FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to________ Commission File Number 1-2256 EXXON 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) 225 E. John W. Carpenter Freeway, Irving, Texas 75062-2298 _______________________________________________________________ (Address of principal executive offices) (Zip Code) (214) 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 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 September 30, 1995 ________________________________ _____________________________________ Common stock, without par value 1,241,678,440 EXXON CORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page Number ______ Item 1. Financial Statements Condensed Consolidated Statement of Income 3 Three and nine months ended September 30, 1995 and 1994 Condensed Consolidated Balance Sheet 4 As of September 30, 1995 and December 31, 1994 Condensed Consolidated Statement of Cash Flows 5 Nine months ended September 30, 1995 and 1994 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 Signature 14 Index to Exhibits 15 -2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EXXON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (millions of dollars) Three Months Ended Nine Months Ended September 30, September 30, __________________ _________________ REVENUE 1995 1994 1995 1994 ______ ____ ____ ____ Sales and other operating revenue, including excise taxes $30,577 $29,237 $90,858 $81,963 Earnings from equity interests and other revenue 392 326 1,557 883 _______ _______ _______ _______ Total revenue 30,969 29,563 92,415 82,846 _______ _______ _______ _______ COSTS AND OTHER DEDUCTIONS Crude oil and product purchases 12,247 12,353 37,673 34,096 Operating expenses 3,060 3,101 9,319 9,315 Selling, general and administrative expenses 1,857 1,783 5,343 5,134 Depreciation and depletion 1,340 1,187 4,004 3,709 Exploration expenses, including dry holes 152 147 487 420 Interest expense 192 126 511 534 Excise taxes 3,552 3,190 9,860 8,787 Other taxes and duties 5,994 5,639 17,298 15,577 Income applicable to minority and preferred interests 84 97 244 189 _______ _______ _______ _______ Total costs and other deductions 28,478 27,623 84,739 77,761 _______ _______ _______ _______ INCOME BEFORE INCOME TAXES 2,491 1,940 7,676 5,085 Income taxes 991 785 2,886 1,885 _______ _______ _______ _______ NET INCOME $ 1,500 $ 1,155 $ 4,790 $ 3,200 ======= ======= ======= ======= Net income per common share* $ 1.20 $ 0.92 $ 3.83 $ 2.54 Dividends per common share $ 0.75 $ 0.72 $ 2.25 $ 2.16 Average number common shares outstanding (millions) 1,241.8 1,241.4 1,242.1 1,241.6 * Computed as income less dividends on preferred stock divided by the weighted average number of common shares outstanding. -3- EXXON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (millions of dollars) Sept. 30, Dec. 31, 1995 1994 _______ _______ ASSETS Current assets Cash and cash equivalents $ 2,200 $ 1,157 Other marketable securities 337 618 Notes and accounts receivable - net 8,059 8,073 Inventories Crude oil, products and merchandise 5,037 4,717 Materials and supplies 840 824 Prepaid taxes and expenses 1,025 1,071 _______ _______ Total current assets 17,498 16,460 Property, plant and equipment - net 64,888 63,425 Investments and other assets 8,320 7,977 _______ _______ TOTAL ASSETS $90,706 $87,862 ======= ======= LIABILITIES Current liabilities Notes and loans payable $ 2,550 $ 3,858 Accounts payable and accrued liabilities 13,556 13,391 Income taxes payable 2,477 2,244 _______ _______ Total current liabilities 18,583 19,493 Long-term debt 8,362 8,831 Annuity reserves, deferred credits and other liabilities 23,726 22,123 _______ _______ TOTAL LIABILITIES 50,671 50,447 _______ _______ SHAREHOLDERS' EQUITY Preferred stock, without par value: Authorized: 200 million shares Outstanding: 8 million shares at Sept. 30, 1995 482 9 million shares at Dec. 31, 1994 554 Guaranteed LESOP obligation (501) (613) Common stock, without par value: Authorized: 2,000 million shares Issued: 1,813 million shares 2,822 2,822 Earnings reinvested 52,796 50,821 Cumulative foreign exchange translation adjustment 1,586 848 Common stock held in treasury: 571 million shares at Sept. 30, 1995 (17,150) 571 million shares at Dec. 31, 1994 (17,017) _______ _______ TOTAL SHAREHOLDERS' EQUITY 40,035 37,415 _______ _______ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $90,706 $87,862 ======= ======= The number of shares of common stock issued and outstanding at September 30, 1995 and December 31, 1994 were 1,241,678,440 and 1,241,744,053, respectively. -4- EXXON CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (millions of dollars) Nine Months Ended Sept. 30, _________________ 1995 1994 _______ _______ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,790 $ 3,200 Depreciation and depletion 4,004 3,709 Changes in operational working capital, excluding cash and debt 109 (312) All other items - net 1,371 504 _______ _______ Net Cash Provided By Operating Activities 10,274 7,101 _______ _______ CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions and additions to property, plant and equipment (4,825) (4,646) Sales of subsidiaries and property, plant and equipment 361 787 Other investing activities - net 278 118 _______ _______ Net Cash Used In Investing Activities (4,186) (3,741) _______ _______ NET CASH GENERATION BEFORE FINANCING ACTIVITIES 6,088 3,360 _______ _______ CASH FLOWS FROM FINANCING ACTIVITIES Additions to long-term debt 964 883 Reductions in long-term debt (976) (336) Additions/(reductions) in short-term debt - net (1,745) (60) Cash dividends to Exxon shareholders (2,824) (2,717) Cash dividends to minority interests (229) (370) Additions/(reductions) to minority interests and sales/(redemptions) of affiliate preferred stock (25) 31 Acquisitions of Exxon shares - net (205) (132) _______ _______ Net Cash Used In Financing Activities (5,040) (2,701) _______ _______ Effects Of Exchange Rate Changes On Cash (5) 58 _______ _______ Increase/(Decrease) In Cash And Cash Equivalents 1,043 717 Cash And Cash Equivalents At Beginning Of Period 1,157 983 _______ _______ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,200 $ 1,700 ======= ======= SUPPLEMENTAL DISCLOSURES Income taxes paid $ 1,794 $ 1,765 Cash interest paid $ 638 $ 517 -5- EXXON CORPORATION 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 S.E.C. in the corporation's 1994 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. 2. Litigation and Other Contingencies A number of lawsuits, including class actions, have been brought in various courts against Exxon Corporation and certain of its subsidiaries relating to the accidental release of crude oil from the tanker Exxon Valdez in 1989. Most of these lawsuits seek unspecified compensatory and punitive damages; several lawsuits seek damages in varying specified amounts. The claims of many individuals have been dismissed or settled. A civil trial in the United States District Court for the District of Alaska commenced on May 2, 1994 on punitive damage claims made by a class composed of all persons and entities seeking punitive damages from the corporation as a result of the Exxon Valdez grounding. On September 16, 1994, the jury returned a verdict awarding the class punitive damages of $5 billion. This verdict is not final. The corporation plans to appeal this verdict following entry of a final judgment by the District Court. The corporation believes that this verdict is unjustified and should be set aside or substantially reduced by the District Court or appellate courts. With respect to the remaining compensatory damage claims against the corporation arising from the grounding, many of these claims have been or will be addressed in the same federal civil trial, which is still ongoing. On August 11, 1994, the jury returned a verdict finding the fisher plaintiffs were damaged in the amount of $286.8 million. On August 31, 1995, the District Court issued an order that reduced this verdict to about $70 million to reflect payments already made to the plaintiffs by the corporation and others. The corporation expects this lesser amount to be further reduced. A later phase of the trial will be a separate proceeding or series of proceedings to deal with certain claims for compensatory damages not addressed or settled in prior phases. The timing and scope of this later phase have yet to be determined. The plaintiffs have made specified claims in this later phase totaling approximately $200 million, which the corporation believes are not supported by the evidence. There are a number of additional cases pending in federal and in state court in Alaska where the compensatory damages claimed have not been fully specified. The ultimate cost to the corporation from the lawsuits arising from the Exxon Valdez grounding is not possible to predict and may not be resolved for a number of years. -6- EXXON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS German and Dutch affiliated companies are the concessionaires of a natural gas field subject to a treaty between the governments of Germany and the Netherlands under which the gas reserves in an undefined border or common area are to be shared equally. Entitlement to the reserves is determined by calculating the amounts of gas which can be recovered from this area. Based on the final reserve determination, the German affiliate has lifted more gas than its entitlement. Arbitration proceedings, as provided in the agreements, have commenced to determine the manner of resolving the imbalance in liftings between the German and Dutch affiliated companies. Financial effects to the corporation related to resolution of this imbalance would be influenced by different tax regimes and ownership interests. The net impact of the ultimate outcome is not expected to have a materially adverse effect upon the corporation's operations or financial condition. The U.S. Tax Court has decided the issue with respect to the pricing of crude oil purchased from Saudi Arabia for the years 1979 to 1981 in favor of the corporation. This decision is subject to appeal. Certain other issues for the years 1979-1982 remain pending before the 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. Claims for substantial amounts have been made against Exxon and certain of its consolidated subsidiaries in other pending lawsuits, the outcome of which is not expected to have a materially adverse effect upon the corporation's operations or financial condition. The corporation and certain of its consolidated subsidiaries are directly and indirectly contingently liable for amounts similar to those at the prior year-end relating to guarantees for notes, loans and performance under contracts, including guarantees of non-U.S. excise taxes and customs duties of other companies, entered into as a normal business practice, under reciprocal arrangements. 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 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. -7- EXXON CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FUNCTIONAL EARNINGS SUMMARY Third Quarter First Nine Months ______________ _________________ 1995 1994 1995 1994 _____ _____ _____ _____ (millions of dollars) Petroleum and natural gas Exploration and production United States $ 209 $ 208 $ 699 $ 659 Non-U.S. 385 408 1,712 1,395 Refining and marketing United States 102 87 179 125 Non-U.S. 365 330 773 881 _____ _____ _____ _____ Total petroleum and natural gas 1,061 1,033 3,363 3,060 Chemicals United States 270 80 766 282 Non-U.S. 225 118 847 255 Other operations 134 89 356 211 Corporate and financing (190) (165) (542) (608) _____ _____ _____ _____ NET INCOME $1,500 $1,155 $4,790 $3,200 ===== ===== ===== ===== THIRD QUARTER 1995 COMPARED WITH THIRD QUARTER 1994 Exxon Corporation estimated third quarter 1995 earnings of $1,500 million, an increase of 30 percent from $1,155 million in the third quarter of 1994. On a per share basis, net income was $1.20, up from $0.92 in the third quarter last year. Exxon's earnings of $1.5 billion were the highest ever achieved in a third quarter. They resulted from improved operating performance in each business segment. Relative to the third quarter of 1994, Exxon increased its liquids, natural gas, coal and copper production, and petroleum product and chemical sales. Refining and marketing earnings increased on the strength of higher petroleum product sales and somewhat better margins in the U.S. and Europe. However, petroleum product margins remained depressed. Weaker crude oil and North American natural gas prices were largely offset by higher volumes and stronger European gas prices. The net result was slightly lower exploration and production earnings. Chemicals earnings were more than double the level achieved in last year's third quarter. Worldwide chemical margins improved, although product prices weakened as the quarter progressed. Earnings from other operations were up significantly, reflecting production and price increases for both copper and coal. Exxon continues to increase its capital and exploration expenditures, maintaining focus on profitable growth opportunities in each of the major operating segments. -8- EXXON CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OTHER COMMENTS ON THIRD QUARTER COMPARISON During the third quarter 1995, increased crude and natural gas production from new developments was offset by the negative impact of weaker crude oil and natural gas prices. Crude prices were on average more than $0.50 per barrel below the third quarter of 1994, and North American natural gas prices were below last year's depressed levels. Crude production in the third quarter 1995 was 1,681 kbd (thousand barrels per day), up from 1,666 kbd the prior year. Production from new developments in the U.S. and the North Sea provided most of the increase. Worldwide natural gas production of 4,709 mcfd (million cubic feet per day) was up 77 mcfd due to higher production in the U.S. and Malaysia. Earnings from U.S. exploration and production operations totaled $209 million, compared with $208 million in the year ago period. Earnings from exploration and production operations outside the U.S. were $385 million versus $408 million in the third quarter 1994. Worldwide petroleum product sales of 5,096 kbd rose 57 kbd compared to the third quarter of last year as a result of clean product demand growth, mainly in the Far East, although petroleum product margins remained low. Third quarter refining and marketing earnings in the U.S. were $102 million compared to $87 million in the same period a year ago. Earnings from refining and marketing operations outside the U.S. were $365 million, versus $330 million in the third quarter of last year. Worldwide chemical earnings totaled $495 million, up sharply from $198 million in the third quarter of 1994. Product margins were higher than the previous year and prime product sales volumes of 3,332 kt (thousand metric tons) were up from 3,307 kt in 1994. Other operations earned $134 million in third quarter 1995 versus $89 million in the year ago period. Earnings from on-going operations benefited this year from increased coal and copper production as well as higher coal realizations outside the U.S. and substantially higher copper prices. Corporate and financing expenses of $190 million compared with $165 million in the third quarter of last year, with the increase due principally to foreign exchange rate fluctuations. Revenue totaled $30,969 million compared with $29,563 million in the third quarter last year. Capital and exploration expenditures of $2,308 million increased from $1,925 million in the third quarter 1994. During the third quarter of 1995, Exxon purchased 1.4 million shares of its common stock for the treasury at a cost of $102 million. -9- EXXON CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST NINE MONTHS 1995 COMPARED WITH FIRST NINE MONTHS 1994 Net income of $4,790 million for the first nine months of 1995 was up 50 percent over the $3,200 million earned in the first three quarters of 1994. Although worldwide crude prices were weaker in the third quarter, prices through nine months of 1995 were on average about $1.50 per barrel above last year. Liquids production of 1,731 kbd was up from 1,701 kbd in 1994, principally as a result of increased production from new developments in the U.S. and North Sea. Natural gas production of 5,643 mcfd declined 105 mcfd versus 1994. Increased natural gas production in the Asia-Pacific region was offset by lower demand in Europe as a result of unseasonably warm temperatures during the first half of 1995. Earnings from U.S. exploration and production operations were $699 million, compared with $659 million in 1994. Outside the U.S., earnings from exploration and production operations were $1,712 million versus $1,395 million in 1994. As a result of higher crude supply costs and an industry-wide product oversupply situation, refining margins for the first nine months were weaker than the same period last year. However, worldwide petroleum product sales of 5,010 kbd were up from 4,980 kbd in 1994, with a 4 percent increase in motor gasoline sales. Through the first nine months of the year, U.S. refining and marketing earnings were $179 million, compared with $125 million the prior year. The impact of weaker product margins was offset by an increase in motor gasoline sales and lower refinery maintenance expense this year. Earnings from refining and marketing operations outside the U.S. were $773 million, down from $881 million in 1994, due principally to extremely weak refining margins in Europe. Worldwide chemical earnings totaled $1,613 million, or about triple the first nine months of 1994. Higher product margins and sales volumes produced the earnings improvement. Record prime product sales volumes of 10,099 kt have been achieved through nine months of 1995. Earnings from other operating segments, including coal, minerals and power, were $356 million in the first nine months of 1995, compared to $211 million in 1994. Prices for both coal and copper were higher, and coal and copper production increased. Corporate and financing expenses of $542 million in the first nine months of 1995 were down from $608 million in 1994. Lower tax expense and debt levels offset the impact of higher interest rates. -10- EXXON CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net cash generation before financing activities was $6,088 million in the first nine months of 1995 versus $3,360 million in the same period last year. Operating activities provided net cash of $10,274 million, a increase of $3,173 million from 1994's first nine months, due mainly to higher net income. Investing activities used net cash of $4,186 million, or $445 million more than a year ago primarily due to lower proceeds from asset dispositions. Net cash used in financing activities was $5,040 million in the first nine months of 1995 versus $2,701 million for the year-ago period. The increase of $2,339 million mainly reflects reductions in both short-term and long-term debt. During the first nine months of 1995, Exxon purchased 6.1 million shares of its common stock for the treasury at a cost of $425 million. Purchases are made in both the open market and through negotiated transactions. Purchases may be discontinued at any time. Capital and exploration expenditures of $6,089 million in the first nine months of 1995 were up versus $5,461 million in the same period last year. Capital and exploration expenditures in 1995 should exceed the 1994 level as Exxon maintains its focus on profitable growth opportunities. Total debt of $10.9 billion at September 30, 1995 was $1.8 billion lower than the level at year-end 1994. The corporation's debt to capital ratio was 20.5 percent at the end of the first nine months of 1995, down from 24.3 percent at year-end 1994 primarily due to a lower debt level. Over the twelve months ended September 30, 1995, return on average shareholders' equity was 17.5 percent. Return on average capital employed, which includes debt, was 14.0 percent over the same time period. The corporation maintained its strong financial position and flexibility to meet future financial needs. 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 2 to the unaudited condensed consolidated financial statements. There are no events or uncertainties known to management beyond those already included in reported financial information that would indicate a material change in future operating results or future financial condition. 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. -11 EXXON CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL ITEMS Third Quarter First Nine Months _____________ _________________ 1995 1994 1995 1994 ____ ____ ____ ____ (millions of dollars) EXPLORATION & PRODUCTION Non-U.S. Primarily tax related - - - $ 66 ___ ___ ___ ____ TOTAL - - - $ 66 === === === ==== -12- PART II - OTHER INFORMATION EXXON CORPORATION FOR THE QUARTER ENDED SEPTEMBER 30, 1995 Item 1. Legal Proceedings _________________________ As reported in the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, the U.S. Environmental Protection Agency ("EPA") issued a complaint to the registrant on September 30, 1994 proposing civil penalties totaling $258,000 for a number of alleged violations of the Clean Air Act and the Clean Water Act at the registrant's Baton Rouge Chemical Plant. On October 4, 1995, the registrant and the EPA agreed to settle this matter for $87,090. Item 6. Exhibits and Reports on Form 8-K ________________________________________ a) Exhibits Exhibit 10(iii) - registrant's 1993 Incentive Program, as amended September 27, 1995. Exhibit 27 - Financial Data Schedule (included only in the electronic filing of this document). b) Reports on Form 8-K The registrant has not filed any reports on Form 8-K during the quarter. -13- EXXON CORPORATION FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995 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. EXXON CORPORATION Date: November 13, 1995 /s/ W. Bruce Cook _________________________________________ W. Bruce Cook, Vice President, Controller and Principal Accounting Officer -14- EXXON CORPORATION INDEX TO EXHIBITS 10(iii). Registrant's 1993 Incentive Program, as amended September 27, 1995. -15-