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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 June 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 June 30, 2002
_______________________________ _______________________________
Common stock, without par value 6,757,441,303
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Three and six months ended June 30, 2002 and 2001
Condensed Consolidated Balance Sheet 4
As of June 30, 2002 and December 31, 2001
Condensed Consolidated Statement of Cash Flows 5
Six months ended June 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 17-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security Holders 25-26
Item 6. Exhibits and Reports on Form 8-K 26
Signature 27
Index to Exhibits 28
-2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(millions of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2002 2001 2002 2001
________ ________ ________ ________
REVENUE
Sales and other operating revenue,
including excise taxes $ 50,077 $ 55,101 $ 92,795 $111,177
Earnings from equity interests and
other revenue 832 1,083 1,645 2,307
________ ________ ________ ________
Total revenue 50,909 56,184 94,440 113,484
________ ________ ________ ________
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 22,632 25,731 40,645 50,609
Operating expenses 4,274 4,626 8,132 9,615
Selling, general and administrative
expenses 3,310 3,215 6,448 6,275
Depreciation and depletion 2,020 1,871 4,040 3,847
Exploration expenses, including dry holes 229 266 447 546
Merger related expenses 41 167 124 288
Interest expense 51 70 139 147
Excise taxes 5,650 5,226 10,441 10,520
Other taxes and duties 8,391 8,057 16,336 16,250
Income applicable to minority and preferred
interests 17 83 32 295
________ ________ ________ ________
Total costs and other deductions 46,615 49,312 86,784 98,392
________ ________ ________ ________
INCOME BEFORE INCOME TAXES 4,294 6,872 7,656 15,092
Income taxes 1,654 2,587 2,926 5,847
________ ________ ________ ________
INCOME BEFORE EXTRAORDINARY ITEM 2,640 4,285 4,730 9,245
Extraordinary gain, net of income tax 0 175 0 215
________ ________ ________ ________
NET INCOME $ 2,640 $ 4,460 $ 4,730 $ 9,460
======== ======== ======== ========
NET INCOME PER COMMON SHARE (DOLLARS)
Before extraordinary gain $ 0.40 $ 0.64 $ 0.70 $ 1.35
Extraordinary gain, net of income tax 0.00 0.02 0.00 0.03
________ ________ ________ ________
Net income $ 0.40 $ 0.66 $ 0.70 $ 1.38
======== ======== ======== ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)
Before extraordinary gain $ 0.39 $ 0.63 $ 0.69 $ 1.33
Extraordinary gain, net of income tax 0.00 0.02 0.00 0.03
________ ________ ________ ________
Net income $ 0.39 $ 0.65 $ 0.69 $ 1.36
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ 0.23 $ 0.23 $ 0.46 $ 0.45
-3-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
June 30, Dec. 31,
2002 2001
____ ____
ASSETS
Current assets
Cash and cash equivalents $ 5,700 $ 6,547
Notes and accounts receivable - net 19,584 19,549
Inventories
Crude oil, products and merchandise 7,412 6,743
Materials and supplies 1,254 1,161
Prepaid taxes and expenses 2,187 1,681
________ ________
Total current assets 36,137 35,681
Property, plant and equipment - net 93,190 89,602
Investments and other assets 18,905 17,891
________ ________
TOTAL ASSETS $148,232 $143,174
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 3,702 $ 3,703
Accounts payable and accrued liabilities 24,140 22,862
Income taxes payable 3,400 3,549
________ ________
Total current liabilities 31,242 30,114
Long-term debt 7,607 7,099
Deferred income tax liability 17,381 16,359
Other long-term liabilities 16,884 16,441
________ ________
TOTAL LIABILITIES 73,114 70,013
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (117) (159)
Common stock, without par value:
Authorized: 9,000 million shares
Issued: 8,019 million shares 3,843 3,789
Earnings reinvested 97,327 95,718
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (3,424) (5,947)
Minimum pension liability adjustment (535) (535)
Unrealized losses on stock investments (17) (108)
Common stock held in treasury:
1,262 million shares at June 30, 2002 (21,959)
1,210 million shares at December 31, 2001 (19,597)
________ ________
TOTAL SHAREHOLDERS' EQUITY 75,118 73,161
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $148,232 $143,174
======== ========
The number of shares of common stock issued and outstanding at June 30, 2002
and December 31, 2001 were 6,757,441,303 and 6,808,565,611, respectively.
-4-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
Six Months Ended
June 30,
________________
2002 2001
____ ____
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,730 $ 9,460
Depreciation and depletion 4,040 3,847
Changes in operational working capital, excluding
cash and debt 88 1,256
All other items - net (118) (319)
________ ________
Net cash provided by operating activities 8,740 14,244
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (5,263) (4,370)
Sales of subsidiaries, investments, and property,
plant and equipment 878 745
Other investing activities - net 15 311
________ ________
Net cash used in investing activities (4,370) (3,314)
________ ________
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 4,370 10,930
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 368 341
Reductions in long-term debt (33) (357)
Additions/(reductions) in short-term debt - net (146) (2,369)
Cash dividends to ExxonMobil shareholders (3,121) (3,037)
Cash dividends to minority interests (77) (94)
Changes in minority interests and sales/(purchases)
of affiliate stock (189) (274)
Net ExxonMobil shares acquired (2,369) (2,776)
________ ________
Net cash used in financing activities (5,567) (8,566)
________ ________
Effects of exchange rate changes on cash 350 (146)
________ ________
Increase/(decrease) in cash and cash equivalents (847) 2,218
Cash and cash equivalents at beginning of period 6,547 7,080
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,700 $ 9,298
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 3,123 $ 4,182
Cash interest paid $ 208 $ 244
-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. 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. The corporation
is evaluating the impact of adopting FAS 143.
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 second quarter of 2002, in association with the Merger, $41 million
of before tax costs ($30 million after tax) were recorded as merger
related expenses, including costs for rationalization of facilities and
systems. In the second quarter of 2001, merger related costs were
$167 million before tax ($95 million after tax). For the six months ended
June 30, 2002, merger related expenses totaled $124 million before tax
($90 million after tax). For the six months ended June 30, 2001, merger
related expenses totaled $288 million before tax ($185 million after tax).
-6-
The severance reserve balance at the end of the second quarter of 2002 is
expected to be expended in 2002. The following table summarizes the
activity in the severance reserve for the six months ended June 30, 2002:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
197 0 116 81
4. Extraordinary Gain
Second quarter 2002 results included no extraordinary gains. Second
quarter 2001 included a net after tax gain of $175 million (including an
income tax credit of $6 million), or $0.02 per common share, from asset
divestment activities in the chemicals segment.
Results for the six months ended June 30, 2002, included no extraordinary
gains. For the six months ended June 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 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.
-7-
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 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.
-8-
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 June 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 Six Months Ended
June 30, June 30,
__________________ ________________
2002 2001 2002 2001
____ ____ ____ ____
(millions of dollars)
Net income $ 2,640 $ 4,460 $ 4,730 $ 9,460
Changes in other nonowner changes
in equity
Foreign exchange translation
adjustment 2,653 (514) 2,523 (1,519)
Minimum pension liability adjustment 0 0 0 0
Unrealized gains/(losses) on stock
investments 39 80 91 73
_______ _______ _______ _______
Total nonowner changes in shareholders'
equity $ 5,332 $ 4,026 $ 7,344 $ 8,014
======= ======= ======= =======
-9-
7. Earnings Per Share
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2002 2001 2002 2001
____ ____ ____ ____
NET INCOME PER COMMON SHARE
Income before extraordinary item
(millions of dollars) $ 2,640 $ 4,285 $ 4,730 $ 9,245
Weighted average number of common shares
outstanding (millions of shares) 6,767 6,883 6,780 6,898
Net income per common share (dollars)
Before extraordinary gain $ 0.40 $ 0.64 $ 0.70 $ 1.35
Extraordinary gain, net of income tax 0.00 0.02 0.00 0.03
_______ _______ _______ _______
Net income $ 0.40 $ 0.66 $ 0.70 $ 1.38
======= ======= ======= =======
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income before extraordinary item
(millions of dollars) $ 2,640 $ 4,285 $ 4,730 $ 9,245
Adjustment for assumed dilution 0 1 0 (2)
_______ _______ _______ _______
Income available to common shares $ 2,640 $ 4,286 $ 4,730 $ 9,243
======= ======= ======= =======
Weighted average number of common shares
outstanding (millions of shares) 6,767 6,883 6,780 6,898
Plus: Issued on assumed exercise of
stock options 64 80 64 76
_______ _______ _______ _______
Weighted average number of common shares
outstanding 6,831 6,963 6,844 6,974
======= ======= ======= =======
Net income per common share
- assuming dilution (dollars)
Before extraordinary gain $ 0.39 $ 0.63 $ 0.69 $ 1.33
Extraordinary gain, net of income tax 0.00 0.02 0.00 0.03
_______ _______ _______ _______
Net income $ 0.39 $ 0.65 $ 0.69 $ 1.36
======= ======= ======= =======
-10-
8. Disclosures about Segments and Related Information
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2002 2001 2002 2001
____ ____ ____ ____
(millions of dollars)
EARNINGS AFTER INCOME TAX
Upstream
United States $ 674 $ 1,111 $ 1,118 $ 2,739
Non-U.S. 1,479 1,739 3,044 3,889
Downstream
United States 234 844 248 1,253
Non-U.S. 148 423 106 1,013
Chemicals
United States 87 149 157 194
Non-U.S. 182 168 244 323
All other (164) 26 (187) 49
________ ________ ________ ________
Corporate total $ 2,640 $ 4,460 $ 4,730 $ 9,460
======== ======== ======== ========
Extraordinary gains included above:
Chemicals
United States $ 0 $ 100 $ 0 $ 100
Non-U.S. 0 75 0 75
All other 0 0 0 40
________ ________ ________ ________
Corporate total $ 0 $ 175 $ 0 $ 215
======== ======== ======== ========
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 982 $ 1,415 $ 1,779 $ 3,701
Non-U.S. 2,803 3,404 5,726 7,901
Downstream
United States 12,642 14,375 22,210 27,104
Non-U.S. 29,259 31,514 55,039 63,442
Chemicals
United States 1,895 1,841 3,371 3,806
Non-U.S. 2,364 2,354 4,382 4,799
All other 132 198 288 424
________ ________ ________ ________
Corporate total $ 50,077 $ 55,101 $ 92,795 $111,177
======== ======== ======== ========
INTERSEGMENT REVENUE
Upstream
United States $ 1,306 $ 1,510 $ 2,419 $ 3,074
Non-U.S. 3,298 3,350 6,046 6,777
Downstream
United States 1,553 1,092 2,762 2,384
Non-U.S. 4,326 4,813 8,216 8,845
Chemicals
United States 676 646 1,217 1,344
Non-U.S. 684 516 1,184 1,102
All other 76 43 142 94
-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 June 30, 2002) and
the 6.125% notes due 2008 ($160 million) of Exxon Capital Corporation and
the deferred interest debentures due 2012 ($955 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 June 30, 2002
_______________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 2,349 $ - $ - $ 47,728 $ - $ 50,077
Earnings from equity
interests and other
revenue 2,680 - (3) 716 (2,561) 832
Intercompany revenue 3,644 10 7 28,338 (31,999) -
________ ________ ________ ________ ________ ________
Total revenue 8,673 10 4 76,782 (34,560) 50,909
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 3,524 - - 48,550 (29,442) 22,632
Operating expenses 1,321 1 1 4,264 (1,313) 4,274
Selling, general and
administrative expenses 476 - - 2,832 2 3,310
Depreciation and
depletion 386 2 - 1,632 - 2,020
Exploration expenses,
including dry holes 38 - - 191 - 229
Merger related expenses 20 - - 28 (7) 41
Interest expense 117 5 28 1,138 (1,237) 51
Excise taxes - - - 5,650 - 5,650
Other taxes and duties 6 - - 8,385 - 8,391
Income applicable to
minority and preferred
interests - - - 17 - 17
________ ________ ________ ________ ________ ________
Total costs and other
deductions 5,888 8 29 72,687 (31,997) 46,615
________ ________ ________ ________ ________ ________
Income before income taxes 2,785 2 (25) 4,095 (2,563) 4,294
Income taxes 145 1 (7) 1,515 - 1,654
________ ________ ________ ________ ________ ________
Income before
extraordinary item 2,640 1 (18) 2,580 (2,563) 2,640
Extraordinary gain, net
of income tax - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 2,640 $ 1 $ (18) $ 2,580 $ (2,563) $ 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 June 30, 2001
_______________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 9,477 $ - $ - $ 45,624 $ - $ 55,101
Earnings from equity
interests and other
revenue 3,687 - 11 960 (3,575) 1,083
Intercompany revenue 1,234 254 17 27,537 (29,042) -
________ ________ ________ ________ ________ ________
Total revenue 14,398 254 28 74,121 (32,617) 56,184
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 6,062 - - 45,691 (26,022) 25,731
Operating expenses 1,499 - 1 4,361 (1,235) 4,626
Selling, general and
administrative expenses 547 1 - 2,667 - 3,215
Depreciation and
depletion 388 1 - 1,482 - 1,871
Exploration expenses,
including dry holes 39 - - 227 - 266
Merger related expenses 36 - - 131 - 167
Interest expense 323 238 28 1,266 (1,785) 70
Excise taxes 650 - - 4,576 - 5,226
Other taxes and duties 3 - - 8,054 - 8,057
Income applicable to
minority and preferred
interests - - - 83 - 83
________ ________ ________ ________ ________ ________
Total costs and
other deductions 9,547 240 29 68,538 (29,042) 49,312
________ ________ ________ ________ ________ ________
Income before income taxes 4,851 14 (1) 5,583 (3,575) 6,872
Income taxes 566 6 (4) 2,019 - 2,587
________ ________ ________ ________ ________ ________
Income before
extraordinary item 4,285 8 3 3,564 (3,575) 4,285
Extraordinary gain, net
of income tax 175 - - (25) 25 175
________ ________ ________ ________ ________ ________
Net income $ 4,460 $ 8 $ 3 $ 3,539 $ (3,550) $ 4,460
======== ======== ======== ======== ======== ========
Condensed consolidated statement of income for six months ended June 30, 2002
_____________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 4,193 $ - $ - $ 88,602 $ - $ 92,795
Earnings from equity
interests and other
revenue 4,891 5 1 1,343 (4,595) 1,645
Intercompany revenue 6,468 21 14 53,111 (59,614) -
________ ________ ________ ________ ________ ________
Total revenue 15,552 26 15 143,056 (64,209) 94,440
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 6,098 - - 89,401 (54,854) 40,645
Operating expenses 2,444 1 1 8,072 (2,386) 8,132
Selling, general and
administrative expenses 934 1 - 5,513 - 6,448
Depreciation and depletion 776 3 1 3,260 - 4,040
Exploration expenses,
including dry holes 81 - - 366 - 447
Merger related expenses 36 - - 98 (10) 124
Interest expense 255 11 56 2,181 (2,364) 139
Excise taxes - - - 10,441 - 10,441
Other taxes and duties 9 - - 16,327 - 16,336
Income applicable to
minority and preferred
interests - - - 32 - 32
________ ________ ________ ________ ________ ________
Total costs and
other deductions 10,633 16 58 135,691 (59,614) 86,784
________ ________ ________ ________ ________ ________
Income before income taxes 4,919 10 (43) 7,365 (4,595) 7,656
Income taxes 189 4 (15) 2,748 - 2,926
________ ________ ________ ________ ________ ________
Income before
extraordinary item 4,730 6 (28) 4,617 (4,595) 4,730
Extraordinary gain, net
of income tax - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 4,730 $ 6 $ (28) $ 4,617 $ (4,595) $ 4,730
======== ======== ======== ======== ======== ========
-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 six months ended June 30, 2001
_____________________________________________________________________________
Revenue
Sales and other
operating revenue,
including excise taxes $ 18,733 $ - $ - $ 92,444 $ - $111,177
Earnings from equity
interests and other
revenue 8,039 - 27 2,023 (7,782) 2,307
Intercompany revenue 2,362 548 38 54,883 (57,831) -
________ ________ ________ ________ ________ ________
Total revenue 29,134 548 65 149,350 (65,613) 113,484
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 11,550 - - 91,093 (52,034) 50,609
Operating expenses 3,178 1 1 8,601 (2,166) 9,615
Selling, general and
administrative expenses 1,056 1 - 5,218 - 6,275
Depreciation and depletion 764 2 1 3,080 - 3,847
Exploration expenses,
including dry holes 83 - - 463 - 546
Merger related expenses 71 - - 217 - 288
Interest expense 703 513 59 2,503 (3,631) 147
Excise taxes 1,258 - - 9,262 - 10,520
Other taxes and duties 7 - - 16,243 - 16,250
Income applicable to
minority and preferred
interests - - - 295 - 295
________ ________ ________ ________ ________ ________
Total costs and
other deductions 18,670 517 61 136,975 (57,831) 98,392
________ ________ ________ ________ ________ ________
Income before income taxes 10,464 31 4 12,375 (7,782) 15,092
Income taxes 1,219 12 (8) 4,624 - 5,847
________ ________ ________ ________ ________ ________
Income before
extraordinary item 9,245 19 12 7,751 (7,782) 9,245
Extraordinary gain, net
of income tax 215 - - - - 215
________ ________ ________ ________ ________ ________
Net income $ 9,460 $ 19 $ 12 $ 7,751 $ (7,782) $ 9,460
======== ======== ======== ======== ======== ========
-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 June 30, 2002
________________________________________________________
Cash and cash equivalents $ 754 $ - $ - $ 4,946 $ - $ 5,700
Notes and accounts
receivable - net 2,528 - - 17,056 - 19,584
Inventories 1,040 - - 7,626 - 8,666
Prepaid taxes and expenses 126 - 21 2,040 - 2,187
________ ________ ________ ________ ________ ________
Total current assets 4,448 - 21 31,668 - 36,137
Property, plant and
equipment - net 16,815 106 5 76,264 - 93,190
Investments and other
assets 99,084 - 553 325,316 (406,048) 18,905
Intercompany receivables 9,431 1,377 1,439 271,368 (283,615) -
________ ________ ________ ________ _________ ________
Total assets $129,778 $ 1,483 $ 2,018 $704,616 $(689,663) $148,232
======== ======== ======== ======== ========= ========
Notes and loan payables $ - $ 10 $ 10 $ 3,682 $ - $ 3,702
Accounts payable and
accrued liabilities 2,665 11 - 21,464 - 24,140
Income taxes payable 486 - - 2,914 - 3,400
________ ________ ________ ________ ________ ________
Total current
liabilities 3,151 21 10 28,060 - 31,242
Long-term debt 1,285 266 1,060 4,996 - 7,607
Deferred income tax
liabilities 2,931 32 300 14,118 - 17,381
Other long-term liabilities 4,442 - - 12,442 - 16,884
Intercompany payables 42,851 267 382 240,115 (283,615) -
________ ________ ________ ________ ________ ________
Total liabilities 54,660 586 1,752 299,731 (283,615) 73,114
Earnings reinvested 97,327 91 (128) 53,241 (53,204) 97,327
Other shareholders'
equity (22,209) 806 394 351,644 (352,844) (22,209)
________ ________ ________ ________ ________ ________
Total shareholders'
equity 75,118 897 266 404,885 (406,048) 75,118
________ ________ ________ ________ ________ ________
Total liabilities
and shareholders'
equity $129,778 $ 1,483 $ 2,018 $704,616 $(689,663) $148,232
======== ======== ======== ======== ========= ========
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 six months ended June 30, 2002
_________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 1,575 $ (22) $ 8 $ 7,456 $ (277) $ 8,740
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (833) - - (4,430) - (5,263)
Sales of long-term assets 74 - - 804 - 878
Net intercompany
investing 4,053 (12) (8) (4,114) 81 -
All other investing, net - - - 15 - 15
________ ________ ________ ________ ________ ________
Net cash provided by/
(used in) investing
activities 3,294 (12) (8) (7,725) 81 (4,370)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 368 - 368
Reductions in long-term
debt - - - (33) - (33)
Additions/(reductions)
in short-term debt
- net - (25) - (121) - (146)
Cash dividends (3,121) - - (277) 277 (3,121)
Net ExxonMobil shares
sold/(acquired) (2,369) - - - - (2,369)
Net intercompany
financing activity - 59 - 22 (81) -
All other financing, net - - - (266) - (266)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) financing
activities (5,490) 34 - (307) 196 (5,567)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - 350 - 350
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ (621) $ - $ - $ (226) $ - $ (847)
======== ======== ======== ======== ======== ========
Condensed consolidated statement of cash flows for six months ended June 30, 2001
_________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 3,214 $ 31 $ 37 $ 11,446 $ (484) $ 14,244
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property,
plant and equipment (1,040) - - (3,330) - (4,370)
Sales of long-term assets 514 - - 231 - 745
Net intercompany
investing 2,268 (1,559) (8) (680) (21) -
All other investing, net (23) - - 334 - 311
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in)investing
activities 1,719 (1,559) (8) (3,445) (21) (3,314)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term
debt - - - 341 - 341
Reductions in long-term
debt (1) (15) - (341) - (357)
Additions/(reductions)
in short-term debt
- net (60) (51) - (2,258) - (2,369)
Cash dividends (3,037) - - (484) 484 (3,037)
Net ExxonMobil shares
sold/(acquired) (2,776) - - - - (2,776)
Net intercompany
financing activity - 1,594 (29) (1,586) 21 -
All other financing, net - - - (368) - (368)
________ ________ ________ ________ ________ ________
Net cash provided
by/(used in) financing
activities (5,874) 1,528 (29) (4,696) 505 (8,566)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - (146) - (146)
________ ________ ________ ________ ________ ________
Increase/(decrease) in
cash and cash equivalents $ (941) $ - $ - $ 3,159 $ - $ 2,218
======== ======== ======== ======== ======== ========
-16-
EXXON MOBIL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FUNCTIONAL EARNINGS SUMMARY
Second Quarter First Six Months
______________ ________________
2002 2001 2002 2001
____ ____ ____ ____
(millions of dollars)
Earnings including merger effects and special items
___________________________________________________
Upstream
United States $ 674 $ 1,111 $ 1,118 $ 2,739
Non-U.S. 1,479 1,739 3,044 3,889
Downstream
United States 234 844 248 1,253
Non-U.S. 148 423 106 1,013
Chemicals
United States 87 149 157 194
Non-U.S. 182 168 244 323
Other operations 86 128 239 269
Corporate and financing (220) (7) (336) (75)
Merger expenses (30) (95) (90) (185)
Gain from required asset divestitures 0 0 0 40
_______ _______ _______ _______
NET INCOME $ 2,640 $ 4,460 $ 4,730 $ 9,460
======= ======= ======= =======
Net income per common share $ 0.40 $ 0.66 $ 0.70 $ 1.38
Net income per common share
- assuming dilution $ 0.39 $ 0.65 $ 0.69 $ 1.36
Merger effects and special items
________________________________
Chemicals
United States (extraordinary item) $ 0 $ 100 $ 0 $ 100
Non-U.S. (extraordinary item) 0 75 0 75
Merger expenses (30) (95) (90) (185)
Gain from required asset divestitures
(extraordinary item) 0 0 0 40
_______ _______ _______ _______
TOTAL $ (30) $ 80 $ (90) $ 30
======= ======= ======= =======
Earnings excluding merger effects and special items
___________________________________________________
Upstream
United States $ 674 $ 1,111 $ 1,118 $ 2,739
Non-U.S. 1,479 1,739 3,044 3,889
Downstream
United States 234 844 248 1,253
Non-U.S. 148 423 106 1,013
Chemicals
United States 87 49 157 94
Non-U.S. 182 93 244 248
Other operations 86 128 239 269
Corporate and financing (220) (7) (336) (75)
_______ _______ _______ _______
TOTAL $ 2,670 $ 4,380 $ 4,820 $ 9,430
======= ======= ======= =======
Earnings per common share $ 0.40 $ 0.65 $ 0.71 $ 1.38
Earnings per common share
- assuming dilution $ 0.39 $ 0.64 $ 0.70 $ 1.36
-17-
REVIEW OF SECOND QUARTER 2002 RESULTS
Excluding merger effects and special items, estimated second quarter 2002
earnings were $2,670 million ($0.39 per share), a decrease of $1,710 million
from the record second quarter of 2001. Including merger effects and special
items, estimated net income of $2,640 million ($0.39 per share) decreased
$1,820 million.
Revenue for the second quarter of 2002 totaled $50,909 million compared with
$56,184 million in 2001. Capital and exploration expenditures of $3,393 million
in the second quarter of 2002 were up $559 million, or 20 percent, compared
with $2,834 million last year and were 14 percent higher than in the first
quarter.
Excluding merger effects, ExxonMobil's second quarter 2002 earnings of
$2,670 million were up $520 million from first quarter 2002 earnings of
$2,150 million. Upstream earnings improved $144 million from the first quarter,
reflecting an upward trend in crude oil prices, which more than offset seasonal
reductions in natural gas volumes. Downstream earnings increased $410 million
from the very weak first quarter of 2002. Industry refining and marketing
margins improved in some geographic areas, but remained depressed overall.
Chemicals earnings were double the first quarter of 2002. Prime product sales
volumes set a quarterly record, which along with improved margins led to the
earnings increase.
First half operating expenses declined $1.4 billion versus the same period last
year. The decline was related to lower energy prices and additional
efficiencies captured in all business lines partially offset by expenses
related to new business opportunities.
Compared with last year's record second quarter, ExxonMobil's second quarter
2002 earnings, excluding merger effects and special items, were $2,670 million,
down $1,710 million. The reduction in earnings reflected weakened conditions in
most business segments, including lower price levels of crude oil and natural
gas, significantly weaker refining margins and adverse foreign exchange
effects.
Upstream earnings were $2,153 million, a decrease of $697 million from the
record second quarter 2001 results. Average realizations on crude oil sales
were lower than the prior year, and natural gas prices fell as well, especially
in North America. Liquids production, excluding the impact of OPEC-driven quota
restrictions, was up slightly with new production from fields in the Gulf of
Mexico, Canada and Angola offset by natural field decline. Natural gas volumes
were up 1 percent, reflecting the net result of resumed operations at the Arun
field in Indonesia partly offset by weather-related demand in Europe which
reduced gas volumes by about 5 percent. On an oil-equivalent basis, excluding
the effect of OPEC-driven quota restrictions and reduced weather-related demand
in Europe, production increased 3 percent. Project schedules for long-term
volume increases remain on track as reflected by higher capital spending.
Downstream earnings were $382 million, down $885 million from last year's
record second quarter, reflecting weak industry-wide margins. Refining margins
dropped in most areas worldwide, with the sharpest declines in the U.S. and
Europe. Improved refining operations provided a partial offset to the margin
decline. Marketing margins remained weak.
-18-
Excluding $175 million of net gains on asset management activities reported as
a special item last year, chemicals earnings of $269 million were nearly double
last year's second quarter due mainly to record sales volumes. Earnings from
other operations of $86 million decreased $42 million from last year, primarily
reflecting the absence of coal operations in Colombia which were sold during
the first quarter of 2002.
Second quarter results were negatively affected by movement in foreign exchange
rates. The impact was more than $100 million, or $0.02 per share versus the
same period last year.
Second quarter 2002 net income of $2,640 million included after-tax merger
expenses of $30 million.
In the second quarter, ExxonMobil continued its active investment program,
spending $3,393 million on capital and exploration projects, compared with
$2,834 million last year, reflecting continued growth in upstream spending.
Capital and exploration expenditures of $6,367 million for the first half of
2002 were up $1,017 million, or 19 percent, compared with $5,350 million last
year. Upstream capital spending was up 25 percent, consistent with long term
investment plans which result in expanding profitable production.
First half 2002 cash flow from operations, including asset management
activities, was $9.6 billion, below last year's record $15 billion level
reflecting lower earnings, but sufficiently large to exceed cash requirements
to fund the corporation's growing capital expenditure program and shareholder
dividends.
During the quarter, the corporation acquired 27 million shares at a gross cost
of $1,105 million to offset the dilution associated with benefit plans and to
reduce common stock outstanding. Shares outstanding were reduced from
6,782 million at the end of the first quarter of 2002 to 6,757 million at the
end of the second quarter. Since the post-merger program was started in August
2000, the corporation has acquired 255 million shares at a gross cost of
$10.6 billion. Purchases may be made in both the open market and through
negotiated transactions and may be discontinued at any time.
ExxonMobil's financial results for the second quarter fairly reflect our
straightforward business model and have been prepared with the same rigor and
discipline that have been consistently applied to our financial statements and
disclosures. The company's comprehensive, well-controlled financial reporting
process positions appropriate senior management to make the newly required
certifications. Certifications meeting the requirements of the Securities and
Exchange Commission's Order No. 4-460 were filed on August 1, 2002 with regard
to ExxonMobil's 2001 Form 10-K, first quarter 2002 Form 10-Q and 2002 Proxy
Statement. Written statements complying with Section 906 of the Sarbanes-Oxley
Act of 2002 accompany this second quarter 2002 Form 10-Q.
OTHER COMMENTS ON SECOND QUARTER 2002 COMPARED TO SECOND QUARTER 2001
Upstream earnings were $2,153 million, down $697 million from the second
quarter record achieved in 2001 reflecting a 6 percent decline in crude oil
realizations, a 35 percent reduction in North American natural gas prices and
lower natural gas liquids realizations.
-19-
Liquids production of 2,492 kbd (thousands of barrels per day) decreased from
2,539 kbd in the second quarter of 2001. Higher production in Angola,
Venezuela, Malaysia and Canada was offset by OPEC-driven quota restrictions and
natural field declines in mature areas. Second quarter natural gas production
of 9,169 mcfd (millions of cubic feet per day) compared with 9,090 mcfd last
year. 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, were partly offset by reduced weather-
related demand in Europe and natural field decline in the U.S. Total oil and
natural gas producible volumes increased 3 percent versus the second quarter of
last year, as resumption of production at Arun and contributions from new
projects and work programs more than offset natural field declines. Taking into
account OPEC-driven quota restrictions and weather-related demand changes in
Europe, actual oil-equivalent production was down 1 percent.
Earnings from U.S. upstream operations were $674 million, a decrease of
$437 million from the prior year, reflecting the sharp decline in natural gas
prices. Upstream earnings outside the U.S. were $1,479 million, a decrease of
$260 million, reflecting lower crude oil and natural gas prices.
Downstream earnings of $382 million decreased substantially from the record
second 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 7,571 kbd, 362 kbd lower than
last year's second quarter in large part due to reduced demand for aviation
fuel and lower fuel oil sales.
U.S. downstream earnings were $234 million, down $610 million. Non-U.S.
downstream earnings of $148 million were $275 million lower than last year's
second quarter.
Excluding special items reported last year, chemicals earnings of $269 million
were up $127 million from the same quarter a year ago reflecting higher
volumes. Prime product sales volumes of 6,785 kt (thousands of metric tons)
established a new quarterly record, supported by recent capacity additions in
Singapore, and reflected higher demand in key commodity businesses across most
regions which led to higher capacity utilization rates.
Earnings from other operations, including coal, minerals and power, totaled
$86 million, down $42 million from last year, due to the absence of Colombian
coal operations which were sold in the first quarter of 2002 and higher
insurance costs. Corporate and financing expenses of $220 million increased
primarily due to the impact of foreign exchange losses and also from higher
pension costs.
Corporate-wide, the negative impact of foreign exchange movement on second
quarter earnings, including the continuing currency devaluations in Argentina
and Venezuela and the effect of a weaker U.S. dollar on financing activities,
was more than $100 million, or $0.02 per share, versus the same period last
year.
During the period, the company continued to benefit from the favorable
resolution of tax related issues, although such benefits were greater in last
year's second quarter. With a larger portion of the corporation's earnings from
the non-U.S. upstream, which is subject to higher tax rates, the corporation's
effective tax rate in the second quarter of 2002 showed a modest increase.
Higher upstream taxes in the U.K. will result from the recent North Sea tax
rate increase. The impact of the U.K. 10 percent supplementary tax will be
reported in the third quarter consistent with U.S. accounting standards.
-20-
Second quarter net income included $30 million of after-tax merger expenses,
including costs for rationalization of facilities and systems.
FIRST SIX MONTHS 2002 COMPARED WITH FIRST SIX MONTHS 2001
Excluding merger effects and special items, first half 2002 earnings of
$4,820 million ($0.70 per share) decreased $4,610 million from the record first
half of last year. Including merger effects and special items, first half net
income of $4,730 million ($0.69 per share) decreased $4,730 million. Included
in this year's first half net income was $90 million in after-tax merger
expenses, while last year's first half included net favorable merger effects
and special items of $30 million after-tax.
Upstream earnings decreased primarily due to lower natural gas realizations,
particularly in North America, which reached historical highs at the beginning
of 2001. Crude oil realizations were also lower. Liquids production of
2,515 kbd decreased 64 kbd from the first half of 2001. Higher production in
Angola, Venezuela and Malaysia was offset by OPEC-driven quota restrictions and
natural field declines in mature areas. Excluding the effect of OPEC-driven
quota restrictions, liquids production in 2002 was flat with the first half of
2001. First half 2002 worldwide natural gas production of 10,450 mcfd compared
with 10,596 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, were more than offset by reduced
weather-related demand in Europe and natural field decline in the U.S.
Weather-related demand in Europe reduced volumes by about 4 percent. Total oil
and natural gas producible volumes increased 1 percent versus the first half of
last year, as resumption of production at Arun and contributions from new
projects and work programs more than offset natural field declines. Taking into
account OPEC-driven quota restrictions and weather-related demand changes in
Europe, actual oil-equivalent production was down 2 percent.
Earnings from U.S. upstream operations for the first half of 2002 were
$1,118 million, a decrease of $1,621 million. Earnings outside the U.S. were
$3,044 million, $845 million lower than last year.
Downstream earnings decreased substantially from the first half of 2001,
reflecting significantly lower refining margins in the U.S. and Europe, and
continued weakness in marketing margins. Petroleum product sales of 7,623 kbd
compared with 7,959 kbd in the first half of 2001.
U.S. downstream earnings were $248 million, down $1,005 million. Earnings
outside the U.S. of $106 million were $907 million lower than last year.
Excluding special items recorded in 2001, first half chemicals earnings of
$401 million were $59 million higher than last year reflecting increased prime
product sales volumes. Sales volumes of 13,505 kt were 4 percent above last
year's level.
Earnings from other operations totaled $239 million, a decrease of $30 million
due primarily to the absence of Colombian coal operations which were sold in
the first quarter of 2002. Corporate and financing expenses increased
$261 million to $336 million, reflecting unfavorable foreign exchange effects
and higher pension expenses.
-21-
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 second quarter of 2002, in association with the Merger, $41 million of
before tax costs ($30 million after tax) were recorded as merger related
expenses, including costs for rationalization of facilities and systems. In the
second quarter of 2001, merger related expenses were $167 million before tax
($95 million after tax). For the six months ended June 30, 2002, merger related
expenses totaled $124 million before tax ($90 million after tax). For the six
months ended June 30, 2001, merger related expenses totaled $288 million before
tax ($185 million after tax).
The severance reserve balance at the end of the second quarter of 2002 is
expected to be expended in 2002. The following table summarizes the activity in
the severance reserve for the six months ended June 30, 2002:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
197 0 116 81
Cumulative merger related expenses total $2.9 billion before tax. Additional
expense for facilities rationalization and systems are anticipated in the
second half of 2002. Merger synergy initiatives are on track.
Results for the six months ended June 30, 2002, included no extraordinary
gains. For the six months ended June 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 $4,370 million in the first
six months of 2002 versus $10,930 million in the same period last year.
Operating activities provided net cash of $8,740 million, a decrease of
$5,504 million from the prior year, influenced by lower net income. Investing
activities used net cash of $4,370 million, compared to cash used of
$3,314 million in the prior year, reflecting higher additions to property,
plant and equipment.
Net cash used in financing activities was $5,567 million in the first half of
2002 versus $8,566 million in the same period last year reflecting the absence
of debt reductions in the prior year.
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During the first half of 2002, Exxon Mobil Corporation purchased 63 million
shares of its common stock for the treasury at a gross cost of $2,555 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 half of 2002 totaled $94,440 million compared to
$113,484 million in the first half of 2001 reflecting lower prices.
Capital and exploration expenditures were $6,367 million in the first half
2002 compared to $5,350 million in last year's first half. In 2002, capital
and exploration investments are expected to increase by 10 percent over 2001
primarily driven by ExxonMobil's large portfolio of upstream projects.
Total debt of $11.3 billion at June 30, 2002 increased $0.5 billion from
year-end 2001. The corporation's debt to total capital ratio was 12.7 percent
at the end of the first half 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 half of 2002 included the sale of coal operations in Colombia in
the first quarter. On May 2, 2002, the corporation announced that it has
reached agreement to sell its affiliated companies that hold all of the
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 third quarter 2002.
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 six months ended June 30,
2002 does not differ materially from that discussed under Item 7A
of the registrant's Annual Report on Form 10-K for 2001.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 25, 2002, ExxonMobil Oil Corporation ("EMOC") entered into a
settlement agreement with the California South Coast Air Quality
Management District (the "District") relating to allegations that EMOC
failed to properly calculate and/or timely transmit daily air
emissions data for EMOC's Torrance refinery for compliance years 1995
through 2000, resulting in violations of various District regulations.
The settlement agreement provides for the payment of a civil fine in
the amount of $1.75 million.
The New York State Department of Environmental Conservation ("NYSDEC")
has issued multiple Notices of Hearing and Complaint ("Notices"). The
NYSDEC served a Notice on EMOC on June 21, 2002 with respect to a
distribution terminal in New Windsor, New York. The Notice alleges
discharges of petroleum into waters of the state which were allegedly
neither timely reported nor immediately contained, in violation of the
Navigation Law and the Environmental Conservation Law. The NYSDEC is
seeking payment of a civil penalty in the amount of $750,000.
The NYSDEC served a Notice on EMOC on June 14, 2002 with respect to a
service station in Smithtown, New York. The NYSDEC alleges that
petroleum was discharged from the station into waters of the state.
EMOC entered into a stipulation agreement in 1999 providing for
performance of remedial activities at the site. The NYSDEC is now
seeking a penalty of $1,500,000 for alleged violations of the New York
Navigation Law and of the stipulation agreement.
On June 5, 2002, the NYSDEC served 23 identical Notices on EMOC, one
for each of 23 service stations in New York. The NYSDEC alleges that
all of the subject stations operated without being properly registered
for a period of two days, in violation of the Environmental
Conservation Law, and it seeks civil penalties of between $10,000 and
$15,000 for each station.
The NYSDEC served a Notice on EMOC on January 14, 2002 with respect to
a service station in New York, New York. The NYSDEC alleges that the
service station discharged petroleum into the waters of the state and
failed to provide, test and maintain cathodic protection for
underground tanks and piping, in violation of the Navigation Law and
the Environmental Conservation Law. The NYSDEC is seeking payment of a
civil penalty in the amount of $200,000.
Settlement discussions with the NYSDEC to resolve all these matters
are ongoing. The amounts of the penalties for which the corporation
might ultimately be liable are unknown at this time.
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 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 29, 2002, the following
proposals were voted upon. Percentages are based on the total of the
shares voted for and against.
Concerning Election of Directors
Votes Votes
Nominees for Directors Cast for Withheld
______________________ __________ __________
Michael J. Boskin 5,520,822,890 58,194,731
William T. Esrey 5,489,925,001 89,092,620
Donald V. Fites 5,517,743,793 61,273,828
James R. Houghton 5,489,281,262 89,736,359
William R. Howell 5,485,665,488 93,352,133
Helene L. Kaplan 5,465,399,826 113,617,795
Reatha Clark King 5,489,135,076 89,882,545
Philip E. Lippincott 5,520,915,608 58,102,013
Harry J. Longwell 5,522,372,394 56,645,227
Marilyn Carlson Nelson 5,489,851,766 89,165,855
Lee R. Raymond 5,519,271,164 59,746,457
Walter V. Shipley 5,521,582,462 57,435,159
Concerning Ratification of Independent Auditors
Votes Cast For: 5,333,006,315 96.2%
Votes Cast Against: 208,760,975 3.8%
Abstentions: 37,250,331
Broker Non-Votes: 0
Concerning Government Service
Votes Cast For: 113,815,749 2.5%
Votes Cast Against: 4,506,322,570 97.5%
Abstentions: 124,553,855
Broker Non-Votes: 834,325,447
Concerning Policy on Board Diversity
Votes Cast For: 334,527,021 7.2%
Votes Cast Against: 4,288,990,427 92.8%
Abstentions: 121,184,726
Broker Non-Votes: 834,315,447
Concerning Human Rights Policy
Votes Cast For: 306,767,747 6.8%
Votes Cast Against: 4,228,298,424 93.2%
Abstentions: 209,626,003
Broker Non-Votes: 834,325,447
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Concerning Executive Compensation Factors
Votes Cast For: 363,389,223 7.9%
Votes Cast Against: 4,248,497,358 92.1%
Abstentions: 132,805,593
Broker Non-Votes: 834,325,447
Concerning Additional Report on ANWR Drilling
Votes Cast For: 302,960,394 6.6%
Votes Cast Against: 4,285,054,813 93.4%
Abstentions: 156,676,967
Broker Non-Votes: 834,325,447
Concerning Renewable Energy Sources
Votes Cast For: 930,638,438 20.2%
Votes Cast Against: 3,679,226,275 79.8%
Abstentions: 134,827,461
Broker Non-Votes: 834,325,447
Concerning Amendment of EEO Policy
Votes Cast For: 1,089,160,651 23.9%
Votes Cast Against: 3,471,805,525 76.1%
Abstentions: 183,725,998
Broker Non-Votes: 834,325,447
Concerning Shareholder Vote on Poison Pills
Votes Cast For: 2,087,168,148 44.9%
Votes Cast Against: 2,564,477,371 55.1%
Abstentions: 93,046,655
Broker Non-Votes: 834,325,447
See also pages 3 through 7 and pages 24 through 44 of the registrant's
definitive proxy statement dated April 17, 2002.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 3(ii) - By-Laws, as revised to July 31, 2002.
b) Reports on Form 8-K
On August 1, 2002, the registrant filed a Current Report on
Form 8-K about the sworn statements filed with the Securities and
Exchange Commission by the principal executive officer and
principal financial officer in accordance with Order No. 4-460
and pursuant to Section 21(a)(1) of the Securities Exchange
Act of 1934.
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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: August 13, 2002 /s/ DONALD D. HUMPHREYS
_______________________________________________
Donald D. Humphreys, Vice President, Controller
and Principal Accounting Officer
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EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
INDEX TO EXHIBITS
3(ii). By-Laws, as revised to July 31, 2002.
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