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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 1-9210
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OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip code)
(310) 208-8800
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1998
--------------------------- ---------------------------------
Common stock $.20 par value 345,921,059 shares
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
September 30, 1998 and December 31, 1997 2
Consolidated Condensed Statements of Operations --
Three and nine months ended September 30, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows --
Nine months ended September 30, 1998 and 1997 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997
(Amounts in millions)
1998 1997
================================================================================ ======= =======
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 118 $ 113
Receivables, net 629 813
Inventories 481 604
Prepaid expenses, note receivable and other 1,598 386
------- -------
Total current assets 2,826 1,916
LONG-TERM RECEIVABLES, net 115 153
EQUITY INVESTMENTS 1,990 921
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation, depletion and amortization of $6,672 at
September 30, 1998 and $7,967 at December 31, 1997 9,899 8,590
OTHER ASSETS 514 470
NET ASSETS OF DISCONTINUED OPERATIONS -- 3,232
------- -------
$15,344 $15,282
================================================================================ ======= =======
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1998 and DECEMBER 31, 1997
(Amounts in millions)
1998 1997
================================================================================ ======= =======
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities $ 1,400 $ 6
Notes payable 30 35
Accounts payable 512 717
Accrued liabilities 864 1,063
Domestic and foreign income taxes 63 49
------- -------
Total current liabilities 2,869 1,870
------- -------
LONG-TERM DEBT, net of current maturities and unamortized discount 5,830 4,925
------- -------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 925 1,028
Other 2,234 3,173
------- -------
3,159 4,201
------- -------
STOCKHOLDERS' EQUITY
Nonredeemable preferred stock, stated at liquidation value 269 1,125
ESOP preferred stock, at par value -- 1,400
Unearned ESOP shares -- (1,348)
Common stock, at par value 69 68
Additional paid-in capital 3,873 4,149
Retained earnings(deficit) (696) (1,097)
Accumulated other comprehensive income (29) (11)
------- -------
3,486 4,286
------- -------
$15,344 $15,282
================================================================================ ======= =======
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Amounts in millions, except per-share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -------------------
1998 1997 1998 1997
=============================================================== ======= ======= ======= =======
REVENUES
Net sales
Oil and gas operations $ 1,030 $ 883 $ 2,509 $ 2,780
Chemical operations 631 1,124 2,395 3,302
------- ------- ------- -------
1,661 2,007 4,904 6,082
Interest, dividends and other income 39 30 189 64
Gains on disposition of assets, net (Note 3) 133 -- 544 (1)
Income from equity investments (Note 11) 2 (5) 10 25
------- ------- ------- -------
1,835 2,032 5,647 6,170
------- ------- ------- -------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,373 1,448 3,838 4,379
Selling, general and administrative and other
operating expenses 181 248 572 625
Environmental remediation -- 6 -- 24
Exploration expense 27 18 79 60
Interest and debt expense, net 136 107 412 323
------- ------- ------- -------
1,717 1,827 4,901 5,411
------- ------- ------- -------
Income from continuing operations before taxes 118 205 746 759
Provision for domestic and foreign income and
other taxes (Note 10) 80 75 383 364
------- ------- ------- -------
Income from continuing operations 38 130 363 395
Discontinued operations, net (Note 3) -- 27 38 99
------- ------- ------- -------
NET INCOME 38 157 401 494
Preferred dividends (4) (21) (13) (67)
------- ------- ------- -------
EARNINGS APPLICABLE TO COMMON STOCK $ 34 $ 136 $ 388 $ 427
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ .10 $ .32 $ 1.00 $ .99
Discontinued operations, net -- .08 .11 .30
------- ------- ------- -------
Basic earnings per common share $ .10 $ .40 $ 1.11 $ 1.29
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ .10 $ .31 $ .99 $ .96
Discontinued operations, net -- .07 .10 .27
------- ------- ------- -------
Diluted earnings per common share $ .10 $ .38 $ 1.09 $ 1.23
======= ======= ======= =======
DIVIDENDS PER COMMON SHARE $ .25 $ .25 $ .75 $ .75
======= ======= ======= =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 350.0 335.6 351.2 331.8
=============================================================== ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Amounts in millions)
1998 1997
========================================================================================= ======= =======
CASH FLOW FROM OPERATING ACTIVITIES
Net income from continuing operations $ 363 $ 395
Adjustments to reconcile income to net cash provided(used) by operating activities:
Depreciation, depletion and amortization of assets 653 598
Deferred income tax provision 319 96
Other noncash charges to income 41 63
Gains on disposition of assets, net (544) 1
Income from equity investments (10) (25)
Exploration expense 79 60
Changes in operating assets and liabilities (596) (318)
Other operating, net (227) (225)
------- -------
78 645
Operating cash flow from discontinued operations (244) 218
------- -------
Net cash provided(used) by operating activities (166) 863
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (840) (1,008)
Buyout of operating leases -- (20)
Sale of businesses and disposals of property, plant and equipment, net 3,326 101
Purchase of businesses, net (3,528) (4)
Other investing, net 48 35
------- -------
(994) (896)
Investing cash flow from discontinued operations (5) (46)
------- -------
Net cash used by investing activities (999) (942)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 919 77
Net proceeds from commercial paper and revolving credit agreements 1,775 508
Payments on long-term debt and capital lease liabilities (313) (320)
Proceeds from issuance of common stock 22 16
Repurchase of common stock (937) --
Proceeds(payments) of notes payable (5) 3
Cash dividends paid (296) (316)
Other financing, net 5 2
------- -------
1,170 (30)
Financing cash flow from discontinued operations -- 15
------- -------
Net cash provided(used) by financing activities 1,170 (15)
------- -------
Increase(decrease) in cash and cash equivalents 5 (94)
Cash and cash equivalents--beginning of period 113 258
------- -------
Cash and cash equivalents--end of period $ 118 $ 164
========================================================================================= ======= =======
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1998
1. General
The accompanying unaudited consolidated condensed financial statements
have been prepared by Occidental Petroleum Corporation (Occidental)
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and disclosures normally included in notes
to consolidated financial statements have been condensed or omitted
pursuant to such rules and regulations, but resultant disclosures are in
accordance with generally accepted accounting principles as they apply to
interim reporting. The consolidated condensed financial statements should
be read in conjunction with the consolidated financial statements and the
notes thereto incorporated by reference in Occidental's Annual Report on
Form 10-K for the year ended December 31, 1997 (1997 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly Occidental's
consolidated financial position as of September 30, 1998 and the
consolidated results of operations for the three and nine months then
ended and the consolidated cash flows for the nine months then ended. The
results of operations and cash flows for the periods ended September 30,
1998 are not necessarily indicative of the results of operations or cash
flows to be expected for the full year.
Certain financial statements and notes for the prior year have been
changed to conform to the 1998 presentation.
Reference is made to Note 1 to the consolidated financial statements
incorporated by reference in the 1997 Form 10-K for a summary of
significant accounting policies.
2. Changes in Accounting Principles
Effective January 1, 1998, Occidental adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 130--"Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The prior year financial statements have been
restated to conform to the new presentation. Occidental's comprehensive
income was $383 million and $482 million for the nine months ended
September 30, 1998 and 1997, respectively, and $27 million and $154
million for the third quarter of 1998 and 1997, respectively.
Effective January 1, 1998, Occidental adopted the provisions of SFAS No.
131--"Disclosures about Segments of an Enterprise and Related
Information." This statement establishes standards for reporting and
display of information about operating segments. It supersedes or amends
several Financial Accounting Standards Board (FASB) statements, most
notably, SFAS No. 14--"Financial Reporting for Segments of a Business
Enterprise." The implementation of SFAS No. 131 did not have an impact on
Occidental's consolidated financial position or results of operations.
Occidental now reports equity earnings or losses from unconsolidated
subsidiaries in the respective business segment rather than, as previously
reported, as a Corporate item. Accordingly, 1997 segment results have been
restated.
In June 1998, the FASB issued SFAS No. 133--"Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives in the statement of
financial position and measure those instruments at fair value. Occidental
must implement SFAS No. 133 by the first quarter of 2000 and has not yet
made a final determination of its impact on the financial statements.
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3. Asset Acquisitions and Dispositions
On January 31, 1998, Occidental completed the sale of all of the issued
and outstanding shares of common stock of MidCon Corp. (MidCon), its
natural gas transmission and marketing business to K N Energy, Inc. (K N
Energy). Occidental sold the shares to K N Energy in return for a cash
payment of $2.1 billion less payments for taxes and certain other
expenses. The net cash proceeds from the transaction were approximately
$1.7 billion. Additionally, in connection with the sale K N Energy issued
a fixed-rate interest bearing note secured by letters of credit, payable
January 4, 1999, to Occidental in the initial principal amount of $1.4
billion, in exchange for a note previously issued to Occidental by the
MidCon Corp. ESOP Trust. In the fourth quarter of 1997 Occidental
classified MidCon and its subsidiaries as a discontinued operation. As of
December 31, 1997, the operating assets and liabilities of MidCon were
reclassified as net assets of discontinued operations on the balance
sheet.
On February 5, 1998, Occidental acquired the U.S. government's approximate
78 percent interest in the Elk Hills Naval Petroleum Reserve oil and gas
fields (Elk Hills Field) for approximately $3.5 billion. Occidental's
results of operations include the operations of the Elk Hills Field from
the date of acquisition. Pro forma net income for the nine months ended
September 30, 1998, including historical Elk Hills results as if the
acquisition had occurred at January 1, 1998, would not have been
materially different. Pro forma net income for the three and nine months
ended September 30, 1997, including historical Elk Hills results as if the
acquisition had occurred at January 1, 1997, would have been $139 million
($.35 earnings per share) and $464 million ($1.19 earnings per share),
respectively. Pro forma revenues would have been $5.7 billion and $6.5
billion for the nine months ended September 30, 1998 and 1997,
respectively, and $1.9 billion and $2.1 billion for the three months ended
September 30, 1998 and 1997, respectively. The pro forma calculations were
made with historical operating results for the Elk Hills Field prior to
ownership by Occidental and give effect to certain adjustments including
increased depreciation, depletion and amortization to reflect the value
assigned to Elk Hills property, plant and equipment, increased interest
expense assuming the acquisition was completely financed, and income and
property tax effects but did not reflect anticipated future production
enhancements in the Elk Hills Field and operational cost improvements
expected to be realized.
In February 1998, Occidental sold its entire interest in an oilfield
development project in Venezuela for approximately $205 million in cash
plus contingent payments over six years based on oil prices. In March
1998, Occidental sold certain Oklahoma oil and gas properties and
interests in the Austin Chalk area of Louisiana and in the Rocky Mountain
region and other oil and gas properties for aggregate proceeds of
approximately $231 million. These sales resulted in first quarter 1998 net
pretax gains of approximately $105 million.
In April 1998, Occidental sold certain oil and gas properties in Texas for
approximately $63 million. Also in April 1998, Occidental sold the stock
of its MC Panhandle subsidiary, which owns certain natural gas interests
in the West Panhandle field in Texas, for approximately $99 million and
sold certain oil and gas properties in Louisiana and Mississippi for
approximately $190 million. In May 1998, Occidental sold certain oil
properties in Kansas and Colorado for approximately $70 million and sold
certain gas properties in Kansas and Oklahoma for approximately $125
million. Occidental recorded net pretax gains of approximately $290
million in the second quarter of 1998 from the sale of these and other
nonstrategic oil and gas properties.
In May 1998, Occidental contributed its ethylene, propylene, ethylene
oxide and ethylene glycol derivatives businesses (collectively, the
petrochemicals business) to a joint venture partnership called Equistar
Chemicals, LP (Equistar), in return for a 29.5 percent interest in such
partnership, receipt of approximately $420 million in cash and the
assumption by Equistar of approximately $205 million of Occidental capital
lease obligations and other liabilities. Lyondell Petrochemical Company
(Lyondell) and Millennium Chemicals, Inc. (Millennium), through their
respective subsidiaries, were the original partners of Equistar. Lyondell
owns 41 percent of Equistar and Occidental and Millennium each own 29.5
percent. Following the closing of the transaction, the assets and
liabilities transferred to the partnership (primarily property, plant and
equipment and inventories) were removed from the balance sheet and an
equity investment was recorded. Occidental's results of operations and
cash flows include amounts related to the assets transferred up to the
transaction
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closing date. Subsequent to the closing date, Occidental has accounted for
the joint venture as an equity investment. Occidental did not record a
gain or loss on the transaction.
In June 1998, Occidental signed a nonbinding letter of intent with The
Geon Company (Geon) providing, among other things, for the combination of
certain polyvinyl chloride resin and vinyl chloride monomer plants and
certain chlor-alkali facilities of the two companies in a joint venture.
Under the agreement, Occidental will own 76 percent and Geon will own 24
percent of such joint venture company. The transaction is expected to be
completed by the first quarter of 1999, after signing of definitive
agreements and receipt of approvals by Geon shareholders and certain
governmental regulatory agencies.
In July 1998, Occidental sold the stock of Occidental Netherlands, Inc.
for approximately $275 million, in cash and the assumption of debt, plus
future contingent payments. Occidental Netherlands owns interests in eight
gas-producing licenses in the Dutch North Sea and a 38.6 percent interest
in Noordgastransport B.V., which owns the gas pipeline system that
services the area. Occidental recorded a pretax gain on the disposition of
approximately $137 million.
In September 1998, Occidental and the Royal Dutch/Shell Group (Shell)
consummated the exchange of Occidental's oil and gas interests in the
Philippines and Malaysia for Shell's oil and gas interests in Yemen and
its interests in the Cravo Norte, Samore, Soapaga and Rondon association
contracts in Colombia. Shell also received a cash payment at closing of
approximately $89 million. No gain or loss was recorded on the
transaction.
4. Supplemental Cash Flow Information
Cash payments during the nine months ended September 30, 1998 and 1997
included federal, foreign and state income taxes of approximately $198
million and $129 million, respectively. Interest paid, net of interest
capitalized, totaled approximately $358 million and $310 million for the
nine months ended September 30, 1998 and 1997, respectively.
5. Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and
bank deposits with maturities of three months or less when purchased. Cash
equivalents totaled $81 million and $50 million at September 30, 1998 and
December 31, 1997, respectively.
6. Inventories
A portion of inventories is valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on management's estimates of
year-end inventory levels and costs. Inventories consist of the following
(in millions):
Balance at September 30, 1998 December 31, 1997
======================== ================== ==================
Raw materials $ 45 $ 102
Materials and supplies 191 189
Work in process 10 22
Finished goods 273 342
-------- --------
519 655
LIFO reserve (38) (51)
-------- --------
Total $ 481 $ 604
======== ========
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7. Property, Plant and Equipment
Reference is made to the consolidated balance sheets and Note 1 thereto
incorporated by reference in the 1997 Form 10-K for a description of
investments in property, plant and equipment.
8. Retirement Plans and Postretirement Benefits
Reference is made to Note 14 to the consolidated financial statements
incorporated by reference in the 1997 Form 10-K for a description of the
retirement plans and postretirement benefits of Occidental and its
subsidiaries.
9. Lawsuits, Claims, Commitments, Contingencies and Related Matters
Occidental and certain of its subsidiaries have been named as defendants
or as potentially responsible parties in a substantial number of lawsuits,
claims and proceedings, including governmental proceedings under the
Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) and corresponding state acts. These governmental proceedings seek
funding, remediation and, in some cases, compensation for alleged property
damage, punitive damages and civil penalties, aggregating substantial
amounts. Occidental is usually one of many companies in these proceedings,
and has to date been successful in sharing response costs with other
financially sound companies. Occidental has accrued reserves at the most
likely cost to be incurred in those proceedings where it is probable that
Occidental will incur remediation costs which can be reasonably estimated.
During the course of its operations, Occidental is subject to audit by
taxing authorities for varying periods in various tax jurisdictions.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities.
It is impossible at this time to determine the ultimate liabilities that
Occidental and its subsidiaries may incur resulting from the foregoing
lawsuits, claims and proceedings, audits, commitments, contingencies and
related matters. Several of these matters may involve substantial amounts,
and if these were to be ultimately resolved unfavorably to the full amount
of their maximum potential exposure, an event not currently anticipated,
it is possible that such event could have a material adverse effect upon
Occidental's consolidated financial position or results of operations.
However, in management's opinion, after taking into account reserves, it
is unlikely that any of the foregoing matters will have a material adverse
effect upon Occidental's consolidated financial position or results of
operations.
Reference is made to Note 10 to the consolidated financial statements
incorporated by reference in the 1997 Form 10-K for information concerning
Occidental's long-term purchase obligations for certain products and
services.
10. Income Taxes
The provision for taxes based on income for the 1998 and 1997 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pretax income.
At December 31, 1997, Occidental had, for U.S. federal income tax return
purposes, an alternative minimum tax credit carryforward of $165 million
available to reduce future income taxes. The alternative minimum tax
credit carryforward does not expire.
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11. Investments
Investments in companies, other than oil and gas exploration and
production companies, in which Occidental has a voting stock interest of
at least 20 percent, but not more than 50 percent, and certain
partnerships are accounted for on the equity method. At September 30,
1998, Occidental's equity investments consisted primarily of a 29.5
percent interest in Equistar acquired in May 1998, an investment of
approximately 29 percent in the common shares of Canadian Occidental
Petroleum Ltd. and various chemical partnerships and joint ventures. The
following table presents Occidental's proportionate interest in the
summarized financial information of its equity method investments (in
millions):
Periods Ended September 30
----------------------------------------------------------
Three Months Nine Months
-------------------------- --------------------------
1998 1997 1998 1997
========== ========== ========== ==========
Revenues $ 522 $ 245 $ 1,128 $ 707
Costs and expenses 520 250 1,118 682
---------- ---------- ---------- ----------
Net income $ 2 $ (5) $ 10 $ 25
========== ========== ========== ==========
12. Summarized Financial Information of Wholly-Owned Subsidiary
Occidental has guaranteed the payments of principal of, and interest on,
certain publicly traded debt securities of its subsidiary, OXY USA Inc.
(OXY USA). The following tables present summarized financial information
for OXY USA (in millions):
Periods Ended September 30
----------------------------------------------------------
Three Months Nine Months
--------------------------- --------------------------
1998 1997 1998 1997
========== =========== ========== ==========
Revenues $ 161 $ 216 $ 1,005 $ 740
Costs and expenses 161 188 802 626
---------- ---------- ---------- ----------
Net income $ -- $ 28 $ 203(a) $ 114
========== =========== ========== ==========
(a) Includes net gains on the sale of certain nonstrategic
assets of $106 million in the second quarter.
Balance at September 30, 1998 December 31, 1997
================================= =================== ===================
Current assets $ 74 $ 150
Intercompany receivable $ 347 $ 29
Noncurrent assets $ 1,735 $ 2,024
Current liabilities $ 208 $ 259
Interest bearing note to parent $ 73 $ 89
Noncurrent liabilities $ 908 $ 1,106
Stockholders' equity $ 967(a) $ 749
(a) Includes a capital contribution of $17 million in the third
quarter.
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13. Industry Segments
Occidental adopted the provisions of SFAS No. 131--"Disclosures about
Segments of an Enterprise and Related Information" effective January 1,
1998. The following table presents the required interim segment
disclosures (in millions):
Oil and Gas Chemical Corporate Total
========================================== =========== =========== =========== ===========
Nine months ended September 30, 1998
Net sales $ 2,509 $ 2,395 $ -- $ 4,904
=========== =========== =========== ===========
Pretax operating profit(loss) $ 890 $ 278 $ (422)(a) $ 746
Income taxes 122 (2) 263(b) 383
Discontinued operations, net -- -- 38 38
----------- ----------- ----------- -----------
Net income(loss) $ 768(c) $ 280(d) $ (647) $ 401
========================================== =========== =========== =========== ===========
Nine months ended September 30, 1997
Net sales $ 2,780 $ 3,302 $ -- $ 6,082
=========== =========== =========== ===========
Pretax operating profit(loss) $ 741 $ 509 $ (491)(a) 759
Income taxes 211 19 134(b) 364
Discontinued operations, net -- -- 99 99
----------- ----------- ----------- -----------
Net income(loss) $ 530 $ 490 $ (526)(e) $ 494
========================================== =========== =========== =========== ===========
(a) Includes unallocated net interest expense, administration expense and
other items.
(b) Includes unallocated income taxes.
(c) Includes net gains on the sale of certain nonstrategic assets of $532
million and other charges of $42 million.
(d) Includes a $30 million pretax charge for reorganization and other
costs.
(e) Includes a $75 million pretax charge to amend certain employment
agreements with two senior executives.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Occidental is experiencing a period of historically low energy and commodity
chemical prices that have adversely affected earnings. The duration of this
period of low prices cannot be predicted. However, consistent with the more
streamlined Occidental that has resulted from a series of sales, acquisitions
and exchanges of assets, Occidental has substantially reduced administrative
staff which will result in reduced costs at its divisions and corporate
headquarters locations.
Occidental's net income for the first nine months of 1998 was $401 million, on
net sales of $4.9 billion, compared with $494 million, on net sales of $6.1
billion, for the same period of 1997. Occidental's net income for the third
quarter of 1998 was $38 million, on net sales of $1.7 billion, compared with
$157 million, on net sales of $2.0 billion, for the same period of 1997. Basic
earnings per common share were $1.11 for the first nine months of 1998, compared
with $1.29 for the same period of 1997. Basic earnings per common share were
$.10 for the third quarter of 1998, compared with $.40 for the same period of
1997.
The 1998 earnings for the first nine months included net pretax gains of
approximately $532 million from the sale of certain nonstrategic oil and gas
properties, as part of an asset redeployment program, of which $137 million was
recorded in the third quarter. The 1998 earnings also included a $30 million
charge for the write-off of certain exploration projects and a $12 million
reorganization charge in the third quarter for the oil and gas division, a $30
million second quarter charge for reorganization and other costs and a favorable
adjustment of estimates for fringe benefit and railcar expense in the third
quarter in the chemical division and $38 million of income from discontinued
operations to reflect the closing of the sale of MidCon Corp. (MidCon), the
natural gas transmission and marketing subsidiary, and the finalization of the
discontinued operations reserve in the first quarter. The 1997 earnings for the
three and nine months ended September 30 included income from discontinued
operations of $27 million and $99 million, respectively. Earnings before special
items were $3 million and $139 million for the three and nine months ended
September 30, 1998, respectively, compared with $184 million and $449 million
for the same periods in 1997, respectively. The 1997 earnings also included a
third quarter charge, net of taxes, of $54 million to amend certain employment
agreements with two senior executives. The decrease in earnings before special
items in both periods primarily reflected lower worldwide crude oil prices and
lower chemical margins, partially offset by increased crude oil production in
the United States and Eastern Hemisphere. The lower chemical margins reflected
the impact of lower prices for most major chemical products, partially offset by
higher caustic soda prices and lower energy and raw material prices.
The decrease in net sales for the three and nine months ended September 30,
1998, compared with the same periods in 1997, primarily reflected lower
worldwide crude oil prices in the oil and gas division and lower prices and
volumes for certain chemical products and also reflected the absence of revenues
related to the petrochemical assets contributed to Equistar Chemicals, LP
(Equistar) in May 1998.
Interest, dividends and other income for the three and nine months ended
September 30, 1998 included, among other things, interest earned on a $1.4
billion note received (the $1.4 billion note receivable) in exchange for a note
previously issued to Occidental by the MidCon Corp. ESOP Trust. The increase in
interest and debt expense reflected the impact of higher debt levels in 1998.
The decrease in income from equity investments for the nine months ended
September 30, 1998, compared with the same period in 1997, reflected lower
equity earnings from Canadian Occidental Petroleum Ltd. and the OxyMar chemical
joint venture, offset in part by equity earnings from Equistar in 1998 and the
improvement in equity earnings from certain chemical joint ventures in Thailand.
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The following table sets forth the sales and earnings of each operating division
and corporate items (in millions):
Periods Ended September 30
--------------------------------------------------
Three Months Nine Months
----------------------- ----------------------
1998 1997 1998 1997
============================================================ ========= ========= ========= =========
DIVISIONAL NET SALES
Oil and gas $ 1,030 $ 883 $ 2,509 $ 2,780
Chemical 631 1,124 2,395 3,302
--------- --------- --------- ---------
NET SALES $ 1,661 $ 2,007 $ 4,904 $ 6,082
========= ========= ========= =========
DIVISIONAL EARNINGS
Oil and gas $ 156 $ 144 $ 768 $ 530
Chemical 62 209 280 490
--------- --------- --------- ---------
218 353 1,048 1,020
UNALLOCATED CORPORATE ITEMS
Interest expense, net (106) (100) (336) (302)
Income taxes, administration and other (74) (123) (349) (323)
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 38 130 363 395
Discontinued operations, net -- 27 38 99
--------- --------- --------- ---------
NET INCOME $ 38 $ 157 $ 401 $ 494
============================================================ ========= ========= ========= =========
Oil and gas earnings for the first nine months of 1998 were $768 million,
compared with $530 million for the same period of 1997. Oil and gas divisional
earnings before special items were $278 million for the first nine months of
1998, compared with $530 million for the first nine months of 1997. Oil and gas
earnings for the third quarter of 1998 were $156 million, compared with $144
million for the same period of 1997. Oil and gas earnings before special items
were $61 million for the third quarter of 1998, compared with $144 million for
the third quarter of 1997. The first nine months of 1998 earnings included
pretax gains of approximately $532 million related to the sale of nonstrategic
assets located in Venezuela, the Netherlands, and the United States, of which
$137 million was recorded in the third quarter for the sale of Occidental's
interests in the Netherlands. The 1998 third quarter earnings also included a
$30 million charge for the write-off of certain exploration projects and a $12
million reorganization charge. The decrease in earnings before special items in
both periods primarily reflected the negative impact of lower worldwide crude
oil prices, partially offset by increased crude oil production in the United
States and Eastern Hemisphere. The decrease in revenues for the nine months
ended September 30, 1998, compared with the same period in 1997, reflected the
impact of lower worldwide crude oil prices and lower domestic natural gas prices
partially offset by increased crude oil production in the United States and
Eastern Hemisphere. The increase in revenues for the three months ended
September 30, 1998, compared with the same period in 1997, reflected higher oil
trading activity and increased crude oil production in the United States and
Eastern Hemisphere partially offset by lower worldwide crude oil prices.
Approximately 39 percent and 33 percent of oil and gas net sales were attributed
to oil and gas trading activity in the first nine months of 1998 and 1997,
respectively. The results of oil and gas trading were not significant. Oil and
gas prices are sensitive to complex factors, which are outside the control of
Occidental. Accordingly, Occidental is unable to predict with certainty the
direction, magnitude or impact of future trends in sales prices for oil and gas.
Chemical earnings for the first nine months of 1998 were $280 million, compared
with $490 million for the same period of 1997. Chemical earnings before special
items were $310 million for the first nine months of 1998, compared with $490
million for the first nine months of 1997. Chemical earnings for the third
quarter of 1998 were $62 million, compared with $209 million for the same period
of 1997. The 1998 earnings reflected a $30 million pretax charge for
reorganization and other costs in the second quarter and a favorable adjustment
of estimates for fringe benefit and railcar expense in the third quarter. The
decrease in earnings before special items in both periods
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primarily reflected the impact of lower prices for most major chemical products,
partially offset by higher caustic soda margins and lower energy and raw
material prices. The decrease in net sales for the three and nine months ended
September 30, 1998, compared with the same periods in 1997, primarily reflected
the absence of revenues related to the petrochemical assets contributed to
Equistar in May 1998 as well as lower prices and volumes for most chemical
products. Most of Occidental's chemical products are commodity in nature, the
prices of which are sensitive to a number of complex factors. Accordingly,
Occidental is unable to accurately forecast the trend of sales prices for its
commodity chemical products.
Divisional earnings include credits in lieu of U.S. federal income taxes. In the
first nine months of 1998 and 1997, divisional earnings benefited by $28 million
and $30 million, respectively, from credits allocated. This included credits of
$8 million and $20 million at oil and gas and chemical, respectively, in the
first nine months of 1998 and $10 million and $20 million at oil and gas and
chemical, respectively, for the first nine months of 1997.
Occidental and certain of its subsidiaries have been named as defendants or as
potentially responsible parties in a substantial number of lawsuits, claims and
proceedings, including governmental proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) and
corresponding state acts. These governmental proceedings seek funding,
remediation and, in some cases, compensation for alleged property damage,
punitive damages and civil penalties, aggregating substantial amounts.
Occidental is usually one of many companies in these proceedings, and has to
date been successful in sharing response costs with other financially sound
companies. Occidental has accrued reserves at the most likely cost to be
incurred in those proceedings where it is probable that Occidental will incur
remediation costs which can be reasonably estimated.
During the course of its operations, Occidental is subject to audit by taxing
authorities for varying periods in various tax jurisdictions. Occidental has
certain other commitments under contracts, guarantees and joint ventures, and
certain other contingent liabilities.
It is impossible at this time to determine the ultimate liabilities that
Occidental and its subsidiaries may incur resulting from the foregoing lawsuits,
claims and proceedings, audits, commitments, contingencies and related matters.
Several of these matters may involve substantial amounts, and if these were to
be ultimately resolved unfavorably to the full amount of their maximum potential
exposure, an event not currently anticipated, it is possible that such event
could have a material adverse effect upon Occidental's consolidated financial
position or results of operations. However, in management's opinion, after
taking into account reserves, it is unlikely that any of the foregoing matters
will have a material adverse effect upon Occidental's consolidated financial
position or results of operations.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities from continuing
operations was $78 million for the first nine months of 1998, compared with net
cash provided of $645 million for the same period of 1997. The decrease
primarily reflected the impact of lower worldwide crude oil prices and lower
chemical prices. Included in total cash flow from operating activities is cash
used by discontinued operations of $244 million in 1998 and cash provided by
discontinued operations of $218 million in 1997. The 1998 cash used by
discontinued operations included the negative effect of $250 million of
receivables repurchased in connection with the sale of MidCon. The 1998 and 1997
noncash charges included employee benefit plans expense and various other
charges. The 1998 noncash charges also included a charge for the write-off of an
investment in certain exploration properties and previously announced
reorganization accruals.
Occidental's net cash used by investing activities was $999 million for the
first nine months of 1998, compared with $942 million for the same period of
1997. The 1998 amount reflected cash used of $3.5 billion for the purchase of
the Elk Hills Field and capital expenditures of $840 million. The 1998 amount
also reflected proceeds of $3.3 billion, primarily from the sale of MidCon and
certain nonstrategic oil and gas properties, as well as disposals of property,
plant and equipment. Capital expenditures in 1998 included $595 million in oil
and gas and $244 million in chemical. Capital expenditures were $1.0 billion in
1997, including $799 million in oil and gas and $207 million in chemical. In
February 1998, Occidental acquired the U.S. government's approximate 78 percent
interest in the
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Elk Hills Naval Petroleum Reserve oil and gas fields (Elk Hills Field). As part
of the asset redeployment program, Occidental completed the sale in 1998 of
various nonstrategic oil and gas properties. These properties included the sale,
in the first quarter of 1998, of Occidental's entire interest in an oilfield
development project in Venezuela for approximately $205 million in cash plus
contingent payments over six years based on oil prices and the sale of certain
Oklahoma oil and gas properties and interests in the Austin Chalk area of
Louisiana and in the Rocky Mountain region and other oil and gas properties for
aggregate proceeds of approximately $231 million. In the second quarter of 1998,
Occidental sold, as part of the program, certain oil and gas properties in Texas
for approximately $63 million; the stock of its MC Panhandle subsidiary, which
owns certain natural gas interests in the West Panhandle field in Texas, for
approximately $99 million; certain oil and gas properties in Louisiana and
Mississippi for approximately $190 million; certain oil properties in Kansas and
Colorado for approximately $70 million; and certain gas properties in Kansas and
Oklahoma for approximately $125 million. In the third quarter of 1998,
Occidental also sold, as part of the program, the stock of Occidental
Netherlands, Inc., for approximately $275 million, in cash and the assumption of
debt, plus future contingent payments. Additionally, in September 1998,
Occidental made a cash payment of approximately $89 million to the Royal
Dutch/Shell Group (Shell) in connection with the exchange of certain oil and gas
interests as described below. Net proceeds from the sale of businesses and
disposal of property, plant and equipment for the first nine months of 1997
totaled $101 million which included the proceeds from the sale of a chemical
plant in the second quarter.
Financing activities provided net cash of $1.2 billion in the first nine months
of 1998, compared with net cash used of $15 million for the same period of 1997.
The 1998 amount reflected net cash provided of $2.4 billion primarily from
proceeds from borrowings to fund a portion of the acquisition of the Elk Hills
Field in February 1998. The 1998 amount also included cash used of $937 million
for the repurchase of 35.1 million shares of Occidental common stock and $296
million for the payment of dividends. Total shares repurchased from the
inception of the program through October 30, 1998 were 39.3 million for
approximately $1.06 billion. In April 1998, Occidental issued $900 million par
value of long-term debt. The scheduled maturities range from 5 to 30 years. The
proceeds were used to repay outstanding commercial paper. The 1997 amount
reflected net cash provided of $268 million, primarily from proceeds from
borrowings, and cash used for the payment of dividends of $316 million.
In October 1998, Occidental issued $270 million of extendible notes with a ten
year final maturity and an initial coupon expiring in April 2000. At the end of
such period, the notes will either be automatically tendered, subject to the
right of any holder not to tender, to a remarketing agent for resale to the
public, or repurchased by Occidental if a mutual agreement is not reached with
the remarketing agent on the remaining spread. The proceeds were used to repay
outstanding commercial paper.
Net cash used by investing activities and operating activities in the first nine
months of 1998, was funded by additional borrowings. Operating cash flow
decreased primarily due to the impact of lower worldwide crude oil prices, lower
chemical prices and the repurchase of previously sold accounts receivable of
Occidental's former subsidiary MidCon and of the petrochemical business
contributed to Equistar. In addition, cash proceeds from Occidental's program to
sell nonstrategic assets did not totally offset cash expenditures for the
February 1998 acquisition of its interest in Elk Hills Field and the common
stock repurchase program.
For 1998 Occidental anticipates a net cash shortfall, which it expects can be
funded without substantial additional borrowings over the levels at September
30, 1998. Occidental believes that cash generated from operations, sale of
assets and available borrowing capacity will be adequate to meet its anticipated
cash requirements including operating requirements, capital spending and
dividend payments for the next twelve months, assuming oil and gas prices remain
in their current range. However, Occidental continually evaluates possible
acquisitions or other extraordinary transactions, which may, individually or in
the aggregate, affect Occidental's cash requirements. Available but unused lines
of committed bank credit totaled approximately $400 million at September 30,
1998, $1.0 billion at October 31, 1998 and $1.5 billion at December 31, 1997.
In May 1998, Occidental contributed its ethylene, propylene, ethylene oxide and
ethylene glycol derivatives businesses (collectively, the petrochemicals
business) to the Equistar joint venture partnership, in return for a 29.5
percent interest in such partnership, receipt of approximately $420 million in
cash and the assumption by Equistar of approximately $205 million of Occidental
capital lease obligations and other liabilities. Lyondell Petrochemical Company
(Lyondell) and Millennium Chemicals, Inc. (Millennium), through their respective
subsidiaries, were the
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original partners of Equistar. Lyondell owns 41 percent of Equistar and
Occidental and Millennium each own 29.5 percent. Occidental did not record a
gain or loss on the transaction.
In June 1998, Occidental signed a nonbinding letter of intent with The Geon
Company (Geon) providing, among other things, for the combination of certain
polyvinyl chloride resin and vinyl chloride monomer plants and certain
chlor-alkali facilities of the two companies in a joint venture. Under the
agreement, Occidental will own 76 percent and Geon will own 24 percent of such
joint venture company. The transaction is expected to be completed by the first
quarter of 1999, after signing of definitive agreements and receipt of approvals
by Geon shareholders and certain governmental regulatory agencies.
In September 1998, Occidental and Shell consummated the exchange of Occidental's
oil and gas interests in the Philippines and Malaysia for Shell's oil and gas
interests in Yemen and its interests in the Cravo Norte, Samore, Soapaga and
Rondon association contracts in Colombia. Shell also received a cash payment at
closing of approximately $89 million. As a result of the exchange, Occidental's
oil production is expected to increase by 46,000 barrels per day. No gain or
loss was recorded on the transaction.
In June 1997, Occidental sold its chlor-alkali chemical plant located in Tacoma,
Washington for approximately $102 million which included $97 million in cash and
the balance in preferred stock. The sale did not have a material effect on the
results of operations. Also in June 1997, Occidental purchased 28,000 shares of
preferred stock of Leslie's Poolmart, Inc. (Leslie's) for total consideration of
$28 million, which consisted of cash and the exchange of $10 million of Leslie's
subordinated debentures held by Occidental.
The balance in prepaid expenses, note receivable and other at September 30, 1998
includes the $1.4 billion note receivable. The balance in equity investments at
September 30, 1998 includes Occidental's interest in Equistar. The increase in
the balance of net property, plant and equipment reflected the acquisition of
the Elk Hills Field offset, in part, by property, plant and equipment
contributed to Equistar and the sale of various nonstrategic oil and gas
properties. The balance in net assets of discontinued operations at December 31,
1997 included the operating assets and liabilities of MidCon.
Current maturities of long-term debt and capital lease liabilities increased
reflecting the current portion of long-term debt that is expected to be paid in
the first quarter of 1999 using the proceeds of the $1.4 billion note
receivable. The increase in long-term debt reflected increased commercial paper
borrowings to fund a portion of the acquisition of the Elk Hills Field. Other
deferred credits and other liabilities decreased, reflecting the payment of
amounts associated with the sale of MidCon and the assumption by Equistar of
approximately $205 million of capital lease liabilities. The decrease in
nonredeemable preferred stock primarily reflected the conversion, in March 1998,
of all of the 15.1 million shares of Occidental's $3.875 preferred stock into
33.2 million shares of common stock. The decrease in ESOP preferred stock and
unearned ESOP shares resulted from the completion of the sale of MidCon. The
decrease in additional paid-in capital reflected dividends on common and
preferred stock and common stock repurchased offset, in part, by common stock
issued in connection with the preferred stock conversion.
Occidental believes it may have exhausted its accumulated earnings and profits
for tax purposes, therefore, some common and preferred stock dividends received
by shareholders in 1998 may be a return of capital.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133--"Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives in the statement of financial position and
measure those instruments at fair value. Occidental must implement SFAS No. 133
by the first quarter of 2000 and has not yet made a final determination of its
impact on the financial statements.
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YEAR 2000 ISSUE
Occidental's efforts to address Year 2000 (Y2K) issues began in 1997. In
addressing the issues Occidental has employed a five-step process consisting of:
1) conducting a company-wide inventory, 2) assessing Y2K compliance, 3)
remediating non-compliant software and hardware and particularly that which
employs embedded chips such as process controls, 4) testing remediated hardware
and software and 5) certifying Y2K compliance.
Personnel from operations and from functional disciplines, as well as
information technology professionals, are involved in the process. Outside
consultants have also been retained to participate in the inventory and
assessment process. A Y2K corporate-level manager was appointed to oversee and
provide consistency to the overall process, provide support resources on a
company-wide basis and minimize duplication of efforts. In addition, a committee
of senior corporate executives provides oversight through an extensive monthly
status review of project elements. Additionally, a report is made to
Occidental's Board of Directors on Y2K status at each board meeting.
Inventory and assessment activities are estimated at approximately 85 percent
complete. This data is continuously updated as new information becomes available
and we expect this to continue throughout the Y2K effort. Overall remediation
efforts are estimated at approximately 35 percent complete. The coincidental
replacement of several major existing systems is well under way; these efforts
began before the Y2K efforts were initiated therefore the timing for completion
of these projects has not been accelerated as a result of Y2K issues. These new
systems will allow Occidental to discontinue use of these existing systems prior
to January 1, 2000.
Costs for Y2K efforts are not being accumulated separately. Much of the cost is
being accounted for as part of normal operating budgets. Overall, the costs are
estimated to be approximately $50 million. Most of the cost is associated with
the remediation of various process control and field systems (systems that
utilize embedded computer chip technology). Due to the nature of these devices
and to minimize the impact on normal operations the remediation process will
continue until mid 1999. Overall, the costs are not expected to have a
significant effect on Occidental's consolidated financial position or results of
operations.
The risks associated with the Y2K issue can be substantial from the standpoint
of reliance on third parties. Communication with customers, suppliers and equity
partners to determine the extent of their Y2K efforts, including selected site
visits, is an integral part of the program. Occidental, like most companies, is
reliant on third parties for a wide variety of goods and services -- from raw
materials to electricity. Occidental's efforts include addressing the "supply
chain" issues to minimize the potential impact of a major supplier (or customer)
experiencing a Y2K problem that would adversely affect Occidental.
Because of these company wide efforts, Occidental believes that appropriate
actions have been taken to minimize the risk to its operations and financial
condition.
Contingency plans that address a reasonably likely worst case scenario are
currently being developed. These plans will address the key systems and third
parties that present potential significant risk. The plans will analyze the
strategies and resources necessary to restore operations in the unlikely event
that an interruption does occur. The plans will also outline a recovery program
detailing the necessary participants, processes and equipment needed to restore
operations. Contingency plans are expected to be finalized during the third
quarter of 1999.
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ENVIRONMENTAL MATTERS
Occidental's operations in the United States are subject to stringent federal,
state and local laws and regulations relating to improving or maintaining the
quality of the environment. Foreign operations also are subject to varied
environmental protection laws. Costs associated with environmental compliance
have increased over time and may continue to rise in the future.
The laws which require or address environmental remediation may apply
retroactively to previous waste disposal practices. And, in many cases, the laws
apply regardless of fault, legality of the original activities or ownership or
control of sites. Occidental is currently participating in environmental
assessments and cleanups under these laws at federal Superfund sites, comparable
state sites and other remediation sites, including Occidental facilities and
previously owned sites.
Occidental does not consider the number of Superfund and comparable state sites
at which it has been notified that it has been identified as being involved to
be a relevant measure of exposure. Although the liability of a potentially
responsible party (PRP), and in many cases its equivalent under state law, may
be joint and several, Occidental is usually one of many companies cited as a PRP
at these sites and has, to date, been successful in sharing cleanup costs with
other financially sound companies.
As of September 30, 1998, Occidental had been notified by the Environmental
Protection Agency (EPA) or equivalent state agencies or otherwise had become
aware that it had been identified as being involved at 174 Superfund or
comparable state sites. (This number does not include those sites where
Occidental has been successful in resolving its involvement). The 174 sites
include 66 former Diamond Shamrock Chemical sites as to which Maxus Energy
Corporation has retained all liability, and 2 sites at which the extent of such
retained liability is disputed. Of the remaining 106 sites, Occidental has
denied involvement at 15 sites and has yet to determine involvement in 15 sites.
With respect to the remaining 76 of these sites, Occidental is in various stages
of evaluation. For 68 of these sites, where environmental remediation efforts
are probable and the costs can be reasonably estimated, Occidental has accrued
reserves at the most likely cost to be incurred. The 68 sites include 15 sites
as to which present information indicates that it is probable that Occidental's
aggregate exposure is immaterial. In determining the reserves, Occidental uses
the most current information available, including similar past experiences,
available technology, regulations in effect, the timing of remediation and
cost-sharing arrangements. For the remaining 8 of the 76 sites being evaluated,
Occidental does not have sufficient information to determine a range of
liability, but Occidental does have sufficient information on which to base the
opinion expressed above under the caption "Results of Operations."
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION
Portions of this report are forward-looking and involve risks and uncertainties
that could significantly affect expected results. Factors that could cause
results to differ materially include, but are not limited to: global commodity
pricing fluctuations; competitive pricing pressures; higher than expected costs
including feedstocks; the supply/demand considerations for Occidental's
products; any general economic recession domestically or internationally;
regulatory uncertainties; and not successfully completing any development of new
fields, expansion, capital expenditure, efficiency improvement, acquisition or
disposition.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
There is incorporated by reference herein the information regarding legal
proceedings in Item 3 of Part I of Occidental's 1997 Annual Report on Form 10-K,
Item 1 of Part II of Occidental's Quarterly Report on Form 10-Q for the
quarterly periods ended March 31, 1998 and June 30, 1998 and Note 9 to the
consolidated condensed financial statements in Part I hereof.
In January 1998, two shareholder derivative actions were filed by the Teacher's
Retirement System of Louisiana and others in the Los Angeles Superior Court
against the Board of Directors of Occidental and Occidental, as a nominal
defendant, with respect to the payments made in 1997 to Occidental's Chairman
and President in connection with the restructuring of their respective
employment agreements. In August 1998, the Superior Court sustained defendants'
demurrers to the consolidated complaint with leave to amend. Thereafter,
plaintiffs filed a second amended consolidated complaint making allegations
similar to those that formed the basis of their earlier complaints. Plaintiffs
seek substantially the same relief, but deleted their request for a declaration
that the employment agreements are null and void. The parties have reached an
agreement in principle fully resolving the litigation without any admission of
liability by the defendants, subject to approval of the Superior Court following
notice to Occidental's shareholders of record. If approved by the court, the
agreement would not have a material adverse effect on Occidental's consolidated
financial condition or results of operations.
ENVIRONMENTAL PROCEEDINGS
In April 1998, a civil action was filed on behalf of the U.S. Environmental
Protection Agency (EPA) against Occidental Chemical Corporation (OxyChem)
relating to the Centre County Kepone Superfund Site at State College,
Pennsylvania. The lawsuit seeks approximately $12 million in penalties and
governmental response costs, a declaratory judgment that OxyChem is a liable
party under CERCLA, and an order requiring OxyChem to carry out the remedy that
is being performed by the site owner. In October 1998, the U.S. District Court
for the Middle District of Pennsylvania granted OxyChem's motion to dismiss the
United States' case.
In October 1998, OxyChem received an administrative complaint filed by Region
III of the EPA with respect to OxyChem's former manufacturing plant at Belle,
West Virginia. The complaint alleges that OxyChem violated various hazardous
waste management rules in 1994 and 1995 and demands civil penalties of
approximately $245 thousand. OxyChem intends to vigorously contest the alleged
violations and the proposed penalties.
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ITEM 5. OTHER INFORMATION
In September 1998, the Board of Directors of Occidental amended the provision of
the By-laws pertaining to the manner in which a stockholder may properly present
business (for example, introduce a proposal that was not included in the proxy
materials) at the Annual Meeting of Stockholders.
Under the By-laws, as amended, to be properly brought before the Annual Meeting,
business must be brought by a stockholder of Occidental (i) who is a stockholder
of record on the date notice is given as provided below and on the record date
for the determination of stockholders entitled to vote at the Annual Meeting and
(ii) who complies with the notice procedures described below. The stockholder
must give timely notice of the business to be brought to the Secretary of
Occidental. The notice must be received at the principal executive offices of
Occidental, not less than 70 days nor more than 90 days prior to the anniversary
date of the immediately preceding Annual Meeting (for example, the 1998 Annual
Meeting was held on May 1st, therefore, stockholder proposals must be received
at Occidental's executive offices from January 31, 1999 through February 20,
1999). The notice must contain (i) a brief description of the business desired
to be brought before the meeting, the reasons for conducting such business at
the Annual Meeting and any material interest in such business of the stockholder
and the beneficial holder, if any, on whose behalf the proposal is made, (ii)
the name and record address of the proponent, (iii) the class, series and number
of shares of Occidental beneficially owned by the proponent, (iv) a description
of all arrangements or understandings between the proponent or any other
person(s) (including their names) in connection with such business, (v) whether
the proponent intends to distribute proxy materials and (vi) a representation
that the proponent intends to appear in person or by another person authorized
to act as proxy for the proponent to present such business.
The change to the By-laws described above does not affect proposals submitted to
Occidental in accordance with Rule 14a-8 of the SEC's proxy rules. As disclosed
in Occidental's Proxy Statement for the 1998 Annual Meeting of Stockholders, in
order to be included in the proxy statement and form of proxy relating to the
1999 Annual Meeting, stockholder proposals must be received at Occidental's
executive offices by November 17, 1998. In order for a shareholder proposal made
outside of Rule 14a-8 to be considered timely within the meaning of Rule
14a-4(c), such proposal must be received by Occidental's principal executive
offices not later than 70 days nor more than 90 days prior to the anniversary
date of the immediately preceding Annual Meeting.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 By-laws of Occidental, as amended through September
17, 1998
4.1 First Amendment dated as of August 31, 1998, amending
that certain Credit Agreement dated as of March 20,
1997, among Occidental and the Banks named therein
11 Statement regarding the computation of earnings per
share for the three and nine months ended September
30, 1998 and 1997
12 Statement regarding the computation of total
enterprise ratios of earnings to fixed charges for
the nine months ended September 30, 1998 and 1997 and
the five years ended December 31, 1997
27 Financial data schedule for the nine-month period
ended September 30, 1998 (included only in the copy
of this report filed electronically with the
Securities and Exchange Commission)
(b) Reports on Form 8-K
During the quarter ended September 30, 1998, Occidental filed
the following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated May 15, 1998 (date
of earliest event reported), filed on July 17, 1998,
for the purpose of reporting, under Item 2, the
completion of the Equistar transaction, under Item 5,
certain recent developments, and under Item 7,
certain financial statements and pro forma financial
information
2. Current Report on Form 8-K dated July 20, 1998 (date
of earliest event reported), filed on July 21, 1998,
for the purpose of reporting, under Item 5,
Occidental's results of operations for the quarter
ended June 30, 1998
From September 30, 1998 to the date hereof, Occidental filed
the following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated September 25, 1998
(date of earliest event reported), filed on October
2, 1998, for the purpose of reporting, under Item 5,
the sale of notes and liquidity status and under Item
7, certain exhibits related to the issuance of notes
2. Current Report on Form 8-K dated October 21, 1998
(date of earliest event reported), filed on October
22, 1998, for the purpose of reporting, under Item 5,
Occidental's results of operations for the quarter
ended September 30, 1998
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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.
OCCIDENTAL PETROLEUM CORPORATION
DATE: November 12, 1998 S. P. Dominick, Jr.
-----------------------------------------
S. P. Dominick, Jr., Vice President and
Controller (Chief Accounting and Duly
Authorized Officer)
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EXHIBIT INDEX
EXHIBITS
- --------
3 By-laws of Occidental, as amended through September 17, 1998
4.1 First Amendment dated as of August 31, 1998, amending that certain
Credit Agreement dated as of March 20, 1997, among Occidental and
the Banks named therein
11 Statement regarding the computation of earnings per share for the
three and nine months ended September 30, 1998 and 1997
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the nine months ended September 30,
1998 and 1997 and the five years ended December 31, 1997
27 Financial data schedule for the nine-month period ended September
30, 1998 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
1
EXHIBIT 3.(II)
[AS AMENDED SEPTEMBER 17, 1998]
BY-LAWS
OF
OCCIDENTAL PETROLEUM CORPORATION
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the
Corporation shall be in the City of Dover, County of Kent, State of Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. Place and Conduct of Meetings. Meetings of the
stockholders for the election of directors or for the transaction of only such
other business as may properly be brought before the meeting in accordance with
these By-laws shall be held at such time and place, either within or without the
State of Delaware, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting or in a duly executed waiver
of notice thereof. The Chairman of such meetings shall have plenary power and
authority with respect to all matters relating to the conduct thereof including,
without limitation, the authority to limit the amount of time which may be taken
by any stockholder or stockholders, the authority to appoint and be advised by a
parliamentarian, and the authority to appoint and to instruct a sergeant or
sergeants at arms.
SECTION 2. Annual Meetings. The Annual Meetings of Stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, for the
purpose of electing directors and for the transaction of only such other
business as may properly be brought before the meeting in accordance with these
By-laws.
To be properly brought before the Annual Meeting, business must be
either (a) specified in the notice of Annual Meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (b) otherwise properly
brought before the Annual Meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the Annual Meeting by a
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 2 and on the record date
for the determination of stockholders entitled to vote at such Annual Meeting
and (ii) who complies with the notice procedures set forth in this Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, the stockholder must
have given timely notice thereof in proper written form to the Secretary of the
Corporation.
To be timely, a stockholder's notice must be delivered to or mailed to
and received at the principal executive offices of the Corporation, not less
than seventy (70) days nor more than ninety (90) days prior to the anniversary
date of the immediately preceding Annual Meeting; provided, however, that in the
event that the Annual Meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the stockholder to be
timely must be so received not later than the close of
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business on the tenth (10th) day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made,
whichever first occurs. In no event shall the public announcement of an
adjournment of an Annual Meeting commence a new time period for the giving of a
stockholder's notice as described above.
To be in proper written form, a stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
Annual Meeting (i) a brief description of the business desired to be brought
before the Annual Meeting, the reasons for conducting such business at the
Annual Meeting and any material interest in such business of the stockholder and
the beneficial owner, if any, on whose behalf the proposal is made, (ii) the
name and record address of the stockholder proposing such business, (iii) the
class, series and number of shares of the Corporation which are beneficially
owned by the stockholder, (iv) a description of all arrangements or
understandings between the stockholder and any other person or persons
(including their names) in connection with such business, (v) whether the
stockholder or the beneficial owner, if any, intends or is part of a group which
intends to distribute proxy materials, and (vi) a representation that the
stockholder intends to appear, in person or by another person authorized in
accordance with the General Corporation Law of the State of Delaware to act as
proxy for the stockholder, at the Annual Meeting to present such business.
Notwithstanding anything in the By-laws to the contrary, no business
shall be conducted at the Annual Meeting except in accordance with the
procedures set forth in this Section 2; provided, however, that nothing in this
Section 2 shall be deemed to preclude discussion by any stockholder of any
business properly brought before the Annual Meeting.
The Chairman of an Annual Meeting shall, if the facts warrant,
determine and declare to the Annual Meeting that business was not properly
brought before the Annual Meeting in accordance with the provisions of this
Section 2, and if he should so determine, he shall so declare to the Annual
Meeting and any such business not properly brought before the Annual Meeting
shall not be transacted.
Written notice of the Annual Meeting stating the place, date and hour
of the Annual Meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
SECTION 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by the Board of Directors or the Chairman of
the Board. Written notice of a Special Meeting stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called shall
be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
SECTION 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
SECTION 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of a majority of the
shares present in person or by proxy at the meeting for the purposes of
determining the
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presence of a quorum at such meeting. Unless otherwise provided in the
Certificate of Incorporation, each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such stockholder. Such votes may be cast
in person or by proxy but no proxy shall be voted on or after three years from
its date, unless such proxy provides for a longer period. No vote at any meeting
of stockholders need be by written ballot unless the Board of Directors, in its
discretion, or the officer of the Corporation presiding at the meeting, in his
discretion, specifically directs the use of a written ballot.
SECTION 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 7. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 8. Voting Procedures and Inspectors of Election. The
corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his ability.
The inspectors shall (i) ascertain the number of shares outstanding and
the voting power of each, (ii) determine the shares represented at a meeting and
the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting.
ARTICLE III
DIRECTORS
SECTION 1. Number and Election of Directors. Subject to the rights,
if any, of holders of preferred stock issued by the Corporation to elect
directors of the Corporation, the Board of Directors shall consist of thirteen
(13) directors, until changed within the limits set forth in the Restated
Certificate of Incorporation by amendment of these By-laws or by resolution duly
adopted by the Board of Directors from time to time. Except as provided in
Section 2 of this Article III, directors shall be elected by a plurality of the
votes cast at Annual Meetings of Stockholders, and each director so elected
shall hold office until his successor is duly elected and qualified, or until
his earlier resignation or removal. No person shall be eligible for election as
a director of the Corporation who shall have reached the age of
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seventy-two (72) at the date of such election; provided, however, that any
person serving as a director of the Corporation on December 15, 1994, who shall
have reached the age of seventy-two at such date, shall be eligible for
re-election as a director of the Corporation once, at the Annual Meeting of
Stockholders occurring upon the expiration of the term of office such director
was serving at December 15, 1994. Any director may resign at any time effective
upon giving written notice to the Corporation, unless the notice specifies a
later time for such resignation to become effective. If the resignation of a
director is effective at a future time, the Board of Directors may elect a
successor prior to such effective time to take office when such resignation
becomes effective. Directors need not be stockholders.
SECTION 2. Nominations of Directors. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors, except as may be otherwise provided in the Certificate of
Incorporation of the Corporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors of the Corporation may be made at any Annual Meeting (a) by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section 2
and on the record date for the determination of stockholders entitled to vote at
the Annual Meeting and (ii) who complies with the notice procedures set forth in
this Section 2.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, the stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than seventy (70) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding Annual Meeting; provided, however,
that in the event that the Annual Meeting is called for a date that is not
within thirty (30) days before or after such anniversary date, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. In no event shall the public announcement of an adjournment of an
Annual Meeting commence a new time period for the giving of a stockholder's
notice as described above.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election or re-election as a director, (i) the name, age, business address
and residence address of the person, (ii) principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person, and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to the
Rules and Regulations of the Securities and Exchange Commission under Section 14
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (b)
as to the stockholder giving the notice, (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are beneficially owned by the stockholder, (iii) a
description of all arrangements or understandings between the stockholder or the
beneficial owner, if any, on whose behalf the nomination is made and each
proposed nominee and any other person or persons (including their names)
pursuant to which the nominations are to be made by such stockholder, (iv)
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends to distribute proxy materials, (v) a representation that the
stockholder intends to appear, in person or by another person authorized in
accordance with the General Corporation Law of the State of Delaware to act as
proxy for the stockholder, at the Annual Meeting to nominate the persons named
in the stockholder's notice, and (vi) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the Rules and Regulations of the Securities
and Exchange Commission under Section 14 of the Exchange Act. Such notice must
be accompanied by a written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
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No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2. If the Chairman of the Annual Meeting determines that a nomination
was not made in accordance with the foregoing procedure, the Chairman shall
declare to the meeting that the nomination was defective and the defective
nomination shall be disregarded.
SECTION 3. Vacancies. Any newly created directorship resulting from
an increase in the number of directors may be filled by a majority of the Board
of Directors then in office, provided that a quorum is present, and any other
vacancy on the Board of Directors may be filled by a majority of directors then
in office, though less than a quorum, or by a sole remaining director. Any
director elected to fill a newly created directorship resulting from an increase
in any class of directors shall hold office for a term that shall coincide with
the remaining term of the other directors of that class. Any director elected to
fill a vacancy not resulting from an increase in the number of directors shall
have the same term as the remaining term of his predecessor.
SECTION 4. Duties and Powers. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.
SECTION 5. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, or any three directors. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight hours before the date of the
meeting, by telephone, telegram or telecopy on twenty-four hours notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
SECTION 6. Quorum. Except as may be otherwise specifically provided
by law, at all meetings of the Board of Directors or of any committee thereof, a
majority of the members of the entire Board of Directors or of the said
committee shall constitute a quorum for the transaction of business; and the act
of a majority of the directors or members of the committee present at any
meeting at which there is a quorum shall be the act of the Board of Directors or
of the said committee, as the case may be. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors or members of the committee if any action taken is
approved by at least a majority of the required quorum for that meeting. If a
quorum shall not be present at any meeting of the Board of Directors or of any
committee thereof, the directors or members of the committee present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
SECTION 7. Actions of Board. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 8. Meetings by Means of Conference Telephone. Members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
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SECTION 9. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Meetings of any
committee may be called by the Chairman of such committee, if there be one, or
by any two members thereof other than such Chairman. Notice thereof stating the
place, date and hour of the meeting shall be given to each member by mail not
less than forty-eight hours before the date of the meeting; by telephone,
telegram or telecopy on twenty-four hours notice; or on such shorter notice as
the person or persons calling such meeting may deem necessary or appropriate in
the circumstances. Each committee shall keep regular minutes and report to the
Board of Directors when required.
SECTION 10. Compensation. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors and/or a
stated annual fee as a director. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 11. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
SECTION 1. General. The officers of this Corporation shall be chosen
by the Board of Directors and shall be a Chairman of the Board, who shall be the
Chief Executive Officer, any number of Vice Chairmen, a President, a Senior
Operating Officer, any number of Executive Vice Presidents, one or more of whom
may be designated Senior Executive Vice President, any number of Vice Presidents
with such rank as the Board of Directors may designate, a Secretary, any number
of Assistant Secretaries, a Treasurer, and any number of Assistant Treasurers.
One of such Executive Vice Presidents or Vice Presidents shall be designated
Chief Financial Officer and shall have responsibility, subject to the direction
of the Board of Directors, the Chairman of the Board and the President, for the
management of the Corporation's financial affairs. Any number of offices may be
held by the same person, unless otherwise
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prohibited by law, the Certificate of Incorporation or these By-laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
SECTION 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in an office of the Corporation shall be filled by the Board
of Directors.
SECTION 3. Remuneration. The Board of Directors shall have the power
to fix and determine the salaries and other remuneration, and the terms and
conditions thereof, of all executive officers of the Corporation.
SECTION 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of the
Board of Directors and the Executive Committee, if any, shall have general and
active management of the business and affairs of the Corporation, shall have
plenary power to issue orders and instructions to all officers and employees of
the Corporation, and shall see that all orders and resolutions of the Board of
Directors and the Executive Committee, if any, are carried into effect. He shall
be the Chief Executive Officer of the Corporation, and except where by law the
signature of the President is required, the Chairman of the Board of Directors
shall possess the power to enter into and sign all contracts, certificates and
other instruments of the Corporation, and shall have the power to delegate any
portion of his authority under these By-laws to any other officer of the
Corporation. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-laws or by the Board of Directors.
SECTION 5. Vice Chairmen of the Board of Directors. The Vice Chairman
of the Board of Directors or Vice Chairmen of the Board of Directors, if there
is more than one (in the order designated by the Board of Directors), shall
perform such duties and may exercise such powers as from time to time may be
assigned to him by the Board of Directors or the Chairman of the Board of
Directors.
SECTION 6. President. The President shall perform such duties and
have such powers as the Board of Directors or the Chairman of the Board may from
time to time prescribe. In the absence or disability of the Chairman of the
Board of Directors, or if there be none, the President shall preside at all
meetings of the stockholders and the Board of Directors. If there be no Chairman
of the Board of Directors, the President shall be the Chief Executive Officer of
the Corporation. The President shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-laws, by the Board of Directors or by the Chairman of the Board of Directors.
SECTION 7. Senior Operating Officer. The Senior Operating Officer
shall perform such duties and have such powers as are prescribed for Executive
Vice Presidents and Vice Presidents under these By-laws and under any resolution
of the Board of Directors and shall perform such additional duties and have such
additional powers as the Board of Directors or the Chairman of the Board of
Directors may from time to time prescribe. The Senior Operating Officer shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these By-laws, by the Board of Directors, or
by the Chairman of the Board of Directors.
SECTION 8. Executive Vice Presidents and Vice Presidents. At the
request of the President or in his absence or in the event of his inability or
refusal to act (and if there be no Chairman of the Board of Directors), the
Executive Vice Presidents and Vice Presidents (in the order designated by the
Board of
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Directors) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors or the Chairman of the Board of Directors
from time to time may prescribe. If there be no Chairman of the Board of
Directors and no Vice President, the Board of Directors shall designate the
officer of the Corporation who, in the absence of the President or in the event
of the inability or refusal of the President to act, shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President.
SECTION 9. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees of the
Board of Directors when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the Chairman of the Board of Directors, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose another officer to
cause such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be any,
shall have authority to affix the same to any instrument requiring it, and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
SECTION 10. Treasurer. Subject to the direction of the Chief
Financial Officer, the Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chairman of the Board and the Board of Directors, at its regular meetings,
or when the Board of Directors so requires, an account of all his transactions
as Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 11. Assistant Secretaries. Except as may be otherwise
provided in these By-laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the Chairman of the Board of Directors, the President,
any Vice President, if there be any, or the Secretary, and in the absence of the
Secretary or in the event of his disability or refusal to act, shall perform the
duties of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary.
SECTION 12. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chairman of the Board of
Directors, the President, any Vice President, if there be any, or the Treasurer,
and in the absence of the Treasurer or in the event of his disability or refusal
to act, shall perform the duties of the Treasurer, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Treasurer. If required by the Board of Directors, an Assistant Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his
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death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 13. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
SECTION 14. Officers of Divisions. The officers of divisions of the
Corporation shall perform such duties and may exercise such powers as the
Chairman of the Board may from time to time prescribe.
ARTICLE V
STOCK
SECTION 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Chief Financial Officer or the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
SECTION 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 3. Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
SECTION 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty days nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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SECTION 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
SECTION 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable or by facsimile or other electronic transmission.
Notice given by any such means shall be deemed to have been given at the time
delivered, sent or transmitted.
SECTION 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these By-laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
SECTION 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 5. Stock Held by Corporation. Powers of attorney, proxies,
waivers of meeting, consents and other instruments relating to securities owned
by the Corporation may be executed in the name and on behalf of the Corporation
by the Chairman of the Board, or such other officer or officers as the Board of
Directors or the Chairman of the Board may designate, and any such officer shall
have full power and authority on behalf of the Corporation, in person or by
proxy, to attend, and to act and vote at,
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any meeting of stockholders of any corporation in which the Corporation may hold
securities, and at any such meeting shall possess, and may exercise, any and all
of the rights and powers incident to the ownership of such securities.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. Power to Indemnify in Actions, Suits or Proceedings other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 1 or Section 2 of this Article VIII, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
-11-
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SECTION 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information, opinions, reports or statements supplied
to him by the officers or employees of the Corporation or another enterprise in
the course of their duties, or by a committee of the Board of Directors of the
Corporation, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports or statements made to
the Corporation or another enterprise by an independent certified public
accountant, by an appraiser or by another person selected with reasonable care
by or on behalf of the Corporation or another enterprise as to matters such
person reasonably believes are within such certified public accountant's,
appraiser's, or other person's professional or expert competence. The term
"another enterprise" as used in this Section 4 shall mean any other corporation
or any partnership, joint venture, trust or other enterprise of which such
person is or was serving at the request of the Corporation as a director,
officer, employee or agent. The provisions of this Section 4 shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth in Sections 1
or 2 of this Article VIII, as the case may be.
SECTION 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such indemnification
by a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 or 2 of this
Article VIII, as the case may be. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the Corporation promptly upon the
filing of such application.
SECTION 6. Expenses Payable in Advance. Expenses incurred in
defending or investigating a threatened or pending action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
SECTION 7. Non-exclusivity and Survival of Indemnification. The
indemnification and advancement of expenses provided by this Article VIII shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any By-law,
agreement, contract, vote of stockholders or disinterested directors or pursuant
to the direction (howsoever embodied) of any court of competent jurisdiction or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise. The indemnification and advancement of expenses provided by this
Article VIII shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
SECTION 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any
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such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
SECTION 9. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
OPCB0998.DOC
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1
EXHIBIT 4.1
CONFORMED COPY
FIRST AMENDMENT dated as of August 31, 1998
(this "Amendment"), among OCCIDENTAL PETROLEUM
CORPORATION, a Delaware corporation (hereinafter
called the "Company"), the banks (the "Banks") party
to the Credit Agreement (as defined below), MORGAN
GUARANTY TRUST COMPANY OF NEW YORK and BANCAMERICA
SECURITIES, INC., as co-syndication agents
(hereinafter, in such capacity, together with any
successor to either thereof in such capacity, the
"Co-Syndication Agents", with each reference herein
to the "Syndication Agent" in the singular meaning
MORGAN GUARANTY TRUST COMPANY OF NEW YORK), THE CHASE
MANHATTAN BANK, as documentation agent (hereinafter,
in such capacity, together with any successor thereto
in such capacity, the "Documentation Agent"), THE
BANK OF NOVA SCOTIA, as administrative agent
(hereinafter, in such capacity, together with any
successor thereto in such capacity, the
"Administrative Agent"), and ABN AMRO BANK N.V., THE
BANK OF NEW YORK, CANADIAN IMPERIAL BANK OF COMMERCE,
CITICORP USA, INC., CREDIT LYONNAIS NEW YORK BRANCH,
CREDIT SUISSE FIRST BOSTON, BANKBOSTON, N.A., THE
FUJI BANK, LIMITED, LOS ANGELES AGENCY, THE
INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES
AGENCY, NATIONSBANK, N.A., ROYAL BANK OF CANADA,
TORONTO DOMINION (TEXAS), INC. and UBS AG, as
co-agents (hereinafter, in such capacity, the
"Co-Agents").
A. Reference is made to the Credit Agreement dated as of March
20, 1997 (the "Credit Agreement"), among the Company, the Banks, the
----------------
Co-Syndication Agents, the Documentation Agent, the Administrative Agent and the
Co-Agents. Capitalized terms used but not otherwise defined herein have the
meanings assigned to them in the Credit Agreement.
B. The Company has requested that the Banks amend certain
provisions of the Credit Agreement. The Banks are willing to do so, subject to
the terms and conditions of this Amendment.
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendment to Section 1.01. Section 1.01 of the
-------------------------
Credit Agreement is hereby amended by:
(a) inserting in the appropriate alphabetical order the following
definition:
""Capital Securities" means, with respect to the
Company, (i) mandatorily redeemable capital trust securities
of trusts which are Subsidiaries and the subordinated
debentures of the Company in which the proceeds of the
issuance of such capital trust securities are invested, which
securities and debentures have an initial final maturity of at
least thirty
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
2
2
years, have no scheduled amortization prior to maturity and,
in the case of the debentures, allow for the deferral of
interest payments for up to five years and have been
subordinated to all other indebtedness of the Company and (ii)
other securities whose basic structure and terms are similar
to those described in (i) which qualify as tier 1 capital
under the capital adequacy rules and guidelines of the U.S.
Federal Reserve Board applicable to U.S. bank holding
companies; provided, however, that in the case of (i) and
(ii), such capital securities are accounted for on the
financial statements of the Company as a minority interest,
Company-Obligated Mandatorily Redeemable Preferred New Capital
Securities of Subsidiary Trust Holding Solely New Subordinated
Debentures of the Company, or similar balance sheet
designation not included in liabilities."
(b) replacing the definition of "Consolidated Debt" with the following:
""Consolidated Debt" means the sum of, without
duplication (i) Consolidated Funded Debt, including that
portion of Consolidated Funded Debt maturing within one year
from the date of such determination, (ii) Consolidated
Short-Term Borrowings and (iii) obligations reflected for
financial reporting purposes as deferred credits for revenue
from sales of future production of the Company and its
Specified Subsidiaries, minus, through January 5, 1999, the
sum of the outstanding principal amounts of two promissory
notes, dated January 30, 1998, issued by KN Energy, Inc. to
the order of the Company in the principal amounts of
$1,000,000,000 and $394,846,122, respectively, each maturing
January 4, 1999, to the extent that the Company shall not have
assigned, granted a participation in or lien on, or otherwise
transferred such notes or any interest therein; provided,
however, that Consolidated Debt shall in no event include any
Capital Securities of the Company or any of its Subsidiaries."
(c) replacing the definition of "Tangible Net Worth" with the
following:
""Tangible Net Worth" of any Person means the sum of
the amounts set forth on the balance sheet of such Person as
(a) the par or stated value of all outstanding capital stock,
(b) the amount of the Capital Securities of such Person,
without duplication of the mandatorily redeemable capital
trust securities and the subordinated debentures of the
Company in which the proceeds of the issuance of such capital
trust securities are invested; provided that the aggregate
amount of Capital Securities added pursuant to this clause (b)
at any time of issuance thereof shall not exceed 5% of the sum
of Consolidated Debt and Consolidated Adjusted Tangible Net
Worth, calculated as of the time of such issuance of any such
securities and (c) capital surplus, earned surplus and premium
on capital stock less (i) the par or stated value of all
redeemable preferred stock, (ii) that portion of the book
value of all assets which would be treated as intangibles
under generally accepted accounting principles, including
without limitation, all such items as goodwill, trademarks,
trade names, brands, copyrights, patents, licenses and rights
with respect to the foregoing and unamortized debt discount
and expenses, and (iii) all
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
3
3
investments in or advances to Excepted Subsidiaries appearing
on the asset side of such balance sheet."
SECTION 2. Conditions to Effectiveness. This Amendment shall
---------------------------
become effective as of the date first above written upon receipt by the
Syndication Agent of duly executed counterparts hereof which, when taken
together, bear the authorized signatures of the Company and the Required Banks.
SECTION 3. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO
-------------
BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 4. Execution in Counterparts. This Amendment may be
-------------------------
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Amendment. Delivery of an
executed signature page to this Amendment by facsimile shall be as effective as
delivery of a manually signed counterpart of this Amendment.
SECTION 5. Expenses. The Company agrees to reimburse the
--------
Syndication Agent for its out-of-pocket expenses in connection with this
Amendment, including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Syndication Agent.
SECTION 6. Terms and Conditions. Except as specifically
--------------------
modified herein, all other terms and conditions of the Credit Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective duly authorized officers as of
the date first above written.
OCCIDENTAL PETROLEUM CORPORATION,
by
/s/ J.R. Havert
----------------------------------------
Name: J.R. Havert
Title: Senior Assistant Treasurer
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
4
4
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, in its individual capacity and as
Syndication Agent,
by
/s/ Diana H. Imhof
----------------------------------------
Name: Diana H. Imhof
Title: Vice President
ABN AMRO BANK N.V.,
by
/s/ Paul K. Stimpfl
----------------------------------------
Name: Paul K. Stimpfl
Title: Group Vice President
/s/ Shikha Rehman
----------------------------------------
Name: Shikha Rehman
Title: Assistant Vice President
ARAB BANK PLC,
by
/s/ Nofal S. Barbar
----------------------------------------
Name: Nofal S. Barbar
Title: Executive Vice President
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED,
by
----------------------------------------
Name:
Title:
BANCA DI ROMA SPA,
by
/s/ Richard G. Dietz
----------------------------------------
Name: Richard G. Dietz
Title: 97271
by
/s/ Augusto Bianchi
----------------------------------------
Name: Augusto Bianchi
Title: 97911
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
5
5
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
by
/s/ Paul L. Colon
----------------------------------------
Name: Paul L. Colon
Title: Vice President
BANKBOSTON, N.A.,
by
/s/ Sarah P.Z. Dwyer
----------------------------------------
Name: Sarah P.Z. Dwyer
Title: Vice President
BANK OF MONTREAL,
by
/s/ Cahal B. Carmody
----------------------------------------
Name: Cahal B. Carmody
Title: Director
THE BANK OF NOVA SCOTIA,
by
/s/ M. Van Oterloo
----------------------------------------
Name: M. Van Oterloo
Title: Senior Relationship Manager
THE BANK OF NEW YORK,
by
/s/ Ian K. Stewart
----------------------------------------
Name: Ian K. Stewart
Title: Senior Vice President
BANQUE NATIONALE DE PARIS,
by
/s/ Clive Bettles
----------------------------------------
Name: Clive Bettles
Title: SVP & Manager
by
/s/ Mitchell M. Ozawa
----------------------------------------
Name: Mitchell M. Ozawa
Title: Vice President
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
6
6
BBL INTERNATIONAL (U.K.) LIMITED,
by
/s/ Marie-Claire Swinnen
----------------------------------------
Name: Marie-Claire Swinnen
Title: Authorized Signatory
by
/s/ Alun Michael
----------------------------------------
Name: Alun Michael
Title: AGM
CANADIAN IMPERIAL BANK OF
COMMERCE,
by
----------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
by
/s/ Peter M. Ling
----------------------------------------
Name: Peter M. Ling
Title: Vice President
CITICORP USA, INC.,
by
/s/ Mark Stanfield Packard
----------------------------------------
Name: Mark Stanfield Packard
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Philippe Soustra
----------------------------------------
Name: Philippe Soustra
Title: Senior Vice President
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
7
7
CREDIT SUISSE FIRST BOSTON,
by
/s/ Douglas E. Maher
----------------------------------------
Name: Douglas E. Maher
Title: Vice President
by
/s/ James P. Moran
----------------------------------------
Name: James P. Moran
Title: Director
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH,
by
----------------------------------------
Name:
Title:
by
----------------------------------------
Name:
Title:
THE FUJI BANK, LIMITED, LOS ANGELES
AGENCY,
by
/s/ Masahito Fukuda
----------------------------------------
Name: Masahito Fukuda
Title: Joint General Manager
GULF INTERNATIONAL BANK B.S.C.,
by
/s/ Abdel-Fattah Tahoun
----------------------------------------
Name: Abdel-Fattah Tahoun
Title: Senior Vice President
by
/s/ William B. Shepard
----------------------------------------
Name: William B. Shepard
Title: Vice- President
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
8
8
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY,
by
/s/ Stephen A. Arce
----------------------------------------
Name: Stephen A. Arce
Title: Vice President
KBC BANK N.V.,
by
/s/ Robert Snauffer
----------------------------------------
Name: Robert Snauffer
Title: First Vice President
by
/s/ Marcel Claes
----------------------------------------
Name: Marcel Claes
Title: Deputy General Manager
MELLON BANK, N.A.,
by
/s/ Lawrence C. Ivey
----------------------------------------
Name: Lawrence C. Ivey
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, NEW
YORK BRANCH AND NASSAU BRANCH
by
/s/ Kevin Howard
----------------------------------------
Name: Kevin Howard
Title: Executive Vice President
NATIONSBANK, N.A.,
by
/s/ Tracey S. Barclay
----------------------------------------
Name: Tracey S. Barclay
Title: SVP
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
9
9
ROYAL BANK OF CANADA,
by
/s/ Andrew C. Williamson
----------------------------------------
Name: Andrew C. Williamson
Title: Senior Manager
THE SAKURA BANK, LIMITED,
by
/s/ Masayuki Kobayashi
----------------------------------------
Name: Masayuki Kobayashi
Title: Joint General Manager
STANDARD CHARTERED BANK,
by
/s/ Kristina McDavid
----------------------------------------
Name: Kristina McDavid
Title: Vice President
by
/s/ Yoo Hee Kim
----------------------------------------
Name: Yoo Hee Kim
Title: Relationship Manager
TORONTO DOMINION (TEXAS), INC.,
by
/s/ Jimmy Simien
----------------------------------------
Name: Jimmy Simien
Title: Vice President
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
10
10
UBS AG, (as successor by merger to Union Bank
of Switzerland), by New York Branch,
by
/s/ Leo L. Baltz
----------------------------------------
Name: Leo L. Baltz
Title: Director
by
/s/ Eric C. Hanson
----------------------------------------
Name: Eric C. Hanson
Title: AD
UNION BANK OF CALIFORNIA, N.A.,
by
/s/ Dustin Gaspari
----------------------------------------
Name: Dustin Gaspari
Title: AVP
[NYCORP3:660488.3:4443d:09/14/98--4:14p]-
1
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Amounts in thousands, except per-share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
BASIC EARNINGS PER SHARE 1998 1997 1998 1997
- -------------------------------------------------- --------- --------- --------- ---------
Income from continuing operations $ 38,418 $ 130,231 $ 362,620 $ 395,524
Preferred stock dividends (4,043) (21,476) (12,877) (67,563)
--------- --------- --------- ---------
Earnings from continuing operations applicable
to common stock 34,375 108,755 349,743 327,961
Discontinued operations, net -- 26,746 38,400 98,940
--------- --------- --------- ---------
Earnings applicable to common shares $ 34,375 $ 135,501 $ 388,143 $ 426,901
========= ========= ========= =========
Weighted average common shares outstanding 350,029 335,594 351,201 331,827
========= ========= ========= =========
Basic earnings per share
Income from continuing operations $ .10 $ .32 $ 1.00 $ .99
Discontinued operations, net -- .08 .11 .30
--------- --------- --------- ---------
Basic earnings per common share $ .10 $ .40 $ 1.11 $ 1.29
========= ========= ========= =========
DILUTED EARNINGS PER SHARE
- --------------------------------------------------
Earnings from continuing operations applicable
to common stock $ 34,375 $ 108,755 $ 349,743 $ 327,961
Dividends applicable to dilutive preferred stock -- 6,841 12,877 23,660
--------- --------- --------- ---------
34,375 115,596 362,620 351,621
Discontinued operations, net -- 26,746 38,400 98,940
--------- --------- --------- ---------
Earnings applicable to common stock $ 34,375 $ 142,342 $ 401,020 $ 450,561
========= ========= ========= =========
Weighted average common shares outstanding 350,029 335,594 351,201 331,827
Dilutive effect of exercise of options outstanding 206 578 548 462
Dilutive effect of conversions of preferred stock -- 33,833 15,196 33,833
--------- --------- --------- ---------
350,235 370,005 366,945 366,122
========= ========= ========= =========
Diluted earnings per share
Income from continuing operations $ .10 $ .31 $ .99 $ .96
Discontinued operations, net -- .07 .10 .27
--------- --------- --------- ---------
Diluted earnings per common share $ .10 $ .38 $ 1.09 $ 1.23
========= ========= ========= =========
1
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
Nine Months Ended
September 30 Year Ended December 31
------------------ ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
- ---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Income(loss) from continuing
operations(a) $ 403 $ 401 $ 245 $ 486 $ 325 $ (236) $ (190)
------- ------- ------- ------- ------- ------- -------
Add:
Provision(credit) for taxes on
income (other than foreign
and gas taxes) 206 149 47 99 155 (59) (23)
Interest and debt expense(b) 424 331 446 492 591 586 598
Portion of lease rentals
representative of the interest
factor 26 30 39 38 43 50 49
------- ------- ------- ------- ------- ------- -------
656 510 532 629 789 577 624
------- ------- ------- ------- ------- ------- -------
Earnings(loss) before fixed charges $ 1,059 $ 911 $ 777 $ 1,115 $ 1,114 $ 341 $ 434
======= ======= ======= ======= ======= ======= =======
Fixed charges
Interest and debt expense
including capitalized
interest(b) $ 438 $ 342 $ 462 $ 499 $ 595 $ 589 $ 609
Portion of lease rentals
representative of the interest
factor 26 30 39 38 43 50 49
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 464 $ 372 $ 501 $ 537 $ 638 $ 639 $ 658
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.28 2.45 1.55 2.08 1.75 n/a(c) n/a(c)
- ---------------------------------------- ======= ======= ======= ======= ======= ======= =======
(a) Includes (1) minority interest in net income of majority-owned subsidiaries
having fixed charges and (2) income from less-than-50-percent-owned equity
investments adjusted to reflect only dividends received.
(b) Includes proportionate share of interest and debt expense of
50-percent-owned equity investments.
(c) Not computed due to less than one-to-one coverage. Earnings were
inadequate to cover fixed charges by $298 million in 1994 and $224 million
in 1993.
5
1,000,000
9-MOS
DEC-31-1998
SEP-30-1998
118
0
420
23
481
2,826
16,571
6,672
15,344
2,869
5,859
0
269
69
3,148
15,344
4,904
5,647
3,838
3,838
79
0
412
736
383
363
38
0
0
401
1.11
1.09
