EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2000 1999 2000 1999
REVENUE ____ ____ ____ ____
Sales and other operating revenue,
including excise taxes $54,936 $42,458 $108,209 $80,440
Earnings from equity interests and
other revenue 1,020 819 1,828 1,519
_______ _______ ________ _______
Total revenue 55,956 43,277 110,037 81,959
_______ _______ ________ _______
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 26,340 17,543 51,304 31,452
Operating expenses 4,456 3,827 8,741 7,970
Selling, general and administrative
expenses 2,830 3,338 5,707 6,582
Depreciation and depletion 1,939 1,989 4,067 4,160
Exploration expenses, including dry holes 166 297 376 539
Merger related expenses 202 20 732 27
Interest expense 126 128 300 310
Excise taxes 5,457 5,222 10,950 10,100
Other taxes and duties 7,624 8,222 15,706 16,442
Income applicable to minority and
preferred interests 110 7 182 16
_______ _______ ________ _______
Total costs and other deductions 49,250 40,593 98,065 77,598
_______ _______ ________ _______
INCOME BEFORE INCOME TAXES 6,706 2,684 11,972 4,361
Income taxes 2,706 730 4,947 923
_______ _______ ________ _______
INCOME BEFORE EXTRAORDINARY ITEM 4,000 1,954 7,025 3,438
Extraordinary gain from required
asset divestitures, net of
income tax 530 0 985 0
_______ _______ ________ _______
NET INCOME $ 4,530 $ 1,954 $ 8,010 $ 3,438
======= ======= ======== =======
NET INCOME PER COMMON SHARE (DOLLARS)
Before extraordinary gain $ 1.15 $ 0.57 $ 2.02 $ 0.99
Extraordinary gain, net of
income tax 0.15 0.00 0.28 0.00
_______ _______ ________ _______
Net Income $ 1.30 $ 0.57 $ 2.30 $ 0.99
======= ======= ======== =======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)
Before extraordinary gain $ 1.13 $ 0.56 $ 1.99 $ 0.98
Extraordinary gain, net of
income tax 0.15 0.00 0.28 0.00
_______ _______ ________ _______
Net Income $ 1.28 $ 0.56 $ 2.27 $ 0.98
======= ======= ======== =======
Dividends per common share $ 0.44 $ 0.42 $ 0.88 $ 0.83
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
June 30, Dec. 31,
2000 1999
_______ ________
ASSETS
Current assets
Cash and cash equivalents $ 5,813 $ 1,688
Other marketable securities 50 73
Notes and accounts receivable - net 20,285 19,155
Inventories
Crude oil, products and merchandise 7,444 7,370
Materials and supplies 1,055 1,122
Prepaid taxes and expenses 2,404 1,733
________ ________
Total current assets 37,051 31,141
Property, plant and equipment - net 91,303 94,043
Investments and other assets 18,264 19,337
________ ________
TOTAL ASSETS $146,618 $144,521
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 6,617 $ 10,570
Accounts payable and accrued liabilities 27,217 25,492
Income taxes payable 4,758 2,671
________ ________
Total current liabilities 38,592 38,733
Long-term debt 8,009 8,402
Annuity reserves, deferred credits and other liabilities 33,081 33,920
________ ________
TOTAL LIABILITIES 79,682 81,055
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (267) (298)
Common stock, without par value:
Authorized: 4,500 million shares
Issued: 4,010 million shares 3,510 3,403
Earnings reinvested 80,002 75,055
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (4,054) (2,300)
Minimum pension liability adjustment (299) (299)
Unrealized gains on stock investments 40 31
Common stock held in treasury:
526 million shares at June 30, 2000 (11,996)
533 million shares at Dec. 31, 1999 (12,126)
________ ________
TOTAL SHAREHOLDERS' EQUITY 66,936 63,466
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $146,618 $144,521
======== ========
The number of shares of common stock issued and outstanding at June 30, 2000
and December 31, 1999 were 3,483,841,401 and 3,477,423,323, respectively.
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
Six Months Ended
June 30,
________________
2000 1999
____ ____
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,010 $ 3,438
Depreciation and depletion 4,067 4,160
Changes in operational working capital, excluding
cash and debt 2,224 2
All other items - net (2,847) (1,079)
_______ _______
Net cash provided by operating activities 11,454 6,521
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (3,801) (5,731)
Sales of subsidiaries and property, plant and equipment 3,209 520
Other investing activities - net 699 (60)
_______ _______
Net cash provided by/(used in) investing activities 107 (5,271)
_______ _______
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 11,561 1,250
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 143 378
Reductions in long-term debt (280) (164)
Additions/(reductions) in short-term debt - net (4,178) 1,878
Cash dividends to ExxonMobil shareholders (3,063) (2,910)
Cash dividends to minority interests (91) (88)
Changes in minority interests and sales/(purchases)
of affiliate stock (112) (236)
Net ExxonMobil shares sold/(acquired) 195 (292)
_______ _______
Net cash used in financing activities (7,386) (1,434)
_______ _______
Effects of exchange rate changes on cash (50) (27)
_______ _______
Increase/(decrease) in cash and cash equivalents 4,125 (211)
Cash and cash equivalents at beginning of period 1,688 2,386
_______ _______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,813 $ 2,175
======= =======
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 2,582 $ 1,267
Cash interest paid $ 476 $ 384
EXXON MOBIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis Of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be
read in the context of the consolidated financial statements and notes
thereto filed with the Securities and Exchange Commission in the
corporation's 1999 Annual Report on Form 10-K. In the opinion of the
corporation, the information furnished herein reflects all known
accruals and adjustments necessary for a fair statement of the results
for the periods reported herein. All such adjustments are of a normal
recurring nature. The corporation's exploration and production
activities are accounted for under the "successful efforts" method.
2. Recently Issued Statements of Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board released Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities
Information." Several requirements of Statement No. 133 were amended in
Statement No. 138 issued in June 2000. The accounting and reporting
standards for derivative instruments established in these statements must
be adopted by Exxon Mobil Corporation beginning no later than January 1,
2001. These statements require that an entity recognize all derivatives
as either assets or liabilities in the financial statements and measure
those instruments at fair value. These statements also define the
accounting for changes in the fair value of the derivatives based on the
intended use of the derivative. Adoption of these statements is not
expected to have a material effect upon the corporation's operations or
financial condition.
3. Merger of Exxon Corporation and Mobil Corporation
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation
merged with Mobil Corporation so that Mobil became a wholly-owned
subsidiary of Exxon (the "Merger"). At the same time, Exxon changed its
name to Exxon Mobil Corporation.
As a result of the Merger, the accounts of certain refining, marketing and
chemicals operations jointly controlled by the combining companies have
been included in the consolidated financial statements. These operations
were previously accounted for by Exxon and Mobil as separate companies
using the equity method of accounting.
The Merger was accounted for as a pooling of interests. Accordingly, the
consolidated financial statements give retroactive effect to the Merger,
with all periods presented as if Exxon and Mobil had always been combined.
In the second quarter of 2000, in association with the Merger, $202
million of before tax costs ($150 million after tax) were recorded as
merger related expenses. For the six months ended June 30, 2000 merger
related expenses totaled $732 million before tax ($475 million after tax).
Charges in the second quarter of 2000 included separation expenses of
approximately $120 million related to workforce reductions (for an
additional 800 employees) plus other merger implementation expenses.
During the quarter, 2,100 employees actually separated and were paid
pursuant to various severance plans.
The severance reserve balance is expected to be expended in 2000, 2001 and
2002. The following table summarizes the activity in the severance reserve
for the six months ended June 30, 2000:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
330 532 467 395
4. Extraordinary Gain on Required Asset Divestitures
Second quarter 2000 results included a net after tax gain of $530 million
(net of $75 million of income taxes), or $0.15 per common share, from
asset divestments that were required as a condition of the regulatory
approval of the Merger. Second quarter divestments included Exxon's
Benicia refinery, Exxon marketing assets in California, and certain Mobil
European gas marketing operations.
For the six months ended June 30, 2000, the net after tax gain from
required asset divestitures totaled $985 million (net of $624 million of
income taxes). The net after tax gain on required divestments was reported
as an extraordinary item according to accounting requirements for business
combinations accounted for as a pooling of interests.
5. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various
courts against the corporation and certain of its subsidiaries relating
to the accidental release of crude oil from the tanker Exxon Valdez in
1989. Essentially all of these lawsuits have now been resolved or are
subject to appeal.
On September 24, 1996, the United States District Court for the District
of Alaska entered a judgment in the amount of $5.058 billion in the Exxon
Valdez civil trial that began in May 1994. The District Court awarded
approximately $19.6 million in compensatory damages to fisher plaintiffs,
$38 million in prejudgment interest on the compensatory damages and $5
billion in punitive damages to a class composed of all persons and
entities who asserted claims for punitive damages from the corporation as
a result of the Exxon Valdez grounding. The District Court also ordered
that these awards shall bear interest from and after entry of the
judgment. The District Court stayed execution on the judgment pending
appeal based on a $6.75 billion letter of credit posted by the
corporation. The corporation has appealed the judgment. The corporation
has also appealed the District Court's denial of its renewed motion for a
new trial. The United States Court of Appeals for the Ninth Circuit heard
oral arguments on the appeals on May 3, 1999. In March 2000, the Ninth
Circuit ruled solely on the issue of the corporation's renewed motion for
a new trial upholding the District Court's denial of the motion. In July
2000, the corporation requested the United States Supreme Court review
the Court of Appeals' March decision. The corporation continues to
believe that the punitive damages in this case are unwarranted and that
the judgment should be set aside or substantially reduced by the
appellate courts.
On January 29, 1997, a settlement agreement was concluded resolving all
remaining matters between the corporation and various insurers arising
from the Valdez accident. Under terms of this settlement, the corporation
received $480 million. Final income statement recognition of this
settlement continues to be deferred in view of uncertainty regarding the
ultimate cost to the corporation of the Valdez accident.
The ultimate cost to the corporation from the lawsuits arising from the
Exxon Valdez grounding is not possible to predict and may not be resolved
for a number of years.
Under the October 8, 1991, civil agreement and consent decrees with the
U.S. and Alaska governments, the corporation has made annual payments
since 1991, which in each of the years 1999, 1998, and 1997, were $70
million. These payments were charged against the provision that was
previously established to cover the costs of the settlement.
German and Dutch affiliated companies are the concessionaires of a
natural gas field subject to a treaty between the governments of Germany
and the Netherlands under which the gas reserves in an undefined border
or common area are to be shared equally. Entitlement to the reserves is
determined by calculating the amount of gas which can be recovered from
this area. Based on the final reserve determination, the German affiliate
has received more gas than its entitlement. Arbitration proceedings, as
provided in the agreements, were conducted to resolve issues concerning
the compensation for the overlifted gas.
By final award dated July 2, 1999, preceded by an interim award in 1996,
an arbitral tribunal established the full amount of the compensation for
the excess gas. This amount has now been paid, but the Dutch affiliate is
seeking to have the award set aside. Other substantive matters remain
outstanding, including recovery of royalties paid on such excess gas and
the taxes payable on the final compensation amount. The ultimate outcome
is not expected to have a materially adverse effect upon the
corporation's operations or financial condition.
The U.S. Tax Court has decided the issue with respect to the pricing of
crude oil purchased from Saudi Arabia for the years 1979-1981 in favor of
the corporation. This decision is subject to appeal. Certain other issues
for the years 1979-1988 remain pending before the Tax Court. The ultimate
resolution of these issues is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
Claims for substantial amounts have been made against the corporation and
certain of its consolidated subsidiaries in other pending lawsuits, the
outcome of which is not expected to have a materially adverse effect upon
the corporation's operations or financial condition.
The corporation and certain of its consolidated subsidiaries are directly
and indirectly contingently liable for amounts similar to those at the
prior year-end relating to guarantees for notes, loans and performance
under contracts, including guarantees of non-U.S. excise taxes and
customs duties of other companies, entered into as a normal business
practice, under reciprocal arrangements.
Additionally, the corporation and its affiliates have numerous long-term
sales and purchase commitments in their various business activities, all
of which are expected to be fulfilled with no adverse consequences
material to the corporation's operations or financial condition.
The operations and earnings of the corporation and its affiliates
throughout the world have been, and may in the future be, affected from
time to time in varying degree by political developments and laws and
regulations, such as forced divestiture of assets; restrictions on
production, imports and exports; price controls; tax increases and
retroactive tax claims; expropriation of property; cancellation of
contract rights and environmental regulations. Both the likelihood of
such occurrences and their overall effect upon the corporation vary
greatly from country to country and are not predictable.
6. Nonowner Changes in Shareholders' Equity
The total nonowner changes in shareholders' equity for the three months
ended June 30, 2000 and 1999 were $3,746 million and $1,657 million,
respectively. The total nonowner changes in shareholders' equity for the
six months ended June 30, 2000 and 1999 were $6,265 million and $2,323
million, respectively. Total nonowner changes in shareholders' equity
include net income and the change in the cumulative foreign exchange
translation adjustment, the minimum pension liability adjustment and the
unrealized gains on stock investments components of shareholders' equity.
7. Earnings Per Share
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2000 1999 2000 1999
____ ____ ____ ____
NET INCOME PER COMMON SHARE
Income before extraordinary item
(millions of dollars) $4,000 $1,954 $7,025 $3,438
Less: Preferred stock dividends 0 (13) 0 (27)
______ ______ ______ ______
Income available to common shares $4,000 $1,941 $7,025 $3,411
====== ====== ====== ======
Weighted average number of common shares
outstanding (millions of shares) 3,481 3,451 3,481 3,450
Net income per common share (dollars)
Before extraordinary item $ 1.15 $ 0.57 $ 2.02 $ 0.99
Extraordinary gain, net of income tax 0.15 0.00 0.28 0.00
______ ______ ______ ______
Net income $ 1.30 $ 0.57 $ 2.30 $ 0.99
====== ====== ====== ======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before extraordinary item
(millions of dollars) $4,000 $1,954 $7,025 $3,438
Adjustment for assumed dilution (3) 1 (10) 0
______ ______ ______ ______
Income available to common shares $3,997 $1,955 $7,015 $3,438
====== ====== ====== ======
Weighted average number of common shares
outstanding (millions of shares) 3,481 3,451 3,481 3,450
Plus: Issued on assumed exercise of
stock options 43 48 43 44
Plus: Assumed conversion of preferred
stock 0 23 0 23
______ ______ ______ ______
Weighted average number of common shares
outstanding 3,524 3,522 3,524 3,517
====== ====== ====== ======
Net income per common share
- assuming dilution (dollars)
Before extraordinary item $ 1.13 $ 0.56 $ 1.99 $ 0.98
Extraordinary gain, net of income tax 0.15 0.00 0.28 0.00
______ ______ ______ ______
Net income $ 1.28 $ 0.56 $ 2.27 $ 0.98
====== ====== ====== ======
8. Disclosures about Segments and Related Information
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2000 1999 2000 1999
____ ____ ____ ____
(millions of dollars)
EARNINGS AFTER INCOME TAX
(Before extraordinary item)
Upstream
United States $ 1,086 $ 351 $ 1,966 $ 510
Non-U.S. 1,679 919 3,553 1,552
Downstream
United States 594 322 776 384
Non-U.S. 404 156 591 511
Chemicals
United States 238 202 419 342
Non-U.S. 124 96 263 267
All Other (125) (92) (543) (128)
_______ _______ ________ _______
Corporate Total $ 4,000 $ 1,954 $ 7,025 $ 3,438
======= ======= ======== =======
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 1,195 $ 709 $ 2,191 $ 1,323
Non-U.S. 3,312 2,697 7,115 5,431
Downstream
United States 14,100 10,150 27,117 18,058
Non-U.S. 31,696 25,523 62,788 49,131
Chemicals
United States 2,113 1,521 4,082 2,926
Non-U.S. 2,302 1,638 4,472 3,149
All Other 218 220 444 422
_______ _______ ________ _______
Corporate Total $54,936 $42,458 $108,209 $80,440
======= ======= ======== =======
INTERSEGMENT REVENUE
Upstream
United States $ 1,467 $ 852 $ 2,948 $ 1,501
Non-U.S. 3,971 1,677 7,686 3,099
Downstream
United States 1,099 720 1,972 1,066
Non-U.S. 2,188 1,351 4,109 2,441
Chemicals
United States 608 450 1,190 804
Non-U.S. 458 321 904 585
All Other 98 177 272 332
EXXON MOBIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Second Quarter First Six Months
______________ ________________
2000 1999 2000 1999
____ ____ ____ ____
(millions of dollars)
Earnings including merger effects and special items
___________________________________________________
Exploration and production
United States $1,086 $ 351 $1,966 $ 510
Non-U.S. 1,679 919 3,553 1,552
Refining and marketing
United States 594 322 776 384
Non-U.S. 404 156 591 511
Chemicals
United States 238 202 419 342
Non-U.S. 124 96 263 267
Other operations 127 85 246 182
Corporate and financing (102) (157) (314) (283)
Merger expenses (150) (20) (475) (27)
Gain on required asset divestitures 530 0 985 0
______ ______ ______ ______
NET INCOME $4,530 $1,954 $8,010 $3,438
====== ====== ====== ======
Net income per common share $ 1.30 $ 0.57 $ 2.30 $ 0.99
Net income per common share
- assuming dilution $ 1.28 $ 0.56 $ 2.27 $ 0.98
Merger effects and special items
________________________________
Exploration and production
Non-U.S. $ 0 $ 119 $ 0 $ 119
Refining and marketing
Non-U.S. 0 0 0 (120)
Merger expenses (150) (20) (475) (27)
Gain on required asset divestitures 530 0 985 0
______ ______ ______ ______
TOTAL $ 380 $ 99 $ 510 $ (28)
====== ====== ====== ======
Earnings excluding merger effects and special items
___________________________________________________
Exploration and production
United States $1,086 $ 351 $1,966 $ 510
Non-U.S. 1,679 800 3,553 1,433
Refining and marketing
United States 594 322 776 384
Non-U.S. 404 156 591 631
Chemicals
United States 238 202 419 342
Non-U.S. 124 96 263 267
Other operations 127 85 246 182
Corporate and financing (102) (157) (314) (283)
______ ______ ______ ______
TOTAL $4,150 $1,855 $7,500 $3,466
====== ====== ====== ======
Earnings per common share $ 1.20 $ 0.54 $ 2.16 $ 1.00
Earnings per common share
- assuming dilution $ 1.18 $ 0.53 $ 2.13 $ 0.99
SECOND QUARTER 2000 COMPARED WITH SECOND QUARTER 1999
Exxon Mobil Corporation reported record results for the second consecutive
quarter. Excluding merger effects and special items, estimated second quarter
2000 earnings of $4,150 million ($1.18 per share) increased $2,295 million
from the second quarter of last year. Including net favorable merger effects
of $380 million, estimated net income of $4,530 million ($1.28 per share)
increased $2,576 million from the second quarter of last year.
Revenue for the second quarter of 2000 totaled $55,956 million compared with
$43,277 million in 1999. Capital and exploration expenditures of $2,424
million in the second quarter of 2000 were up about 10 percent from the first
quarter and will continue to increase over the remainder of the year. Second
quarter spending was below last year's level of $3,561 million due to the
completion of several major projects.
ExxonMobil's second quarter 2000 earnings improved substantially from the same
period a year ago, and were a second consecutive quarterly record. These
results reflect not only historically high crude oil and natural gas prices,
but also the fact that the merger is on track and synergy capture is well
underway. First half total operating costs, excluding merger expenses, were
down about $800 million (before tax) from the first half of 1999. The combined
assets of the new company are performing well and the financial results for
each of the major businesses improved. The majority of the improvement in
profits this quarter came from outside the U.S. and from the upstream business
due to higher crude and natural gas prices. These prices, which are the raw
material costs for the downstream and chemicals businesses, increased at a
faster pace than prices in the highly competitive end-user and consumer market
places.
Upstream earnings were $2.8 billion and represented a third consecutive record
quarter. Upstream results benefited from higher crude oil prices, which were
up over $11 per barrel from the second quarter of 1999, reflecting the impact
of tight worldwide crude oil markets. Higher natural gas prices, particularly
in the U.S., also contributed to improved earnings. Liquids production,
excluding the effects of lower entitlements caused by higher crude prices, was
3 percent higher this quarter, mainly reflecting new production from fields in
the North Sea and Venezuela and increased production from eastern Canada.
Downstream earnings improved from last year's results when business
fundamentals were deteriorating due to product oversupply and the inability of
product prices to keep pace with rising crude costs. That supply and demand
environment persisted through 1999 and has continued into 2000 in many parts
of the world. This year's results reflect improved refining margins in the
U.S. and Europe, partly offset by lower Asia-Pacific refining margins and
lower marketing margins in most geographic areas. As perspective, though
higher than the depressed level of 1999, this year's second quarter results
are in line with downstream earnings in both the second quarter of 1997 and
1998.
Chemicals earnings also improved from last year. Record sales volumes helped
earnings. However, in the face of higher feedstock costs the business had
difficulty in maintaining margins, particularly in the specialty businesses.
Earnings from other operations also improved due to higher copper prices.
During the quarter, ExxonMobil continued its active investment program,
spending $2,424 million on capital and exploration projects, up about 10
percent from the first quarter. Capital expenditures should continue to
increase throughout the rest of the year.
OTHER COMMENTS ON SECOND QUARTER COMPARISON
Upstream earnings benefited from higher crude oil prices that averaged over
$11 per barrel more than the second quarter of 1999. Worldwide average natural
gas realizations were almost 50 percent higher than last year, partly driven
by much higher U.S. gas prices as a result of lower industry inventory levels.
Lower exploration expenses also benefited upstream results.
Liquids production increased 31 kbd (thousands of barrels per day) or
1 percent to 2,504 kbd. Excluding the impact of lower entitlement volumes that
resulted from higher crude prices, the increase was 3 percent, reflecting a
second full quarter of production from the Balder and Jotun developments in
Norway and the Cerro Negro development in Venezuela. These increases more than
offset the effects of natural field declines. Second quarter natural gas
production of 9,238 mcfd (millions of cubic feet per day) was up 60 mcfd or
1 percent from the prior year due to higher production in Europe, eastern
Canada and Qatar, partly offset by lower Indonesian volumes.
Earnings from U.S. upstream operations were $1,086 million, an increase of
$735 million from the prior year. Upstream earnings outside the U.S. were
$1,679 million, an increase of $879 million, after excluding special items of
$119 million from 1999.
Downstream results improved mainly as a result of stronger refining margins in
the U.S. and Europe. Lower operating expenses also benefited earnings. These
favorable effects were partly offset by lower refining margins in Asia-Pacific
and lower marketing margins in most geographic areas. Petroleum product sales
were 7,895 kbd compared with 8,842 kbd in the prior year's second quarter.
The reduction was mainly due to the required divestiture of Mobil's European
fuels joint venture and lower supply sales in Asia-Pacific as a result of the
low margin environment. Sales volumes increased 98 kbd from first quarter.
U.S. downstream earnings were $594 million, up $272 million from the prior
year as a result of higher refining margins, improved operating performance
and lower operating expenses, partly offset by lower marketing margins.
Outside of the U.S., higher European refining margins more than offset the
effects of lower refining margins in Asia-Pacific and lower marketing margins.
Earnings of $404 million were $248 million higher than the second quarter
of 1999.
Although total downstream earnings improved from last year's depressed levels,
the business had difficulty in recovering the significantly higher crude oil
costs in the market place. Even with these improved results, the U.S. business
made about 5 cents per gallon.
Chemicals earnings were $362 million, up $64 million from the same quarter a
year ago. Prime product sales volumes of 6,596 kt (thousands of metric tons)
were a record and were 456 kt or 7 percent higher than last year. Feedstock
cost increases put significant pressure on both commodity and specialty
product margins.
Earnings from other operations, including coal, minerals and power, totaled
$127 million, compared with $85 million in the second quarter of 1999.
Earnings improved on higher copper prices, partly offset by lower coal prices.
Corporate and financing expenses of $102 million compared with $157 million in
the second quarter of 1999. The decrease was driven by a reduction in
administrative expenses as a result of combining Exxon and Mobil headquarters
operations. Lower interest expenses as a result of lower debt levels and
higher tax-related benefits also contributed to the improvement.
During the period, the company's operating segments continued to benefit from
reductions in the tax rates of several countries and the favorable resolution
of tax-related issues.
Second quarter net income included gains on required asset divestments of
$530 million, offset by $150 million of merger expenses, including
implementation expenses and employee separations.
FIRST SIX MONTHS 2000 COMPARED WITH FIRST SIX MONTHS 1999
Excluding merger effects and special items, first half 2000 earnings of $7,500
million ($2.13 per share) increased $4,034 million from the first half of last
year. Including net favorable merger effects of $510 million in the current
year, net income of $8,010 million ($2.27 per share) increased $4,572 million.
Upstream earnings increased due to higher crude oil and natural gas
realizations, up 107 percent and 37 percent, respectively. Liquids production
of 2,545 kbd compared with 2,506 kbd in the first half of 1999, primarily
reflecting new production from the Jotun and Balder fields in Norway and from
the Cerro Negro field in Venezuela. Worldwide natural gas production of 10,690
mcfd was up 350 mcfd reflecting higher production in eastern Canada, Europe
and Qatar partly offset by lower production in Indonesia. Total oil equivalent
production, net of entitlement effects, is 3 percent higher than last year.
Exploration expenses were also lower this year.
Earnings from U.S. upstream operations for the first six months were $1,966
million, an increase of $1,456 million from 1999. Earnings outside the U.S.
were $3,553 million, $2,120 million higher than last year, excluding special
items from 1999.
Petroleum product sales of 7,846 kbd compared with 8,908 kbd in the first half
of 1999. The decrease reflects the effects of the required divestiture of
Mobil's European fuels joint venture and lower supply sales in Asia-Pacific as
a result of the low margin environment. Overall first half results were
impacted by difficulty in recovering the significant increases in raw material
costs. Earnings from U.S. downstream operations were $776 million, up $392
million from 1999, reflecting stronger refining margins, improved operations
and lower operating expense, partly offset by the effects of lower marketing
margins. Excluding special items from 1999, earnings outside the U.S. of $591
million were $40 million lower than last year. The effects of lower Asia-
Pacific refining margins and lower marketing margins and volumes were partly
offset by stronger European refining margins.
Chemicals earnings totaled $682 million in the first half of 2000, up $73
million from last year. Prime product sales volumes of 13,115 kt were 8
percent higher than last year. Stronger industry commodity prices and record
production helped offset significant margin pressure on specialty products.
Earnings from other operations totaled $246 million, an increase of $64
million from the first half of 1999, reflecting higher copper prices and
higher copper and coal volumes, partly offset by lower coal prices. Corporate
and financing expenses increased $31 million to $314 million, primarily
reflecting higher interest rates.
MERGER OF EXXON CORPORATION AND MOBIL CORPORATION
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation merged
with Mobil Corporation so that Mobil became a wholly-owned subsidiary of Exxon
(the "Merger"). At the same time, Exxon changed its name to Exxon Mobil
Corporation.
As a result of the Merger, the accounts of certain refining, marketing and
chemicals operations jointly controlled by the combining companies have been
included in the consolidated financial statements. These operations were
previously accounted for by Exxon and Mobil as separate companies using the
equity method of accounting.
The Merger was accounted for as a pooling of interests. Accordingly, the
consolidated financial statements give retroactive effect to the Merger, with
all periods presented as if Exxon and Mobil had always been combined.
In the second quarter of 2000, in association with the Merger, $202 million of
before tax costs ($150 million after tax) were recorded as merger related
expenses. For the six months ended June 30, 2000 merger related expenses
totaled $732 million before tax ($475 million after tax). Additional severance
and implementation expenses will be recognized during 2000 as the merger
implementation program progresses.
Charges in the second quarter of 2000 included separation expenses of
approximately $120 million related to workforce reductions (for an additional
800 employees) plus other merger implementation expenses. During the quarter,
2,100 employees actually separated and were paid pursuant to various severance
plans.
The severance reserve balance is expected to be expended in 2000, 2001 and
2002. The following table summarizes the activity in the severance reserve
for the six months ended June 30, 2000:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
330 532 467 395
Merger related expenses are expected to grow to approximately $2.5 billion
before tax on a cumulative basis by 2002. Pre-tax operating synergies
associated with the Merger, including cost savings and efficiency gains, are
expected to reach $4.6 billion per year by 2002. Merger synergy initiatives
are on track and the rate of benefit capture is expected to increase as the
year progresses.
Certain property -- primarily refining, marketing, pipeline and natural gas
distribution assets -- must be divested as a condition of the regulatory
approval of the Merger by the U.S. Federal Trade Commission and the European
Commission. Second quarter 2000 results included a net after tax gain of $530
million (net of $75 million of income taxes), or $0.15 per common share, from
such divestments. Second quarter divestments included Exxon's Benicia
refinery, Exxon marketing assets in California, and certain Mobil European gas
marketing operations.
For the six months ended June 30, 2000, the net after tax gain from required
asset divestitures totaled $985 million (net of $624 million of income taxes).
The net after tax gain on required divestments was reported as an
extraordinary item according to accounting requirements for business
combinations accounted for as a pooling of interests. Further required
divestments will occur during the remainder of the year and are also expected
to result in a net gain.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generation before financing activities was $11,561 million in the
first six months of 2000 versus $1,250 million in the same period last year.
Operating activities provided net cash of $11,454 million, an increase of
$4,933 million from the prior year, influenced by higher net income.
Investing activities provided net cash of $107 million, compared to a use of
cash of $5,271 million in the prior year, reflecting lower additions to
property, plant, and equipment and the proceeds from the asset divestments
that were required as a condition of regulatory approval of the merger.
Net cash used in financing activities was $7,386 million in the first half of
2000 versus $1,434 million in the same period last year. The increase was
driven by debt reductions in the current year period versus debt increases
last year.
Prior to the merger, the corporation purchased shares of its common stock for
the treasury to offset shares issued in conjunction with company benefit plans
and programs. Consistent with pooling accounting requirements, these purchases
were suspended effective with the close of the ExxonMobil merger on
November 30, 1999. On August 1, 2000, the corporation announced its intention
to purchase shares. Share purchases are expected to offset the dilution
associated with the company's benefit plans and programs and gradually reduce
shares of common stock outstanding. Purchases may be made in both the open
market and through negotiated transactions, and may be discontinued at any
time.
Revenue for the first half of 2000 totaled $110,037 million compared to
$81,959 million in the first half of 1999.
Capital and exploration expenditures were $4,648 million in the first half
2000 compared to $6,915 million in last year's first half. The capital and
exploration spending program for 2000 is forecast to be between $11 and
$12 billion. Spending over the next several years is projected to be in the
$13 billion plus range.
Total debt of $14.6 billion at June 30, 2000 decreased $4.3 billion from
year-end 1999. The corporation's debt to total capital ratio was
17.2 percent at the end of the first half of 2000, compared to 22.0 percent
at year-end 1999.
Over the twelve months ended June 30, 2000, return on average shareholders'
equity was 19.4 percent. Return on average capital employed, which includes
debt, was 15.2 percent over the same time period.
Although the corporation issues long-term debt from time to time and
maintains a revolving commercial paper program, internally generated funds
cover the majority of its financial requirements.
Litigation and other contingencies are discussed in note 5 to the unaudited
condensed consolidated financial statements. There are no events or
uncertainties known to management beyond those already included in reported
financial information that would indicate a material change in future
operating results or future financial condition.
The corporation, as part of its ongoing asset management program, continues
to evaluate its mix of assets for potential upgrade. Because of the ongoing
nature of this program, dispositions will continue to be made from time to
time, within the constraints of pooling of interests accounting, which will
result in either gains or losses.
FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future
events or conditions are forward-looking statements. Actual future
results, including synergy benefits from the merger; asset divestment
proceeds; financing sources; the resolution of contingencies; the effect
of changes in prices, interest rates and other market conditions; and
environmental and capital expenditures could differ materially depending
on a number of factors. These factors include management's ability to
implement merger plans successfully and on schedule; the outcome of
commercial negotiations; and other factors discussed above and in Item 1
of ExxonMobil's most recent Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the six months ended June 30, 2000
does not differ materially from that discussed under Item 7A of the
registrant's Annual Report on Form 10-K for 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 29, 2000, the California South Coast Air Quality
Management District ("SCAQMD") issued an initial demand letter
alleging that Mobil Oil Corporation's Torrance Refinery had
underpaid air emissions fees during the period 1994-99 due to
the use of incorrect emissions calculation methodologies. In
addition to demanding payment of approximately $3,134,000 in
fees, the letter proposes penalties of approximately $1,431,000.
The SCAQMD Fee Review Committee is scheduled to consider the
matter in August, 2000, and discussions with the authorities are
on going.
On May 1, 2000, a previously-reported matter, involving
allegations by the New Jersey Department of Environmental
Protection ("NJDEP") that Mobil Oil Corporation's operations of
a formerly-owned refinery in Paulsboro, New Jersey, had violated
air permit conditions, was settled. The NJDEP had sought
penalties of $111,600; the matter was settled with a payment of
$67,500.
Refer to the relevant portions of Note 5 on pages 7 through 9 of
this Quarterly Report on Form 10-Q for further information on
legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 31, 2000, the following
proposals were voted upon. Percentages are based on the total of the
shares voted for and against.
Concerning Election of Directors
Votes Votes
Nominees for Directors Cast For Withheld
______________________ ________ ________
Michael J. Boskin 2,846,604,419 24,913,064
Rene Dahan 2,847,691,609 23,825,874
William T. Esrey 2,847,188,794 24,328,689
Donald V. Fites 2,843,925,776 27,591,707
Jess Hay 2,844,596,812 26,920,671
Charles A. Heimbold, Jr. 2,846,352,025 25,165,458
James R. Houghton 2,847,385,945 24,131,538
William R. Howell 2,844,686,180 26,831,303
Helene L. Kaplan 2,830,281,297 41,236,186
Reatha Clark King 2,846,811,836 24,705,647
Philip E. Lippincott 2,847,266,037 24,251,446
Harry J. Longwell 2,847,044,723 24,472,760
J. Richard Munro 2,846,096,456 25,421,027
Marilyn Carlson Nelson 2,847,010,223 24,507,260
Lucio A. Noto 2,846,029,043 25,488,440
Lee R. Raymond 2,845,803,311 25,714,172
Eugene A. Renna 2,847,005,957 24,511,526
Walter V. Shipley 2,847,045,215 24,472,268
Concerning Ratification of Independent Accountants
See also pages 3 through 10 and pages 27 through 43 of the registrant's
definitive proxy statement dated April 14, 2000.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27 - Financial Data Schedule (included only in the electronic
filing of this document).
b) Reports on Form 8-K
The registrant has not filed any reports on Form 8-K during the
quarter.
EXXON MOBIL CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXXON MOBIL CORPORATION
Date: August 14, 2000 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
ARTICLE 5
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXXONMOBIL'S
CONDENSED CONSOLIDATED BALANCE SHEET AT 6/30/00 AND EXXONMOBIL'S CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED 6/30/00, THAT ARE
CONTAINED IN EXXONMOBIL'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 6/30/00. THE
SCHEDULE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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