-----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, NPO8AnGZc7QFq+/EQoHIzGobEOUhoj1VoRXGsDs/qGI0DB5Qkz6sb9dmiMIe9u3X Msaiax1S/CHy3XlVTS04nQ== 0000093397-98-000013.txt : 19981116 0000093397-98-000013.hdr.sgml : 19981116 ACCESSION NUMBER: 0000093397-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMOCO CORP CENTRAL INDEX KEY: 0000093397 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 363353184 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00170 FILM NUMBER: 98748026 BUSINESS ADDRESS: STREET 1: 200 E RANDOLPH DR STREET 2: MAIL CODE 3107A CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3128566111 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD OIL CO /IN/ DATE OF NAME CHANGE: 19850425 10-Q 1 AMOCO CORPORATION 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-170-2 AMOCO CORPORATION (Exact name of registrant as specified in its charter) INDIANA 36-1812780 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601 (Address of principal executive offices) (Zip Code) 312-856-6111 (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 outstanding as of September 30, 1998--954,653,958 PART I-- FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statement of Income (millions of dollars, except as noted) Three Months Nine Months Ended Ended September 30, September 30, 1998 1997 1998 1997 Revenues: Sales and other operating revenues..................... $ 6,448 $ 7,984 $19,955 $23,724 Consumer excise taxes.......... 924 894 2,682 2,577 Equity in income of affiliates and other income............. 85 105 384 299 Total revenues............... 7,457 8,983 23,021 26,600 Cost and Expenses: Purchased crude oil, natural gas, petroleum products and merchandise.................. 3,451 4,471 10,817 13,144 Operating expenses............. 1,307 1,219 3,600 3,649 Petroleum exploration expenses, including exploratory dry holes........................ 158 132 459 417 Selling and administrative expenses..................... 550 555 1,661 1,562 Taxes other than income taxes.. 1,043 1,058 3,096 3,163 Depreciation, depletion, amortization, and retire- ments and abandonments....... 531 570 1,835 1,662 Interest expense............... 100 97 303 269 Total costs and expenses..... 7,140 8,102 21,771 23,866 Income before income taxes....... 317 881 1,250 2,734 Income taxes..................... 22 246 282 803 Net income....................... $ 295 $ 635 $ 968 $ 1,931 Weighted average number of shares of common stock outstanding (in thousands): Basic.......................... 954,187 976,506 957,410 983,813 Assuming dilution.............. 960,133 982,852 962,087 989,320 Per Share Data (Based on weighted average shares outstanding): Net income (basic)............... $ .31 $ .65 $ 1.01 $ 1.96 Net income (assuming dilution)... $ .31 $ .64 $ 1.01 $ 1.95 Cash dividends................... $ .375 $ .35 $ 1.125 $ 1.05 All share data reflect the March 31, 1998 two-for-one common stock split. Consolidated Statement of Financial Position (millions of dollars) Sept. 30, Dec. 31, ASSETS 1998 1997 Current assets: Cash......................................... $ 122 $ 166 Marketable securities -- at cost (corporate securities, except $104 at December 31, 1997 which represents state and municipal securities)...................... 535 979 Accounts and notes receivable (less allowances of $17 at September 30, 1998, and $10 at December 31, 1997).............. 2,851 3,585 Inventories Crude oil and products..................... 999 914 Materials and supplies..................... 271 260 Prepaid expenses, income taxes and other..... 533 1,140 Total current assets....................... 5,311 7,044 Investments and Other Assets: Investments and related advances............. 2,238 2,099 Long-term receivables and other assets....... 940 803 3,178 2,902 Properties--at cost, less accumulated depre- ciation, depletion and amortization of $28,439 at September 30, 1998, and $26,814 at December 31, 1997............................ 23,060 22,543 Total assets............................... $ 31,549 $ 32,489 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term obligations..... $ 213 $ 218 Short-term obligations....................... 760 751 Accounts payable............................. 2,126 3,026 Accrued liabilities.......................... 1,062 785 Taxes payable (including income taxes)....... 1,052 1,264 Total current liabilities.................. 5,213 6,044 Long-term obligations: Debt......................................... 5,257 4,639 Capitalized leases........................... 82 80 5,339 4,719 Deferred Credits and Other Non-Current Liabilities: Income taxes................................. 2,829 2,868 Other........................................ 2,323 2,408 5,152 5,276 Minority Interest.............................. 163 131 Shareholders' Equity: Common stock (authorized 1,600,000,000 shares; issued and outstanding at September 30, 1998 --954,653,958; December 31, 1997 --966,047,616 shares)...................... 2,552 2,568 Earnings retained and invested in the business................................... 13,281 13,900 Accumulated other comprehensive income: Pension liability adjustment............... (31) (31) Foreign currency translation adjustment.... (120) (118) 15,682 16,319 Total liabilities and shareholders' equity. $ 31,549 $ 32,489 Consolidated Statement of Cash Flows (millions of dollars) Nine Months Ended Sept. 30, 1998 1997 Cash Flows from Operating Activities: Net income................................... $ 968 $ 1,931 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization, and retirements and abandonments......... 1,835 1,662 Decrease in receivables.................... 744 172 Increase in inventories.................... (93) (200) Decrease in payables and accrued liabilities.............................. (944) (583) Deferred taxes and other items............. (6) 116 Net cash provided by operating activities.. 2,504 3,098 Cash Flows from Investing Activities: Capital expenditures......................... (2,253) (2,335) Proceeds from dispositions of property and other assets........................... 488 450 Net investments, advances and business acquisitions............................... (288) (507) Other........................................ 55 74 Net cash used in investing activities...... (1,998) (2,318) Cash Flows from Financing Activities: New long-term obligations.................... 767 775 Repayment of long-term obligations........... (150) (116) Cash dividends paid.......................... (1,080) (1,038) Issuances of common stock.................... 44 101 Acquisitions of common stock................. (584) (1,056) Increase in short-term obligations........... 9 258 Net cash used in financing activities...... (994) (1,076) Decrease in Cash and Marketable Securities................................... (488) (296) Cash and Marketable Securities- Beginning of Period.......................... 1,145 1,321 Cash and Marketable Securities-End of Period... $ 657 $ 1,025 Basis of Financial Statement Preparation The consolidated financial statements contained herein are unaudited and have been prepared from the books and records of Amoco Corporation ("Amoco" or the "Corporation"). In the opinion of management, the consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of results of operations, financial position and cash flows in conformity with generally accepted accounting principles. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that all derivatives be recognized at fair value as either assets or liabilities in the statement of financial position. The effect of the adoption of SFAS No. 133 is not known at this time, but is not expected to be material to Amoco's financial position or results of operations. Implementation of SFAS No. 133 is required no later than the quarter ending March 31, 2000. Amoco adopted Statement of Position ("SOP") 98-1, "Accounting For the Costs of Computer Software Developed or Obtained for Internal Use" in the first quarter of 1998. The SOP requires costs of computer software developed for internal use to be capitalized as a long-lived asset. The capitalized costs are amortized over the estimated useful life of the software. The amount capitalized, which would have been expensed previously, was approximately $71 million after tax in the first nine months of 1998 with $14 million after tax capitalized during the third quarter. Shown below is Amoco's comprehensive income. Three Months Nine Months Ended Ended September 30, September 30, 1998 1997 1998 1997 Net income............................ $ 295 $ 635 $ 968 $1,931 Other comprehensive income, after tax. (1) (22) (2) (97) Comprehensive income.................. $ 294 $ 613 $ 966 $1,834 Item 2. Management's Discussion and Analysis Results of Operations Net income for the third quarter of 1998 was $295 million, or $.31 per share, compared to third-quarter 1997 earnings of $635 million, or $.65 per share and $.64 per share, basic and assuming dilution, respectively. Basic and fully diluted per-share data were the same for 1998. The earnings decline primarily resulted from lower worldwide crude oil prices, which for Amoco have fallen 30 percent in the last year. In addition, lower crude oil prices have not translated into more favorable downstream results, which have been adversely affected by lower margins. For the first nine months of 1998, Amoco reported earnings of $1,033 million, excluding the second quarter impairment charges of $214 million for Colombian assets, favorable second-quarter tax adjustments of $106 million and the first-quarter gain of $43 million on asset divestitures. This compared with $1,931 million for the first nine months of 1997. The decrease in earnings in 1998 primarily reflected lower energy prices and chemical margins. Sales and other operating revenues totaled $6.4 billion for the third quarter of 1998, 20 percent lower than the $8.0 billion reported in the corresponding 1997 period. For the first nine months of 1998, sales and other operating revenues declined 16 percent to $20.0 billion from 1997 revenues of $23.7 billion. The decline in revenues in both periods reflected lower prices for crude oil and refined products. The increase in other income for the year-to-date 1998 period reflected gains associated with the divestitures of North American exploration and production ("E&P") properties. The divestitures, which began in the third quarter of 1997, were part of the Corporation's strategy to upgrade and refocus the portfolio of E&P assets. Purchases of crude oil, natural gas, petroleum products and merchandise totaled $3.5 billion for the third quarter of 1998, down 23 percent from the third quarter of 1997. For the first nine months of 1998, purchases totaled $10.8 billion, 18 percent below the comparable 1997 period. The decrease in both periods was primarily attributable to lower crude oil purchase prices. Petroleum exploration expenses of $158 million for the third quarter of 1998 increased 20 percent from the third quarter of 1997, mainly due to higher dry hole costs. For the first nine months of 1998, exploration expenses increased ten percent over the nine-month period in 1997, primarily reflecting higher exploration costs in the United States. The increase in depreciation, depletion, amortization, and retirements and abandonments for the year-to-date period primarily reflected the previously mentioned impairment charge for Colombian assets. The increase in interest expense for the third quarter and first nine months of 1998, compared with the prior-year's periods, reflected higher debt balances. For the 12 months ended September 30, 1998, return on average shareholders' equity was 11.0 percent compared with 17.5 percent for the 12 months ended September 30, 1997. Return on average capital employed was 8.8 percent for the 12-month period ended September 30, 1998, compared with 13.3 percent for the corresponding prior-year period. Results by Industry Segment Three Months Nine Months Ended Ended September 30, September 30, (millions of dollars) 1998 1997 1998 1997 Exploration and Production United States................. $ 107 $ 217 $ 474 $ 791 Canada........................ 35 61 142 164 Overseas...................... (30) 67 (254) 261 Subtotal...................... 112 345 362 1,216 Petroleum Products.............. 140 241 469 454 Chemicals....................... 99 172 317 504 Corporate and Other Operations*. (56) (123) (180) (243) Net Income.................... $ 295 $ 635 $ 968 $1,931 * Corporate and other operations include net interest and general corporate expenses, as well as the results of investments in technology companies, real estate interests and other activities. Exploration and Production Operating Statistics Three Months Nine Months Ended Ended September 30, September 30, 1998 1997 1998 1997 Net Production of Natural Gas(million cubic feet per day) United States............ 2,123 2,356 2,196 2,385 Canada................... 721 775 753 757 Overseas................. 1,260 910 1,336 974 Total.................. 4,104 4,041 4,285 4,116 Amoco's share of affiliates' production (included in overseas)... 164 - 156 - Net Production of Crude Oil and NGL(thousand barrels per day) United States--crude oil. 148 161 151 165 --NGL....... 100 105 106 112 Canada--crude oil........ 66 50 63 51 --NGL.............. 10 10 10 10 Overseas................. 308 292 303 299 Total.................. 632 618 633 637 Amoco's share of affiliates' production (included in overseas).... 50 - 48 - Exploration and Production - U. S. U.S. E&P operations earned $107 million during the third quarter of 1998 compared with $217 million for the similar 1997 period. The decline was primarily due to lower crude oil prices, and lower crude oil and natural gas production, reflecting normal field declines and dispositions. Earnings of $431 million for first nine months of 1998, excluding $43 million related to asset dispositions, compared with $791 million for the comparable 1997 period. The decrease primarily reflected lower energy prices and production, and higher exploration expenses. Amoco's third-quarter 1998 U.S. natural gas prices averaged approximately $1.70 per thousand cubic feet ("mcf"), a decrease of six percent compared with 1997. Amoco's average U.S. crude oil prices of about $12.50 per barrel declined over $5.00 per barrel from the third quarter of 1997. For the first nine months of 1998, Amoco's U.S. natural gas prices averaged about $1.80 per mcf, about $.20 per mcf below the prior-year period. Amoco's U.S. crude oil prices averaged $13.00 per barrel during the first nine months of 1998, a decrease of almost $5.70 per barrel from the comparable 1997 period. Exploration and Production - Canada Canadian operations earned $35 million in the third quarter of 1998 compared to $61 million in the 1997 period. The decrease primarily reflected lower crude oil and NGL prices, partially offset by higher crude oil production and natural gas prices. Also, 1997 earnings included a gain on the sale of Amoco's Canmar arctic drilling unit. Earnings for the first nine months of 1998, of $92 million, excluding second-quarter tax benefits of $50 million, compared with nine-month 1997 earnings of $164 million. The earnings decline resulted primarily from lower crude oil and natural gas prices. Amoco's Canadian natural gas prices averaged $1.30 per mcf for the quarter, 10 cents per mcf higher than the third quarter of 1997. For the first nine months, Canadian natural gas prices decreased seven percent from the comparable 1997 period, averaging about $1.30 per mcf. Canadian crude oil prices averaged $9.00 per barrel for the third quarter of 1998, about $5.00 per barrel below the prior-year third quarter average, reflecting lower industry prices and increased lower-priced heavy oil production. For the first nine months of 1998, Canadian crude oil prices averaged about $8.00 per barrel, almost $7.00 per barrel lower than the 1997 level. Exploration and Production - Overseas Overseas E&P operations lost $30 million in the third quarter of 1998 compared with earnings of $67 million in the third quarter of 1997. The decline was primarily due to lower crude oil prices, which on average dropped approximately $6.00 per barrel, and higher exploration expenses. Partially offsetting was higher natural gas production. For the first nine months of 1998, overseas E&P operations lost $40 million, excluding $214 million related to the impairment of the Opon field and power plant facility in Colombia. This compared with earnings of $261 million for the similar 1997 period. The decrease mainly reflected lower crude oil prices, partly offset by increased production. Third-quarter 1998 natural gas production increased primarily as a result of new production in Argentina, the United Kingdom and Trinidad. Crude oil production increased five percent over the third quarter of 1997, due to higher production in Azerbaijan, Venezuela and Egypt. Of the $214 million second-quarter Colombian impairment charge referred to above, $121 million related to the Opon field and $93 million related to the adjacent power plant facility. The impairment of the field reflected lower than anticipated natural gas production and related reserve estimates, and the adjacent power plant was impaired because of the unavailability of an economic fuel supply. The fair value of the impaired assets was deemed to be minimal given the low level of reserves in the field, the absence of an economic fuel supply for the power plant, the potential for dismantlement and transportation costs related to any sale of assets from the plant, the small number of potential qualified buyers and uncertainties associated with the realization of any tax benefits. Petroleum Products Operating Statistics Three Months Nine Months Ended Ended September 30, September 30, 1998 1997 1998 1997 U.S. Refined Product Sales (thousand barrels per day) Gasoline................. 702 686 677 652 Distillates.............. 360 352 357 338 Other products........... 318 238 256 199 Total.................. 1,380 1,276 1,290 1,189 Input to U.S. Crude Units (thousand barrels per day) 993 988 953 943 Refinery Utilization Rate 98% 98% 94% 93% Petroleum Products' activities earned $140 million during the third quarter of 1998, compared with $241 million for the third quarter of 1997. The decrease primarily resulted from lower margins as product prices declined more than crude oil costs. Earnings for the first nine months of 1998 totaled $469 million, compared with $454 million for the comparable period of 1997. The slight increase reflected higher U.S. gasoline and distillate volumes and the absence of 1997 planned turnarounds at Amoco's largest refineries. Offsetting were lower refined product margins and lower earnings from NGL supply and marketing operations in Canada. Chemicals Chemical earnings of $99 million for the third quarter and $317 million for the first nine months of 1998 compared with $172 million and $504 million for the similar 1997 periods, respectively. The decrease primarily reflected lower olefins, purified terephthalic acids ("PTA") and paraxylene margins as additions to industry capacity resulted in oversupply and put downward pressure on margins across most commodity product lines. Corporate and Other Operations Corporate and other operations include net interest and general corporate expenses as well as the results of investments in technology companies, real estate interests and other activities. Corporate and other operations incurred net expenses of $56 million for the third quarter of 1998, which reflected favorable tax adjustments. This compared with net expenses after tax of $123 million in the corresponding 1997 period, which was adversely affected by revised estimates of litigation and tax obligations. For the first nine months of 1998, corporate and other operations expenses of $180 million compared with $243 million for the similar 1997 period. The underrun compared with 1997 reflects favorable tax adjustments, including $48 million second-quarter favorable adjustments related to Canadian taxes, and currency effects. These factors more than offset higher interest expense. Outlook On August 11, 1998, the British Petroleum Company p.l.c. ("BP") and Amoco announced their agreement to merge. The merger is subject to a number of conditions, including shareholder approval and various regulatory and other consents and confirmations, which are in process. Assuming all requested consents and confirmations are obtained, the merger is planned to be consummated by year-end 1998. Amoco set a record date of October 19, 1998 for a special meeting of Amoco shareholders for voting on the merger. Shareholders of record at the close of business on that date will be entitled to attend the meeting to be held on December 10, 1998 and vote on the merger proposal. The proxy statement for the special shareholders meeting was mailed to shareholders starting October 30, 1998. Liquidity and Capital Resources Cash flows from operating activities for the first nine months of 1998 amounted to $2,504 million compared with $3,098 million in the prior-year period. Working capital of $98 million at September 30, 1998 compared with $1.0 billion at December 31, 1997. The Corporation's current ratio was 1.02 to 1 at September 30, 1998, compared with 1.17 to 1 at year-end 1997. As a matter of policy, Amoco practices asset and liability management techniques that are designed to minimize its investment in non- cash working capital. This does not impair operational flexibility since the Corporation has ready access to both short- and long-term debt markets. Amoco's debt totaled $6.2 billion at September 30, 1998 and $5.6 billion at year-end 1997. Debt as a percentage of debt-plus- equity was 28.2 percent at September 30, 1998, and 25.4 percent at year-end 1997. Amoco Corporation guarantees the public debt obligations of Amoco Company and the public notes, bonds and debentures of Amoco Canada Petroleum Company Ltd. ("Amoco Canada"). Amoco also guarantees certain outstanding loans of equity-basis affiliates, which at September 30, 1998 totaled $354 million. Cash dividends paid in the first nine months of 1998 totaled $1,080 million. Amoco was into the second year of a two-year, $2 billion stock repurchase program which was discontinued as a result of the merger agreement announced in August 1998 between Amoco and BP. Total shares repurchased under the program totaled 40.6 million on a post-split basis, at a cost of $1.8 billion. Stock repurchased under the program was in addition to shares purchased for benefit plan purposes. The Corporation believes its strong financial position will permit the financing of business needs and opportunities as they arise. Short-term borrowings totaled $760 million at September 30, 1998, an increase of $9 million since year-end 1997. Short- term obligations, such as commercial paper borrowings, give the Corporation the flexibility to meet short-term working capital and other temporary requirements. At September 30, 1998, bank lines of credit available to support outstanding commercial paper borrowings amounted to $790 million, all of which were supported by commitment fees. The Corporation also may utilize its favorable access to long- term debt markets to finance profitable growth opportunities and for ongoing operations. Capital and exploration expenditures for the first nine months of 1998 totaled $2,712 million, excluding $325 million for Amoco's share of equity-basis affiliates' spending. This compared with $2,752 million for the similar 1997 period, excluding $131 million for Amoco's share of affiliates' spending. Approximately 70 percent of the 1998 expenditures was spent in E&P operations. The Corporation has provided in its accounts for the reasonably estimable future costs of probable environmental remediation obligations relating to various oil and gas operations, refineries, marketing sites and chemical locations, including multiparty sites at which Amoco and certain of its subsidiaries have been identified as potentially responsible parties by the U.S. Environmental Protection Agency. Such estimated costs will be refined over time as remedial requirements and regulations become better defined. However, any additional environmental costs cannot be reasonably estimated at this time due to uncertainty of timing, the magnitude of contamination, future technology, regulatory changes and other factors. Although future costs could have a significant effect on the results of operations in any one period, they are not expected to be material in relation to Amoco's liquidity or consolidated financial position. In total, the accrued liability represents a reasonable best estimate of Amoco's remediation liability. Year 2000 Update Amoco has been addressing the issue of preparing its computer systems to properly handle date information in the year 2000 and beyond. This has involved the implementation of new systems and upgrading of business computer information technology ("IT") where needed. In addition Amoco has reviewed its information and process control systems, as well as other electronic control systems, to identify all critical equipment and software that will need to be altered or replaced in preparation for the year 2000. The upgrading and replacement of these systems is underway and will occur primarily during the three years ending in December 1999, with the majority of the work being completed by year end 1998. The estimated total cost of Amoco's year 2000 program is approximately $155 million with yearly expenditures of $21 million in 1997, $82 million in 1998, $45 million in 1999 and $7 million in the year 2000. The total impact of the year 2000 effort on the Corporation's before-tax net income is expected to be $100 million over the three-year period. The total amount expended on the effort through the end of September, 1998 was $82 million. Of the total amount projected to be spent on the program, approximately $72 million, or 47 percent is expected to be spent internally on repair or replacement of business computer systems that have been identified as susceptible to the year 2000 issue. As a result of the year 2000 efforts, several non-critical IT projects have been either terminated or deferred. Amoco's year 2000 efforts cover all areas that are known to be impacted by the issue including IT application systems and infrastructure, process control systems and embedded microprocessors in plants, fields and building facilities. Through September, 1998, in excess of 50 percent of our high criticality internal systems that have been found to be susceptible to the year 2000 issue have been either repaired or replaced. The Amoco year 2000 process calls for the ongoing assessment of year 2000 readiness of critical suppliers, customers, joint ventures and partners. Through September, 1998 over 80 percent of critical suppliers and customers have been assessed for year 2000 readiness at least once. The Corporation is in the process of reviewing and updating its business continuity and contingency plans to mitigate the impact of possible third party failures. The failure to correct a material year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such potential interruptions and failures could materially and adversely affect Amoco. However, due to the general uncertainty inherent in the year 2000 problem, Amoco is unable to determine at this time whether the consequences of such failures will have a material impact on the Corporation's results of operations, but they are not expected to have a material effect on Amoco's liquidity or financial condition. Amoco's year 2000 program is expected to significantly reduce Amoco's level of uncertainty about the year 2000 problem and about the year 2000 compliance and readiness of its material external parties. The Corporation believes that with the implementation of new business systems and completion of the program as scheduled, the possibility of significant interruptions of normal operations should be reduced. Each business entity is accountable for identifying, categorizing, and prioritizing risks associated with the year 2000 transition and developing, exercising, and implementing appropriate contingency plans to mitigate those risks. Amoco intends to leverage existing Crisis Management, Emergency Response, and Business Continuity organizations and plans to assist in contingency planning and to supplement these organizations and plans as needed. The Corporation is attempting to minimize the uncertainties expected to be caused by the proposed BP - Amoco merger. To this end Amoco is currently focusing contingency planning efforts on the most stable parts of the existing organizations such as individual plant sites. Higher level plans that call for cross-organization coordination are being deferred until completion of the merger and definition of the resulting organizational structures. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Statements in this report that are not historical facts, including statements about industry and company growth, estimates of expenditures and savings, completion of the merger with BP and other trend projections are forward looking statements. These statements are based on current expectations and involve risk and uncertainties. Actual future results or trends may differ materially depending on a variety of factors. These include specific factors identified in the discussion accompanying such forward looking statements, industry product supply, demand and pricing, political stability and economic growth in relevant areas of the world, the Corporation's successful execution of its internal performance plans, development and use of new technology, successful partnering, actions of competitors, natural disasters, other changes to business conditions and, 1) in the case of the merger with BP, attainment of the approval of the shareholders of BP and Amoco and the required regulatory consents and confirmations and other unforeseen circumstances in connection with the merger, and 2) in the case of the year 2000 issue, external parties year 2000 readiness, availability and costs of personnel trained in relevant areas, the ability to locate and correct all relevant computer code, complications and unforeseen circumstances resulting from the proposed BP and Amoco merger and other uncertainties. PART II--OTHER INFORMATION Item 1. Legal Proceedings Reference is made to the description of the challenge by the Internal Revenue Service of certain foreign income taxes as credits against the Corporation's U.S. taxes that otherwise would have been payable for the years 1980 through 1992 in Part II, Item 1 of Amoco's Form 10-Q for the quarter ended March 31, 1998. Six proceedings instituted by governmental authorities are pending or known to be contemplated against Amoco and certain of its subsidiaries under federal, state or local environmental laws, each of which could result in monetary sanctions in excess of $100,000. No individual proceeding is, nor are the proceedings as a group, expected to have a material adverse effect on Amoco's liquidity, consolidated financial position or results of operations. Amoco estimates that in the aggregate the monetary sanctions reasonably likely to be imposed from these proceedings amount to approximately $3 million. Amoco has various other suits and claims pending against it among which are several class actions for substantial monetary damages which in Amoco's opinion are not meritorious. While it is impossible to estimate with certainty the ultimate legal and financial liability in respect to these other suits and claims, Amoco believes that, while the aggregate amount could be significant, it will not be material in relation to its liquidity or its consolidated financial position. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Shown below is summarized financial information for Amoco's wholly owned subsidiary, Amoco Company. Three Months Nine Months Ended Ended September 30, September 30, 1998 1997 1998 1997 (millions of dollars) Total revenues(including excise taxes)........... $ 6,603 $8,299 $20,772 $24,199 Net income.............. $ 243 $ 468 $ 698 $ 1,570 Sept. 30, Dec. 31, 1998 1997 (millions of dollars) Current assets................. $ 5,557 $ 6,442 Total assets................... $29,679 $30,062 Current liabilities............ $ 4,400 $ 5,165 Long-term debt-affiliates...... $ 5,022 $ 4,739 -other........... $ 3,463 $ 2,791 Deferred credits............... $ 4,761 $ 4,663 Minority interest.............. $ 122 $ 119 Shareholder's equity........... $11,829 $12,505 Shown below is summarized financial information for Amoco's wholly owned subsidiary, Amoco Canada. Three Months Nine Months Ended Ended September 30, September 30, 1998 1997 1998 1997 (millions of dollars) Revenues................ $ 1,016 $ 1,101 $ 2,849 $ 3,508 Net income(loss)........ $ 72 $ 91 $ 231 $ 228 Sept. 30, Dec. 31, 1998 1997 (millions of dollars) Current assets.................. $ 864 $ 1,479 Total assets.................... $ 3,923 $ 4,217 Current liabilities............. $ 614 $ 948 Non-current liabilities......... $ 2,852 $ 3,043 Shareholder's equity............ $ 457 $ 226 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number 12 Statement Setting Forth Computation of Ratio of Earnings to Fixed Charges. 27 Financial Data Schedule. (b) A report on Form 8-K was filed on August 26, 1998 with a copy of the presentation slides and supplemental materials distributed to attendees at the August 12, 1998 meeting between BP and Amoco representatives, the financial community and the press. 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. Amoco Corporation (Registrant) Date: November 13, 1998 A. J. NOCCHIERO A. J. Nocchiero Vice President and Controller (Duly Authorized and Chief Accounting Officer) EX-12 2 EXHIBIT 12 EXHIBIT 12 AMOCO CORPORATION __________________ STATEMENT SETTING FORTH COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (millions of dollars, except ratios) Nine Months Ended Sept. 30, Year Ended December 31, 1998 1997 1996 1995 1994 1993 Determination of Income: Consolidated earnings before income taxes and minority interest.. $ 1,249 $3,771 $3,965 $2,404 $2,491 $2,506 Fixed charges expensed by consolidated companies. 369 452 412 406 316 350 Adjustments for certain companies accounted for by the equity method... 107 66 69 25 7 11 Adjusted earnings plus fixed charges.......... $ 1,725 $4,289 $4,446 $2,835 $2,814 $2,867 Determination of Fixed Charges: Consolidated interest on indebtedness (including interest capitalized).. $ 297 $ 363 $ 317 $ 317 $ 288 $ 299 Consolidated rental expense representative of an interest factor.. 75 102 107 89 23 50 Adjustments for certain companies accounted for by the equity method... 45 7 8 6 5 8 Total fixed charges...... $ 417 $ 472 $ 432 $ 412 $ 316 $ 357 Ratio of earnings to fixed charges............ 4.1 9.1 10.3 6.9 8.9 8.0 EX-27 3 EXHIBIT 27
5 This schedule contains summary financial information extracted from the Consolidated Statement of Income and the Consolidated Statement of Financial Position and is qualified in its entirety by reference to such financial statements. 0000093397 AMOCO CORPORATION 1,000,000 9-MOS DEC-31-1998 JAN-1-1998 SEP-30-1998 122 535 2868 17 1270 5311 51499 28439 31549 5213 5257 0 0 2552 13130 31549 19955 23021 14876 14876 4931 0 303 1250 282 968 0 0 0 968 1.01 1.01
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