UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
-----------------------
January 3, 2002
Date of Report
MARATHON OIL CORPORATION
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-5153 25-0996816
-------------------- ------------------------- ---------------------
State or Other Jurisdiction of Commission File Number IRS Employer
Incorporation Identification Number
5555 San Felipe Road, Houston, TX 77056-2723
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(Address of Principal Executive Offices)
(713) 629-6600
------------------------------
(Registrant's telephone number, including area code)
USX CORPORATION
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) On January 3, 2002, Marathon Oil Corporation, formerly known
as USX Corporation (the "Company"), filed a current report on Form 8-K to
report the completion of the separation of its steel and energy businesses
pursuant to the Agreement and Plan of Reorganization, dated as of July 31,
2001, by and between the Company and United States Steel LLC (the "Plan of
Reorganization"). Pursuant to Item 7 of Form 8-K, the Company indicated
that it would file the unaudited pro forma financial information required
to be filed under Item 7 of Form 8-K by amendment. This amendment is being
filed to provide the required financial information.
(c) Not applicable.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
FOR MARATHON OIL CORPORATION
The following unaudited pro forma condensed financial statements give
effect to the separation and significant transactions related to the
separation of USX Corporation (renamed Marathon Oil Corporation) into two
separate companies, Marathon Oil Corporation and United States Steel
Corporation (the "Separation"). Pro forma adjustments have been made to
reflect the presentation of the businesses of United States Steel Corporation
as discontinued operations, the effects of the redemptions/conversion of
preferred securities, costs directly attributable to the Separation, and the
separation of the businesses of United States Steel Corporation through a
tax-free distribution of United States Steel Corporation shares to the holders
of USX--U. S. Steel Group shares.
The following unaudited pro forma condensed balance sheet as of
September 30, 2001 gives effect to the Separation and significant
transactions related to the Separation, as if such transactions had been
consummated as of September 30, 2001.
The following unaudited pro forma condensed statements of operations
for the nine months ended September 30, 2001 and the year ended December
31, 2000 give effect to the Separation and significant transactions related
to the Separation as if such transactions were consummated at the beginning
of the periods presented. The unaudited pro forma condensed statements of
operations of Marathon Oil Corporation for the years ended December 31,
1999 and 1998 reflect the businesses of United States Steel Corporation as
discontinued operations but do not give effect to any adjustments
associated with the Separation.
No pro forma adjustments were made for changes in the future level of
corporate administrative costs to be incurred by Marathon Oil Corporation
as compared with the historical level of such costs allocated to the
Marathon Group. These costs are expected to continue at approximately the
same level as previously allocated, except for insurance costs, which are
estimated to increase by $5 million annually.
Nonrecurring costs directly attributable to the Separation, including
the costs to complete the Separation and the loss on Separation, have not
been reflected in the unaudited pro forma condensed statements of
operations. Pro forma adjustments have been made to remove the effects of
the nonrecurring costs directly attributable to the Separation that were
incurred and recorded in the historical accounts of Marathon Oil
Corporation during the nine months ended September 30, 2001. However, pro
forma adjustments have been made to reflect all nonrecurring costs directly
attributable to the Separation in the unaudited pro forma condensed balance
sheet.
The pro forma adjustments included herein are based on available
information and certain assumptions that management believes are reasonable
and are described in the accompanying notes. The unaudited pro forma
condensed financial statements do not necessarily represent Marathon Oil
Corporation's financial position or results of operations had the
Separation and significant transactions related to the Separation occurred
at such dates or project Marathon Oil Corporation's financial position or
results of operations for any future date or period. In the opinion of
management, all adjustments necessary to present fairly the unaudited pro
forma condensed financial statements have been made. The unaudited pro
forma condensed financial statements should be read in conjunction with the
historical financial statements of USX, including the notes thereto,
included in USX's Form 10-K, as amended, for the year ended Decmber 31,
2000 and the Form 10-Q for the quarterly period ended September 30, 2001,
which were filed with the SEC, and which are hereby incorporated in this
document by reference.
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
September 30, 2001
Dollars in millions
Marathon
Oil
Corporation
Pro Forma Separation of
Marathon Before Redemptions/ United Marathon
Oil Discontinued Separation Conversion States Oil
Corporation Operations Related of Preferred Separation Steel Corporation
Historical Adjustments Adjustments Securities Adjustments Corporation Pro Forma
------------ ------------ ----------- ------------ ----------- ----------- -----------
ASSETS
Current assets:
Cash $ 987 $ (475) (A) $ 512 $ $ 394 (D) $ - $ 906
Receivable from United
States Steel Corporation - 21 (E) 21
Other current assets 6,432 (2,526) (A) 4,285 - 4,285
379 (B)
Net Investment in
Discontinued Operations 1,829 (A) 1,829 (139)(C) 46 (F) (2,661)(L) -
25 (G)
900 (H)
Receivable from United
States Steel Corporation - - 550 (E) 550
Property, plant and equipment 12,471 (3,089) (A) 9,382 (20)(F) 9,362
Prepaid pensions 2,963 (2,740) (A) 223 223
Other assets 1,824 (507) (A) 1,439 (3)(C) (85)(F) 1,351
122 (B)
------------ ------------ -------- ---------- ------------- ----------- ---------
Total assets $ 24,677 $(7,007) $ 17,670 $ (142) $ 1,831 $ (2,661) $ 16,698
------------ ------------ -------- --------- ------------- ----------- ---------
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and long-term
debt due within one year $ 227 $ (136) (A) $ 91 $ - $ 133 (I) $ - $ 224
Preferred securities payable - 296 (C) 296
Payable to United States
Steel Corporation - 379 (B) 379 (379)(J) 20
20 (G)
Other current liabilities 4,592 (1,329) (A) 3,263 (5)(G) 3,275
15 (K)
2 (F)
Long-term debt 4,140 (2,622) (A) 1,518 (108)(C) 2,157 (I) 3,567
Payable to United
States Steel Corporation - 43 (B) 43 43
Other long-term liabilities 5,451 (3,172) (A) 2,358 (61)(F) 2,305
79 (B) 8 (G)
Mandatorily redeemable
convertible preferred securities
of a subsidiary trust 183 (183) (A) - -
Preferred stock of subsidiary 250 (66) (A) 184 (184)(C) -
Minority interest in Marathon
Ashland Petroleum LLC 2,029 2,029 2,029
Equity:
Preferred stock 2 2 (2)(C) -
Common stock and additional
paid-in capital 5,078 5,078 (144)(C) (1,247)(L) 3,687
Retained earnings and
accumulated other
comprehensive income 2,826 2,826 (59)(G) (1,414)(L) 1,353
Other (101) (101) (101)
------------ ------------ --------- ---------- ------------- ----------- -----------
Total liabilities and equity $ 24,677 $(7,007) $ 17,670 $ (142) $ 1,831 $(2,661) $ 16,698
------------ ------------ --------- ---------- ------------- ----------- -----------
See Notes to Unaudited Pro Forma Condensed Balance Sheet
MARATHON OIL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(A) Reflects the reclassification of the historical assets and liabilities
of the businesses comprising United States Steel Corporation to
discontinued operations.
(B) Reflects the establishment of payables to United States Steel
Corporation previously eliminated in consolidation related to income
taxes under the tax allocation policy of Marathon Oil Corporation and
certain balances related to employee benefit plans.
(C) Reflects the effects of the redemption/conversion of the following
preferred securities in connection with the Separation:
o 8.75% Cumulative Monthly Income Preferred Shares, Series A
(MIPS(R)), of USX Capital LLC.
o 6.75% Convertible Quarterly Income Preferred Securities (QUIPSSM)
of USX Capital Trust I, a wholly owned subsidiary of Marathon Oil
Corporation.
o 6.50% Cumulative Convertible Preferred Stock ("6.50% Preferred
Stock") of Marathon Oil Corporation converted to a right to receive,
in cash, $50.00 per share.
The decrease in the net investment in discontinued operations reflects
the impact on the equity of the businesses comprising United States Steel
Corporation associated with the redemptions/conversion of the portions of
the preferred securities historically attributed to United States Steel
Corporation as follows:
Dollars
in millions
Conversion of 6.50% Preferred Stock $ 121
Excess of redemption value over carrying value of QUIPS 14
Deferred financing costs related to the Quips 4
-------
Decrease in investment in discontinued operations $ 139
=======
The decrease in other assets reflects the removal of the deferred
financing costs associated with the MIPS that were historically
attributed to the Marathon Group.
The increase in preferred securities payable reflects the redemption
value of the QUIPS of $185 million and the consideration to be paid for
the conversion of 6.50% Preferred Stock of $110 million outstanding that
were converted at Separation.
The net decrease in long-term debt reflects the effects of the
following:
Dollars
in millions
-----------
Debt incurred by Marathon Oil Corporation to redeem the $ 223
outstanding MIPS
Advance from United States Steel Corporation to convert
the 6.50% Preferred Stock and redeem the QUIPS
historically attributed to United States Steel Corporation (282)
Preferred Securities refinanced by United States Steel
Corporation with debt that will remain with United
States Steel Corporation (49)
-------
Net decrease in long-term debt $ (108)
=======
The decrease in preferred stock of a subsidiary represents the
redemption of the MIPS historically attributed to the Marathon Group.
The decrease in equity reflects the conversion of the 6.50% Preferred
Stock, the excess redemption value over net book value of the QUIPS, and
deferred financing costs associated with the MIPS and QUIPS as follows:
Dollars
in millions
-----------
Conversion of 6.50% Preferred Stock $ 121
Excess of redemption value over carrying value of QUIPS 14
Deferred financing costs related to the QUIPS and MIPS 11
-----
Decrease in equity $ 146
=====
(D) Reflects the cash historically attributed to United States Steel
Corporation that will be included in the accounts of Marathon Oil
Corporation. Also see Note (I).
(E) Reflects the establishment of receivables from United States Steel
Corporation for certain debt and capital lease obligations for which
Marathon Oil Corporation remains obligated but United States Steel
Corporation assumes responsibility for repayment in accordance with
the Financial Matters Agreement between Marathon Oil Corporation and
United States Steel Corporation. Also see Note (I).
(F) Reflects the assignment of certain Marathon Oil Corporation corporate
assets and liabilities to United States Steel Corporation in
accordance with the Plan of Reorganization as follows:
Dollars in millions
-------------------------------------
Property,
Plant and Other Current Other
Equipment Assets Liabilities Liabilities Total
Property, plant and equipment....... $ (20) $ -- $ -- $ -- $ (20)
Assets and liabilities associated
with employee benefits........... -- (6) (2) (68) (76)
Reclassification of intercompany
balances......................... -- (79) -- 79 --
Income tax assets and liabilities,
including the tax effect of
above adjustments................ -- -- -- 50 50
------ ------ ------ ----- -------
Net effect on net investment in
discontinued operations.......... $ (20) $ (85) $ (2) $ 61 $ (46)
====== ====== ====== ====== =======
(G) Reflects the effects of additional costs directly related to the
Separation that were incurred after September 30, 2001. In addition, a
$20 million payable to United States Steel Corporation has been
recorded which reflects the establishment of the cash settlement
amount between Marathon Oil Corporation and United States Steel
Corporation as defined in the Agreement and Plan of Reorganization,
which is to be paid 35 days after Separation. Also see Note (I).
(H) Reflects the $900 million value transfer with United States Steel
Corporation in accordance with the Plan of Reorganization, pursuant to
which a portion of Marathon Oil Corporation indebtedness will be
repaid or retired and United States Steel Corporation will incur
indebtedness and agree to repay a portion of the indebtedness and
other obligations of Marathon Oil Corporation historically attributed
to the businesses comprising United States Steel Corporation, such
that the amount of indebtedness and other obligations for which United
States Steel Corporation is responsible following the Separation is
$900 million less than the net amounts attributed to United States
Steel Corporation immediately prior to the Separation. Also see Note
(I).
(I) Reflects a net increase in debt related to Separation adjustments of
$2,290 million (the sum of an increase in notes payable and long-term
debt due within one year of $133 million and an increase in long-term
debt of $2,157 million) as shown in the table below which reconciles
Marathon Oil Corporation historical debt to the ending pro forma
balance of Marathon Oil Corporation debt.
Dollars in
millions
-----------
Total Marathon Oil Corporation historical debt $ 4,367
Less debt attributed to discontinued operations 2,758
________
Debt of Marathon Oil Corporation before separation adjustments and 1,609
redemptions/conversion of preferred securities
Net decrease in debt associated with the redemptions of preferred
securities (See Note C) (108)
Net Increase in debt related to Separation adjustments
Debt to fund the $900 million Value Transfer with United States Steel
Corporation in accordance with the Plan of Reorganization (See Note H) 900
Debt and capital lease obligations assumed by United
States Steel Corporation, reflected as both an
asset and liability by Marathon Oil Corporation (See Note E) 571
Debt associated with invested cash historically attributed to
United States Steel Corporation that will be included in
the accounts of Marathon Oil Corporation (See Note D) 394
Debt to fund preliminary tax settlement with United States
Steel Corporation (See Note J) 379
Debt to fund costs to complete the Separation (See Note G) 61
Net reduction in debt due to accrued interest historically
attributed to United States Steel Corporation (See Note K) (15)
------
Net increase in debt related to Separation Adjustments 2,290
--------
Pro forma balance of Marathon Oil Corporation debt $ 3,791
========
(J) Reflects the preliminary tax settlement with United States Steel
Corporation, which occurred immediately prior to Separation in
accordance with the Tax Sharing Agreement between Marathon Oil
Corporation and United States Steel Corporation. Also see Note (I).
(K) Reflects accrued interest on debt and other obligations historically
attributed to United States Steel that will be the responsibility of
Marathon Oil Corporation after the Separation. Also see Note (I).
(L) Reflects the effects of the tax-free distribution of United States
Steel Corporation shares to the holders of USX--U. S. Steel Group
shares and the removal of the net investment in discontinued
operations. Because the net investment in discontinued operations
exceeded the fair value, as measured by the aggregate market value of
the USX--U. S. Steel Group shares at September 30, 2001, a
nonrecurring non-cash charge would have been recognized as follows:
Dollars
in millions
-----------
Market value of the USX--U. S Steel Group Shares (89,196,212
shares of stock issued and outstanding at $13.98 per share)............... $ 1,247
Less net investment in discontinued operations.............................. 2,661
--------
Loss on separation........................................................... $(1,414)
========
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2001
Dollars in millions (except per share amounts)
Marathon Redemptions/
Oil Corporation Conversions
Before of Preferred Marathon
Marathon Discontinued Separation Securities and Oil
Oil Corporation Operations Related Separation Corporation
Historical Adjustments Adjustments Adjustments Pro Forma
-------------- ------------- --------------- -------------- ------------
Revenues and other income $ 31,176 $ (4,961) (A) $ 26,247 $ 26,247
32 (B)
Costs and expenses:
Costs of revenues (excludes items shown below) 23,108 (4,658) (A) 18,482 18,482
32 (B)
Selling, general and administrative expenses 516 (19) (A) 514 $ (17) (F) 497
17 (C)
Depreciation, depletion and amortization 1,157 (246) (A) 911 911
Taxes other than income taxes 3,732 (191) (A) 3,541 3,541
Exploration expenses 69 - 69 69
-------------- ------------ -------------- --------- ----------
Total costs and expenses 28,582 (5,065) 23,517 (17) 23,500
-------------- ------------ -------------- --------- ----------
Income from operations 2,594 136 2,730 17 2,747
Net interest and other financial costs 183 (74) (A) 133 88 (G) 221
24 (D)
Minority interest in Marathon Ashland Petroleum LLC 650 - 650 650
-------------- ------------ -------------- --------- ----------
Income before income taxes 1,761 186 1,947 (71) 1,876
Provision for income taxes 522 183 (A) 690 (26) (H) 664
(15) (E)
-------------- ------------ -------------- --------- ----------
Income from continuing operations 1,239 18 1,257 (45) 1,212
Discontinued operations:
Results of operations, net of tax (18) (A) (18) 18 (I) -
-------------- ------------ -------------- --------- ----------
Income before cumulative effect of change in
accounting principle 1,239 - 1,239 (27) 1,212
Cumulative effect of change in accounting principle (8) - (8) (8)
-------------- ------------ -------------- --------- ------------
Net income $ 1,231 $ - $ 1,231 $ (27) $ 1,204
============== ============ ============== ========= ============
Applicable to Marathon Stock: (J)
Income before cumulative effect
of change in accounting principle $ 1,283
Per share - basic 4.16
- diluted 4.15
Cumulative effect of change in accounting principle $ (8)
Per share - basic and diluted (0.03)
Net income $ 1,275
Per share - basic 4.13
- diluted 4.12
Applicable to Steel Stock: (J)
Net income $ (50)
Per share - basic (0.56)
- diluted (0.57)
Applicable to Marathon Oil Corporation Stock: (J)
Income before cumulative effect
of change in accounting principle $ 1,212
Per share - basic 3.93
- diluted 3.92
Cumulative effect of change in accounting principle $ (8)
Per share - basic and diluted (0.03)
Net income $ 1,204
Per share - basic 3.90
- diluted 3.89
See Notes to Unaudited Pro Forma Condensed Statements of Operations
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2000
Dollars in millions (except per share amounts)
Marathon Redemptions/
Oil Corporation Conversions
Before of Preferred
Marathon Discontinued Separation Securities and Marathon
Oil Corporation Operations Related Separation Oil Corporation
Historical Adjustments Adjustments Adjustments Pro Forma
--------------- ------------ --------------- ----------------- ---------------
Revenues and other income............... $ 39,914 $ (6,132) (A) $ 33,859 $ 33,859
77 (B)
Costs and expenses:
Costs of revenues (excludes items
shown below)....................... 31,056 (5,656) (A) 25,477 25,477
77 (B)
Selling, general and administrative
expenses........................... 402 223 (A) 643 643
18 (C)
Depreciation, depletion and
amortization....................... 1,605 (360) (A) 1,245 1,245
Taxes other than income taxes........ 4,861 (235) (A) 4,626 4,626
Exploration expenses................. 238 - 238 238
-------- -------- ------- -------- --------
Total costs and expenses.......... 38,162 (5,933) 32,229 - 32,229
-------- -------- ------- -------- --------
Income from operations................ 1,752 (122) 1,630 - 1,630
Net interest and other financial
costs.............................. 341 (105) (A) 236 69 (G) 305
Minority interest in Marathon
Ashland Petroleum LLC.............. 498 - 498 498
--------- -------- ------- ----- --------
Income before income taxes.......... 913 (17) 896 (69) 827
Provision for income taxes.......... 502 (20) (A) 476 (25) (H) 451
(6) (E)
--------- -------- ------- ------ ---------
Income from continuing operations.... 411 9 420 (44) 376
Discontinued operations:
Results of operations, net of tax..... (9) (A) (9) 9 (I) -
--------- -------- -------- ------ --------
Net income............................. $ 411 $ - $ 411 $ (35) $ 376
========= ======== ======== ====== ========
Applicable to Marathon Stock: (J)
Net income........................... $ 432
Per share - basic and diluted... 1.39
Applicable to Steel Stock: (J)
Net income (loss)..................... $ (29)
Per share - basic and diluted..... (0.33)
Applicable to Marathon Oil Corporation
Stock: (J)
Net income........................... $ 376
of Per share - basic and diluted.... 1.21
See Notes to Unaudited Pro Forma Condensed Statements of Operations
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1999
Dollars in millions
Marathon Discontinued Marathon
Oil Corporation Operations Oil Corporation
Historical Adjustments Pro forma
------------------ ------------ ---------------
Revenues and other income $ 29,119 $ (5,470) (A) $ 23,707
58 (B)
Costs and expenses:
Costs of revenues (excludes items shown below)....... 21,679 (5,084) (A) 16,653
58 (B)
Selling, general and administrative expenses......... 203 283 (A) 498
12 (C)
Depreciation, depletion and amortization............. 1,254 (304) (A) 950
Taxes other than income taxes........................ 4,433 (215) (A) 4,218
Exploration expenses................................. 238 238
Inventory market valuation credits................... (551) (551)
------------ ---------- --------
Total costs and expenses........................ 27,256 (5,250) 22,006
----------- ---------- --------
Income from operations 1,863 (162) 1,701
Net interest and other financial costs 362 (74) (A) 288
Minority interest in Marathon Ashland Petroleum LLC 447 447
---------- ----------- --------
Income before income taxes 1,054 (88) 966
Provision for income taxes 349 (25) (A) 320
(4) (E)
--------- ---------- --------
Income from continuing operations 705 (59) 646
Discontinued operations:
Results of operations for the Steel Group, net of tax 59 (A) 59
Extraordinary loss 7 7
--------- --------- ---------
Net income $ 698 $ - $ 698
========= ========= =========
See Notes to Unaudited Pro Forma Condensed Statements of Operations
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1998
Dollars in millions
Marathon Discontinued Marathon
Oil Corporation Operations Oil Corporation
Historical Adjustments Pro forma
----------------- ------------------------ ------------------
Revenues and other income $ 28,077 $ (6,477)(A) $ 21,623
23 (B)
Costs and expenses:
Costs of revenues (excludes
items shown below)
20,211 (5,604)(A) 14,630
23 (B)
Selling, general and
administrative expenses
304 201 (A) 514
9 (C)
Depreciation, depletion and amortization
1,224 (283)(A) 941
Taxes other than income taxes
4,241 (212)(A) 4,029
Exploration expenses
313 313
Inventory market valuation credits
267 267
----------------- ------------------- ------------------
Total costs and expenses
26,560 (5,866) 20,694
----------------- ------------------- ------------------
Income from operations................... 1,517 (588) 929
Net interest and other financial costs... 279 (42)(A) 237
Minority interest in Marathon
Ashland Petroleum LLC 249 249
----------------- ------------------- ------------------
Income before income taxes 989 (546) 443
Provision for income taxes 315 (173)(A) 139
(3)(E)
----------------- ------------------- ------------------
Income from continuing operations 674 (370) 304
----------------- ------------------- ------------------
Discontinued operations:
Results of operations for
the Steel Group, net of tax 370 370
----------------- ------------------- ------------------
Net income $ 674 $ - $ 674
================= =================== ==================
See Notes to Unaudited Pro Forma Condensed Statements of Operations
MARATHON OIL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(A) Reflects the reclassification of revenues and expenses of the
businesses comprising United States Steel Corporation to discontinued
operations.
(B) Reflects the establishment of revenues and the related cost of
revenues for intercompany sales previously eliminated in
consolidation.
(C) Reflects the reversal of general corporate overhead expenses allocated
to United States Steel Corporation that are not permitted to be
reflected in discontinued operations.
(D) Reflects the reversal of a portion of the interest expense allocated
to United States Steel Corporation that is not permitted to be
reflected in discontinued operations. The only period in which
allocated interest exceeded the permitted amount was the nine months
ended September 30, 2001.
(E) Reflects the income tax effects of adjustments (C) and (D).
(F) Reflects the removal of nonrecurring costs directly attributable to
the Separation that were incurred during the nine months ended
September 30, 2001, that were included in the historical accounts of
Marathon Oil Corporation. There were no costs related to the
Separation incurred prior to the nine months ended September 30, 2001.
(G) Reflects an increase in net interest and other financial costs, primarily
due to the increase in the amount of indebtedness of Marathon Oil
Corporation following the Separation. The increase primarily reflects the
$900 million value transfer with United States Steel Corporation and
incremental interest effects associated with the redemptions/conversion
of the preferred securities. Pro forma interest costs have been
calculated based on average levels of pro forma debt for the nine months
ended September 30, 2001, and the year ended December 31, 2000. Pro forma
debt reflects the redemptions/conversion of the preferred securities and
repayment of the Marathon Oil Corporation receivables facility with
proceeds from new financings obtained by United States Steel Corporation
and drawings on the Marathon Oil Corporation revolving credit facility.
For the majority of the year 2000, the amount of debt that would have
remained with Marathon Oil Corporation was less than the net debt levels
attributed to the Marathon Group, after adjusting for the $900 million
value transfer. As a result, average pro forma debt for 2000 reflects
drawings on the Marathon Oil Corporation revolving credit facility to
fund the redemptions/conversion of the preferred securities and to repay
the receivables facility.
The assumed interest rate for new financings was 5% in 2001 and 7% in
2000, which was based on the average borrowing rates on the revolving
credit facility. A 1/8 percentage point change in the assumed
financing rate would have changed annualized interest expense by less
than $1 million.
(H) Reflects the income tax effects of adjustment (F) and (G).
(I) Reflects the elimination of discontinued operations as a result of the
Separation. Also includes amounts related to general corporate
overhead expenses and interest expense allocated to United States
Steel Corporation but were not classified as discontinued operations.
(J) Weighted average shares of common stock outstanding were 309,056,000
(basic) and 309,452,000 (diluted) for USX--Marathon Group and, on a
pro forma basis, Marathon Oil Corporation for the nine months ended
September 30, 2001. Weighted average shares of common stock
outstanding were 311,531,000 (basic) and 311,761,000 (diluted) for
USX--Marathon Group, and on a pro forma basis, Marathon Oil
Corporation for the year ended December 31, 2000. Weighted average
shares of common stock outstanding (basic and diluted) for the USX--U.
S. Steel Group were 89,003,000 for the nine months ended September 30,
2001, and 88,613,000 for the year ended December 31, 2000. Preferred
stock dividends of $6 million and $8 million reduced net income
applicable to USX--U. S. Steel Group shares for the nine months ended
September 30, 2001, and for the year ended December 31, 2000,
respectively.
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 hereunto duly authorized.
Dated: January 15, 2002 MARATHON OIL CORPORATION
By: /s/ A. G. Adkins
-----------------------------
A. G. Adkins
Vice President--Accounting
and Controller