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UNITED STATES
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, 2001
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 1-2256
EXXON MOBIL CORPORATION
____________________________________________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
______________________________ _____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
_____________________________________________________________
(Address of principal executive offices) (Zip Code)
(972) 444-1000
________________________________________________________
(Registrant's telephone number, including area code)
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 .
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of September 30, 2001
_______________________________ ____________________________________
Common stock, without par value 6,840,529,514
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and nine months ended September 30, 2001 and 2000
Condensed Consolidated Balance Sheet 4
As of September 30, 2001 and December 31, 2000
Condensed Consolidated Statement of Cash Flows 5
Nine months ended September 30, 2001 and 2000
Notes to Condensed Consolidated Financial Statements 6-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 6. Exhibits and Reports on Form 8-K 25
Signature 26
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ __________________
REVENUE 2001 2000 2001 2000
________ ________ ________ ________
Sales and other operating revenue,
including excise taxes $ 51,132 $ 57,497 $162,309 $165,706
Earnings from equity interests and
other revenue 981 1,071 3,288 2,899
________ ________ ________ ________
Total revenue 52,113 58,568 165,597 168,605
________ ________ ________ ________
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 22,839 27,927 73,448 79,231
Operating expenses 4,481 4,049 14,096 12,790
Selling, general and administrative
expenses 3,196 3,358 9,471 9,065
Depreciation and depletion 1,957 1,901 5,804 5,968
Exploration expenses, including dry holes 318 235 864 611
Merger related expenses 145 372 433 1,104
Interest expense 76 108 223 408
Excise taxes 5,316 5,319 15,836 16,269
Other taxes and duties 8,420 8,529 24,670 24,235
Income applicable to minority and
preferred interests 125 73 420 255
________ ________ ________ ________
Total costs and other deductions 46,873 51,871 145,265 149,936
________ ________ ________ ________
INCOME BEFORE INCOME TAXES 5,240 6,697 20,332 18,669
Income taxes 2,060 2,637 7,907 7,584
________ ________ ________ ________
INCOME BEFORE EXTRAORDINARY ITEM 3,180 4,060 12,425 11,085
Extraordinary gain, net of income tax 0 430 215 1,415
________ ________ ________ ________
NET INCOME $ 3,180 $ 4,490 $ 12,640 $ 12,500
======== ======== ======== ========
NET INCOME PER COMMON SHARE (DOLLARS)*
Before extraordinary gain $ 0.46 $ 0.57 $ 1.81 $ 1.59
Extraordinary gain, net of income tax 0.00 0.06 0.03 0.20
________ ________ ________ ________
Net income $ 0.46 $ 0.63 $ 1.84 $ 1.79
======== ======== ======== ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)*
Before extraordinary gain $ 0.46 $ 0.57 $ 1.79 $ 1.57
Extraordinary gain, net of income tax 0.00 0.06 0.03 0.20
________ ________ ________ ________
Net income $ 0.46 $ 0.63 $ 1.82 $ 1.77
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE* $ 0.23 $ 0.22 $ 0.68 $ 0.66
* Prior year amounts restated to reflect two-for-one stock split implemented
in June 2001.
-3-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
Sept. 30, Dec. 31,
2001 2000
_________ ________
ASSETS
Current assets
Cash and cash equivalents $ 9,026 $ 7,080
Notes and accounts receivable - net 20,512 22,996
Inventories
Crude oil, products and merchandise 7,470 7,244
Materials and supplies 1,145 1,060
Prepaid taxes and expenses 2,174 2,019
________ ________
Total current assets 40,327 40,399
Property, plant and equipment - net 89,533 89,829
Investments and other assets 18,044 18,772
________ ________
TOTAL ASSETS $147,904 $149,000
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 3,893 $ 6,161
Accounts payable and accrued liabilities 24,632 26,755
Income taxes payable 6,040 5,275
________ ________
Total current liabilities 34,565 38,191
Long-term debt 7,240 7,280
Deferred income tax liability 16,138 16,442
Other long-term liabilities 16,136 16,330
________ ________
TOTAL LIABILITIES 74,079 78,243
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (182) (235)
Common stock, without par value:
Authorized: 9,000 million shares
Issued: 8,019 million shares 3,752 3,661
Earnings reinvested 94,609 86,652
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (5,724) (4,862)
Minimum pension liability adjustment (310) (310)
Unrealized gains/(losses) on stock investments (90) (17)
Common stock held in treasury:
1,179 million shares at September 30, 2001 (18,230)
1,089 million shares at December 31, 2000 (14,132)
________ ________
TOTAL SHAREHOLDERS' EQUITY 73,825 70,757
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $147,904 $149,000
======== ========
The number of shares of common stock issued and outstanding at
September 30, 2001 and December 31, 2000 (restated to reflect two-for-one stock
split implemented in June 2001) were 6,840,529,514 and 6,930,006,228,
respectively.
-4-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
Nine Months Ended
September 30,
___________________
2001 2000
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 12,640 $ 12,500
Depreciation and depletion 5,804 5,968
Changes in operational working capital, excluding
cash and debt 832 1,732
All other items - net 223 (3,338)
________ ________
Net cash provided by operating activities 19,499 16,862
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (6,863) (5,836)
Sales of subsidiaries, investments, and property,
plant and equipment 888 3,714
Other investing activities - net 30 419
________ ________
Net cash provided by/(used in) investing activities (5,945) (1,703)
________ ________
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 13,554 15,159
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 338 159
Reductions in long-term debt (403) (383)
Additions/(reductions) in short-term debt - net (2,307) (4,093)
Cash dividends to ExxonMobil shareholders (4,683) (4,596)
Cash dividends to minority interests (158) (178)
Changes in minority interests and sales/(purchases)
of affiliate stock (338) (119)
Net ExxonMobil shares sold/(acquired) (4,065) (661)
________ ________
Net cash provided by/(used in) financing activities (11,616) (9,871)
________ ________
Effects of exchange rate changes on cash 8 (332)
________ ________
Increase/(decrease) in cash and cash equivalents 1,946 4,956
Cash and cash equivalents at beginning of period 7,080 1,688
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,026 $ 6,644
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 6,539 $ 4,211
Cash interest paid $ 403 $ 590
-5-
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
2000 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. Accounting Change
As of January 1, 2001, ExxonMobil adopted Financial Accounting Standards
Board Statement No. 133 (FAS 133), "Accounting for Derivative Instruments
and Hedging Activities" as amended by Statements No. 137 and 138. This
statement requires that all derivatives be recognized as either assets or
liabilities in the financial statements and be measured at fair value.
Since the corporation makes limited use of derivatives, the effect of
adoption of FAS 133 on the corporation's operations or financial condition
was negligible.
3. Recently Issued Statements of Financial Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141 (FAS 141), "Business
Combinations", and No. 142 (FAS 142), "Goodwill and Other Intangible
Assets". Under FAS 141, the pooling of interests method of accounting is
no longer permitted and the purchase method must be used for business
combinations initiated after June 30, 2001. Under FAS 142, which will be
effective for the corporation beginning January 1, 2002, goodwill and
certain intangibles will no longer be amortized but will be subject to
annual impairment tests. The effect of adoption of the new standards on
the corporation's financial statements will be negligible.
In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143 (FAS 143), "Accounting for Asset
Retirement Obligations". FAS 143 is required to be adopted by the
corporation no later than January 1, 2003 and its primary impact will be
to change the method of accruing for upstream site restoration costs.
These costs are currently accrued ratably over the productive lives of the
assets. Under FAS 143, the fair value of asset retirement obligations will
be recorded as liabilities when they are incurred, which are typically at
the time the assets are installed. Amounts recorded for the related assets
will be increased by the amount of these obligations. Over time the
liabilities will be accreted for the change in their present value and the
initial capitalized costs will be depreciated over the useful lives of the
related assets. The corporation is evaluating the impact of adopting
FAS 143.
-6-
4. Capital
On May 30, 2001, the company's Board of Directors approved a two-for-one
stock split to common stock shareholders of record on June 20, 2001. The
authorized common stock was increased from four billion five hundred
million (4,500,000,000) shares without par value to nine billion
(9,000,000,000) shares without par value and the issued shares were split
on a two-for-one basis on June 20, 2001.
The number of shares of common stock issued and outstanding as of
March 31, 2001 and as of December 31, 2000 and 1999, restated to reflect
the two-for-one stock split, were 6,899,752,948, 6,930,006,228 and
6,954,846,646, respectively. Net income per common share -- assuming
dilution, restated to reflect the two-for-one stock split, for the
quarters ended March 31, 2001 and 2000 were $0.71 and $0.49, respectively,
and for the years ended December 31, 2000, 1999 and 1998, were $2.52,
$1.12, and $1.14, respectively.
5. 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. The Merger was accounted for as a pooling
of interests.
In the third quarter of 2001, in association with the Merger, $145 million
of before tax costs ($140 million after tax) were recorded as merger
related expenses. In the third quarter of 2000, merger related expenses
were $372 million before tax ($230 million after tax). For the nine months
ended September 30, 2001 merger related expenses totaled $433 million
before tax ($325 million after tax). For the nine months ended
September 30, 2000, merger related expenses totaled $1,104 million
($705 million after tax).
The severance reserve balance at the end of the third quarter of 2001 is
expected to be expended in 2001 and 2002. The following table summarizes
the activity in the severance reserve for the nine months ended
September 30, 2001:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
317 111 231 197
6. Extraordinary Gain
Third quarter 2001 results included no extraordinary gains. Third quarter
2000 included a net after tax gain of $430 million (including an income
tax credit of $41 million), or $0.06 per common share, from asset
divestments that were required as a condition of the regulatory approval
of the Merger.
-7-
For the nine months ended September 30, 2001, the net after tax gain from
asset management activities in the chemicals segment and required asset
divestitures totaled $215 million (including an income tax credit of
$21 million), or $0.03 per common share. For the nine months ended
September 30, 2000, the net after tax gain from required asset
divestitures totaled $1,415 million (net of $583 million of income taxes),
or $0.20 per common share. These net gains from asset management
activities in the chemicals segment and required asset divestitures have
been reported as extraordinary items in accordance with accounting
requirements for business combinations accounted for as a pooling of
interests.
7. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various
courts against Exxon Mobil 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. ExxonMobil appealed the judgment. On November 7, 2001, the
United States Court of Appeals for the Ninth Circuit vacated the punitive
damage award as being excessive under the Constitution and remanded the
case to the federal district court for it to determine the amount of the
punitive damage award consistent with the Ninth Circuit's holding. The
Ninth Circuit upheld the compensatory award.
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, ExxonMobil
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 ExxonMobil 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 made the final payment of
$70 million in the third quarter of 2001. This payment, along with prior
payments, was charged against the provision that was previously
established to cover the costs of the settlement.
-8-
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 and a petition to set the
award aside has now been dismissed, rendering the award final in all
respects. Other substantive matters remain outstanding, including recovery
of royalties paid on such excess gas and the taxes payable on the final
compensation amount. The net financial impact on the corporation is not
possible to predict at this time. However, the ultimate outcome is not
expected to have a materially adverse effect upon the corporation's
operations or financial condition.
On December 19, 2000, a jury in Montgomery County, Alabama, returned a
verdict against the corporation in a contract dispute over royalties in
the amount of $87.69 million in compensatory damages and $3.42 billion in
punitive damages in the case of Exxon Corporation v. State of Alabama,
et al. The verdict was upheld by the trial court on May 4, 2001.
ExxonMobil has appealed the verdict and believes that the verdict is
unwarranted and that the judgement should be set aside or substantially
reduced. The ultimate outcome is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
On May 22, 2001, a state court jury in New Orleans, Louisiana, returned a
verdict against the corporation and three other entities in a case brought
by a landowner claiming damage to his property. The property had been
leased by the landowner to a company that performed pipe cleaning and
storage services for customers, including the corporation. The jury
awarded the plaintiff $56 million in compensatory damages (90 percent to
be paid by the corporation) and $1 billion in punitive damages (all to be
paid by the corporation). The damage related to the presence of naturally
occurring radioactive material (NORM) on the site resulting from pipe
cleaning operations. The award has been affirmed by the trial court, and
the corporation is in the process of taking an appeal to the Louisiana
Fourth Circuit Court of Appeals. 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 1979-1993 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 ExxonMobil 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.
-9-
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.
8. Nonowner Changes in Shareholders' Equity
Three Months Ended Nine Months Ended
September 30, September 30,
_________________ ________________
2001 2000 2001 2000
_______ _______ _______ ________
Net income $ 3,180 $ 4,490 $12,640 $12,500
Changes in other nonowner changes in equity
Foreign exchange translation adjustment 657 (994) (862) (2,748)
Minimum pension liability adjustment 0 0 0 0
Unrealized gains/(losses) on stock
investments (146) 8 (73) 17
_______ _______ _______ _______
Total nonowner changes in shareholders'
equity $ 3,691 $ 3,504 $11,705 $ 9,769
======= ======= ======= =======
-10-
9. Earnings Per Share*
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
2001 2000 2001 2000
_______ _______ _______ _______
NET INCOME PER COMMON SHARE
Income before extraordinary item
(millions of dollars) $ 3,180 $ 4,060 $12,425 $11,085
Weighted average number of common shares
outstanding (million of shares) 6,852 6,960 6,883 6,958
Net income per common share (dollars)
Before extraordinary gain $ 0.46 $ 0.57 $ 1.81 $ 1.59
Extraordinary gain, net of income tax 0.00 0.06 0.03 0.20
_______ _______ _______ _______
Net income $ 0.46 $ 0.63 $ 1.84 $ 1.79
======= ======= ======= =======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before extraordinary item
(millions of dollars) $ 3,180 $ 4,060 $12,425 $11,085
Adjustment for assumed dilution (1) 2 (3) (8)
_______ _______ _______ _______
Income available to common shares $ 3,179 $ 4,062 $12,422 $11,077
======= ======= ======= =======
Weighted average number of common shares
outstanding (millions of shares) 6,852 6,960 6,883 6,958
Plus: Issued on assumed exercise of
stock options 72 83 74 82
_______ _______ _______ _______
Weighted average number of common shares
outstanding 6,924 7,043 6,957 7,040
======= ======= ======= =======
Net income per common share
- assuming dilution (dollars)
Before extraordinary gain $ 0.46 $ 0.57 $ 1.79 $ 1.57
Extraordinary gain, net of income tax 0.00 0.06 0.03 0.20
_______ _______ _______ _______
Net income $ 0.46 $ 0.63 $ 1.82 $ 1.77
======= ======= ======= =======
* Prior year amounts restated to reflect two-for-one stock split implemented in
June 2001.
-11-
10. Disclosures about Segments and Related Information
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
2001 2000 2001 2000
_______ _______ _______ _______
(millions of dollars)
EARNINGS AFTER INCOME TAX
Upstream
United States $ 767 $ 1,215 $ 3,506 $ 3,181
Non-U.S. 1,364 1,885 5,253 5,438
Downstream
United States 390 392 1,643 1,168
Non-U.S. 552 501 1,565 1,092
Chemicals
United States 76 132 270 551
Non-U.S. 80 132 403 395
All Other (49) 233 0 675
________ ________ ________ ________
Corporate Total $ 3,180 $ 4,490 $ 12,640 $ 12,500
======== ======== ======== ========
Extraordinary gains included above:
Chemicals
United States $ 0 $ 0 $ 100 $ 0
Non-U.S. 0 0 75 0
All Other 0 430 40 1,415
________ ________ ________ ________
Corporate Total $ 0 $ 430 $ 215 $ 1,415
======== ======== ======== ========
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 971 $ 1,341 $ 4,672 $ 3,532
Non-U.S. 2,991 3,405 10,892 10,520
Downstream
United States 13,075 14,045 40,179 41,162
Non-U.S. 30,031 33,940 93,473 96,728
Chemicals
United States 1,606 2,081 5,412 6,163
Non-U.S. 2,247 2,423 7,046 6,895
All Other 211 262 635 706
________ ________ ________ ________
Corporate Total $ 51,132 $ 57,497 $162,309 $165,706
======== ======== ======== ========
INTERSEGMENT REVENUE
Upstream
United States $ 1,416 $ 2,062 $ 5,213 $ 5,010
Non-U.S. 2,820 4,507 9,597 11,425
Downstream
United States 888 1,118 3,272 3,790
Non-U.S. 4,744 3,380 13,589 8,257
Chemicals
United States 390 851 1,734 2,219
Non-U.S. 540 554 1,642 1,458
All Other 48 53 142 120
-12-
11. Condensed Consolidating Financial Information Related to Guaranteed
Securities Issued by Subsidiaries
Exxon Mobil Corporation has fully and unconditionally guaranteed the
6.0% notes due 2005 and the 6.125% notes due 2008 of Exxon Capital
Corporation and the deferred interest debentures due 2012 and the debt
securities due 2001-2011 of SeaRiver Maritime Financial Holdings, Inc.
Exxon Capital Corporation and SeaRiver Maritime Financial Holdings, Inc.
are 100 percent owned subsidiaries of Exxon Mobil Corporation.
The following condensed consolidating financial information is provided
for Exxon Mobil Corporation, as guarantor, and for Exxon Capital
Corporation and SeaRiver Maritime Financial Holdings, Inc., as issuers, as
an alternative to providing separate financial statements for the issuers.
The accounts of Exxon Mobil Corporation, Exxon Capital Corporation and
SeaRiver Maritime Financial Holdings, Inc., are presented utilizing the
equity method of accounting for investments in subsidiaries.
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of income for three months ended September 30, 2001
____________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 8,112 $ - $ - $ 43,020 $ - $ 51,132
Earnings from equity
interests and other
revenue 3,221 - 1 630 (2,871) 981
Intercompany revenue 462 23 15 27,254 (27,754) -
________ ________ ________ ________ ________ ________
Total revenue 11,795 23 16 70,904 (30,625) 52,113
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 4,729 - - 42,923 (24,813) 22,839
Operating expenses 1,464 1 - 4,427 (1,411) 4,481
Selling, general
and administrative
expenses 602 - - 2,594 - 3,196
Depreciation and depletion 415 2 1 1,539 - 1,957
Exploration expenses,
including dry holes 20 - - 298 - 318
Merger related expenses 118 - - 91 (64) 145
Interest expense 228 12 29 1,280 (1,473) 76
Excise taxes 699 - - 4,617 - 5,316
Other taxes and duties 4 - - 8,416 - 8,420
Income applicable to
minority and preferred
interests - - - 125 - 125
________ ________ ________ ________ ________ ________
Total costs and other
deductions 8,279 15 30 66,310 (27,761) 46,873
________ ________ ________ ________ ________ ________
Income before income taxes 3,516 8 (14) 4,594 (2,864) 5,240
Income taxes 336 3 (5) 1,726 - 2,060
________ ________ ________ ________ ________ ________
Income before extraordinary
item 3,180 5 (9) 2,868 (2,864) 3,180
Extraordinary gain, net
of income tax - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 3,180 $ 5 $ (9) $ 2,868 $ (2,864) $ 3,180
======== ======== ======== ======== ======== ========
-13-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of income for three months ended September 30, 2000
____________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 9,563 $ - $ - $ 47,934 $ - $ 57,497
Earnings from equity
interests and other
revenue 3,865 - 18 808 (3,620) 1,071
Intercompany revenue 5,158 289 21 23,856 (29,324) -
________ ________ ________ ________ ________ ________
Total revenue 18,586 289 39 72,598 (32,944) 58,568
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 10,204 - - 43,870 (26,147) 27,927
Operating expenses 1,464 2 1 3,441 (859) 4,049
Selling, general and
administrative expenses 548 (1) 3 2,842 (34) 3,358
Depreciation and depletion 388 2 1 1,510 - 1,901
Exploration expenses,
including dry holes 49 - - 186 - 235
Merger related expenses 124 - - 312 (64) 372
Interest expense 360 266 30 1,672 (2,220) 108
Excise taxes 635 - - 4,684 - 5,319
Other taxes and duties 5 - - 8,524 - 8,529
Income applicable to
minority and preferred
interests - - - 73 - 73
________ ________ ________ ________ ________ ________
Total costs and
other deductions 13,777 269 35 67,114 (29,324) 51,871
________ ________ ________ ________ ________ ________
Income before income taxes 4,809 20 4 5,484 (3,620) 6,697
Income taxes 749 5 (3) 1,886 - 2,637
________ ________ ________ ________ ________ ________
Income before extraordinary
item 4,060 15 7 3,598 (3,620) 4,060
Extraordinary gain, net of
income tax 430 - - (31) 31 430
________ ________ ________ ________ ________ ________
Net income $ 4,490 $ 15 $ 7 $ 3,567 $ (3,589) $ 4,490
======== ======== ======== ======== ======== ========
Condensed consolidated statement of income for nine months ended September 30, 2001
___________________________________________________________________________________
Revenue
Sales and other operating
revenue, including excise
taxes $ 26,845 $ - $ - $135,464 $ - $162,309
Earnings from equity
interests and other
revenue 11,260 - 28 2,653 (10,653) 3,288
Intercompany revenue 2,824 571 53 82,137 (85,585) -
________ ________ ________ ________ ________ ________
Total revenue 40,929 571 81 220,254 (96,238) 165,597
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 16,279 - - 134,016 (76,847) 73,448
Operating expenses 4,642 2 1 13,028 (3,577) 14,096
Selling, general and
administrative expenses 1,658 1 - 7,812 - 9,471
Depreciation and depletion 1,179 4 2 4,619 - 5,804
Exploration expenses,
including dry holes 103 - - 761 - 864
Merger related expenses 189 - - 308 (64) 433
Interest expense 931 525 88 3,783 (5,104) 223
Excise taxes 1,957 - - 13,879 - 15,836
Other taxes and duties 11 - - 24,659 - 24,670
Income applicable to
minority and preferred
interests - - - 420 - 420
________ ________ ________ ________ ________ ________
Total costs and
other deductions 26,949 532 91 203,285 (85,592) 145,265
________ ________ ________ ________ ________ ________
Income before income taxes 13,980 39 (10) 16,969 (10,646) 20,332
Income taxes 1,555 15 (13) 6,350 - 7,907
________ ________ ________ ________ ________ ________
Income before extraordinary
item 12,425 24 3 10,619 (10,646) 12,425
Extraordinary gain, net of
income tax 215 - - - - 215
________ ________ ________ ________ ________ ________
Net income $ 12,640 $ 24 $ 3 $ 10,619 $(10,646) $ 12,640
======== ======== ======== ======== ======== ========
-14-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of income for nine months ended September 30, 2000
___________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 26,655 $ - $ - $139,051 $ - $165,706
Earnings from equity
interests and other
revenue 9,956 - 31 2,427 (9,515) 2,899
Intercompany revenue 6,297 696 59 63,742 (70,794) -
________ ________ ________ ________ ________ ________
Total revenue 42,908 696 90 205,220 (80,309) 168,605
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 20,107 - - 122,088 (62,964) 79,231
Operating expenses 4,229 2 1 11,771 (3,213) 12,790
Selling, general and
administrative expenses 1,348 - - 7,820 (103) 9,065
Depreciation and
depletion 1,077 4 2 4,885 - 5,968
Exploration expenses,
including dry holes 90 - - 521 - 611
Merger related expenses 438 - - 730 (64) 1,104
Interest expense 1,048 636 87 3,087 (4,450) 408
Excise taxes 2,040 - - 14,229 - 16,269
Other taxes and duties 10 - - 24,225 - 24,235
Income applicable to
minority and preferred
interests - - - 255 - 255
________ ________ ________ ________ ________ ________
Total costs and
other deductions 30,387 642 90 189,611 (70,794) 149,936
________ ________ ________ ________ ________ ________
Income before income taxes 12,521 54 - 15,609 (9,515) 18,669
Income taxes 1,436 14 (9) 6,143 - 7,584
________ ________ ________ ________ ________ ________
Income before
extraordinary item 11,085 40 9 9,466 (9,515) 11,085
Extraordinary gain, net
of income tax 1,415 - - 690 (690) 1,415
________ ________ ________ ________ ________ ________
Net income $ 12,500 $ 40 $ 9 $ 10,156 $(10,205) $ 12,500
======== ======== ======== ======== ======== ========
-15-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated balance sheet as of September 30, 2001
_____________________________________________________________
Cash and cash equivalents $ 2,162 $ - $ - $ 6,864 $ - $ 9,026
Notes and accounts
receivable - net 3,838 - - 16,674 - 20,512
Inventories 1,141 - - 7,474 - 8,615
Other current assets 189 - 14 1,971 - 2,174
_________ _________ _________ _________ _________ _________
Total current assets 7,330 - 14 32,983 - 40,327
Property, plant and
equipment - net 18,877 110 7 70,539 - 89,533
Investments and other
assets 88,907 - 561 318,071 (389,495) 18,044
Intercompany receivables 6,092 1,525 1,397 224,132 (233,146) -
_________ _________ _________ _________ _________ _________
Total assets $ 121,206 $ 1,635 $ 1,979 $ 645,725 $(622,641) $ 147,904
========= ========= ========= ========= ========= =========
Notes and loans payables $ - $ 44 $ 7 $ 3,842 $ - $ 3,893
Accounts payable and
accrued liabilities 3,418 2 1 21,211 - 24,632
Income taxes payable 641 24 - 5,375 - 6,040
_________ _________ _________ _________ _________ _________
Total current
liabilities 4,059 70 8 30,428 - 34,565
Long-term debt 1,246 266 995 4,733 - 7,240
Deferred income tax
liabilities 3,412 33 292 12,401 - 16,138
Other long-term liabilities 4,488 - - 11,648 - 16,136
Intercompany payables 34,176 379 383 198,208 (233,146) -
_________ _________ _________ _________ _________ _________
Total liabilities 47,381 748 1,678 257,418 (233,146) 74,079
Earnings reinvested 94,609 81 (93) 46,664 (46,652) 94,609
Other shareholders' equity (20,784) 806 394 341,643 (342,843) (20,784)
_________ _________ _________ _________ _________ _________
Total shareholders'
equity 73,825 887 301 388,307 (389,495) 73,825
_________ _________ _________ _________ _________ _________
Total liabilities
and shareholders'
equity $ 121,206 $ 1,635 $ 1,979 $ 645,725 $(622,641) $ 147,904
========= ========= ========= ========= ========= =========
Condensed consolidated balance sheet as of December 31, 2000
____________________________________________________________
Cash and cash equivalents $ 4,235 $ - $ - $ 2,845 $ - $ 7,080
Notes and accounts
receivable - net 4,427 - - 18,569 - 22,996
Inventories 1,102 - - 7,202 - 8,304
Other current assets 262 - 14 1,743 - 2,019
_________ _________ _________ _________ _________ _________
Total current assets 10,026 - 14 30,359 - 40,399
Property, plant and
equipment - net 18,559 113 9 71,148 - 89,829
Investments and other
assets 80,097 2 558 308,584 (370,469) 18,772
Intercompany receivables 9,339 19,124 1,355 212,790 (242,608) -
_________ _________ _________ _________ _________ _________
Total assets $ 118,021 $ 19,239 $ 1,936 $ 622,881 $(613,077) $ 149,000
========= ========= ========= ========= ========= =========
Notes and loans payables $ 60 $ 74 $ 7 $ 6,020 $ - $ 6,161
Accounts payable and
accrued liabilities 3,918 8 2 22,827 - 26,755
Income taxes payable 902 9 - 4,364 - 5,275
_________ _________ _________ _________ _________ _________
Total current
liabilities 4,880 91 9 33,211 - 38,191
Long-term debt 1,209 281 925 4,865 - 7,280
Deferred income tax
liabilities 3,334 31 292 12,785 - 16,442
Other long-term
liabilities 4,428 9 - 11,893 - 16,330
Intercompany payables 33,413 17,965 412 190,818 (242,608) -
_________ _________ _________ _________ _________ _________
Total liabilities 47,264 18,377 1,638 253,572 (242,608) 78,243
Earnings reinvested 86,652 56 (96) 36,946 (36,906) 86,652
Other shareholders' equity (15,895) 806 394 332,363 (333,563) (15,895)
_________ _________ _________ _________ _________ _________
Total shareholders'
equity 70,757 862 298 369,309 (370,469) 70,757
_________ _________ _________ _________ _________ _________
Total liabilities
and shareholders'
equity $ 118,021 $ 19,239 $ 1,936 $ 622,881 $(613,077) $ 149,000
========= ========= ========= ========= ========= =========
-16-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of cash flows for nine months ended September 30, 2001
_______________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 3,751 $ 32 $ 71 $ 16,326 $ (681) $ 19,499
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (1,549) - - (5,314) - (6,863)
Sales of long-term assets 531 - - 357 - 888
Net intercompany
investing 4,033 17,599 (42) (20,205) (1,385) -
All other investing, net (31) - - 61 - 30
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in)investing
activities 2,984 17,599 (42) (25,101) (1,385) (5,945)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 338 - 338
Reductions in long-term
debt (1) (15) - (387) - (403)
Additions/(reductions)
in short-term debt
- net (59) (30) - (2,218) - (2,307)
Cash dividends (4,683) - - (681) 681 (4,683)
Net ExxonMobil shares
sold/(acquired) (4,065) - - - - (4,065)
Net intercompany
financing activity - (17,586) (29) 16,230 1,385 -
All other financing, net - - - (496) - (496)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) financing
activities (8,808) (17,631) (29) 12,786 2,066 (11,616)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - 8 - 8
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ (2,073) $ - $ - $ 4,019 $ - $ 1,946
======== ======== ======== ======== ======== ========
Condensed consolidated statement of cash flows for nine months ended September 30, 2000
_______________________________________________________________________________________
Cash provided
by/(used in) operating
activities $ 6,789 $ 36 $ 61 $ 10,489 $ (513) $ 16,862
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (1,277) - - (4,559) - (5,836)
Sales of long-term assets 1,093 - - 2,621 - 3,714
Net intercompany
investing 617 (5,640) (59) 4,024 1,058 -
All other investing, net 21 - - 398 - 419
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) investing
activities 454 (5,640) (59) 2,484 1,058 (1,703)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 159 - 159
Reductions in long-term
debt (51) (179) - (153) - (383)
Additions/(reductions)
in short-term debt
- net (973) 41 - (3,161) - (4,093)
Cash dividends (4,596) - - (513) 513 (4,596)
Net ExxonMobil shares
sold/(acquired) (661) - - - - (661)
Net intercompany
financing activity - 5,742 (2) (4,682) (1,058) -
All other financing, net - - - (297) - (297)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) financing
activities (6,281) 5,604 (2) (8,647) (545) (9,871)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - (332) - (332)
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ 962 $ - $ - $ 3,994 $ - $ 4,956
======== ======== ======== ======== ======== ========
-17-
EXXON MOBIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Third Quarter First Nine Months
______________ _________________
2001 2000 2001 2000
____ ____ ____ ____
(millions of dollars)
Earnings including merger effects and special items
___________________________________________________
Upstream
United States $ 767 $ 1,215 $ 3,506 $ 3,181
Non-U.S. 1,364 1,885 5,253 5,438
Downstream
United States 390 392 1,643 1,168
Non-U.S. 552 501 1,565 1,092
Chemicals
United States 76 132 270 551
Non-U.S. 80 132 403 395
Other operations 120 148 389 394
Corporate and financing (29) (115) (104) (429)
Merger expenses (140) (230) (325) (705)
Gain from required asset divestitures 0 430 40 1,415
_______ _______ _______ _______
NET INCOME $ 3,180 $ 4,490 $12,640 $12,500
======= ======= ======= =======
Net income per common share* $ 0.46 $ 0.63 $ 1.84 $ 1.79
Net income per common share
- assuming dilution* $ 0.46 $ 0.63 $ 1.82 $ 1.77
Merger effects and special items
________________________________
Chemicals
United States $ 0 $ 0 $ 100 $ 0
Non-U.S. 0 0 75 0
Merger expenses (140) (230) (325) (705)
Gain from required asset divestitures 0 430 40 1,415
_______ _______ _______ _______
TOTAL $ (140) $ 200 $ (110) $ 710
======= ======= ======= =======
Earnings excluding merger effects and special items
___________________________________________________
Upstream
United States $ 767 $ 1,215 $ 3,506 $ 3,181
Non-U.S. 1,364 1,885 5,253 5,438
Downstream
United States 390 392 1,643 1,168
Non-U.S. 552 501 1,565 1,092
Chemicals
United States 76 132 170 551
Non-U.S. 80 132 328 395
Other operations 120 148 389 394
Corporate and financing (29) (115) (104) (429)
_______ _______ _______ _______
TOTAL $ 3,320 $ 4,290 $12,750 $11,790
======= ======= ======= =======
Earnings per common share* $ 0.48 $ 0.60 $ 1.86 $ 1.69
Earnings per common share
- assuming dilution* $ 0.48 $ 0.60 $ 1.84 $ 1.67
* Prior year amounts restated to reflect two-for-one stock split implemented
in June 2001.
-18-
THIRD QUARTER 2001 COMPARED WITH THIRD QUARTER 2000
Excluding merger effects, estimated third quarter 2001 earnings of
$3,320 million ($0.48 per share) decreased $970 million from the record third
quarter of 2000. Earnings per share declined by 20 percent reflecting the
weakening economic and commodity price environment. Including merger effects,
third quarter net income was $3,180 million ($0.46 per share). These per share
amounts reflect the two-for-one stock split implemented in June 2001. Included
in this year's third quarter net income were merger expenses of $140 million,
while last year's third quarter included net favorable merger effects of
$200 million.
Revenue for the third quarter of 2001 totaled $52,113 million compared with
$58,568 million in 2000. Capital and exploration expenditures of $3,098 million
in the third quarter of 2001 were up $452 million, or 17 percent, compared with
$2,646 million last year and were 9 percent higher than in the second quarter.
ExxonMobil produced solid results in an adverse economic and commodity price
environment. Excluding merger effects, third quarter 2001 earnings of
$3,320 million were down $970 million. Per share earnings were down 20 percent.
Net income of $3,180 million was $1,310 million lower. The reduction in
earnings reflected lower crude oil and natural gas realizations, both of which
declined significantly and tracked widely quoted price markers. The drop in
crude oil prices was especially steep in the latter half of September.
Upstream volumes, on an oil-equivalent basis, were up 1 percent excluding the
effect of reduced natural gas production operations in Indonesia due to
security concerns. This performance is consistent with the increase in capacity
from new projects which result in an annual average of 3 percent growth over
the next several years. Actual production, however, is also affected by
political and project start-up issues, as has been experienced this year.
Capital expenditures were 17 percent higher than last year in line with
full-year spending plans, and additional operating cost efficiencies were
captured in all business lines.
Upstream earnings were $2,131 million, a decrease of $969 million from last
year's record third quarter, reflecting lower average crude oil and natural gas
realizations, in line with declines in industry markers. In the final weeks of
the quarter, crude prices fell to their lowest levels in 20 months. Liquids
production decreased 1 percent as growth from new capacity additions in Canada,
Equatorial Guinea, Venezuela and Kazakhstan was offset by natural field decline
in mature areas and the impacts of civil unrest on our operations. Natural gas
volumes increased by about 3 percent absent the impact of reduced operations in
the Aceh province of Indonesia due to security concerns.
Downstream earnings of $942 million were $49 million higher than the same
period a year ago, as the impact of lower refining margins was more than offset
by stronger marketing margins, particularly outside the U.S. Sales volumes were
down 1 percent reflecting weakness late in the quarter, especially in
transportation fuels.
Chemicals earnings of $156 million declined $108 million due to weaker
commodity margins. U.S. volumes decreased 2 percent reflecting continued
weakness in the manufacturing sector. Outside the U.S., volumes were higher
reflecting capacity additions in Singapore and Saudi Arabia. Earnings from
other operations of $120 million declined $28 million due primarily to lower
copper prices.
-19-
Third quarter net income included merger expenses of $140 million.
In the third quarter, ExxonMobil continued its active investment program,
spending $3,098 million on capital and exploration projects, compared with
$2,646 million last year, with higher spending focused in the upstream.
During the quarter, the Corporation acquired 32.1 million shares at a gross
cost of $1,315 million to offset the dilution associated with benefit plans and
to reduce common stock outstanding.
OTHER COMMENTS ON THIRD QUARTER COMPARISON
Upstream earnings decreased $969 million to $2,131 million due to lower crude
oil and natural gas realizations, down about 20 percent from last year. The
lower natural gas realizations were driven by sharply lower North American
prices.
Liquids production of 2,481 kbd (thousands of barrels per day) decreased from
2,497 kbd in the third quarter of 2000. Higher production in Canada, Equatorial
Guinea, Venezuela and Kazakhstan was offset by natural field declines in mature
areas and the impacts of civil unrest on operations. Worldwide gas production
was up about 3 percent, excluding the effect of reduced operations at the Arun
facility in Indonesia due to security concerns. Gas production was higher in
Europe reflecting North Sea capacity additions. Including the effects of Arun,
third quarter natural gas production was 8,597 mcfd (millions of cubic feet per
day) in 2001, compared with 8,735 mcfd last year.
Earnings from U.S. upstream operations were $767 million, a decrease of
$448 million from the prior year. Upstream earnings outside the U.S. were
$1,364 million, a decrease of $521 million.
Downstream results improved by 5 percent from the third quarter of 2000
primarily reflecting higher marketing margins, particularly outside the U.S.
Refining margins outside the U.S. declined and Asia-Pacific margins remained
depressed. Petroleum product sales of 7,951 kbd decreased from 8,069 kbd in the
third quarter of 2000 reflecting weakness late in the quarter, especially in
transportation fuels.
U.S. downstream earnings were $390 million, down $2 million. Non-U.S.
downstream earnings of $552 million were $51 million higher than last year.
Chemicals earnings were $156 million, down $108 million from the same quarter a
year ago on softer commodity margins reflecting depressed economic conditions
in the U.S. manufacturing sector as well as market weakness outside the U.S.
Prime product sales volumes of 6,457 kt (thousands of metric tons) were above
last year's level as higher sales outside of the U.S., helped by recent
capacity additions, were partly offset by lower volumes in a difficult U.S.
market.
Earnings from other operations, including coal, minerals and power, totaled
$120 million, compared with $148 million in the third quarter of 2000. Higher
coal production rates and realizations were offset by lower copper prices.
Corporate and financing expenses of $29 million compared with $115 million last
year, reflecting lower net interest costs due to lower debt levels and higher
cash balances, and favorable tax effects.
-20-
During the period, the company's operating segments continued to benefit from
favorable resolution of tax-related issues.
Third quarter net income included $140 million of after tax merger expenses.
During the third quarter of 2001, Exxon Mobil Corporation purchased
32.1 million shares of its common stock for the treasury at a gross cost of
$1,315 million. These purchases were to offset shares issued in conjunction
with company benefit plans and programs and to reduce the number of shares
outstanding. Shares outstanding were reduced from 6,871 million at the end of
the second quarter of 2001 to 6,841 million at the end of the third quarter.
Purchases may be made in both the open market and through negotiated
transactions, and may be discontinued at any time. The number of common shares
reflect the two-for-one stock split which had a record date of June 20, 2001.
FIRST NINE MONTHS 2001 COMPARED WITH FIRST NINE MONTHS 2000
Excluding merger effects and special items, record earnings of $12,750 million
($1.84 per share) for the first nine months of 2001 increased $960 million
(8 percent) from the first nine months of last year. Per share earnings
increased 10 percent reflecting higher earnings and the results of the
company's share buy back activity. Including merger effects and special items,
net income of $12,640 million ($1.82 per share) for the first nine months of
2001 increased $140 million. This year's first nine months' net income included
net unfavorable $110 million in merger effects and special items, while last
year's first nine months' benefited from $710 million in net favorable merger
effects.
Upstream earnings of $8,759 million increased $140 million or 2 percent
primarily due to higher natural gas realizations, particularly in the U.S.,
which reached historical highs in January 2001 but have steadily dropped since
then, ending the period below prior year levels. The impact of higher average
gas realizations was largely offset by lower crude oil realizations, curtailed
gas production and higher exploration expenses in future growth areas. Liquids
production of 2,543 kbd increased 6 kbd over the first nine months of 2000,
reflecting higher production in West Africa, Kazakhstan and Canada, partly
offset by natural field declines in mature areas and the impact of civil unrest
on operations. Absent the effect of reduced operations in the Aceh province of
Indonesia due to security concerns, worldwide gas production was up about
3 percent, with increases in Europe, Australia, Canada and Qatar. Including the
impact of lower Indonesia volumes, worldwide natural gas production of
9,918 mcfd for the first nine months of 2001 compared with 10,038 mcfd in 2000.
Earnings from U.S. upstream operations for the first nine months of 2001 were
$3,506 million, an increase of $325 million. Earnings outside the U.S. were
$5,253 million, $185 million lower than last year.
Downstream earnings improved by 42 percent versus the first nine months of
2000, reflecting higher refining margins in the U.S., higher marketing margins,
particularly outside the U.S., and improved refinery operations. Petroleum
product sales of 7,956 kbd compared with 7,967 kbd in the first nine months of
2000. Excluding the effect of the required merger related divestments in 2000,
volumes were up 1 percent.
U.S. downstream earnings were $1,643 million, up $475 million. Earnings outside
the U.S. of $1,565 million were $473 million higher than last year.
-21-
Chemicals earnings for the first nine months of 2001 were $673 million,
including $175 million of net gains on asset management activities. Absent this
special item, chemicals earnings were $498 million, $448 million lower than
last year. Most of the reduction occurred in the U.S. as higher feedstock and
energy costs and weakening demand conditions put significant pressure on
commodity margins. Prime product sales volumes of 19,408 kt were 1 percent
above last year's level, as higher sales outside the U.S., reflecting capacity
additions in Singapore and Saudi Arabia, were partly offset by lower sales in
the U.S.
Earnings from other operations totaled $389 million, a decrease of $5 million
reflecting lower copper prices, partly offset by higher coal production rates
and realizations. Corporate and financing expenses decreased $325 million to
$104 million, reflecting lower net interest costs due to lower debt levels and
higher cash balances, along with favorable foreign exchange and tax effects.
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. The Merger was accounted for as a pooling of interests.
In the third quarter of 2001, in association with the Merger, $145 million of
before tax costs ($140 million after tax) were recorded as merger related
expenses. In the third quarter of 2000, merger related expenses were
$372 million before tax ($230 million after tax). For the nine months ended
September 30, 2001 merger related expenses totaled $433 million before tax
($325 million after tax). For the nine months ended September 30, 2000, merger
related expenses totaled $1,104 million ($705 million after tax).
The severance reserve balance at the end of the third quarter of 2001 is
expected to be expended in 2001 and 2002. The following table summarizes the
activity in the severance reserve for the nine months ended September 30, 2001:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
317 111 231 197
Merger related expenses are expected to be approximately $2.7 billion before
tax on a cumulative basis by 2002. Merger synergy initiatives, including cost
savings, efficiency gains, and revenue enhancements, are on track.
-22-
Certain property -- primarily refining, marketing, pipeline and natural gas
distribution assets -- were divested as a condition of the regulatory approval
of the Merger by the U.S. Federal Trade Commission and the European Commission.
For the nine months ended September 30, 2001, the net after tax gain from
required asset divestitures, all in the first quarter, totaled $40 million
(including an income tax credit of $15 million), or $0.01 per common share.
Third quarter 2000 included a net after tax gain of $430 million (including an
income tax credit of $41 million), or $0.06 per common share, from required
asset divestments. For the nine months ended September 30, 2000, the net after
tax gain from required asset divestitures totaled $1,415 million (net of
$583 million of income taxes), or $0.20 per common share. These merger related
net gains from required asset divestitures have been reported as extraordinary
items in accordance with accounting requirements for business combinations
accounted for as a pooling of interests.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generation before financing activities was $13,554 million in the
first nine months of 2001 versus $15,159 million in the same period last year.
Operating activities provided net cash of $19,499 million, an increase of
$2,637 million from the prior year. Investing activities used net cash of
$5,945 million, compared to cash provided of $1,703 million in the prior year,
reflecting higher additions to property, plant, and equipment and the absence
of proceeds from the asset divestments that were required as a condition of
regulatory approval of the merger.
Net cash used in financing activities was $11,616 million in the first nine
months of 2001 versus $9,871 million in the same period last year. The increase
was driven by higher purchases of shares of ExxonMobil common stock, partially
offset by lower debt reductions in the current year period versus last year.
During the first nine months of 2001, Exxon Mobil Corporation purchased
101.8 million shares of its common stock for the treasury at a gross cost of
$4,273 million. These purchases were to offset shares issued in conjunction
with company benefit plans and programs and to reduce the number of shares
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 nine months of 2001 totaled $165,597 million compared to
$168,605 million in the first nine months of 2000.
Capital and exploration expenditures were $8,448 million in the first nine
months 2001 compared to $7,294 million in last year's first nine months.
Capital and exploration investments are expected to increase by approximately
15 percent in 2001 versus 2000.
Total debt of $11.1 billion at September 30, 2001 decreased $2.3 billion from
year-end 2000. The corporation's debt to total capital ratio was 12.7 percent
at the end of the first nine months of 2001, compared to 15.4 percent at
year-end 2000.
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.
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Litigation and other contingencies are discussed in note 7 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
merger related expenses; synergy benefits from the merger (including cost
savings, efficiency gains, and revenue enhancements); 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; changes in the supply of and demand for
crude oil, natural gas and petroleum and petrochemical products; and other
factors discussed above and discussed under the caption "Factors Affecting
Future Results" in Item 1 of ExxonMobil's 2000 Form 10-K.
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EXXON MOBIL CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the nine months ended
September 30, 2001 does not differ materially from that discussed
under Item 7A of the registrant's Annual Report on Form 10-K for 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 27, 2001, the Louisiana Department of Environmental
Quality ("LDEQ") issued a Notice of Potential Penalty ("NPP") in a
proceeding captioned "In re: Chalmette Refining, LLC." The facility
involved is a refinery in Chalmette, Louisiana that is operated and
50 percent-owned by a wholly owned subsidiary of the corporation. The
primary issue in the proceeding is whether the refinery complied with
the release reporting requirements under Louisiana's environmental
laws and the refinery's water discharge permit with respect to
discharges of pollutants into navigable waters of the state resulting
from a leaking heat exchanger at the refinery. The other issues under
the NPP include reporting of emergency conditions associated with a
fire and complying with various water discharge permitting conditions
to prevent an unauthorized discharge of pollutants into navigable
waters. The LDEQ has not made a demand for specific penalties,
although it is possible that the LDEQ could seek penalties in excess
of $100,000.
Refer to the relevant portions of Note 7 on pages 8 through 10 of this
Quarterly Report on Form 10-Q for information on legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The registrant has no exhibits for the three month period ended
September 30, 2001.
b) Reports on Form 8-K
The registrant has not filed any reports on Form 8-K during the
quarter.
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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: November 13, 2001 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
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