UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 30, 2002
ConocoPhillips
(Exact name of registrant as specified in its charter)
Delaware 000-49987 01-0562944
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
600 North Dairy Ashford Road, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
281-293-1000
Portions Amended
As set forth below, the registrant hereby amends its Current
Report on Form 8-K filed on August 30, 2002.
Item 5. Other Events.
Item 5 is amended by adding the following:
In connection with the mergers of Conoco and Phillips with wholly
owned subsidiaries of ConocoPhillips, and to simplify the
companies' credit structure, ConocoPhillips and Conoco have fully
and unconditionally guaranteed the payment obligations of
Phillips with respect to its publicly held debt securities, and
ConocoPhillips and Phillips have fully and unconditionally
guaranteed the payment obligations of Conoco and Conoco Funding
Company, Conoco's wholly owned finance subsidiary, with respect
to the publicly held debt securities of Conoco and the publicly
held debt securities of Conoco Funding Company fully and
unconditionally guaranteed by Conoco.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The audited consolidated financial statements of Conoco Inc.
as of December 31, 2001 and 2000, and for each of the three
years in the period ended December 31, 2001, found on pages
72 through 121 of Conoco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 2001, filed with the
Securities and Exchange Commission on March 15, 2002, are
incorporated herein by reference.
The unaudited consolidated financial statements of Conoco
Inc. for the quarter ended June 30, 2002, included in Conoco
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002, filed on August 9, 2002, are incorporated
herein by reference.
(b) Pro Forma Financial Information.
Basis of Presentation
The following unaudited pro forma condensed combined
financial statements have been prepared to illustrate the
estimated effect of the merger between Phillips Petroleum
Company (Phillips) and Conoco Inc. (Conoco). The merger has
been accounted for using purchase accounting. Although the
1
business combination of Phillips and Conoco was a merger of
equals, generally accepted accounting principles require
that one of the two companies in the transaction be
designated as the acquiror for accounting purposes.
Phillips has been designated as the acquiror based on the
fact that its common stockholders initially held more than
50 percent of the ConocoPhillips common stock after the
merger.
The unaudited pro forma condensed combined balance sheet
gives effect to the merger as if it had occurred on June 30,
2002. The unaudited pro forma combined statements of income
for the year ended December 31, 2001, and the six-month
period ended June 30, 2002, were prepared assuming the
merger occurred January 1, 2001. However, during the year
ended December 31, 2001, Phillips and Conoco entered into
other significant transactions that are not reflected in the
companies' historical income statements for the full year
ended December 31, 2001. Therefore, Phillips' historical
income statement for the year ended December 31, 2001, has
been adjusted on a pro forma basis to reflect Phillips'
acquisition of Tosco Corporation on September 14, 2001 (as
reported in Phillips' Current Report on Form 8-K filed on
September 28, 2001, as amended on October 31, 2001, and
November 13, 2001), as if it had occurred on January 1,
2001; and Conoco's historical income statement for the year
ended December 31, 2001, has been adjusted on a pro forma
basis to reflect Conoco's acquisition of Gulf Canada
Resources Limited on July 16, 2001 (as reported in Conoco's
Current Report on Form 8-K filed on July 31, 2001, as
amended on September 10, 2001), as if it had occurred on
January 1, 2001. For an analysis of these pro forma
adjustments, see the Supplemental Schedules on pages 12
though 16. For more detail, see the Form 8-K filings
referenced above.
This pro forma financial information is not intended to
reflect results from operations or the financial position
which would have actually resulted had the merger been
effective on the dates indicated. Moreover, this pro forma
information is not intended to be indicative of the results
of operations or financial position which may be achieved by
ConocoPhillips in the future. The pro forma adjustments use
estimates and assumptions based on currently available
information. Management believes that the estimates and
assumptions are reasonable, and that the significant effects
of the transactions are properly reflected. However, actual
results may materially differ from this pro forma financial
information.
2
The unaudited pro forma condensed combined financial
statements contain pro forma adjustments for the disposition
of assets required by order of the U.S. Federal Trade
Commission. They do not contain all pro forma adjustments
for restructuring charges that will be required to fully
integrate and operate the combined organization more
efficiently, or anticipated synergies resulting from the
merger.
The preliminary purchase price allocation is subject to
revision as more detailed analysis is completed and
additional information on the fair value of Conoco's assets
and liabilities becomes available. Final purchase
accounting adjustments may therefore differ from the pro
forma adjustments presented here.
3
- -------------------------------------------------------------------------------------------------
Unaudited Pro Forma ConocoPhillips
Combined Statement of Income
Millions of Dollars
-------------------------------------------------------------------
Pro Forma ProForma
Phillips Conoco Adjustments Purchase
Year Ended as as for FTC Asset Accounting Pro Forma
December 31, 2001 Adjusted* Adjusted* Dispositions Adjustments ConocoPhillips
-------- -------- ------------- ----------- --------------
(a) (b) (c)
Revenues
Sales and other operating
revenues $47,582 39,913 (1,609) (29)(d) 85,857
Equity in earnings of
affiliates 41 178 - (20)(e) 199
Other income 103 751 (1) - 853
- -------------------------------------------------------------------------------------------------
Total Revenues 47,726 40,842 (1,610) (49) 86,909
- -------------------------------------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and
products 29,976 23,304 (1,261) (13)(d) 52,006
Production and operating
expenses 4,292 3,288 (114) (3)(d) 7,463
Selling, general and
administrative expenses 1,290 924 (35) - 2,179
Exploration expenses 306 437 - - 743
Depreciation, depletion
and amortization 1,586 1,858 (14) (141)(e)(f) 3,289
Property impairments 26 238 - (238)(g) 26
Taxes other than income
taxes 5,602 6,988 (7) - 12,583
Accretion on discounted
liabilities 23 - - 17 (h) 40
Interest and debt expense 448 574 - (122)(i) 900
Foreign currency
transaction losses 11 65 - - 76
Preferred dividend
requirements of capital
trusts 53 - - - 53
- -------------------------------------------------------------------------------------------------
Total Costs and Expenses 43,613 37,676 (1,431) (500) 79,358
- -------------------------------------------------------------------------------------------------
Income before income taxes,
extraordinary items and
cumulative effect of changes
in accounting principles 4,113 3,166 (179) 451 7,551
Provision for income taxes 1,986 1,455 (65) 235 (j) 3,611
- -------------------------------------------------------------------------------------------------
Income Before Extraordinary
Items and Cumulative Effect
of Changes in Accounting
Principles $ 2,127 1,711 (114) 216 3,940
=================================================================================================
Income Before Extraordinary
Items and Cumulative Effect
of Changes in Accounting
Principles
Basic $ 5.59 2.74 5.84
Diluted 5.54 2.69 5.77
- -------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding (in thousands)
Basic 380,315 625,503 674,469
Diluted 383,637 635,094 682,636
- -------------------------------------------------------------------------------------------------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
*Certain amounts have been reclassified to conform to ConocoPhillips' presentation.
4
- -------------------------------------------------------------------------------------------------
Unaudited Pro Forma ConocoPhillips
Combined Statement of Income
Millions of Dollars
-----------------------------------------------------------------------
Pro Forma ProForma
Six Months Ended Adjustments Purchase
June 30, 2002 Historical Historical for FTC Asset Accounting Pro Forma
Phillips* Conoco* Dispositions Adjustments ConocoPhillips
---------- ---------- ------------- ----------- --------------
(c)
Revenues
Sales and other
operating revenues $20,930 17,556 (640) (14)(d) 37,832
Equity in earnings of
affiliates 49 116 - (10)(e) 155
Other income 33 27 - - 60
- -------------------------------------------------------------------------------------------------
Total Revenues 21,012 17,699 (640) (24) 38,047
- -------------------------------------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and
products 13,621 10,207 (539) (7)(d) 23,282
Production and operating
expenses 1,810 1,475 (63) (9)(d) 3,213
Selling, general and
administrative expenses 895 412 (13) - 1,294
Exploration expenses 230 176 - - 406
Depreciation, depletion
and amortization 834 932 (7) (124)(e)(f) 1,635
Property impairments 18 - - - 18
Taxes other than income
taxes 2,579 3,727 (3) - 6,303
Accretion on discounted
liabilities 11 - - 9 (h) 20
Interest and debt expense 213 235 - (50)(i) 398
Foreign currency
transaction (gains)
losses (5) 20 - - 15
Preferred dividend
requirements of capital
trusts 24 - - - 24
- -------------------------------------------------------------------------------------------------
Total Costs and
Expenses 20,230 17,184 (625) (181) 36,608
- -------------------------------------------------------------------------------------------------
Income before income
taxes, extraordinary
items and cumulative
effect of change in
accounting principle 782 515 (15) 157 1,439
Provision for income taxes 518 301 (6) 82 (j) 895
- -------------------------------------------------------------------------------------------------
Income Before Extraordinary
Items and Cumulative
Effect of Changes in
Accounting Principles $ 264 214 (9) 75 544
=================================================================================================
Income Before Extraordinary
Items and Cumulative
Effect of Changes in
Accounting Principles
Basic $ .69 .34 .80
Diluted .69 .34 .79
- -------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding
(in thousands)
Basic 383,130 627,328 677,284
Diluted 385,927 636,275 684,926
- -------------------------------------------------------------------------------------------------
See Notes to Unaudited Pro Forma Financial Statements.
*Certain amounts have been reclassified to conform to ConocoPhillips' presentation.
5
- --------------------------------------------------------------------------------------------------
Unaudited Pro Forma Condensed ConocoPhillips
Combined Balance Sheet
Millions of Dollars
-----------------------------------------------------------------------
Pro Forma ProForma
Adjustments Purchase
At June 30, 2002 Historical Historical for FTC Asset Accounting Pro Forma
Phillips* Conoco* Dispositions Adjustments ConocoPhillips
---------- ---------- ------------- ----------- --------------
(c)
Assets
Cash and cash equivalents $ 145 313 - - 458
Accounts and notes
receivable 1,939 1,736 (51) - 3,624
Inventories 2,580 1,152 (62) 437 (e) 4,107
Prepaid expenses and
other current assets 395 860 - - 1,255
- --------------------------------------------------------------------------------------------------
Total Current Assets 5,059 4,061 (113) 437 9,444
Investments and long-term
receivables 3,530 2,345 (1) 504 (e) 6,378
Net properties, plants
and equipment 24,399 19,790 (301) (905)(e) 42,983
Goodwill 2,360 3,084 - 7,909 (e) 13,353
Intangibles 1,270 75 - 720 (e) 2,065
Other assets 205 399 (5) - 599
- --------------------------------------------------------------------------------------------------
Total $36,823 29,754 (420) 8,665 74,822
==================================================================================================
Liabilities
Accounts payable $ 3,214 2,238 (23) - 5,429
Notes payable and
long-term debt due
within one year 1,059 1,782 - - 2,841
Accrued income and
other taxes 1,004 430 (5) - 1,429
Deferred income taxes - 230 (7) - 223
Other accruals 628 1,818 (3) 250 (k) 2,693
- --------------------------------------------------------------------------------------------------
Total Current
Liabilities 5,905 6,498 (38) 250 12,615
Long-term debt 8,576 8,240 - 363 (i) 17,179
Accrued dismantlement,
removal and
environmental costs 1,263 641 - (344)(f)(h) 1,560
Deferred income taxes 4,205 4,676 (47) (568)(e) 8,266
Employee benefit
obligations 967 679 - 688 (l) 2,334
Other liabilities and
deferred credits 1,101 1,032 (7) 36 (d)(m) 2,162
- --------------------------------------------------------------------------------------------------
Total Liabilities 22,017 21,766 (92) 425 44,116
- --------------------------------------------------------------------------------------------------
Company-Obligated
Mandatorily Redeemable
Preferred Securities and
Other Minority Interests 350 843 - - 1,193
- --------------------------------------------------------------------------------------------------
Total Common
Stockholders' Equity 14,456 7,145 (328) 8,240(n)(o) 29,513
- --------------------------------------------------------------------------------------------------
Total $36,823 29,754 (420) 8,665 74,822
==================================================================================================
See Notes to Unaudited Pro Forma Financial Statements.
*Certain amounts have been reclassified to conform to ConocoPhillips' presentation.
6
- -----------------------------------------------------------------
Notes to Unaudited Pro Forma ConocoPhillips
Financial Statements
(a) The Phillips historical income statement information for the
year ended December 31, 2001, has been adjusted on a pro
forma basis to reflect the acquisition of Tosco Corporation
on September 14, 2001, as if it had occurred on January 1,
2001. The significant pro forma adjustments that were made
for the acquisition of Tosco were:
o Estimated income statement impact resulting from the
purchase price allocation to the Tosco assets and
liabilities acquired--for example, changes in
depreciation due to the step-up of the properties, plants
and equipment to fair value;
o The conforming of Tosco's accounting policies to those of
Phillips; and
o An increase in average common shares outstanding for
stock and stock options issued in the acquisition.
For additional information on this transaction, see the
Unaudited Supplemental Pro Forma Combined Statement of
Income--Phillips as Adjusted on pages 12 and 13.
(b) The Conoco historical income statement information for the
year ended December 31, 2001, has been adjusted on a pro
forma basis to reflect the acquisition of Gulf Canada
Resources Limited on July 16, 2001, as if it had occurred on
January 1, 2001. The significant pro forma adjustments that
were made for the acquisition of Gulf Canada were:
o Estimated income statement impact resulting from the
purchase price allocation to the Gulf Canada assets and
liabilities acquired--for example, increased depreciation
due to the step-up of the properties, plants and
equipment to fair value;
o The conforming of Gulf Canada's accounting policies to
those of Conoco, including the conversion from Canadian
GAAP to United States GAAP and Canadian dollars to U.S.
dollars; and
o An increase in interest expense due to the debt incurred
to fund the acquisition.
For additional information on this transaction, see the
Unaudited Supplemental Pro Forma Combined Statement of
Income--Conoco as Adjusted on pages 14 through 16.
7
(c) On August 30, 2002, the U.S. Federal Trade Commission (FTC)
accepted for public comment an Agreement Containing Consent
Orders (Consent Agreement) that permitted Conoco and
Phillips to close the merger. This Consent Agreement
included a proposed Decision and Order that required, among
other things, the divestiture of specified Conoco and
Phillips assets. These assets include:
o Phillips' Woods Cross business unit, which includes the
Woods Cross, Utah, refinery and associated Phillips motor
fuel marketing operations (both retail and wholesale) in
Utah, Idaho, Wyoming, and Montana, as well as Phillips'
50 percent interests in two refined products terminals in
Boise and Burley, Idaho;
o Conoco's Commerce City, Colorado, refinery;
o Phillips' Colorado motor fuel marketing operations (both
retail and wholesale);
o Phillips' refined products terminal in Spokane,
Washington;
o Phillips' propane terminal assets at Jefferson City,
Missouri, and East St. Louis, Illinois, which include the
propane portions of these terminals and the customer
relationships and contracts for the supply of propane
therefrom;
o Certain of Conoco's midstream natural gas gathering and
processing assets in southeast New Mexico; and
o Certain of Conoco's midstream natural gas gathering
assets in West Texas.
No pro forma adjustments have been made to reflect any
anticipated gain or loss from the disposition of these
assets, as the method of disposition and sales proceeds are
not known, but any such effect is not expected to be
material with respect to financial position or liquidity in
any given period. Additionally, no pro forma adjustments
have been made to reflect any earnings benefit from the
reinvestment of any proceeds which might be recovered, or
reduction of debt which may arise as a consequence of the
asset dispositions required under the consent agreement.
(d) Primarily reflects the elimination of a deferred credit
arising from a prior year settlement for future price
modifications to a U.K. long-term natural gas sales
contract, as well as the revaluation of certain other long-
term contracts to their fair value.
8
(e) The following is a preliminary estimate of the purchase
price for Conoco on a purchase accounting basis:
Number of shares of ConocoPhillips common
stock issued to holders of Conoco
common stock in the exchange ............ 294.15 million
Multiplied by Phillips' average stock
price two days before and two days after
the date the merger was announced........ x $53.15
--------
$15,634 million
Fair value of Conoco stock options
exchanged for 23.3 million ConocoPhillips
stock options............................ 384 million
Estimated transaction-related costs........ 50 million
-------
Purchase price............................. $16,068 million
=======
The pro forma income statement adjustments reflect the
estimated effects of depreciating and amortizing these
purchase accounting adjusted balances in properties, plants
and equipment; equity method investments; and identifiable
intangible assets with definite lives, over their estimated
useful lives. The preliminary assessment of fair values
results in $11 billion of goodwill (which, when added to
Phillips' historical goodwill of $2.4 billion, equals
ConocoPhillips' pro forma goodwill of $13.4 billion) and
$652 million of intangible assets with indefinite lives,
both of which will be subject to periodic impairment
testing.
In determining the fair values for purposes of allocating
the purchase price, an outside appraisal firm was engaged to
estimate the fair values of Conoco's properties, plants and
equipment; investments in certain affiliates accounted for
under the equity method of accounting; and intangible
assets. The appraisal firm used a variety of methods to
estimate these fair values, including comparable market
data, asset replacement costs, royalty relief, and the net
present value of expected cash flows, discounted at rates
varying from 8 percent to 16 percent.
Included in goodwill is $4.3 billion that offsets net
deferred tax liabilities arising from differences between
the allocated financial bases and historical tax bases of
the Conoco net assets. Due to the non-taxable nature of
this transaction, Conoco's tax basis in its assets carries
over to ConocoPhillips.
9
(f) Under Phillips' accounting policy and current prevalent
industry practice for the acquisition of oil and gas
businesses, ConocoPhillips will not record an initial
liability for the estimated costs of removing Conoco's
properties, plants and equipment at the end of their useful
lives. Instead, currently estimated total undiscounted
removal costs of $691 million will be accrued as an
additional component of future depreciation, building the
liability for removal over the remaining useful lives of the
properties, plants and equipment on a unit-of-production
basis.
(g) Reverses property impairments recorded by Conoco, as the
assets would have been adjusted to fair value as part of the
purchase price allocation.
(h) Includes the impact of conforming accounting policies and
discounting Conoco's environmental liabilities and recording
the corresponding accretion over time.
(i) Reflects the restatement of Conoco's fixed-rate debt to fair
value and the corresponding reduction in interest expense as
the resulting premium is amortized. Also reflects the
capitalization of interest based on the estimated fair value
of Conoco's qualifying assets of $1.7 billion using a
weighted-average interest rate of 6.2 percent.
(j) Reflects the estimated federal and state income tax effects
of the pro forma adjustments to Conoco's pretax income using
a blended statutory rate of 52 percent.
(k) Includes an accrued liability of $250 million for the
estimated costs, as a result of the merger, to terminate or
relocate Conoco employees and to exit certain Conoco
activities. Similar costs for Phillips employees and
activities, which will also be incurred as a result of the
merger, are not included in this amount and will be accrued
separately and reported as an expense in the third-quarter
2002 financial results of ConocoPhillips.
(l) Reflects the adjustment to increase Conoco's pension and
other post-retirement benefit obligations to the estimated
difference between projected benefit obligations and plan
assets.
(m) Reflects the impact of adjusting to the fair value of
certain long-term liabilities and deferred credits.
10
(n) Included in the preliminary assessment of the fair value of
Conoco was an estimated $246 million for the value of in-
process research and development projects. Under generally
accepted accounting principles, this value would be charged
against earnings immediately after consummation of the
merger. Due to the non-recurring nature of this one-time
charge, the pro forma statements do not include this charge.
The after-tax effect of the charge is reflected in the pro
forma balance sheet as a reduction in common stockholders'
equity.
(o) Reflects the exchange of outstanding Conoco common stock,
the issuance of 294.15 million shares of ConocoPhillips
common stock, and the effect of ConocoPhillips' stock
options issued in the exchange to Conoco stock option
holders.
11
Supplemental Schedules
- -----------------------------------------------------------------------
Unaudited Supplemental Pro Forma Phillips as Adjusted
Combined Statement of Income
Millions of Dollars
------------------------------
Phillips
Phillips as
Historical* Tosco* Adjusted
Year Ended December 31, 2001 ---------- ----- --------
Revenues
Sales and other operating revenues $ 26,729 20,853 47,582
Equity in earnings of affiliates 41 - 41
Other income 98 5(A) 103
- -----------------------------------------------------------------------
Total Revenues 26,868 20,858 47,726
- -----------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and products 14,535 15,441 29,976
Production and operating expenses 2,688 1,604(B) 4,292
Selling, general and administrative
expenses 946 344 1,290
Exploration expenses 306 - 306
Depreciation, depletion and amortization 1,391 195(B) 1,586
Property impairments 26 - 26
Taxes other than income taxes 3,258 2,344 5,602
Accretion on discounted liabilities 14 9(C) 23
Interest and debt expense 338 110(D) 448
Foreign currency transaction losses 11 - 11
Preferred dividend requirements of
capital trusts 53 -(E) 53
- -----------------------------------------------------------------------
Total Costs and Expenses 23,566 20,047 43,613
- -----------------------------------------------------------------------
Income before income taxes, extraordinary
items and cumulative effect of changes
in accounting principles 3,302 811 4,113
Provision for income taxes 1,659 327(F) 1,986
- -----------------------------------------------------------------------
Income Before Extraordinary Items
and Cumulative Effect of Changes
in Accounting Principles $ 1,643 484 2,127
=======================================================================
Income Before Extraordinary Items
and Cumulative Effect of Changes
in Accounting Principles
Basic $ 5.61 5.59
Diluted 5.57 5.54
- -----------------------------------------------------------------------
Average Common Shares
Outstanding (in thousands)
Basic 292,964 380,315
Diluted 295,016 383,637
- -----------------------------------------------------------------------
See Notes to Phillips as Adjusted Unaudited Supplemental Pro Forma
Combined Financial Statements.
*Certain amounts have been reclassified to conform to ConocoPhillips'
presentation.
12
- ------------------------------------------------------------------
Notes to Unaudited Supplemental Phillips as Adjusted
Pro Forma Combined Statement
of Income For the Year Ended
December 31, 2001
The Phillips income statement for the year ended December 31,
2001, has been adjusted on a pro forma basis to reflect the
acquisition of Tosco on September 14, 2001, as if it was
consummated January 1, 2001. The Tosco information is presented
on a pro forma basis and has been adjusted as described below.
Footnotes referenced from the statement follow:
(A) Includes $28 million for the reversal of a deferred gain on
Tosco's balance sheet that was not subject to any future
performance requirement, along with the related amortization
of the deferred gain.
(B) Includes adjustments related to the purchase price allocation,
such as changes to depreciation resulting from asset re-
valuations, as well as adjustments to conform Tosco's
accounting policies to those of Phillips.
(C) Reflects the impact of adjusting and discounting Tosco's
environmental liabilities and recording the corresponding
accretion over time.
(D) Reflects the restatement of Tosco debt to fair value and the
corresponding $14 million reduction in interest expense as the
resulting premium is amortized.
(E) Reflects the February 2001 conversion of Tosco's company-
obligated, mandatorily redeemable, convertible preferred
securities into 9.1 million shares of Tosco common stock.
(F) Includes the estimated federal and state income tax effects of
the pro forma adjustments to Tosco's pretax income using a
blended statutory rate of 40 percent.
13
Supplemental Schedules
- -----------------------------------------------------------------------
Unaudited Supplemental Pro Forma Conoco as Adjusted
Combined Statement of Income
Millions of Dollars
----------------------------------
Conoco
Conoco Gulf Canada as
Historical* (U.S. GAAP)* Adjusted
Year Ended December 31, 2001 ---------- ----------- --------
Revenues
Sales and other operating revenues $38,737 1,176 39,913
Equity in earnings of affiliates 181 (3) 178
Other income 727 24 751
- -----------------------------------------------------------------------
Total Revenues 39,645 1,197 40,842
- -----------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and products 23,043 261(A) 23,304
Production and operating expenses 3,053 235 3,288
Exploration expenses 378 59(B) 437
Selling, general and administrative
expenses 888 36 924
Depreciation, depletion and
amortization 1,614 244(C) 1,858
Property impairments 238 - 238
Taxes other than income taxes 6,983 5 6,988
Accretion on discounted liabilities - - -
Interest and debt expense 396 178(D) 574
Foreign currency transaction losses 65 - 65
Preferred dividend requirements of
capital trusts - - -
- -----------------------------------------------------------------------
Total Costs and Expenses 36,658 1,018 37,676
- -----------------------------------------------------------------------
Income before income taxes,
extraordinary items and cumulative
effect of changes in accounting
principles 2,987 179 3,166
Provision for income taxes 1,391 64(E) 1,455
- -----------------------------------------------------------------------
Income Before Extraordinary Items
and Cumulative Effect of Changes
in Accounting Principles $1,596 115 1,711
=======================================================================
Income Before Extraordinary Items
and Cumulative Effect of Changes
in Accounting Principles
Basic $ 2.55 2.74
Diluted 2.51 2.69
- -----------------------------------------------------------------------
Average Common Shares
Outstanding (in thousands)
Basic 625,503 625,503
Diluted 635,094 635,094
- -----------------------------------------------------------------------
See Notes to Conoco as Adjusted Unaudited Supplemental Pro Forma
Combined Financial Statements.
*Certain amounts have been reclassified to conform to ConocoPhillips'
presentation.
14
- ------------------------------------------------------------------
Notes to Supplemental Unaudited Conoco as Adjusted
Pro Forma Combined Statement
of Income For the Year Ended
December 31, 2001
The Conoco income statement for the year ended December 31, 2001,
has been adjusted on a pro forma basis to reflect the acquisition
of Gulf Canada on July 16, 2001, as if it was consummated
January 1, 2001. The Gulf Canada information is presented on a
pro forma basis and has been adjusted as described below.
Footnotes referenced from the statement follow:
(A) Includes $11 million for the recognition of Gulf Canada's
preferred stock dividend. Gulf Canada reflected preferred
stock in the stockholders' equity section of the balance
sheet, while Conoco reflected these shares as a minority
interest after the acquisition because such shares represent
preferred stock of a subsidiary.
(B) Includes $2 million of incremental undeveloped leasehold
amortization expense based on the estimated fair value of the
undeveloped leaseholds acquired.
(C) Includes $31 million of incremental depreciation, depletion
and amortization expense for Gulf Canada and Crestar Energy
Inc., a company acquired by Gulf Canada on November 6, 2000,
based on the step-up to estimated fair value of these assets
assuming the acquisition occurred on January 1, 2001. Oil and
gas properties were depreciated on a unit-of-production basis
using estimated proved reserve quantities attributable to Gulf
Canada.
(D) Includes $108 million of additional pro forma interest expense
related to the borrowing of $4.5 billion to fund the Gulf
Canada acquisition. This entry assumes that the borrowing
occurred on January 1, 2001. Interest expense calculations
are based on Conoco's $4,500 million senior unsecured 364-day
bridge credit facility used to fund the acquisition. Interest
expense was calculated using an effective interest rate of
approximately 4.76 percent. This rate was based on a July 1,
2001, LIBOR three-month rate of approximately 3.83 percent.
Conoco refinanced the $4.5 billion, 364-day bridge credit
facility in the capital markets in October 2001.
15
(E) Includes an $82 million income tax benefit related to purchase
price adjustments, that was calculated using a blended
statutory rate of 43 percent for cost and expense items (with
the exception of interest expense, which was calculated using
a rate of 58 percent reflecting the deductibility of interest
expense in both Canada and the United States).
16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
CONOCOPHILLIPS
/s/ Rand C. Berney
October 1, 2002 -----------------------------
Rand C. Berney
Vice President and Controller
17
