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CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 57



“Net฀decrease฀in฀operating฀working฀capital”฀is฀composed฀of฀the฀
following:
Year ended December 31
2003 2002
Increase in accounts and
notes receivable  $ (265) $ (1,135)
(Increase) decrease in inventories  115 185
(Increase) decrease in prepaid
expenses and other current assets  261 92
Increase in accounts payable and
accrued liabilities  242 1,845
Increase (decrease) in income and
other taxes payable  (191) 138
Net decrease in operating
working capital   $ 162 $ 1,125
Net cash provided by operating
activities includes the following
cash payments for interest and
income taxes:
Interest paid on debt
(net of capitalized interest)   $ 467 $ 533
Income taxes   $ 5,316 $ 2,916
Net (purchases) sales of
marketable securities consist
of the following gross amounts:
Marketable securities purchased  $ (3,563) $ (5,789)
Marketable securities sold  3,716 5,998
Net (purchases) sales of
marketable securities   $ 153 $ 209
The฀2003฀“Net฀cash฀provided฀by฀operating฀activities”฀included฀
an฀$890฀“Decrease฀in฀other฀deferred฀charges”฀and฀a฀decrease฀of฀the฀
same฀amount฀in฀“Other”฀related฀to฀balance฀sheet฀netting฀of฀certain฀
pension-related฀asset฀and฀liability฀accounts,฀in฀accordance฀with฀the฀
requirements฀of฀Financial฀Accounting฀Standards฀Board฀(FASB)฀
Statement฀No.฀87,฀“Employers’฀Accounting฀for฀Pensions.”
The฀“Net฀(purchases)฀sales฀of฀treasury฀shares”฀in฀2004฀
included฀share฀repurchases฀of฀$2.1฀billion฀related฀to฀the฀compa-
ny’s฀common฀stock฀repurchase฀program,฀which฀were฀partially฀
offset฀by฀the฀issuance฀of฀shares฀for฀the฀exercise฀of฀stock฀options.
The฀major฀components฀of฀“Capital฀expenditures”฀and฀the฀rec-
onciliation฀of฀this฀amount฀to฀the฀reported฀capital฀and฀exploratory฀
expenditures,฀including฀equity฀affiliates,฀presented฀in฀MD&A฀are฀
presented฀in฀the฀following฀table.
Year ended December 31
 2003 2002

Income (loss) from equity affiliates   $ 179 $ (829)
Other income  (148) –
Gain from exchange of Dynegy
preferred stock 365 –
  396 (829)

Operating expenses  329 259
Selling, general and administrative
expenses 146 180
Depreciation, depletion and
amortization 286 298
Write-down of investments in
Dynegy Inc. – 1,796
Merger-related expenses – 576
  761 3,109

    (365) (3,938)
Income tax expense (benefit)  (312) (604)
  (53) (3,334)
  – –
  $ (53) $ (3,334)
Other฀financial฀information฀is฀as฀follows:
Year ended December 31
2003 2002
Total financing interest and debt costs   $ 549 $ 632
Less: Capitalized interest  75 67
Interest and debt expense   $ 474 $ 565
Research and development expenses   $ 228 $ 221
Foreign currency effects*   $ (404) $ (43)
* Includes $(13), $(96) and $(66) in 2004, 2003 and 2002, respectively, for the
company’s share of equity affiliates’ foreign currency effects.
The฀excess฀of฀market฀value฀over฀the฀carrying฀value฀of฀inven-
tories฀for฀which฀the฀LIFO฀method฀is฀used฀was฀$3,036,฀$2,106฀and฀
$1,571฀at฀December฀31,฀2004,฀2003฀and฀2002,฀respectively.฀Market฀
value฀is฀generally฀based฀on฀average฀acquisition฀costs฀for฀the฀year.฀
LIFO฀profits฀of฀$36,฀$82฀and฀$13฀were฀included฀in฀net฀income฀for฀
the฀years฀2004,฀2003฀and฀2002,฀respectively.


On฀July฀28,฀2004,฀the฀company’s฀Board฀of฀Directors฀approved฀
a฀two-for-one฀stock฀split฀in฀the฀form฀of฀a฀stock฀dividend฀to฀the฀
company’s฀stockholders฀of฀record฀on฀August฀19,฀2004,฀with฀dis-
tribution฀of฀shares฀on฀September฀10,฀2004.฀The฀total฀number฀of฀
authorized฀common฀stock฀shares฀and฀associated฀par฀value฀was฀
unchanged฀by฀this฀action.฀All฀per-share฀amounts฀in฀the฀financial฀
statements฀reflect฀the฀stock฀split฀for฀all฀periods฀presented.฀The฀effect฀
of฀the฀common฀stock฀split฀is฀reflected฀on฀the฀Consolidated฀Balance฀
Sheet฀in฀“Common฀stock”฀and฀“Capital฀in฀excess฀of฀par฀value.”
 SPECIAL ITEMS AND OTHER FINANCIAL INFORMATION – Continued