. Implementation of
SFAS No. 121 will occur no later than the quarter ending March 31, 1996.
Item 2. Management's Narrative Analysis of Results of Operations
Results of Operations
The Company earned $948 million for the first six months of 1995, compared
with $938 million for the first six months of 1994. Included in 1994
results were second-quarter restructuring charges of $149 million after
tax. Of this amount, $51 million related to costs directly associated
with severances of employees expected to occur by year-end 1995. The
remaining $98 million was attributable to various facility closings and
asset dispositions. The 1994 results also included second-quarter after-
tax benefits of $270 million relating to final settlements with the
Internal Revenue Service ("IRS") involving crude oil excise taxes ("COET")
in the 1980s.
On an adjusted basis, net income for the first six months of 1995
increased $131 million above 1994's earnings, primarily reflecting higher
chemical earnings and improved overseas exploration and production ("E&P")
earnings. Higher volumes and margins across most product lines contributed
to the strong chemical earnings. Overseas E&P earnings benefited from
higher crude oil prices and lower exploration and other expenses.
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Partially offsetting were lower U.S. E&P earnings, reflecting lower
natural gas prices, and lower petroleum product results attributable to
lower refined product margins and higher refinery maintenance expense.
Earnings for the second quarter of 1995 were $502 million compared with
$561 million for the second quarter of 1994. Results for the 1994 second
quarter included the previously mentioned $149 million restructuring
charges and the $270 million favorable COET settlement. Adjusting for
these items, second-quarter 1995 earnings were $62 million higher than
last year's second quarter. The increase was attributable to improved
chemical earnings on the strength of higher volumes and margins in major
product lines and higher overseas E&P earnings primarily related to higher
crude oil prices and lower exploration and other expenses. Partially
offsetting was lower U.S. E&P earnings reflecting lower natural gas
prices.
Sales and other operating revenues totaled $12.1 billion for the first six
months of 1995, above the $11.3 billion reported in the corresponding 1994
period. Chemical revenues increased 17 percent reflecting higher volumes
and prices for major product lines. Depressed natural gas prices lowered
natural gas revenues by 15 percent. Second-quarter 1995 sales and other
operating revenues of $6.3 billion increased 4 percent over the $6.0
billion reported in 1994's second quarter. Chemical revenues improved 15
percent due to increased volumes and prices while crude oil revenues
decreased 20 percent due to lower volumes. Natural gas revenues decreased
15 percent primarily due to lower prices.
Other income for the first six months and second quarter of 1995 decreased
due to the absence of the 1994 COET settlement of approximately $400
million.
Purchases of crude oil, natural gas, petroleum products and merchandise
totaled $6.4 billion for the first six months of 1995, 10 percent higher
than 1994's first six months, primarily attributable to higher purchase
prices and volumes for refined products, higher prices for crude oil
purchases and higher chemical purchases due to increased chemical
activity.
Operating expenses totaled $2.0 billion for the first six months of 1995,
compared with $2.1 billion for the corresponding 1994 period. Second-
quarter 1994 included restructuring charges of $150 million related to
various facility closings and asset dispositions. Exclusive of that
charge, first six-month operating expenses for 1995 were essentially level
with the comparable 1994 period, as expense reductions related to
restructuring efforts were offset by higher refinery expenses, reflecting
planned and unplanned maintenance, an increase in chemical manufacturing
expenses and inflation.
Petroleum exploration expenses of $202 million in the first six months of
1995 and $103 million in the second quarter of 1995 decreased 21 percent
and 32 percent, respectively, compared with prior-year periods. The
decrease in both periods was mainly attributable to lower overseas dry
hole costs of approximately $50 million.
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Selling and administrative expenses for the first six months and second
quarter of 1995 increased slightly compared with prior-year periods, after
adjusting for the second-quarter 1994 restructuring charges related to
severance costs of $79 million.
Interest expense was $282 million higher during the first six months of
1995 and $151 million for the second quarter of 1995 compared with the
like 1994 periods, due to interest on intercompany notes from affiliates.
The higher interest expense with affiliates reflects the 1994 transfer of
95 percent ownership of certain European chemical operations to Amoco
Corporation.
Outlook
The Company and the oil industry will continue to be affected by the
volatility of crude oil and natural gas prices. Also affecting chemical
and petroleum product activities are the overall industry product supply
and demand balance. The Company's future performance is expected to be
impacted by its organizational structure announced in July 1994, and
associated savings, ongoing cost reduction programs, the divestment of
marginal properties and underperforming assets, application of new
technologies and new governmental regulation. The Company's exploration
efforts will continue to target those areas that offer the most potential,
especially overseas. Amoco will also pursue areas that capitalize on its
natural gas resources and continue to develop internationally. Amoco
recently announced it is expanding its chemical operations in the Far East
and entering gasoline marketing operations in Central Europe.
Restructuring
In July 1994, Amoco Corporation announced that its organizational
structure was being changed into 17 business groups with a shared services
organization providing support services. In conjunction with the
restructuring, an after-tax charge of $256 million was accrued in the
second quarter of 1994. Selling and administrative expenses for that
period included charges of $225 million ($146 million after-tax) related
to employee-termination costs associated with the severance of
approximately 3,800 employees expected to occur by year-end 1995. Since
July of last year, charges against the accrual totaled $128 million ($83
million after-tax). As of June 30, 1995, the accrual balance associated
with restructuring was $97 million ($63 million after-tax), which was
considered adequate for all future severances and other related activities
to which Amoco has committed. First six-month 1995 earnings reflected
before-tax savings of approximately $200 million in employment costs and
other costs resulting from Amoco's restructuring effort.
The second-quarter 1994 accrual also included charges in operating
expenses of $169 million ($110 million after-tax) related to a reduction
in carrying value of assets that were to be divested. The sale of a
hazardous-waste incineration facility in Kimball, Nebraska has been
completed. Disposition of these assets, including the hazardous-waste
incineration facility, will not have a material effect on revenues,
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depreciation or income.
Additional restructuring costs totaling approximately $200 million after-
tax are expected to be incurred from July 1994 through 1996, representing
costs for system redesign, relocations, work force consolidation and
development of new processes in support of the restructuring. Costs
incurred, primarily for system development and redesign, totaled
approximately $40 million after-tax in the first six months of 1995.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $1,267 million in the
first six months of 1995 compared with $1,196 million in the comparable
1994 period. Working capital totaled $1,170 million at June 30, 1995 as
compared with $1,257 million at year-end 1994. The Company's current
ratio was 1.35 to 1 at June 30, 1995 and 1.30 to 1 at year-end 1994. As a
matter of policy, the Company practices asset and liability management
techniques that are designed to minimize its investment in non-cash
working capital. This does not impair operating capability or flexibility
since the Company has ready access to both short-term and long-term debt
markets.
The Company's ratio of debt to debt-plus-equity on public obligations was
18.2 percent at June 30, 1995, compared with 18.8 percent at year-end
1994. Including debt with affiliates, the ratio was 40.5 percent at June
30, 1995, and 39.6 percent at year-end 1994. The ratio of earnings to
fixed charges on outstanding public obligations was 12.9 to 1 for 1995's
first six months compared with 20.4 to 1 for the year ended December 31,
1994.
Amoco announced on April 25, 1995, that it planned to purchase up to 8.9
million shares of its common stock in excess of amounts needed for benefit
plan purposes. As of June 30, 1995, approximately 6 million shares had
been purchased at a cost of $405 million. Through July 31, 1995, 8.9
million shares were repurchased at a cost of $601 million, completing
the stock repurchase program.
Investments in affiliates totaled $1,199 million at June 30, 1995. The
investments reflect the Company's remaining interest in certain European
chemical operations, of which 95 percent ownership was transferred to
Amoco Corporation in 1994. Also reflected were the Company's purchases of
Amoco stock.
The Company believes that its strong financial position will permit it to
finance business needs and opportunities in an orderly manner. To
maintain flexibility, a shelf registration statement for $500 million in
debt securities remains on file with the Securities and Exchange
Commission ("SEC") to permit ready access to capital markets.
Capital and exploration expenditures totaled $1,317 million for the first
six months of 1995 compared to the $1,175 million spent during the same
8.<PAGE>
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period of 1994.
The Company has provided in its accounts for the reasonably estimable
future costs of probable environmental remediation obligations relating to
various oil and gas operations, refineries, marketing sites and chemical
locations, including multiparty sites at which the Company and certain of
its subsidiaries have been identified as potentially responsible parties
by the U.S. Environmental Protection Agency. Such estimated costs will be
refined over time as remedial requirements and regulations become better
defined. However, any additional costs cannot be reasonably estimated at
this time due to uncertainty of timing, the magnitude of contamination,
future technology, regulatory changes and other factors. Although future
costs could have a significant effect on the results of operations in any
one period, they are not expected to be material in relation to the
Company's liquidity or consolidated financial position. In total, the
accrued liability represents a reasonable best estimate of the Company's
remediation liability.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the description of legal proceedings in Part I, Item
3 of the Company's 1994 Annual Report on Form 10-K and Part II, Item 1 of
the Company's Report on Form 10-Q for the quarterly period ended March 31,
1995.
Thirteen proceedings instituted by governmental authorities are pending or
known to be contemplated against the Company and certain of its
subsidiaries under federal, state or local environmental laws, each of
which could result in monetary sanctions in excess of $100,000. No
individual proceeding is, nor are the proceedings as a group, expected to
have a material adverse effect on the Company's liquidity, consolidated
financial position or results of operations. The Company estimates that
in the aggregate the monetary sanctions reasonably likely to be imposed
from these proceedings amount to approximately $5.2 million.
The Company has various other suits and claims pending against it among
which are several class actions for substantial monetary damages which in
the Company's opinion are not meritorious. While it is impossible to
estimate with certainty the ultimate legal and financial liability in
respect to these other suits and claims, the Company believes that, while
the aggregate amount could be significant, it will not be material in
relation to its liquidity or its consolidated financial position.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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Item 5. Other Information
Amoco Argentina Oil Company ("Amoco Argentina") is a wholly owned
subsidiary of Amoco International Petroleum Company, which is an
indirect wholly owned subsidiary of the Company. Summarized financial
data for Amoco Argentina are presented below.
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
(millions of dollars)
Revenues................... $ 61 $ 38 $ 122 $ 80
Net income................. $ 20 $ 20 $ 44 $ 38
June 30, Dec. 31,
1995 1994
(millions of dollars)
Current assets........................ $ 113 $ 97
Total assets.......................... $ 398 $ 349
Current liabilities................... $ 60 $ 58
Non-current liabilities............... $ 103 $ 100
Shareholder's equity.................. $ 235 $ 191
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
Number Page
12 Statement Setting Forth Computation of Ratio
of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) A current report on Form 8-K dated April 5, 1995,
was filed, to incorporate by reference summarized
financial data for Amoco Argentina Oil Company,
included in Note 22 of Amoco Corporation's
Consolidated Financial Statements.
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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.
Amoco Company
(Registrant)
Date: August 11, 1995
J. R. Reid
J. R. Reid
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)
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EXHIBIT 12
AMOCO COMPANY
STATEMENT SETTING FORTH COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
(millions of dollars, except ratios)
Six Months
Ended Year Ended December 31,
June 30,
1995 1994 1993 1992 1991 1990
Determination of Income:
Consolidated earnings
before income taxes
and minority interest.. $1,296 $2,688 $2,427 $1,823 $2,093 $3,456
Fixed charges expensed by
consolidated companies. 109 140 193 238 231 266
Adjustments for certain
companies accounted for
by the equity method... 3 7 9 18 12 24
Adjusted earnings plus
fixed charges.......... $1,408 $2,835 $2,629 $2,079 $2,336 $3,746
Determination of Fixed Charges:
Consolidated interest on
indebtedness (including
interest capitalized).. $ 74 $ 127 $ 162 $ 219 $ 216 $ 232
Consolidated rental
expense representative
of an interest factor.. 29 7 31 20 22 30
Adjustments for certain
companies accounted for
by the equity method... 5 5 6 12 17 15
Total fixed charges..... $ 108 $ 139 $ 199 $ 251 $ 255 $ 277
Ratio of earnings to
fixed charges.......... 13.0* 20.4* 13.2 8.3 9.2 13.5
* Based on outstanding public debt obligations. Including debt with
affiliates, the ratio would have been 4.6 as of June 30, 1995, and 13.0
as of December 31, 1994.<PAGE>
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Income and the Condensed Consolidated
Statement of Financial Position and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000766916
<NAME> AMOCO COMPANY
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 94
<SECURITIES> 541
<RECEIVABLES> 2452
<ALLOWANCES> 18
<INVENTORY> 932
<CURRENT-ASSETS> 4552
<PP&E> 40472
<DEPRECIATION> 22272
<TOTAL-ASSETS> 25194
<CURRENT-LIABILITIES> 3382
<BONDS> 2129
<COMMON> 0
0
0
<OTHER-SE> 10273
<TOTAL-LIABILITY-AND-EQUITY> 25194
<SALES> 12078
<TOTAL-REVENUES> 13934
<CGS> 8567
<TOTAL-COSTS> 8567
<OTHER-EXPENSES> 2855
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 1296
<INCOME-TAX> 348
<INCOME-CONTINUING> 948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 948
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</TABLE>
