Chevron 2004 Annual Report Download - page 35

CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 33
2004฀were฀the฀highest฀in฀recent฀years.฀Earnings฀in฀2004฀also฀included฀
a฀benefit฀of฀$40฀million฀related฀to฀changes฀in฀income฀tax฀laws.
Total฀international฀refined฀products฀sales฀volumes฀were฀2.4฀
million฀barrels฀per฀day฀in฀2004,฀more฀than฀4฀percent฀higher฀than฀
2.3฀million฀in฀2003฀and฀about฀10฀percent฀higher฀than฀2.2฀million฀
in฀2002.฀Weak฀economic฀conditions฀dampened฀industry฀demand฀
in฀2002.฀Refer฀to฀the฀“Selected฀Operating฀Data”฀table฀on฀page฀34฀
for฀the฀three-year฀comparative฀refined-product฀sales฀volumes฀in฀
the฀international฀areas.
Special฀charges฀of฀$189฀million฀in฀2003฀included฀the฀write-
down฀of฀the฀Batangas฀Refinery฀in฀the฀Philippines฀in฀advance฀of฀its฀
conversion฀to฀a฀product฀terminal฀facility,฀employee฀severance฀costs฀
associated฀with฀the฀global฀downstream฀restructuring฀and฀reorga-
nization,฀the฀impairment฀of฀certain฀assets฀in฀anticipation฀of฀their฀
sale,฀and฀the฀company’s฀share฀of฀losses฀from฀an฀asset฀sale฀and฀asset฀
impairment฀by฀an฀equity฀affiliate.฀The฀special฀charge฀in฀2002฀was฀
for฀a฀write-down฀of฀the฀company’s฀investment฀in฀its฀publicly฀traded฀
Caltex฀Australia฀Limited฀affiliate฀to฀its฀estimated฀fair฀value.
Chemicals
Millions฀of฀dollars  2003 2002
  $ 69 $ 86
*Includes Foreign Currency Effects:  $ 13 $ 3
The฀chemicals฀segment฀
includes฀the฀company’s฀Oronite฀
division฀and฀the฀company’s฀
50฀percent฀share฀of฀its฀equity฀
investment฀in฀Chevron฀฀฀฀฀฀฀฀฀฀฀฀
Phillips฀Chemical฀Company฀฀฀฀
LLC฀(CPChem).฀In฀2004,฀results฀
for฀the฀company’s฀Oronite฀sub-
sidiary฀improved฀on฀higher฀sales฀
volumes.฀Earnings฀in฀2004฀for฀
CPChem฀increased฀as฀the฀result฀
of฀increased฀chemical฀commodity฀
margins฀and฀sales฀volumes฀and฀
higher฀equity฀affiliate฀income.฀
Protracted฀weak฀demand฀for฀com-
modity฀chemicals฀and฀industry฀
oversupply฀conditions฀suppressed฀
earnings฀for฀this฀segment฀in฀2003฀
and฀2002.฀
All฀Other
Millions฀of฀dollars  2003 2002
Charges Before Cumulative Effect of
Changes in Accounting Principles  $ (213) $ (3,143)
Cumulative Effect of Accounting
Changes   9 –
  $ (204) $ (3,143)
1 Includes Foreign Currency Effects:  $ 43 $ 40
2 Includes Special-Item Gains (Charges):
Dynegy-Related   $ 325 $ (2,306)
Asset Impairments/Write-offs  (84) –
Restructuring and Reorganizations  (16) –
Tax Adjustments   – 97
Environmental Remediation Provisions   – (37)
Merger-Related Expenses  – (386)
Total   $ 225 $ (2,632)
All฀Other฀consists฀of฀the฀company’s฀interest฀in฀Dynegy,฀coal฀
mining฀operations,฀power฀generation฀businesses,฀worldwide฀cash฀
management฀and฀debt฀financing฀activities,฀corporate฀administra-
tive฀functions,฀insurance฀operations,฀real฀estate฀activities,฀and฀
technology฀companies.
The฀improvement฀between฀2003฀and฀2004฀was฀primarily฀
associated฀with฀the฀company’s฀investment฀in฀Dynegy,฀including฀
gains฀from฀the฀redemption฀of฀certain฀Dynegy฀securities,฀higher฀
interest฀income,฀lower฀interest฀expense,฀and฀favorable฀corporate-
level฀tax฀adjustments.฀The฀net฀change฀between฀2002฀and฀2003฀was฀
largely฀attributable฀to฀the฀differences฀in฀the฀effect฀of฀net฀special฀
charges.฀The฀2003฀period฀also฀included฀lower฀interest฀expense฀
and฀other฀corporate฀charges฀compared฀with฀2002.
Net฀special฀gains฀in฀2003฀included฀a฀benefit฀of฀$365฀mil-
lion฀from฀the฀exchange฀of฀the฀company’s฀investment฀in฀Dynegy฀
preferred฀stock฀for฀cash฀and฀other฀Dynegy฀securities.฀This฀benefit฀
was฀partially฀offset฀by฀charges฀for฀asset฀write-downs฀of฀$84฀mil-
lion,฀primarily฀in฀the฀gasification฀business,฀which฀was฀later฀sold;฀
$40฀million฀for฀the฀company’s฀share฀of฀an฀asset฀impairment฀by฀
Dynegy;฀and฀employee฀severance฀costs฀of฀$16฀million.฀
Special฀charges฀in฀2002฀included฀$2.3฀billion฀related฀to฀
Dynegy,฀composed฀of฀$1.6฀billion฀for฀the฀write-down฀of฀the฀com-
pany’s฀investment฀in฀Dynegy฀common฀and฀preferred฀stock฀to฀its฀
estimated฀fair฀value฀and฀$680฀million฀for฀the฀company’s฀share฀of฀
Dynegy’s฀own฀special฀items฀for฀asset฀write-downs฀and฀revaluations,฀
and฀a฀loss฀on฀an฀asset฀sale.฀Refer฀also฀to฀page฀35฀for฀“Information฀
Relating฀to฀the฀Company’s฀Investment฀in฀Dynegy.”

Comparative฀amounts฀for฀certain฀income฀statement฀categories฀
are฀shown฀in฀the฀following฀table.฀For฀each฀category,฀the฀amounts฀
associated฀with฀special฀items฀in฀the฀comparative฀periods฀are฀also฀
indicated฀to฀assist฀in฀the฀explanation฀of฀the฀period-to-period฀
changes.฀Besides฀the฀information฀in฀this฀section,฀separately฀
disclosed฀on฀the฀face฀of฀the฀Consolidated฀Statement฀of฀Income฀
are฀a฀gain฀from฀the฀exchange฀of฀Dynegy฀securities,฀merger-
related฀expenses,฀write-down฀of฀investments฀in฀Dynegy฀and฀the฀
cumulative฀effect฀of฀changes฀in฀accounting฀principles.฀These฀
matters฀are฀discussed฀elsewhere฀in฀MD&A฀and฀in฀Note฀14฀to฀the฀
Consolidated฀Financial฀Statements฀on฀page฀63.฀
Millions฀of฀dollars  2003 2002
   $ 1,029 $ (25)
Memo: Special gains (charges),
before tax   179 (829)
   $ 308 $ 222
Memo: Special gains, before tax  217 –
   $ 8,500 $ 7,795
Memo: Special charges, before tax  329 259

    $ 4,440 $ 4,155
Memo: Special charges, before tax  146 180

    $ 5,326 $ 5,169
Memo: Special charges, before tax  286 298
   $ 474 $ 565
Memo: Special charges, before tax  – –
  $ 17,901 $ 16,682
Memo: Special charges, before tax  – –
   $ 5,294 $ 2,998
Memo: Special charges (benefits)  (312) (604)
-150
350
100
50
-50
0
-100
200
150
250
300
0100 02 03 



Millions of dollars
Chemicals฀earnings฀improved฀
significantly฀on฀higher฀
margins฀for฀commodity฀
chemicals฀and฀higher฀affiliate฀
income.
�Includes฀equity฀in฀affiliates
