<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
_________________________
Commission file number 1-9678
_________________________
ARCO CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)
_________________________
DELAWARE 51-0104393
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3801 WEST CHESTER PIKE
NEWTOWN SQUARE, PENNSYLVANIA 19073-2387
(Address of principal executive offices) (Zip Code)
_________________________
(610) 359-2000
(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, $1.00 par value, outstanding as of
September 30, 1995: 96,398,504.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. ARCO CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME
(Millions of Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales and other operating revenues $ 999 $ 895 $3,289 $2,476
Costs and other operating expenses 729 672 2,395 1,867
------ ------ ------ ------
Gross profit 270 223 894 609
Selling, general and administrative
expenses 70 63 203 182
Research and development 20 20 58 57
------ ------ ------ ------
Operating income 180 140 633 370
Interest expense (23) (21) (67) (64)
Other income, net 4 3 20 5
------ ------ ------ ------
Income before income taxes 161 122 586 311
Provision for income taxes 44 41 193 117
------ ------ ------ ------
Net income $ 117 $ 81 $ 393 $ 194
====== ====== ====== ======
Earnings per common share $ 1.21 $ .84 $ 4.08 $ 2.02
====== ====== ====== ======
Cash dividends paid per common
share $ .700 $ .625 $1.950 $1.875
====== ====== ====== ======
</TABLE>
See accompanying notes.
<PAGE>
ARCO CHEMICAL COMPANY
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 122 $ 144
Short-term investments 30 -
Accounts receivable 658 565
Inventories 491 397
Prepaid expenses and other current assets 39 18
------ ------
Total current assets 1,340 1,124
Investments and long-term receivables 106 97
Property, plant and equipment, net 2,281 2,221
Deferred charges and other assets (net of
accumulated amortization of $276 in 1995
and $247 in 1994) 367 295
------ ------
Total assets $4,094 $3,737
====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable $ 4 $ 23
Long-term debt due within one year 25 15
Accounts payable 252 242
Taxes payable 79 66
Other accrued liabilities 218 199
------ ------
Total current liabilities 578 545
Long-term debt 897 898
Other liabilities and deferred credits 158 142
Deferred income taxes 410 369
Minority interest 122 124
Stockholders' equity:
Common stock 100 100
Additional paid-in capital 868 864
Retained earnings 937 732
Foreign currency translation 121 70
Treasury stock, at cost (97) (107)
------ ------
Total stockholders' equity 1,929 1,659
------ ------
Total liabilities and stockholders'
equity $4,094 $3,737
====== ======
</TABLE>
See accompanying notes.
- 2 -
<PAGE>
ARCO CHEMICAL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 393 $ 194
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 176 173
Increase in accounts receivable (68) (108)
Net change in inventories, accounts
and other payables (59) 47
Provision for environmental liabilities 12 13
Other (26) 4
----- -----
Net cash provided by operating activities 428 323
----- -----
Cash flows from investment activities
Capital expenditures (132) (128)
Increase in deferred charges (82) (7)
Purchase of short-term investments (30) -
Other 4 21
----- -----
Net cash used in investment activities (240) (114)
----- -----
Cash flows from financing activities
Dividends paid (188) (180)
Net repayments of notes payable (21) (31)
Repayment of long-term debt (15) (18)
Other 14 3
----- -----
Net cash used in financing activities (210) (226)
----- -----
Effect of exchange rate changes on cash - 1
----- -----
Net decrease in cash and cash equivalents (22) (16)
Cash and cash equivalents at beginning of period 144 42
----- -----
Cash and cash equivalents at end of period $ 122 $ 26
===== =====
</TABLE>
See accompanying notes.
- 3 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE A. Basis of Presentation
The foregoing financial information is unaudited and has been prepared
from the records of ARCO Chemical Company (the company). In the opinion of
management, the financial information reflects all adjustments (consisting only
of items of a normal recurring nature) necessary for a fair statement of
financial position and results of operations in conformity with generally
accepted accounting principles. Certain amounts in 1994 have been reclassified
for comparative purposes. These interim financial statements should be read in
conjunction with the consolidated financial statements for the year ended
December 31, 1994.
NOTE B. Business Segment Information
The following table sets forth certain information concerning the
company's principal geographic regions for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
(Millions of Dollars)
<S> <C> <C> <C> <C>
Total revenues
Americas $ 691 $ 648 $2,253 $1,793
Europe 370 243 1,124 668
Asia Pacific 56 59 180 170
Elimination of interregional
sales (118) (55) (268) (155)
----- ----- ------ ------
Total $ 999 $ 895 $3,289 $2,476
===== ===== ====== ======
Pretax earnings
Americas $ 154 $ 114 $ 506 $ 328
Europe 6 7 30 3
Asia Pacific 3 (1) 13 (8)
Corporate 32 24 108 51
Interest expense (23) (21) (67) (64)
Equity in net income of
Asian joint venture 6 1 14 1
Eliminations (17) (2) (18) -
----- ----- ------ ------
Total $ 161 $ 122 $ 586 $ 311
===== ===== ====== ======
</TABLE>
Interregional sales are made at prices approximating current market values.
Included in pretax earnings are royalty charges made from corporate to the
regions for the use of company technology.
- 4 -
<PAGE>
NOTE C. Inventories
Inventories at September 30, 1995 and December 31, 1994 comprised the
following categories:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Millions of Dollars)
<S> <C> <C>
Finished goods $ 350 $ 272
Work-in-process 27 35
Raw materials 69 49
Materials and supplies 45 41
----- -----
Total $ 491 $ 397
===== =====
</TABLE>
NOTE D. Property, Plant and Equipment, Net
Property, plant and equipment, at cost, and related accumulated
depreciation at September 30, 1995 and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Millions of Dollars)
<S> <C> <C>
Property, plant and equipment $3,763 $3,524
Less: accumulated depreciation 1,482 1,303
------ ------
Total $2,281 $2,221
====== ======
</TABLE>
NOTE E. Contingencies
The company and its subsidiaries are involved in a number of lawsuits,
all of which have arisen in the ordinary course of the company's business. The
company is unable to predict the outcome of these matters, but does not believe,
based upon currently available facts, that the ultimate resolution of such
matters will have a material adverse effect on the consolidated financial
statements of the company.
The company is subject to other loss contingencies pursuant to federal,
state, local, and foreign environmental laws and regulations. These
contingencies include possible obligations to remove or mitigate the effects on
the environment of the past disposal or release of certain chemical substances
at various sites (remediation costs). The company continues to evaluate the
amount of these remediation costs and periodically adjusts its reserve for
remediation costs and its estimate of additional environmental loss
contingencies based on progress made in determining the magnitude, method and
timing of the remedial actions that may be required by government authorities
and an evaluation of the company's potential liability in relation to the
liability and financial resources of any other potentially responsible parties.
At September 30, 1995, the company's environmental reserve totaled $60
million, which reflected the company's latest assessment of potential future
remediation costs associated with existing sites. A significant portion of the
reserve is related to the company's Beaver Valley (Pennsylvania) facility.
- 5 -
<PAGE>
The reserve gives recognition to a work plan, between the company and the
Pennsylvania Department of Environmental Resources, for testing, risk
assessment, remedial process design and remediation of conditions at the Beaver
Valley plant. The reserve also reflects an agreement between the company and
another responsible party whereby that party has agreed to pay for approximately
50 percent of the costs associated with the Beaver Valley plant work plan. The
remainder of the reserve is related to four other plant sites and two federal
Superfund sites for amounts ranging from $1 million to $15 million per site. The
company is involved in administrative proceedings or lawsuits relating to seven
other Superfund sites. However, it estimates, based on currently available
information, that potential loss contingencies associated with these sites,
individually and in the aggregate, are not significant. Substantially all
amounts reserved are expected to be paid out over the next five to ten years.
The company relies upon remedial investigation/feasibility studies
(RI/FS) at each site as a basis for estimating remediation costs at the site.
The company has substantially completed RI/FS at most of its sites, with two
plant facilities currently undergoing either RI/FS or preliminary assessments.
However, selection of the remediation method and the cleanup standard to be
applied are, in most cases, subject to approval by the appropriate government
authority. Accordingly, the company may have possible loss contingencies in
excess of the amounts reserved to the extent the scope of remediation required,
the final remediation method selected and the cleanup standard applied vary from
the assumptions used in estimating the reserve. The company estimates that the
upper range of these possible loss contingencies should not exceed the amount of
the reserve accrued by more than $65 million.
The extent of loss related to environmental matters ultimately depends
upon a number of factors, including technological developments, changes in
environmental laws, the number and ability to pay of other parties involved at a
particular site and the company's potential involvement in additional
environmental assessments and cleanups. Based upon currently known facts,
management believes that any remediation costs the company may incur in excess
of the amounts reserved or disclosed above would not have a material adverse
impact on the company's consolidated financial statements.
The company and Atlantic Richfield Company (ARCO) are parties to an
agreement whereby the company has indemnified ARCO against certain claims or
liabilities that ARCO may incur relating to ARCO's former ownership and
operation of the oxygenates and polystyrenics businesses of the company,
including liabilities under laws relating to the protection of the environment
and the workplace and liabilities arising out of certain litigation. ARCO has
indemnified the company with respect to claims or liabilities and other matters
of litigation not related to the assets or businesses reflected in the
consolidated financial statements. ARCO has also indemnified the company for
certain federal, foreign, state, and local taxes that might be assessed upon
audit of the operations of the company included in its consolidated financial
statements for periods prior to the July 1, 1987 formation of the company.
NOTE F. Earnings Per Common Share
Earnings per common share for the three- and nine-month periods ended
September 30, 1995 are computed based on 96,340,677 and 96,243,844 weighted
average number of shares outstanding, respectively. Earnings per common share
for the three- and nine-month periods ended September 30, 1994 are computed
based on 96,067,815 and 96,051,097 weighted average number of shares
outstanding, respectively. The effect of stock options issued under the 1987
Executive Long-
- 6 -
<PAGE>
Term Incentive Plan and the 1990 Long-Term Incentive Plan on the computation of
primary and fully diluted earnings per common share was not material and had no
effect on the reported earnings per common share.
NOTE G. Supplemental Cash Flow Information
Following is supplemental cash flow information for the nine months
ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(Millions of Dollars)
<S> <C> <C>
Short-term investments:
Gross proceeds from sales $ - $ -
Gross purchases (30) -
------- -------
Net purchases $ (30) $ -
======= =======
Notes payable:
Gross proceeds from issuances $ 1,425 $ 347
Gross repayments (1,446) (378)
------- -------
Net repayments $ (21) $ (31)
======= =======
Cash paid during the period for:
Interest (net of amount capitalized) $ 60 $ 59
======= =======
Income taxes (net of refunds) $ 171 $ 51
======= =======
</TABLE>
NOTE H. Corporate Restructuring Program
In connection with the company's 1994 global restructuring,
approximately 130 people will be leaving the company. The company accrued $30
million before tax in the fourth quarter of 1994, consisting primarily of
personnel costs (pension enhancements, severance and other ancillary costs)
associated with personnel reductions. Of the total accrued, approximately $15
million related to severance and other ancillary costs that will be paid from
company funds. An additional $15 million is primarily related to enhanced
pension benefits, the majority of which will be paid from the assets of
qualified pension plans. Through September 30, 1995, a total of 77 employees
have left the company, and approximately $5 million of severance and ancillary
costs have been paid and charged against the accrual. Payments made do not
necessarily correlate to the number of employees who have left due to the
ability of affected employees to defer receipt of certain payments.
NOTE I. Long-term Supply Arrangement
As more fully described in the December 31, 1994 consolidated financial
statements, the company entered into a long-term, toluene di-isocyanate supply
arrangement in January 1995. A substantial portion of the initial payment of $80
million made at closing related to capacity reservation fees and other long-term
rights and costs. These are reported in the accompanying consolidated balance
sheet as "Deferred charges and other assets" and are being amortized on a
straight-line basis over the 15-year period of the agreement, the period of
expected benefit.
- 7 -
<PAGE>
NOTE J. Derivative Instruments
The company has announced plans to commence engineering studies for the
construction of a new world scale PO/SM plant in Rotterdam, the Netherlands. In
connection with this project, the company anticipates that it will make capital
commitments denominated in a foreign currency beginning in 1996 and extending
through 2000. During the third quarter 1995, the company entered into foreign
currency forward and purchased option contracts to hedge foreign exchange
exposures associated with these anticipated commitments. The company also holds
other foreign currency forward, option and swap contracts which are intended to
hedge other foreign currency exchange exposures. The notional amounts of all
foreign currency contracts outstanding (principally involving European
currencies) were $431 million at September 30, 1995, with various maturity dates
ranging from 1996 to 2000. At December 31, 1994, the notional amounts of foreign
currency contracts outstanding were $120 million. Gains on the purchased options
related to the new PO/SM plant project are deferred and will be used in the
measurement of the plant construction costs. There were no deferred hedging
gains as of September 30, 1995.
The carrying value and the estimated fair value of the company's
derivative instruments as of September 30, 1995 and December 31, 1994 are shown
as assets (liabilities) in the table below. The carrying value of the purchased
options represents the unamortized balance of the option premium.
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
Carrying Market Carrying Market
Value Value Value Value
-------- ------ -------- ------
(Millions of Dollars)
<S> <C> <C> <C> <C>
Foreign currency forwards $ (4) $ (4) $ - $ -
Foreign currency purchased options 8 8 - -
Foreign currency swaps (11) (11) (4) (4)
</TABLE>
- 8 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Product Volumes
Sales volumes of the company's key product, propylene oxide (PO), its
two co-products, tertiary butyl alcohol (TBA) and styrene monomer (SM), and
their derivatives are noted below.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
(Millions)
<S> <C> <C> <C> <C>
PO and derivatives (pounds) 811 917 2,601 2,751
TBA and derivatives (gallons) 272 252 862 748
SM and derivatives (pounds) 616 680 1,965 1,984
</TABLE>
Methyl tertiary butyl ether (MTBE) is a key derivative of TBA used in oxygenated
fuels and reformulated gasoline and as a gasoline octane additive. Toluene di-
isocyanate (TDI) is not a derivative of PO or the two co-products; TDI and
polyols, a key PO derivative, are combined to manufacture polyurethanes- see
Liquidity and Capital Resources. The company manufactures and markets its
products in three major world regions, the Americas, Europe, and Asia Pacific.
Results of Operations
Third Quarter 1995 versus Third Quarter 1994
Net Income
Net income in the third quarter 1995 increased to $117 million, or
$1.21 per share, from $81 million, or $.84 per share, for the third quarter
1994. The 1995 increase primarily reflected higher margins for SM and PO and
derivatives, partially offset by lower volumes for PO and derivatives and lower
MTBE margins. Additionally, net income in 1995 included a lower effective tax
rate than the 1994 period.
Revenues and Gross Profit
Revenues increased 12 percent to $999 million in the third quarter 1995
from $895 million in the third quarter 1994 primarily due to TDI sales and
generally higher sales prices in 1995. Gross profit of $270 million in the third
quarter 1995 increased 21 percent from $223 million in the 1994 third quarter,
primarily reflecting the higher margins for SM and PO and derivatives. Overall
gross profit was 27.0 percent of sales in 1995 compared to 24.9 percent in 1994
as higher sales prices more than offset higher feedstock and other costs.
- 9 -
<PAGE>
PO and Derivatives
PO and derivatives margins in the third quarter 1995 increased compared
to the prior year period as generally higher sales prices and benefits of a
weaker U.S. dollar more than offset higher propylene feedstock and other
variable costs. PO and derivatives volumes in the third quarter 1995 decreased
12 percent compared to the third quarter 1994 due to lower U.S. and Asia-Pacific
volumes. The lower volumes were primarily due to the entry of a new PO producer
into the U.S. market in late 1994, which has increased industry supplies of PO
and propylene glycol, and lower sales to markets in China. Sales to China have
been negatively affected by the Chinese government's active enforcement of
import duties.
TBA and Derivatives
TBA and derivatives volumes increased eight percent in the third
quarter 1995 compared to the third quarter 1994 primarily due to increased U.S.
demand for MTBE. The increased demand resulted from implementation of the
reformulated gasoline phase of the Clean Air Act in 1995. TBA and derivatives
margins in the third quarter 1995 decreased compared to the third quarter 1994
due to lower MTBE margins, which reflected a number of factors including a
higher proportion of sales in the spot market versus contract sales in 1995.
In mid-1994, the Environmental Protection Agency (EPA) promulgated
regulations under the Clean Air Act mandating that 15 percent in 1995 and 30
percent thereafter of the oxygenate content in reformulated gasoline be supplied
by oxygenates such as ethanol and ethyl tertiary butyl ether (ETBE), which are
derived from renewable feedstocks. In June 1995, the U. S. Court of Appeals for
the District of Columbia Circuit ruled that the EPA mandate had been improperly
promulgated and was not enforceable. In September 1995, the EPA announced that
it would not appeal this decision.
SM and Derivatives
SM and derivatives margins improved in the third quarter 1995 compared
to the third quarter 1994 primarily reflecting higher SM prices. SM and
derivatives volumes in the third quarter 1995 decreased nine percent versus the
third quarter 1994 primarily due to lower exports to China. Sales to China have
been adversely affected by the Chinese government's active enforcement of import
duties.
Other
The 1995 and 1994 third quarters include pretax charges of $12 million
and $13 million, respectively, for estimated future environmental cleanup
costs. These charges do not reflect any potential benefit from insurance
proceeds.
The company revised its expected 1995 effective tax rate to 33.0
percent from the 35.0 percent used in the second quarter 1995 due to higher
estimated foreign earnings. This revision resulted in a 27.3 percent tax rate
for the third quarter 1995 compared to 33.6 percent in the third quarter 1994.
- 10 -
<PAGE>
Nine Months Ended September 30, 1995 versus Nine Months Ended September 30, 1994
Net Income
Net income for the first nine months 1995 was $393 million, or $4.08
per share, compared with $194 million, or $2.02 per share, for the first nine
months 1994. The 1995 increase was primarily due to the significant improvement
in SM margins. Also contributing to the improvement were higher PO and
derivatives margins and higher MTBE volumes and margins, partly offset by lower
PO and derivatives volumes. The 1995 period benefitted as well from a lower
effective tax rate.
Revenues and Gross Profit
Revenues increased 33 percent to $3,289 million in the first nine
months 1995 from $2,476 million in the first nine months 1994 primarily due to
higher sales prices. Gross profit increased 47 percent to $894 million in the
first nine months 1995 from $609 million in the first nine months 1994,
reflecting the increased revenues as well as higher margins. Overall gross
profit was 27.2 percent of sales in 1995 compared to 24.6 percent in 1994 as
higher sales prices more than offset higher costs.
PO and Derivatives
PO and derivatives margins in the first nine months 1995 increased
compared to the first nine months 1994 due to higher sales prices offsetting
increased costs. Margins in 1995 also benefitted from a weaker U.S. dollar. PO
and derivatives volumes in the first nine months 1995 decreased five percent
compared to the 1994 period as lower U.S. and Asia-Pacific volumes were partly
offset by higher European volumes. U.S. volumes have been affected by the entry
of a new PO producer into the U.S. market in late 1994, while Asia-Pacific
volumes have been affected by reduced exports to China. Higher European volumes
reflected the stronger economy in that region.
TBA and Derivatives
TBA and derivatives volumes increased 15 percent in the first nine
months 1995 versus the comparable 1994 period primarily due to increased U.S.
demand for MTBE in reformulated gasoline. TBA and derivatives margins in the
first nine months 1995 increased slightly compared to the same period in 1994.
SM and Derivatives
SM and derivatives margins improved significantly in the first nine
months 1995 compared to the first nine months 1994 reflecting higher worldwide
SM demand during the early part of 1995. SM and derivatives volumes in the first
nine months 1995 decreased slightly compared to the first nine months 1994.
- 11 -
<PAGE>
Other
The projected 1995 effective tax rate of 33.0 percent compares to 37.5
percent at September 30, 1994. The decrease in 1995 reflects benefits from
higher foreign earnings.
Liquidity and Capital Resources
As of September 30, 1995, the company had $152 million in cash and cash
equivalents and short-term investments compared with $144 million at December
31, 1994.
The Consolidated Statement of Cash Flows for the nine months ended
September 30, 1995 shows $428 million of net cash flows provided by operating
activities, whereas net cash flows used by investment and financing activities
were $240 million and $210 million, respectively.
Investment activities for the first nine months 1995 included capital
expenditures of $132 million. A significant portion of the 1995 capital program
has been allocated to environmental, health and safety projects as well as to
low-cost capacity debottlenecking projects. As more fully described in the
company's consolidated financial statements for the year ended December 31,
1994, the company entered into a long-term, TDI supply arrangement in January
1995. A substantial portion of the initial $80 million payment made at closing
related to capacity reservation fees and other long-term rights and costs. These
are reported in the accompanying consolidated balance sheet as "Deferred charges
and other assets" and are being amortized on a straight-line basis over the 15-
year period of the agreement, the period of expected benefit.
The Board of Directors has approved commencement of engineering studies
for the expansion of the PO/SM complex located in Channelview, Texas and the
construction of a new world scale PO/SM plant in Rotterdam, the Netherlands.
Final Board of Directors' approval of such projects will depend on the results
of engineering studies, the receipt of permitting approvals and the conclusion
of certain commercial arrangements. In connection with the plant project in
Rotterdam, the company anticipates that it will make capital commitments
denominated in a foreign currency beginning in 1996 and extending through 2000.
The company has entered into foreign currency forward and purchased option
contracts to hedge the foreign exchange exposures associated with these
anticipated commitments. The notional amount of foreign currency contracts
outstanding increased to $431 million at September 30, 1995 from $120 million at
December 31, 1994, primarily due to these contracts. See Note J of Notes to
Consolidated Financial Statements.
The company paid dividends totalling $188 million during the first nine
months 1995, including a $.70 per share dividend, totalling $67 million, during
the quarter ended September 30, 1995. On October 19, 1995, the Board of
Directors declared a dividend of $.70 per share of common stock, payable
December 1, 1995.
It is expected that future cash requirements for capital expenditures,
dividends and debt repayments will be met by cash generated from operating
activities and additional borrowing.
- 12 -
<PAGE>
Statement 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."
SFAS No. 121 requires companies to adopt its provisions for fiscal years
beginning after December 15, 1995. The provisions of SFAS No. 121 require the
company to review its long-lived assets for impairment on an exception basis
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable through future cash flows. 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
believes that the provisions of SFAS No. 121, when implemented, will not have a
material effect on the company's consolidated financial statements.
- 13 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No material developments.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule for the nine months ended September 30, 1995.
(b) Reports on Form 8-K:
None
- 14 -
<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.
ARCO CHEMICAL COMPANY
(Registrant)
/s/ John A. Shaw
----------------------------
(Signature)
John A. Shaw
Vice President
and Controller
(Duly Authorized Officer and
Chief Accounting Officer)
Dated: October 31, 1995
- 15 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27 Financial Data Schedule for the nine months
ended September 30, 1995
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 122
<SECURITIES> 30
<RECEIVABLES> 658
<ALLOWANCES> 0
<INVENTORY> 491
<CURRENT-ASSETS> 1,340
<PP&E> 3,763
<DEPRECIATION> 1,482
<TOTAL-ASSETS> 4,094
<CURRENT-LIABILITIES> 578
<BONDS> 897
<COMMON> 100
0
0
<OTHER-SE> 1,829
<TOTAL-LIABILITY-AND-EQUITY> 4,094
<SALES> 3,289
<TOTAL-REVENUES> 3,289
<CGS> 2,395
<TOTAL-COSTS> 2,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 586
<INCOME-TAX> 193
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393
<EPS-PRIMARY> 4.08
<EPS-DILUTED> 4.08
</TABLE>
