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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended March 31, 2003
 
or
 
o
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-368-2

ChevronTexaco Corporation

(Exact name of registrant as specified in its charter)
     
Delaware
   94-0890210
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification Number)
 
6001 Bollinger Canyon Road,    
San Ramon, California   94583
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (925) 842-1000

NONE

(Former name or former address, if changed since last report.)

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      Indicate the number of shares of each of the issuer’s classes of common stock, as of the latest practicable date:

         
Class Outstanding as of March 31, 2003
Common stock, $0.75 par value
    1,068,334,996  

 

INDEX

               
Page
No.
    Cautionary Statements Relevant to Forward-Looking Information for the Purpose of “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995     2  
PART I

FINANCIAL INFORMATION
 
Item 1.
  Consolidated Financial Statements     3  
    Consolidated Statement of Income for the three months ended March 31, 2003 and 2002     3  
    Consolidated Statement of Comprehensive Income for the three months ended March 31, 2003 and 2002     4  
    Consolidated Balance Sheet at March 31, 2003 and December 31, 2002     5  
    Consolidated Statement of Cash Flows for the three months ended March 31, 2003 and 2002     6  
    Notes to Consolidated Financial Statements     7-18  
 
Item 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     19-31  
 
Item 3.
  Quantitative and Qualitative Disclosures About Market Risk     32  
 
Item 4
  Controls and Procedures     32  
PART II

OTHER INFORMATION
 
Item 1.
  Legal Proceedings     33  
 
Item 6.
  Listing of Exhibits and Reports on Form 8-K     33  
Signature     34  
Certifications     35-36  
 
Exhibit
  : Computation of Ratio of Earnings to Fixed Charges     38  
Certifications Required by Section 906 of the Sarbanes-Oxley Act of 2002     39-40  

1

 

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR

THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q of ChevronTexaco Corporation contains forward-looking statements relating to ChevronTexaco’s operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “projects,” “believes,” “seeks,” “estimates” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, ChevronTexaco undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Among the factors that could cause actual results to differ materially are crude oil and natural gas prices; refining margins and marketing margins; chemicals prices and competitive conditions affecting supply and demand for aromatics, olefins and additives products; actions of competitors; the competitiveness of alternate energy sources or product substitutes; technological developments; the results of operations and financial condition of equity affiliates; the ability of the company’s Dynegy equity affiliate to successfully execute its recapitalization and restructuring plans; inability or failure of the company’s joint-venture partners to fund their share of operations and development activities; potential failure to achieve expected production from existing and future oil and gas development projects; potential delays in the development, construction or start-up of planned projects; potential disruption or interruption of the company’s production or manufacturing facilities due to accidents, political events, severe weather or war; potential liability for remedial actions under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental regulations (including, particularly, regulations and litigation dealing with gasoline composition and characteristics); potential liability resulting from pending or future litigation; and the possibility of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies. In addition, such statements could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.

2

 

PART I

FINANCIAL INFORMATION

 
Item 1. Consolidated Financial Statements

CHEVRONTEXACO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
                     
Three Months Ended
March 31,
2003 2002
(Millions of dollars, except
per-share amounts)
Revenues and Other Income
                
Sales and other operating revenues(1)
  $ 30,652     $ 20,844  
Income from equity affiliates
    265       112  
Other income
    48       199  
     
     
 
 
Total Revenues and Other Income
     30,965       21,155  
     
     
 
Costs and Other Deductions
                
Purchased crude oil and products
    18,275       11,813  
Operating expenses
    1,938       1,752  
Selling, general and administrative expenses
    1,009       863  
Exploration expenses
    155       85  
Depreciation, depletion and amortization
    1,242       1,205  
Merger-related expenses
    —       183  
Taxes other than on income(1)
    4,330       3,780  
Interest and debt expense
    130       147  
Minority interests
    22       12  
     
     
 
 
Total Costs and Other Deductions
     27,101       19,840  
     
     
 
Income Before Income Tax Expense
     3,864       1,315  
Income Tax Expense
     1,748       590  
     
     
 
Income Before Cumulative Effect of Changes in Accounting Principles
     2,116       725  
Cumulative effect of changes in accounting principles, net of tax
    (196 )     —  
     
     
 
Net Income
   $ 1,920     $ 725  
     
     
 
Per Share of Common Stock:
                
 
Income Before Cumulative Effect of Changes in Accounting Principles
                
   
— Basic
  $ 1.99     $ 0.68  
   
— Diluted
   $ 1.99     $ 0.68  
 
Net Income
                
   
— Basic
  $ 1.81     $ 0.68  
   
— Diluted
   $ 1.81     $ 0.68  
 
Dividends
   $ 0.70     $ 0.70  
 
Weighted Average Number of Shares Outstanding (000s)
                
   
— Basic
    1,062,017       1,060,080  
   
— Diluted
     1,063,600       1,062,010  
               
(1)Includes consumer excise taxes
  $ 1,691     $ 1,688  

See accompanying notes to consolidated financial statements.

3

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)
                   
Three Months
Ended March 31,
2003 2002
(Millions of
dollars)
Net Income
   $ 1,920     $ 725  
     
     
 
 
Unrealized holding (loss) gain on securities
    (11 )     63  
 
Minimum pension liability adjustment
    (17 )     —  
 
Net derivatives gain on hedge transactions
    5       5  
 
Currency translation adjustment
    (4 )     (17 )
     
     
 
Other Comprehensive (Loss) Income, net of tax
     (27 )     51  
     
     
 
Comprehensive Income
   $ 1,893     $ 776  
     
     
 

See accompanying notes to consolidated financial statements.

4

 

CHEVRONTEXACO CORPORATION AND SUBSIDIARIES

 
CONSOLIDATED BALANCE SHEET
                       
At March 31, At December 31,
2003 2002
(Unaudited)
(Millions of dollars)
ASSETS
Cash and cash equivalents
  $ 3,804     $ 2,957  
Marketable securities
    760       824  
Accounts and notes receivable
    10,197       9,385  
Inventories:
               
 
Crude oil and petroleum products
    2,149       2,019  
 
Chemicals
    182       193  
 
Materials, supplies and other
    500       551  
     
     
 
      2,831       2,763  
Prepaid expenses and other current assets
    1,927       1,847  
     
     
 
   
Total Current Assets
     19,519       17,776  
Long-term receivables, net
    1,227       1,338  
Investments and advances
    11,484       11,097  
Properties, plant and equipment, at cost
    107,068       105,231  
Less: accumulated depreciation, depletion and amortization
    60,470       61,076  
     
     
 
      46,598       44,155  
Deferred charges and other assets
    2,474       2,993  
     
     
 
     
Total Assets
   $ 81,302     $ 77,359  
     
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt
  $ 4,114     $ 5,358  
Accounts payable
    8,530       8,455  
Accrued liabilities
    3,075       3,364  
Federal and other taxes on income
    2,575       1,626  
Other taxes payable
    1,106       1,073  
     
     
 
   
Total Current Liabilities
     19,400       19,876  
Long-term debt
    10,962       10,666  
Capital lease obligations
    217       245  
Deferred credits and other noncurrent obligations
    7,404       4,474  
Noncurrent deferred income taxes
    5,594       5,619  
Reserves for employee benefit plans
    4,590       4,572  
Minority interests
    322       303  
     
     
 
   
Total Liabilities
     48,489       45,755  
     
     
 
Preferred stock (authorized 100,000,000 shares, $1.00 par value, none issued)
    —       —  
Common stock (authorized 4,000,000,000 shares, $0.75 par value, 1,137,021,057 shares issued)
    853       853  
Capital in excess of par value
    4,833       4,833  
Retained earnings
    32,123       30,942  
Accumulated other comprehensive loss
    (1,025 )     (998 )
Deferred compensation and benefit plan trust
    (602 )     (652 )
Treasury stock, at cost (68,686,061 and 68,884,416 shares at March 31, 2003 and December 31, 2002, respectively)
    (3,369 )     (3,374 )
     
     
 
   
Total Stockholders’ Equity
     32,813       31,604  
     
     
 
     
Total Liabilities and Stockholders’ Equity
   $ 81,302     $ 77,359  
     
     
 

See accompanying notes to consolidated financial statements.

5

 

CHEVRONTEXACO CORPORATION AND SUBSIDIARIES

 
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
                       
Three Months Ended
March 31,
2003 2002
(Millions of dollars)
Operating Activities
                
 
Net income
  $ 1,920     $ 725  
 
Adjustments
               
   
Cumulative effect of changes in accounting principles
    196       —  
   
Depreciation, depletion and amortization
    1,242       1,205  
   
Dry hole expenses
    71       39  
   
Distributions less than income from equity affiliates
    (167 )     (51 )
   
Net before-tax gains on asset retirements and sales
    (6 )     (27 )
   
Net foreign currency losses (gains)
    26       (121 )
   
Deferred income tax provision
    (18 )     (204 )
   
Net increase in operating working capital
    (306 )     (229 )
   
Minority interest in net income
    22       12  
   
Decrease (increase) in long-term receivables
    113       (30 )
   
Decrease (increase) in other deferred charges
    214       (237 )
   
Other, net
    25       (13 )
     
     
 
     
Net Cash Provided by Operating Activities
     3,332       1,069  
     
     
 
Investing Activities
                
 
Capital expenditures
    (1,301 )     (1,845 )
 
Proceeds from asset sales
    71       2,177  
 
Net sales of marketable securities
    386       222  
     
     
 
     
Net Cash (Used for) Provided by Investing Activities
     (844 )     554  
     
     
 
Financing Activities
                
 
Net (payments) borrowings of short-term obligations
    (1,120 )     861  
 
Proceeds from issuance of long-term debt
    817       25  
 
Repayments of long-term debt and other financing obligations
    (628 )     (371 )
 
Cash dividends
    (743 )     (743 )
 
Dividends paid to minority interests
    (3 )     (2 )
 
Net sales of treasury shares
    4       21  
     
     
 
     
Net Cash Used for Financing Activities
     (1,673 )     (209 )
     
     
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
     32       (6 )
     
     
 
Net Change in Cash and Cash Equivalents
     847       1,408  
Cash and Cash Equivalents at January 1
     2,957       2,117  
     
     
 
Cash and Cash Equivalents at March 31
   $ 3,804     $ 3,525  
     
     
 

See accompanying notes to consolidated financial statements.

6

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.     Interim Financial Statements

      The accompanying consolidated financial statements of ChevronTexaco Corporation and its subsidiaries (the company) have not been audited by independent accountants, except for the Consolidated Balance Sheet at December 31, 2002. In the opinion of the company’s management, the interim data include all adjustments necessary for a fair statement of the results for the interim periods. These adjustments were of a normal recurring nature, except for the cumulative effect of changes in accounting principles, special charges and merger-related expenses described in Notes 2 and 3.

      Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the company’s 2002 Annual Report on Form 10-K.

      The results for the three-month period ended March 31, 2003, are not necessarily indicative of future financial performance.

Note 2.     Net Income

      Net income for the first quarter of 2003 included a charge of $196 million for the cumulative effect of changes in accounting principles and a charge of $39 million for the company’s share of losses from asset sales by an international equity affiliate. The cumulative effect of changes in accounting principles is discussed in Note 3. Net income for the first quarter of 2002 included charges of $74 million for the company’s share of a write-down of investments in telecommunications businesses by its Dynegy Inc. affiliate and $132 million for merger-related expenses.

      Net income in the first quarter 2003 included foreign currency losses of $45 million, compared with gains of $124 million in the first quarter 2002.

Note 3.     Cumulative Effect of Changes in Accounting Principles

      The company adopted Financial Accounting Standards Board Statement No. 143, “Accounting for Asset Retirement Obligations” (FAS 143), effective January 1, 2003. This new accounting standard applies to legal obligations associated with the retirement of tangible long-lived assets. FAS 143 primarily affects the company’s accounting for oil and gas producing assets and differs in several respects from previous accounting under FAS 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” In the first quarter 2003, the company recorded a net after-tax charge of $200 million for the cumulative effect of the adoption of FAS 143, including the company’s share of amounts attributable to equity affiliates. The cumulative-effect adjustment also increased the following balance sheet categories: “Properties, plant and equipment” $2.568 billion; “Accrued liabilities” $115 million; and, “Deferred credits and other noncurrent obligations,” $2.674 billion. “Noncurrent deferred income taxes” decreased by $21 million. Upon adoption, legal obligations, if any, to retire refining, marketing and transportation (downstream) and chemical long-lived assets generally were not recognized, as indeterminate settlement dates for the asset retirements prevented estimation of the fair value of the associated retirement obligation (ARO). The company will perform future periodic reviews of its downstream and chemical long-lived assets for any changes in facts and circumstances that might trigger recognition of a retirement obligation.

      Other than the cumulative-effect net charge, the effect of the new accounting standard on the first quarter 2003 net income was not materially different from what the result would have been under FAS 19 accounting. Included in “Depreciation, depletion and amortization” of $1.242 billion in the first quarter 2003, was $43 million of expenses related to asset retirement obligations.

7

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table shows what the company’s net income and net income per share would have been in the first quarter 2002 if the provisions of FAS 143 had been applied in that period, compared with net income and net income per share recorded in the first quarter 2003.

                   
Three Months Ended
March 31,
2003 2002
(Millions of dollars)
Net income:
                
Reported net income
  $ 1,920