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 March 31, 1995
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 preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of Common Stock, $2.50 par value, outstanding as of
March 31, 1995: 160,799,714.
<PAGE>
PART I. FINANCIAL INFORMATION
ATLANTIC RICHFIELD COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended
March 31,
------------------
(Millions except per share amounts) 1995 1994
---- ----
<S> <C> <C>
Revenues
Sales and other operating revenues,
including excise taxes . . . . . . . . . . . . . . $4,244 $3,800
Income from equity investments. . . . . . . . . . . 74 17
Interest. . . . . . . . . . . . . . . . . . . . . . 59 39
Other revenues. . . . . . . . . . . . . . . . . . . 80 69
----- -----
4,457 3,925
----- -----
Expenses
Trade purchases . . . . . . . . . . . . . . . . . . 1,568 1,303
Operating expenses. . . . . . . . . . . . . . . . . 704 719
Selling, general and administrative expenses. . . . 402 395
Depreciation, depletion and amortization. . . . . . 412 421
Exploration expenses (including undeveloped
leasehold amortization). . . . . . . . . . . . . . 90 104
Excise taxes. . . . . . . . . . . . . . . . . . . . 350 360
Taxes other than excise and income taxes. . . . . . 194 184
Interest. . . . . . . . . . . . . . . . . . . . . . 203 184
----- -----
3,923 3,670
----- -----
Income before income taxes and minority interest. . . 534 255
Provision for taxes on income . . . . . . . . . . . . 185 97
Minority interest in earnings of subsidiaries . . . . 27 9
----- -----
Net Income. . . . . . . . . . . . . . . . . . . . . . $ 322 $ 149
===== =====
Earned per Share. . . . . . . . . . . . . . . . . . . $ 1.97 $ .92
===== =====
Cash Dividends Paid per Share of Common Stock . . . . $1.375 $1.375
===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
-1-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1995 1994
---- ----
(Millions)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 1,164 $ 1,394
Short-term investments. . . . . . . . . . . . 2,336 2,991
Accounts receivable . . . . . . . . . . . . . 1,457 1,446
Inventories . . . . . . . . . . . . . . . . . 794 797
Prepaid expenses and other current assets . . 304 185
------ ------
Total current assets. . . . . . . . . . . . . 6,055 6,813
------ ------
Investments and long-term receivables:
Investments accounted for on the equity method 400 348
Other investments and long-term receivables . 299 297
------ ------
699 645
------ ------
Fixed assets:
Property, plant and equipment . . . . . . . . 32,234 32,248
Less accumulated depreciation, depletion
and amortization . . . . . . . . . . . . . . 16,493 16,526
------ ------
15,741 15,722
------ ------
Deferred charges and other assets . . . . . . . 1,462 1,383
------ ------
Total assets. . . . . . . . . . . . . . . . . . $23,957 $24,563
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1995 1994
---- ----
(Millions)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . $ 1,180 $ 1,478
Accounts payable. . . . . . . . . . . . . . . . 904 986
Long-term debt due within one year. . . . . . . 564 630
Taxes payable, including excise taxes . . . . . 439 253
Accrued interest. . . . . . . . . . . . . . . . 151 183
Other . . . . . . . . . . . . . . . . . . . . . 852 958
------ ------
Total current liabilities . . . . . . . . . . . 4,090 4,488
------ ------
Long-term debt. . . . . . . . . . . . . . . . . . 6,969 7,198
Deferred income taxes . . . . . . . . . . . . . . 2,654 2,721
Other deferred liabilities and credits. . . . . . 3,388 3,471
Minority interest . . . . . . . . . . . . . . . . 426 407
Stockholders' equity:
Preference stocks . . . . . . . . . . . . . . . 1 1
Common stock. . . . . . . . . . . . . . . . . . 402 402
Capital in excess of par value of stock . . . . 647 647
Retained earnings . . . . . . . . . . . . . . . 5,442 5,342
Pension liability adjustment. . . . . . . . . . (20) (20)
Net unrealized loss on investments. . . . . . . (22) (38)
Foreign currency translation. . . . . . . . . . (11) (51)
Treasury stock, at cost . . . . . . . . . . . . (9) (5)
------ ------
Total stockholders' equity. . . . . . . . . . . 6,430 6,278
------ ------
Total liabilities and stockholders' equity. . . . $23,957 $24,563
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC RICHFIELD COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended
March 31,
------------------
1995 1994
---- ----
(Millions)
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 322 $ 149
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization . . . . . . 412 421
Dry hole expense and undeveloped leasehold
amortization . . . . . . . . . . . . . . . . . . . 36 50
Net gain on asset sales. . . . . . . . . . . . . . . (8) --
Income from equity investments . . . . . . . . . . . (74) (17)
Dividends from equity investments. . . . . . . . . . 21 14
Cash payments greater than noncash provisions. . . . (210) (13)
Deferred income taxes. . . . . . . . . . . . . . . . (4) (9)
Changes in accounts receivable, inventories
and accounts payable. . . . . . . . . . . . . . . . (89) (188)
Changes in other working capital accounts. . . . . . 16 (109)
Other. . . . . . . . . . . . . . . . . . . . . . . . (41) (23)
----- -----
Net cash provided by operating activities. . . . . 381 275
----- -----
Cash flows from investing activities:
Additions to fixed assets (including dry hole costs) (353) (392)
Net cash provided (used) by short-term investments . 677 (316)
Proceeds from asset sales. . . . . . . . . . . . . . 45 9
Payments received on notes from sale of assets . . . -- 37
Other. . . . . . . . . . . . . . . . . . . . . . . . (103) 28
----- -----
Net cash provided (used) by investing activities . 266 (634)
----- -----
Cash flows from financing activities:
Repayments of long-term debt . . . . . . . . . . . . (470) (97)
Proceeds from issuance of long-term debt . . . . . . 149 --
Net cash provided (used) by notes payable. . . . . . (324) 219
Dividends paid . . . . . . . . . . . . . . . . . . . (222) (221)
Treasury stock purchases . . . . . . . . . . . . . . (11) --
Treasury stock contributed to benefit plans. . . . . -- 29
Other. . . . . . . . . . . . . . . . . . . . . . . . (4) (7)
----- -----
Net cash used by financing activities. . . . . . . (882) (77)
----- -----
Effect of exchange rate changes on cash. . . . . . . . 5 5
----- -----
Net decrease in cash and cash equivalents. . . . . . . (230) (431)
Cash and cash equivalents at beginning of period . . . 1,394 1,458
----- -----
Cash and cash equivalents at end of period . . . . . . $1,164 $1,027
===== =====
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE A. Inventories.
Inventories at March 31, 1995 and December 31, 1994 comprised the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
(Millions)
<S> <C> <C>
Crude oil and petroleum products. . . . . . . . . $ 176 $ 172
Chemical products . . . . . . . . . . . . . . . . 354 351
Other products. . . . . . . . . . . . . . . . . . 35 46
Materials and supplies. . . . . . . . . . . . . . 229 228
---- ----
Total. . . . . . . . . . . . . . . . . . . . . $ 794 $ 797
==== ====
</TABLE>
NOTE B. Restructuring Program.
During 1994, ARCO announced a restructuring program under which
approximately 2,400 positions were eliminated. The program covered all
operating units, excluding Lower 48 oil and gas operations, along with the
corporate headquarters. The Company accrued $347 million before tax
consisting primarily of personnel costs (pension enhancements, severance
and other ancillary costs) associated with the terminations. Approximately
$155 million of the $347 million related to severance and other ancillary
costs will be paid from Company funds over the next two years.
In 1993, ARCO announced a reorganization of its Lower 48 oil and gas
operations under which approximately 1,300 positions were eliminated. The
Company accrued $65 million related to severance and other ancillary costs.
Through March 31, 1995, approximately 1,600 employees have been
terminated under the 1994 program, and approximately $78 million of
severance and ancillary benefits have been paid and charged against the
accrual. Nearly 1,300 employees have been terminated under the 1993
program, and approximately $53 million of severance and ancillary benefits
have been paid and charged against the accrual. Payments made do not
necessarily correlate to the number of terminations due to the ability of
terminees to defer receipt of certain payments.
NOTE C. Investments.
At March 31, 1995, investments were composed principally of U.S.
Treasury securities, corporate debt instruments, and municipal securities
and were principally included in cash equivalents or short-term investments
depending on their maturities, which generally ranged from one day to one
year. Investments in debt securities classified as held-to-maturity were
recorded at amortized cost while investments in debt securities classified
as available-for-sale are reported at fair value, with unrealized holding
gains and losses, net of tax, reported in a separate component of
stockholders' equity.
-5-
<PAGE>
NOTE C. Investments (Continued).
The following summarizes investments in securities, principally debt
securities, at March 31, 1995:
<TABLE>
<CAPTION>
Millions Available-for-Sale Held-to-Maturity
<S> <C> <C>
Aggregate fair value . . . . . . . . . $1,769 $ 910
Gross unrealized holding losses. . . . 35 -
Amortized cost . . . . . . . . . . . . 1,804 910
Gross purchases. . . . . . . . . . . . 698 1,293
Gross sales. . . . . . . . . . . . . . 854 -
Gross maturities . . . . . . . . . . . 36 1,624
</TABLE>
For the period ended March 31, 1995, gross realized gains and losses on
sales of securities were insignificant.
NOTE D. Capital Stock.
Detail of the Company's capital stock was as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
(Thousands)
<S> <C> <C>
$3.00 Cumulative convertible preference stock,
par $1 . . . . . . . . . . . . . . . . . . . . . . $ 72 $ 74
$2.80 Cumulative convertible preference stock,
par $1 . . . . . . . . . . . . . . . . . . . . . . 777 795
Common stock, par $2.50. . . . . . . . . . . . . . . 402,200 402,000
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . $403,049 $402,869
======= =======
</TABLE>
NOTE E. Capitalization of Interest.
Interest expense excludes capitalized interest of $12 million and $7
million for the three-month periods ended March 31, 1995 and 1994,
respectively.
-6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE F. Income Taxes.
Provision for taxes on income:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
---- ----
(Millions)
<S> <C> <C>
Federal:
Current . . . . . . . . . . . . . . . . . . . $ 140 $ 71
Deferred. . . . . . . . . . . . . . . . . . . (2) (15)
---- ----
138 56
---- ----
Foreign:
Current . . . . . . . . . . . . . . . . . . . 22 25
Deferred. . . . . . . . . . . . . . . . . . . 1 6
---- ----
23 31
---- ----
State:
Current . . . . . . . . . . . . . . . . . . . 27 10
Deferred. . . . . . . . . . . . . . . . . . . (3) --
---- ----
24 10
---- ----
Total. . . . . . . . . . . . . . . . . . . $ 185 $ 97
==== ====
</TABLE>
Reconciliation of provision for taxes on income with tax at federal
statutory rate:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
---------------- ----------------
Percent Percent
of of
Pretax Pretax
Amount Income Amount Income
------ ------- ------ -------
(Millions)
<S> <C> <C> <C> <C>
Income before income taxes and
minority interest . . . . . . . . . $ 534 100.0 $ 255 100.0
==== ===== ==== =====
Tax at federal statutory rate. . . . . $ 187 35.0 $ 89 35.0
Increase (reduction) in taxes
resulting from:
Dividend exclusion . . . . . . . . . (18) (3.4) (2) (.8)
Taxes on foreign income in
excess of statutory rate . . . . . 16 3.0 25 9.8
State income taxes (net of
federal effect). . . . . . . . . . 16 3.0 7 2.7
Tax credits . . . . . . . . . . . . (18) (3.4) (13) (5.1)
Other. . . . . . . . . . . . . . . . 2 .4 (9) (3.6)
---- ----- ---- -----
Provision for taxes on income. . . . . $ 185 34.6 $ 97 38.0
==== ===== ==== =====
</TABLE>
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE G. 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
March 31,
------------------
1995 1994
---- ----
(Millions of shares)
<S> <C> <C>
Average number of common shares outstanding . . . . . 160.8 160.1
Common stock equivalents . . . . . . . . . . . . . . 2.6 2.8
----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . 163.4 162.9
===== =====
</TABLE>
NOTE H. Supplemental Income Statement Information.
Taxes other than excise and income taxes comprised the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
---- ----
(Millions)
<S> <C> <C>
Production/severance. . . . . . . . . . . . . . . . . $ 83 $ 66
Property. . . . . . . . . . . . . . . . . . . . . . . 48 50
Other . . . . . . . . . . . . . . . . . . . . . . . . 63 68
--- ---
Total . . . . . . . . . . . . . . . . . . . . . . . $194 $184
=== ===
</TABLE>
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE I. Supplemental Cash Flow Information.
Following is supplemental cash flow information for the three months
ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
---- ----
(Millions)
<S> <C> <C>
Gross maturities of short-term investments . . . . . . $ 1,567 $ 2,421
Gross purchases of short-term investments. . . . . . . (890) (2,737)
------ ------
Net cash provided (used) by short-term investments . . $ 677 $ (316)
====== ======
Gross proceeds from issuance of notes payable. . . . . $ 1,892 $ 2,491
Gross repayments of notes payable. . . . . . . . . . . (2,216) (2,272)
------ ------
Net cash provided (used) by notes payable. . . . . . . $ (324) $ 219
====== ======
Gross noncash provisions charged to income . . . . . . $ 108 $ 111
Cash payments of previously accrued items. . . . . . . (318) (124)
------ ------
Cash payments greater than noncash provisions. . . . . $ (210) $ (13)
====== ======
</TABLE>
Interest paid during the three-month periods ended March 31, 1995 and
1994 was $235 million and $227 million, respectively.
Income taxes paid during the three-month periods ended March 31, 1995
and 1994 were $129 million and $37 million, respectively.
-9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE J. Summarized Financial Information.
Summarized financial information for Lyondell Petrochemical Company
("Lyondell"), a company in which Atlantic Richfield owned a 49.9 percent
interest at March 31, 1995, was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
---- ----
(Millions)
<S> <C> <C>
Revenues (including sales to ARCO and
ARCO Chemical Company). . . . . . . . . . . . $1,174 $ 824
Sales to ARCO and ARCO Chemical Company . . . . 90 69
Operating income. . . . . . . . . . . . . . . . 222 54
Net income. . . . . . . . . . . . . . . . . . . 127 22
_____________________________
ARCO's equity in net income of Lyondell . . . . $ 64 $ 11
Cash dividends received from Lyondell . . . . . 9 9
</TABLE>
________________________
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
(Millions)
<S> <C> <C>
Current assets. . . . . . . . . . . . . . . . . . $ 830 $ 697
Noncurrent assets . . . . . . . . . . . . . . . . 1,051 966
Current liabilities . . . . . . . . . . . . . . . 466 433
Long-term debt. . . . . . . . . . . . . . . . . . 707 707
Other liabilities . . . . . . . . . . . . . . . . 191 192
Minority interest . . . . . . . . . . . . . . . . 345 268
Stockholders' equity. . . . . . . . . . . . . . . 172 63
</TABLE>
-10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE K. 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 March 31, 1995 and December 31, 1994, there were contingent
liabilities primarily with respect to guarantees of securities of other
issuers of approximately $55 million and $75 million, respectively.
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. Alyeska and its owner companies have settled the
federal and state claims and the lawsuits by private plaintiffs. Certain
issues relating to the liability for the spill remain unresolved between
the Exxon companies and Alyeska and its owner companies.
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 is also the subject or party to a number of other pending or
threatened legal actions.
In January 1995, the State of Montana presented to ARCO a revised
demand for damages of $635 million based on alleged injuries to natural
resources resulting from ARCO's mining and mineral processing businesses
formerly operated by Anaconda, ARCO's predecessor, in Montana. ARCO is
contesting the amount of this demand.
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 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,
sites associated with discontinued operations and sites formerly owned by
ARCO. 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. In addition,
environmental loss contingencies include claims for personal injuries
allegedly caused by exposure to toxic materials manufactured or used by
ARCO.
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
-11-
<PAGE>
NOTE K. Other Commitments and Contingencies (Continued).
financial wherewithal of the other responsible parties. At March 31, 1995,
the environmental remediation reserve was $658 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 environmental remediation accrual 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, sites associated with
discontinued operations and sites formerly owned by ARCO. ARCO has been
named a potentially responsible party (PRP) for 126 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 accrual. ARCO's future costs at these sites
could exceed the amount accrued by as much as $1 billion.
Approximately half of the accrual related to sites associated with
ARCO's discontinued operations, primarily mining activities in the states
of Montana, Utah and New Mexico. Another significant component of the
accrual 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 accrual.
Substantially all amounts accrued 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. These claims have not 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.
Although any ultimate liability arising from any of the matters
described herein 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 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.
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Quarter 1995 vs. First Quarter 1994
Consolidated Earnings
The earnings increase in 1995 primarily reflected improved margins in
ARCO's chemical businesses, higher crude oil prices and the benefits of
companywide cost reductions partially offset by lower refining and
marketing margins and U.S. natural gas prices.
Revenues
The increase in 1995 sales and other operating revenues resulted
primarily from higher crude oil, chemical and refined products prices and
higher chemical products volumes, partially offset by decreased crude oil
trading activity and lower U.S. natural gas prices.
The increase in 1995 income from equity investments primarily
reflected higher earnings from ARCO's 49.9 percent equity interest in
Lyondell Petrochemical Company ("Lyondell").
Expenses
Trade purchases were higher primarily as a result of higher crude oil
prices and increased trade purchases of chemical feedstocks and products,
partially offset by decreased crude oil trading activity and lower U.S.
natural gas prices.
Upstream Earnings
<TABLE>
<CAPTION>
<S> <C> <C>
Millions (after tax) 1995 1994
---- ----
Oil and Gas . . . . . . . . . . . . . $ 195 $ 82
Coal. . . . . . . . . . . . . . . . . $ 16 $ 19
</TABLE>
ARCO's earnings from worldwide oil and gas exploration and production
operations benefited from higher crude oil prices and lower operating and
exploration costs, partially offset by lower U.S. natural gas prices.
Average Oil and Gas Prices
<TABLE>
1995 1994
---- ----
<S> <C> <C>
U.S.
Crude oil per bbl . . . . . . . . . . . $11.87 $ 7.83
Natural gas per mcf . . . . . . . . . . $ 1.33 $ 2.09
International
Crude oil per bbl . . . . . . . . . . . $16.32 $13.64
Natural gas per mcf . . . . . . . . . . $ 2.57 $ 2.57
</TABLE>
-13-
<PAGE>
Petroleum Liquids and Natural Gas Production
<TABLE>
<CAPTION>
Net Production 1995 1994
-------------- ---- ----
<S> <C> <C>
U.S.
Petroleum liquids bbld . . . . . . . . 603,000 624,700
Natural gas mmcfd. . . . . . . . . . . 1,031 915
Barrels of oil equivalent (BOE). . . . 774,900 777,200
International
Petroleum liquids bbld . . . . . . . . 60,600 69,500
Natural gas mmcfd. . . . . . . . . . . 640 567
BOE . . . . . . . . . . . . . . . . . 167,300 164,000
</TABLE>
The reduction in petroleum liquids production primarily resulted from
natural field declines, the impact of prices and costs on production
sharing contracts, and volume prorations resulting from inclement weather
conditions in Alaska.
The increase in U.S. natural gas production primarily resulted from
the Mustang Island and South Marsh Island fields which are owned and
produced by Vastar Resources, Inc. ("Vastar"). ARCO holds an 82.3 percent
interest in Vastar.
The higher international natural gas volumes in 1995 reflected
increased production in Indonesia, particularly in the Pagerungan field.
Coal Operations
The reduced earnings in 1995 resulted from lower Australian coal
prices and an unfavorable exchange rate, partially offset by higher sales
volumes and reduced overhead expenses, which resulted from cost reduction
actions.
Downstream Earnings
<TABLE>
<CAPTION>
Millions (after tax) 1995 1994
---- ----
<S> <C> <C>
Refining and marketing . . . . . . . . . . $ 22 $ 95
Transportation . . . . . . . . . . . . . . $ 50 $ 45
Intermediate chemicals
and specialty products . . . . . . . . . $115 $ 48
</TABLE>
The refining and marketing results were down compared to 1994 as a
result of weaker West Coast refined product margins, partially offset by
ARCO's cost reduction efforts.
The 1994 transportation results included net after-tax expenses of $9
million related to the January 17, 1994 earthquake in Southern California.
For the intermediate chemicals and specialty products segment,
reflecting ARCO's 83.2 percent interest in ARCO Chemical Company, the 1995
improvement primarily reflected strong worldwide styrene monomer ("SM")
demand, resulting in higher margins and sales volumes for SM, as well as
higher demand for methyl tertiary butyl ether ("MTBE"), resulting in higher
overall MTBE margins and volumes.
-14-
<PAGE>
Equity Affiliate
ARCO earned $64 million from its 49.9 percent equity interest in
Lyondell in the first quarter of 1995, as compared to $11 million in the
first quarter of 1994. The improvement resulted primarily from the strong
performance of Lyondell's chemical operations reflecting higher ethylene
and methanol margins, while its refinery performance also improved.
Financial Position and Liquidity
<TABLE>
<CAPTION>
Millions 1995 1994
---- ----
<S> <C> <C>
Cash flow provided (used) by:
Operations . . . . . . . . . . . . . . $ 381 $ 275
Investing activities . . . . . . . . . $ 266 $ (634)
Financing activities . . . . . . . . . $ (882) $ (77)
</TABLE>
The net cash provided by investing activities in the first quarter
1995 included a decrease in short-term investments of $677 million
partially offset by expenditures for additions to fixed assets of $353
million.
The net cash used in financing activities in the first quarter of 1995
included repayments of long-term debt of $470 million, a decrease of $324
million in the Company's short-term debt position and dividend payments of
$222 million.
Cash and cash equivalents and short-term investments totaled $3.5
billion, and short-term borrowings were $1.2 billion at the end of the
first quarter of 1995.
During the first quarter of 1995, ARCO purchased 100,000 shares of its
common stock and contributed them to treasury in order to satisfy ARCO's
obligations upon conversion of the $3.00 and $2.80 Preference Stocks and
upon exercise of stock options.
It is expected that future cash requirements for capital expenditures,
dividends and debt repayments will come from cash generated from operating
activities, existing cash balances, and future financings.
Statements of Financial Accounting Standards Not Yet Adopted
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The Company will have to implement SFAS No. 121 by the
fiscal year ended December 31, 1996. The provisions will require the
Company to review long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. If it is determined that an impairment loss has
occurred based on expected future cash flows, then the loss should be
recognized in the income statement and certain disclosures regarding the
impairment should be made in the financial statements. The Company has not
yet had sufficient time to evaluate the impact, if any, of the provisions
of SFAS No. 121.
___________________________
-15-
<PAGE>
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 with classifications adopted in 1995.
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.
-16-
<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, 1994
(hereinafter, the "1994 Form 10-K Report") regarding a Notice of Deficiency
from the Internal Revenue Service. ARCO has paid the amount of tax (and
interest) that it believes is due and filed a petition in the U.S. Tax
Court in March 1995 challenging the balance of the additional federal
income tax set forth in the Notice.
2. Reference is made to the Company's 1994 Form 10-K Report for
information on other legal proceeding matters reported therein.
-17-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of stockholders was held on May 1, 1995.
The stock-holders elected all the Company's nominees for director and
approved the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for 1995. The votes were as follows:
1. Election of Directors.
<TABLE>
For Withheld
<S> <C> <C>
Ronald J. Arnault 136,180,710 3,467,687
Mike R. Bowlin 137,087,962 2,560,435
Richard H. Deihl 137,103,864 2,544,533
David T. McLaughlin 137,085,250 2,563,147
Hicks B. Waldron 136,943,277 2,705,120
</TABLE>
2. Approval of appointment of Coopers & Lybrand L.L.P.
<TABLE>
<S> <C>
For 137,703,007
Against 1,255,074
Abstain 690,316
</TABLE>
In addition, the stockholders voted on the following proposal:
Stockholders' proposal with respect to public environmental reporting.
<TABLE>
<S> <C>
For 10,586,321
Against 107,872,228
Abstain 9,093,395
Broker Non-Votes 12,096,453
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The following Current Report on Form 8-K was filed during
the quarter ended March 31, 1995 and through the date hereof.
Date of Report Item No. Financial Statements
March 27, 1995 5 None
-18-
<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)
/s/ALLAN L. COMSTOCK
Dated: May 9, 1995 _____________________________
(signature)
Allan L. Comstock
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Income and the Consolidated Balance Sheet and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,164
<SECURITIES> 2,336
<RECEIVABLES> 1,457
<ALLOWANCES> 0
<INVENTORY> 794
<CURRENT-ASSETS> 6,055
<PP&E> 32,234
<DEPRECIATION> 16,493
<TOTAL-ASSETS> 23,957
<CURRENT-LIABILITIES> 4,090
<BONDS> 6,969
<COMMON> 402
0
1
<OTHER-SE> 6,027
<TOTAL-LIABILITY-AND-EQUITY> 23,957
<SALES> 4,244
<TOTAL-REVENUES> 4,457
<CGS> 3,228
<TOTAL-COSTS> 3,318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> 534
<INCOME-TAX> 185
<INCOME-CONTINUING> 322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322
<EPS-PRIMARY> $1.97
<EPS-DILUTED> $1.97
</TABLE>
