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, 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 October 31, 1995: 51,599,959
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
(Millions of dollars, September 30, September 30,
except per-share amounts) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $ 456.0 $ 408.4 $1,376.6 $1,202.4
Costs and Expenses
Costs and operating expenses 260.1 228.8 764.4 690.9
Selling, general, and
administrative expenses 19.7 28.0 58.8 70.8
Depreciation and depletion 83.5 75.1 241.0 222.3
Asset impairment 227.4 - 227.4 -
Exploration, including dry holes
and amortization of
undeveloped leases 31.0 15.8 74.8 58.3
Provisions for environmental
reclamation and remediation
of inactive sites 27.5 4.9 42.1 9.6
Taxes, other than income taxes 16.0 14.4 49.2 50.2
Interest and debt expense 13.5 14.8 48.4 41.6
Total Costs and Expenses 678.7 381.8 1,506.1 1,143.7
(222.7) 26.6 (129.5) 58.7
Other Income 2.4 3.5 11.4 10.7
Income (Loss) from Continuing
Operations before Income Taxes (220.3) 30.1 (118.1) 69.4
Provision (Benefit) for
Income Taxes (87.4) 9.5 (57.2) 21.6
Income (Loss) from Continuing
Operations (132.9) 20.6 (60.9) 47.8
Income (Loss) from Discontinued
Operations
[net of provision (benefit)
for income taxes of $(5.9)
and $(1.2) for the third
quarter of 1995 and 1994,
respectively, and NIL and
$13.3 for the first nine
months of 1995 and 1994,
respectively] (10.2) (2.9) .2 21.9
Net Income (Loss) $(143.1) $ 17.7 $ (60.7) $ 69.7
Net Income (Loss) per
Common Share
Continuing operations $ (2.56) $ .40 $ (1.17) $ .92
Discontinued operations (.20) (.05) - .43
Total $ (2.76) $ .35 $ (1.17) $ 1.35
Cash Dividends Declared
per Common Share $ .38 $ .38 $ 1.14 $ 1.14
Average Number of Shares
Outstanding (thousands) 51,858 51,667 51,783 51,661
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
Sept. 30, Dec. 31,
(Millions of dollars) 1995 1994
ASSETS
Current Assets
Cash $ 102.2 $ 81.7
Notes and accounts receivable 412.4 421.7
Inventories 221.1 398.7
Deposits and prepaid expenses 62.6 60.3
Total Current Assets 798.3 962.4
Property, Plant, and Equipment, net 2,210.7 2,551.7
Investments and Other Assets 197.4 184.1
$3,206.4 $3,698.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings and
accounts payable $ 403.0 $ 686.9
Other current liabilities 190.6 202.7
Total Current Liabilities 593.6 889.6
Long-Term Debt 576.8 672.8
Deferred Credits and Other Liabilities 586.3 592.4
Stockholders' Equity
Common stock, par value $1 - 150,000,000
shares authorized, 53,485,583 shares
issued at 9-30-95 and 53,304,076
at 12-31-94 53.5 53.3
Capital in excess of par value 317.0 309.3
Preferred stock purchase rights .5 .5
Retained earnings 1,200.5 1,320.3
Unrealized gain on securities
available-for-sale 22.1 11.5
Common shares in treasury, at
cost - 1,610,090 shares at
9-30-95 and 1,610,438 at 12-31-94 (62.6) (62.6)
Deferred compensation (81.3) (88.9)
Total Stockholders' Equity 1,449.7 1,543.4
$3,206.4 $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 balance sheet.
<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
(Millions of dollars) 1995 1994
Operating Activities
Net income (Loss) $(60.7) $ 69.7
Adjustments to reconcile to net
cash provided by operating activities -
Depreciation, depletion, and
amortization 269.0 255.5
Deferred income taxes (65.5) 1.4
Gain on sale of refining and
marketing operations (1.7) -
Asset impairment 227.4 -
Provision for environmental reclamation
and remediation of inactive sites 53.6 9.6
Noncash items affecting net income 50.6 52.4
Other net cash used in operating
activities (136.1) (122.4)
Net Cash Provided by Operating
Activities 336.6 266.2
Investing Activities
Capital expenditures (369.1) (309.5)
Proceeds from sale of refining and
marketing operations 386.1 -
Purchase of long-term investments (7.6) (35.3)
Other investing activities 35.9 45.8
Net Cash Provided by (Used in)
Investing Activities 45.3 (299.0)
Financing Activities
Increase (decrease) in short-term
borrowings (219.9) 141.8
Repayment of long-term debt (90.4) (47.4)
Dividends paid (59.0) (58.8)
Other financing activities 7.9 .4
Net Cash Provided by (Used in)
Financing Activities (361.4) 36.0
Net Increase in Cash and Cash Equivalents 20.5 3.2
Cash and Cash Equivalents at Beginning
of Period 81.7 94.4
Cash and Cash Equivalents at End of Period $102.2 $ 97.6
The accompanying notes are an integral part of this statement.
<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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
52,089,204 and 51,785,493 for the three months ended September
30, 1995 and 1994, respectively, and 51,947,026 and 51,740,673
for the nine months ended September 30, 1995 and 1994,
respectively.
C. The company has entered into various contracts or letters of
intent to sell its refining and marketing assets. The sale of
a small refinery was completed in the first quarter of 1995.
The sale of a lubricating oil and grease operation and the
Residuum Oil and Supercritical Extraction (ROSE(registered trademark))
process was completed in the second quarter of 1995. Sales of refineries
at Corpus Christi, Texas, and Wynnewood, Oklahoma, a pipeline
gathering system in Oklahoma, and most of the company-
operated retail service stations were completed in the third
quarter of 1995. The sales of the remaining refining and
marketing assets are scheduled for closing or are in various
stages of negotiation. 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 will
result from the disposal of the segment.
Revenues applicable to the discontinued operations totaled
$174.5 million and $490.6 million for the three months ended
September 30, 1995 and 1994, respectively, and $1.1 billion
and $1.4 billion for the nine months ended September 30, 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 at September 30, 1995,
are accounts and notes receivable of $88.8 million;
inventories of $21.6 million; net property, plant, and
equipment of $35.8 million; accounts payable of $41.2 million;
and other current liabilities of $26.1 million.
D. The crude oil and refined petroleum products inventories of
the remaining 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 September 30, 1995, were
based on quantities and costs expected to exist at the
anticipated date of disposition.
E. Net cash provided by operating activities reflects cash
payments for income taxes and interest as follows:
Nine Months Ended
September 30,
(Millions of dollars) 1995 1994
Income taxes $47.3 $37.5
Interest 51.3 53.3
F. On September 12, 1995, the company announced certain actions
by its board of directors, including an increase in the
quarterly dividend payable on January 2, 1996, from $.38 per
share to $.41 per share. Additionally, management was
authorized to purchase from time to time company stock of up
to $300 million or approximately 10% of the currently
outstanding shares at market prices.
G. The company adopted the provisions of the Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," during the third 1995 quarter. In
conjunction with the adoption of this statement, the company
now evaluates impairment of its proved oil and gas assets on
a field-by-field basis rather than the previously used area-
of-interest basis. Chemical, coal, and other assets are
evaluated on an individual asset basis or logical groupings of
assets.
As a result of this change in accounting principle, certain
oil and gas fields in the United States and Canada and certain
coal and other assets were deemed to be impaired because the
assets are not expected to recover their entire carrying value
through future cash flows. The write-down amount, totaling
$123.6 million and included in the income statement caption
"Asset Impairment," was determined as the difference between
the carrying value and the estimated fair value. The fair
value for these impaired assets was generally determined based
on the estimated present value of future cash flows. The
asset impairment by segment was $99.6 million for exploration
and production, $22.9 million for coal, and $1.1 million for
other.
During the third quarter of 1995, the company's exploration
and production operating unit announced a divestiture and
restructuring program. Included in this program are a number
of crude oil and natural gas properties that are considered
nonstrategic. The majority of these properties are located
onshore in the United States; however, certain of these
properties are located in the Gulf of Mexico, Canada, and the
North Sea. These properties constitute approximately 10% of
the company's oil and gas reserves, account for 10% of the
current oil and gas production volumes and 5% of the company's
annual cash flow, and are expected to be sold or abandoned by
the end of 1996. The carrying value of these assets totaled
$172.2 million prior to the write-down discussed in the
following paragraph.
As a result of the divestiture program, these nonstrategic oil
and gas properties have been written down to their estimated
fair value less the cost to sell if the carrying value of the
property exceeded such fair value net of the estimated cost of
selling the property. The write-down on the properties for
which a loss was indicated totaled $103.8 million and has been
included in the income statement as part of the expense
caption "Asset Impairment."
In connection with the divestiture program, the exploration
and production operating unit has implemented a restructuring
program to reorganize its administrative and operating func-
tions. As a result of this restructuring program, it is
expected that approximately 120 employees will be terminated
during the remainder of 1995 or in 1996. The company accrued
a total of $6.2 million for future compensation, outplacement,
and the cost of special termination benefits for retiring
employees to be paid from retirement assets.
H. CONTINGENCIES
West Chicago -
Since August 1979, when the company's wholly owned subsidiary,
Kerr-McGee Chemical Corporation (KMCC), filed a plan with the
Nuclear Regulatory Commission to decommission a former
operation in West Chicago, Illinois, KMCC has been involved in
a number of related 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 by the State of Illinois (the
State). The State has jurisdiction over the site and requires
offsite disposal of contaminated material. In July 1994,
KMCC, 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, KMCC built or 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), KMCC 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
KMCC as decommissioning expenditures are incurred. KMCC has
received reimbursement for all amounts paid under the Act to
the State through September 30, 1995, 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 KMCC will be reduced by any amounts recovered pursuant to
the Federal Energy Policy Act of 1992 (which could total up to
$42 million, of which $18 million has been received). At
December 31, 1994, reserves provided for the cost to
decommission the site under the plan proposed by KMCC 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. During the first nine
months of 1995, additions to the reserve totaled $43 million.
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 KMCC 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 KMCC to conduct a removal action to excavate
contaminated soils and to ship the soil elsewhere for
disposal. At December 31, 1994, the estimated cost to clean
up the residential area was $22 million. Without waiving any
of its rights or defenses, in May 1995 KMCC began the cleanup
of this site.
Judicial Proceedings - Several personal injury lawsuits have
been filed against KMCC 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 KMCC. The
remaining cases continue in the judiciary process. KMCC will
continue its defense of these cases and its efforts to recover
insurance proceeds from policies on the former facility.
Summary -
The plants and facilities of the company and its subsidiaries
are subject to various environmental laws and regulations.
The company or its subsidiaries have been notified that they
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 10-K, the company
or its subsidiaries have spent $228 million on remediation and
cleanup through December 31, 1994. Additionally, the remaining
reserves provided for the cost to investigate and/or remediate
all presently identified sites of former or current operations
were $239 million at December 31, 1994, which total includes
$179 million for the former KMCC facility and offsite areas in
West Chicago. During the first nine months of 1995,
expenditures charged to the reserves totaled $42 million;
additions to the reserves were $108 million, including $52
million resulting from the sale of refining and marketing
properties.
In addition to the environmental issues previously discussed,
the company or its subsidiaries are also a party to a number
of other legal proceedings pending in various courts or
agencies in which the company 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 Opera-
tions and Financial Condition.
COMPARISON OF 1995 RESULTS WITH 1994 RESULTS
CONSOLIDATED OPERATIONS
Loss from continuing operations for the 1995 third quarter totaled
$132.9 million, compared with income of $20.6 million for the same
1994 period. For the first nine months of 1995, loss from
continuing operations was $60.9 million, down from income of $47.8
million for the 1994 period. Both the 1995 third-quarter and nine-
month periods include noncash charges to income of $227.4 million
for the divestiture of certain oil and natural gas properties and
the adoption of Financial Accounting Standard (FAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of;" an additional $27.5 million net
provision for environmental remediation of inactive sites related
principally to the company's closed facility in West Chicago,
Illinois; and a $6.2 million provision for restructuring costs in
the Exploration and Production Division as a result of the
divestiture program.
Third-quarter 1995 net loss totaled $143.1 million, compared with
net income of $17.7 million for the same 1994 period. For the
first nine months of 1995, net loss totaled $60.7 million, compared
with net income of $69.7 million for the same 1994 period.
For the third quarter and nine months ended September 30, 1995, the
company had an operating loss, compared with operating profit in
the same 1994 periods, as a result of the asset impairment
discussed in Note G, higher exploration costs, and lower natural
gas sales prices. Partially offsetting were higher titanium
dioxide pigment sales prices, higher coal sales volumes, and higher
crude oil and natural gas sales volumes.
Third-quarter 1995 nonoperating expense of $48.7 million was 36%
higher than for the 1994 quarter due primarily to higher environ-
mental provisions, partially offset by the cost of the company's
1994 restructuring program. Nonoperating expense for the first
nine months of 1995 was $110.3 million, compared with $86.7 million
for the same 1994 period. This increase was due primarily to
higher environmental provisions, partially offset by the cost of
the company's 1994 restructuring program.
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 1995, compared with the same periods last year.
Three Months Ended Nine Months Ended
September 30, September 30,
(Millions of dollars) 1995 1994 1995 1994
Sales
Exploration and production(1) $(176.4 $161.9 $ 518.3 $ 464.8
Chemicals 169.0 161.1 546.5 480.7
Coal 96.1 73.7 270.7 224.1
Other 14.5 11.7 41.1 32.8
Total Sales $ 456.0 $408.4 $1,376.6 $1,202.4
Operating Profit (Loss)
Exploration and production $(199.3) $ 30.3 $ (140.0) $ 53.1
Chemicals 29.1 25.0 94.1 68.8
Coal (3.1) 9.6 29.9 35.1
Other 1.7 1.1 8.2 (.9)
Total Operating Profit
(Loss) (171.6) 66.0 (7.8) 156.1
Nonoperating Expense 48.7 35.9 110.3 86.7
Provision (Benefit) for
Income Taxes (87.4) 9.5 (57.2) 21.6
Income (Loss) from Continuing
Operations (132.9) 20.6 (60.9) 47.8
Income (Loss) from Discontinued
Operations,
Net of Income Taxes (10.2) (2.9) .2 21.9
Net Income (Loss) $(143.1) $ 17.7 $ (60.7) $ 69.7
(1)Includes sales of primarily crude oil to discontinued operations
in the amount of $25.8 and $40.8 for the third quarter of 1995
and 1994, respectively, and $112.1 and $116.9 for the nine
months ended September 30, 1995 and 1994, respectively.
Exploration and Production -
Exploration and production had an operating loss of $199.3 million
for the third quarter of 1995, compared with operating profit of
$30.3 million for the same 1994 quarter. For the first nine months
of 1995, operating loss totaled $140 million, compared with
operating profit of $53.1 million last year. In addition to the
write-down to fair value of nonstrategic properties included in the
divestiture program and the asset impairment resulting from the
adoption of FAS No. 121, which totaled $203.4 million (see Note G),
exploration and productions operating profit was adversely affected
in both 1995 periods by higher exploration expenses and lower
natural gas sales prices, partially offset by higher crude oil
sales volumes. For the first nine months of 1995, the operating
loss was also partially offset by higher crude oil sales prices.
Revenues, including sales to the discontinued refining and
marketing operations, were $176.4 million and $161.9 million for
the third quarter of 1995 and 1994, respectively, and $518.3
million and $464.8 million for the first nine months of 1995 and
1994, respectively. The following table shows the company's
average crude oil and natural gas sales prices and volumes for both
the third quarter and first nine months of 1995 and 1994.
Three Months Ended Percent
September 30, Increase
1995 1994 (Decrease)
Crude oil sales (thousands of bbls/day)
United States 28.5 25.0 14
Canada 4.7 4.5 4
North Sea 36.9 34.9 6
Other international(1) - 2.6 NM
Total 70.1 67.0 5
Average crude oil sales price (per barrel)
United States $15.46 $15.74 (2)
Canada 16.08 15.04 7
North Sea 15.89 16.01 (1)
Other international(1) - 14.86 NM
Average $15.73 $15.80 -
Natural gas sold (MMCF/day) 283 259 9
Average natural gas sales price
(per MCF) $1.44 $1.62 (11)
Nine Months Ended Percent
September 30, Increase
1995 1994 (Decrease)
Crude oil sales (thousands of bbls/day)
United States 29.2 25.6 14
Canada 4.6 4.6 -
North Sea 37.3 31.6 18
Other international(1) - 3.6 NM
Total 71.1 65.4 9
Average crude oil sales price (per barrel)
United States $15.76 $14.35 10
Canada 15.77 13.46 17
North Sea 16.42 14.88 10
Other international(1) - 14.48 NM
Average $16.10 $14.55 11
Natural gas sold (MMCF/day) 295 263 12
Average natural gas sales price
(per MCF) $1.45 $1.83 (21)
(1)The 1994 sales were from ABK field in Arabian Gulf, which was
sold in late 1994.
Chemicals -
Third-quarter 1995 operating profit was $29.1 million on revenues
of $169 million, compared with operating profit of $25 million on
revenues of $161.1 million for the same 1994 quarter. For the
first nine months of 1995 and 1994, operating profit was $94.1
million and $68.8 million, respectively, on revenues of $546.5
million and $480.7 million, respectively. Revenues for the third
quarter of 1995 increased due to higher titanium dioxide pigment
sales prices. Revenues for the first nine months of 1995 increased
due principally to higher titanium dioxide pigment sales prices and
sales volumes and higher sodium chlorate sales prices. Operating
profit for both 1995 periods increased due principally to higher
revenues.
Coal -
Coal had an operating loss of $3.1 million for the third quarter of
1995, compared with operating profit of $9.6 million for the same
1994 quarter. For the first nine months of 1995, operating profit
totaled $29.9 million, compared with $35.1 million for the 1994
period. Revenues were $96.1 million and $73.7 million for the
third quarter of 1995 and 1994, respectively, and $270.7 million
and $224.1 million for the first nine months of 1995 and 1994,
respectively. Revenues for the third quarter of 1995 increased due
to higher sales prices and higher sales volumes. Revenues for the
first nine months of 1995 increased due to higher sales volumes,
partially offset by lower sales prices. Operating profit for both
1995 periods decreased due to the $22.9 million asset impairment
resulting from the adoption of FAS No. 121 (see Note G), partially
offset by lower per-unit production costs and the higher revenues.
Nonoperating Expense -
For a discussion of variances in nonoperating expenses, see
Consolidated Operations discussion on page 8.
Provision for Income Taxes -
Income tax benefits for the third quarter and first nine months of
1995 totaled $87.4 million and $57.2 million, respectively,
compared with an income tax provision of $9.5 million and $21.6
million for the respective 1994 periods. The 1995 amounts include
income tax benefits resulting from the asset impairment (see Note
G).
FINANCIAL CONDITION
At September 30, 1995, the company's net working capital position
was $204.7 million, compared with $72.8 million at December 31,
1994. The current ratio was 1.3 to 1 at September 30, 1995,
compared with 1.1 to 1 at both December 31, 1994, and September 30,
1994. The company's percentage of total debt to total capitaliza-
tion was 32% at September 30, 1995, compared with 39% at both
December 31, 1994, and September 30, 1994.
For the first nine months of 1995, net cash provided by operating
activities was $336.6 million, compared with $266.2 million for the
same 1994 period. The increase was due principally to higher income
before noncash charges, which include the asset impairment and
environmetal provisions, and working capital changes. The 1995 amount
was comprised principally of the net loss adjusted for noncash charges
of $472.7 million, and a decrease in current assets, excluding
cash, of $32.4 million, partially offset by a decrease in current
liabilities, excluding debt, of $106 million.
The company had unused lines of credit and revolving credit
facilities of $675.6 million at September 30, 1995. Of this
amount, $330 million and $219.6 million can be used to support
commercial paper borrowings of Kerr-McGee Credit Corporation and
Kerr-McGee (U.K.) PLC, respectively.
Cash capital expenditures for the first nine months of 1995 totaled
$369.1 million, compared with $309.5 million for the same 1994
period. This 19% increase was related principally to continued
investments in offshore China projects and domestic lease acquisi-
tions. Exploration and production expenditures were 83% of the
1995 amount. 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Kerr-McGee Chemical Corporation (KMCC), a wholly owned
subsidiary of the company, has recently been indirectly
informed by the Environmental Protection Agency (EPA) that it
is one of several companies against whom a civil action may be
filed for the recovery of remediation costs incurred by the
EPA at the Bayou Bonfouca superfund site located at Slidell,
Louisiana. Public information indicates that the EPA has
expended approximately $97 million for remediation of this
site over the last several years.
KMCC was never notified by the EPA that it is a potentially
responsible party at this site and was never offered an
opportunity to participate in the formulation or
implementation of a remediation plan. KMCC never owned, nor
operated the site, nor disposed of any waste at the site. It
is alleged that a subsidiary of American Creosoting
Corporation had owned the site at one time but sold it in
1958. The company acquired American Creosoting Corporation in
1964.
After conferring with counsel the company believes there are
meritorious defenses to be asserted should the EPA elect to
pursue a civil action to recover remediation costs, and the
company has not established a reserve for any such costs.
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 Statements beginning on
page 6 of this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
On September 12, 1995, the company filed a report on Form
8-K, reporting Item 5, "Other Events."
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: November 13, 1995 By: (John M. Rauh)
John M. Rauh
Vice President and Controller
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMT HE FORM
10-Q DATED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000055458
<NAME> KERR-MCGEE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 102200
<SECURITIES> 0
<RECEIVABLES> 412400
<ALLOWANCES> 0
<INVENTORY> 221100
<CURRENT-ASSETS> 798300
<PP&E> 0<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 3206400
<CURRENT-LIABILITIES> 593600
<BONDS> 0
<COMMON> 53500
0
0
<OTHER-SE> 1396200
<TOTAL-LIABILITY-AND-EQUITY> 3206400
<SALES> 1376600
<TOTAL-REVENUES> 1376600
<CGS> 823200
<TOTAL-COSTS> 1506100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48400
<INCOME-PRETAX> (118100)
<INCOME-TAX> (57200)
<INCOME-CONTINUING> (60900)
<DISCONTINUED> 200
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (60700)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> 0
<FN>
<F1>Property, plant and equipment, net of depreciation, totaled $2,210.7
million.
</FN>
</TABLE>
