-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, i9d53X5hA4oeTaDQUd9hRS/Tq5SjeP3fFDgCi8jbBJ1OnPzeWNM0CRiD1WjbOltq VK1lxeVam6VSrAO4OF442A== 0000716039-94-000049.txt : 19940815 0000716039-94-000049.hdr.sgml : 19940815 ACCESSION NUMBER: 0000716039-94-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOCAL CORP CENTRAL INDEX KEY: 0000716039 STANDARD INDUSTRIAL CLASSIFICATION: 2911 IRS NUMBER: 953825062 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08483 FILM NUMBER: 94543409 BUSINESS ADDRESS: STREET 1: 1201 W FIFTH ST CITY: LOS ANGELES STATE: CA ZIP: 90017 BUSINESS PHONE: 2139777600 10-Q 1 UNOCAL CORPORATION 1994 SECOND QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 -------------- 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 1-8483 UNOCAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-3825062 -------- ----------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1201 West Fifth Street, Los Angeles, California 90017 -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (213) 977-7600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Number of shares of Common Stock, $1 par value, outstanding as of July 31, 1994: 242,642,330 PART I - FINANCIAL INFORMATION
CONSOLIDATED EARNINGS UNOCAL CORPORATION (Unaudited) For the Three Months For the Six Months Ended June 30 Ended June 30 ------------------------------------------- Dollars in millions except per share amounts 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------- Revenues Sales and operating revenues (a) $2,023 $2,041 $3,852 $4,245 Interest, dividends and miscellaneous income 4 20 53 35 Equity in earnings of affiliated companies 28 22 52 44 Gain (loss) on sales of assets (10) 15 4 92 - ----------------------------------------------------------------------------------------- Total revenues 2,045 2,098 3,961 4,416 Costs and Other Deductions Crude oil and product purchases 783 820 1,394 1,724 Operating expense 400 425 832 839 Selling, administrative and general expense 128 125 248 249 Depreciation, depletion and amortization 267 238 539 472 Dry hole costs 10 10 34 18 Exploration expense 29 28 54 55 Interest expense 67 76 141 157 Excise, property and other operating taxes (a) 265 216 518 492 - ----------------------------------------------------------------------------------------- Total costs and other deductions 1,949 1,938 3,760 4,006 - ----------------------------------------------------------------------------------------- Earnings before income taxes 96 160 201 410 Income taxes 46 72 97 181 - ----------------------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes 50 88 104 229 Cumulative effect of accounting changes - - - (130) - ----------------------------------------------------------------------------------------- Net Earnings $ 50 $ 88 $ 104 $ 99 Dividends on preferred stock 9 9 18 18 - ----------------------------------------------------------------------------------------- Net Earnings Applicable to Common Stock $ 41 $ 79 $ 86 $ 81 ======================================== Earnings per share of common stock (b) Before cumulative effect of accounting changes $ .16 $ .33 $ .35 $ .88 Cumulative effect of accounting changes - - - (.54) - ----------------------------------------------------------------------------------------- Net earnings per share $ .16 $ .33 $ .35 $ .34 Cash dividends declared per share of common stock $ .200 $ .175 $ .400 $ .350 - ----------------------------------------------------------------------------------------- (a) Includes consumer excise taxes of $ 234 $ 177 $ 457 $ 414 (b) Based on net earnings applicable to common stock divided by weighted average shares outstanding (in thousands) 242,210 241,124 241,926 240,981 See Notes to Consolidated Financial Statements.
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CONSOLIDATED BALANCE SHEET UNOCAL CORPORATION (Unaudited) June 30 December 31 --------------------- Millions of Dollars 1994 1993 - --------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 150 $ 205 Accounts and notes receivable Trade 892 877 Refundable income taxes 84 114 Inventories Crude oil 28 44 Refined products 152 146 Chemicals 29 55 Minerals 15 15 Supplies, merchandise and other 76 66 Other current assets 55 56 - --------------------------------------------------------------------------- Total current assets 1,481 1,578 Investments and long-term receivables 889 847 Properties (net of accumulated depreciation and other allowances of $12,025 in 1994 and $11,667 in 1993) 6,596 6,723 Other assets 87 106 - --------------------------------------------------------------------------- Total assets $9,053 $9,254 =========================================================================== Liabilities Current liabilities Accounts payable $ 613 $ 735 Taxes payable 172 208 Current portion of long-term debt and capital lease obligations 55 54 Interest payable 69 92 Other current liabilities 98 107 - --------------------------------------------------------------------------- Total current liabilities 1,007 1,196 Long-term debt and capital lease obligations 3,444 3,468 Deferred income taxes 828 875 Other deferred credits and liabilities 636 586 - --------------------------------------------------------------------------- Total liabilities 5,915 6,125 - --------------------------------------------------------------------------- Stockholders' Equity Preferred stock ($0.10 par value; stated at 513 513 liquidation value of $50 per share) Common stock ($1 par value) 242 241 Capital in excess of par value 191 163 Foreign currency translation adjustment (12) (5) Unearned portion of restricted stock issued (15) (13) Retained earnings 2,219 2,230 - --------------------------------------------------------------------------- Total stockholders' equity 3,138 3,129 - --------------------------------------------------------------------------- Total liabilities and stockholders' equity $9,053 $9,254 =========================================================================== See Notes to Consolidated Financial Statements.
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CONSOLIDATED CASH FLOWS UNOCAL CORPORATION (Unaudited) For the Six Months Ended June 30 -------------------- Millions of Dollars 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 104 $ 99 Adjustments to reconcile net earnings to net cash provided by operating activities Cumulative effect of accounting changes - 130 Depreciation, depletion and amortization 539 472 Dry hole costs 34 18 Deferred income taxes (38) 48 Gain on sales of assets (before-tax) (4) (92) Other 68 39 Working capital and other changes related to operations Accounts and notes receivable 20 117 Inventories 23 (24) Accounts payable (127) (38) Taxes payable (36) (140) Other (55) (136) - ----------------------------------------------------------------------------- Net cash provided by operating activities 528 493 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (includes dry hole costs) (518) (489) Proceeds from sales of assets 55 546 - ----------------------------------------------------------------------------- Net cash provided by (used in) investing activities (463) 57 CASH FLOWS FROM FINANCING ACTIVITIES Long-term borrowings 547 44 Reduction of long-term debt and capital lease obligations (570) (462) Dividends paid on preferred stock (18) (18) Dividends paid on common stock (97) (84) Other 18 - - ----------------------------------------------------------------------------- Net cash used in financing activities (120) (520) Increase (decrease) in cash and cash equivalents (55) 30 Cash and cash equivalents at beginning of year 205 157 - ----------------------------------------------------------------------------- Cash and cash equivalents at end of period $150 $187 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $151 $170 Income taxes (net of refunds) $155 $204
See Notes to Consolidated Financial Statements. -3- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) The consolidated financial statements included herein are unaudited and, in the opinion of management, include all adjustments necessary for a fair presentation of financial position and results of operations. All adjustments are of a normal recurring nature, except for items discussed in Note 4. Such financial statements are presented in accordance with the Securities and Exchange Commission's disclosure requirements for Form 10-Q. These interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements filed with the Commission in Unocal Corporation's 1993 Annual Report on Form 10-K. Results for the three and six months ended June 30, 1994, are not necessarily indicative of future financial results. (2) For the purpose of this report, Unocal Corporation and its consolidated subsidiary, Union Oil Company of California (Union Oil), will be referred to as "Unocal" or "the company". (3) Contingent Liabilities: The company has received Notices of Proposed Adjustments from the Internal Revenue Service (IRS) related to a 1985 takeover attempt and the efforts undertaken to defeat it. These proposed IRS adjustments would increase the company's 1985 taxable income by up to $607 million, of which $201 million would result in decreases to taxable income in subsequent years. The company believes that it has substantial legal defenses to the IRS proposed adjustments. Upon receipt of the Notice of Proposed Deficiency for 1985 (expected October 1, 1994), the company will protest the proposed adjustments to the Appeals section of the IRS. In the opinion of management, a successful outcome in these disputes is reasonably likely. Although considered unlikely, substantial adverse decisions could have a material effect on the company's operating results and financial condition in a given year when such matters are resolved. (4) 1993 Accounting Changes: (a) Effective January 1, 1993, the company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This accounting standard requires the company to recognize its obligation to provide postretirement health care benefits and to accrue such costs rather than recording them on a cash basis. The actuarial present value of the accumulated postretirement health care obligation existing at January 1, 1993 was recognized in the Consolidated Earnings Statement as the cumulative effect of an accounting change, resulting in a charge to the first quarter 1993 earnings of $192 million before tax ($121 million after tax or 50 cents per common share). (b) The company also adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," effective January 1, 1993. This statement requires the company to recognize its obligation to provide benefits, such as workers' compensation and disabled employees' medical care, to former or inactive employees after employment but before retirement. The charge to earnings for the cumulative effect of the company's unfunded obligation prior to 1993, was $14 million before tax ($9 million after tax or 4 cents per common share). (5) Capitalized interest totaled $9 million for the second quarter 1994 and $18 million for the first six months of 1994. For the same periods of 1993, $10 million and $17 million of interest were capitalized, respectively. -4- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (6) Between March 24 and April 27, 1994, the company issued $179 million in Medium Term Notes with interest rates ranging from 6.33% to 7.24% and maturity dates ranging from February 1997 to March 2001. The proceeds were used to refinance maturing and callable debt. In August 1994, Union Oil and the company filed a new shelf registration statement with the Securities and Exchange Commission to register for offering and sale, from time to time, up to $1 billion of debt securities of Union Oil, to be guaranteed as to payment by Unocal, equity securities of Unocal and warrants to purchase such securities. (7) Certain items in the prior year financial statements have been reclassified to conform to the 1994 classification. -5-
UNOCAL CORPORATION OPERATING HIGHLIGHTS For the Three Months For the Six Months Ended June 30 Ended June 30 ------------------------------------------- 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------- NET DAILY PRODUCTION (a) Crude oil and condensate (thousand barrels): United States 139.8 148.2 140.9 150.4 ----- ----- ----- ----- Foreign: Far East 86.3 68.3 81.9 68.6 Other 37.6 28.9 37.7 30.2 ----- ---- ----- ---- Total Foreign 123.9 97.2 119.6 98.8 - ----------------------------------------------------------------------------------------- Worldwide 263.7 245.4 260.5 249.2 Natural Gas (million cubic feet): United States 1,119 916 1,118 918 ----- ---- ----- ---- Foreign: Far East 573 645 581 643 Other 34 47 66 57 ---- ---- ---- ---- Total Foreign 607 692 647 700 - ----------------------------------------------------------------------------------------- Worldwide 1,726 1,608 1,765 1,618 Natural gas liquids (thousand barrels) 21.9 19.6 20.6 19.6 Geothermal (million kilowatt-hours) 20.7 19.5 20.1 20.8 Input to crude oil processing units (thousand barrels daily) (b) 305 292 300 286 Sales of petroleum products (thousand barrels daily) (b) 309 331 308 355 AVERAGE SALES PRICES Crude oil and condensate (per barrel): United States $13.59 $15.47 $12.03 $14.92 Foreign: Far East $14.39 $16.31 $13.83 $13.47 Other $14.41 $17.82 $13.28 $17.46 Total Foreign $14.40 $16.82 $13.61 $16.42 - ----------------------------------------------------------------------------------------- Worldwide $13.92 $15.93 $12.64 $15.41 Natural gas (per thousand cubic feet): United States $1.84 $2.07 $1.96 $1.94 Foreign: Far East $1.99 $2.10 $2.00 $2.10 Other $1.84 $1.77 $1.79 $1.50 Total Foreign $1.99 $2.09 $1.98 $2.03 - ----------------------------------------------------------------------------------------- Worldwide $1.89 $2.08 $1.97 $1.98
(a) Includes net profits type agreements on a gross basis. (b) Includes the company's 50% equity portion of The UNO-VEN Company. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Unocal's net earnings for the second quarter of 1994 were $50 million, or 16 cents per common share, compared with $88 million in the second quarter of 1993, or 33 cents per common share. For the first six months of 1994, net earnings were $104 million, or 35 cents per common share. This compares with six-month 1993 earnings of $99 million, or 34 cents per common share. The comparability of the company's reported earnings for these periods is affected by the following special items:
For the Three Months For the Six Months Ended June 30 Ended June -------------------- ------------------ Millions of dollars 1994 1993 1994 1993 ------------------------------------------------------------------------------------------- Special items: Cumulative effect of accounting changes: For postretirement benefits (SFAS 106) $ - $ - $ - $(121) For postemployment benefits (SFAS 112) - - - (9) Write-down of investment and provision for abandonment and remediation of the Guadalupe oil field (4) - (27) - Litigation - (8) (17) (9) Mesa settlement - - 24 - Asset sales (6) 10 2 57 Other (5) (2) (5) (5) ------------------------------------------------------------------------------------------ Total $(15) $ - $(23) $ (87)
Excluding the special items, second quarter 1994 net earnings were $65 million, or 23 cents per common share, compared with $88 million, or 33 cents per common share, in the second quarter of 1993. The 1994 year-to- date earnings, excluding special items, were $127 million, or 45 cents per common share, compared with $186 million, or 70 cents per common share, a year ago. Both the quarter and year-to-date results reflected the steep decline in crude oil prices from a year ago, which were partially offset by higher worldwide crude oil and natural gas production. The 1994 year-to-date consolidated revenues were $3.96 billion, down from $4.42 billion in the same period a year ago. Total costs and other deductions for the six months were $3.76 billion, compared to $4.01 billion for 1994 and 1993, respectively. The decrease in both revenues and costs reflects the sale of several businesses during 1993 and the continued phase- out of Southeastern retail gasoline marketing operations. PETROLEUM EXPLORATION AND PRODUCTION. Earnings for the second quarter 1994 totaled $79 million, compared with $113 million in 1993. For the six-month period, earnings were $150 million in 1994, compared with $255 million in 1993. Both the 1994 quarter and six-month periods included special items related to asset sales and charges for the Guadalupe oil field, while the 1993 periods included net gains from asset sales. Excluding these special items, petroleum exploration and production second quarter earnings were $92 million and $122 million in 1994 and 1993, respectively, and the six- month 1994 earnings were $179 million, compared with $242 million during the same period a year ago. The charges for the Guadalupe oil field, located on the central coast of California, included a provision for the write-down of investment, abandonment and remediation of the field. The provision covers the remediation and cleanup efforts currently underway from leaks of a diesel- like additive, called diluent, that was formerly used to help produce the heavy crude oil. The decline in operating earnings was principally due to lower worldwide crude oil prices. The average sales price for worldwide crude oil in the second quarter of 1994 was $13.92 per barrel, down from $15.93 per barrel a year ago. For the six-month period, the 1994 average sales price was $12.64 versus $15.41 in 1993. -7- The results also reflect the earnings benefit of an increase in the company's worldwide production of crude oil and natural gas. Although domestic crude oil production continued to decline mainly due to the asset divestment program, the decrease was more than offset by increased foreign production from Indonesia and the Netherlands. Domestic natural gas production was up 22 percent from a year ago due to the accelerated development program initiated in 1993. The decrease in foreign gas production was primarily due to reduced pipeline allocation in Thailand. REFINING, MARKETING AND TRANSPORTATION. Unocal's refining, marketing and transportation segment recorded earnings of $38 million in the second quarter of 1994, compared with $46 million a year ago. Earnings for the first six months were $79 million, compared with $94 million in 1993. Excluding the special items, primarily asset sales, the operating earnings were $37 million and $32 million in the second quarter of 1994 and 1993, respectively, and the six-month earnings were $78 million in 1994, compared with $80 million in 1993. The results for both the six months and second quarter reflected lower average sales prices for refined products, which were partially offset by lower raw material costs. Petroleum product sales volumes were 308,000 barrels per day in 1994, down from 355,000 barrels per day in 1993. The decline was mainly due to the sale of the auto/truckstop system in 1993 and the continued phase-out of Southeastern retail gasoline marketing. However, the company's West Coast U.S. petroleum product six-month sales volumes increased 9 percent in 1994, compared to the same period a year ago. The company's equity in earnings from The UNO-VEN Company, a refining and marketing partnership in the Midwest, is expected to be lower in the third quarter due to a regularly scheduled maintenance shut-down at its Chicago Refinery. The work is scheduled to begin in mid-July 1994, with full production being resumed in early September. CHEMICALS. Chemicals operations recorded earnings of $13 million for the second quarter and $22 million for the first six months of 1994. This compares with $16 million and $28 million for the same periods in 1993, respectively. The quarter and year-to-date results reflected lower earnings from the sale of petroleum coke. GEOTHERMAL. Earnings for the second quarter of 1994 were $9 million, up from $6 million in 1993. Six-month earnings were $14 million in 1994, compared with $38 million in 1993. However, the six-month 1993 earnings included a $26 million after-tax gain in the first quarter from the sale of the geothermal Imperial Valley (California) assets and other exploration properties. CORPORATE AND OTHER. Second quarter 1994 corporate expenses and the results of other businesses were $89 million, compared with $93 million for the same period in 1993. For the six-month period, expenses were $161 million in 1994 and $186 million in 1993. Adjusted for special items, net expense for corporate and other for the second quarter was $86 million in 1994, versus $88 million for the same period a year ago. Six month expenses were $166 million and $177 million for 1994 and 1993, respectively. The decreases reflected lower net interest expense. The 1994 six-month special items included a $24 million benefit from the settlement of a lawsuit against Mesa Petroleum, resulting from the takeover attempt in 1985. Additional special items included in the results for each reporting period are unusual litigation expenses and asset sales. FINANCIAL CONDITION AND CAPTIAL EXPENDITURES For the six months of 1994, cash flows from operating activities, including working capital changes, were $528 million, up from $493 million in 1993. The increase reflects higher gas revenues and the Mesa lawsuit settlement, which were largely offset by lower crude oil prices. Proceeds from asset sales were $55 million for the first six months of 1994, compared to $546 million in the same period a year ago. The 1994 proceeds were mainly from the sale of nonstrategic oil and gas properties, while 1993 included $224 million from the sale of the company's Imperial Valley (California) geothermal assets and other geothermal exploration properties, $177 million from the sale of the national auto/truckstop network and the balance from the sale of miscellaneous nonstrategic assets, including oil and gas properties. -8- Capital expenditures for the six-months 1994 totaled $518 million, compared with $489 million a year ago. The increase primarily reflects refinery construction to prepare for manufacturing reformulated gasoline. Consolidated working capital at June 30, 1994 was $474 million, an increase of $92 million from the 1993 year-end level of $382 million. The company's total debt was $3,499 million, a decrease of $23 million from the year-end 1993 level. OTHER MATTERS The company has received Notices of Proposed Adjustments from the Internal Revenue Service related to a 1985 takeover attempt and the efforts undertaken to defeat it. For more information, see Note 3 in the Notes to Consolidated Financial Statements on page 4 of this report. OUTLOOK Worldwide crude oil prices improved during the second quarter and are expected to remain stable in the third quarter. This improvement combined with increasing production levels should benefit Unocal in the future. The demand for natural gas in the United States continues to be strong with the current supply of natural gas able to meet the demand. Therefore, no improvement in prices is expected in the third quarter. The company's worldwide production of natural gas is expected to average about 1,780 million cubic feet per day during the full-year 1994, up nearly 11 percent from the 1993 level. Crude oil and condensate production is expected to average 258,000 barrels per day for the full-year 1994, up nearly 5 percent from 1993. The company continues to work toward its asset sales targets. Through the first six months of 1994, the company has realized proceeds of $611 million (after tax) from asset sales under the program announced in April 1992. This represents 87 percent of the goal to generate at least $700 million in after-tax proceeds by May 1994. Although the goal was not met by May 1994, due mainly to soft market conditions, the company has identified additional assets that it plans to sell to meet the goal by year-end 1994. Unocal has recently received expressions of interest from four different firms in purchasing the company's crude oil and natural gas assets in California. The company plans to determine if a sales agreement can be reached that would be in the best interest of Unocal's stockholders. If a sale is completed, the proceeds would give Unocal additional flexibility and financial strength to pursue and accelerate development of significant growth opportunities in Unocal's strategic areas of interest, such as the Gulf of Mexico and Southeast Asia. The company recently announced a major reorganization of its corporate management that would change the operating outlook of the company in the future. For more detailed information, see the Current Report on Form 8-K dated and filed June 27, 1994, with the Securities and Exchange Commission. -9- PART II - OTHER INFORMATION Item 1. Legal Proceedings 1. In June 1994, the EPA filed an administrative complaint against the company seeking $252,000 in civil penalties for alleged late filing of certain reports regarding gas processing plant inventories under the Toxic Substances Control Act Inventory Update Rule. In light of the ambiguities in the application of the rule to natural gas streams, the company intends to appeal this complaint. 2. Unocal and the operator of one of its product terminals are finalizing negotiations with the California Air Resources Board regarding prior gasoline additive concentration level deficiencies (reported in the first quarter 1994 Form 10-Q Legal Proceedings). Unocal will pay a total civil penalty of $526,666. 3. The State of Arizona filed suit against Unocal in Superior Court of Maricopa County, Arizona, in April 1994, seeking civil penalties of $10,000 per day for each underground storage tank allegedly violating the underground storage tank regulations. Such penalties could exceed $100,000. 4. The Casmalia waste site in Casmalia, California, should be added to the list of clean-up sites reported as Item No. 1 in the 1993 Form 10-K Legal Proceedings. 5. Citizens for a Better Environment, et al, v. Union Oil Company of California, No. C94-0712, filed in federal district court in San Francisco in March 1994, alleges that as of February 28, 1994, Unocal's refinery at Rodeo, California, was in violation of the selenium limit in its National Pollutant Discharge Elimination System permit. By a prior Cease and Desist Order issued after notice and hearing, the permitting agency, the California Regional Water Quality Control Board, had deferred to July 1998 the effective date of the selenium limitation in question. Unocal denies that the limits asserted by Citizens have been in effect, and therefore denies any violation. Unocal's motion to dismiss the Citizens action was denied by the trial court on July 8, 1994. Unocal believes that the Court's ruling is in error, and that it conflicts with precedent in two other federal circuits. In the event that Unocal is unsuccessful in obtaining interlocutory review of the Court's ruling, the company could suffer a trial court judgment for penalties in excess of $100,000. An appeal of any such judgment would be likely. 6. Settlement discussions on the past cost portion of the McColl dumpsite litigation (reported as Item No. 5 in the 1993 Form 10-K Legal Proceedings) have been completed. The settlement is awaiting judicial approval. Unocal's share of the $18 million settlement is $3,375,000. 7. The company and the State of Ohio negotiated an Agreed Addendum to the Consent Order for further investigation and interim remedies at the Ashland Petroleum terminal/refinery site (reported as Item No. 8 in the 1993 Form 10-K Legal Proceedings). The Agreed Addendum to the Consent Order was entered effective April 7, 1994. The State's complaint also seeks past costs, damages, an injunction ordering clean-up, and civil penalties. The above items 1, 2, 3, 4 and 5 are in addition to items reported under Item 3 of Unocal Corporation's Form 10-K for the year ended December 31, 1993, as amended. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3 Bylaws of Unocal, as amended July 25, 1994, and currently in effect (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 of Union Oil Company of California and Unocal, Nos. 33-54861 and 33-54861-01). -10- 10 Employment Agreement, effective July 1, 1994, between Union Oil Company of California and Lawrence M. Higby. 11 Statement re computation of earnings per common share. 12.1 Statement re computation of ratio of earnings to fixed charges. 12.2 Statement re computation of ratio of earnings to combined fixed charges and preferred stock dividends. (b) Reports on Form 8-K During the second quarter of 1994: 1. Current Report on Form 8-K dated and filed April 25, 1994, for the purpose of reporting, under Item 5, Unocal's 1994 first quarter earnings. 2. Current Report on Form 8-K dated and filed June 27, 1994, for the purpose of reporting, under Item 5, Unocal's reorganization. 3. Current Report on Form 8-K dated and filed June 28, 1994, for the purpose of reporting, under Item 5, discussions for the sale of Unocal's producing assets in California. During the third quarter of 1994 to date of the filing of this second quarter Form 10-Q: 1. Current Report on Form 8-K dated and filed July 22, 1994, for the purpose of reporting, under Item 5, and filing, under Item 7, an opinion of legal counsel concerning the Unocal Profit Sharing Plan. 2. Current Report on Form 8-K dated and filed July 25, 1994, for the purpose of reporting, under Item 5, Unocal's 1994 second quarter and six months earnings. -11- 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. UNOCAL CORPORATION ------------------- (Registrant) Dated: August 11, 1994 By: CHARLES S. MCDOWELL - ---------------------- -------------------- Charles S. McDowell, Vice President and Comptroller -12- EX-10 2 EMPLOYMENT AGREEMENT EXHIBIT 10 EMPLOYMENT AGREEMENT Union Oil Company of California ("Unocal") and Lawrence M. Higby ("Employee") hereby agree that Employee shall provide personal services to Unocal effective July 1, 1994 in accordance with the following terms and conditions: 1. Employee shall have the title of President, 76 Products Company and shall function as a group Vice-President responsible for refining and marketing activities. Employee shall be assigned such duties and responsibilities as established from time to time by R. C. Beach, Chief Executive Officer and Chief Operating Officer of Unocal, or his successor or delegate. 2. Employee shall be compensated for such services at a base salary of $25,833.38 per calendar month. Employee shall be eligible for consideration for subsequent salary increases in accordance with Company practices and standards. 3. The term of this Agreement shall be for a period of three years beginning July 1, 1994 and ending June 30, 1997 unless Employee shall die, become unable or unwilling to perform his duties under this Agreement, resign, or engage in misconduct. This Agreement shall terminate automatically on June 30, 1997. However, the obligation of paragraphs 6 and 9 shall survive the termination of this Agreement. 4. Employee shall be eligible for grants under the Company's Long-Term Incentive Plan of 1991 in accordance with the terms of said plan and the practices of the Company. In addition to grants made at the normal period, the Chief Executive Officer will recommend to the Compensation Committee of the Board that a pro-rata grant of stock options and Performance Share Awards be made to Employee during 1994. 5. Employee shall be an employee of Unocal. As such, Employee shall be eligible for and subject to Unocal's benefit plans and employment policies that are generally applicable to Unocal employees in accordance with the terms of said plans and policies. Employee shall be subject to all of Unocal's policies and standards of conduct except as otherwise specifically provided herein. - 2 - 6. Employee recognizes that any business, economic or technical information pertaining to his assignment and/or the technology of Unocal Corporation, Union Oil Company of California or of any of its subsidiaries or affiliates (jointly referred to as "Union") which is received or developed by Employee in connection with Employee's work hereunder, or which is otherwise disclosed to Employee by Union either orally or in writing, is the sole property of Union. Employee agrees to keep such information confidential and not to use such information except in the course of rendering services pursuant to this Agreement. Employee shall not divulge such information to non-Union personnel, unless authorized to do so by a writing directed to him by Unocal's Chief Executive Officer either while performing services hereunder or thereafter. The foregoing obligation shall not apply to information which Employee can show either (i) is already known to Employee from non-Union sources, or (ii) is or becomes part of the public domain, other than by the wrongful act of Employee. 7. This Agreement is for Employee's unique personal services and may not be assigned or delegated by him unless authorized in writing by the individual designated in Section 1. 8. Employee will be eligible for immediate participation in the Unocal Incentive Compensation Plan. The "target award" under said plan shall be 20% of his annual base salary rate for calendar year 1994. Thereafter, Employee's target award will be determined in accordance with the terms of said plan and the practices generally applicable to participants. The actual payment of any award shall be subject to the general rules of the plan, including without limitation, achievement of individual goals, the Company's relative return to shareholders and satisfaction of the financial criteria of the plan. 9. In the event that the Employee resigns, is terminated for misconduct, dies or is unable or unwilling to continue to render the services for which he was retained, no further payments under this Agreement shall be due. If the Employee is terminated for any other reason during the term of this Agreement, Employee shall be entitled to his base salary for the greater of one year or the remaining term of this Agreement. Employee shall also be entitled to a supplemental payment so that to the extent he has elected continued Unocal Medical Plan coverage under COBRA, his contribution rate will be the same as an active Unocal employee with the same coverage as Employee. The Employee shall also be entitled to payment - 3 - of accrued Incentive Compensation Plan and Performance Share Awards to the extent such payment is consistent with the terms of said plans. 10. If the Employee remains employed by Unocal or a subsidiary after June 30, 1997, this Agreement shall not govern the terms of said employment. 11. Unocal shall retain the right to change Employee's title and assignment from time to time during the term of this Agreement. 12. This Agreement constitutes the entire Agreement between the parties relating to the subject of this Agreement. There are no verbal or written agreements, inducements, statements, representations, promises or understandings between the parties except as expressly stated in this Agreement. 13. Neither Unocal nor Employee shall be deemed to have waived any right available to either party under this Agreement or applicable law unless such waiver is set forth in a written document signed by Employee or by Unocal's Chief Executive Officer and directed to the other party. 14. This Agreement may not be modified except by a written document signed by Employee and the Chief Executive Officer of Unocal. 15. The Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against any of the parties hereto. 16. The validity and interpretation of this Agreement and the legal relationship of the parties to it shall be governed by the laws of the State of California. Executed Agreed to: Agreed to: /s/LAWRENCE M. HIGBY UNION OIL COMPANY OF CALIFORNIA ----------------- By: /s/R. C. BEACH ------------------ 6/10/94 6/10/94 ------- ------- Date Date EX-11 3 COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE For the Three Months For the Six Months Ended June 30 Ended June 30 --------------------- ------------------ Dollars in millions except per share amounts 1994 1993 1994 1993 - -------------------------------------------------------------------------------------------------- ASSUMING NO DILUTION: Net earnings before cumulative effect of accounting changes $49,559 $88,223 $103,490 $228,416 Preferred stock dividend (8,969) (8,969) (17,938) (17,938) Cumulative effect of accounting changes - - - (129,594) - -------------------------------------------------------------------------------------------------- Net earnings applicable to common stock $40,590 $79,254 $ 85,552 $ 80,884 - -------------------------------------------------------------------------------------------------- Weighted average common stock outstanding 242,210 241,124 241,926 240,981 Net earnings per common share: Before cumulative effect of accounting changes $ .16 $ .33 $ .35 $ .88 Cumulative effect of accounting changes - - - (.54) - -------------------------------------------------------------------------------------------------- Net earnings per common share $ .16 $ .33 $ .35 $ .34 - -------------------------------------------------------------------------------------------------- ASSUMING FULL DILUTION: Net earnings before cumulative effect of accounting changes $49,559 $88,223 $103,490 $228,416 Cumulative effect of accounting changes - - - (129,594) - -------------------------------------------------------------------------------------------------- Net earnings $49,559 $88,223 $103,490 $ 98,822 - -------------------------------------------------------------------------------------------------- Fully diluted shares of common stock (a) 260,452 260,090 260,050 259,860 Net earnings per common share: Before cumulative effect of accounting changes $ .19 $ .34 $ .40 $ .88 Cumulative effect of accounting changes - - - (.50) - -------------------------------------------------------------------------------------------------- Net earnings per common share $ .19 $ .34 $ .40 $ .38 - -------------------------------------------------------------------------------------------------- (a) Weighted average common stock outstanding 242,210 241,124 241,926 240,981 Common stock equivalents: Stock options & performance shares * 1,575 2,299 1,457 2,212 Convertible preferred stock 16,667 16,667 16,667 16,667 - -------------------------------------------------------------------------------------------------- Total 260,452 260,090 260,050 259,860 - -------------------------------------------------------------------------------------------------- * Stock options exclude those at exercise prices in excess of market value at the end of each period.
EX-12 4 EXHIBITS 12.1 AND 12.2 EARNINGS RATIOS EXHIBIT 12.1
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES For the Six Months Ended June 30 Dollars in millions 1994 1993 - --------------------------------------------------------------------- Earnings before cumulative effect of accounting changes $104 $229 Provision for income taxes 97 181 ---- ---- Earnings subtotal 201 410 Fixed charges included in earnings: Interest expense 141 157 Interest portion of rentals 28 31 ---- ---- Subtotal 169 188 Earnings available before fixed charges $370 $598 ===== ===== Fixed charges: Fixed charges included in earnings $169 $188 Capitalized interest 18 17 ----- ----- Total fixed charges $187 $205 ===== ===== Ratio of earnings to fixed charges 2.0 2.9
EXHIBIT 12.2
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS For the Six Months Ended June 30 ------------------- Dollars in millions 1994 1993 - --------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes $104 $229 Provision for income taxes 97 181 ---- ---- Earnings subtotal 201 410 Fixed charges included in earnings: Interest expense 141 157 Interest portion of rentals 28 31 ---- ---- Subtotal 169 188 Earnings available before fixed charges $370 $598 ==== ==== Fixed charges and preferred stock dividends: Fixed charges included in earnings $169 $188 Capitalized interest 18 17 Preferred stock dividends * 29 29 ----- ----- Total fixed charges and preferred stock dividends $216 $234 ===== ===== Ratio of earnings to fixed charges and preferred stock dividends 1.7 2.6 * For purposes of this ratio, preferred stock dividends are adjusted to a pre-tax basis.
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