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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to________
Commission File Number 1-2256
EXXON MOBIL CORPORATION
_____________________________________________________
(Exact name of registrant as specified in its charter)
NEW JERSEY 13-5409005
______________________________ _____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5959 Las Colinas Boulevard, Irving, Texas 75039-2298
______________________________________________________________________
(Address of principal executive offices) (Zip Code)
(972) 444-1000
_________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of September 30, 2002
_______________________________ ____________________________________
Common stock, without par value 6,728,898,090
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and nine months ended September 30, 2002 and 2001
Condensed Consolidated Balance Sheet 4
As of September 30, 2002 and December 31, 2001
Condensed Consolidated Statement of Cash Flows 5
Nine months ended September 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements 6-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25-26
Item 2. Changes in Securities 27
Item 6. Exhibits and Reports on Form 8-K 27
Signature 28
Certifications 29-34
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ __________________
REVENUE 2002 2001 2002 2001
____ ____ ____ ____
Sales and other operating revenue,
including excise taxes $ 53,278 $ 51,132 $146,073 $162,309
Earnings from equity interests and
other revenue 904 981 2,549 3,288
________ ________ ________ ________
Total revenue 54,182 52,113 148,622 165,597
________ ________ ________ ________
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 25,243 22,839 65,888 73,448
Operating expenses 4,830 4,481 12,962 14,096
Selling, general and administrative
expenses 2,730 3,196 9,178 9,471
Depreciation and depletion 2,195 1,957 6,235 5,804
Exploration expenses, including dry holes 162 318 609 864
Merger related expenses 129 145 253 433
Interest expense 51 76 190 223
Excise taxes 5,783 5,316 16,224 15,836
Other taxes and duties 8,485 8,420 24,821 24,670
Income applicable to minority and
preferred interests 76 125 108 420
________ ________ ________ ________
Total costs and other deductions 49,684 46,873 136,468 145,265
________ ________ ________ ________
INCOME BEFORE INCOME TAXES 4,498 5,240 12,154 20,332
Income taxes 1,858 2,060 4,784 7,907
________ ________ ________ ________
INCOME BEFORE EXTRAORDINARY ITEM 2,640 3,180 7,370 12,425
Extraordinary gain, net of income tax 0 0 0 215
________ ________ ________ ________
NET INCOME $ 2,640 $ 3,180 $ 7,370 $ 12,640
======== ======== ======== ========
NET INCOME PER COMMON SHARE (DOLLARS)
Before extraordinary gain $ 0.39 $ 0.46 $ 1.09 $ 1.81
Extraordinary gain, net of income tax 0.00 0.00 0.00 0.03
________ ________ ________ ________
Net income $ 0.39 $ 0.46 $ 1.09 $ 1.84
======== ======== ======== ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)
Before extraordinary gain $ 0.39 $ 0.46 $ 1.08 $ 1.79
Extraordinary gain, net of income tax 0.00 0.00 0.00 0.03
________ ________ ________ ________
Net income $ 0.39 $ 0.46 $ 1.08 $ 1.82
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ 0.23 $ 0.23 $ 0.69 $ 0.68
-3-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
Sept. 30, Dec. 31,
2002 2001
________ ________
ASSETS
Current assets
Cash and cash equivalents $ 6,937 $ 6,547
Notes and accounts receivable - net 18,699 19,549
Inventories
Crude oil, products and merchandise 7,472 6,743
Materials and supplies 1,284 1,161
Prepaid taxes and expenses 2,151 1,681
________ ________
Total current assets 36,543 35,681
Property, plant and equipment - net 93,459 89,602
Investments and other assets 19,471 17,891
________ ________
TOTAL ASSETS $149,473 $143,174
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 3,773 $ 3,703
Accounts payable and accrued liabilities 24,394 22,862
Income taxes payable 4,892 3,549
________ ________
Total current liabilities 33,059 30,114
Long-term debt 7,110 7,099
Deferred income tax liability 16,572 16,359
Other long-term liabilities 18,042 16,441
________ ________
TOTAL LIABILITIES 74,783 70,013
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (92) (159)
Common stock, without par value:
Authorized: 9,000 million shares
Issued: 8,019 million shares 3,851 3,789
Earnings reinvested 98,416 95,718
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (3,905) (5,947)
Minimum pension liability adjustment (535) (535)
Unrealized losses on stock investments (55) (108)
Common stock held in treasury:
1,290 million shares at September 30, 2002 (22,990)
1,210 million shares at December 31, 2001 (19,597)
________ ________
TOTAL SHAREHOLDERS' EQUITY 74,690 73,161
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $149,473 $143,174
======== ========
The number of shares of common stock issued and outstanding at September 30,
2002 and December 31, 2001 were 6,728,898,090 and 6,808,565,611, respectively.
-4-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
Nine Months Ended
September 30,
___________________
2002 2001
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,370 $ 12,640
Depreciation and depletion 6,235 5,804
Changes in operational working capital, excluding
cash and debt 2,510 832
All other items - net 74 223
________ ________
Net cash provided by operating activities 16,189 19,499
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (8,147) (6,863)
Sales of subsidiaries, investments, and property,
plant and equipment 1,059 888
Other investing activities - net (437) 30
________ ________
Net cash used in investing activities (7,525) (5,945)
________ ________
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 8,664 13,554
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 382 338
Reductions in long-term debt (208) (403)
Additions/(reductions) in short-term debt - net (463) (2,307)
Cash dividends to ExxonMobil shareholders (4,672) (4,683)
Cash dividends to minority interests (152) (158)
Changes in minority interests and sales/(purchases)
of affiliate stock (167) (338)
Net ExxonMobil shares acquired (3,402) (4,065)
________ ________
Net cash used in financing activities (8,682) (11,616)
________ ________
Effects of exchange rate changes on cash 408 8
________ ________
Increase/(decrease) in cash and cash equivalents 390 1,946
Cash and cash equivalents at beginning of period 6,547 7,080
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,937 $ 9,026
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 4,360 $ 6,539
Cash interest paid $ 328 $ 403
-5-
EXXON MOBIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis Of Financial Statement Preparation
These unaudited condensed consolidated financial statements should be read
in the context of the consolidated financial statements and notes thereto
filed with the Securities and Exchange Commission in the corporation's
2001 Annual Report on Form 10-K. In the opinion of the corporation, the
information furnished herein reflects all known accruals and adjustments
necessary for a fair statement of the results for the periods reported
herein. All such adjustments are of a normal recurring nature. The
corporation's exploration and production activities are accounted for
under the "successful efforts" method.
2. Recently Issued Statements of Financial Accounting Standards
In 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 in accordance with Statement of Financial Accounting Standards
No. 19 (FAS 19), "Financial Accounting and Reporting by Oil and Gas
Producing Companies". 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
accreted for the change in their present value and the initial capitalized
costs will be depreciated over the useful lives of the related assets.
While the corporation continues to evaluate the impact of adopting
FAS 143, preliminary estimates indicate that the cumulative adjustment for
the change in accounting principle will result in after-tax income in the
range of $500 million to $700 million as of January 1, 2003. This
adjustment is due to the difference in the method of accruing site
restoration costs under FAS 143 compared with the method required by
FAS 19, the accounting standard that the corporation has been required to
follow since 1978. Under FAS 19, site restoration costs are accrued on a
unit-of-production basis of accounting as the oil and gas is produced. The
FAS 19 method matches the accruals with the revenues generated from
production and results in most of the costs being accrued in early field
life, when production is at the highest level. Because FAS 143 requires
accretion of the liability as a result of the passage of time using an
interest method of allocation, the majority of the costs will be accrued
towards the end of field life, when production is at the lowest level. The
cumulative income adjustment described above results from reversing the
higher liability accumulated under FAS 19 in order to adjust it to the
lower amount resulting from transition to FAS 143. This amount being
reversed in transition, which was previously charged to operating earnings
under FAS 19, will again be charged to those earnings under FAS 143 in
future years. Because of the long periods over which these costs will be
charged, the impact on future annual net income of these increased charges
will be immaterial.
-6-
3. Merger of Exxon Corporation and Mobil Corporation
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation
merged with Mobil Corporation so that Mobil became a wholly-owned
subsidiary of Exxon (the "Merger"). At the same time, Exxon changed its
name to Exxon Mobil Corporation. The Merger was accounted for as a pooling
of interests.
In the third quarter of 2002, in association with the Merger, $129 million
of before tax costs ($85 million after tax) were recorded as merger
related expenses, including costs for rationalization of facilities and
systems. In the third quarter of 2001, merger related costs were
$145 million before tax ($140 million after tax). For the nine months
ended September 30, 2002, merger related expenses totaled $253 million
before tax ($175 million after tax). For the nine months ended
September 30, 2001, merger related expenses totaled $433 million before
tax ($325 million after tax).
The severance reserve balance at the end of the third quarter of 2002 is
expected to be expended in 2002 and 2003. The following table summarizes
the activity in the severance reserve for the nine months ended
September 30, 2002:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
197 32 134 95
4. Extraordinary Gain
Third quarter 2002 and 2001 results included no extraordinary gains.
Results for the nine months ended September 30, 2002, included no
extraordinary gains. For the nine months ended September 30, 2001, the net
after tax gain from asset management activities and required asset
divestitures totaled $215 million (including an income tax credit of
$21 million), or $0.03 per common share. These net gains from asset
management activities in the chemicals segment and from required asset
divestitures have been reported as extraordinary items in accordance with
accounting requirements for business combinations accounted for as a
pooling of interests.
5. 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
-7-
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.
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 it should be set aside
or substantially reduced on factual and constitutional grounds. The
Alabama Supreme Court heard oral arguments on the appeal on April 25,
2002. 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 has appealed 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.
-8-
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 are directly
and indirectly contingently liable for amounts similar to those at the
prior year-end relating to guarantees for notes, loans and performance
under contracts, including guarantees of non-U.S. excise taxes and customs
duties of other companies, entered into as a normal business practice,
under reciprocal arrangements.
Additionally, the corporation and its affiliates have numerous long-term
sales and purchase commitments in their various business activities, all
of which are expected to be fulfilled with no adverse consequences
material to the corporation's operations or financial condition. The
corporation's outstanding unconditional purchase obligations at
September 30, 2002 were similar to those at the prior year-end period.
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.
6. Nonowner Changes in Shareholders' Equity
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
2002 2001 2002 2001
____ ____ ____ ____
(millions of dollars)
Net income $ 2,640 $ 3,180 $ 7,370 $12,640
Changes in other nonowner changes in equity
Foreign exchange translation adjustment (481) 657 2,042 (862)
Minimum pension liability adjustment 0 0 0 0
Unrealized gains/(losses) on stock
investments (38) (146) 53 (73)
_______ _______ _______ _______
Total nonowner changes in shareholders'
equity $ 2,121 $ 3,691 $ 9,465 $11,705
======= ======= ======= =======
-9-
7. Earnings Per Share
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
2002 2001 2002 2001
____ ____ ____ ____
NET INCOME PER COMMON SHARE
Income before extraordinary item
(millions of dollars) $ 2,640 $ 3,180 $ 7,370 $12,425
Weighted average number of common shares
outstanding (millions of shares) 6,740 6,852 6,767 6,883
Net income per common share (dollars)
Before extraordinary gain $ 0.39 $ 0.46 $ 1.09 $ 1.81
Extraordinary gain, net of income tax 0.00 0.00 0.00 0.03
_______ _______ _______ _______
Net income $ 0.39 $ 0.46 $ 1.09 $ 1.84
======= ======= ======= =======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before extraordinary item
(millions of dollars) $ 2,640 $ 3,180 $ 7,370 $12,425
Adjustment for assumed dilution 0 (1) 0 (3)
_______ _______ _______ _______
Income available to common shares $ 2,640 $ 3,179 $ 7,730 $12,422
======= ======= ======= =======
Weighted average number of common shares
outstanding (millions of shares) 6,740 6,852 6,767 6,883
Plus: Issued on assumed exercise of
stock options 47 72 57 74
_______ _______ _______ _______
Weighted average number of common shares 6,787 6,924 6,824 6,957
outstanding ======= ======= ======= =======
Net income per common share
- assuming dilution (dollars)
Before extraordinary gain $ 0.39 $ 0.46 $ 1.08 $ 1.79
Extraordinary gain, net of income tax 0.00 0.00 0.00 0.03
_______ _______ _______ _______
Net income $ 0.39 $ 0.46 $ 1.08 $ 1.82
======= ======= ======= =======
-10-
8. Disclosures about Segments and Related Information
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ _________________
2002 2001 2002 2001
____ ____ ____ ____
(millions of dollars)
EARNINGS AFTER INCOME TAX
Upstream
United States $ 641 $ 767 $ 1,759 $ 3,506
Non-U.S. 1,561 1,364 4,605 5,253
Downstream
United States 42 390 290 1,643
Non-U.S. 83 552 189 1,565
Chemicals
United States 156 76 313 270
Non-U.S. 197 80 441 403
All other (40) (49) (227) 0
________ ________ ________ ________
Corporate total $ 2,640 $ 3,180 $ 7,370 $ 12,640
======== ======== ======== ========
Extraordinary gains included above:
Chemicals
United States $ 0 $ 0 $ 0 $ 100
Non-U.S. 0 0 0 75
All other 0 0 0 40
________ ________ ________ ________
Corporate total $ 0 $ 0 $ 0 $ 215
======== ======== ======== ========
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 938 $ 971 $ 2,717 $ 4,672
Non-U.S. 2,775 2,991 8,501 10,892
Downstream
United States 13,468 13,075 35,678 40,179
Non-U.S. 31,644 30,031 86,683 93,473
Chemicals
United States 1,773 1,606 5,144 5,412
Non-U.S. 2,565 2,247 6,947 7,046
All other 115 211 403 635
________ ________ ________ ________
Corporate total $ 53,278 $ 51,132 $146,073 $162,309
======== ======== ======== ========
INTERSEGMENT REVENUE
Upstream
United States $ 1,277 $ 1,145 $ 3,696 $ 4,219
Non-U.S. 2,584 2,820 8,630 9,597
Downstream
United States 636 888 3,398 3,272
Non-U.S. 4,448 4,744 12,664 13,589
Chemicals
United States 727 390 1,944 1,734
Non-U.S. 626 540 1,810 1,642
All other 88 48 230 142
-11-
9. 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 September 30, 2002) and
the 6.125% notes due 2008 ($160 million) of Exxon Capital Corporation and
the deferred interest debentures due 2012 ($980 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 three months ended September 30, 2002
____________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 2,205 $ - $ - $ 51,073 $ - $ 53,278
Earnings from equity
interests and other
revenue 2,703 - (11) 779 (2,567) 904
Intercompany revenue 4,843 11 7 31,448 (36,309) -
________ ________ ________ ________ ________ ________
Total revenue 9,751 11 (4) 83,300 (38,876) 54,182
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 4,746 - - 54,712 (34,215) 25,243
Operating expenses 1,187 1 - 4,373 (731) 4,830
Selling, general
and administrative
expenses 452 1 - 2,277 - 2,730
Depreciation and depletion 388 1 1 1,805 - 2,195
Exploration expenses,
including dry holes 46 - - 116 - 162
Merger related expenses 27 - - 105 (3) 129
Interest expense 184 5 28 1,194 (1,360) 51
Excise taxes - - - 5,783 - 5,783
Other taxes and duties 1 - - 8,484 - 8,485
Income applicable to
minority and preferred
interests - - - 76 - 76
________ ________ ________ ________ ________ ________
Total costs and
other deductions 7,031 8 29 78,925 (36,309) 49,684
________ ________ ________ ________ ________ ________
Income before income taxes 2,720 3 (33) 4,375 (2,567) 4,498
Income taxes 80 1 (8) 1,785 - 1,858
________ ________ ________ ________ ________ ________
Income before extraordinary
item 2,640 2 (25) 2,590 (2,567) 2,640
Extraordinary gain, net
of income tax - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 2,640 $ 2 $ (25) $ 2,590 $ (2,567) $ 2,640
======== ======== ======== ======== ======== ========
-12-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of income for three months ended September 30, 2001
____________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 8,112 $ - $ - $ 43,020 $ - $ 51,132
Earnings from equity
interests and other
revenue 3,221 - 1 630 (2,871) 981
Intercompany revenue 462 23 15 27,254 (27,754) -
________ ________ ________ ________ ________ ________
Total revenue 11,795 23 16 70,904 (30,625) 52,113
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 4,729 - - 42,923 (24,813) 22,839
Operating expenses 1,464 1 - 4,427 (1,411) 4,481
Selling, general and
administrative expenses 602 - - 2,594 - 3,196
Depreciation and depletion 415 2 1 1,539 - 1,957
Exploration expenses,
including dry holes 20 - - 298 - 318
Merger related expenses 118 - - 91 (64) 145
Interest expense 228 12 29 1,280 (1,473) 76
Excise taxes 699 - - 4,617 - 5,316
Other taxes and duties 4 - - 8,416 - 8,420
Income applicable to
minority and preferred
interests - - - 125 - 125
________ ________ ________ ________ ________ ________
Total costs and
other deductions 8,279 15 30 66,310 (27,761) 46,873
________ ________ ________ ________ ________ ________
Income before income taxes 3,516 8 (14) 4,594 (2,864) 5,240
Income taxes 336 3 (5) 1,726 - 2,060
________ ________ ________ ________ ________ ________
Income before extraordinary
item 3,180 5 (9) 2,868 (2,864) 3,180
Extraordinary gain, net of
income tax - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 3,180 $ 5 $ (9) $ 2,868 $ (2,864) $ 3,180
======== ======== ======== ======== ======== ========
Condensed consolidated statement of income for nine months ended September 30, 2002
___________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 6,398 $ - $ - $139,675 $ - $146,073
Earnings from equity
interests and other
revenue 7,594 5 (10) 2,122 (7,162) 2,549
Intercompany revenue 11,311 32 21 84,559 (95,923) -
________ ________ ________ ________ ________ ________
Total revenue 25,303 37 11 226,356 (103,085) 148,622
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 10,844 - - 144,113 (89,069) 65,888
Operating expenses 3,631 2 1 12,445 (3,117) 12,962
Selling, general and
administrative expenses 1,386 2 - 7,790 - 9,178
Depreciation and depletion 1,164 4 2 5,065 - 6,235
Exploration expenses,
including dry holes 127 - - 482 - 609
Merger related expenses 63 - - 203 (13) 253
Interest expense 439 16 84 3,375 (3,724) 190
Excise taxes - - - 16,224 - 16,224
Other taxes and duties 10 - - 24,811 - 24,821
Income applicable to
minority and preferred
interests - - - 108 - 108
________ ________ ________ ________ ________ ________
Total costs and
other deductions 17,664 24 87 214,616 (95,923) 136,468
_________ ________ ________ ________ ________ ________
Income before income taxes 7,639 13 (76) 11,740 (7,162) 12,154
Income taxes 269 5 (23) 4,533 - 4,784
________ ________ ________ ________ ________ ________
Income before
extraordinary item 7,370 8 (53) 7,207 (7,162) 7,370
Extraordinary gain, net
of income tax - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 7,370 $ 8 $ (53) $ 7,207 $ (7,162) $ 7,370
======== ======== ======== ======== ======== ========
-13-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of income for nine months ended September 30, 2001
___________________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 26,845 $ - $ - $135,464 $ - $162,309
Earnings from equity
interests and other
revenue 11,260 - 28 2,653 (10,653) 3,288
Intercompany revenue 2,824 571 53 82,137 (85,585) -
________ ________ ________ ________ ________ ________
Total revenue 40,929 571 81 220,254 (96,238) 165,597
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 16,279 - - 134,016 (76,847) 73,448
Operating expenses 4,642 2 1 13,028 (3,577) 14,096
Selling, general and
administrative expenses 1,658 1 - 7,812 - 9,471
Depreciation and depletion 1,179 4 2 4,619 - 5,804
Exploration expenses,
including dry holes 103 - - 761 - 864
Merger related expenses 189 - - 308 (64) 433
Interest expense 931 525 88 3,783 (5,104) 223
Excise taxes 1,957 - - 13,879 - 15,836
Other taxes and duties 11 - - 24,659 - 24,670
Income applicable to
minority and preferred
interests - - - 420 - 420
________ ________ ________ ________ ________ ________
Total costs and
other deductions 26,949 532 91 203,285 (85,592) 145,265
________ ________ ________ ________ ________ ________
Income before income taxes 13,980 39 (10) 16,969 (10,646) 20,332
Income taxes 1,555 15 (13) 6,350 - 7,907
________ ________ ________ ________ ________ ________
Income before
extraordinary item 12,425 24 3 10,619 (10,646) 12,425
Extraordinary gain, net
of income tax 215 - - - - 215
________ ________ ________ ________ ________ ________
Net income $ 12,640 $ 24 $ 3 $ 10,619 $(10,646) $ 12,640
======== ======== ======== ======== ======== ========
-14-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated balance sheet as of September 30, 2002
_____________________________________________________________
Cash and cash equivalents $ 470 $ - $ - $ 6,467 $ - $ 6,937
Notes and accounts
receivable - net 3,488 - - 15,211 - 18,699
Inventories 1,043 - - 7,713 - 8,756
Prepaid taxes and expenses 167 - 27 1,957 - 2,151
________ ________ ________ ________ ________ ________
Total current assets 5,168 - 27 31,348 - 36,543
Property, plant and
equipment - net 16,895 105 4 76,455 - 93,459
Investments and other
assets 101,056 - 542 330,514 (412,641) 19,471
Intercompany receivables 18,090 1,462 1,444 302,400 (323,396) -
________ ________ ________ ________ ________ ________
Total assets $141,209 $ 1,567 $ 2,017 $740,717 $(736,037) $149,473
======== ======== ======== ======== ========= ========
Notes and loan payables $ - $ 23 $ 10 $ 3,740 $ - $ 3,773
Accounts payable and
accrued liabilities 2,640 2 - 21,752 - 24,394
Income taxes payable 923 1 - 3,968 - 4,892
________ ________ ________ ________ ________ ________
Total current
liabilities 3,563 26 10 29,460 - 33,059
Long-term debt 1,298 266 1,085 4,461 - 7,110
Deferred income tax
liabilities 2,868 32 299 13,373 - 16,572
Other long-term liabilities 4,101 - - 13,941 - 18,042
Intercompany payables 54,689 345 382 267,980 (323,396) -
________ ________ ________ ________ ________ ________
Total liabilities 66,519 669 1,776 329,215 (323,396) 74,783
Earnings reinvested 98,416 92 (153) 55,985 (55,924) 98,416
Other shareholders' equity (23,726) 806 394 355,517 (356,717) (23,726)
________ ________ ________ ________ ________ ________
Total shareholders'
equity 74,690 898 241 411,502 (412,641) 74,690
________ ________ ________ ________ ________ ________
Total liabilities and
shareholders'
equity $141,209 $ 1,567 $ 2,017 $740,717 $(736,037) $149,473
======== ======== ======== ======== ========= ========
Condensed consolidated balance sheet as of 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
Property, plant and
equipment - net 16,843 108 6 72,645 - 89,602
Investments and other
assets 92,844 - 552 323,689 (399,194) 17,891
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 loan payables $ - $ 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
========= ======== ======== ======== ========= ========
-15-
SeaRiver
Exxon Mobil Maritime Consolidating
Corporation Exxon Financial and
Parent Capital Holdings, All Other Eliminating
Guarantor Corporation Inc. Subsidiaries Adjustments Consolidated
___________ ___________ _________ ____________ _____________ ____________
(millions of dollars)
Condensed consolidated statement of cash flows for nine months ended September 30, 2002
_______________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 260 $ 12 $ 13 $ 16,324 $ (420) $ 16,189
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (1,274) - - (6,873) - (8,147)
Sales of long-term assets 120 - - 939 - 1,059
Net intercompany
investing 8,063 (97) (13) (8,075) 122 -
All other investing, net - - - (437) - (437)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in)investing
activities 6,909 (97) (13) (14,446) 122 (7,525)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 382 - 382
Reductions in long-term
debt - - - (208) - (208)
Additions/(reductions)
in short-term debt
- net - (12) - (451) - (463)
Cash dividends (4,672) - - (420) 420 (4,672)
Net ExxonMobil shares
sold/(acquired) (3,402) - - - - (3,402)
Net intercompany
financing activity - 97 - 25 (122) -
All other financing, net - - - (319) - (319)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in)financing
activities (8,074) 85 - (991) 298 (8,682)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - 408 - 408
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ (905) $ - $ - $ 1,295 $ - $ 390
======== ======== ======== ======== ======== ========
Condensed consolidated statement of cash flows for nine months ended September 30, 2001
_______________________________________________________________________________________
Cash provided
by/(used in) operating
activities $ 3,751 $ 32 $ 71 $ 16,326 $ (681) $ 19,499
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (1,549) - - (5,314) - (6,863)
Sales of long-term assets 531 - - 357 - 888
Net intercompany investing 4,033 17,599 (42) (20,205) (1,385) -
All other investing, net (31) - - 61 - 30
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) investing
activities 2,984 17,599 (42) (25,101) (1,385) (5,945)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 338 - 338
Reductions in long-term
debt (1) (15) - (387) - (403)
Additions/(reductions)
in short-term debt
- net (59) (30) - (2,218) - (2,307)
Cash dividends (4,683) - - (681) 681 (4,683)
Net ExxonMobil shares
sold/(acquired) (4,065) - - - - (4,065)
Net intercompany
financing activity - (17,586) (29) 16,230 1,385 -
All other financing, net - - - (496) - (496)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in)financing
activities (8,808) (17,631) (29) 12,786 2,066 (11,616)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - 8 - 8
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ (2,073) $ - $ - $ 4,019 $ - $ 1,946
======== ======== ======== ======== ======== ========
-16-
EXXON MOBIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Third Quarter First Nine Months
_____________ _________________
2002 2001 2002 2001
____ ____ ____ ____
(millions of dollars)
Earnings including merger effects and special items
___________________________________________________
Upstream
United States $ 641 $ 767 $ 1,759 $ 3,506
Non-U.S. 1,561 1,364 4,605 5,253
Downstream
United States 42 390 290 1,643
Non-U.S. 83 552 189 1,565
Chemicals
United States 156 76 313 270
Non-U.S. 197 80 441 403
Other operations 121 120 360 389
Corporate and financing (76) (29) (412) (104)
Merger expenses (85) (140) (175) (325)
Gain from required asset divestitures 0 0 0 40
_______ _______ _______ _______
NET INCOME $ 2,640 $ 3,180 $ 7,370 $12,640
======= ======= ======= =======
Net income per common share $ 0.39 $ 0.46 $ 1.09 $ 1.84
Net income per common share
- assuming dilution $ 0.39 $ 0.46 $ 1.08 $ 1.82
Merger effects and special items
________________________________
Upstream
Non-U.S. $ (215) $ 0 $ (215) $ 0
Chemicals
United States (extraordinary item) 0 0 0 100
Non-U.S. (extraordinary item) 0 0 0 75
Merger expenses (85) (140) (175) (325)
Gain from required asset divestitures
(extraordinary item) 0 0 0 40
_______ _______ _______ _______
TOTAL $ (300) $ (140) $ (390) $ (110)
======= ======= ======= =======
Earnings excluding merger effects and special items
___________________________________________________
Upstream
United States $ 641 $ 767 $ 1,759 $ 3,506
Non-U.S. 1,776 1,364 4,820 5,253
Downstream
United States 42 390 290 1,643
Non-U.S. 83 552 189 1,565
Chemicals
United States 156 76 313 170
Non-U.S. 197 80 441 328
Other operations 121 120 360 389
Corporate and financing (76) (29) (412) (104)
_______ _______ _______ _______
TOTAL $ 2,940 $ 3,320 $ 7,760 $12,750
======= ======= ======= =======
Earnings per common share $ 0.44 $ 0.48 $ 1.15 $ 1.86
Earnings per common share
- assuming dilution $ 0.44 $ 0.48 $ 1.14 $ 1.84
-17-
REVIEW OF THIRD QUARTER 2002 RESULTS
Excluding merger effects and special items, estimated third quarter 2002
earnings were $2,940 million ($0.44 per share), a decrease of $380 million from
the third quarter of 2001, but an increase of $270 million from the second
quarter of 2002. Including merger effects and special items, estimated net
income of $2,640 million ($0.39 per share) decreased $540 million.
Revenue for the third quarter of 2002 totaled $54,182 million compared with
$52,113 million in 2001. Capital and exploration expenditures of $3,563 million
in the third quarter of 2002 were up $465 million, or 15 percent, compared with
$3,098 million last year and were 5 percent higher than in this year's second
quarter.
Excluding merger effects and special items, ExxonMobil's third quarter 2002
earnings of $2,940 million were up $270 million from second quarter 2002
earnings of $2,670 million. This improvement followed an increase of
$520 million from first to second quarter 2002. Upstream earnings improved
$264 million from the second quarter, primarily reflecting the continued upward
trend in crude oil prices. Downstream earnings decreased $257 million from the
second quarter primarily due to weak U.S. refining conditions and unfavorable
foreign exchange effects. Marketing margins declined and remained weak overall.
Chemicals earnings rose $84 million compared with the second quarter. Improved
margins in the U.S. more than offset lower volumes, which were down slightly
from the prior quarter's record level. Corporate and financing expenses of
$76 million decreased $144 million mainly due to favorable foreign exchange
impacts.
Operating costs for the first nine months of 2002 declined $1.5 billion versus
the same period last year. The decline was related to lower energy prices and
additional efficiencies captured in all business lines.
Nine Months Ended
September 30,
_________________
2002 2001
____ ____
(millions of dollars)
OPERATING COSTS EXCLUDING MERGER EXPENSES
From ExxonMobil's Condensed Consolidated Statement of Income
Operating expenses $ 12,962 $ 14,096
Selling, general and administrative expenses 9,178 9,471
Depreciation and depletion 6,235 5,804
Exploration expenses, including dry holes 609 864
________ ________
Subtotal 28,984 30,235
ExxonMobil's share of equity company expenses 2,736 3,004
________ ________
Total operating costs $ 31,720 $ 33,239
======== ========
Compared with last year's third quarter, ExxonMobil's third quarter 2002
earnings, excluding merger effects and special items, were $2,940 million, down
$380 million. The reduction in earnings reflected significantly weaker
conditions in the downstream segments, partly offset by improvements in crude
oil prices and production levels in the upstream.
-18-
Upstream earnings were $2,417 million, an increase of $286 million from the
third quarter 2001 results. These upstream results reflected higher
realizations on sales of crude oil. Liquids production, excluding the impact of
OPEC quota restrictions, was flat as new production from fields in Malaysia,
Angola and Canada was offset by natural field decline. Natural gas volumes were
up 8 percent, reflecting resumed operations at the Arun field in Indonesia and
higher production elsewhere in Asia-Pacific. On an oil-equivalent basis,
excluding the effect of OPEC quota restrictions, production increased
3 percent. Project schedules for long-term volume increases remain on track as
reflected by higher capital spending.
Downstream earnings were $125 million, down $817 million from last year's third
quarter, reflecting weak industry-wide conditions. Refining margins dropped in
most areas worldwide, with the sharpest declines in the U.S., Europe and Japan.
Improved refining operations have continued to provide a partial offset to the
margin decline. Marketing margins remained weak in most areas worldwide, with
further declines in the quarter outside of the U.S.
Chemicals earnings of $353 million were more than double last year's third
quarter due mainly to record third quarter sales volumes and a net improvement
in margins.
Earnings from other operations, including coal, minerals and power, totaled
$121 million, similar to last year.
Third quarter 2002 net income of $2,640 million included after-tax merger
expenses of $85 million and a special charge of $215 million, reflecting the
impact on deferred income taxes from the 10 percent supplementary upstream tax
enacted in the U.K. in July.
In the third quarter, ExxonMobil continued its active investment program,
spending $3,563 million on capital and exploration projects, compared with
$3,098 million last year, reflecting continued growth in upstream spending.
Capital and exploration expenditures of $9,930 million for the first nine
months of 2002 were up $1,482 million, or 18 percent, compared with
$8,448 million last year. Upstream capital spending was up 22 percent,
consistent with long term investment plans which will result in expanding
profitable production.
Cash flow from operations and asset sales for the first nine months of 2002 was
$17.2 billion, below last year's $20.4 billion level due to lower earnings, but
sufficiently large to exceed cash requirements to fund the corporation's
growing capital expenditure program, shareholder dividends and continuing share
purchases.
Nine Months Ended
September 30,
_________________
2002 2001
____ ____
(millions of dollars)
CASH FLOWS FROM OPERATIONS AND ASSET SALES
Net cash provided by operating activities $ 16,189 $ 19,499
Sales of subsidiaries, investments, and property, plant
and equipment 1,059 888
________ ________
Cash flows from operations and asset sales $ 17,248 $ 20,387
======== ========
-19-
OTHER COMMENTS ON THIRD QUARTER 2002 COMPARED TO THIRD QUARTER 2001
Excluding a special charge recorded in 2002, upstream earnings were
$2,417 million, up $286 million from the third quarter 2001 reflecting higher
crude oil realizations.
Liquids production of 2,448 kbd (thousands of barrels per day) decreased from
2,484 kbd in the third quarter of 2001. Higher production in Angola, Malaysia,
Canada and Venezuela was offset by OPEC quota restrictions and natural field
declines in mature areas. Absent OPEC quota restrictions, liquids production
was flat with last year. Third quarter natural gas production increased to
9,214 mcfd (millions of cubic feet per day), compared with 8,561 mcfd last
year. Improvements in Asia-Pacific natural gas volumes, mainly from the return
to full production levels at the Arun field in Indonesia following last year's
curtailments due to security concerns, were partly offset by natural field
decline in the U.S. and North Sea. Total actual oil and natural gas production
increased 2 percent versus the third quarter of last year, as resumption of
full operations at Arun and contributions from new projects and work programs
more than offset natural field declines. Excluding the impact of OPEC quota
restrictions, oil-equivalent production was up 3 percent.
Earnings from U.S. upstream operations were $641 million, down $126 million.
Excluding the special U.K. tax charge in 2002, non-U.S. upstream earnings of
$1,776 million were $412 million higher than last year's third quarter.
Downstream earnings of $125 million decreased substantially from the third
quarter of last year, reflecting significantly lower refining margins in the
U.S. and Europe with continued weakness in Asia-Pacific. Marketing margins
remained depressed. Petroleum product sales were 7,763 kbd, 188 kbd lower than
last year's third quarter in large part due to reduced demand for aviation fuel
and lower distillate and fuel oil sales in Europe.
U.S. downstream earnings were $42 million, down $348 million. Non-U.S.
downstream earnings of $83 million were $469 million lower than last year's
third quarter.
Chemicals earnings of $353 million were up $197 million from the same quarter a
year ago reflecting higher volumes and improved margins. Prime product sales of
6,711 kt (thousands of metric tons) were up 254 kt, reflecting higher demand in
key commodity businesses across most regions and supported by capacity
additions in Singapore.
Earnings from other operations, including coal, minerals and power, totaled
$121 million, similar to last year.
Corporate and financing expenses of $76 million increased $47 million,
primarily due to higher pension costs.
The corporation's effective tax rate increased to 43.2 percent in the third
quarter, and reflected the impact of higher U.K. taxes, including a special
charge of $215 million related to the deferred income tax effect of the
10 percent supplementary U.K. tax on North Sea operations that was enacted
during the quarter. During the period, the Company continued to benefit from
the favorable resolution of other tax related issues.
Third quarter net income also included $85 million of after-tax merger
expenses, including costs for rationalization of facilities and systems.
-20-
During the third quarter of 2002, Exxon Mobil Corporation purchased 30 million
shares of its common stock for the treasury at a gross cost of $1,062 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 6,757 million at the end of the second
quarter of 2002 to 6,729 million at the end of the third quarter. Purchases may
be made in both the open market and through negotiated transactions, and may be
discontinued at any time.
FIRST NINE MONTHS 2002 COMPARED WITH FIRST NINE MONTHS 2001
Excluding merger effects and special items, earnings of $7,760 million
($1.14 per share) for the first nine months of 2002 decreased $4,990 million
from the record first nine months of last year. Including merger effects and
special items, net income of $7,370 million ($1.08 per share) for the first
nine months of 2002 decreased $5,270 million. Included in this year's first
nine months net income was $390 million in after-tax merger expenses and
unfavorable special items, while last year's first nine months included net
unfavorable merger effects and special items of $110 million.
Upstream earnings decreased primarily due to lower natural gas realizations,
particularly in North America, where prices reached historical highs at the
beginning of 2001. Crude oil realizations were also lower. Liquids production
of 2,494 kbd decreased 53 kbd from the first nine months of 2001. Higher
production in Angola, Malaysia, Venezuela and Canada was offset by OPEC quota
restrictions and natural field declines in mature areas. Excluding the effect
of OPEC quota restrictions, liquids production in 2002 was flat with the first
nine months of 2001. Worldwide natural gas production of 10,039 mcfd in the
first nine months of 2002 compared with 9,910 mcfd in 2001. Improvements in
Asia-Pacific volumes, mainly from the return to full production levels at the
Arun field in Indonesia following last year's curtailments due to security
concerns, more than offset reduced weather-related demand in Europe and natural
field decline in the U.S. Weather-related demand in Europe reduced total gas
volumes by about 3 percent. Total oil and natural gas producible volumes
increased 2 percent versus the first nine months of last year, as resumption of
production at Arun and contributions from new projects and work programs more
than offset natural field declines.
Earnings from U.S. upstream operations for the first nine months of 2002 were
$1,759 million, a decrease of $1,747 million. Excluding a special item reported
in 2002, earnings outside the U.S. were $4,820 million, $433 million lower than
last year.
Downstream earnings decreased substantially from the first nine months of 2001,
reflecting significantly lower refining margins in the U.S. and Europe, and
further weakness in marketing margins. Improved refining operations provided a
partial offset to the margin decline. Petroleum product sales of 7,670 kbd
decreased 286 kbd from the first nine months of 2001, largely related to
reduced refinery runs due to weak margins, and lower demand for aviation fuels
and distillates.
U.S. downstream earnings were $290 million, down $1,353 million. Earnings
outside the U.S. of $189 million were $1,376 million lower than last year.
Excluding special items of $175 million recorded in 2001, Chemicals earnings of
$754 million for the first nine months of 2002 were $256 million higher than
last year reflecting increased prime product sales volumes across all regions
and higher margins. Sales volumes of 20,216 kt were 4 percent above last year's
level.
-21-
Earnings from other operations totaled $360 million, a decrease of $29 million
due primarily to the absence of Colombian coal operations which were sold in
the first quarter of 2002. Corporate and financing expenses increased
$308 million to $412 million, mainly reflecting higher pension expenses and
lower interest income.
MERGER OF EXXON CORPORATION AND MOBIL CORPORATION
On November 30, 1999, a wholly-owned subsidiary of Exxon Corporation merged
with Mobil Corporation so that Mobil became a wholly-owned subsidiary of Exxon
(the "Merger"). At the same time, Exxon changed its name to Exxon Mobil
Corporation. The Merger was accounted for as a pooling of interests.
In the third quarter of 2002, in association with the Merger, $129 million of
before tax costs ($85 million after tax) were recorded as merger related
expenses, including costs for rationalization of facilities and systems. In the
third quarter of 2001, merger related expenses were $145 million before tax
($140 million after tax). For the nine months ended September 30, 2002, merger
related expenses totaled $253 million before tax ($175 million after tax). For
the nine months ended September 30, 2001, merger related expenses totaled
$433 million before tax ($325 million after tax).
The severance reserve balance at the end of the third quarter of 2002 is
expected to be expended in 2002 and 2003. The following table summarizes the
activity in the severance reserve for the nine months ended September 30, 2002:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
197 32 134 95
Merger related expenses are expected to total approximately $3.2 billion before
tax on a cumulative basis by the end of 2002. Additional expense for facilities
rationalization and systems are anticipated in the fourth quarter of 2002,
after which the corporation does not expect to use the merger expense segment
in future reporting. Merger synergy initiatives are on track.
Results for the nine months ended September 30, 2002, included no extraordinary
gains. For the nine months ended September 30, 2001, the net after tax gain
from required asset divestments, all in the first quarter, totaled $40 million
(including an income tax credit of $15 million), or $0.01 per common share.
These net gains from required asset divestments have been reported as
extraordinary items in accordance with accounting requirements for business
combinations accounted for as a pooling of interests.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generation before financing activities was $8,664 million in the first
nine months of 2002 versus $13,554 million in the same period last year.
Operating activities provided net cash of $16,189 million, a decrease of
$3,310 million from the prior year, influenced by lower net income partly
offset by the positive impact of lower working capital. Cash flow from
operations also included $1.5 billion in funds received from BEB Erdgas und
Erdoel GmbH ("BEB"), a German exploration and production company indirectly
owned 50 percent and accounted for under the equity method of
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accounting. The funds were loaned in connection with a restructuring that will
enable BEB, pending German regulatory approvals, to transfer its holdings in
Ruhrgas AG, a German gas transmission company. Net income will not reflect the
transfer of the Ruhrgas shares until final approvals are obtained.
Investing activities used net cash of $7,525 million, compared to cash used of
$5,945 million in the prior year, reflecting higher additions to property,
plant and equipment.
Net cash used in financing activities was $8,682 million in the first nine
months of 2002 versus $11,616 million in the same period last year reflecting a
lower level of debt reductions in the current year.
During the first nine months of 2002, Exxon Mobil Corporation purchased
93 million shares of its common stock for the treasury at a gross cost of
$3,617 million. These purchases were to offset shares issued in conjunction
with company benefit plans and programs and to reduce the number of shares
outstanding. Purchases may be made in both the open market and through
negotiated transactions, and may be discontinued at any time.
Revenue for the first nine months of 2002 totaled $148,622 million compared to
$165,597 million in the first nine months of 2001 reflecting lower prices.
Capital and exploration expenditures were $9,930 million in the first nine
months 2002 compared to $8,448 million in last year's first nine months. In
2002, capital and exploration investments are expected to increase by more than
10 percent over 2001 primarily driven by ExxonMobil's large portfolio of
upstream projects.
Total debt of $10.9 billion at September 30, 2002 increased $0.1 billion from
year-end 2001. The corporation's debt to total capital ratio was 12.3 percent
at the end of the first nine months of 2002, compared to 12.4 percent at
year-end 2001.
Although the corporation issues long-term debt from time to time and maintains
a revolving commercial paper program, internally generated funds cover the
majority of its financial requirements.
Litigation and other contingencies are discussed in note 5 to the unaudited
condensed consolidated financial statements. There are no events or
uncertainties known to management beyond those already included in reported
financial information that would indicate a material change in future operating
results or future financial condition.
The corporation, as part of its ongoing asset management program, continues to
evaluate its mix of assets for potential upgrade. Because of the ongoing nature
of this program, dispositions will continue to be made from time to time which
will result in either gains or losses. Asset management activities in the first
nine months of 2002 included the sale of coal operations in Colombia in the
first quarter. On May 2, 2002, the corporation announced that it had reached
agreement to sell its interests in Compania Minera Disputada de las Condes
Limitada (a Chile copper mining business) for $1.3 billion, plus future
contingent payments in the event of higher future copper prices. The sale is
subject to the completion of outstanding due diligence, the completion of a
definitive sale and purchase agreement and required regulatory approvals, with
such work continuing into the fourth quarter 2002.
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FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future events
or conditions are forward-looking statements. Actual future results, including
merger related expenses 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 petrochemical products; and other factors discussed above and
discussed under the caption "Factors Affecting Future Results" in Item 1 of
ExxonMobil's 2001 Form 10-K. We assume no duty to update these statements as of
any future date.
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EXXON MOBIL CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the nine months ended September 30,
2002 does not differ materially from that discussed under Item 7A of
the registrant's Annual Report on Form 10-K for 2001.
Item 4. Controls and Procedures
As indicated in the certifications on pages 29 through 34 of this
report, the corporation's principal executive officer, principal
financial officer and principal accounting officer have evaluated the
corporation's disclosure controls and procedures as of September 30,
2002. Based on that evaluation, these officers have concluded that the
corporation's disclosure controls and procedures are effective for the
purpose of ensuring that material information required to be in this
quarterly report is made known to them by others on a timely basis.
There have not been changes in the corporation's internal controls or
in other factors that could significantly affect these controls
subsequent to the date of this evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The New York State Department of Environmental Conservation ("NYSDEC")
issued a Notice of Violation with respect to the Port Mobil Terminal
in Staten Island, New York on August 1, 2002. The NYSDEC alleges
violations of regulations under New York's Petroleum Bulk Storage and
Chemical Bulk Storage programs, including that certain above-ground
storage tanks holding petroleum products (or chemicals) are not being
managed in accordance with regulatory requirements or are in violation
of permit requirements. The NYSDEC served a Notice of Hearing and
Complaint on ExxonMobil Oil Corporation ("EMOC") on October 7, 2002,
specifically demanding, among other things, a penalty of $750,000.
EMOC filed a motion for a More Definite Statement on October 17, 2002.
The NYSDEC served multiple Notices of Hearing and Complaint
("Notices") on EMOC on September 5, 2002 relating to three service
stations. The Notice relating to a service station on Fort Hamilton
Parkway in Brooklyn, New York alleges the discharge of petroleum into
the waters of the state and failure to report spills in violation of
the Navigation Law and the Environmental Conservation Law. The NYSDEC
is seeking payment of a civil penalty in the amount of $125,000. In
Notices relating to service stations on West Street in Manhattan and
on Pike Street in New York City, the NYSDEC alleges the discharge of
petroleum into the waters of the state in violation of the Navigation
Law and the Environmental Conservation Law. For each of these two
service stations, the NYSDEC is seeking a civil penalty in the amount
of $200,000. EMOC filed an answer and affirmative defenses on
October 29, 2002.
In a previously reported matter, the NYSDEC has amended its complaint
originally served on EMOC on June 14, 2002 with respect to a service
station in Smithtown, New York. In the amendment, the NYSDEC has added
alleged violations at a service station across the highway from
the first location, and has increased the penalty it is seeking from
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$1.5 million to $2.0 million. Allegations regarding the second site
are that petroleum was discharged from the station into waters of the
state and that EMOC has violated the Stipulation Agreement regulating
remedial activities at the site. The NYSDEC has filed a motion for
order without hearing, and EMOC's opposition to this motion is due by
November 8, 2002.
The NYSDEC has indicated that it is continuing its inspections and
investigations at certain other sites in New York and that additional
Notices may be issued to the corporation in the future. Settlement
discussions with the NYSDEC to resolve all outstanding matters are
ongoing. The amounts of the penalties for which the corporation might
ultimately be liable are unknown.
The Texas Commission on Environmental Quality issued Notices of
Enforcement to EMOC with respect to its Beaumont, Texas refinery on
May 21, 2002, and on August 22, 2002. Each Notice alleged violations
of Texas Air Quality regulations. The primary focus is on leak
detection and repair issues, including allegations that certain
equipment valves were not monitored as required or were not repaired
in a timely manner. No specific demand for penalties has been made.
On August 20, 2002, the Environmental Protection Agency ("EPA") issued
a Notice of Violation and Finding of Violation ("NOV") in connection
with the EPA's New Source Review Enforcement Initiative. In the NOV,
the EPA alleged that the corporation undertook certain projects at its
refinery in Baton Rouge, Louisiana without obtaining appropriate New
Source Review permits under the Clean Air Act. The NOV also included
new allegations of violations at refineries in Baytown and Beaumont,
Texas; Chalmette, Louisiana; and Joliet, Illinois, in addition to
reciting prior claims relating to these four refineries that have been
the subject of prior disclosure by the corporation. The NOV did not
include a demand for specific fines or penalties. The corporation and
the EPA continue to have discussions regarding these matters.
Regarding a previously reported matter, EMOC and the Department of
Environmental Protection of the Commonwealth of Massachusetts have
agreed to settle a matter set forth in the agency's draft Consent
Order and Notice of Non-Compliance issued on August 27, 1998 relating
to alleged violations of air and waste regulations at multiple service
stations in Massachusetts. Pursuant to the agreement between the
parties, EMOC has agreed to pay a civil penalty in the amount of
$175,000. The settlement is subject to finalization and court approval
of a formal settlement agreement.
The corporation and the Bay Area Air Quality Management District
("BAAQMD") have agreed to settle matters relating to 16 Notices of
Violation issued by the BAAQMD on different occasions in 1998 and 1999
for alleged violations of various local, state and federal laws
relating to control of air contaminants at the corporation's former
Benicia, California refinery. Pursuant to a stipulated judgment, which
was approved by the Superior Court of the State of California, County
of Solano, on October 29, 2002, the corporation has agreed to pay a
civil penalty of $221,000.
Refer to the relevant portions of Note 5 on pages 7 through 9 of this
Quarterly Report on Form 10-Q for additional information on legal
proceedings.
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Item 2. Changes in Securities
In accordance with the registrant's 1997 Nonemployee Director
Restricted Stock Plan, a newly elected nonemployee director was
granted 8,000 shares of restricted Common Stock on October 29, 2002.
This grant is exempt from registration under bonus stock
interpretations such as the "no action" letter to Pacific Telesis
Group (June 30, 1992).
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The registrant has no exhibits for the three month period ended
September 30, 2002.
b) Reports on Form 8-K
On August 13, 2002, the registrant filed a Current Report on Form 8-K
about the certifications filed with the Securities and Exchange
Commission by the principal executive officer and principal financial
officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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EXXON MOBIL CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXXON MOBIL CORPORATION
Date: November 12, 2002 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
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CERTIFICATIONS
Certification by L. R. Raymond
Pursuant to Securities Exchange Act Rule 13a-14
I, L. R. Raymond, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Exxon Mobil
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ L. R. Raymond
_______________________
L. R. Raymond
Chief Executive Officer
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Certification by F. A. Risch
Pursuant to Securities Exchange Act Rule 13a-14
I, F. A. Risch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Exxon Mobil
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ F. A. Risch
____________________________
F. A. Risch
Vice President and Treasurer
(Principal Financial Officer)
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Certification by D. D. Humphreys
Pursuant to Securities Exchange Act Rule 13a-14
I, D. D. Humphreys, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Exxon Mobil
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
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6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ D. D. Humphreys
_____________________________
D. D. Humphreys
Vice President and Controller
(Principal Accounting Officer)
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