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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
_________
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995 Commission file number 1-27
Texaco Inc.
(Exact name of the registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Westchester Avenue
White Plains, New York 10650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 253-4000
_________
Texaco Inc. (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,
and (2) has been subject to such filing requirements for the past 90 days.
As of July 31, 1995, there were outstanding 260,026,863 shares of Texaco
Inc. Common Stock - par value $6.25.
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PART I - FINANCIAL INFORMATION
TEXACO INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1995 AND 1994
---------------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
-----------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
REVENUES
Sales and services $17,617 $15,097 $ 9,032 $ 7,865
Equity in income of affiliates, income from
dividends, interest, asset sales and other 694 337 220 135
------- ------- ------- -------
18,311 15,434 9,252 8,000
------- ------- ------- -------
DEDUCTIONS
Purchases and other costs 13,506 10,970 6,980 5,787
Operating expenses 1,426 1,521 681 790
Selling, general and administrative expenses 748 863 391 472
Maintenance and repairs 184 185 95 95
Exploratory expenses 114 156 59 90
Depreciation, depletion and amortization 924 839 356 431
Interest expense 245 246 121 124
Taxes other than income taxes 246 242 122 117
Minority interest 30 18 13 7
------- ------- ------- -------
17,423 15,040 8,818 7,913
------- ------- ------- -------
Income from continuing operations
before income taxes 888 394 434 87
Provision for (benefit from) income taxes 325 77 172 (28)
------- ------- ------- -------
Net income from continuing operations 563 317 262 115
Discontinued operations - Net loss on disposal - (87) - (87)
------- ------- ------- -------
NET INCOME $ 563 $ 230 $ 262 $ 28
======= ======= ======= =======
Preferred stock dividend requirements $ 31 $ 49 $ 15 $ 25
------- ------- ------- -------
Net income available for common stock $ 532 $ 181 $ 247 $ 3
======= ======= ======= =======
Per common share (dollars)
Net income (loss)
Continuing operations $ 2.05 $ 1.04 $ .95 $ .35
Discontinued operations - (.34) - (.34)
------- ------- ------- -------
Net income $ 2.05 $ .70 $ .95 $ .01
======= ======= ======= =======
Cash dividends paid $ 1.60 $ 1.60 $ .80 $ .80
Average number of common shares
outstanding (thousands) 259,749 259,230 259,876 259,275
See accompanying notes to consolidated financial statements.
- 1 -
TEXACO INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1995 AND DECEMBER 31, 1994
-----------------------------------------
(Millions of dollars)
June 30, December 31,
1995 1994
----------- ------------
(Unaudited)
-----------
ASSETS
Current Assets
Cash and cash equivalents $ 383 $ 404
Short-term investments - at fair value 41 60
Accounts and notes receivable, less allowance for doubtful
accounts of $23 million in 1995 and $25 million in 1994 3,232 3,297
Inventories 1,405 1,358
Assets under agreements for sale - 488
Net assets of discontinued operations 195 195
Deferred income taxes and other current assets 221 217
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Total current assets 5,477 6,019
Investments and Advances 5,764 5,336
Properties, Plant and Equipment - at cost 31,302 31,095
Less - Accumulated depreciation, depletion and amortization 18,039 17,612
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Net properties, plant and equipment 13,263 13,483
Deferred Charges 655 667
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Total $25,159 $25,505
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable, commercial paper and
current portion of long-term debt $ 695 $ 917
Accounts payable and accrued liabilities 3,277 3,297
Estimated income and other taxes 735 801
------- -------
Total current liabilities 4,707 5,015
Long-Term Debt and Capital Lease Obligations 5,497 5,564
Deferred Income Taxes 839 879
Employee Retirement Benefits 1,112 1,130
Deferred Credits and Other Noncurrent Liabilities 2,369 2,558
Minority Interest in Subsidiary Companies 592 610
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Total 15,116 15,756
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 504 515
Unearned employee compensation (261) (282)
Common stock - par value $6.25:
Shares authorized - 350,000,000
Shares issued - 274,293,417 in 1995 and 1994,
including treasury stock 1,714 1,714
Paid-in capital in excess of par value 655 654
Retained earnings 7,583 7,463
Currency translation adjustment 233 87
Unrealized net gain on investments 44 51
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10,772 10,502
Less - Common stock held in treasury, at cost -
14,299,575 shares in 1995 and
14,761,296 shares in 1994 729 753
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Total stockholders' equity 10,043 9,749
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Total $25,159 $25,505
======= =======
See accompanying notes to consolidated financial statements.
-2-
TEXACO INC. AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
-----------------------------------------------
(Millions of dollars)
(Unaudited)
-------------------
For the six months
ended June 30,
1995 1994
---- ----
OPERATING ACTIVITIES
Net income $ 563 $ 230
Reconciliation to net cash provided by (used in)
operating activities
Loss on disposal of discontinued operations - 85
Depreciation, depletion and amortization 924 839
Deferred income taxes 40 (60)
Exploratory expenses 114 156
Minority interest in net income 30 18
Dividends from affiliates, less than equity in income (112) (5)
Gains on asset sales (231) (27)
Changes in operating working capital (373) (120)
Other - net 26 (15)
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Net cash provided by operating activities 981 1,101
INVESTING ACTIVITIES
Capital and exploratory expenditures (1,020) (1,025)
Proceeds from sale of discontinued operations, net of
cash and cash equivalents sold - 645
Proceeds from sales of assets 737 82
Purchases of investment instruments (535) (562)
Sales/maturities of investment instruments 553 552
Other - net 16 2
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Net cash used in investing activities (249) (306)
FINANCING ACTIVITIES
Borrowings having original terms in excess
of three months
Proceeds 57 104
Repayments (240) (126)
Net decrease in other borrowings (76) (470)
Issuance of preferred stock by a subsidiary - 112
Dividends paid to the company's stockholders
Common (416) (415)
Preferred (31) (48)
Dividends paid to minority shareholders (35) (16)
Other - net - (3)
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Net cash used in financing activities (741) (862)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (12) 1
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (21) (66)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 404 488
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 383 $ 422
======= =======
See accompanying notes to consolidated financial statements.
-3-
TEXACO INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Assets Under Agreements for Sale
----------------------------------------
In 1994, Texaco announced that it agreed to sell more than 300 scattered U.S.
producing fields to Apache Corporation and agreed to form a strategic alliance
with STENA, involving the sale of a portion of its international marine
fleet. At December 31, 1994, the net properties, plant and equipment and
deferred income taxes relating to those assets, and to other non-core assets
for which sales agreements had been signed, were classified as current assets
in the Consolidated Balance Sheet under the caption "Assets under agreements
for sale." During the first six months of 1995, Texaco completed virtually all
of these non-core asset sales, generating some $650 million in cash proceeds.
Note 2. Discontinued Operations
-------------------------------
In 1993, Texaco Inc. entered into memorandums of understanding with an
affiliate of the Jon M. Huntsman Group of Companies for the sale of
substantially all of Texaco's worldwide chemical operations and, therefore,
has accounted for these operations as discontinued operations.
On April 21, 1994, Texaco Inc. received from Huntsman Corporation $850
million as part of the sale of Texaco Chemical Company, consisting of $650
million in cash and an 11-year subordinated note with a face amount of $200
million. Not included in this transaction was Texaco's worldwide lubricant
additives business.On February 14, 1995, Texaco and Huntsman Corporation
announced that they intend to form a joint venture to own and operate this
business, which includes manufacturing facilities in Port Arthur, Texas,
Ghent, Belgium and Rio De Janeiro, Brazil, as well as sales and marketing
offices in various locations in the U.S. and abroad. Formation of the joint
venture and completion of the transaction is expected to take place during
the third quarter of 1995.
The results for Texaco's worldwide lubricant additives business are accounted
for as discontinued operations pending finalization of the formation of the
joint venture. The assets and liabilities of the worldwide lubricant additives
business have been classified in the Consolidated Balance Sheet as "Net assets
of discontinued operations."
Revenues for the discontinued operations totaled $113 million and $59 million
for the first six months and the second quarter of 1995, respectively,
representing revenues of the lubricant additives business. For 1994, revenues
for the discontinued operations totaled $311 million for the first six months
and $43 million for the second quarter, representing revenues of the chemical
and lubricant additives businesses for the first quarter of 1994 and only the
revenues of the lubricant additives business for the second quarter of 1994.
A net charge of $87 million, (including a $2 million provision for income
taxes), or $.34 per share, was recorded in the second quarter of 1994 relating
to the disposal of the chemical business.
- 4 -
Note 3. Inventories
-------------------
The inventories of Texaco Inc. and consolidated subsidiary companies were
as follows:
As of
---------------------------
June 30, December 31,
1995 1994
----------- ------------
(Unaudited)
(Millions of dollars)
Crude oil $ 287 $ 284
Petroleum products and petrochemicals 899 854
Other merchandise 32 30
Materials and supplies 187 190
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Total $1,405 $1,358
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Note 4. Contingent Liabilities
------------------------------
Information relative to commitments and contingent liabilities of Texaco Inc.
and subsidiary companies is presented in Notes 16 and 17, beginning on page
57, of Texaco Inc.'s 1994 Annual Report to Stockholders.
____________________
In the company's opinion, while it is impossible to ascertain the ultimate
legal and financial liability with respect to the above-mentioned and other
contingent liabilities and commitments, including lawsuits, claims,
guarantees, taxes and regulations, the aggregate amount of such liability in
excess of financial reserves, together with deposits and prepayments made
against disputed tax claims, is not anticipated to be materially important
in relation to the consolidated financial position or results of operations
of Texaco Inc. and its subsidiaries.
- 5 -
Note 5. Caltex Group of Companies
---------------------------------
Summarized unaudited financial information for the Caltex Group of Companies,
owned 50 percent by Texaco and 50 percent by Chevron Corporation, is presented
below and is reflected on a 100 percent Caltex Group basis:
For the six months For the three months
ended June 30, ended June 30,
-------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(Millions of dollars)
Gross revenues $8,299 $6,938 $3,928 $3,570
Income before income taxes $ 832 $ 506 $ 290 $ 211
Net income $ 580 $ 297 $ 164 $ 119
Net income for the first six months of 1995 includes a first quarter net gain
for U.S. financial reporting of $171 million relating to the sale of a portion
of land and air utility rights by a Caltex Petroleum Corporation affiliate in
Japan required for a public project. The proceeds include compensation that
will be used to remove and relocate or replace existing fixed operating assets
affected by the sale.
The merger of the refining and marketing assets of Caltex Australia Limited
(CAL), a 75 percent owned subsidiary of Caltex Petroleum Corporation, with
the refining and marketing assets of Ampol Limited, a unit of Pioneer
International Limited, was completed during the second quarter of 1995 with
an effective date of May 1, 1995. CAL and Pioneer each hold a 50 percent
stake in the new company, Australian Petroleum Pty Ltd.
* * * * * * * * * * *
In the determination of preliminary and unaudited financial statements for
the six-month and three-month periods ended June 30, 1995 and 1994, Texaco's
accounting policies have been applied on a basis consistent with the
application of such policies in Texaco's financial statements issued in its
1994 Annual Report to Stockholders. In the opinion of Texaco, all adjustments
and disclosures necessary to present fairly the results of operations for
such periods have been made. These adjustments are of a normal recurring
nature. The information is subject to year-end audit by independent public
accountants. Texaco makes no forecasts or representations with respect to the
level of net income for the year 1995.
- 6 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
---------------------
Consolidated worldwide net income for Texaco Inc. and subsidiary companies
for the second quarter of 1995 was $262 million, or $.95 per share, as
compared with $28 million, or $.01 per share, for the second quarter of
1994. For the first six months of 1995, net income was $563 million, or $2.05
per share, as compared with $230 million, or $.70 per share, for the first
six months of 1994.
Net income for the first six months of 1994 reflects a second quarter net
charge of $87 million, (including a $2 million provision for income taxes),
or $0.34 per share, for discontinued operations relating to the sale of
substantially all of Texaco's worldwide chemical business.
Net income for the first six months of 1995 includes first quarter special net
gains of $88 million, principally relating to the sale of land by a Caltex
Petroleum Corporation affiliate in Japan and to sales of non-core U.S.
producing properties. The 1994 six months and second quarter results include
$79 million in tax benefits realizable through the sale of an interest in a
subsidiary, as well as special charges of $119 million related to staff
reductions and write-downs of assets being offered for sale. Of the previously
mentioned $79 million in tax benefits, $38 million was realizable due to the
taxable gain on the sale of discontinued chemical operations.
These results are summarized in the following table:
(Unaudited)
------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
-------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
(Millions of dollars)
Net income from continuing operations before special items $ 475 $ 357 $ 262 $ 155
Net gains from major asset sales 88 - - -
Tax benefits on asset sale - 79 - 79
Special charges - (119) - (119)
----- ----- ----- -----
Net income from continuing operations 563 317 262 115
Net loss on disposal of discontinued chemical operations - (87) - (87)
----- ----- ----- -----
Net income $ 563 $ 230 $ 262 $ 28
===== ===== ===== =====
Improved operating performance, resulting from continued progress on key
initiatives of Texaco's plan for growth, supplemented by increased worldwide
crude oil prices, were the main contributors to higher second quarter and
first six months 1995 earnings. International production of oil and gas grew
from both existing and new fields and continued improvements in Texaco's
Latin American marketing businesses added to profits. In addition, operating
and overhead expenses were reduced, especially in the U.S., as a result of
sales of non-core producing assets, expense containment programs and focused
technology applications.
These benefits, however, were dampened by lower U.S. natural gas prices. Also,
while refining margins in the U.S. and Europe improved somewhat in the second
quarter, margins were still weaker on a six month comparative basis.
- 7 -
OPERATING EARNINGS
PETROLEUM AND NATURAL GAS
UNITED STATES
Exploration and Production
Exploration and production earnings in the U.S. for the second quarter of
1995 were $170 million, as compared with $97 million for the second quarter
of 1994. For the first six months of 1995 and 1994, earnings were $313 million
and $172 million, respectively. Results for the first six months of 1995
include a first quarter net special gain of $8 million from non-core producing
property sales, after certain write-downs of properties being held for sale
and reserves for environmental remediation on these properties which totaled
$112 million. Results for the first six months of 1994 include second quarter
special charges of $24 million relating to the estimated cost of employee
separations.
The strong growth in 1995 earnings for both the comparative second quarter
and the first six month periods resulted from increased crude oil prices,
which averaged $2.40 and $3.11 per barrel higher than the respective 1994
periods. These prices reflect, in part, a strong regional demand for heavy
Californian crudes. Net income in 1995 also benefited from lower operating
expenses. These expense reductions reflect the effects of technology
applications and reduced overhead, including reductions associated with the
sales of non-core producing properties.
Partly offsetting these benefits were lower natural gas prices. Second
quarter 1995 average natural gas prices were $.32 per MCF lower than 1994,
while prices for the first six months of 1995 were $.47 per MCF lower than
1994.
Excluding the divested non-core assets, crude oil and natural gas production
in 1995 was essentially equal to prior year production levels. This reflects
success in adding new production, most notably along the Louisiana Gulf Coast.
Manufacturing and Marketing
Manufacturing and marketing earnings in the U.S. were $28 million for the
second quarter of 1995, as compared with $15 million for the second quarter
of 1994. For the first six months of 1995 and 1994, earnings were $9 million
and $93 million, respectively. Results for the first six months of 1994
include second quarter special charges of $24 million relating to the
adjustment to fair market value of facilities being offered for sale and the
estimated cost of employee separations.
During the second quarter of 1995, earnings improved over the first quarter,
but were still below the level experienced in the second quarter of 1994.
Comparatively, second quarter 1995 versus 1994, margins on the East and Gulf
Coasts improved despite higher crude costs. These margins reflect increased
demand and temporary product supply tightening created by the Brazilian Oil
Workers strike, as well as lower industry-wide refinery utilization rates
during the latter part of the period. Margins on the West Coast, however,
were weaker due to higher crude oil costs and a general oversupply of products
caused partly by industry-wide refinery utilization rates on the West Coast,
which reached a five-year high in 1995.
Earnings for the first six months of 1995 decreased as compared to the same
period in 1994. Continuing improvements in operating performance and expenses
did not overcome severely depressed industry-wide margins, particularly
through April. Compounding this situation were uncertainties with regard to
changing state requirements for reformulated gasolines earlier in the year.
- 8 -
INTERNATIONAL
Exploration and Production
Exploration and production earnings outside the U.S. were $82 million for
the second quarter of 1995, as compared with $18 million for the second
quarter of 1994. For the first six months of 1995 and 1994, earnings were
$164 million and $63 million, respectively. Results for the first six months
of 1994 include second quarter special charges of $16 million related to the
adjustment to fair market value of properties being offered for sale and the
estimated cost of employee separations.
The profit improvements for the second quarter and first six months of 1995
reflect the growth in oil and gas production and increased crude oil prices,
which averaged nearly $3 per barrel higher than in 1994. Production of crude
oil and natural gas increased in the U.K. North Sea, mainly from the
Strathspey field. There also was higher crude oil production in Australia
from the offshore Roller and Skate fields, as well as in the Partitioned
Neutral Zone between Kuwait and Saudi Arabia resulting from continuing field
development programs. Production for the second quarter 1995 was somewhat
lessened by scheduled maintenance work on facilities in the North Sea. Also,
offshore China production was suspended during most of the second quarter for
scheduled maintenance and to complete required work for the June 1995 start-up
of two new fields, which will nearly double current production rates.
Upstream results in 1995 include a second quarter non-cash benefit of $7
million and a year-to-date non-cash charge of $6 million due to currency
exchange impacts associated with deferred income taxes in the U.K. For 1994,
these currency impacts resulted in an $11 million charge, entirely in the
second quarter.
Manufacturing and Marketing
Manufacturing and marketing earnings outside the U.S. were $79 million for the
second quarter of 1995, as compared with $29 million for the second quarter of
1994. For the first six months of 1995 and 1994, earnings were $260 million
and $154 million, respectively. Results for the first six months of 1995
include a first quarter net gain of $80 million principally relating to the
sale of land by a Caltex affiliate in Japan. Results for the first six months
of 1994 include second quarter special charges of $38 million related to the
estimated cost of employee separations and the adjustment to fair market value
of certain properties being offered for sale.
Comparative operating earnings reflect weak European refined product margins,
particularly in the U.K. Margins which began to decline in 1994, due to the
oversupply in the marketplace, have remained depressed in 1995. Higher refined
product sales volumes and margins in Latin America partly offset the general
weakness in European operations. Earnings in the Caltex operating areas of
the Pacific Rim benefited from improved margins and higher sales volumes.
Downstream results in 1995 include a second quarter non-cash benefit of $8
million and a year-to-date non-cash charge of $5 million due to currency
exchange impacts associated with deferred income taxes in the U.K. For 1994,
these currency impacts resulted in a $12 million charge, entirely in the
second quarter.
NONPETROLEUM
Nonpetroleum results were earnings of $7 million for the second quarter of
1995, as compared with losses of $6 million for the second quarter of 1994.
For the first six months of 1995 and 1994, results were earnings of $11
million and losses of $7 million, respectively. The 1995 earnings reflect
improved loss experience of Heddington Insurance Limited, a subsidiary.
- 9 -
CORPORATE/NONOPERATING RESULTS
Corporate/nonoperating charges were $104 million for the second quarter of
1995, as compared with charges of $38 million for the second quarter of 1994.
For the first six months of 1995 and 1994, charges were $194 million and $158
million, respectively. The 1994 six months and second quarter results include
special charges of $17 million related to the estimated cost of employee
separations and $79 million of tax benefits realizable through the sale of an
interest in a subsidiary. Of these benefits, $38 million was realizable due to
the taxable gain on the sale of discontinued operations.
Results for the first six months of 1995 include a first quarter gain of $25
million, principally from sales of equity securities held for investment by an
insurance subsidiary. Comparatively, results in 1995 for the second quarter
and first six months benefited from higher interest income and reduced
overhead stemming from expense containment programs. Results for the first
six months of 1994 include a second quarter gain of $7 million relating to
the receipt of a cash option payment relative to the sale of a manufacturing
facility.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 30, 1995, Texaco's cash, cash equivalents and short-term
investments totaled $424 million, as compared to the 1994 year-end level of
$464 million. Texaco's total cash from operating activities for the first
six months of 1995 (as presented on the Condensed Statement of Consolidated
Cash Flows) included several significant items that were not directly related
to current period operations, and which in the aggregate, amounted to a net
outflow of some $120 million. Among these items were payments related to
litigation settlements, mainly the State of Louisiana royalty dispute,
and severance.
During the first six months of 1995, cash generated from normal operating
activities and proceeds from asset sales, which are discussed below, were
used to support Texaco's capital and exploratory expenditures of $1,020
million, for payment of dividends to common, preferred and minority
shareholders of $482 million, and for the reduction of debt.
Total debt at June 30, 1995 amounted to $6.2 billion as compared to $6.5
billion at year-end 1994. Texaco's ratio of total debt to total borrowed and
invested capital was 36.8% at June 30, 1995 and 38.5% at year-end 1994.
During the first quarter of 1995, Texaco terminated $175 million of its
receive fixed/pay floating interest rate swaps, reducing the notional
principal amount of these swaps from $777 million at December 31, 1994 to
$602 million at June 30, 1995.
Texaco maintains a revolving credit facility with commitments of $2.0
billion, which remained unused at both June 30, 1995 and at year-end 1994.
Additionally, a subsidiary maintains a long-term revolving credit facility for
$330 million, which was fully utilized at June 30, 1995 and year-end 1994 and
is reflected in long-term debt.
At June 30, 1995, Texaco's long-term debt included $649 million of debt
scheduled to mature within one year, which the company has both the intent
and the ability to refinance on a long-term basis.
Proceeds from asset sales for the first six months of 1995 amounted to $737
million. These proceeds were principally related to the disposition of
non-core producing properties in the United States, including some 300
scattered properties sold to Apache Corporation, and the sale of a portion
of Texaco's international marine fleet. Proceeds from these sales are key to
financing growth opportunities in core businesses.
Subsequent to June 30, 1995, Texaco completed the sale of its 50 percent
equity interest in Pekin Energy Company, a producer and marketer of fuel-grade
ethanol, to Williams Energy Ventures, a subsidiary of The Williams Companies,
Inc., for approximately $85 million. The proceeds will be redirected to growth
opportunities in Texaco's core oil and gas business.
The company considers its financial position sufficient to meet its
anticipated future financial requirements.
- 10 -
EMPLOYEE SEVERANCE PROGRAM
--------------------------
On July 5, 1994, Texaco announced its plan for growth which includes a series
of action steps to increase competitiveness and profitability. This program
also calls for reduction in overheads and improvements in operating
efficiencies. Implementation of Texaco's program was expected to result in
the reduction of approximately 2,500 employees worldwide by June 30, 1995,
involving both the U.S. and international upstream and downstream segments,
as well as various support staff functions. During the second quarter of 1994,
Texaco recorded a charge of $88 million, net of tax, for the anticipated
severance costs associated with the employee reductions.
As of June 30, 1995, implementation of Texaco's program has included
reductions of approximately 2,570 employees worldwide with a related
commitment to severance payments of $126 million, or an after-tax cost
of $88 million. Of this commitment, payments of $108 million have been
made as of June 30, 1995.
CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------
Capital and exploratory expenditures for continuing operations, including
equity in such expenditures of affiliates, were $1,272 million for the first
half of 1995, as compared to $1,231 million for the same period of 1994.
Expenditures for the second quarter of 1995 amounted to $759 million, versus
$607 million for the second quarter of 1994.
Increased exploration and production expenditures in 1995 reflect the
development of the Captain field in the U.K. sector of the North Sea, as
well as the acquisition of the outstanding minority ownership in a Canadian
subsidiary. Partially offsetting these increases were lower scheduled U.S.
upstream expenditures in 1995, as compared to the higher level of
developmental gas drilling during the first quarter of 1994, and also reflect
efficiency improvements in the company's 1995 drilling program.
Downstream expenditures by Texaco's affiliates decreased due to completions
of refinery upgrades in the Far East, partially offset by selected investments
in Europe.
- 11 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------
Reference is made to the discussion of Contingent Liabilities in Note 4 to the
Consolidated Financial Statements of this Form 10-Q, Item 1 of Texaco Inc.'s
Form 10-Q for the quarterly period ended March 31, 1995 and to Item 3 of
Texaco Inc.'s 1994 Annual Report on Form 10-K, which are incorporated herein
by reference.
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
The Annual Meeting of the Stockholders of Texaco Inc. was held on May 9, 1995,
for the purpose of (1) electing four directors, (2) approving the appointment
of auditors for the year 1995, and (3) acting on four stockholder proposals
concerning classification of the Board of Directors, executive compensation,
employment opportunity, and corporate conduct guidelines.
Each of the four directors elected at the Annual Meeting were elected by a
vote of at least 226.4 million shares, or 97.7%. Dr. John Brademas and Messrs.
Alfred C. DeCrane, Jr., Thomas S. Murphy and Charles H. Price, II received
votes in favor of 227.8 million shares, 226.4 million shares, 228.0 million
shares and 228.0 million shares, respectively, and votes withheld were 3.9
million shares, 5.3 million shares, 3.7 million shares and 3.7 million shares,
respectively. Directors continuing in office are Dr. Franklyn G. Jenifer, Ms.
Robin B. Smith, and Messrs. Robert A. Beck, Willard C. Butcher, Edmund M.
Carpenter, Allen J. Krowe, Thomas A. Vanderslice, William C. Steere, Jr. and
William Wrigley. Additionally, on July 28, 1995, Texaco announced that Mr.
Michael C. Hawley, President and Chief Operating Officer of the Gillette
Company, had been elected to the company's Board of Directors.
The appointment of Arthur Andersen LLP to audit the accounts of the company
and its subsidiaries for the fiscal year 1995 was approved by a vote of 228.6
million shares, or 99.2% of those shares voted, voting against were 2.0
million shares, or .8%, and 1.2 million shares abstained.
Four stockholder proposals relating to classification of the Board of
Directors, executive compensation, employment opportunity and corporate
conduct guidelines, as set forth in Items 3,4, 5 and 6, respectively, of the
1995 Proxy Statement, were defeated by votes in opposition of 112.4 million
shares, or 56.7%, 178.4 million shares, or 91.0%, 178.8 million shares, or
92.1%, and 180.3 million shares, or 94.5%, respectively. The votes in favor
were 85.7 million shares, or 43.3%, 17.7 million shares, or 9.0%, 15.4
million shares, or 7.9%, and 10.4 million shares, or 5.5%, respectively. In
addition, 3.7 million shares, 5.7 million shares, 7.7 million shares and
11.0 million shares, respectively, abstained.
- 12 -
Item 5. Other Information
-------------------------
(Unaudited)
-----------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
(Millions of dollars)
FUNCTIONAL NET INCOME
---------------------
Operating earnings (losses) from continuing operations
Petroleum and natural gas
Exploration and production
United States $ 313 $ 172 $ 170 $ 97
International 164 63 82 18
------ ------ ------ ------
Total 477 235 252 115
------ ------ ------ ------
Manufacturing, marketing and distribution
United States 9 93 28 15
International 260 154 79 29
------ ------ ------ ------
Total 269 247 107 44
------ ------ ------ ------
Total petroleum and natural gas 746 482 359 159
Nonpetroleum 11 (7) 7 (6)
------ ------ ------ ------
Total operating earnings 757 475 366 153
Corporate/Nonoperating (194) (158) (104) (38)
------ ------ ------ ------
Net income from continuing operations 563 317 262 115
------ ------ ------ ------
Discontinued operations - Net loss on disposal - (87) - (87)
------ ------ ------ ------
Net income $ 563 $ 230 $ 262 $ 28
====== ====== ====== ======
CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------
Texaco Inc. and subsidiary companies
Exploration and production
United States $ 387 $ 450 $ 215 $ 180
International 384 265 269 142
------ ------ ------ ------
Total 771 715 484 322
------ ------ ------ ------
Manufacturing, marketing and distribution
United States 102 102 59 52
International 118 121 76 68
------ ------ ------ ------
Total 220 223 135 120
------ ------ ------ ------
Other 12 14 7 8
------ ------ ------ ------
Total 1,003 952 626 450
------ ------ ------ ------
Equity in affiliates
United States 65 51 33 26
International 204 228 100 131
------ ------ ------ ------
Total 269 279 133 157
------ ------ ------ ------
Total continuing operations 1,272 1,231 759 607
Discontinued operations 1 20 - 1
------ ------ ------ ------
Total, including equity in affiliates $1,273 $1,251 $ 759 $ 608
====== ====== ====== ======
- 13 -
(Unaudited)
-----------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
IN AFFILIATES
-------------
Net production of crude oil and natural gas liquids
(thousands of barrels per day)
United States 385 408 382 408
Other Western Hemisphere 17 20 17 20
Europe 116 110 98 104
Other Eastern Hemisphere 237 235 236 231
------ ------ ------ ------
Total 755 773 733 763
Net production of natural gas available for sale
(millions of cubic feet per day)
United States 1,632 1,732 1,604 1,777
International 403 306 374 281
------ ------ ------ ------
Total 2,035 2,038 1,978 2,058
Natural gas sales (millions of cubic feet per day)
United States 3,221 3,045 3,166 3,175
International 419 322 390 295
------ ------ ------ ------
Total 3,640 3,367 3,556 3,470
Natural gas liquids sales, including purchased LPG's
(thousands of barrels per day)
United States 218 196 199 196
International 75 58 61 56
------ ------ ------ ------
Total 293 254 260 252
Refinery input (thousands of barrels per day)
United States 685 640 686 665
Other Western Hemisphere 32 44 41 37
Europe 270 325 226 322
Other Eastern Hemisphere 437 460 409 443
------ ------ ------ ------
Total 1,424 1,469 1,362 1,467
Refined product sales (thousands of barrels per day)
United States 896 843 904 872
Other Western Hemisphere 345 304 342 297
Europe 436 462 424 461
Other Eastern Hemisphere 756 700 731 676
------ ------ ------ ------
Total 2,433 2,309 2,401 2,306
- 14 -
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits
_ (11) Computation of Earnings Per Share of Common Stock of Texaco Inc.
and Subsidiary Companies.
_ (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on a
Total Enterprise Basis.
_ (20) Copy of Texaco Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (including portions of Texaco Inc.'s
Annual Report to Stockholders for the year 1994) and a copy of
Texaco Inc.'s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1995, as previously filed by the
Registrant with the Securities and Exchange Commission, File
No. 1-27.
_ (22) Information relative to the various matters submitted to a vote
of security holders are described on pages 7 through 21 of the
1995 Proxy Statement of Texaco Inc., relating to the Annual
Meeting of Stockholders held on May 9, 1995, as previously filed
by the Registrant with the Securities and Exchange Commission,
File No. 1-27.
_ (27) Financial Data Schedule.
(b) Reports on Form 8-K:
During the second quarter of 1995, the Registrant filed a Current Report
on Form 8-K for the following event:
1. April 24, 1995 (date of earliest event reported: April 24, 1995)
Item 5. Other Events - reported that Texaco issued an Earnings Press
Release for the first quarter 1995. Texaco appended as an exhibit
thereto a copy of the Press Release entitled "Texaco Reports Results
for the First Quarter 1995," dated April 24, 1995.
- 15 -
SIGNATURES
----------
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.
Texaco Inc.
--------------------
(Registrant)
By: R.C. Oelkers
---------------------
(Comptroller)
By: R.E. Koch
---------------------
(Assistant Secretary)
Date: August 10, 1995
---------------
- 16 -
EXHIBIT 11
TEXACO INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1995 AND 1994
----------------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
-----------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
--------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
Primary Net Income Per Common Share
-----------------------------------
Net income from continuing operations $ 563 $ 317 $ 262 $ 115
Discontinued operations - (87) - (87)
------- ------- ------- -------
Net income 563 230 262 28
Less: Preferred stock dividend requirements (31) (49) (15) (25)
------- ------- ------- -------
Primary net income available for common stock $ 532 $ 181 $ 247 $ 3
======= ======= ======= =======
Average number of primary common shares
outstanding (thousands) 259,749 259,230 259,876 259,275
======= ======= ======= =======
Primary net income per common share $ 2.05 $ .70 $ .95 $ .01
======= ======= ======= =======
Fully Diluted Net Income Per Common Share
-----------------------------------------
Net income $ 563 $ 230 $ 262 $ 28
Preferred stock dividend requirements of
non-dilutive issues and adjustments to net
income associated with dilutive securities (13) (49) (6) (25)
------- ------- ------- -------
Fully diluted net income $ 550 $ 181 $ 256 $ 3
======= ======= ======= =======
Average number of primary common shares
outstanding (thousands) 259,749 259,230 259,876 259,275
Additional shares outstanding assuming full
conversion of dilutive convertible securities
into common stock (thousands):
Convertible debentures 148 - 148 -
Convertible Preferred Stock
Series B ESOP 9,930 - 9,872 -
Series F ESOP 664 - 655 -
Other 78 - 50 -
------- ------- ------- -------
Average number of fully diluted common
shares outstanding (thousands) 270,569 259,230 270,601 259,275
======= ======= ======= =======
Fully diluted net income per common share $ 2.03 $ .70 $ .94 $ .01
======= ======= ======= =======
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
OF TEXACO ON A TOTAL ENTERPRISE BASIS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1994 (a)
------------------------------------------------------
(Millions of dollars)
For the Six
Months Ended Years Ended December 31,
June 30, 1995 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ----
Income from continuing operations, before provision or
benefit for income taxes and cumulative effect of
accounting changes effective 1-1-92 $1,005 $1,409 $1,392 $1,707 $1,744 $2,448
Dividends from less than 50% owned companies
more or (less) than equity in net income (1) (1) (8) (9) 5 (7)
Minority interest in net income 30 44 17 18 16 12
Previously capitalized interest charged to
income during the period 16 29 33 30 23 16
------ ------ ------ ------ ------ ------
Total earnings 1,050 1,481 1,434 1,746 1,788 2,469
------ ------ ------ ------ ------ ------
Fixed charges:
Items charged to income:
Interest charges 312 594 546 551 644 676
Interest factor attributable to operating
lease rentals 60 118 91 94 76 58
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc. 18 31 4 - - -
------ ------ ------ ------ ------ ------
Total items charged to income 390 743 641 645 720 734
Interest capitalized 13 21 57 109 80 50
Interest on ESOP debt guaranteed by Texaco Inc. 7 14 14 18 26 38
------ ------ ------ ------ ------ ------
Total fixed charges 410 778 712 772 826 822
------ ------ ------ ------ ------ ------
Earnings available for payment of fixed charges
(Total earnings + Total items charged to income) $1,440 $2,224 $2,075 $2,391 $2,508 $3,203
====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges of Texaco
on a total enterprise basis 3.51 2.86 2.91 3.10 3.04 3.90
====== ====== ====== ====== ====== ======
(a) Excludes discontinued operations.
5
0000097349
TEXACO INC.
1,000,000
6-MOS
DEC-31-1995
JAN-1-1995
JUN-30-1995
383
41
3,255
23
1,405
5,477
31,302
18,039
25,159
4,707
5,497
1,640
0
543
7,860
25,159
17,617
18,311
13,506
14,932
2,246
0
245
888
325
563
0
0
0
563
2.05
2.05
