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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, 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 June 30, 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 Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
Revenues:
Sales and other operating revenues $ 7,098 $ 6,269 $13,580 $12,078
Consumer excise taxes............. 844 835 1,663 1,643
Other income...................... 84 91 187 213
Total revenues.................. 8,026 7,195 15,430 13,934
Costs and Expenses:
Purchased crude oil, natural
gas, petroleum products and
merchandise..................... 4,028 3,375 7,485 6,398
Operating expenses................ 1,070 966 2,028 1,967
Petroleum exploration expenses,
including exploratory dry holes. 108 103 213 202
Selling and administrative
expenses........................ 492 438 936 872
Taxes other than income taxes..... 1,019 986 2,020 1,963
Depreciation, depletion, amorti-
zation, and retirements and
abandonments.................... 480 442 944 892
Interest expense:
Affiliates...................... 124 125 245 248
Other........................... 15 54 41 96
Total costs and expenses...... 7,336 6,489 13,912 12,638
Income before income taxes.......... 690 706 1,518 1,296
Income taxes........................ 180 204 410 348
Net income.......................... $ 510 $ 502 $ 1,108 $ 948
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Condensed Consolidated Statement of Financial Position
(millions of dollars)
June 30, Dec. 31,
1996 1995
ASSETS
Current Assets:
Cash ................................... $ 209 $ 145
Marketable securities--at cost.......... 415 855
Accounts and notes receivable (less
allowances of $13 at June 30, 1996,
and $12 at December 31, 1995)......... 2,819 2,744
Inventories............................. 1,007 870
Prepaid expenses and income taxes....... 720 689
Total current assets.................. 5,170 5,303
Investments and Other Assets:
Affiliates.............................. 1,428 1,428
Other................................... 1,383 1,063
2,811 2,491
Properties--at cost, less accumulated
depreciation, depletion and amorti-
zation of $24,110 at June 30, 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)........... 19,298 18,532
Total assets.......................... $27,279 $26,326
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations $ 16 $ 196
Short-term obligations.................. 744 266
Accounts payable........................ 2,148 2,496
Accrued liabilities..................... 984 948
Taxes payable (including income taxes).. 455 672
Total current liabilities............. 4,347 4,578
Long-Term Debt:
Affiliates.............................. 4,568 4,608
Other debt.............................. 2,207 2,177
6,775 6,785
Deferred Credits and Other Non-Current
Liabilities:
Income taxes............................ 2,629 2,502
Other................................... 1,880 1,895
4,509 4,397
Minority Interest......................... 110 110
Shareholder's Equity...................... 11,538 10,456
Total liabilities and shareholder's
equity.............................. $27,279 $26,326
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Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Six Months Ended
June 30,
1996 1995
Cash Flows from Operating Activities:
Net income................................... $ 1,108 $ 948
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirement and abandonments.......... 944 892
Other...................................... (894) (573)
Net cash provided by operating activities.. 1,158 1,267
Cash Flows From Investing Activities:
Capital expenditures......................... (1,434) (1,115)
Proceeds from dispositions of property and
other assets............................... 166 59
Net investments, advances and business
acquisitions............................... (596) (554)
Other........................................ (4) 14
Net cash used in investing activities...... (1,868) (1,596)
Cash Flows From Financing Activities:
New long-term obligations.................... 91 72
Repayment of long-term obligations........... (235) (38)
Distributions to Amoco Corporation........... - (332)
Increase in short-term obligations........... 478 24
Net cash used in financing activities...... 334 (274)
Decrease in Cash and Marketable
Securities................................... (376) (603)
Cash and Marketable Securities-Beginning of
Period....................................... 1,000 1,238
Cash and Marketable Securities-End of Period... $ 624 $ 635
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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 $1,108 million for the first six months
of 1996, compared with $948 million for the first six months
of 1995. The increase in earnings reflected strong
exploration and production ("E&P") earnings, primarily
resulting from higher energy prices, offset by lower
chemical and petroleum products margins.
Earnings for the second quarter of 1996 were $510 million
compared with $502 million for the second quarter of 1995.
The improvement resulted from higher energy prices and an
increase in production in the E&P segment, which more than
offset lower petroleum products earnings, and a decline from
very strong chemical margins of a year ago.
Sales and other operating revenues totaled $13.6 billion and
$7.1 billion for the first six months and second quarter of
1996, respectively, approximately 12 percent higher than the
1995 periods, primarily on the strength of higher prices for
refined products, crude oil and natural gas.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $7.5 billion for the first six months of
1996, 17 percent higher than the first six months of 1995.
For the second quarter of 1996, purchases of crude oil,
natural gas, petroleum products and merchandise totaled $4.0
billion, 19 percent higher than the second quarter of 1995.
The increase for both periods reflected higher prices and
volumes for crude oil and higher prices for natural gas.
Selling and administrative expenses for the second quarter,
1996 increased 12 percent from 1995's second quarter.
Included in 1996 second quarter results were unfavorable
currency effects of $19 million compared with favorable
currency effects in 1995 of $1 million.
Interest expense for the first six months and second quarter
of 1996 decreased primarily as a result of lower interest
relating to revised estimates of tax obligations.
Outlook
The Company and the oil industry will continue to be
affected by the volatility of crude oil and natural gas
prices. Also 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 savings associated with changes
in its organizational structure; 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. The Company will
pursue areas to capitalize on its natural gas resources and
continue to expand internationally. The Company's E&P barrel-
oil-equivalent production in the United States is expected
to remain approximately at the 1995 level. Outside the
United States, 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 in 1996 compared to 1995.
In the petroleum products sector, the Company anticipates
weak U.S. refining margins in its marketing areas in the
near term. The Company's marketing strategy will continue to
emphasize brand product quality and improve its position as
a convenience retailer. The Company will continue to pursue
additional cost reduction programs and improved asset
utilization.
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 three percent, with
higher increase anticipated in the Asia-Pacific region.
Purified terephthalic acid's ("PTA") average annual growth
is expected to be seven percent over the next decade, with
the largest demand increase expected to be in the Asia-
Pacific region, while worldwide paraxylene ("PX") demand is
expected to grow about six 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. Amoco
and Shell Oil Company signed a letter of intent to form a
limited 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.
In late June, a unit of Tenneco Corporation announced that
it was seeking to acquire Amoco Foam Products Company
("Amoco Foam") in a transaction valued at approximately $310
million. Amoco Foam is a leading manufacturer and marketer
of polystyrene 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 $1,158
million in the first six months of 1996 compared with $1,267
million in the comparable 1995 period. Working capital
totaled $823 million at June 30, 1996, compared with $725
million at year-end 1995. The Company's current ratio was
1.19 to 1 at June 30, 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 20.3 percent at June 30, 1996, compared with
20 percent at year-end 1995. Including debt with affiliates,
the ratio was 39.2 percent at June 30, 1996, and 40.7
percent at year-end 1995. The ratio of earnings to fixed
charges on public obligations was 13.5 to 1 for 1996's first
six months compared with 11.6 to 1 for the year ended
December 31, 1995.
The Company believes that its strong financial position will
permit the financing of 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 $1,647 million for the first
six months of 1996 compared with $1,317 million spent during
the same period of 1995. Approximately 70 percent of the
total 1996 expenditures was spent in exploration and
production operations. The increase over the first six
months of 1995 reflected planned increases in spending in
growth areas.
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
Reference is made to the description of the challenge by the
Internal Revenue Service ("IRS") of certain foreign income
taxes as credits against Amoco's U.S. taxes that would
otherwise have been payable for the years 1980 through 1989
in Part I, Item 3 of Amoco's 1995 Form 10-K and Part II,
Item 1 of Amoco's Form 10-Q for the quarter ended March 31,
1996. The Tax Court's decision became final on July 16, 1996
and is subject to appeal by the IRS until October 14, 1996.
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.
Reference is made to the description of AMOCO CHEMICAL
COMPANY, et al. vs. CERTAIN UNDERWRITERS AT LLOYD'S OF
LONDON, et al. in Part I, Item 3 of Amoco's 1995 Form 10-K.
On June 4, 1996, a California appellate court reversed the
judgment in favor of Amoco and remanded the case for a new
trial. Accordingly, it is impossible at this time to predict
the ultimate outcome of the case. However, it is not
expected to have a material effect on the liquidity or
consolidated financial position of Amoco.
Fourteen 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 $7.6 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 with
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 for the
Company's indirectly wholly owned subsidiary Amoco
Argentina.
Three Months Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
(millions of dollars)
Revenues................ $ 79 $ 61 $154 $122
Net income.............. $ 29 $ 20 $ 56 $ 44
June 30 Dec. 31,
1996 1995
(millions of dollars)
Current assets.................. $ 62 $ 73
Total assets.................... $419 $389
Current liabilities............. $ 66 $ 49
Non-current liabilities......... $136 $113
Shareholder's equity............ $217 $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 June 30, 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: August 12, 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)
Six
Months
Ended Year Ended December 31,
June 30,
1996 1995 1994 1993 1992 1991
Determination of Income:
Consolidated earnings
before income taxes
and minority interest... $1,520 $2,425 $2,688 $2,427 $1,823 $2,093
Fixed charges expensed by
consolidated companies.. 123 233 140 193 238 231
Adjustments for certain
companies accounted for
by the equity method... 33 10 7 9 18 12
Adjusted earnings plus
fixed charges........... $1,676 $2,668 $2,835 $2,629 $2,079 $2,336
Determination of Fixed Charges:
Consolidated interest on
indebtedness (including
interest capitalized)... $ 80 $ 152 $ 127 $ 162 $ 219 $ 216
Consolidated rental
expense representative
of an interest factor... 39 71 7 31 20 22
Adjustments for certain
companies accounted for
by the equity method.... 5 6 5 6 12 17
Total fixed charges...... $ 124 $ 229 $ 139 $ 199 $ 251 $ 255
Ratio of earnings to
fixed charges........... 13.5* 11.6* 20.4* 13.2 8.3 9.2
*Based on public debt obligations. Including debt with affiliates, the
ratio would have been 5.2 as of June 30, 1996, 4.4 as of December 31,
1995, and 13.0 as of December 31, 1994.
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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>
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<NAME> AMOCO COMPANY
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