===============================================================================
United States
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 September 30, 1995 Commission file number 1-27
Texaco Inc.
(Exact name of the registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Westchester Avenue
White Plains, New York 10650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 253-4000
_________
Texaco Inc. (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,
and (2) has been subject to such filing requirements for the past 90 days.
As of October 31, 1995, there were outstanding 264,109,696 shares of
Texaco Inc. Common Stock - par value $6.25.
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
TEXACO INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Millions of dollars, except per share amounts)
(Unaudited)
-----------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Sales and services $26,237 $23,822 $ 8,620 $ 8,725
Equity in income of affiliates, income from
dividends, interest, asset sales and other 889 572 195 235
------- ------- ------- -------
27,126 24,394 8,815 8,960
------- ------- ------- -------
DEDUCTIONS
Purchases and other costs 20,062 17,431 6,556 6,461
Operating expenses 2,125 2,339 699 818
Selling, general and administrative expenses 1,159 1,229 411 366
Maintenance and repairs 272 282 88 97
Exploratory expenses 195 208 81 52
Depreciation, depletion and amortization 1,275 1,284 351 445
Interest expense 365 368 120 122
Taxes other than income taxes 361 373 115 131
Minority interest 42 30 12 12
------- ------- ------- -------
25,856 23,544 8,433 8,504
------- ------- ------- -------
Income from continuing operations
before income taxes 1,270 850 382 456
Provision for income taxes 419 252 94 175
------- ------- ------- -------
Net income from continuing operations 851 598 288 281
------- ------- ------- -------
Discontinued operations - Net loss on disposal - (87) - -
------- ------- ------- -------
NET INCOME $ 851 $ 511 $ 288 $ 281
======= ======= ======= =======
Preferred stock dividend requirements $ 46 $ 76 $ 15 $ 27
------- ------- ------- -------
Net income available for common stock $ 805 $ 435 $ 273 $ 254
======= ======= ======= =======
Net income per common share (dollars)
Net income (loss)
Continuing operations $ 3.10 $ 2.02 $ 1.05 $ .98
Discontinued operations - (.34) - -
------- ------- ------- -------
Net income $ 3.10 $ 1.68 $ 1.05 $ .98
======= ======= ======= =======
Cash dividends paid $ 2.40 $ 2.40 $ .80 $ .80
Average number of common shares
outstanding (thousands) 259,862 259,192 260,087 259,117
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
----------------------------------------------
(Millions of dollars)
September 30, December 31,
1995 1994
----------- ------------
(Unaudited)
-----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 360 $ 404
Short-term investments - at fair value 24 60
Accounts and notes receivable, less allowance for doubtful
accounts of $23 million in 1995 and $25 million in 1994 3,338 3,297
Inventories 1,385 1,358
Assets under agreements for sale - 488
Net assets of discontinued operations 195 195
Deferred income taxes and other current assets 242 217
------- -------
Total current assets 5,544 6,019
Investments and Advances 5,629 5,336
Properties, Plant and Equipment - at cost 31,253 31,095
Less - Accumulated depreciation, depletion and amortization 18,091 17,612
------- -------
Net properties, plant and equipment 13,162 13,483
Deferred Charges 661 667
------- -------
Total $24,996 $25,505
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, commercial paper and
current portion of long-term debt $ 347 $ 917
Accounts payable and accrued liabilities 3,159 3,297
Estimated income and other taxes 793 801
------- -------
Total current liabilities 4,299 5,015
Long-Term Debt and Capital Lease Obligations 5,605 5,564
Deferred Income Taxes 848 879
Employee Retirement Benefits 1,120 1,130
Deferred Credits and Other Noncurrent Liabilities 2,534 2,558
Minority Interest in Subsidiary Companies 600 610
------- -------
Total 15,006 15,756
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 500 515
Unearned employee compensation (256) (282)
Common stock - par value $6.25:
Shares authorized - 350,000,000
Shares issued - 274,293,417 in 1995 and 1994,
including treasury stock 1,714 1,714
Paid-in capital in excess of par value 654 654
Retained earnings 7,660 7,463
Currency translation adjustment 92 87
Unrealized net gain on investments 51 51
------- -------
10,715 10,502
Less - Common stock held in treasury, at cost -
14,212,232 shares in 1995 and
14,761,296 shares in 1994 725 753
------- -------
Total stockholders' equity 9,990 9,749
------- -------
Total $24,996 $25,505
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
-----------------------------------------------------
(Millions of dollars)
(Unaudited)
-------------------
For the nine months
ended September 30,
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 851 $ 511
Reconciliation to net cash provided by (used in) operating activities
Loss on disposal of discontinued operations - 92
Depreciation, depletion and amortization 1,275 1,284
Deferred income taxes 2 (43)
Exploratory expenses 195 208
Minority interest in net income 42 30
Dividends from affiliates, less than equity in income (117) (52)
Gains on asset sales (275) (76)
Changes in operating working capital (451) (230)
Other - net 53 54
------- -------
Net cash provided by operating activities 1,575 1,778
INVESTING ACTIVITIES
Capital and exploratory expenditures (1,681) (1,443)
Proceeds from sale of discontinued operations, net of
cash and cash equivalents sold - 645
Proceeds from sales of assets 1,043 222
Sale of leasehold interests 214 -
Purchases of investment instruments (959) (589)
Sales/maturities of investment instruments 964 594
Other - net 13 2
------- -------
Net cash used in investing activities (406) (569)
FINANCING ACTIVITIES
Borrowings having original terms in excess
of three months
Proceeds 94 641
Repayments (287) (358)
Net decrease in other borrowings (301) (595)
Issuance of preferred stock by a subsidiary - 112
Redemption of redeemable Series C preferred stock - (267)
Purchases of common stock for treasury - (77)
Dividends paid to the company's stockholders
Common (624) (622)
Preferred (36) (65)
Dividends paid to minority shareholders (46) (77)
Other - net - (3)
------- -------
Net cash used in financing activities (1,200) (1,311)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (13) 7
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (44) (95)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 404 488
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 360 $ 393
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Assets Under Agreements for Sale
- ----------------------------------------
In 1994, Texaco announced that it agreed to sell more than 300 scattered U.S.
producing fields to Apache Corporation and agreed to form a strategic
alliance with STENA, involving the sale of a portion of its international
marine fleet. At December 31, 1994, the net properties, plant and equipment
and deferred income taxes relating to those assets, and to other non-core
assets for which sales agreements had been signed, were classified as current
assets in the Consolidated Balance Sheet under the caption "Assets under
agreements for sale." During 1995, virtually all of these non-core asset sales
have been completed, generating some $650 million in cash proceeds.
Note 2. Discontinued Operations
- -------------------------------
In 1993, Texaco Inc. entered into memorandums of understanding with an
affiliate of the Jon M. Huntsman Group of Companies for the sale of
substantially all of Texaco's worldwide chemical operations and, therefore,
has accounted for these operations as discontinued operations.
On April 21, 1994, Texaco Inc. received from Huntsman Corporation $850 million
as part of the sale of Texaco Chemical Company ("TCC"), consisting of $650
million in cash and an 11-year subordinated note with a face amount of $200
million. Not included in this transaction was Texaco's worldwide lubricant
additives business.
On September 25, 1995, Texaco announced that it had signed an agreement with
Ethyl Corporation ("Ethyl"), a fuel and lubricant additives manufacturer, for
the sale of Texaco's worldwide lubricant additives business. The plan to sell
Texaco's lubricant additives operations, which had been a division of TCC, was
announced in December 1993 when it was separated from the sale of TCC to
Huntsman Corporation. At that time, Texaco agreed to work with Huntsman to
determine if there was an appropriate third-party buyer or an operating
arrangement for the lubricant additives business. The sale to Ethyl is subject
to approval by appropriate regulatory agencies and antitrust review under the
Hart-Scott-Rodino Act.
The results for Texaco's worldwide lubricant additives business are accounted
for as discontinued operations. The assets and liabilities of the worldwide
lubricant additives business have been classified in the Consolidated Balance
Sheet as "Net assets of discontinued operations."
Revenues for the discontinued operations totaled $171 million and $57 million
for the first nine months and the third quarter of 1995, respectively,
representing revenues of the lubricant additives business. For 1994, revenues
for the discontinued operations totaled $364 million for the first nine months
and $53 million for the third quarter, representing revenues of the chemical
and lubricant additives businesses for the first quarter of 1994 and only the
revenues of the lubricant additives business for the second and third quarters
of 1994.
A net charge of $87 million, (including a $2 million provision for income
taxes), or $.34 per share, was recorded in the second quarter of 1994 relating
to the disposal of the chemical business.
- 4 -
<PAGE>
Note 3. Inventories
- -------------------
The inventories of Texaco Inc. and consolidated subsidiary companies were
as follows:
<TABLE>
<CAPTION>
As of
---------------------------
September 30, December 31,
1995 1994
----------- ------------
(Unaudited)
(Millions of dollars)
<S> <C> <C>
Crude oil $ 311 $ 284
Petroleum products and petrochemicals 852 854
Other merchandise 32 30
Materials and supplies 190 190
------ ------
Total $1,385 $1,358
====== ======
</TABLE>
Note 4. Contingent Liabilities
- ------------------------------
Information relative to commitments and contingent liabilities of Texaco Inc.
and subsidiary companies is presented in Notes 16 and 17, beginning on page 57,
of Texaco Inc.'s 1994 Annual Report to Stockholders.
____________________
In the company's opinion, while it is impossible to ascertain the ultimate
legal and financial liability with respect to the above-mentioned and other
contingent liabilities and commitments, including lawsuits, claims, guarantees,
taxes and regulations, the aggregate amount of such liability in excess of
financial reserves, together with deposits and prepayments made against
disputed tax claims, is not anticipated to be materially important in relation
to the consolidated financial position or results of operations of Texaco Inc.
and its subsidiaries.
- 5 -
<PAGE>
Note 5. Caltex Group of Companies
- ---------------------------------
Summarized unaudited financial information for the Caltex Group of Companies
("Caltex Group"), owned 50 percent by Texaco and 50 percent by Chevron
Corporation, is presented below and is reflected on a 100 percent Caltex
Group basis:
<TABLE>
<CAPTION>
For the nine months For the three months
ended September 30, ended September 30,
-------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Gross revenues $11,603 $10,844 $3,304 $3,906
Income before income taxes $ 1,034 $ 774 $ 202 $ 268
Net income $ 667 $ 448 $ 87 $ 151
</TABLE>
Net income for the first nine months of 1995 includes a third quarter net
charge of $26 million for the restructuring of certain operations and a first
quarter net gain for U.S. financial reporting of $171 million relating to the
sale of a portion of land and air utility rights by a Caltex Petroleum
Corporation affiliate in Japan required for a public project. The proceeds
include compensation that will be used to remove and relocate or replace
existing fixed operating assets affected by the sale.
* * * * * * * * * * *
In the determination of preliminary and unaudited financial statements for
the nine -month and three-month periods ended September 30, 1995 and 1994,
Texaco's accounting policies have been applied on a basis consistent with the
application of such policies in Texaco's financial statements issued in its
1994 Annual Report to Stockholders. In the opinion of Texaco, all adjustments
and disclosures necessary to present fairly the results of operations for such
periods have been made. These adjustments are of a normal recurring nature.
The information is subject to year-end audit by independent public accountants.
Texaco makes no forecasts or representations with respect to the level of net
income for the year 1995.
- 6 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Consolidated worldwide net income for Texaco Inc. and subsidiary companies for
the third quarter of 1995 was $288 million, or $1.05 per share, as compared
with $281 million, or $.98 per share, for the third quarter of 1994. For the
first nine months of 1995, net income was $851 million, or $3.10 per share,
as compared with $511 million, or $1.68 per share, for the first nine months
of 1994.
Net income for the first nine months of 1994 reflects a second quarter net
charge of $87 million, (including a $2 million provision for income taxes),
or $0.34 per share, for discontinued operations relating to the sale of
substantially all of Texaco's worldwide chemical business.
Net income for the third quarter and nine months of 1995 includes $44 million
in tax benefits realizable through the sale of an interest in a subsidiary.
Nine months 1994 results include similar tax benefits of $87 million, of which
$79 million was recognized in the second quarter and $8 million in the third
quarter. Results for the third quarter of 1995 also include a net special
charge of $42 million, comprised of $56 million for the cost of additional
employee separations, $13 million for the restructuring of certain Caltex
Petroleum Corporation operations and a $27 million gain from the sale of
Texaco's interest in Pekin Energy Company. Additionally, nine-month results
for 1995 include first quarter special net gains of $88 million, principally
relating to the sale of land by a Caltex affiliate in Japan and to sales of
non-core U.S. producing properties.
Third quarter 1994 results include a net special gain of $3 million resulting
from a $23 million gain on the sale of an interest in a downstream joint
venture in Sweden and a charge of $20 million by an insurance subsidiary
related to property damage from a refinery fire. Nine months results for
1994 also include second quarter special charges of $119 million related
to employee separations and the write-down of certain non-core assets.
These results are summarized in the following table:
<TABLE>
<CAPTION>
(Unaudited)
------------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
-------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Net income from continuing operations before special items $ 761 $ 627 $ 286 $ 270
Tax benefits on asset sale 44 87 44 8
Net special (charges) credits 46 (116) (42) 3
----- ----- ----- -----
Net income from continuing operations 851 598 288 281
Net loss on disposal of discontinued chemical operations - (87) - -
----- ----- ----- -----
Net income $ 851 $ 511 $ 288 $ 281
===== ===== ===== =====
</TABLE>
Third quarter operating results reflect continued positive progress on Texaco's
plan for growth, despite the impact of lower prices for both U.S. natural gas
and worldwide crude oil. Improved earnings in the face of these factors reflect
Texaco's focus on maximizing core oil and gas results and divesting non-core
assets.
Nine months 1995 earnings were boosted by higher worldwide crude oil prices
earlier in the year, and continued significant operational improvements and
cost reductions, helping offset the $.41 per MCF decrease in U.S. natural gas
prices and poor manufacturing margins which dampened solid U.S. marketing
performance.
- 7 -
<PAGE>
OPERATING EARNINGS FROM CONTINUING OPERATIONS
PETROLEUM AND NATURAL GAS
UNITED STATES
Exploration and Production
Exploration and production earnings in the U.S. for the third quarter of 1995
were $159 million, as compared with $127 million for the third quarter of 1994.
Earnings for the first nine months of 1995 and 1994, including special items,
were $472 million and $299 million, respectively. Results for 1995 include a
first quarter gain of $120 million from non-core producing property sales,
mostly offset by certain write-downs of properties being held for sale and
reserves for environmental remediation on these properties which totaled $112
million, resulting in a net gain of $8 million. Results for 1994 included
second quarter special charges of $24 million relating to the cost associated
with employee separations.
Improvements in comparative results for both the third quarter and first nine
months reflect lower operating expenses in core producing properties, the
effects of reduced overhead and operating improvements from the application of
new technologies. These savings are in addition to expense reductions
associated with the sales of non-core producing properties.
Net income for the first nine months of 1995 also benefited from crude oil
prices that averaged some $2 per barrel higher than last year, although third
quarter 1995 prices were only $.06 per barrel above the comparable 1994 levels.
The 1995 prices for heavy Californian crudes, approximately 35 percent of
Texaco's U.S. production, were higher than 1994 due to continuing strong
regional demand. However, results for both the third quarter and first nine
months of 1995 were reduced by the significant deterioration of natural gas
prices from last year.
Excluding non-core producing properties, which represented some nine percent of
U.S. production, crude oil and natural gas production in 1995 was essentially
equal to 1994 levels due to enhanced production from core areas.
Manufacturing, Marketing and Distribution
Manufacturing, marketing and distribution earnings in the U.S. for the third
quarter of 1995, including special charges, were $60 million, as compared with
$92 million for the third quarter of 1994. Earnings for the first nine months
of 1995 and 1994, including special charges, were $69 million and $185
million, respectively. Third quarter and nine months 1995 results include
special charges of $11 million relating to employee separations. Results for
the first nine months of 1994 include second quarter special charges of $24
million relating to the write-down of certain non-core assets and employee
separations.
Third quarter 1995 margins improved substantially over the second quarter of
the year, principally on the West Coast. However, third quarter and nine
months 1995 results were below the levels experienced last year, reflecting
continuing weak margins in many areas and the effects of storm-related
downtime and scheduled maintenance at refineries, particularly on the East
and Gulf coasts. Expense containment programs partly offset these declines.
- 8 -
<PAGE>
INTERNATIONAL
Exploration and Production
Exploration and production earnings outside the U.S. for the third quarter of
1995 were $89 million, as compared with $83 million for the third quarter of
1994. Earnings for the first nine months of 1995 were $253 million, as compared
with $146 million for the first nine months of 1994, including special charges.
Results for 1994 include second quarter special charges of $16 million related
to the write-down of certain non-core assets and employee separations.
The increase in comparative operating results for the third quarter reflects
production from new fields in China, as well as expanded production in
Indonesia and in the Partitioned Neutral Zone between Kuwait and Saudi Arabia.
However, these benefits were largely offset by the impact of temporary
interruptions of some crude oil production in the North Sea, as well as lower
crude oil prices largely in Far East markets.
Nine-month 1995 prices were $1.71 per barrel higher than in 1994. These higher
prices, combined with increased crude oil and natural gas production,
contributed to the strong comparative earnings improvement for the first nine
months.
Manufacturing, Marketing and Distribution
Manufacturing, marketing and distribution earnings outside the U.S. for the
third quarter of 1995 and 1994, including special items, were $15 million and
$98 million, respectively. Earnings for the first nine months of 1995 and 1994,
including special items, were $275 million and $252 million, respectively. Net
income for the first nine months of 1995 includes a net special gain of $38
million, comprised of $42 million of third quarter special charges relating to
employee separations in subsidiary operations and Caltex restructuring charges
and a first quarter net gain of $80 million, principally relating to the sale
of land by a Caltex affiliate in Japan. Nine months 1994 results included a
$23 million third quarter gain related to the sale of an interest in a
downstream joint venture in Sweden and second quarter special charges of $38
million related to employee separations and to the write-down of certain
non-core assets.
Comparative third quarter international downstream operating earnings declined
as improved results in United Kingdom operations were more than offset by
weakened margins in Latin America and lower volumes as a result of the
continuing refinery upgrade project in Panama, and lower results in the Caltex
operating areas.
The decrease in operating earnings before special charges for the first nine
months of 1995 mainly reflects overall weak European margins during the first
half of the year, particularly in the U.K., partly offset by solid first-half
margins and volumes in Latin America and higher margins in the Caltex
operating areas.
NONPETROLEUM
Nonpetroleum results for the third quarter of 1995 and 1994, including special
items, were earnings of $36 million and losses of $26 million, respectively.
Results for the first nine months of 1995 and 1994, including special items,
were earnings of $47 million and losses of $33 million, respectively.
Results for the third quarter and nine months 1995 include a $27 million gain
from the sale of the company's interest in Pekin Energy Company. The third
quarter and nine months 1994 results included a $20 million special charge in
the insurance operations related to property fire damage at the Pembroke,
Wales, refinery.
Higher 1995 nonpetroleum earnings mainly reflect the improved loss experience
of insurance operations.
- 9 -
<PAGE>
CORPORATE/NONOPERATING RESULTS FROM CONTINUING OPERATIONS
Corporate/nonoperating charges for the third quarter of 1995 and 1994,
including special items, were $71 million and $93 million, respectively.
Charges for the first nine months of 1995 and 1994, including special items,
were $265 million and $251 million, respectively. Results for the first nine
months of 1995 include first quarter gains of $25 million, principally from
sales of equity securities held for investment by the insurance operations.
The third quarter and nine months 1995 results include $44 million of tax
benefits realizable through the sale of an interest in a subsidiary. Nine
months 1994 results include similar tax benefits of $87 million, of which
$79 million was recognized in the second quarter and $8 million in the third
quarter. Special charges for employee separations totaled $16 million for the
third quarter and nine months of 1995. The results for the first nine months
of 1994 included second quarter special charges of $17 million for employee
separations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of September 30, 1995, Texaco's cash, cash equivalents and short-term
investments totaled $384 million, as compared to the 1994 year-end level of
$464 million. Texaco's total cash from operating activities for the first nine
months of 1995 (as presented on the Condensed Statement of Consolidated Cash
Flows) included several significant items that were not directly related to
current period operations, and which in the aggregate, amounted to a net
outflow of some $200 million. Among these items were payments related to
employee severance and litigation settlements (primarily the State of Louisiana
royalty dispute).
During the first nine months of 1995, cash generated from normal operating
activities and proceeds from asset sales, which are discussed below, were used
to support Texaco's capital and exploratory expenditures of $1,681 million,
for payment of dividends to common, preferred and minority shareholders of
$706 million, and for the reduction of debt.
Total debt at September 30, 1995 amounted to $5,952 million as compared to
$6,481 million at year-end 1994. Texaco's ratio of total debt to total borrowed
and invested capital was 36.0% at September 30, 1995 and 38.5% at year-end
1994. At September 30, 1995, Texaco's long-term debt included $741 million of
debt scheduled to mature within one year, which the company has both the intent
and the ability to refinance on a long-term basis. Texaco maintains a
revolving credit facility with commitments of $2.0 billion, which remained
unused at both September 30, 1995 and at year-end 1994. Additionally, a
subsidiary maintains a long-term revolving credit facility for $330 million,
which was fully utilized at September 30, 1995 and year-end 1994 and is
reflected in long-term debt. Texaco's total notional principal amount of
interest rate swaps declined from $1,202 million at December 31, 1994 to
$790 million at September 30, 1995 through maturities and terminations.
Proceeds from asset sales for the first nine months of 1995 amounted to $1,043
million. These proceeds included the sale of non-core producing properties in
the United States, mainly some 300 scattered properties sold to Apache
Corporation, the sale and leaseback of equipment in a foreign offshore
development project, the sale of Texaco's 50 percent equity interest in Pekin
Energy Company and the sale of a portion of Texaco's marine fleet.
Additionally, Texaco expects to collect some $250 million during the next six
months relative to receivables associated with asset sales in 1994 and 1995.
Proceeds from asset sales are key to financing growth opportunities in
core businesses.
During the third quarter of 1995, Texaco received $214 million, representing
partial proceeds from the sale of equipment leasehold interests in conjunction
with a sale/leaseback arrangement. Texaco will repurchase these interests at a
future date.
- 10 -
<PAGE>
Also, during the third quarter of 1995, Texaco announced that it had signed an
agreement with Ethyl Corporation, a fuel and lubricant additives manufacturer,
for the sale of Texaco's worldwide lubricant additives business, subject to
antitrust review under the Hart-Scott-Rodino Act. The proceeds from this sale
will be applied to opportunities in core businesses and for other general
corporate purposes.
Subsequent to September 30, 1995, Texaco announced a stock repurchase program
to buy up to $500 million of its common stock through open market or privately
negotiated transactions. Subject to market conditions and applicable regulatory
requirements, the stock repurchase program is expected to be completed around
the second quarter of 1997.
The company considers its financial position sufficient to meet its anticipated
future financial requirements.
EMPLOYEE SEVERANCE PROGRAM
- --------------------------
On July 5, 1994, Texaco announced its plan for growth which included a series
of action steps to increase competitiveness and profitability. This program
also called for reduction in overheads and improvements in operating
efficiencies. Implementation of Texaco's program was expected to result in the
reduction of approximately 2,500 employees worldwide by June 30, 1995,
involving both the U.S. and international upstream and downstream segments, as
well as various support staff functions. During the second quarter of 1994,
Texaco recorded a charge of $88 million, net of tax, for the anticipated
severance costs associated with the employee reductions.
On October 2, 1995, Texaco announced additional employee separations as a
result of the continued successful application of its overhead reduction
initiative. In this regard, in the third quarter 1995, Texaco recorded an
after-tax charge of $56 million for the cost of these employee separations. By
year-end 1996, these overhead reduction initiatives will have effected workload
reductions and non-core asset sales, resulting in approximately 4,000 fewer
positions worldwide compared with June 1994 levels.
As of September 30, 1995, implementation of Texaco's program has included
reductions of over 3,000 employees worldwide with a related commitment to
severance payments of $143 million, or an after-tax cost of $99 million. Of
this commitment, payments of $128 million have been made as of September
30, 1995.
CAPITAL AND EXPLORATORY EXPENDITURES
- ------------------------------------
Capital and exploratory expenditures for continuing operations, including
equity in such expenditures of affiliates, were $2,058 million for the first
nine months of 1995, as compared to $1,788 million for the same period of 1994.
Consistent with the intent to reinvest the proceeds of non-core asset sales,
expenditures for the third quarter of 1995 amounted to $786 million, versus
$557 million for the third quarter of 1994.
Increased worldwide exploration and production expenditures in 1995 reflect the
continued development of the Captain field in the U.K. sector of the North
Sea, as well as higher U.S. expenditures, both onshore and offshore, during the
third quarter of 1995.
Downstream expenditures remained relatively stable as compared to the prior
year as 1995's higher worldwide marketing investments were balanced out by the
completion of several refinery upgrade projects.
- 11 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Reference is made to the discussion of Contingent Liabilities in Note 4 to the
Consolidated Financial Statements of this Form 10-Q, Item 1 of Texaco Inc.'s
Form 10-Q for the quarterly periods ended March 31, 1995 and June 30, 1995 and
to Item 3 of Texaco Inc.'s 1994 Annual Report on Form 10-K, which are
incorporated herein by reference.
Environmental Matters
As of September 30, 1995, Texaco Inc. and its subsidiaries were parties to
various proceedings, instituted by governmental authorities, arising under the
provisions of applicable laws or regulations relating to the discharge of
materials into the environment or otherwise relating to the protection of the
environment, none of which is material to the business or financial condition
of the company. The following is a brief description of one new proceeding
which, because of the amount involved, requires disclosure under applicable
Securities and Exchange Commission regulations:
The Delaware Department of Natural Resources and Environmental Control
(DNREC) has informally cited Star Enterprise's Delaware City refinery for
emitting nitrogen oxide in quantities exceeding the refinery's permit
levels in 1993 and 1994. The DNREC seeks civil penalties of $175,000.
Star Enterprise is contesting liability.
- 12 -
<PAGE>
Item 5. Other Information
- -------------------------
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
(Millions of dollars)
<S> <C> <C> <C> <C>
FUNCTIONAL NET INCOME
- --------------------
Operating earnings (losses) from continuing operations
Petroleum and natural gas
Exploration and production
United States $ 472 $ 299 $ 159 $ 127
International 253 146 89 83
------ ------ ------ ------
Total 725 445 248 210
------ ------ ------ ------
Manufacturing, marketing and distribution
United States 69 185 60 92
International 275 252 15 98
------ ------ ------ ------
Total 344 437 75 190
------ ------ ------ ------
Total petroleum and natural gas 1,069 882 323 400
Nonpetroleum 47 (33) 36 (26)
------ ------ ------ ------
Total operating earnings 1,116 849 359 374
Corporate/Nonoperating (265) (251) (71) (93)
------ ------ ------ ------
Net income from continuing operations 851 598 288 281
Discontinued operations - Net loss on disposal - (87) - -
------ ------ ------ ------
Net income $ 851 $ 511 $ 288 $ 281
====== ====== ====== ======
CAPITAL AND EXPLORATORY EXPENDITURES
- ------------------------------------
Texaco Inc. and subsidiary companies
Exploration and production
United States $ 633 $ 598 $ 246 $ 148
International 644 376 260 111
------ ------ ------ ------
Total 1,277 974 506 259
------ ------ ------ ------
Manufacturing, marketing and distribution
United States 168 166 66 64
International 187 181 69 60
------ ------ ------ ------
Total 355 347 135 124
------ ------ ------ ------
Other 18 20 6 6
------ ------ ------ ------
Total 1,650 1,341 647 389
------ ------ ------ ------
Equity in affiliates
United States 97 96 32 45
International 311 351 107 123
------ ------ ------ ------
Total 408 447 139 168
------ ------ ------ ------
Total continuing operations 2,058 1,788 786 557
------ ------ ------ ------
Discontinued operations 2 21 1 1
------ ------ ------ ------
Total worldwide $2,060 $1,809 $ 787 $ 558
====== ====== ====== ======
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
- -------------
Net production of crude oil and natural gas liquids
(thousands of barrels per day)
United States 381 408 373 407
Other Western Hemisphere 17 20 15 21
Europe 117 116 118 126
Other Eastern Hemisphere 243 234 257 232
------ ------ ------ ------
Total 758 778 763 786
Net production of natural gas available for sale
(millions of cubic feet per day)
United States 1,627 1,728 1,618 1,720
Europe 210 148 172 137
Other International 170 153 163 157
------ ------ ------ ------
Total 2,007 2,029 1,953 2,014
Natural gas sales (millions of cubic feet per day)
United States 3,162 3,083 3,046 3,156
Europe 254 153 227 141
Other International 180 164 171 167
------ ------ ------ ------
Total 3,596 3,400 3,444 3,464
Natural gas liquids sales, including purchased LPG's
(thousands of barrels per day)
United States 214 211 207 212
International 79 70 86 93
------ ------ ------ ------
Total 293 281 293 305
Refinery input (thousands of barrels per day)
United States 691 661 703 704
Other Western Hemisphere 35 47 41 53
Europe 284 279 312 188
Other Eastern Hemisphere 443 456 453 447
------ ------ ------ ------
Total 1,453 1,443 1,509 1,392
Refined product sales (thousands of barrels per day)
United States 913 876 942 908
Other Western Hemisphere 340 308 331 318
Europe 453 445 487 411
Other Eastern Hemisphere 736 702 698 707
------ ------ ------ ------
Total 2,442 2,331 2,458 2,344
</TABLE>
- 14 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
_ (11) Computation of Earnings Per Share of Common Stock of Texaco Inc.
and Subsidiary Companies.
_ (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on a
Total Enterprise Basis.
_ (20) Copy of Texaco Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (including portions of Texaco Inc.'s
Annual Report to Stockholders for the year 1994) and a copy of
Texaco Inc.'s Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1995 and June 30, 1995, as previously
filed by the Registrant with the Securities and Exchange
Commission, File No. 1-27.
_ (27) Financial Data Schedule.
(b) Reports on Form 8-K:
During the third quarter of 1995, the Registrant filed two Current Reports
on Form 8-K for the following events:
1. July 25, 1995 (date of earliest event reported: July 25, 1995)
Item 5. Other Events - reported that Texaco issued an Earnings Press
Release for the second quarter 1995. Texaco appended as an exhibit
thereto a copy of the Press Release entitled "Texaco Reports Results
for the Second Quarter and First Half 1995," dated July 25, 1995.
2. September 26, 1995 (date of earliest event reported: September 25,
1995)
Item 5. Other Events - reported that Texaco announced that it had
signed an agreement with Ethyl Corporation for the sale of Texaco's
worldwide additives business, subject to antitrust review under the
Hart-Scott-Rodino Act. Texaco appended as an exhibit thereto a copy
of the Press Release entitled "Texaco to Sell Worldwide Lubricant
Additives Business to Ethyl Corporation," dated September 25, 1995.
- 15 -
<PAGE>
SIGNATURES
----------
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.
Texaco Inc.
--------------------
(Registrant)
By: R.C. Oelkers
---------------------
(Comptroller)
By: R.E. Koch
---------------------
(Assistant Secretary)
Date: November 13, 1995
-----------------
- 16 -
EXHIBIT 11
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
---------------------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
-----------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Net Income Per Common Share
- -----------------------------------
Net income from continuing operations $ 851 $ 598 $ 288 $ 281
Discontinued operations - (87) - -
------- ------- ------- -------
Net income 851 511 288 281
Less: Preferred stock dividend requirements (46) (76) (15) (27)
------- ------- ------- -------
Primary net income available for common stock $ 805 $ 435 $ 273 $ 254
======= ======= ======= =======
Average number of primary common shares
outstanding (thousands) 259,862 259,192 260,087 259,117
======= ======= ======= =======
Primary net income per common share $ 3.10 $ 1.68 $ 1.05 $ .98
======= ======= ======= =======
Fully Diluted Net Income Per Common Share
- -----------------------------------------
Net income $ 851 $ 511 $ 288 $ 281
Preferred stock dividend requirements of
non-dilutive issues and adjustments to net
income associated with dilutive securities (18) (76) (6) (18)
------- ------- ------- -------
Fully diluted net income $ 833 $ 435 $ 282 $ 263
======= ======= ======= =======
Average number of primary common shares
outstanding (thousands) 259,862 259,192 260,087 259,117
Additional shares outstanding assuming full
conversion of dilutive convertible securities
into common stock (thousands):
Convertible debentures 147 - 146 148
Convertible Preferred Stock
Series B ESOP 9,883 - 9,790 10,183
Series F ESOP 663 - 660 702
Other 52 69 52 67
------- ------- ------- -------
Average number of fully diluted common
shares outstanding (thousands) 270,607 259,261 270,735 270,217
======= ======= ======= =======
Fully diluted net income per common share $ 3.08 $ 1.68 $ 1.04 $ .97
======= ======= ======= =======
</TABLE>
EXHIBIT 12
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
OF TEXACO ON A TOTAL ENTERPRISE BASIS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1994 (a)
------------------------------------------------------
(Millions of dollars)
For the Nine Years Ended December 31,
Months Ended ------------------------
September 30, 1995 1994 1993 1992 1991 1990
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations, before provision or
benefit for income taxes and cumulative effect of
accounting changes effective 1-1-92 $1,435 $1,409 $1,392 $1,707 $1,744 $2,448
Dividends from less than 50% owned companies
more or (less) than equity in net income 2 (1) (8) (9) 5 (7)
Minority interest in net income 42 44 17 18 16 12
Previously capitalized interest charged to
income during the period 25 29 33 30 23 16
------ ------ ------ ------ ------ ------
Total earnings 1,504 1,481 1,434 1,746 1,788 2,469
------ ------ ------ ------ ------ ------
Fixed charges:
Items charged to income:
Interest charges 465 594 546 551 644 676
Interest factor attributable to operating
lease rentals 89 118 91 94 76 58
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc. 28 31 4 - - -
------ ------ ------ ------ ------ ------
Total items charged to income 582 743 641 645 720 734
Interest capitalized 19 21 57 109 80 50
Interest on ESOP debt guaranteed by Texaco Inc. 10 14 14 18 26 38
------ ------ ------ ------ ------ ------
Total fixed charges 611 778 712 772 826 822
------ ------ ------ ------ ------ ------
Earnings available for payment of fixed charges $2,086 $2,224 $2,075 $2,391 $2,508 $3,203
(Total earnings + Total items charged to income) ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges of Texaco
on a total enterprise basis 3.41 2.86 2.91 3.10 3.04 3.90
====== ====== ====== ====== ====== ======
<FN>
(a) Excludes discontinued operations.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TEXACO
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000097349
<NAME> TEXACO INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 360
<SECURITIES> 24
<RECEIVABLES> 3,361
<ALLOWANCES> 23
<INVENTORY> 1,385
<CURRENT-ASSETS> 5,544
<PP&E> 31,253
<DEPRECIATION> 18,091
<TOTAL-ASSETS> 24,996
<CURRENT-LIABILITIES> 4,299
<BONDS> 5,605
<COMMON> 1,643
0
544
<OTHER-SE> 7,803
<TOTAL-LIABILITY-AND-EQUITY> 24,996
<SALES> 26,237
<TOTAL-REVENUES> 27,126
<CGS> 20,062
<TOTAL-COSTS> 22,187
<OTHER-EXPENSES> 3,304
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 365
<INCOME-PRETAX> 1,270
<INCOME-TAX> 419
<INCOME-CONTINUING> 851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851
<EPS-PRIMARY> 3.10
<EPS-DILUTED> 3.08
</TABLE>
