Occidental Petroleum 2003 Annual Report Download - page 28

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19
RECEIVABLES SALE PROGRAM
Occidental has an agreement in place to sell, under a revolving sale
program, an undivided interest in a designated pool of trade receivables. This
program is used by Occidental as a low-cost source of working capital funding.
The balance of receivables sold at December 31, 2003 and 2002 was $360 million.
This amount is not included in the debt and related trade receivables accounts,
respectively, on Occidental's consolidated balance sheets. Receivables must meet
certain criteria to qualify for the program.
Under this program, Occidental serves as the collection agent with respect
to the receivables sold. An interest in new receivables is sold as collections
are made from customers. Fees and expenses under this program are included in
selling, general and administrative and other operating expenses. The fair value
of any retained interests in the receivables sold is not material. The buyers of
the receivables are protected against significant risk of loss on their purchase
of receivables. Occidental provides for allowances for any doubtful receivables
based on its periodic evaluation of such receivables. The provisions for such
receivables were not material in the years ended December 31, 2003, 2002 and
2001.
The program can terminate upon the occurrence of certain events, which
generally are under Occidental's control or relate to bankruptcy. In such an
event, alternative funding would have to be arranged, which could result in an
increase in debt recorded on the consolidated balance sheet, with a
corresponding increase in the accounts receivable balance. The consolidated
income statement effect of such an event would not be significant.
LEASES
Occidental has entered into various operating-lease agreements, mainly for
railcars, power plants, manufacturing facilities and office space. The leased
assets are used in Occidental's operations where leasing offers advantages of
greater operating flexibility and generally costs less than alternative methods
of funding that were available at the time financing decisions were made. Lease
payments are expensed mainly as cost of sales. See contractual obligation table
below.
CONTRACTUAL OBLIGATIONS
The table below summarizes and cross-references certain contractual
obligations that are reflected in the Consolidated Balance Sheets and/or
disclosed in the accompanying Notes.
Payments Due by Year
-------------------------------------------------
2005 2007 2009
Contractual to to and
Obligations (in millions) Total 2004 2006 2008 thereafter
========================= ========== ========== ========== ========== ==========
CONSOLIDATED
BALANCE SHEET
Long-term debt
(Note 6) (a) $ 4,389 $ 476 $ 653 $ 955 $ 2,305
Capital leases
(Note 7) 33 1 2 2 28
Other long-term
liabilities (b) 658 75 146 102 335
OTHER OBLIGATIONS
Operating leases
(Note 7) (c) 1,332 106 179 137 910
Purchase
obligations (d) 2,728 1,657 292 151 628
---------- ---------- ---------- ---------- ----------
TOTAL $ 9,140 $ 2,315 $ 1,272 $ 1,347 $ 4,206
========================= ========== ========== ========== ========== ==========