-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P9pA6zFZvZQP2gWa8SuoQzDyzNSam4yIM8E5MpHB94EdhLRbXhiY+0UL4dUalO8v RhaVDw7+7IwTIbuxWEqcAQ== 0000775483-97-000012.txt : 19970807 0000775483-97-000012.hdr.sgml : 19970807 ACCESSION NUMBER: 0000775483-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970806 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC RICHFIELD CO /DE CENTRAL INDEX KEY: 0000775483 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 230371610 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01196 FILM NUMBER: 97652458 BUSINESS ADDRESS: STREET 1: 515 S FLOWER ST CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134863511 10-Q 1 ARCO 2ND QT 1997 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-Q ________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ________________ For the quarterly period ended June 30, 1997 Commission file number 1-1196 ________________ ATLANTIC RICHFIELD COMPANY (Exact name of registrant as specified in its charter) _________________ Delaware 23-0371610 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 515 South Flower Street Los Angeles, California 90071 (Address of principal executive offices) (Zip code) __________________ (213) 486-3511 (Registrant's telephone number, including area code) __________________ Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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, $2.50 par value, outstanding as of June 30, 1997: 320,796,157. PART I. FINANCIAL INFORMATION ATLANTIC RICHFIELD COMPANY AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED STATEMENT OF INCOME Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- (Millions except per share amounts) 1997 1996 1997 1996 ---- ---- ---- ---- Revenues Sales and other operating revenues . . $4,587 $4,559 $9,631 $8,715 Other revenues . . . . . . . . . . . . 223 114 362 340 ----- ----- ----- ----- 4,810 4,673 9,993 9,055 ----- ----- ----- ----- Expenses Trade purchases. . . . . . . . . . . . 1,990 1,866 4,222 3,540 Operating expenses . . . . . . . . . . 1,087 971 2,097 1,927 Selling, general and administrative expenses . . . . . . . . . . . . . . 271 249 522 487 Depreciation, depletion and amortization . . . . . . . . . . . . 417 399 844 803 Exploration expenses (including undeveloped leasehold amortization). 90 107 216 207 Taxes other than income taxes. . . . . 177 194 408 411 Interest . . . . . . . . . . . . . . . 8 167 174 340 ----- ----- ----- ----- 4,040 3,953 8,483 7,715 ----- ----- ----- ----- Income before income taxes, minority interest and extraordinary item. . . . 770 720 1,510 1,340 Provision for taxes on income. . . . . . 243 261 479 481 Minority interest in earnings of subsidiaries . . . . . . . . . . . . . 19 25 40 55 Net income before extraordinary item . . 508 434 991 804 Extraordinary loss on extinguishment of debt (net of income tax of $74). . . . (118) - (118) - ----- ----- ----- ----- Net Income . . . . . . . . . . . . . . . $ 390 $ 434 $ 873 $ 804 ===== ===== ===== ===== Earned per Share Income before extraordinary item . . . $ 1.55 $ 1.33 $ 3.02 $ 2.46 Extraordinary loss . . . . . . . . . . (.36) - (.36) - ----- ----- ----- ----- Net income . . . . . . . . . . . . . . $ 1.19 $ 1.33 $ 2.66 $ 2.46 ===== ===== ===== ===== Cash Dividends Paid per Share of Common Stock . . . . . . . . . . . . . $.7125 $.6875 $1.400 $1.375 ===== ===== ===== =====
The accompanying notes are an integral part of these statements. - 1 - ATLANTIC RICHFIELD COMPANY CONSOLIDATED BALANCE SHEET
June 30, December 31, 1997 1996 ---- ---- (Millions) Assets Current assets: Cash and cash equivalents . . . . . . . . . . . . $ 1,134 $ 1,460 Short-term investments. . . . . . . . . . . . . . 473 784 Accounts receivable . . . . . . . . . . . . . . . 1,698 1,936 Inventories . . . . . . . . . . . . . . . . . . . 1,020 995 Prepaid expenses and other current assets . . . . 413 258 ------ ------ Total current assets. . . . . . . . . . . . . . . 4,738 5,433 ------ ------ Investments and long-term receivables: Investments accounted for on the equity method. . 1,483 1,174 Other investments and long-term receivables . . . 1,566 1,188 ------ ------ 3,049 2,362 ------ ------ Net property, plant and equipment . . . . . . . . . 16,217 16,195 Deferred charges and other assets . . . . . . . . . 1,743 1,725 ------ ------ Total assets. . . . . . . . . . . . . . . . . . . . $25,747 $25,715 ====== ======
The accompanying notes are an integral part of these statements. - 2 - ATLANTIC RICHFIELD COMPANY CONSOLIDATED BALANCE SHEET
June 30, December 31, 1997 1996 ---- ---- (Millions) Liabilities and Stockholders' Equity Current liabilities: Notes payable . . . . . . . . . . . . . . . . . $ 1,225 $ 1,157 Accounts payable. . . . . . . . . . . . . . . . 1,948 1,443 Long-term debt due within one year. . . . . . . 1,397 1,102 Taxes payable, including excise taxes . . . . . 371 438 Other . . . . . . . . . . . . . . . . . . . . . 1,135 1,163 ------ ------ Total current liabilities . . . . . . . . . . . 6,076 5,303 ------ ------ Long-term debt. . . . . . . . . . . . . . . . . . 4,334 5,593 Deferred income taxes . . . . . . . . . . . . . . 2,932 2,884 Other deferred liabilities and credits. . . . . . 3,397 3,450 Minority interest . . . . . . . . . . . . . . . . 724 684 Stockholders' equity: Preference stocks . . . . . . . . . . . . . . . 1 1 Common stock. . . . . . . . . . . . . . . . . . 806 403 Capital in excess of par value of stock . . . . 631 628 Retained earnings . . . . . . . . . . . . . . . 6,616 6,592 Equity adjustments. . . . . . . . . . . . . . . 230 177 ------ ------ Total stockholders' equity. . . . . . . . . . . 8,284 7,801 ------ ------ Total liabilities and stockholders' equity. . . . $25,747 $25,715 ====== ======
The accompanying notes are an integral part of these statements. - 3 - ATLANTIC RICHFIELD COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30, ---------------- 1997 1996 ---- ---- (Millions) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . $ 873 $ 804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . 844 803 Dry hole expense and undeveloped leasehold amortization . . . . . . . . . . . . . . . . . . . 87 108 Net gain on asset sales. . . . . . . . . . . . . . . (18) (40) Income from equity investments . . . . . . . . . . . (88) (28) Dividends from equity investments. . . . . . . . . . 28 42 Minority interest in earnings of subsidiaries. . . . 40 55 Cash payments greater than noncash provisions. . . . (149) (120) Extraordinary loss on extinguishment of debt . . . . 118 - Changes in working capital accounts. . . . . . . . . (312) 34 Other. . . . . . . . . . . . . . . . . . . . . . . . 40 14 ----- ----- Net cash provided by operating activities. . . . . 1,463 1,672 ----- ----- Cash flows from investing activities: Additions to fixed assets (including dry hole costs) . . . . . . . . . . . . . . . . . . . . . . (1,072) (873) Net cash provided by short-term investments. . . . . 304 76 Investment in LUKARCO. . . . . . . . . . . . . . . . (201) - Investment in LUKOIL convertible bonds . . . . . . . - (89) Proceeds from asset sales. . . . . . . . . . . . . . 23 43 Other. . . . . . . . . . . . . . . . . . . . . . . . 4 (12) ----- ----- Net cash used by investing activities. . . . . . . (942) (855) ----- ----- Cash flows from financing activities: Repayments of long-term debt . . . . . . . . . . . . (575) (208) Proceeds from issuance of long-term debt . . . . . . 253 46 Net cash provided (used) by notes payable. . . . . . 93 (69) Dividends paid . . . . . . . . . . . . . . . . . . . (452) (444) Treasury stock purchases . . . . . . . . . . . . . . (155) (39) Other. . . . . . . . . . . . . . . . . . . . . . . . (2) (5) ----- ----- Net cash used by financing activities. . . . . . . (838) (719) ----- ----- Effect of exchange rate changes on cash. . . . . . . . (9) (2) ----- ----- Net increase (decrease) in cash and cash equivalents . (326) 96 Cash and cash equivalents at beginning of period . . . 1,460 1,537 ----- ----- Cash and cash equivalents at end of period . . . . . . $1,134 $1,633 ===== =====
The accompanying notes are an integral part of these statements. - 4 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE A. Accounting Policies. Basis of Presentation. The foregoing financial information is unaudited and has been prepared from the books and records of the Company. Certain previously reported amounts have been restated to conform to classifications adopted in 1997. In the opinion of the Company, the financial information reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations in conformity with generally accepted accounting principles. Environmental Remediation. Effective January 1, 1997, the Company adopted Statement of Position ("SOP") 96-1, "Environmental Remediation Liabilities," issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants. The provisions include standards affecting the measurement, recognition and disclosure of environmental remediation liabilities. The effect of adopting the provisions of SOP 96-1 in the first quarter of 1997 was a decrease in the Company's net income for the first six months of 1997 of $30 million, or $.09 per share. Derivative Instruments The Company uses a variety of derivative instruments, both financial and commodity based, to minimize the effects of commodity price, interest rate and foreign currency fluctuations. The Company does not hold or issue derivative instruments for trading purposes and is not a party to leveraged instruments. All derivative instruments are off-balance sheet instruments; however, net receivable or payable positions related to derivative instruments are carried on the balance sheet. The nature of the transaction underlying a risk management strategy, primarily whether or not the instrument qualifies as a hedge, determines which accounting method is used. The conditions to be met for a derivative instrument to qualify as a hedge are the following: (1) item to be hedged exposes the Companay to price or interest rate risk, (2) the derivative reduces the risk exposure and is designated as a hedge at the time the derivative contract is entered into and (3) at the inception of the hedge and throughout the hedge period there is a high correlation of changes in the market value of the derivative instrument and the fair value of the underlying items being hedged. Deferral accounting is used for the following types of transactions, providing the instrument qualifies as a hedge: future crude oil and natural gas production, fixed-price crude oil and natural gas purchase and sale commitments, U.S. dollar-denominated debt issued by a foreign subsidiary, debt denominated in a foreign currency or anticipated foreign currency commitments. Under the deferral method of accounting, gains and losses are deferred and included in other assets or accrued liabilities until the designated underlying item is recognized in income. Recognized gains and losses under the deferral method are recorded in sales and other operating revenues, other revenues or trade purchases depending on the underlying item associated with the derivative instrument. Instruments typically used in these transactions are crude oil and natural gas swap and price collar contracts and some foreign currency swap, forward and option contracts. - 5 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE A. Accounting Policies (continued). Derivative Instruments (continued). The accrual method of accounting is used for interest rate swap agreements entered into by the Company which convert the interest rate on variable rate debt to a fixed rate. Under the accrual method, each net payment or receipt due or owed under the derivative instrument is recognized in income during the period to which the payment or receipt relates. Amounts to be paid or received under these agreements are recognized as an adjustment to interest expense. The related amounts payable to, or receivable from, the counter-parties are included in other accrued liabilities. The fair value method of accounting is used for any derivative instrument that does not qualify as a hedge. The fair value method of accounting, whereby gains and losses associated with changes in fair value of a derivative instrument are recognized currently in income or stockholders' equity, is used for the following derivative instruments: foreign currency forward and option contracts associated with anticipated future cash flows from overseas operations and foreign currency swap contracts associated with foreign-denominated intercompany debt with maturities exceeding one year. Presently, changes in fair value of all transactions accounted for under this method are recognized currently in income and reported as other revenues. Under each method of accounting used by the Company the cash flows related to any recognized gains or losses associated with derivative instruments are reported as cash flows from operations. If a derivative instrument designated as a hedge is terminated prior to expected maturity, gains or losses are deferred and included in income when the underlying hedged item is recognized in income. When the designated item associated with a derivative instrument matures, is sold, extinguished or terminated, gains or losses are recognized as part of the gain or loss on sale or settlement of the underlying item. When a derivative instrument is associated with an anticipated transaction that is no longer expected to occur, the gain or loss on the derivative is recognized immediately in income. NOTE B. Investments. At June 30, 1997 and 1996, investments were primarily composed of U.S. Treasury securities and corporate debt instruments and were principally included in short-term investments. Maturities generally ranged from one day to 20 months. At June 30, 1997, all investments were classified as available-for-sale ("AFS"); there were no investments considered held-to- maturity. AFS investments were reported at fair value, with unrealized holding gains and losses, net of tax, reported in a separate component of stockholders' equity. - 6 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE B. Investments (continued). The following summarizes investments in securities, at June 30:
Millions 1997 1996 ---- ---- Aggregate fair value . . . . . . . . . . . . $1,961 $1,986 Gross unrealized holding losses. . . . . . . 3 12 Gross unrealized holding gains . . . . . . . (798) (4) ----- ----- Amortized cost . . . . . . . . . . . . . . . $1,166 $1,994 ===== =====
Investment activity for the six-month periods ended June 30 was as follows:
Millions 1997 1996 ---- ---- Gross purchases. . . . . . . . . . . . . . . $4,185 $2,561 Gross sales. . . . . . . . . . . . . . . . . 1,303 973 Gross maturities . . . . . . . . . . . . . . 3,588 2,035
For the three-and six-month periods ended June 30, 1997 and 1996, gross realized gains and losses were insignificant and were determined by the specific identification method. NOTE C. Inventories. Inventories at June 30, 1997 and December 31, 1996 comprised the following:
June 30, December 31, 1997 1996 ---- ---- (Millions) Crude oil and petroleum products . . . . . . . . $ 246 $ 204 Chemical products. . . . . . . . . . . . . . . . 464 488 Other products . . . . . . . . . . . . . . . . . 47 48 Materials and supplies . . . . . . . . . . . . . 263 255 ------- ------- Total . . . . . . . . . . . . . . . . . . . . $ 1,020 $ 995 ======= =======
- 7 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE D. Long-term Debt. During the second quarter of 1997, ARCO retired debt with a face value of $756 million prior to maturity. The debt repurchases resulted in an extraordinary charge of $118 million, or $.36 per share against net income, after tax of $74 million. The settlement of certain repurchased debt did not take place until July 1997. Approximately $800 million, which included the face amount of the debt and premium to be paid for the early retirement, is recorded in accounts payable at June 30, 1997. In July 1997, ARCO redeemed its 10.25% Eurobonds which had a face value of $250 million and were due in 2000. Accordingly, that debt issue was reclassified to current liabilities as of June 30, 1997. NOTE E. Capital Stock. Detail of the Company's capital stock was as follows:
June 30, December 31, 1997 1996 ---- ---- (Thousands) $3.00 Cumulative convertible preference stock, par $1 . . . . . . . . . . . . . . . . . . . . . $ 58 $ 61 $2.80 Cumulative convertible preference stock, par $1 . . . . . . . . . . . . . . . . . . . . . 645 674 Common stock, par $2.50 . . . . . . . . . . . . . . 806,442 402,715 ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . $807,145 $403,450 ======= =======
The Company's Board of Directors authorized a two-for-one stock split effective June 13, 1997, in the form of a 100 percent stock dividend. The par value of the additional shares of common stock issued in connection with the stock split was credited to common stock and charged against capital in excess of par value. All per share data have been adjusted to reflect the stock split. NOTE F. Stockholders' Equity Adjustments. Adjustments to stockholders' equity at June 30, 1997 and December 31, 1996 were as follows:
June 30, December 31, 1997 1996 ---- ---- (Millions) Minimum pension liability. . . . . . . . . . . $ (28) $ (28) Treasury stock, at cost. . . . . . . . . . . . (117) (1) Net unrealized gain on investments . . . . . . 489 225 Foreign currency translation . . . . . . . . . (114) (19) ---- ---- Total. . . . . . . . . . . . . . . . . . . . $ 230 $ 177 ==== ====
- 8 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE G. Capitalization of Interest. Interest expense excluded capitalized interest of $15 million and $7 million, respectively, for the three-month periods ended June 30, 1997 and 1996, and $18 million and $12 million, respectively, for the six-month periods ended June 30, 1997 and 1996. NOTE H. Income Taxes. Provision for taxes on income:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 1997 1996 1997 1996 ---- ---- ---- ---- (Millions) Federal: Current . . . . . . . . . . . . . $161 $190 $330 $337 Deferred. . . . . . . . . . . . . 27 5 14 10 --- --- --- --- 188 195 344 347 --- --- --- --- Foreign: Current . . . . . . . . . . . . . 15 26 67 65 Deferred. . . . . . . . . . . . . 1 5 (5) 7 --- --- --- --- 16 31 62 72 --- --- --- --- State: Current . . . . . . . . . . . . . 39 35 73 62 Deferred. . . . . . . . . . . . . - - - - --- --- --- --- 39 35 73 62 --- --- --- --- Total . . . . . . . . . . . . $243 $261 $479 $481 === === === ===
- 9 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED Note H. Income Taxes (continued). Reconciliation of provision for taxes on income with tax at federal statutory rate:
Three Months Ended June 30, --------------------------------------- 1997 1996 ------------------ ----------------- Percent Percent of of Pretax Pretax Amount Income Amount Income ------ ------- ------ ------- (Millions) Income before income taxes, minority interest and extraordinary item . . $ 770 100.0 $ 720 100.0 ==== ===== ==== ===== Tax at federal statutory rate . . . . $ 270 35.0 $ 252 35.0 Increase (reduction) in taxes resulting from: Dividend exclusion. . . . . . . . . (13) (1.7) (2) (0.3) Subsidiary stock transaction. . . . (22) (2.9) - - Taxes on foreign income in excess of statutory rate . . . . . . . . 14 1.8 6 0.8 State income taxes (net of federal effect) . . . . . . . . . . . . . 25 3.2 22 3.1 Tax credits . . . . . . . . . . . . (26) (3.4) (24) (3.3) Other . . . . . . . . . . . . . . . (5) (0.4) 7 1.0 ---- ----- ---- ----- Provision for taxes on income . . . . $ 243 31.6 $ 261 36.3 ==== ===== ==== =====
Six Months Ended June 30, ---------------------------------------- 1997 1996 ------------------ ----------------- Percent Percent of of Pretax Pretax Amount Income Amount Income ------ ------- ------ ------- (Millions) Income before income taxes, minority interest and extraordinary item . . $1,510 100.0 $1,340 100.0 ===== ===== ===== ===== Tax at federal statutory rate . . . . $ 529 35.0 $ 469 35.0 Increase (reduction) in taxes resulting from: Dividend exclusion. . . . . . . . . (21) (1.4) (5) (0.4) Subsidiary stock transaction. . . . (44) (2.9) - - Taxes on foreign income in excess of statutory rate. . . . . . . . 28 1.9 23 1.7 State income taxes (net of federal effect). . . . . . . . . . . . . 47 3.1 40 3.0 Tax credits . . . . . . . . . . . . (51) (3.4) (46) (3.4) Other . . . . . . . . . . . . . . . (9) (0.6) - - ----- ----- ----- ----- Provision for taxes on income . . . . $ 479 31.7 $ 481 35.9 ===== ===== ===== =====
- 10 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE I. Earned Per Share. Earned per share is based on the average number of common shares outstanding during each period, including common stock equivalents that consist of certain outstanding options and all outstanding convertible securities. The information necessary for the calculation of earned per share is as follows:
Three Months Ended June 30, -------------------- 1997 1996* ---- ---- (Millions of Shares) Average number of common shares outstanding . . . . 321.0 321.6 Common stock equivalents. . . . . . . . . . . . . . 7.1 5.1 ----- ----- Total. . . . . . . . . . . . . . . . . . . . . . 328.1 326.7 ===== =====
Six Months Ended June 30, ---------------- 1997 1996* ---- ---- (Millions of Shares) Average number of common shares outstanding . . . . 321.6 321.6 Common stock equivalents. . . . . . . . . . . . . . 6.4 5.0 ----- ----- Total. . . . . . . . . . . . . . . . . . . . . . 328.0 326.6 ===== ===== * Restated to give affect to stock split (Note E).
- 11 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE I. Earned Per Share (continued). In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share." SFAS No. 128 requires companies to adopt its provisions for fiscal years ending after December 15, 1997 and requires restatement of all prior period earnings per share ("EPS") data presented. Earlier application is not permitted. A company is permitted to disclose pro forma EPS amounts computed using SFAS No. 128 in periods prior to required adoption. Accordingly, the pro forma EPS data for the three-and-six-month periods ended June 30, 1997 and 1996 is as follows:
Three Months Ended June 30, ------------------------------ 1997 1996* -------------- ------------- Millions, except per share amounts Shares EPS Shares EPS ------ --- ------ --- Basic EPS. . . . . . . . . . . . . . . . 321.1 $1.21 321.6 $1.35 Diluted EPS. . . . . . . . . . . . . . . 325.7 $1.20 326.4 $1.33
Six Months Ended June 30, ------------------------------- 1997 1996* ------------- -------------- Millions, except per share amounts Shares EPS Shares EPS ------ --- ------ --- Basic EPS. . . . . . . . . . . . . . . . 321.6 $2.71 321.6 $2.50 Diluted EPS. . . . . . . . . . . . . . . 326.2 $2.67 325.7 $2.47 * Restated to give affect to stock split (Note E).
NOTE J. Supplemental Income Statement Information. Taxes other than income taxes comprised the following:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- --- (Millions) Production/severance . . . . . . . $ 82 $105 $205 $208 Property. . . . . . . . . . . . . . 48 46 93 93 Other . . . . . . . . . . . . . . . 47 43 110 110 --- --- --- --- Total . . . . . . . . . . . . . . $177 $194 $408 $411 === === === ===
- 12 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE K. Supplemental Cash Flow Information. Following is supplemental cash flow information for the six months ended June 30, 1997 and 1996:
Six Months Ended June 30, ---------------- 1997 1996 ---- ---- (Millions) Gross sales and maturities of short-term investments . . . . . . . . . . . . . . . . . $ 1,069 $ 1,618 Gross purchases of short-term investments . . . (1,373) (1,542) ------ ------ Net cash provided by short-term investments . . $ 304 $ 76 ====== ====== Gross proceeds from issuance of notes payable . $ 4,171 $ 3,028 Gross repayments of notes payable . . . . . . . (4,078) (3,097) ------ ------ Net cash provided (used) by notes payable . . . $ 93 $ (69) ====== ====== Gross noncash provisions charged to income. . . $ 154 $ 206 Reserve reversal from partial tax audit settlements . . . . . . . . . . . . . . . . . (145) - Cash payments of previously accrued items . . . (158) (326) ------ ------ Cash payments greater than noncash provisions . $ (149) $ (120) ====== ====== Changes in working capital - Increase (decrease) to cash: Accounts receivable . . . . . . . . . . . . . . $ 176 $ 109 Inventories . . . . . . . . . . . . . . . . . . (37) (104) Accounts payable. . . . . . . . . . . . . . . . (292) 63 Other working capital . . . . . . . . . . . . . (159) (34) ------ ------ Total. . . . . . . . . . . . . . . . . . . . $ (312) $ 34 ====== ======
Interest paid during the six-month periods ended June 30, 1997 and 1996 was $335 million and $334 million, respectively. Income taxes paid during the six-month periods ended June 30, 1997 and 1996 were $598 million and $395 million, respectively. - 13 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE L. Summarized Financial Information. Summarized financial information for Lyondell Petrochemical Company ("Lyondell"), a company in which Atlantic Richfield owned a 49.9% interest at June 30, 1997, was as follows:
Three Months Ended Six Months Ended June 30, June 30, ------------------- ----------------- Pro forma* Pro forma* 1997 1996 1997 1996 ---- ---------- ---- ---------- (Millions) Revenues (including sales to ARCO and ARCO Chemical Company). . . $ 789 $ 613 $1,544 $1,192 Sales to ARCO and ARCO Chemical Company . . . . . . . . . . . . 75 73 142 137 Operating income. . . . . . . . . 146 38 225 68 Income from equity investment in LYONDELL-CITGO Refining Co. ("LCR") . . . . . . . . . . . . 21 7 27 33 Net income. . . . . . . . . . . . 93 15 133 39 * Effective January 1, 1997, Lyondell began accounting for its investment in LCR under the equity method of accounting. Pro forma financial information for the three and six months ended June 30, 1996 presents Lyondell's results of operations as if the change from consolidation of LCR to accounting for Lyondell's investment in LCR under the equity method accounting had been effective January 1, 1996. _________________ ARCO's equity in net income of Lyondell. . . . . . . . . . . . 46 7 76 19 Cash dividends received from Lyondell. . . . . . . . . . . . 9 9 18 18
________________________
Pro forma** June 30, December 31, 1997 1996 ---- ---- (Millions) Current assets. . . . . . . . . . . . . . . . . . $ 612 $ 619 Noncurrent assets . . . . . . . . . . . . . . . . 1,297 1,271 Current liabilities . . . . . . . . . . . . . . . 385 485 Long-term debt. . . . . . . . . . . . . . . . . . 742 744 Other liabilities . . . . . . . . . . . . . . . . 249 227 Minority interest . . . . . . . . . . . . . . . . 5 3 Stockholders' equity. . . . . . . . . . . . . . . 528 431 ________ ** Pro forma December 31, 1996 information reflects the accounting for Lyondell's investment in LCR under the equity method as if the change from consolidation to equity accounting had been effective December 31, 1996.
- 14 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE M. Other Commitments and Contingencies. ARCO has commitments, including those related to the acquisition, construction and development of facilities, all made in the normal course of business. Following the March 1989 EXXON VALDEZ oil spill, numerous lawsuits seeking compensatory and punitive damages and injunctions were filed by the state of Alaska, the United States and private plaintiffs against Exxon, Alyeska Pipeline Service Company ("Alyeska") and Alyeska's owner companies (including ARCO, which owns approximately 22%). Alyeska and its owner companies have settled the civil damage claims by federal and state governments and the lawsuits by private plaintiffs. Certain issues relating to the liability for the spill remain unresolved between the Exxon companies, on the one hand, and Alyeska and its owner companies. ARCO and former producers of lead pigments have been named as defendants in cases filed by a municipal housing authority, three purported classes and several individuals seeking damages and injunctive relief as a consequence of the presence of lead-based paint in certain housing units. ARCO is also the subject of or party to a number of other pending or threatened legal actions. The State of Montana is seeking recovery from ARCO of $764 million based on alleged injuries to natural resources resulting from ARCO's mining and mineral processing businesses formerly operated by Anaconda, ARCO's predecessor, in Montana. ARCO is contesting this demand. ARCO is subject to other loss contingencies pursuant to federal, state and local environmental laws and regulations. These include possible obligations to remove or mitigate the effects on the environment of the disposal or release of certain chemical, mineral and petroleum substances at various sites, including the restoration of natural resources located at these sites and damages for loss of use and non-use values. ARCO is currently participating in environmental assessments and cleanups under these laws at federal Superfund and state-managed sites, as well as other clean-up sites. ARCO may in the future be involved in additional environmental assessments and cleanups. The amount of such future costs will depend on such factors as the unknown nature and extent of contamination, the unknown timing, extent and method of the remedial actions which may be required and the determination of ARCO's liability in proportion to other responsible parties. In addition, environmental loss contingencies include claims for personal injuries allegedly caused by exposure to toxic materials manufactured or used by ARCO. ARCO continues to estimate the amount of these costs in periodically establishing reserves based on progress made in determining the magnitude of remediation costs, experience gained from sites on which remediation has been completed, the timing and extent of remedial actions required by the applicable governmental authorities and an evaluation of the amount of ARCO's liability considered in light of the liability and financial where withal of the other responsible parties. At June 30, 1997, the environmental remediation accrual was $600 million. As the scope of ARCO's obligations becomes more clearly defined, there may be changes in these estimated costs, which might result in future charges against ARCO's earnings. ARCO's environmental remediation accrual covers federal Superfund and state-managed sites as well as other clean-up sites, including service stations, refineries, terminals, chemical facilities, third-party landfills, former nuclear processing facilities, sites associated with discontinued operations and sites formerly owned by ARCO. ARCO has been named a potentially responsible party ("PRP") for 117 sites. The number of PRP sites in and of itself is not a relevant measure of liability, because the nature and extent of environmental concerns varies by site and ARCO's share of responsibility varies from sole responsibility to very little responsibility. ARCO reviews all of the PRP sites, along - 15 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE M. Other Commitments and Contingencies (continued). with other sites as to which no claims have been asserted, in estimating the amount of the accrual. ARCO's future costs at these sites could exceed the amount accrued by as much as $600 million. Approximately 45% of the reserve related to sites associated with ARCO's discontinued operations, primarily mining activities in the states of Montana, Utah and New Mexico. Another significant component related to currently and formerly owned chemical, nuclear processing, and refining and marketing facilities, and other sites which received wastes from these facilities. The remainder related to other sites with reserves ranging from $1 million to $10 million per site. No one site represents more than 10% of the total reserve. Substantially all amounts accrued are expected to be paid out over the next five to six years. Claims for recovery of remediation costs already incurred and to be incurred in the future have been filed against various insurance companies and other third parties. Many of these claims have been resolved. ARCO has neither recorded any asset nor reduced any liability in connection with unresolved claims. Although any ultimate liability arising from any of the matters described herein could result in significant expenses or judgments that, if aggregated and assumed to occur within a single fiscal period, would be material to ARCO's results of operations, the likelihood of such occurrence is considered remote. On the basis of management's best assessment of the ultimate amount and timing of these events, such expenses or judgments are not expected to have a material adverse effect on ARCO's consolidated financial statements. The operations and consolidated financial position of ARCO continue to be affected from time to time in varying degrees by domestic and foreign political developments as well as legislation, regulations and litigation pertaining to restrictions on production, imports and exports, tax increases, environmental regulations, cancellation of contract rights and expropriation of property. Both the likelihood of such occurrences and their overall effect on ARCO vary greatly and are not predictable. These uncertainties are part of a number of items that ARCO has taken and will continue to take into account in periodically establishing reserves. - 16 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Second Quarter 1997 vs. Second Quarter 1996 Consolidated Earnings The earnings decline in 1997 primarily reflected lower refining and marketing margins and lower ARCO Chemical Company ("ARCO Chemical") earnings and crude oil prices. Partially offsetting these declines were higher natural gas sales volumes and prices, higher earnings from ARCO's equity interest in Lyondell Petrochemical Company ("Lyondell") and increased refined products sales volumes. The 1997 second quarter included an extraordinary loss of $118 million after tax related to early retirement of debt. The impact of the extraordinary loss was offset by the reversal of reserves for taxes and related interest which resulted primarily from the partial resolution of certain federal and state income tax audits. The 1996 second quarter results included a net charge of $6 million after tax, primarily associated with future environmental remediation costs. Upstream Earnings
Millions (after tax) 1997 1996 ---- ---- Exploration and Production . . . . . . . . . . . . $321 $309 Coal . . . . . . . . . . . . . . . . . . . . . . . $ 24 $ 22
Exploration and Production operations ARCO's earnings from worldwide oil and gas exploration and production operations benefited from growth in international natural gas volumes and higher natural gas prices, partially offset by lower crude oil prices. Average Oil and Gas Prices
1997 1996 ---- ---- U.S. Petroleum liquids - per barrel (bbl) Alaska . . . . . . . . . . . . . . . . . . . $14.95 $15.99 Lower 48, including Vastar . . . . . . . . . $16.06 $17.58 Composite average price. . . . . . . . . . . $15.31 $16.47 Natural gas - per thousand cubic feet (mcf). . $ 1.72 $ 1.67 International Petroleum liquids - per bbl. . . . . . . . . . $17.04 $17.69 Natural gas - per mcf. . . . . . . . . . . . . $ 2.75 $ 2.46
- 17 - Petroleum Liquids and Natural Gas Production
Net Production 1997 1996 ---- ---- U.S. Petroleum liquids - bbl/day. . . . . . . . . . 554,000 558,500 Natural gas - mcf/day. . . . . . . . . . . . . 1,060,100 1,043,000 Barrels of oil equivalent (BOE)/day* . . . . . 730,700 732,300 International Petroleum liquids - bbl/day. . . . . . . . . . 76,800 60,800 Natural gas - mcf/day. . . . . . . . . . . . . 855,400 651,500 BOE/day. . . . . . . . . . . . . . . . . . . . 219,400 169,400 Total net production BOE/day . . . . . . . . . . 950,100 901,700 __________ * Natural gas converted at the ratio of 6 mcf to 1 barrel of liquid.
The reduction in U.S. petroleum liquids production primarily resulted from natural field declines in the Prudhoe Bay and Kuparuk River fields in Alaska. Increased international petroleum liquids production reflects the production from the Rhourde El Baguel field in Algeria. International natural gas volumes in 1997 reflected increased production from Yacheng 13, ARCO's South China Sea natural gas field and increased production from the United Kingdom North Sea, primarily the new Tyne field. The South China Sea natural gas field increased production by approximately 95 million cubic feet per day and the Tyne field added approximately 62 million cubic feet per day to natural gas production in the 1997 second quarter. Coal Operations The earnings increase in 1997 primarily reflected the earnings contribution from ARCO's 65% ownership interest in Canyon Fuel Company, a limited liability company which owns three mines in Utah. Decreases in U.S. and Australian volumes and lower average U.S. prices were offset by a favorable judgment associated with litigation over a coal sales contract. In April 1997, ARCO announced it is evaluating a likely withdrawal from its worldwide coal business through the disposition of coal-mining operations in the United States and Australia because they are no longer considered part of the Company's core business. The method of disposition is currently under study. Downstream Earnings
Millions (after tax) 1997 1996 ---- ---- Refining and marketing. . . . . . . . . . . . . $ 66 $129 Chemicals . . . . . . . . . . . . . . . . . . . $ 38 $ 75
- 18 - Refining and Marketing Operations The decline in earnings in 1997 primarily reflected lower margins as the West Coast experienced high operating rates by refiners and high inventories. In the 1996 second quarter product prices benefited from product scarcity due to problems at a number of West Coast refineries. The lower margins were partially offset by increased sales volumes. Approximately 200 recently-leased Thrifty Oil Co. gas stations were integrated into ARCO's retail network. In addition, there was a net increase of 12 ARCO branded sites to the retail network during the 1997 second quarter. These added sites contributed to an increase in gasoline sales of 5%. In addition, jet fuel and diesel sales volumes were up 9% and 20%, respectively, as a result of refineries running at higher crude rates in 1997. The 1997 volume decrease in other products reflected the sale of intermediate product as a result of turnarounds in 1996. ARCO also announced that it is expanding its retail marketing into British Columbia with the expected acquisition of 52 Super-Save gasoline sites in the greater Vancouver area. West Coast Petroleum Products Sales
Volumes (Barrels/day) 1997 1996 ---- ---- Gasoline. . . . . . . . . . . . . . . . . . . 275,800 262,700 Jet . . . . . . . . . . . . . . . . . . . . . 122,400 111,800 Distillate. . . . . . . . . . . . . . . . . . 78,100 64,700 Other . . . . . . . . . . . . . . . . . . . . 75,100 93,100 ------- ------- Total . . . . . . . . . . . . . . . . . . . . 551,400 532,300 ======= =======
Chemicals For the chemicals segment, reflecting ARCO's 82.5% interest in ARCO Chemical Company, the 1997 earnings decline primarily reflected lower margins for most products and higher costs due to plant turnarounds in the U.S. and Europe, partially offset by higher sales volumes for propylene oxide ("PO") erivatives. The decline in margins is due to the combined effect of lower sales prices and higher feedstock costs in the second quarter of 1997, compared to the 1996 second quarter. Factors contributing to the lower 1997 prices included stronger price competition in PO derivatives and toluene di-isocyanate markets, the expiration of most of ARCO Chemical's long-term methyl tertiary butyl ether contracts and the effect of a stronger U.S. dollar. During the second quarter, ARCO Chemical launched a cost reduction program designed to reduce annual fixed and controllable costs by $150 million, starting in 1998. ARCO Chemical reported that it expects a charge to earnings in the second half of 1997 to account for the costs of the restructuring program. Equity Affiliate ARCO earned $46 million from its 49.9% equity interest in Lyondell in the second quarter of 1997. This compared to $7 million in the second quarter of 1996. The increased earnings resulted primarily from stronger petrochemicals margins and improved results for LYONDELL-CITGO Refining Company Ltd. (LCR). LCR's improved performance resulted from the completion of a refinery upgrade project in February 1997 which provided higher processing capability for very heavy crude oil. - 19 - Consolidated Revenues
Millions 1997 1996 ---- ---- Sales and other operating revenues Upstream . . . . . . . . . . . . . . . . . . . $2,568 $2,311 Downstream . . . . . . . . . . . . . . . . . . 2,641 2,930 Intersegment eliminations. . . . . . . . . . . (622) (682) ----- ----- Total. . . . . . . . . . . . . . . . . . . . $4,587 $4,559 ===== =====
Upstream sales and other operating revenues increased primarily as a result of higher international natural gas volumes, higher natural gas prices and increased natural gas marketing activity, partially offset by lower crude oil prices. Natural gas marketing sales volumes increased to 2.8 billion cubic feet per day in the 1997 second quarter, up from 2.6 billion cubic feet per day in the 1996 second quarter. International natural gas volumes increased by approximately 200 million cubic feet per day in the 1997 second, compared to the 1996 second quarter. Downstream sales and other operating revenues primarily decreased because of lower refined products prices, partially offset by higher refined products volumes. The increase in 1997 other revenues primarily reflected the $39 million earnings increase from ARCO's equity interest in Lyondell and revenue resulting from the termination of a lease agreement and a favorable judgment associated with litigation over a coal sales contract. Consolidated Expenses Trade purchases were higher primarily as a result of increased natural gas marketing activity, partially offset by lower crude oil prices. Natural gas marketing purchase volumes increased to 2.0 billion cubic feet per day in the 1997 second quarter, up from 1.7 billion cubic feet per day in the 1996 second quarter. Operating expenses were higher in 1997 primarily as a result of lease operating costs associated with production from the Rhourde El Baguel field, manufacturing plant turnarounds at ARCO Chemical and higher tolling volumes at ARCO Chemical related to a plant in France that was under repair and operated at restricted rates in the 1996 second quarter. The lower interest expense reflected the reversal of reserves for tax- related interest which resulted from the partial resolution of certain federal and state income tax audits. Income Taxes The Company's effective tax rate was 31.6% in the 1997 second quarter, compared to 36.3% in the 1996 second quarter. The lower effective tax rate in 1997 primarily reflected the partial elimination of deferred taxes which were provided in a prior year upon the sale of stock of a subsidiary but which are no longer required. Elimination of such taxes is expected to continue in future periods. The remaining amount of deferred taxes that may be eliminated in future periods is approximately $140 million. In addition, an increase in the dividends received tax deduction also lowered the effective tax rate. - 20 - Six-Month Period Ended June 30, 1997 vs. Same Six-Month Period 1996 Consolidated Earnings The earnings increase in the first six months of 1997 primarily reflected higher crude oil and natural gas prices and volumes, higher refined products volumes and higher earnings from ARCO's equity interest in Lyondell. These combined improvements more than offset lower refining and marketing margins and lower earnings from ARCO Chemical. Consolidated Revenues
Millions 1997 1996 ---- ---- Sales and other operating revenues Upstream. . . . . . . . . . . . . . . . . . . . . $5,608 $4,602 Downstream. . . . . . . . . . . . . . . . . . . . 5,409 5,397 Intersegment eliminations . . . . . . . . . . . . (1,386) (1,284) ----- ----- Total. . . . . . . . . . . . . . . . . . . . . . $9,631 $8,715 ===== =====
For the first six months of 1997 upstream sales and other operating revenues reflected increased natural gas marketing activity, higher natural gas and crude oil prices and natural gas volumes. Natural gas marketing sales volumes increased to 3.2 billion cubic feet per day in the 1997 second quarter, up from 2.5 billion cubic feet per day in the 1996 second quarter. International natural gas volumes increased by approximately 145 million cubic feet per day during the first six months of 1997, compared to the same period in 1996. For the first six months of 1997 downstream sales and other operating revenues increased slightly as higher chemical and refined products volumes and higher refined products prices were mostly offset by lower chemical products prices. Consolidated Expenses Trade purchases for the six months ended June 30, 1997 were higher primarily as a result of increased natural gas marketing activity. Natural gas marketing purchase volumes increased to 2.4 billion cubic feet per day in the 1997 second quarter, up from 1.7 billion cubic feet per day in the 1996 second quarter. Operating expenses for the first six months of 1997 reflected charges for future environmental remediation related to the adoption of a new accounting standard, lease operating costs associated with production from the Rhourde El Baguel field and higher tolling volumes and manufacturing plant turnaround expense at ARCO Chemical. The higher tolling volumes related to a plant in France that was under repair and operated at restricted rates during the first six months of 1997. For the first six months ended June 30, 1997, the lower interest expense reflected the reversal of reserves for tax-related interest which resulted from the partial resolution of certain federal and state income tax audits. - 21 - Income Taxes The Company's effective tax rate was 31.7% for the first six months of 1997, compared to 35.9% for the same period in 1996. The lower effective tax rate in 1997 primarily reflected the partial elimination of deferred taxes which were provided in a prior year upon the sale of stock of a subsidiary but which are no longer required. Elimination of such taxes is expected to continue in future periods. In addition, an increase in the dividends received tax deduction also lowered the effective tax rate. Average Oil and Gas Prices
Six Months Ended June 30, ---------------- 1997 1996 ---- ---- U.S. Petroleum liquids - per bbl Alaska . . . . . . . . . . . . . . . . . . $16.80 $14.50 Lower 48, including Vastar. . . . . . . . . $17.65 $17.04 Composite average price . . . . . . . . . . $17.07 $15.25 Natural gas - per mcf . . . . . . . . . . . . $ 2.03 $ 1.62 International Petroleum liquids - per bbl . . . . . . . . . $19.00 $17.51 Natural gas - per mcf . . . . . . . . . . . . $ 2.70 $ 2.54
Petroleum Liquids and Natural Gas Production
1997 1996 ---- ---- Net Production U.S. Petroleum liquids - bbl/day. . . . . . . . . 564,300 569,400 Natural gas - mcf/day. . . . . . . . . . . . 1,054,600 1,049,800 Barrels of oil equivalent (BOE)/day* . . . . 740,100 744,300 International Petroleum liquids - bbl/day. . . . . . . . . 72,500 62,800 Natural gas - mcf/day. . . . . . . . . . . . 867,000 721,800 BOE/day. . . . . . . . . . . . . . . . . . . 217,000 183,200 Total net production BOE/day . . . . . . . . 957,100 927,500 __________ * Natural gas converted at the ratio of 6 mcf to 1 barrel of liquid.
Liquidity and Capital Resources
Millions 1997 ---- Cash flow provided (used) by: Operations. . . . . . . . . . . . . . . . . . . . . $1,463 Investing activities. . . . . . . . . . . . . . . . $ (942) Financing activities. . . . . . . . . . . . . . . . $ (838)
- 22 - The net cash used by investing activities in the first six months of 1996 primarily included expenditures for additions to fixed assets of $1,072 million. The net cash used in financing activities in the first six months of 1996 primarily included repayments of long-term debt of $575 million, dividend payments of $452 million, and treasury stock purchases of $155 million. These uses were partially offset by proceeds of $253 million from the issuance of long-term debt and an increase of $93 million in the Company's short-term debt position. The Company used approximately $800 million in cash in July 1997 to settle early retirements of debt contracted in the second quarter of 1997. Also in July the Company used approximately $250 million in cash for redemption of its 10.25% Eurobonds which were due in 2000. Cash and cash equivalents and short-term investments totaled $1.6 billion, short-term borrowings were $1.2 billion and long-term debt due within one year was $1.4 billion at the end of the second quarter of 1996. On July 28, 1997, ARCO's Board of Directors finalized a decision to settle all of ARCO's 9% Exchangeable Notes ("Notes") due September 15, 1997 with Lyondell stock currently owned by ARCO. If market conditions remain unchanged from July 1997, ARCO expects to realized an after-tax gain of approximately $300 million upon the exchange. The outstanding amount of the Notes at June 30, 1997 was $988 million. On July 28, 1997, Lyondell common stock was trading above the issue price of the Notes ($24.75). The Notes were structured such that ARCO retains approximately the first 12% in stock price appreciation above the issue price. Therefore, if the final pricing of the stock settlement exceeds $24.75, ARCO will retain a residual stockholding, which it plans to sell at such times and in the manner deemed in the best interest of the Company. ARCO's 2-for-1 stock split and a 4% increase in the quarterly dividend became effective June 13 to stockholders of record on May 16, 1997. It is expected that future cash requirements for capital expenditures, dividends and debt repayments will come from cash generated from operating activities, existing cash balances, and future financings. Statements of Financial Accounting Standards Not Yet Adopted In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 requires companies to adopt its provisions for fiscal years ending after December 15, 1997 and requires restatement of all prior period earnings per share ("EPS") data presented. Earlier application is not permitted. SFAS No. 128 specifies the computation, presentation and disclosure requirements for EPS. The implementation of SFAS No. 128 is not expected to have a material effect on the EPS data presented by the Company. See Note H of notes to the consolidated financial statements. _______________________________ Management cautions against projecting any future results based on present earnings levels because of economic uncertainties, the extent and form of existing or future governmental regulations and other possible actions by governments. - 23 - PART II. OTHER INFORMATION Item 1. Legal Proceedings. 1. Reference is made to the disclosure on page 14 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (hereinafter, the "1996 Form 10-K Report") and on page 19 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (the "First Quarter Form 10-Q Report") regarding In re Hanford Nuclear Reservation Litigation (CY-91- 3015-AAM). On April 4, 1997, ARCO was served with a new complaint making allegations similar to those already pending in this litigation, filed by six individual Native Americans in the United States District Court for the Western District of Washington. This action has been transferred to the United States District Court for the Eastern District of Washington. 2. Reference is made to the disclosure on pages 15 and 16 of the Company's 1996 Form 10-K Report and on page 19 of the First Quarter Form 10-Q Report regarding the case of Aguilar, et al. v. Atlantic Richfield, et al. (Case No. 700810). The court has set a date of November 7, 1997 for trial. 3. On March 29, 1994, Siemens Solar Industries ("Siemens") filed a complaint in the Supreme Court of the State of New York for the County of New York, titled Siemens Solar Industries v. Atlantic Richfield Company (Case No. 94-109092). Siemens' complaint alleges breach of contract and misrepresentation in connection with the February 1990 sale by ARCO to Siemens of the stock of ARCO Solar, Inc. Siemens seeks damages in the amount of the purchase price, operating losses incurred after the sale, prejudgment interest, and punitive damages. ARCO denies the allegations of the complaint. The court has set a date of September 3, 1997 for trial. 4. On July 29, 1996, a crude oil spill involving ARCO Pipe Line Company's ("APL") Line 8 occurred in Long Beach, California. On May 23, 1997, the City Prosecuting Attorney of Long Beach filed a misdemeanor complaint against APL. The complaint alleges inter alia that APL violated the California Fish & Game Code, the California Government Code and the California Waster Code. Settlement discussions have been initiated and it is anticipated that an amount in excess of $100,000 will be paid. 5. Reference is made to the Company's 1996 Form 10-K Report for information on other legal proceedings matters reported herein. - 24 - Item 5. Other. At its meeting on July 28, 1997, the Board of Directors elected two Senior Vice Presidents of the Company, Messrs. Hazelwood and Slater. Set forth below is a current list of the Company's Executive Officers and Officers. Mike R. Bowlin Chairman, President and Chief Executive Officer Anthony G. Fernandes Executive Vice President Marie L. Knowles Executive Vice President and Chief Financial Officer William E. Wade, Jr. Executive Vice President Michael E. Wiley Executive Vice President Harrell L. Bilhartz Senior Vice President John B. Cheatham IV Senior Vice President Terry G. Dallas Senior Vice President and Treasurer Kenneth R. Dickerson Senior Vice President Mark L. Hazelwood Senior Vice President John H. Kelly Senior Vice President Stephen R. Mut Senior Vice President William C. Rusnack Senior Vice President John M. Slater Senior Vice President J. Kenneth Thompson Senior Vice President Donald R. Voelte, Jr. Senior Vice President Bruce G. Whitmore Senior Vice President, General Counsel and Secretary Allan L. Comstock Vice President and Controller Dodd W. DeCamp Vice President Stephen J. Giovanisci Vice President Beverly L. Hamilton Vice President and Investment Officer Robert L. Healy Vice President Allen C. Holmes Vice President and General Tax Officer
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27 Financial Data Schedule. (b) Reports on Form 8-K The following Current Reports on Form 8-K were filed during the quarter ended June 30, 1997 and through the date hereof. Date of Report Item No. Financial Statements -------------- -------- -------------------- June 23, 1997 5 None July 28, 1997 5 None - 25 - 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. ATLANTIC RICHFIELD COMPANY (Registrant) /s/ ALLAN L. COMSTOCK Dated: August 5, 1997 ______________________________ (signature) Allan L. Comstock Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) - 26 - EX-27 2 FINANCIAL DATA SCHEDULE 6-MONTHS JUN 1997
5 This schedule contains summary financial information extracted from the Consolidated Statement of Income and the Consolidated Balance Sheet and is qualified in its entirety by reference to such financial statements. 1,000,000 6-MOS DEC-31-1997 JUN-30-1997 $ 1,134 473 1,698 0 1,020 4,738 35,380 19,163 25,747 6,076 4,334 0 1 806 7,477 25,747 9,631 9,993 7,571 7,787 0 0 174 1,510 479 991 0 118 0 873 $2.66 $2.66
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