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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 March 31, 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 1-8888
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 March 31, 1996--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
Ended
March 31,
1996 1995
Revenues:
Sales and other operating revenues..... $ 6,482 $ 5,809
Consumer excise taxes.................. 819 808
Other income........................... 103 122
Total revenues....................... 7,404 6,739
Costs and Expenses:
Purchased crude oil, natural gas,
petroleum products and merchandise... 3,457 3,023
Operating expenses..................... 958 1,001
Petroleum exploration expenses,
including exploratory dry holes...... 105 99
Selling and administrative expenses.... 444 434
Taxes other than income taxes.......... 1,001 977
Depreciation, depletion, amortization,
and retirements and abandonments..... 464 450
Interest expense:
Affiliates........................... 121 123
Other................................ 26 42
Total costs and expenses........... 6,576 6,149
Income before income taxes............... 828 590
Income taxes............................. 230 144
Net income............................... $ 598 $ 446
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Condensed Consolidated Statement of Financial Position
(millions of dollars)
March 31, Dec. 31,
1996 1995
ASSETS
Current Assets:
Cash ................................... $ 136 $ 145
Marketable securities--at cost.......... 382 855
Accounts and notes receivable (less
allowances of $13 at March 31, 1996,
and $12 at December 31, 1995)......... 2,757 2,744
Inventories............................. 974 870
Prepaid expenses and income taxes....... 724 689
Total current assets.................. 4,973 5,303
Investments and Other Assets:
Affiliates.............................. 1,430 1,428
Other................................... 1,256 1,063
2,686 2,491
Properties--at cost, less accumulated
depreciation, depletion and amorti-
zation of $23,746 at March 31, 1996,
and $23,337 at December 31, 1995 (The
successful efforts method of accounting
is followed for costs incurred in oil
and gas producing activities)........... 19,066 18,532
Total assets.......................... $26,725 $26,326
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations $ 36 $ 196
Short-term obligations.................. 602 266
Accounts payable........................ 2,117 2,496
Accrued liabilities..................... 910 948
Taxes payable (including income taxes).. 698 672
Total current liabilities............. 4,363 4,578
Long-Term Debt:
Affiliates.............................. 4,568 4,608
Other debt.............................. 2,163 2,177
6,731 6,785
Deferred Credits and Other Non-Current
Liabilities:
Income taxes............................ 2,548 2,502
Other................................... 1,930 1,895
4,478 4,397
Minority Interest......................... 111 110
Shareholder's Equity...................... 11,042 10,456
Total liabilities and shareholder's
equity.............................. $26,725 $26,326
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Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Three Months Ended
March 31,
1996 1995
Cash Flows from Operating Activities:
Net income................................... $ 598 $ 446
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirement and abandonments.......... 464 450
Other...................................... (643) (543)
Net cash provided by operating activities.. 419 353
Cash Flows From Investing Activities:
Capital expenditures......................... (633) (434)
Proceeds from dispositions of property and
other assets............................... 131 39
Net investments, advances and business
acquisitions............................... (563) (23)
Other........................................ 3 (12)
Net cash used in investing activities...... (1,062) (430)
Cash Flows From Financing Activities:
New long-term obligations.................... 16 48
Repayment of long-term obligations........... (191) (14)
Increase in short-term obligations........... 336 96
Net cash used in financing activities...... 161 130
(Decrease) increase in Cash and Marketable
Securities................................... (482) 53
Cash and Marketable Securities-Beginning of
Period....................................... 1,000 1,238
Cash and Marketable Securities-End of Period... $ 518 $ 1,291
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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 public debt
obligations of the Company. The Company and Amoco guarantee
the public notes and debentures of Amoco Canada and Amoco
Argentina Oil Company ("Amoco Argentina").
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.
Item 2. Management's Narrative Analysis of Results of
Operations
Results of Operations
The Company earned $598 million for the first three months
of 1996, compared with $446 million for the first three
months of 1995. The increase in earnings for the first
quarter of 1996 reflected strong exploration and production
("E&P") earnings, primarily reflecting higher energy prices.
Chemical earnings continued strong while petroleum products
decreased slightly, reflecting the continuous competitive
environment in that segment.
Sales and other operating revenues totaled $6.5 billion for
the first quarter of 1996, 12 percent higher than the $5.8
billion reported in the corresponding 1995 period. Natural
gas and refined products revenues increased 34 percent and
14 percent, respectively, resulting from both higher prices
and volumes.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $3.5 billion for the first three months
of 1996, 14 percent higher that the first three months of
1995. The increase was primarily attributable to higher
crude oil purchase prices and volumes.
Outlook
The Company and the oil industry will continue to be
affected by the volatility of crude oil and natural gas
prices. Affecting chemicals and petroleum products
activities is the overall industry product supply and demand
balance. The Company's future performance is expected to
continue to be impacted by its organizational structure and
associated savings; ongoing cost reduction programs; the
divestment of marginal properties and underperforming
assets; application of new technologies; and new
governmental regulations.
The Company's exploration efforts will continue to target
those areas that offer the most potential. Amoco will pursue
areas that capitalize on its natural gas resources and
continue to expand internationally. Amoco's E&P barrel-oil-
equivalent production in the United States is expected to
remain approximately at the 1995 level. Production from the
Liuhua oil field in the South China Sea, which came onstream
in late March, should benefit crude oil production by an
average of 30,000 barrels per day for the remainder of 1996.
Overseas natural gas production is expected to increase
modestly in 1996.
In the petroleum products sector, the Company anticipates
weak U.S. industry refining margins in the near term. The
Company will continue to pursue additional cost reduction
programs and improved asset utilization. Refining results
should benefit from higher utilization rates in 1996,
reflecting reduced planned downtime.
In the chemical sector, while the near-term industry outlook
is continuing to soften for commodity chemicals, the Company
expects long-term growth to exceed 3 percent, with higher
growth anticipated in the Asia-Pacific region. Purified
terephthalic acid's ("PTA") average annual growth is
expected to be 7 percent over the next decade, with the
largest demand growth expected to be in the Asia-Pacific
region, while worldwide paraxylene ("PX") demand is expected
to grow about 6 percent per year. In order to meet expected
growth in PTA and PX demand, the Company's chemical segment
is expanding its wholly owned and joint-venture operations.
The Company continues to seek attractive opportunities
worldwide and is constantly reviewing strategic
alternatives. The Company will also continue to evaluate and
divest marginal properties and underperforming assets. As
previously announced, Amoco and Shell Oil Company plan to
form a partnership combining exploration and production
assets in the greater Permian Basin area of west Texas and
southeast New Mexico. Final agreement is contingent on the
successful completion of ongoing discussions regarding
design, management and operation of the company. Start-up of
the partnership is expected in 1996. Also, Amoco announced
the possible divestment of Atlanta-based Amoco Foam Products
Company ("Amoco Foam"). Amoco Foam is a leading manufacturer
and marketer of polyester foam products, with nine plants in
the United States. In 1995, Amoco Foam product revenues
totaled $288 million.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $419
million in the first three months of 1996 compared with $353
million in the comparable 1995 period. Working capital
totaled $610 million at March 31, 1996, compared with $725
million at year-end 1995. The Company's current ratio was
1.14 to 1 at March 31, 1996 and 1.16 to 1 at year-end 1995.
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 flexibility since the Company has
ready access to both short- and long-term debt markets.
The Company's ratio of debt to debt-plus-equity on public
obligations was 20.1 percent at March 31, 1996, compared
with 20 percent at year-end 1995. Including debt with
affiliates, the ratio was 39.8 percent at March 31, 1996,
and 40.7 percent at year-end 1995. In early 1996, the
Company redeemed the $25 million, 9 7/8 percent debentures
due 2016 and the $57 million, 9 3/4 percent debentures due
2016. The ratio of earnings to fixed charges on public
obligations was 14.6 to 1 for 1996's first three months
compared with 11.6 to 1 for the year ended December 31,
1995.
The Company believes that its strong financial position will
permit it to finance business needs and opportunities as
they arise. 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. Amoco Argentina, an
indirect wholly owned subsidiary of the Company, filed a
shelf registration with the SEC for $200 million in debt
securities, of which $100 million in debt securities were
subsequently issued. Amoco Corporation and Amoco Company
guarantee the securities issued under this registration
statement.
On March 1, 1996, Albemarle Corporation's ("Albemarle")
alpha-olefins, poly alpha olefins and synthetics alcohol
businesses were purchased for approximately $500 million.
The purchase involved about 550 employees and assets in
Texas and Belgium.
Capital and exploration expenditures, excluding the
Albemarle acquisition, totaled $738 million for the first
three months of 1996 compared with $533 million spent during
the same period of 1995. Approximately 88 percent of the
total 1996 expenditures was spent in exploration and
production operations.
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 environmental 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
The Internal Revenue Service ("IRS") has challenged the
application of certain foreign income taxes as credits
against Amoco's U.S. taxes that otherwise would have been
payable for the years 1980 through 1989. On June 18, 1992,
the IRS issued a statutory Notice of Deficiency for
additional taxes in the amount of $466 million, plus
interest, relating to 1980 through 1982. Amoco filed a
petition in the U.S. Tax Court contesting the IRS statutory
Notice of Deficiency. Trial on the matter was held in April
1995. The Tax Court issued an opinion on March 28, 1996,
deciding that Amoco was entitled to its foreign tax credits
for the years 1980 through 1982 and that additional taxes of
$466 million claimed by the IRS were not due. Pending
resolution of final tax computations, the Tax Court's
decision will become final and will be subject to appeal
within ninety days. A comparable adjustment of foreign tax
credits for each year has been proposed for the years 1983
through 1989 based upon subsequent IRS audits. Similar
challenges could arise relating to years subsequent to 1989.
Amoco believes that the foreign income taxes have been
reflected properly in its U.S. federal tax returns.
Consequently, this dispute is not expected to have a
material adverse effect on the liquidity, results of
operations, or the consolidated financial position of Amoco.
Twelve 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 $7.7 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.
Item 5. Other Information
Shown below is summarized financial information of
the Company's indirectly wholly owned subsidiary,
Amoco Argentina.
Three Months
Ended
March 31,
1996 1995
(millions of dollars)
Revenues........................ $ 75 $ 61
Net income...................... $ 27 $ 24
March 31 Dec. 31,
1996 1995
(millions of dollars)
Current assets.................. $ 94 $ 73
Total assets.................... $ 419 $ 389
Current liabilities............. $ 52 $ 49
Non-current liabilities......... $ 113 $ 113
Shareholder's equity............ $ 254 $ 227
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number
12 Statement Setting Forth Computation of Ratio
of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
ended March 31, 1996.
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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: May 13, 1996
Judith G. Boynton
Judith G. Boynton
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)
Three
Months
Ended Year Ended December 31,
March 31,
1996 1995 1994 1993 1992 1991
Determination of Income:
Consolidated earnings
before income taxes
and minority interest... $ 829 $2,425 $2,688 $2,427 $1,823 $2,093
Fixed charges expensed by
consolidated companies.. 61 233 140 193 238 231
Adjustments for certain
companies accounted for
by the equity method... 1 10 7 9 18 12
Adjusted earnings plus
fixed charges........... $ 891 $2,668 $2,835 $2,629 $2,079 $2,336
Determination of Fixed Charges:
Consolidated interest on
indebtedness (including
interest capitalized)... $ 39 $ 152 $ 127 $ 162 $ 219 $ 216
Consolidated rental
expense representative
of an interest factor... 20 71 7 31 20 22
Adjustments for certain
companies accounted for
by the equity method.... 2 6 5 6 12 17
Total fixed charges...... $ 61 $ 229 $ 139 $ 199 $ 251 $ 255
Ratio of earnings to
fixed charges........... 14.6* 11.6* 20.4* 13.2 8.3 9.2
*Based on public debt obligations. Including debt with affiliates, the
ratio would have been 5.6 as of March 31, 1996, 4.4 as of December 31,
1995, and 13.0 as of December 31, 1994.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statements of Income and the Condensed Consolidated
Statement of Financial Position and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
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<NAME> AMOCO COMPANY
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