-----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, LASoN99Bc7p6n8gC7yR46GBb1seEZk/3ReD2pLmD4vhjVteBVuMmGdCrYze04mTV UmkVRv9NXyF5FEHS6nefMA== 0000775483-95-000003.txt : 19950511 0000775483-95-000003.hdr.sgml : 19950511 ACCESSION NUMBER: 0000775483-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950510 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: 95535922 BUSINESS ADDRESS: STREET 1: 515 S FLOWER ST CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: 2134863511 10-Q 1 ARCO 1ST QUARTER FORM 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 March 31, 1995 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 March 31, 1995: 160,799,714. PART I. FINANCIAL INFORMATION ATLANTIC RICHFIELD COMPANY AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED STATEMENT OF INCOME Three Months Ended March 31, ------------------ (Millions except per share amounts) 1995 1994 ---- ---- Revenues Sales and other operating revenues, including excise taxes . . . . . . . . . . . . . . $4,244 $3,800 Income from equity investments. . . . . . . . . . . 74 17 Interest. . . . . . . . . . . . . . . . . . . . . . 59 39 Other revenues. . . . . . . . . . . . . . . . . . . 80 69 ----- ----- 4,457 3,925 ----- ----- Expenses Trade purchases . . . . . . . . . . . . . . . . . . 1,568 1,303 Operating expenses. . . . . . . . . . . . . . . . . 704 719 Selling, general and administrative expenses. . . . 402 395 Depreciation, depletion and amortization. . . . . . 412 421 Exploration expenses (including undeveloped leasehold amortization). . . . . . . . . . . . . . 90 104 Excise taxes. . . . . . . . . . . . . . . . . . . . 350 360 Taxes other than excise and income taxes. . . . . . 194 184 Interest. . . . . . . . . . . . . . . . . . . . . . 203 184 ----- ----- 3,923 3,670 ----- ----- Income before income taxes and minority interest. . . 534 255 Provision for taxes on income . . . . . . . . . . . . 185 97 Minority interest in earnings of subsidiaries . . . . 27 9 ----- ----- Net Income. . . . . . . . . . . . . . . . . . . . . . $ 322 $ 149 ===== ===== Earned per Share. . . . . . . . . . . . . . . . . . . $ 1.97 $ .92 ===== ===== Cash Dividends Paid per Share of Common Stock . . . . $1.375 $1.375 ===== =====
The accompanying notes are an integral part of these statements. -1-
ATLANTIC RICHFIELD COMPANY CONSOLIDATED BALANCE SHEET March 31, December 31, 1995 1994 ---- ---- (Millions) Assets Current assets: Cash and cash equivalents . . . . . . . . . . $ 1,164 $ 1,394 Short-term investments. . . . . . . . . . . . 2,336 2,991 Accounts receivable . . . . . . . . . . . . . 1,457 1,446 Inventories . . . . . . . . . . . . . . . . . 794 797 Prepaid expenses and other current assets . . 304 185 ------ ------ Total current assets. . . . . . . . . . . . . 6,055 6,813 ------ ------ Investments and long-term receivables: Investments accounted for on the equity method 400 348 Other investments and long-term receivables . 299 297 ------ ------ 699 645 ------ ------ Fixed assets: Property, plant and equipment . . . . . . . . 32,234 32,248 Less accumulated depreciation, depletion and amortization . . . . . . . . . . . . . . 16,493 16,526 ------ ------ 15,741 15,722 ------ ------ Deferred charges and other assets . . . . . . . 1,462 1,383 ------ ------ Total assets. . . . . . . . . . . . . . . . . . $23,957 $24,563 ====== ======
The accompanying notes are an integral part of these statements. -2-
ATLANTIC RICHFIELD COMPANY CONSOLIDATED BALANCE SHEET March 31, December 31, 1995 1994 ---- ---- (Millions) Liabilities and Stockholders' Equity Current liabilities: Notes payable . . . . . . . . . . . . . . . . . $ 1,180 $ 1,478 Accounts payable. . . . . . . . . . . . . . . . 904 986 Long-term debt due within one year. . . . . . . 564 630 Taxes payable, including excise taxes . . . . . 439 253 Accrued interest. . . . . . . . . . . . . . . . 151 183 Other . . . . . . . . . . . . . . . . . . . . . 852 958 ------ ------ Total current liabilities . . . . . . . . . . . 4,090 4,488 ------ ------ Long-term debt. . . . . . . . . . . . . . . . . . 6,969 7,198 Deferred income taxes . . . . . . . . . . . . . . 2,654 2,721 Other deferred liabilities and credits. . . . . . 3,388 3,471 Minority interest . . . . . . . . . . . . . . . . 426 407 Stockholders' equity: Preference stocks . . . . . . . . . . . . . . . 1 1 Common stock. . . . . . . . . . . . . . . . . . 402 402 Capital in excess of par value of stock . . . . 647 647 Retained earnings . . . . . . . . . . . . . . . 5,442 5,342 Pension liability adjustment. . . . . . . . . . (20) (20) Net unrealized loss on investments. . . . . . . (22) (38) Foreign currency translation. . . . . . . . . . (11) (51) Treasury stock, at cost . . . . . . . . . . . . (9) (5) ------ ------ Total stockholders' equity. . . . . . . . . . . 6,430 6,278 ------ ------ Total liabilities and stockholders' equity. . . . $23,957 $24,563 ====== ======
The accompanying notes are an integral part of these statements. -3-
ATLANTIC RICHFIELD COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (Millions) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . $ 322 $ 149 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . 412 421 Dry hole expense and undeveloped leasehold amortization . . . . . . . . . . . . . . . . . . . 36 50 Net gain on asset sales. . . . . . . . . . . . . . . (8) -- Income from equity investments . . . . . . . . . . . (74) (17) Dividends from equity investments. . . . . . . . . . 21 14 Cash payments greater than noncash provisions. . . . (210) (13) Deferred income taxes. . . . . . . . . . . . . . . . (4) (9) Changes in accounts receivable, inventories and accounts payable. . . . . . . . . . . . . . . . (89) (188) Changes in other working capital accounts. . . . . . 16 (109) Other. . . . . . . . . . . . . . . . . . . . . . . . (41) (23) ----- ----- Net cash provided by operating activities. . . . . 381 275 ----- ----- Cash flows from investing activities: Additions to fixed assets (including dry hole costs) (353) (392) Net cash provided (used) by short-term investments . 677 (316) Proceeds from asset sales. . . . . . . . . . . . . . 45 9 Payments received on notes from sale of assets . . . -- 37 Other. . . . . . . . . . . . . . . . . . . . . . . . (103) 28 ----- ----- Net cash provided (used) by investing activities . 266 (634) ----- ----- Cash flows from financing activities: Repayments of long-term debt . . . . . . . . . . . . (470) (97) Proceeds from issuance of long-term debt . . . . . . 149 -- Net cash provided (used) by notes payable. . . . . . (324) 219 Dividends paid . . . . . . . . . . . . . . . . . . . (222) (221) Treasury stock purchases . . . . . . . . . . . . . . (11) -- Treasury stock contributed to benefit plans. . . . . -- 29 Other. . . . . . . . . . . . . . . . . . . . . . . . (4) (7) ----- ----- Net cash used by financing activities. . . . . . . (882) (77) ----- ----- Effect of exchange rate changes on cash. . . . . . . . 5 5 ----- ----- Net decrease in cash and cash equivalents. . . . . . . (230) (431) Cash and cash equivalents at beginning of period . . . 1,394 1,458 ----- ----- Cash and cash equivalents at end of period . . . . . . $1,164 $1,027 ===== =====
The accompanying notes are an integral part of these statements. -4- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE A. Inventories. Inventories at March 31, 1995 and December 31, 1994 comprised the following:
March 31, December 31, 1995 1994 ---- ---- (Millions) Crude oil and petroleum products. . . . . . . . . $ 176 $ 172 Chemical products . . . . . . . . . . . . . . . . 354 351 Other products. . . . . . . . . . . . . . . . . . 35 46 Materials and supplies. . . . . . . . . . . . . . 229 228 ---- ---- Total. . . . . . . . . . . . . . . . . . . . . $ 794 $ 797 ==== ====
NOTE B. Restructuring Program. During 1994, ARCO announced a restructuring program under which approximately 2,400 positions were eliminated. The program covered all operating units, excluding Lower 48 oil and gas operations, along with the corporate headquarters. The Company accrued $347 million before tax consisting primarily of personnel costs (pension enhancements, severance and other ancillary costs) associated with the terminations. Approximately $155 million of the $347 million related to severance and other ancillary costs will be paid from Company funds over the next two years. In 1993, ARCO announced a reorganization of its Lower 48 oil and gas operations under which approximately 1,300 positions were eliminated. The Company accrued $65 million related to severance and other ancillary costs. Through March 31, 1995, approximately 1,600 employees have been terminated under the 1994 program, and approximately $78 million of severance and ancillary benefits have been paid and charged against the accrual. Nearly 1,300 employees have been terminated under the 1993 program, and approximately $53 million of severance and ancillary benefits have been paid and charged against the accrual. Payments made do not necessarily correlate to the number of terminations due to the ability of terminees to defer receipt of certain payments. NOTE C. Investments. At March 31, 1995, investments were composed principally of U.S. Treasury securities, corporate debt instruments, and municipal securities and were principally included in cash equivalents or short-term investments depending on their maturities, which generally ranged from one day to one year. Investments in debt securities classified as held-to-maturity were recorded at amortized cost while investments in debt securities classified as available-for-sale are reported at fair value, with unrealized holding gains and losses, net of tax, reported in a separate component of stockholders' equity. -5- NOTE C. Investments (Continued). The following summarizes investments in securities, principally debt securities, at March 31, 1995:
Millions Available-for-Sale Held-to-Maturity Aggregate fair value . . . . . . . . . $1,769 $ 910 Gross unrealized holding losses. . . . 35 - Amortized cost . . . . . . . . . . . . 1,804 910 Gross purchases. . . . . . . . . . . . 698 1,293 Gross sales. . . . . . . . . . . . . . 854 - Gross maturities . . . . . . . . . . . 36 1,624
For the period ended March 31, 1995, gross realized gains and losses on sales of securities were insignificant. NOTE D. Capital Stock. Detail of the Company's capital stock was as follows:
March 31, December 31, 1995 1994 ---- ---- (Thousands) $3.00 Cumulative convertible preference stock, par $1 . . . . . . . . . . . . . . . . . . . . . . $ 72 $ 74 $2.80 Cumulative convertible preference stock, par $1 . . . . . . . . . . . . . . . . . . . . . . 777 795 Common stock, par $2.50. . . . . . . . . . . . . . . 402,200 402,000 ------- ------- Total. . . . . . . . . . . . . . . . . . . . . . $403,049 $402,869 ======= =======
NOTE E. Capitalization of Interest. Interest expense excludes capitalized interest of $12 million and $7 million for the three-month periods ended March 31, 1995 and 1994, respectively. -6- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE F. Income Taxes. Provision for taxes on income:
Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (Millions) Federal: Current . . . . . . . . . . . . . . . . . . . $ 140 $ 71 Deferred. . . . . . . . . . . . . . . . . . . (2) (15) ---- ---- 138 56 ---- ---- Foreign: Current . . . . . . . . . . . . . . . . . . . 22 25 Deferred. . . . . . . . . . . . . . . . . . . 1 6 ---- ---- 23 31 ---- ---- State: Current . . . . . . . . . . . . . . . . . . . 27 10 Deferred. . . . . . . . . . . . . . . . . . . (3) -- ---- ---- 24 10 ---- ---- Total. . . . . . . . . . . . . . . . . . . $ 185 $ 97 ==== ====
Reconciliation of provision for taxes on income with tax at federal statutory rate:
Three Months Ended March 31, ------------------ 1995 1994 ---------------- ---------------- Percent Percent of of Pretax Pretax Amount Income Amount Income ------ ------- ------ ------- (Millions) Income before income taxes and minority interest . . . . . . . . . $ 534 100.0 $ 255 100.0 ==== ===== ==== ===== Tax at federal statutory rate. . . . . $ 187 35.0 $ 89 35.0 Increase (reduction) in taxes resulting from: Dividend exclusion . . . . . . . . . (18) (3.4) (2) (.8) Taxes on foreign income in excess of statutory rate . . . . . 16 3.0 25 9.8 State income taxes (net of federal effect). . . . . . . . . . 16 3.0 7 2.7 Tax credits . . . . . . . . . . . . (18) (3.4) (13) (5.1) Other. . . . . . . . . . . . . . . . 2 .4 (9) (3.6) ---- ----- ---- ----- Provision for taxes on income. . . . . $ 185 34.6 $ 97 38.0 ==== ===== ==== =====
-7- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE G. 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 March 31, ------------------ 1995 1994 ---- ---- (Millions of shares) Average number of common shares outstanding . . . . . 160.8 160.1 Common stock equivalents . . . . . . . . . . . . . . 2.6 2.8 ----- ----- Total . . . . . . . . . . . . . . . . . . . . . . . 163.4 162.9 ===== =====
NOTE H. Supplemental Income Statement Information. Taxes other than excise and income taxes comprised the following:
Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (Millions) Production/severance. . . . . . . . . . . . . . . . . $ 83 $ 66 Property. . . . . . . . . . . . . . . . . . . . . . . 48 50 Other . . . . . . . . . . . . . . . . . . . . . . . . 63 68 --- --- Total . . . . . . . . . . . . . . . . . . . . . . . $194 $184 === ===
-8- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE I. Supplemental Cash Flow Information. Following is supplemental cash flow information for the three months ended March 31, 1995 and 1994:
Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (Millions) Gross maturities of short-term investments . . . . . . $ 1,567 $ 2,421 Gross purchases of short-term investments. . . . . . . (890) (2,737) ------ ------ Net cash provided (used) by short-term investments . . $ 677 $ (316) ====== ====== Gross proceeds from issuance of notes payable. . . . . $ 1,892 $ 2,491 Gross repayments of notes payable. . . . . . . . . . . (2,216) (2,272) ------ ------ Net cash provided (used) by notes payable. . . . . . . $ (324) $ 219 ====== ====== Gross noncash provisions charged to income . . . . . . $ 108 $ 111 Cash payments of previously accrued items. . . . . . . (318) (124) ------ ------ Cash payments greater than noncash provisions. . . . . $ (210) $ (13) ====== ======
Interest paid during the three-month periods ended March 31, 1995 and 1994 was $235 million and $227 million, respectively. Income taxes paid during the three-month periods ended March 31, 1995 and 1994 were $129 million and $37 million, respectively. -9- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE J. Summarized Financial Information. Summarized financial information for Lyondell Petrochemical Company ("Lyondell"), a company in which Atlantic Richfield owned a 49.9 percent interest at March 31, 1995, was as follows:
Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (Millions) Revenues (including sales to ARCO and ARCO Chemical Company). . . . . . . . . . . . $1,174 $ 824 Sales to ARCO and ARCO Chemical Company . . . . 90 69 Operating income. . . . . . . . . . . . . . . . 222 54 Net income. . . . . . . . . . . . . . . . . . . 127 22 _____________________________ ARCO's equity in net income of Lyondell . . . . $ 64 $ 11 Cash dividends received from Lyondell . . . . . 9 9
________________________
March 31, December 31, 1995 1994 ---- ---- (Millions) Current assets. . . . . . . . . . . . . . . . . . $ 830 $ 697 Noncurrent assets . . . . . . . . . . . . . . . . 1,051 966 Current liabilities . . . . . . . . . . . . . . . 466 433 Long-term debt. . . . . . . . . . . . . . . . . . 707 707 Other liabilities . . . . . . . . . . . . . . . . 191 192 Minority interest . . . . . . . . . . . . . . . . 345 268 Stockholders' equity. . . . . . . . . . . . . . . 172 63
-10- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED NOTE K. 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. At March 31, 1995 and December 31, 1994, there were contingent liabilities primarily with respect to guarantees of securities of other issuers of approximately $55 million and $75 million, respectively. Following the March 1989 EXXON VALDEZ oil spill, Alyeska Pipeline Service Company ("Alyeska") and Alyeska's owner companies were the subject of numerous lawsuits by the State of Alaska, the United States and private plaintiffs. ARCO Transportation Alaska, Inc. ("ATA") owns approximately 21 percent of Alyeska. Alyeska and its owner companies have settled the federal and state claims and the lawsuits by private plaintiffs. Certain issues relating to the liability for the spill remain unresolved between the Exxon companies 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, a purported class 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 or party to a number of other pending or threatened legal actions. In January 1995, the State of Montana presented to ARCO a revised demand for damages of $635 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 the amount of 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, 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 may in the future be involved in additional environmental assessments and cleanups, including the restoration of natural resources and damages for loss of use and non-use values. The amount of such future costs will depend on such factors as the unknown nature and extent of contamination at many sites, 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 -11- NOTE K. Other Commitments and Contingencies (Continued). financial wherewithal of the other responsible parties. At March 31, 1995, the environmental remediation reserve was $658 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 126 sites. The number of PRP sites in and of itself does not represent a relevant measure of liability, because the nature and extent of environmental concerns varies from site to site and ARCO's share of responsibility varies from sole responsibility to very little responsibility. ARCO reviews all of the PRP sites, along 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 $1 billion. Approximately half of the accrual related to sites associated with ARCO's discontinued operations, primarily mining activities in the states of Montana, Utah and New Mexico. Another significant component of the accrual 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 15 percent of the total accrual. 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. These claims have not been resolved. Due to the uncertainty as to ultimate recovery from these parties, ARCO has neither recorded any asset nor reduced any liability in anticipation of such recovery. 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. -12- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First Quarter 1995 vs. First Quarter 1994 Consolidated Earnings The earnings increase in 1995 primarily reflected improved margins in ARCO's chemical businesses, higher crude oil prices and the benefits of companywide cost reductions partially offset by lower refining and marketing margins and U.S. natural gas prices. Revenues The increase in 1995 sales and other operating revenues resulted primarily from higher crude oil, chemical and refined products prices and higher chemical products volumes, partially offset by decreased crude oil trading activity and lower U.S. natural gas prices. The increase in 1995 income from equity investments primarily reflected higher earnings from ARCO's 49.9 percent equity interest in Lyondell Petrochemical Company ("Lyondell"). Expenses Trade purchases were higher primarily as a result of higher crude oil prices and increased trade purchases of chemical feedstocks and products, partially offset by decreased crude oil trading activity and lower U.S. natural gas prices. Upstream Earnings
Millions (after tax) 1995 1994 ---- ---- Oil and Gas . . . . . . . . . . . . . $ 195 $ 82 Coal. . . . . . . . . . . . . . . . . $ 16 $ 19
ARCO's earnings from worldwide oil and gas exploration and production operations benefited from higher crude oil prices and lower operating and exploration costs, partially offset by lower U.S. natural gas prices. Average Oil and Gas Prices 1995 1994 ---- ---- U.S. Crude oil per bbl . . . . . . . . . . . $11.87 $ 7.83 Natural gas per mcf . . . . . . . . . . $ 1.33 $ 2.09 International Crude oil per bbl . . . . . . . . . . . $16.32 $13.64 Natural gas per mcf . . . . . . . . . . $ 2.57 $ 2.57
-13- Petroleum Liquids and Natural Gas Production
Net Production 1995 1994 -------------- ---- ---- U.S. Petroleum liquids bbld . . . . . . . . 603,000 624,700 Natural gas mmcfd. . . . . . . . . . . 1,031 915 Barrels of oil equivalent (BOE). . . . 774,900 777,200 International Petroleum liquids bbld . . . . . . . . 60,600 69,500 Natural gas mmcfd. . . . . . . . . . . 640 567 BOE . . . . . . . . . . . . . . . . . 167,300 164,000
The reduction in petroleum liquids production primarily resulted from natural field declines, the impact of prices and costs on production sharing contracts, and volume prorations resulting from inclement weather conditions in Alaska. The increase in U.S. natural gas production primarily resulted from the Mustang Island and South Marsh Island fields which are owned and produced by Vastar Resources, Inc. ("Vastar"). ARCO holds an 82.3 percent interest in Vastar. The higher international natural gas volumes in 1995 reflected increased production in Indonesia, particularly in the Pagerungan field. Coal Operations The reduced earnings in 1995 resulted from lower Australian coal prices and an unfavorable exchange rate, partially offset by higher sales volumes and reduced overhead expenses, which resulted from cost reduction actions. Downstream Earnings
Millions (after tax) 1995 1994 ---- ---- Refining and marketing . . . . . . . . . . $ 22 $ 95 Transportation . . . . . . . . . . . . . . $ 50 $ 45 Intermediate chemicals and specialty products . . . . . . . . . $115 $ 48
The refining and marketing results were down compared to 1994 as a result of weaker West Coast refined product margins, partially offset by ARCO's cost reduction efforts. The 1994 transportation results included net after-tax expenses of $9 million related to the January 17, 1994 earthquake in Southern California. For the intermediate chemicals and specialty products segment, reflecting ARCO's 83.2 percent interest in ARCO Chemical Company, the 1995 improvement primarily reflected strong worldwide styrene monomer ("SM") demand, resulting in higher margins and sales volumes for SM, as well as higher demand for methyl tertiary butyl ether ("MTBE"), resulting in higher overall MTBE margins and volumes. -14- Equity Affiliate ARCO earned $64 million from its 49.9 percent equity interest in Lyondell in the first quarter of 1995, as compared to $11 million in the first quarter of 1994. The improvement resulted primarily from the strong performance of Lyondell's chemical operations reflecting higher ethylene and methanol margins, while its refinery performance also improved. Financial Position and Liquidity
Millions 1995 1994 ---- ---- Cash flow provided (used) by: Operations . . . . . . . . . . . . . . $ 381 $ 275 Investing activities . . . . . . . . . $ 266 $ (634) Financing activities . . . . . . . . . $ (882) $ (77)
The net cash provided by investing activities in the first quarter 1995 included a decrease in short-term investments of $677 million partially offset by expenditures for additions to fixed assets of $353 million. The net cash used in financing activities in the first quarter of 1995 included repayments of long-term debt of $470 million, a decrease of $324 million in the Company's short-term debt position and dividend payments of $222 million. Cash and cash equivalents and short-term investments totaled $3.5 billion, and short-term borrowings were $1.2 billion at the end of the first quarter of 1995. During the first quarter of 1995, ARCO purchased 100,000 shares of its common stock and contributed them to treasury in order to satisfy ARCO's obligations upon conversion of the $3.00 and $2.80 Preference Stocks and upon exercise of stock options. 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 March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company will have to implement SFAS No. 121 by the fiscal year ended December 31, 1996. The provisions will require the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected future cash flows, then the loss should be recognized in the income statement and certain disclosures regarding the impairment should be made in the financial statements. The Company has not yet had sufficient time to evaluate the impact, if any, of the provisions of SFAS No. 121. ___________________________ -15- 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. 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 with classifications adopted in 1995. In the opinion of the Company, the financial information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations in conformity with generally accepted accounting principles. -16- PART II. OTHER INFORMATION Item 1. Legal Proceedings. 1. Reference is made to the disclosure on page 18 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (hereinafter, the "1994 Form 10-K Report") regarding a Notice of Deficiency from the Internal Revenue Service. ARCO has paid the amount of tax (and interest) that it believes is due and filed a petition in the U.S. Tax Court in March 1995 challenging the balance of the additional federal income tax set forth in the Notice. 2. Reference is made to the Company's 1994 Form 10-K Report for information on other legal proceeding matters reported therein. -17- Item 4. Submission of Matters to a Vote of Security Holders. The Company's annual meeting of stockholders was held on May 1, 1995. The stock-holders elected all the Company's nominees for director and approved the appointment of Coopers & Lybrand L.L.P. as the Company's independent auditors for 1995. The votes were as follows: 1. Election of Directors. For Withheld Ronald J. Arnault 136,180,710 3,467,687 Mike R. Bowlin 137,087,962 2,560,435 Richard H. Deihl 137,103,864 2,544,533 David T. McLaughlin 137,085,250 2,563,147 Hicks B. Waldron 136,943,277 2,705,120
2. Approval of appointment of Coopers & Lybrand L.L.P. For 137,703,007 Against 1,255,074 Abstain 690,316
In addition, the stockholders voted on the following proposal: Stockholders' proposal with respect to public environmental reporting. For 10,586,321 Against 107,872,228 Abstain 9,093,395 Broker Non-Votes 12,096,453
Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 27 Financial Data Schedule. (b) Reports on Form 8-K. The following Current Report on Form 8-K was filed during the quarter ended March 31, 1995 and through the date hereof. Date of Report Item No. Financial Statements March 27, 1995 5 None -18- 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: May 9, 1995 _____________________________ (signature) Allan L. Comstock Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer) -19- EX-27 2 FINANCIAL DATA SCHEDULE
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 3-MOS DEC-31-1995 MAR-31-1995 1,164 2,336 1,457 0 794 6,055 32,234 16,493 23,957 4,090 6,969 402 0 1 6,027 23,957 4,244 4,457 3,228 3,318 0 0 203 534 185 322 0 0 0 322 $1.97 $1.97
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