SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] 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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-9210
---------------------
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)
(310) 208-8800
(Registrant's telephone number, including area code)
---------------------
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 [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 2003
- ------------------------------- ---------------------------------
Common stock $.20 par value 379,260,500 shares
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
March 31, 2003 and December 31, 2002 2
Consolidated Condensed Statements of Income--
Three months ended March 31, 2003 and 2002 4
Consolidated Condensed Statements of Cash Flows--
Three months ended March 31, 2003 and 2002 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 21
PART II OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Amounts in millions)
2003 2002
================================================================================ ========== ==========
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 146 $ 146
Receivables, net 1,277 1,079
Inventories 455 491
Prepaid expenses and other 165 157
---------- ----------
Total current assets 2,043 1,873
LONG-TERM RECEIVABLES, net 258 275
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES 1,130 1,056
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation, depletion and amortization of $6,611 at
March 31, 2003 and $6,395 at December 31, 2002 13,124 13,036
OTHER ASSETS 382 308
---------- ----------
$ 16,937 $ 16,548
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
2
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Amounts in millions)
2003 2002
================================================================================ ========== ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities $ 24 $ 206
Accounts payable 896 785
Accrued liabilities 903 1,107
Domestic and foreign income taxes 315 137
---------- ----------
Total current liabilities 2,138 2,235
---------- ----------
LONG-TERM DEBT, net of current maturities and unamortized discount 3,998 3,997
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 985 982
Other 2,359 2,228
---------- ----------
3,344 3,210
---------- ----------
MINORITY INTEREST 331 333
---------- ----------
OCCIDENTAL OBLIGATED MANDATORILY REDEEMABLE
TRUST PREFERRED SECURITIES OF A SUBSIDIARY
TRUST HOLDING SOLELY SUBORDINATED NOTES OF
OCCIDENTAL 454 455
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, at par value 76 75
Additional paid-in capital 3,982 3,967
Retained earnings 2,628 2,303
Accumulated other comprehensive income (14) (27)
---------- ----------
6,672 6,318
---------- ----------
$ 16,937 $ 16,548
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
3
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Amounts in millions, except per-share amounts)
2003 2002
================================================================================ ========== ==========
REVENUES
Net sales $ 2,371 $ 1,523
Interest, dividends and other income 34 25
---------- ----------
2,405 1,548
---------- ----------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,298 987
Selling, general and administrative and other operating expenses 187 151
Exploration expense 28 27
Interest and debt expense, net 131 74
---------- ----------
1,644 1,239
---------- ----------
Income before taxes and other items 761 309
Provision for domestic and foreign income and other taxes 333 126
Minority interest 19 25
Loss from equity investments 16 35
---------- ----------
Income from continuing operations 393 123
Discontinued operations, net -- (3)
Cumulative effect of changes in accounting principles, net (68) (95)
---------- ----------
NET INCOME AND EARNINGS APPLICABLE TO COMMON STOCK $ 325 $ 25
========== ==========
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.04 $ .33
Discontinued operations, net -- (.01)
Cumulative effect of changes in accounting principles, net (.18) (.25)
---------- ----------
Basic earnings per common share $ .86 $ .07
========== ==========
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.03 $ .33
Discontinued operations, net -- (.01)
Cumulative effect of changes in accounting principles, net (.18) (.25)
---------- ----------
Diluted earnings per common share $ .85 $ .07
========== ==========
DIVIDENDS PER COMMON SHARE $ .26 $ .25
========== ==========
BASIC SHARES OUTSTANDING 379.1 374.5
DILUTED SHARES 383.2 376.6
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
4
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Amounts in millions)
2003 2002
================================================================================ ========== ==========
CASH FLOW FROM OPERATING ACTIVITIES
Income from continuing operations $ 393 $ 123
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation, depletion and amortization of assets 285 261
Deferred income tax provision 32 28
Other non-cash charges to income 25 22
Loss from equity investments 16 35
Dry hole and impairment expense 15 8
Changes in operating assets and liabilities (18) (233)
Other operating, net (74) (51)
---------- ----------
Operating cash flow from continuing operations 674 193
Operating cash flow from discontinued operations -- (4)
---------- ----------
Net cash provided by operating activities 674 189
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (298) (254)
Purchase of businesses, net (42) (5)
Sales of businesses and disposal of property, plant, and equipment, net 1 --
Equity investments and other investing, net (87) 79
---------- ----------
Investing cash flow from continuing operations (426) (180)
Investing cash flow from discontinued operations -- (1)
---------- ----------
Net cash used by investing activities (426) (181)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 298 --
Repurchase of Trust Preferred Securities (1) (2)
Purchases for natural gas delivery commitment -- (31)
Payments on long-term debt and capital lease liabilities (482) (3)
Proceeds from issuance of common stock 1 6
Cash dividends paid (94) (94)
Stock options exercised 30 12
---------- ----------
Net cash used by financing activities (248) (112)
---------- ----------
(Decrease) increase in cash and cash equivalents -- (104)
Cash and cash equivalents--beginning of period 146 198
---------- ----------
Cash and cash equivalents--end of period $ 146 $ 94
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
5
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2003
1. General
The accompanying unaudited consolidated condensed financial statements have
been prepared by Occidental Petroleum Corporation and subsidiaries
(Occidental) pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and disclosures normally included
in notes to consolidated financial statements have been condensed or
omitted pursuant to such rules and regulations, but resultant disclosures
are in accordance with accounting principles generally accepted in the
United States of America as they apply to interim reporting. The
consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto in
Occidental's Annual Report on Form 10-K for the year ended December 31,
2002 (2002 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to fairly present Occidental's
consolidated financial position as of March 31, 2003, and the consolidated
statements of income and cash flows for the three months then ended. The
income and cash flows for the period ended March 31, 2003, are not
necessarily indicative of the income or cash flows to be expected for the
full year.
Certain financial statements and notes for the prior year have been changed
to conform to the 2003 presentation.
Refer to Note 1 to the consolidated financial statements in the 2002 Form
10-K for a summary of significant accounting policies, including critical
accounting policies.
2. Accounting Changes
See Note 7 regarding accounting changes related to asset retirement
obligations.
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends and clarifies financial accounting
and reporting for derivative instruments. This statement is effective for
contracts entered into or modified after June 30, 2003. Occidental will
adopt this statement in the third quarter of 2003. Occidental is currently
evaluating the provisions of this statement to determine its impact on the
financial statements.
In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
"Consolidation of Variable Interest Entities." FIN No. 46 requires a
company to consolidate a variable interest entity if it is designated as
the primary beneficiary of that entity even if the company does not have a
majority of voting interests. A variable interest entity is generally
defined as an entity where its equity is unable to finance its activities
or where the owners of the entity lack the risk and rewards of ownership.
The provisions of this statement apply at inception for any entity created
after January 31, 2003. For an entity created before February 1, 2003, the
provisions of this Interpretation must be applied at the beginning of the
first interim or annual period beginning after June 15, 2003. When
Occidental adopts the provisions of FIN No. 46 in the third quarter of 2003
for existing entities that are within the scope of this interpretation,
Occidental believes that its OxyMar investment will be consolidated. The
statement also has disclosure requirements, which Occidental adopted in the
2002 Form 10-K.
In January 2003, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN No. 45
6
requires a company to recognize a liability for the obligations it has
undertaken in issuing a guarantee. This liability would be recorded at the
inception of a guarantee and would be measured at fair value. The
measurement provisions of this statement apply prospectively to guarantees
issued or modified after December 31, 2002. The disclosure provisions of
the statement were adopted by Occidental in the 2002 Form 10-K. Occidental
adopted the measurement provisions of this statement in the first quarter
of 2003 and it did not have an effect on the financial statements when
adopted.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 permits two
additional transition methods for companies that elect to adopt the
fair-value-based method of accounting for stock-based employee
compensation. The statement also expands the disclosure requirements for
stock-based compensation (See note 11). The provisions of this statement
apply to financial statements for fiscal years ending after December 15,
2002. The statement did not have a material effect on the financial
statements.
Since 1999, Occidental has accounted for certain energy-trading contracts
in accordance with Emerging Issues Task Force (EITF) Issue No. 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities." EITF Issue No. 98-10 required that all energy-trading
contracts must be marked to fair value with gains and losses included in
earnings, whether the contracts were derivatives or not. In October 2002,
the EITF rescinded EITF Issue No. 98-10 thus precluding mark-to-market
accounting for all energy-trading contracts that are not derivatives and
fair value accounting for inventories purchased from third parties. Also,
the rescission requires derivative gains and losses to be presented net on
the income statement, whether or not they are physically settled, if the
derivative instruments are held for trading purposes. Occidental adopted
this accounting change in the first quarter of 2003 and recorded a
cumulative effect of a change in accounting principles charge of
approximately $18 million, after tax.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires that a
liability be recognized for exit and disposal costs only when the liability
has been incurred and when it can be measured at fair value. The statement
is effective for exit and disposal activities that are initiated after
December 31, 2002. Occidental adopted SFAS No. 146 in the first quarter of
2003 and it did not have a material effect on its financial statements.
3. Comprehensive Income
The following table presents Occidental's comprehensive income items (in
millions):
Three Months Ended March 31, 2003 2002
================================================== ========== ==========
Net income $ 325 $ 25
Other comprehensive income items
Foreign currency translation adjustments 2 --
Derivative mark-to-market adjustments (12) (2)
Unrealized gain on securities 23 --
---------- ----------
Other comprehensive income, net of tax 13 (2)
---------- ----------
Comprehensive income $ 338 $ 23
================================================== ========== ==========
7
4. Supplemental Cash Flow Information
During the three months ended March 31, 2003 and 2002, net cash payments
for federal, foreign and state income taxes were approximately $13 million
and $3 million, respectively. Interest paid (net of interest capitalized of
$1 million and $2 million, respectively) totaled approximately $155 million
(including a $61 million debt repayment fee) and $68 million for the three
months ended March 31, 2003 and 2002, respectively.
5. Inventories
The valuation of LIFO inventory for interim periods is based on
management's estimates of year-end inventory levels and costs. Inventories
consist of the following (in millions):
Balance at March 31, 2003 December 31, 2002
============================== ==================== ====================
Raw materials $ 59 $ 54
Materials and supplies 129 125
Finished goods 274 319
---------- ----------
462 498
LIFO adjustment (7) (7)
---------- ----------
Total $ 455 $ 491
============================== ========== ==========
6. Derivative Activities
For the three months ended March 31, 2003 and 2002, the results of
operations included net pre-tax gains of $21 million and $9 million,
respectively, related to derivative mark-to-market adjustments. The amount
of interest expense recorded in the income statement was lower by
approximately $12.8 million and $10.6 million for the three months ended
March 31, 2003 and 2002, respectively, to reflect net pre-tax gains from
fair-value hedges.
The following table summarizes after-tax derivative activity recorded in
OCI for the three months ended March 31, 2003 and 2002 (in millions):
2003 2002
======================================================= ========== ==========
Beginning Balance $ (26) $ (20)
Losses from changes in current cash flow hedges (22) (2)
Amount reclassified to income from the expiration of
cash flow hedges 10 --
---------- ----------
Ending Balance $ (38) $ (22)
======================================================= ========== ==========
During the next twelve months, Occidental expects that $14 million of net
derivative after-tax losses included in OCI, based on their valuation at
March 31, 2003, will be reclassified into earnings. Hedge ineffectiveness
did not have a significant impact on earnings for the three months ended
March 31, 2003 and 2002.
7. Asset Retirement Obligations
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires companies to recognize the
fair value of a liability for an asset retirement obligation in the period
in which the liability is incurred if there is a legal obligation to
dismantle the asset and reclaim or remediate the property at the end of its
useful life. When the liability is initially recorded, the company
capitalizes the cost into property, plant and equipment. Over time, the
liability
8
is accreted and the cost is depreciated, both over the asset's useful life.
Occidental's asset retirement obligations primarily relate to the cost of
plugging and abandoning wells, well-site cleanup, facilities abandonment
and environmental closure and post-closure care.
Occidental adopted SFAS No. 143 in the first quarter of 2003. The initial
adoption resulted in an after-tax charge of $50 million, which was recorded
as a cumulative effect of a change in accounting principles. The adoption
increased net property, plant and equipment by $73 million, increased asset
retirement obligations by $151 million and decreased deferred tax
liabilities by $28 million. In addition, Occidental recorded a pre-tax
charge to income of approximately $3 million in the first quarter of 2003
for the accretion of the liability and $1 million for additional
depreciation expense. The pro-forma asset retirement obligation, if the
adoption of this statement had occurred on January 1, 2002, would have been
$131 million at January 1, 2002 and $151 million at December 31, 2002.
The following summarizes the activity of the asset retirement obligations
(in millions):
Three Months Ended March 31, 2003
============================================================ ==========
Beginning balance $ --
Cumulative effect of change in accounting principles 151
Liabilities settled in the period (3)
Accretion expense 3
----------
Ending balance $ 151
============================================================ ==========
8. Environmental Expenditures
Occidental's operations in the United States are subject to stringent
federal, state and local laws and regulations relating to improving or
maintaining the quality of the environment. Foreign operations also are
subject to environmental-protection laws. The laws that require or address
environmental remediation may apply retroactively to past waste disposal
practices and releases. In many cases, the laws apply regardless of fault,
legality of the original activities or current ownership or control of
sites. Occidental Petroleum Corporation (OPC) or certain of its
subsidiaries are currently participating in environmental assessments and
cleanups under these laws at federal Superfund sites and other sites
subject to the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), comparable state sites and other remediation sites,
including Occidental facilities and previously owned sites.
The following table presents Occidental's environmental remediation
reserves at March 31, 2003, grouped by three categories of environmental
remediation sites ($ amounts in millions):
# of Sites Reserve
============================== ========== ==========
CERCLA & Equivalent Sites 126 $ 268
Active Facilities 14 43
Closed or Sold Facilities 43 57
---------- ----------
Total 183 $ 368
============================== ========== ==========
In determining the environmental remediation reserves, Occidental refers to
currently available information, including relevant past experience,
available technology, regulations in effect, the timing of remediation and
cost-sharing arrangements. Occidental expects that it will continue to
incur additional liabilities beyond those recorded for environmental
remediation at these and other sites. The range of reasonably possible loss
for existing environmental remediation matters could be up to $400 million
beyond the amount accrued.
9
At March 31, 2003, OPC or certain of its subsidiaries have been named in
CERCLA or state equivalent proceedings, as shown below ($ amounts in
millions):
# of Sites Reserve
============================== ========== ==========
Minimal/No Exposure (a) 106 $ 6
Reserves between $1-10 MM 13 56
Reserves over $10 MM 7 206
---------- ----------
Total 126 $ 268
============================== ========== ==========
(a) Includes 33 sites for which Maxus Energy Corporation has retained the
liability and indemnified Occidental, 7 sites where Occidental has
denied liability without challenge, 53 sites where Occidental's
reserves are less than $50,000 each, and 13 sites where reserves are
between $50,000 and $1 million each.
Refer to Note 8 to the consolidated financial statements in the 2002 Form
10-K for additional information regarding Occidental's environmental
expenditures.
9. Lawsuits, Claims, Commitments, Contingencies and Related Matters
OPC and certain of its subsidiaries have been named in a substantial number
of lawsuits, claims and other legal proceedings. These actions seek, among
other things, compensation for alleged personal injury, breach of contract,
property damage, punitive damages, civil penalties or other losses; or
injunctive or declaratory relief. OPC and certain of its subsidiaries also
have been named in proceedings under CERCLA and similar federal, state and
local environmental laws. These environmental proceedings seek funding or
performance of remediation and, in some cases, compensation for alleged
property damage, punitive damages and civil penalties; however, Occidental
is usually one of many companies in these proceedings and has to date been
successful in sharing response costs with other financially-sound
companies. With respect to all such lawsuits, claims and proceedings,
including environmental proceedings, Occidental accrues reserves when it is
probable a liability has been incurred and the amount of loss can be
reasonably estimated.
During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and
foreign tax jurisdictions. Taxable years prior to 1996 are closed for U.S.
federal income tax purposes. Taxable years 1996 through 2000 are in various
stages of audit by the Internal Revenue Service. Disputes arise during the
course of such audits as to facts and matters of law.
It is impossible at this time to determine the ultimate liabilities that
OPC and its subsidiaries may incur resulting from any lawsuits, claims and
proceedings, audits, commitments, contingencies and related matters. If
these matters were to be ultimately resolved unfavorably at amounts
substantially exceeding Occidental's reserves, an outcome not currently
anticipated, it is possible that such outcome could have a material adverse
effect upon Occidental's consolidated financial position or results of
operations. However, after taking into account reserves, management does
not expect the ultimate resolution of any of these matters to have a
material adverse effect upon Occidental's consolidated financial position
or results of operations.
10. Income Taxes
The provision for taxes based on income for the 2003 and 2002 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pretax income.
10
11. Stock-Based Compensation
Occidental accounts for stock options using the intrinsic value method
under Accounting Principles Board Opinion (APB) No. 25 and related
interpretations. Under this accounting method, Occidental did not record
any compensation expense related to its stock option plans. The following
table presents pro-forma information as if Occidental had adopted the
provisions of SFAS No. 123 at January 1, 2002 (in millions, except per
share amounts):
Three Months Ended March 31, 2003 2002
================================================== ========== ==========
Net income $ 325 $ 25
Compensation cost under SFAS No. 123, net 4 5
---------- ----------
Pro-forma net income $ 321 $ 20
========== ==========
Basic earnings per share $ 0.86 $ 0.07
SFAS No. 123 Compensation cost, net per share 0.01 0.02
---------- ----------
Pro-forma basic earnings per share $ 0.85 $ 0.05
========== ==========
Diluted earnings per share $ 0.85 $ 0.07
SFAS No. 123 Compensation cost, net per share 0.01 0.02
---------- ----------
Pro-forma diluted earnings per share $ 0.84 $ 0.05
================================================== ========== ==========
12. Investments in Unconsolidated Subsidiaries
The following table presents Occidental's proportionate interest in the
summarized financial information of its equity method investments (in
millions):
Three Months Ended March 31, 2003 2002
================================================== ========== ==========
Revenues $ 426 $ 432
Costs and expenses 442 467
---------- ----------
Net loss from continuing operations $ (16) $ (35)
================================================== ========== ==========
11
13. Industry Segments
The following table presents Occidental's interim industry segment and
corporate disclosures (in millions):
Oil and Gas Chemical Corporate Total
======================================== =========== =========== =========== ===========
Quarter ended March 31, 2003
Net sales $ 1,553 $ 790 $ 28 (d) $ 2,371
=========== =========== =========== ===========
Pretax operating profit (loss) $ 880 $ 38 $ (192)(a) $ 726
Income taxes (153) (3) (177)(b) (333)
Cumulative effect of changes in
accounting principles, net -- -- (68) (68)
----------- ----------- ----------- -----------
Net income (loss) $ 727 $ 35 $ (437)(c) $ 325
======================================== =========== =========== =========== ===========
Quarter ended March 31, 2002
Net sales $ 958 $ 565 $ -- $ 1,523
=========== =========== =========== ===========
Pretax operating profit (loss) $ 390 $ (29) $ (112)(a) $ 249
Income taxes (84) (2) (40)(b) (126)
Discontinued operations, net -- -- (3) (3)
Cumulative effect of changes in
accounting principles, net -- -- (95) (95)
----------- ----------- ----------- -----------
Net income (loss) $ 306 $ (31) $ (250) $ 25
======================================== =========== =========== =========== ===========
(a) Includes unallocated net interest expense, administration expense and
other items.
(b) Includes unallocated income taxes.
(c) Includes a $61 million pre-tax interest charge ($40 million net of
tax) to repay a $450 million 6.4 percent senior note issue that had
ten years of remaining life, but was subject to remarketing on April
1, 2003.
(d) During the first quarter of 2003, the Taft cogeneration facility began
generating revenue, which is included in the corporate net sales
amount.
14. Subsequent Event
In April 2003, Occidental exercised its purchase option related to its
LaPorte, Texas VCM plant lease for approximately $180 million.
In April 2003, Occidental announced that it had closed three acquisitions
for approximately $235 million in the Permian Basin, adding about 73
million BOE to its proved reserves.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Occidental Petroleum Corporation and entities in which it owns a majority voting
interest (Occidental) reported net income for the first quarter of 2003 of $325
million, on net sales of $2.4 billion, compared with net income of $25 million,
on net sales of $1.5 billion, for the same period of 2002. Basic earnings per
common share were $0.86 for the first quarter of 2003, compared with earnings
per share of $0.07 for the same period of 2002.
Net income for the first quarter of 2003 included a pre-tax debt repayment
charge of $61 million and a $68 million after-tax cumulative effect of a change
in accounting principles. Net income for the first quarter of 2002 included a
$95 million after-tax cumulative effect of a change in accounting principles and
a $3 million after-tax charge for discontinued operations. Net income for the
first quarter of 2003, compared to the same period in 2002, reflected higher
crude oil and natural gas prices. Additionally, net income in 2003 increased due
to higher chemical prices, partially offset by higher energy and raw material
costs.
The increase of $848 million in net sales in the first quarter of 2003, compared
with the same period in 2002, primarily reflected higher worldwide crude oil,
natural gas and chemical prices.
The increase of $311 million in cost of sales for the first quarter of 2003,
compared with the same period in 2002, primarily reflected higher energy and raw
material costs. The increase of $36 million in selling, general and
administrative and other operating expenses for the first quarter of 2003,
compared to the same period in 2002, primarily reflected increases in various
oil and gas costs, including higher domestic production taxes. Interest and debt
expense, net for the first quarter of 2003 included a pre-tax debt repayment
charge of $61 million.
SEGMENT OPERATIONS
The following table sets forth the sales and earnings of each industry segment
and corporate items (in millions):
Three Months Ended
March 31
-------------------------
2003 2002
================================================================================ ========== ==========
NET SALES
Oil and gas $ 1,553 $ 958
Chemical 790 565
Corporate and other 28 --
---------- ----------
NET SALES $ 2,371 $ 1,523
========== ==========
SEGMENT EARNINGS (LOSS)
Oil and gas $ 727 $ 306
Chemical 35 (31)
---------- ----------
762 275
UNALLOCATED CORPORATE ITEMS
Interest expense, net (124) (56)
Income taxes (178) (44)
Trust preferred distributions and other (11) (11)
Other (56) (41)
---------- ----------
INCOME FROM CONTINUING OPERATIONS 393 123
Discontinued operations, net -- (3)
Cumulative effect of changes in accounting principles, net (68) (95)
---------- ----------
NET INCOME $ 325 $ 25
================================================================================ ========== ==========
13
SIGNIFICANT ITEMS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
Three Months Ended March 31
-------------------------------------------------
(in millions, except per share amounts) 2003 EPS 2002 EPS
================================================== ========== ========= ========= =========
TOTAL REPORTED EARNINGS $ 325 $ 0.86 $ 25 $ 0.07
========== ========= ========= =========
OIL AND GAS
Segment Earnings $ 727 $ 306
No significant items affecting earnings -- --
---------- ---------
Segment Core Earnings 727 306
---------- ---------
CHEMICAL
Segment Earnings (Loss) 35 (31)
No significant items affecting earnings -- --
---------- ---------
Segment Core Earnings (Loss) 35 (31)
---------- ---------
CORPORATE
Results (437) (250)
Less:
Debt repayment charge (61) --
Tax effect of pre-tax adjustments 21 --
Discontinued operations, net * -- (3)
Changes in accounting principles, net * (68) (95)
---------- ---------
TOTAL CORE EARNINGS $ 433 $ 1.14 $ 123 $ 0.33
================================================== ========== ========= ========= =========
* These amounts are shown after tax.
14
OIL AND GAS SEGMENT
Three Months Ended
March 31
-------------------------
Summary of Operating Statistics 2003 2002
======================================================= ========== ==========
NET PRODUCTION PER DAY:
CRUDE OIL AND NATURAL GAS LIQUIDS (MBL)
United States 241 233
Latin America 53 49
Middle East and Other Eastern Hemisphere 109 116
NATURAL GAS (MMCF)
United States 528 591
Eastern Hemisphere 75 50
BARRELS OF OIL EQUIVALENT (MBOE)
Consolidated subsidiaries 504 505
Other interests 28 20
---------- ----------
Worldwide production 532 525
======================================================= ========== ==========
AVERAGE SALES PRICE:
CRUDE OIL ($/BBL)
United States $ 31.57 $ 18.83
Latin America $ 31.23 $ 18.25
Middle East and Other Eastern Hemisphere $ 30.16 $ 20.29
NATURAL GAS ($/MCF)
United States $ 4.30 $ 2.38
Eastern Hemisphere $ 1.89 $ 2.51
======================================================= ========== ==========
Oil and gas earnings for the first quarter of 2003 were $727 million, compared
with $306 million for the same period of 2002. The increase of $421 million in
earnings for the first quarter of 2003, compared to the first quarter of 2002,
reflected higher prices for worldwide crude oil and natural gas.
The increase of $595 million in net sales in the first quarter of 2003, compared
with the same period in 2002, primarily reflected higher worldwide crude oil and
natural gas prices.
The average West Texas Intermediate price in the first quarter was $33.85 per
barrel and the average NYMEX price for natural gas was $4.75 per thousand cubic
feet. A change of 10-cents per million BTUs in NYMEX gas prices impacts
quarterly oil and gas segment earnings by approximately $5 million while a $1.00
per barrel change in oil prices has a quarterly impact of approximately $31
million. Occidental expects second quarter 2003 production to be approximately
535,000 barrels of oil equivalent (BOE) per day.
15
CHEMICAL SEGMENT
Three Months Ended
March 31
-------------------------
Summary of Operating Statistics 2003 2002
======================================================= ========== ==========
MAJOR PRODUCT VOLUMES (M TONS)
Chlorine 686 701
Caustic Soda 637 574
Ethylene Dichloride 131 152
PVC Resins 1,063 1,042
MAJOR PRODUCT PRICE INDEX (BASE 1987-1990 = 1.0)
Chlorine 1.64 0.50
Caustic Soda 0.81 0.95
Ethylene Dichloride 1.23 0.61
PVC Resins 0.89 0.54
======================================================= ========== ==========
Chemical results for the first quarter of 2003 were earnings of $35 million,
compared with a loss of $31 million for the same period of 2002. The increase in
earnings for the first quarter of 2003, compared with the same period in 2002,
primarily resulted from higher prices for polyvinyl chloride (PVC), chlorine and
ethylene dichloride (EDC) and a smaller loss from certain equity investments,
partially offset by lower caustic soda prices and higher energy and raw material
costs. Additionally, the 2002 chemical earnings include a loss from the Equistar
equity investment, which was sold in August 2002. The results from the Lyondell
equity investment for the first quarter of 2003 are included in corporate and
other results, as discussed below.
The increase of $225 million in net sales in the first quarter of 2003, compared
with the same period in 2002, primarily reflected higher prices for PVC,
chlorine and EDC and higher sales volume, partially offset by lower prices for
caustic soda.
Occidental expects second quarter chemical segment earnings to be between $40
million and $70 million unless energy prices spike in the second quarter as they
did in the first quarter.
CORPORATE AND OTHER
During the first quarter of 2003, the Taft cogeneration facility began
generating revenue, which is included in the corporate and other net sales
amount.
The results from the Lyondell equity investment for the first quarter of 2003
are included in unallocated corporate items - other. Unallocated corporate items
- - income taxes exclude U.S. federal income tax charges and credits allocated to
the segments and foreign taxes. In the first quarter of 2003, segment earnings
benefited by $1 million (all for oil and gas) from credits allocated. In the
first quarter of 2002, segment earnings benefited by $5 million from credits
allocated: $1 million to oil and gas and $4 million to chemical.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities was $674 million for the
first quarter of 2003, compared with $189 million for the same period of 2002.
The increase of $485 million in the 2003 amount is primarily attributable to
higher income from continuing operations compared with the first quarter of the
prior year. Additionally, changes in operating assets and liabilities reflected
significantly increased income tax expense payable in future quarters.
16
Occidental's net cash used by investing activities was $426 million for the
first quarter of 2003, compared with $181 million for the same period of 2002.
The 2003 amount includes a deposit for the purchase of Permian assets, advances
to equity investees, purchases of equity investee debt and an additional stock
purchase of a cost-method investee. The 2002 amount includes the receipt of
partial repayments of amounts that were advanced to equity affiliates in prior
years. Capital expenditures for the first quarter of 2003 were $298 million,
including $225 million in oil and gas and $68 million for chemical. The chemical
amount included $44 million related to the exercise of purchase options for
certain leased assets. Capital expenditures for the first quarter of 2002 were
$254 million, including $228 million in oil and gas.
Occidental's net cash used by financing activities was $248 million in the first
quarter of 2003, compared with $112 million for the same period of 2002. The
2003 amount includes net debt payments of approximately $184 million.
Available but unused lines of committed bank credit totaled approximately $1.8
billion at March 31, 2003. Occidental currently expects to spend $1.3 billion on
its capital spending program in 2003. Occidental expects to have sufficient cash
in 2003 from operations to fund its operating needs, capital expenditure
requirements, dividend payments and mandatory debt repayments. If needed,
Occidental could access its existing credit facilities.
DERIVATIVE ACTIVITIES
For the three months ended March 31, 2003 and 2002, the results of operations
included net pre-tax gains of $21 million and $9 million, respectively, related
to derivative mark-to-market adjustments. The amount of interest expense
recorded in the income statement was lower by approximately $12.8 million and
$10.6 million for the three months ended March 31, 2003 and 2002, respectively,
to reflect net pre-tax gains from fair-value hedges.
The following table summarizes after-tax derivative activity recorded in OCI for
the three months ended March 31, 2003 and 2002 (in millions):
2003 2002
============================================================== ======== ========
Beginning Balance $ (26) $ (20)
(Losses) gains from changes in current cash flow hedges (22) (2)
Amount reclassified to income from the expiration of cash
flow hedges 10 --
-------- --------
Ending Balance $ (38) $ (22)
============================================================== ======== ========
During the next twelve months, Occidental expects that $14 million of net
derivative after-tax losses included in OCI, based on their valuation at March
31, 2003, will be reclassified into earnings. Hedge ineffectiveness did not have
a significant impact on earnings for the three months ended March 31, 2003 and
2002.
ENVIRONMENTAL EXPENDITURES
Occidental's operations in the United States are subject to stringent federal,
state and local laws and regulations relating to improving or maintaining the
quality of the environment. Foreign operations also are subject to
environmental-protection laws. The laws that require or address environmental
remediation may apply retroactively to past waste disposal practices and
releases. In many cases, the laws apply regardless of fault, legality of the
original activities or current ownership or control of sites. Occidental
Petroleum Corporation (OPC) or certain of its subsidiaries are currently
participating in environmental assessments and cleanups under these laws at
federal Superfund sites and other sites subject to the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), comparable
state sites and other remediation sites, including Occidental facilities and
previously owned sites.
17
The following table presents Occidental's environmental remediation reserves at
March 31, 2003, grouped by three categories of environmental remediation sites
($ amounts in millions):
# of Sites Reserve
=================================== ========== ==========
CERCLA & Equivalent Sites 126 $ 268
Active Facilities 14 43
Closed or Sold Facilities 43 57
---------- ----------
Total 183 $ 368
=================================== ========== ==========
In determining the environmental remediation reserves, Occidental refers to
currently available information, including relevant past experience, available
technology, regulations in effect, the timing of remediation and cost-sharing
arrangements. Occidental expects that it will continue to incur additional
liabilities beyond those recorded for environmental remediation at these and
other sites. The range of reasonably possible loss for existing environmental
remediation matters could be up to $400 million beyond the amount accrued.
At March 31, 2003, OPC or certain of its subsidiaries have been named in CERCLA
or state equivalent proceedings, as shown below ($ amounts in millions):
Description # of Sites Reserve
=================================== ========== ==========
Minimal/No Exposure (a) 106 $ 6
Reserves between $1-10 MM 13 56
Reserves over $10 MM 7 206
---------- ----------
Total 126 $ 268
=================================== ========== ==========
(a) Includes 33 sites for which Maxus Energy Corporation has retained the
liability and indemnified Occidental, 7 sites where Occidental has denied
liability without challenge, 53 sites where Occidental's reserves are less
than $50,000 each, and 13 sites where reserves are between $50,000 and $1
million each.
Refer to the "Environmental Expenditures" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations in the 2002 Form 10-K
for additional information regarding Occidental's environmental expenditures.
LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS
OPC and certain of its subsidiaries have been named in a substantial number of
lawsuits, claims and other legal proceedings. These actions seek, among other
things, compensation for alleged personal injury, breach of contract, property
damage, punitive damages, civil penalties or other losses; or injunctive or
declaratory relief. OPC and certain of its subsidiaries also have been named in
proceedings under CERCLA and similar federal, state and local environmental
laws. These environmental proceedings seek funding or performance of remediation
and, in some cases, compensation for alleged property damage, punitive damages
and civil penalties; however, Occidental is usually one of many companies in
these proceedings and has to date been successful in sharing response costs with
other financially-sound companies. With respect to all such lawsuits, claims and
proceedings, including environmental proceedings, Occidental accrues reserves
when it is probable a liability has been incurred and the amount of loss can be
reasonably estimated.
During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and foreign tax
jurisdictions. Taxable years prior to 1996 are closed for U.S. federal income
tax purposes. Taxable years 1996 through 2000 are in various stages of audit by
the Internal Revenue Service. Disputes arise during the course of such audits as
to facts and matters of law.
It is impossible at this time to determine the ultimate liabilities that OPC and
its subsidiaries may incur resulting from any lawsuits, claims and proceedings,
audits, commitments, contingencies and related matters. If these matters were to
be ultimately resolved unfavorably at amounts substantially exceeding
18
Occidental's reserves, an outcome not currently anticipated, it is possible that
such outcome could have a material adverse effect upon Occidental's consolidated
financial position or results of operations. However, after taking into account
reserves, management does not expect the ultimate resolution of any of these
matters to have a material adverse effect upon Occidental's consolidated
financial position or results of operations.
ACCOUNTING CHANGES
In June 2001, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires
companies to recognize the fair value of a liability for an asset retirement
obligation in the period in which the liability is incurred if there is a legal
obligation to dismantle the asset and reclaim or remediate the property at the
end of its useful life. When the liability is initially recorded, the company
capitalizes the cost into property, plant and equipment. Over time, the
liability is accreted and the cost is depreciated, both over the asset's useful
life. Occidental's asset retirement obligations primarily relate to the cost of
plugging and abandoning wells, well-site cleanup, facilities abandonment and
environmental closure and post-closure care. Occidental adopted SFAS No. 143 in
the first quarter of 2003. The initial adoption resulted in an after-tax charge
of $50 million, which was recorded as a cumulative effect of a change in
accounting principles. The adoption increased net property, plant and equipment
by $73 million, increased asset retirement obligations by $151 million and
decreased deferred tax liabilities by $28 million. In addition, Occidental
recorded a pre-tax charge to income of approximately $3 million in the first
quarter of 2003 for the accretion of the liability and $1 million for additional
depreciation expense.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments. This
statement is effective for contracts entered into or modified after June 30,
2003. Occidental will adopt this statement in the third quarter of 2003.
Occidental is currently evaluating the provisions of this statement to determine
its impact on the financial statements.
In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
"Consolidation of Variable Interest Entities." FIN No. 46 requires a company to
consolidate a variable interest entity if it is designated as the primary
beneficiary of that entity even if the company does not have a majority of
voting interests. A variable interest entity is generally defined as an entity
where its equity is unable to finance its activities or where the owners of the
entity lack the risk and rewards of ownership. The provisions of this statement
apply at inception for any entity created after January 31, 2003. For an entity
created before February 1, 2003, the provisions of this Interpretation must be
applied at the beginning of the first interim or annual period beginning after
June 15, 2003. When Occidental adopts the provisions of FIN No. 46 in the third
quarter of 2003 for existing entities that are within the scope of this
interpretation, Occidental believes that its OxyMar investment will be
consolidated. The statement also has disclosure requirements, which Occidental
adopted in the 2002 Form 10-K.
In January 2003, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN No. 45 requires a company to recognize a liability
for the obligations it has undertaken in issuing a guarantee. This liability
would be recorded at the inception of a guarantee and would be measured at fair
value. The measurement provisions of this statement apply prospectively to
guarantees issued or modified after December 31, 2002. The disclosure provisions
of the statement were adopted by Occidental in the 2002 Form 10-K. Occidental
adopted the measurement provisions of this statement in the first quarter of
2003 and it did not have an effect on the financial statements when adopted.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 permits two additional
transition methods for companies that elect to adopt the fair-value-based method
of accounting for stock-based employee compensation. The statement also expands
the disclosure requirements for stock-based compensation. The provisions of
19
this statement apply to financial statements for fiscal years ending after
December 15, 2002. The statement did not have a material effect on the financial
statements.
Since 1999, Occidental has accounted for certain energy-trading contracts in
accordance with Emerging Issues Task Force (EITF) Issue No. 98-10, "Accounting
for Contracts Involved in Energy Trading and Risk Management Activities." EITF
Issue No. 98-10 required that all energy-trading contracts must be marked to
fair value with gains and losses included in earnings, whether the contracts
were derivatives or not. In October 2002, the EITF rescinded EITF Issue No.
98-10 thus precluding mark-to-market accounting for all energy-trading contracts
that are not derivatives and fair value accounting for inventories purchased
from third parties. Also, the rescission requires derivative gains and losses to
be presented net on the income statement, whether or not they are physically
settled, if the derivative instruments are held for trading purposes. Occidental
adopted this accounting change in the first quarter of 2003 and recorded a
cumulative effect of a change in accounting principles charge of approximately
$18 million, after tax.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires that a liability be
recognized for exit and disposal costs only when the liability has been incurred
and when it can be measured at fair value. The statement is effective for exit
and disposal activities that are initiated after December 31, 2002. Occidental
adopted SFAS No. 146 in the first quarter of 2003 and it did not have a material
effect on its financial statements.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION
Portions of this report contain forward-looking statements and involve risks and
uncertainties that could significantly affect expected results of operations,
liquidity, cash flows and business prospects. Factors that could cause results
to differ materially include, but are not limited to: global commodity pricing
fluctuations; competitive pricing pressures; higher-than-expected costs,
including feedstocks; crude oil and natural gas prices; chemical prices;
potential liability for remedial actions under existing or future environmental
regulations and litigation; potential liability resulting from pending or future
litigation; general domestic and international political conditions; potential
disruption or interruption of Occidental's production or manufacturing
facilities due to accidents, political events or insurgent activity; potential
failure to achieve expected production from existing and future oil and gas
development projects; the supply/demand considerations for Occidental's
products; any general economic recession or slowdown domestically or
internationally; regulatory uncertainties; and not successfully completing, or
any material delay of, any development of new fields, expansion, capital
expenditure, efficiency-improvement project, acquisition or disposition.
Forward-looking statements are generally accompanied by words such as
"estimate", "project", "predict", "will", "anticipate", "plan", "intend",
"believe", "expect" or similar expressions that convey the uncertainty of future
events or outcomes. Occidental expressly disclaims any obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed might not occur.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the three months ended March 31, 2003, there were no material changes in the
information required to be provided under Item 305 of Regulation S-X included
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations (Incorporating Item 7A) - Derivative Activities and
Market Risk" in Occidental's 2002 Annual Report on Form 10-K.
20
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days before filing this Quarterly Report, Occidental's Chief Executive
Officer and Chief Financial Officer supervised and participated in Occidental's
evaluation of its disclosure controls and procedures. Disclosure controls and
procedures are controls and procedures designed to ensure that information
required to be disclosed in Occidental's periodic reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. Based upon that evaluation, Occidental's Chief
Executive Officer and Chief Financial Officer concluded that Occidental's
disclosure controls and procedures are effective.
There have been no significant changes in Occidental's internal controls or in
other factors that could significantly affect internal controls after the date
Occidental carried out its evaluation.
21
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
This item incorporates by reference the information regarding legal proceedings
in Note 9 to the consolidated condensed financial statements in Part I of this
Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Occidental's 2003 Annual Meeting of Stockholders (the Annual Meeting) was held
on April 25, 2003. The following actions were taken at the Annual Meeting, for
which proxies were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended:
1. The twelve nominees proposed by Occidental's Board of Directors were
elected as directors by the following votes:
Name For Withheld
------------------------- -------------------- --------------------
Ronald W. Burkle 315,776,240 20,918,014
John S. Chalsty 315,619,741 21,074,513
Edward P. Djerejian 315,663,233 21,031,021
R. Chad Dreier 321,257,506 15,436,748
John E. Feick 315,478,833 21,215,421
Dr. Ray R. Irani 315,276,788 21,417,466
Dr. Dale R. Laurance 315,562,271 21,131,983
Irvin W. Maloney 315,173,873 21,520,381
Rodolfo Segovia 315,713,840 20,980,414
Aziz D. Syriani 315,319,473 21,374,781
Rosemary Tomich 315,250,143 21,444,111
Walter L. Weisman 321,497,383 15,196,871
2. A proposal to ratify the selection of KPMG LLP as Occidental's
independent auditors for 2003 was approved. The proposal received
331,716,964 votes for, 2,699,502 votes against and 2,277,788
abstentions.
3. A proposal to amend the 2001 Incentive Compensation Plan (the Plan),
to increase, among other things, the number of shares of Common Stock
available for issuance under the Plan was approved. The proposal
received 291,134,359 votes for, 38,226,199 votes against and 7,333,696
abstentions.
4. A stockholder proposal requesting Occidental's Board of Directors to
adopt a stockholder vote policy on poison pills was defeated. The
proposal received 129,582,911 votes for, 160,188,489 votes against,
8,984,887 abstentions and 37,937,967 broker non-votes.
5. A stockholder proposal to report on the enforceability of stockholder
votes was defeated. The proposal received 28,770,952 votes for,
260,867,748 votes against, 9,117,568 abstentions and 37,937,986 broker
non-votes.
22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.(i) Restated Certificate of Incorporation of Occidental,
dated November 12, 1999 (incorporated by reference to
Exhibit 3.(i) to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1999,
File No. 1-9210).
3.(i)(a) Certificate of Change in Location of Registered Office
and of Registered Agent, dated July 6, 2001
(incorporated by reference to Exhibit 3.1(i) to the
Registration Statement on Form S-3 of Occidental, File
No. 333-82246).
3.(ii) Bylaws of Occidental, as amended through April 24, 2003
(incorporated by reference to Exhibit 3.(ii) to the
Registration Statement on Form S-8 of Occidental, File
No. 333-104827).
10.1 Occidental Petroleum Corporation 1996 Restricted Stock
Plan for Non-Employee Directors (as amended effective
April 25, 2003).
10.2 Occidental Petroleum Corporation 2001 Incentive
Compensation Plan (as amended through April 25, 2003)
(incorporated by reference to Exhibit 99.1 to the
Registration Statement on Form S-8 of Occidental, File
No. 333-104827).
10.3 Form of Restricted Stock Agreement under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors.
11 Statement regarding the computation of earnings per
share for the three months ended March 31, 2003 and
2002.
12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the three
months ended March 31, 2003 and 2002 and the five years
ended December 31, 2002.
99.1 Certifications of CEO and CFO.
(b) Reports on Form 8-K
During the quarter ended March 31, 2003, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 29, 2003 (date of
earliest event reported), filed on January 29, 2003, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the fourth quarter and fiscal year ended
December 31, 2002, and under Item 9, speeches and
supplemental investor information relating to Occidental's
fourth quarter 2002 earnings announcement.
From March 31, 2003 to the date hereof, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated April 22, 2003 (date of
earliest event reported), filed on April 22, 2003, for the
purpose of reporting, under Items 9 and 12, Occidental's
results of operations for the first quarter ended March 31,
2003, and speeches and supplemental investor information
relating to Occidental's first quarter 2003 earnings
announcement.
23
2. Current Report on Form 8-K dated April 25, 2003 (date of
earliest event reported), filed on April 25, 2003, for the
purpose of reporting, under Item 9, a speech made by Dr. Ray
R. Irani, Chief Executive Officer, at Occidental's 2003
Annual Meeting of Stockholders.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
DATE: May 8, 2003 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
25
CERTIFICATIONS
I, Ray R. Irani, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Occidental Petroleum
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 8, 2003
Ray R. Irani
----------------------------------------
Ray R. Irani
Chief Executive Officer
26
I, Stephen I. Chazen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Occidental Petroleum
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 8, 2003
Stephen I. Chazen
----------------------------------------
Stephen I. Chazen
Chief Financial Officer
27
EXHIBIT INDEX
EXHIBITS
- --------
10.1 Occidental Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors (as amended effective April 25, 2003).
10.3 Form of Restricted Stock Agreement under Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors.
11 Statement regarding the computation of earnings per share for the
three months ended March 31, 2003 and 2002.
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the three months ended March 31, 2003
and 2002 and the five years ended December 31, 2002.
99.1 Certifications of CEO and CFO.
EXHIBIT 10.1
OCCIDENTAL PETROLEUM CORPORATION
1996 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED EFFECTIVE APRIL 25, 2003)
1. Purpose. The purpose of the Occidental Petroleum Corporation 1996
Restricted Stock Plan for Non-Employee Directors (the "Plan") is to provide
ownership of Occidental Petroleum Corporation's ("Occidental") Common Stock to
non-employee directors in order to more closely align director and stockholder
interests, to provide a competitive compensation program for directors and to
enhance Occidental's ability to attract and retain top-quality directors.
2. Administration of the Plan.
(a) Members of the Committee. The Plan shall be administered by the
Compensation Committee of the Board (the "Committee"). Members of the Committee
shall be appointed from time to time by the Board and shall serve at the
pleasure of the Board. Any Committee member may resign at any time upon written
notice to the Board.
(b) Authority of the Committee. The Committee shall adopt such rules
as it may deem appropriate in order to carry out the purpose of the Plan. All
questions of interpretation, administration, and application of the Plan shall
be determined by a majority of the members of the Committee then in office,
except that the Committee may authorize any one or more of its members, or any
officer of Occidental, to execute and deliver documents on behalf of the
Committee. The determination of such majority shall be final and binding in all
matters relating to the Plan. Determinations made with respect to any individual
Non-Employee Director shall be made without participation by such Non-Employee
Director in such determination. No member of the Committee shall be liable for
any act done or omitted to be done by such member or by any other member of the
Committee in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
3. Stock Reserved for the Plan. The number of shares of Common Stock
authorized for issuance under the Plan is 150,000, subject to adjustment
pursuant to Section 8 hereof. Shares of Common Stock delivered hereunder may be
Common Stock of original issuance or Common Stock held in treasury, or a
combination thereof.
4. Awards of Restricted Stock.
(a) Annual Awards. On the first business day following each annual
meeting commencing with the 1999 Annual Meeting, each Non-Employee Director who
is then a member of the Board shall be awarded two thousand five hundred (2,500)
whole shares of Restricted Stock.
(b) Special Awards. On the first business day following each annual
meeting, each Non-Employee Director who is then serving as a Chairman of one or
more committees of the Board or as Lead Independent Director shall be awarded
three hundred (300) whole shares of Restricted Stock with respect to each such
position, in addition to any Award he or she may be granted pursuant to Section
4(a) above.
(c) Interim Awards. If a Non-Employee Director is elected other than
at an annual meeting, then on the first business day following his or her
election as a member of the Board, such newly elected Non-Employee Director
shall be awarded the number of shares (rounded to the nearest whole share) of
Restricted Stock equal to two thousand five hundred (2,500) multiplied by a
fraction, the numerator of which is the number of regularly scheduled Board
meetings remaining between the date of his or her election and the next annual
meeting and the denominator of which is the number of regularly scheduled Board
meetings between the most recent annual meeting and the next annual meeting.
(d) Effectiveness of Awards. Notwithstanding anything in this Plan to
the contrary, no Award made pursuant to the Plan or any amendment to the Plan
shall be effective prior to the requisite approval of the Plan or such amendment
by the stockholders of Occidental. In the event requisite stockholder approval
is not obtained, the Plan, and any Award thereunder, shall be null and void.
5. Terms and Conditions of Awards. Restricted Stock awarded to a
Non-Employee Director under the Plan shall be subject to the following
restrictions:
(a) During the period of the Director's service as a member of the
Board (the "Restriction Period"), any shares of Common Stock awarded under the
Plan shall not be sold, assigned, pledged, hypothecated or otherwise transferred
or encumbered. During the Restriction Period, the certificate representing such
shares of Common Stock shall contain a statement referring to the restrictions
contained in this Section 5(a) and such certificate shall be held by the
Company. Except as provided in Section 9, as soon as practicable after the lapse
of restrictions applicable to Restricted Stock, all shares of Restricted Stock
held by the Company for the benefit of a Non-Employee Director shall be given to
such Non-Employee Director, free and clear of any restrictions applicable
thereto during the Restriction Period.
(b) Whenever cash dividends are paid by Occidental on outstanding
Common Stock, each Non-Employee Director will receive in cash all dividends paid
on the Restricted Stock then held by the Company for the benefit of such
Non-Employee Director on the record date for the dividend. Common Stock
distributed in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to restrictions to the same
extent as the Restricted Stock with respect to which such Common Stock or other
property has been distributed.
(c) Each Non-Employee Director hereunder may designate from time to
time any beneficiary or beneficiaries (who may be designated concurrently,
contingently or successively) to whom any shares of Restricted Stock and any
cash amounts are to be paid in case of the Non-Employee Director's death before
receipt of any part or all of such Restricted Stock and cash. Each designation
will revoke all prior designations by the Non-Employee Director, shall be in a
form prescribed by the Committee, and will be effective only when filed by the
Non-Employee Director, in writing, with the Secretary of Occidental. Reference
in the Plan to a Non-Employee Director's "beneficiary" at any date shall include
such persons designated as concurrent beneficiaries on the Non-Employee
Director's beneficiary designation form then in effect. In the absence of any
such designation, any shares of Restricted Stock being held by the Company for
the benefit of such Non-Employee Director at the time of his or her death may,
in the sole discretion of the Committee, be paid to such Non-Employee Director's
estate in a cash lump sum.
6. Foreign Participants. In order to facilitate the making of an Award,
the Board may provide for such special terms for Awards to Non-Employee
Directors who are foreign nationals, as the Board may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom.
Moreover, the Board may approve such supplements to, or amendments, restatements
or alternative versions of, the Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of the Plan as in effect
for any other purpose, and the Secretary or other appropriate officer of
Occidental may certify any such document as having been approved and adopted in
the same manner as the Plan; provided that, no such supplements, amendments,
restatements or alternative versions shall include any provisions that are
inconsistent with the terms of the Plan, as then in effect, unless the Plan
could have been amended to eliminate the inconsistency without further approval
by the stockholders of Occidental.
7. Change in Control. Upon the occurrence of a Change in Control, all
restrictions affecting Restricted Shares shall lapse and such shares shall be
delivered to each Non-Employee Director as soon as practicable thereafter;
provided that, the Committee may, in its sole discretion authorize the payment
of cash, in lieu of the issuance of such shares.
8. Adjustments. The Board may make or provide for such adjustments in the
number of shares of Restricted Stock awarded under the Plan, as the Board may in
good faith determine to be required in order to prevent dilution or expansion of
the rights of Non-Employee Directors that otherwise would result from (i) any
stock dividend, stock split, combination of shares recapitalization or other
change in the capital structure of the Company or (ii) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Board may provide in substitution for any or all
outstanding Restricted Stock Awards under the Plan such alternative
consideration as it may in good
2
faith determine to be appropriate under the circumstances and may require the
surrender of all Awards so replaced. Moreover, the Board may, on or after the
date of any Award, provide in the agreement evidencing such Award that the
Non-Employee Director may elect to receive an equivalent Award in respect of
securities of the surviving entity of any merger, consolidation or other
transaction or event having similar effect, or the Board may provide that the
Non-Employee Director will automatically be entitled to receive such an
equivalent Award. The Board may also provide for such adjustments in the maximum
number of shares of Common Stock specified in Section 3 as the Board, in good
faith, determines to be appropriate in order to reflect any transaction or event
described in this Section 8.
9. Withholding. Occidental shall defer making payments or deliveries
under the Plan until satisfactory arrangements have been made for the payment of
any federal, state, local or foreign taxes (whether or not required to be
withheld) with respect to such payment or delivery. At the discretion of the
Committee, any such arrangements may without limitation include relinquishment
of a portion of any such payment or benefit or the surrender of outstanding
Common Stock, and any agreement pertaining to an Award may make such
relinquishment the mandatory form of satisfying such taxes. The Committee may
also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
10. Rights of Non-Employee Directors.
(a) Retention as Non-Employee Director. Nothing contained in the Plan
or with respect to any Award shall interfere with or limit in any way the right
of the stockholders of Occidental to remove any Non-Employee Director from the
Board, nor confer upon any Non-Employee Director any right to continue in the
service of Occidental as a Non-Employee Director.
(b) Nontransferability. No right or interest of any Non-Employee
Director in any Award shall be assignable or transferable during the lifetime of
the Non-Employee Director, either voluntarily or involuntarily, or subjected to
any lien, directly or indirectly, by operation of law, or otherwise, including
execution, levy, garnishment, attachment, pledge or bankruptcy. In the event of
a Non-Employee Director's death, a Non-Employee Director's rights and interests
in his or her Award shall be transferable by testamentary will or the laws of
descent and distribution. If in the opinion of the Committee a person entitled
to payments or to exercise rights with respect to the Plan is disabled from
caring for his or her affairs because of mental condition, physical condition or
age, payment due such person may be made to, and such rights shall be exercised
by, such person's guardian, conservator or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee of
such status.
(c) Except to the extent restricted under the terms of an agreement
evidencing a grant of Restricted Stock, a Non-Employee Director awarded such
stock shall have all of the rights of a stockholder, including, without
limitation, the right to vote Restricted Stock and the right to receive
dividends thereon.
11. Amendment; Termination. The Board may at any time and from time to
time alter, amend, suspend or terminate the Plan in whole or in part; provided
that, no amendment which requires stockholder approval shall be effective unless
the same shall be approved by the stockholders of Occidental entitled to vote
thereon. Notwithstanding the foregoing, no amendment shall affect adversely any
of the rights of any Non-Employee Director, without such Non-Employee Director's
consent.
12. General Restrictions.
(a) Regulations and Offer Approvals. The obligation of Occidental to
deliver Common Stock with respect to any Award under the Plan shall be subject
to all applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
(b) Each Award granted under the Plan is subject to the requirement
that, if at any time the Committee determines, in its absolute discretion, that
the listing, registration or qualification of Common Stock issuable pursuant to
the Plan is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of,
3
or in connection with, such Award or the issuance of Common Stock, no such Award
or payment shall be made or Common Stock issued, in whole or in part, unless
listing, registration, qualification, consent or approval has been effected or
obtained free of any conditions not acceptable to the Committee. Nothing herein
shall be deemed to require Occidental to apply for or to obtain such listing,
registration or qualification.
(c) In the event that the disposition of Common Stock acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act and is not otherwise exempt from such registration,
such Common Stock shall be restricted against transfer to the extent required by
the Securities Act or regulations thereunder, and Occidental may require any
Non-Employee Director to whom Common Stock is granted, as a condition of
receiving such Common Stock, to give written assurances in substance and form
satisfactory to Occidental and its counsel to the effect that such person is
acquiring the Common Stock for his or her own account and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as Occidental deems necessary or appropriate in order to comply with
federal and applicable state securities laws.
13. Governing Law. The Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
14. Plan Interpretation. The Plan is intended to comply with Rule 16b-3
and shall be construed to so comply.
15. Headings. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
16. Term of Plan. This Plan shall become effective on the Effective Date,
and shall remain in effect for ten (10) years from such date, unless sooner
terminated by the Board.
17. Definitions. For purposes of the Plan, the following terms shall have
the following meanings:
(a) "Award" means any award of Restricted Stock under the Plan.
(b) "Board" means the Board of Directors of Occidental.
(c) "Change in Control" means a change in control of Occidental,
which shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of Occidental or any
company owned, directly or indirectly, by the stockholders of Occidental in
substantially the same proportions as their ownership of the Common Stock of
Occidental), is or becomes, after the Effective Date of the Plan, the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Occidental (not including in the securities
beneficially owned by such person any securities acquired directly from
Occidental or its affiliates) representing 50 percent (50%) or more of the
combined voting power of Occidental's then-outstanding securities; or
(ii) during any period of two consecutive years (not including
any period prior to the Effective Date), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with Occidental to
effect a transaction described in clause (i), (iii), or (iv) of this definition)
whose election by the Board or nomination for election by Occidental's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board;
or
(iii) the stockholders of Occidental approve a merger or
consolidation of Occidental with any other corporation, other than (A) a merger
or consolidation which would result in the voting
4
securities of Occidental outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under any employee benefit plan of
Occidental, at least 50 percent of the combined voting power of the voting
securities of Occidental or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of Occidental (or similar transaction) in which no
person acquires more than 50 percent (50%) of the combined voting power of
Occidental's then-outstanding securities; or
(iv) the stockholders of Occidental approve a plan of complete
liquidation of Occidental or an agreement for the sale or disposition of all or
substantially all of Occidental's assets; provided that, prior to the occurrence
of any of the events described in clauses (i) through (iii) above, the Board may
determine that such an event shall not constitute a Change of Control for
purposes of the Plan.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(e) "Common Stock" means shares of the common stock, par value $.20
per share, of Occidental.
(f) "Company" means Occidental Petroleum Corporation and its
subsidiaries, collectively.
(g) "Effective Date" means April 26, 1996 or the date of approval of
the Plan by the stockholders of Occidental, whichever comes first.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as now
or hereafter construed, interpreted and applied by regulations, rulings and
cases.
(i) "Fair Market Value" means the per share fair market value of
Common Stock as determined by such methods or procedures as shall be established
from time to time by the Committee. Unless otherwise determined by the Committee
in good faith, the per share Fair Market Value of Common Stock as of a
particular date shall mean (i) the closing sales price per share of Common Stock
on the national securities exchange on which the Common Stock is principally
traded, for the last preceding date on which there was a sale of such Common
Stock on such exchange, or (ii) if the shares of Common Stock are then traded in
an over-the-counter market, the average of the closing bid and asked prices for
the shares of Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Common Stock in such market, or
(iii) if the shares of Common Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the Committee,
in its sole discretion, shall determine.
(j) "Non-Employee Director" means a member of the Board who is
neither an officer nor employee of the Company.
(k) "Plan" means this Occidental Petroleum Corporation 1996
Restricted Stock Plan For Non-Employee Directors.
(l) "Restriction Period" means, in respect of Restricted Stock, the
period referenced in Section 5(a).
(m) "Restricted Stock" means a grant of shares of Common Stock, which
shares are subject to the restrictions on transfer described in Section 5(a).
(n) "Rule 16b-3" means Rule 16b-3, as promulgated and amended from
time to time by the Securities and Exchange Commission under the Exchange Act,
or any successor rule to the same effect.
5
EXHIBIT 10.3
OCCIDENTAL PETROLEUM CORPORATION
RESTRICTED STOCK AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
Name of Grantee:
------------------------------------------------------------
Date of Grant:
------------------------------------------------------------
Number of Shares of Restricted Stock:
----------------------------------------
This AGREEMENT (the "Agreement") made as of the Date of Grant by and between
OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation (hereinafter called
"Occidental," and, collectively with its Subsidiaries, the "Company"), and
Grantee.
1. GRANT OF RESTRICTED STOCK. Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors, as amended,
(the "Plan"), Occidental hereby grants to the Grantee as of the Date of Grant,
the number of shares of Restricted Stock set forth above. The Restricted Stock
shall be fully paid and nonassessable and shall be issued by Occidental's
registrar and stock transfer agent in book-entry form in the name of the
Grantee.
2. RESTRICTIONS ON TRANSFER OF RESTRICTED STOCK. The shares of Restricted
Stock may not be transferred, sold, pledged, exchanged, assigned or otherwise
encumbered or disposed of by the Grantee, except to Occidental, until they have
become nonforfeitable in accordance with Section 3; provided, however, that the
Grantee may designate from time to time any beneficiary or beneficiaries to whom
any shares of Restricted Stock and any cash amounts are to be paid in case of
the Grantee's death before receipt of such Restricted Stock and cash. If a
written beneficiary designation is not on file with the Company at the time of
Grantee's death, the Grantee's interest in the Restricted Stock will be
transferred by will or the laws of descent and distribution. Until the shares of
Restricted Stock become nonforfeitable in accordance with Section 3,
Occidental's registrar and stock transfer agent will place a restricted legend
stop on the book-entry shares. Any purported transfer, encumbrance or other
disposition of the Restricted Stock that is in violation of this Section 2 shall
be null and void, and the other party to any such purported transaction shall
not obtain any rights to or interest in the Restricted Stock.
3. VESTING OF RESTRICTED STOCK. The Restricted Stock shall become
nonforfeitable the day following the date that the Grantee ceases serving as a
member of the Board of Directors of the Company. Notwithstanding the provisions
of this Section 3, all of the shares of Restricted Stock shall immediately
become nonforfeitable in the event of a "Change of Control," as defined in the
Plan.
4. DIVIDEND, VOTING AND OTHER RIGHTS. Except as otherwise provided
herein, the Grantee shall have all of the rights of a stockholder with respect
to the shares of Restricted Stock, including the right to vote such shares and
receive any dividends that may be paid thereon; provided, however, that any
additional shares of Common Stock or other securities that the Grantee may
become entitled to receive pursuant to a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, separation or
reorganization or any other
change in the capital structure of Occidental shall be subject to the same
restrictions as the shares of Restricted Stock.
5. RETENTION AS DIRECTOR. Nothing contained in this Agreement shall
interfere with or limit in any way the right of the stockholders of the Company
to remove the Grantee from the Board of Directors of the Company pursuant to the
by-laws of the Company, nor confer upon any Grantee any right to continue in the
service of the Company as a member of the Board of Directors.
6. TAXES AND WITHHOLDING. The Company shall withhold any federal, state,
local or foreign tax in connection with the issuance or vesting of any
Restricted Stock. Unless the Grantee shall have made other arrangements
satisfactory to the Committee in its sole discretion, the Grantee shall satisfy
any such withholding obligation by surrendering to the Company a portion of the
shares of Common Stock that are issued or transferred to the Grantee hereunder,
and the shares of Common Stock so surrendered by the Grantee shall be credited
against any such withholding obligation at the Fair Market Value per Share of
such shares on the date of such surrender.
7. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal, state and foreign securities laws; provided,
however, notwithstanding any other provision of this Agreement, the Company
shall not be obligated to issue any Common Stock or other securities pursuant to
this Agreement if the issuance thereof would result in a violation of any such
law.
8. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Grantee under this Agreement without the Grantee's consent.
9. SEVERABILITY. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
10. RELATION TO PLAN. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between this
Agreement and the Plan, the Plan shall govern. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Plan.
11. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and Grantee has also executed this
Agreement in duplicate, as of the day and year first above written.
OCCIDENTAL PETROLEUM CORPORATION
By:
---------------------------
The Undersigned Grantee hereby (i) acknowledges receipt of an executed
original of this Agreement and a copy of the Memorandum, dated ________________,
and (ii) accepts the right to receive the Common Stock or other securities
covered hereby, subject to the terms and conditions of the Plan and the terms
and conditions hereinabove set forth.
--------------------------------
Grantee
Date:
-------------------------
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Amounts in thousands, except per-share amounts)
Three Months Ended
March 31
-------------------------
2003 2002
========================================================================= ========== ==========
BASIC EARNINGS PER SHARE
Income before taxes and other items $ 393,605 $ 122,655
Effect of repurchase of Trust Preferred Securities (18) (32)
---------- ----------
Income from continuing operations 393,587 122,623
Discontinued operations, net of tax -- (3,000)
Cumulative effect of changes in accounting principles, net of tax (68,430) (94,973)
---------- ----------
Earnings applicable to common stock $ 325,157 $ 24,650
========== ==========
Basic shares
Weighted average common shares outstanding 378,409 374,466
Issued, unvested restricted stock (206) (357)
Vested, unissued restricted stock 127 --
Deferred shares 753 220
---------- ----------
Basic shares outstanding 379,083 374,329
========== ==========
Basic earnings per share
Income from continuing operations $ 1.04 $ .33
Discontinued operations, net of tax -- (.01)
Cumulative effect of changes in accounting principles, net of tax (.18) (.25)
---------- ----------
Basic earnings per common share $ .86 $ .07
========== ==========
DILUTED EARNINGS PER SHARE
Earnings applicable to common stock $ 325,157 $ 24,650
========== ==========
Diluted shares
Basic shares outstanding 379,083 374,329
Dilutive effect of exercise of options outstanding 3,079 2,131
Issued, unvested restricted stock 206 357
Deferred, restricted stock 796 --
---------- ----------
Diluted shares 383,164 376,817
========== ==========
Diluted earnings per share
Income before effect of changes in accounting principles $ 1.03 $ .33
Discontinued operations, net of tax -- (.01)
Cumulative effect of changes in accounting principles, net of tax (.18) (.25)
---------- ----------
Diluted earnings per common share $ .85 $ .07
========================================================================= ========== ==========
The following items were not included in the computation of diluted earnings per
share because their effect was antidilutive (in thousands, except per-share
amounts):
Three Months Ended March 31, 2003 2002
================================================== ==================== ====================
STOCK OPTIONS
Number of shares 6 21
Price range per share $ 29.438 $ 29.063 -- $ 29.438
Expiration range 12/01/07 12/01/07 -- 4/29/08
================================================== ==================== ====================
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
Three Months Ended Year Ended
March 31 December 31
--------------------- ---------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
===================================== ========= ========= ========= ========= ========= ========= =========
Income from continuing
operations(a) $ 437 $ 183 $ 1,548 $ 1,418 $ 1,785 $ 699 $ 400
--------- --------- --------- --------- --------- --------- ---------
Add:
Provision for taxes on
income (other than foreign
and gas taxes) 475 52 428 172 871 306 204
Interest and debt expense(b) 133 77 309 111 540 515 576
Portion of lease rentals
representative of the interest
factor 7 7 6 7 6 31 36
--------- --------- --------- --------- --------- --------- ---------
615 136 743 590 1,417 852 816
--------- --------- --------- --------- --------- --------- ---------
Earnings before fixed charges $ 1,052 $ 319 $ 2,291 $ 2,008 $ 3,202 $ 1,551 $ 1,216
========= ========= ========= ========= ========= ========= =========
Fixed charges
Interest and debt expense
including capitalized
interest(b) $ 134 $ 79 $ 321 $ 417 $ 543 $ 522 $ 594
Portion of lease rentals
representative of the interest
factor 7 7 6 7 6 31 36
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges $ 141 $ 86 $ 327 $ 424 $ 549 $ 553 $ 630
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 7.46 3.71 7.00 4.74 5.83 2.80 1.93
===================================== ========= ========= ========= ========= ========= ========= =========
(a) Includes (1) minority interest in net income of majority-owned subsidiaries
having fixed charges and (2) income from less-than-50-percent-owned equity
investments adjusted to reflect only dividends received.
(b) Includes proportionate share of interest and debt expense of
50-percent-owned equity investments.
EXHIBIT 99.1
CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Occidental Petroleum
Corporation (the "Company") for the quarterly period ending March 31, 2003, as
filed with the Securities and Exchange Commission on May 8, 2003 (the "Report"),
Ray R. Irani, as Chief Executive Officer of the Company, and Stephen I. Chazen,
as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Ray R. Irani
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Name: Ray R. Irani
Title: Chief Executive Officer
Date: May 8, 2003
Stephen I. Chazen
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Name: Stephen I. Chazen
Title: Chief Financial Officer
Date: May 8, 2003
A signed original of this written statement required by Section 906 has been
provided to Occidental Petroleum Corporation and will be retained by Occidental
Petroleum Corporation and furnished to the Securities and Exchange Commission or
its staff upon request.