UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
For the transition period from __________to________
Commission File Number 1-2256
EXXON MOBIL CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
(Address of principal executive offices) (Zip Code)
(972) 444-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerate filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer X Accelerated filer Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding as of March 31, 2006
Common stock, without par value 6,050,323,935
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Consolidated Statement of Income
3
Three months ended March 31, 2006 and 2005
Condensed Consolidated Balance Sheet
4
As of March 31, 2006 and December 31, 2005
Condensed Consolidated Statement of Cash Flows
5
Notes to Condensed Consolidated Financial Statements
6-17
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
18-22
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
23
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
Unregistered Sales of Equity Securities and Use of Proceeds
24
Item 6.
Exhibits
Signature
25
Index to Exhibits
26
-2-
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended
March 31,
2006
2005
REVENUES AND OTHER INCOME
Sales and other operating revenue (1) (2)
$
86,317
79,475
Income from equity affiliates
1,800
1,556
Other income
863
1,020
Total revenues and other income
88,980
82,051
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases (2)
41,519
39,289
Production and manufacturing expenses
7,424
6,108
Selling, general and administrative expenses
3,466
3,451
Depreciation and depletion
2,644
2,553
Exploration expenses, including dry holes
282
173
Interest expense
165
56
Excise taxes (1)
7,664
7,238
Other taxes and duties
10,175
10,185
Income applicable to minority and preferred interests
182
95
Total costs and other deductions
73,521
69,148
INCOME BEFORE INCOME TAXES
15,459
12,903
Income taxes
7,059
5,043
NET INCOME
8,400
7,860
NET INCOME PER COMMON SHARE (dollars)
1.38
1.23
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (dollars)
1.37
1.22
DIVIDENDS PER COMMON SHARE (dollars)
0.32
0.27
(1) Excise taxes included in sales and other
operating revenue
(2) Amounts included in prior period sales and other operating
revenue for purchases/sales contracts with the same
counterparty. Associated costs are included in crude oil
and product purchases. See accounting change note 2
on page 6.
0
7,160
-3-
CONDENSED CONSOLIDATED BALANCE SHEET
Dec. 31,
ASSETS
Current assets
Cash and cash equivalents
31,945
28,671
Cash and cash equivalents - restricted (note 4)
4,604
Notes and accounts receivable - net
26,962
27,484
Inventories
Crude oil, products and merchandise
10,048
7,852
Materials and supplies
1,536
1,469
Prepaid taxes and expenses
3,379
3,262
Total current assets
78,474
73,342
Property, plant and equipment - net
108,397
107,010
Investments and other assets
29,131
27,983
TOTAL ASSETS
216,002
208,335
LIABILITIES
Current liabilities
Notes and loans payable
1,739
1,771
Accounts payable and accrued liabilities
39,019
36,120
Income taxes payable
10,676
8,416
Total current liabilities
51,434
46,307
Long-term debt
6,255
6,220
Deferred income tax liabilities
21,895
20,878
Other long-term liabilities
23,955
23,744
TOTAL LIABILITIES
103,539
97,149
Commitments and contingencies (note 4)
SHAREHOLDERS' EQUITY
Common stock, without par value:
Authorized:
9,000 million shares
Issued:
8,019 million shares
4,397
4,477
Earnings reinvested
169,778
163,335
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment
1,393
979
Minimum pension liability adjustment
(2,275
)
(2,258
Common stock held in treasury:
1,969 million shares at March 31, 2006
(60,830
1,886 million shares at December 31, 2005
(55,347
TOTAL SHAREHOLDERS' EQUITY
112,463
111,186
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
The number of shares of common stock issued and outstanding at March 31, 2006 and
December 31, 2005 were 6,050,323,935 and 6,132,998,174, respectively.
-4-
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Changes in operational working capital, excluding cash and debt
3,257
3,549
All other items - net
330
(994
Net cash provided by operating activities
14,631
12,968
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(3,730
(2,713
Sales of subsidiaries, investments, and property, plant and equipment
394
1,797
Other investing activities - net
(167
(170
Net cash used in investing activities
(3,503
(1,086
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt
13
Reductions in long-term debt
(7
(6
Additions/(reductions) in short-term debt - net
(61
15
Cash dividends to ExxonMobil shareholders
(1,957
(1,728
Cash dividends to minority interests
(81
(94
Changes in minority interests and sales/(purchases)
of affiliate stock
(145
(103
Net ExxonMobil shares acquired
(5,764
(3,087
Net cash used in financing activities
(8,002
(5,003
Effects of exchange rate changes on cash
148
(245
Increase/(decrease) in cash and cash equivalents
3,274
6,634
Cash and cash equivalents at beginning of period
18,531
CASH AND CASH EQUIVALENTS AT END OF PERIOD
25,165
SUPPLEMENTAL DISCLOSURES
Income taxes paid
4,088
3,820
Cash interest paid
108
66
-5-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission in the Corporation's 2005 Annual Report on Form 10-K. In the opinion of the Corporation, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. The Corporation's exploration and production activities are accounted for under the "successful efforts" method. Certain reclassifications to the prior period have been made to conform to the 2006 presentation.
2.
Accounting Change for Purchases/Sales Contracts
Effective January 1, 2006, the Corporation adopted the Emerging Issues Task Force (EITF) consensus on Issue No. 04-13, “Accounting for Purchases and Sales of Inventory with the Same Counterparty.” The EITF concluded that purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another should be combined and recorded as exchanges measured at the book value of the item sold. In prior periods, the Corporation recorded certain crude oil, natural gas, petroleum product and chemical sales and purchases contemporaneously negotiated with the same counterparty as revenues and purchases. As a result of the EITF consensus, the Corporation’s accounts “Sales and other operating revenue” and “Crude oil and product purchases” on the income statement were reduced by associated amounts with no impact on net income. All operating seg ments are affected by this change, with the largest impact in the Downstream.
3.
Accounting Change for Share-based Payments
Effective January 1, 2006, the Corporation adopted the Financial Accounting Standards Board's revised Statement of Financial Accounting Standards No. 123 (FAS 123R), “Share-based Payment.” FAS 123R requires compensation costs related to share-based payments to be recognized in the income statement over the requisite service period. The amount of the compensation cost is to be measured based on the grant-date fair value of the instrument issued. FAS 123R is effective for awards granted or modified after the date of adoption and for awards granted prior to that date that have not vested. In 2003, the Corporation adopted a policy of expensing all share-based payments that is consistent with the provisions of FAS 123R, and all prior years outstanding stock option awards have vested. FAS 123R will therefore not materially change the Corporation’s existing accounting practices or the amount of share-based c ompensation recognized in earnings.
The cumulative compensation expense associated with share-based payments made in 2005, 2004 and 2003 has been recognized in the income statement using the “nominal vesting period approach.” The full cost of awards given to employees who have retired before the end of the vesting period has been expensed. The use of a “non-substantive vesting period approach” based on the retirement eligibility age is not significantly different from the nominal vesting period approach. The non-substantive vesting period approach is applicable to grants made after the adoption of FAS 123R.
-6-
Incentive Program
The 2003 Incentive Program provides for grants of stock options, stock appreciation rights (SARs), restricted stock and other forms of award. Awards may be granted to eligible employees of the Corporation and those affiliates at least 50 percent owned. The maximum number of shares of stock that may be issued under the 2003 Incentive Program is 220 million. Awards that are forfeited or expire, or are settled in cash, do not count against this maximum limit. The 2003 Incentive Program does not have a specified term. New awards may be made until the available shares are depleted, unless the Board terminates the plan early. Outstanding awards are subject to certain forfeiture provisions contained in the program or award instrument.
As under earlier programs, options and SARs may be granted at prices not less than 100 percent of market value on the date of grant and have a maximum life of 10 years. Most of the options and SARs normally first become exercisable one year following the date of grant. All remaining stock options and SARs outstanding were granted prior to 2002.
Restricted stock awards have been granted in the fourth quarter and the restricted shares were issued in the following first quarter. These shares are issued to employees from treasury stock. The units that are settled in cash are recorded as liabilities and their changes in fair value are recognized over the vesting period. During the applicable restricted periods, the shares may not be sold or transferred and are subject to forfeiture. The majority of the awards have graded vesting periods, with 50 percent of the shares in each award vesting after three years and the remaining 50 percent vesting after seven years. A small number of awards granted to certain senior executives have vesting periods of five years for 50 percent of the award and of ten years or retirement, which ever occurs later, for the remaining 50 percent of the award.
The Corporation has purchased shares in the open market and through negotiated transactions to offset shares issued in conjunction with benefit plans and programs. Purchases may be discontinued at any time without prior notice.
In 2002, the Corporation began issuing restricted stock as share-based compensation in lieu of stock options. Compensation expense for these awards is based on the price of the stock at the date of grant and has been recognized in income over the requisite service period, which is the same method of accounting as under FAS 123R. Prior to 2002, the Corporation issued stock options as share-based compensation, and since these awards vested prior to the effective date of FAS 123R, they continue to be accounted for by the method prescribed in APB 25, "Accounting for Stock Issued to Employees." Under this method, compensation expense for awards granted in the form of stock options is measured at the intrinsic value of the options (the difference between the market price of the stock and the exercise price of the options) on the date of grant. Since these two prices are the same on the date of g rant, no compensation expense has been recognized in income for these awards.
-7-
Restricted stock and restricted units
The following table summarizes information about restricted stock and restricted stock units, including those shares from former Mobil plans, for the three months ended March 31, 2006.
Weighted
Average
Grant-Date
Fair Value
Restricted stock/units:
Shares
per Share
(thousands)
Issued and outstanding at December 31, 2005
29,530
$41.52
2005 award issued in 2006
11,064
$58.43
Vested
-
Forfeited
(22
$44.09
Issued and outstanding at March 31, 2006
40,572
$46.13
As of March 31, 2006, there was $1,158 million of unrecognized compensation cost related to the nonvested restricted awards. This cost is expected to be recognized over a weighted-average period of 4.6 years. The compensation cost charged against income for the restricted stock and restricted units was $194 million and $82 million for the three months ended March 31, 2006, and 2005, respectively. The total income tax benefit recognized in income related to this compensation expense was $35 million and $13 million for the same periods, respectively.
Stock options
The following table summarizes information about stock options, including those shares from former Mobil plans, for the three months ended March 31, 2006.
Exercise
Remaining
Price
Contractual
Stock options:
Term
Outstanding at December 31, 2005
147,774
$37.11
Exercised
(7,129
$28.10
Expired/canceled
(33
$26.70
Outstanding at March 31, 2006
140,612
$37.57
3.7
years
Exercisable at March 31, 2006
No compensation expense was recognized for stock options in the three months ended March 31, 2006, and 2005, as all remaining outstanding stock options were granted prior to 2002 and are fully vested. No income tax benefit was recognized in income during the quarter related to stock options. Cash received from stock option exercises for the three months ended March 31, 2006, was $200 million. The estimated cash tax benefit to be realized for the options exercised in the three months ended March 31, 2006, is $70 million. The aggregate intrinsic value of stock options exercised in the three months ended March 31, 2006, was $230 million and for the balance of outstanding stock options was $3,276 million.
-8-
4.
Litigation and Other Contingencies
Litigation
A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits and tax disputes. The Corporation accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. The Corporation does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. ExxonMobil will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Corporation does not believe the ultimate outcome of any currently pending lawsuit against ExxonMobil will have a materially adverse effect upon the Corporation’s operations or financial condition.
A number of lawsuits, including class actions, were brought in various courts against Exxon Mobil Corporation and certain of its subsidiaries relating to the accidental release of crude oil from the tanker Exxon Valdez in 1989. The vast majority of the compensatory claims have been resolved and paid. All of the punitive damage claims were consolidated in the civil trial that began in 1994. The first judgment from the United States District Court for the District of Alaska in the amount of $5 billion was vacated by the United States Court of Appeals for the Ninth Circuit as being excessive under the Constitution. The second judgment in the amount of $4 billion was vacated by the Ninth Circuit panel without argument and sent back for the District Court to reconsider in light of the recent U.S. Supreme Court decision in Campbell v. State Farm. The most recent District Court judgment for punitive damages was for $4.5 bi llion plus interest and was entered in January 2004. ExxonMobil and the plaintiffs have appealed this decision to the Ninth Circuit. The Corporation has posted a $5.4 billion letter of credit. Oral arguments were held before the Ninth Circuit on January 27, 2006. Management believes that the likelihood of the judgment being upheld is remote. While it is reasonably possible that a liability may have been incurred from the Exxon Valdez grounding, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability.
In December 2000, a jury in the 15th Judicial Circuit Court of Montgomery County, Alabama, returned a verdict against the Corporation in a dispute over royalties in the amount of $88 million in compensatory damages and $3.4 billion in punitive damages in the case of Exxon Corporation v. State of Alabama, et al. The verdict was upheld by the trial court in May 2001. In December 2002, the Alabama Supreme Court vacated the $3.5 billion jury verdict. The case was retried and in November 2003, a state district court jury in Montgomery, Alabama, returned a verdict against Exxon Mobil Corporation. The verdict included $63.5 million in compensatory damages and $11.8 billion in punitive damages. In March 2004, the district court judge reduced the amount of punitive damages to $3.5 billion. ExxonMobil believes the judgment is not justified by the evidence, that any punitive damage award is not justified by either the facts or the law, and that the amount of the award is grossly excessive and unconstitutional. ExxonMobil has appealed the decision to the Alabama Supreme Court. Management believes that the likelihood of the judgment being upheld is remote. While it is reasonably possible that a liability may have been incurred by ExxonMobil from this dispute over royalties, it is not possible to predict the ultimate outcome or to reasonably estimate any such potential liability. In May 2004, the Corporation posted a $4.5 billion supersedeas bond as required by Alabama law to stay execution of the judgment pending appeal. The Corporation has pledged to the issuer of the bond collateral consisting of cash and short-term, high-quality securities with an aggregate value of approximately $4.6 billion. This collateral is reported as restricted cash and cash equivalents on the Consolidated Balance Sheet. Under the terms of the pledge agreement, the Corporation is entitled to receive the income generated from the cash and securities and to make investment decisions, but is restricted from using the pledged cash and securities for any other purpose until such time the bond is canceled.
-9-
In 2001, a Louisiana state court jury awarded compensatory damages of $56 million and punitive damages of $1 billion to a landowner for damage caused by a third party that leased the property from the landowner. The third party provided pipe cleaning and storage services for the Corporation and other entities. The Louisiana Fourth Circuit Court of Appeals reduced the punitive damage award to $112 million in 2005. The Corporation appealed this decision to the Louisiana Supreme Court which, in March 2006, refused to hear the appeal. ExxonMobil has paid the compensatory damage award and is preparing to appeal the punitive damage award to the U.S. Supreme Court. The Corporation is seeking to stay payment of the punitive damage award pending the outcome of its appeal. The Corporation has fully accrued for this potential liability.
In Allapattah v. Exxon, a jury in the United States District Court for the Southern District of Florida determined in 2001 that a class of Exxon dealers between March 1983 and August 1994 had been overcharged for gasoline. In June 2003, the Eleventh Circuit Court of Appeals affirmed the judgment and in March 2004, denied a petition for Rehearing En Banc. In October 2004, the U.S. Supreme Court granted review as to whether the class in the District Court judgment should include members that individually do not satisfy the $50,000 minimum amount-in-controversy requirement in federal court. In light of the Supreme Court’s decision to grant review of only part of ExxonMobil’s appeal, the Corporation took an after-tax charge of $550 million in the third quarter of 2004 reflecting the estimated liability, after considering potential set-offs and defenses for the claims under review by the Supreme Court. In June 2005, the Supreme Court granted the District Court the right to hear the claims of all class members and the Corporation took an after-tax charge of $200 million. The District Court has given final approval of a settlement of $1,075 million, pre-tax, which will be paid in May. This obligation has been fully accrued.
Tax issues for 1986 to 1993 remain pending before the U.S. Tax Court. The ultimate resolution of these issues is not expected to have a materially adverse effect upon the Corporation’s operations or financial condition.
Other Contingencies
As of March 31, 2006
Equity
Other
Company
Third Party
Obligations
Total
Total guarantees
4,008
246
4,254
The Corporation and certain of its consolidated subsidiaries were contingently liable at March 31, 2006, for $4,254 million, primarily relating to ExxonMobil's guarantees of obligations of equity companies for notes, loans and other liabilities.
Additionally, the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities, all of which are expected to be fulfilled with no adverse consequences material to the Corporation’s operations or financial condition. The Corporation's outstanding unconditional purchase obligations at March 31, 2006 were similar to those at the prior year-end period. Unconditional purchase obligations as defined by accounting standards are those long-term commitments that are noncancelable or cancelable only under certain conditions, and that third parties have used to secure financing for the facilities that will provide the contracted goods or services.
The operations and earnings of the Corporation and its affiliates throughout the world have been, and may in the future be, affected from time to time in varying degree by political developments and laws and regulations, such as forced divestiture of assets; restrictions on production, imports and exports; price controls; tax increases and retroactive tax claims; expropriation of property; cancellation of contract rights and environmental regulations. Both the likelihood of such occurrences and their overall effect upon the Corporation vary greatly from country to country and are not predictable.
-10-
5.
Nonowner Changes in Shareholders' Equity
Changes in other nonowner changes in equity
Foreign exchange translation adjustment
414
(899
(17
Reclassification adjustment for gain on sale of
stock investment included in net income
(428
Total nonowner changes in shareholders' equity
8,797
6,533
6.
Earnings Per Share
Net income (millions of dollars)
Weighted average number of common shares
outstanding (millions of shares)
6,068
6,365
Net income per common share (dollars)
- ASSUMING DILUTION
Effect of employee stock-based awards
58
outstanding - assuming dilution
6,126
6,421
Net income per common share
- assuming dilution (dollars)
-11-
7.
Annuity Benefits and Other Postretirement Benefits
Annuity Benefits - U.S.
Components of net benefit cost
Service cost
85
82
Interest cost
159
151
Expected return on plan assets
(157
(155
Amortization of actuarial loss/(gain)
and prior service cost
69
68
Net pension enhancement and
curtailment/settlement expense
39
30
Net benefit cost
195
176
Annuity Benefits - Non-U.S.
103
93
215
213
(237
(202
126
106
1
208
210
Other Postretirement Benefits
18
16
77
74
(10
(9
53
49
138
130
-12-
8.
Disclosures about Segments and Related Information
EARNINGS AFTER INCOME TAX
Upstream
United States
1,280
1,353
Non-U.S.
5,103
3,701
Downstream
679
645
592
808
Chemical
329
492
620
940
All other
(203
(79
Corporate total
SALES AND OTHER OPERATING REVENUE (1) (2)
1,777
7,539
4,972
21,128
19,313
47,704
45,489
3,225
3,155
4,940
5,006
(1) Includes excise taxes
(2) Prior year period includes amounts in sales and
other operating revenue for purchases/sales
contracts with the same counterparty. See
accounting change note 2 on page 6.
INTERSEGMENT REVENUE
1,854
1,807
8,874
6,340
2,782
2,080
10,983
8,727
1,823
1,405
1,582
1,289
72
-13-
9.
Condensed Consolidating Financial Information Related to Guaranteed Securities Issued by Subsidiaries
Exxon Mobil Corporation has fully and unconditionally guaranteed the 6.125% notes due 2008 ($160 million of long-term debt at March 31, 2006) of Exxon Capital Corporation and the deferred interest debentures due 2012 ($1,431 million long-term) and the debt securities due 2006-2011 ($65 million long-term and $10 million short-term) of SeaRiver Maritime Financial Holdings, Inc. Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc. are 100 percent owned subsidiaries of Exxon Mobil Corporation.
The following condensed consolidating financial information is provided for Exxon Mobil Corporation, as guarantor, and for Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc., as issuers, as an alternative to providing separate financial statements for the issuers. The accounts of Exxon Mobil Corporation, Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc. are presented utilizing the equity method of accounting for investments in subsidiaries.
SeaRiver
Exxon Mobil
Maritime
Consolidating
Corporation
Exxon
Financial
and
Parent
Capital
Holdings
All Other
Eliminating
Guarantor
Inc.
Subsidiaries
Adjustments
Consolidated
Condensed consolidated statement of income for three months ended March 31, 2006
Revenues and other income
Sales and other operating revenue,
including excise taxes
4,221
82,096
8,443
9
(8,449
191
672
Intercompany revenue
8,769
20
77,787
(86,592
21,624
29
162,352
(95,041
Costs and other deductions
Crude oil and product purchases
8,454
114,897
(81,832
Production and manufacturing
expenses
2,037
6,615
(1,229
Selling, general and administrative
686
2,920
(140
311
2,332
Exploration expenses, including dry
holes
993
45
2,517
(3,394
Excise taxes
6
10,169
Income applicable to minority and
preferred interests
12,593
147,472
(86,595
Income before income taxes
9,031
10
(16
14,880
(8,446
631
6,433
8,447
-14-
Condensed consolidated statement of income for three months ended March 31, 2005
3,980
75,495
7,050
(7,053
890
6,857
11
59,340
(66,218
18,017
137,281
(73,271
6,578
95,621
(62,910
1,633
5,762
(1,287
557
3,000
(106
331
2,221
28
145
407
1,553
(1,947
10,180
9,539
125,815
(66,250
8,478
(26
11,466
(7,021
618
2
4,433
7,033
-15-
Condensed consolidated balance sheet as of March 31, 2006
9,104
22,841
Cash and cash equivalents - restricted
2,261
24,701
1,402
10,182
11,584
614
2,755
17,985
60,479
15,538
91
92,768
171,994
458
409,899
(553,220
Intercompany receivables
12,540
1,063
1,783
380,100
(395,486
Total assets
218,057
1,154
2,251
943,246
(948,706
Notes and loan payables
287
1,442
3,896
35,116
939
9,732
5,122
46,290
270
160
1,496
4,329
3,056
260
18,553
5,664
18,273
Intercompany payables
91,482
125
383
303,496
Total liabilities
105,594
340
2,150
390,941
(368
116,449
(116,110
Other shareholders' equity
(57,315
785
469
435,856
(437,110
Total shareholders' equity
814
101
552,305
Total liabilities and
shareholders' equity
Condensed consolidated balance sheet as of December 31, 2005
12,076
16,595
2,183
25,301
1,241
8,080
9,321
117
3,145
20,221
53,121
15,537
92
91,381
164,290
449
409,233
(545,989
14,569
1,041
1,768
377,176
(394,554
214,617
1,133
2,217
930,911
(940,543
446
1,315
3,137
32,979
553
4,136
42,154
1,456
4,334
2,909
27
257
17,685
5,411
18,320
90,705
121
303,345
103,431
325
2,109
385,838
(361
108,770
(108,432
(52,149
436,303
(437,557
545,073
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Condensed consolidated statement of cash flows for three months ended March 31, 2006
Cash provided by/(used in) operating
activities
2,387
12,979
(768
Cash flows from investing activities
Additions to property, plant and
equipment
(340
(3,390
Sales of long-term assets
376
Net intercompany investing
2,847
(2,874
65
All other investing, net
Net cash provided by/(used in)
investing activities
2,525
(6,055
Cash flows from financing activities
Additions/(reductions) in short-term
debt - net
(163
102
Cash dividends
768
Net ExxonMobil shares sold/(acquired)
Net intercompany financing activity
60
(65
All other financing, net
(226
financing activities
(7,884
(826
703
Effects of exchange rate changes
on cash
Increase/(decrease) in cash and cash
equivalents
(2,972
6,246
Condensed consolidated statement of cash flows for three months ended March 31, 2005
1,342
7
11,913
(298
(278
(2,435
1,773
4,705
(4,719
(67
4,451
(5,551
298
(76
(20
67
(197
(4,815
(457
365
978
(4
5,660
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
First Three Months
Net Income (U.S. GAAP)
Corporate and financing
Special items included in net income
Non-U.S. Downstream
Sale of Sinopec shares
310
Non-U.S. Chemical
150
REVIEW OF FIRST QUARTER 2006 RESULTS
Exxon Mobil Corporation reported first quarter 2006 net income of $8,400 million ($1.37 per share), an increase of $540 million from the first quarter of 2005. Higher crude oil and natural gas realizations and improved marketing margins were partly offset by lower chemical margins and litigation and tax items. First quarter 2005 net income included a $460 million gain from the sale of ExxonMobil's interest in Sinopec.
Upstream earnings
6,383
5,054
Upstream earnings were $6,383 million, up $1,329 million from the first quarter of 2005. On an oil-equivalent basis, production increased by 5 percent from the first quarter of 2005. Excluding the impact of divestments and entitlements, production increased 7 percent.
Liquids production of 2,696 kbd (thousands of barrels per day) was 152 kbd higher. Higher production from projects in West Africa and increased volumes in Abu Dhabi were partly offset by mature field decline, and the impact of entitlements and divestments. Excluding entitlement and divestment effects, liquids production increased by 10 percent.
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First quarter natural gas production was 11,199 mcfd (millions of cubic feet per day) compared with 10,785 mcfd last year. Higher volumes from projects in Qatar and increased European demand were partly offset by the impact of mature field decline.
Earnings from U.S. Upstream operations were $1,280 million, $73 million lower than the first quarter of 2005. The combination of a litigation item and higher tax expenses reduced results by over 4 cents per share. Non-U.S. Upstream earnings were $5,103 million, up $1,402 million from 2005. Higher realizations were partly offset by negative foreign exchange impacts.
Downstream earnings
1,271
1,453
Downstream earnings of $1,271 million increased due to higher marketing margins, improved refining operations and positive foreign exchange effects, offset by the absence of the $310 million Sinopec gain in the first quarter of 2005. Petroleum product sales were 7,865 kbd, 364 kbd lower than last year's first quarter, primarily due to lower refining throughput and divestments.
U.S. Downstream earnings were $679 million, up $34 million. Non-U.S. Downstream earnings of $592 million increased $94 million, after the absence of the $310 million Sinopec gain in the first quarter of 2005.
Chemical earnings
949
1,432
Chemical earnings of $949 million were down from the record quarter a year ago primarily due to reduced margins and $150 million from the absence of the Sinopec gain. Prime product sales of 6,916 kt (thousands of metric tons) were down 22 kt from last year's first quarter.
All other segments earnings
Corporate and financing expenses were $203 million, up $124 million mainly due to tax items.
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LIQUIDITY AND CAPITAL RESOURCES
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Total cash and cash equivalents (at end of period)
36,549
29,769
Cash flow from operations and asset sales
Net cash provided by operating activities (U.S. GAAP)
Sales of subsidiaries, investments and property,
plant and equipment
15,025
14,765
Because of the ongoing nature of our asset management and divestment program, we believe
it is useful for investors to consider asset sales proceeds together with cash provided by operating
activities when evaluating cash available for investment in the business and financing activities.
Total cash and cash equivalents, including the $4.6 billion of restricted cash, was $36.5 billion at the end of the first quarter of 2006.
Cash provided by operating activities totaled $14,631 million for the first three months of 2006 and increased $1,663 million. Major sources of funds were net income of $8,400 million and non-cash provisions of $2,644 million for depreciation and depletion. For additional details, see the Condensed Consolidated Statement of Cash Flows on page 5.
Investing activities for the first three months of 2006 used net cash of $3,503 million compared to $1,086 million in the prior year. Spending for additions to property, plant and equipment increased $1,017 million to $3,730 million. Proceeds from asset divestments were $1,403 million lower in 2006 reflecting the absence of the sale of the Corporation's interest in Sinopec in 2005.
Cash flow from operations and asset sales in the first three months of 2006 of $15.0 billion, including asset sales of $0.4 billion, increased from 2005 as higher cash from operating activities more than offset the lower proceeds from asset sales.
Net cash used in financing activities of $8,002 million in the first three months of 2006 compared to $5,003 million in the 2005 period reflecting a higher level of purchases of shares of ExxonMobil stock.
During the first quarter of 2006, Exxon Mobil Corporation purchased 99 million shares of its common stock for the treasury at a gross cost of $6.0 billion. These purchases included $5.0 billion to reduce the number of shares outstanding and the balance to offset shares issued in conjunction with the company benefits plans and programs. As a consequence of the continued strengthening of our financial position, the Corporation intends to increase share purchases to $6.0 billion to reduce shares outstanding in the second quarter. Shares outstanding were reduced from 6,133 million at the end of the fourth quarter to 6,050 million at the end of the first quarter. Purchases may be made in both the open market and through negotiated transactions, and may be increased, decreased or discontinued at any time without prior notice.
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The Corporation distributed a total of $7.0 billion to shareholders in the first quarter through dividends of $2.0 billion and share purchases to reduce shares outstanding of $5.0 billion, an increase of 67 percent versus the first quarter of 2005.
Total debt of $8.0 billion at March 31, 2006 was comparable to year-end 2005. The Corporation's debt to total capital ratio was 6.4 percent at the end of the first quarter of 2006, comparable to year-end 2005.
Although the Corporation issues long-term debt from time to time and maintains a revolving commercial paper program, internally generated funds cover the majority of its financial requirements.
Litigation and other contingencies are discussed in note 4 to the unaudited condensed consolidated financial statements.
The Corporation, as part of its ongoing asset management program, continues to evaluate its mix of assets for potential upgrade. Because of the ongoing nature of this program, dispositions will continue to be made from time to time which will result in either gains or losses.
TAXES
Taxes
All other taxes and duties
11,049
10,944
25,772
23,225
Effective income tax rate
47.4
%
41.3
Income, excise and all other taxes for the first quarter of 2006 of $25,772 million were up $2,547 million compared to 2005. In the first quarter of 2006 income tax expense was $7,059 million and the effective income tax rate was 47.4 percent, compared to $5,043 million and 41.3 percent, respectively, in the prior year period. Resolution of income tax related issues resulted in charges in the first quarter 2006. Excise and all other taxes and duties were similar as effects of higher prices were offset by foreign exchange effects.
CAPITAL AND EXPLORATION EXPENDITURES
Capital and exploration expenditures
Upstream (including exploration expenses)
4,087
2,812
581
452
144
12
4,824
3,417
ExxonMobil continued its active investment program in the first quarter, spending $4.8 billion on capital and exploration projects, an increase of 41 percent or $1.4 billion versus 2005. In the first quarter of 2006, the results of our continuing long term investment program contributed to a 5 percent increase in production.
Depending on the progress of individual projects, the Corporation expects the level of capital and exploration spending to be about $19 billion in 2006 compared to $18 billion in 2005.
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FORWARD-LOOKING STATEMENTS
Statements in this report relating to future plans, projections, events, or conditions are forward-looking statements. Actual results, including project plans, resource recoveries, timing, and capacities, could differ materially due to changes in long-term oil or gas prices or other market conditions affecting the oil and gas industry; political events or disturbances; reservoir performance; the outcome of commercial negotiations; potential liability resulting from pending or future litigation; wars and acts of terrorism or sabotage; changes in technical or operating conditions; and other factors discussed under the heading "Risk Factors" in Item 1A of ExxonMobil's 2005 Form 10-K. We assume no duty to update these statements as of any future date.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the three months ended March 31, 2006, does not differ materially from that discussed under Item 7A of the registrant's Annual Report on Form 10-K for 2005.
Item 4. Controls and Procedures
As indicated in the certifications in Exhibit 31 of this report, the Corporation's chief executive officer, principal financial officer and principal accounting officer have evaluated the Corporation's disclosure controls and procedures as of March 31, 2006. Based on that evaluation, these officers have concluded that the Corporation's disclosure controls and procedures are effective in ensuring that material information required to be in this quarterly report is made known to them on a timely basis. There were no changes during the Corporation's last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
Item 1. Legal Proceedings
On April 19, 2006, in a case captioned United States v. Chalmette Refining, L.L.C., the United States District Court for the Eastern District of Louisiana accepted a plea agreement reached by Chalmette Refining (a 50-percent owned, indirect subsidiary of the Corporation) with the U.S. Department of Justice and the U.S. Environmental Protection Agency. In accordance with the terms of the agreement, Chalmette Refining pled guilty on January 25, 2006, to a one-count misdemeanor violation of the Clean Water Act for a negligent discharge of benzene on February 5, 2000, at the Chalmette, Louisiana refinery and was sentenced to and paid a fine of $200,000 on April 19th. The violation involved a discharge into the Mississippi River that resulted from a leak in a heat exchanger. When the source of the leak was identified, the heat exchanger was immediately replaced and new procedures implemented to prevent a re currence. Chalmette Refining has also agreed to make $25,000 community service donations to the Louisiana State Police Right to Know Fund and to the Southern Environmental Enforcement Network.
Refer to the relevant portions of note 4 on pages 9 and 10 of this Quarterly Report on Form 10-Q for further information on legal proceedings.
-23-
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer purchase of equity securities for quarter ended March 31, 2006
Total Number of
Maximum Number
Shares Purchased
of Shares that May
Total Number
as Part of Publicly
Yet Be Purchased
of Shares
Price Paid
Announced Plans
Under the Plans or
Period
Purchased
or Programs
Programs
January, 2006
30,995,704
$60.41
February, 2006
30,382,771
$60.48
March, 2006
37,173,716
$60.63
98,552,191
$60.51
(See Note 1)
Note 1 -- On August 1, 2000, the Corporation announced its intention to resume purchases of shares of its common stock for the treasury both to offset shares issued in conjunction with company benefit plans and programs and to gradually reduce the number of shares outstanding. The announcement did not specify an amount or expiration date. The Corporation has continued to purchase shares since this announcement and to report purchased volumes in its quarterly earnings releases. In its most recent earnings release dated April 27, 2006, the Corporation stated its intention to increase share purchases to $6.0 billion to reduce shares outstanding in the second quarter of 2006. Purchases may be made in both the open market and through negotiated transactions, and purchases may be increased, decreased or discontinued at any time without prior notice.
Item 6. Exhibits
Exhibit
Description
31.1
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Chief
Executive Officer.
31.2
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by Principal
Financial Officer.
31.3
Accounting Officer.
32.1
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Chief
32.2
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by
Principal Financial Officer.
32.3
Principal Accounting Officer.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 4, 2006
By: /s/ Patrick T. Mulva
Name: Patrick T. Mulva
Title: Vice President, Controller and
Principal Accounting Officer
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INDEX TO EXHIBITS
Certification (pursuant to Securities Exchange Act Rule 13a-14(a)) by
Chief Executive Officer.
Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal
-26-