<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
---------------------
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 June 30,
1996: 96,674,812.
================================================================================
<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 Six Months Ended
June 30, June 30,
--------------- -----------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
------ ------ ------ ------
Sales and other operating revenues $ 959 $1,149 $1,941 $2,290
Costs and other operating expenses 743 822 1,473 1,666
----- ------ ------ ------
Gross profit 216 327 468 624
Selling, general and administrative
expenses 70 69 133 133
Research and development 21 20 39 38
----- ------ ------ ------
Operating income 125 238 296 453
Interest expense (21) (22) (43) (44)
Other income, net 9 11 18 16
----- ------ ------ ------
Income before income taxes 113 227 271 425
Provision for income taxes 32 77 84 149
----- ------ ------ ------
Net income $ 81 $ 150 $ 187 $ 276
===== ====== ====== ======
Earnings per common share $ .84 $ 1.56 $ 1.94 $ 2.87
===== ====== ====== ======
Cash dividends paid per common
share $.700 $ .625 $ 1.40 $ 1.25
===== ====== ====== ======
</TABLE>
See accompanying notes.
<PAGE>
ARCO CHEMICAL COMPANY
CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
June 30, December 31,
1996 1995
---- ----
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 308 $ 235
Short-term investments - 25
Accounts receivable 583 631
Inventories 505 472
Prepaid expenses and other current assets 48 19
------ ------
Total current assets 1,444 1,382
Investments and long-term receivables 76 90
Property, plant and equipment, net 2,247 2,293
Deferred charges and other assets (net of
accumulated amortization of $294 in 1996
and $285 in 1995) 419 370
------ ------
Total assets $4,186 $4,135
====== ======
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Long-term debt due within one year $ 25 $ 25
Accounts payable 299 253
Taxes payable 73 94
Other accrued liabilities 193 217
------ ------
Total current liabilities 590 589
------ ------
Long-term debt 857 887
Other liabilities and deferred credits 167 158
Deferred income taxes 398 409
Minority interest 182 123
Stockholders' equity:
Common stock 100 100
Additional paid-in capital 872 869
Retained earnings 1,036 985
Foreign currency translation 72 110
Treasury stock, at cost (88) (95)
------ ------
Total stockholders' equity 1,992 1,969
------ ------
Total liabilities and stockholders'
equity $4,186 $4,135
====== ======
</TABLE>
See accompanying notes.
- 2 -
<PAGE>
ARCO CHEMICAL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
<S> <C> <C>
1996 1995
----- -----
Cash flows from operating activities
Net income $ 187 $ 276
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 109 120
Net change in accounts receivable, inventories,
accounts and other payables 13 (91)
Other (52) (47)
----- -----
Net cash provided by operating activities 257 258
----- -----
Cash flows from investment activities
Capital expenditures (95) (75)
Increase in deferred charges (1) (73)
Proceeds from (purchases of) short-term investments 25 (30)
Other 31 2
----- -----
Net cash used in investment activities (40) (176)
----- -----
Cash flows from financing activities
Dividends paid (135) (120)
Repayment of long-term debt (15) (14)
Other 9 2
----- -----
Net cash used in financing activities (141) (132)
----- -----
Effect of exchange rate changes on cash (3) -
----- -----
Net increase (decrease) in cash and cash equivalents 73 (50)
Cash and cash equivalents at beginning of year 235 144
----- -----
Cash and cash equivalents at end of period $ 308 $ 94
===== =====
</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 1995 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, 1995.
NOTE B. Geographic Information
The Company is an international manufacturer of intermediate chemicals
and specialty chemical products which it principally markets to other
industrial concerns. The Company operates in one industry segment. The
geographic distribution of the Company's markets is indicated by the table
below. Total revenues are summarized geographically by destination (customer
location) and by origin (point of sale); intercompany sales between geographic
areas are excluded.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------- -----------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
----- ------ ------ ------
(Millions of Dollars)
Total revenues (by destination)
United States $ 501 $ 544 $1,017 $1,178
Europe 265 325 546 596
Other foreign 193 280 378 516
----- ------ ------ ------
Total $ 959 $1,149 $1,941 $2,290
===== ====== ====== ======
Total revenues (by origin)
United States $ 569 $ 674 $1,130 $1,394
Europe 311 390 648 731
Other foreign 79 85 163 165
----- ------ ------ ------
Total $ 959 $1,149 $1,941 $2,290
===== ====== ====== ======
Pretax earnings
United States $ 115 $ 211 $ 254 $ 429
Europe 21 32 61 24
Other foreign (8) 11 (10) 17
Interest expense (21) (22) (43) (44)
Eliminations 6 (5) 9 (1)
----- ------ ------ ------
Total $ 113 $ 227 $ 271 $ 425
===== ====== ====== ======
</TABLE>
Included in pretax earnings are royalty charges made to foreign operations
for the use of Company technology. Eliminations principally include
intercompany profit.
- 4 -
<PAGE>
NOTE C. Inventories
Inventories at June 30, 1996 and December 31, 1995 comprised the following
categories:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
(Millions of Dollars)
Finished goods $ 361 $ 338
Work-in-process 35 38
Raw materials 63 51
Materials and supplies 46 45
----- -----
Total $ 505 $ 472
===== =====
</TABLE>
NOTE D. Property, Plant and Equipment, Net
Property, plant and equipment, at cost, and related accumulated depreciation
at June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
(Millions of Dollars)
Property, plant and equipment $3,821 $3,812
Less: accumulated depreciation 1,574 1,519
------ ------
Total $2,247 $2,293
====== ======
</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.
- 5 -
<PAGE>
At June 30, 1996, the Company's environmental reserve totaled $54 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. The reserve
gives recognition to a work plan, between the Company and the Pennsylvania
Department of Environmental Protection, 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, the Company 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; however, two plant
facilities are currently undergoing either RI/FS or preliminary assessments. In
addition, 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 that 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 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 the 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.
- 6 -
<PAGE>
NOTE F. Earnings Per Common Share
Earnings per common share for the three- and six-month periods ended
June 30, 1996 are computed based on 96,633,054 and 96,585,166 weighted average
number of shares outstanding, respectively. Earnings per common share for the
three- and six-month periods ended June 30, 1995 are computed based on
96,247,342 and 96,194,622 weighted average number of shares outstanding,
respectively. The effect of stock options issued under the 1987 Executive
Long-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.
NOTE G. Supplemental Cash Flow Information
Following is supplemental cash flow information for the six months
ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
(Millions of Dollars)
Short-term investments:
Gross proceeds from maturities $ 139 $ -
Gross purchases (114) (30)
----- -----
Net proceeds (purchases) $ 25 $ (30)
===== =====
Cash paid during the period for:
Interest (net of amount capitalized) $ 47 $ 43
===== =====
Income taxes $ 97 $ 136
===== =====
</TABLE>
NOTE H. Proposed Asset Sale
On June 7, 1996, the Company entered into a letter of intent for the sale of
its plastics business. As part of the proposed transaction, the Company would
enter into a long-term sales agreement to supply the buyer with approximately
400 million pounds per year of styrene monomer, a principal raw material in
plastics production. The proposed transaction is contingent, among other
things, upon the negotiation and execution of definitive agreements and
obtaining regulatory approvals. The proposed sale is not expected to have a
material effect on the Company's consolidated financial statements.
- 7 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company manufactures and markets intermediate chemicals and specialty
chemical products, operating in a single industry segment. It conducts
business primarily in the Western Hemisphere, Europe, and the Asia Pacific
region.
The Company's two principal manufacturing processes both yield its key
product, propylene oxide (PO), and either one of two co-products, styrene
monomer (SM) or tertiary butyl alcohol (TBA). The Company also manufactures
numerous derivatives of these products, including methyl tertiary butyl ether
(MTBE), the principal derivative of TBA used as an oxygenate and an octane
enhancer in gasoline, and polyols, a key derivative of PO. The Company also
sells toluene di-isocyanate (TDI) obtained under long-term supply agreements
with a third party. TDI and polyols are combined to manufacture polyurethanes.
RESULTS OF OPERATIONS
Product Volumes
Sales and other operating revenues include the sales and processing
volumes of PO, SM, TBA and their derivatives for the periods indicated below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
(Millions)
PO and derivatives (pounds) 794 853 1,647 1,790
Co-products:
SM and derivatives
(pounds) 691 650 1,350 1,349
TBA and derivatives
(gallons) 257 301 532 590
</TABLE>
Second Quarter 1996 versus Second Quarter 1995
Net Income
Net income for the second quarter 1996 was $81 million compared with
$150 million in the second quarter 1995. The decrease in second quarter 1996
net income was primarily attributable to lower SM margins and, to a lesser
extent, lower MTBE margins and volumes. The impact of lower PO and derivatives
volumes was substantially offset by higher PO and derivatives margins.
- 8 -
<PAGE>
Revenues
Revenues of $959 million in the second quarter 1996 decreased 17
percent from $1,149 million in the second quarter 1995, primarily reflecting
lower sales prices for SM as well as lower volumes for TBA and derivatives and
PO and derivatives. SM prices declined significantly from last year's levels
as weaker demand for styrene in Europe and Asia and increased worldwide
capacity resulted in lower selling prices. For example, market data indicate
that average spot styrene prices fell by nearly 60 percent versus the prior
period. The presence of a new competitor in U.S. markets coupled with weaker
demand during the second quarter contributed to a 7 percent decrease in PO and
derivatives volumes. TBA and derivatives volumes decreased 15 percent due to
weaker PO demand, which resulted in lower production levels of co-product TBA.
Gross Profit
Gross profit was $216 million, or 22.5 percent of sales, in the second
quarter 1996, a decrease of $111 million from $327 million, or 28.5 percent of
sales, in the second quarter 1995. The gross profit decrease was primarily
attributable to significantly lower SM margins. Lower MTBE margins and volumes
also contributed to the decline. The impact of lower PO and derivatives
volumes was substantially offset by higher PO and derivatives margins. SM
margins were significantly lower as SM prices decreased substantially more than
raw material costs. PO and derivatives margins primarily improved as a result
of lower raw materials costs.
The Company is party to a number of multi-year, fixed-margin MTBE toll-
based sales contracts covering a substantial portion of the Company's U.S.-
based MTBE volume. These contracts have had the effect of reducing the
exposure of the MTBE business to market cycles. A significant number of these
contracts will terminate in late 1996 through early 1997. The Company is in
the process of negotiating new contracts. In view of the current market
conditions, however, it is anticipated that the pricing in the new contracts
may not provide margins that are as favorable as those provided in the
contracts that are currently in effect.
Other
The Company updated its 1996 estimated effective income tax rate to
31.0 percent from 33.0 percent, reflecting increased utilization of foreign tax
credits. The update resulted in a 28.3 effective income tax rate for the
second quarter 1996 in comparison to 33.7 percent for the second quarter 1995.
The final 1995 effective income tax rate was 32.8 percent.
- 9 -
<PAGE>
Six Months Ended June 30, 1996 versus Six Months Ended June 30, 1995
Net Income
Net income for the first six months 1996 was $187 million compared with
$276 million in the first six months 1995. The decrease was primarily due to
lower SM margins versus the first six months 1995. The benefit from higher PO
and derivatives margins was substantially offset by the combined effect of
lower PO and derivatives volumes and lower MTBE margins and volumes.
Revenues
Revenues decreased 15 percent to $1,941 million in the first six months
1996 from $2,290 million in the first six months 1995, primarily reflecting
lower SM prices and lower volumes for PO and derivatives and TBA and
derivatives. Domestic MTBE prices also decreased from year ago levels but were
more than offset by the benefit from higher prices for PO derivatives.
Volumes for PO and derivatives decreased 8 percent, and volumes for TBA
and derivatives decreased 10 percent. The decrease in PO and derivatives
volumes reflected weaker demand and increased industry capacity. The lower TBA
volumes reflected weaker PO demand, which resulted in lower production levels
of co-product TBA.
Gross Profit
Gross profit decreased to $468 million in the first six months 1996
from $624 million in the first six months 1995. The gross profit decrease was
primarily attributable to significantly lower SM margins. The benefit from
higher PO and derivatives margins was substantially offset by the combined
effect of lower PO and derivatives volumes and lower MTBE margins and volumes.
FINANCIAL CONDITION
Liquidity and Capital Resources
As of June 30, 1996, the Company had $308 million in cash and cash
equivalents and short-term investments compared with $260 million at December
31, 1995. The Consolidated Statement of Cash Flows for the quarter ended June
30, 1996 shows that net cash flows provided by operating activities were $257
million, whereas net cash flows used by investment and financing activities
were $40 million and $141 million, respectively.
On June 7, 1996, the Company entered into a letter of intent for the
sale of its plastics business. As part of the proposed transaction, the
Company would enter into a long-term sales agreement to supply the buyer with
approximately 400 million pounds per year of styrene monomer, a principal raw
material in plastics production. The proposed transaction is contingent, among
- 10 -
<PAGE>
other things, upon the negotiation and execution of definitive agreements and
obtaining regulatory approvals. The proposed sale is not expected to have a
material effect on the Company's consolidated financial statements.
On April 12, 1996, the Board of Directors gave final approval for the
expansion of the PO/SM complex in Channelview, Texas, and the construction of a
new world-scale PO/SM plant in Rotterdam, the Netherlands. The Channelview
PO/SM expansion will add annual PO and SM capacity of 110 million and 248
million pounds, respectively, in early 1998. The new PO/SM plant will be
completed in the fourth quarter 1999, adding annual PO and SM capacity of 625
million and 1,400 million pounds, respectively, upon start up.
Investment activities for the first six months 1996 included capital
expenditures of $95 million, which included initial spending for the above
PO/SM projects as well as low-cost capacity increases and environmental, health
and safety projects. Minority interest includes equity contributions
designated for specific capital projects. At June 30, 1996, the unexpended
amounts were classified as long-term other assets in the balance sheet.
The Company paid dividends of $.70 per share, totalling $68 million, in
the second quarter 1996. On July 18, 1996, the Board of Directors declared a
dividend of $.70 per share on the Company's common stock, payable September 6,
1996.
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.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 requires companies to adopt its
provisions for fiscal years beginning after December 15, 1995. SFAS No. 123
encourages a fair value-based method of accounting for employee stock options
or similar equity instruments, but allows continued use of the intrinsic value-
based method of accounting prescribed by Accounting Principles Board (APB) No.
25, "Accounting for Stock Issued to Employees." Companies electing to continue
to use APB No. 25 must make pro forma disclosures of net income and earnings
per share as if the fair value-based method of accounting had been applied.
The Company will continue to follow the provisions of APB No. 25 and
accordingly, will make the pro forma disclosures required by SFAS No. 123, if
material, in its financial statements for the year ended December 31, 1996.
- 11 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No material developments.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on May 10, 1996.
The stockholders elected all the Company's nominees for director, approved and
ratified an amendment to the ARCO Chemical Company 1990 Long-Term Incentive
Plan, and approved the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for 1996. The votes were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors:
For Withheld
--- --------
Ronald J. Arnault 94,779,337 273,662
Walter F. Beran 94,841,767 211,232
Mike R. Bowlin 94,799,520 253,479
E. Kent Damon, Jr. 94,812,312 240,687
Anthony G. Fernandes 94,814,112 238,887
Alan R. Hirsig 94,812,320 240,679
James A. Middleton 94,800,100 252,899
Frank Savage 94,853,408 199,591
Marvin O.Schlanger 94,807,677 245,322
Robert H. Stewart, III 94,836,862 216,137
Walter J. Tusinski 94,814,172 238,827
</TABLE>
2. Approval and ratification of amendment to the ARCO Chemical
Company 1990 Long-Term Incentive Plan:
For 94,205,853
Against 600,372
Abstain 246,774
3. Approval of the Appointment of Coopers & Lybrand L.L.P.:
For 94,838,138
Against 134,153
Abstain 80,708
- 12 -
<PAGE>
Item 5. Other Information
The Company amended the ARCO Chemical Company 1990 Long-Term Incentive
Plan (the 1990 Plan) to increase to 2,200,000 the number of shares of the
Company's common stock, par value $1.00 per share (Common Stock), that may be
issued upon the exercise of stock options granted under the 1990 Plan. The
1990 Plan had previously authorized the issuance of a maximum of 2,000,000
shares of Common Stock. Amendment No. 5 to the 1990 plan (the Amendment) became
effective as of February 15, 1996.
The Amendment will enable the Long-Term Incentive Plan Administration
Subcommittee (the Subcommittee) of the Compensation Committee of the Board of
Directors of the Company to make future awards of stock options under the 1990
Plan at levels consistent with the purposes of the 1990 Plan and the Company's
compensation policies. The Subcommittee adopted the Amendment on February 15,
1996, subject to stockholder approval and ratification. The Company's
stockholders approved and ratified the Amendment at the annual meeting of
stockholders held on May 10, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10 Amendment No. 5 to the ARCO Chemical Company 1990 Long-Term
Incentive Plan, effective as of February 15, 1996.
27 Financial Data Schedule for the six months ended June 30, 1996.
(b) Reports on Form 8-K:
None
- 13 -
<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: July 31, 1996
- 14 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
10 Amendment No. 5 to the ARCO Chemical Company
1990 Long-Term Incentive Plan, effective as
of February 15, 1996
27 Financial Data Schedule for the six months
ended June 30, 1996
<PAGE>
AMENDMENT NO. 5 TO
THE ARCO CHEMICAL COMPANY
1990 LONG-TERM INCENTIVE PLAN
___________________________________
The ARCO Chemical Company 1990 Long-Term Incentive Plan, as amended (the
"Plan"), is hereby amended as follows:
1. Article IV, Section 1 of the Plan shall be amended and restated in its
entirety as follows:
Section 1. Option Limits
-------------
Subject to adjustment as provided in Section 2 of this Article IV, the
number of shares of Common Stock that may be issued upon exercise of
Stock Options shall not exceed 2,200,000 in the aggregate over the
life of the Plan. The shares shall be made available from authorized
but unissued Common Stock or from Common Stock issued and held in the
treasury of the Company as shall be determined by the Subcommittee.
2. Except as set forth herein, the Plan shall not be amended or modified
and shall remain in full force and effect. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Plan.
Executed as of this 15th day of February, 1996.
By /s/ Frank W. Welsh
---------------------
Frank W. Welsh
Vice President
Attest:
By /s/ Kathy H. Gaddes
---------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 308
<SECURITIES> 0
<RECEIVABLES> 583
<ALLOWANCES> 0
<INVENTORY> 505
<CURRENT-ASSETS> 1,444
<PP&E> 3,821
<DEPRECIATION> 1,574
<TOTAL-ASSETS> 4,186
<CURRENT-LIABILITIES> 590
<BONDS> 857
0
0
<COMMON> 100
<OTHER-SE> 1,892
<TOTAL-LIABILITY-AND-EQUITY> 4,186
<SALES> 1,941
<TOTAL-REVENUES> 1,941
<CGS> 1,473
<TOTAL-COSTS> 1,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 271
<INCOME-TAX> 84
<INCOME-CONTINUING> 187
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
</TABLE>
