FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
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 July 31,
1998: 47,741,023
<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 Six Months Ended
June 30, June 30,
(Millions of dollars, except per-share amounts) 1998 1997 1998 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Sales $394.6 $335.5 $685.5 $719.3
------ ------ ------ ------
Costs and Expenses
Costs and operating expenses 228.6 183.8 383.7 386.8
Selling, general and administrative expenses 38.2 24.8 66.5 57.9
Depreciation and depletion 73.2 60.8 134.6 123.5
Exploration, including dry holes and
amortization of undeveloped leases 20.5 14.6 39.2 25.5
Taxes, other than income taxes 5.2 4.8 10.3 11.5
Interest and debt expense 17.1 11.0 29.7 22.8
------ ------ ------ ------
Total Costs and Expenses 382.8 299.8 664.0 628.0
------ ------ ------ ------
11.8 35.7 21.5 91.3
Other Income 11.7 17.9 25.9 47.3
------ ------ ------ ------
Income from Continuing Operations
before Income Taxes 23.5 53.6 47.4 138.6
Provision (Benefit) for Income Taxes (2.5) 17.3 5.5 43.8
------ ------ ------ ------
Income from Continuing Operations 26.0 36.3 41.9 94.8
Income from Discontinued Operations (net of
provision for income taxes of $31.6 and $.5
for the second quarter of 1998 and 1997,
respectively, and $34.0 and $4.2 for the first
six months of 1998 and 1997, respectively) 51.5 5.3 59.5 17.0
------ ------ ------ ------
Net Income $ 77.5 $ 41.6 $101.4 $111.8
====== ====== ====== ======
Net Income per Common Share
Basic
Continuing operations $ .55 $ .76 $ .88 $ 1.98
Discontinued operations 1.08 .11 1.25 .35
----- ------ ------ ------
Total $1.63 $ .87 $ 2.13 $ 2.33
===== ====== ====== ======
Diluted
Continuing operations $ .55 $ .76 $ .88 $ 1.97
Discontinued operations 1.07 .11 1.24 .35
----- ------ ------ ------
Total $1.62 $ .87 $ 2.12 $ 2.32
===== ====== ====== ======
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
June 30, December 31,
(Millions of dollars) 1998 1997
----------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 88.6 $ 182.6
Notes and accounts receivable 346.1 274.3
Inventories 222.8 172.2
Deposits and prepaid expenses 68.2 59.4
------- --------
Total Current Assets 725.7 688.5
------- --------
Property, Plant and Equipment 4,918.1 4,602.1
Less reserves for depreciation,
depletion and amortization 2,374.9 2,603.7
------- --------
2,543.2 1,998.4
Investments and Other Assets 417.5 409.2
------- --------
$3,686.4 $3,096.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ - $ 25.0
Accounts payable 259.6 247.1
Other current liabilities 304.0 250.9
------- --------
Total Current Liabilities 563.6 523.0
------- --------
Long-Term Debt 888.5 552.0
------- --------
Deferred Credits and Reserves 729.7 581.1
------- --------
Stockholders' Equity
Common stock, par value $1 - 150,000,000
shares authorized, 54,174,271 shares issued at
6-30-98 and 54,120,747 shares issued at 12-31-97 54.2 54.1
Capital in excess of par value 348.4 345.8
Preferred stock purchase rights .5 .5
Retained earnings 1,514.2 1,455.7
Accumulated other comprehensive income (loss) (.7) .1
Common shares in treasury, at cost - 6,433,415
shares at 6-30-98 and 6,434,465 at 12-31-97 (362.3) (362.4)
Deferred compensation (49.7) (53.8)
------- --------
Total Stockholders' Equity 1,504.6 1,440.0
------- --------
$3,686.4 $3,096.1
======== ========
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.
</TABLE>
<PAGE>
<TABLE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
(Millions of dollar) 1998 1997
--------------------
<S> <C> <C>
Operating Activities
Net income $101.4 $111.8
Adjustments to reconcile to net cash
provided by operating activities -
Depreciation, depletion and amortization 152.7 138.2
Deferred income taxes (2.0) 22.9
Gain on sale of discontinued coal operations (41.7) -
Loss (gain) on sale and retirement of assets 16.2 (2.9)
Realized gain on available-for-sale securities - (10.7)
Noncash items affecting net income (26.6) (5.3)
Other net cash provided by operating activities (76.2) 77.1
------ ------
Net Cash Provided by Operating Activities 123.8 331.1
------ ------
Investing Activities
Capital expenditures (222.3) (156.9)
Acquisitions (517.9) -
Proceeds from the sale of discontinued coal operations 198.8 -
Proceeds from sale of assets 46.9 7.8
Other investing activities 4.5 31.4
------ ------
Net Cash Used in Investing Activities (490.0) (117.7)
------ ------
Financing Activities
Issuance of long-term debt 385.3 -
Repayment of long-term debt (47.8) (158.5)
Decrease in short-term borrowings (25.0) (16.4)
Purchase of treasury stock - (49.1)
Dividends paid (42.9) (41.5)
Other financing activities 2.6 7.9
------ ------
Net Cash Used in Financing Activities 272.2 (257.6)
------ ------
Net Increase in Cash and Cash Equivalents (94.0) (44.2)
Cash and Cash Equivalents at Beginning of Period 182.6 120.9
------ ------
Cash and Cash Equivalents at End of Period $ 88.6 $ 76.7
====== ======
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
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. The company committed to formal plans for the sale of its coal operations
in the second quarter of 1998; therefore, coal operations are reported as a
discontinued operation. During the second quarter of 1998, the company sold
its Galatia Mine in the Illinois Basin to the American Coal Company for
$200 million in cash. On July 23, 1998, the company completed the sale of
the Jacobs Ranch surface mine operation in Wyoming to Kennecott Energy and
Coal Company for $400 million cash. The two negotiated sales are expected
to result in an after-tax gain of approximately $260 million, of which
$41.7 million was reported in the second quarter of 1998. The net proceeds
to be received by the company will be used to purchase the company's stock
and for general corporate purposes.
Revenues applicable to the discontinued operation totaled $81.9 million and
$76.2 million for the three months ended June 30, 1998 and 1997,
respectively, and $160.1 million and $160.4 million for the six months ended
June 30, 1998 and 1997, respectively. Coal assets not yet sold at June 30,
1998 are included as part of the appropriate line items in the Consolidated
Balance Sheet. Included at June 30, 1998, are inventories of $3.9 million;
net property, plant and equipment of $82.6 million; other current
liabilities of $6.5 million; and other deferred credits of $40.3 million.
The company's Consolidated Statement of Income for the year ended December
31, 1997, restated for the effects of the discontinued coal operation is
presented below.
(Millions of dollars)
Sales $1,388.3
Costs and expenses 738.8
General and administrative expenses 137.4
Depreciation and depletion 238.7
Exploration, including dry holes and
amortization of undeveloped leases 64.7
Taxes, other than income taxes 20.5
Interest and debt expenses 46.5
-------
Total Costs and Expenses 1,246.6
141.7
Other Income 90.4
Income from continuing operations
before Income Taxes 232.1
Provision for Income Taxes 71.0
-------
Income from Continuing Operations 161.1
Income from Discontinued Operations (net of
provision for income taxes of $12.3) 32.7
-------
Net income $ 193.8
=======
Net Income per Common Share - diluted
Continuing operations $ 3.36
Discontinued operations .68
-------
Total $ 4.04
=======
C. Income from continuing operations for purposes of computing both basic
earnings per share and diluted earnings per share was $26.0 million and
$36.3 million for the three months ended June 30, 1998 and 1997,
respectively, and $41.9 million and $94.8 million for the six months ended
June 30, 1998 and 1997, respectively. A reconciliation of the average
shares outstanding used to compute basic earnings per share to the shares
used to compute diluted earnings per share for the indicated periods is
presented below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of shares) 1998 1997 1998 1997
------------------ -----------------
<S> <C> <C> <C> <C>
Averages shares outstanding - basic 47.7 47.8 47.7 48.0
Dilutive effect of stock options .2 .2 .2 .2
---- ---- ---- ---
Average shares outstanding assuming dilution 47.9 48.0 47.9 48.2
==== ==== ==== ====
</TABLE>
D. Net cash provided by operating activities reflects cash payments for income
taxes and interest as follows:
Six Months Ended
June 30,
(Millions of dollars) 1998 1997
------------------
Income taxes $14.1 $13.8
Interest 27.9 28.2
E. During the second quarter of 1998 and 1997, comprehensive income was $78
million and $36.1 million, respectively. For the six months ended June 30,
1998 and 1997, comprehensive income was $101.9 million and $104.6 million,
respectively. Adoption of this standard had no effect on the company's
results of operations or financial position as reported elsewhere in the
consolidated financial statements.
The company held U.S. government obligations considered to be available for
sale at June 30, 1998, and December 31, 1997. These financial instruments
are carried in the Consolidated Balance Sheet at fair value, which is based
on quoted market prices. The fair value of these financial instruments
totaled $27.9 million at June 30, 1998, which approximated cost. At December
31, 1997, the fair value of the financial instruments totaled $27.5 million,
which approximated cost. The company held no securities classified as held
to maturity or trading during the respective periods.
During 1997, the company sold equity securities considered to be available
for sale. Proceeds from the sale during the 1997 second quarter totaled $7.7
million, resulting in a realized gain of $6.6 million before income taxes.
Proceeds from the sale for the first six months of 1997 totaled $12.4
million, resulting in a realized gain of $10.7 million before income taxes.
The average cost of the securities was used in computing the realized gain.
During the second quarter of 1997, the company donated 50,000 shares of its
available-for-sale securities to the Kerr-McGee Foundation Corporation, a
tax-exempt entity whose purpose is to contribute to not-for-profit
organizations. The fair value of these donated shares totaled $3.2 million,
which includes appreciation of $2.8 million before income taxes.
F. Investments in equity affiliates totaled $282 million at June 30, 1998, and
$272.9 million at December 31, 1997. Equity income related to the
investments is included in Other Income in the Consolidated Statement of
Income and totaled $5.5 million and $6.5 million for the three months ended
June 30, 1998 and 1997, respectively, and $12 million and $16 million for
the six months ended June 30, 1997.
G. CONTINGENCIES
WEST CHICAGO -
In 1973, a wholly owned subsidiary, Kerr-McGee Chemical Corporation, closed
the facility located in West Chicago, Illinois, that processed thorium ores.
Kerr-McGee Chemical Corporation now operates as Kerr-McGee Chemical LLC
(Chemical). Operations resulted in some low-level radioactive contamination
at the site, and in 1979, Chemical filed a plan with the Nuclear Regulatory
Commission (NRC) to decommission the facility. The NRC transferred
jurisdiction of this site to the State of Illinois (the State) in 1990. The
following discusses the current status of various matters associated with
the West Chicago site.
Closed Facility - In 1994, Chemical, the City of West Chicago (the City),
and the State reached agreement on the initial phase of the decommissioning
plan for the closed West Chicago facility, and Chemical began shipping
material from the site to a licensed permanent disposal facility.
In February 1997, Chemical executed an agreement with the City as to the
terms and conditions for completing the final phase of decommissioning work.
The State indicated approval of this agreement and has issued license
amendments authorizing much of the work. Chemical expects the majority of
the work to be completed within six years.
In 1992, the State enacted legislation imposing an annual storage fee equal
to $2 per cubic foot of byproduct material located at the closed facility.
The storage fee cannot exceed $26 million per year, and any storage fee
payments must be reimbursed to Chemical as decommissioning costs are
incurred. Chemical has been fully reimbursed for all storage fees paid
pursuant to this legislation. In June 1997, the legislation was amended to
provide that future storage fee obligations are to be offset against
decommissioning costs incurred but not yet reimbursed.
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 Chemical as a potentially responsible party in these four areas.
The EPA issued unilateral administrative orders for two of these areas
(referred to as the residential area and Reed-Keppler Park), which require
Chemical to conduct removal actions to excavate contaminated soils and ship
the soils elsewhere for disposal. Without waiving any of its rights or
defenses, Chemical has begun the cleanup of these two sites.
Judicial Proceedings - In December 1996, a lawsuit was filed against the
company and Chemical, in Illinois state court on behalf of a purported class
of present and former West Chicago residents. The lawsuit seeks damages for
alleged diminution in property values and the establishment of a medical
monitoring fund to benefit those allegedly exposed to thorium wastes
originating from the former facility. The case was removed to federal court
and is being vigorously defended.
Government Reimbursement - Pursuant to Title X of the Energy Policy Act of
1992 (Title X), the United States Department of Energy is obligated to
reimburse Chemical for certain decommissioning and cleanup costs in
recognition of the fact that much of the facility's production was dedicated
to United States government contracts. Title X was amended in 1996 to
increase the amount authorized to $65 million plus inflation adjustments.
Through July 31, 1998, Chemical has been reimbursed approximately $54
million under Title X.
OTHER MATTERS
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 of June 30, 1998, the company's estimate for the cost to
investigate and/or remediate all presently identified sites of former or
current operations, based on currently known facts and circumstances,
totaled $249 million, which includes $149 million for the former West
Chicago facility and $13 million for the residential area and Reed-Keppler
Park. Reserves have been established based on this estimate. Expenditures
are reduced by the amounts recovered under government programs. Expenditures
from inception through June 30, 1998, totaled $470 million for currently
known sites.
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. The ultimate costs to decommission
presently known sites are difficult to estimate because of the numerous
contingencies, including continually changing laws and regulations, the
nature of the company's businesses and pending legal proceedings. Actual
costs could differ from those currently estimated as information becomes
available for sites that are not now included in the reserve, if
contamination is not as expected, or field conditions or other variables
differ significantly from those that are now assumed. Therefore, it is not
possible to reliably estimate the amount or timing of all future
expenditures relating to environmental and other 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, the ultimate cost will depend on the resolution
of the above-noted uncertainties. Therefore, it is possible that additional
reserves could be required in the future.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Comparison of 1998 Results with 1997 Results
CONSOLIDATED OPERATIONS
Income from continuing operations for the 1998 second quarter totaled $26
million, compared with $36.3 million for the same 1997 period. For the first six
months of 1998, income from continuing operations was $41.9 million, down from
$94.8 million for the 1997 period.
Second-quarter 1998 net income totaled $77.5 million, compared with $41.6
million for the same 1997 period. For the first six months of 1998, net income
totaled $101.4 million, compared with $111.8 million for the same 1997 period.
Operating profit decreased for both the second quarter and six months ended June
30, 1998, compared with the same 1997 periods. Higher chemical operating profit
in both 1998 periods, compared with the same 1997 periods, was more than offset
by lower operating profit from exploration and production. The decline for both
periods was due primarily to lower crude oil sales prices, higher depreciation
and depletion expense and higher exploration expense, partially offset by higher
crude oil sales volumes, higher titanium dioxide pigment sales prices and income
from the newly acquired European pigment operations. Also benefiting the second
quarter were higher natural gas sales volumes and prices. Contributing to the
decline in the first six months were lower natural gas sales prices and higher
pigment production costs.
Other expense for second-quarter 1998 was $20.1 million, compared with $.6
million for the 1997 quarter. The increase was due primarily to higher loss on
sale of assets, 1997 gains on sales of equity securities and higher litigation
costs, partially offset by lower net interest expense and 1998 foreign currency
transaction gains compared with 1997 losses. Other expense for the first six
months of 1998 was $30.1, compared with other income of $1.2 million for the
1997 period due primarily to higher loss on sale of assets, 1997 gain on sale of
equity securities and lower equity income, partially offset by lower net
interest expense. Net interest expense for both 1998 periods declined primarily
due to higher interest income resulting from an income tax settlement.
The provision (benefit) for income taxes for both the second quarter and six
months ended June 30, 1998, included a tax benefit of $11.1 million resulting
from an income tax settlement. Excluding this special item in both periods, the
provision for income taxes was $8.6 million and $16.6 million for the second
quarter and first six months of 1998, respectively, compared with $17.3 million
and $43.8 million for the respective 1997 period. The decrease for both 1998
periods was due to lower pretax income, partially offset by higher effective tax
rates.
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 second quarter and first six months of 1998, compared with the same periods
last year.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 1998 1997 1998 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Sales
Exploration and production $128.7 $146.5 $241.3 $346.8
Chemicals 265.8 189.0 444.0 372.4
------ ------ ------ ------
394.5 335.5 685.3 719.2
All other .1 - .2 .1
----- ------ ------ ------
Total Sales $394.6 $335.5 $685.5 $719.3
====== ====== ====== ======
Operating Profit
Exploration and production $ 8.8 $ 32.5 $ 20.8 $100.5
Chemicals 34.8 21.7 56.7 36.9
------ ------ ------ ------
Total Operating Profit 43.6 54.2 77.5 137.4
Other Income (Expense) (20.1) (.6) (30.1) 1.2
------ ------ ------ ------
Income from Continuing Operations
before Income Taxes 23.5 53.6 47.4 138.6
Provision (Benefit) for Income Taxes (2.5) 17.3 5.5 43.8
------ ------ ------ ------
Income from Continuing Operations 26.0 36.3 41.9 94.8
Discontinued Operations, Net of
Income Taxes 51.5 5.3 59.5 17.0
------ ------ ------ ------
Net Income $ 77.5 $ 41.6 $101.4 $111.8
====== ====== ====== ======
</TABLE>
<PAGE>
Exploration and Production -
Operating profit for the second quarter of 1998 was $8.8 million, compared with
$32.5 million for the same 1997 period. Operating profit for the first six
months of 1998 and 1997 was $20.8 million and $100.5 million, respectively. The
decrease in operating profit for both periods was due primarily to lower crude
oil sales prices, higher depreciation and depletion expense and higher
exploration expense, partially offset by higher crude oil sales volumes. The
higher volumes in the second-quarter 1998 were mainly attributable to the
acquisition of Gulf Canada Resources Limited's North Sea assets. Offsetting the
second-quarter decline in operating profit were higher natural gas sales volumes
and prices. The lower operating profit for the six month period also reflects
lower natural gas sales prices.
Revenues were $128.7 million and $146.5 million for the three months ended June
30, 1998 and 1997, respectively, and $241.3 million and $346.8 million for the
first six months of 1998 and 1997, respectively. The following table shows the
company's average crude oil and natural gas sales prices and volumes for both
the second quarter and first six months of 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, Increase June 30, Increase
1998 1997 (Decrease) 1998 1997 (Decrease)
------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Crude oil sales
(thousands of bbls/day)
United States 23.5 25.1 (6) 23.3 25.2 (8)
North Sea 38.6 22.6 71 29.8 24.3 23
China 7.6 10.2 (25) 8.3 8.5 (2)
Other 3.0 - NM 2.5 - NM
---- ---- ---- ----
Total proprietary sales 72.7 57.9 26 63.9 58.0 10
Proportionate interest in
equity affiliate's sales 7.1 7.4 (4) 7.2 7.4 (3)
---- ---- ---- ----
Total 79.8 65.3 22 71.1 65.4 9
==== ==== ==== ====
Average crude oil sales price
(per barrel)
United States $11.78 $17.48 (33) $12.70 $19.19 (34)
North Sea 12.55 17.19 (27) 12.96 19.49 (34)
China 12.43 16.52 (25) 12.62 18.16 (31)
Other 12.68 - NM 13.03 - NM
Average $12.29 $17.21 (29) $12.83 $19.16 (33)
Natural gas sold
(MMCF/day)
United States 180 163 10 167 173 (3)
North Sea 34 28 21 34 31 10
---- ---- ---- ----
Total proprietary sales 214 191 12 201 204 (1)
Proportionate interest in
equity affiliate's sales 63 59 7 63 59 7
---- ---- ---- ----
Total 277 250 11 264 263 -
==== ==== ==== ====
Average natural gas sales price
(per MCF)
United States $2.24 $2.11 6 $2.24 $2.47 (9)
North Sea 2.35 2.26 4 2.64 2.65 -
Average $2.25 $2.13 6 $2.31 $2.49 (7)
</TABLE>
Chemicals -
Second-quarter 1998 operating profit was $34.8 million on revenues of $265.8
million, compared with operating profit of $21.7 million on revenues of $189
million for the same 1997 quarter. For the first six months of 1998 and 1997,
operating profit was $56.7 million and $36.9 million, respectively, on revenues
of $444 million and $372.4 million, respectively. Revenues for both 1998 periods
increased due to higher sales volumes resulting from the newly acquired European
titanium dioxide pigment operations and higher pigment sales prices. Operating
profit for both 1998 periods increased primarily due to higher revenues,
partially offset by higher pigment production costs.
Financial Condition
At June 30, 1998, the company's net working capital position was $162.1 million,
compared with $165.5 million at December 31, 1997. The current ratio was 1.3 to
1 at June 30, 1998, which is unchanged from both December 31, 1997, and June 30,
1997. The company's percentage of total debt to total capitalization was 37% at
June 30, 1998, compared with 29% at December 31, 1997, and 26% at June 30, 1997.
The company had unused lines of credit and revolving credit facilities of $738
million at June 30, 1998. Of this amount, $380 million and $240 million can be
used to support commercial paper borrowings of Kerr-McGee Credit Corporation LLC
and Kerr-McGee Oil (U.K.)
PLC, respectively.
On May 15, 1998, Kerr-McGee Resources (U.K.), Kerr-McGee Andrew and Kerr-McGee
Dorset, all wholly owned limited liability companies in the United Kingdom,
entered into a revolving credit agreement with various banks to provide
borrowings up to $76 million at varying rates through May 15, 2003. The company
and Kerr-McGee (G.B.) Limited are the guarantors of the agreement. A total of
$76 million was outstanding at June 30, 1998.
Cash capital expenditures for the first six months of 1998, excluding
acquisitions, totaled $222.3 million, compared with $156.9 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 1998 total.
Chemical expenditures were 14% of the 1998 amount. Management anticipates that
the cash requirements for the next several years can be provided through
internally generated funds and selective short-term and/or long-term borrowings.
On July 14, 1998, the company's Board of Directors authorized management to
purchase from time to time company stock of up to $300 million, or approximately
11% of the outstanding shares at the then current market price.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
4.6 The company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of the $76 million Credit
Agreement dated May 15, 1998, between Kerr-McGee Resources (U.K.)
Limited, Kerr-McGee Andrew Limited, Kerr-McGee Dorset Limited and
various banks providing for revolving credit through May 15,
2003.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
On June 8, 1998, the company filed a report on Form 8-K announcing that
it has reached agreements to sell its coal operations for $600 million
in cash.
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 August 7, 1998 By: (Deborah A. Kitchens)
-------------- ---------------------
Deborah A. Kitchens
Vice President and Controller
and Chief Accounting Officer
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1998, and the Consolidated Statement of
Income for the period ending June 30, 1998, and is qualified in its entirety by
reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1000
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
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<CURRENT-LIABILITIES> 563600
<BONDS> 0
0
0
<COMMON> 54200
<OTHER-SE> 1450400
<TOTAL-LIABILITY-AND-EQUITY> 3686400
<SALES> 685500
<TOTAL-REVENUES> 685500
<CGS> 383700
<TOTAL-COSTS> 664000
<OTHER-EXPENSES> (25900)
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<NET-INCOME> 101400
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 2.13
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