Occidental Petroleum 2003 Annual Report Download - page 24

the July 1, 2003 adoption of SFAS No. 150, which required distributions on trust
preferred securities to be classified as interest expense. These distributions
were previously recorded in minority interest. The decrease in minority interest
in 2002, compared to 2001, was due to an $84 million decrease in preferred
distributions to the Altura partners. The remaining Altura partnership interests
were redeemed in May 2002.
The 2002 loss from equity investments includes a pre-tax loss of $242
million from the sale of the Equistar investment in August 2002. The loss from
equity investments in 2001 includes a $412 million pre-tax write-down of
Equistar and a loss of $89 million from the Equistar equity investment.
TAXES
Deferred tax liabilities were $926 million at December 31, 2003, net of
deferred tax assets of $839 million. The current portion of the deferred tax
assets of $75 million is included in prepaid expenses and other. The net
deferred tax assets are expected to be realized through future operating income
and reversal of taxable temporary differences.
LIQUIDITY AND CAPITAL RESOURCES
FINANCING ACTIVITY
During 2003, Occidental strengthened its liquidity position, generating
approximately $3 billion in cash from operations. Although future volatility in
commodity prices may result in varying operating cash flows, Occidental believes
that cash on hand, cash generated from operating activities, unused committed
bank credit lines and other sources of funds, such as debt issued in the capital
markets and the receivables sale program, will be adequate to satisfy its future
financial obligations and liquidity needs.
As of December 31, 2003, available borrowing capacity under Occidental's
unused committed bank credit lines was $1.5 billion. Occidental had
approximately $683 million in cash on hand at December 31, 2003, an increase of
$537 million from 2002. A portion of the year-end 2003 cash balance was used to
redeem all of the outstanding 8.16 percent Trust Preferred Redeemable Securities
(trust preferred securities) on January 20, 2004. The trust preferred securities
were redeemed at par plus accrued interest, resulting in a decrease in current
liabilities of approximately $453 million.
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In 2003, Occidental recorded a pre-tax interest charge of $61 million to
repay a $450 million 6.4-percent senior notes issue that had ten years of
remaining life, but was subject to remarketing on April 1, 2003. Occidental
refinanced $300 million of this amount and paid the remaining $150 million out
of existing cash.
In 2002, Occidental filed a shelf registration statement for up to $1
billion of various securities, including senior debt securities. In November
2002, Occidental issued $175 million of 4-percent Medium-Term Senior Notes,
Series C, and $75 million of 4.101-percent Medium-Term Senior Notes, Series C,
due 2007 for general corporate purposes. In March 2003, Occidental issued $300
million of 4.25-percent Medium-Term Senior Notes and used the proceeds to
refinance a portion of the $450 million senior notes discussed above. Occidental
has $450 million of securities remaining under the shelf registration.
In 2002, Occidental repaid and or redeemed approximately $198 million of
senior notes and medium-term notes and a subsidiary of Occidental issued $75
million of preferred stock. Occidental retains all common shares of the
subsidiary and elects the majority of the directors. The subsidiary is the
holding company for a number of international subsidiaries of Occidental. In the
event that the subsidiary fails to pay preferred dividends for two consecutive
quarters or upon the occurrence of certain other events, the holder of the
preferred stock could gain control of the subsidiary's board of directors.
CASH FLOW ANALYSIS
In millions 2003 2002 2001