Chevron 2006 Annual Report Download - page 61

CHEVRON CORPORATION 2006 ANNUAL REPORT 59CHEVRON CORPORATION 2006 ANNUAL REPORT 59
NOTE 2. ACQUISITION OF UNOCAL CORPORATION – Continued
NOTE 3.
INFORMATION RELATING TO THE CONSOLIDATED STATEMENT
OF CASH FLOWS
Year ended December 31
2006 2005 2004
Net decrease (increase) in operating working
capital was composed of the following:
Decrease (increase) in accounts and
notes receivable $ 17 $ (3,164) $ (2,515)
Increase in inventories (536) (968) (298)
Increase in prepaid expenses and
other current assets (31) (54) (76)
Increase in accounts payable and
accrued liabilities 1,246 3,851 2,175
Increase in income and other
taxes payable 348 281 1,144
Net decrease (increase) in operating
working capital $ 1,044 $ (54) $ 430
Net cash provided by operating
activities includes the following
cash payments for interest and
income taxes:
Interest paid on debt
(net of capitalized interest) $ 470 $ 455 $ 422
Income taxes $ 13,806 $ 8,875 $ 6,679
Net (purchases) sales of
marketable securities consisted
of the following gross amounts:
Marketable securities purchased $ (1,271) $ (918) $ (1,951)
Marketable securities sold 1,413 1,254 1,501
Net sales (purchases) of
marketable securities $ 142 $ 336 $ (450)
The Consolidated Statement of Cash Flows excludes the
effects of noncash transactions. In October 2006, operating
service agreements in Venezuela were converted to joint stock
companies. Upon conversion, the company reclassifi ed $441
of long-term receivables, $132 of accounts receivable and $45
of properties, plant and equipment to investments in equity
affi liates. Refer also to Note 21 on page 72 for the noncash
effects associated with the implementation of FASB State-
ment No. 158, Employers’ Accounting for Defi ned Pension and
Other Postretirement Plans.
In accordance with the cash-fl ow classifi cation require-
ments of FAS 123R, Share-Based Payment, the “Net decrease
(increase) in operating working capital” includes reductions
of $94 and $20 for excess income tax benefi ts associated with
stock options exercised during 2006 and 2005, respectively.
These amounts are offset by “Net purchases of treasury shares.”
The “Net purchases of treasury shares” represents the cost
of common shares acquired in the open market less the cost
of shares issued for share-based compensation plans. Open-
market purchases totaled $5,033, $3,029 and $2,122 in 2006,
2005 and 2004, respectively.
The acquisition was accounted for under the rules of
FASB Statement No. 141, Business Combinations. The follow-
ing table summarizes the fi nal purchase-price allocation:
Current assets $ 3,573
Investments and long-term receivables 1,695
Properties 17,285
Goodwill 4,820
Other assets 2,174
Total assets acquired 29,547
Current liabilities (2,364)
Long-term debt and capital leases (2,392)
Deferred income taxes (4,009)
Other liabilities (3,494)
Total liabilities assumed (12,259)
Net assets acquired $ 17,288
The $4,820 of goodwill, which represents benefi ts of
the acquisition that are additional to the fair values of the
other net assets acquired, was assigned to the upstream seg-
ment. The goodwill is not deductible for tax purposes. The
goodwill balance was reviewed for possible impairment as of
June 30, 2006, according to the requirements of FASB State-
ment No. 142, Goodwill and Other Intangible Assets, to test
goodwill for impairment on an annual basis. Goodwill was
determined not to be impaired at that time, and no events
have occurred subsequently that would necessitate an addi-
tional impairment review.
The following unaudited pro forma summary presents
the results of operations as if the acquisition of Unocal had
occurred at the beginning of each period:
Year ended December 31
2005 2004
Sales and other operating revenues $ 198,762 $ 158,471
Net income 14,967 14,164
Net income per share of common stock
Basic $ 6.68 $ 6.22
Diluted $ 6.64 $ 6.19
The pro forma summary uses estimates and assumptions
based on information available at the time. Management
believes the estimates and assumptions to be reasonable;
however, actual results may differ signifi cantly from this pro
forma fi nancial information. The pro forma information does
not refl ect any synergistic savings that might be achieved from
combining the operations and is not intended to refl ect the
actual results that would have occurred had the companies
actually been combined during the periods presented.