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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, 1996 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
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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, 1996, there were outstanding 264,459,840 shares of Texaco
Inc. Common Stock - par value $6.25.
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<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
---------------------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
--------------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
------------------- --------------------
1996 1995(a) 1996 1995(a)
---- ------- ---- -------
<S> <C> <C> <C> <C>
REVENUES
Sales and services $31,777 $26,237 $10,901 $ 8,621
Equity in income of affiliates, and income from
interest, asset sales and other 852 903 196 193
------- ------- ------- --------
32,629 27,140 11,097 8,814
------- ------- ------- --------
DEDUCTIONS
Purchases and other costs 24,526 20,062 8,399 6,556
Operating expenses 2,105 2,140 721 713
Selling, general and administrative expenses 1,205 1,159 406 411
Maintenance and repairs 266 272 88 88
Exploratory expenses 243 180 84 66
Depreciation, depletion and amortization 1,068 1,091 364 346
Interest expense 328 365 107 120
Taxes other than income taxes 361 361 129 115
Minority interest 50 43 17 13
------- ------- ------- --------
30,152 25,673 10,315 8,428
------- ------- ------- --------
Income from continuing operations before income
taxes and cumulative effect of accounting change 2,477 1,467 782 386
Provision for income taxes 968 488 348 96
------- ------- ------- --------
Net income from continuing operations before
cumulative effect of accounting change 1,509 979 434 290
Cumulative effect of accounting change - (121) - -
------- ------- ------- --------
NET INCOME $ 1,509 $ 858 $ 434 $ 290
======= ======= ======= ========
Preferred stock dividend requirements (43) (46) (14) (15)
------- ------- ------- --------
Net income available for common stock $ 1,466 $ 812 $ 420 $ 275
------- ------- ------- --------
Per common share (dollars)
Net income from continuing operations before
cumulative effect of accounting change $ 5.62 $ 3.60 $ 1.61 $ 1.06
Cumulative effect of accounting change - (.47) - -
------- ------- ------- --------
Net income $ 5.62 $ 3.13 $ 1.61 $ 1.06
======= ======= ======= ========
Cash dividends paid $ 2.45 $ 2.40 $ .85 $ .80
Average number of common shares outstanding
for computation of earnings per share
(thousands) 260,725 259,862 260,758 260,087
<FN>
(a) Previously reported results for 1995 have been reclassified and restated for the adoption of SFAS 121.
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
----------------------------------------------
(Millions of dollars)
September 30, December 31,
1996 1995
---- ----
(Unaudited)
-----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 903 $ 501
Short-term investments - at fair value 42 35
Accounts and notes receivable, less allowance for doubtful
accounts of $36 million in 1996 and $28 million in 1995 4,019 4,177
Inventories 1,526 1,357
Net assets of discontinued operations - 164
Deferred income taxes and other current assets 204 224
------- -------
Total current assets 6,694 6,458
Investments and Advances 5,114 5,278
Properties, Plant and Equipment - at cost 32,143 31,492
Less - accumulated depreciation, depletion and amortization 19,097 18,912
------- -------
Net properties, plant and equipment 13,046 12,580
Deferred Charges 842 621
------- -------
Total $25,696 $24,937
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 584 $ 737
Accounts payable and accrued liabilities 3,711 3,777
Estimated income and other taxes 1,024 692
------- -------
Total current liabilities 5,319 5,206
Long-Term Debt and Capital Lease Obligations 5,044 5,503
Deferred Income Taxes 694 634
Employee Retirement Benefits 1,182 1,138
Deferred Credits and Other Noncurrent Liabilities 2,549 2,270
Minority Interest in Subsidiary Companies 672 667
------- -------
Total 15,460 15,418
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 479 495
Unearned employee compensation and benefit plan trust (403) (437)
Common stock (authorized: 350,000,000 shares, $6.25 par
value; 274,293,417 shares issued) 1,714 1,714
Paid-in capital in excess of par value 651 655
Retained earnings 8,027 7,186
Currency translation adjustment (35) 61
Unrealized net gain on investments 43 62
------- -------
10,776 10,036
Less - Treasury stock, at cost 540 517
------- -------
Total stockholders' equity 10,236 9,519
------- -------
Total $25,696 $24,937
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Millions of dollars)
(Unaudited)
-----------
For the nine months
ended September 30,
-------------------
1996 1995(a)
---- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,509 $ 858
Reconciliation to net cash provided by (used in)
operating activities
Cumulative effect of accounting change - 121
Depreciation, depletion and amortization 1,068 1,091
Deferred income taxes 108 71
Exploratory expenses 243 180
Minority interest in net income 50 43
Dividends from affiliates, greater than (less than)
equity in income 141 (117)
Gains on asset sales (49) (289)
Changes in operating working capital 36 (451)
Other - net (55) 53
------ ------
Net cash provided by operating activities 3,051 1,560
INVESTING ACTIVITIES
Capital and exploratory expenditures (2,001) (1,666)
Proceeds from sale of discontinued operations, net of
cash and cash equivalents sold 344 -
Proceeds from sales of assets 99 1,043
Sale of leasehold interests 231 214
Purchases of investment instruments (1,390) (959)
Sales/maturities of investment instruments 1,436 964
Other - net 21 13
------ ------
Net cash used in investing activities (1,260) (391)
FINANCING ACTIVITIES
Borrowings having original terms in excess
of three months
Proceeds 125 94
Repayments (250) (287)
Net decrease in other borrowings (481) (301)
Purchases of common stock (59) -
Dividends paid to the company's stockholders
Common (638) (624)
Preferred (34) (36)
Dividends paid to minority shareholders (49) (46)
------ ------
Net cash used in financing activities (1,386) (1,200)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (3) (13)
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 402 (44)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 501 404
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 903 $ 360
====== ======
<FN>
(a) Previously reported results for 1995 have been reclassified and restated for the adoption of SFAS 121.
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Change in Accounting Principle
- --------------------------------------
During 1995, Texaco adopted Statement of Financial Accounting Standards (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". Under SFAS 121, assets whose carrying amounts are not
expected to be fully recovered by future use or disposition must be written down
to their fair values.
Adoption of SFAS 121 resulted in a non-cash after-tax charge of $639 million
against fourth quarter 1995 earnings. Additionally, in accordance with SFAS 121,
a $121 million after-tax write-down of non-core domestic producing properties
held for sale at January 1, 1995, previously recorded in the first quarter of
1995 in income from continuing operations, was reclassified as a cumulative
effect of an accounting change.
Adoption of SFAS 121 by Star Enterprise and the Caltex Group of Companies, each
owned 50% by Texaco, had no effect on 1995 net income.
Note 2. Discontinued Operations
- -------------------------------
On February 29, 1996, Texaco completed the disposition of its operations
classified as discontinued operations by completing the sale of its worldwide
lubricant additives business, which included manufacturing facilities, as well
as sales and marketing offices in various locations in the U.S. and abroad, to
Ethyl Corporation, a fuel and lubricant additives manufacturer. Ethyl purchased
this business for $196 million, comprised of $136 million in cash and a
three-year note of $60 million.
The results for Texaco's worldwide lubricant additives business had been
accounted for as discontinued operations and the assets and liabilities had been
classified in the Consolidated Balance Sheet at December 31, 1995 as "Net assets
of discontinued operations."
Revenues for the discontinued operations totaled $33 million for the first two
months of 1996, representing activities through the sale date, and $57 million
and $171 million for the third quarter and first nine months of 1995,
respectively.
Discontinued operations had no significant impact on the 1996 and 1995 results.
- 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,
1996 1995
---- ----
(Unaudited)
(Millions of dollars)
<S> <C> <C>
Crude oil $ 354 $ 294
Petroleum products and other 972 866
Materials and supplies 200 197
------ ------
Total $1,526 $1,357
====== ======
</TABLE>
Note 4. Contingent Liabilities
- ------------------------------
Information relative to commitments and contingent liabilities of Texaco Inc.
and subsidiary companies is presented in Notes 15 and 17, pages 57-58 and 60,
respectively, of Texaco Inc.'s 1995 Annual Report to Stockholders. With respect
to the Internal Revenue Service (IRS) claims discussed in Note 17, page 60, of
Texaco Inc.'s 1995 Annual Report to Stockholders, on October 17, 1996, the
United States Court of Appeals for the Fifth Circuit affirmed the 1993 U.S. Tax
Court decision in the so-called "Aramco Advantage" case and upheld Texaco's
position in this dispute with the IRS. Disposition of the amount remaining in
the Deposit Fund and interest will be determined when the IRS has exhausted its
legal options.
In the company's opinion, while it is impossible to ascertain the ultimate legal
and financial liability with respect to the company's 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,
owned 50% by Texaco and 50% by Chevron Corporation, is presented below and is
reflected on a 100% Caltex Group basis:
<TABLE>
<CAPTION>
For the nine months For the three months
ended September 30, ended September 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Gross revenues $13,365 $11,603 $4,205 $3,304
Income before income taxes $ 1,945 $ 1,034 $ 221 $ 202
Net income $ 1,082 $ 667 $ 93 $ 87
</TABLE>
On April 2, 1996, Caltex Petroleum Corporation ("Caltex") completed the sale of
its 50% interest in Nippon Petroleum Refining Company, Limited to its partner
Nippon Oil Company for approximately $2 billion. Earnings relating to this sale
of some $630 million was recorded by Caltex in the second quarter of 1996.
Net income for the first nine months of 1995 included 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 affiliate in Japan required for a
public project.
* * * * * * * * * * *
In the preparation of preliminary and unaudited financial statements for the
nine-month and three-month periods ended September 30, 1996 and 1995, 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 1995 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 1996.
- 6 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total worldwide net income for Texaco Inc. and subsidiary companies for the
third quarter of 1996 was $434 million, or $1.61 per share, as compared with
$290 million, or $1.06 per share, for the third quarter of 1995. Total net
income for the first nine months of 1996 was $1,509 million, or $5.62 per share,
as compared with $858 million, or $3.13 per share, for the first nine months of
1995. Both years included special items.
Net income before special items for the first nine months of 1996 totaled $1,285
million, or $4.76 per share. Net income before special items and the cumulative
effect of an accounting change for the first nine months of 1995 totaled $785
million, or $2.84 per share. Third quarter 1996 results had no special items.
For the third quarter of 1995, net income before special items was $288 million,
or $1.05 per share.
Net income for the first nine months of 1996 included a second quarter net
special gain of $224 million relating to the sale by Texaco's affiliate Caltex
Petroleum Corporation ("Caltex") of its interest in the Nippon Petroleum
Refining Company, Limited (NPRC). Net income for the third quarter and first
nine months of 1995 included $44 million in tax benefits realizable through the
sale of an interest in a subsidiary, a $27 million gain from the sale of
Texaco's interest in Pekin Energy Company, special charges of $56 million for
the cost of employee separations and $13 million for the restructuring of
certain Caltex operations. Net income for the first nine months of 1995 also
included first quarter net special gains of $205 million resulting from the sale
of non-core U.S. producing properties, partly offset by reserves for
environmental remediation of these properties of $13 million, and from the sale
of land by a Caltex affiliate in Japan. Nine months 1995 also included a $121
million non-cash charge from the write-down of non-core U.S. producing
properties held for sale at January 1, 1995, classified as a cumulative effect
of an accounting change in accordance with the 1995 adoption of Statement of
Financial Accounting Standards (SFAS) 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
On February 29, 1996, Texaco completed the sale of its worldwide lubricant
additives business for $196 million, comprised of $136 million in cash and a
three-year note of $60 million. This sale completed the disposition of the
operations classified as discontinued operations. Discontinued operations had no
significant impact on 1996 and 1995 results.
Results for 1996 and 1995 are summarized in the following table:
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
(Millions of Dollars)
<S> <C> <C> <C> <C>
Net income before special items and the cumulative
effect of accounting change $ 1,285 $ 785 $ 434 $ 288
Gain on sale of an interest in an affiliate 224 - - -
Gains on major asset sales - 232 - 27
Tax benefits on asset sales - 44 - 44
Employee separations costs - (56) - (56)
Other - (26) - (13)
------- ------ ----- ------
Net income before cumulative effect of
accounting change 1,509 979 434 290
Cumulative effect of accounting change - (121) - -
------- ------ ----- ------
Total net income $ 1,509 $ 858 $ 434 $ 290
======= ====== ===== ======
</TABLE>
- 7 -
<PAGE>
Texaco's higher worldwide crude oil and natural gas production and the
continuing strength in commodity prices led the company's strong third quarter
and year-to-date results. Texaco has been successful this year in reversing
previous production declines from maturing fields and non-core asset sales. The
company's success was bolstered by increased production from new fields in the
Gulf of Mexico, China and Angola, and improved recovery from existing fields,
most notably in the Kern River, Calif., and Partitioned Neutral Zone operations.
In the downstream sector, higher margins, increased branded gasoline sales
volumes and better operating performance at the company's refineries,
particularly on the West Coast, contributed to improved results in the United
States. However, in the international sector, results were lower this year as
the effects of intense competitive pressure in Europe and poor margins in the
Caltex operating areas more than offset solid results achieved by the company's
Latin American marketing operations.
The company has continued its strict commitment to cost containment throughout
its worldwide operations as shown by this year's decline in per barrel cash
operating expenses. In addition, strong earnings and cash flow, both important
measures of the company's plan for growth, enabled Texaco to increase its
quarterly dividend rate to $.85 per share in July and to maintain an aggressive
capital expenditure program this year. Year-to-date capital expenditures were
$2,252 million, up $208 million or 10 percent from last year, with the majority
of funds targeted to key upstream opportunities.
OPERATING EARNINGS
PETROLEUM AND NATURAL GAS
EXPLORATION AND PRODUCTION
United States
Exploration and production earnings in the U.S. for the third quarter of 1996
were $262 million, as compared with $162 million for the third quarter of 1995.
For the first nine months of 1996 and 1995, earnings were $772 million and $595
million, respectively. Results for 1995 included a first quarter special gain of
$125 million principally resulting from the sale of non-core producing
properties partly offset by reserves for environmental remediation on these
properties of $13 million. Excluding the net special gain, first nine months of
1995 results totaled $483 million.
In the U.S. upstream operations, the strong growth in earnings for both the
comparative third quarter and nine months of 1996 resulted from increased crude
oil and natural gas production and higher prices. Increased crude oil, natural
gas liquids (NGL), and natural gas production, which in total are up 2.5 percent
for the year, reflects success in adding new production, most notably from the
Gulf of Mexico, and enhancing production from existing fields, primarily in the
Kern River, Calif., operations. This new production reverses previous declines
from maturing fields and non-core asset sales, and is in contrast to U.S. oil
industry statistics which indicate an overall decline in U.S. crude oil
production. Increased exploratory expenses for both the third quarter and nine
months reflect an increased level of exploration activity, and complement this
year's success in acquiring lease acreage and the discovery and development of
new prospects.
The Texaco U.S. average natural gas price for the third quarter of 1996 was $.50
per thousand cubic feet (MCF) higher than 1995, while the price for the nine
months of 1996 was $.48 per MCF higher than 1995. These price improvements were
primarily due to unusually cold weather earlier this year and the resulting
increase in industry demand to replenish depleted natural gas storage.
The 1996 average price for Texaco U.S. crude oil was $3.05 and $2.07 per barrel
higher for the third quarter and nine months, respectively. These higher prices
reflect increased demand combined with historically low inventory levels in 1996
and market uncertainty related to delays in the possible resumption of Iraqi
crude sales.
- 8 -
<PAGE>
International
Exploration and production earnings outside the U.S. for the third quarter of
1996 were $132 million, as compared with $87 million for the third quarter of
1995. For the first nine months of 1996 and 1995, earnings were $365 million and
$253 million, respectively.
In the international upstream, results for both the third quarter and nine
months of 1996 benefited from higher crude oil prices. Additionally, crude oil
production increased primarily from activity in Angola, China and the
Partitioned Neutral Zone, located between Saudi Arabia and Kuwait. In Angola,
the production increases were the result of new offshore fields as well as the
resumption of onshore production early this year. Production increased in China
due to new fields and in the Partitioned Neutral Zone due to continuing
development programs. Lower production from maturing fields in the United
Kingdom (U.K.) and Australia partly offset overall production improvements for
the third quarter and nine months of 1996. Third quarter 1996 natural gas
production reflected the continued development of the Dolphin field in Trinidad.
MANUFACTURING, MARKETING AND DISTRIBUTION
United States
Manufacturing, marketing and distribution earnings in the U.S. for the third
quarter of 1996 were $94 million, as compared with $59 million for the third
quarter of 1995. For the first nine months of 1996 and 1995, earnings were $242
million and $70 million, respectively. Results for 1995 included third quarter
special charges of $11 million relating to employee separations. Excluding
special charges, results for the third quarter and first nine months of 1995
totaled $70 million and $81 million, respectively.
In the U.S. downstream operations, results for the third quarter and nine months
of 1996 benefited primarily from higher West Coast refinery margins as compared
to the same period of 1995. Although third quarter 1996 refining margins have
steadily deteriorated from their peak in May, they exceeded the depressed levels
of the comparable period of 1995.
The significant improvement in West Coast refining margins this year reflected
product price increases due to shortages resulting from regional refining
problems and new California gasoline formulation requirements during the first
half of the year when the seasonal increase in market demand occurred. Improved
refinery operations and continued cost containment efforts also contributed to
the improved 1996 results.
For the third quarter and nine months of 1996, marketing margins for most
refined products were lower than the comparable period of 1995. This was offset
partially by the continued strength in gasoline and diesel sales volumes, with
Texaco branded gasoline sales up more than three percent for both the
comparative third quarter and nine months. Additionally, downstream results for
the nine months of 1996 benefited from improved profits in the distribution and
transportation businesses, particularly in the second quarter.
International
Manufacturing, marketing and distribution earnings outside the U.S. for the
third quarter of 1996 were $37 million, as compared with $16 million for the
third quarter of 1995. For the first nine months of 1996 and 1995, earnings were
$433 million and $279 million, respectively. Results for the first nine months
of 1996 included a second quarter net special gain of $224 million relating to
the sale by Caltex of its interest in NPRC. Results for 1995 included a $42
million third quarter special charge relating to employee separations in
subsidiary operations and Caltex restructuring charges and first quarter net
special gains of $80 million, principally relating to the sale of land by a
Caltex affiliate in Japan. Excluding net special gains, first nine months of
1996 earnings totaled $209 million. For the third quarter and first nine months
of 1995, results excluding special items totaled $58 million and $241 million,
respectively.
In the international downstream, comparative third quarter and nine months 1996
earnings before special items reflected lower margins in both the Europe and
Caltex operating areas offset partially by improved results in Brazil from
increased volumes and higher product margins.
- 9 -
<PAGE>
In Europe, marketing margins were significantly depressed from excess gasoline
supply and a highly competitive market, especially in the U.K., and only
partially offset by higher refining margins. In the Caltex operating markets,
significantly lower margins in Korea and Thailand, primarily due to higher crude
costs not fully recovered in the market, were somewhat offset by higher margins
in Bahrain and Singapore. Additionally, earnings in Japan were lower as a result
of the April 1996 sale of NPRC.
NONPETROLEUM
Nonpetroleum earnings for the third quarter and first nine months of 1996 were
$6 million and $11 million, respectively, as compared with $36 million and $47
million for the respective 1995 periods. Third quarter 1995 results included a
special gain of $27 million from the sale of the company's interest in Pekin
Energy Company. Excluding the special gain, results for the third quarter and
first nine months of 1995 totaled $9 million and $20 million, respectively.
Nonpetroleum results for 1996 reflected higher gasification licensing revenues,
while 1995 mainly reflected improved loss experience of insurance operations.
CORPORATE/NONOPERATING RESULTS
Corporate and nonoperating charges for the third quarter and first nine months
of 1996 were $97 million and $314 million, respectively, as compared with
charges of $70 million and $265 million for the respective periods of 1995. Nine
months 1995 included first quarter gains of $25 million, principally from sales
of equity securities held for investment by the insurance operations. The 1995
third quarter also included a special gain of $44 million related to tax
benefits realizable through the sale of an interest in a subsidiary and a
special charge of $16 million for employee separations.
On October 17, 1996 the United States Court of Appeals for the Fifth Circuit
affirmed the 1993 U.S. Tax Court decision in the so-called "Aramco Advantage"
case and upheld Texaco's position in this dispute with the Internal Revenue
Service (IRS). A favorable conclusion of this case could result in a significant
benefit to net income in 1997.
- 10 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of September 30, 1996, Texaco's cash, cash equivalents and short-term
investments totaled $945 million, as compared with the 1995 year-end level of
$536 million. Texaco's total cash provided by operating activities for the first
nine months of 1996 totaled $3.05 billion. Total cash provided by operating
activities for 1996 reflected strong operational earnings and a net inflow of
$430 million primarily comprised of a cash dividend from Caltex (related to the
sale of Caltex' interest in NPRC) and the collection of receivables (primarily
insurance recoveries relating to environmental matters) which were partially
offset by payments related to litigation and other matters.
During the first nine months of 1996, cash generated from operating activities,
proceeds from the sale of discontinued operations (discussed below) and proceeds
from normal asset sales were used to support Texaco's capital and exploratory
expenditures of $2,001 million, for payment of dividends to common, preferred
and minority shareholders of $721 million, and for the reduction of debt.
Total debt at September 30, 1996 amounted to $5.6 billion as compared with $6.2
billion at year-end 1995. Texaco's ratio of total debt to total borrowed and
invested capital was 34.0% at September 30, 1996, as compared with 38.0% at
year-end 1995. At September 30, 1996, Texaco's long-term debt included $688
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. The company
maintained a revolving credit facility with commitments of $2.0 billion, which
was unused at both September 30, 1996 and at year-end 1995. In November 1996,
the company decreased the amount of this credit facility to $1.5 billion, which
remains unused.
During the first nine months of 1996, Texaco received $231 million from the sale
of certain equipment leasehold interests in conjunction with a sale/leaseback
arrangement. In the aggregate, through September 30, 1996, Texaco has received
$479 million for these interests. Additional payments are expected to be
received over the remainder of 1996. The company expects to repurchase the total
interests, in early 1997, after the related equipment is placed in service.
During the first quarter of 1996, Texaco sold its worldwide lubricant additive
business for $196 million, comprised of $136 million in cash and a three-year
note of $60 million. Also during the first quarter of 1996, Texaco received $208
million from the prepayment of the note received as part of the consideration
for the 1994 sale of Texaco Chemical Company and related international chemical
operations to Huntsman Corporation.
During 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 in 1997.
The sale of a 15% interest in the company's Captain Field in the U.K. North Sea
to Korea Petroleum Development Corporation for approximately $210 million is
expected to be completed in early 1997.
In the third quarter of 1996, Texaco increased its quarterly dividend on its
common stock to 85 cents per share from 80 cents per share, an increase of 6.25
percent.
On October 17, 1996 the United States Court of Appeals for the Fifth
Circuit affirmed the 1993 U.S. Tax Court decision in the so-called "Aramco
Advantage" case and upheld Texaco's position in this dispute with the IRS. In
March 1988, prior to the commencement of the Tax Court action, Texaco, as a
condition of its emergence from Chapter 11 proceedings, made certain
cash deposits to the IRS in contemplation of potential tax claims. The
remaining portion of these deposits, together with interest, currently
exceed $700 million. Disposition of the deposits and interest will be
determined when the IRS has exhausted its legal options. A favorable
conclusion of this case could result in the receipt of a significant
portion of the deposits and interest in 1997.
The company considers its financial position sufficient to meet its anticipated
future financial requirements.
- 11 -
<PAGE>
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 reductions in overhead, including reduced layers of supervision, 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 U.S. and international upstream and downstream
segments, as well as various support staff functions. During the second quarter
of 1994, Texaco recorded an after-tax charge of $88 million for the anticipated
severance costs associated with the employee reductions. As a result of the
continued successful application of its overhead reduction initiative, on
October 2, 1995, Texaco announced that it had expanded this program to include
approximately 1,500 additional employee separations worldwide by year-end 1996.
In this regard, in the third quarter of 1995, Texaco recorded an after-tax
charge of $56 million for the cost of these additional employee separations.
As of September 30, 1996, implementation of Texaco's program has included
reductions of approximately 4,400 employees worldwide with a related commitment
to severance payments of $209 million, or an after-tax cost of $143 million. Of
this pre-tax commitment, payments of $189 million have been made as of September
30, 1996.
CAPITAL AND EXPLORATORY EXPENDITURES
- ------------------------------------
Capital and exploratory expenditures for continuing operations, including equity
in such expenditures of affiliates, were $2,252 million for the first nine
months of 1996, as compared with $2,044 million for the same period of 1995.
Expenditures for the third quarter of 1996 amounted to $815 million versus $772
million for the third quarter of 1995.
Increased U.S. exploration and development expenditures during 1996 reflect
solid opportunities in traditional offshore and key deepwater areas of the Gulf
of Mexico. Texaco continued its aggressive acquisition of acreage at the latest
Gulf of Mexico lease sale, adding to significant deepwater acreage acquired at
the federal lease sale earlier this year. Progress on design and construction
for the Petronius deepwater project continued during the third quarter.
Aggressive international upstream investment also continued this year as
increased expenditures focused in Colombia, Australia, Nigeria, the Partitioned
Neutral Zone and Denmark, while development work continues in the Captain and
Erskine Fields in the U.K. North Sea and in Indonesia.
Comparative downstream expenditure levels decreased due to the completion of
major refinery construction projects in Thailand and Singapore by Caltex and the
completion of refinery upgrades in the U.S. and Panama. Increased investments in
1996 relating to the Poseidon oil pipeline, which will service new deepwater and
subsalt oil production from the central Gulf of Mexico as well as selected
worldwide marketing investments particularly in Latin American growth areas and
by Caltex in Singapore, partially offset the decrease in refinery spending.
- 12 -
<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
Forms 10-Q for the quarterly periods ended March 31, 1996 and June 30, 1996 and
to Item 3 of Texaco Inc.'s 1995 Annual Report on Form 10-K, which are
incorporated herein by reference.
In addition, in March 1994 six current or former employees filed a purported
class action against the company in the United States District Court for the
Southern District of New York (District Court) alleging race discrimination
against African-American employees, principally with respect to promotions. The
District Court referred the matter to the Equal Employment Opportunity
Commission, which found some disparity in promotions in some pay grades for some
periods of time between African-American employees and other employees. In
November 1996, the plaintiffs filed in the District Court a motion for sanctions
alleging that Texaco concealed or withheld documents requested by the
plaintiffs. A hearing on that motion is scheduled for November 22, 1996.
On November 6, 1996, a purported derivative action was filed in the District
Court against Texaco Inc., as nominal defendant, its directors, and certain
current and former officers and employees. The suit alleges, among other things,
that the directors violated their fiduciary duties as a result of alleged
discriminatory employment practices, discovery abuses and violations of law by
the company. The suit seeks, among other things, the formation of an equal
opportunity committee and an oversight and litigation committee of the Board,
damages in the form of restitution of all costs and expenses to the company
resulting from the alleged violations, fees and expenses.
In addition, the company has received a subpoena from the office of the United
States Attorney for the Southern District of New York requesting the production
of documents related to the foregoing matters.
- 13 -
<PAGE>
Item 5. Other Information
- -------------------------
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
------------------- --------------------
1996 1995(a) 1996 1995(a)
---- ------- ---- -------
(Millions of dollars)
<S> <C> <C> <C> <C>
FUNCTIONAL NET INCOME
- ---------------------
Operating earnings from continuing operations before cumulative
effect of accounting change Petroleum and natural gas
Exploration and production
United States $ 772 $ 595 $ 262 $ 162
International 365 253 132 87
------ ------ ----- -------
Total 1,137 848 394 249
Manufacturing, marketing and distribution
United States 242 70 94 59
International 433 279 37 16
------ ------ ----- -------
Total 675 349 131 75
------ ------ ----- -------
Total petroleum and natural gas 1,812 1,197 525 324
Nonpetroleum 11 47 6 36
------ ------ ----- -------
Total operating earnings 1,823 1,244 531 360
Corporate/Nonoperating (314) (265) (97) (70)
------ ------ ----- -------
Net income from continuing operations before
cumulative effect of accounting change 1,509 979 434 290
Cumulative effect of accounting change - (121) - -
------ ------ ----- -------
Net income $1,509 $ 858 $ 434 $ 290
====== ====== ===== =======
CAPITAL AND EXPLORATORY EXPENDITURES -
- --------------------------------------
INCLUDING EQUITY IN AFFILIATES
------------------------------
Exploration and production
United States $ 894 $ 619 $ 273 $ 232
International 762 727 312 289
------ ------ ----- -------
Total 1,656 1,346 585 521
------ ------ ----- -------
Manufacturing, marketing and distribution
United States 234 263 78 96
International 345 415 144 147
------ ------ ----- -------
Total 579 678 222 243
------ ------ ----- -------
Other 17 20 8 8
------ ------ ----- -------
Total 2,252 2,044 815 772
Discontinued operations - 2 - 1
------ ------ ----- -------
Total, including equity in affiliates $2,252 $2,046 $ 815 $ 773
====== ====== ===== =======
<FN>
(a) Previously reported results for 1995 have been reclassified and restated for the adoption of SFAS 121.
</FN>
</TABLE>
- 14 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
-------------
Exploration and Production
- --------------------------
United States
- -------------
Net production of crude oil and natural
gas liquids (000 BPD) 388 381 393 373
Net production of natural gas - available
for sale (000 MCFPD) 1,680 1,627 1,708 1,618
Total net production (000 BOEPD) 668 652 678 643
Natural gas sales (000 MCFPD) 3,100 3,162 3,059 3,046
Natural gas liquids sales - (including
purchased LPGs) (000 BPD) 208 214 191 207
Average U.S. crude (per bbl) $17.24 $15.17 $17.93 $14.88
Average U.S. natural gas (per mcf) $ 2.08 $ 1.60 $ 2.02 $ 1.52
Average WTI (Spot) (per bbl) $21.30 $18.52 $22.41 $17.85
Average Kern (Spot) (per bbl) $14.92 $13.90 $14.41 $13.84
International
- -------------
Net production of crude oil and natural
gas liquids (000 BPD)
Europe 115 117 115 118
Indonesia 143 149 146 153
Partitioned Neutral Zone 75 56 79 63
Other 62 55 65 56
------ ------ ------ ------
Total 395 377 405 390
Net production of natural gas - available
for sale (000 MCFPD)
Europe 182 210 162 172
Colombia 117 118 124 117
Other 66 52 77 46
------ ------ ------ ------
Total 365 380 363 335
Total net production (000 BOEPD) 456 440 466 446
Natural gas sales (000 MCFPD) 456 434 450 398
Natural gas liquids sales - (including
purchased LPGs) (000 BPD) 95 79 74 86
Average International crude (per bbl) $18.64 $16.32 $19.43 $15.45
Average U.K. natural gas (per mcf) $ 2.56 $ 2.63 $ 2.55 $ 2.55
Average Colombia natural gas (per mcf) $ .94 $ .87 $ .97 $ .92
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the nine months For the three months
ended September 30, ended September 30,
------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
-------------
Manufacturing, Marketing and Distribution
- -----------------------------------------
United States
- -------------
Refinery input (000 BPD)
Subsidiary 405 391 417 406
Affiliate - Star Enterprise 320 300 325 297
----- ----- ----- -----
Total 725 691 742 703
Refined product sales (000 BPD)
Gasolines 499 448 515 458
Avjets 127 89 122 94
Middle Distillates 214 193 217 195
Residuals 65 53 70 66
Other 133 130 132 129
----- ----- ----- -----
Total 1,038 913 1,056 942
International
- -------------
Refinery input (000 BPD)
Europe 336 284 334 312
Affiliate - Caltex 368 441 340 451
Latin America/West Africa 64 37 68 43
----- ----- ----- -----
Total 768 762 742 806
Refined product sales (000 BPD)
Europe 453 453 431 487
Affiliate - Caltex 602 645 555 622
Latin America/West Africa 397 356 408 353
Other 61 75 39 54
----- ----- ----- -----
Total 1,513 1,529 1,433 1,516
</TABLE>
- 16 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
-- (3.2) Copy of By-Laws of Texaco Inc., as amended to and including
September 27, 1996.
-- (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, 1995 (including portions of Texaco
Inc.'s Annual Report to Stockholders for the year 1995) and a
copy of Texaco Inc.'s Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 1996 and June 30, 1996, 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 1996, the Registrant filed a Current Report on
Form 8-K for the following event:
1. July 22, 1996 (date of earliest event reported: July 22, 1996)
Item 5. Other Events -- reported that Texaco issued an Earnings Press
Release for the second quarter 1996. Texaco appended as an exhibit
thereto a copy of the Press Release entitled "Texaco Reports Results
for the Second Quarter and First Half 1996," dated July 22, 1996.
- 17 -
<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
-------------------------------
(Vice President and Comptroller)
By: R.E. Koch
-------------------------------
(Assistant Secretary)
Date: November 13, 1996
-----------------
- 18-
EXHIBIT 3.2
BY-LAWS OF TEXACO INC.
A Delaware Corporation
ARTICLE I.
Stockholders.
Section 1. Annual Meeting.The annual meeting of stockholders shall be held
on the second Tuesday in May of each year at 10:00 A.M., or at such time of day
or on such other date in each calendar year as may be fixed by the Board of
Directors, for the election of directors and the transaction of any other
business as may properly come before the meeting.
Section 2. Stockholder Action; Special Meetings.Any action required or
permitted to be taken by the stockholders of the Company must be effected at a
duly called annual or special meeting of such holders and may not be effected by
any consent in writing by such holders. Except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the Company may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the entire Board of
Directors.
Section 3. Notice of Meetings.Notice of each meeting of stockholders,
annual or special, stating the time and place, and, if a special meeting, the
purpose or purposes in general terms, shall be mailed no earlier than 60 days
and no later than 10 days prior to the meeting to each stockholder at the
stockholders address as the same appears on the books of the Company.
Section 4. Place.Meetings of the stockholders shall be held at such place
or places as the Board of Directors may direct, the place to be specified in the
notice.
Section 5. Quorum. At any meeting of stockholders, the holders of a
majority of the voting shares issued and outstanding, being present in person or
represented by proxy, shall be a quorum for all purposes, except where otherwise
provided by statute.
Section 6. Adjournments.Any annual or special meeting of stockholders duly
and regularly called in accordance with these by-laws may adjourn one or more
times and no further notice of such adjourned meeting or meetings shall be
necessary. If at any annual or special meeting of stockholders a quorum shall
fail to attend in person or by proxy, a majority in interest of the stockholders
attending in person or by proxy may adjourn the meeting to another time, or to
another time and place, and there may be successive adjournments for like cause
and in like manner without further notice until a quorum shall attend. Any
business may be transacted at any such adjourned meeting or meetings which might
have been transacted at the meeting as originally called.
Section 7. Organization.The Chairman of the Board, or, in his absence, the
Vice Chairman, or, in their absence, the President, or, in their absence, one of
the Executive Vice Presidents, or, in their absence, one of the Senior Vice
Presidents, or, in their absence, a Vice President appointed by the
stockholders, shall call meetings of the stockholders to order and shall act as
chairman thereof. The Secretary of the Company, if present, shall act as
secretary of all meetings of the stockholders; and, in his absence, the
presiding officer may appoint a secretary.
Section 8. Voting.At each meeting of the stockholders, every stockholder of
record (at the closing of the transfer books if closed) shall be entitled to
vote in person or by proxy appointed by an instrument in writing subscribed by
such stockholder or by his duly authorized attorney and delivered to and filed
with the Secretary at the meeting; and each stockholder shall have one vote for
each share of stock standing in his name. Voting for directors, and upon any
question at any meeting, shall be by ballot, if demanded by any stockholder.
Section 9. List of Stockholders.The Secretary shall keep records from which
a list of stockholders can be compiled, and shall furnish such list upon order
of the Board of Directors.
ARTICLE II.
The Board of Directors.
Section 1. Number, Election and Terms. Except as otherwise fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the directors
of the Company shall be fixed from time to time by the Board of Directors but
shall not be less than three. The directors, other than those who may be elected
by the holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, as determined by the Board of Directors, one
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1985, another class to be originally elected for a
term expiring
* 1 *
<PAGE>
at the annual meeting of stockholders to be held in 1986, and another class to
be originally elected for a term expiring at the annual meeting of stockholders
to be held in 1987, with each class to hold office until its successor is
elected and qualified. At each annual meeting of the stockholders of the
Company, the successors of the class of directors whose term expires at that
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
Section 2. Newly Created Directorships and Vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article IV of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increases in the number of directors or any
vacancies on the Board of Directors resulting from death, resignation or
disqualification, or other cause shall be filled by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director so elected shall stand for
election (for the balance of his term) at the next annual meeting of
stockholders, unless his term expires at such Annual Meeting. Any vacancy on the
Board of Directors resulting from removal by stockholder vote shall be filled
only by the vote of a majority of the voting power of all shares of the Company
entitled to vote generally in the election of Directors, voting together as a
single class. The affirmative vote of the holders of at least a majority of the
then outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class, shall be required to
repeal the foregoing provisions.
Section 3. Removal.Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect Directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of
66-2/3% of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of Directors, voting
together as a single class.
Section 4. Nominations.Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, nominations for the election of Directors may be made by the
Board of Directors or a proxy committee appointed by the Board of Directors or
by any stockholder entitled to vote in the election of Directors generally.
However, any stockholder entitled to vote in the election of Directors generally
may nominate one or more persons for election as Directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Company not later than (i) with
respect to an election to be held at an annual meeting of stockholders, 90 days
in advance of such meeting, and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of Directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice shall set forth: (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the stockholder is
a holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a director of the Company if so elected. The chairman of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
Section 5. Organization Meeting of the Board.At the last regular meeting of
the Board of Directors prior to each annual meeting of stockholders, the Board
of Directors shall establish its organization, elect and appoint officers and
appoint committee members. Such action may also be taken at another place and
time fixed by written consent of the Directors.
Section 6. Regular Meetings. Regular meetings of the Board are fixed and
may be held without notice at the office of the Company in Harrison, New York on
the fourth Friday in each month at 9:00 A.M., or at such other time and place,
either within or without the State of Delaware, as the Board may provide by
resolution, without other notice than such resolution. If less than a quorum is
present at any meeting time and place, those present may adjourn from time to
time until a quorum shall be present, but if there shall be no quorum prior to
another regular meeting time, then such meetings of less than a quorum need not
be recorded.
Section 7. Special Meetings.Special meetings of the Board shall be held
whenever called by the Chairman of the Board, or, in his absence, by the Vice
Chairman of the Board, or, in their absence, by the President, or by one-third
of the Directors then in office. The person or persons authorized to call
special meetings of the Board may fix any place, either within or without the
State of Delaware, as the place for holding any special meeting.
* 2 *
<PAGE>
Unless otherwise specified in the notice thereof, any business may be transacted
at a special meeting.
Section 8. Notice of Special Meetings.The Secretary shall mail to each
director notice of any special meeting at least two days before the meeting, or
shall telegraph or telephone such notice not later than the day before the
meeting. When all Directors are present, any business may be transacted without
any previous notice. Any director may waive notice of any meeting.
Section 9. Quorum.A majority of the total number of Directors, or half of
the total number when the number of Directors then in office is even, shall
constitute a quorum for the transaction of business, and a majority of those
present at the time and place of any regular or special meeting, although less
than a quorum, may adjourn the same from time to time, as provided in these
by-laws.
Section 10. Chairman.At all meetings of the Board, the Chairman of the
Board, or, in his absence, the Vice Chairman of the Board, or, in their absence,
the President, or, in their absence, a chairman chosen by the Directors present,
shall preside.
Section 11. Action without Meeting.A statement in writing, signed by all
members of the Board of Directors or the Executive Committee, shall be deemed to
be action by the Board or Committee, as the case may be, to the effect therein
expressed, and it shall be the duty of the Secretary to record such statement in
the minute books of the Company under its proper date.
ARTICLE III.
Executive Committee and Other Committees.
Section 1. Executive Committee.The Board of Directors shall appoint an
Executive Committee of seven or more members to serve during the pleasure of the
Board to consist of the Chairman of the Executive Committee, the Chairman of the
Board, the Vice Chairman of the Board, the President, and such additional
Directors as the Board may from time to time designate.
Section 2. The Chairman of the Executive Committee.The Chairman of the
Executive Committee shall be designated by the Board of Directors and shall be a
member of the Board and of the Executive Committee. He shall preside at meetings
of the Executive Committee, and shall do and perform such other things as may
from time to time be assigned to him by the Board of Directors.
Section 3. Vacancies.Vacancies in the Executive Committee shall be filled
by the Board.
Section 4. Executive Committee to Report.All action by the Executive
Committee shall be reported promptly to the Board and such action shall be
subject to review by the Board, provided that no rights of third parties shall
be affected by such review.
Section 5. Procedure.The Executive Committee, by a vote of a majority of
all of its members, shall fix its own times and places of meeting, shall
determine the number of its members constituting a quorum for the transaction of
business, and shall prescribe its own rules of procedure, no change in which
shall be made save by a majority vote of all of its members.
Section 6. Powers.During the intervals between the meetings of the Board,
the Executive Committee shall possess and may exercise all the powers of the
Board in the management and direction of the business and affairs of the
Company, except those which by applicable statute are reserved to the Board of
Directors.
Section 7. Other Committees.From time to time the Board may appoint other
committees, and they shall have such powers as shall be specified in the
resolution of appointment.
ARTICLE IV.
Officers.
Section 1. Number.The Board of Directors shall elect the executive officers
of the Company which may include a Chairman of the Board, one or more Vice
Chairmen of the Board, a President, one or more Vice Presidents (one or more of
whom may be designated as Executive Vice Presidents or as Senior Vice Presidents
or by other designations), a General Counsel, a Secretary, a Treasurer, a
Comptroller, and a General Tax Counsel. A person may at the same time hold,
exercise and perform the powers and duties of more than one executive officer
position. In addition to the executive officers, the Board may appoint one or
more Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers and
such other officers or agents as the Board may from time to time deem necessary
or desirable. All officers and agents shall perform the duties and exercise the
powers usually incident to the offices or positions held by them, those
prescribed by these by-laws, and those assigned to them from time to time by the
Board or by the Chief Executive Officer.
Section 2. The Chairman of the Board.The Chairman of the Board shall be a
member of the Board of Directors and of the Executive Committee. He shall
preside at meetings of the stockholders and of the Directors, and shall keep in
close touch with the administration of the affairs of the Company, shall advise
and counsel with
* 3 *
<PAGE>
the Vice Chairman of the Board and the President, and with other executives of
the Company and shall do and perform such other duties as may from time to time
be assigned to him by the Board of Directors or by the Executive Committee.
Section 3. The Vice Chairman of the Board.The Vice Chairman of the Board
shall be a member of the Board of Directors and the Executive Committee. He
shall keep in close touch with the administration of the affairs of the Company,
shall advise and counsel with the Chairman of the Board and the President, and
with other executives of the Company, and shall do and perform such other duties
as may from time to time be assigned to him by the Board of Directors or the
Executive Committee.
Section 4. The President.The President shall be a member of the Board of
Directors and of the Executive Committee. He shall keep in close touch with the
administration of the affairs of the Company, shall advise and counsel with the
Chairman of the Board and the Vice Chairman of the Board and with other
executives of the Company, and shall do and perform such other duties as may
from time to time be assigned to him by the Board of Directors or the Executive
Committee. In the absence of the Chairman of the Board, he shall preside at
meetings of the stockholders and of the Directors.
Section 5. The Chief Executive Officer.Either the Chairman of the Board, or
the President, as the Board of Directors may designate, shall be the Chief
Executive Officer of the Company. The officer so designated shall have, in
addition to the powers and duties applicable to the office set forth in either
Section 2 or 4 of this Article IV, general active supervision over the business
and affairs of the Company and over its several officers, agents, and employees,
subject, however, to the direction and control of the Board or the Executive
Committee. The Chief Executive Officer shall see that all orders and resolutions
of the Board or the Executive Committee are carried into effect, and, in
general, shall perform all duties incident to the position of Chief Executive
Officer and such other duties as may from time to time be assigned by the Board
or the Executive Committee.
Section 6. The Executive Vice Presidents. The Executive Vice Presidents
shall keep in touch with the administration of the affairs of the Company, shall
advise and counsel with the Chairman of the Board, the Vice Chairman of the
Board and with the President and with other executives of the Company, and shall
do and perform such other duties as from time to time may be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. In the absence of the Chairman of
the Board, the Vice Chairman of the Board and the President, the Senior
Executive Vice President shall preside at meetings of the stockholders.
Section 7. The Senior Vice Presidents.Each Senior Vice President shall have
such powers as may be conferred upon him by the Board of Directors, and shall
perform such duties as from time to time may be assigned to him by the Board of
Directors, the Executive Committee, the Chairman of the Board, the Vice Chairman
of the Board, or the President.
Section 8. The Vice Presidents.Each Vice President shall have such powers
as may be conferred upon him by the Board of Directors, and shall perform such
duties as from time to time may be assigned to him by the Board of Directors,
the Executive Committee, the Chairman of the Board, the Vice Chairman of the
Board, or the President.
Section 9. The General Counsel.The General Counsel shall have charge of all
the legal affairs of the Company and shall exercise supervision over its
contract relations.
Section 10. The Secretary.The Secretary shall keep the minutes of all
meetings of the stockholders and the Board of Directors in books provided for
the purpose. He shall attend to the giving and serving of all notices for the
Company. He shall sign with the Chairman of the Board, the Vice Chairman of the
Board, the President, and Executive Vice President, a Senior Vice President, or
a Vice President, such contracts as may require his signature, and shall in
proper cases affix the seal of the Company thereto. He shall have charge of the
certificate books and such other books and papers as the Board of Directors may
direct. He shall sign with the Chairman of the Board, the President, or a Vice
President certificates of stock, and he shall in general perform all the duties
incident to the Office of Secretary, subject to the control of the Board, and
shall perform such other duties as from time to time may be assigned to him by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. Any Assistant Secretary may, in
his own name, perform any duty of the Secretary, when so requested by the
Secretary or in the absence of that officer, and may perform such duties as may
be prescribed by the Board. In the absence of the Secretary and of all Assistant
Secretaries, minutes of any meetings may be kept by a Secretary pro tem,
appointed for that purpose by the presiding officer.
Section 11. The Treasurer.The Treasurer shall have charge and custody of
and be responsible for all the funds and securities of the Company, and may
invest the same in any securities as may be permitted by law; designate
depositories in which all monies and other valuables to the credit of the
Company may be deposited; render to the Board, or any committee designated by
the Board, whenever the Board or such committee may require, an account of all
transactions as Treasurer; and in general perform all the duties of the office
of Treasurer and such other duties as from time to time may be assigned by the
Chairman of the Board, the Vice Chairman of the Board, the
* 4 *
<PAGE>
President, the officer of the Company who may be designated Chief Financial
Officer, and the Board of Directors. In case one or more Assistant Treasurers be
appointed, the Treasurer may delegate to them the authority to perform such
duties as the Treasurer may determine.
Section 12. The Comptroller.The Comptroller shall be the principal
accounting officer of the corporation; shall have charge of the Company's books
of accounts, records and auditing, shall ensure that the necessary internal
controls exist within the Company to provide reasonable assurance that the
Company's assets are safeguarded and that financial records are maintained and
publicly disclosed in accordance with generally accepted accounting principles;
and in general perform all the duties incident to the office of Comptroller and
such other duties as from time to time may be assigned by the Chairman of the
Board, the Vice Chairman of the Board, the President, the officer of the Company
who may be designated Chief Financial Officer, and the Board of Directors. In
case one or more Assistant Comptrollers be appointed, the Comptroller may
delegate to them such duties as the Comptroller may determine.
Section 13. The General Tax Counsel.The General Tax Counsel shall have
charge of all the tax affairs of the Company.
Section 14. Tenure of Officers: Removal.All officers elected or appointed
by the Board shall hold office until their successor is elected or appointed and
qualified, or until their earlier resignation or removal. All such officers
shall be subject to removal, with or without cause, at any time by the
affirmative vote of a majority of the whole Board.
ARTICLE V.
Indemnification.
Section 1. Right to Indemnification. The Company shall indemnify, defend
and hold harmless any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or other, including
appeals, by reason of the fact that he is or was a director, officer or employee
of the Company, or is or was serving at the request of the Company as a
director, officer or employee of any corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or employee or in any other capacity while
serving as a director, officer or employee, to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said Law permitted the Company to provide prior to such amendment) against all
expenses, liability and loss (including attorney's fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that except as provided in Section 2 hereof with respect to
proceedings seeking to enforce rights to indemnification, the Company shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding (or
part thereof) was authorized by the Board of Directors of the Company.
The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the Company expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if required by law at the time of such payment, the payment of
such expenses incurred by a director or officer in his capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the Company of an undertaking,
by or on behalf of such director or officer to repay all amounts so advanced if
it should be determined ultimately that such director or officer is not entitled
to be indemnified under this Section or otherwise. "Employee", as used herein,
includes both an active employee in the Company's service as well as a retired
employee who is or has been a party to a written agreement under which he might
be, or might have been obligated to render services to the Company.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 is not
paid in full by the Company within sixty days or, in cases of advances of
expenses, twenty days, after a written claim has been received by the Company,
the claimant may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking has been tendered to the
Company) that the claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the Company to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to have
made a
* 5 *
<PAGE>
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant had
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant had not met the applicable standard of
conduct. The Company shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Article that the procedures and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such proceeding that the Company is bound by all the provisions
of this Article.
Section 3. Non-Exclusivity and Survival. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article (a) shall apply to acts or omissions
antedating the adoption of this by-law, (b) shall be severable, (c) shall not be
exclusive of other rights to which any director, officer or employee may now or
hereafter be entitled, (d) shall continue as to a person who has ceased to be
such director, officer or employee and (e) shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VI.
Capital Stock.
Section 1. Form and Execution of Certificates. The certificates of shares
of the capital stock of the Company shall be in such form as shall be approved
by the Board. The certificates shall be signed by the Chairman of the Board, the
President, or a Vice President, and the Secretary or an Assistant Secretary.
Section 2. Certificates to be Entered.Certificates shall be consecutively
numbered, and the names of the owners, the number of shares and the date of
issue, shall be entered in the books of the Company.
Section 3. Old Certificates to be Canceled.Except in the case of lost or
destroyed certificates, and in that case only upon performance of such
conditions as the Board may prescribe, no new certificate shall be issued in
lieu of a former certificate until such former certificate shall have been
surrendered and canceled.
Section 4. Transfer of Shares.Shares shall be transferred only on the books
of the Company by a holder thereof in person or by his attorney appointed in
writing, upon the surrender and cancellation of certificates for a like number
of shares.
Section 5. Regulations. The Board may make such rules and regulations as it
may deem expedient concerning the issue, transfer and registration of
certificates of stock of the Company.
Section 6. Registrar. The Board may appoint a registrar of transfers and
may require all certificates to bear the signature of such registrar.
Section 7. Closing of Transfer Books. If deemed expedient by the Board, the
stock books and transfer books may be closed for the meetings of the
stockholders, or for other purposes, during such periods as from time to time
may be fixed by the Board, and during such periods no stock shall be
transferable on said books.
Section 8. Dates of Record. If deemed expedient by the Board, the Directors
may fix in advance, a date, not exceeding 60 days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case only such stockholders
as shall be stockholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any stock on the books of the
Company after any such record date fixed as aforesaid.
Section 9. Rights to Purchase Securities. The Company shall not, without
either the prior approval of a majority of the total number of shares then
issued and outstanding and entitled to vote or the receipt by the Company of a
favorable opinion issued by a nationally recognized investment banking firm
designated by the Committee of Equity Security Holders of Texaco Inc. appointed
in the Company's jointly administered chapter 11 case in the United States
Bankruptcy Court for the Southern District of New York or its last chairman (or
his designee) to the effect that the proposed issuance is fair from a finance
point of view to the stockholders of the Company issue to its stockholders
generally (i) any warrant or other right to purchase any security of the
Company, any successor thereto or any other person or entity or (ii) any
security of the Company containing any such right to purchase, which warrant,
right or security (a) is exercisable, exchangeable or convertible, based or
conditioned in whole or in part on (I) a change of control of the Company or
(II) the owning or holding of any number or percentage of outstanding shares or
voting power or any offer to acquire any number of shares or percentage of
voting power by any entity, individual or group of entities and/or individuals
or (b) discriminates among holders
* 6 *
<PAGE>
of the same class of securities (or the class of securities for which such
warrant or right is exercisable or exchangeable) of the Company or any successor
thereto. The affirmative vote of the holders of at least a majority of the then
outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class, shall be required to
repeal the foregoing provisions.
ARTICLE VII.
Fair Price.
A. Vote Required for Certain Business Combinations.
1. Higher Vote for Certain Business Combinations.In addition to any
affirmative vote required by law or the Certificate of Incorporation, and except
as otherwise expressly provided in Section B of this Article VII:
a. any merger or consolidation of the Company or any Subsidiary (as
hereinafter defined) with (i) any Interested Stockholder (as hereinafter
defined) or (ii) any other person (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of
any assets of the Company or any Subsidiary having an aggregate Fair Market
Value of $100 million or more; or
c. the issuance or transfer by the Company or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Company
or any Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value of $100
million or more; or
d. the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
e. any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity or
convertible securities of the Company or any Subsidiary which is directly
or indirectly owned by any Interested Stockholder or any Affiliate of any
Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of capital stock of the Company entitled to
vote generally in the election of Directors (the "Voting Stock"), voting
together as a single class (it being understood that for purposes of this
Article VII, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article IV of the Certificate of Incorporation).
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
2. Definition of "Business Combination". The term "Business Combination" as
used in this Article VII shall mean any transaction which is referred to in
any one or more of clauses (a) through (e) of paragraph 1 of this Section A.
B. When Higher Vote is Not Required.The provisions of Section A of this Article
VII shall not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as is required by
law and any provision of the Certificate of Incorporation, if all of the
conditions specified in either of the following paragraphs 1 and 2 are met:
1. Approval by Disinterested Directors.The Business Combination shall have
been approved by a majority of the Disinterested Directors (as hereinafter
defined).
2. Price and Procedure Requirements.All of the following conditions shall
have been met:
a. The aggregate amount of the cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Stockholder for any shares of Common Stock
acquired by it (a) within the two-year period immediately prior to the
first publication announcement of the proposal of the Business
Combination (the "Announcement Date") or (b) in the transaction in
which it became an Interested Stockholder, whichever is higher; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (such latter date is referred to in
this Article VII as the "Determination Date"), whichever is higher.
* 7 *
<PAGE>
b. The aggregate amount of the cash to be received per share by
holders of shares of any other class of outstanding Voting Stock shall be
at least equal to the highest of the following (it being intended that the
requirements of this paragraph 2b shall be required to be met with respect
to every class of outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a particular class of
Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers fees)
paid by the Interested Stockholder for any shares of such class of
Voting Stock acquired by it (a) within the two-year period immediately
prior to the Announcement Date or (b) in the transaction in which it
became an Interested Stockholder, whichever is higher;
(ii) (if applicable) the highest preferential amount per share to
which the holders of shares of such class of Voting Stock are entitled
in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company; and
(iii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date, whichever
is higher.
c. The consideration to be received by holders of a particular class
of outstanding Voting Stock (including Common Stock) shall be in cash. The
price determined in accordance with paragraphs 2a and 2b of this Section B
shall be subject to appropriate adjustment in the event of any stock
dividend, stock split, combination of shares or similar event.
d. After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
except as approved by a majority of the Disinterested Directors, there
shall have been no failure to declare and pay at the regular date therefor
any full quarterly dividends (whether or not cumulative) on the outstanding
Preferred Stock; (ii) there shall have been (a) no reduction in the annual
rate of dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), except as approved by a majority of
the Disinterested Directors, and (b) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock unless the failure so to increase such annual
rate is approved by a majority of the Disinterested Directors; and (iii)
such Interested Stockholder shall have not become the beneficial owner of
any additional shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an Interested
Stockholder.
e. After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the Company, whether
in anticipation of or in connection with such Business Combination or
otherwise.
f. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
public stockholders of the Company at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
C. Vote Required for Certain Stock Repurchases. In addition to any other
requirement of the Certificate of Incorporation, the affirmative vote of the
holders of at least 50% of the Voting Stock (other than Voting Stock
beneficially owned by a Selling Stockholder (as hereinafter defined)), shall be
required before the Company purchases any outstanding shares of Common Stock at
a price above the Market Price (as hereinafter defined) from a person actually
known by the Company to be a Selling Stockholder, unless the purchase is made by
the Company (a) on the same terms and as a result of an offer made generally to
all holders of Common Stock or (b) pursuant to statutory appraisal rights.
D. Certain Definitions. For the purpose of this Article VII:
1. A "person" shall mean any individual, firm, corporation or other
entity.
2. "Interested Stockholder" shall mean any person (other than the
Company or any Subsidiary) who or which:
a. is the beneficial owner, directly or indirectly, of more than 20%
of the voting power of the outstanding Voting Stock; or
b. is an Affiliate of the Company and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 20% or more of the voting power of the then
outstanding Voting Stock; or
* 8 *
<PAGE>
c. is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
3. A person shall be a "beneficial owner" of any Voting Stock:
a. which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns directly or indirectly; or
b. which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote pursuant to
any agreement, arrangement or understanding; or
c. which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
4. For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph 2 of this Section D, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph 3 of this Section D but shall not include any other
shares which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1988.
6. "Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Company; provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in paragraph 2 of this Section D, the term Subsidiary shall mean only a
corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the Company.
7. "Disinterested Director" means any member of the Board of Directors who
is unaffiliated with the Interested Stockholder and was a member of the
Board of Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Disinterested Director who is
unaffiliated with the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then on
the Board of Directors.
8. "Fair Market Value" means (a) in the case of the stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for the New York Stock
Exchange-Listed Stocks, or, if such stock is not listed on such Exchange,
on the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by the Board of Directors in good faith;
and (b) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority of
the Disinterested Directors.
9. "Selling Stockholder" means any person who or which is the beneficial
owner of in the aggregate more than 1% of the outstanding shares of Common Stock
and who or which has purchased or agreed to purchase any of such shares within
the most recent two-year period and who sells or proposes to sell Common Stock
in a transaction requiring the affirmative vote provided for in Section C
of this Article VII.
10. "Market Price" means the highest sale price on or during the period of
five trading days immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed Stock, or if such
stock is not quoted on the Composite Tape on the New York Stock Exchange, or,
if such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of stock
on or during the period of five trading days immediately preceding the date
in question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Disinterested Directors.
E. Powers of the Board of Directors. A majority of the Directors shall have the
power and duty to determine for the purposes of this Article VII, on the basis
of information known to them after reasonable inquiry, (1)whether a person is an
Interested Stockholder, (2) the number of shares of Voting Stock beneficially
owned by any person, (3) whether a person is an Affiliate or Associate of
another,(4) whether the assets which are
* 9 *
<PAGE>
the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Company or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value of
$100 million or more. A majority of the Directors shall have the further power
to interpret all of the terms and provisions of this Article VII.
F. No Effect on Fiduciary Obligations of Interested Stockholders.Nothing
contained in this Article VII shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
G. Amendment, Repeal, etc. Notwithstanding any other provisions of the
Certificate of Incorporation or these by-laws (and notwithstanding the fact that
a lesser percentage may be specified by law, the Certificate of Incorporation or
these by-laws) the affirmative vote of the holders of at least a majority of
then outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class shall be required to
repeal the foregoing provisions of this Article VII.
ARTICLE VIII.
Seal.
The seal of the Company shall be in circular form containing the name of
the Company around the margin, with a five pointed star in the center embodying
a capital "T".
ARTICLE IX.
By-Law Amendments.
Subject to the provisions of the Certificate of Incorporation, these
by-laws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these by-laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend these by-laws,
or enact such other by-laws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the Company.
_________
I, .........R.E. Koch........................ Assistant Secretary of Texaco
Inc., a Delaware corporation, do hereby certify that the above and foregoing is
a true and correct copy of the by-laws of said Company as amended to September
27, 1996, and now in effect.
Dated Harrison, N.Y ......November 13......, 1996.. .....R.E. Koch........
Assistant Secretary
* 10 *
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, 1996 AND 1995
---------------------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
-------------------------------------------------
For the nine months For the three months
Primary Net Income Per Common Share ended September 30, ended September 30,
- ----------------------------------- ------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income from continuing operations before
cumulative effect of accounting change $ 1,509 $ 979 $ 434 $ 290
Cumulative effect of accounting change - (121) - -
------- ------- ------- -------
Net income 1,509 858 434 290
Less: Preferred stock dividend requirements (43) (46) (14) (15)
------- ------- ------- -------
Primary net income available for common stock $ 1,466 $ 812 $ 420 $ 275
======= ======= ======= =======
Average number of primary common shares
outstanding for computation of earnings
per share (thousands) 260,725 259,862 260,758 260,087
======= ======= ======= =======
Primary net income per common share $ 5.62 $ 3.13 $ 1.61 $ 1.06
======= ======= ======= =======
Fully Diluted Net Income Per Common Share
- -----------------------------------------
Net income $ 1,509 $ 858 $ 434 $ 290
Less: Preferred stock dividend requirements of
non-dilutive and anti-dilutive issues and
adjustments to net income associated with
dilutive securities (18) (18) (6) (6)
------- ------- ------- -------
Fully diluted net income $ 1,491 $ 840 $ 428 $ 284
======= ======= ======= =======
Average number of primary common shares
outstanding for computation of earnings
per share (thousands) 260,725 259,862 260,758 260,087
Additional shares outstanding assuming full
conversion of dilutive convertible securities
into common stock (thousands):
Convertible debentures 146 147 145 146
Convertible Preferred Stock
Series B ESOP 9,447 9,883 9,348 9,790
Series F ESOP 589 663 580 660
Other 62 52 117 52
------- ------- ------- -------
Average number of fully diluted common
shares outstanding for computation of earnings
per share (thousands) 270,969 270,607 270,948 270,735
======= ======= ======= =======
Fully diluted net income per common share $ 5.50 $ 3.10 $ 1.58 $ 1.05
======= ======= ======= =======
</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, 1996 AND
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1995 (a)
------------------------------------------------------
(Millions of dollars)
For the Nine Years Ended December 31,
Months Ended -----------------------------------------
September 30, 1996 1995 1994 1993 1992 1991
------------------ ---- ---- ---- ---- ----
<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 and 1-1-95.......... $2,881 $1,201 $1,409 $1,392 $1,707 $1,744
Dividends from less than 50% owned companies
more or (less) than equity in net income................ (5) 1 (1) (8) (9) 5
Minority interest in net income............................ 50 54 44 17 18 16
Previously capitalized interest charged to
income during the period................................ 20 33 29 33 30 23
------ ------ ------ ------ ------ ------
Total earnings..................................... 2,946 1,289 1,481 1,434 1,746 1,788
------ ------ ------ ------ ------ ------
Fixed charges:
Items charged to income:
Interest charges...................................... 414 614 594 546 551 644
Interest factor attributable to operating
lease rentals.................................... 82 110 118 91 94 76
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc......................... 27 36 31 4 - -
------ ------ ------ ------ ------ ------
Total items charged to income...................... 523 760 743 641 645 720
Interest capitalized.................................... 12 28 21 57 109 80
Interest on ESOP debt guaranteed by Texaco Inc.......... 7 14 14 14 18 26
------ ------ ------ ------ ------ ------
Total fixed charges................................ 542 802 778 712 772 826
------ ------ ------ ------ ------ ------
Earnings available for payment of fixed charges............ $3,469 $2,049 $2,224 $2,075 $2,391 $2,508
(Total earnings + Total items charged to income) ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges of Texaco
on a total enterprise basis............................. 6.41 2.55 2.86 2.91 3.10 3.04
====== ====== ====== ====== ====== ======
<FN>
(a) Excludes discontinued operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TEXACO INC.'S THIRD QUARTER 1996 FORM 10-Q 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-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 903
<SECURITIES> 42
<RECEIVABLES> 4,055
<ALLOWANCES> 36
<INVENTORY> 1,526
<CURRENT-ASSETS> 6,694
<PP&E> 32,143
<DEPRECIATION> 19,097
<TOTAL-ASSETS> 25,696
<CURRENT-LIABILITIES> 5,319
<BONDS> 5,044
0
611
<COMMON> 1,590
<OTHER-SE> 8,035
<TOTAL-LIABILITY-AND-EQUITY> 25,696
<SALES> 31,777
<TOTAL-REVENUES> 32,629
<CGS> 24,526
<TOTAL-COSTS> 26,631
<OTHER-EXPENSES> 3,193
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 328
<INCOME-PRETAX> 2,477
<INCOME-TAX> 968
<INCOME-CONTINUING> 1,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,509
<EPS-PRIMARY> 5.62
<EPS-DILUTED> 5.50
</TABLE>
