SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
EXXON MOBIL CORPORATION
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[LOGO]
Notice of 2002 Annual Meeting
and Proxy Statement
including
Financial Statements
YOUR VOTE IS IMPORTANT
PLEASE VOTE YOUR SHARES PROMPTLY
NOTICE OF ANNUAL MEETING
MAY 29, 2002
AND PROXY STATEMENT
[LOGO]
Dear Shareholder:
We invite you to attend the annual meeting of shareholders on Wednesday,
May 29, 2002, in Dallas, Texas. The meeting will begin promptly at 9:30 a.m. At
the meeting, you will hear a report on our business and have a chance to meet
your directors and executives.
This booklet includes the formal notice of the meeting, the proxy statement and
financial statements. The proxy statement tells you about the agenda, procedures
and rules of conduct for the meeting. It also describes how the board operates
and gives personal information about our director candidates.
Based on favorable shareholder response, financial statements again are included
with this proxy statement as Appendix A rather than with the summary annual
report. The summary annual report mailed with this booklet includes summary
financial statements.
Even if you only own a few shares, we want your shares to be represented at the
meeting. You can vote your shares by Internet, toll-free telephone call, or
proxy card. If you vote this year's proxy via the Internet, you can elect to
access future proxy statements and annual reports on our Web site. If you are a
registered shareholder, you can choose to discontinue receiving more than one
annual report.
To attend the meeting in person, please follow the instructions on page 2. If
you are not able to attend, you may listen to a live audiocast of the meeting on
the Internet. Instructions for listening to this audiocast will be available at
our Web site, www.exxonmobil.com, approximately one week prior to the event. A
report on the meeting will be included in the June issue of EXXONMOBIL
PERSPECTIVES, which will also be available on our Web site.
Sincerely yours,
/s/ Lee R. Raymond
Lee R. Raymond
Chairman of the Board
April 17, 2002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF EXXON MOBIL CORPORATION
TIME:
Doors open: 8:00 a.m., central time
Meeting begins: 9:30 A.M., central time
DATE:
Wednesday, May 29, 2002
PLACE:
Morton H. Meyerson Symphony Center
2301 Flora Street
Dallas, Texas 75201
PURPOSE:
- Elect directors
- Ratify appointment of independent auditors
- Vote on 8 shareholder proposals
- Conduct other business if properly raised
Only shareholders of record on April 5, 2002, may vote at the
meeting. Only shareholders or their proxy holders and ExxonMobil
guests may attend the meeting. Guests are not permitted to speak
at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY. TO
VOTE YOUR SHARES, USE THE INTERNET OR CALL THE TOLL-FREE
TELEPHONE NUMBER AS DESCRIBED IN THE INSTRUCTIONS ON YOUR PROXY
CARD, OR COMPLETE, SIGN, DATE, AND RETURN YOUR PROXY CARD.
[/S/ P. T. MULVA]
Patrick T. Mulva
Secretary
April 17, 2002
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
TABLE OF CONTENTS PAGE
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General Information........................................ 1
ELECTION OF DIRECTORS...................................... 3
Director Compensation...................................... 8
Board Committees........................................... 8
Director and Executive Officer Stock Ownership............. 11
BCC Report on Executive Compensation....................... 12
Executive Compensation Tables.............................. 16
Stock Performance Graphs................................... 22
Board Audit Committee Report............................... 23
BOARD OF DIRECTORS PROPOSAL:
Ratification of Independent Auditors..................... 24
SHAREHOLDER PROPOSALS...................................... 25
Additional Information..................................... 45
Appendix A: Financial Section.............................. A1
Appendix B: Board Audit Committee Charter.................. B1
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
GENERAL INFORMATION
WHO MAY VOTE
Shareholders of ExxonMobil, as recorded in our stock register on April 5, 2002,
may vote at the meeting.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
HOW PROXIES WORK
ExxonMobil's Board of Directors is asking for your proxy. Giving us your proxy
means you authorize us to vote your shares at the meeting in the manner you
direct. You may vote for all, some, or none of our director candidates. You may
also vote for or against the other proposals or abstain from voting.
If your shares are held in your name, you can vote by proxy in three convenient
ways:
- VIA INTERNET: Go to www.eproxyvote.com/xom and follow the instructions.
You will need to enter the Control Number printed on your proxy card. At
this Web site, you can elect to access future proxy statements and annual
reports via the Internet.
- BY TELEPHONE: Call toll-free 1-877-779-8683 and follow the instructions.
You will need to enter the Control Number printed on your proxy card.
- IN WRITING: Complete, sign, date, and return your proxy card in the
enclosed envelope.
Your proxy card covers all shares registered in your name and shares held in
your Shareholder Investment Program (SIP) account. If you own shares in the
ExxonMobil Savings Plan, your proxy card also covers those shares.
If you give us your signed proxy, but do not specify how to vote, we will vote
your shares in favor of our director candidates; in favor of the management
proposal to ratify the appointment of independent auditors; and against the
shareholder proposals.
If you hold shares through someone else, such as a stockbroker, you may receive
material from that firm asking how you want to vote. Check the voting form used
by that firm to see if it offers Internet or telephone voting.
VOTING SHARES IN THE EXXONMOBIL SAVINGS PLAN
The trustee of the ExxonMobil Savings Plan will vote plan shares as participants
direct. To the extent participants do not give instructions, the trustee will
vote shares as it thinks best. This year, the proxy card also serves to give
voting instructions to the trustee.
1
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
REVOKING A PROXY
You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date, including a proxy given via the
Internet or by telephone;
- notifying ExxonMobil's Secretary in writing before the meeting; or
- voting in person at the meeting.
CONFIDENTIAL VOTING
Independent inspectors count the votes. Your individual vote is kept
confidential from us unless special circumstances exist. For example, a copy of
your proxy card will be sent to us if you write comments on the card.
QUORUM
In order to carry on the business of the meeting, we must have a quorum. This
means at least a majority of the outstanding shares eligible to vote must be
represented at the meeting, either by proxy or in person. Treasury shares, which
are shares owned by ExxonMobil itself, are not voted and do not count for this
purpose.
VOTES NEEDED
The director candidates who receive the most votes will be elected to fill the
seats on the board. Approval of the other proposals requires the favorable vote
of a majority of the votes cast. Only votes for or against a proposal count.
Abstentions and broker non-votes count for quorum purposes but not for voting
purposes. Broker non-votes occur when a broker returns a proxy but does not have
authority to vote on a particular proposal.
ATTENDING IN PERSON
Only shareholders or their proxy holders and ExxonMobil's guests may attend the
meeting. For safety and security reasons, cameras will not be allowed in the
meeting and will need to be checked at the admissions counter.
For registered shareholders, an admission ticket is attached to your proxy card.
Please bring the admission ticket with you to the meeting.
If your shares are held in the name of your broker, bank, or other nominee, you
must bring to the meeting an account statement or letter from the nominee
indicating that you are the beneficial owner of the shares on April 5, 2002, the
record date for voting. You may receive an admission ticket in advance by
sending a written request with proof of ownership to the address listed under
"Contact information" on page 46.
Shareholders who do not present admission tickets at the meeting will be
admitted only upon verification of ownership at the admissions counter.
2
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
CONDUCT OF THE MEETING
The Chairman has broad authority to conduct the annual meeting in an orderly and
timely manner. This authority includes establishing rules for shareholders who
wish to address the meeting. A copy of these rules will be available at the
meeting. The Chairman is also entitled to exercise broad discretion in
recognizing shareholders who wish to speak and in determining the extent of
discussion on each item of business. In light of the number of business items on
this year's agenda and the need to conclude the meeting within a reasonable
period of time, we cannot assure that every shareholder who wishes to speak on
an item of business will be able to do so. The Chairman may also rely on
applicable law regarding disruptions or disorderly conduct to ensure that the
meeting is conducted in a manner that is fair to all shareholders.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The board has nominated the director candidates named below. Personal
information on each of our nominees is also given below. All of our nominees
currently serve as ExxonMobil directors.
The Board of Directors performs a number of services for ExxonMobil and its
shareholders, including:
- overseeing the management of the company on your behalf;
- reviewing ExxonMobil's long-term strategic plans;
- exercising direct decision-making authority in key areas, such as
declaring dividends;
- choosing the CEO, setting the scope of his authority to manage the
company's business day to day, and evaluating his performance; and
- reviewing development and succession plans for ExxonMobil's top
executives.
Most ExxonMobil directors--including 10 of our 12 nominees--are not ExxonMobil
employees. Only nonemployee directors serve on ExxonMobil's Board Audit, Board
Compensation, Public Issues, Board Affairs, and Board Advisory on Contributions
committees.
All ExxonMobil directors are elected for one-year terms. Nonemployee directors
cannot stand for election after they have reached age 70. Mr. Renna elected to
retire effective January 31, 2002, so he is not standing for reelection. Also,
Mr. Dahan has advised the board of his intention to retire, therefore, he is not
standing for reelection.
The board met ten times in 2001. All of ExxonMobil's directors, on average,
attended approximately 97% of board and committee meetings during the year 2001.
If a director nominee becomes unavailable before the election, your proxy
authorizes the people named as proxies to vote for a replacement nominee if the
board names one.
THE BOARD RECOMMENDS YOU VOTE FOR EACH OF THE FOLLOWING CANDIDATES:
3
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
BIOGRAPHIES OF OUR BOARD NOMINEES
- -----------------------------------------------------------------------------------------------
MICHAEL J. BOSKIN T. M. Friedman Professor of Economics, and Senior Fellow,
Hoover Institution, Stanford University. Holds bachelor's,
[PHOTO] master's, and Ph.D. degrees in economics. Joined Stanford
University in 1970. Adjunct Scholar, American Enterprise
AGE 56 Institute; Research Associate, National Bureau of Economic
Director since 1996 Research. Director, First Health Group Corporation; Oracle
Corporation; Vodafone Group PLC; Western Multiplex
Corporation. Chairman, Congressional Advisory Commission on
the Consumer Price Index 1995-96; Council of Economic
Advisors, 1989-93. Member, Advisory Committee of the Joint
Committee on Taxation of the U.S. Congress; Panel of
Advisors to the Congressional Budget Office. Dr. Boskin is
the recipient of numerous professional awards.
- -----------------------------------------------------------------------------------------------
WILLIAM T. ESREY Chairman and Chief Executive Officer, Sprint Corporation.
Holds bachelor's degree in economics and master of business
[PHOTO] administration degree. Joined Sprint, a global
communications company integrating long distance, local, and
wireless communications services and one of the world's
AGE 62 largest carriers of Internet traffic, in 1980. Held a
Director since 1998 variety of management positions. Elected Chief Executive
Officer in 1985 and Chairman in 1990. Prior to joining
Sprint, Mr. Esrey held management positions with Dillon,
Read and Company; AT&T; New York Telephone Company; and
Empire City Subway Co., Ltd. Director, Duke Energy
Corporation; General Mills, Inc. Member, The Business
Council; The Business Roundtable.
- -----------------------------------------------------------------------------------------------
DONALD V. FITES Former Chairman and Chief Executive Officer, Caterpillar
Inc. Holds bachelor's degree in civil engineering and
[PHOTO] master's degree in management. Joined Caterpillar, a
manufacturer of heavy machinery, in 1956. Held a variety of
AGE 68 management positions. Became Vice President in 1981,
Director since 1999 Executive Vice President in 1985, Director in 1986,
President and Chief Operating Officer in 1989, and Chairman
and Chief Executive Officer in 1990. Retired in 1999.
Director of Mobil from 1990 to 1999. Director, AK Steel
Corporation; AT&T Wireless Services, Inc.; Georgia-Pacific
Corporation; Oshkosh Truck Corporation; Wolverine World
Wide, Inc.; Valparaiso University. Trustee, Knox College.
Chairman, The Salvation Army National Advisory Board; the
World Methodist Council Financial Development Committee.
Member, Board of Advisors, Thayer Capital Partners; The
Business Council. Mr. Fites is the recipient of numerous
awards, including two honorary doctorate of law degrees.
4
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
- -----------------------------------------------------------------------------------------------
JAMES R. HOUGHTON Chairman of the Board, Corning Incorporated. Holds bachelor
of arts and master of business administration degrees.
[PHOTO] Joined Corning, a communications, advanced materials, and
display products company, in 1962. Held a variety of
AGE 66 management positions. Elected Chairman of the Board and
Director since 1994 Chief Executive Officer of Corning in 1983. Retired in 1996.
Elected Chairman of the Board in June 2001. Director,
Corning Incorporated; Metropolitan Life Insurance Company.
Trustee, Corning Museum of Glass; The Metropolitan Museum of
Art; The Pierpont Morgan Library. Member, The Business
Council; Council on Foreign Relations; Harvard Corporation.
- -----------------------------------------------------------------------------------------------
WILLIAM R. HOWELL Chairman Emeritus, J.C. Penney Company, Inc. Holds bachelor
of business administration degree. Joined J.C. Penney, a
[PHOTO] department store and catalog chain, in 1958. Held a variety
of management positions. Elected Chairman of the Board and
AGE 66 Chief Executive Officer in 1983. Retired as Chairman of the
Director since 1982 Board in 1997. Director, Bankers Trust New York Corporation
and Bankers Trust Company; American Electric Power;
Halliburton Co.; Pfizer, Inc.; Williams; Viseon.
- -----------------------------------------------------------------------------------------------
HELENE L. KAPLAN Of Counsel to Skadden, Arps, Slate, Meagher & Flom LLP, a
law firm that performed services for Mobil. Holds bachelor
[PHOTO] of arts degree and juris doctor. Director of Mobil 1989
through 1999. Director, J.P. Morgan Chase & Co.; May
AGE 68 Department Stores Company; Metropolitan Life, Inc.; Verizon
Director since 1999 Communications. Chair, Carnegie Corporation of New York.
Trustee and Vice Chair, American Museum of Natural History;
Commonwealth Fund; J. Paul Getty Trust; Institute for
Advanced Study. Member, American Academy of Arts and
Sciences; Council on Foreign Relations. Fellow, American
Philosophical Society. Mrs. Kaplan is the recipient of
numerous awards, including an honorary doctorate of law.
5
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
- -----------------------------------------------------------------------------------------------
REATHA CLARK KING President and Executive Director, General Mills Foundation;
Vice President, General Mills, Inc., a manufacturer and
[PHOTO] marketer of consumer food products. Holds bachelor of
science degree in chemistry and mathematics, master of
AGE 64 science degree in chemistry, master of business
Director since 1997 administration degree in finance management, and Ph.D.
degree in thermochemistry. Prior to joining the General
Mills Foundation in 1988, Dr. King held a variety of
scientific and educational positions, including Research
Chemist, National Bureau of Standards; Chemistry Professor,
Associate Dean for Division of Natural Science &
Mathematics, and Associate Dean for Academic Affairs, York
College, City University of New York; President,
Metropolitan State University. Director, H.B. Fuller
Company; Minnesota Mutual Companies, Inc.; Wells Fargo and
Company. Trustee, Clark Atlanta University; H.B. Fuller
Foundation. Life Trustee, University of Chicago. Dr. King is
the recipient of numerous awards, including 14 honorary
doctorate degrees.
- -----------------------------------------------------------------------------------------------
PHILIP E. LIPPINCOTT Retired Chairman of the Board, Campbell Soup Company, a
global manufacturer and marketer of high quality, branded
[PHOTO] convenience food products. Retired Chairman and Chief
Executive Officer, Scott Paper Company. Holds bachelor of
AGE 66 arts and master of business administration degrees. Joined
Director since 1986 Scott Paper, a company involved in sanitary paper, printing
and publishing papers, and forestry operations, in 1959.
Held a variety of management positions. Elected Director in
1978, Chief Executive Officer in 1982 and Chairman in 1983.
Retired in 1994. Director, Campbell Soup Company. Chairman
of the Board and Director, Fox Chase Cancer Center. Trustee,
The Penn Mutual Life Insurance Company. Member, The Business
Council.
- -----------------------------------------------------------------------------------------------
HARRY J. LONGWELL Executive Vice President. Holds bachelor's degree in
petroleum engineering. Principal responsibilities include
[PHOTO] the corporation's worldwide upstream oil and gas activities;
Imperial Oil Limited; aviation; and human resources. Since
AGE 60 joining the Exxon organization in 1963, Mr. Longwell has
Director since 1995 held a variety of management positions in domestic and
foreign operations, including Vice President-Production and
President, Exxon Company, U.S.A.; Vice President, Esso
Europe Inc.; Senior Vice President-Upstream and Executive
Vice President, Exxon Company, International. Elected Senior
Vice President and Director of Exxon in 1995, Executive Vice
President and Director of ExxonMobil in 2001. Director,
National Action Council for Minorities in Engineering;
University of Dallas. Member, Board of Visitors, University
of Texas, M.D. Anderson Cancer Center; Advisory Board,
Dallas Area Habitat for Humanity.
6
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
- -----------------------------------------------------------------------------------------------
MARILYN CARLSON NELSON Chairman and Chief Executive Officer, Carlson Companies,
Inc. Co-Chair, Carlson Holdings, Inc.; Carlson Wagonlit
[PHOTO] Travel, Inc. Holds bachelor's degree in international
economics. Since joining Carlson Companies, a travel, hotel,
AGE 62 restaurant, and marketing services company, in 1989, Mrs.
Director since 1991 Nelson has held a number of management positions, including
Director, Senior Vice President, and Vice Chair. Director,
Carlson Companies, Inc; Qwest Communications, Inc.; Mayo
Foundation. Past Chair, Travel Industry Association of
America. Member, Council of the World Economic Forum; World
Travel and Tourism Council; Advisory Board, Curtis L.
Carlson School of Management, University of Minnesota. Mrs.
Nelson is the recipient of numerous awards, including three
honorary doctorate degrees.
- -----------------------------------------------------------------------------------------------
LEE R. RAYMOND Chairman of the Board and Chief Executive Officer. Holds
bachelor's and Ph.D. degrees in chemical engineering. Since
[PHOTO] joining the Exxon organization in 1963, Mr. Raymond has held
a variety of management positions in domestic and foreign
AGE 63 operations, including Exxon Company, U.S.A.; Creole
Director since 1984 Petroleum Corporation; Exxon Company, International; Exxon
Enterprises; Esso Inter-America, Inc. Elected Senior Vice
President and Director of Exxon in 1984, President in 1987,
Chairman and Chief Executive Officer in 1993, and added
title of President in 1996. Director, J.P. Morgan Chase &
Co.; American Petroleum Institute; American Enterprise
Institute; United Negro College Fund. Trustee, Wisconsin
Alumni Research Foundation. Member, The Business Council;
The Business Roundtable; Council on Foreign Relations;
Emergency Committee for American Trade; National Petroleum
Council; Singapore-U.S. Business Council; Trilateral
Commission; University of Wisconsin Foundation.
- -----------------------------------------------------------------------------------------------
WALTER V. SHIPLEY Retired Chairman of the Board, The Chase Manhattan
Corporation and The Chase Manhattan Bank, a banking and
[PHOTO] finance company. Holds bachelor of science degree. Joined
Chase Bank in 1956. Held a variety of management positions.
AGE 66 Director, Verizon Communications; Lincoln Center for the
Director since 1998 Performing Arts, Inc.; American Home Products Corporation.
Chairman and Director, Goodwill Industries of Greater New
York, Inc. Trustee, American Museum of Natural History.
Member, The Business Council.
7
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
DIRECTOR COMPENSATION
ExxonMobil employees receive no extra pay for serving as directors. Nonemployee
directors receive a base fee of $75,000 a year. We also pay members of the Audit
and Compensation Committees a fee of $15,000 per year, and an additional fee of
$10,000 per year to the chairs of those committees. For other committees,
nonemployee directors receive $8,000 per year for each committee on which they
serve, and the chairs receive an additional fee of $7,000 per year. No fees are
paid to members of the Executive Committee. Nonemployee directors are reimbursed
for actual expenses to attend meetings.
Nonemployee directors may elect to defer all or part of these fees either into
ExxonMobil stock equivalents with dividends or into a deferred account that
earns interest at the prime rate. Deferred fees are payable after the director
leaves the board in one to five annual installments.
We also pay a portion of director compensation in stock. Each nonemployee
director receives 8,000 shares of restricted stock when first elected to the
board and, if the director remains in office, an additional 2,400 restricted
shares each following year. While on the board, each nonemployee director
receives the same cash dividends on restricted shares as a holder of regular
common stock, but the director is not allowed to sell the shares. The restricted
shares can be forfeited if the director leaves the board early.
BOARD COMMITTEES
The board appoints committees to help carry out its duties. In particular, board
committees work on key issues in greater detail than would be possible at full
board meetings. Each committee reviews the results of its meetings with the full
board.
BOARD AUDIT COMMITTEE
Mr. Houghton (Chairman)
Mr. Esrey
Mr. Howell
Mrs. Kaplan
Dr. King
Mrs. Nelson
The Board Audit Committee met three times during 2001. The committee oversees
accounting and internal control matters. The committee also recommends to the
board the independent auditors to audit ExxonMobil's financial statements,
subject to shareholder approval. The committee's report on its activities for
the fiscal year 2001 is on page 23. Fees paid to the independent auditors are
provided on pages 24-25. The committee's charter is attached as Appendix B to
this proxy statement.
8
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
BOARD ADVISORY COMMITTEE ON CONTRIBUTIONS
Dr. Boskin (Chairman)
Mr. Esrey
Mrs. Kaplan
Dr. King
Mr. Lippincott
Mrs. Nelson
The Board Advisory Committee on Contributions met three times during 2001. The
committee reviews the level of ExxonMobil's support for education and other
public service programs, including the company's contributions to the ExxonMobil
Foundation. The foundation works to improve the quality of education in America
at all levels, with special emphasis on math and science. The foundation also
supports the company's other cultural and public service giving.
BOARD AFFAIRS COMMITTEE
Mrs. Nelson (Chairman)
Mr. Fites
Mr. Howell
Mr. Lippincott
Mr. Shipley
The Board Affairs Committee met once during 2001. The committee recommends
director candidates; reviews nonemployee director compensation; and reviews
other corporate governance practices. The committee will consider your
suggestions for possible director candidates if you submit the name and
biographical information in writing to ExxonMobil's Secretary at the address
under "Contact information" on page 46. On request, the Secretary will also
provide a description of the qualifications we look for in director candidates.
BOARD COMPENSATION COMMITTEE
Mr. Howell (Chairman)
Dr. Boskin
Mr. Esrey
Mr. Houghton
Dr. King
The Board Compensation Committee (BCC) met seven times during 2001. The
committee oversees compensation for ExxonMobil's senior executives, including
salary, bonus, and incentive awards. The committee also reviews succession plans
for key executive positions. The committee's report on executive compensation
starts on page 12.
9
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
FINANCE COMMITTEE
Mr. Raymond (Chairman)
Dr. Boskin
Mr. Fites
Mr. Houghton
Mr. Shipley
The Finance Committee met two times and acted by written consent one time during
2001. The committee reviews ExxonMobil's financial policies and strategies,
including our capital structure, and authorizes corporate debt within limits set
by the board.
PUBLIC ISSUES COMMITTEE
Mr. Lippincott (Chairman)
Mr. Fites
Mrs. Kaplan
Mr. Shipley
The Public Issues Committee met two times during 2001. The committee reviews
ExxonMobil's policies and practices on relevant public issues, including their
effects on safety, health and the environment. The committee hears reports from
operating units on safety and environmental activities. The committee also
visits operating sites to observe and comment on current practices, including
spill and hazard prevention.
EXECUTIVE COMMITTEE
Mr. Raymond (Chairman)
Mr. Houghton
Mr. Howell
Mr. Lippincott
Mrs. Nelson
Other directors serve as alternate members on a rotational basis.
The Executive Committee met once during 2001. The committee has broad power to
act on behalf of the board. In practice, the committee meets only when it is
impractical to call a meeting of the full board.
10
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
DIRECTOR AND EXECUTIVE OFFICER STOCK OWNERSHIP
These tables show how much ExxonMobil common stock each executive named in the
Summary Compensation Table on page 16 and each nonemployee director and nominee
owned on February 28, 2002. In these tables, ownership means the right to direct
the voting or the sale of shares, even if those rights are shared with someone
else. None of these individuals owns more than 0.13 percent of the outstanding
shares. All share information in this proxy statement reflects the two-for-one
stock split effective June 20, 2001.
Shares
Covered
by
Shares Exercisable
Named Executive Officer Owned Options*
---------------------------------------------------------------------------------------
Lee R. Raymond.............................................. 1,534,909(1) 7,006,684
Rene Dahan.................................................. 246,468(2) 2,384,670
Harry J. Longwell........................................... 394,538(3) 3,260,000
Eugene A. Renna............................................. 378,152 2,119,960
K. Terry Koonce............................................. 202,212(4) 1,193,024
----------
(1) Includes 300 shares owned by spouse.
(2) Includes 109,176 shares held jointly with spouse.
(3) Includes 102 shares owned by spouse and 30,092 shares held jointly with
spouse.
(4) Includes 11,752 shares held jointly with spouse.
*Includes options that will become exercisable within 60 days.
Shares
Nonemployee Director/Nominee Owned*
------------------------------------------------------------------------
Michael J. Boskin........................................... 25,900
William T. Esrey............................................ 24,540(1)
Donald V. Fites............................................. 24,770
James R. Houghton........................................... 34,500(2)
William R. Howell........................................... 32,300(3)
Helene L. Kaplan............................................ 40,022
Reatha Clark King........................................... 27,004(4)
Philip E. Lippincott........................................ 35,500
Marilyn Carlson Nelson...................................... 48,428(5)
Walter V. Shipley........................................... 26,140
----------
(1) Includes 1,040 shares held jointly with spouse.
(2) Includes 5,000 shares owned by spouse.
(3) Includes 5,400 restricted shares held as constructive trustee for former
spouse.
(4) Includes 1,000 shares owned by spouse.
(5) Includes 18,528 shares held as co-trustee of family trusts.
*The nonemployee directors are not granted ExxonMobil stock options.
On February 28, 2002, ExxonMobil's directors and executive officers (31 people)
together owned 5,568,990 shares of ExxonMobil stock and 26,846,580 shares
covered by exercisable options, representing about 0.48 percent of the
outstanding shares.
11
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
BCC REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
ExxonMobil's success depends on developing, motivating and retaining executives
who have the skills and expertise required to lead a global organization. To
that end, our executive compensation program is designed to motivate, reward and
retain the management talent our company needs to achieve its business goals and
maintain its leadership. We do this with:
- competitive base salaries in keeping with a philosophy of career
continuity;
- rewards for exceptional performance and accomplishments; and
- incentives to meet short-term and long-term objectives.
The nature of the petroleum business requires long-term, capital-intensive
investments. These investments often take years to generate a return to
shareholders. Accordingly, we grant incentive awards with a view toward
long-term corporate performance. These awards may not fluctuate as much as
year-to-year financial results. Under our program, a substantial portion of
senior executives' potential compensation depends on increases in shareholder
value.
ExxonMobil pays for performance based on an individual's level of
responsibility. For this purpose, performance means both individual and
corporate performance. Individual performance includes the ability to put
ExxonMobil's business plans into effect and to react to unanticipated events. We
base compensation decisions for all executives, including the Chief Executive
Officer (CEO) and the other executives named in the Summary Compensation Table
on page 16 on these criteria.
The three major components of ExxonMobil's compensation program are base salary,
short term incentive awards, and long term incentive awards.
BASE SALARY
In keeping with the long-term and highly technical nature of ExxonMobil's
business, we take a long-term approach to management development. This
career-oriented philosophy requires a competitive base salary. Each year, we
adjust ExxonMobil's salary structure based on competitive positioning (comparing
ExxonMobil's salary structure with salaries paid by other companies),
ExxonMobil's own business performance, and general economic factors. Specific
weights are not given to these factors, but competitive positioning is the most
important factor.
We use a number of surveys to determine ExxonMobil's competitive salary
position. We compare our salary structure with the U.S.-based oil companies in
the industry group used for comparing stock performance on page 22. We do not
consider salary data from the foreign-based oil companies in that group. Their
executive compensation structures are not considered comparable.
ExxonMobil's business, and the competition for executives, extend beyond the oil
industry. Therefore, we also compare our salary structure with other major
U.S.-based corporations. ExxonMobil is significantly larger and more diverse
than the other surveyed companies.
12
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
Therefore, ExxonMobil targets its salary ranges between the median and high end
of the survey data. Within these ranges, we determine individual executive
salaries based on individual performance, level of responsibility, and
experience. The BCC recommends the CEO's salary to the Board of Directors, sets
the salaries for ExxonMobil's other elected officers, and reviews the salaries
of other senior executives.
SHORT TERM INCENTIVE AWARDS
Short term incentive awards consist of cash bonuses and Earnings Bonus Units
(EBUs). See page 19 for a description of the terms of EBUs. We grant short term
awards to executives to reward their contributions to the business during the
past year. We also grant EBUs as incentives for strong, mid-term corporate
performance. EBUs help stress that decisions and contributions in any one year
affect future years. In 2001, approximately one half of executive bonuses were
in the form of EBUs. The cumulative earnings required for maximum payout of each
EBU granted this year was increased from those granted in 2000.
Each year, the BCC establishes a ceiling for cash bonuses and EBUs. The ceiling
for 2001 was $145 million. Almost all of that amount was granted in awards to
approximately 1,500 employees. The ceiling is based on ExxonMobil's business
performance, progress towards long-term goals, and competitive position. No
particular formula is used. Some of the measures of performance considered by
the BCC include net income, earnings per share, return on capital employed,
return on equity, dividends, and operational excellence. The BCC does not give
specific weights to these measures. The 2001 ceiling was approximately the same
as the 2000 ceiling based on several factors: ExxonMobil's second highest annual
earnings, following record earnings in 2000, and overall business performance,
continued strengthening of its worldwide competitive position and progress
toward long-range strategic goals.
The bonus an executive receives depends on the executive's individual
performance and level of responsibility. Each year, we assess relative
performance based on factors including initiative, business judgment, technical
expertise, and management skills.
LONG TERM INCENTIVE AWARDS
Long term incentive awards are intended to develop and retain strong management
through share ownership and incentive awards that recognize future performance.
Stock options were the primary long term incentive granted to executive officers
and over 5,600 other key employees in 2001. The BCC believes that a significant
portion of senior executives' compensation should depend on value created for
the shareholders. Options are an excellent way to accomplish this because they
tie the executives' interests directly to the shareholders' interests. See page
17 for a description of the terms of options.
The number of options granted to executive officers is based on individual
performance and level of responsibility. For this purpose, the committee
measures performance the same way as described above for short term awards.
Option grants must be sufficient in size to provide a strong incentive for
executives to work for long-term business interests and become significant
owners of the business. The number of options held by an executive is not a
factor in
13
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
determining subsequent grants. Granting options on that basis could create an
incentive for executives to exercise options and sell their shares.
The company does not have required levels for equity holdings by senior
management, but long term awards are designed to encourage share ownership. The
five officers named in the Summary Compensation Table on page 16 have, on
average, equity holdings of approximately 15 times salary as of year-end 2001.
In addition, other elected officers have holdings that exceed typical ownership
guidelines used by some companies in industry.
Last year, the BCC granted Career Shares to a limited number of senior
executives. Career Shares are shares of ExxonMobil common stock that normally
may not be sold until after an executive reaches normal retirement age. The
shares may be forfeited if an executive leaves before that time. Given the size,
complexity, and global scope of ExxonMobil's business, it is essential to retain
an experienced senior management team. Career Shares help ExxonMobil retain key
strategic and operating executives for the long term. These awards also provide
an additional incentive for superior long-term corporate performance and align
their total compensation with senior executives in the group of industry and
other major U.S. corporations used in our compensation survey. The number of
Career Shares granted to senior executives also reflects the increased
responsibility and complexity of senior positions.
The committee bases individual Career Share grants on the executive's personal
contribution and level of responsibility. The number of shares held by an
executive is not a factor in determining individual grants since Career Shares
are primarily designed to promote long-term retention.
U.S. INCOME TAX LIMITS ON DEDUCTIBILITY
U.S. income tax law limits the amount ExxonMobil can deduct for compensation
paid to the CEO and the other four most highly paid executives.
Performance-based compensation that meets IRS requirements is not subject to
this limit. The short term awards and stock option grants described above are
designed to meet these requirements so that ExxonMobil can continue to deduct
the related expenses. Specifically, the shareholders have approved broad
performance measures for short term awards to the top executives. The
shareholders also set limits on short term awards to these executives (0.2% of
operating net income) and on individual option grants (0.2% of outstanding
shares at year-end 1996, adjusted for stock splits). These are not targets, only
maximums established for deductibility purposes. Actual award levels have been
significantly less based on the factors and judgments described in the preceding
sections of this report.
CEO COMPENSATION
Within the framework described above, the BCC determines the CEO's compensation
by judging his individual contributions to ExxonMobil's business, level of
responsibility, and career experience. The BCC does not think narrow
quantitative measures or formulas are sufficient for determining Mr. Raymond's
compensation. The committee does not give specific weights to the factors
considered, but the primary factor is the CEO's individual contribution to the
business.
14
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
Considering all of the factors, the BCC believes the combination of
Mr. Raymond's base salary and short term awards is appropriate compared to CEOs
of ExxonMobil's competitors and other large, complex, global organizations.
Mr. Raymond's long term incentive awards reflect the complex, highly technical,
and long-term nature of ExxonMobil's business. The Career Share award granted to
Mr. Raymond recognizes his outstanding contributions to ExxonMobil's business
performance, continued strengthening of the corporation's worldwide competitive
position, and its progress toward long-range strategic goals. Noting the impact
of the Exxon and Mobil merger during the past three years, and the resultant
delay of some executive moves required to develop the next generation of
corporate management, the board requested, and Mr. Raymond agreed, to defer his
retirement beyond the normal retirement date of August 2003. The restrictions on
the award are designed to retain his leadership through an orderly plan which
will assure continuity in superior corporate management.
In determining Mr. Raymond's total compensation, the BCC considered
Mr. Raymond's level of responsibility, his leadership, and his overall
contribution as CEO. The BCC believes his package is appropriately positioned
relative to the CEOs of U.S.-based oil companies and other major U.S.-based
corporations.
SUMMARY
The BCC is made up of nonemployee directors who do not participate in any of the
compensation plans they administer. The BCC approves or endorses all the
programs that involve compensation paid or awarded to senior executives.
The BCC is responsible for ensuring that ExxonMobil's compensation program
serves the best interests of its shareholders. To help meet this responsibility,
the BCC is guided by an independent analysis prepared by an outside consultant
of the competitiveness of the total compensation of the CEO and other senior
executives. This analysis, based on a survey of comparable positions at 18 other
major corporations both within and outside the oil industry, focuses on the
competitiveness of total compensation for the CEO and other senior executives.
The BCC also considers the results of the salary surveys described above.
In the opinion of the committee, ExxonMobil has an appropriate and competitive
compensation program. The combination of sound base salary, competitive short
term bonuses, and emphasis on long term incentives provides a balanced and
stable foundation for effective executive leadership.
William R. Howell, Chairman James R. Houghton
Michael J. Boskin Reatha Clark King
William T. Esrey
15
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
EXECUTIVE COMPENSATION TABLES
The following tables show the compensation of ExxonMobil's Chairman and the four
other most highly paid executives. See the Board Compensation Committee (BCC)
report beginning on page 12 for an explanation of our compensation philosophy.
All share information listed below reflects the two-for-one stock split
effective June 20, 2001.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
-----------------------------------------------------------------------------
Awards
-------------------------- Payouts
Restricted ---------
Other Annual Stock LTIP All Other
Name and Salary Bonus Compensation Award(s) Options Payouts Compensation
Principal Position Year ($) ($)(b) ($) ($)(d) (#) ($)(f) ($)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
L. R. Raymond 2001 2,850,000 2,700,000 83,091(c) 7,424,000 1,050,000 1,355,130 261,288
CHAIRMAN AND CEO 2000 2,500,000 2,700,000 91,643 9,043,750 1,050,000 2,817,630 227,925
1999 2,110,417 13,900,000 222,571 8,356,250 850,000 0 128,547
....................................................................................................................................
R. Dahan 2001 1,250,000 863,000 5,370 0 500,000 443,520 116,300
EXECUTIVE VICE
PRESIDENT 2000 1,100,000 863,000 5,485 904,375 500,000 893,520 99,689
AND DIRECTOR 1999 953,333 2,640,000 5,484 835,625 400,000 0 75,136
....................................................................................................................................
H. J. Longwell 2001 1,250,000 863,000 6,590 742,400 500,000 443,520 116,300
EXECUTIVE VICE
PRESIDENT 2000 1,100,000 863,000 5,485 904,375 500,000 893,520 99,689
AND DIRECTOR 1999 953,333 2,640,000 5,484 835,625 400,000 0 75,136
....................................................................................................................................
E. A. Renna (a) 2001 1,250,000 863,000 12,806 0 500,000 714,185 75,000
EXECUTIVE VICE
PRESIDENT 2000 1,100,000 863,000 458,101 904,375 500,000 878,111 105,420
AND DIRECTOR 1999 828,750 2,880,500 0 835,625 703,632(e) 1,172,501 102,095
(RETIRED--1/31/02)
....................................................................................................................................
K. T. Koonce 2001 700,000 475,000 3,418 371,200 220,000 204,705 65,876
VICE PRESIDENT; 2000 620,000 412,500 1,181 452,188 180,000 425,205 67,087
PRESIDENT, EXXONMOBIL 1999 546,667 515,000 0 417,813 140,000 0 60,378
PRODUCTION COMPANY
(a) Mr. Renna became an executive of ExxonMobil when the merger closed in
November 1999. In order to provide more complete and comparable
information, we have included in this table compensation paid by Mobil
before the merger.
(b) 1999 bonus includes regular annual bonus plus special merger bonus.
(c) Represents certain perquisites, including membership fees of $36,920,
and tax assistance of $31,598.
(d) The value shown is the number of restricted shares times the market
price of ExxonMobil stock on the day of grant. As of December 31, 2001,
the total number and value of restricted shares held by these
executives was: Mr. Raymond: 1,160,000 shares ($45,588,000);
Mr. Dahan: 132,000 ($5,187,600); Mr. Longwell: 152,000 ($5,973,600);
Mr. Renna: 40,000 ($1,572,000); and Mr. Koonce: 30,000 ($1,179,000).
The values given do not reflect the fact that shares are restricted.
The executives receive the same cash dividends on restricted shares as
holders of regular common stock, but cannot sell the shares during the
restricted period. See page 14 for more details on these shares, which
we call Career Shares.
(e) Includes 1999 ExxonMobil grant plus Mobil grants of 303,632 shares to
Mr. Renna.
(f) Settlements of Earnings Bonus Units. See page 19 for more details.
(g) 2001 values represent company credits and other allocations under
defined contribution plans (Mr. Raymond: $171,000; Mr. Dahan: $76,700;
Mr. Longwell: $76,700; Mr. Renna: $75,000; and Mr. Koonce: $43,700);
and costs of executive life insurance (Mr. Raymond: $90,288;
Mr. Dahan: $39,600; Mr. Longwell: $39,600; and Mr. Koonce: $22,176).
16
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
Individual Grants (a) Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option Term (b)
----------------------------------------------------------------------------
% of
Total
Options
Number of Granted
Securities to Exercise
Underlying Employees or If Stock If Stock
Options in Base At $60.46 At $96.28
Granted Fiscal Price Expiration 5% 10%
Name (#) Year ($/Sh) Date ($) ($)
- ---------------------------------------------------------------------------------------------------
All Shareholders' N/A N/A N/A N/A 158.6 billion 401.9 billion
Stock Appreciation
...................................................................................................
L. R. Raymond 1,050,000 3.0 37.12 11/27/11 24,511,797 62,117,706
...................................................................................................
R. Dahan 500,000 1.4 37.12 11/27/11 11,672,284 29,579,860
...................................................................................................
H. J. Longwell 500,000 1.4 37.12 11/27/11 11,672,284 29,579,860
...................................................................................................
E. A. Renna 500,000 1.4 37.12 11/27/11 11,672,284 29,579,860
...................................................................................................
K. T. Koonce 220,000 0.6 37.12 11/27/11 5,135,805 13,015,138
(a) The exercise price is the market price of ExxonMobil stock on the grant
date. Options granted to senior executives become exercisable after one
year or on death. The maximum option term is 10 years after grant or
five years after death, if earlier. Options may be forfeited in cases
of detrimental activity or early termination of employment. We did not
grant any stock appreciation rights to senior executives.
(b) These columns show the gains option holders and all shareholders could
realize if ExxonMobil stock appreciates at a 5% or 10% rate. These
growth rates are arbitrary assumptions specified by the SEC, not
ExxonMobil's predictions.
17
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
- -----------------------------------------------------------------------------------------------
Number Number of Securities
of Underlying Value of Unexercised,
Shares Unexercised In-the-Money
Underlying Options/SARs at Options/SARs
Options/SARs Value FY-End (#) at FY-End ($)*
Exercised Realized --------------------- ------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------
L. R. Raymond 556,856 16,366,988 7,070,000 1,050,000 81,525,687 2,289,000
...............................................................................................
R. Dahan 100,000 2,479,792 2,384,670 500,000 16,506,408 1,090,000
...............................................................................................
H. J. Longwell 0 0 3,260,000 500,000 36,892,687 1,090,000
...............................................................................................
E. A. Renna 66,566 1,754,441 1,863,758 803,632 16,781,719 3,397,604
...............................................................................................
K. T. Koonce 103,828 2,603,835 1,203,024 220,000 14,269,898 479,600
* The difference between the option exercise price and the market price of
ExxonMobil stock at year-end. The actual gain, if any, an executive realizes
will depend on the market price of ExxonMobil stock at the time of exercise.
"In-the-money" means the market price of the stock is greater than the
exercise price of the option on the date specified.
18
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------
Number of Performance or
Shares, Other Period Estimated Future Payouts Under
Units or Until Non-Stock Price-Based Plans
Other Maturation or --------------------------------
Name Rights Payout Maximum ($)
- ---------------------------------------------------------------------------------------------
L. R. Raymond 900,000 5 years maximum 2,700,000
.............................................................................................
R. Dahan 287,340 5 years maximum 862,020
.............................................................................................
H. J. Longwell 287,340 5 years maximum 862,020
.............................................................................................
E. A. Renna 287,340 5 years maximum 862,020
.............................................................................................
K. T. Koonce 158,330 5 years maximum 474,990
The awards shown above are Earnings Bonus Units or EBUs. Each EBU entitles the
executive to receive an amount equal to ExxonMobil's cumulative net income per
common share as announced each quarter beginning after the grant. Payout
occurs on the fifth anniversary of the grant or when the maximum settlement
value of $3.00 per unit is reached, if earlier. SEC rules classify EBUs as
long term incentives, but because of the nature of ExxonMobil's business we
view EBUs as short term awards. See page 13 for more details.
19
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
Years of Accredited Service
---------------------------------------------
Remuneration* 30 35 40 45
- --------------------------------------------------------------------
1,000,000 480,000 560,000 640,000 720,000
....................................................................
1,500,000 720,000 840,000 960,000 1,080,000
....................................................................
2,000,000 960,000 1,120,000 1,280,000 1,440,000
....................................................................
2,500,000 1,200,000 1,400,000 1,600,000 1,800,000
....................................................................
3,000,000 1,440,000 1,680,000 1,920,000 2,160,000
....................................................................
3,500,000 1,680,000 1,960,000 2,240,000 2,520,000
....................................................................
4,000,000 1,920,000 2,240,000 2,560,000 2,880,000
....................................................................
4,500,000 2,160,000 2,520,000 2,880,000 3,240,000
....................................................................
5,000,000 2,400,000 2,800,000 3,200,000 3,600,000
....................................................................
5,500,000 2,640,000 3,080,000 3,520,000 3,960,000
....................................................................
6,000,000 2,880,000 3,360,000 3,840,000 4,320,000
....................................................................
6,500,000 3,120,000 3,640,000 4,160,000 4,680,000
....................................................................
7,000,000 3,360,000 3,920,000 4,480,000 5,040,000
....................................................................
7,500,000 3,600,000 4,200,000 4,800,000 5,400,000
....................................................................
8,000,000 3,840,000 4,480,000 5,120,000 5,760,000
....................................................................
8,500,000 4,080,000 4,760,000 5,440,000 6,120,000
....................................................................
9,000,000 4,320,000 5,040,000 5,760,000 6,480,000
....................................................................
* For plan purposes, this means: (1) average annual salary over the highest
paid 36-month period during the employee's last 10 years of employment;
plus, (2) the average of the three highest cash bonus and EBU awards during
the employee's last five years of employment.
20
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
Employees who meet the age, service, and other requirements of ExxonMobil's
pension plans are eligible for a pension after retirement. The table shows the
approximate yearly benefit that would be paid to an ExxonMobil employee in the
top compensation and period of service categories. The table reflects a
five-year certain and life annuity form of payment. Retiring employees may also
elect to receive an equivalent lump-sum payment instead of an annuity. The
actual benefit would be reduced by a portion of the employee's Social Security
benefits.
Under the ExxonMobil plans, covered compensation for the named executive
officers includes the amount shown in the "Salary" column of the Summary
Compensation Table; the regular bonus shown in the "Bonus" column of that table;
and the EBU award shown in the Long Term Incentive Plans table.
At February 28, 2002, the covered compensation and years of service were
$7,139,589 (39 years) for Mr. Raymond; $2,594,183 (40 years) for Mr. Dahan;
$2,594,183 (39 years) for Mr. Longwell; and $1,374,056 (40 years) for
Mr. Koonce. At Mr. Renna's retirement on January 31, 2002, his covered
compensation and years of service were $2,518,600 (33 years). The benefit
payable to Mr. Renna is calculated on the basis of combined compensation and
years of service with Mobil and ExxonMobil.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires that our
executive officers and directors file reports of their ownership and changes in
ownership of ExxonMobil stock on Forms 3, 4, and 5 with the Securities and
Exchange Commission and New York Stock Exchange. The Form 3 report of initial
holdings filed when J. S. Simon, an ExxonMobil Vice President, first became an
executive officer in 1999 inadvertently failed to include a previously-granted
deferred share bonus. The deferred shares are not actually deliverable until
after Mr. Simon retires, and are subject to forfeiture until then.
21
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
STOCK PERFORMANCE GRAPHS
Annual total returns to ExxonMobil shareholders were (8)% in 2001, 10% in 2000,
and 13% in 1999 and have averaged 13% over the past five years. Total returns
mean share price increase plus dividends paid, with dividends reinvested. The
graphs below show the relative investment performance of ExxonMobil common
stock, the S&P 500, and an industry peer group over the last five- and ten-year
periods. The peer group consists of four other international integrated oil
companies: BP, ChevronTexaco, Royal Dutch, and Shell Transport and Trading.
Since last year's proxy statement, Texaco ceased to be a component of the peer
group as a result of its merger with Chevron.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT YEAR-END 1996
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
1996 1997 1998 1999 2000 2001
ExxonMobil 100 128 157 177 195 180
S&P 500 100 133 171 208 189 166
Industry Group 100 126 126 162 153 143
Fiscal Years Ended December 31
TEN-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED AT YEAR-END 1991
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
ExxonMobil 100 105 114 114 158 200 256 314 353 389 359
S&P 500 100 108 118 120 165 203 271 348 421 383 338
Industry Group 100 94 128 142 187 245 309 309 398 375 352
Fiscal Years Ended December 31
22
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
BOARD AUDIT COMMITTEE REPORT
The primary function of our committee is oversight of the corporation's
financial reporting process, public financial reports, internal accounting and
financial controls, and the independent audit of the annual consolidated
financial statements. The board, in its business judgment, has determined that
our members are "independent," as required by the New York Stock Exchange. Our
committee acts under a charter attached to this proxy statement. We review the
adequacy of the charter at least annually. Our members are not professionally
engaged in the practice of accounting or auditing, and are not experts in either
of those fields or in auditor independence.
In carrying out our responsibilities, we look to management and the independent
auditors. Management is responsible for the preparation, presentation and
integrity of the corporation's financial statements, the financial reporting
process and internal controls. The independent auditors are responsible for
auditing the corporation's annual financial statements in accordance with
generally accepted auditing standards and expressing an opinion as to the
statements' conformity with generally accepted accounting principles.
In performance of our oversight function, we have reviewed and discussed the
consolidated financial statements with management and PricewaterhouseCoopers LLP
(PwC), the independent auditors. Management and PwC told us that the
corporation's consolidated financial statements were fairly stated in accordance
with generally accepted accounting principles. We discussed with PwC matters
covered by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
We have also discussed with PwC their independence from the corporation and
management, including the matters in Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) and the letter and
disclosures from PwC to us pursuant to Standard No. 1. We considered whether the
information technology consulting services relating to financial information
systems design and implementation and other non-audit services provided by PwC
to the corporation are compatible with maintaining the auditors' independence.
We discussed with the corporation's internal auditors and PwC the overall scope
and plans for their respective audits. We met with the internal auditors and
PwC, with and without management present, to discuss the results of their
examinations, their evaluations of the corporation's internal controls, and the
overall quality of the corporation's financial reporting.
Based on the reviews and discussions referred to above, in reliance on
management and PwC, and subject to the limitations of our role, we recommended
to the board, and the board has approved, the inclusion of the audited financial
statements in the corporation's annual report on Form 10-K for the year ended
December 31, 2001, for filing with the Securities and Exchange Commission.
We have also recommended to the board, and the board has appointed, PwC to audit
the corporation's financial statements for 2002, subject to shareholder
ratification of that appointment.
James R. Houghton, Chairman
William T. Esrey William R. Howell Helene L. Kaplan
Reatha Clark King Marilyn Carlson Nelson
23
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
BOARD OF DIRECTORS PROPOSAL: RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 2 ON THE PROXY CARD)
Based on the recommendations of the Board Audit Committee, the board has
appointed PricewaterhouseCoopers LLP (PwC) to audit our financial statements for
2002. We are asking you to ratify that appointment.
AUDIT FEES
The aggregate fees paid to PwC for professional services rendered for the audit
of our annual financial statements for the fiscal year ended December 31, 2001,
and for the reviews of the financial statements included in our quarterly
reports on Form 10-Q for that fiscal year, are estimated to be $17.7 million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The aggregate fees billed by PwC for professional services rendered to
ExxonMobil managed financial information systems design and implementation
projects for the fiscal year ended December 31, 2001 were $49.8 million.
Competitive bidding was used by ExxonMobil project executives for each of three
projects where ExxonMobil project teams were assisted by PwC resources. The
ExxonMobil project executives responsible for overall system design and
implementation used PwC to assist with such services as systems configuration
and training. In each case, Board Audit Committee approval was obtained prior to
engaging PwC for assistance. ExxonMobil has made all project management
decisions including the selection of systems processes and controls. ExxonMobil
internal audit department personnel performed design evaluations, as well as,
pre and post implementation reviews to evaluate the adequacy of internal
accounting and financial reporting controls associated with the enterprise
business system projects. Two of the projects were completed during 2001. The
final project is expected to be completed in 2002.
PwC has announced that it plans to separate its management consulting business,
PwC Consulting, through an initial public offering.
ALL OTHER FEES
The aggregate fees billed by PwC for services rendered to us, other than the
services described above under "Audit Fees" and "Financial Information Systems
Design and Implementation Fees," for the fiscal year ended December 31, 2001
were $19.3 million. The more significant services are described below.
- - Tax compliance and other tax services totaled $14.1 million. The services
primarily included tax preparation assistance for individual ExxonMobil
expatriate employees. PwC also assisted various ExxonMobil affiliates with the
preparation of local tax filings and tax valuation services.
- - Other audit-related services totaled $3.0 million. The services were
principally comprised of benefit plan and joint venture audits, cost
certifications and government compliance reviews.
24
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
- - Actuarial services related to pension plan and other post-employment benefit
obligations totaled $1.9 million. PwC finalized the sale of the business that
provided these services on December 31, 2001.
PwC has been ExxonMobil's independent auditing firm for many years, and we
believe they are well qualified for the job. A PwC representative will be at the
annual meeting to answer appropriate questions and to make a statement if he
desires.
THE BOARD RECOMMENDS YOU VOTE FOR THIS PROPOSAL.
SHAREHOLDER PROPOSALS
(ITEMS 3 THROUGH 10 ON THE PROXY CARD)
We expect the following proposals to be presented by shareholders at the annual
meeting. Following SEC rules, other than minor formatting changes, we are
reprinting the proposals and supporting statements as they were submitted to us.
We take no responsibility for them. On request to the Secretary at the address
listed under "Contact information" on page 46, we will provide the names of
co-sponsors and information about the sponsors' shareholdings.
THE BOARD RECOMMENDS YOU VOTE AGAINST THESE PROPOSALS FOR THE REASONS WE GIVE
AFTER EACH ONE.
SHAREHOLDER PROPOSAL: GOVERNMENT SERVICE
(ITEM 3 ON THE PROXY CARD)
This proposal was submitted by Mrs. Evelyn Y. Davis, Watergate Office Building,
2600 Virginia Avenue, N.W., Suite 215, Washington, DC 20037.
"RESOLVED: That the stockholders of ExxonMobil assembled in Annual Meeting in
person and by proxy hereby request the Board of Directors to have the Company
furnish the stockholders each year with a list of people employed by the
Corporation with the rank of Vice President or above, or as a consultant, or as
a lobbyist, or as legal counsel or investment banker or director, who, in the
previous five years have served in any governmental capacity, whether Federal,
City or State, or as a staff member of any CONGRESSIONAL COMMITTEE or regulatory
agency, and to disclose to the stockholders whether such person was engaged in
any matter which had a bearing on the business of the Corporation and/or its
subsidiaries, provided that information directly affecting the competitive
position of the Corporation may be omitted.
REASONS: Full disclosure on these matters is essential at ExxonMobil because of
its many dealings with Federal and State agencies, and because of pending issues
forthcoming in Congress and/or State and Regulatory Agencies.
25
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
Last year the owners of 101.1 million shares, representing 4.5% of shares
voting, voted FOR this proposal.
If you AGREE, please mark your proxy FOR this resolution."
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
The proponent submitted this same proposal for the ExxonMobil annual meeting
last year when more than 95% of the votes cast by shareholders were AGAINST. As
previously stated, this proposal would serve no useful purpose and would entail
significant burdens in trying to interpret and then implement its vague
requirements.
The board interprets this resolution as implying that individuals now associated
with ExxonMobil who were once affiliated with federal, state or municipal
governments might use their past associations in an inappropriate manner. While
there may be rare occasions when ExxonMobil's employment requirements are met by
someone who also happens to have had prior government experience, to list such
persons solely because of past government associations seems to imply that this
is the reason for employment and that he or she might behave in an unethical
manner. We believe such inference is incorrect in practice and assumes behavior
that is inconsistent with the corporation's long standing STANDARDS OF BUSINESS
CONDUCT. Qualified employees who volunteer to serve in the public interest do so
openly and no useful purpose would be served by publishing a list as proposed in
this resolution.
Further, the listing of outside consultants, investment bankers and legal
counsel with previous government service, as required by this resolution, would
present the practical problem of trying to ascertain information about past
activities of all individuals in those outside firms who could fall under the
vaguely defined requirements of this proposal. As a result, this proposal might
make it difficult for the corporation to obtain the most qualified outside
advisors.
SHAREHOLDER PROPOSAL: POLICY ON BOARD DIVERSITY
(ITEM 4 ON THE PROXY CARD)
This proposal was submitted by Mr. Tom Gniewek, 123 Norwood Circle, Camden,
Tennessee 38320.
"WHEREAS shareholders believe that our board of directors needs to be more
representative of shareholders and reflect a diverse workforce and population so
our company can remain competitive and,
Recently the Investor Responsibility Research Center reported inclusiveness at
senior management and board levels was only 9% within Fortune 500 companies.
26
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
If we are to successfully compete in the increasingly diverse global marketplace
of the future, we must select the best people regardless of race, gender,
religion or physical challenge.
We believe a more diverse board with its wider range of perspectives would
improve the quality of corporate decision-making. We request our corporation to
enlarge its search for qualified board members including minorities and women.
The recent proxy of W.R. Grace states their Board... 'recognizes that its
composition should reflect the global nature of the company's operation and the
diversity of its workforce. The Board also recognizes that it is in a unique
position to 'set the tone at the top' and to demonstrate its belief that
diversity makes good business sense.'
Though ExxonMobil has three women, one of whom is African American on its board,
we do believe this is inadequate to provide the necessary diversity for
ExxonMobil to effectively compete in the future.
We request that the Board promptly take steps to include additional minorities
and women candidates for nominations to the Board starting in 2001 and
thereafter.
THEREFORE, BE IT RESOLVED that the shareholders request:
The Board issue a policy publicly committing the company to a more diverse
board, a program of steps, and the timeline to move further in that direction.
The Board make available an annual report starting in 2001 summarizing efforts
to encourage and increase the diversification of:
- our Board of Directors
- our Board search firms
- all Board of Directors committees.
NOTES: Last year 90.3% of votes were cast against this proxy and 9.7% in favor.
The previous year 7.9% was in favor. This is indicative of stockholder support
which this proxy commands. Please vote."
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
As the proponent indicates above, more than 92% and 90% of votes cast by
shareholders in 2000 and 2001, respectively, were cast AGAINST this proposal.
The board is committed to the diversity of its membership. However, we believe
that developing and issuing another policy addressing board diversity and
preparing a related annual report would replicate current policy and practice
and create an unnecessary expense.
Again this year, the proposal essentially asks the board to do what it is
already doing. The board has reviewed and approved "Guidelines for Selection of
Nonemployee Directors," which
27
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
state that the corporation "seeks candidates with diverse backgrounds who
possess knowledge and skills in areas of importance to the corporation, such as
management, finance, marketing, technology, law, international business, or
public service." The guidelines, which are made available on request to any
interested shareholder, also state that the corporation "recognizes the strength
and effectiveness of the board reflects the balance, experience, and diversity
of the individual directors..." The Board Affairs Committee, whose members are
all nonemployee directors, is responsible for recommending these guidelines and
criteria as to the desired qualifications for director and for reviewing
qualifications of individuals suggested as potential candidates for director.
Mrs. Nelson is currently chair of the Board Affairs Committee.
The board is always searching for the most qualified candidates, regardless of
race, sex, ethnicity, religion, or any other personal characteristic, with the
background, experience, knowledge, and skills to oversee the operations of a
corporation as large and complex as ExxonMobil.
SHAREHOLDER PROPOSAL: HUMAN RIGHTS POLICY
(ITEM 5 ON THE PROXY CARD)
This proposal was submitted by Amnesty International USA, 322 Eighth Avenue, New
York, New York 10001, as lead proponent of a filing group.
"WHEREAS, we believe that transnational corporations operating in countries with
repressive governments, ethnic conflict, weak rule of law, endemic corruption,
or poor labor and environmental standards face serious risks to their reputation
and share value if they are seen to be responsible for, or complicit in, human
rights violations; and,
WHEREAS, Our company (Exxon Mobil Corporation) operates in several countries
where allegations of serious human rights violations have been made including:
Angola, Cameroon, Chad, Colombia, Indonesia, and Nigeria; and,
WHEREAS, we believe our company does not possess a comprehensive human rights
policy that would enable it to effectively manage and avoid these risks; and,
WHEREAS, the United Nations Universal Declaration of Human Rights (1948) is
recognized as the basic international standard for human rights; and,
WHEREAS, several of our company's major competitors have already adopted a
comprehensive human rights policy based upon the Universal Declaration of Human
Rights; and,
WHEREAS, we believe that significant commercial advantages may accrue to our
company by adopting a comprehensive human rights policy including: enhanced
corporate reputation, improved employee recruitment and retention, improved
community and stakeholder relations, and reduced risk of adverse publicity,
consumer boycotts, divestment campaigns, and law suits;
28
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
THEREFORE BE IT RESOLVED that the shareholders request the Board of Directors of
Exxon Mobil Corporation develop and adopt a comprehensive and verifiable human
rights policy which shall include an explicit commitment to support and uphold
the principles and values contained in the Universal Declaration of Human
Rights.
BE IT FURTHER RESOLVED that the shareholders request the Board of Directors
adopt such a policy at the earliest possible time and that they report on the
progress made in this regard no later than November 1, 2002.
SUPPORTING STATEMENT: In addition to basing our company's human rights policy on
the Universal Declaration of Human Rights, we believe that any adequate company
human rights policy should also include consideration of the following:
1. Workplace standards based upon the core conventions of the International
Labor Organization (ILO Conventions No. 29, 87, 98, 100, 105, 111, 138,
and 182).
2. A policy on the use of security personnel, both private security and
security forces provided by the government of a host country, that is
based upon and consistent with internationally accepted human rights
norms, such as the U.N. Code of Conduct for Law Enforcement Officials.
3. A policy requiring a human rights and social impact assessment to be
conducted prior to our company's decision to invest in countries that are
experiencing civil conflict or which have poor human rights records, as
evidenced by credible reports by independent human rights organizations
or by the annual country reports on human rights prepared by the U.S.
Department of State.
4. A plan for implementing these commitments and policies throughout our
company's global operations that provides for a secure and independent
complaint mechanism, provisions for consultation with local affected
communities, provisions for social auditing by credible independent
agencies, and provisions for annual public reporting."
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
ExxonMobil condemns human rights violations in any form. We believe that our
actions and our practices as outlined in the STANDARDS OF BUSINESS CONDUCT, and
other documents, are consistent with the spirit and intent of the principles set
forth in the Universal Declaration of Human Rights, to the extent that the
provisions are relevant to private entities.
The shareholder proposal claims that the company "does not possess a
comprehensive human rights policy," with the objective of effectively managing
and avoiding the risks of operating in certain countries where "allegations of
serious human rights violations have been made." In fact, the company has a
comprehensive approach to implementing actions and policies that guide worldwide
operations, including actions necessary to ensure appropriate regard for human
rights in all locations where the company and its affiliates operate.
29
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
The company and its affiliates operate in over 200 countries and territories
around the world. Specific guidance is provided to ensure that managers,
supervisors, and all other employees understand senior management's expectations
with regard to operating in diverse cultures and dispersed locations. Exxon
Mobil Corporation's Guiding Principles and STANDARDS OF BUSINESS CONDUCT, which
are intentionally broad, serve as the foundation for the company's activities.
These are applied uniformly around the globe and are modified only as required
by local law. A copy of these principles and standards is given to each employee
worldwide.
In particular, our Guiding Principles and STANDARDS OF BUSINESS CONDUCT require
adherence to the highest ethical standards, including being a good corporate
citizen, obeying all laws and regulations, and respecting local and national
cultures. Our Ethics Policy, which is one of the core policies that constitute
the STANDARDS OF BUSINESS CONDUCT, states that even where laws are permissive,
the company will choose the course of highest integrity in conducting its
operations. These broad principles and policies extend to all activities of the
company, including appropriate respect for human rights wherever the company and
its affiliates operate.
To ensure adherence to the requirements of these principles and policies,
management has put in place systems for communicating with employees and for
monitoring compliance. For example, we conducted Business Practice Reviews in
all functions and locations worldwide in 2000 and early 2001. All supervisors
and most non-supervisory employees were required to participate. During these
reviews, the requirements of our principles and policies were discussed, and
employees were encouraged to raise any issues about these requirements in
general, or about how the requirements apply to specific work situations.
These Business Practices Reviews will be conducted periodically in the future.
Also, employees are encouraged to raise issues at any time with their
supervisors, or to raise questions or disclose any potential problems in
confidence through a publicized phone number. To ensure management stewardship,
the company requires managers to confirm annually that they and their
organization are in compliance with corporate policies.
With respect to security issues, we recognize that security and respect for
human rights can and should be consistent. We have long been committed to the
value of engaging with citizens and host governments to contribute to the
welfare of the local community while mitigating any potential for conflict where
possible. In areas where we operate, we make a direct and concrete contribution
to furthering human rights by enhancing economic and social well-being. We are
supporting numerous community-based initiatives around the world to develop
institutional capacities in health and education fields, areas considered
fundamental to the universal enjoyment of human rights.
SHAREHOLDER PROPOSAL: EXECUTIVE COMPENSATION FACTORS
(ITEM 6 ON THE PROXY CARD)
This proposal was submitted by Sisters of St. Dominic of Caldwell, New Jersey,
52 Old Swartswood Station Road, Newton, New Jersey 07860, as lead proponent of a
filing group.
30
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
"WHEREAS:
- We believe that executive compensation should reflect not only the
financial performance of a company, but also the total performance,
including social and environmental criteria;
- During the period 1990-2000, corporate profits rose 114%, the S&P 500 rose
300%, and CEO pay rose 571%. During the same period, average worker pay
rose 37%;
- The average large company CEO made 531 times more than the average
production worker in 1999 (BUSINESS WEEK). If the pay of the average
manufacturing worker had increased as fast as CEO pay between 1990-2000,
it would be $120,491/year, not $24,668/yr. If minimum wage rose as fast as
CEO pay it would be $25.50/hour, not $5.15/hour;
- Business leaders and thinkers ranging from J.P. Morgan to Peter Drucker
have argued against wide pay gaps and call for limits on executive pay;
- ExxonMobil's CEO received $41,696,282 in overall compensation in 2000
(2001 proxy statement);
- ExxonMobil has been sued for up to $4.7 million for nearly 200 violations
of the Clean Air Act and has been sued with a partner company for
$4.8 million for toxic discharges into San Francisco Bay (THE HERALD,
Glasgow). Federal and State agencies have initiated numerous actions
against the company. Our liabilities for the Valdez spill have only
recently been settled.
RESOLVED: Shareholders request that the Board Compensation Committee should
consider non-financial factors, including social and environmental concerns, in
determining compensation for top executives. We recommend the Committee consider
setting executive performance goals that take into account disparities between
increases in top executives' compensation and that of the lowest paid workers,
as well as to environmental liability and progress.
STATEMENT OF SUPPORT
Links between executive compensation and environmental performance do not impose
arbitrary limits. Instead, they address issues of
- The lost profitability represented by waste by-products released into the
environment instead of being utilized in production processes.
- The increasing detrimental and unstable environmental impacts of operating
waste and output.
By joining executive compensation with social and environmental liability and
progress, our company can establish social and environmental accountability as
an integral business goal that positively impacts the bottom line and helps to
reverse global trends of waste and degradation."
31
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
The proponent submitted essentially the same proposal for the ExxonMobil annual
meetings in 2000 and in 2001. More than 90% of the votes cast by shareholders
were AGAINST on both occasions.
The Board Compensation Committee (BCC) does consider non-financial factors,
including social and environmental concerns, in determining compensation for top
executives. As described in the Board Compensation Committee Report starting on
page 12 of this proxy statement, the BCC establishes a ceiling for incentive
awards each year based on ExxonMobil's business performance, progress towards
long-term goals and competitive positions. Some of the measures of performance
considered by the BCC are financial results, including operational earnings and
cost management. In addition, corporate citizenship, safety performance,
environmental performance, and operational excellence are important factors
which are also reviewed with and considered by the BCC. Environmental issues are
discussed or reported at board and committee meetings on a regular basis. The
BCC members are privy to all this information as members of the board, and they
indeed received information relating to the company's environmental, corporate
citizenship and financial performance at the very meeting at which the committee
set specific compensation levels.
As further stated in the BCC Report, the committee does not assign specific
weights to any of these factors, as the BCC does not think that narrow,
quantitative measures or formulas are sufficient for determining executive
compensation. Efforts to change the company's executive compensation program to
a formula driven system could jeopardize the corporation's ability to maintain a
competitive compensation system which attracts, retains and motivates key
executives and would not, therefore, be in the best interests of the
shareholders.
SHAREHOLDER PROPOSAL: ADDITIONAL REPORT ON ANWR DRILLING
(ITEM 7 ON THE PROXY CARD)
This proposal was submitted by Trillium Asset Management Corporation, 711
Atlantic Avenue, Boston, Massachusetts 02111, as lead proponent of a filing
group.
"WHEREAS: the Arctic National Wildlife Refuge is the only conservation area in
the nation that provides a complete range of Arctic and sub-Arctic ecosystems
balanced with a wide variety of wildlife, including large populations of
caribou, muskoxen, polar bears, snow geese and 180 species of other migratory
birds;
the U.S. Fish and Wildlife Service considers the Arctic Refuge one of the finest
examples of wilderness left on the planet;
the coastal plain of the Arctic Refuge is the only section of Alaska's entire
North Slope not open for oil and gas leasing, exploration and production; and
32
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
RESOLVED: the Shareholders request that Board of Directors prepare a report, at
reasonable cost and omitting proprietary information, on the potential
environmental damage that would result from the company drilling for oil and gas
in the coastal plain of the Arctic National Wildlife Refuge. The report should
also cover the financial costs of the plan and the expected return.
SUPPORTING STATEMENT
'Ninety-five percent of Alaska's most promising oil-bearing lands are already
open for development, but it is imperative that we continue to protect the
wildlife, fish and wilderness that make up the rest of this invaluable part of
our American heritage.'--President Jimmy Carter (1995)
Once part of the largest intact wilderness area in the United States, the North
Slope now hosts one of the world's largest industrial complexes. In fact, oil
companies already have access to 95 percent of Alaska's North Slope. More than
1500 miles of roads and pipelines and thousands of acres of industrial
facilities sprawl over some 400 square miles of once pristine arctic tundra. Oil
operations on the North Slope annually emit roughly 43,000 tons of nitrogen
oxides and 100,000 metric tons of methane, emissions that contribute to smog,
acid rain, and global warming.
The coastal plain is the biological heart of the Refuge, to which the vast
Porcupine River caribou herd migrates each spring to give birth. The Department
of Interior has concluded that development in the coastal plain would result in
major adverse impacts on the caribou population. According to biologists from
the Alaska Department of Fish and Game caribou inhabiting the oil fields do not
thrive as well as members of the same herd that seldom encounter oil-related
facilities.
The coastal plain is also the most important onshore denning area for the entire
South Beaufort Sea polar bear population, and serves as crucial habitat for
muskoxen and for at least 180 bird species that gather there for breeding,
nesting and migratory activities.
Balanced against these priceless resources is the small potential for
economically recoverable oil in the coastal plain. In fact, the most recent
federal estimate predicted that only 3.2 billion barrels would be economically
recoverable in the coastal plain--less than 6 months worth of oil for the United
States.
Vote YES for this proposal, which would improve our Company's reputation as a
leader in environmentally responsible energy recovery."
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
The board supports environmentally responsible development within the Coastal
Plain of the Arctic National Wildlife Refuge (ANWR). Oil and gas exploration and
development in this area is currently prohibited by federal regulations. We
believe that with more than 30 years of oil and gas industry experience on
Alaska's North Slope and with recent technological
33
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
advancements, there is a strong case for the development of ANWR. However, at
this time, the corporation has absolutely no property interests, or rights to
acquire any property interest, or drilling rights in the Coastal Plain. Should
the Federal government choose to authorize that development, the corporation may
pursue those opportunities. We believe such exploration and development can be
accomplished with little threat to the ecology of the Coastal Plain.
This proposal is essentially the same as proposals submitted for the ExxonMobil
annual meetings in 2000 and 2001. More than 90% of the votes cast by
shareholders in both years were AGAINST this proposal. While there has been
considerable discussion in Washington regarding ANWR and the possible
development of this resource, as yet, no change to the current restrictions has
occurred.
The Coastal Plain is an area of about 1.5 million acres within ANWR's
19 million acres. Contrary to the proponents' claim that there is only a "small
potential for economically recoverable oil" in this area, the U.S. Department of
the Interior (DOI) estimates the Coastal Plain could contain between 9 and
16 billion barrels of recoverable oil. Development could significantly
contribute to increased domestic oil production and to a reduction of U.S.
dependence on foreign oil for many years.
An environmental impact report issued by the DOI in 1987 on the Coastal Plain
area concluded that potential impacts from exploration and drilling activities
would be minor or negligible on the wildlife resources, and that production
activities would affect less than one percent of the Coastal Plain area. An
example of such a small footprint can be found at the Alpine field, one of the
most recently developed oil fields on the North Slope, where only 97 acres of
surface land is needed to produce approximately 100,000 barrels of oil per day
from a 40,000 acre oil field.
In the supporting statement, the proponents also speculate about the possible
adverse impacts of Coastal Plain development on wildlife. Alaska Governor Tony
Knowles wrote to the 435 members of Congress in 2001 stating,
"Alaskans understand the importance of treating our land with care and respect.
The more than 20 years experience on Alaska's North Slope provides strong
evidence that oil development at nearby ANWR poses little threat to the Coastal
Plain's ecology. The Central Arctic Caribou Herd occupying the Prudhoe Bay area
has grown steadily from a population of 6,000 in 1978, the year after North
Slope oil production began, to over 27,000 today. The Inupiant people of the
North Slope who depend on the caribou for subsistence are among the strongest
supporters of Coastal Plain oil development."
In addition, over 74% of Alaskans polled in December of 2001 supported
exploration in ANWR.
Given the uncertainties about what, if anything, will change with regard to
current Federal regulations and when those changes might occur, preparation of a
report as requested by the proponents would be so speculative as to be
essentially meaningless. We believe such a report
34
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
would provide little additional information and represent an inappropriate use
of corporate resources.
SHAREHOLDER PROPOSAL: RENEWABLE ENERGY SOURCES
(ITEM 8 ON THE PROXY CARD)
This proposal was submitted by the Province of St. Joseph of the Capuchin Order,
1015 North Ninth Street, Milwaukee, Wisconsin 53233, as lead proponent of a
filing group.
"WHEREAS:
- Growing evidence points to global warming caused, in part, by fossil fuel
burning. At the same time, in our opinion an increasing number of voices
are calling for the development of alternative energy sources to reduce
our nation's over-dependence on fossil fuels for its energy supply;
- The European Union's energy ministers are committed to doubling their use
of renewable energy by 2010;
- The Intergovernmental Panel on Climate Change has found 'new and stronger
evidence that most of the warming observed over the last 50 years is
attributed to human activity' (IPCC, 2001: 10), and that 'stabilization of
the concentration of carbon dioxide at its present level could only be
achieved through an immediate reduction in its emissions of 50-70% and
further reductions thereafter.' (IPCC, 1995)
- International energy companies will face unprecedented pressure to reduce
emissions and meet clean energy demands, since 178 countries have signed
onto the final emissions reductions rules for the Kyoto Protocol, even
though the U.S. refused to do so (Financial Times, 07/24/01). Our company
operates in many of these countries.
- Committed to combat pollution from fossil fuels and respond to growing
demands for clean energy, two of our main international competitors, Royal
Dutch/Shell and BP, have significantly increased their development of
renewables. Royal Dutch/Shell will spend another $0.5-1.0 billion on
renewable energy in the next five years. In July, BP announced its goal of
being 'a new company able to offer global energy solutions' through
gasoline and diesel producing lower emissions and becoming 'the world's
leading producer of solar power.'
- Meanwhile we believe ExxonMobil continues to resist efforts urging
management to diversify its energy products from an over-dependence on
pollution-causing fuels and begin similar demonstrable efforts to expand
'beyond petroleum.' In its January 20, 2000 filing of legal arguments to
disallow this resolution, management stated: 'Renewable energy sources
currently compose only an extremely insignificant percentage of the
company's business.'
35
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
- ExxonMobil's resistance to investing in renewable energy has contributed
to a consumer boycott based on Europe. This boycott is being supported by
government ministers, the public and the media. We believe this may
threaten long-term shareholder value.
- ExxonMobil has made some efforts to develop renewable sources of energy;
however, by its concentration on cheap fossil fuels, it is cutting itself
'out of the loop' in the clean business segment. At the same time, we
believe its ongoing denial of climatic effects from fossil fuel burning is
increasingly isolating it from the innovative policies and strategies of
our main international competitors (such as Shell and BP).
RESOLVED: shareholders request the Board to prepare a report (at reasonable cost
and omitting proprietary information) by September 1, 2002 outlining how it will
promote renewable energy sources and develop strategic plans to help bring
bioenergy and other renewable energy sources into ExxonMobil's energy mix.
SUPPORTING STATEMENT
Supporting this resolution will indicate shareholder desire to emphasize greater
diversification of energy products through the development of more non-polluting
energy sources."
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
The proponents of this proposal have requested that the company pursue renewable
energy sources without offering a sound business case for evaluation. Proponents
have submitted similar proposals in the past for ExxonMobil annual meetings. In
2000, over 93 percent of the votes cast by shareholders were AGAINST, and in
2001 over 91 percent were AGAINST.
The proponents have cast renewables as an attractive business opportunity that
also addresses the risk of climate change. ExxonMobil, in contrast to the
proponents, has considerable experience in the evaluation of business
opportunities and we do not share either view at this time. Participation in
noneconomic projects would dilute shareholder value. As with other potential
business options, should future developments occur that change our analysis, we
would reconsider our position.
ExxonMobil has substantial experience in renewable energy as a business venture.
The corporation has previously participated in significant commercial ventures
with renewable energy, particularly solar energy, involving expenditures in
excess of $500 million on research and commercial activities.
In considering renewables as a business opportunity, we note that renewables
have not demonstrated an ability to compete effectively on a large scale with
fossil fuels, nor are they expected to reach such a position for the foreseeable
future. Performance to date indicates that to have any significant impact on
conventional energies, renewables must overcome significant cost and reliability
disadvantages. For example, in electric power generation, solar and wind are
only as dependable as sunshine and the wind, which naturally limits their
reliability for base load or peaking power needs with current technology.
36
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
Also, it is important to note that the use of renewables is not free from impact
on the environment, particularly if deployed on a scale necessary to make an
appreciable contribution to global energy demand. Wind power faces challenges
because of the impact of turbines on wildlife as well as its inherent sight and
sound implications. Large-scale solar power and bio-energy pose significant land
use issues, with the latter also requiring considerable use of water, fertilizer
and energy in planting, cultivation, and harvesting of crops. In our view, these
are significant factors with regard to the potential growth of renewables.
Despite these limitations, we do expect that renewables will continue to grow as
a source of energy to meet future needs, but not to an extent sufficient to make
a meaningful contribution to address climate change concerns. For the
foreseeable future, it is our view that such growth will be highly dependent on
support received through public policies and subsidies as well as through the
capture of small, economical niche markets. While renewable energy supplies are
expanding, it is important to recognize that they are doing so from a very small
base. ExxonMobil's outlook for solar and wind energy indicates that even at a
fairly optimistic growth rate of over 10 percent per year for 2000 to 2020,
their share of the world's energy mix in 2020 will still be less than 0.5
percent.
Related to the outlook for renewables, one of our competitors cited by
proponents has recently published a scenario for future energy supply in which
renewables go through a boom and bust phase over the next 20 years. In their
scenario, renewables do not become truly competitive until after 2040, based on
as-yet-unforeseen technical developments. This illustrates that there is
widespread uncertainty about the growth and economic potential for renewables
over the current planning horizon.
In considering the shareholder proposal, it is important to note that management
must evaluate a renewables option against other business opportunities, in
contrast to the proponents who have not tried to make this comparison. We
believe an investment in renewables faces a greater risk of poor returns than
other available opportunities. As such, it would dilute shareholder return and
negatively impact shareholder value. Therefore, after evaluating relevant
considerations, management does not believe that renewables represent commercial
opportunities at this time. Instead, we will continue to concentrate on our core
energy and petrochemical businesses.
With regard to surface climate change, there continue to be substantial and
well-documented gaps in today's knowledge of climate science. The proponents
believe the science is settled--it is not. However, ExxonMobil recognizes that
the risk of climate change and its potential impacts on society and ecosystems
may prove to be significant. While studies must continue to better understand
these risks and possible consequences, we will continue to take tangible actions
and work with others to develop effective long-term solutions that minimize the
risk of climate change from energy use without unacceptable social and economic
damage.
Our actions include systematic implementation of steps to improve energy
efficiency and reduce emissions. From 1973 to 1998, we were able to improve
energy use at our refineries and chemical plants by more than 35 percent. In
1998, to ensure continued progress in this regard, we instituted our Global
Energy Management System (G-EMS). From this effort, we expect to
37
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
improve our energy efficiency by another 15 percent over the next several years.
Related additional benefits include lower emissions of carbon dioxide, sulfur
dioxide, nitrogen oxide and other gases. A key to our performance gains have
been investments in co-generation facilities that now account for over
40 percent of our power generating capacity with significantly reduced emissions
of up to 50 percent in some cases. These energy savings are equivalent to about
one-fourth the electricity generated by all wind and solar power facilities
worldwide in 2000.
Also, we participate in research and development on a range of innovative
technologies related to our business operations and to use of our products by
customers. Our collaborations with General Motors and Toyota aim to enable the
development of commercially-viable fuel cell vehicles with the potential to make
a dramatic reduction in global greenhouse emissions from transportation.
As a further comment, we believe that proponents are mistaken in other matters
that they cite to justify their proposal. For example, they imply that renewable
energy sources are inevitably "clean," and they suggest that ExxonMobil is not
taking steps to provide clean fuels.
First, the record clearly shows that ExxonMobil works actively to develop and
provide new and improved products with reduced environmental impacts. As
reported by the Foundation for Clean Air Progress, even with dramatically higher
economic activity and vehicle miles traveled in the U.S., five of the six most
important air quality measures have improved since 1970. Lead has fallen by 98
percent; particulates by 75 percent, smog-producing compounds by 42 percent,
sulfur dioxide by 39 percent and carbon monoxide by 28 percent. Only nitrogen
oxides have risen, but by much less than economic growth, and even these
emissions have declined recently. Further enhancements to fuels and engines will
provide additional reductions, promoted in part by our leading-edge research
with General Motors and Toyota.
Second, all energy sources, including renewables as noted earlier, inevitably
impact the environment to some degree. It is the role of sound economic and
energy policy and regulations to balance those impacts versus the relative
benefits. As a company, we remain steadfast in our commitment to minimize any
adverse environmental impacts of our business operations and activities.
Finally, we recognize that there is no single solution to meet future energy
needs and challenges. Enhanced supply of all economic fuels is important, and
within the current spectrum of energy options, some companies may choose to
devote resources to renewable energy. These companies are not limited to the oil
and gas industry, and each may make its own informed judgment as to the expected
value of investments in renewables. Experience, research and policy developments
may alter the prospects for various options, so we will continue to maintain a
close watch for new opportunities. Should prospects for renewables improve in
the years ahead, we expect our management, technical and financial capabilities
would allow us to participate effectively should we decide to again pursue
opportunities in renewables. For now, our assessment is that we will best serve
the interests of our shareholders by focusing our resources in other areas.
38
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
In conclusion, the board recommends you vote against the proponents'
recommendation that the corporation pursue business activity in renewables. For
the reasons noted above, such activity is not in the best interests of
shareholders at this time. However, ExxonMobil remains committed and engaged in
research, innovation, technology development and investment to improve our own
energy efficiency and to meet consumers' demands for new, affordable and
environmentally-improved products.
SHAREHOLDER PROPOSAL: AMENDMENT OF EEO POLICY
(ITEM 9 ON THE PROXY CARD)
This proposal was submitted by the New York City Employees' Retirement System,
1 Centre Street, New York, New York, 10007, as lead proponent of a filing group.
"WHEREAS: ExxonMobil claims to bar all forms of employment discrimination but
its post-merger written policies do not explicitly prohibit discrimination based
on sexual orientation;
Prior to the merger Mobil explicitly prohibited discrimination based on sexual
orientation in its equal employment opportunity policy;
Our competitors Chevron, Sunoco, Atlantic Richfield, BP Amoco and Texaco
explicitly prohibit discrimination based on sexual orientation;
The hundreds of corporations with non-discrimination policies relating to sexual
orientation have a competitive advantage to recruit and retain employees from
the widest talent pool;
Employment discrimination on the basis of sexual orientation diminishes employee
morale and productivity;
Our company has an interest in preventing discrimination and resolving
complaints internally so as to avoid costly litigation and damage to its
reputation as an equal opportunity employer;
San Francisco, Atlanta, Seattle and Los Angeles have adopted legislation
restricting business with companies that do not guarantee equal treatment for
lesbian and gay employees and similar legislation is pending in other
jurisdictions;
Our company has operations in and makes sales to institutions in states and
cities which prohibit discrimination on the basis of sexual orientation;
A recent National Gay and Lesbian Task Force study has found that 16%-44% gay
men and lesbians in twenty cities nationwide experienced workplace harassment or
discrimination based on their sexual orientation;
National public opinion polls consistently find more than three-quarters of the
American people support equal rights in the workplace for gay men, lesbians and
bisexuals;
39
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
RESOLVED: The Shareholders request the Board of Directors to amend ExxonMobil's
written equal employment opportunity policy to explicitly prohibit
discrimination based on sexual orientation and to substantially implement that
policy.
STATEMENT: By implementing a written policy prohibiting discrimination based on
sexual orientation, our Company will ensure a respectful and supportive
atmosphere for all employees and enhance its competitive edge by joining the
growing ranks of companies guaranteeing equal opportunity for all employees."
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
Similar proposals were submitted for the Exxon annual meeting in 1999 and the
ExxonMobil annual meetings in 2000 and 2001. The proposal has been defeated each
year, with votes AGAINST the proposal representing more than 94%, 91% and 87%,
respectively.
We agree with the proponent that discrimination is bad for our business and
employees and that is why we have a broad policy that prohibits any
discrimination. It has always been ExxonMobil's policy not to discriminate on
the basis of sexual orientation or any other non-work-related individual
characteristic. The proponent has argued that this is not our policy or that, if
it is, the policy is not adequately documented, communicated, monitored, and
enforced. We believe it is perfectly clear that, as requested by the proposal,
ExxonMobil has adopted a written policy, practices and procedures, prohibiting
discrimination based on sexual orientation and that we have fully implemented
that policy.
ExxonMobil has an all-inclusive global policy, so that there can be no doubt
among employees, supervisors, contractors, or anyone else that discrimination
and harassment for ANY reason is prohibited. Not only have ExxonMobil's written
policies been in place for a number of years, but communication, training and
monitoring programs are continuously upgraded. Our policies prohibit ANY form of
discrimination or harassment in ANY company workplace, ANYWHERE in the world.
Period.
ExxonMobil prefers an all-inclusive global policy, so that there can be no doubt
among employees, supervisors, or contractors worldwide that discrimination and
harassment for any reason is prohibited. The corporation maintains one
consistent global policy, which makes management's expectations clear. The
language included in the U.S. version of the EEO standards, to the effect that
we provide equal employment opportunity regardless of "RACE, COLOR, SEX,
RELIGION, NATIONAL ORIGIN, CITIZENSHIP STATUS, AGE, PHYSICAL OR MENTAL
DISABILITY, VETERAN OR OTHER LEGALLY PROTECTED STATUS" is NOT a limitation of
the scope of the employment policy. Rather, that language is included to respond
to various U.S. federal legal requirements, including affirmative action
requirements and requirements applicable to government contractors such as
ourselves. The language does not mean, as we clearly document elsewhere in our
employment policy materials, that discrimination is permitted on any other basis
except merit and job-related qualifications.
ExxonMobil's STANDARDS OF BUSINESS CONDUCT, which was distributed to all
employees of the newly merged company in 1999, contains four Guiding Principles
overarching everything we do. As
40
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
we state with respect to employees, "we will strive to hire and retain the most
qualified people available and maximize their opportunities for success through
training and development." This principle is key. ExxonMobil is a meritocracy,
designed to employ the best people and to create an environment in which they
can reach their fullest potential. Discrimination on the basis of sexual
orientation would be contrary to that principle and therefore prohibited at the
outset.
Consistent with the Guiding Principles regarding our employees, we state in the
EEO portions of the Standards that the corporation administers its personnel
policies, programs, and practices in a non-discriminatory manner in all aspects
of the employment relationship, including recruitment, hiring, work assignment,
promotion, transfer, termination, wage and salary administration, and selection
for training. That this language prohibits discrimination on the basis of sexual
orientation is made explicit by the Chairman's statement on sexual orientation
published in the company's newspaper, incorporated into policy training
materials, and by additional confirming materials including statements made in
our proxy statements in response to this shareholder proposal.
The EEO statements in the Standards must be read in conjunction with the
Harassment in the Workplace statements. Together, these constitute the
foundational documents (although by no means the entirety) of our
non-discrimination policy. Training materials use case examples and questions
and answers that specifically state that discrimination based on sexual
orientation is prohibited.
In 2000 and early 2001, Business Practices Reviews were conducted in all
functions and locations around the world. These are meetings of employees, led
by trained personnel and managers, at which the company's key policies and
practices are reviewed and explained with the help of various audiovisual and
written materials. All supervisors and most non-supervisory employees were
required to participate in these reviews. A specific required talking point for
these reviews reads as follows, "No change in intent versus former Exxon or
Mobil policies: policy protection goes beyond the law and includes sexual
orientation."
As part of our ongoing policy compliance stewardship, we also have annual
reporting and compliance monitoring procedures. Global policy stewardship for
year-end 2000 included reports on the status of harassment and equal opportunity
policy implementation, including summaries of harassment complaints that
resulted in disciplinary actions. An annual compliance and representation letter
process as implemented in the fourth quarter of 2001 included distribution of
our employment related policies; a letter to all senior managers emphasizing
their responsibilities regarding maintaining work environments free from
harassment and discrimination; and a requirement for managers to sign and return
a representation letter confirming that they and their organizations are in
compliance with corporate policies.
Our policy prohibiting discrimination on the basis of sexual orientation has
been disseminated to all employees, through written materials, Business
Practices Reviews, and Intranet training modules. These materials remain
continuously available in hard copy and through the company's Intranet site. The
board's unequivocal statements on this issue have been distributed to
ExxonMobil's two-million-plus shareholders, which includes 97% of our U.S.
employees, as part of our proxy materials. Therefore, the board believes the
proposal is moot.
41
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
SHAREHOLDER PROPOSAL: SHAREHOLDER VOTE ON POISON PILLS
(ITEM 10 ON THE PROXY CARD)
This proposal was submitted by Mr. Chris Rossi, P.O. Box 249, Boonville,
California 95415.
"Shareholders request that our Board of Directors seek shareholder approval
prior to adopting any poison pill and also redeem or terminate any pill now in
effect unless it has been approved by a shareholder vote at the next shareholder
meeting.
The poison pill is an important issue for shareholder vote even if our company
does not now have a poison pill or plan to adopt a poison pill in the future in
my view. Currently our board can adopt a poison pill and/or redeem a current
poison pill and adopt a new poison pill:
1. At any time
2. In a short period of time
3. Without shareholder approval
NEGATIVE EFFECTS OF POISON PILLS ON SHAREHOLDER VALUE
A study by the Securities and Exchange Commission found evidence that the
negative effect of poison pills to deter profitable takeover bids outweigh
benefits.
Source: Office of the Chief Economist, Securities and Exchange
Commission, The Effect of Poison Pills on the Wealth of Target
Shareholders, October 23, 1986.
ADDITIONAL SUPPORT FOR THIS PROPOSAL TOPIC
- Pills adversely affect shareholder value.
POWER AND ACCOUNTABILITY, Robert Monks and Nell Minow
- The Council of Institutional Investors
WWW.CII.ORG recommends shareholder approval of all poison pills.
INSTITUTIONAL INVESTOR SUPPORT FOR SHAREHOLDER VOTE
Many institutional investors believe poison pills should be voted on by
shareholders. A poison pill can insulate management at the expense of
shareholders. A poison pill is such a powerful tool that shareholders should be
able to vote on whether it is appropriate. I believe a shareholder vote on
poison pills will avoid an unbalanced concentration of power in our directors
who could focus on narrow interests at the expense of the vast majority of
shareholders.
Many institutional investors believe poison pills should be submitted for a vote
by shareholders. Institutional investors include:
(1) Teachers Insurance and Annuity Association College Retirement Equities Fund
(TIAA-CREF). Source: TIAA-CREF Policy Statement on Corporate Governance.
(2) California Public Employees Retirement System (CalPERS). Source: CalPERS
U.S. Corporate Governance Principles.
42
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
INSTITUTIONAL INVESTOR SUPPORT IS HIGH-CALIBER SUPPORT
Shareholder right to vote on poison pill resolutions achieved a 57% average
yes-vote from shareholders at 26 major companies in 2000 (Percentage based on
yes-no votes). Source: IRRC, Average Voting Results, 9/27/00.
Institutional investors TIAA-CREF, Gamco Investors and the New York State
Retirement Fund sponsored their own proposals on this same topic. This is
further evidence of institutional support of this proposal topic. Source: IRRC
Corporate Governance Bulletin, May-July 2001.
Institutional investor support is high-caliber support. Institutional investors
have the advantage of a specialized staff and resources, long-term focus,
fiduciary duty and independent perspective to thoroughly study the issues
involved in this proposal topic.
In the interest of shareholder value:
SHAREHOLDER VOTE ON POISON PILLS
YES ON 10"
THE BOARD RECOMMENDS YOU VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
We share the proponent's apparent commitment to maximizing shareholder value. We
also support the principle of shareholder voting on rights plans. However, the
proposal as drafted is imprecise and overly restrictive, and could prevent the
board from acting in the best interests of shareholders under extraordinary
circumstances.
The term "poison pill" is not defined in the proposal, but is commonly used to
mean so-called shareholder rights plans. Generally, the purpose of such plans is
to force potential acquirers of a company to negotiate with the company's board
of directors. In our view, rights plans are neither good nor bad PER SE. They
can be used as leverage to negotiate more favorable terms than might otherwise
be offered, thereby aiding in increasing shareholder value, or they can be used
to deter transactions which might be in the interests of shareholders. Thus,
rights plans need to be judged on the basis of how they are used. The test
should be whether a rights plan is likely to assist in the board's efforts to
increase shareholder value.
ExxonMobil has never had a rights plan and we have no plans to adopt one.
Further, given ExxonMobil's outstanding record of delivering shareholder value
over the long term, as well as the scope and size of our business, we believe it
unlikely that our board would ever need to consider such a plan. The future,
however, is not predictable. Unexpected events can and do occur. If, as a result
of circumstances we do not presently foresee, ExxonMobil were to adopt a rights
plan at some point in the future, we would only do so if the board determined
that the plan was likely to assist in the board's efforts to create additional
shareholder value.
If ExxonMobil ever were to adopt a rights plan, it would be our preference to
obtain prior shareholder approval. However, in some situations, due to timing
constraints or other reasons we believe to be in the best interests of
shareholders, circumstances might demand that a plan be adopted without
shareholder approval.
43
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
In summary, the board must always place the interests of shareholders first and
the board must retain the flexibility to act expeditiously to protect our
shareholders in unexpected circumstances. In acting, the board's guiding
principle, as in other aspects of our business, would be to maximize shareholder
value.
44
PROXY STATEMENT 2002 - EXXON MOBIL CORPORATION
ADDITIONAL INFORMATION
OTHER BUSINESS
We are currently not aware of any other business to be acted on at the meeting.
Under the laws of New Jersey, where ExxonMobil is incorporated, no business
other than procedural matters may be raised at the meeting unless proper notice
has been given to the shareholders. If other business is properly raised, your
proxies have authority to vote as they think best, including to adjourn the
meeting.
PEOPLE WITH DISABILITIES
We can provide reasonable assistance to help you participate in the meeting if
you tell us about your disability and your plan to attend. Please call or write
the Secretary at least two weeks before the meeting at the number or address
listed under "Contact information" on the next page.
OUTSTANDING SHARES
On February 28, 2002, 6,793,172,101 shares of common stock were outstanding.
Each common share has one vote.
HOW WE SOLICIT PROXIES
In addition to this mailing, ExxonMobil employees may solicit proxies
personally, electronically, or by telephone. ExxonMobil pays the costs of
soliciting this proxy. We are paying D.F. King & Co. a fee of $27,500 plus
expenses to help with the solicitation. We also reimburse brokers and other
nominees for their expenses in sending these materials to you and getting your
voting instructions.
SHAREHOLDER PROPOSALS FOR NEXT YEAR
Any shareholder proposal for the annual meeting in 2003 must be sent to the
Secretary at the address of ExxonMobil's principal executive office listed under
"Contact information" on the next page. The deadline for receipt of a proposal
to be considered for inclusion in the proxy statement is December 18, 2002. The
deadline for notice of a proposal for which a shareholder will conduct his or
her own solicitation is March 3, 2003. On request, the Secretary will provide
instructions for submitting proposals.
45
EXXON MOBIL CORPORATION - PROXY STATEMENT 2002
DUPLICATE ANNUAL REPORTS
Registered shareholders with multiple accounts may authorize ExxonMobil to
discontinue mailing extra summary annual reports by marking the "discontinue
annual report mailing for this account" box on the proxy card. If you vote via
the Internet or by telephone, you will also have the opportunity to indicate
that you wish to discontinue receiving extra annual reports. At least one
account must continue to receive an annual report. Eliminating these duplicate
mailings will not affect receipt of future proxy statements and proxy cards.
Also, you may call ExxonMobil Shareholder Services at the toll-free 800 number
listed below at any time during the year to discontinue duplicate mailings.
CONTACT INFORMATION
If you have questions or need more information about the annual meeting, write
to:
Secretary
Exxon Mobil Corporation
5959 Las Colinas Boulevard
Irving, TX 75039-2298
or call us at (972) 444-1157
For information about shares registered in your name or your Shareholder
Investment Program account, call ExxonMobil Shareholder Services at
1-800-252-1800 or access your account via the Internet at www.equiserve.com. We
also invite you to visit ExxonMobil's Web site at www.exxonmobil.com. Web site
materials are not part of this proxy solicitation.
FINANCIAL STATEMENTS
The year 2001 consolidated financial statements and auditor's report,
management's discussion and analysis of financial condition and results of
operations, information concerning the quarterly financial data for the past two
fiscal years and other information are provided in Appendix A.
SEC FORM 10-K
Shareholders may obtain a copy of the company's annual report to the Securities
and Exchange Commission on Form 10-K without charge by writing to the Secretary
at the address listed above or by visiting ExxonMobil's Web site at
www.exxonmobil.com.
46
A P P E N D I X A
FINANCIAL SECTION
TABLE OF CONTENTS
Business Profile ................................................................................. A2
Financial Summary................................................................................. A3
Management's Discussion and Analysis of Financial Condition and Results of Operations
Functional Earnings ............................................................................. A4
Review of 2001 and 2000 Results ................................................................. A5
Liquidity and Capital Resources ................................................................. A7
Capital and Exploration Expenditures ............................................................ A9
Merger of Exxon Corporation and Mobil Corporation ............................................... A9
Merger Expenses and Reorganization Reserves ..................................................... A9
Site Restoration and Other Environmental Costs .................................................. A10
Taxes............................................................................................ A10
Market Risks, Inflation and Other Uncertainties ................................................. A10
Recently Issued Financial Accounting Standards .................................................. A11
Critical Accounting Policies .................................................................... A11
Forward Looking Statements ...................................................................... A13
Report of Independent Accountants ................................................................ A14
Consolidated Financial Statements
Statement of Income ............................................................................. A15
Balance Sheet ................................................................................... A16
Statement of Shareholders' Equity ............................................................... A17
Statement of Cash Flows ......................................................................... A18
Notes to Consolidated Financial Statements
1. Summary of Accounting Policies ............................................................. A19
2. Extraordinary Item and Accounting Change ................................................... A20
3. Merger of Exxon Corporation and Mobil Corporation .......................................... A20
4. Merger Expenses and Reorganization Reserves ................................................ A20
5. Miscellaneous Financial Information ........................................................ A21
6. Cash Flow Information ...................................................................... A21
7. Additional Working Capital Data ............................................................ A21
8. Equity Company Information ................................................................. A22
9. Investments and Advances ................................................................... A22
10.Investment in Property, Plant and Equipment ................................................ A23
11.Leased Facilities .......................................................................... A23
12.Employee Stock Ownership Plans ............................................................. A23
13.Capital .................................................................................... A24
14.Financial Instruments and Derivatives ...................................................... A25
15.Long-Term Debt ............................................................................. A25
16.Incentive Program .......................................................................... A31
17.Litigation and Other Contingencies ......................................................... A32
18.Annuity Benefits and Other Postretirement Benefits ......................................... A33
19.Income, Excise and Other Taxes ............................................................. A35
20.Disclosures about Segments and Related Information ......................................... A36
Quarterly Information ............................................................................ A37
Supplemental Information on Oil and Gas Exploration and Production Activities ................ A38-A42
Operating Summary .................................................................................A43
A1
BUSINESS PROFILE
Return on Capital and
Earnings After Average Capital Average Capital Exploration
Income Taxes Employed Employed Expenditures
-----------------------------------------------------------------------------------------
Financial 2001 2000 2001 2000 2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
(millions of dollars) (percent) (millions of dollars)
Petroleum and natural gas
Upstream
United States $ 3,932 $ 4,545 $ 12,900 $ 12,804 30.5 35.5 $ 2,418 $ 1,859
Non-U.S. 6,497 7,824 25,037 26,235 25.9 29.8 6,345 5,040
------------------------------------------------ ---------------------
Total $ 10,429 $ 12,369 $ 37,937 $ 39,039 27.5 31.7 $ 8,763 $ 6,899
------------------------------------------------ ---------------------
Downstream
United States $ 1,924 $ 1,561 $ 7,711 $ 7,976 25.0 19.6 $ 961 $ 1,077
Non-U.S. 2,303 1,857 18,610 19,756 12.4 9.4 1,361 1,541
------------------------------------------------ ---------------------
Total $ 4,227 $ 3,418 $ 26,321 $ 27,732 16.1 12.3 $ 2,322 $ 2,618
------------------------------------------------ ---------------------
Total petroleum and natural gas $ 14,656 $ 15,787 $ 64,258 $ 66,771 22.8 23.6 $ 11,085 $ 9,517
------------------------------------------------ ---------------------
Chemicals
United States $ 398 $ 644 $ 5,506 $ 5,644 7.2 11.4 $ 432 $ 351
Non-U.S. 484 517 8,333 8,170 5.8 6.3 440 1,117
------------------------------------------------ ---------------------
Total $ 882 $ 1,161 $ 13,839 $ 13,814 6.4 8.4 $ 872 $ 1,468
Other operations 489 551 3,721 3,992 13.1 13.8 285 163
Corporate and financing (222) (589) 6,182 2,886 - - 69 20
Merger expenses (525) (920) - - - - - -
Gain from required asset divestitures 40 1,730 - - - - - -
------------------------------------------------ ---------------------
Net income $ 15,320 $ 17,720 $ 88,000 $ 87,463 17.8 20.6 $ 12,311 $ 11,168
================================================ =====================
Operating 2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
(thousands of barrels daily) (thousands of barrels daily)
Net liquids production Refinery throughput
United States 712 733 United States 1,840 1,862
Non-U.S. 1,830 1,820 Non-U.S. 3,731 3,780
-------------------- ------------------
Total 2,542 2,553 Total 5,571 5,642
(millions of cubic feet daily) (thousands of metric tons)
Natural gas production available for sale Chemical prime product sales 25,780 25,637
United States 2,598 2,856
Non-U.S. 7,681 7,487 (millions of metric tons)
--------------------
Total 10,279 10,343 Coal production
United States 3 2
(thousands of barrels daily) Non-U.S. 10 15
------------------
Petroleum product sales Total 13 17
United States 2,751 2,669
Non-U.S. 5,220 5,324 (thousands of metric tons)
--------------------
Total 7,971 7,993 Copper production 252 254
A2
FINANCIAL SUMMARY
2001 2000 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
(millions of dollars, except per share amounts)
Sales and other operating revenue
Petroleum and natural gas $ 192,680 $ 210,006 $ 167,802 $ 151,109 $ 179,137
Chemicals 15,943 17,501 13,777 13,589 16,190
Other 794 932 950 929 2,408
-------------------------------------------------------------
Sales and other operating revenue, including excise taxes $ 209,417 $ 228,439 $ 182,529 $ 165,627 $ 197,735
Earnings from equity interests and other revenue 4,071 4,309 2,998 4,015 4,011
-------------------------------------------------------------
Total revenue $ 213,488 $ 232,748 $ 185,527 $ 169,642 $ 201,746
=============================================================
Earnings
Petroleum and natural gas
Upstream $ 10,429 $ 12,369 $ 5,886 $ 3,352 $ 6,905
Downstream 4,227 3,418 1,227 3,474 3,088
-------------------------------------------------------------
Total petroleum and natural gas $ 14,656 $ 15,787 $ 7,113 $ 6,826 $ 9,993
Chemicals 882 1,161 1,354 1,394 1,771
Other operations 489 551 426 384 434
Corporate and financing (222) (589) (514) (460) (466)
Merger expenses (525) (920) (469) - -
Gain from required asset divestitures 40 1,730 - - -
Accounting change - - - (70) -
-------------------------------------------------------------
Net income $ 15,320 $ 17,720 $ 7,910 $ 8,074 $ 11,732
=============================================================
Net income per common share $ 2.23 $ 2.55 $ 1.14 $ 1.15 $ 1.66
Net income per common share - assuming dilution $ 2.21 $ 2.52 $ 1.12 $ 1.14 $ 1.64
Cash dividends per common share $ 0.910 $ 0.880 $ 0.844 $ 0.833 $ 0.810
Net income to average shareholders' equity (percent) 21.3 26.4 12.6 12.9 18.7
Net income to total revenue (percent) 7.2 7.6 4.3 4.8 5.8
Working capital $ 5,567 $ 2,208 $ (7,592) $ (5,187) $ (377)
Ratio of current assets to current liabilities 1.18 1.06 0.80 0.85 0.99
Total additions to property, plant and equipment $ 9,989 $ 8,446 $ 10,849 $ 12,730 $ 11,652
Property, plant and equipment, less allowances $ 89,602 $ 89,829 $ 94,043 $ 92,583 $ 93,527
Total assets $ 143,174 $ 149,000 $ 144,521 $ 139,335 $ 143,751
Exploration expenses, including dry holes $ 1,175 $ 936 $ 1,246 $ 1,506 $ 1,252
Research and development costs $ 603 $ 564 $ 630 $ 753 $ 763
Long-term debt $ 7,099 $ 7,280 $ 8,402 $ 8,532 $ 10,868
Total debt $ 10,802 $ 13,441 $ 18,972 $ 17,016 $ 17,182
Fixed charge coverage ratio (times) 17.8 15.7 6.6 6.9 9.9
Debt to capital (percent) 12.4 15.4 22.0 20.6 20.3
Shareholders' equity at year-end $ 73,161 $ 70,757 $ 63,466 $ 62,120 $ 63,121
Shareholders' equity per common share $ 10.74 $ 10.21 $ 9.13 $ 8.98 $ 9.04
Average number of common shares outstanding (millions) 6,868 6,953 6,906 6,937 7,022
Number of regular employees at year-end (thousands) 97.9 99.6 106.9 111.6 114.5
Note: Prior period per share amounts restated for the two-for-one stock split
effective June 20, 2001.
A3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FUNCTIONAL EARNINGS 2001 2000 1999
- --------------------------------------------------------------------------------------------------------
(millions of dollars except per share amounts)
Earnings Including Merger Effects and Special Items
Upstream
United States $ 3,932 $ 4,545 $ 1,842
Non-U.S. 6,497 7,824 4,044
Downstream
United States 1,924 1,561 577
Non-U.S. 2,303 1,857 650
Chemicals
United States 398 644 738
Non-U.S. 484 517 616
Other operations 489 551 426
Corporate and financing (222) (589) (514)
Merger expenses (525) (920) (469)
Gain from required asset divestitures 40 1,730 -
---------------------------------------------
Net income $ 15,320 $ 17,720 $ 7,910
=============================================
Net income per common share $ 2.23 $ 2.55 $ 1.14
Net income per common share - assuming dilution $ 2.21 $ 2.52 $ 1.12
=======================================================================================================
Merger Effects and Special Items
Upstream
United States $ - $ - $ -
Non-U.S. - - 119
Downstream
United States - - -
Non-U.S. - - (120)
Chemicals
United States (extraordinary item) 100 - -
Non-U.S. (extraordinary item) 75 - -
Merger expenses (525) (920) (469)
Gain from required asset divestitures (extraordinary item) 40 1,730 -
---------------------------------------------
Total $ (310) $ 810 $ (470)
=============================================
=======================================================================================================
Earnings Excluding Merger Effects and Special Items
Upstream
United States $ 3,932 $ 4,545 $ 1,842
Non-U.S. 6,497 7,824 3,925
Downstream
United States 1,924 1,561 577
Non-U.S. 2,303 1,857 770
Chemicals
United States 298 644 738
Non-U.S. 409 517 616
Other operations 489 551 426
Corporate and financing (222) (589) (514)
---------------------------------------------
Total $ 15,630 $16,910 $ 8,380
=============================================
Earnings per common share $ 2.28 $ 2.43 $ 1.21
Earnings per common share - assuming dilution $ 2.26 $ 2.40 $ 1.19
=======================================================================================================
Note: Prior period per share amounts restated for the two-for-one stock split
effective June 20, 2001.
A4
The following discussion and analysis of ExxonMobil's financial results, as well
as the accompanying financial statements and related notes to consolidated
financial statements to which they refer, are the responsibility of the
management of Exxon Mobil Corporation. The corporation's accounting and
financial reporting fairly reflect its straightforward business model involving
the extracting, refining and marketing of hydrocarbons and hydrocarbon-based
products. The corporation's business model involves the production (or
purchase), manufacture and sale of physical products, and all commercial
activities are directly in support of the underlying physical movement of goods.
This straightforward approach extends to the financing of the business. In
evaluating business or investment opportunities, the corporation views as
economically equivalent any debt obligation, whether disclosed on the face of
the consolidated balance sheet, or disclosed as other debt-like obligations in
notes to the financial statements, such as those summarized in the table on page
A7. This consistent, conservative approach to financing the capital-intensive
needs of the corporation has helped Exxon Mobil to sustain the "triple-A" status
of its long-term debt securities for more than eighty years.
REVIEW OF 2001 RESULTS
Earnings excluding merger effects and special items were $15,630 million, a
decrease of $1,280 million from 2000. Net income in 2001 was $15,320 million,
including $215 million of extraordinary gains and $525 million of merger costs,
a decrease of $2,400 million from 2000, which benefited from $810 million in net
favorable merger effects including gains from divestments required as a
condition of regulatory approval of the merger. Upstream (Exploration and
Production) earnings in 2001 declined, following lower crude oil realizations,
which on average were down 18 percent versus 2000. Upstream volumes in 2001, on
an oil equivalent basis, were up 1 percent excluding the effect of reduced
natural gas production operations in Indonesia due to security concerns.
Downstream (Refining and Marketing) earnings improved from 2000, reflecting
stronger U.S. refining margins and improved marketing results outside of the
U.S. Chemicals earnings declined versus 2000, as lower product realizations and
weakening demand conditions put significant pressure on commodity margins and
more than offset the $175 million of extraordinary gains associated with asset
management activities. Prime product sales volumes were 1 percent higher than
2000, reflecting capacity additions in Singapore and Saudi Arabia. Merger
implementation activities in 2001 reduced earnings by a net $485 million. Gains
from asset divestitures that were a condition of regulatory approval of the
merger added $40 million to earnings, partly offsetting merger implementation
expenses of $525 million. Revenue for 2001 totaled $213 billion, down 8 percent
from 2000.
Excluding merger expenses, the combined total of operating costs (including
operating, selling, general, administrative, exploration, depreciation and
depletion expenses from the consolidated statement of income and ExxonMobil's
share of similar costs for equity companies) in 2001 was $44.0 billion, up $400
million from 2000. Cost increases associated with new operations, higher energy
costs and higher pension-related expenses were substantially offset by the
favorable impact of continuing efficiency initiatives carried out in all busi-
ness lines. The impact of these initiatives, including the capture of merger
synergies, reduced operating costs by $1.2 billion in 2001, and cumulatively by
$4 billion since 1998. Interest expense in 2001 was $293 million compared to
$589 million in 2000 reflecting lower debt levels and interest rates.
Upstream
Upstream earnings of $10,429 million decreased $1,940 million, or 16 percent
from last year's record level, primarily due to lower crude oil prices. The
impacts of lower crude realizations and higher exploration expenses in future
growth areas were partly offset by higher average natural gas realizations,
principally in North America and Europe. U.S. and Canadian natural gas prices
reached historical highs early in 2001 but dropped through the remainder of the
year. Liquids production in 2001 of 2,542 kbd (thousands of barrels daily) was
down slightly from 2000, as natural field declines in mature areas were largely
offset by new volumes from work programs and new developments in the North Sea,
U.S., Equatorial Guinea and Kazakhstan, some of which have not yet reached full
capacity. Absent the effect of reduced Arun operations in Indonesia due to
security concerns, worldwide gas production was up about 2 percent, with
increases in Europe, Australia, Canada and Qatar. Including the impact of lower
Indonesia volumes, full-year 2001 worldwide natural gas production of 10,279
mcfd (millions of cubic feet daily) compared with 10,343 mcfd in 2000. Combined
liquids and gas volumes, on an oil equivalent basis, were up 1 percent excluding
the effect of reduced natural gas production operations in Indonesia. Earnings
from U.S. upstream operations were $3,932 million, a decrease of $613 million.
Earnings outside the U.S. were $6,497 million, $1,327 million lower than 2000.
Downstream
Downstream earnings of $4,227 million were a record and improved 24 percent over
2000. Results benefited from higher refining margins early in the year,
particularly in the U.S., improved worldwide refining operations and higher
marketing margins outside the U.S. Refining margins in most areas peaked in the
second quarter and declined during the second half of 2001. Earnings also
benefited from a planned reduction in inventories as a result of optimizing
operations around the world. Petroleum product sales of 7,971 kbd compared with
7,993 kbd in the prior year. Excluding the effect of the required merger
related divestments in 2000, volumes were up slightly. Refinery throughput was
5,571 kbd compared with 5,642 kbd in 2000. U.S. downstream earnings were $1,924
million, up $363 million, reflecting stronger refining margins and improved
operations. Earnings outside the U.S. of $2,303 million were $446 million higher
than 2000. The improvement was driven by stronger marketing margins, partly
offset by weaker European refining margins.
Chemicals
Chemicals earnings totaled $882 million, including $175 million of net gains on
asset management activities. Absent this special item, chemicals earnings were
$707 million, a decrease of $454 million from 2000. Most of the reduction
occurred in the U.S. as lower product realizations and weakening demand
conditions put significant pressure on
A5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
commodity margins. Record prime product sales volumes of 25,780 kt (thousands of
metric tons) were 1 percent above the prior year's record 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. reflecting weaker industrial
demand.
Other Operations
Earnings from other operating segments totaled $489 million, a decrease of $62
million from 2000, reflecting lower copper prices.
Corporate and Financing
Corporate and financing expenses decreased $367 million to $222 million,
reflecting lower net interest costs due to lower debt levels and higher cash
balances, along with favorable foreign exchange and tax effects.
REVIEW OF 2000 RESULTS
Earnings excluding merger effects and special items were $16,910 million, an
increase of $8,530 million from 1999. Net income in 2000 of $17,720 million,
including net favorable merger effects of $810 million, increased $9,810 million
from 1999. Upstream earnings benefited from higher crude oil and natural gas
realizations, which on average were up about 60 percent and 45 percent,
respectively, versus 1999. Excluding the effects of lower entitlements caused by
higher crude prices, liquids production was 3 percent higher than 1999.
Downstream earnings improved from the very depressed results in 1999, driven by
stronger worldwide refining margins and better refining operations. However,
downstream profitability was restrained by difficulties in recovering the
significant increases in raw material costs that occurred over much of the year.
Merger implementation activities in 2000 added a net $810 million to net income,
reflecting $1,730 million of extraordinary gains from asset divestitures that
were a condition of regulatory approval of the merger. These gains more than
offset merger implementation expenses of $920 million. Results in 1999 included
$470 million of net charges for special items, primarily merger expenses with
other special items essentially offsetting. Revenue for 2000 totaled $233
billion, up 25 percent from 1999, and the cost of crude oil and product
purchases increased by 41 percent, both influenced by higher prices.
Excluding merger expenses, the combined total of operating costs (including
operating, selling, general, administrative, exploration, depreciation and
depletion expenses from the consolidated statement of income and ExxonMobil's
share of similar costs for equity companies) in 2000 was $43.6 billion, down
about $700 million from 1999. The impact of efficiency initiatives, including
the capture of merger synergies, reduced operating costs by $1.6 billion.
Interest expense in 2000 was $589 million compared to $695 million in 1999 as
the effect of lower debt levels was partly offset by higher interest rates.
Upstream
Upstream earnings of $12,369 million were a record and increased due to higher
crude oil and natural gas realizations, up about 60 percent and 45 percent,
respectively. Liquids production of 2,553 kbd increased from 2,517 kbd in 1999.
Excluding the effects of lower entitlements caused by higher crude prices,
liquids production was 3 percent higher than 1999, mainly reflecting new
production from fields in the North Sea and Venezuela and increased production
from eastern Canada and Alaska. These increases more than offset the effects of
natural field declines. Natural gas production of 10,343 mcfd was about the same
as 1999 reflecting higher production in eastern Canada, Europe and Qatar, offset
by lower production in Indonesia. Excluding entitlement impacts, natural gas
production increased about 1 percent. Lower exploration expenses also benefited
2000 upstream earnings. Earnings from U.S. upstream operations were $4,545
million, an increase of $2,703 million from 1999. Earnings outside the U.S. were
$7,824 million, $3,899 million higher than last year, excluding a $141 million
deferred tax benefit and a $22 million property write-off in 1999.
Downstream
Downstream earnings of $3,418 million improved over $2 billion from the very
depressed results in 1999, driven by stronger worldwide refining margins and
better refining operations. Earnings also benefited from a planned reduction in
inventories as a result of merging Exxon and Mobil operations around the world.
Petroleum product sales of 7,993 kbd compared with 8,887 kbd in 1999. The
decrease reflected the effects of the required divestiture of Mobil's European
fuels joint venture and of U.S. marketing and refining assets, as well as lower
supply sales in Asia-Pacific resulting from the low margin environment.
Refinery throughput was 5,642 kbd compared with 5,977 kbd in 1999. Excluding the
effects of the divestments, refinery throughput in 2000 was at the same level as
1999 and petroleum product sales were down about 4 percent. Earnings from U.S.
downstream operations were $1,561 million, up $984 million from the depressed
results of 1999, reflecting stronger refining margins and improved operations,
partly offset by weaker marketing margins. Earnings outside the U.S. of $1,857
million were $1,087 million higher than 1999 after excluding special charges in
1999 in Japan of $80 million for non-merger related restructuring of downstream
operations and a $40 million write-off associated with the cancellation of a
power project. The improvement was driven by stronger European and to a much
lesser extent Southeast Asian refining margins and improved refining operations,
partly offset by weaker marketing margins.
Chemicals
Chemicals earnings totaled $1,161 million compared with $1,354 million in 1999.
Prime product sales volumes of 25,637 kt were up 354 kt. The decline in earnings
was driven by higher feedstock and energy costs and unfavorable foreign exchange
effects.
Other Operations
Earnings from other operating segments totaled $551 million, an increase of $125
million from 1999, reflecting record copper and coal sales, higher copper
prices, lower operating expenses and favorable foreign exchange effects, partly
offset by lower coal prices.
Corporate and Financing
Corporate and financing expenses of $589 million compared with $514 million in
1999. The increase resulted from unfavorable foreign exchange effects and lower
tax-related benefits, partly offset by a reduction in administrative expenses as
a result of combining Exxon and Mobil headquarters operations. The effect of
lower debt levels was partly offset by higher interest rates during the year.
A6
LIQUIDITY AND CAPITAL RESOURCES
In 2001, cash provided by operating activities totaled $22.9 billion, the same
level as 2000. Major sources of funds were net income of $15.3 billion and
non-cash provisions of $7.9 billion for depreciation and depletion.
Cash used in investing activities totaled $8.2 billion, up $4.9 billion from
2000 due to lower proceeds from sales of subsidiaries, investments and
property, plant and equipment resulting from the absence of the asset
divestitures in 2000 that were required as a condition of the regulatory
approval of the merger, and due to higher additions to property, plant and
equipment.
Cash used in financing activities was $15.0 billion, up $0.9 billion, driven
by higher purchases of common shares, offset by lower debt reductions. Dividend
payments on common shares increased from $0.88 per share to $0.91 per share and
totaled $6.3 billion, a payout of 41 percent. Total consolidated short-term and
long-term debt declined by $2.6 billion to $10.8 billion. Shareholders' equity
increased by $2.4 billion to $73.2 billion.
During 2001, Exxon Mobil Corporation purchased 139 million shares of its
common stock for the treasury at a gross cost of $5,721 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 6,930 million at the end of 2000 to 6,809 million at the end of
2001. Purchases were made in both the open market and through negotiated
transactions, and may be discontinued at any time.
In 2000, cash provided by operating activities totaled $22.9 billion, up $7.9
billion from 1999. Major sources of funds were net income of $17.7 billion and
non-cash provisions of $8.1 billion for depreciation and depletion.
Cash used in investing activities totaled $3.3 billion, down $7.7 billion
from 1999 due to higher proceeds from sales of subsidiaries, investments and
property, plant and equipment resulting from asset divestitures that were
required as a condition of the regulatory approval of the merger, and due to
lower additions to property, plant and equipment.
Cash used in financing activities was $14.2 billion, up $9.4 billion, driven
by debt reductions in the current year versus debt increases in 1999, along with
higher purchases of common shares. Dividend payments on common shares increased
from $0.844 per share to $0.880 per share and totaled $6.1 billion, a payout of
35 percent. Total consolidated short-term and long-term debt declined by $5.6
billion to $13.4 billion. Shareholders' equity increased by $7.3 billion to
$70.8 billion.
Prior to the merger, the corporation purchased shares of its common stock for
the treasury. Consistent with pooling accounting requirements, this repurchase
program was terminated effective with the close of the Exxon Mobil merger on
November 30, 1999. On August 1, 2000, the corporation announced its intention
to purchase shares of its common stock. During 2000, Exxon Mobil Corporation
purchased 54 million shares of its common stock for the treasury at a gross cost
of $2,352 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 6,955 million at the end of
1999 to 6,930 million at the end of 2000. Purchases were made in both the open
market and through negotiated transactions.
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. The management of cash that may be
temporarily available as surplus to the corporation's immediate needs is
carefully controlled, both to optimize returns on cash balances, and to ensure
its secure, ready availability to meet the corporation's cash requirements as
they arise.
Long-Term Contractual Obligations and
Other Commercial Commitments
Set forth below is information about the corporation's long-term contractual
obligations and other commercial commitments outstanding at December 31, 2001.
It brings together data for easy reference from the consolidated balance sheet
and from individual notes to consolidated financial statements. This
information is important in understanding the financial position of the
corporation. In considering the economic viability of investment opportunities,
the corporation views any source of financing, whether it be operating leases,
third party guarantees or equity company debt, as being economically equivalent
to consolidated debt of the corporation.
Payments due by Period
--------------------------
Long-Term Contractual Footnote 2003- 2007 and Total
Obligations Reference 2002 2006 Beyond Amount
- --------------------------------------------------------------------------------
(millions of dollars)
Long-term debt (1) Note 15 $ - $ 3,498 $ 3,601 $ 7,099
- Due in one year (2) 339 - - 339
ExxonMobil share
of equity company
long-term debt (3) Note 8 - 1,922 2,028 3,950
- Due in one year (2) 590 - - 590
Operating leases (4) Note 11 1,327 2,910 2,687 6,924
Unconditional purchase
obligations (5) Note 17 156 544 1,329 2,029
Firm capital
commitments (6) 1,996 911 978 3,885
--------------------------------------
Total $ 4,408 $ 9,785 $10,623 $24,816
======================================
Notes:
(1) Includes capitalized lease obligations of $266 million.
(2) The amounts due in one year are included in notes and loans payable of
$3,703 million (note 7) for consolidated companies and in short-term debt of
$1,232 million (note 8) for equity companies.
(3) The corporation includes its share of equity company debt in its calculation
of return on average capital employed.
(4) Minimum commitments for operating leases, shown on an undiscounted basis,
cover drilling equipment, tankers, service stations and other properties.
A7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(5) Unconditional purchase obligations, shown on an undiscounted basis, mainly
pertain to pipeline throughput agreements. The present value of these
commitments, excluding imputed interest of $733 million, totaled $1,296
million.
(6) Firm commitments related to capital projects, shown on an undiscounted
basis, totaled approximately $3.9 billion at the end of 2001, compared with $4.6
billion at year-end 2000. The largest single commitment outstanding at year-end
2001 was $2.1 billion associated with the development of crude oil and natural
gas resources in Malaysia. The corporation expects to fund the majority of these
commitments through internal cash flow.
Other Commercial Commitments
The corporation and certain of its consolidated subsidiaries were contingently
liable at December 31, 2001, for $3,921 million, primarily relating to
guarantees for notes, loans and performance under contracts (note 17). This
included $672 million representing guarantees of non-U.S. excise taxes and
customs duties of other companies, entered into as a normal business practice,
under reciprocal arrangements. Also included in this amount were guarantees by
consolidated affiliates of $1,641 million, representing ExxonMobil's share of
obligations of certain equity companies.
On December 31, 2001, unused credit lines for short-term financing totaled
approximately $5.3 billion (note 7).
The table below shows the corporation's fixed charge coverage and consolidated
debt to capital ratios. The data demonstrate the corporation's
creditworthiness. Throughout this period, the corporation's long-term debt
securities maintained the top credit rating from both Standard and Poor's (AAA)
and Moody's (Aaa), a rating it has sustained for 83 years.
2001 2000 1999
-----------------------
Fixed charge coverage ratio (times) 17.8 15.7 6.6
Debt to capital (percent) 12.4 15.4 22.0
Net debt to capital (percent) (1) 5.3 7.9 20.4
Credit rating AAA/Aaa AAA/Aaa AAA/Aaa
(1) Debt net of all cash
Management views the corporation's financial strength, as evidenced by the
above financial ratios and other similar measures, to be a competitive
advantage of strategic importance. The corporation's sound financial position
gives it the opportunity to access the world's capital markets in the full range
of market conditions, and enables the corporation to take on large, long-term
capital commitments in the pursuit of maximizing shareholder value.
In addition to the above commitments, the corporation makes limited use of
derivative instruments, which are discussed in Risk Management on page A10 and
note 14 on page A25.
Litigation and Other Contingencies
As discussed in note 17 to the consolidated financial statements, 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. The vast majority of
the claims have been resolved leaving a few compensatory damages cases to be
tried. All of the punitive damage claims were consolidated in the civil trial
that began in May 1994.
In that trial, on September 24, 1996, the United States District Court for the
District of Alaska entered a judgment in the amount of $5.058 billion. 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 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 damage award which has been paid. The letter of
credit was terminated on February 1, 2002. 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.
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 judgment and
believes it should be set aside or substantially reduced on factual and
constitutional grounds. 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 upheld at
the trial court. ExxonMobil will appeal the judgment to the Louisiana Fourth
Circuit Court of Appeals and believes that the judgment should be set aside or
substantially reduced on factual and constitutional grounds. 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 and several other tax and legal issues, including resolution of tax
issues related to the gas lifting imbalance along the German/Dutch border, is
not expected to have a materially adverse effect upon the corporation's
operations or financial condition.
A8
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 financial condition.
CAPITAL AND EXPLORATION EXPENDITURES
Capital and exploration expenditures in 2001 were $12.3 billion, up from $11.2
billion in 2000, reflecting the corporation's active investment program.
Upstream spending was up 27 percent to $8.8 billion in 2001, from $6.9 billion
in 2000, as a result of higher spending on major projects in Africa, the North
Sea, and Canada, and increased drilling activity. Capital investments in the
downstream totaled $2.3 billion in 2001, down $0.3 billion from 2000, primarily
reflecting timing of investments in China partly offset by increased spending in
the retail businesses. Chemicals capital expenditures were $0.9 billion in 2001,
down from $1.5 billion in 2000, due to the completion of major projects in
Singapore and Saudi Arabia, and timing of investment in China.
Capital and exploration expenditures in the U.S. totaled $3.9 billion in 2001,
an increase of $0.6 billion from 2000, reflecting higher spending in both the
upstream and chemicals, partly offset by lower spending in the downstream.
Spending outside the U.S. of $8.4 billion in 2001 was up $0.5 billion from 2000,
reflecting higher expenditures in the upstream, partly offset by lower
expenditures in the downstream and chemicals.
MERGER OF EXXON CORPORATION AND MOBIL CORPORATION
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation (Exxon)
merged with Mobil Corporation (Mobil) so that Mobil became a wholly-owned
subsidiary of Exxon (the "Merger"). At the same time, Exxon changed its name to
Exxon Mobil Corporation (ExxonMobil). Under the terms of the agreement,
approximately 1.0 billion shares of ExxonMobil common stock were issued in
exchange for all the outstanding shares of Mobil common stock based upon an
exchange ratio of 1.32015. Following the exchange, former shareholders of Exxon
owned approximately 70 percent of the corporation, while former Mobil
shareholders owned approximately 30 percent of the corporation. Each outstanding
share of Mobil preferred stock was converted into one share of a new class of
ExxonMobil preferred stock.
As a result of the Merger, the accounts of certain downstream 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.
As a condition of the approval of the Merger, the U.S. Federal Trade
Commission and the European Commission required that certain property --
primarily downstream, pipeline and natural gas distribution assets -- be
divested. The carrying value of these assets was approximately $3 billion and
before-tax proceeds were approximately $5 billion. Net after-tax gains of $40
million and $1,730 million were reported in 2001 and 2000, respectively, as
extraordinary items consistent with pooling of interests accounting
requirements. The divested properties historically earned approximately $200
million per year.
MERGER EXPENSES AND REORGANIZATION RESERVES
In association with the merger between Exxon and Mobil, $748 million pre-tax
($525 million after-tax), $1,406 million pre-tax ($920 million after-tax) and
$625 million pre-tax ($469 million after-tax) of costs were recorded as
merger-related expenses in 2001, 2000 and 1999, respectively. Charges included
separation expenses related to workforce reductions (approximately 8,000
employees at year-end 2001), plus implementation and merger closing costs. The
separation reserve balance at year-end 2001 of approximately $197 million is
expected to be expended in 2002. Merger-related expenses are expected to grow to
approximately $2.9 billion pre-tax on a cumulative basis by the end of 2002.
Pre-tax operating synergies associated with the Merger, which are on track with
expectations, including cost savings, efficiency gains, and revenue
enhancements, are expected to reach approximately $7 billion per year by 2002.
In the first quarter of 1999, the corporation recorded a $120 million
after-tax charge for the non-merger related reorganization of Japanese
downstream operations in its wholly-owned Esso Sekiyu K.K. and 50.1 percent
owned General Sekiyu K.K. affiliates. The reorganization resulted in the
reduction of approximately 700 administrative, financial, logistics and
marketing service employee positions. The Japanese affiliates recorded a
combined charge of $216 million (before-tax) to selling, general and
administrative expenses for the employee related costs. Substantially all cash
expenditures anticipated in the restructuring provision were paid in 1999.
General Sekiyu also recorded a $211 million (before-tax) charge to depreciation
and depletion for the write-off of costs associated with the cancellation of a
power plant project at the Kawasaki terminal. Workforce reduction savings
associated with this reorganization are approximately $50 million per year
after-tax.
The following table summarizes the activity in the reorganization reserves.
The 1999 opening balance represents accruals for provisions taken in prior
years.
Opening Balance at
Balance Additions Deductions Year End
- ------------------------------------------------------------------
(millions of dollars)
1999 $169 $563 $351 $381
2000 381 738 780 339
2001 339 187 329 197
A9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SITE RESTORATION AND OTHER ENVIRONMENTAL COSTS
Over the years the corporation has accrued provisions for estimated site
restoration costs to be incurred at the end of the operating life of certain of
its facilities and properties. In addition, the corporation accrues provisions
for environmental liabilities in the many countries in which it does business
when it is probable that obligations have been incurred and the amounts can be
reasonably estimated. This policy applies to assets or businesses currently
owned or previously disposed.
The corporation has accrued provisions for probable environmental remediation
obligations at various sites, including multi-party sites where ExxonMobil has
been identified as one of the potentially responsible parties by the U.S.
Environmental Protection Agency. The involvement of other financially
responsible companies at these multi-party sites mitigates ExxonMobil's actual
joint and several liability exposure. At present, no individual site is
expected to have losses material to ExxonMobil's operations, financial condition
or liquidity.
Charges made against income for site restoration and environmental
liabilities were $371 million in 2001, $311 million in 2000 and $219 million in
1999. At the end of 2001, accumulated site restoration and environmental
provisions, after reduction for amounts paid, amounted to $3.7 billion.
ExxonMobil believes that any cost in excess of the amounts already provided for
in the financial statements would not have a materially adverse effect upon the
corporation's operations, financial condition or liquidity.
ExxonMobil's worldwide environmental costs in 2001 totaled $1,782 million of
which $505 million were capital expenditures and $1,277 million were operating
costs (including the $371 million of site restoration and environmental
provisions noted above). These costs were mostly associated with air and water
conservation. Total costs for such activities are expected to increase to about
$2.5 billion in both 2002 and 2003 (with capital expenditures representing about
50 percent of the total). The projected increase is primarily for capital
projects to implement refining technology to manufacture low-sulfur motor fuels
in many parts of the world.
TAXES
Income, excise and all other taxes and duties totaled $66.6 billion in 2001, a
decrease of $1.8 billion or 3 percent from 2000. Income tax expense, both
current and deferred, was $9.0 billion compared to $11.1 billion in 2000,
reflecting lower pre-tax income in 2001. The effective tax rate of 39.3 percent
in 2001 compared to 42.4 percent in 2000, benefiting from a higher level of
favorably resolved tax-related issues. Excise and all other taxes and duties
were $57.6 billion.
Income, excise and all other taxes and duties totaled $68.4 billion in 2000,
an increase of $6.9 billion or 11 percent from 1999. Income tax expense, both
current and deferred, was $11.1 billion compared to $3.2 billion in 1999,
reflecting higher pre-tax income in 2000. The effective tax rate increased from
31.8 percent in 1999 to 42.4 percent in 2000 as a result of a larger share of
total earnings coming from the more highly taxed non-U.S. upstream segment and
lower benefits from resolution of tax-related issues. Excise and all other taxes
and duties decreased $1.0 billion to $57.3 billion.
MARKET RISKS, INFLATION AND OTHER UNCERTAINTIES
In the past, crude, natural gas, petroleum product and chemical prices have
fluctuated widely in response to changing market forces. The impacts of these
price fluctuations on earnings from upstream operations, downstream operations
and chemicals operations have been varied, tending at times to be offsetting.
Nonetheless, the global energy markets can give rise to extended periods in
which market conditions are adverse to one or more of the corporation's
businesses. Such conditions, along with the capital intensive nature of the
industry and very long lead times associated with many of our projects,
underscore the importance of maintaining a strong financial position. Management
views the corporation's financial strength, including the AAA and Aaa ratings of
its long-term debt securities by Standard and Poor's and Moody's, as a
competitive advantage.
Although price levels of crude oil and natural gas will occasionally spike
upwards or drop precipitously, industry prices over the long term will continue
to be driven by market supply and demand fundamentals. Accordingly, the
corporation tests the viability of its oil and gas operations based on long-term
price projections. The corporation's assessment is that its operations will
continue to be successful in a variety of market conditions. This is the outcome
of disciplined investment and asset management programs. Investment
opportunities are tested against a variety of market conditions, including low
price scenarios. As a result, investments that would succeed only in highly
favorable price environments are screened out of the investment plan.
The corporation has had an active asset management program in which
under-performing assets are either improved to acceptable levels or considered
for divestment. The asset management program involves a disciplined, regular
review to ensure that all assets are contributing to the corporation's strategic
and financial objectives. The result has been the creation of a very efficient
capital base and has meant that the corporation has seldom been required to
write-down the carrying value of assets, even during periods of low commodity
prices.
RISK MANAGEMENT
The corporation's size, geographic diversity and the complementary nature of the
upstream, downstream and chemicals businesses mitigate the corporation's risk
from changes in interest rates, currency rates and commodity prices. The
corporation relies on these operating attributes and strengths to reduce
enterprise-wide risk. As a result, the corporation makes limited use of
derivatives to offset exposures arising from existing transactions.
The corporation does not trade in derivatives nor does it use derivatives
with leverage features. The corporation maintains a system of controls that
includes a policy covering the authorization, reporting, and monitoring of
derivative activity. The corporation's derivative activities pose no material
credit or market risks to ExxonMobil's operations, financial condition or
liquidity. Interest rate, foreign exchange rate and commodity price exposures
arising from derivative contracts undertaken in accordance with the
corporation's policies have not been significant.
A10
The fair value of derivatives outstanding and recorded on the balance sheet at
December 31, 2001 was $50 million before-tax. This is the amount that the
corporation would have had to pay to third parties if these derivatives had been
settled at year-end. These derivative fair values were substantially offset by
the fair values of the underlying exposures being hedged. During 2001, the
corporation recognized a before-tax gain of $23 million related to derivative
activity. This gain included the offsetting amounts from the changes in fair
value of the items being hedged by the derivatives. The fair value of
derivatives outstanding at year-end and gains recognized during the year are
immaterial in relation to the corporation's year-end cash balance of $6.5
billion, total assets of $143.2 billion, or net income for the year of $15.3
billion.
Debt-Related Instruments
The corporation is exposed to changes in interest rates, primarily as a result
of its short-term debt and long-term debt carrying floating interest rates. The
corporation makes limited use of interest rate swap agreements to adjust the
ratio of fixed and floating rates in the debt portfolio. The impact of a 100
basis point change in interest rates affecting the corporation's debt would not
be material to earnings, cash flow or fair value.
Foreign Currency Exchange Rate Instruments
The corporation conducts business in many foreign currencies and is subject to
foreign currency exchange rate risk on cash flows related to sales, expenses,
financing and investment transactions. The impacts of fluctuations in foreign
currency exchange rates on ExxonMobil's geographically diverse operations are
varied and often offsetting in amount. The corporation makes limited use of
currency exchange contracts to reduce the risk of adverse foreign currency
movements related to certain foreign currency debt obligations. Exposure from
market rate fluctuations related to these contracts is not material. Aggregate
foreign exchange transaction gains and losses included in net income are
discussed in note 5 to the consolidated financial statements.
Commodity Instruments
The corporation makes limited use of commodity forwards, swaps and futures
contracts of short duration to mitigate the risk of unfavorable price movements
on certain crude, natural gas and petroleum product purchases and sales.
Commodity price exposure related to these contracts is not material.
Inflation and Other Uncertainties
The general rate of inflation in most major countries of operation has been
relatively low in recent years, and the associated impact on operating costs
has been countered by cost reductions from efficiency and productivity
improvements.
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.
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. At the end of 2001 the
cumulative amount accrued under this policy was approximately $3.2 billion.
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 accrued
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.
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 (FAS 144), "Accounting for the Impairment
or Disposal of Long-Lived Assets." FAS 144 is required to be adopted
prospectively by the corporation no later than January 1, 2002. FAS 144
supercedes previous guidance related to the impairment or disposal of long-lived
assets. For long-lived assets to be held and used, it resolves certain
implementation issues of the former standards, but retains the basic
requirements of recognition and measurement of impairment losses. For long-lived
assets to be disposed of by sale, it broadens the definition of those disposals
that should be reported separately as discontinued operations. There is no
impact on the corporation of adopting FAS 144, except that future sales of
long-lived assets may be required to be presented as discontinued operations,
which would be a different presentation than under previous accounting
standards.
CRITICAL ACCOUNTING POLICIES
The corporation's accounting and financial reporting fairly reflect its
straightforward business model involving the extracting, refining and marketing
of hydrocarbons and hydrocarbon-based products. The preparation of financial
statements in conformity with U.S. Generally Accepted Accounting Principles
(GAAP) requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. The following summary provides
further information about the critical accounting policies and should be read in
conjunction with note 1 on page A19.
A11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Principles of Consolidation
The consolidated financial statements include the accounts of those significant
subsidiaries that the corporation controls. They also include the corporation's
undivided interests in upstream assets and liabilities. Amounts representing the
corporation's percentage interest in the underlying net assets of other
significant affiliates that it does not control, but exercises significant
influence, are included in "Investments and advances"; the corporation's share
of the net income of these companies is included in the consolidated statement
of income caption "Earnings from equity interests and other revenue." The
accounting for these non-consolidated companies is referred to as the equity
method of accounting.
Additional disclosures of summary balance sheet and income information for
those subsidiaries accounted for under the equity method of accounting can be
found in note 8 on page A22. The corporation believes this to be important
information necessary to a full understanding of the corporation's financial
statements.
Investments in companies that are partially owned by the corporation are
integral to the corporation's operations. In some cases they serve to balance
worldwide risks and in others they provide the only available means of entry
into a particular market or area of interest. The other parties who also have an
equity interest in these companies are either independent third parties or host
governments that share in the business results according to their percentage
ownership. The corporation does not invest in these companies in order to
remove liabilities from its balance sheet. In fact, the corporation has long
been on record supporting an alternative accounting method that would require
each investor to consolidate its percentage share of all assets and liabilities
in these partially owned companies rather than only the percentage in the net
equity. This method of accounting for investments in partially owned companies
is not permitted by GAAP except where the investments are in the undivided
interests in upstream assets and liabilities. However, for purposes of
calculating return on average capital employed, which is not covered by GAAP
standards, the corporation includes its share of debt of these partially owned
companies in the determination of average capital employed.
Revenue Recognition
Revenues associated with sales of crude oil, natural gas, petroleum and chemical
products and all other items are recorded when title passes to the customer.
The corporation does not engage in arrangements whereby the corporation has
ongoing relationships with its buyers that require it to repurchase its products
or provide buyers with the right of return. As a result, the recognition of
revenues is straightforward.
Derivative Instruments
As discussed on page A10, the corporation makes limited use of derivatives.
Derivative instruments are not held for trading purposes nor do they have
leverage features. The corporation's size, geographic diversity and the
complementary nature of the upstream, downstream, and chemicals businesses
mitigate the corporation's risk from changes in interest rates, currency rates,
and commodity prices, reducing the corporation's need for derivatives to manage
business risk.
Because of their limited use, accounting policies for derivatives do not
impact information that is significant or critical to an understanding of the
corporation's financial condition and results of operations.
Inventories
Crude oil, products and merchandise are carried at the lower of current market
value or cost (generally determined under the last-in, first-out method - LIFO).
There are other acceptable methods of accounting for inventory such as
first-in, first-out or average cost. The corporation uses the LIFO method
because it charges each sale with the cost of the most recently purchased
inventory. As such, the profit recognized on these sales is based on the latest
cost structure and generally results in a better matching of costs and revenues.
Property, Plant and Equipment
The corporation's exploration and production activities are accounted for under
the "successful efforts" method. Depreciation, depletion and amortization, based
on cost less estimated salvage value of the asset, are primarily determined
under either the unit-of-production method or the straight-line method.
Unit-of-production rates are based on oil, gas and mineral reserves estimated to
be recoverable from existing facilities. The straight-line method is based on
estimated asset service life taking obsolescence into consideration. The service
lives of refinery and chemicals components generally extend to 25 and 20 years,
respectively, and reflect the corporation's long-term commitment to effective
asset optimization.
Under the "successful efforts" method, costs are accumulated on a
field-by-field basis with certain exploratory expenditures and exploratory dry
holes being expensed as incurred. Exploratory wells that find oil and gas in an
area requiring a major capital expenditure before production can begin are
evaluated annually to ensure that commercial quantities of reserves have been
found or that additional exploration work is underway or planned. Costs of
productive wells and development dry holes are capitalized and amortized on the
unit-of-production method for each field. The corporation uses this accounting
policy instead of the "full cost" method because it provides a more timely
accounting of the success or failure of the corporation's exploration and
production activities. If the full cost method were used, all costs would be
capitalized and depreciated on a country-by-country basis. The capitalized costs
would be subject to an impairment test by country. The full cost method would
tend to delay the expense recognition of unsuccessful projects.
Oil, gas and other properties held and used by the corporation are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. The corporation estimates the future
undiscounted cash flows of the affected properties to judge the recoverability
of carrying amounts. In general, analyses are based on proved reserves, except
in circumstances where it is probable that additional resources will be
developed and contribute to cash flows in the future.
Evaluations of oil and gas reserves are important to the effective management
of upstream assets. They are integral to making investment decisions about oil
and gas properties such as whether develop-
A12
ment should proceed or enhanced recovery methods should be undertaken. Proved
oil and gas reserve quantities are also used as the basis of calculating the
unit-of-production rates for depreciation and evaluating for impairment. These
reserves are the estimated quantities of crude oil, natural gas and natural gas
liquids that geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under
existing economic and operating conditions, i.e., prices and costs as of the
date the estimate is made. The estimation of reserves is an ongoing process
based on rigorous technical evaluations and extrapolations of well information
such as flow rates and reservoir pressure declines.
Supplemental information on oil and gas exploration and production activities
can be found on pages A38 to A42. Included in that section on page A41 is
information on Canadian tar sands proven reserves. This information is shown
separately from the conventional liquids and natural gas proved reserves. For
internal management purposes, the corporation does not view these reserves
separately, but instead considers them and their development as an integral part
of total upstream operations. Refining tar sands reserves produces the same
petroleum products that are produced from refining conventional oil and gas
reserves. However, U.S. Securities and Exchange Commission regulations define
these tar sands reserves as mining reserves and not a part of conventional oil
and gas reserves.
Site Restoration and Environmental Conservation Costs
Site restoration costs that may be incurred by the corporation at the end of the
operating life of certain of its facilities and properties are accrued ratably
over the asset's productive life. Liabilities for environmental conservation
are recorded when it is probable that obligations have been incurred and the
amounts can be reasonably estimated.
The necessity of recording liabilities for these costs is prescribed by GAAP.
Estimating the probability of whether obligations have been incurred and the
amounts that should be recorded requires significant management judgment. This
judgment is based on extensive cost and engineering studies using the latest
available technology.
Foreign Currency Translation
The "functional currency" for translating the accounts of the majority of
downstream and chemicals operations outside the U.S. is the local currency.
Local currency is also used for upstream operations that are relatively
self-contained and integrated within a particular country. The U.S. dollar is
used for operations in highly inflationary economies and certain other
countries.
The method of translating the foreign currency financial statements of the
corporation's international subsidiaries into U.S. dollars is prescribed by
GAAP. Under these principles, it is necessary to select the functional currency
of these subsidiaries. The functional currency is the currency of the primary
economic environment in which the subsidiary operates. Management selects the
functional currency after evaluating this economic environment. Downstream and
chemicals operations normally use the local currency, except in highly
inflationary countries, primarily Latin America, as well as in Singapore, which
uses the U.S. dollar, because it predominantly sells into the U.S. dollar export
market. Upstream operations also use the local currency as the functional
currency, except where crude and natural gas production is predominantly sold
in the export market in U.S. dollars. These operations, which use the U.S.
dollar as their functional currency, are in Malaysia, Indonesia, Nigeria,
Equatorial Guinea and the Middle East countries.
Litigation and Other Contingencies
Claims for substantial amounts have been made against Exxon Mobil and certain of
its consolidated subsidiaries in pending lawsuits and tax disputes. These are
summarized on page A8, with a more extensive discussion included in note 17 on
page A32.
The general guidance provided by GAAP requires that liabilities for
contingencies should be recorded when it is probable that a liability has been
incurred before the date of the balance sheet and that the amount can be
reasonably estimated. Significant management judgement is required to comply
with this guidance, and it includes management reviews with the corporation's
attorneys, taking into consideration all of the relevant facts and
circumstances.
FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future events or
conditions are forward-looking statements. Actual future results, including
merger expenses and synergies; 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, such as the outcome of commercial
negotiations; changes in the supply of and demand for crude oil, natural gas,
and petroleum and petro-chemical products; and other factors discussed above and
under the caption "Factors Affecting Future Results" in Item 1 of ExxonMobil's
2001 Form 10-K.
A13
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICEWATERHOUSECOOPERS LOGO]
Dallas, Texas
February 27, 2002
To the Shareholders of Exxon Mobil Corporation
In our opinion, the consolidated financial statements appearing on pages A15
through A36 present fairly, in all material respects, the financial position of
Exxon Mobil Corporation and its subsidiary companies at December 31, 2001 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the corporation's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
A14
CONSOLIDATED STATEMENT OF INCOME
2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
(millions of dollars)
Revenue
Sales and other operating revenue, including excise taxes $209,417 $228,439 $182,529
Earnings from equity interests and other revenue 4,071 4,309 2,998
--------------------------------------
Total revenue $213,488 $232,748 $185,527
--------------------------------------
Costs and other deductions
Crude oil and product purchases $ 92,286 $108,951 $ 77,011
Operating expenses 18,170 18,135 16,806
Selling, general and administrative expenses 12,900 12,044 13,134
Depreciation and depletion 7,944 8,130 8,304
Exploration expenses, including dry holes 1,175 936 1,246
Merger related expenses 748 1,406 625
Interest expense 293 589 695
Excise taxes 21,907 22,356 21,646
Other taxes and duties 33,377 32,708 34,765
Income applicable to minority and preferred interests 569 412 145
--------------------------------------
Total costs and other deductions $189,369 $205,667 $174,377
--------------------------------------
Income before income taxes $ 24,119 $ 27,081 $ 11,150
Income taxes 9,014 11,091 3,240
--------------------------------------
Income before extraordinary item $ 15,105 $ 15,990 $ 7,910
Extraordinary gain, net of income tax 215 1,730 -
--------------------------------------
Net income $ 15,320 $ 17,720 $ 7,910
======================================
Net income per common share (dollars)
Before extraordinary item $ 2.20 $ 2.30 $ 1.14
Extraordinary gain, net of income tax 0.03 0.25 -
--------------------------------------
Net income $ 2.23 $ 2.55 $ 1.14
======================================
Net income per common share - assuming dilution (dollars)
Before extraordinary item $ 2.18 $ 2.27 $ 1.12
Extraordinary gain, net of income tax 0.03 0.25 -
--------------------------------------
Net income $ 2.21 $ 2.52 $ 1.12
======================================
The information on pages A19 through A36 is an integral part of these
statements.
A15
CONSOLIDATED BALANCE SHEET
Dec. 31 Dec. 31
2001 2000
- --------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
Assets
Current assets
Cash and cash equivalents $ 6,547 $ 7,080
Notes and accounts receivable, less estimated doubtful amounts 19,549 22,996
Inventories
Crude oil, products and merchandise 6,743 7,244
Materials and supplies 1,161 1,060
Prepaid taxes and expenses 1,681 2,019
--------------------------
Total current assets $ 35,681 $ 40,399
Investments and advances 10,768 12,618
Property, plant and equipment, at cost, less accumulated depreciation and depletion 89,602 89,829
Other assets, including intangibles, net 7,123 6,154
--------------------------
Total assets $143,174 $149,000
==========================
Liabilities
Current liabilities
Notes and loans payable $ 3,703 $ 6,161
Accounts payable and accrued liabilities 22,862 26,755
Income taxes payable 3,549 5,275
--------------------------
Total current liabilities $ 30,114 $ 38,191
Long-term debt 7,099 7,280
Annuity reserves and accrued liabilities 12,475 11,934
Deferred income tax liabilities 16,359 16,442
Deferred credits 1,141 1,166
Equity of minority and preferred shareholders in affiliated companies 2,825 3,230
--------------------------
Total liabilities $ 70,013 $ 78,243
==========================
Shareholders' equity
Benefit plan related balances $ (159) $ (235)
Common stock without par value (9,000 million shares authorized) 3,789 3,661
Earnings reinvested 95,718 86,652
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (5,947) (4,862)
Minimum pension liability adjustment (535) (310)
Unrealized gains/(losses) on stock investments (108) (17)
Common stock held in treasury (1,210 million shares in 2001 and 1,089 million (19,597) (14,132)
shares in 2000) --------------------------
Total shareholders' equity $ 73,161 $ 70,757
--------------------------
Total liabilities and shareholders' equity $143,174 $149,000
==========================
The information on pages A19 through A36 is an integral part of these statements.
A16
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
2001 2000 1999
------------------------------------------------------------------------------
Nonowner Nonowner Nonowner
Shareholders' Changes in Shareholders' Changes in Shareholders' Changes in
Equity Equity Equity Equity Equity Equity
------------------------------------------------------------------------------
(millions of dollars)
Benefit plan related balances $ (159) $ (235) $ (298)
Common stock (see note 13)
At beginning of year 3,661 3,403 4,870
Issued - - 92
Other 128 258 303
Cancellation of common stock held in treasury - - (1,862)
--------- --------- ---------
At end of year $ 3,789 $ 3,661 $ 3,403
--------- --------- ---------
Earnings reinvested
At beginning of year 86,652 75,055 75,109
Net income for the year 15,320 $ 15,320 17,720 $ 17,720 7,910 $ 7,910
Dividends - common and preferred shares (6,254) (6,123) (5,872)
Cancellation of common stock held in treasury - - (2,092)
--------- --------- ---------
At end of year $ 95,718 $ 86,652 $ 75,055
--------- --------- ---------
Accumulated other nonowner changes in equity
At beginning of year (5,189) (2,568) (1,981)
Foreign exchange translation adjustment (1,085) (1,085) (2,562) (2,562) (727) (727)
Minimum pension liability adjustment (225) (225) (11) (11) 109 109
Unrealized gains/(losses) on stock investments (91) (91) (48) (48) 31 31
--------- --------- ---------
At end of year $ (6,590) $ (5,189) $ (2,568)
--------- --------- ---------
-------- --------- ---------
Total $ 13,919 $ 15,099 $ 7,323
======== ========= =========
Common stock held in treasury
At beginning of year (14,132) (12,126) (15,831)
Acquisitions, at cost (5,721) (2,352) (976)
Dispositions 256 346 727
Cancellation, returned to unissued - - 3,954
--------- --------- ---------
At end of year $ (19,597) $ (14,132) $ (12,126)
--------- --------- ---------
Shareholders' equity at end of year $ 73,161 $ 70,757 $ 63,466
========= ========= =========
Share Activity
---------------------------------------------------------------------
2001 2000 1999
---------------------------------------------------------------------
(millions of shares)
Common stock
Issued (see note 13)
At beginning of year 8,019 8,019 8,338
Issued - - 8
Cancelled - - (327)
------------- ------------- -------------
At end of year 8,019 8,019 8,019
------------- ------------- -------------
Held in treasury (see note 13)
At beginning of year (1,089) (1,064) (1,422)
Acquisitions, at cost (139) (54) (33)
Dispositions 18 29 64
Cancellation, returned to unissued - - 327
------------- ------------- -------------
At end of year (1,210) (1,089) (1,064)
------------- ------------- -------------
Common shares outstanding at end of year 6,809 6,930 6,955
============= ============= =============
The information on pages A19 through A36 is an integral part of these statements.
A17
CONSOLIDATED STATEMENT OF CASH FLOWS
2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
Cash flows from operating activities
Net income
Accruing to ExxonMobil shareholders $ 15,320 $ 17,720 $ 7,910
Accruing to minority and preferred interests 569 412 145
Adjustments for non-cash transactions
Depreciation and depletion 7,944 8,130 8,304
Deferred income tax charges/(credits) 650 10 (1,439)
Annuity and accrued liability provisions 498 (662) 412
Dividends received greater than/(less than) equity in current earnings of equity companies 78 (387) 146
Extraordinary gain, before income tax (194) (2,038) -
Changes in operational working capital, excluding cash and debt
Reduction/(increase) - Notes and accounts receivable 3,062 (4,832) (3,478)
- Inventories 154 (297) 50
- Prepaid taxes and expenses 118 (204) 177
Increase/(reduction) - Accounts and other payables (5,103) 5,411 3,046
All other items - net (207) (326) (260)
---------------------------------------
Net cash provided by operating activities $ 22,889 $ 22,937 $ 15,013
---------------------------------------
Cash flows from investing activities
Additions to property, plant and equipment $ (9,989) $ (8,446) $ (10,849)
Sales of subsidiaries, investments and property, plant and equipment 1,078 5,770 972
Additional investments and advances (1,035) (1,648) (1,476)
Collection of advances 1,735 985 387
Additions to other marketable securities - (41) (61)
Sales of other marketable securities - 82 42
---------------------------------------
Net cash used in investing activities $ (8,211) $ (3,298) $ (10,985)
---------------------------------------
Net cash generation before financing activities $ 14,678 $ 19,639 $ 4,028
---------------------------------------
Cash flows from financing activities
Additions to long-term debt $ 547 $ 238 $ 454
Reductions in long-term debt (506) (901) (341)
Additions to short-term debt 705 500 1,870
Reductions in short-term debt (1,212) (2,413) (2,359)
Additions/(reductions) in debt with less than 90 day maturity (2,306) (3,129) 2,210
Cash dividends to Exxon Mobil shareholders (6,254) (6,123) (5,872)
Cash dividends to minority interests (194) (251) (219)
Changes in minority interests and sales/(purchases) of affiliate stock (401) (227) (200)
Common stock acquired (5,721) (2,352) (670)
Common stock sold 301 493 348
---------------------------------------
Net cash used in financing activities $ (15,041) $ (14,165) $ (4,779)
---------------------------------------
Effects of exchange rate changes on cash $ (170) $ (82) $ 53
---------------------------------------
Increase/(decrease) in cash and cash equivalents $ (533) $ 5,392 $ (698)
Cash and cash equivalents at beginning of year 7,080 1,688 2,386
---------------------------------------
Cash and cash equivalents at end of year $ 6,547 $ 7,080 $ 1,688
=======================================
The information on pages A19 through A36 is an integral part of these statements.
A18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements and the supporting and
supplemental material are the responsibility of the management of Exxon Mobil
Corporation.
The corporation's principal business is energy, involving the worldwide
exploration, production, transportation and sale of crude oil and natural gas
(upstream) and the manufacture, transportation and sale of petroleum products
(downstream). The corporation is also a major worldwide manufacturer and
marketer of petrochemicals and participates in coal and minerals mining and
electric power generation.
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities. Actual results could differ
from these estimates.
1. Summary of Accounting Policies
Principles of Consolidation. The consolidated financial statements include the
accounts of those significant subsidiaries owned directly or indirectly with
more than 50 percent of the voting rights held by the corporation, and for
which other shareholders do not possess the right to participate in significant
management decisions. They also include the corporation's share of the undivided
interest in upstream assets and liabilities. Amounts representing the
corporation's percentage interest in the underlying net assets of other
significant subsidiaries and less than majority owned companies in which a
significant equity ownership interest is held, are included in "Investments and
advances"; the corporation's share of the net income of these companies is
included in the consolidated statement of income caption "Earnings from equity
interests and other revenue."
Investments in other companies, none of which is significant, are generally
included in "Investments and advances" at cost or less. Dividends from these
companies are included in income as received.
Revenue Recognition. Revenues associated with sales of crude oil, natural gas,
petroleum and chemical products and all other items are recorded when title
passes to the customer.
Revenues from the production of natural gas properties in which the
corporation has an interest with the other producers are recognized on the basis
of the company's net working interest. Differences between actual production and
net working interest volumes are not significant.
Derivative Instruments. The corporation makes limited use of derivatives.
Derivative instruments are not held for trading purposes nor do they have
leverage features. When the corporation does enter into derivative transactions,
it is to offset exposures associated with interest rates, foreign currency
exchange rates and hydrocarbon prices. The gains and losses resulting from the
changes in fair value of these instruments are recorded in income, except when
the instruments are designated as hedging the currency exposure of net
investments in foreign subsidiaries, in which case they are recorded in the
cumulative foreign exchange translation account, as part of shareholders equity.
The gains and losses on derivative instruments that are designated as fair
value hedges (i.e., those hedging the exposure to changes in the fair value of
an asset or a liability or the changes in the fair value of a firm commitment),
are offset by the gains and losses from the changes in fair value of the hedged
items, which are also recognized in income. Most of these designated hedges are
entered into at the same time that the hedged items are transacted, they are
fully effective and in combination with the offsetting hedged items, they result
in no net impact on income. In some situations, the corporation has chosen not
to designate certain immaterial derivatives used for hedging economic exposure
as hedges for accounting purposes due to the excessive administrative effort
that would be required to account for these items as hedging transactions. These
derivatives are recorded on the balance sheet at fair value and the gains and
losses arising from changes in fair value are recognized in income. All
derivatives activity is immaterial.
Inventories. Crude oil, products and merchandise inventories are carried at the
lower of current market value or cost (generally determined under the last-in,
first-out method - LIFO). Costs include applicable purchase costs and operating
expenses but not general and administrative expenses or research and development
costs. Inventories of materials and supplies are valued at cost or less.
Property, Plant and Equipment. Depreciation, depletion and amortization, based
on cost less estimated salvage value of the asset, are primarily determined
under either the unit-of-production method or the straight-line method.
Unit-of-production rates are based on oil, gas and other mineral reserves
estimated to be recoverable from existing facilities. The straight-line method
of depreciation is based on estimated asset service life taking obsolescence
into consideration.
Maintenance and repairs are expensed as incurred. Major renewals and
improvements are capitalized and the assets replaced are retired.
The corporation's upstream activities are accounted for under the "successful
efforts" method. Under this method, costs of productive wells and development
dry holes, both tangible and intangible, as well as productive acreage are
capitalized and amortized on the unit-of-production method. Costs of that
portion of undeveloped acreage likely to be unproductive, based largely on
historical experience, are amortized over the period of exploration. Other
exploratory expenditures, including geophysical costs, other dry hole costs and
annual lease rentals, are expensed as incurred. Exploratory wells that find oil
and gas in an area requiring a major capital expenditure before production can
begin are evaluated annually to assure that commercial quantities of reserves
have been found or that additional exploration work is underway or planned.
Exploratory well costs not meeting either of these tests are charged to expense.
Oil, gas and other properties held and used by the corporation are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. The corporation estimates the future
undiscounted cash flows of the affected properties to judge the recoverability
of carrying amounts. In general, analyses are based on proved reserves, except
in circumstances where it is probable that additional resources will be
developed and contribute to cash flows in the future.
Site Restoration and Environmental Conservation Costs. Site restoration costs
that may be incurred by the corporation at the end of the operating life of
certain of its facilities and properties are reserved ratably over the asset's
productive life.
A19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Liabilities for environmental conservation are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably
estimated. These liabilities are not reduced by possible recoveries from third
parties, and projected cash expenditures are not discounted.
Foreign Currency Translation. The "functional currency" for translating the
accounts of the majority of downstream and chemical operations outside the U.S.
is the local currency. Local currency is also used for upstream operations that
are relatively self-contained and integrated within a particular country, such
as in Canada, the United Kingdom, Norway and Continental Europe. The U.S. dollar
is used for operations in highly inflationary economies, in Singapore which is
predominantly export oriented and for some upstream operations, primarily in
Malaysia, Indonesia, Nigeria, Equatorial Guinea and the Middle East countries.
For all operations, gains or losses on remeasuring foreign currency transactions
into functional currency are included in income.
2. Extraordinary Item and Accounting Change
Net income for 2001 included net after-tax gains from asset management
activities in the chemicals segment and regulatory required asset divestitures
in the amount of $215 million (including an income tax credit of $21 million),
or $0.03 per common share. Net income for 2000 included net after-tax gains from
regulatory required asset divestitures in the amount of $1,730 million (net
$308 million of income taxes), or $0.25 per common share. These net after-tax
gains were reported as extraordinary items according to accounting requirements
for business combinations accounted for as pooling of interests.
As of January 1, 2001, Exxon Mobil 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. Merger of Exxon Corporation and Mobil Corporation
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation (Exxon)
merged with Mobil Corporation (Mobil) so that Mobil became a wholly-owned
subsidiary of Exxon (the "Merger"). At the same time, Exxon changed its name to
Exxon Mobil Corporation (ExxonMobil). Under the terms of the agreement,
approximately 1.0 billion shares of ExxonMobil common stock were issued in
exchange for all the outstanding shares of Mobil common stock based upon an
exchange ratio of 1.32015. Following the exchange, former shareholders of Exxon
owned approximately 70 percent of the corporation, while former Mobil
shareholders owned approximately 30 percent of the corporation. Each outstanding
share of Mobil preferred stock was converted into one share of a new class of
ExxonMobil preferred stock.
As a result of the Merger, the accounts of certain downstream 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. Certain
reclassifications have been made to conform the presentation of Exxon and
Mobil.
As a condition of the approval of the Merger, the U.S. Federal Trade
Commission and the European Commission required that certain property --
primarily downstream, pipeline and natural gas distribution assets -- be
divested. The carrying value of these assets was approximately $3 billion and
net after-tax gains of $40 million and $1,730 million were reported as
extraordinary items in 2001 and 2000, respectively. The divested properties
historically earned approximately $200 million per year.
4. Merger Expenses and Reorganization Reserves
In association with the Merger, $748 million pre-tax ($525 million after-tax),
$1,406 million pre-tax ($920 million after-tax), and $625 million pre-tax ($469
million after-tax) of costs were recorded as merger-related expenses in 2001,
2000 and 1999, respectively. These cumulative charges of $2,779 million included
separation expenses of approximately $1,345 million related to workforce
reductions (approximately 8,000 employees at year-end 2001), plus implementation
costs and merger closing costs. The separation reserve balance at year-end 2001
of approximately $197 million, is expected to be expended in 2002.
In the first quarter of 1999, the corporation recorded a $120 million
after-tax charge for the non-merger related reorganization of Japanese
downstream operations in its wholly-owned Esso Sekiyu K.K. and 50.1 percent
owned General Sekiyu K.K. affiliates. The reorganization resulted in the
reduction of approximately 700 administrative, financial, logistics and
marketing service employee positions. The Japanese affiliates recorded a
combined charge of $216 million (before-tax) to selling, general and
administrative expenses for the employee related costs. Substantially all cash
expenditures anticipated in the restructuring provision have been paid as of the
end of 1999. General Sekiyu also recorded a $211 million (before-tax) charge to
depreciation and depletion for the write-off of costs associated with the
cancellation of a power plant project at the Kawasaki terminal.
The following table summarizes the activity in the reorganization reserves.
The 1999 opening balance represents accruals for provisions taken in prior
years.
Opening Balance at
Balance Additions Deductions Year End
- -----------------------------------------------------------------------------
(millions of dollars)
1999 $169 $563 $351 $381
2000 381 738 780 339
2001 339 187 329 197
A20
5. Miscellaneous Financial Information
Research and development costs totaled $603 million in 2001, $564 million in
2000 and $630 million in 1999.
Net income included aggregate foreign exchange transaction losses of $142
million in 2001, $236 million in 2000 and $5 million in 1999.
In 2001, 2000, and 1999, net income included gains of $238 million, and $175
million, and losses of $7 million, respectively, attributable to the combined
effects of LIFO inventory accumulations and draw-downs. The aggregate
replacement cost of inventories was estimated to exceed their LIFO carrying
values by $4.2 billion and $6.7 billion at December 31, 2001 and 2000,
respectively.
6. Cash Flow Information
The consolidated statement of cash flows provides information about changes in
cash and cash equivalents. Highly liquid investments with maturities of three
months or less when acquired are classified as cash equivalents.
Cash payments for interest were: 2001 - $562 million, 2000 - $729 million and
1999 - $882 million. Cash payments for income taxes were: 2001 - $9,855 million,
2000 - $8,671 million and 1999 - $3,805 million.
7. Additional Working Capital Data Dec. 31 Dec. 31
2001 2000
- ------------------------------------------------------------------------
(millions of dollars)
Notes and accounts receivable
Trade, less reserves of $279 million
and $258 million $ 13,597 $ 17,568
Other, less reserves of $62 million
and $48 million 5,952 5,428
---------------------
$ 19,549 $ 22,996
=====================
Notes and loans payable
Bank loans $ 1,063 $ 1,244
Commercial paper 1,804 3,761
Long-term debt due within one year 339 650
Other 497 506
--------------------
$ 3,703 $ 6,161
====================
Accounts payable and accrued liabilities
Trade payables $ 12,696 $ 15,357
Obligations to equity companies 632 586
Accrued taxes other than income taxes 4,768 5,423
Other 4,766 5,389
---------------------
$ 22,862 $ 26,755
=====================
On December 31, 2001, unused credit lines for short-term financing totaled
approximately $5.3 billion. Of this total, $2.1 billion support commercial paper
programs under terms negotiated when drawn. The weighted average interest rate
on short-term borrowings outstanding at December 31, 2001 and 2000 was 3.8
percent and 6.4 percent, respectively.
A21
Notes to Consolidated Financial Statements
8. Equity Company Information
The summarized financial information below includes amounts related to certain
less than majority owned companies and majority owned subsidiaries where
minority shareholders possess the right to participate in significant management
decisions (see note 1). These companies are primarily engaged in crude
production, natural gas marketing and refining operations in North America;
natural gas production, natural gas distribution, and downstream operations in
Europe and crude production in Kazakhstan and the Middle East. Also included are
several power generation, petrochemical/lubes manufacturing and chemical
ventures; 1999 included amounts related to Mobil's European Fuels joint venture
which was divested as a condition of the Merger approval.
2001 2000 1999
-------------------------------------------------------------
ExxonMobil ExxonMobil ExxonMobil
Equity Company Financial Summary Total Share Total Share Total Share
- ----------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
Total revenues
Percent of revenues from companies included in the ExxonMobil
consolidation was 9% in 2001, 11% in 2000 and 8% in 1999 $ 95,009 $ 36,695 $ 81,371 $ 32,452 $ 94,534 $ 32,124
--------------------------------------------------------------
Income before income taxes $ 6,952 $ 2,922 $ 7,632 $ 3,092 $ 4,100 $ 2,095
Less: Related income taxes (1,562) (748) (1,382) (658) (734) (449)
--------------------------------------------------------------
Net income $ 5,390 $ 2,174 $ 6,250 $ 2,434 $ 3,366 $ 1,646
==============================================================
Current assets $ 18,992 $ 7,369 $ 28,784 $ 11,479 $ 21,518 $ 7,739
Property, plant and equipment, less accumulated depreciation 36,565 13,135 36,553 13,733 44,213 15,509
Other long-term assets 5,127 2,284 6,656 2,979 4,806 2,106
--------------------------------------------------------------
Total assets $ 60,684 $ 22,788 $ 71,993 $ 28,191 $ 70,537 $ 25,354
--------------------------------------------------------------
Short-term debt $ 3,142 $ 1,232 $ 2,636 $ 1,093 $ 2,856 $ 1,129
Other current liabilities 16,218 6,349 25,377 10,357 18,129 6,324
Long-term debt 10,496 3,950 11,116 4,094 13,486 3,978
Other long-term liabilities 6,253 2,862 7,054 3,273 5,372 2,598
Advances from shareholders 8,443 2,179 8,485 2,510 3,636 1,919
--------------------------------------------------------------
Net assets $ 16,132 $ 6,216 $ 17,325 $ 6,864 $ 27,058 $ 9,406
==============================================================
9. Investments and Advances Dec. 31 Dec. 31
2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
Companies carried at equity in underlying assets
Investments $ 6,216 $ 6,864
Advances 2,179 2,510
-----------------
$ 8,395 $ 9,374
Companies carried at cost or less and stock investments carried at fair value 1,060 1,230
-----------------
$ 9,455 $10,604
Long-term receivables and miscellaneous investments at cost or less 1,313 2,014
-----------------
Total $10,768 $12,618
=================
A22
10. Investment in Property, Plant and Equipment Dec. 31, 2001 Dec. 31, 2000
--------------------------------------------------
Cost Net Cost Net
- ------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
Petroleum and natural gas
Upstream $109,616 $46,597 $106,287 $45,731
Downstream 50,691 25,560 51,862 26,730
------------------------------------------------
Total petroleum and natural gas $160,307 $72,157 $158,149 $72,461
Chemicals 17,973 9,690 17,860 9,935
Other 12,223 7,755 11,737 7,433
------------------------------------------------
Total $190,503 $89,602 $187,746 $89,829
================================================
Accumulated depreciation and depletion totaled $100,901 million at the end of
2001 and $97,917 million at the end of 2000. Interest capatalized in 2001, 2000
and 1999 was $518 million, $641 million and $595 million, respectively.
- --------------------------------------------------------------------------------
11. Leased Facilities
At December 31, 2001, the corporation and its consolidated subsidiaries held
non-cancelable operating charters and leases covering drilling equipment,
tankers, service stations and other properties with minimum lease commitments as
indicated in the table.
Net rental expenditures for 2001, 2000 and 1999 totaled $2,454 million, $1,935
million and $2,172 million, respectively, after being reduced by related rental
income of $199 million, $195 million and $317 million, respectively. Minimum
rental expenditures totaled $2,562 million in 2001, $1,992 million in 2000 and
$2,311 million in 1999.
- -------------------------------------------------------------------
Minimum Related
Commitment Rental income
- -------------------------------------------------------------------
(millions of dollars)
2002 $ 1,327 $ 110
2003 1,107 103
2004 801 95
2005 569 87
2006 433 48
2007 and beyond 2,687 103
----------------------------
Total $ 6,924 $ 546
============================
- --------------------------------------------------------------------------------
12. Employee Stock Ownership Plans
In 1989, the Exxon leveraged employee stock ownership plan (Exxon LESOP) trust
borrowed $1,000 million under the terms of notes guaranteed by Exxon. The Exxon
LESOP trust used the proceeds of the borrowing to purchase shares of Exxon's
convertible Class A Preferred Stock. The final Exxon LESOP note was repaid in
1999. By year-end 1999, all remaining shares of Exxon Class A Preferred Stock
were converted to ExxonMobil common shares.
In 1989, the Mobil Oil Corporation employee stock ownership plan (Mobil LESOP)
trust borrowed $800 million under the terms of notes and debentures guaranteed
by Mobil. The trust used the proceeds of the borrowing to purchase shares of
Mobil's Series B Convertible Preferred Stock which upon the merger were
converted into shares of ExxonMobil Class B Preferred Stock with similar terms.
By year-end 1999, all remaining shares of Class B Preferred Stock were converted
to ExxonMobil common shares.
The Exxon LESOP and Mobil LESOP were merged in late 1999 to create the
ExxonMobil LESOP. The ExxonMobil LESOP is a constituent part of the ExxonMobil
Savings Plan which, effective February 8, 2002, is an employee stock ownership
plan in its entirety. Employees eligible to participate in the ExxonMobil
Savings Plan may elect to participate in the ExxonMobil LESOP. Corporate
contributions to the plan and dividends are used to make principal and interest
payments on the ExxonMobil LESOP trust notes. As corporate contributions and
dividends are credited, common shares are allocated to participants' plan
accounts. The corporation's contribution to the ExxonMobil LESOP, representing
the amount by which debt service exceeded dividends on shares held by the
ExxonMobil LESOP, was $58 million, $15 million, and $19 million in 2001, 2000
and 1999, respectively.
Accounting for the plans has followed the principles that were in effect for
the respective plans when they were established. The amount of compensation
expense related to the plans and recorded by the corporation during the periods
was $83 million in 2001, $13 million in 2000, and $5 million in 1999. The
ExxonMobil LESOP trust held 104.2 million shares of ExxonMobil common stock at
the end of 2001 and 109.2 million shares at the end of 2000.
A23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Capital
On May 30, 2001, the company's Board of Directors approved a two-for-one stock
split of common stock for shareholders of record on June 20, 2001. The
authorized common stock was increased from 4.5 billion shares without par value
to 9 billion shares without par value, and the issued shares were split on a
two-for-one basis on June 20, 2001.
At the effective time of the merger of Exxon and Mobil, the authorized common
stock of ExxonMobil was increased from 3 billion shares to 4.5 billion shares.
Under the terms of the merger agreement, approximately 1.0 billion shares of
ExxonMobil common stock were issued in exchange for all of the outstanding
shares of Mobil's common stock based upon an exchange ratio of 1.32015
ExxonMobil shares for each Mobil share. Mobil's common stock accounted for as
treasury stock was cancelled at the effective time of the merger.
In 1989, $1,800 million of benefit related balances were recorded as debt and
as a reduction to shareholders' equity, representing Exxon and Mobil guaranteed
borrowings by the Exxon LESOP to purchase Exxon Class A Preferred Stock and the
Mobil LESOP to purchase Mobil Class B Preferred Stock. As common shares are
earned by employees and the debt is repaid, the benefit plan related balances
are being reduced. Preferred dividends of $36 million were paid during 1999 on
preferred shares described in note 12, all of which were converted to ExxonMobil
common stock by year-end 1999. The table below summarizes the earnings
per share calculations.
2001 2000 1999
------------------------------------
Net income per common share
- ---------------------------
Income before extraordinary item (millions of dollars) $15,105 $15,990 $7,910
Less: Preferred stock dividends - - (36)
------------------------------------
Income available to common shares $15,105 $15,990 $7,874
====================================
Weighted average number of common shares outstanding (millions of shares) 6,868 6,953 6,906
Net income per common share
Before extraordinary item $ 2.20 $ 2.30 $ 1.14
Extraordinary gain, net of income tax 0.03 0.25 -
------------------------------------
Net income $ 2.23 $ 2.55 $ 1.14
====================================
Net income per common share - assuming dilution
- -----------------------------------------------
Income before extraordinary item (millions of dollars) $15,105 $15,990 $7,910
Adjustment for assumed dilution (4) (8) 1
------------------------------------
Income available to common shares $15,101 $15,982 $7,911
====================================
Weighted average number of common shares outstanding (millions of shares) 6,868 6,953 6,906
Plus: Issued on assumed exercise of stock options 73 80 88
Plus: Assumed conversion of preferred stock - - 42
------------------------------------
Weighted average number of common shares outstanding 6,941 7,033 7,036
====================================
Net income per common share
Before extraordinary item $ 2.18 $ 2.27 $ 1.12
Extraordinary gain, net of income tax 0.03 0.25 -
------------------------------------
Net income $ 2.21 $ 2.52 $ 1.12
====================================
Dividends paid per common share $ 0.910 $ 0.880 $0.844
A24
14. Financial Instruments and Derivatives
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. Long-term debt is the
only category of financial instruments whose fair value differs materially from
the recorded book value. The estimated fair value of total long-term debt,
including capitalized lease obligations, at December 31, 2001 and 2000, was $7.9
billion and $8.0 billion, respectively, as compared to recorded book values of
$7.1 billion and $7.3 billion.
The corporation's size, geographic diversity and the complementary nature of
the upstream, downstream and chemicals businesses mitigate the corporation's
risk from changes in interest rates, currency rates and commodity prices. The
corporation relies on these operating attributes and strengths to reduce
enterprise-wide risk. As a result, the corporation makes limited use of
derivatives to offset exposures arising from existing transactions.
The corporation does not trade in derivatives nor does it use derivatives
with leveraged features. The corporation maintains a system of controls that
includes a policy covering the authorization, reporting and monitoring of
derivative activity. The corporation's derivative activities pose no material
credit or market risks to ExxonMobil's operations, financial condition or
liquidity. Interest rate, foreign exchange rate and commodity price exposures
arising from derivative contracts undertaken in accordance with the
corporation's policies have not been significant.
The fair value of derivatives outstanding and recorded on the balance sheet
at December 31, 2001 was $50 million before-tax. This is the amount that the
corporation would have had to pay to third parties if these derivatives had
been settled at year-end. These derivative fair values were substantially offset
by the fair values of the underlying exposures being hedged. During 2001, the
corporation recognized a before-tax gain of $23 million related to derivative
activity. This gain included the offsetting amounts from the changes in fair
value of the items being hedged by the derivatives.
15. Long-Term Debt
At December 31, 2001, long-term debt consisted of $6,465 million due in U.S.
dollars and $634 million representing the U.S. dollar equivalent at year-end
exchange rates of amounts payable in foreign currencies. These amounts exclude
that portion of long-term debt, totaling $339 million, which matures within one
year and is included in current liabilities. The amounts of long-term debt
maturing, together with sinking fund payments required, in each of the four
years after December 31, 2002, in millions of dollars, are: 2003 - $880, 2004 -
$2,176, 2005 - $328 and 2006 - $114. Certain of the borrowings described may
from time to time be assigned to other ExxonMobil affiliates. At December 31,
2001, the corporation's unused long-term credit lines were not material.
The total outstanding balance of defeased debt at year-end 2001 was $408
million. Summarized long-term borrowings at year-end 2001 and 2000 were as shown
in the adjacent table:
2001 2000
- --------------------------------------------------------------------
(millions of dollars)
Exxon Mobil Corporation
Guaranteed zero coupon notes due 2004
- Face value ($1,146) net of
unamortized discount $ 836 $ 749
Exxon Capital Corporation
6.0% Guaranteed notes due 2005 106 106
6.125% Guaranteed notes due 2008 160 175
SeaRiver Maritime Financial Holdings, Inc.
Guaranteed debt securities due 2003-2011 (1) 105 115
Guaranteed deferred interest
debentures due 2012
- Face value ($771) net of unamortized
discount plus accrued interest 903 811
Imperial Oil Limited
Variable rate notes due 2004 (2) 600 600
ExxonMobil Canada Ltd.
3.0% Swiss franc debentures due 2003 (3) 328 331
5.0% U.S. dollar Eurobonds due 2004 (4) 262 274
Mobil Producing Nigeria Unlimited
8.625% notes due 2003-2006 146 188
Mobil Corporation
8.625% debentures due 2021 247 247
7.625% debentures due 2033 204 203
Industrial revenue bonds due 2003-2033 (5) 1,535 1,469
ESOP Trust notes due 2003 65 100
Other U.S. dollar obligations (6) 751 1,062
Other foreign currency obligations 585 598
Capitalized lease obligations (7) 266 252
----------------
Total long-term debt $7,099 $7,280
================
(1) Average effective interest rate of 4.1% in 2001 and 6.4% in 2000.
(2) Average effective interest rate of 4.2% in 2001 and 6.6% in 2000.
(3) Swapped into floating rate U.S. dollar debt.
(4) Swapped into floating rate debt.
(5) Average effective interest rate of 3.0% in 2001 and 4.5% in 2000.
(6) Average effective interest rate of 8.0% in 2001 and 7.8% in 2000.
(7) Average imputed interest rate of 6.4% in 2001 and 7.2% in 2000.
A25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 ($106 million of long-term debt at year-end 2001) and the 6.125% notes
due 2008 ($160 million) of Exxon Capital Corporation and the deferred interest
debentures due 2012 ($903 million) and the debt securities due 2003-2011 ($105
million long-term and $10 million short-term) 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 twelve months ended December 31, 2001
- ------------------------------------------------------------------------------------
Revenue
Sales and other operating revenue, including
excise taxes $ 28,800 $ - $ - $180,617 $ - $ 209,417
Earnings from equity interests and other revenue 13,535 - 32 3,709 (13,205) 4,071
Intercompany revenue 6,252 584 62 106,498 (113,396) -
------------------------------------------------------------------------
Total revenue 48,587 584 94 290,824 (126,601) 213,488
------------------------------------------------------------------------
Costs and other deductions
Crude oil and product purchases 19,483 - - 174,484 (101,681) 92,286
Operating expenses 5,702 3 1 17,613 (5,149) 18,170
Selling, general and administrative expenses 2,158 2 - 10,802 (62) 12,900
Depreciation and depletion 1,584 5 3 6,352 - 7,944
Exploration expenses, including dry holes 125 - - 1,050 - 1,175
Merger related expenses 89 - - 771 (112) 748
Interest expense 1,043 531 114 4,924 (6,319) 293
Excise taxes 1,957 - - 19,950 - 21,907
Other taxes and duties 14 - - 33,363 - 33,377
Income applicable to minority and preferred interests - - - 569 - 569
------------------------------------------------------------------------
Total costs and other deductions 32,155 541 118 269,878 (113,323) 189,369
------------------------------------------------------------------------
Income before income taxes 16,432 43 (24) 20,946 (13,278) 24,119
Income taxes 1,327 15 (20) 7,692 - 9,014
------------------------------------------------------------------------
Income before extraordinary item 15,105 28 (4) 13,254 (13,278) 15,105
Extraordinary gain, net of income tax 215 - - - - 215
------------------------------------------------------------------------
Net income $ 15,320 $ 28 $ (4) $ 13,254 $ (13,278) $ 15,320
========================================================================
A26
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustment Consolidated
------------------------------------------------------------------------
(millions of dollars)
Condensed consolidated statement of income for twelve months ended December 31, 2000
- ------------------------------------------------------------------------------------
Revenue
Sales and other operating revenue, including excise taxes $ 36,211 $ - $ - $192,228 $ - $ 228,439
Earnings from equity interests and other revenue 14,399 - 35 3,577 (13,702) 4,309
Intercompany revenue 4,148 997 90 92,832 (98,067) -
------------------------------------------------------------------
Total revenue 54,758 997 125 288,637 (111,769) 232,748
------------------------------------------------------------------
Costs and other deductions
Crude oil and product purchases 22,790 - - 173,012 (86,851) 108,951
Operating expenses 5,787 3 1 17,051 (4,707) 18,135
Selling, general and administrative expenses 1,978 - - 10,203 (137) 12,044
Depreciation and depletion 1,510 5 3 6,612 - 8,130
Exploration expenses, including dry holes 115 - - 821 - 936
Merger related expenses 402 - - 1,171 (167) 1,406
Interest expense 1,449 916 116 4,313 (6,205) 589
Excise taxes 2,614 - - 19,742 - 22,356
Other taxes and duties 15 - - 32,693 - 32,708
Income applicable to minority and preferred interests - - - 412 - 412
------------------------------------------------------------------
Total costs and other deductions 36,660 924 120 266,030 (98,067) 205,667
------------------------------------------------------------------
Income before income taxes 18,098 73 5 22,607 (13,702) 27,081
Income taxes 2,108 20 (10) 8,973 - 11,091
------------------------------------------------------------------
Income before extraordinary item 15,990 53 15 13,634 (13,702) 15,990
Extraordinary gain, net of income tax 1,730 - - 962 (962) 1,730
------------------------------------------------------------------
Net income $ 17,720 $ 53 $ 15 $ 14,596 $ (14,664) $ 17,720
==================================================================
Condensed consolidated statement of income for twelve months ended December 31, 1999
- ------------------------------------------------------------------------------------
Revenue
Sales and other operating revenue, including excise taxes $ 25,758 $ - $ - $156,771 $ - $ 182,529
Earnings from equity interests and other revenue 7,585 37 31 2,102 (6,757) 2,998
Intercompany revenue 1,585 660 61 35,825 (38,131) -
------------------------------------------------------------------
Total revenue 34,928 697 92 194,698 (44,888) 185,527
------------------------------------------------------------------
Costs and other deductions
Crude oil and product purchases 13,926 - - 97,296 (34,211) 77,011
Operating expenses 4,669 3 1 13,285 (1,152) 16,806
Selling, general and administrative expenses 2,230 - - 10,908 (4) 13,134
Depreciation and depletion 1,396 5 3 6,900 - 8,304
Exploration expenses, including dry holes 110 - - 1,136 - 1,246
Merger related expenses 479 - - 146 - 625
Interest expense 1,150 561 95 1,653 (2,764) 695
Excise taxes 2,846 - - 18,800 - 21,646
Other taxes and duties 14 - - 34,751 - 34,765
Income applicable to minority and preferred interests - - - 145 - 145
------------------------------------------------------------------
Total costs and other deductions 26,820 569 99 185,020 (38,131) 174,377
------------------------------------------------------------------
Income before income taxes 8,108 128 (7) 9,678 (6,757) 11,150
Income taxes 198 28 (13) 3,027 - 3,240
------------------------------------------------------------------
Income before extraordinary item 7,910 100 6 6,651 (6,757) 7,910
Extraordinary gain, net of income tax - - - - - -
------------------------------------------------------------------
Net income $ 7,910 $ 100 $ 6 $ 6,651 $ (6,757) $ 7,910
=================================================================
A27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidating financial information related to guaranteed securities
issued by 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 balance sheet for year ended December 31, 2001
- ---------------------------------------------------------------------
Cash and cash equivalents $ 1,375 $ - $ - $ 5,172 $ - $ 6,547
Notes and accounts receivable - net 2,458 - - 17,091 - 19,549
Inventories 996 - - 6,908 - 7,904
Prepaid taxes and expenses 155 5 8 1,513 - 1,681
--------------------------------------------------------------------------
Total current assets 4,984 5 8 30,684 - 35,681
Investments and advances 92,091 - 415 317,456 (399,194) 10,768
Property, plant and equipment - net 16,843 108 6 72,645 - 89,602
Other long-term assets 753 - 137 6,233 - 7,123
Intercompany receivables 8,466 1,365 1,431 266,527 (277,789) -
---------------------------------------------------------------------------
Total assets $ 123,137 $ 1,478 $ 1,997 $ 693,545 $(676,983) $ 143,174
===========================================================================
Notes and loans payable $ - $ 35 $ 10 $ 3,658 $ - $ 3,703
Accounts payable and accrued liabilities 2,735 6 1 20,120 - 22,862
Income taxes payable 767 - - 2,782 - 3,549
---------------------------------------------------------------------------
Total current liabilities 3,502 41 11 26,560 - 30,114
Long-term debt 1,258 266 1,008 4,567 - 7,099
Deferred income tax liabilities 2,989 33 302 13,035 - 16,359
Other long-term liabilities 4,373 - - 12,068 - 16,441
Intercompany payables 37,854 248 382 239,305 (277,789) -
---------------------------------------------------------------------------
Total liabilities 49,976 588 1,703 295,535 (277,789) 70,013
Earnings reinvested 95,718 84 (100) 48,907 (48,891) 95,718
Other shareholders' equity (22,557) 806 394 349,103 (350,303) (22,557)
---------------------------------------------------------------------------
Total shareholders' equity 73,161 890 294 398,010 (399,194) 73,161
---------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 123,137 $ 1,478 $ 1,997 $ 693,545 $(676,983) $ 143,174
===========================================================================
Condensed consolidated balance sheet for year ended 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
Prepaid taxes and expenses 262 - 14 1,743 - 2,019
---------------------------------------------------------------------------
Total current assets 10,026 - 14 30,359 - 40,399
Investments and advances 79,589 - 408 303,090 (370,469) 12,618
Property, plant and equipment - net 18,559 113 9 71,148 - 89,829
Other long-term assets 508 2 150 5,494 - 6,154
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 payable $ 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
===========================================================================
A28
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 twelve months ended December 31, 2001
- ----------------------------------------------------------------------------------------
Cash provided by/(used in) operating activities $ 7,277 $ 12 $ 113 $ 16,239 $ (752) $ 22,889
---------------------------------------------------------------------------
Cash flows from investing activities
Additions to property, plant and equipment (2,058) - - (7,931) - (9,989)
Sales of long-term assets 536 - - 542 - 1,078
Net intercompany investing 3,152 17,759 (76) (1,345) (19,490) -
All other investing, net (31) - - 731 - 700
---------------------------------------------------------------------------
Net cash provided by/(used in) investing
activities 1,599 17,759 (76) (8,003) (19,490) (8,211)
---------------------------------------------------------------------------
Cash flows from financing activities
Additions to short- and long-term debt - - - 1,252 - 1,252
Reductions in short- and long-term debt (62) (15) (7) (1,634) - (1,718)
Additions/(reductions) in debt with less than
90 day maturity - (39) - (2,267) - (2,306)
Cash dividends (6,254) - - (752) 752 (6,254)
Common stock acquired (5,721) - - - - (5,721)
Net intercompany financing activity - (17,717) (30) (1,743) 19,490 -
All other financing, net 301 - - (595) - (294)
---------------------------------------------------------------------------
Net cash provided by/(used in) financing
activities (11,736) (17,771) (37) (5,739) 20,242 (15,041)
---------------------------------------------------------------------------
Effects of exchange rate changes on cash - - - (170) - (170)
---------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents $ (2,860) $ - $ - $ 2,327 $ - $ (533)
===========================================================================
Condensed consolidated statement of cash flows for twelve months ended December 31, 2000
- ----------------------------------------------------------------------------------------
Cash provided by/(used in) operating activities $ 7,704 $ 61 $ 94 $ 16,063 $ (985) $ 22,937
---------------------------------------------------------------------------
Cash flows from investing activities
Additions to property, plant and equipment (1,832) - - (6,614) - (8,446)
Sales of long-term assets 1,088 - - 4,682 - 5,770
Net intercompany investing 6,386 (7,143) (114) (6,285) 7,156 -
All other investing, net (26) - - (596) - (622)
---------------------------------------------------------------------------
Net cash provided by/(used in) investing
activities 5,616 (7,143) (114) (8,813) 7,156 (3,298)
---------------------------------------------------------------------------
Cash flows from financing activities
Additions to short- and long-term debt 23 - - 715 - 738
Reductions in short- and long-term debt (247) (214) (7) (2,846) - (3,314)
Additions/(reductions) in debt with less than
90 day maturity (990) 16 - (2,155) - (3,129)
Cash dividends (6,123) - - (985) 985 (6,123)
Common stock acquired (2,352) - - - - (2,352)
Net intercompany financing activity - 7,280 27 (151) (7,156) -
All other financing, net 493 - - (478) - 15
---------------------------------------------------------------------------
Net cash provided by/(used in) financing
activities (9,196) 7,082 20 (5,900) (6,171) (14,165)
---------------------------------------------------------------------------
Effects of exchange rate changes on cash - - - (82) - (82)
---------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents $ 4,124 $ - $ - $ 1,268 $ - $ 5,392
===========================================================================
A29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed consolidating financial information related to guaranteed securities
issued by 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 cash flows for twelve months ended December 31, 1999
- ----------------------------------------------------------------------------------------
Cash provided by/(used in) operating activities $ 5,056 $ 78 $ 104 $ 12,916 $ (3,141) $ 15,013
---------------------------------------------------------------------------
Cash flows from investing activities
Additions to property, plant and equipment (1,968) - - (8,881) - (10,849)
Sales of long-term assets 294 - - 678 - 972
Net intercompany investing 2,982 (751) (95) (6,468) 4,332 -
All other investing, net (31) - - (1,077) - (1,108)
---------------------------------------------------------------------------
Net cash provided by/(used in) investing
activities 1,277 (751) (95) (15,748) 4,332 (10,985)
---------------------------------------------------------------------------
Cash flows from financing activities
Additions to short- and long-term debt 2 - - 2,322 - 2,324
Reductions in short- and long-term debt (2) - (7) (2,691) - (2,700)
Additions/(reductions) in debt with less than
90 day maturity (117) 10 - 2,317 - 2,210
Cash dividends (5,872) (2,000) - (1,141) 3,141 (5,872)
Common stock acquired (670) - - - - (670)
Net intercompany financing activity - 2,663 (2) 1,671 (4,332) -
All other financing, net 348 - - (419) - (71)
---------------------------------------------------------------------------
Net cash provided by/(used in) financing
activities (6,311) 673 (9) 2,059 (1,191) (4,779)
---------------------------------------------------------------------------
Effects of exchange rate changes on cash - - - 53 - 53
---------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents $ 22 $ - $ - $ (720) $ - $ (698)
===========================================================================
A30
16. Incentive Program
The 1993 Incentive Program provides for grants of stock options, stock
appreciation rights (SARs), restricted stock and other forms of award. Awards
may be granted over a 10-year period to eligible employees of the corporation
and those affiliates at least 50 percent owned. The number of shares of stock
which may be awarded each year under the 1993 Incentive Program may not exceed
seven tenths of one percent (0.7%) of the total number of shares of common stock
of the corporation outstanding (excluding shares held by the corporation) on
December 31 of the preceding year. If the total number of shares effectively
granted in any year is less than the maximum number of shares allowable, the
balance may be carried over thereafter. Outstanding awards are subject to
certain forfeiture provisions contained in the program or award instrument.
Options and SARs may be granted at prices not less than 100 percent of market
value on the date of grant and have a maximum life of 10 years. Most of the
options and SARs normally first become exercisable one year following the date
of grant.
On the closing of the merger on November 30, 1999, outstanding options and
SARs granted by Mobil under its 1995 Incentive Compensation and Stock Ownership
Plan and prior plans were assumed by ExxonMobil and converted into rights to
acquire ExxonMobil common stock with adjustments to reflect the exchange ratio.
No further awards may be granted under the former Mobil plans.
Shares available for granting under the 1993 Incentive Program were 133,115
thousand at the beginning of 2001 and 98,668 thousand at the end of 2001. At
December 31, 2000 and 2001, respectively, 2,438 thousand and 2,559 thousand
shares of restricted common stock were outstanding.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," was implemented in January 1996. As permitted by the
Standard, ExxonMobil retained its prior method of accounting for stock
compensation. If the provisions of Statement No. 123 had been adopted, net
income and earnings per share (on both a basic and diluted basis) would have
been reduced by $285 million, or $0.04 per share in 2001; $296 million, or
$0.04 per share in 2000 and $149 million, or $0.02 per share in 1999. For the
ExxonMobil plan, the average fair value of each option granted during 2001,
2000 and 1999 was $6.89, $10.18 and $9.85, respectively. The fair value was
estimated at the grant date using an option-pricing model with the following
weighted average assumptions for 2001, 2000 and 1999, respectively: risk-free
interest rates of 4.6 percent, 5.5 percent and 6.2 percent; expected life of 6
years for all years; volatility of 16 percent, 16 percent and 15 percent and a
dividend yield of 2.5 percent, 2.0 percent and 2.1 percent. For the Mobil
plans, the average fair value of each Mobil option granted during 1999 was
$8.51. The fair value was estimated at the grant date using an option-pricing
model with the following weighted average assumptions for 1999: risk-free
interest rate of 5.2 percent; expected life of 5 years; volatility of 20 percent
and a dividend yield of 2.7 percent.
Changes that occurred in options outstanding in 2001, 2000 and 1999,
including the former Mobil plans, are summarized below (shares in thousands):
2001 2000 1999
--------------------------------------------------------------------
Avg. Exercise Avg.Exercise Avg. Exercise
Shares Price Shares Price Shares Price
--------------------------------------------------------------------
Outstanding at beginning of year 248,680 $ 28.70 242,232 $ 24.81 221,218 $ 21.02
Granted 34,717 37.12 36,224 45.19 44,198 39.00
Exercised (16,949) 16.63 (28,714) 16.35 (22,500) 15.16
Expired/Canceled (753) 39.44 (1,062) 37.13 (684) 33.09
------- ------- -------
Outstanding at end of year 265,695 30.54 248,680 28.70 242,232 24.81
Exercisable at end of year 221,405 29.29 195,144 25.95 174,944 21.08
The following table summarizes information about stock options outstanding,
including those from former Mobil plans, at December 31, 2001 (shares in
thousands):
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------- -------------------------------
Exercise Price Avg. Remaining Avg. Exercise Avg. Exercise
Range Shares Contractual Life Price Shares Price
- ------------------------------------------------------------------------- -------------------------------
$11.64-16.54 48,548 2.5 years $ 15.08 48,548 $ 15.08
19.06-27.71 63,525 5.1 years 22.92 63,525 22.92
29.18-45.22 153,622 8.2 years 38.58 109,332 39.30
------- -------
Total 265,695 6.4 years 30.54 221,405 29.29
A31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. 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. The vast
majority of the claims have been resolved leaving a few compensatory damages
cases to be tried. All of the punitive damage claims were consolidated in the
civil trial that began in May 1994.
In that trial, on September 24, 1996, the United States District Court for the
District of Alaska entered a judgment in the amount of $5.058 billion. 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 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 damage award which has been paid. The letter of
credit was terminated on February 1, 2002.
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.
A dispute with a Dutch affiliate concerning an overlift of natural gas by a
German affiliate was resolved by payments by the German affiliate pursuant to an
arbitration award. The German affiliate had paid royalties on the excess gas
and recovered the royalties in 2001. The only substantive issue remaining is
the taxes payable on the final compensation for the overlift. Resolution of this
issue will not 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 judgment and
believes that it should be set aside or substantially reduced on factual and
constitutional grounds. 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 upheld at
the trial court. ExxonMobil will appeal the judgment to the Louisiana Fourth
Circuit Court of Appeals and believes that the judgment should be set aside or
substantially reduced on factual and constitutional grounds. 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.
The corporation and certain of its consolidated subsidiaries were
contingently liable at December 31, 2001, for $3,921 million, primarily
relating to guarantees for notes, loans and performance under contracts. This
included $672 million representing guarantees of non-U.S. excise taxes and
customs duties of other companies, entered into as a normal business practice,
under reciprocal arrangements. Also included in this amount were guarantees by
consolidated affiliates of $1,641 million, representing ExxonMobil's share of
obligations of certain equity companies.
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 present value of
unconditional purchase obligations was $1,296 million at December 31, 2001. On
an undiscounted basis, including imputed interest of $733 million, these
commitments totaled $2,029 million. Unconditional purchase obligations as
defined by accounting standards are those long-term commitments that are
noncancelable or cancelable only under certain conditions, and that third
parties have used to secure financing for the facilities that will provide the
contracted goods or services.
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.
A32
18. Annuity Benefits and Other Postretirement Benefits
Annuity Benefits
------------------------------------------------------- Other Postretirement
U.S. Non-U.S. Benefits
-------------------------- ---------------------- -----------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
-----------------------------------------------------------------------------------
(millions of dollars)
Components of net benefit cost
Service cost $ 200 $ 214 $ 249 $ 232 $ 245 $ 312 $ 27 $ 24 $ 36
Interest cost 579 592 555 598 603 608 205 201 190
Expected return on plan assets (623) (726) (601) (629) (641) (599) (43) (51) (48)
Amortization of actuarial loss/(gain)
and prior service cost (25) (168) (36) 78 55 167 4 - 14
Net pension enhancement and
curtailment/settlement expense 14 (175) 1 27 77 50 - (5) -
-----------------------------------------------------------------------------------
Net benefit cost $ 145 $ (263) $ 168 $ 306 $ 339 $ 538 $ 193 $ 169 $ 192
===================================================================================
Costs for defined contribution plans were $132 million, $67 million and $69
million in 2001, 2000 and 1999, respectively.
Annuity Benefits
--------------------------------------------- Other Postretirement
U.S. Non-U.S. Benefits
------------------ ---------------------- --------------------
2001 2000 2001 2000 2001 2000
--------------------------------------------------------------------
(millions of dollars)
Change in benefit obligation
Benefit obligation at January 1 $ 7,651 $ 8,032 $ 11,063 $ 11,628 $ 2,942 $ 2,620
Service cost 200 214 232 245 27 24
Interest cost 579 592 598 603 205 201
Actuarial loss/(gain) 638 179 540 429 7 144
Benefits paid (868) (1,534) (710) (815) (258) (233)
Foreign exchange rate changes - - (678) (811) (12) (8)
Other 13 168 161 (216) 220 194
--------------------------------------------------------------------
Benefit obligation at December 31 $ 8,213 $ 7,651 $ 11,206 $ 11,063 $ 3,131 $ 2,942
====================================================================
Change in plan assets
Fair value at January 1 $ 6,795 $ 7,965 $ 7,780 $ 8,689 $ 446 $ 568
Actual return on plan assets (647) 208 (424) (12) (34) (30)
Foreign exchange rate changes - - (422) (612) - -
Payments directly to participants 135 156 225 311 187 166
Company contribution - - 299 232 32 38
Benefits paid (868) (1,534) (710) (815) (258) (233)
Other - - 7 (13) 22 (63)
--------------------------------------------------------------------
Fair value at December 31 $ 5,415 $ 6,795 $ 6,755 $ 7,780 $ 395 $ 446
====================================================================
Assets in excess of / (less than) benefit obligation
Balance at December 31 $ (2,798) $ (856) $ (4,451) $ (3,283) $ (2,736) $ (2,496)
Unrecognized net transition liability/(asset) (2) (31) 34 49 - -
Unrecognized net actuarial loss/(gain) 1,142 (788) 2,002 507 108 35
Unrecognized prior service cost 248 281 308 297 381 180
Intangible asset (226) (12) (135) (82) - -
Equity of minority shareholders - - (82) (36) - -
Minimum pension liability adjustment (144) (163) (805) (422) - -
--------------------------------------------------------------------
Prepaid/(accrued) benefit cost $ (1,780) $ (1,569) $ (3,129) $ (2,970) $ (2,247) $ (2,281)
====================================================================
Assumptions as of December 31 (percent)
Discount rate 7.25 7.5 2.6-6.8 3.0-7.0 7.25 7.5
Long-term rate of compensation increase 3.50 3.5 2.8-4.3 3.0-5.0 3.50 3.5
Long-term rate of return on funded assets 9.50 9.5 6.5-10.0 6.5-10.0 9.50 9.5
A33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Annuity Benefits
-----------------------------------------------
U.S. Non-U.S.
--------------------- ----------------------
2001 2000 2001 2000
-----------------------------------------------
(millions of dollars)
For funded pension plans with accumulated
------
benefit obligations in excess of plan assets:
Projected benefit obligation $ 7,140 $ - $ 4,142 $ 2,234
Accumulated benefit obligation 6,226 - 3,828 2,089
Fair value of plan assets 5,247 - 2,855 1,333
For unfunded plans covered by book reserves:
--------
Projected benefit obligation $ 963 $ 885 $ 3,197 $ 2,918
Accumulated benefit obligation 859 799 2,854 2,587
The preceding data conform with current accounting standards that specify use of
a discount rate at which postretirement liabilities could be effectively
settled. The discount rate for calculating year-end postretirement liabilities
is based on the year-end rate of interest on high quality bonds. The return on
the annuity fund's actual portfolio of assets has historically been higher than
bonds as the majority of pension assets are invested in equities. The actual
rate earned in the U.S. over the past decade has been 12 percent. All funded
U.S. plans are fully funded in 2001 under the standards set by the Department of
Labor and the Internal Revenue Service. The corporation will continue to make
contributions as necessary to maintain the fully funded status of these plans
according to those standards. Certain smaller U.S. plans and a number of
non-U.S. plans are not funded because local tax conventions and regulatory
practices do not encourage funding of these plans. Book reserves have been
established for these plans to provide for future benefit payments. All defined
benefit pension obligations, regardless of the funding status of the underlying
plans, are fully supported by the financial strength of the corporation or the
respective sponsoring affiliate.
A34
19. Income, Excise and Other Taxes
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
United Non- United Non- United Non-
States U.S. Total States U.S. Total States U.S. Total
----------------------------------------------------------------------------------------------
Income taxes (millions of dollars)
Federal or non-U.S.
Current $ 1,729 $ 6,084 $ 7,813 $ 2,635 $ 7,972 $ 10,607 $ 369 $ 3,973 $ 4,342
Deferred - net 712 169 881 433 (322) 111 214 (1,489) (1,275)
U.S. tax on non-U.S. operations 91 - 91 64 - 64 25 - 25
----------------------------------------------------------------------------------------------
$ 2,532 $ 6,253 $ 8,785 $ 3,132 $ 7,650 $ 10,782 $ 608 $ 2,484 $ 3,092
State 229 - 229 309 - 309 148 - 148
----------------------------------------------------------------------------------------------
Total income taxes $ 2,761 $ 6,253 $ 9,014 $ 3,441 $ 7,650 $ 11,091 $ 756 $ 2,484 $ 3,240
Excise taxes 7,030 14,877 21,907 6,997 15,359 22,356 7,795 13,851 21,646
All other taxes and duties 1,177 34,485 35,662 1,253 33,685 34,938 1,021 35,616 36,637
----------------------------------------------------------------------------------------------
Total $ 10,968 $ 55,615 $ 66,583 $ 11,691 $ 56,694 $ 68,385 $ 9,572 $ 51,951 $ 61,523
==============================================================================================
All other taxes and duties include taxes reported in operating and selling,
general and administrative expenses. The above provisions for deferred income
taxes include net credits for the effect of changes in tax laws and rates of $31
million in 2001, $84 million in 2000 and $205 million in 1999. Income taxes
(charged)/credited directly to shareholders' equity were:
2001 2000 1999
- -----------------------------------------------------------------
(millions of dollars)
Cumulative foreign exchange
translation adjustment $ 102 $ 221 $ (84)
Minimum pension liability
adjustment 139 27 (127)
Unrealized gains and losses on stock
investments 40 57 (45)
Other components of
shareholders' equity 83 111 50
The reconciliation between income tax expense and a theoretical U.S. tax
computed by applying a rate of 35 percent for 2001, 2000 and 1999, is as
follows:
2001 2000 1999
- ---------------------------------------------------------------------
(millions of dollars)
Earnings before Federal and
non-U.S. income taxes
United States $ 8,310 $ 9,016 $ 3,187
Non-U.S. 15,580 17,756 7,815
------------------------------
Total $ 23,890 $ 26,772 $ 11,002
------------------------------
Theoretical tax $ 8,362 $ 9,370 $ 3,851
Effect of equity method accounting (761) (852) (576)
Non-U.S. taxes in excess of
theoretical U.S. tax 1,354 1,986 201
U.S. tax on non-U.S. operations 91 64 25
Other U.S. (261) 214 (409)
------------------------------
Federal and non-U.S. income
tax expense $ 8,785 $ 10,782 $ 3,092
==============================
Total effective tax rate 39.3% 42.4% 31.8%
The effective income tax rate includes state income taxes and the
corporation's share of income taxes of equity companies. Equity company taxes
totaled $748 million in 2001, $658 million in 2000 and $449 million in 1999,
primarily all outside the U.S.
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes and
such amounts recognized for tax purposes.
Deferred tax liabilities /(assets) are comprised of the following at
December 31:
Tax effects of temporary differences for: 2001 2000
- -------------------------------------------------------------------
(millions of dollars)
Depreciation $ 12,738 $ 13,358
Intangible development costs 3,445 3,282
Capitalized interest 1,989 1,891
Other liabilities 3,165 2,935
-----------------------
Total deferred tax liabilities $ 21,337 $ 21,466
-----------------------
Pension and other postretirement benefits $ (1,911) $ (1,923)
Tax loss carryforwards (2,057) (1,763)
Other assets (2,803) (3,465)
-----------------------
Total deferred tax assets $ (6,771) $ (7,151)
-----------------------
Asset valuation allowances 209 380
-----------------------
Net deferred tax liabilities $ 14,775 $ 14,695
=======================
The corporation had $17 billion of indefinitely reinvested, undistributed
earnings from subsidiary companies outside the U.S. Unrecognized deferred taxes
on remittance of these funds are not expected to be material.
A35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. Disclosures About Segments and Related Information
The functional segmentation of operations reflected below is consistent with
ExxonMobil's internal reporting. Earnings include special items and transfers
are at estimated market prices. The interest revenue amount relates to interest
earned on cash deposits and marketable securities. Interest expense includes
non-debt related interest expense of $105 million, $142 million and $123
million in 2001, 2000 and 1999, respectively.
All Other includes smaller operating segments, corporate and financing
activities, merger expenses, and extraordinary gains from required asset
divestitures of $40 million and $1,730 million in 2001 and 2000, respectively.
U.S. chemicals and non-U.S. chemicals after-tax earnings in 2001 include net
gains on asset management activities totaling $100 million and $75 million,
respectively.
Upstream Downstream Chemicals
-------------------- ------------------- ---------------- All Corporate
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Other Total
------------------------------------------------------------------------------------
(millions of dollars)
As of December 31, 2001
Earnings after income tax $ 3,932 $ 6,497 $ 1,924 $ 2,303 $ 398 $ 484 $ (218) $ 15,320
Earnings of equity companies included above 482 1,477 89 12 19 118 (23) 2,174
Sales and other operating revenue 5,606 12,889 50,988 123,197 6,918 9,025 794 209,417
Intersegment revenue 5,408 12,322 4,115 16,880 2,186 2,284 178 -
Depreciation and depletion expense 1,436 3,221 598 1,476 408 289 516 7,944
Interest revenue - - - - - - 380 380
Interest expense - - - - - - 293 293
Income taxes 2,093 5,547 1,075 744 82 149 (676) 9,014
Additions to property, plant and equipment 1,980 4,518 827 1,239 390 243 792 9,989
Investments in equity companies 1,371 2,043 329 831 333 1,291 18 6,216
Total assets 18,809 40,018 12,850 37,617 7,495 9,524 16,861 143,174
====================================================================================
As of December 31, 2000
Earnings after income tax $ 4,545 $ 7,824 $ 1,561 $ 1,857 $ 644 $ 517 $ 772 $ 17,720
Earnings of equity companies included above 753 1,400 71 74 35 139 (38) 2,434
Sales and other operating revenue 5,669 15,774 56,080 132,483 8,198 9,303 932 228,439
Intersegment revenue 6,557 15,654 8,631 11,684 2,905 2,398 181 -
Depreciation and depletion expense 1,417 3,469 594 1,489 397 281 483 8,130
Interest revenue - - - - - - 258 258
Interest expense - - - - - - 589 589
Income taxes 2,489 7,137 889 850 344 210 (828) 11,091
Additions to property, plant and equipment 1,513 3,501 966 926 288 458 794 8,446
Investments in equity companies 1,261 1,971 264 1,456 492 1,395 25 6,864
Total assets 18,825 39,626 13,516 42,422 8,047 10,234 16,330 149,000
====================================================================================
As of December 31, 1999
Earnings after income tax $ 1,842 $ 4,044 $ 577 $ 650 $ 738 $ 616 $ (557) $ 7,910
Earnings of equity companies included above 299 881 8 148 49 83 178 1,646
Sales and other operating revenue 3,104 11,353 43,376 109,969 6,554 7,223 950 182,529
Intersegment revenue 3,925 9,093 2,867 5,387 1,624 1,317 796 -
Depreciation and depletion expense 1,330 3,497 697 1,670 402 274 434 8,304
Interest revenue - - - - - - 153 153
Interest expense - - - - - - 695 695
Income taxes 1,008 2,703 343 (22) 338 63 (1,193) 3,240
Additions to property, plant and equipment 1,440 5,025 830 1,201 600 1,093 660 10,849
Investments in equity companies 1,171 2,647 280 3,304 429 1,537 38 9,406
Total assets 18,211 40,906 13,699 43,718 7,605 9,831 10,551 144,521
====================================================================================
Geographic
Sales and other operating revenue 2001 2000 1999
- ---------------------------------------------------------------------
(millions of dollars)
United States $ 63,603 $ 70,036 $ 53,214
Non-U.S. 145,814 158,403 129,315
------------------------------
Total $209,417 $228,439 $182,529
Significant non-U.S. revenue sources include:
Japan $ 21,788 $ 24,520 $ 19,727
United Kingdom 18,628 19,904 16,305
Canada 14,912 16,059 11,576
Long-lived assets 2001 2000 1999
--------------------------------------------------------------------
(millions of dollars)
United States $ 33,637 $ 33,087 $ 33,913
Non-U.S. 55,965 56,742 60,130
------------------------------
Total $ 89,602 $ 89,829 $ 94,043
Significant non-U.S. long-lived assets include:
United Kingdom $ 8,390 $ 9,024 $ 10,293
Canada 7,862 7,922 8,404
Norway 4,627 4,383 4,802
A36
QUARTERLY INFORMATION
2001 2000
-------------------------------------------------------------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------------------------------------
Volumes
Production of crude oil (thousands of barrels daily)
and natural gas liquids 2,620 2,539 2,484 2,527 2,542 2,602 2,514 2,497 2,600 2,553
Refinery throughput 5,687 5,406 5,605 5,587 5,571 5,528 5,572 5,736 5,732 5,642
Petroleum product sales 7,985 7,933 7,951 8,016 7,971 7,796 8,035 8,069 8,068 7,993
Natural gas production (millions of cubic feet daily)
available for sale 12,119 9,090 8,561 11,373 10,279 12,146 9,247 8,735 11,252 10,343
(thousands of metric tons)
Chemical prime product sales 6,533 6,418 6,457 6,372 25,780 6,519 6,596 6,038 6,484 25,637
Summarized financial data
Sales and other operating (millions of dollars)
revenue $ 56,076 55,101 51,132 47,108 209,417 $ 53,273 54,936 57,497 62,733 228,439
Gross profit* $ 24,233 22,873 21,855 22,056 91,017 $ 21,896 22,201 23,620 25,506 93,223
Net income before
extraordinary item $ 4,960 4,285 3,180 2,680 15,105 $ 3,025 4,000 4,060 4,905 15,990
Extraordinary gain
net of income tax $ 40 175 - - 215 $ 455 530 430 315 1,730
Net income $ 5,000 4,460 3,180 2,680 15,320 $ 3,480 4,530 4,490 5,220 17,720
Per share data
Net income per common share (dollars per share)
before extraordinary item $ 0.71 0.64 0.46 0.39 2.20 $ 0.44 0.58 0.57 0.71 2.30
Extraordinary gain
net of income tax $ 0.01 0.02 - - 0.03 $ 0.06 0.08 0.06 0.05 0.25
Net income per common share $ 0.72 0.66 0.46 0.39 2.23 $ 0.50 0.66 0.63 0.76 2.55
Net income per common share
- assuming dilution $ 0.71 0.65 0.46 0.39 2.21 $ 0.49 0.65 0.63 0.75 2.52
Dividends per common share $ 0.22 0.23 0.23 0.23 0.91 $ 0.22 0.22 0.22 0.22 0.88
Common stock prices
High $ 44.875 45.835 44.400 42.700 45.835 $ 43.156 42.375 45.375 47.719 47.719
Low $ 37.600 38.500 35.010 36.410 35.010 $ 34.938 37.500 37.563 42.031 34.938
* Gross profit equals sales and other operating revenue less estimated costs associated with products sold.
Note: Prior period per share amounts restated for the two-for-one stock split effective June 20, 2001.
The price range of ExxonMobil common stock is as reported on the composite tape
of the several U.S. exchanges where ExxonMobil common stock is traded. The
principal market where ExxonMobil common stock (XOM) is traded is the New York
Stock Exchange, although the stock is traded on other exchanges in and outside
the United States.
There were 698,770 registered shareholders of ExxonMobil common stock at
December 31, 2001. At January 31, 2002, the registered shareholders of
ExxonMobil common stock numbered 697,972.
On January 30, 2002, the corporation declared a $0.23 dividend per common
share, payable March 11, 2002.
A37
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Consolidated Subsidiaries
----------------------------------------------------------------------
Non-
United Consolidated Total
Results of Operations States Canada Europe Asia-Pacific Africa Other Total Interests Worldwide
- ----------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
2001 - Revenue
Sales to third parties $ 4,045 $ 1,784 $ 5,017 $ 1,269 $ 17 $ 342 $ 12,474 $ 3,326 $ 15,800
Transfers 4,547 1,203 3,927 1,917 2,894 250 14,738 1,306 16,044
------------------------------------------------------------------------------------------
$ 8,592 $ 2,987 $ 8,944 $ 3,186 $ 2,911 $ 592 $ 27,212 $ 4,632 $ 31,844
Production costs excluding taxes 1,389 633 1,425 549 414 210 4,620 580 5,200
Exploration expenses 215 109 117 103 217 412 1,173 18 1,191
Depreciation and depletion 1,392 570 1,644 557 318 148 4,629 354 4,983
Taxes other than income 545 54 484 410 375 5 1,873 1,160 3,033
Related income tax 1,957 543 2,567 622 1,023 (98) 6,614 1,037 7,651
------------------------------------------------------------------------------------------
Results of producing activities $ 3,094 $ 1,078 $ 2,707 $ 945 $ 564 $ (85) $ 8,303 $ 1,483 $ 9,786
Other earnings* 354 (37) 132 (36) 33 (58) 388 255 643
------------------------------------------------------------------------------------------
Total earnings $ 3,448 $ 1,041 $ 2,839 $ 909 $ 597 $ (143) $ 8,691 $ 1,738 $ 10,429
==========================================================================================
2000 - Revenue
Sales to third parties $ 4,060 $ 2,423 $ 4,387 $ 2,167 $ 20 $ 366 $ 13,423 $ 3,055 $ 16,478
Transfers 5,420 771 5,491 2,130 3,212 324 17,348 1,532 18,880
------------------------------------------------------------------------------------------
$ 9,480 $ 3,194 $ 9,878 $ 4,297 $ 3,232 $ 690 $ 30,771 $ 4,587 $ 35,358
Production costs excluding taxes 1,231 595 1,627 543 400 181 4,577 621 5,198
Exploration expenses 145 81 135 164 196 211 932 22 954
Depreciation and depletion 1,373 586 1,906 556 340 141 4,902 399 5,301
Taxes other than income 637 33 358 506 446 4 1,984 997 2,981
Related income tax 2,419 736 3,274 1,005 1,093 97 8,624 975 9,599
------------------------------------------------------------------------------------------
Results of producing activities $ 3,675 $ 1,163 $ 2,578 $ 1,523 $ 757 $ 56 $ 9,752 $ 1,573 $ 11,325
Other earnings* 117 (36) 521 144 31 (31) 746 298 1,044
------------------------------------------------------------------------------------------
Total earnings $ 3,792 $ 1,127 $ 3,099 $ 1,667 $ 788 $ 25 $ 10,498 $ 1,871 $ 12,369
==========================================================================================
1999 - Revenue
Sales to third parties $ 2,419 $ 925 $ 3,287 $ 2,160 $ 13 $ 178 $ 8,982 $ 2,123 $ 11,105
Transfers 3,237 848 2,965 1,250 1,986 204 10,490 867 11,357
------------------------------------------------------------------------------------------
$ 5,656 $ 1,773 $ 6,252 $ 3,410 $ 1,999 $ 382 $ 19,472 $ 2,990 $ 22,462
Production costs excluding taxes 1,347 504 1,499 566 394 157 4,467 617 5,084
Exploration expenses 232 93 280 144 236 261 1,246 29 1,275
Depreciation and depletion 1,260 486 1,932 678 318 173 4,847 443 5,290
Taxes other than income 425 31 246 288 309 2 1,301 591 1,892
Related income tax 893 252 929 521 534 (5) 3,124 546 3,670
------------------------------------------------------------------------------------------
Results of producing activities $ 1,499 $ 407 $ 1,366 $ 1,213 $ 208 $ (206) $ 4,487 $ 764 $ 5,251
Other earnings* 42 32 391 6 17 (36) 452 183 635
------------------------------------------------------------------------------------------
Total earnings $ 1,541 $ 439 $ 1,757 $ 1,219 $ 225 $ (242) $ 4,939 $ 947 $ 5,886
============================================================================================
Average sales prices and production costs per unit of production
- -----------------------------------------------------------------------------------------------------------------------------------
During 2001
Average sales prices
Crude oil and NGL, per barrel $ 19.92 $ 15.95 $ 22.79 $ 24.36 $ 23.34 $ 20.21 $ 21.30 $ 19.64 $ 21.10
Natural gas, per thousand cubic feet 4.36 3.71 3.28 1.80 - 1.44 3.37 3.48 3.39
Average production costs, per barrel** 3.68 3.88 3.40 2.98 3.32 5.85 3.54 2.53 3.39
During 2000
Average sales prices
Crude oil and NGL, per barrel $ 23.94 $ 21.60 $ 26.96 $ 28.74 $ 28.17 $ 24.57 $ 25.77 $ 24.17 $ 25.59
Natural gas, per thousand cubic feet 3.85 3.58 2.69 2.59 - 1.29 3.12 3.11 3.12
Average production costs, per barrel** 3.08 4.04 3.72 2.72 3.39 5.50 3.43 2.90 3.35
During 1999
Average sales prices
Crude oil and NGL, per barrel $ 14.96 $ 14.47 $ 16.59 $ 17.96 $ 16.81 $18.57 $ 16.16 $ 14.52 $ 15.97
Natural gas, per thousand cubic feet 2.21 1.61 2.25 1.88 - 1.21 2.08 2.47 2.15
Average production costs, per barrel** 3.42 3.69 3.64 2.40 3.31 6.20 3.38 3.02 3.33
*Includes earnings from transportation operations, tar sands operations, LNG
operations, technical services agreements, other non-operating activities and
adjustments for minority interests.
**Production costs exclude depreciation and depletion and all taxes. Natural gas
included by conversion to crude oil equivalent.
A38
Oil and Gas Exploration and Production Costs
The amounts shown for net capitalized costs of consolidated subsidiaries are
$5,212 million less at year-end 2001 and $4,852 million less at year end 2000
than the amounts reported as investments in property, plant and equipment for
the upstream in note 10. This is due to the exclusion from capitalized costs of
certain transportation and research assets and assets relating to the tar sands
and LNG operations, and to the inclusion of accumulated provisions for site
restoration costs, all as required in Statement of Financial Accounting
Standards No. 19.
The amounts reported as costs incurred include both capitalized costs and
costs charged to expense during the year. Total worldwide costs incurred in 2001
were $7,803 million, up $1,740 million from 2000, due primarily to higher
development costs. 2000 costs were $6,063 million, down $1,696 million from
1999, due primarily to lower development costs.
Consolidated Subsidiaries
------------------------------------------------------------------
Non-
United Consolidated Total
Capitalized costs States Canada Europe Asia-Pacific Africa Other Total Interests Worldwide
- ------------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
As of December 31, 2001
Property (acreage) costs - Proved $ 4,543 $ 2,656 $ 178 $ 689 $ 107 $ 957 $ 9,130 $ 11 $ 9,141
- Unproved 674 196 49 850 630 530 2,929 2 2,931
--------------------------------------------------------------------------------------
Total property costs $ 5,217 $ 2,852 $ 227 $ 1,539 $ 737 $ 1,487 $ 12,059 $ 13 $ 12,072
Producing assets 33,379 6,662 27,628 11,764 4,300 1,992 85,725 5,710 91,435
Support facilities 488 83 449 925 208 159 2,312 257 2,569
Incomplete construction 1,050 334 1,306 684 1,433 346 5,153 495 5,648
--------------------------------------------------------------------------------------
Total capitalized costs $ 40,134 $ 9,931 $ 29,610 $ 14,912 $ 6,678 $ 3,984 $105,249 $ 6,475 $111,724
Accumulated depreciation and depletion 25,754 4,888 19,398 9,705 2,323 1,796 63,864 3,127 66,991
--------------------------------------------------------------------------------------
Net capitalized costs $ 14,380 $ 5,043 $ 10,212 $ 5,207 $ 4,355 $ 2,188 $ 41,385 $ 3,348 $ 44,733
======================================================================================
As of December 31, 2000
Property (acreage) costs - Proved $ 4,686 $ 2,784 $ 161 $ 729 $ 54 $ 1,187 $ 9,601 $ 11 $ 9,612
- Unproved 700 236 50 1,044 641 314 2,985 3 2,988
--------------------------------------------------------------------------------------
Total property costs $ 5,386 $ 3,020 $ 211 $ 1,773 $ 695 $ 1,501 $ 12,586 $ 14 $ 12,600
Producing assets 31,843 5,958 27,794 11,359 3,920 1,592 82,466 5,528 87,994
Support facilities 860 105 447 950 41 119 2,522 260 2,782
Incomplete construction 877 682 1,050 678 1,001 497 4,785 430 5,215
--------------------------------------------------------------------------------------
Total capitalized costs $ 38,966 $ 9,765 $ 29,502 $ 14,760 $ 5,657 $ 3,709 $102,359 $ 6,232 $108,591
Accumulated depreciation and depletion 25,129 4,607 18,666 9,486 1,946 1,646 61,480 2,858 64,338
--------------------------------------------------------------------------------------
Net capitalized costs $ 13,837 $ 5,158 $ 10,836 $ 5,274 $ 3,711 $ 2,063 $ 40,879 $ 3,374 $ 44,253
=======================================================================================
Costs incurred in property acquisitions, exploration and development activities
- --------------------------------------------------------------------------------------------------------------------------------
During 2001
Property acquisition costs - Proved $ - $ - $ - $ - $ 2 $ - $ 2 $ - $ 2
- Unproved 95 17 1 (1) - 10 122 - 122
Exploration costs 352 141 144 148 281 459 1,525 35 1,560
Development costs 1,648 664 1,498 666 995 219 5,690 429 6,119
-------------------------------------------------------------------------------------
Total $ 2,095 $ 822 $ 1,643 $ 813 $ 1,278 $ 688 $ 7,339 $ 464 $ 7,803
=====================================================================================
During 2000
Property acquisition costs - Proved $ 1 $ 1 $ - $ 1 $ - $ - $ 3 $ - $ 3
- Unproved 72 15 4 96 2 49 238 - 238
Exploration costs 219 145 187 145 272 297 1,265 23 1,288
Development costs 1,236 525 1,262 502 402 224 4,151 383 4,534
-------------------------------------------------------------------------------------
Total $ 1,528 $ 686 $ 1,453 $ 744 $ 676 $ 570 $ 5,657 $ 406 $ 6,063
=====================================================================================
During 1999
Property acquisition costs - Proved $ - $ - $ 1 $ 18 $ - $ - $ 19 $ - $ 19
- Unproved 8 5 8 - 459 70 550 - 550
Exploration costs 263 106 248 152 304 267 1,340 38 1,378
Development costs 1,263 787 1,822 576 547 408 5,403 409 5,812
-------------------------------------------------------------------------------------
Total $ 1,534 $ 898 $ 2,079 $ 746 $ 1,310 $ 745 $ 7,312 $ 447 $ 7,759
=====================================================================================
A39
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Oil and Gas Reserves
The following information describes changes during the years and balances of
proved oil and gas reserves at year-end 1999, 2000 and 2001.
The definitions used are in accordance with applicable Securities and
Exchange Commission regulations.
Proved oil and gas reserves are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions, i.e., prices
and costs as of the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual arrangements, but not on
escalations based upon future conditions. In some cases, substantial new
investments in additional wells and related facilities will be required to
recover these proved reserves.
Proved reserves include 100 percent of each majority owned affiliate's
participation in proved reserves and ExxonMobil's ownership percentage of the
proved reserves of equity companies, but exclude royalties and quantities due
others. Gas reserves exclude the gaseous equivalent of liquids expected to be
removed from the gas on leases, at field facilities and at gas processing
plants. These liquids are included in net proved reserves of crude oil and
natural gas liquids.
Consolidated Subsidiaries
---------------------------------------------------------- Non-
United Asia- Consolidated Total
Crude Oil and Natural Gas Liquids States Canada Europe Pacific Africa Other Total Interests Worldwide
- -----------------------------------------------------------------------------------------------------------------------------
(millions of barrels)
Net proved developed and undeveloped reserves
January 1, 1999 2,804 1,154 1,708 786 1,821 710 8,983 1,970 10,953
Revisions 96 19 96 23 128 6 368 25 393
Purchases - - - - - - - - -
Sales (3) - - - - - (3) (9) (12)
Improved recovery 7 1 15 - 3 - 26 72 98
Extensions and discoveries 58 277 174 18 191 2 720 - 720
Production (213) (96) (232) (112) (119) (18) (790) (102) (892)
-------------------------------------------------------------------------------
December 31, 1999 2,749 1,355 1,761 715 2,024 700 9,304 1,956 11,260
Revisions 410 9 25 29 50 24 547 33 580
Purchases - - - - - - - - -
Sales (1) (5) - - - - (6) - (6)
Improved recovery 40 34 20 - 3 - 97 26 123
Extensions and discoveries 8 33 5 39 425 4 514 3 517
Production (220) (96) (253) (93) (118) (26) (806) (107) (913)
-------------------------------------------------------------------------------
December 31, 2000 2,986 1,330 1,558 690 2,384 702 9,650 1,911 11,561
Revisions 89 (9) 68 (1) 94 15 256 8 264
Purchases - - - - - - - - -
Sales (6) - - - - - (6) (3) (9)
Improved recovery 57 5 5 - 34 - 101 20 121
Extensions and discoveries 112 53 79 23 74 - 341 112 453
Production (210) (102) (234) (90) (125) (29) (790) (109) (899)
-------------------------------------------------------------------------------
December 31, 2001 3,028 1,277 1,476 622 2,461 688 9,552 1,939 11,491
Developed reserves, included above
At December 31, 1999 2,383 608 1,086 615 1,048 186 5,926 1,333 7,259
At December 31, 2000 2,661 630 978 504 989 245 6,007 1,331 7,338
At December 31, 2001 2,567 593 881 477 1,022 232 5,772 1,440 7,212
A40
Net proved developed reserves are those volumes which are expected to be
recovered through existing wells with existing equipment and operating methods.
Undeveloped reserves are those volumes which are expected to be recovered as a
result of future investments to drill new wells, to recomplete existing wells
and/or to install facilities to collect and deliver the production from existing
and future wells.
Reserves attributable to certain oil and gas discoveries were not considered
proved as of year-end 2001 due to geological, technological or economic
uncertainties and therefore are not included in the tabulation.
Crude oil and natural gas liquids and natural gas production quantities
shown are the net volumes withdrawn from ExxonMobil's oil and gas reserves.
The natural gas quantities differ from the quantities of gas delivered for
sale by the producing function as reported on page A43 due to volumes
consumed or flared and inventory changes. Such quantities amounted to
approximately 391 billion cubic feet in 1999, 392 billion cubic feet in 2000
and 406 billion cubic feet in 2001.
Consolidated Subsidiaries
-------------------------------------------------------- Non-
United Asia- Consolidated Total
Natural Gas States Canada Europe Pacific Africa Other Total Interests Worldwide
- -------------------------------------------------------------------------------------------------------------------------
(billions of cubic feet)
Net proved developed and undeveloped reserves
January 1, 1999 13,057 3,489 11,401 9,998 113 615 38,673 19,333 58,006
Revisions 781 31 680 131 - 42 1,665 142 1,807
Purchases - - - - - - - - -
Sales (18) (1) - - - - (19) - (19)
Improved recovery 2 14 105 - - - 121 161 282
Extensions and discoveries 305 207 192 44 58 6 812 61 873
Production (1,126) (353) (1,150) (815) - (55) (3,499) (654) (4,153)
--------------------------------------------------------------------------------
December 31, 1999 13,001 3,387 11,228 9,358 171 608 37,753 19,043 56,796
Revisions 987 69 970 (113) 147 62 2,122 85 2,207
Purchases - 10 - - - - 10 - 10
Sales (3) (5) - - - - (8) - (8)
Improved recovery 22 24 46 - - 24 116 50 166
Extensions and discoveries 195 430 96 11 70 26 828 45 873
Production (1,157) (399) (1,170) (710) (13) (53) (3,502) (676) (4,178)
--------------------------------------------------------------------------------
December 31, 2000 13,045 3,516 11,170 8,546 375 667 37,319 18,547 55,866
Revisions 612 (51) 564 (198) 8 (5) 930 (94) 836
Purchases - 1 - - - - 1 - 1
Sales (57) - (2) (8) - - (67) (2) (69)
Improved recovery 4 15 11 - 2 - 32 7 39
Extensions and discoveries 242 120 360 590 8 120 1,440 1,991 3,431
Production (1,114) (418) (1,172) (629) (14) (54) (3,401) (757) (4,158)
--------------------------------------------------------------------------------
December 31, 2001 12,732 3,183 10,931 8,301 379 728 36,254 19,692 55,946
Developed reserves, included above
At December 31, 1999 10,820 2,475 7,764 6,471 2 426 27,958 8,643 36,601
At December 31, 2000 10,956 2,850 8,222 6,300 125 477 28,930 9,087 38,017
At December 31, 2001 10,366 2,517 7,824 6,005 122 404 27,238 8,784 36,022
INFORMATION ON CANADIAN TAR SANDS PROVEN RESERVES NOT INCLUDED ABOVE
In addition to conventional liquids and natural gas proved reserves, ExxonMobil
has significant interests in proven tar sands reserves in Canada associated with
the Syncrude project. For internal management purposes, ExxonMobil views these
reserves and their development as an integral part of total Upstream operations.
However, U.S. Securities and Exchange Commission regulations define these
reserves as mining related and not a part of conventional oil and gas reserves.
The tar sands reserves are not considered in the standardized measure of
discounted future cash flows for conventional oil and gas reserves, which is
found on page A42.
Tar Sands Reserves Canada
- -----------------------------------------------
(millions of barrels)
At December 31, 1999 577
At December 31, 2000 610
At December 31, 2001 821
A41
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Standardized Measure of Discounted Future Cash Flows
As required by the Financial Accounting Standards Board, the standardized
measure of discounted future net cash flows is computed by applying year-end
prices, costs and legislated tax rates and a discount factor of 10 percent to
net proved reserves. The corporation believes the standardized measure is not
meaningful and may be misleading, due to a number of factors, including
significant variability in cash flows due to changes in year-end prices.
Consolidated Subsidiaries
--------------------------------------------------------------------- Non-
United Asia- Consolidated Total
States Canada Europe Pacific Africa Other Total Interests Worldwide
- ------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
As of December 31, 1999
Future cash inflows from
sales of oil and gas $ 82,674 $ 29,360 $ 64,192 $ 34,771 $ 49,247 $ 13,780 $ 274,024 $ 94,767 $ 368,791
Future production costs 21,219 6,618 13,660 9,754 11,784 2,548 65,583 33,006 98,589
Future development costs 4,131 2,116 4,904 3,516 4,779 605 20,051 3,104 23,155
Future income tax expenses 20,103 8,096 23,396 7,680 20,405 2,493 82,173 26,573 108,746
------------------------------------------------------------------------------------------------
Future net cash flows $ 37,221 $ 12,530 $ 22,232 $ 13,821 $ 12,279 $ 8,134 $ 106,217 $ 32,084 $ 138,301
Effect of discounting
net cash flows at 10% 20,139 5,884 7,351 5,918 6,275 4,694 50,261 19,473 69,734
------------------------------------------------------------------------------------------------
Discounted future net cash
flows $ 17,082 $ 6,646 $ 14,881 $ 7,903 $ 6,004 $ 3,440 $ 55,956 $ 12,611 $ 68,567
================================================================================================
As of December 31, 2000
Future cash inflows from
sales of oil and gas $ 177,178 $ 41,275 $ 70,208 $ 34,658 $ 52,651 $ 10,317 $ 386,287 $ 93,597 $ 479,884
Future production costs 26,417 7,857 15,979 9,977 10,953 3,467 74,650 38,011 112,661
Future development costs 3,977 2,806 5,552 3,405 7,516 798 24,054 3,901 27,955
Future income tax expenses 55,192 12,731 26,078 7,382 18,949 1,830 122,162 21,333 143,495
------------------------------------------------------------------------------------------------
Future net cash flows $ 91,592 $ 17,881 $ 22,599 $ 13,894 $ 15,233 $ 4,222 $ 165,421 $ 30,352 $ 195,773
Effect of discounting
net cash flows at 10% 48,876 6,795 7,779 5,638 8,158 2,450 79,696 18,825 98,521
------------------------------------------------------------------------------------------------
Discounted future net cash
flows $ 42,716 $ 11,086 $ 14,820 $ 8,256 $ 7,075 $ 1,772 $ 85,725 $ 11,527 $ 97,252
================================================================================================
As of December 31, 2001
Future cash inflows from
sales of oil and gas $ 68,713 $ 19,573 $ 58,394 $ 24,452 $ 42,806 $ 10,370 $ 224,308 $ 87,828 $ 312,136
Future production costs 20,008 6,711 15,807 7,801 10,341 3,217 63,885 31,839 95,724
Future development costs 4,613 2,695 5,252 3,262 7,839 831 24,492 3,043 27,535
Future income tax expenses 16,620 3,908 17,416 4,325 13,485 2,091 57,845 22,046 79,891
------------------------------------------------------------------------------------------------
Future net cash flows $ 27,472 $ 6,259 $ 19,919 $ 9,064 $ 11,141 $ 4,231 $ 78,086 $ 30,900 $ 108,986
Effect of discounting
net cash flows at 10% 15,065 2,377 7,338 3,552 6,087 2,553 36,972 18,766 55,738
------------------------------------------------------------------------------------------------
Discounted future net cash
flows $ 12,407 $ 3,882 $ 12,581 $ 5,512 $ 5,054 $ 1,678 $ 41,114 $ 12,134 $ 53,248
================================================================================================
Change in Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Oil and Gas Reserves
Consolidated Subsidiaries 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
(millions of dollars)
Value of reserves added during the year due to extensions, discoveries, improved recovery
and net purchases less related costs $ 2,660 $ 6,029 $ 4,245
Changes in value of previous-year reserves due to:
Sales and transfers of oil and gas produced during the year, net of production (lifting) costs (20,748) (24,498) (13,395)
Development costs incurred during the year 5,577 4,194 5,313
Net change in prices, lifting and development costs (79,693) 44,702 59,466
Revisions of previous reserves estimates 2,520 12,537 3,106
Accretion of discount 12,293 7,694 3,056
Net change in income taxes 32,780 (20,889) (30,833)
-------------------------------
Total change in the standardized measure during the year $ (44,611) $ 29,769 $ 30,958
===============================
A42
OPERATING SUMMARY
2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
(thousands of barrels daily)
Production of crude oil and natural gas liquids
Net production
United States 712 733 729 745 803
Canada 331 304 315 322 287
Europe 653 704 650 635 641
Asia-Pacific 247 253 307 322 347
Africa 342 323 326 301 294
Other Non-U.S. 257 236 190 177 155
------------------------------------------------------
Worldwide 2,542 2,553 2,517 2,502 2,527
======================================================
(millions of cubic feet daily)
Natural gas production available for sale
Net production
United States 2,598 2,856 2,871 3,140 3,223
Canada 1,006 844 683 667 600
Europe 4,595 4,463 4,438 4,245 4,283
Asia-Pacific 1,547 1,755 2,027 2,352 2,632
Other Non-U.S. 533 425 289 213 156
------------------------------------------------------
Worldwide 10,279 10,343 10,308 10,617 10,894
======================================================
(thousands of barrels daily)
Refinery throughput
United States 1,840 1,862 1,930 1,919 2,026
Canada 449 451 441 445 448
Europe 1,563 1,578 1,782 1,888 1,899
Asia-Pacific 1,436 1,462 1,537 1,554 1,559
Other Non-U.S. 283 289 287 287 302
------------------------------------------------------
Worldwide 5,571 5,642 5,977 6,093 6,234
======================================================
Petroleum product sales
United States 2,751 2,669 2,918 2,804 2,777
Canada 585 577 587 579 574
Europe 2,079 2,129 2,597 2,646 2,609
Asia-Pacific and other Eastern Hemisphere 2,024 2,090 2,223 2,266 2,249
Latin America 532 528 562 578 564
------------------------------------------------------
Worldwide 7,971 7,993 8,887 8,873 8,773
======================================================
Gasoline, naphthas 3,165 3,122 3,428 3,417 3,317
Heating oils, kerosene, diesel oils 2,389 2,373 2,658 2,689 2,725
Aviation fuels 721 749 813 774 753
Heavy fuels 668 694 706 765 744
Specialty petroleum products 1,028 1,055 1,282 1,228 1,234
------------------------------------------------------
Worldwide 7,971 7,993 8,887 8,873 8,773
======================================================
(thousands of metric tons)
Chemical prime product sales 25,780 25,637 25,283 23,628 23,838
======================================================
(millions of metric tons)
Coal production 13 17 17 15 15
======================================================
(thousands of metric tons)
Copper production 252 254 248 216 205
======================================================
Operating statistics include 100 percent of operations of majority owned
subsidiaries; for other companies, crude production, gas, petroleum product and
chemical prime product sales include ExxonMobil's ownership percentage, and
refining throughput includes quantities processed for ExxonMobil. Net
production excludes royalties and quantities due others when produced, whether
payment is made in kind or cash.
A43
APPENDIX B
BOARD AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Board Audit Committee (the "committee") is
oversight. The committee shall assist the Board of Directors (the "board") in
fulfilling its responsibility to oversee management's conduct of the
corporation's financial reporting process, the financial reports and other
financial information provided by the corporation to the Securities and Exchange
Commission and the public, the corporation's system of internal accounting and
financial controls, and the annual independent audit of the corporation's
financial statements.
The committee, subject to any action that may be taken by the full board, shall
have the ultimate authority and responsibility to select (subject to shareholder
ratification), evaluate and, where appropriate, replace the independent auditor.
The corporation's management is responsible for preparing the corporation's
financial statements. The independent auditors are responsible for auditing
those financial statements. Management, including the internal audit function,
and the independent auditors have more time, knowledge and detailed information
about the corporation than do committee members. Consequently, in carrying out
its oversight responsibilities, the committee is not providing any professional
certification as to the independent auditors' work or any expert or special
assurance as to the corporation's financial statements, including with respect
to auditor independence. Each member of the committee shall be entitled to rely
on the integrity of people and organizations from whom the committee receives
information and the accuracy of such information, including representations by
management and the independent auditors regarding information technology and
other non-audit services provided by the independent auditor.
In discharging its oversight role, the committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the corporation and the authority to retain outside
counsel, auditors or other experts for this purpose.
II. MEMBERSHIP
The committee's composition shall meet the requirements of the Audit Committee
Policy of the New York Stock Exchange.
Accordingly, each member of the committee shall:
have no relationship to the corporation that may interfere with the exercise
of his or her independence from management and the corporation; and
be financially literate or become financially literate within a reasonable
period of time after appointment to the committee.
In addition, at least one member of the committee shall have accounting or
related financial management expertise.
B1
III. ACTIVITIES
The following shall be the common recurring activities of the committee in
carrying out its oversight function. These activities are set forth as a guide
with the understanding that the committee may diverge from this guide as
appropriate given the circumstances.
1. The committee shall make a recommendation to the board prior to the end
of each year with respect to the appointment of independent auditors to
audit the consolidated financial statements of the corporation and its
subsidiaries for the coming year.
2. The committee shall review from time to time, at least annually,
(a) the results of the audits by the corporation's independent auditors
of the corporation's consolidated financial statements, (b) the costs of
such audits including the fees paid to the independent auditors,
(c) any significant deficiency in the design or the operation of
internal accounting controls identified by the independent auditors and
any resulting recommendations, and (d) the arrangements for and the
scope of the independent auditors' audits of the corporation's
consolidated financial statements. The committee shall report the
foregoing to the board with such recommendations as it may deem
appropriate.
3. The committee shall confer with the Controller, the General Auditor,
management and the independent auditors as requested by any of them or
by the committee, at least annually, and review their reports with
respect to the functioning, quality and adequacy of programs for
compliance with the corporation's policies and procedures regarding
business ethics, financial controls and internal auditing, including
information regarding violations or probable violations of such
policies. The committee shall report the foregoing to the board with
such recommendations as it may deem appropriate.
4. The committee shall review with the Controller and the General Auditor,
at least annually, the activities, budget, staffing and structure of the
internal auditing function of the corporation and its subsidiaries,
including their evaluations of the performance of that function and any
recommendations with respect to improving the performance of or
strengthening that function. As appropriate, the committee shall review
the reports of any internal auditor on a financial safeguard problem
which has not resulted in corrective action or has not otherwise been
resolved to the auditor's satisfaction at any intermediate level of
audit management.
5. The committee, along with the other members of the board, shall review
with management and the independent auditors the audited financial
statements to be included in the corporation's annual report on
Form 10-K. The committee shall review and consider with the independent
auditors the matters required to be discussed by Statement of Auditing
Standards No. 61 ("SAS No. 61"), including deficiencies in internal
controls, fraud, illegal acts, management judgments and estimates, audit
adjustments, audit difficulties, and the independent auditors' judgments
about the quality of the corporation's accounting practices.
B2
6. As a whole, or through the committee chairman, the committee shall
review with the independent auditors and management the corporation's
interim financial results to be included in each quarterly report on
Form 10-Q. Each such review shall include any matters required to be
discussed by SAS No. 61 and shall occur prior to the corporation's
filing of the related Form 10-Q, with the Securities and Exchange
Commission.
7. The committee shall: (a) request annually from the independent auditors
a formal written statement delineating all relationships between the
independent auditors and the corporation consistent with Independence
Standards Board Standard Number 1; (b) consider, with a view to auditor
independence, the fees payable to the independent auditor for audit
services, information technology services, and all other services, for
such periods, in such categories and on such bases as the committee may
request; (c) discuss with the independent auditors any such disclosed
relationships and their impact on the independent auditors'
independence; and (d) recommend that the board take appropriate action
in response to the independent auditors' report to satisfy itself of the
auditors' independence.
8. The committee shall deliver any report or other disclosure by the
committee required to be included in any proxy statement for the
election of the corporation's directors under the rules of the
Securities and Exchange Commission.
9. The committee shall review the adequacy of this charter on an annual
basis.
10. The committee shall review major changes to the corporation's auditing
and accounting principles and practices based on advice of the
independent auditor, the Controller, the General Auditor or management.
11. The committee shall evaluate, along with the other members of the board,
the performance of the independent auditor.
12. The committee shall review the expenses of officers of the corporation
who are also members of the board and such other officers as it may deem
appropriate.
13. The committee shall take such other actions and do such other things as
may be referred to it from time to time by the board.
B3
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EXXONMOBIL 2002 ANNUAL MEETING
ADMISSION TICKET
c/o EquiServe This ticket will admit shareholder and one guest.
P.O. Box 43068
Providence, RI 02940-3068
ANNUAL MEETING OF SHAREHOLDERS
TIME: Wednesday, May 29, 2002, 9:30 a.m.
PLACE: Morton H. Meyerson Symphony Center
Dallas, Texas (MAP ON BACK)
AUDIOCAST: Live on the Internet at WWW.EXXONMOBIL.COM.
Instructions on the Web site one week prior to the event.
- --------------------------------------------------------------------------------
-----------------------------
VOTE BY INTERNET OR TELEPHONE
QUICK EASY
-----------------------------
IF YOU VOTE BY INTERNET OR TELEPHONE, YOU WILL BE ASKED TO ENTER YOUR CONTROL
NUMBER LOCATED ABOVE YOUR NAME ON THE PROXY/VOTING INSTRUCTION CARD.
VOTE BY INTERNET: The Web address is WWW.EPROXYVOTE.COM/XOM
VOTE BY PHONE: Call toll-free on a touch-tone phone 1-877-779-8683 anytime.
VOTE BY CARD: Complete, sign, date, and return your proxy/voting
instruction card in the enclosed envelope.
Check the appropriate box below to discontinue duplicate
annual report mailings.
To access the Summary Annual Report and Proxy Statement
on the Internet, visit our Web site at WWW.EXXONMOBIL.COM
IF YOU VOTE BY INTERNET OR PHONE --
DO NOT MAIL THE PROXY/VOTING INSTRUCTION CARD
DETACH HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PLEASE MARK
|X| VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- --------------------------------------------------------------------------------
FOR ALL WITHHELD FROM ALL
1. ELECTION OF DIRECTORS (PAGE 3). | | | |
For all nominees except as noted above.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF INDEPENDENT AUDITORS (PAGE 24). | | | | | |
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEMS 3 THROUGH 10.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. GOVERNMENT SERVICE (PAGE 25). | | | | | |
4. POLICY ON BOARD DIVERSITY (PAGE 26). | | | | | |
5. HUMAN RIGHTS POLICY (PAGE 28). | | | | | |
6. EXECUTIVE COMPENSATION FACTORS (PAGE 30). | | | | | |
7. ADDITIONAL REPORT ON ANWR DRILLING (PAGE 32). | | | | | |
8. RENEWABLE ENERGY SOURCES (PAGE 35). | | | | | |
9. AMENDMENT OF EEO POLICY (PAGE 39). | | | | | |
10. SHAREHOLDER VOTE ON POISON PILLS (PAGE 42). | | | | | |
- --------------------------------------------------------------------------------
MARK BOX IF COMMENTS APPEAR ON THIS | |
CARD OR AN ATTACHMENT.
MARK BOX TO DISCONTINUE ANNUAL REPORT | |
MAILING FOR THIS ACCOUNT.
Signature:__________________________________ Date:_______________________, 2002
Signature:__________________________________ Date:_______________________, 2002
NOTE: Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please give full name as such.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXXONMOBIL 2002 ANNUAL MEETING
MORTON H. MEYERSON SYMPHONY CENTER
2301 FLORA STREET
DALLAS, TEXAS 75201
----------------------------------------------------------
[MAP]
----------------------------------------------------------
Free parking is available in the Arts District Garage. Have your parking
ticket validated at the annual meeting. Traffic in the area may cause a
delay; please allow extra time for parking.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
EXXONMOBIL PROXY/VOTING INSTRUCTION
SOLICITED BY BOARD OF DIRECTORS
c/o Proxy Services
P.O. Box 43054 ANNUAL MEETING, MAY 29, 2002
Providence, RI 02940-3054 DALLAS, TEXAS
The undersigned hereby appoints, and instructs the appropriate account
trustee(s), if any, to appoint, J.R. Houghton, W.R. Howell, P.E. Lippincott,
M.C. Nelson, and L.R. Raymond, or each or any of them, with power of
substitution, proxies to act and vote shares of common stock of the
undersigned at the 2002 annual meeting of shareholders of Exxon Mobil
Corporation and at any adjournments thereof, as indicated, upon all matters
referred to on the reverse side and described in the proxy statement for the
meeting and, at their discretion, upon any other matters that may properly
come before the meeting.
Election of Directors(1)
NOMINEES:
(01) M.J. Boskin (05) W.R. Howell (09) H.J. Longwell
(02) W.T. Esrey (06) H.L. Kaplan (10) M.C. Nelson
(03) D.V. Fites (07) R.C. King (11) L.R. Raymond
(04) J.R. Houghton (08) P.E. Lippincott (12) W.V. Shipley
This proxy covers shares of common stock registered in the name of the
undersigned and held in the name of the undersigned in the ExxonMobil
Shareholder Investment Program. This proxy also provides voting instructions
for any shares held in the name of the undersigned in the ExxonMobil Savings
Plan and/or ExxonMobil Shareholder Investment Program IRA (SIP IRA).
IF NO OTHER INDICATION IS MADE, THE PROXIES/TRUSTEES SHALL VOTE (a) FOR THE
ELECTION OF THE DIRECTOR NOMINEES AND (b) IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS ON THE OTHER MATTERS REFERRED TO ON
THE REVERSE SIDE.
(1)See item 1 on reverse side. The numbers in front of the nominees' names
are provided to assist in Internet and telephone voting (OVER)
================================================================================
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