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 September 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. Employer
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 October
31, 1994: 51,684,099
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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 Nine Months Ended
September 30, September 30,
(Millions of dollars,
except per-share amounts) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales $858.2 $819.2 $2,523.9 $2,448.5
Costs and Expenses
Costs and operating
expenses 659.6 635.2 1,908.3 1,882.4
Selling, general, and
administrative expenses 45.9 32.0 120.7 99.9
Depreciation and depletion 82.2 75.8 243.2 221.4
Exploration, including dry
holes and amortization of
undeveloped leases 15.8 17.2 58.3 43.2
Taxes, other than income
taxes 17.3 20.0 58.1 61.2
Interest and debt expense 14.8 11.9 41.7 36.2
Total Costs and Expenses 835.6 92.1 2,430.3 2,344.3
22.6 27.1 93.6 104.2
Other Income 3.4 2.8 11.0 13.5
Income before Income Taxes 26.0 29.9 104.6 117.7
Provision for Income Taxes 8.3 11.1 34.9 40.8
Net Income $17.7 $18.8 $69.7 $76.9
Net Income per Common Share $.35 $.39 $1.35 $1.59
Cash Dividends Declared
per Common Share $.38 $.38 $1.14 $1.14
Average Number of Shares
Outstanding (thousands) 51,667 48,422 51,661 48,347
The accompanying notes are an integral part of this statement.
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KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
Sept. 30, Dec. 31,
(Millions of dollars) 1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash $97.6 $94.4
Notes and accounts
receivable 373.3 373.2
Inventories 395.8 348.9
Deposits and prepaid
expenses 76.4 49.3
Total Current Assets 943.1 865.8
Property, Plant, and Equipment 6,026.8 5,852.3
Less reserves for
depreciation, depletion,
and amortization 3,491.5 3,338.9
2,535.3 2,513.4
Investments and Other Assets 188.1 168.2
$3,666.5 $3,547.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings and
accounts payable $619.3 $593.8
Other current liabilities 219.9 193.7
Total Current Liabilities 839.2 787.5
Long-Term Debt 673.1 589.9
Deferred Credits and Other
Liabilities 611.7 657.8
Stockholders' Equity
Common stock, par value
$1 - 150,000,000 shares authorized,
53,279,837 shares issued at 9-30-94
and 53,268,181 at 12-31-93 53.3 53.3
Capital in excess of par value 308.4 308.0
Preferred stock purchase rights .5 .5
Retained earnings 1,319.5 1,308.8
Unrealized gain on securities
available for sale 12.3 -
Common shares in treasury,
at cost - 1,610,538 shares at
9-30-94 and 1,612,688 at 12-31-93 (62.6) (62.7)
Deferred compensation (88.9) (95.7)
Total Stockholders' Equity 1,542.5 1,512.2
$3,666.5 $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.
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KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30,
(Millions of dollars) 1994 1993
<S> <C> <C>
Operating Activities
Net income $69.7 $76.9
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion, and
amortization 255.5 234.2
Deferred income taxes 1.4 1.8
Noncash items affecting net income 62.0 45.8
Other net cash used in operating
activities (122.4) (51.2)
Net Cash Provided by Operating
Activities 266.2 307.5
Investing Activities
Capital expenditures (309.5) (342.2)
Purchase of long-term investments (35.3) (24.6)
Other investing activities 45.8 27.7
Net Cash Used in Investing
Activities (299.0) (339.1)
Financing Activities
Increase in short-term borrowings 141.8 158.3
Repayment of long-term debt (47.4) (14.0)
Dividends paid (58.8) (55.0)
Other financing activities .4 .9
Net Cash Provided by Financing
Activities 36.0 92.2
Net Increase in Cash and Cash Equivalents 3.2 60.6
Cash and Cash Equivalents at Beginning
of Period 94.4 57.3
Cash and Cash Equivalents at End
of Period $97.6 $117.9
The accompanying notes are an integral part of this statement.
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<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
A. The condensed financial statements 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, consist-
ing only of normal recurring accruals, necessary to present
fairly the resulting operations for the indicated periods.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the company
believes that the disclosures are adequate to make the informa-
tion 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 51,785,493 and
48,575,878 for the three months ended September 30, 1994 and
1993, respectively, and 51,740,673 and 48,459,816 for the nine
months ended September 30, 1994 and 1993, respectively.
C. The company's crude oil and refined 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 annual determination of quantities and costs as of the
last day of the year, the carrying values of inventories at
September 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:
Nine Months Ended
September 30,
(Millions of dollars) 1994 1993
Income taxes $37.5 $44.2
Interest 53.3 47.7
E. The Kerr-McGee Corporation Employee Stock Ownership Plan (ESOP)
was established in 1989. A leveraged employee stock ownership
plan, the ESOP invests only in the common stock of the company.
Most of the company's employees are eligible to participate in
both the ESOP and the Kerr-McGee Savings Investment Plan (SIP).
Participants' contributions 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 contin-
gent 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 account. 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
released 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'
accounts are also used to repay the loan. Stock with a market
value equal to the amount of the dividend is allocated to the
participants' accounts.
At September 30, 1994, the ESOP held 1,021,000 shares of company
stock allocated to participants' accounts and 1,659,373 shares
in the loan suspense account. An additional 23,572 shares had
been released from the loan suspense account but not yet
allocated to participants' accounts.
All ESOP shares are considered outstanding for earnings-per-
share calculations. Dividends on ESOP shares are charged to
retained 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
company) are set forth below:
Three Months Ended Nine Months Ended
September 30, September 30,
(Millions of dollars) 1994 1993 1994 1993
Total expenses recognized $3.9 $4.1 $11.6 $11.7
Interest expense
(included in above total) 2.1 2.2 6.5 6.9
For the first nine months of 1994 and 1993, the company's total
cash contributions to the ESOP were $13.7 million, net of $4.1
million for the dividends paid on the company's stock held by
the ESOP, and $12.1 million, net of $4.1 million for dividends,
respectively. For the 1994 and 1993 third quarter, the
company's contributions were $6.1 million, net of $2.1 million
for dividends, and $5.8 million, net of $2.1 million for
dividends, respectively.
F. The company adopted Statement of Financial Accounting Standards
115, "Accounting for Investments in Certain Debt and Equity
Securities," in the first quarter of 1994. Net income was not
affected by this change in accounting principle. At September
30, 1994, the company had no securities classified as held to
maturity or trading, but held the following securities
considered to be available for sale:
Gross Unrealized
Holding Gains
(Millions of dollars) Cost Fair Value (Losses)
Equity Securities $12.0 $33.3 $21.3
U.S. Government Obligations -
Due within one year 5.6 5.5 (.1)
Due after one year through
four years 21.7 20.3 (1.4)
Total $39.3 $59.1 $19.8
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
Investments and Other Assets, depending upon their maturity.
Unrealized holding gains are classified as a separate component
of Stockholder's Equity, net of income taxes. The change in the
equity component during the first nine 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
Net unrealized holding losses (.6)
Balance at September 30, 1994 $12.3
G. In August 1994, the company implemented a restructuring program
consisting principally of a reorganization of corporate support
functions. As a result of the program, 208 employees were
terminated at September 30, 1994, and an additional 26 employees
were notified that their positions will be eliminated by year-
end 1994. During the 1994 third quarter, the company accrued $8
million for future compensation, outplacement, and retirement
plan benefits. As of September 30, 1994, $600,000 had been paid
and charged against the accrual. The remainder will be paid and
charged to the reserve during the next 12 months.
H. Since August 1979, when the company filed a plan with the
Nuclear Regulatory Commission to decommission a former operation
in West Chicago, Illinois, the company has been involved in a
number of judicial and administrative proceedings. 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
proceedings have been settled or resolved, several proceedings
remain pending, and while several approvals have been received
for the decommissioning process, a license to decommission has
not been issued. The State of Illinois (the State) has
jurisdiction of this site and requires offsite disposal of the
material.
In September 1992, the Governor of Illinois signed the Uranium
and Thorium Mill Tailings Control Act (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 provides that the assessed fee may
be used as reimbursement for removal expenses. In February
1993, the company filed suit in the Northern District of
Illinois challenging the 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. Although the circuit court
suit remains pending, the circuit court has issued an interim
consent decree ratifying the settlement agreement explained in
the following paragraph. Under this settlement 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 completing their
obligations under the settlement agreement.
In July 1994, the company, the City of West Chicago (the City),
and the State executed a settlement agreement regarding the
decommissioning of the closed West Chicago facility. The
settlement agreement calls for the disposal of the material at
a licensed off-site disposal facility. The company constructed
appropriate support facilities during the summer of 1994 and
began shipments of material from the site to a licensed
permanent disposal facility in Utah in September 1994. Subject
to the company moving certain amounts of material by specified
dates, the State agreed that the storage fee applies only to
byproduct material onsite and that the storage fee shall not
exceed $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, and the company commenced receiving
reimbursements in the fall of 1994. Subject to the City and
State each performing its obligations under the agreement, the
company has agreed to pay $2.8 million to the City for public
works projects. The company also 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 estimated, however, that the total
remaining decommissioning costs, including the off-site disposal
costs that may be expended pursuant to the agreement referred to
above, will approximate $140 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, all the amounts paid to the State
pursuant to the Uranium and Thorium Mill Tailings Control 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 million, of which $165 million was spent
through December 31, 1993, and that reserves for future
expenditures totaled $278 million at December 31, 1993.
Expenditures charged to reserves totaled $31.8 million between
January 1, 1994, and September 30, 1994. Provisions for
environmental reserves during the nine months totaled $10.9
million.
The company is also a party to a number of other legal
proceedings pending in various courts or agencies in which it or
a subsidiary appears as plaintiff or defendant.
Because of continually changing environmental laws and
regulations, the nature of the company's businesses, the large
number of other potentially responsible parties, and pending
legal proceedings, 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
consultation with general counsel, that adequate reserves have
been provided 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 Analysis of Results of Opera-
tions and Financial Condition.
COMPARISON OF 1994 RESULTS WITH 1993 RESULTS
CONSOLIDATED OPERATIONS
Third-quarter 1994 net income totaled $17.7 million, compared with
$18.8 million for the same 1993 period. For the first nine months
of 1994, net income totaled $69.7 million, compared with $76.9
million for the same 1993 period.
Operating profit in the 1994 third quarter increased 27% compared
with the same 1993 period with improved results from all operations
except coal. The increase in operating profit was due primarily to
higher crude oil sales volumes and prices, higher pigment sales
volumes and lower per-unit pigment costs. Partially offsetting
were lower natural gas sales prices and volumes and lower coal
sales prices. Operating profit for the nine months ended September
30, 1994, was higher than the same 1993 period due primarily to
higher refined-product margins, higher sales prices and lower per-
unit costs for chemicals' foreign pigment operations and higher
domestic pigment volumes, partially offset by lower crude oil sales
prices and higher exploration expenses.
Third-quarter 1994 net nonoperating expense was $36.1 million,
compared with $19 million for the 1993 quarter. For the first nine
months of 1994, net nonoperating expense was $86.8 million,
compared with $57.6 million for the same 1993 period. The increase
in both periods was due primarily to the provision for the
company's restructuring program, higher environmental provisions,
losses on foreign currency transactions compared with 1993 gains,
and higher interest expense.
SEGMENT OPERATIONS
Following is a summary of sales and operating profit and a
discussion of major factors influencing the results of each of the
company's business segments for the third quarter and first nine
months of 1994, compared with the same periods last year.
Three Months Ended Nine Months Ended
September 30, September 30,
(Millions of dollars) 1994 1993 1994 1993
Sales
Exploration and production(1) $121.1 $92.3 $347.9 $271.7
Refining and marketing 490.6 487.8 1,438.4 1,498.9
Chemicals 161.1 148.5 480.7 409.0
Coal 73.7 81.3 224.1 240.3
Other 11.7 9.3 32.8 28.6
Total Sales $858.2 $819.2 $2,523.9 $2,448.5
Operating Profit (Loss)
Exploration and production $30.3 $21.4 $53.1 $82.9
Refining and marketing (3.9) (7.0) 35.1 (16.4)
Chemicals 25.0 19.2 68.8 55.3
Coal 9.6 17.9 35.1 59.1
Other 1.1 (2.6) (.7) (5.6)
Total Operating Profit 62.1 48.9 191.4 75.3
Net Nonoperating Expense 36.1 19.0 86.8 57.6
Income before Income Taxes 26.0 29.9 104.6 117.7
Provision for Income Taxes 8.3 11.1 34.9 40.8
Net Income $17.7 $18.8 $69.7 $76.9
(1) Excludes intersegment sales, primarily crude oil sales, of
$42.3 and $49.1 for the third quarter of 1994 and 1993,
respectively, and $117.0 and $151.0 for the first nine months
of 1994 and 1993, respectively.
Exploration and Production -
Operating profit for the third quarter of 1994 was $30.3 million,
compared with $21.4 million for the same 1993 period. Operating
profit for the first nine months of 1994 and 1993 was $53.1 million
and $82.9 million, respectively. Third-quarter 1994 operating
profit was up due primarily to higher crude oil sales volumes and
prices, partially offset by lower natural gas sales prices and
volumes. The decline in operating profit for the first nine months
of 1994 was due to lower crude oil sales prices, higher exploration
expense, and lower natural gas sales volumes, partially offset by
higher crude oil sales volumes.
Revenues, including intersegment sales, were $163.4 million and
$141.4 million for the three months ended September 30, 1994 and
1993, respectively, and $464.9 million and $422.7 million for the
first nine 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 third quarter
and first nine months of 1994 and 1993.
Three Months Ended Percent
September 30, Increase
1994 1993 (Decrease)
Crude oil sales (thousands of bbls/day)
United States 25.0 27.9 (10)
Canada 4.5 4.8 (6)
North Sea 34.9 15.3 128
Other international 2.6 3.8 (32)
Total 67.0 51.8 29
Average crude oil sales price (per barrel)
United States $15.74 $14.83 6
Canada 15.04 14.32 5
North Sea 16.01 15.75 2
Other international 14.86 14.50 2
Average $15.80 $15.03 5
Natural gas sold (MMCF/day) 259 294 (12)
Average natural gas sales price
(per MCF) $1.62 $1.94 (16)
Nine Months Ended Percent
September 30, Increase
1994 1993 (Decrease)
Crude oil sales (thousands of bbls/day)
United States 25.6 28.3 (10)
Canada 4.6 4.8 (4)
North Sea 31.6 13.7 131
Other international 3.6 4.0 (10)
Total 65.4 50.8 29
Average crude oil sales price (per barrel)
United States $14.35 $16.36 (12)
Canada 13.46 15.24 (12)
North Sea 14.88 16.70 (11)
Other international 14.48 15.38 (6)
Average $14.55 $16.27 (11)
Natural gas sold (MMCF/day) 263 292 (10)
Average natural gas sales price
(per MCF) $1.83 $1.89 (3)
Refining and Marketing -
Refining and marketing had an operating loss of $3.9 million on
revenues of $490.6 million for the third quarter of 1994, compared
with an operating loss of $7 million on revenues of $487.8 million
for the same 1993 quarter. For the first nine months of 1994,
operating profit totaled $35.1 million on revenues of $1.4 billion,
compared with an operating loss of $16.4 million on revenues of
$1.5 billion for the 1993 period.
Revenues for both the 1994 third quarter and nine months did not
change significantly from the same periods last year. The lower
operating loss for the 1994 third quarter was due primarily to
higher sales prices, partially offset by higher refined-product
costs. The improved operating results for the nine months was due
primarily to higher margins as product costs declined faster than
sales prices. Refinery runs averaged 144,500 and 146,200 barrels
per day for the third quarter of 1994 and 1993, respectively, and
147,900 and 141,700 barrels per day for the first nine months of
1994 and 1993, respectively. Refined product sales volumes
averaged 224,000 and 237,300 barrels per day for the third quarter
of 1994 and 1993, respectively, and 237,600 and 233,800 barrels per
day for the first nine months of 1994 and 1993, respectively.
Chemicals -
Third-quarter 1994 operating profit was $25 million on revenues of
$161.1 million, compared with operating profit of $19.2 million on
revenues of $148.5 million for the 1993 quarter. For the first
nine months of 1994 and 1993, operating profit was $68.8 million
and $55.3 million, respectively, on revenues of $480.7 million and
$409 million, respectively. Revenues for both 1994 periods
increased due principally to higher domestic pigment and
electrolytic product sales volumes and higher sales prices for
international pigment operations, partially offset by lower
domestic pigment prices. Operating profit for the 1994 third
quarter improved primarily due to higher revenues and lower
domestic pigment costs. Operating profit for the nine month period
increased due to the improved revenues and lower costs for
international pigment operations, partially offset by higher forest
products costs.
Coal -
Third-quarter 1994 operating profit was $9.6 million on revenues of
$73.7 million, compared with operating profit of $17.9 million on
revenues of $81.3 million for the same 1993 quarter. For the first
nine months of 1994, operating profit was $35.1 million, compared
with $59.1 million last year. Revenues were $224.1 million and
$240.3 million for the first nine months of 1994 and 1993,
respectively. Revenues for the third quarter and first nine months
of 1994 decreased primarily due to a contract renegotiation that
reduced average sales prices, partially offset by higher sales
volumes. Operating profit decreased due to the lower revenues,
partially offset by lower per-unit production costs.
Net Nonoperating Expense -
Net nonoperating expense was $36.1 million, an increase of $17.1
million from the prior year's third quarter. For the first nine
months of 1994, net nonoperating expense was $86.8 million,
compared with $57.6 million last year. The increase in both
periods resulted principally from the company's restructuring
provision, losses on foreign currency transactions compared with
1993 gains, higher provision for environmental reclamation and
remediation of inactive sites, and higher interest expense.
Provision for Income Taxes -
The provision for income taxes was $8.3 million and $34.9 million
for the third quarter and first nine months of 1994, respectively,
compared with $11.1 million and $40.8 million for the respective
1993 periods. The decreased tax provision for both periods was due
to lower pretax income and lower effective tax rates.
FINANCIAL CONDITION
At September 30, 1993, the company's net working capital position
was $103.9 million, compared with $78.3 million at December 31,
1993. Working capital increased due principally to additional
commercial paper borrowings classified as long-term debt and
decrease in long-term investments partially offset by the reclassi-
fication of certain environmental reserves to current liabilities.
For the first nine months of 1994, net cash provided by operating
activities of $266.2 million was comprised principally of net
income of $69.7 million and depreciation, depletion, and amortiza-
tion of $255.5 million. Partially offsetting was an increase in
current assets, excluding cash, of $59 million. Net cash provided
by operating activities for the same 1993 period was $307.5
million.
On August 25, 1994, Kerr-McGee Corporation and Kerr-McGee Credit
Corporation, a wholly owned subsidiary, entered into a revolving
credit agreement with a group of banks. The agreement provides for
combined borrowings up to a total of $325 million through August
25, 1999, and requires that any amount outstanding on August 25,
1999, be repaid at that time. Interest is payable at varying
rates. A total of $70 million had been borrowed under this
agreement as of September 30, 1994. This agreement replaces a
similar $300 million facility dated August 15, 1990.
The company had unused lines of credit and revolving credit
facilities of $462.9 million at September 30, 1994. Of this
amount, $285 million and $115 million can be used to support the
commercial paper borrowings of Kerr-McGee Credit Corporation and
Kerr-McGee Oil (U.K.) PLC, respectively.
Capital expenditures for the 1994 nine-month period totaled $295.5
million, compared with $310.4 million for the same period last
year. Petroleum-related expenditures, principally in the Gulf of
Mexico, North Sea, and offshore China, were 79% of the 1994 amount.
Chemical and Coal expenditures were 12% and 8%, respectively, of
the total. Management anticipates 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 is in discussions with potential buyers of its
refineries, marketing operations and pipelines, which could be sold
separately or in groups.
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,
reference is made to Note H to the Consolidated Financial
Statements beginning on page 7 of this Form 10-Q.
In 1992, a company subsidiary, Kerr-McGee Coal Corporation,
received a Complaint, Compliance Order, and Notice of
Opportunity for Hearing from the U.S. Environmental Protection
Agency (EPA) for alleged violations at the Jacobs Ranch Mine in
northern Wyoming. In September 1994, this matter was settled
for $265,000 pursuant to a Consent Agreement between the EPA and
the subsidiary.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
Exhibit No.
4.2 The company agrees to furnish to the
Securities and Exchange Commission, upon
request, a copy of the $325 million Credit
Agreement dated as of August 25, 1994,
providing for a five-year revolving credit
facility with a bullet maturity on the fifth
anniversary of the execution of the Credit
Agreement.
(b) Reports on Form 8-K
None
SIGNATURE
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.
KERR-McGEE CORPORATION
Date: By: (JOHN M. RAUH)
John M.Rauh
Vice President and Controller
and Chief Accounting Officer
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
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