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 March 31, 1995
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 April 28, 1995: 51,724,838
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
(Millions of dollars,
except per-share amounts) 1995 1994
Sales $463.9 $373.3
Costs and Expenses
Costs and operating expenses 254.5 219.3
Selling, general, and
administrative expenses 18.3 20.6
Depreciation and depletion 80.5 72.3
Exploration, including dry holes and
amortization of undeveloped leases 21.2 23.1
Provision for environmental reclamation
and remediation of inactive sites 8.1 2.2
Taxes, other than income taxes 16.0 18.5
Interest and debt expense 18.6 12.8
Total Costs and Expenses 417.2 368.8
46.7 4.5
Other Income 5.8 4.9
Income from Continuing Operations
before Income Taxes 52.5 9.4
Provision for Income Taxes 15.7 2.5
Income from Continuing Operations 36.8 6.9
Income from Discontinued Operations
(net of provision for income taxes
of $.5 in 1995 and $8.2 in 1994) .9 14.7
Net Income $37.7 $21.6
Net Income per Common Share
Continuing operations $.71 $.13
Discontinued operations .02 .29
Total $.73 $.42
Cash Dividends Declared per Common Share $.38 $.38
Average Number of Shares Outstanding
(thousands) 51,706 51,656
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, December 31,
(Millions of dollars) 1995 1994
ASSETS
Current Assets
Cash $ 96.5 $ 81.7
Notes and accounts receivable 411.5 421.7
Inventories 358.7 398.7
Deposits and prepaid expenses 49.7 60.3
Total Current Assets 916.4 962.4
Property, Plant, and Equipment 6,086.8 6,009.5
Less reserves for depreciation,
depletion, and amortization 3,535.0 3,457.8
2,551.8 2,551.7
Investments and Other Assets 187.7 184.1
$3,655.9 $3,698.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings and accounts payable $ 586.6 $ 686.9
Other current liabilities 210.8 202.7
Total Current Liabilities 797.4 889.6
Long-Term Debt 669.8 672.8
Deferred Credits and Reserves 620.4 592.4
Stockholders' Equity
Common stock, par value $1 - 150,000,000
shares authorized, 53,325,576 shares
issued at 3-31-95 and 53,304,076 shares
issued at 12-31-94 53.3 53.3
Capital in excess of par value 310.2 309.3
Preferred stock purchase rights .5 .5
Retained earnings 1,338.4 1,320.3
Unrealized gain on securities
available-for-sale 13.8 11.5
Common shares in treasury,
at cost - 1,610,088 shares at 3-31-95
and 1,610,438 at 12-31-94 (62.6) (62.6)
Deferred compensation (85.3) (88.9)
Total Stockholders' Equity 1,568.3 1,543.4
$3,655.9 $3,698.2
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 statement.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
(Millions of dollars) 1995 1994
Operating Activities
Net income $ 37.7 $ 21.6
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion,
and amortization 92.6 83.2
Deferred income taxes 15.5 (5.8)
Provision for reclamation and
remediation of inactive sites 8.1 2.2
Noncash items affecting net income 17.4 15.7
Other net cash provided by (used in)
operating activities 26.0 (50.6)
Net Cash Provided by Operating
Activities 197.3 66.3
Investing Activities
Capital expenditures (124.4) (129.4)
Purchase of long-term investments (.1) (35.2)
Other investing activities 34.2 11.1
Net Cash Used in Investing
Activities (90.3) (153.5)
Financing Activities
Increase (decrease) in short-term
borrowings (73.5) 148.9
Repayment of debt - (36.1)
Dividends paid (19.6) (19.6)
Other financing activities .9 -
Net Cash Provided by (Used in)
Financing Activities (92.2) 93.2
Net Increase in Cash and Cash Equivalents 14.8 6.0
Cash and Cash Equivalents at Beginning
of Period 81.7 94.4
Cash and Cash Equivalents at
End of Period $ 96.5 $100.4
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
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,
consisting 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
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 51,816,492 and
51,731,887 for the three months ended March 31, 1995 and 1994,
respectively.
C. The company has entered into various contracts or letters of
intent to sell certain refining and marketing assets. The sale
of a small refinery was completed in the first quarter of 1995.
The sale of other refining and marketing assets are scheduled
for closing or are in various stages of negotiations. The
company intends to complete its plan to exit the refining and
marketing business in 1995; therefore, refining and marketing
operations are reported as a discontinued operation. No
material gain or loss is expected to result from the disposal of
the segment.
Revenues applicable to the discontinued operations totaled
$449.1 million and $461.6 million for the three months ended
March 31, 1995 and 1994, respectively. Refining and marketing
assets not yet sold are included as part of the appropriate line
items in the Consolidated Balance Sheet. Included are accounts
receivable of $137.5 million; inventories of $176 million; net
property, plant, and equipment of $206.9 million; accounts
payable of $127.4 million; and other current liabilities of $39
million.
D. The crude oil and refined petroleum products inventories of the
refining and marketing operations are priced at cost under the
LIFO method. The carrying values of these inventories under
the LIFO method are based on an annual determination of
quantities and costs as of the last day of the fiscal year.
However, since these inventories are held for sale, the carrying
values at March 31, 1995, were based on quantities and costs
expected to exist at the date of disposition.
E. Net cash provided by operating activities reflects cash payments
for income taxes and interest as follows:
Three Months Ended
March 31,
(Millions of dollars) 1995 1994
Income taxes $2.2 $20.7
Interest 23.2 19.5
F. 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
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.
At March 31, 1995 and 1994, the ESOP held company stock as
follows:
1995 1994
Allocated to participants 1,092,019 918,877
Loan suspense account 1,561,689 1,755,844
Released but not allocated 51,769 8,704
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
March 31,
(Millions of dollars) 1995 1994
Total expenses recognized $3.6 $4.0
Interest expense
(included in above total) 2.1 2.2
The company's total cash contribution to the ESOP for the first
quarter of 1995 was $7.3 million, net of $2.1 million for
dividends paid on the company's stock held by the ESOP. For the
1994 first quarter, the company's cash contribution was $6.2
million, net of $2 million for dividends.
G. The company held U.S. government obligations and equity
securities considered to be available for sale at March 31, 1995
and December 31, 1994. These financial instruments are carried
in the Consolidated Balance at fair value, which is based on
quoted market prices. The company held no securities classified
as held to maturity or trading during the respective periods.
At March 31, 1995 and December 31, 1994, these financial
instruments were as follows:
March 31, 1995
Gross Unrealized
Fair Holding Gains
(Millions of dollars) Cost Value (Losses)
Equity Securities $12.0 $35.1 $23.1
U.S. Government Obligations
Maturing within one year 11.0 10.9 (.1)
Maturing between one
and four years 18.8 18.1 (.7)
Total $41.8 $64.1 $22.3
December 31, 1994
Gross Unrealized
Fair Holding Gains
(Millions of dollars) Cost Value (Losses)
Equity Securities $12.0 $32.5 $20.1
U.S. Government Obligations
Maturing within one year 11.2 11.1 (.1)
Maturing between one
and four years 18.9 17.0 (1.9)
Total $42.1 $60.6 $18.5
Equity securities are carried in the Consolidated Balance Sheet
as Investments and Other Assets. U.S. government Obligations
are carried as Current Assets or Investments and Other Assets,
depending upon their maturity. The change in the equity
component for unrealized holding gains and losses, net of income
taxes, for the first quarter of 1995 and 1994 was as follows:
March 31, March 31,
(Millions of dollars) 1995 1994
Balance, January 1 $11.5 $ -
Effect of change in
accounting principle - 20.3
Net unrealized holding
gains (losses) 2.3 (5.6)
Balance, March 31 $13.8 $14.7
H. CONTINGENCIES
West Chicago
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, the following
discusses the remaining proceedings.
Decommissioning - Several approvals have been received for the
decommissioning process, but a license amendment to decommission
has not been issued. The State of Illinois (the State) has
jurisdiction over the site and requires offsite disposal of
contaminated material. In July 1994, the company, the City of
West Chicago, and the State executed a Settlement Agreement (the
Agreement) regarding the decommissioning of the closed West
Chicago facility. Pursuant to the Agreement, the company leased
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.
Under the Illinois Uranium and Thorium Mill Tailings Control Act
(the Act), the company is obligated to pay an annual storage fee
of $2.00 per cubic foot of byproduct material located at the
former facility. Under the Agreement, the amount of the storage
fee paid each year shall not exceed $26 million, and all amounts
paid pursuant to the Act are to be reimbursed to the company as
decommissioning expenditures are incurred. The company has
received reimbursement for all amounts paid under the Act to the
State in 1994 and will continue to seek reimbursement for future
amounts paid under the Act as decommissioning costs are
incurred.
The aggregate cost to decommission the former facility is
difficult to estimate because of the many contingencies,
including the terms of the license amendment required to
complete the decommissioning process. Decommissioning costs to
the company will be reduced by any amounts recovered pursuant to
the Energy Policy Act of 1992 (which could total up to $42
million, of which $7 million has been received). It was
reported in the most recent Form 10-K that the remaining
reserves provided for the cost to decommission the site under
the plan proposed by the company were $157 million (before any
further recovery under the Energy Policy Act of 1992), payable
over the time necessary to relocate the materials, which was
estimated at year-end 1994 to be between four and six years.
Offsite Areas - The U.S. Environmental Protection Agency (EPA)
has listed four areas in the vicinity of the West Chicago
facility on the National Priority List that the EPA promulgates
under authority of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 and has designated the
company as a potentially responsible party in these four areas.
The EPA issued a unilateral administrative order for one of
these areas (referred to as the residential area), which
requires the company to conduct a removal action to excavate
contaminated soils and to ship the soil elsewhere for disposal.
Without waiving any of its rights or defenses, in May 1995 the
company began the cleanup of this site.
Judicial Proceedings - Several personal injury lawsuits have
been filed against the company's wholly owned subsidiary, Kerr-
McGee Chemical Corporation, by residents of West Chicago seeking
compensation for illnesses allegedly caused by exposure to
thorium wastes from the former West Chicago facility. One case
was settled in 1994 with a payment by the company. The
remaining cases continue in the judiciary process. The company
will continue its defense of these cases and its efforts to
recover insurance proceeds from policies on the former facility.
SUMMARY -
The company's plants and facilities are subject to various
environmental laws and regulations. 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. As reported in the most recent Form
10-K, the remaining reserves provided for the cost to
investigate and/or remediate all presently identified sites of
former or current operations, including $179 million for the
former facility and offsite areas in West Chicago, were $239
million at December 31, 1994. Expenditures through December 31,
1994, totaled $228 million. During the first quarter of 1995,
expenditures charged to the reserves totaled $14.4 million and
additional provisions for environmental reserves were $9.5
million.
In addition to the environmental issues previously discussed,
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 laws and regulations, the nature of the
company's businesses, and pending legal proceedings, it is not
possible to reliably estimate the amount or timing of all future
expenditures relating to 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
Operations and Financial Condition.
Comparison of 1995 Results with 1994 Results
CONSOLIDATED OPERATIONS
First-quarter 1995 income from continuing operations totaled $36.8
million, compared with $6.9 million for the same 1994 period. Net
income for the 1995 first quarter totaled $37.7 million, compared
with $21.6 million for the same 1994 period.
Operating profit in the 1995 first quarter increased 161% compared
with the same 1994 period as results from operations improved for
all business units. The improved results were due primarily to
higher crude oil and natural gas sales volumes, higher crude oil
sales prices, higher pigment sales volumes and prices, lower per-
unit coal production costs, and higher coal sales volumes.
Partially offsetting were lower natural gas sales prices and lower
coal sales prices.
First-quarter 1995 nonoperating expense was $31.1 million, compared
with $22.6 million for the 1994 quarter. The increase was due
primarily to higher environmental reserve provisions, losses on
foreign currency transactions compared with 1994 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 first quarter of 1995, compared
with the same period last year.
Three Months Ended
March 31,
(Millions of dollars) 1995 1994
Sales
Exploration and production(1) $171.5 $144.0
Chemicals 193.8 145.3
Coal 86.7 74.0
Other 11.9 10.0
Total Sales $463.9 $373.3
Operating Profit (Loss)
Exploration and production $31.9 $4.9
Chemicals 31.3 16.9
Coal 17.1 12.6
Other 3.3 (2.4)
Total Operating Profit 83.6 32.0
Nonoperating Expense 31.1 22.6
Income before Discontinued Operations
and Income Taxes 52.5 9.4
Provision for Income Taxes 15.7 2.5
Income from Continuing Operations 36.8 6.9
Discontinued Operations, Net of Tax .9 14.7
Net Income $37.7 $21.6
(1)Includes sales of primarily crude oil to discontinued operations
in the amount of $37.6 and $34.0 for the three months ended March
31, 1995 and 1994, respectively.
Exploration and Production -
Operating profit for the first quarter of 1995 was $31.9 million,
compared with $4.9 million for the same 1994 period. First-quarter
1995 operating profit was up due primarily to higher crude oil and
natural gas sales volumes and higher crude oil sales prices,
partially offset by lower natural gas sales prices.
Revenues, including sales to discontinued operations, were $171.5
million and $144.0 million for the three months ended March 31,
1995 and 1994, respectively. The following table shows the
company's average crude oil and natural gas sales prices and
volumes for the first quarter of 1995 and 1994.
Three Months Ended Percent
March 31, Increase
1995 1994 (Decrease)
Crude oil sales
(thousands of bbls/day)
United States 30.0 25.5 18
Canada 4.7 4.9 (4)
North Sea 38.7 31.0 25
Other international (1) - 4.0 NM
Total 73.4 65.4 12
(1)Sales were from the ABK field in the Arabian Gulf, which was
sold in late 1994.
Three Months Ended Percent
March 31, Increase
1995 1994 (Decrease)
Average crude oil sales price
(per barrel)
United States $15.68 $12.19 29
Canada 14.98 11.47 31
North Sea 16.11 13.18 22
Other international - 13.71 NM
Average $15.86 $12.70 25
Natural gas sold
(MMCF/day) 312 264 18
Average natural gas sales
price (per MCF) $1.40 $2.04 (31)
Chemicals -
Chemicals' first-quarter 1995 operating profit was $31.3 million on
revenues of $193.8 million, compared with operating profit of $16.9
million on revenues of $145.3 million for the same 1994 quarter.
Revenues and operating profit improved primarily due to higher
pigment sales volumes and prices.
Coal -
First-quarter 1995 operating profit for coal was $17.1 million on
revenues of $86.7 million, compared with operating profit of $12.6
million on revenues of $74.0 million for the same 1994 quarter.
The increased revenues resulted from higher sales volumes,
partially offset by lower sales prices. Operating profit increased
due to higher revenues and lower per-unit production costs.
Nonoperating Expense -
Nonoperating expense was $31.1 million for the first three months
of 1995, compared with $22.6 million for the same 1994 period. The
increase was principally due to higher environmental reserve
provisions, losses on foreign currency transactions compared with
1994 gains, and higher interest expense.
Provision for Income Taxes -
The provision for income taxes was $15.7 million, compared with
$2.5 million for the same 1994 period. The increased tax provision
was due to higher pretax income and higher effective tax rate.
FINANCIAL CONDITION
At March 31, 1995, the company's net working capital was $119
million, compared with $72.8 million at December 31, 1994. The
current ratio was 1.1 to 1 at March 31, 1995, which is unchanged
from both December 31, 1994 and March 31, 1994. The company's
percentage of total debt to total capitalization was 37% at March
31,1995, compared with 39% at December 31, 1994, and 40% at March
31, 1994.
For the first three months of 1995, net cash provided by operating
activities of $197.3 million was comprised principally of net
income of $37.7 million; depreciation, depletion, and amortization
of $92.6 million; and a decrease in current assets and liabilities,
excluding cash and debt, of $45.7 million. Net cash provided by
operating activities for the same 1994 period was $66.3 million.
On February 24, 1995, Kerr-McGee China Petroleum Ltd., a wholly
owned subsidiary, entered into a revolving credit agreement with
various banks to provide borrowings of up to U.S. $105 million at
a rate equal to the Singapore Interbank Offered Rate plus 1/4%
through February 24, 1998. The agreement requires that the amount
outstanding on the termination date be paid in full on that date.
The company is the guarantor of the agreement. No amount was
outstanding under the agreement at March 31, 1995.
The company had unused lines of credit and revolving credit
facilities of $565 million at March 31, 1995. Of this amount, $250
million and $179 million can be used to support commercial paper
borrowings of Kerr-McGee Credit Corporation and Kerr-McGee (U.K.)
PLC, respectively.
First-quarter 1995 cash capital expenditures totaled $124.4
million, compared with $129.4 million for the same period last
year. Exploration and production expenditures, principally in the
Gulf of Mexico, North Sea, and offshore China, were 81% of the 1995
amount. Chemicals expenditures were 10% 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 has adopted a plan to dispose of its refining and
marketing assets and exit this business. Accordingly, the company
is reporting refining and marketing as a discontinued operation.
The company has sold the Cotton Valley, Louisiana, refinery and
Cato Oil and Grease Company. Additionally, the company has signed
letters of intent for the sale of the Corpus Christi, Texas, and
Wynnewood, Oklahoma, refineries, the pipeline gathering system
associated with the Wynnewood refinery, most of the retail service
stations, and several of the terminals, including the high volume
Sewaren, New Jersey, facility, all of which represent most of the
refining and marketing assets.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Region Six of the United States Environmental Protection Agency
(EPA) and Kerr-McGee Refining Corporation (KMRC), a wholly owned
subsidiary of the Company, are finalizing negotiations regarding
the findings of an inspection of the refinery in Wynnewood,
Oklahoma, in May 1992. KMRC anticipates the issuance of a
Consent Agreement and Consent Order providing for monetary
sanctions of $150,000.
The company continues its efforts to obtain the necessary
approvals to decommission a facility located in West Chicago,
Illinois, which processed thorium ores and was closed in 1973.
Currently the State of Illinois has jurisdiction of this site,
and the company has agreed to offsite disposal of the waste
material.
Reference is made to the West Chicago matter on page 24 of the
company's Form 10-K for the year ended December 31, 1994. For
the report on the current status of this matter, reference is
made to Note H to the Consolidated Financial Statements
beginning on page 7 of this Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The 1995 annual meeting of stockholders was held on May
9, 1995.
(b) The following matters were voted upon at the annual
meeting:
(1) Following are the directors elected at the 1995 annual
meeting and the tabulation of votes related to each
nominee.
Votes
Affirmative Withheld
Bennett E. Bidwell 43,230,357 799,900
Earnest H. Clark, Jr. 43,227,269 802,988
Luke R. Corbett 43,232,760 797,497
Martin C. Jischke 43,258,865 771,392
Robert S. Kerr, Jr. 43,290,600 739,657
Frank A. McPherson 43,233,949 796,308
William C. Morris 43,303,944 726,313
John J. Murphy 43,250,083 780,174
John J. Nevin 43,274,326 755,931
Farah M. Walters 43,221,354 808,903
(2) The stockholders ratified the appointment of Arthur
Andersen LLP as independent public accountants for 1995.
Affirmative votes were 43,328,870; negative votes were
634,486; and abstentions were 66,901.
(3) The stockholders approved the Long Term Incentive
Program, as amended and restated effective May 9, 1995.
Affirmative votes were 37,598,090; negative votes were
5,749,596; and abstentions were 682,571.
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 $105
million Credit Agreement dated February 24, 1995,
among Kerr-McGee China Petroleum Ltd. and various
banks providing for revolving credit through February
24, 1998.
10.5 The Long Term Incentive Program, as Amended and
Restated effective May 9, 1995.
(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 May 12, 1995 By: (John M. Rauh)
John M. Rauh
Vice President and Controller
and Chief Accounting Officer
Kerr-McGee Corporation
Long Term Incentive Program
As Amended and Restated
May 9, 1995
1. PURPOSE
The purpose of the Kerr-McGee Corporation Long Term Incentive
Program (the "Plan") is to provide incentive opportunities for key
employees and to increase their personal financial identification
with the interests of the Company's stockholders. The Plan
includes provisions for stock options and stock and performance
related awards.
2. DEFINITIONS
(a) "Award" shall mean the award which an LTPP Participant is
entitled to receive under the Long Term Performance Plan (the
"LTPP").
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(d) "Company" shall mean Kerr-McGee Corporation and any
successor corporation by merger or otherwise.
(e) "Committee" shall mean the committee of the Board
referred to in Section 3 hereof as appointed from time to time, and
consisting of not less than three Board members. Each member of
the Committee shall be a "disinterested person" as that term is
defined in Rule 16(b)(3) promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or any
successor definition adopted by the Commission.
(f) "Employee" shall mean any person employed by the Company
or a Subsidiary on a full-time salaried basis, including officers
and employee directors thereof.
(g) "Fair Market Value" of Stock shall be the mean of the
highest price and the lowest price at which Stock shall have been
sold on the applicable date as reported in the Wall Street Journal
as New York Stock Exchange Composite Transactions for that date.
In the event that the applicable date is a date on which there were
no such sales of Stock, the Fair Market Value of Stock on such date
shall be the mean of the highest price and the lowest price at
which Stock shall have been sold on the last trading day preceding
such date.
(h) "Incentive Stock Option" or "ISO" shall mean an Option
grant which meets or complies with the terms and conditions set
forth in Section 422A of the Code and Treasury regulations.
(i) "Indicators of Performance" shall mean the criteria used
by the Committee to evaluate the Company's performance with respect
to each Performance Period as described in Section 10(b) of this
Plan.
(j) "Long Term Performance Plan Participant" or "LTPP
Participant" shall mean any eligible Employee so designated by the
Committee.
(k) "Option" or "Stock Option" shall mean a right granted
under the Plan to an Optionee to purchase a stated number of shares
of Stock at a stated exercise price.
(l) "Optionee" shall mean an Employee who has received a
Stock Option granted under the Plan.
(m) "Performance Period" shall mean a period established by
the Committee of not less than one year, at the conclusion of which
settlement will be made with an LTPP Participant with respect to
the Award.
(n) "Restricted Stock" shall mean Stock which is issued
pursuant to Section 9 of the Plan.
(o) "Restriction Period" shall mean that period of time as
determined by the Committee during which Restricted Stock is
subject to such terms, conditions and restrictions as shall be
assigned by the Committee.
(p) "Retirement" shall mean retirement under a retirement
program of the Company or a Subsidiary.
(q) "Stock" shall mean the common stock of the Company.
(r) "Stock Appreciation Right" or "SAR" shall mean a right
granted in connection with an Option in accordance with Section 8
of the Plan.
(s) "Subsidiary" shall mean any corporation, a majority of
the voting stock of which is "beneficially owned" (as that term is
defined in the Securities Exchange Act of 1934 and its accompanying
regulation), either directly or indirectly, by the Company.
(t) "Total Disability" and "Totally Disabled" shall normally
have such meaning as that defined under the Company's group
insurance program covering total disability and determinations of
Total Disability normally shall be made by the insurance company
providing such coverage on the date on which the employee, whether
or not eligible for benefits under such insurance plan, becomes
Totally Disabled. In the absence of such insurance plan or
company, or at the sole discretion of the Committee, the Committee
shall make such determination.
3. ADMINISTRATION
Subject to such approvals and other authority as the Board may
reserve to itself from time to time, the Committee shall,
consistent with the provisions of the Plan, from time to time
establish such rules and regulations and appoint such agents as it
deems appropriate for the proper administration of the Plan, and
make such determinations under, and such interpretations of, and
take such steps in connection with the Plan or the Options or Stock
Appreciation Rights or the Restricted Stock Plan or the Long Term
Performance Plan as it deems necessary or advisable.
Each determination, interpretation, or other action made or
taken pursuant to the Plan by the Committee and/or the Board shall
be final and shall be binding and conclusive for all purposes and
upon all persons.
4. ELIGIBILITY
Those Employees who, in the judgment of the Committee, may
have a significant effect on the profitability and growth of the
Company, shall be eligible to receive Options, Stock Appreciation
Rights, grants of Restricted Stock and Awards under the Plan.
5. MAXIMUM SHARES AVAILABLE
The Stock to be distributed under the Plan may be either
authorized and unissued shares or issued shares of the Company, but
grants of Restricted Stock shall be made in treasury shares. The
maximum amount of Stock which may be issued under the Plan in
satisfaction of exercised Options or SARs, issued as Restricted
Stock or issued under the Long Term Performance Plan shall not
exceed, in the aggregate, two million seven hundred forty thousand
(2,740,000) shares. Stock subject to an Option which for any
reason is cancelled or terminated without having been exercised, or
Stock awarded as Restricted Stock which is forfeited, shall again
be available for grants and Awards under the Plan. Stock not
issued because the holder of any Option exercises the accompanying
SAR shall not again be subject to award by the Committee.
6. STOCK OPTIONS
(a) Grant of Options.
(i) The Committee may, at any time and from time to time
prior to December 31, 2002, grant Options under the Plan to
eligible Employees, for such numbers of shares and having such
terms as the Committee shall designate, subject however, to the
provisions of the Plan. The Committee will also determine the type
of Option granted (e.g. ISO, non-statutory, other statutory Options
as from time to time may be permitted by the Code) or a combination
of various types of Options. Options designated as ISOs shall
comply with all the provisions of Section 422A of the Code and
applicable Treasury Department rules and regulations. The
aggregate Fair Market Value (determined at the time the Option is
granted) of Stock with respect to which ISOs are exercisable for
the first time by an individual during a calendar year under all
plans of the Company and any Subsidiary shall not exceed $100,000.
The date on which an Option shall be granted shall be the date of
the Committee's authorization of such grant. Any individual at any
one time and from time to time may hold more than one Option
granted under the Plan or under any other Stock plan of the
Company.
(ii) Each Option shall be evidenced by a Stock Option
Agreement in such form and containing such provisions consistent
with the provisions of the Plan as the Committee from time to time
shall approve.
(b) Exercise Price. The price at which shares of Stock may
be purchased under an Option shall not be less than 100 percent of
the Fair Market Value of the Stock on the date the Option is
granted.
(c) Option Period. The period during which an Option may be
exercised shall be determined by the Committee; provided, that such
period will not be longer than ten years from the date on which the
Option is granted in the case of ISOs, and ten years and one day in
the case of other Options. The date or dates on which installment
portion(s) of an Option may be exercised during the term of an
Option shall be determined by the Committee and may vary from
Option to Option. The Committee may also determine to accelerate
the time at which installment portion(s) of an outstanding Option
may be exercised. The foregoing notwithstanding, and subject to
Section 7, no Option or portion of an Option shall be exercisable
within six months of its grant date.
(d) Termination of Employment. An Option shall terminate and
may no longer be exercised three months after the Optionee ceases
to be an Employee for any reason other than Total Disability, death
or Retirement. If an Optionee's employment is terminated by reason
of Total Disability or Retirement to the extent that the Option was
exercisable at the time of the Optionee's Retirement or Total
Disability, such Option may be exercised within the period, not to
exceed four years, specified by the Committee in the instrument
evidencing the Option. If the Optionee dies while in the employ of
the Company or of a Subsidiary, or within three months after the
termination of such employment, to the extent that the Option was
exercisable at the time of the Optionee's death, such Option may,
within one year after the Optionee's death, be exercised by the
executor or administrator of his estate, or if it has been
distributed as part of the estate, by the person or persons to whom
the Optionee's rights under the Option shall pass by will or by the
applicable laws of decent and distribution. In no event may an
Option be exercised to any extent by anyone after the expiration or
termination of the Option.
(e) Payment for Shares.
(i) The exercise price for all shares of Stock purchased
upon the exercise of an Option, or a portion thereof, shall be paid
in full at the time of such exercise. Such payment may be made in
cash, by tendering shares of Stock having a Fair Market Value on
the date of exercise equal to the exercise price, or tendering
shares of Restricted Stock having a Fair Market Value on the date
of exercise equal to the exercise price. The Committee may limit
the extent to which shares of Stock or shares of Restricted Stock
may be used in exercising Options.
(ii) If shares of Restricted Stock are used to pay the
exercise price of an Option, an equal number of shares of Stock
delivered to the Optionee upon exercise of an Option, shall be
subject to the same restrictions for the remainder of the
Restriction Period.
7. TENDER OFFERS
Notwithstanding any other provision of this Plan, an Option
may, if the Optionee has agreed in writing, provide that the Option
shall be automatically repurchased by the Company if any person or
persons has made a successful tender offer for shares of Stock
which, together with shares then owned directly or indirectly by
such person or persons, would constitute 25% or more of the
outstanding shares of Stock. In such case, the purchase date shall
be the date preceding the last date (including any extension
thereof) on which stockholders of the Company could tender their
shares for purchase by the offeror pursuant to the terms of the
tender offer; the Fair Market Value of each share covered by the
Option shall be the highest price per share at which shares could
have been tendered for cash pursuant to the offer, or, if higher,
the mean between the high and the low prices of the Stock reported
in the Wall Street Journal as the New York Stock Exchange Composite
Transactions for such day, or, if there were no sales on such day,
the next preceding day on which there was a sale; and the Optionee
shall receive in cash as full satisfaction of his rights under the
Option a payment equal to the excess of such Fair Market Value of
the shares then covered by the Option (including any installments
not then exercisable) over the total Option exercise price of such
shares.
Options may also provide that upon the commencement of any
tender offer for such number of shares, the Option and any
accompanying SAR shall, to the extent they are not then
exercisable, become immediately exercisable in full until the tenth
day following the expiration of such offer or any extension
thereof, and at the conclusion of said period the Option and any
accompanying SAR shall, to the extent not theretofore exercised,
revert back to their status as in effect immediately prior to the
commencement of said offer.
8. STOCK APPRECIATION RIGHTS
(a) Grant. The Committee may affix Stock Appreciation Rights
to an Option, either at the time of its initial granting to the
Optionee or at a later date. The addition of such SARs must be
accomplished prior to the completion of the period during which the
Option may be exercised and such exercise period may not be
extended beyond that which was initially established. The
Committee may establish SAR terms and conditions at the time such
SAR is established, provided that, notwithstanding any provision of
this Plan to the contrary, the terms and conditions of an SAR
affixed to an ISO shall be the same as the terms and conditions
applicable to the underlying ISO.
(b) Exercise.
(i) A Stock Appreciation Right shall be exercisable at
such time as may be determined by the Committee, and provided
that an SAR shall be exercisable only to the extent that the
related Option could be exercised. Upon the exercise of an
SAR, that portion of the Option underlying the SAR will be
considered as having been surrendered. An SAR shall be
automatically exercised at the end of the last business day
prior to the stated expiration date of the unexercised portion
of the related Option if on such date the Fair Market Value of
Stock exceeds the Option exercise price per share.
(ii) The Committee may impose any other conditions upon
the exercise of an SAR, consistent with the Plan, which it
deems appropriate. Such rules and regulations may govern the
right to exercise SARs granted prior to the adoption or
amendment of such rules and regulations as well as SARs
granted thereafter.
(iii) Upon the exercise of an SAR, the Company shall
give to an Optionee an amount (less any applicable withholding
taxes) equivalent to the excess of the Fair Market Value of
the shares of Stock for which the right is exercised on the
date of such exercise over the exercise price of such shares
under the related Option. Such amount shall be paid to the
Optionee either in cash or in shares of Stock or both as the
Committee shall determine. Such determination may be made at
the time of the granting of the SAR and may be changed at any
time thereafter. No fractional shares of Stock shall be
issued and the Committee shall determine whether cash shall be
given in lieu of such fractional share or whether such
fractional share shall be eliminated.
(c) Expiration or Termination.
(i) Subject to (c)(ii), each Stock Appreciation Right
and all rights and obligations thereunder shall expire on a
date to be determined by the Committee.
(ii) An SAR shall terminate and may no longer be
exercised upon the exercise, termination or expiration of the
related Option.
9. RESTRICTED STOCK PLAN
(a) At the time of making a grant of Restricted Stock or
making payment of an Award in Restricted Stock to an Employee, the
Committee shall establish a Restriction Period and assign such
terms, conditions and other restrictions to the Restricted Stock as
it shall determine applicable to the Restricted Stock to be issued
in settlement of such grant or Award.
(b) Restricted Stock will be represented by a Stock
certificate registered in the name of the Restricted Stock
recipient. Such certificate, accompanied by a separate duly
endorsed stock power, shall be deposited with the Company. The
recipient shall be entitled to receive dividends during the
Restriction Period and shall have the right to vote such Restricted
Stock and all other shareholder's rights, with the exception that
(i) the recipient will not be entitled to delivery of the Stock
certificate during the Restriction Period, (ii) the Company will
retain custody of the Restricted Stock during the Restriction
Period, and (iii) a breach of the terms and conditions established
by the Committee pursuant to the Award will cause a forfeiture of
the Restricted Stock. Subject to Section 6(e), Restricted Stock
may be used to exercise Options. The committee may, in addition,
prescribe additional restrictions, terms and conditions upon or to
the Restricted Stock.
(i) Termination of Employment. The Committee may
establish such rules concerning the termination of employment
of a recipient of Restricted Stock (by reason of Retirement,
Total Disability, death, or otherwise) prior to the expiration
of the applicable Restriction Period, as it may deem
appropriate from time to time.
(ii) Restricted Stock Agreement. Each grant of, or
payment of an Award in, Restricted Stock shall be evidenced by
a Restricted Stock Agreement in such form and containing such
terms and conditions not inconsistent with the provisions of
the Plan as the Committee from time to time shall approve.
10. LONG TERM PERFORMANCE PLAN
(a) Administrative Procedure. The committee shall designate
Employees as LTPP Participants to become eligible to receive Awards
under the plan and shall establish Performance Periods under the
LTPP.
(b) Indicators of Performance. The Committee shall establish
Indicators of Performance applicable to the Performance Period.
Indicators of Performance are utilized to determine amount and
timing of Awards, and may vary between Performance Periods.
Indicators of Performance may include, but shall not be limited to,
various financial and operating measures, and may be based on the
Company's performance compared to one or more selected companies
during the same Performance Period or may be related solely to the
Company's performance during the Performance Period, or a
combination of such indicators. The Committee may take into
consideration, and make appropriate adjustments for, events
occurring during the Performance Period which the Committee
concludes have affected the performance of the Company or any
selected company with respect to any of the Indicators of
Performance.
(c) Award Adjustment. Subject to the terms of the Plan, the
Committee may make adjustments in Awards to LTPP Participants.
(d) Performance Awards. Awards may be in the form of
performance shares, which are units valued by reference to shares
of stock, or performance units which are units valued by reference
to financial measures or property other than stock and shall be
subject to such terms and conditions and other restrictions as the
Committee shall assign. At the time of making grants of Awards,
the Committee shall establish such terms and conditions as it shall
determine applicable to such Awards. Awards may be paid-out in
cash, Stock, Restricted Stock, other property or combination
thereof. Recipients of Awards are not required to provide
consideration other than the rendering of service.
(e) Partial Performance Period Participation. The Committee
shall determine the extent to which an Employee shall participate
in a partial Performance Period because of becoming eligible to be
a LTPP Participant after the beginning of such Performance Period.
11. ADJUSTMENT UPON CHANGES IN STOCK
The number of shares of Stock which may be issued pursuant to
this Plan, the number of shares covered by each outstanding Option,
the Option exercise price per share, the number of shares granted
as Restricted Stock, and the number of shares representing an LTPP
Participant's Award under the Long Term Performance Plan, shall be
adjusted proportionately, and any other appropriate adjustments
shall be made, for any increase or decrease in the total number of
issued and outstanding Stock (or change in kind) resulting from any
change in the Stock or Options through a merger, consolidation,
reorganization, recapitalization, a subdivision or consolidation of
shares or other capital adjustment or the payment of a Stock
dividend or other increase or decrease (or change in kind) in such
shares. In the event of any such adjustment, fractional shares
shall be eliminated. Appropriate adjustment shall also be made by
the Committee in the terms of Stock Appreciation Rights to reflect
the foregoing changes.
12. CHANGE IN CONTROL
Notwithstanding anything to the contrary in the Plan, in the
event of a Change in Control:
(i) if during a Restriction Period(s) applicable to
Restricted Stock issued under the Plan, all restrictions
imposed hereunder on such Restricted Stock shall lapse
effective the date of the Change in Control; and
(ii) if during a Performance Period(s) applicable to an
Award granted under the Plan, a Participant shall earn no less
than the number of performance shares or performance units
which the participant would have earned if the Performance
Period(s) had terminated as of the date of the Change in
Control.
For purposes of the Plan, a "Change in Control" shall be
deemed to have occurred if any "person" or "group" (as those terms
are used in Sections 13(d) and 14(d), respectively, of the
Securities Exchange Act of 1934 --- the "Exchange Act"), is or
becomes the "beneficial owner" (as defined in Rule 13(d)-3 issued
under the Exchange Act), directly or indirectly, of shares of Stock
of the Company representing twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding shares
of Stock.
13. MISCELLANEOUS
(a) Except as otherwise required by law, no action taken
under the Plan shall be taken into account in determining any
benefits under any pension, retirement, thrift, profit sharing,
group insurance, or other benefit plan maintained by the Company or
any Subsidiaries, unless such other plan specifically provides for
such inclusion.
(b) No Option or Stock Appreciation Right, grant of
Restricted Stock or Award under the Long Term Performance Plan
shall be transferrable other than by will or the laws of descent
and distribution. Any Option or Stock Appreciation Right shall be
exercisable (i) during the lifetime of an Optionee, only by the
Optionee or, to the extent permitted by the Code, by an appointed
guardian or legal representative of the Optionee, and (ii) after
death of the Optionee, only by the Optionee's legal representative
or by the person who acquired the right to exercise such Option or
Stock Appreciation Right by bequest or inheritance or by reason of
the death of the Optionee.
(c) The Company shall have the right to withhold from any
settlement hereunder any federal, state, or local taxes required by
law to be withheld, or require payment in the amount of such
withholding. If settlement hereunder is in the form of Stock, such
withholding may be satisfied by the withholding of shares of Stock
by the Company, unless the Optionee shall pay to the Corporation an
amount sufficient to cover the amount of taxes required to be
withheld, and such withholding of shares does not violate any
applicable laws, rules or regulations of federal, state or local
authorities.
(d) Transfer of employment between the Company and a
Subsidiary or between Subsidiaries shall not constitute termination
of employment for the purpose of the Plan. Whether any leave of
absence shall constitute termination of employment for the purposes
of the Plan shall be determined in each case by the Committee.
(e) All administrative expenses associated with the
administration of the Plan shall be borne by the Company.
(f) The titles and headings of the sections in this Plan are
for convenience of reference only and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall
control.
(g) No grant or Award to an employee under the Plan or any
provisions thereof, shall constitute any agreement for or guarantee
of continued employment by the Company.
14. AMENDMENT AND TERMINATION
The Board may at any time terminate or amend this Plan in such
respect as it shall deem advisable, provided, the Board may not,
without further approval of the stockholders of the Company amend
the Plan so as to (i) increase the number of shares of Stock which
may be issued under the plan, except as provided for in Section 11,
or change Plan provisions relating to establishment of the exercise
prices under Options granted; (ii) materially modify the
requirements as to eligibility for participation; (iii) materially
increase the benefits accruing to Participants under the plan; (iv)
extend the duration of the Plan beyond the date approved by the
stockholders; or (v) increase the maximum dollar amount of ISOs
which an individual Optionee may exercise during any calendar year
beyond that permitted in the Code and applicable rules and
regulations of the Treasury Department. No amendment or
termination of the Plan shall, without the consent of the Optionee
or Plan participant, alter or impair any of the rights or
obligations under any Options or other rights theretofore granted
such person under the Plan.
15. DURATION OF THE PLAN
This Plan became effective July 1, 1987. If not sooner
terminated by the Board this Plan shall terminate on December 31,
2002, but Options and other rights theretofore granted and any
Restriction Period may extend beyond that date and the terms of the
Plan shall continue to apply.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1995, and the Consolidated Statement of
Income for the three months ended March 31, 1995, and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000055488
<NAME> KERR-MCGEE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 96,500
<SECURITIES> 0
<RECEIVABLES> 415,400
<ALLOWANCES> 3,900
<INVENTORY> 358,700
<CURRENT-ASSETS> 916,400
<PP&E> 6,086,800
<DEPRECIATION> 3,535,000
<TOTAL-ASSETS> 3,655,900
<CURRENT-LIABILITIES> 797,400
<BONDS> 0
<COMMON> 53,300
0
0
<OTHER-SE> 1,515,000
<TOTAL-LIABILITY-AND-EQUITY> 3,655,900
<SALES> 463,900
<TOTAL-REVENUES> 463,900
<CGS> 272,800
<TOTAL-COSTS> 417,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,600
<INCOME-PRETAX> 52,500
<INCOME-TAX> 15,700
<INCOME-CONTINUING> 36,800
<DISCONTINUED> 900
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,700
<EPS-PRIMARY> .73
<EPS-DILUTED> 0
</TABLE>
