FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
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 1-3939
KERR-McGEE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
A Delaware Corporation 73-0311467
(State or Other Jurisdiction of (I.R.S.
Incorporation or Organization) Identification No.)
Kerr-McGee Center, Oklahoma City, Oklahoma 73125
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (405) 270-1313
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
Number of shares of common stock, $1.00 par
value, outstanding as of July 31, 1994:
51,664,447
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars,
except per-share amounts) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales $864.8 $845.8 $1,665.7 $1,629.3
Costs and Expenses
Costs and operating
expenses 648.4 647.5 1,248.7 1,247.2
Selling, general, and
administrative expenses 37.6 32.9 74.8 67.9
Depreciation and depletion 81.9 72.9 161.0 145.6
Exploration, including dry
holes and amortization
of undeveloped leases 19.4 12.1 42.5 26.0
Taxes, other than income
taxes 19.6 20.6 40.8 41.2
Interest and debt expense 14.0 11.9 26.9 24.3
Total Costs and
Expenses 820.9 797.9 1,594.7 1,552.2
43.9 47.9 71.0 77.1
Other Income 2.3 3.9 7.6 10.7
Income before Income Taxes 46.2 51.8 78.6 87.8
Provision for Income Taxes 15.8 18.1 26.6 29.7
Net Income $ 30.4 $ 33.7 $ 52.0 $ 58.1
Net Income per Common Share $ .58 $ .70 $ 1.00 $ 1.20
Cash Dividends Declared
per Common Share $ .38 $ .38 $ .76 $ .76
Average Number of Shares
Outstanding (thousands) 51,659 48,323 51,658 48,309
The accompanying notes are an integral part of this statement.
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<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
June 30, Dec. 31,
(Millions of dollars) 1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash $ 126.2 $ 94.4
Notes and accounts receivable 433.7 373.2
Inventories 389.2 348.9
Deposits and prepaid expenses 83.4 49.3
Total Current Assets 1,032.5 865.8
Property, Plant, and Equipment 5,939.3 5,852.3
Less reserves for depreciation,
depletion, and amortization 3,418.3 3,338.9
2,521.0 2,513.4
Investments and Other Assets 188.3 168.2
$3,741.8 $3,547.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings and
accounts payable $ 695.3 $ 593.8
Other current liabilities 213.3 193.7
Total Current Liabilities 908.6 787.5
Long-Term Debt 676.0 589.9
Deferred Credits and Other
Liabilities 615.8 657.8
Stockholders' Equity
Common stock, par value $1 -
150,000,000 shares authorized,
53,270,585 shares issued at
6-30-94 and 53,268,181 at
12-31-93 53.3 53.3
Capital in excess of par value 308.1 308.0
Preferred stock purchase rights .5 .5
Retained earnings 1,321.5 1,308.8
Unrealized gain on securities
available for sale 12.9 -
Common shares in treasury,
at cost - 1,611,688 shares
at 6-30-94 and 1,612,688
at 12-31-93 (62.7) (62.7)
Deferred compensation (92.2) (95.7)
Total Stockholders' Equity 1,541.4 1,512.2
$3,741.8 $3,547.4
The "successful efforts" method of accounting for oil and
gas exploration and production activities has been followed
in preparing this balance sheet.
The accompanying notes are an integral part of this balance sheet.
</TABLE>
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<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended June 30,
(Millions of dollars) 1994 1993
<S> <C> <C>
Operating Activities
Net income $ 52.0 $ 58.1
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion, and
amortization 169.6 154.2
Deferred income taxes (1.6) (4.0)
Noncash items affecting net income 35.5 26.9
Other net cash used in operating
activities (114.1) (25.6)
Net Cash Provided by Operating
Activities 141.4 209.6
Investing Activities
Capital expenditures (203.3) (256.6)
Purchase of long-term investments (35.3) (16.3)
Proceeds from sales of assets 18.4 10.4
Other investing activities 10.4 9.9
Net Cash Used in
Investing Activities (209.8) (252.6)
Financing Activities
Increase in short-term borrowings 186.8 134.1
Repayment of long-term debt (47.4) (13.1)
Dividends paid (39.3) (36.6)
Other financing activities .1 2.4
Net Cash Provided by
Financing Activities 100.2 86.8
Net Increase in Cash and Cash Equivalents 31.8 43.8
Cash and Cash Equivalents at
Beginning of Period 94.4 57.3
Cash and Cash Equivalents at End of Period $126.2 $101.1
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COM-
PANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
A. The condensed financial state-
ments included herein have been
prepared by the company, without
audit, pursuant to the rules and
regulations of the Securities and
Exchange Commission and, in the
opinion of management, include
all adjustments, consisting only
of normal recurring accruals,
necessary to present fairly the
resulting operations for the
indicated periods. Certain in-
formation and footnote disclo-
sures normally included in finan-
cial statements prepared in ac-
cordance with generally accepted
accounting principles have been
condensed or omitted pursuant to
such rules and regulations, al-
though the company believes that
the disclosures are adequate to
make the information presented
not misleading. It is suggested
that these condensed financial
statements be read in conjunction
with the financial statements and
the notes thereto included in the
company's latest annual report on
Form 10-K.
B. After adding the dilutive effect
of the conversion of options to
the weighted average number of
shares outstanding, the shares
used to compute net income per
common share were 51,727,196 and
48,456,622 for the three months
ended June 30, 1994 and 1993,
respectively, and 51,727,879 and
48,412,007 for the six months
ended June 30, 1994 and 1993,
respectively.
C. The company's crude oil and re-
fined petroleum products invento-
ries are priced at cost under the
LIFO method. Since the carrying
values of inventories under the
LIFO method are based on an annu-
al determination of quantities
and costs as of the last day of
the year, the carrying values of
inventories at June 30, 1994,
were based on certain estimates
relating to quantities and costs
expected to exist at December 31,
1994.
D. Net cash provided by operating
activities reflects cash payments
for income taxes and interest as
follows:
Six Months Ended
June 30,
(Millions of dollars) 1994 1993
Income taxes $33.6 $34.4
Interest 38.7 37.0
E. The Kerr-McGee Corporation Em-
ployee Stock Ownership Plan
(ESOP) was established in 1989.
A leveraged employee stock owner-
ship plan, the ESOP invests only
in the common stock of the compa-
ny. Most of the company's em-
ployees are eligible to partici-
pate in both the ESOP and the
Kerr-McGee Savings Investment
Plan (SIP). Participants' con-
tributions to the SIP are matched
by company contributions to the
ESOP. Although the SIP and the
ESOP are separate plans, matching
contributions to the ESOP are
contingent upon participants'
contributions to the SIP.
In 1989, the ESOP purchased 2.7
million shares of the company's
common stock at market value. To
finance the purchase, the ESOP
incurred indebtedness to a group
of institutional investors in the
aggregate principal amount of
$125 million. The borrowings are
guaranteed by the company.
Company stock acquired with the
proceeds of the loan is held by
the ESOP trust in a suspense ac-
count. The company's matching
contributions and dividends paid
on the common stock held in the
loan suspense account are used to
repay the loan. Stock is re-
leased from the loan suspense
account as the principal and
interest are paid. The stock is
then allocated to participants'
accounts at market value as the
participants' contributions are
made to the SIP.
Dividends paid on the common
stock held in participants' ac-
counts are also used to repay the
loan. Stock with a market value
equal to the amount of the divi-
dend is allocated to the
participants' accounts.
At June 30, 1994, the ESOP held
1,755,844 shares of company stock
in the loan suspense account and
972,431 shares allocated to
participants' accounts. Included
in the participants' accounts
were 16,642 shares committed to
be released from the loan sus-
pense account. These shares were
released on July 1.
All ESOP shares are considered
outstanding for earnings per
share calculations. Dividends on
ESOP shares are charged to re-
tained earnings. Compensation
expense, recognized by the cash
method, is reduced for dividends
paid on the ESOP shares. Total
expenses recognized in connection
with the ESOP (which includes
interest expense incurred on the
ESOP debt guaranteed by the com-
pany) are set forth below:
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 1994 1993 1994 1993
Total expenses
recognized $3.7 $3.5 $7.7 $7.6
Interest expense
(included in above
total) 2.2 2.4 4.4 4.7
For the first six months of 1994
and 1993, the company's total
cash contributions to the ESOP
were $7.6 million, net of $2
million for the dividends paid on
the company's stock held by the
ESOP, and $6.3 million, net of $2
million for dividends, respec-
tively. For the 1994 and 1993
second quarter, the company's
contributions were $1.4 million
and $.6 million, respectively.
F. The company adopted Statement of
Financial Accounting Standards
115, "Accounting for Investments
in Certain Debt and Equity Secu-
rities," in the first quarter of
1994. Net income was not affect-
ed by this change in accounting
principle. At June 30, 1994, the
company held securities consid-
ered to be available for sale as
follows:
Gross Unrealized
Holding Gains
(Millions of dollars) Cost Fair Value (Losses)
Equity Securities $12.0 $34.2 $22.2
U.S. Government
Obligations -
Due within one year 3.6 3.5 (.1)
Due after one year
through four years 23.7 22.4 (1.3)
Total $39.3 $60.1 $20.8
Equity securities are carried in
the Consolidated Balance Sheet at
fair value as Investments and
Other Assets. U.S. Government
obligations are carried at fair
value as Current Assets or Invest-
ments and Other Assets depending
upon their maturity. Unrealized
holding gains are classified as a
separate component of
Stockholder's Equity, net of in-
come taxes. The change in the
equity component during the first
six months of 1994 was as follows:
Net Unrealized
Holding Gains
(Millions of dollars) (Losses)
Balance at December 31, 1993 $ -
Net unrealized holding gains 14.7
Balance at March 31, 1994 14.7
Net unrealized holding losses (1.8)
Balance at June 30, 1994 $12.9
G. Since August 1979, when the com-
pany filed a plan with the Nuclear
Regulatory Commission to decom-
mission a former operation in West
Chicago, Illinois, a number of
judicial and administrative pro-
ceedings have been filed. The
operation, which was closed in
1973, processed thorium ores,
leaving ore residues, process
buildings, and equipment with some
low-level radioactivity on site.
While a number of these proceed-
ings have been settled or re-
solved, several proceedings remain
pending, and while several approv-
als have been received for the
decommissioning process, a license
to decommission has not been is-
sued. The State of Illinois has
jurisdiction of this site and
requires offsite disposal of the
material.
In March 1992, the company entered
into an agreement with a third
party to provide for the disposal
of the material at a permanent
disposal facility in Utah, and the
third party received a disposal
license from the Nuclear Regulato-
ry Commission in 1993. The agree-
ment covers an estimated 13.5
million cubic feet of thorium mill
tailings and other related materi-
als. Removal of the material is
subject to additional regulatory
approvals being obtained.
In September 1992, the Governor of
Illinois signed the Uranium and
Thorium Mill Tailings Control Act,
which imposes on the company,
beginning January 1, 1994, an
annual fee of $2.00 per cubic foot
of byproduct material stored at
the former West Chicago mill site.
The act also provides that the
assessed fee may be used as reim-
bursement for removal expenses.
In February 1993, the company
filed suit in the Northern Dis-
trict of Illinois challenging this
act on federal constitutional
grounds and seeking to enjoin
state officials from assessing
such a fee. In early 1994, the
company paid an assessed fee of
$33 million under protest and
filed suit in the Cook County
Circuit Court protesting the
amount of the fee. This circuit
court suit remains pending, but
the circuit court has issued an
interim consent decree ratifying
the settlement agreement explained
in the following paragraph. Under
this agreement, the suit in the
Northern District of Illinois was
dismissed without prejudice in
July 1994, and the circuit court
suit will be dismissed by the
company upon all the parties com-
pleting their obligations under
the agreement.
In July 1994, the company, the
City of West Chicago (the City),
and the State of Illinois (the
State) executed an agreement re-
garding the decommissioning of the
closed West Chicago facility. The
company has commenced construction
and is scheduled to commence ship-
ments of material from the site on
or before October 1, 1994. Sub-
ject to the company moving certain
amounts of material by specified
dates, the State has agreed that
the storage fee applies only to
byproduct material onsite and has
further agreed to a cap on the
storage fee of $26 million per
annum which results in a refund of
$7 million of the 1994 payment.
The agreement also assures storage
fee amounts paid will be promptly
reimbursed to the company for
removing the material. Subject to
the City and State each performing
its obligations under the agree-
ment, the company has agreed to
pay $2.8 million to the City for
public works projects. The compa-
ny paid $800,000 to the State for
response costs.
The aggregate decommissioning and
relocation costs to the company
are difficult to estimate because
of the many contingencies. These
contingencies include the issuance
of a license and other approvals
necessary to decommission the
facility. It is presently esti-
mated, however, that the total re-
maining decommissioning costs,
including the relocation costs
that may be expended pursuant to
the agreement referred to above,
will approximate $150 million,
payable over the time necessary to
relocate the materials, presently
estimated at between four and
seven years. The company has
established reserves for offsite
disposal of the material. The
costs to the company for removal
will be reduced by any amounts
recovered pursuant to the Energy
Policy Act of 1992 (which could be
up to $40 million). As discussed
in the preceding two paragraphs,
all the amounts paid to the State
of Illinois pursuant to the Urani-
um and Thorium Mill Tailings Con-
trol Act will be reimbursed to the
company as relocation expenditures
are incurred.
Almost all of the company's plants
and facilities are subject to
various environmental laws and
regulations. In addition to the
West Chicago site discussed above,
the company has been notified that
it may be responsible in varying
degrees for a portion of the costs
to clean up certain waste disposal
sites and former plant sites. It
was reported in the most recent
Form 10-K that the total aggregate
estimated cost to investigate
and/or remediate all presently
identified sites of former or
current operations was $443 mil-
lion of which $165 million was
spent through December 31, 1993,
and that reserves for future ex-
penditures totaled $278 million at
December 31, 1993. Expenditures
charged to reserves totaled $11.8
million during the first six
months of 1994. Provisions for
environmental reserves during the
six months totaled $4.7 million.
The company is also a party to a
number of other legal proceedings
pending in various courts or agen-
cies in which it or a subsidiary
appears as plaintiff or defendant.
Because of continually changing
environmental laws and regula-
tions, the nature of the company's
businesses, the large number of
other potentially responsible
parties, and pending legal pro-
ceedings, it is not possible to
reliably estimate the amount or
timing of all future expenditures
relating to these contingencies.
The company provides for costs
related to contingencies when a
loss is probable, and the amount
is reasonably estimable. Although
management believes, after consul-
tation with general counsel, that
adequate reserves have been pro-
vided for all known contingencies,
it is possible, due to the above-
noted uncertainties, additional
reserves could be required in the
future that could have a material
effect on results of operations in
a particular quarter or annual
period. However, the ultimate
resolution of these commitments
and contingencies, to the extent
not previously provided for,
should not have a material adverse
effect on the company's financial
position.
Item 2. Management's Discussion and Analy-
sis of Results of Operations and
Financial Condition.
COMPARISON OF 1994 RESULTS WITH 1993
RESULTS
CONSOLIDATED OPERATIONS
Second-quarter 1994 net income totaled $30.4
million, compared with $33.7 million for the
same 1993 period. For the first six months
of 1994, net income totaled $52 million,
compared with $58.1 million for the same
1993 period.
Compared with the same 1993 periods, operat-
ing profit for the quarter and the six
months ended June 30, 1994, was higher
despite significantly lower crude oil pric-
es. The increased operating profit for both
periods reflects improved results for both
refining and marketing and for chemicals.
Operating profit for exploration and produc-
tion was lower than in last year's periods.
The refining and marketing improvement for
both the second quarter and six months
resulted from higher wholesale margins
resulting from lower product costs. Chemi-
cals operating profit for both 1994 periods
improved due principally to higher sales
prices and lower per-unit costs of sales for
certain chemical products. In addition to
the lower crude oil sales prices, explora-
tion and production operating profit was
adversely affected by higher exploration
expenses and lower natural gas sales vol-
umes, partially offset by higher crude oil
sales volumes. Coal operating profit was
lower than for the same periods last year
due to lower sales prices, partially offset
by lower average per-unit production costs
and higher sales volumes.
Second-quarter 1994 net nonoperating expense
of $28.3 million was 44% higher than for the
1993 quarter due primarily to higher inter-
est expense, losses on foreign currency
translation compared with 1993 gains, and
higher environmental provisions, partially
offset by higher gains on sales of assets.
Net nonoperating expense for the first six
months of 1994 was $50.7 million, 31% higher
than for the 1993 six-month period. This
increase was due primarily to higher inter-
est expense, higher environmental provi-
sions, higher losses from unconsolidated
affiliates, and lower gains on sales of
assets.
SEGMENT OPERATIONS
Following is a summary of sales and operat-
ing profit and a discussion of major factors
influencing the results of each of the
company's business segments for the second
quarter and first six months of 1994, com-
pared with the same periods last year.
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 1994 1993 1994 1993
Sales
Exploration and
production(1) $116.8 $ 91.1 $ 226.8 $ 179.4
Refining and marketing 486.2 525.1 947.8 1,011.1
Chemicals 174.3 139.4 319.6 260.5
Coal 76.4 80.1 150.4 159.0
Other 11.1 10.1 21.1 19.3
Total Sales $864.8 $845.8 $1,665.7 $1,629.3
Operating Profit (Loss)
Exploration and
production $ 17.9 $ 31.8 $ 22.8 $ 61.5
Refining and marketing 16.4 (.2) 39.0 (9.4)
Chemicals 26.9 21.3 43.8 36.1
Coal 12.9 20.5 25.5 41.2
Other .4 (2.0) (1.8) (3.0)
Total Operating
Profit 74.5 71.4 129.3 126.4
Net Nonoperating Expense 28.3 19.6 50.7 38.6
Income before Income Taxes 46.2 51.8 78.6 87.8
Provision for Income Taxes 15.8 18.1 26.6 29.7
Net Income $ 30.4 $ 33.7 $ 52.0 $ 58.1
(1)Excludes intersegment sales, primarily
crude oil sales, of $40.7 and $55.7 for the
second quarter of 1994 and 1993, respective-
ly, and $74.7 and $101.9 for the first six
months of 1994 and 1993, respectively.
Exploration and Production -
Operating profit for the second quarter of
1994 was $17.9 million, compared with $31.8
million for the same 1993 period. Operating
profit for the first six months of 1994 and
1993 was $22.8 million and $61.5 million,
respectively. The decline in operating
profit for both 1994 periods was due princi-
pally to lower crude oil sales prices,
higher exploration expenses, and lower
natural gas sales volumes. Partially offset-
ting was a 23% and a 28% increase in crude
oil sales volumes for the second quarter and
the first six months of 1994, respectively.
Revenues, including intersegment sales, were
$157.5 million and $146.8 million for the
three months ended June 30, 1994 and 1993,
respectively, and $301.5 million and $281.3
million for the first six months of 1994 and
1993, respectively.
The following table shows the company's
average crude oil and natural gas sales
prices and volumes by geographic area for
both the second quarter and first half of
1994 and 1993.
Three Months Ended Percent
June 30, Increase
1994 1993 (Decrease)
Crude oil sales (thousands of bbls/day)
United States 26.4 29.5 (11)
Canada 4.4 4.9 (10)
North Sea 28.8 13.8 109
Other international 4.3 3.9 10
Total 63.9 52.1 23
Average crude oil sales price (per barrel)
United States $15.07 $16.96 (11)
Canada 14.04 15.82 (11)
North Sea 15.30 17.38 (12)
Other international 14.94 15.87 (6)
Average $15.09 $16.88 (11)
Natural gas deliveries (MMCF/day) 266 289 (8)
Average natural gas sales price
(per MCF) $1.83 $1.98 (8)
Six Months Ended Percent
June 30, Increase
1994 1993 (Decrease)
Crude oil sales (thousands of bbls/day)
United States 25.9 28.5 (9)
Canada 4.7 4.9 (4)
North Sea 29.9 12.8 134
Other international 4.1 4.1 -
Total 64.6 50.3 28
Average crude oil sales price (per barrel)
United States $13.66 $17.12 (20)
Canada 12.69 15.70 (19)
North Sea 14.21 17.28 (18)
Other international 14.36 15.79 (9)
Average $13.89 $16.92 (18)
Natural gas deliveries (MMCF/day) 265 291 (9)
Average natural gas sales price
(per MCF) $1.93 $1.86 4
Refining and Marketing -
Refining and marketing had operating profit
of $16.4 million on revenues of $486.2
million for the second quarter of 1994,
compared with an operating loss of $.2
million on revenues of $525.1 million for
the same 1993 quarter. For the first half
of 1994, the operating profit totaled $39
million on revenues of $947.8 million,
compared with an operating loss of $9.4
million on revenues of $1 billion for the
1993 period.
The lower revenues for both periods resulted
principally from lower sales prices. The
higher operating profit for both the second
quarter and six-month period was due to
higher wholesale margins resulting from
lower product costs.
Refinery runs averaged 152,000 and 149,800
barrels per day for the second quarter of
1994 and 1993, respectively, and 149,600 and
139,400 barrels per day for the first half
of 1994 and 1993, respectively.
Chemical -
Second-quarter 1994 operating profit was
$26.9 million on revenues of $174.3 million,
compared with operating profit of $21.3
million on revenues of $139.4 million for
the 1993 quarter. For the first six months
of 1994 and 1993, operating profit was $43.8
million and $36.1 million, respectively, on
revenues of $319.6 million and $260.5 mil-
lion, respectively. Revenues for both 1994
periods increased due principally to higher
international pigment and forest-product
sales prices, and higher ammonium
perchlorate and domestic and international
pigment sales volumes. Operating profit for
both 1994 periods increased due to higher
international pigment margins, resulting
from higher prices and lower per-unit costs,
and the higher ammonium perchlorate and
forest-product revenue, partially offset by
higher cost of sales for these products.
Coal -
Second-quarter 1994 operating profit was
$12.9 million on revenues of $76.4 million,
compared with $20.5 million on revenues of
$80.1 million for the same 1993 quarter.
For the first six months of 1994, operating
profit was $25.5 million, compared with
$41.2 million last year. Revenues were
$150.4 million and $159 million for the
first six months of 1994 and 1993, respec-
tively. Revenues for the second quarter and
first six months of 1994 decreased due to
lower average sales prices, partially offset
by higher sales volumes. Operating profit
decreased due to the lower revenues, par-
tially offset by lower per-unit production
costs.
Net Nonoperating Expense -
Net nonoperating expense was $28.3 million,
an increase of $8.7 million from the prior
year's second quarter. The increase was due
to higher interest expense, losses on for-
eign currency translation compared with 1993
gains, and higher environmental provisions,
partially offset by higher gains on sales of
assets.
For the first half of 1994, net nonoperating
expense was $50.7 million, compared with
$38.6 million last year. This increase
resulted principally from higher interest
expense, higher environmental provisions,
higher losses from unconsolidated affili-
ates, and lower gains on sales of assets.
Provision for Income Taxes -
The provision for income taxes was $15.8
million and $26.6 million for the second
quarter and first six months of 1994, re-
spectively, compared with $18.1 million and
$29.7 million for the respective 1993 peri-
ods. The decreased tax provision for both
periods was due to lower pretax income.
FINANCIAL CONDITION
At June 30, 1993, the company's net working
capital position was $123.9 million, com-
pared with $78.3 million at December 31,
1993. Working capital increased due princi-
pally to additional commercial paper
borrowings classified as long-term debt,
partially offset by the reclassification of
certain environmental reserves to current
liabilities.
The company had unused lines of credit and
revolving credit facilities of $390 million
at June 30, 1994. Of this amount, $270
million and $65 million can be used to
support the commercial paper borrowings of
Kerr-McGee Credit Corporation and Kerr-McGee
Oil (U.K.) PLC, respectively.
For the first six months of 1994, net cash
provided by operating activities of $141.4
million was comprised principally of net
income of $52 million; depreciation, deple-
tion, and amortization of $169.6 million;
and an increase in current liabilities,
excluding debt, of $27.7 million. Partially
offsetting was an increase in current as-
sets, excluding cash, of $106.9 million.
Net cash provided by operating activities
for the same 1993 period was $209.6 million.
Capital expenditures totaled $193.2 million,
compared with $224.8 million for the same
period last year. Petroleum-related expen-
ditures, principally in the Gulf of Mexico,
North Sea, and offshore China, were 81% of
the 1994 amount. Chemicals expenditures
were 13% of the total. Management antici-
pates that the cash requirements for the
next several years can be provided through
internally generated funds and selective
long- and/or short-term borrowings.
The company continues to evaluate strategic
alternatives for the refining and marketing
operations, as announced in June 1992.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the Legal
Proceedings on page 23 of the
company's Form 10-K for the year
ended December 31, 1993.
For a report on the current status
of the West Chicago matter, refer-
ence is made to Note G to the Con-
solidated Financial Statements
beginning on page 7 of this Form
10-Q.
In 1991, the California Department
of Toxic Substance Control (DTSC)
issued a Report of Violation out-
lining certain violations of the
California Health and Safety Code
alleged to have occurred during
operation of the former Searles
Valley Chemical facilities by a
subsidiary of the company. In
August 1994, this matter was set-
tled for $1.4 million, pursuant to
an agreement executed by DTSC and
the company's subsidiary.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securi-
ties Exchange Act of 1934, the Registrant
has duly caused this report to be signed on
its behalf by the undersigned, thereunto
duly authorized.
KERR-McGEE CORPORATION
Date: August 15, 1994 By: (JOHN M. RAUH)
J. Michael Rauh
Vice President and Controller
and Chief Accounting Officer
