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, 2003
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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 July 31, 2003
_______________________________ ________________________________
Common stock, without par value 6,636,854,594
EXXON MOBIL CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
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, 2003 and 2002
Condensed Consolidated Balance Sheet 4
As of June 30, 2003 and December 31, 2002
Condensed Consolidated Statement of Cash Flows 5
Six months ended June 30, 2003 and 2002
Notes to Condensed Consolidated Financial Statements 6-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
Item 4. Controls and Procedures 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24-25
Item 4. Submission of Matters to a Vote of Security Holders 25-27
Item 6. Exhibits and Reports on Form 8-K 28
Signature 29
Index to Exhibits 30
-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,
__________________ _________________
2003 2002 2003 2002
____ ____ ____ ____
REVENUE
Sales and other operating revenue,
including excise taxes $ 56,167 $ 49,972 $116,355 $ 92,564
Earnings from equity interests and
other revenue 998 832 4,590 1,633
________ ________ ________ ________
Total revenue 57,165 50,804 120,945 94,197
________ ________ ________ ________
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases 24,227 22,620 52,305 40,637
Operating expenses 5,320 4,211 10,660 7,984
Selling, general and
administrative expenses 3,340 3,310 6,442 6,447
Depreciation and depletion 2,169 2,003 4,351 4,001
Exploration expenses,
including dry holes 182 229 329 447
Merger related expenses 0 41 0 124
Interest expense 70 51 112 139
Excise taxes 5,896 5,650 11,727 10,441
Other taxes and duties 9,113 8,391 17,920 16,336
Income applicable to minority and
preferred interests 100 17 473 32
________ ________ ________ ________
Total costs and other deductions 50,417 46,523 104,319 86,588
________ ________ ________ ________
INCOME BEFORE INCOME TAXES 6,748 4,281 16,626 7,609
Income taxes 2,578 1,652 5,966 2,917
________ ________ ________ ________
INCOME FROM CONTINUING OPERATIONS 4,170 2,629 10,660 4,692
Discontinued operations,
net of income tax 0 11 0 38
Cumulative effect of accounting change,
net of income tax 0 0 550 0
________ ________ ________ ________
NET INCOME $ 4,170 $ 2,640 $ 11,210 $ 4,730
======== ======== ======== ========
NET INCOME PER COMMON SHARE (DOLLARS)
Income from continuing operations $ 0.63 $ 0.39 $ 1.60 $ 0.69
Discontinued operations,
net of income tax 0.00 0.01 0.00 0.01
Cumulative effect of accounting change,
net of income tax 0.00 0.00 0.08 0.00
________ ________ ________ ________
Net income $ 0.63 $ 0.40 $ 1.68 $ 0.70
======== ======== ======== ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION (DOLLARS)
Income from continuing operations $ 0.62 $ 0.38 $ 1.59 $ 0.68
Discontinued operations,
net of income tax 0.00 0.01 0.00 0.01
Cumulative effect of accounting change,
net of income tax 0.00 0.00 0.08 0.00
________ ________ ________ ________
Net income $ 0.62 $ 0.39 $ 1.67 $ 0.69
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ 0.25 $ 0.23 $ 0.48 $ 0.46
-3-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(millions of dollars)
June 30, Dec. 31,
2003 2002
________ ________
ASSETS
Current assets
Cash and cash equivalents $ 12,521 $ 7,229
Notes and accounts receivable - net 19,471 21,163
Inventories
Crude oil, products and merchandise 8,783 6,827
Materials and supplies 1,252 1,241
Prepaid taxes and expenses 2,039 1,831
________ ________
Total current assets 44,066 38,291
Property, plant and equipment - net 99,500 94,940
Investments and other assets 21,537 19,413
________ ________
TOTAL ASSETS $165,103 $152,644
======== ========
LIABILITIES
Current liabilities
Notes and loans payable $ 4,327 $ 4,093
Accounts payable and accrued liabilities 26,530 25,186
Income taxes payable 5,791 3,896
________ ________
Total current liabilities 36,648 33,175
Long-term debt 5,811 6,655
Deferred income tax liability 17,541 16,484
Other long-term liabilities 22,522 21,733
________ ________
TOTAL LIABILITIES 82,522 78,047
________ ________
SHAREHOLDERS' EQUITY
Benefit plan related balances (381) (450)
Common stock, without par value:
Authorized: 9,000 million shares
Issued: 8,019 million shares 4,089 4,217
Earnings reinvested 108,963 100,961
Accumulated other nonowner changes in equity
Cumulative foreign exchange translation adjustment (1,099) (3,015)
Minimum pension liability adjustment (2,960) (2,960)
Unrealized gains/(losses) on stock investments 74 (79)
Common stock held in treasury:
1,367 million shares at June 30, 2003 (26,105)
1,319 million shares at December 31, 2002 (24,077)
________ ________
TOTAL SHAREHOLDERS' EQUITY 82,581 74,597
________ ________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $165,103 $152,644
======== ========
The number of shares of common stock issued and outstanding at June 30, 2003
and December 31, 2002 were 6,651,546,054 and 6,700,074,272, respectively.
-4-
EXXON MOBIL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(millions of dollars)
Six Months Ended
June 30,
________________
2003 2002
____ ____
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 11,210 $ 4,730
Depreciation and depletion 4,351 4,001
Changes in operational working capital,
excluding cash and debt 2,470 88
All other items - net (2,036) (79)
________ ________
Net cash provided by operating activities 15,995 8,740
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (6,232) (5,263)
Sales of subsidiaries, investments, and
property, plant and equipment 1,581 878
Other investing activities - net 280 15
________ ________
Net cash used in investing activities (4,371) (4,370)
________ ________
NET CASH GENERATION BEFORE FINANCING ACTIVITIES 11,624 4,370
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to long-term debt 26 368
Reductions in long-term debt (632) (33)
Additions/(reductions) in short-term debt
- net (192) (146)
Cash dividends to ExxonMobil shareholders (3,208) (3,121)
Cash dividends to minority interests (311) (77)
Changes in minority interests and sales/(purchases)
of affiliate stock (160) (189)
Net ExxonMobil shares acquired (2,211) (2,369)
________ _______
Net cash used in financing activities (6,688) (5,567)
________ _______
Effects of exchange rate changes on cash 356 350
________ ________
Increase/(decrease) in cash and cash equivalents 5,292 (847)
Cash and cash equivalents at beginning of period 7,229 6,547
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,521 $ 5,700
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid $ 3,970 $ 3,123
Cash interest paid $ 159 $ 208
-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 2002 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. Stock Option Accounting
Effective January 1, 2003, the corporation adopted the recognition
provisions of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation" for all employee stock-based awards granted after that
date. In accordance with FAS 123, compensation expense for future awards
will be measured by the fair value of the award at the date of grant and
recognized over the vesting period. The fair value of awards in the form
of restricted stock is the market price of the stock. The fair value of
awards in the form of stock options is estimated using an option-pricing
model.
As permitted by FAS 123, the corporation has retained its prior method of
accounting for stock-based awards granted before January 1, 2003. Under
this method, compensation expense for awards granted in the form of stock
options is measured at the intrinsic value of the options (the difference
between the market price of stock and the exercise price of the options)
on the date of grant. Since these two prices are the same on the date of
grant, no compensation expense was recognized in income for these awards.
Additionally, compensation expense for awards granted in the form of
restricted stock is based on the price of the stock when it is granted
and is recognized over the vesting period, which is the same method of
accounting as under FAS 123.
If the provisions of FAS 123 had been adopted in the prior year, the
impact on compensation expense, net income, and net income per share
would have been as follows:
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2003 2002 2003 2002
____ ____ ____ ____
(millions of dollars)
Net income, as reported $ 4,170 $ 2,640 $ 11,210 $ 4,730
Add: Stock-based compensation,
net of tax, included in
reported net income 20 4 42 7
Deduct: Stock-based compensation,
net of tax, determined under
fair value method (22) (51) (46) (104)
________ ________ ________ ________
Pro forma net income $ 4,168 $ 2,593 $ 11,206 $ 4,633
======== ======== ======== ========
Net income per share: (dollars per share)
Basic - as reported $ 0.63 $ 0.40 $ 1.68 $ 0.70
Basic - pro forma 0.63 0.39 1.68 0.69
Diluted - as reported 0.62 0.39 1.67 0.69
Diluted - pro forma 0.62 0.38 1.67 0.68
-6-
3. Discontinued Operations
In 2002, the copper business in Chile and the coal operations in Colombia
were sold. Prior periods include reclassifications to reflect the
earnings of these businesses as discontinued operations. Income taxes
related to discontinued operations in the second quarter of 2002 were $2
million and for the six months ended June 30, 2002 were $9 million.
Revenues and earnings for these businesses were historically reported in
the "All Other" line in the segment disclosures located in note 10 on page
12.
4. Accounting Change
As of January 1, 2003 the corporation adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 143 (FAS
143), "Accounting for Asset Retirement Obligations." The primary impact
of FAS 143 is to change the method of accruing for upstream site
restoration costs. These costs were previously 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 2002, the cumulative
amount accrued under FAS 19 was approximately $3.5 billion. Under FAS 143,
the fair values of asset retirement obligations are recorded as
liabilities on a discounted basis when they are incurred, which is
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 cumulative adjustment for the change in accounting principle reported
in the first quarter of 2003 was after-tax income of $550 million (net of
$434 million of income tax effects, including ExxonMobil's share of
related equity company income taxes of $51 million), or $0.08 per common
share. The effect of this accounting change on the balance sheet was a
$0.3 billion increase to property, plant and equipment, a $0.6 billion
reduction to the accrued liability and a $0.4 billion increase in deferred
income tax liabilities.
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 early in 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 resulted from reversing the
higher liability accumulated under FAS 19 in order to adjust it to the
lower present value 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.
If FAS 143 had been in effect in 2002, net income that would have been
reported would not have been materially different from the net income that
was reported under FAS 19. The effect of FAS 143 on net income in the
current year period is also not material.
-7-
5. Recently Issued Statements of Financial Accounting Standards
In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest
Entities," which provides guidance on when certain entities should be
consolidated or the interests in those entities should be disclosed by
enterprises that do not control them through majority voting interest.
Under FIN 46, entities are required to be consolidated by enterprises that
lack majority voting interest when equity investors of those entities have
insignificant capital at risk or they lack voting rights, the obligation
to absorb expected losses, or the right to receive expected returns.
Entities identified with these characteristics are called variable
interest entities and the interests that enterprises have in these
entities are called variable interests. These interests can derive from
certain guarantees, leases, loans or other arrangements that result in
risks and rewards that are disproportionate to the voting interests in the
entities.
The provisions of FIN 46 must be immediately applied for variable interest
entities created after January 31, 2003. For variable interest entities
created before February 1, 2003, FIN 46 must be adopted in the first
reporting period beginning after June 15, 2003.
There have been no variable interest entities created after January 31,
2003 in which the corporation has an interest. The corporation is reviewing
its financial arrangements entered into before February 1, 2003 to identify
any that might qualify as variable interest entities. There is a
reasonable possibility that certain joint ventures in which the corporation
has an interest might be variable interest entities. These joint ventures
are operating entities and the other equity investors are third parties
independent from the corporation. The corporation's share of net income of
these entities is included in the consolidated statement of income. The
variable interests arise primarily because of certain guarantees extended
by the corporation to the joint ventures. These guarantees are included in
the guarantees disclosed on page 10 as part of note 7.
The corporation does not expect any impact on net income if it is required
to consolidate any of these possible variable interest entities because it
already is recording its share of net income of these entities. The impact
to the balance sheet would be an increase in both assets and liabilities,
estimated to be in the range of $500 million to $750 million (less than
one-half of 1 percent of total assets). However, there would be no change
to the calculation of return on average capital employed because the
corporation already includes its share of joint venture debt in the
determination of average capital employed.
6. 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.
There were no merger related expenses in 2003 reflecting the completion of
the merger related activities in 2002. Merger related costs in the second
quarter of 2002 were $41 million ($30 million after tax) and were $124
million ($90 million after tax) for the six months ended June 30, 2002.
The severance reserve balance at the end of the second quarter of 2003 is
expected to be expended mainly in 2003 and 2004. The following table
summarizes the activity in the severance reserve for the six months ended
June 30, 2003:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ _________ __________
(millions of dollars)
101 0 27 74
-8-
7. Litigation and Other Contingencies
A number of lawsuits, including class actions, were brought in various
courts against Exxon Mobil Corporation and certain of its subsidiaries
relating to the accidental release of crude oil from the tanker Exxon
Valdez in 1989. The vast majority of the claims have been resolved leaving
a few compensatory damages cases to be resolved. 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 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. 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. On December 6, 2002, the District Court reduced
the punitive damages award from $5 billion to $4 billion. Both ExxonMobil
and the plaintiffs have appealed to the Ninth Circuit. The corporation has
posted a $4.8 billion letter of credit.
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. On
December 20, 2002, the Alabama Supreme Court vacated the $3.5 billion jury
verdict. The decision sends the case back to a lower court for a new
trial, which is scheduled to begin on October 20, 2003. 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
-9-
be set aside or substantially reduced on factual and constitutional
grounds. The ultimate outcome is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
The U.S. Tax Court has decided the issue with respect to the pricing of
crude oil purchased from Saudi Arabia for the years 1979-1981 in favor of
the corporation. This decision is subject to appeal. Certain other issues
for the years 1979-1993 remain pending before the Tax Court. The ultimate
resolution of these issues is not expected to have a materially adverse
effect upon the corporation's operations or financial condition.
Claims for substantial amounts have been made against ExxonMobil and
certain of its consolidated subsidiaries in other pending lawsuits, the
outcome of which is not expected to have a materially adverse effect upon
the corporation's operations or financial condition.
The corporation and certain of its consolidated subsidiaries were
contingently liable at June 30, 2003, for $3.3 billion, primarily relating
to guarantees for notes, loans and performance under contracts. This
included $0.9 billion representing guarantees of non-U.S. excise taxes and
customs duties of other companies, entered into as a normal business
practice, under reciprocal arrangements. Also included in this amount were
guarantees by consolidated affiliates of $2.0 billion, representing
ExxonMobil's share of obligations of certain equity companies.
Additionally, the corporation and its affiliates have numerous long-term
sales and purchase commitments in their various business activities, all
of which are expected to be fulfilled with no adverse consequences
material to the corporation's operations or financial condition. The
corporation's outstanding unconditional purchase obligations at
June 30, 2003 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.
8. Nonowner Changes in Shareholders' Equity
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2003 2002 2003 2002
____ ____ ____ ____
(millions of dollars)
Net income $ 4,170 $ 2,640 $ 11,210 $ 4,730
Changes in other nonowner changes
in equity
Foreign exchange translation
adjustment 1,444 2,653 1,916 2,523
Minimum pension liability adjustment 0 0 0 0
Unrealized gains/(losses) on stock
investments 99 39 153 91
________ ________ ________ ________
Total nonowner changes in
shareholders' equity $ 5,713 $ 5,332 $ 13,279 $ 7,344
======== ======== ======== ========
-10-
9. Earnings Per Share
Three Months Ended Six Months Ended
June 30, June 30,
__________________ ________________
2003 2002 2003 2002
____ ____ ____ ____
NET INCOME PER COMMON SHARE
Income from continuing operations
(millions of dollars) $ 4,170 $ 2,629 $ 10,660 $ 4,692
Weighted average number of common shares
outstanding (millions of shares) 6,654 6,767 6,669 6,780
Net income per common share (dollars)
Income from continuing operations $ 0.63 $ 0.39 $ 1.60 $ 0.69
Discontinued operations,
net of income tax 0.00 0.01 0.00 0.01
Cumulative effect of accounting
change, net of income tax 0.00 0.00 0.08 0.00
________ ________ _______ ________
Net income $ 0.63 $ 0.40 $ 1.68 $ 0.70
======== ======== ======= ========
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Income from continuing operations
(millions of dollars) $ 4,170 $ 2,629 $ 10,660 $ 4,692
Weighted average number of common shares
outstanding - assuming dilution
(millions of shares) 6,654 6,767 6,669 6,780
Effect of employee stock-based
awards 33 64 32 64
________ ________ ________ ________
Weighted average number of common shares
outstanding - assuming dilution 6,687 6,831 6,701 6,844
Net income per common share
- assuming dilution (dollars)
Income from continuing operations $ 0.62 $ 0.38 $ 1.59 $ 0.68
Discontinued operations,
net of income tax 0.00 0.01 0.00 0.01
Cumulative effect of accounting change,
net of income tax 0.00 0.00 0.08 0.00
________ ________ ________ ________
Net income $ 0.62 $ 0.39 $ 1.67 $ 0.69
======== ======== ======== ========
-11-
10. Disclosures about Segments and Related Information
Consistent with a change in internal organization in 2002, earnings from
the electric power business and U.S. coal operations, previously reported
in the All Other line, are now shown in the U.S. upstream for coal and
non-U.S. upstream for electric power. Earnings from the coal and
minerals businesses divested in 2002, reported as discontinued
operations, are included in the All Other line. Earnings and revenues for
prior periods have been reclassified to reflect these 2002 events
consistent with current period reporting.
Three Months Ended Six Months Ended
June 30, June 30,
__________________ _________________
2003 2002 2003 2002
____ ____ ____ ____
(millions of dollars)
EARNINGS AFTER INCOME TAX
Upstream
United States $ 907 $ 677 $ 2,166 $ 1,125
Non-U.S. 1,931 1,553 6,365 3,194
Downstream
United States 419 234 593 248
Non-U.S. 727 148 1,276 106
Chemicals
United States 128 87 144 157
Non-U.S. 311 182 582 244
All other (253) (241) 84 (344)
________ ________ ________ ________
Corporate total $ 4,170 $ 2,640 $ 11,210 $ 4,730
======== ======== ======== ========
Included in All Other above
Discontinued operations $ 0 $ 11 $ 0 $ 38
Cumulative effect of
accounting change $ 0 $ 0 $ 550 $ 0
SALES AND OTHER OPERATING REVENUE
Upstream
United States $ 1,440 $ 1,002 $ 3,208 $ 1,820
Non-U.S. 3,623 2,803 7,696 5,726
Downstream
United States 13,225 12,642 27,423 22,210
Non-U.S. 32,933 29,259 67,909 55,039
Chemicals
United States 1,924 1,895 3,953 3,371
Non-U.S. 3,014 2,364 6,149 4,382
All other 8 7 17 16
________ ________ ________ ________
Corporate total $ 56,167 $ 49,972 $116,355 $ 92,564
======== ======== ======== ========
INTERSEGMENT REVENUE
Upstream
United States $ 1,255 $ 1,306 $ 2,855 $ 2,419
Non-U.S. 3,581 3,298 7,846 6,046
Downstream
United States 1,447 1,553 3,107 2,762
Non-U.S. 4,916 4,326 10,380 8,216
Chemicals
United States 776 676 1,510 1,217
Non-U.S. 776 684 1,614 1,184
All other 77 76 154 142
-12-
11. Condensed Consolidating Financial Information Related to Guaranteed
Securities Issued by Subsidiaries
Exxon Mobil Corporation has fully and unconditionally guaranteed the 6.0%
notes due 2005 ($106 million of long-term debt at June 30, 2003) and the
6.125% notes due 2008 ($160 million) of Exxon Capital Corporation and the
deferred interest debentures due 2012 ($1,064 million) and the debt
securities due 2004-2011 ($95 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.
Exxon SeaRiver
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, 2003
________________________________________________________________________________
Revenue
Sales and other operating
revenue, including
excise taxes $ 2,782 $ - $ - $ 53,385 $ - $ 56,167
Earnings from equity interests
and other revenue 4,127 - 2 878 (4,009) 998
Intercompany revenue 4,069 8 5 32,827 (36,909) -
________ ________ ________ ________ ________ ________
Total revenue 10,978 8 7 87,090 (40,918) 57,165
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and product
purchases 3,802 - - 55,115 (34,690) 24,227
Operating expenses 1,663 - - 4,731 (1,074) 5,320
Selling, general and
administrative expenses 464 1 - 2,912 (37) 3,340
Depreciation and depletion 382 2 - 1,785 - 2,169
Exploration expenses,
including dry holes 34 - - 148 - 182
Merger related expenses - - - - - -
Interest expense 162 5 31 1,032 (1,160) 70
Excise taxes - - - 5,896 - 5,896
Other taxes and duties 2 - - 9,111 - 9,113
Income applicable to minority
and preferred interests - - - 100 - 100
_______ ________ ________ ________ ________ ________
Total costs and other
deductions 6,509 8 31 80,830 (36,961) 50,417
________ ________ ________ ________ ________ ________
Income before income taxes 4,469 - (24) 6,260 (3,957) 6,748
Income taxes 299 - (9) 2,288 - 2,578
________ ________ ________ ________ ________ ________
Income from continuing
operations 4,170 - (15) 3,972 (3,957) 4,170
Discontinued operations - - - - - -
Accounting change - - - - - -
________ ________ ________ _________ ________ ________
Net income $ 4,170 $ - $ (15) $ 3,972 $ (3,957) $ 4,170
======== ======== ======== ======== ======== ========
-13-
Exxon SeaRiver
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 $ - $ - $ 47,623 $ - $ 49,972
Earnings from equity
interests and
other revenue 2,669 - (3) 716 (2,550) 832
Intercompany revenue 3,644 10 7 28,338 (31,999) -
________ ________ ________ ________ ________ ________
Total revenue 8,662 10 4 76,677 (34,549) 50,804
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and
product purchases 3,524 - - 48,538 (29,442) 22,620
Operating expenses 1,321 1 1 4,207 (1,319) 4,211
Selling, general and
administrative expenses 476 - - 2,832 2 3,310
Depreciation and depletion 386 2 - 1,615 - 2,003
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 72,601 (32,003) 46,523
________ ________ ________ ________ ________ ________
Income before income taxes 2,774 2 (25) 4,076 (2,546) 4,281
Income taxes 145 1 (7) 1,513 - 1,652
________ ________ ________ ________ ________ ________
Income from continuing
operations 2,629 1 (18) 2,563 (2,546) 2,629
Discontinued operations 11 - - 11 (11) 11
Accounting change - - - - -
________ ________ _______ ________ ________ ________
Net income $ 2,640 $ 1 $ (18) $ 2,574 $ (2,557) $ 2,640
======== ======== ======= ======== ======== ========
Condensed consolidated statement of income for six months ended June 30, 2003
_____________________________________________________________________________
Revenue
Sales and other operating
revenue,including
excise taxes $ 5,843 $ - $ - $110,512 $ - $116,355
Earnings from equity
interests and
other revenue 10,899 - 4 4,354 (10,667) 4,590
Intercompany revenue 8,708 17 10 70,188 (78,923) -
________ ________ ________ ________ ________ ________
Total revenue 25,450 17 14 185,054 (89,590) 120,945
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and
product purchases 8,490 - - 118,402 (74,587) 52,305
Operating expenses 3,337 1 - 9,361 (2,039) 10,660
Selling, general and
administrative expenses 890 1 - 5,588 (37) 6,442
Depreciation and depletion 767 3 1 3,580 - 4,351
Exploration expenses,
including dry holes 64 - - 265 - 329
Merger related expenses - - - - - -
Interest expense 323 10 61 2,032 (2,314) 112
Excise taxes - - - 11,727 - 11,727
Other taxes and duties 3 - - 17,917 - 17,920
Income applicable to minority
and preferred interests - - - 473 - 473
________ ________ ________ ________ ________ ________
Total costs and
other deductions 13,874 15 62 169,345 (78,977) 104,319
________ ________ ________ ________ ________ ________
Income before income taxes 11,576 2 (48) 15,709 (10,613) 16,626
Income taxes 916 1 (18) 5,067 - 5,966
________ ________ ________ ________ ________ ________
Income from continuing
operations 10,660 1 (30) 10,642 (10,613) 10,660
Discontinued operations - - - - - -
Accounting change 550 - - 481 (481) 550
________ ________ ________ ________ ________ ________
Net income $ 11,210 $ 1 $ (30) $ 11,123 $(11,094) $ 11,210
======== ======== ======== ======== ======== ========
-14-
Exxon SeaRiver
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, 2002
_____________________________________________________________________________
Revenue
Sales and other operating
revenue, including
excise taxes $ 4,193 $ - $ - $ 88,371 $ - $ 92,564
Earnings from equity
interests and
other revenue 4,853 5 1 1,331 (4,557) 1,633
Intercompany revenue 6,468 21 14 53,111 (59,614) -
________ ________ ________ ________ ________ ________
Total revenue 15,514 26 15 142,813 (64,171) 94,197
________ ________ ________ ________ ________ ________
Costs and other deductions
Crude oil and
product purchases 6,098 - - 89,393 (54,854) 40,637
Operating expenses 2,444 1 1 7,930 (2,392) 7,984
Selling, general and
administrative expenses 934 1 - 5,512 - 6,447
Depreciation and depletion 776 3 1 3,221 - 4,001
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 58 135,501 (59,620) 86,588
________ ________ ________ ________ ________ ________
Income before income taxes 4,881 10 (43) 7,312 (4,551) 7,609
Income taxes 189 4 (15) 2,739 - 2,917
________ ________ ________ ________ ________ ________
Income from continuing
operations 4,692 6 (28) 4,573 (4,551) 4,692
Discontinued operations 38 - - 38 (38) 38
Accounting change - - - - - -
________ ________ ________ ________ ________ ________
Net income $ 4,730 $ 6 $ (28) $ 4,611 $ (4,589) $ 4,730
======== ======== ======== ======== ======== ========
-15-
Exxon SeaRiver
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, 2003
________________________________________________________
Cash and cash equivalents $ 2,245 $ - $ - $ 10,276 $ - $ 12,521
Notes and accounts receivable
- net 3,996 - - 15,475 - 19,471
Inventories 1,208 - - 8,827 - 10,035
Prepaid taxes and expenses 86 - 23 1,930 - 2,039
________ ________ ________ ________ _________ ________
Total current assets 7,535 - 23 36,508 - 44,066
Property, plant and
equipment - net 17,042 101 2 82,355 - 99,500
Investments and
other assets 116,330 - 524 341,455 (436,772) 21,537
Intercompany receivables 7,495 1,359 1,496 315,955 (326,305) -
________ ________ ________ ________ _________ ________
Total assets $148,402 $ 1,460 $ 2,045 $776,273 $(763,077) $165,103
======== ======== ======== ======== ========= ========
Notes and loan payables $ - $ - $ 10 $ 4,317 $ - $ 4,327
Accounts payable and
accrued liabilities 3,008 11 - 23,511 - 26,530
Income taxes payable 1,254 2 - 4,535 - 5,791
________ ________ ________ ________ _________ ________
Total current
liabilities 4,262 13 10 32,363 - 36,648
Long-term debt 1,338 266 1,159 3,048 - 5,811
Deferred income
tax liabilities 3,007 30 305 14,199 - 17,541
Other long-term
liabilities 6,017 22 - 16,483 - 22,522
Intercompany payables 51,197 343 382 274,383 (326,305) -
________ ________ ________ ________ _________ ________
Total liabilities 65,821 674 1,856 340,476 (326,305) 82,522
Earnings reinvested 108,963 1 (205) 64,830 (64,626) 108,963
Other shareholders'
equity (26,382) 785 394 370,967 (372,146) (26,382)
________ ________ ________ ________ _________ ________
Total shareholders'
equity 82,581 786 189 435,797 (436,772) 82,581
________ ________ ________ ________ _________ ________
Total liabilities and
shareholders' equity $148,402 $ 1,460 $ 2,045 $776,273 $(763,077) $165,103
======== ======== ======== ======== ========= ========
Condensed consolidated balance sheet as of December 31, 2002
____________________________________________________________
Cash and cash equivalents $ 710 $ - $ - $ 6,519 $ - $ 7,229
Notes and accounts
receivable - net 3,827 - - 17,336 - 21,163
Inventories 964 - - 7,104 - 8,068
Prepaid taxes and expenses 65 - - 1,766 - 1,831
________ ________ ________ ________ _________ ________
Total current assets 5,566 - - 32,725 - 38,291
Property, plant and equipment
- net 16,922 104 3 77,911 - 94,940
Investments and
other assets 104,115 - 521 340,821 (426,044) 19,413
Intercompany receivables 16,234 1,395 1,490 295,909 (315,028) -
________ ________ ________ ________ _________ ________
Total assets $142,837 $ 1,499 $ 2,014 $747,366 $(741,072) $152,644
======== ======== ======== ======== ========= ========
Notes and loan payables $ - $ 6 $ 10 $ 4,077 $ - $ 4,093
Accounts payable and
accrued liabilities 2,844 6 - 22,336 - 25,186
Income taxes payable 916 1 - 2,979 - 3,896
________ ________ ________ ________ _________ ________
Total current
liabilities 3,760 13 10 29,392 - 33,175
Long-term debt 1,311 266 1,101 3,977 - 6,655
Deferred income tax
liabilities 3,163 31 301 12,989 - 16,484
Other long-term liabilities 5,820 - - 15,913 - 21,733
Intercompany payables 54,186 290 382 260,170 (315,028) -
________ ________ ________ ________ _________ ________
Total liabilities 68,240 600 1,794 322,441 (315,028) 78,047
Earnings reinvested 100,961 93 (174) 54,547 (54,466) 100,961
Other shareholders'
equity (26,364) 806 394 370,378 (371,578) (26,364)
________ ________ ________ ________ _________ ________
Total shareholders'
equity 74,597 899 220 424,925 (426,044) 74,597
________ ________ ________ ________ _________ ________
Total liabilities and
shareholders' equity $142,837 $ 1,499 $ 2,014 $747,366 $(741,072) $152,644
======== ======== ======== ======== ========= ========
-16-
Exxon SeaRiver
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, 2003
_________________________________________________________________________________
Cash provided by/(used in)
operating activities $ 2,116 $ 31 $ 6 $ 14,776 $ (934) $ 15,995
________ ________ ________ ________ ________ ________
Cash flows from investing
activities
Additions to property, plant
and equipment (908) - - (5,324) - (6,232)
Sales of long-term
assets 29 - - 1,552 - 1,581
Net intercompany
investing 5,717 36 (6) (5,687) (60) -
All other investing, net - - - 280 - 280
________ ________ ________ ________ ________ ________
Net cash provided by
/(used in) investing
activities 4,838 36 (6) (9,179) (60) (4,371)
________ ________ ________ ________ ________ ________
Cash flows from financing
activities
Additions to long-term debt - - - 26 - 26
Reductions in long-term debt - - - (632) - (632)
Additions/(reductions) in
short-term debt - net - (6) - (186) - (192)
Cash dividends (3,208) (93) - (841) 934 (3,208)
Net ExxonMobil shares
sold/(acquired) (2,211) - - - - (2,211)
Net intercompany financing
activity - 53 - (92) 39 -
All other financing, net - (21) - (471) 21 (471)
________ ________ ________ ________ ________ ________
Net cash provided by/
(used in) financing
activities (5,419) (67) - (2,196) 994 (6,688)
________ ________ ________ ________ ________ ________
Effects of exchange rate
changes on cash - - - 356 - 356
________ ________ ________ ________ ________ ________
Increase/(decrease) in cash
and cash equivalents $ 1,535 $ - $ - $ 3,757 $ - $ 5,292
======== ======== ======== ======== ======== ========
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)
======== ======== ======== ======== ======== ========
-17-
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
_______________ ________________
2003 2002 2003 2002
____ ____ ____ ____
(millions of dollars)
Net Income (U.S. GAAP)
______________________
Upstream
United States $ 907 $ 677 $ 2,166 $ 1,125
Non-U.S. 1,931 1,553 6,365 3,194
Downstream
United States 419 234 593 248
Non-U.S. 727 148 1,276 106
Chemicals
United States 128 87 144 157
Non-U.S. 311 182 582 244
Corporate and financing (253) (222) (466) (292)
Merger expenses 0 (30) 0 (90)
_______ _______ ________ _______
Income from continuing operations 4,170 2,629 10,660 4,692
Discontinued operations 0 11 0 38
Accounting change 0 0 550 0
_______ _______ ________ ________
Net Income (U.S. GAAP) $ 4,170 $ 2,640 $ 11,210 $ 4,730
======= ======= ======== ========
Net income per common share $ 0.63 $ 0.40 $ 1.68 $ 0.70
Net income per common share
- assuming dilution $ 0.62 $ 0.39 $ 1.67 $ 0.69
Other special items included in net income
Upstream
Non-U.S. (gain on transfer
of Ruhrgas shares) $ 0 $ 0 $ 1,700 $ 0
REVIEW OF SECOND QUARTER 2003 RESULTS
Exxon Mobil Corporation estimated net income of $4,170 million ($0.62 per
share) in the second quarter of 2003, an increase of $1,530 million from the
second quarter of 2002. Second quarter earnings remained strong and improved
in all parts of the business versus last year. Chemicals earnings were at
their highest level since 1998. Revenue for the second quarter of 2003 totaled
$57,165 million compared with $50,804 million in the second quarter of 2002.
Upstream earnings were $2,838 million, up $608 million from the second quarter
2002, reflecting higher crude oil and natural gas realizations.
Oil-equivalent production was flat versus the second quarter of last year.
Higher European gas demand and contributions from new projects and work
programs were offset by natural field declines and operational outages in the
North Sea and West Africa. Operational problems were largely resolved by the
end of the quarter.
-18-
Liquids production of 2,478 kbd (thousands of barrels per day) decreased from
2,495 kbd in the second quarter of 2002. Higher production in Nigeria and
Canada, and reduced OPEC quota restrictions in Abu Dhabi, were more than
offset by natural field declines in mature areas and by the operational
outages in the North Sea and West Africa.
Second quarter natural gas production increased to 9,259 mcfd (millions of
cubic feet per day), compared with 9,192 mcfd last year. Higher demand in
Europe and contributions from new projects and work programs more than offset
natural field decline in mature areas and the impacts of operational problems
in the North Sea.
Earnings from U.S. upstream operations were $907 million, up $230 million.
Non-U.S. upstream earnings of $1,931 million were $378 million higher than
last year's second quarter.
Downstream earnings were $1,146 million, an increase of $764 million from last
year's second quarter, reflecting stronger worldwide refining and marketing
margins. Margins were particularly strong at the beginning of the quarter but
have since weakened significantly. Petroleum product sales were 7,800 kbd, 231
kbd higher than last year's second quarter.
U.S. downstream earnings were $419 million, up $185 million. Non-U.S.
downstream earnings of $727 million were $579 million higher than last year's
second quarter.
Chemicals earnings of $439 million were up $170 million from the same quarter
a year ago due to improved margins during the first part of the period and
favorable foreign exchange effects. Prime product sales of 6,369 kt (thousands
of metric tons) were down 333 kt, reflecting lower industry demand.
Corporate and financing expenses of $253 million increased by $31 million
mainly due to higher U.S. pension costs.
FIRST SIX MONTHS 2003 COMPARED WITH FIRST SIX MONTHS 2002
Net income of $11,210 million ($1.67 per share) for the first half of 2003
increased $6,480 million from the first half of 2002. Net income for the
first half of 2003 included a $550 million positive impact for the required
adoption of FAS 143 relating to accounting for asset retirement obligations.
First half net income in 2003 also included a one-time gain of $1,700 million
from the transfer of shares in Ruhrgas AG, a German gas transmission company.
First half net income in 2002 included $90 million of after-tax merger
expenses and $38 million in earnings from discontinued operations.
Revenue for the first half of 2003 totaled $120,945 million compared to
$94,197 million in the first half of 2002 reflecting significantly higher
prices.
Upstream earnings, including were $8,531 million, an increase of $4,212
million due to higher liquids and natural gas realizations and the Ruhrgas
gain. Total oil and natural gas producible volumes increased 2 percent versus
the first half of last year as higher European gas demand and contributions
from new projects and work programs more than offset natural field decline.
Taking into account the effects of the national strike in Venezuela, and the
operational outages in the second quarter, actual oil-equivalent production
was flat.
-19-
Liquids production of 2,491 kbd decreased 27 kbd from 2002. Higher production
in Nigeria and Canada, and lower OPEC-driven quota constraints, were offset by
natural field decline and the impact of operational problems in the North Sea
and West Africa.
First half 2003 natural gas production of 10,652 mcfd increased 193 mcfd from
2002. Higher demand in Europe and contributions from new projects and work
programs more than offset natural field decline and the operational outages in
the North Sea.
Excluding the impacts of the national strike in Venezuela and the second
quarter operational outages, total oil and natural gas producible volumes
increased 2 percent versus the first half of last year. Plans for long-term
capacity increases remain on track as reflected by higher capital spending.
Earnings from U.S. upstream operations for the first half of 2003 were $2,166
million, an increase of $1,041 million. Earnings outside the U.S. were $6,365
million, $3,171 million higher than last year.
Downstream earnings of $1,869 million increased by $1,515 million from a weak
first half of 2002 reflecting higher worldwide refining and marketing margins.
Petroleum product sales of 7,830 kbd compared with 7,622 kbd in the first half
of 2002.
U.S. downstream earnings were $593 million, up $345 million. Non-U.S.
downstream earnings of $1,276 million were $1,170 million higher than last
year.
Chemicals earnings of $726 million were up $325 million from the first half of
2002 due to improved margins and favorable foreign exchange effects. Prime
product sales of 13,260 kt were down 76 kt, reflecting lower demand.
Corporate and financing expenses of $466 million increased by $174 million
mainly due to higher U.S. pension costs.
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.
There were no merger related expenses in 2003 reflecting the completion of the
merger related activities in 2002. Merger related costs in the second quarter
of 2002 were $41 million ($30 million after tax) and were $124 million ($90
million after tax) for the six months ended June 30, 2002. The severance
reserve balance at the end of the second quarter of 2003 is expected to be
expended mainly in 2003 and 2004. The following table summarizes the activity
in the severance reserve for the six months ended June 30, 2003:
Opening Balance at
Balance Additions Deductions Period End
_______ _________ __________ __________
(millions of dollars)
101 0 27 74
-20-
LIQUIDITY AND CAPITAL RESOURCES
Net cash generation before financing activities was $11,624 million in the
first six months of 2003 versus $4,370 million in the same period last year.
Operating activities provided net cash of $15,995 million, an increase of
$7,255 million from the prior year, influenced by higher net income.
Investing activities used net cash of $4,371 million, comparable to the prior
year, including higher additions to property, plant, and equipment and higher
proceeds from asset divestments.
Net income in 2003 included a one-time gain of $1,700 million from the
transfer of ExxonMobil's interests in the Ruhrgas AG shares. The shares were
valued at approximately $2.6 billion. In the third quarter of 2002, a loan of
$1.5 billion was received in connection with the restructuring of BEB Erdgas
und Erdoel GmbH that allowed for the transfer of the Ruhrgas shares. The
remainder was received upon completion of the share transaction and has been
reported as proceeds from sales of investments in the current period. The "All
other items -- net" line in the current year includes an adjustment of the
non-cash net income gain included in first quarter 2003 for the cash received
and reported in the third quarter of 2002 and the cash received and reported
in cash flows from investing activities in the first quarter of 2003.
Net cash used in financing activities was $6,688 million in the first half of
2003 versus $5,567 million in the same period last year reflecting debt
reductions in the current year.
During the second quarter, the corporation acquired 33 million shares at a
gross cost of $1,194 million to offset the dilution associated with benefit
plans and to reduce common stock outstanding. During the first half of 2003,
Exxon Mobil Corporation purchased 68 million shares of its common stock for
the treasury at a gross cost of $2,385 million. Shares outstanding were
reduced from 6,700 million at the end of 2002 to 6,652 million at the end of
the second quarter 2003. Purchases may be made in both the open market and
through negotiated transactions, and may be increased, decreased or
discontinued at any time without prior notice.
Due to the strong earnings through the first half of the year and the
resulting significant cash flow, the corporation increased its rate of share
purchases in July. During the month of July, the corporation purchased 15
million shares for the treasury at a gross cost of $539 million.
Total debt of $10.1 billion at June 30, 2003 was $0.6 billion lower than at
year-end 2002. The corporation's debt to total capital ratio was 10.6 percent
at the end of the second quarter of 2003, compared to 12.2 percent at year-end
2002.
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.
All funded U.S. pension plans were fully funded in 2002 under the standards
set by the Department of Labor and the Internal Revenue Service. In addition
to the $0.5 billion contributed to pension funds in the first six months of
2003, the corporation expects to make contributions totaling about $2 billion
during the second half of 2003 from existing cash in order to maintain the
funded status of the U.S. plans and to meet regulatory requirements for
non-U.S. plans.
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Litigation and other contingencies are discussed in note 7 to the unaudited
condensed consolidated financial statements. There are no events or
uncertainties known to management beyond those already included in reported
financial information that would indicate a material change in future
operating results or future financial condition.
The corporation, as part of its ongoing asset management program, continues to
evaluate its mix of assets for potential upgrade. Because of the ongoing
nature of this program, dispositions will continue to be made from time to
time which will result in either gains or losses.
TAXES
Income, excise and all other taxes for the first half of 2003 of $36,867
million were up $6,088 million compared to last year. First half 2003 income
tax expense was $5,966 million and the effective tax rate was 37.8 percent,
compared to $2,917 million and 41.3 percent, respectively, in the prior year
period. The increase in income tax expense reflects higher pre-tax income.
Excluding the income tax effects of the gain on the Ruhrgas share transfer in
the first quarter, the effective rate in the first half of 2003 was similar to
the prior year. During both periods, the corporation continued to benefit from
the favorable resolution of tax related issues.
CAPITAL AND EXPLORATION EXPENDITURES
Capital and exploration expenditures continued to grow consistent with
ExxonMobil's long-term investment plans. In the second quarter, ExxonMobil
continued its active investment program, spending $3,831 million on capital
and exploration projects, compared with $3,393 million last year, reflecting
continued growth in upstream spending.
Capital and exploration expenditures were $7,327 million in the first half of
2003 compared to $6,367 million in last year's first half.
In 2003, capital and exploration investments are expected to increase to about
$15 billion reflecting the continued spending on ExxonMobil's large portfolio
of upstream projects and foreign exchange effects.
REPORTING INVESTMENTS IN MINERAL INTERESTS IN OIL AND GAS PROPERTIES
Statements of Financial Accounting Standards No. 141 (FAS 141), "Business
Combinations" and No. 142 (FAS 142), "Goodwill and Other Intangible Assets"
were issued by the Financial Accounting Standards Board (FASB) in June 2001
and became effective for the corporation on July 1, 2001 and January 1, 2002,
respectively. The Securities and Exchange Commission (SEC) has requested the
Emerging Issues Task Force (EITF) to consider the issue of whether FAS 141 and
142 require interests held under oil, gas and mineral leases to be separately
classified as intangible assets on the balance sheets of companies in the
extractive industries. If such interests were deemed to be intangible assets
by the EITF, mineral rights to extract oil and gas for both undeveloped and
developed leaseholds would be classified separately from oil and gas
properties as intangible assets on the corporation's balance sheet.
Historically, in accordance with Statement of Financial Accounting Standards
No. 19 (FAS 19), "Financial Accounting and Reporting by Oil and Gas Producing
Companies", the corporation has capitalized the cost of oil and gas leasehold
interests and, consistent with industry practice, reported these assets as
part of tangible oil and gas property, plant and equipment.
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This interpretation of FAS 141 and 142 would only affect the classification of
oil and gas leaseholds on the corporation's balance sheet, and would not
affect total assets, net worth or cash flows. The corporation's results of
operations would not be affected, since these leasehold costs would continue
to be amortized in accordance with FAS 19.
At June 30, 2003, the corporation had leasehold costs for mineral interests of
approximately $4.3 billion, net of accumulated depletion, that would be
classified on the balance sheet as "leasehold costs for the right to extract
oil and gas" if the interpretation the SEC requested the EITF to consider was
applied.
The corporation will continue to classify its leasehold costs for mineral
interests as tangible oil and gas property, plant and equipment assets until
further guidance is provided by the EITF.
FORWARD-LOOKING STATEMENTS
Statements in this discussion regarding expectations, plans and future events
or conditions are forward-looking statements. Actual future results;
production and capacity growth; financing sources; the resolution of
contingencies; the effect of changes in prices, interest rates and other
market conditions; and environmental and capital and exploration 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; changes in technical or
operating conditions or rates of natural field decline; and other factors
discussed above and discussed under the caption "Factors Affecting Future
Results" in Item 1 of ExxonMobil's 2002 Form 10-K.
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EXXON MOBIL CORPORATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the six months ended June 30, 2003
does not differ materially from that discussed under Item 7A of the
registrant's Annual Report on Form 10-K for 2002.
Item 4. Controls and Procedures
As indicated in the certifications in Exhibit 31 of this report, the
corporation's principal executive officer, principal accounting
officer and principal financial officer have evaluated the
corporation's disclosure controls and procedures as of June 30, 2003.
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
control over financial reporting that occurred during the
corporation's last fiscal quarter that have materially affected, or
are reasonably likely to materially affect the corporation's internal
control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In a previously reported matter, on June 5, 2003 the Texas Commission
on Environmental Quality ("TCEQ") withdrew its Notice of Enforcement
Action dated March 27, 2003, relating to alleged violations of
certain reporting, calculation, and documentation requirements under
the Texas Clean Air Act (and related implementing and operating
permit regulations) in connection with upset events at the
corporation's Means Gas Conditioning Facility in Andrews County,
Texas. These administrative issues had been corrected. After
reviewing the evidence, the TCEQ conceded this enforcement action was
not warranted, and all claims were withdrawn. No penalties or other
actions on the part of the corporation are required.
In another previously reported matter, ExxonMobil Oil Corporation
("EMOC") has entered into a final consent order with the New York
State Department of Environmental Conservation ("NYSDEC") whereby
EMOC has agreed to a scope of work at its New Windsor, New York
distribution terminal. The original Notices of Hearing and Complaint
alleged 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 consent order does not address penalties, and the NYSDEC
reserves the right to seek penalties at a later date.
Also in a previously reported matter, the Massachusetts Department of
Environmental Protection ("MADEP") issued a revised Administrative
Consent Order ("ACO") on May 19, 2003, which addressed four of the 55
sites referenced in its original Notice of Enforcement ("NOE")
received by the corporation on January 22, 2003. The original NOE
alleged that certain reports relating to remediation activities at
the sites were not submitted by the relevant deadlines under the
Massachusetts Contingency Plan. Pursuant to the revised ACO, MADEP
now seeks an administrative penalty of $60,000 to settle its claims
regarding
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these four sites, but settlement discussions are underway.
The 51 other sites mentioned in the original NOE are not presently
the subject of a current NOE.
The South Coast Air Quality Management District (the "District")
issued ten Notices of Violation ("NOVs") between March and October of
2002 relating to alleged violations at EMOC's Torrance, California
refinery of District rules regarding above-ground storage tanks. The
primary rule at issue regulates fugitive emissions from above-ground
storage tanks of organic liquids through a compliance program
requiring refineries to self-inspect, repair and report tank
integrity issues. Inspections and audits of the refinery by the
District have resulted in the issuance of the NOVs, which allege
deficiencies in the condition of tank seals/gaps, insufficient
recordkeeping and untimely reporting. The NOVs do not specify the
amount of penalties sought. However, the District has recently
indicated it will seek penalties that may exceed $100,000, and
settlement discussions are underway.
On May 23, 2003, the Louisiana Department of Environmental Quality
("LDEQ") issued a Consolidated Compliance Order and Notice of
Potential Penalty ("NOPP") in a proceeding captioned "In re: Chalmette
Refining, LLC." The facility involved is a refinery in Chalmette,
Louisiana that is operated and 50 percent-owned by wholly owned
subsidiaries of the corporation. The NOPP alleges non-compliance with
Louisiana's environmental laws and regulations, including unauthorized
discharges of pollutants to the air or water and violations of related
release reporting requirements, fugitive emissions and other
monitoring irregularities, and the failure to adequately maintain and
utilize certain pollution control devices. The facility owner has
requested a hearing and is continuing to pursue discussions with the
LDEQ to resolve these NOPP issues as well as issues raised in earlier
NOPPs and other self-reported potential compliance issues. The LDEQ
has not made a demand for specific penalties.
Refer to the relevant portions of note 7 on pages 9 and 10 of this
Quarterly Report on Form 10-Q for further information on legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 28, 2003, 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 Cast For Withheld
________ ________ ________
Michael J. Boskin 5,455,679,135 97,953,681
Donald V. Fites 5,449,280,769 104,352,047
James R. Houghton 5,390,063,160 163,569,656
William R. Howell 5,379,571,509 174,061,307
Helene L. Kaplan 5,381,513,904 172,118,912
Reatha Clark King 5,388,487,175 165,145,641
Philip E. Lippincott 5,455,081,699 98,551,117
Harry J. Longwell 5,456,029,983 97,602,833
Henry A. McKinnell, Jr. 5,450,078,289 103,554,527
Marilyn Carlson Nelson 5,374,777,614 178,855,202
Lee R. Raymond 5,431,439,372 122,193,444
Walter V. Shipley 5,458,471,879 95,160,937
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Concerning Ratification of Independent Auditors
_______________________________________________
Votes Cast For: 5,301,719,630 96.4%
Votes Cast Against: 197,918,425 3.6%
Abstentions: 53,994,761
Broker Non-Votes: 0
Concerning Approval of 2003 Incentive Program
_____________________________________________
Votes Cast For: 5,097,022,404 93.1%
Votes Cast Against: 376,292,694 6.9%
Abstentions: 80,317,718
Broker Non-Votes: 0
Concerning Political Nonpartisanship
____________________________________
Votes Cast For: 261,248,318 6.4%
Votes Cast Against: 3,847,365,625 93.6%
Abstentions: 298,429,094
Broker Non-Votes: 1,146,589,779
Concerning Auditor Services
___________________________
Votes Cast For: 496,498,189 11.5%
Votes Cast Against: 3,808,310,906 88.5%
Abstentions: 102,306,474
Broker Non-Votes: 1,146,517,247
Concerning Additional Board Nominees
____________________________________
Votes Cast For: 176,660,436 4.1%
Votes Cast Against: 4,124,737,701 95.9%
Abstentions: 105,717,435
Broker Non-Votes: 1,146,517,244
Concerning Non-employee Director Compensation
_____________________________________________
Votes Cast For: 309,773,587 7.2%
Votes Cast Against: 4,000,001,919 92.8%
Abstentions: 97,340,067
Broker Non-Votes: 1,146,517,243
Concerning Poison Pill
______________________
Votes Cast For: 1,387,152,487 32.2%
Votes Cast Against: 2,917,098,973 67.8%
Abstentions: 102,864,108
Broker Non-Votes: 1,146,517,248
Concerning Board Chairman and CEO
_________________________________
Votes Cast For: 883,190,885 21.5%
Votes Cast Against: 3,215,950,510 78.5%
Abstentions: 307,974,475
Broker Non-Votes: 1,146,516,946
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Concerning Report on Health in Africa
_____________________________________
Votes Cast For: 324,217,712 7.9%
Votes Cast Against: 3,773,663,374 92.1%
Abstentions: 309,234,527
Broker Non-Votes: 1,146,517,203
Concerning Investment Program Report
____________________________________
Votes Cast For: 289,356,215 7.2%
Votes Cast Against: 3,745,455,855 92.8%
Abstentions: 372,303,505
Broker Non-Votes: 1,146,517,241
Concerning Human Rights Report
______________________________
Votes Cast For: 323,957,371 8.0%
Votes Cast Against: 3,709,631,480 92.0%
Abstentions: 373,526,723
Broker Non-Votes: 1,146,517,242
Concerning Amendment of EEO Policy
__________________________________
Votes Cast For: 1,118,365,426 27.3%
Votes Cast Against: 2,981,006,546 72.7%
Abstentions: 307,743,603
Broker Non-Votes: 1,146,517,241
Concerning Climate Change Report
________________________________
Votes Cast For: 910,374,979 22.2%
Votes Cast Against: 3,187,416,124 77.8%
Abstentions: 309,324,474
Broker Non-Votes: 1,146,517,239
Concerning Renewable Energy Report
__________________________________
Votes Cast For: 870,170,718 21.3%
Votes Cast Against: 3,223,227,762 78.7%
Abstentions: 313,717,098
Broker Non-Votes: 1,146,517,238
See also pages 4 through 8, the section entitled "Director Relationships" on
page 9, and pages 24 through 55 of the registrant's definitive proxy statement
dated April 17, 2003.
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Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10(iii)(a) 2003 Incentive Program (incorporated by reference to
Appendix B to the Proxy Statement of Exxon Mobil
Corporation dated April 17, 2003).
31.1 Certification (pursuant to Securities Exchange Act Rule
13a-14(a)) by Chief Executive Officer.
31.2 Certification (pursuant to Securities Exchange Act Rule
13a-14(a)) by Principal Accounting Officer.
31.3 Certification (pursuant to Securities Exchange Act Rule
13a-14(a)) by Principal Financial Officer.
32.1 Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Chief Executive Officer.
32.2 Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Principal Accounting Officer.
32.3 Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Principal Financial Officer.
b) Reports on Form 8-K
On May 1, 2003, the registrant filed a Current Report on Form 8-K
furnishing under Item 9, and also pursuant to Item 12, its News
Release, dated May 1, 2003, announcing first quarter results and the
information in the related 1Q03 Investor Relations Data Summary.
On May 7, 2003, the registrant filed a Current Report on Form 8-K
furnishing under Item 9, and also pursuant to Item 12, its 2002
Financial and Operating Review.
On July 31, 2003, the registrant filed a Current Report on Form 8-K
furnishing under Item 9, and Item 12, its News Release, dated July 31,
2003, announcing second quarter results and the information in the
related 2Q03 Investor Relations Data Summary.
Reports listed above as "furnished" under Item 9 and Item 12 are not
deemed "filed" with the SEC and are not incorporated by reference
herein or in any other SEC filings.
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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, 2003
By: /s/ DONALD D. HUMPHREYS
____________________________
Name: Donald D. Humphreys
Title: Vice President, Controller and
Principal Accounting Officer
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INDEX TO EXHIBITS
Exhibit No. Description
__________ ___________
10(iii)(a) 2003 Incentive Program (incorporated by reference to
Appendix B to the Proxy Statement of Exxon Mobil
Corporation dated April 17, 2003).
31.1 Certification (pursuant to Securities Exchange Act Rule
13a-14(a)) by Chief Executive Officer.
31.2 Certification (pursuant to Securities Exchange Act Rule
13a-14(a)) by Principal Accounting Officer.
31.3 Certification (pursuant to Securities Exchange Act Rule
13a-14(a)) by Principal Financial Officer.
32.1 Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Chief Executive Officer.
32.2 Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Principal Accounting Officer.
32.3 Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Principal Financial Officer.
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