SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
________________
For the quarterly period ended June 30, 1994
Commission file number 1-1196
________________
ATLANTIC RICHFIELD COMPANY
(Exact name of registrant as specified in its charter)
_________________
Delaware 23-0371610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 South Flower Street
Los Angeles, California 90071
(Address of principal executive offices) (Zip code)
__________________
(213) 486-3511
(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 pre-ceding 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, $2.50 par value, outstanding as of
June 30, 1994: 160,604,859.
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended Six Months Ended
June 30, June30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(Millions of dollars except
per share amounts)
<S> <C> <C> <C> <C>
Revenues
Sales and other operating revenues,
including excise taxes . . . . . . $4,174 $4,670 $7,974 $9,177
Income from equity investments . . . 24 - 41 15
Interest . . . . . . . . . . . . . . 56 37 101 79
Other revenues . . . . . . . . . . . 83 193 146 297
----- ----- ----- -----
4,337 4,900 8,262 9,568
----- ----- ----- -----
Expenses
Trade purchases. . . . . . . . . . . 1,558 1,808 2,825 3,552
Operating expenses . . . . . . . . . 823 822 1,578 1,569
Exploration expenses (including
undeveloped leasehold
amortization). . . . . . . . . . . 91 148 195 284
Selling, general and administrative
expenses . . . . . . . . . . . . . 429 461 824 885
Taxes other than excise and
income taxes . . . . . . . . . . . 184 301 368 607
Excise taxes . . . . . . . . . . . . 382 336 742 626
Depreciation, depletion and
amortization . . . . . . . . . . . 414 387 835 786
Interest . . . . . . . . . . . . . . 187 176 371 356
Unusual items. . . . . . . . . . . . 249 - 249 -
----- ----- ----- -----
4,317 4,439 7,987 8,665
----- ----- ----- -----
Income before income taxes and
minority interest 20 461 275 903
Provision (benefit) for taxes on
income . . . . . . . . . . . . . . . (17) 182 80 355
Minority interest in earnings of
subsidiaries . . . . . . . . . . . . 13 8 22 17
----- ----- ----- -----
Net Income . . . . . . . . . . . . . . $ 24 $ 271 $ 173 $ 531
===== ===== ===== =====
Earned per Share . . . . . . . . . . . $ 0.14 $ 1.67 $ 1.06 $ 3.27
===== ===== ===== =====
Cash Dividends Paid per Share of
Common Stock . . . . . . . . . . . . $1.375 $1.375 $ 2.75 $ 2.75
===== ===== ===== =====
The accompanying notes are an integral part of these statements.
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1994 1993
---- ----
(Millions of dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 1,009 $ 1,458
Short-term investments. . . . . . . . . . . . . 2,192 2,289
Accounts receivable . . . . . . . . . . . . . . 1,343 1,333
Inventories . . . . . . . . . . . . . . . . . . 843 914
Prepaid expenses and other current assets . . . 470 237
------ ------
Total current assets. . . . . . . . . . . . . . 5,857 6,231
------ ------
Investments and long-term receivables:
Investments accounted for on the equity
method. . . . . . . . . . . . . . . . . . . . 277 266
Other investments and long-term receivables . . 245 221
------ ------
522 487
------ ------
Fixed assets:
Property, plant and equipment . . . . . . . . . 31,958 31,494
Less accumulated depreciation, depletion
and amortization . . . . . . . . . . . . . . . 16,068 15,628
------ ------
15,890 15,866
------ ------
Deferred charges and other assets . . . . . . . . 1,270 1,310
------ ------
Total assets. . . . . . . . . . . . . . . . . . . $23,539 $23,894
====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1994 1993
---- ----
(Millions of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . $ 1,433 $ 1,510
Accounts payable. . . . . . . . . . . . . . . . . 970 1,091
Taxes payable, including excise taxes . . . . . . 350 272
Long-term debt due within one year. . . . . . . . 108 165
Accrued interest. . . . . . . . . . . . . . . . . 188 190
Other . . . . . . . . . . . . . . . . . . . . . . 1,121 1,107
------ ------
Total current liabilities . . . . . . . . . . . . 4,170 4,335
------ ------
Long-term debt. . . . . . . . . . . . . . . . . . . 7,021 7,089
Deferred income taxes . . . . . . . . . . . . . . . 2,667 2,779
Other deferred liabilities and credits. . . . . . . 3,322 3,177
Minority interest . . . . . . . . . . . . . . . . . 392 387
Stockholders' equity:
Preference stocks . . . . . . . . . . . . . . . . 1 1
Common stock. . . . . . . . . . . . . . . . . . . 402 402
Capital in excess of par value of stock . . . . . 650 661
Retained earnings . . . . . . . . . . . . . . . . 5,039 5,308
Pension liability adjustment. . . . . . . . . . . (33) (29)
Treasury stock, at cost . . . . . . . . . . . . . (15) (83)
Foreign currency translation. . . . . . . . . . . (77) (133)
------ ------
Total stockholders' equity. . . . . . . . . . . . 5,967 6,127
------ ------
Total liabilities and stockholders' equity. . . . . $23,539 $23,894
====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
----------------
1994 1993
---- ----
(Millions of dollars)
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 173 $ 531
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization . . . . . . . 835 786
Dry hole expense and undeveloped leasehold
amortization . . . . . . . . . . . . . . . . . . . . 96 172
Net gain on asset sales. . . . . . . . . . . . . . . . - (152)
Income from equity investments . . . . . . . . . . . . (41) (15)
Dividends from equity investments. . . . . . . . . . . 29 59
Noncash provisions greater than cash payments. . . . . 249 37
Deferred income taxes. . . . . . . . . . . . . . . . . (135) (2)
Net change in accounts receivable, inventories
and accounts payable. . . . . . . . . . . . . . . . . (128) (109)
Net change in other working capital accounts . . . . . (261) (166)
Other. . . . . . . . . . . . . . . . . . . . . . . . . (19) 40
----- -----
Net cash provided by operating activities. . . . . . 798 1,181
----- -----
Cash flows from investing activities:
Additions to fixed assets (including dry hole costs) . (846) (991)
Net cash provided (used) by short-term investments . . 94 (202)
Proceeds from asset sales. . . . . . . . . . . . . . . 46 286
Payments received on notes for sales of property . . . 48 -
Other. . . . . . . . . . . . . . . . . . . . . . . . . 83 (72)
----- -----
Net cash used by investing activities. . . . . . . . (575) (979)
----- -----
Cash flows from financing activities:
Repayments of long-term debt . . . . . . . . . . . . . (445) (624)
Proceeds from issuance of long-term debt . . . . . . . 276 5
Net cash provided (used) by notes payable. . . . . . . (105) 276
Dividends paid . . . . . . . . . . . . . . . . . . . . (442) (439)
Treasury stock contributed to benefit plans. . . . . . 56 28
Other. . . . . . . . . . . . . . . . . . . . . . . . . (19) (13)
----- -----
Net cash used by financing activities. . . . . . . . (679) (767)
----- -----
Effect of exchange rate changes on cash. . . . . . . . . 7 (39)
----- -----
Net decrease in cash and cash equivalents. . . . . . . . (449) (604)
Cash and cash equivalents at beginning of period . . . . 1,458 1,414
----- -----
Cash and cash equivalents at end of period . . . . . . . $1,009 $ 810
===== =====
The accompanying notes are an integral part of these statements.
</TABLE>
-4-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE A. Unusual Items.
Unusual items included net charges of $249 million before tax related
to a restructure and personnel reductions announced by the Company on July
18, 1994. Approximately 2,000 jobs will be eliminated in 1994 and 1995,
including 750 in Alaska and reductions at corporate headquarters in Los
Angeles and other operating units.
NOTE B. Investments.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company has adopted the
provisions of SFAS No. 115 for investments held as of or acquired after
January 1, 1994. Investments subject to this standard are required to be
carried at fair value, unless they are held to maturity. In accordance
with SFAS No. 115, prior period financial statements have not been restated
to reflect this change in accounting principle. The effect of adopting
SFAS No. 115 had no impact on income for the three-month and six-month
periods ended June 30, 1994.
As of June 30, 1994 and January 1, 1994, the Company held
approximately $1.0 billion and $1.6 billion, respectively, of investments
in debt securities classified as held-to-maturity. As of June 30, 1994 and
January 1, 1994, the Company held approximately $1.3 billion and $1.2
billion, respectively, of investments in debt securities classified as
available-for-sale. The securities were composed principally of
investments in U.S. Treasury securities, corporate debt instruments, and
municipal securities and were included in cash equivalents or short-term
investments on the balance sheet depending on their maturities, which range
from 1 day to 36 months. The securities are recorded at cost which
approximated their estimated fair value.
The Company realized losses of $6 million and $7 million respectively,
on sales of available-for-sale securities during the three-month and six-
month periods ended June 30, 1994. Proceeds from the sales were $0.9
billion and $3.0 billion, respectively.
NOTE C. Inventories.
Inventories at June 30, 1994 and December 31, 1993 comprised the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
(Millions of dollars)
<S> <C> <C>
Crude oil and petroleum products. . . . . . . . . $ 206 $ 266
Chemical products . . . . . . . . . . . . . . . . 368 373
Other products. . . . . . . . . . . . . . . . . . 33 32
Materials and supplies. . . . . . . . . . . . . . 236 243
----- -----
Total. . . . . . . . . . . . . . . . . . . . . $ 843 $ 914
===== =====
</TABLE>
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE D. Capital Stock.
Detail of the Company's capital stock was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
(Thousands of dollars)
<S> <C> <C>
$3.00 Cumulative convertible preference stock,
par $1 . . . . . . . . . . . . . . . . . . . $ 77 $ 81
$2.80 Cumulative convertible preference stock,
par $1 . . . . . . . . . . . . . . . . . . . 830 854
Common stock, par $2.50 . . . . . . . . . . . . 401,867 401,865
------- -------
Total . . . . . . . . . . . . . . . . . . . . $402,774 $402,800
======= =======
</TABLE>
NOTE E. Capitalization of Interest.
Interest expense excluded capitalized interest of $10 million and $16
million, respectively, for the three-month periods ended June 30, 1994 and
1993, and $17 million and $37 million, respectively, for the six-month
periods ended June 30, 1994 and 1993.
NOTE F. Income Taxes.
Provision (benefit) for taxes on income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Federal:
Current . . . . . . . . . . . . . . $ 86 $ 167 $ 157 $ 294
Deferred. . . . . . . . . . . . . . (88) (12) (103) (24)
---- ---- ---- ----
(2) 155 54 270
---- ---- ---- ----
Foreign:
Current . . . . . . . . . . . . . . 5 (2) 30 16
Deferred. . . . . . . . . . . . . . (15) 4 (9) 21
---- ---- ---- ----
(10) 2 21 37
State:
Current . . . . . . . . . . . . . . 18 24 28 47
Deferred. . . . . . . . . . . . . . . (23) 1 (23) 1
---- ---- ---- ----
(5) 25 5 48
---- ---- ---- ----
Total . . . . . . . . . . . . . . $ (17) $ 182 $ 80 $ 355
==== ==== ==== ====
</TABLE>
-6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note G. Income Taxes (Continued).
Reconciliation of provision (benefit) for taxes on income with tax at
federal statutory rate:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------------------
1994 1993
---------------- ---------------
Percent Percent
of of
Pretax Pretax
Amount Income Amount Income
------ ------- ------ ------
(Millions of dollars)
<S> <C> <C> <C> <C>
Income before income taxes and
minority interest. . . . . . . . . . $ 20 100.0 $ 461 100.0
==== ===== ==== =====
Tax at federal statutory rate. . . . . $ 7 35.0 $ 157 34.0
Increase (reduction) in taxes
resulting from:
Dividend exclusion . . . . . . . . (3) (15.0) 3 .7
Taxes on foreign income in
excess of statutory rate . . . . 21 105.0 17 3.7
Foreign deferred tax asset
recognition . . . . . . . . . . (26) (130.0) - -
State income taxes (net of
federal effect). . . . . . . . . (4) (20.0) 17 3.7
Tax credits. . . . . . . . . . . . (15) (75.0) (9) (2.0)
Other. . . . . . . . . . . . . . . 3 15.0 (3) (.6)
---- ----- ---- -----
Provision (benefit) for taxes on
income . . . . . . . . . . . . . . . $ (17) (85.0) $ 182 39.5
---- ----- ---- -----
Six Months Ended
June 30,
------------------------------------
1994 1993
---------------- ----------------
Percent Percent
of of
Pretax Pretax
Amount Income Amount Income
------ ------ ------ ------
(Millions of dollars)
<S> <C> <C> <C> <C>
Income before income taxes and
minority interest. . . . . . . . . . $ 275 100.0 $ 903 100.0
==== ===== ==== =====
Tax at federal statutory rate. . . . . $ 96 35.0 $ 307 34.0
Increase (reduction) in taxes
resulting from:
Dividend exclusion . . . . . . . . (5) (1.8) 2 .2
Taxes on foreign income in
excess of statutory rate . . . . 46 16.7 36 4.0
Foreign deferred tax asset
recognition. . . . . . . . . . . (26) (9.5) - -
State income taxes (net of
federal effect). . . . . . . . . 3 1.1 32 3.5
Tax credits. . . . . . . . . . . . (28) (10.2) (17) (1.9)
Other. . . . . . . . . . . . . . . (6) (2.2) (5) (.5)
---- ----- ---- -----
Provision for taxes on income. . . . . $ 80 29.1 $ 355 39.3
==== ===== ==== =====
</TABLE>
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE H. Earned Per Share.
Earned per share is based on the average number of common shares
outstanding during each period, including common stock equivalents that
consist of certain outstanding options and all outstanding convertible
securities.
The information necessary for the calculation of earned per share is
as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------
1994 1993
---- ----
(Millions of Shares)
<S> <C> <C>
Average number of common shares outstanding. . . . . 160.4 159.2
Common stock equivalents . . . . . . . . . . . . . . 2.7 3.2
----- -----
Total . . . . . . . . . . . . . . . . . . . . . . 163.1 162.4
===== =====
Six Months Ended
June 30,
-----------------
1994 1993
---- ----
(Millions of Shares)
<S> <C> <C>
Average number of common shares outstanding. . . . . 160.3 159.1
Common stock equivalents . . . . . . . . . . . . . . 2.7 3.2
----- -----
Total . . . . . . . . . . . . . . . . . . . . . . 163.0 162.3
===== =====
</TABLE>
NOTE I. Supplemental Income Statement Information.
Taxes other than excise and income taxes comprised the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Production/severance . . . . . . . . . $ 76 $ 89 $142 $180
Property . . . . . . . . . . . . . . . 46 51 96 103
Value added. . . . . . . . . . . . . . - 86 - 165
Other. . . . . . . . . . . . . . . . . 62 75 130 159
--- --- --- ---
Total. . . . . . . . . . . . . . . . $184 $301 $368 $607
=== === === ===
</TABLE>
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE J. Supplemental Cash Flow Information.
Following is supplemental cash flow information for the six months
ended June 30, 1994 and 1993:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1994 1993
(Millions of dollars)
<S> <C> <C>
Gross maturities of short-term investments . . . . . . $ 3,880 $ 2,444
Gross purchases of short-term investments. . . . . . . (3,786) (2,646)
------ ------
Net cash provided (used) by short-term investments . . $ 94 $ (202)
====== ======
Gross proceeds from issuance of notes payable. . . . . $ 4,954 $ 4,771
Gross repayments of notes payable. . . . . . . . . . . (5,059) (4,495)
------ ------
Net cash provided (used) by notes payable . . . . . . $ (105) $ 276
====== ======
Gross noncash provisions charged to income . . . . . . $ 475 $ 246
Cash payments of previously accrued items. . . . . . . (226) (209)
------ ------
Noncash provisions greater than cash payments. . . . . $ 249 $ 37
====== ======
</TABLE>
Interest paid during the six-month periods ended June 30, 1994 and
1993 was $373 million and $380 million, respectively.
Income taxes paid during the six-month periods ended June 30, 1994 and
1993 were $157 million and $354 million, respectively.
-9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE K. Summarized Financial Information.
Summarized financial information for Lyondell Petrochemical Company
("Lyondell"), a company of which Atlantic Richfield Company ("ARCO") owned
a 49.9 percent interest at June 30, 1994, was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Revenues (including sales to ARCO
and ARCO Chemical Company). . . . . $ 900 $1,080 $1,724 $2,144
Sales to ARCO and ARCO Chemical
Company . . . . . . . . . . . . . . 82 77 151 146
Operating income. . . . . . . . . . . 71 5 125 12
Income (loss) before income taxes
and cumulative effect of changes
in accounting principles . . . . . 51 (14) 85 (24)
Net income (loss) . . . . . . . . . . 32 (11) 54 3
________________________
ARCO's equity in net income (loss)
of Lyondell . . . . . . . . . . . . 16 (5) 27 2
Cash dividends received from
Lyondell . . . . . . . . . . . . . 9 18 18 36
----------------------------
June 30, December 31,
1994 1993
---- ----
(Millions of dollars)
<S> <C> <C>
Current assets. . . . . . . . . . . . . . . $ 542 $ 523
Noncurrent assets . . . . . . . . . . . . . 766 708
Current liabilities . . . . . . . . . . . . 328 299
Long-term debt. . . . . . . . . . . . . . . 707 717
Other liabilities . . . . . . . . . . . . . 187 179
Minority interest . . . . . . . . . . . . . 156 124
Stockholders' deficit . . . . . . . . . . . (70) (88)
</TABLE>
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE L. Other Commitments and Contingencies.
ARCO has commitments, including those related to the acquisition,
construction and development of facilities, all made in the normal course
of business.
At June 30, 1994 and December 31, 1993, there were contingent
liabilities primarily with respect to guarantees of securities of other
issuers of approximately $112 million and $111 million, respectively, of
which approximately $41 million were indemnified at December 31, 1993.
None of the contingent liabilities were indemnified at June 30, 1994.
Following the March 1989 EXXON VALDEZ oil spill, Alyeska Pipeline
Service Company (Alyeska) and Alyeska's owner companies were the subject of
numerous lawsuits by the State of Alaska, the United States and private
plaintiffs. ARCO Transportation Alaska, Inc. (ATA) owns approximately 21
percent of Alyeska. In July 1993, it was announced that Alyeska and its
owner companies had agreed to pay $98 million in settlement of all but a
handful of the lawsuits by private plaintiffs, of which $20.9 million was
ATA's share. In October 1993, the settlement was tentatively approved;
however, there remain certain issues concerning claims asserted by Exxon
Shipping against Alyeska and its owner companies that must be resolved
before the settlement becomes final.
ARCO and former producers of lead pigments have been named as
defendants in cases filed by a municipal housing authority, a purported
class and several individuals seeking damages and injunctive relief as a
consequence of the presence of lead-based paint in certain housing units.
ARCO and its subsidiary, Atlantic Richfield Hanford Company (ARHCO),
and several other companies have been named as defendants in lawsuits filed
on behalf of individual persons and a number of purported classes. These
lawsuits arise out of radioactive and non-radioactive toxic and hazardous
substances allegedly generated at the Hanford Nuclear Reservation in
Richland, Washington (HNR). The claims against ARCO and ARHCO arise out of
the performance by ARHCO of a contract with the Atomic Energy Commission to
provide chemical processing, waste management and support services at HNR
from 1967 to 1977. ARCO and ARHCO believe that, should either or both
ultimately be held liable, they will be entitled to indemnification by the
federal government as provided under the Price-Anderson Act, and pursuant
to the terms of the contract between ARHCO and the Atomic Energy
Commission.
ARCO is also the subject of or party to a number of pending or
threatened legal actions. Although any ultimate liability arising from any
of these suits, or from any of the proceedings described above, if
aggregated and assumed to occur in a single fiscal period, would be
material to ARCO's results of operations, the likelihood of such occurrence
is considered remote. 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 ARCO's consolidated
financial statements.
ARCO is subject to other loss contingencies pursuant to federal, state
and local environmental laws and regulations. These include possible
obligations to remove or mitigate the effects on the environment of the
disposal or release of certain chemical, mineral and petroleum substances
at various sites, including the restoration of natural resources located at
these sites and damages for loss of use and non-use values. ARCO is
currently participating in environmental assessments and cleanups
under these laws at
-11-
<PAGE>
NOTE L. Other Commitments and Contingencies (Continued).
federal Superfund and state-managed sites, as well as other clean-up sites,
including service stations, refineries, terminals, chemical facilities,
third-party landfills, former nuclear processing facilities, and sites
associated with discontinued operations. ARCO may in the future be
involved in additional environmental assessments and cleanups, including
the restoration of natural resources and damages for loss of use and non-
use values. The amount of such future costs will depend on such factors as
the unknown nature and extent of contamination at many sites, the unknown
timing, extent and method of the remedial actions which may be required and
the determination of ARCO's liability in proportion to other responsible
parties.
ARCO continues to estimate the amount of these costs in periodically
establishing reserves based on progress made in determining the magnitude
of remediation costs, experience gained from sites on which remediation has
been completed, the timing and extent of remedial actions required by the
applicable governmental authorities and an evaluation of the amount of
ARCO's liability considered in light of the liability and financial
wherewithal of the other responsible parties. At June 30, 1994, the
reserve balance is $637 million. As the scope of ARCO's obligations
becomes more clearly defined, there may be changes in these estimated
costs, which might result in future charges against ARCO's earnings.
ARCO's reserve covers federal Superfund and state-managed sites as
well as other clean-up sites, including service stations, refineries,
terminals, chemical facilities, third-party landfills, former nuclear
processing facilities and sites associated with discontinued operations.
ARCO has been named a potentially responsible party (PRP) for 123 sites.
The number of PRP sites in and of itself does not represent a relevant
measure of liability, because the nature and extent of environmental
concerns varies from site to site and ARCO's share of responsibility varies
from sole responsibility to very little responsibility. ARCO reviews all
of the PRP sites, along with other sites as to which no claims have been
asserted, in estimating the amount of the reserve. ARCO's future costs at
these sites could exceed the reserve by as much as $1 billion.
Approximately half of the reserve related to sites associated with
ARCO's discontinued operations, primarily mining activities in the states
of Montana, Utah and New Mexico. Another significant component related to
currently and formerly owned chemical, nuclear processing, and refining and
marketing facilities, and other sites which received wastes from these
facilities. The remainder related to other sites with reserves ranging
from $1 million to $10 million per site. No one site represents more than
15 percent of the total reserve. Substantially all amounts accrued in the
reserve are expected to be paid out over the next five to six years.
Claims for recovery of remediation costs already incurred and to be
incurred in the future have been filed against various insurance companies
and other third parties. None of these claims has been resolved. Due to
the uncertainty as to ultimate recovery from these parties, ARCO has
neither recorded any asset nor reduced any liability in anticipation of
such recovery.
Environmental loss contingencies also include claims for personal
injuries allegedly caused by exposure to toxic materials manufactured or
used by ARCO. Although these contingencies could result in significant
expenses or judgments that, if aggregated and assumed to occur within a
single fiscal period, would be material to ARCO's results of operations,
the likelihood of such occurrence is considered remote. On the basis of
management's best assessment of the ultimate amount and timing of
these events, such
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<PAGE>
NOTE L. Other Commitments and Contingencies (Continued).
expenses or judgments are not expected to have a material adverse effect on
ARCO's consolidated financial statements.
The operations and consolidated financial position of ARCO continue to
be affected from time to time in varying degrees by domestic and foreign
political developments as well as legislation, regulations and litigation
pertaining to restrictions on production, imports and exports, tax
increases, environmental regulations, cancellation of contract rights and
expropriation of property. Both the likelihood of such occurrences and
their overall effect on ARCO vary greatly and are not predictable.
These uncertainties are part of a number of items that ARCO has taken
and will continue to take into account in periodically establishing
reserves.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Second Quarter 1994 vs. Second Quarter 1993
Net income for the second quarter of 1994 was $24 million, or $0.14
per share, compared to $271 million, or $1.67 per share for the second
quarter of 1993. The 1994 second quarter results included net charges of
$154 million after tax. Included in those net charges were unusual items
of $249 million before tax, $153 million after tax, related to the
restructure and personnel reductions announced by the Company. The 1993
second quarter results included a net benefit of $48 million after tax.
In addition, the earnings decline in the second quarter of 1994 also
resulted from lower crude oil prices and margins on refined products,
partially offset by higher natural gas and petrochemical volumes, higher
petrochemical margins and lower exploration costs.
Sales and other operating revenues were $4,174 million in the second
quarter of 1994, compared to $4,670 million in the second quarter of 1993.
The decrease in revenues primarily resulted from the sale of ARCO's
Brazilian marketing operations in December 1993. Lower crude oil and
refined product prices were partially offset by increased natural gas
marketing activity.
Other revenues were $83 million in the second quarter of 1994,
compared to $193 million for the same period in 1993. Other revenues for
the second quarter of 1993 included before-tax gains of approximately $117
million from the sale of Lower 48 oil and gas properties.
Trade purchases decreased to $1,558 million in the second quarter of
1994, compared to $1,808 million in the second quarter of 1993. Trade
purchases were lower in 1994 primarily as a result of the sale of ARCO's
Brazilian marketing operations, partially offset by increased natural gas
marketing activity.
Taxes other than excise and income taxes decreased to $184 million in
the second quarter of 1994, compared to $301 million in the second quarter
of 1993. The decline primarily reflected the absence of value added taxes
associated with the Brazilian marketing operations. Production taxes were
also lower as a result of lower crude oil prices in the second quarter of
1994.
Excise taxes increased to $382 million in the second quarter of 1994,
compared to $336 million in the same period last year. The change
primarily resulted from the fourth quarter 1993 increase in the federal
excise tax rate.
After-tax earnings for worldwide oil and gas operations were $81
million in the second quarter of 1994, compared to $233 million in the
second quarter of 1993. Included in the second quarter 1994 results was a
net charge of $38 million related primarily to personnel reductions in
Alaska, partially offset by a tax benefit associated with international
operations. The second quarter 1993 results included after-tax gains of
$73 million from Lower 48 property sales. The earnings decline in the
second quarter of 1994 also resulted from higher foreign natural gas
volumes and lower exploration and operating costs being more than offset by
the decline in crude oil prices. The decrease in operating costs are the
result of the Company's Lower 48 restructuring and personnel reductions in
1993.
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<PAGE>
Worldwide exploration expenses were $91 million for the second quarter
of 1994, compared to $148 million in the same period in 1993. The decrease
primarily reflected lower dryhole costs internationally and in Alaska.
ARCO's average domestic crude oil price was $10.30 per barrel in the
second quarter of 1994, compared to $13.43 per barrel in the second quarter
of 1993. ARCO's average domestic natural gas price was $1.73 per thousand
cubic feet in the second quarter of 1994, compared to $2.07 per thousand
cubic feet in the same period last year.
Worldwide crude oil and natural gas liquids production averaged
655,500 barrels per day during the second quarter of 1994 versus 667,100
barrels per day during the same period last year. Production increases
internationally and in Alaska were more than offset by a decline in Lower
48 production which resulted from both the impact of producing property
sales in 1993 and natural field declines.
Domestic natural gas production was 969 million cubic feet per day in
the second quarter of 1994, compared to 952 million cubic feet per day in
the second quarter of 1993. New production from the Mustang Island field
in the Gulf of Mexico and improved field performance offset the impact of
producing property sales and natural field declines.
ARCO's foreign natural gas production was 527 million cubic feet per
day in the 1994 second quarter, an increase from 263 million cubic feet per
day in the same period last year, primarily as a result of new production
from natural gas fields in Indonesia and the United Kingdom North Sea.
After-tax earnings from ARCO's coal operations were $12 million for
the second quarter of 1994, compared to $26 million for the same 1993
quarter. The decrease was caused by the expiration of higher priced
contracts in the U.S., lower export prices from Australia and an
unfavorable foreign exchange rate. A favorable legal settlement related to
a customer sales contract was partially offset by a charge of $3 million
for U.S. staff reductions.
Second quarter 1994 after-tax earnings from refining and marketing
operations were $16 million, including a $28 million after-tax charge for
restructuring, compared to $79 million in the second quarter of 1993. The
decrease in earnings resulted from lower West Coast margins for refined
products. The lower margins resulted from increases in refined product
prices lagging behind increases in crude oil prices.
Transportation operations contributed after-tax earnings of $25
million in the second quarter of 1994, compared to $50 million in the same
period last year. The transportation results included $26 million after
tax for restructuring charges.
The intermediate chemicals and specialty products segment, reflecting
ARCO's 83.3 percent interest in ARCO Chemical Company, had after-tax
earnings of $68 million in the second quarter of 1994, compared to $55
million in the same period last year. The 1994 results were impacted by
higher propylene oxide and styrene monomer volumes and margins, which
reflected a stronger U.S. economy and increased export sales.
ARCO earned $16 million after tax from its 49.9 percent equity
interest in Lyondell Petrochemical Company (Lyondell) in the second quarter
of 1994. This compared to a loss of $5 million in the second quarter of
1993. Lyondell's performance improved in the second quarter of 1994
primarily as a result of higher margins for petrochemicals. Lyondell's
results in the second quarter of 1993 were reduced by approximately $4
million of charges net to ARCO, primarily for cancellation of a capital
project.
-15-
<PAGE>
The $154 million in net charges in the 1994 second quarter also
included after-tax charges of $32 million for personnel reductions at the
Company's corporate headquarters, $14 million to reimburse money market
losses in certain employee benefit plans and $13 million for future
environmental remediation costs. The 1993 second quarter earnings included
a $25 million after-tax charge for future environmental remediation costs.
The Company recorded a net tax benefit for second quarter 1994 as a
result of the recognition of a foreign deferred tax asset associated with
international oil and gas operations.
Six Month Period Ended June 30, 1994 vs. Same Six Month Period 1993
Net income for the first six months of 1994 was $173 million, or $1.06
per share, compared to $531 million, or $3.27 per share for the first six
months of 1993. For the first six months of 1994, higher foreign natural
gas and chemical products volumes and lower exploration costs were more
than offset by lower crude oil prices and volumes and lower refined product
margins.
The average domestic price for crude oil for the first half of 1994
was $9.02 per barrel versus $12.86 per barrel in the first half of 1993.
Domestic natural gas prices were $1.90 per thousand cubic feet in the first
half of 1994, compared to $1.89 per thousand cubic feet in the first half
of 1993.
Sales and other operating revenues, trade purchases and taxes other
than excise and income taxes decreased in the first six months of 1994,
compared to the same period in 1993, primarily as a result of the sale of
ARCO's Brazilian marketing operations.
In addition, sales and other operating revenues decreased as a result
of lower crude oil and refined product prices, partially offset by higher
natural gas marketing activities. Taxes other than excise and income taxes
also decreased in the first half of 1994 as a result of lower production
taxes which reflected the lower crude oil prices.
Excise taxes increased to $742 million in the first half of 1994,
compared to $626 million in the same period last year. The change
primarily resulted from the fourth quarter 1993 increase in the federal
excise tax rate.
The Company's effective tax rate for the first six months of 1994 was
29.1 percent, compared to 39.3 percent for the same period in 1993. The
decrease in the 1994 effective tax rate is primarily the result of the
Company recognizing a foreign deferred tax asset.
Financial Position and Liquidity
Cash flows from operating activities totaled $798 million for the
first six months of 1994. The net cash used by investing activities in the
first half of 1994 was $575 million and included expenditures for additions
to fixed assets of $846 million offset by proceeds from asset sales of $46
million and net cash provided by short-term investments of $94 million.
The net cash used by financing activities in the first six months of
1994 was $679 million and included repayments of long-term debt of $445
million, dividend payments of $442 million and net repayments of short-term
debt of $105 million, offset by proceeds from issuance of long-term debt of
$276 million.
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<PAGE>
Cash and cash equivalents and short-term investments totaled $3.2
billion, and short-term borrowings were $1.4 billion at June 30, 1994.
On July 5, 1994 Vastar Resources, Inc. (Vastar) consummated the sale
of 17,250,000 shares of its common stock to the public at an initial
offering price of $28 per share. Proceeds to Vastar, net of the
underwriting discount and expenses, were approximately $453 million. Prior
to the offering, Vastar was a wholly owned subsidiary of ARCO. Currently,
ARCO owns 80,000,001 shares of Vastar's common stock, which represents 82.3
percent of Vastar's outstanding common stock. ARCO will realize an after-
tax gain of approximately $270 million in the third quarter of 1994 as a
result of the initial public offering by Vastar.
On August 8, 1994, ARCO expects to issue 39,921,400 9% Exchangeable
Notes due September 15, 1997 at a price of $24.75 per note. The aggregate
principal amount of the Notes will be approximately $988 million. The
proceeds to ARCO, net of the underwriting discount of $0.75 per note, will
be approximately $958 million. When the Notes mature, holders will receive
in exchange for the principal amount of the Notes, shares of Lyondell
common stock, or at ARCO's option, cash with an equal value. The number of
shares or the amount of such cash will be determined using a formula based
on the price of Lyondell common stock at the maturity of the Notes.
It is expected that future cash requirements for capital expenditures,
dividends, debt repayments and any treasury stock purchases will come from
cash generated from operating activities, future financings and existing
cash balances.
____________________
Management cautions against projecting any future results based on
present earnings levels because of economic uncertainties, the extent and
form of existing or future governmental regulations and other possible
actions by governments.
The foregoing financial information is unaudited and has been prepared
from the books and records of the Company. Certain previously reported
amounts have been restated to conform to classifications adopted in 1994.
In the opinion of the Company, the financial information reflects all
adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position and results of operations in
conformity with generally accepted accounting principles.
-17-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
1. Reference is made to the disclosure on page 18 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1993
(hereinafter, the "1993 Form 10-K Report") and on page 16 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 (the
"First Quarter 10-Q Report") regarding the Hanford litigation. On May 11,
1994, a new action entitled Barbara Thomson, et al. v. E.I. DuPont de
Nemours and Company, et al. (Case No. 94 2 01000 9) was filed in the
Superior Court of the State of Washington for the county of Yakima. The
complaint, which names ARCO and ARHCO as defendants, was filed on behalf of
a purported class that includes all people who have lived, resided, or
worked, at any time from 1942 through the present, within the Washington
and Oregon counties surrounding the Reservation. This action seeks medical
monitoring and surveillance services for the plaintiffs and the members of
the class to detect diseases allegedly caused by the release of radioactive
and non-radioactive waste from the Reservation. Defendants plan to handle
this claim in a similar manner to claims previously filed in state court by
removing the case to federal court and seeking to have it consolidated with
the In Re Hanford Nuclear Reservation litigation. With respect to all of
these actions, the Company and ARHCO believe that, should either or both
ultimately be held liable, they will be entitled to indemnification by the
federal government as provided under the Price-Anderson Act, and pursuant
to the terms of the contract between ARHCO and the Atomic Energy
Commission. Without confirming or denying the government's indemnity
obligations, the DOE has instructed the defendants to proceed with the good
faith defense of the lawsuits.
2. Reference is made to the disclosure on page 20 of the Company's
1993 Form 10-K Report regarding the suit brought by the City of New York
and the New York City Housing Authority against former lead pigment
manufacturers. On June 2, 1994, the trial court entered an order dismissing
plaintiffs' claims for restitution and indemnification, from which plaintiffs
noticed an appeal on June 20, 1994.
3. Reference is made to the disclosure on page 21 of the Company's
1993 Form 10-K Report regarding ARCO Chemical Company's Monaca, Pennsylvania
(Beaver Valley) plant. ARCO Chemical Company has entered into a Consent
Order and Agreement (the "Consent Agreement") with the Pennsylvania
Department of Environmental Resources ("PADER") pursuant to which ARCO
Chemical Company and PADER have agreed upon a work plan for testing and
remedial process design with regard to the conditions at the plant. Under
the terms of the Consent Agreement, ARCO Chemical Company will pay a civil
penalty of $300,000 (representing an amount previously agreed upon by ARCO
Chemical Company with PADER in 1988 and previously disclosed) and an
additional penalty of $63,000 each year from 1994 until the commencement of
active remediation at the plant, after which the amount of such annual
penalty shall be reduced based on the extent of remediation commenced at
the plant.
4. In January 1994, the California Air Resources Board ("CARB")
requested information regarding any failure by a terminal, within the
period starting January 1, 1992 and ending December 31, 1993, to meet
CARB's minimum additive injection standards for gasoline. CARB's
regulations require monthly records at each terminal of the volume
of each grade of gasoline, the volume of additive injected, and the minimum
volume of additive required, as a way of monitoring compliance. Although
some terminals' monthly records showed less than the minimum amount of
additive injected during one month in 1992, the other terminals' monthly
records demonstrated compliance with CARB's minimum additive injection
rules. Nonetheless, CARB has obtained the daily additive injection records
from each terminal. These daily records were not maintained in a manner
designed to measure compliance, because CARB's regulations required
monthly, not daily, record keeping. If
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<PAGE>
Item 1. Legal Proceedings (Continued).
CARB is able to use these daily records to measure compliance for the last
two years, ARCO believes that CARB may impose penalties for failure to
comply; in such event, ARCO would negotiate with CARB the amount of such
penalty.
5. In July 1994, Atlantic Richfield and Snyder Oil Company signed
a consent decree in settlement of the claims made by the Environmental
Protection Agency alleging (a) that Atlantic Richfield constructed
and operated certain pieces of equipment at the Riverton Dome Gas Plant
without the appropriate permit under the Clean Air Act and that (b) Snyder,
who purchased the plant from ARCO, continued to operate the plant without
the requisite permit. The decree has been forwarded to the U.S. Department
of Justice; it is expected that final settlement will occur sometime
before the end of the year. The consent decree will impose a fine, but
will not impose any affirmative injunctive relief on Atlantic Richfield.
6. Reference is made to the Company's 1993 Form 10-K Report for
information on other legal proceedings matters reported herein.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3 Restated Certificate of Incorporation of Atlantic Richfield
Company as of June 27, 1994.
12 Statement of computation of ratio of earnings to fixed
charges.
(b) Reports on Form 8-K.
The following Current Report on Form 8-K was filed during
the quarter ended June 30, 1994 and through the date hereof.
Date of Report Item No. Financial Statements
-------------- -------- --------------------
July 27, 1994 5 None
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ATLANTIC RICHFIELD COMPANY
(Registrant)
Dated: August 5, 1994 /s/ ALLAN L. COMSTOCK
--------------------------
(signature)
Allan L. Comstock
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
-20-
RESTATED CERTIFICATE OF INCORPORATION
OF
ATLANTIC RICHFIELD COMPANY
(Originally incorporated on March 14, 1985
under the name Atlantic Richfield Delaware Corporation)
ARTICLE I
Name and Term of Existence
A. The name of the Company is Atlantic Richfield Company.
B. The term of existence of the Company is perpetual.
ARTICLE II
Address and Registered Agent
The location and post office address of the Company's
registered office in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle 19801. The name of the registered
agent at such address is The Corporation Trust Company.
ARTICLE III
Description of Business
The nature of the business or purposes to be conducted
or promoted is to engage in any lawful act or activity for
which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
Capital Stock
A. Authorized Shares
The aggregate number of shares of Capital Stock which
the Company shall have authority to issue is six hundred
seventy-five million, nine hundred eleven thousand, eight
hundred sixty-five (675,911,865) shares ("Capital Stock"),
to be divided into four classes consisting of:
1. Seventy-five million (75,000,000) shares of
Preferred Stock of the par value of One Cent ($.01) each
(hereinafter sometimes called "Preferred Stock"),
2. Seventy-eight thousand, eighty-nine (78,089) shares
of $3.00 Preference Stock of the par value of One Dollar
($1.00) each (hereinafter sometimes called "$3.00 Preference
Stock"),
- 1 -
<PAGE>
3. Eight hundred thirty-three thousand, seven hundred
seventy-six (833,776) shares of $2.80 Cumulative Convertible
Preference Stock of the par value of One Dollar ($1.00) each
(hereinafter sometimes called "$2.80 Preference Stock"), and
4. Six hundred million (600,000,000) shares of Common
Stock of the par value of Two Dollars Fifty Cents ($2.50)
each (hereinafter sometimes called "Common Stock").
The following is a description of each class of capital
stock and a statement of the preferences, qualifications,
privileges, limitations, restrictions, and other special or
relative rights granted to or imposed upon the shares of
each class:
B. Preferred Stock
The Board of Directors is authorized, subject to any
limitations prescribed by law, to provide for the issuance
of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix a
designation, powers, preferences, and rights of the shares
of each such series and any qualifications, limitations or
restrictions thereof; provided, however, that the Preferred
Stock shall be subordinate as to dividends and rights upon
liquidation, dissolution and winding up to the $3.00
Preference Stock and the $2.80 Preference Stock. The number
of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of stock
of the Company entitled to vote thereon having a majority of
the votes entitled to be cast, without a vote of the holders
of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the
certificate or certificates establishing the series of
Preferred Stock.
C. Preference Stock
1. Issuance of Preference Stock.
The Company is authorized to issue the following two
classes of Preference Stock:
$3.00 Preference Stock
$2.80 Preference Stock
A. The shares of $3.00 Preference Stock may be divided
into and issued in series. Each series shall be so
designated as to distinguish the shares thereof from the
shares of all other series. All shares of $3.00 Preference
Stock shall be identical except as to the relative rights
and preferences, set forth in this Certificate. There may be
variations between different series, namely, the amount
payable upon shares in the event of liquidation of the
Company and the price or prices at which shares may be
redeemed.
- 2 -
<PAGE>
The Board of Directors is hereby expressly vested with
authority, by resolution, to divide the $3.00 Preference
Stock into series and, within the limitations prescribed by
law and by this Certificate, to fix and determine at the
time of the establishment of any series the relative rights
and preferences of any series so established.
The series of the authorized shares of $3.00 Preference
Stock of the Company designated $3.00 Cumulative Convertible
Preference Stock shall consist of seventy-eight thousand,
eighty-nine (78,089) shares; and the shares of said series
shall have, in addition to the rights and preferences
granted by law and by the other provisions of this
Certificate, the following relative rights and preferences:
(i) The amount which, in the event of voluntary
or involuntary liquidation of the Company, shall be
payable for shares of said series prior to any payment
to the holders of Common Stock or of any other class of
stock of the Company ranking as to assets subordinate
to the $3.00 Preference Stock shall be Eighty Dollars
($80.00) for each share of said series (in addition to
accrued and unpaid dividends).
(ii) The price for each share at which shares may
be redeemed at the option of the Company is Eighty-Two
Dollars ($82.00).
B. The authorized shares of $2.80 Preference Stock
shall have, in addition to the rights and preferences
granted by law and by the other provisions of this
Certificate, the following rights and preferences:
(i) The amount which, in the event of voluntary
or involuntary liquidation of the Company, shall be
payable for said shares prior to any payment to the
holders of Common Stock or any other class of stock of
the Company ranking as to assets subordinate to the
$2.80 Preference Stock shall be Seventy Dollars
($70.00) for each share (in addition to accrued and
unpaid dividends).
(ii) The price for each share at which shares may
be redeemed at the option of the Company is Seventy
Dollars ($70.00).
2. Dividends.
The holders of shares of Preference Stock shall be
entitled to receive, when and as declared by the Board of
Directors, dividends at the rate of Three Dollars ($3.00)
per share per year for $3.00 Preference Stock and at the
rate of Two Dollars and Eighty Cents ($2.80) per share per
year for $2.80 Preference Stock, and no more, payable
quarterly on the twentieth day of each March, June,
September and December. Such dividends shall be cumulative
from the quarterly dividend payment date next preceding the
date of issue of each share, unless the date of issue is a
quarterly dividend payment date or a date between the record
date for the determination of holders of Preference Stock
entitled to receive a quarterly dividend and the date of
payment of such quarterly dividend, in either of which
- 3 -
<PAGE>
events such dividends shall be cumulative from such
quarterly dividend payment date. In case dividends for any
quarterly dividend period are not paid in full, all shares
of Preference Stock and all shares of any class or classes
of stock of the Company ranking as to dividends on a parity
with the Preference Stock shall participate ratably in the
payment of dividends for such period in proportion to the
full amounts of dividends for such period to which they are
respectively entitled. No dividends shall be paid or set
apart for payment or declared on the Common Stock or on any
other class of stock of the Company ranking as to dividends
subordinate to the Preference Stock (other than dividends
payable in Common Stock or in any other class of stock of
the Company ranking as to dividends and assets subordinate
to the Preference Stock or dividends paid or set apart for
payment or declared in order to comply with law or with a
governmental or court order or decree), and no payment shall
be made to any sinking fund for any class of stock of the
Company ranking as to dividends or assets on a parity with
or subordinate to the Preference Stock, until dividends
payable for all past quarterly dividend periods on all
outstanding shares of Preference Stock have been paid, or
declared and set apart for payment, in full.
3. Liquidation of the Company.
In the event of voluntary or involuntary liquidation of
the Company, the holders of shares of Preference Stock shall
be entitled to receive from the assets of the Company
(whether capital or surplus), prior to any payment to the
holders of Common Stock or of any other class of stock of
the Company ranking as to assets subordinate to the
Preference Stock, the amount per share which shall have been
fixed and determined with respect to such Preference Stock
plus an amount equal to the accrued and unpaid dividends
thereon computed to the date on which payment thereof is
made available, whether or not earned or declared. After
such payments to the holders of shares of Preference Stock,
any balance then remaining shall be paid to the holders of
the Common Stock or of any other class of stock of the
Company ranking as to assets subordinate to the Preference
Stock, as they may be entitled. If, upon liquidation of the
Company, its assets are not sufficient to pay in full the
amounts so payable to the holders of shares of Preference
Stock, all shares of Preference Stock shall participate
ratably in the distribution of assets in proportion to the
full amounts to which they are respectively entitled.
4. Rank.
The Preferred Stock shall be subordinate with respect
to dividends and rights upon liquidation, dissolution or
winding up to the Preference Stock.
5. Conversion Provisions.
(a) Shares of Preference Stock, may, at the option of
the holder, be converted into Common Stock of the Company
(as such shares may be constituted on the conversion date)
at the rate of six and eight-tenths (6.8) shares of Common
Stock for each share of $3.00 Preference Stock, and at the
rate of two and four-tenths (2.4) shares of Common Stock for
each share of $2.80 Preference Stock, subject to adjustment
as provided herein,
- 4 -
<PAGE>
provided that, as to any shares of Preference Stock which
shall have been called for redemption, the conversion right
shall terminate at the close of business on the fifth full
business day prior to the date fixed for redemption or at
such later time as may be fixed by the Board of Directors
of the Company.
(b) The holder of a share or shares of Preference
Stock may exercise the conversion right as to any share or
shares thereof by delivering to the Company during regular
business hours, at the office of any transfer agent of the
Company for the Preference Stock or at such other place as
may be designated by the Company, the certificate or
certificates for the shares to be converted, duly endorsed
or assigned in blank or to the Company (if required by it),
accompanied by written notice stating that the holder elects
to convert such shares and stating the name or names (with
address or addresses) in which the certificate or
certificates for Common Stock are to be issued. Conversion
shall be deemed to have been effected on the date when such
delivery is made and such date is referred to herein as the
"conversion date." As promptly as practicable thereafter the
Company shall issue and deliver to or upon the written order
of such holder, at such office or other place designated by
the Company, a certificate or certificates for the number of
full shares of Common Stock to which the stockholder is
entitled and a check, cash, scrip certificate or other
adjustment in respect of any fraction of a share as provided
in subparagraph 5(d) below. The person in whose name the
certificate or certificates for Common Stock are to be
issued shall be deemed to have become a stockholder of
record on the conversion date unless the transfer books of
the Company are closed on that date, in which event the
stockholder shall be deemed to have become a stockholder of
record on the next succeeding date on which the transfer
books are open, but the conversion rate shall be that in
effect on the conversion date.
(c) No payment or adjustment shall be made for
dividends accrued on any shares of Preference Stock
converted or for dividends on any shares of Common Stock
issuable on conversion, but until all dividends accrued and
unpaid on such Preference Stock up to the quarterly dividend
payment date next preceding the conversion date shall have
been paid to the holder of the shares of Preference Stock
converted or to his assigns, or declared and set apart for
such payment, in full, no dividends shall be paid or set
apart for payment or declared on the Common Stock or on any
other class of stock of the Company ranking as to dividends
subordinate to the Preference Stock (other than dividends
payable in Common Stock or in any other class of stock of
the Company ranking as to dividends and assets subordinate
to the Preference Stock or dividends paid or set apart for
payment or declared in order to comply with law or with a
governmental or court order or decree) and no payment shall
be made to any sinking fund for any class of stock of the
Company ranking as to dividends or assets on a parity with
or subordinate to the Preference Stock.
(d) The Company shall not be required to issue any
fraction of a share upon conversion of any share or shares
of Preference Stock. If more than one share of Preference
Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the
total number of shares of Preference Stock so surrendered. If
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any fractional interest in a share of Common Stock would be
deliverable upon conversion, the Company shall make an adjustment
therefor in cash unless its Board of Directors shall have
determined to adjust fractional interests by issuance of scrip
certificates or in some other manner. Adjustment in cash shall
be made on the basis of the current market value of one share of
Common Stock, which shall be taken to be the last reported sale
price of the Company's Common Stock on the New York Stock Exchange
on the last business day before the conversion date or, if there
was no reported sale on that day, the average of the closing
bid and asked quotations on that Exchange on that day or, if
the Common Stock was not then listed on that Exchange, the
average of the lowest bid and the highest asked quotations
in the over-the-counter market on that day.
(e) The issuance of Common Stock on conversion of
Preference Stock shall be without charge to the converting
holder of Preference Stock for any tax in respect of the
issuance thereof, but the Company shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares in any name
other than that of the holder of record on the books of the
Company of the shares of Preference Stock converted, and the
Company shall not be required to issue or deliver any
certificate for shares of Common Stock unless and until the
person requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been
paid.
(f) The conversion rates provided in subparagraph 5(a)
shall be subject to the following adjustments, which shall
be made to the nearest one-hundredth of a share of Common
Stock or, if none, to the next lower one-hundredth:
(i) If the Company shall pay to the holders of
its Common Stock a dividend in shares of Common Stock
or in securities convertible into Common Stock, the
conversion rate in effect immediately prior to the
record date fixed for the determination of the holders
of Common Stock entitled to such dividend shall be
proportionately increased, effective at the opening of
business on the next following full business day.
(ii) If the Company shall split the outstanding
shares of its Common Stock into a greater number of
shares or combine the outstanding shares into a smaller
number, the conversion rate in effect immediately prior
to such action shall be proportionately increased in
the case of a split or decreased in the case of a
combination, effective at the opening of business on
the full business day next following the day such
action becomes effective.
(iii) If the Company shall issue to the holders
of its Common Stock rights or warrants to subscribe for
or purchase shares of its Common Stock at a price less
than the Current Market Price (as defined below in this
subparagraph) of the Company's Common Stock at the
record date fixed for the determination of the holders
of Common Stock entitled to such rights or warrants,
the conversion rate in effect immediately prior to said
record date shall be increased, effective at the
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opening of business on the next following full business
day, to an amount determined by multiplying such
conversion rate by a fraction the numerator of which is
the number of shares of Common Stock of the Company
outstanding immediately prior to said record date plus
the number of additional shares of its Common Stock
offered for subscription or purchase and the
denominator of which is said number of shares
outstanding immediately prior to said record date plus
the number of shares of Common Stock of the Company
which the aggregate subscription or purchase price of
the total number of shares so offered would purchase at
the Current Market Price of the Company's Common Stock
at said record date. Notwithstanding the preceding
sentence, if the Established Market Price (as defined
below in this subparagraph) of the rights or warrants
in the case of a particular issue thereof is less than
Thirty-seven and One-half Cents ($0.375) per right or
warrant in the case of $3.00 Preference Stock or is
less than One Dollar ($1.00) per right or warrant in
the case of $2.80 Preference Stock, the increase in the
conversion rate shall be postponed and the amount of
such Established Market Price shall be carried forward
and applied as provided in subparagraph 5(f) (v). As
used in this subparagraph 5(f) (iii) the term "Current
Market Price" at said record date shall mean the
average of the daily last reported sale prices per
share of the Company's Common Stock on the New York
Stock Exchange during the twenty (20) consecutive full
business days commencing with the thirtieth (30th) full
business day before said record date, provided that if
there was no reported sale on any such day or days
there shall be substituted the average of the closing
bid and asked quotations on that Exchange on that day,
and provided further that if the Common Stock was not
listed on that Exchange on any such day or days there
shall be substituted the average of the lowest bid and
the highest asked quotations in the over-the-counter
market on that day. As used in this subparagraph 5(f)
(iii) the term "Established Market Price" of the rights
or warrants shall mean the average of the means between
the reported high and low sale prices per right or
warrant on the New York Stock Exchange during the first
three business days on which the rights or warrants are
traded on that Exchange, provided that if an over-the-
counter market for the rights or warrants is
established on any day before they are traded on that
Exchange there shall be substituted the mean between
the lowest bid and the highest asked quotations in the
over-the-counter market on that day.
(iv) If the Company shall distribute to the
holders of its Common Stock any evidences of its
indebtedness, or any rights or warrants to subscribe
for any security other than its Common Stock, or any
other assets (excluding dividends and distributions in
cash to the extent permitted by law), the conversion
rate in effect immediately prior to the record date
fixed for the determination of the holders of Common
Stock entitled to such distribution shall be increased,
effective at the opening of business on the next
following full business day, to an amount determined by
multiplying such conversion rate by a fraction the
numerator of which is the Current Market Price (as defined in
subparagraph 5(f) (iii), of the Company's Common Stock
at said record date and the denominator of which is
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such Current Market Price less the fair market
value (as determined by the Board of Directors, whose
determination, in the absence of fraud, shall be
conclusive) of the amount of evidences of indebtedness,
rights, warrants or other assets (excluding cash
dividends and distributions as aforesaid) so
distributed which is applicable to one share of Common
Stock. Notwithstanding the preceding sentence, if such
fair market value in the case of a particular
distribution is less than Thirty-seven and One-half
Cents ($0.375) in the case of $3.00 Preference Stock or
One Dollar ($1.00) in the case of $2.80 Preference
Stock, the increase in the conversion rate shall be
postponed and the amount of such fair market value
shall be carried forward and applied as provided in
subparagraph 5(f)(v).
(v) Whenever the amounts of Established Market
Price and the amounts of fair market value being
carried forward as provided in subparagraphs 5(f) (iii)
and (iv) plus any similar amount determined in
connection with a particular issue of rights or
warrants or a particular distribution aggregate Thirty-
seven and One-half Cents ($0.375) or more in the case
of $3.00 Preference Stock or One Dollar ($1.00) in the
case of $2.80 Preference Stock, the conversion rate in
effect immediately prior to the record date fixed for
the determination of the holders of Common Stock
entitled to such particular issue or distribution shall
be increased, effective at the opening of business on
the next following full business day, by the aggregate
of the increases in the conversion rate which were
postponed as provided in subparagraphs 5(f) (iii) and
(iv) plus the increase resulting from such particular
issue or distribution.
(vi) If the Company shall pay to the holders of
its Common Stock a dividend in shares of Common Stock
or if it shall split or combine the outstanding shares
of its Common Stock, the amount of Thirty-seven and One-
half Cents ($0.375) in the case of $3.00 Preference
Stock and One Dollar ($1.00) in the case of $2.80
Preference Stock referred to in subparagraphs 5(f)
(iii), (iv) and (v) (as theretofore decreased or
increased) and also all amounts of Established Market
Price and all amounts of fair market value then being
carried forward as provided in subparagraphs 5(f) (iii)
and (iv) (as theretofore decreased or increased) shall
forthwith be proportionately decreased in the case of a
stock dividend or split or increased in the case of a
combination, so as to appropriately reflect the same,
and all increases in the conversion rate then being
postponed as provided in subparagraphs 5(f) (iii) and
(iv) (as theretofore increased or decreased) shall
forthwith be proportionately increased in the case of a
stock dividend or split or decreased in the case of a
combination, so as to appropriately reflect the same.
No adjustment of the conversion rate provided in subparagraph
5(a) shall be made by reason of the issuance of Common Stock
for cash except as provided in subparagraph 5(f) (iii), or by
reason of the issuance of Common Stock for property or services.
Whenever the conversion rate is adjusted pursuant to this
subparagraph 5(f) the Company shall (i) promptly place on file at the
office of each of its transfer agents for Preference Stock a statement
signed by the Chairman of the Board, the President or a Vice President
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<PAGE>
of the Company and by its Treasurer or an Assistant Treasurer
or Secretary showing in detail the facts requiring such adjustment
and the conversion rate after such adjustment, and shall make
such statement available for inspection by shareholders of the
Company and (ii) cause a notice to be published at least once in
a newspaper printed in the English language and of general
circulation in the Borough of Manhattan, the City of New York,
New York, stating that such adjustment has been made and the
adjusted conversion rate.
(g) In case of any reclassification or change of the
outstanding shares of Common Stock of the Company (except a
split or combination of shares) or in case of any
consolidation or merger to which the Company is a party
(except a merger in which the Company is the surviving
corporation and which does not result in any
reclassification of or change in the outstanding Common
Stock of the Company except a split or combination of
shares) or in case of any sale or conveyance to another
corporation of all or substantially all of the property of
the Company, effective provision shall be made by the
Company or by the successor or purchasing corporation
(i) that the holder of each share of Preference
Stock then outstanding shall thereafter have the right
to convert such share into the kind and amount of stock
and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale
or conveyance by a holder of the number of shares of
Common Stock of the Company into which such share of
Preference Stock might have been converted immediately
prior thereto, and
(ii) that there shall be subsequent adjustments
of the conversion rate which shall be equivalent, as
nearly as practicable, to the adjustments provided for
in subparagraph 5(f) above.
The provisions of this subparagraph 5(g) shall
similarly apply to successive reclassifications, changes,
consolidations, mergers, sales or conveyances.
(h) Shares of Common Stock issued on conversion
of shares of Preference Stock shall be issued as fully
paid shares and shall be non-assessable by the Company.
The Company shall at all times reserve and keep
available, free from preemptive rights, for the purpose
of effecting the conversion of Preference Stock, such
number of its duly authorized shares of Common Stock as
shall be sufficient to effect the conversion of all
outstanding shares of Preference Stock.
(i) Shares of Preference Stock converted as
provided herein shall not be reissued.
6. Redemption and Acquisition.
The Company, at its option to be exercised by its Board
of Directors, may redeem the whole or any part of the
Preference Stock or of any class thereof or of any series
thereof at any time at the applicable price for each share
which shall have been fixed and
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<PAGE>
determined with respect thereto, plus an amount equal
to the accrued and unpaid dividends thereon computed
to the date fixed for redemption, whether or not
earned or declared (hereinafter collectively called
the "redemption price"). If at any time less than all
of the $3.00 Preference Stock then outstanding is to
be called for redemption, the Board may select one or
more series of $3.00 Preference Stock to be redeemed
and if less than all of the outstanding $3.00 Preference
Stock of any series is to be called for redemption, the shares
to be redeemed may be selected by lot or by such other equitable
method as the Board in its discretion may determine. If at
any time less than all of the $2.80 Preference Stock then
outstanding is to be called for redemption, the shares to be
redeemed may be selected by lot or by such other equitable
method as the Board in its discretion may determine. The
Board may determine that all shares of Preference Stock or
all shares of either class of Preference Stock or all shares
of any series of $3.00 Preference Stock shall be redeemed
pro rata. Notice of every redemption, stating the redemption
date, the redemption price, and the place of payment
thereof, and, if less than all of either class of the
Preference Stock then outstanding is called for redemption,
identifying the shares of such class of Preference Stock to
be redeemed, shall be published at least twice in a
newspaper printed in the English language and of general
circulation in the Borough of Manhattan, the City of New
York, New York, the first publication to be not less than
thirty (30) nor more than sixty (60) days prior to the date
fixed for redemption. Successive publications may be made in
the same or in a different newspaper or newspapers meeting
the foregoing requirements. Copies of such notice shall be
mailed at least thirty (30) days and not more than sixty
(60) days prior to the date fixed for redemption to the
holders of record of the shares of Preference Stock to be
redeemed at their addresses as the same shall appear on the
books of the Company, but failure to give such additional
notice by mail or any defect therein or failure of any
addressee to receive it shall not affect the validity of the
proceedings for redemption. The Company, upon publication of
the first notice of redemption as aforesaid or upon
irrevocably authorizing the bank or trust company
hereinafter mentioned to publish or to complete publication
of such notice as aforesaid, may deposit or cause to be
deposited in trust with a bank or trust company in the City
of New York, New York, an amount equal to the redemption
price of the shares to be redeemed, which amount shall be
payable to the holders of the shares to be redeemed upon
surrender of certificates therefor on or after the date
fixed for redemption or prior thereto if so directed by the
Board of Directors of the Company. Upon such deposit, or if
no such deposit is made then from and after the date fixed
for redemption unless the Company shall default in making
payment of the redemption price upon surrender of
certificates as aforesaid, the shares called for redemption
or a pro rata part of each share in cases of redemption pro
rata shall cease to be outstanding and the holders thereof
shall cease to be stockholders with respect to such shares
or pro rata parts and shall have no interest in or claim
against the Company with respect to such shares or pro rata
parts other than the right to receive the redemption price
from such bank or trust company or from the Company, as the
case may be, without interest thereon, upon surrender of
certificates as aforesaid; provided that conversion rights
of shares called for redemption shall terminate at the close
of business on the fifth full business day prior to the date
fixed for redemption or at such later time as may be fixed
by the Board of Directors of the Company. Any funds so
deposited which shall not be required for such
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<PAGE>
redemption because of the exercise of conversion rights subsequent
to the date of such deposit shall be returned to the Company.
In case any holder of shares of Preference Stock which have
been called for redemption shall not, within six (6) years
after the date of such deposit, have claimed the amount
deposited with respect to the redemption thereof, such bank
or trust company, upon demand, shall pay over to the Company
such unclaimed amount and shall thereupon be relieved of all
responsibility in respect thereof to such holder, and
thereafter such holder shall look only to the Company for
payment thereof. Any interest which may accrue on funds so
deposited shall be paid to the Company from time to time.
The Company shall, subject to applicable law, have the
right to acquire Preference Stock from time to time at such
price or prices as the Company may determine, provided that
unless dividends payable for all past quarterly dividend
periods on all outstanding shares of Preference Stock have
been paid, or declared and set apart for payment, in full,
the Company shall not acquire for value any shares of
Preference Stock except in accordance with an offer (which
may vary as to terms offered with respect to shares of
different series but not with respect to shares of the same
series) made in writing or by publication (as determined by
the Board of Directors) to all holders of record of shares
of Preference Stock.
Preference Stock redeemed by the Company shall not be
reissued and the appropriate officers of the Company shall
take appropriate action from time to time to certify
reductions in the number of shares of Preference Stock which
the Company is authorized to issue. Preference Stock
acquired otherwise than upon redemption or conversion shall
not be cancelled or retired except by action of the Board of
Directors and shall have the status of treasury stock which
may be reissued by the Board until cancelled and retired by
action of the Board.
7. Action by Company Requiring Approval of Preference Stock.
The Company shall not, without the affirmative vote at
a meeting of the holders of at least two-thirds of the then
outstanding $3.00 Preference Stock or of at least two-thirds
of the then outstanding $2.80 Preference Stock:
(a) change the preferences, qualifications,
privileges, limitations, restrictions, or other special
or relative rights granted to or imposed upon the
shares of such class of Preference Stock in any
material respect adverse to the holders thereof,
provided that if any such change will affect any
particular class or series of a class materially and
adversely as contrasted with the effect thereof upon
any other class or series of a class, no such change
may be made without, in addition, such vote of the
holders of at least two-thirds of the then outstanding
shares of the particular class or series of a class
which would be so affected; or
(b) create or increase the authorized number of
shares of any class of stock ranking as to dividends or
assets prior to the class of Preference Stock;
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<PAGE>
and the Company shall not, without the affirmative vote at a
meeting of the holders of at least a majority of the then
outstanding $3.00 Preference Stock of all series and of at
least a majority of the then outstanding $2.80 Preference
Stock;
(c) create any class of stock ranking as to
dividends or assets on a parity with the Preference
Stock or increase the authorized number of shares of
the Preference Stock or of any class of stock ranking
as to dividends or assets on a parity with it; or
(d) sell, lease or convey (which terms shall not
include a mortgage) all or substantially all of the
property or business of the Company; or
(e) become a party to a merger or consolidation
unless the surviving or resulting corporation will have
immediately after such merger or consolidation no stock
either authorized or outstanding (except such stock of
the Company as may have been authorized or outstanding
immediately before such merger or consolidation or such
stock of the surviving or resulting corporation as may
be issued upon conversion thereof or in exchange
therefor) ranking as to dividends or assets prior to or
on a parity with the Preference Stock or the stock of
the surviving or resulting corporation issued upon
conversion thereof or in exchange therefor.
8. Voting Rights.
(a) Each holder of record of $3.00 Preference Stock
shall have the right to eight votes for each share of $3.00
Preference Stock standing in his name on the books of the
Company. Each holder of record of $2.80 Preference Stock
shall have the right to two votes for each share of $2.80
Preference Stock standing in his name on the books of the
Company. In each election of directors in which holders of
Preference Stock are entitled to vote, every holder of
Preference Stock entitled to vote shall have the right to
multiply the number of votes to which he may be entitled by
the total number of directors to be elected in the same
election by the holders of the class or classes or series of
Preference Stock of which his shares are a part, and he may
cast the whole number of such votes for one candidate or he
may distribute them among any two or more candidates. If the
Company shall make a distribution to the holders of its
Common Stock in the form of a dividend in shares of Common
Stock, or split the Common Stock, the vote to which each
holder of record of Preference Stock shall be entitled
immediately prior to the record date fixed for the
determination of the holders of Common Stock entitled to
additional shares resulting from such dividend or split
shall be proportionately increased effective at the opening
of business on the next following full business day. Except
as required by law or as otherwise specifically provided in
this Article IV of this Certificate the holders of $3.00
Preference Stock, the holders of $2.80 Preference Stock and
the holders of Common Stock shall vote together as one
class.
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<PAGE>
(b) If the Company shall have failed to pay, or
declare and set apart for payment, dividends on all
outstanding shares of $3.00 Preference Stock in an amount
equal to six quarterly dividends at the rates payable upon
such shares, the number of directors of the Company shall be
increased by two at the first annual meeting of the
stockholders of the Company held thereafter, and at such
meeting and at each subsequent annual meeting until
dividends payable for all past quarterly dividend periods on
all outstanding shares of each series of $3.00 Preference
Stock shall have been paid, or declared and set apart for
payment, in full, the holders of shares of $3.00 Preference
Stock shall have the right, voting as a class, to elect such
two additional members of the Board of Directors to hold
office for a term of one year. Upon such payment, or such
declaration and setting apart for payment, in full, the
terms of the two additional directors so elected shall
forthwith terminate, and the number of directors of the
Company shall be reduced by two, and such voting right of
the holders of shares of $3.00 Preference Stock shall cease,
subject to increase in the number of directors as aforesaid
and to revesting of such voting right in the event of each
and every additional failure in the payment of dividends in
an amount equal to six quarterly dividends as aforesaid.
(c) If the Company shall have failed to pay, or
declare and set apart for payment, dividends on all
outstanding shares of $2.80 Preference Stock in an amount
equal to six quarterly dividends at the rate payable upon
such shares, the number of directors of the Company shall be
increased by two at the first annual meeting of the
stockholders of the Company held thereafter, and at such
meeting and at each subsequent annual meeting until
dividends payable for all past quarterly dividend periods on
all outstanding shares of $2.80 Preference Stock shall have
been paid, or declared and set apart for payment, in full,
the holders of shares of $2.80 Preference Stock shall have
the right, voting as a class, to elect such two additional
members of the Board of Directors to hold office for a term
of one year. Upon such payment, or such declaration and
setting apart for payment, in full, the terms of the two
additional directors so elected shall forthwith terminate,
and the number of directors of the Company shall be reduced
by two, and such voting right of the holders of shares of
$2.80 Preference Stock shall cease, subject to increase in
the number of directors as aforesaid and to revesting of
such voting right in the event of each and every additional
failure in the payment of dividends in an amount equal to
six quarterly dividends as aforesaid.
D. Common Stock
1. Each holder of record of Common Stock shall have
the right to one vote for each share of Common Stock
standing in his name on the books of the Company. Except as
required by law or as otherwise specifically provided in
this Article IV, the holders of $3.00 Preference Stock, the
holders of $2.80 Preference Stock and the holders of Common
Stock shall vote together as one class.
E. Preemptive Rights
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<PAGE>
1. Neither the holders of Preferred Stock, nor the
holders of $3.00 Preference Stock, nor the holders of $2.80
Preference Stock, nor the holders of Common Stock shall have
preemptive rights, and the Company shall have the right to
issue and to sell to any person or persons any shares of its
capital stock or any option rights or any securities having
conversion or option rights without first offering such
shares, rights or securities to any holders of the Preferred
Stock, the $3.00 Preference Stock, the $2.80 Preference
Stock or the Common Stock.
ARTICLE V
Annual and Special Meetings of Stockholders
A. Any action required or permitted to be taken by the
holders of the Capital Stock of the Company must be effected
at a duly called annual or special meeting of such holders
and may not be effected by any consent in writing by such
holders. Except as otherwise required by law and subject to
the rights of the holders of any class or series of stock
having a preference over the Common Stock, special meetings
of stockholders of the Company may be called only by the
Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors or by the Chairman
of the Board or by the President.
B. Notwithstanding anything contained in this
Certificate to the contrary, the affirmative vote of at
least 66-2/3% of all votes entitled to be cast by the
holders of Capital Stock entitled to vote generally in the
election of directors voting together as a single class
shall be required to amend or repeal this Article V or to
adopt any provision inconsistent herewith.
ARTICLE VI
Directors
A. Except as otherwise fixed by or pursuant to the
provisions of Article IV relating to the rights of the
holders of any class or series of stock having a preference
over the Common Stock, the number of directors of the
Company shall be fixed from time to time by or pursuant to
the By-Laws of the Company. Each director elected prior to
1995 shall hold office for the term of years for which that
director was elected, and each director elected after
January 1, 1995 shall hold office until the next annual
meeting of stockholders and until that director's successor
is elected and qualified or until that director's earlier
resignation or removal.
B. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock,
nominations for the election of directors may be made by the
Board of Directors or by any record owner of Capital Stock
of the Company entitled to vote in the election of directors
generally. However, any such stockholder may nominate one or
more persons for election as director at a meeting only if
written notice of such stockholder's intent to make such
nomination or nominations has been given, either
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<PAGE>
by personal delivery or by United States mail, postage prepaid,
to the Secretary of the Company not later than (i) with respect to
an election to be held at an annual meeting of stockholders,
one hundred twenty (120) days in advance of such meeting,
and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, the
close of business on the seventh day following the earlier
of (x) the date on which notice of such meeting is first
given to stockholders and (y) the date on which a public
announcement of such meeting is first made. Each such notice
shall include: (a) the name and address of each stockholder
of record who intends to appear in person or by proxy to
make the nomination and of the person or persons to be
nominated; (b) a description of all arrangements or
understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be
made by the stockholder; (c) such other information
regarding each nominee proposed by such stockholder as would
have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and (d) the consent of
each nominee to serve as a director of the Company if so
elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
C. Except as otherwise provided for, or fixed by, or
pursuant to the provisions of Article IV relating to the
rights of the holders of any class or series of stock having
a preference over the Common Stock, newly created
directorships resulting from any increase in the number of
directors or any vacancy on the Board of Directors resulting
from death, resignation, disqualification, removal or other
cause shall be filled solely by the affirmative vote of a
majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a
sole remaining director. Any director elected in accordance
with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in
which the new directorship was created or the vacancy
occurred and until such director's successor shall have been
elected and qualified. No decrease in the number of
directors constituting the Board of Directors shall shorten
the term of any incumbent director.
D. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock,
any one or more directors may be removed only for cause by
the stockholders as provided herein. At any annual meeting
of stockholders of the Company or at any special meeting of
stockholders of the Company, the notice of which shall state
that the removal of a director or directors is among the
purposes of the meeting, the holders of Capital Stock
entitled to vote thereon, present in person or by proxy, by
the affirmative vote of at least 66-2/3% of all votes
entitled to be cast by the holders of Capital Stock of the
Company entitled to vote generally in an election of
directors voting together as a single class, may remove such
director or directors for cause.
- 15 -
<PAGE>
E. The Board of Directors shall have the power to
adopt, amend and repeal By-Laws of the Company.
Notwithstanding anything in this Certificate or the By-Laws
of the Company to the contrary (and notwithstanding that a
lesser percentage may be specified by law or in the By-
Laws), the By-Laws shall not be amended or repealed by vote
of the stockholders of the Company and no provision
inconsistent therewith shall be adopted by vote of the
stockholders of the Company without the affirmative vote of
at least 66-2/3% of all votes entitled to be cast by the
holders of Capital Stock of the Company entitled to vote
generally in the election of directors voting together as a
single class.
F. Notwithstanding anything contained in this
Certificate to the contrary, the affirmative vote of at
least 66-2/3% of all votes entitled to be cast by the
holders of Capital Stock entitled to vote generally in the
election of directors, voting together as a single class,
shall be required to amend or repeal this Article VI or to
adopt any provision inconsistent herewith.
ARTICLE VII
Prohibition of "Greenmail"
A. Any purchase or other acquisition, directly or
indirectly, in one or more transactions, by the Company or
any Subsidiary (as hereinafter defined) of the Company of
any share of Voting Stock (as hereinafter defined) or any
Voting Stock Right (as hereinafter defined) known by the
Company to be beneficially owned by any Interested
Stockholder (as hereinafter defined) who has beneficially
owned such security or right for less than two years prior
to the date of such purchase shall, except as hereinafter
expressly provided, require the affirmative vote of at least
66-2/3% of all votes entitled to be cast by the holders of
the Voting Stock voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage
may be specified, by law or any agreement with any national
securities exchange, or otherwise, but no such affirmative
vote shall be required with respect to any purchase or other
acquisition by the Company or any of its Subsidiaries of
Voting Stock or Voting Stock Rights purchased at or below
Fair Market Value (as hereinafter defined) or made as part
of a tender or exchange offer made on the same terms to all
holders of such securities and complying with the applicable
requirements of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations thereunder or
in a Public Transaction (as hereinafter defined).
B. For the purposes of this Article VII:
1. An "Affiliate" of, or a person "Affiliated"
with, a specified person, is a person that directly, or
indirectly through one or more intermediaries,
controls, or is controlled by, or is under common
control with, the person specified.
2. The term "Associate" used to indicate a
relationship with any person, means (1) any corporation
or organization (other than the Company or a Subsidiary
of the Company) of which such person is an officer or
partner or is,
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<PAGE>
directly or indirectly, the beneficial
owner of 5% or more of any class of equity securities,
(2) any trust or other estate in which such person has
a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary
capacity, and (3) any relative or spouse of such
person, or any relative of such spouse, who has the
same home as such person.
3. A person shall be a "beneficial owner" of any
Voting Stock or Voting Stock Right:
(a) which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly; or
(b) which such person or any of its
Affiliates or Associates has (i) the right to
acquire (whether such right is exercisable
immediately or only after the passage of time),
pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (ii) any right to vote pursuant to
any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or
indirectly, by any other person with which such
person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or
disposing of any security of any class of the
Company or any of its Subsidiaries.
(d) For the purposes of determining whether
a person is an Interested Stockholder, the
relevant class of securities outstanding shall be
deemed to include all such securities of which
such person is deemed to be the "beneficial owner"
through application of this subparagraph 3, but
shall not include any other securities of such
class which may be issuable pursuant to any
agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or
options, or otherwise, but are not yet issued.
4. "Fair Market Value" means, for any share of
Voting Stock or any Voting Stock Right, the average of
the closing sale prices during the 90-day period
immediately preceding the repurchase of such Voting
Stock or Voting Stock Right, as the case may be, on the
Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such Voting Stock or Voting Stock Right,
as the case may be, is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such
Voting Stock or Voting Stock Right, as the case may be,
is not listed on such Exchange, on the principal United
States securities exchange registered under the
Exchange Act on which such Voting Stock or Voting Stock
Right, as the case may be, is listed, or if such Voting
Stock or Voting Stock Right, as the case may be, is not
listed on any such exchange, the average of the closing
bid quotations with
- 17 -
<PAGE>
respect to a share of such Voting Stock or Voting Stock
Right, as the case may be, during the 90-day period
immediately preceding the date in question on the
National Association of Securities Dealers, Inc.
Automated Quotations System or any system
then in use, or if no such quotations are available,
the Fair Market Value on the date in question of a
share of such Voting Stock or Voting Stock Right, as
the case may be, as determined by the Board of
Directors in good faith.
5. "Interested Stockholder" shall mean any person
(other than (i) the Company, (ii) any of its Subsidiaries,
(iii) any benefit plan or trust of or for the benefit
of the Company or any of its Subsidiaries, or (iv) any
trustee, agent or other representative of any of the
foregoing) who or which:
(a) is the beneficial owner, directly or
indirectly, of more than 3% of any class of Voting
Stock (or Voting Stock Rights with respect to more
than 3% of any such class); or
(b) is an Affiliate of the Company and at
any time within the two-year period immediately
prior to the date in question was the beneficial
owner, directly or indirectly, of more than 3% of
any class of Voting Stock (or Voting Stock Rights
with respect to more than 3% of any such class);
or
(c) is an assignee of or has otherwise
succeeded to any shares of any class of Voting
Stock (or Voting Stock Rights with respect to more
than 3% of any such class) which were at any time
within the two-year period immediately prior to
the date in question beneficially owned by an
Interested Stockholder, unless such assignment or
succession shall have occurred pursuant to any
Public Transaction or a series of transactions
including a Public Transaction.
6. A "person" shall mean any individual, firm,
corporation or other entity (including a "group" within
the meaning of Section 13(d) of the Exchange Act).
7. A "Public Transaction" shall mean any (i)
purchase of shares offered pursuant to an effective
registration statement under the Securities Act of 1933
or (ii) open market purchases of shares if, in either
such case, the price and other terms of sale are not
negotiated by the purchaser and seller of the
beneficial interest in the shares.
8. The term "Subsidiary" shall mean any
corporation at least a majority of the outstanding
securities of which having ordinary voting power to
elect a majority of the board of directors of such
corporation (whether or not any other class of
securities has or might have voting power by reason of
the happening of a contingency) is at the time owned or
controlled directly or indirectly by the
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<PAGE>
Company or one or more Subsidiaries or by the Company
and one or more Subsidiaries.
9. The term "Voting Stock" shall mean stock of
all classes and series of the Company entitled to vote
generally in the election of directors.
10. The term "Voting Stock Right" shall mean any
security convertible into, and any warrant, option or
other right of any kind to acquire beneficial ownership
of, any Voting Stock, other than securities issued
pursuant to any of the Company's employee benefit
plans.
C. A majority of the Board of Directors shall have the
power and duty to determine for the purposes of this Article
VII, on the basis of information known to it after
reasonable inquiry, all facts necessary to determine
compliance with this Article VII, including without
limitation,
1. whether:
(a) a person is an Interested Stockholder;
(b) any Voting Stock and Voting Stock Right
is beneficially owned by any person;
(c) a person is an Affiliate or Associate of
another;
(d) a transaction is a Public Transaction; and
2. the Fair Market Value of any Voting Stock or
Voting Stock Right.
D. Notwithstanding anything contained in this
Certificate to the contrary, the affirmative vote of at
least 66-2/3% of all votes entitled to be cast by the
holders of Capital Stock entitled to vote generally in the
election of directors, voting together as a single class,
shall be required to amend or repeal this Article VII or to
adopt any provision inconsistent herewith.
ARTICLE VIII
Director's Liability
To the fullest extent permitted by the General
Corporation Law of Delaware as the same exists or may
hereafter be amended, a director of the Company shall not be
liable to the Company or its Stockholders for monetary
damages for breach of fiduciary duty as a director. If the
General Corporation Law of Delaware is amended after
approval by the Stockholders of this provision to authorize
corporate action further eliminating or limiting the
personal liability of directors, then the liability of a
director of the Company shall be
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<PAGE>
eliminated or limited to the fullest extent permitted by
the General Corporation Law of Delaware, as so amended.
Any repeal or modification of this Article VIII by the
Stockholders of the Company shall not adversely affect
any right or protection of a director of the Company
existing at the time of such repeal or modification or
with respect to events occurring prior to such time.
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation, which restates and integrates and does not
further amend the provisions of the Certificate of
Incorporation of this Company as heretofore amended and
supplemented, having been duly adopted in accordance with
Section 245 of the General Corporation Law of Delaware, has
been accepted by its President and attested by its Secretary
on this 27th day of June, 1994.
Atlantic Richfield Company
/s/ MIKE R. BOWLIN
By ______________________
Mike R. Bowlin
President
Attest:
/s/HOWARD L. EDWARDS
By__________________________
Howard L. Edwards
Corporate Secretary
- 20 -
EXHIBIT 12
ATLANTIC RICHFIELD COMPANY
<TABLE>
<CAPTION>
STATEMENT SETTING FORTH DETAIL OF COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGED-UNAUDITED
(Millions of Dollars)
Six months Year Ended December 31
ended --------------------------------------
June 30, 1994 1993 1992 1991 1990 1989
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes,
minority interest and
cumulative effect of
changes in accounting
principles (1) . . . . . . $275 $ 634 $1,907 $1,160 $2,820 $3,161
Less: Undistributed income
of less than 50% owned
subsidiaries (net of
losses) (2). . . . . . . . (14) - (12) (49) (84) (111)
--- ----- ----- ----- ----- -----
Fixed charges:
Interest expense charged
to income, interest of
appropriate unconsolidated
subsidiaries, and portion
of rentals representative
of interest (3). . . . . 405 784 825 952 900 849
Capitalized interest . . . . 17 56 115 79 79 95
--- ----- ----- ----- ----- -----
Total fixed charges. . . . . 422 840 940 1,031 979 944
--- ----- ----- ----- ----- -----
Earnings (1) + (2) + (3) . . $666 $1,418 $2,720 $2,063 $3,636 $3,899
=== ===== ===== ===== ===== =====
Ratio of earnings to
fixed charges . . . . . 1.58 1.69 2.89 2.00 3.71 4.13
==== ==== ==== ==== ==== ====
</TABLE>
