SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the Year Ended December 31, 1999
Commission File Number 1-3939
Kerr-McGee Corporation Savings Investment Plan
(full title of the Plan)
Kerr-McGee Corporation
Kerr-McGee Center
Oklahoma City, Oklahoma 73102
(Name of the issuer of the securities held pursuant to
the Plan and address of its principal executive office)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Kerr-McGee Corporation Benefits Committee:
We have audited the accompanying statement of net assets available for
benefits of the KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN (the Plan) as of
December 31, 1999 and 1998, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1999 These financial
statements and the schedules referred to below are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for benefits as of
December 31, 1999 and 1998, and the changes in the net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedule of assets
held for investment purposes as of December 31, 1999, and the supplemental
schedule of reportable transactions for the year ended December 31, 1999, are
presented for purposes of additional analysis and are not a required part of the
basic financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
(ARTHUR ANDERSEN LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
June 23, 2000
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(Thousands of dollars)
December 31,
-------------------------
1999 1998
-------- --------
ASSETS:
Investments $304,749 $142,229
Dividends receivable 534 460
Receivable from investment sales 1,270 35
Other assets 1,069 17
-------- --------
Total assets 307,622 142,741
LIABILITIES:
Purchases pending settlement 17 158
-------- --------
NET ASSETS AVAILABLE FOR BENEFITS $307,605 $142,583
======== ========
The accompanying notes are an integral part of these statements.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(Thousands of dollars)
Year Ended
December 31, 1999
-----------------
Additions:
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments $ 39,143
Dividends 16,432
Interest 397
--------
55,972
Employee contributions 11,527
Transfer from affiliated plan 132,264
--------
Total additions 199,763
--------
Deductions:
Deductions from net assets attributed to:
Distributions to terminating and
withdrawing participants 34,722
Loans to participants, net of repayments 19
--------
Total deductions 34,741
--------
Net increase 165,022
Net assets available for benefits:
Beginning of year 142,583
--------
End of year $307,605
========
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) DESCRIPTION OF THE PLAN
General -
The Kerr-McGee Corporation Savings Investment Plan (the Plan) is a
defined contribution plan in which eligible employees of Kerr-McGee
Corporation and its affiliated companies (collectively referred to as
the Company) may participate. The Plan and the trust established
thereunder (the Trust) were executed on September 26, 1975, and became
fully effective on January 1, 1976.
Due to the merger of Kerr-McGee Corporation and Oryx Energy Company,
the Oryx Capital Accumulation Plan (CAP Plan) was merged into the Plan
and the Kerr-McGee Employee Stock Ownership Plan (ESOP) during 1999.
Net assets merged into the Plan totaled $132,264,000. Net liabilities
merged into the ESOP totaled $36,604,000. Future benefits of the CAP
Plan will be paid from the Plan and the ESOP.
The Plan allows participants to defer taxable earnings through
contributions to the Plan as provided for under Section 401(k) of the
Internal Revenue Code (the Code), and to borrow from their accounts
within the Plan.
The Plan is administered by the Kerr-McGee Corporation Benefits
Committee (the Committee), which is appointed by the Board of Directors
of the Company. Accounting and administration for the Plan are provided
by the Company at no cost to the Plan. In addition, all expenses of the
Trust are borne by the Company. During 1999, the Company paid $41,000
of administrative and trust expenses on behalf of the Plan.
The Company intends to continue the Plan indefinitely, but reserves the
right to alter, amend, modify, revoke or terminate the Plan at any time
upon the direction of the Company's Board of Directors. If the Plan is
terminated for any reason, the Committee will direct that the
participants' account balances be distributed as soon as practical. The
Company has no continuing liability under the Plan after the final
disposition of the assets of the Plan.
Effective January 1, 1990, all employer matching contributions are made
to the ESOP, which was established in September 1989. All matching
contributions are invested in Kerr-McGee Corporation common stock. The
ESOP is not part of the Plan; therefore, the employer contributions to
the ESOP and the ESOP assets and earnings are not included in the
Plan's accompanying financial statements. The maximum Company matching
contribution is 6% of salary, and the maximum employee contribution is
15% of salary. Employees are allowed to participate in the Plan from
their initial date of employment. Company contributions vest on the
basis of 100% for contributions made after 1998 and on the basis of 20%
for each completed year of vesting service for contributions made prior
to 1999. Vesting service is completed years of Company service reduced
in certain limited situations.
Prior to January 1, 1990, employer matching contributions were made
into the Plan and invested in Kerr-McGee Corporation common stock. The
1999 activity related to these nonparticipant-directed contributions is
shown in Note 3. The participants' contributions to the Plan and
earnings thereon are fully vested at all times. For both years ended
December 31, 1999 and 1998, the participants' share of the Company
contributions and earnings thereon were fully vested. Each
participant's account is credited with the participant's contributions
and an allocation of Plan earnings. With the exception of the
nonparticipant-directed portion of the Kerr-McGee Stock Fund,
participants designate how their balances are invested in any one or
more of several investment options.
On termination of service due to death, disability, or retirement, a
participant or participant's beneficiary may elect to receive an amount
equal to the value of the participant's account. The normal form of
such distribution is a single lump sum payment; however, certain
eligible members may elect to have an annuity purchased from an
insurance company in lieu of a lump sum payment. Terminating
participants with more than $5,000 in the Plan may defer distribution
until age 70 1/2. Investments relating to these participants remain in
the Trust until the terminated participant requests distribution.
Participants who defer distribution continue to share in earnings and
losses of the Plan.
The following is a description of the investment options available
under the Plan during 1999 :
Kerr-McGee Stock Fund - common stock of the Company.
Bond Index Fund - seeks to approximate the return of the Leman
Brothers Aggregate Bond Index.
Windsor II Fund - investments in a diversified group of
undervalued stocks of large-capitalization companies.
U.S. Growth Fund - investments in large, high-quality,
seasoned U.S. companies.
Balanced Index Fund - invests 60% of its assets in stocks and
40% of its assets in bonds.
Income Fund - debt securities including both government and
corporate obligations, preferred stocks and dividend paying
common stock.
Stable Value Fund - primarily investments in contracts issued
by insurance companies, banks and similar financial
institutions.
Vista Fund - shares of stock in companies believed to have the
potential for above-average growth.
Growth and Income Fund - primarily stocks of mature companies
that offer long-term growth while providing income.
International Growth Fund - primarily stocks and bonds of
companies and governments outside of the United States.
S&P 500 Index Fund - mirrors the performance and composition
of Standard & Poor's 500 Composite Index through investments
in common stocks.
Growth Portfolio - asset allocation for capital appreciation
typically consisting of 80% domestic and international stocks
and 20% bonds and money market investments.
Balanced Portfolio - asset allocation for total return
typically consisting of 65% domestic and international stocks
and 35% bonds and money market investments.
Conservative Portfolio - asset allocation for capital
preservation typically consisting of 35% domestic and
international stocks and 65% bonds and money market
investments.
The Putnam Stable Value Fund investment option is a collective
investment trust that invests in various investment contracts. This
investment option is fully benefit-responsive and is, therefore,
recorded at contract value in the accompanying Statements of Net Assets
Available for Benefits. Contract value represents the principal balance
of the fund, plus accrued interest at the stated contract rate, less
payments received and contract charges by the fund manager. The
crediting interest rate is based on the average rates of the underlying
investment contracts. The average yield of this fund for the year ended
December 31, 1999 was 5.8%. The Putnam Stable Value Fund's fiscal
year-end crediting interest rate was 6.2%. The fair value of the fund
approximates contract value at December 31, 1999.
SMART and CAPITAL Savings Programs -
All participants participate in the Plan under the SMART and CAPITAL
Savings Programs. Participants may direct their savings, up to a
maximum of 15% of salary, to be invested in 1% increments among one or
more of the funds provided for under the Plan. An unlimited number of
transfers are allowed between funds.
Contributions to the SMART Savings Program are from a participant's
salary, before income taxes. The participant's income taxes on the
pre-tax contributions are deferred until the contributions are
distributed after termination, at the time of hardship withdrawal, or
under minimum distribution rules at age 70 1/2. The annual SMART
Savings Program contribution limitation is subject to annual
adjustments for inflation and was $10,000 for 1999 in accordance with
the Code. Participant contributions in excess of this amount are
considered to be contributions to the CAPITAL Savings Program.
Contributions to the CAPITAL Savings Program are from a participant's
salary, after income taxes. If a participant has authorized less than
15% of their salary to be contributed to the SMART Savings Program,
they may contribute the remaining whole percentages up to 15% to the
CAPITAL Savings Program. Participant contributions may be invested in
the same proportions and the same funds as outlined above for the SMART
Savings Program. The maximum contributions allowed to each program may
be limited for highly compensated employees, depending upon the balance
of contributions at all levels.
Participants may borrow from the Plan against their contributions to
the SMART and CAPITAL Savings Programs and against their vested
interest in Company matching contributions held in the SIP. By
administrative rule established by the Committee, new loans to
participants bear interest at a fixed rate equal to the national
average interest rate for five-year certificates of deposit (as
published in The Wall Street Journal), plus 1.5%. Such interest is
credited to the participant's accounts in the Plan when repaid. The
average interest rate for new loans, which is adjusted quarterly, was
6.2% for 1999. The minimum loan amount, determined periodically by the
Committee, is currently $1,000. The maximum amount of all loans to a
participant under the Plan and any other plans of any employer may not
exceed the lesser of (a) $50,000, reduced by an amount equal to the
difference between (i) the participant's highest loan balance under the
Plan during the one-year period ending on the day before the date on
which such loan is made and (ii) the outstanding loan balance of the
participant under the Plan on the date on which such loan was made or
(b) one-half the current value of the participant's vested interest in
their accounts. Loans must be repaid within five years from the initial
date of the loan, with certain special provisions available for
military reservists called to active duty. In the event of a
participant's termination of employment and subsequent default on the
loan, any outstanding balance will be considered a distribution and
will be taxable to the participant as prescribed by the Code.
(2) SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
under the accrual method of accounting in accordance with accounting
principles generally accepted in the United States.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that
affect the reported amounts of net assets available for benefits and
changes therein. Actual results could differ from those estimates.
Investment Valuation and Income Recognition - The Plan's investments
are stated at fair value except for its investment contracts which are
valued at contract values (Note 1). Shares of registered investment
companies are valued at quoted market prices, which represent the net
asset value of shares held by the Plan at year-end. The Company stock
is valued at its quoted market price. Loans to participants are valued
at cost which approximates fair value. Purchases and sales of
securities are recorded on a trade-date basis. Interest income is
recorded on the accrual basis.
Payment of Benefits - Distributions to terminating and withdrawing
participants are recorded when paid.
(3) LOANS TO PARTICIPANTS
Loan activity during 1999 and 1998 is set forth below:
(Thousands of dollars) 1999 1998
------ -------
Balance at beginning of year $6,332 $10,654
New loans 2,824 3,628
Principal repayments (3,113) (4,987)
Loans included as distributions
to terminated participants (1,407) (2,963)
Transfer from affiliated plan 4,520 -
------ -------
Balance at end of year $9,156 $ 6,332
====== =======
Interest income applicable to these loans during 1999 was $397,000
which is reported as interest income in the funds to which the
participants are currently contributing.
(4) INVESTMENTS
The following presents investments that represent five percent or more
of the Plan's net assets.
<TABLE>
<CAPTION>
December 31,
------------------------
(Thousands of Dollars) 1999 1998
------- -------
<S> <C> <C>
Kerr-McGee Corporation Common Stock -
1,097,655 shares in 1999 and 1,008,624
shares in 1998 $68,055 * $38,580 *
Vanguard Windsor II Fund - 872,064 shares
in 1999 21,775 -
Vanguard U.S. Growth Fund - 536,726 shares
in 1999 23,364 -
Vanguard Balanced Index Fund - 887,949 shares
in 1999 17,954 -
Putnam Stable Value Fund - 62,019,067 shares
in 1999 and 17,486,519 shares in 1998 62,019 17,486
Putnam Visit Fund - 2,247,810 shares in 1999
and 2,055,295 shares in 1998 39,247 26,209
Putnam Growth & Income Fund - 1,331,405 shares
in 1999 and 1,525,384 shares in 1998 24,964 31,255
Putnam S&P 500 Index Fund - 392,996 shares in 1999
and 300,491 shares in 1998 13,731 8,693
*Nonparticipant-directed
</TABLE>
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
appreciated in value by $39,143 as follows:
Common stock $26,788
Mutual funds 12,355
-------
$39,143
=======
(5) NONPARTICIPANT-DIRECTED INVESTMENTS
The Kerr-McGee Stock Fund is the only fund consisting of both
participant-directed contributions and nonparticipant-directed Company
matching contributions. Information about the net assets and the
significant components of the changes in net assets relating to the
nonparticipant-directed investments, is as follows:
December 31,
------------------------
(Thousands of dollars) 1999 1998
------- ------
Net Assets:
Common stock $20,563 $9,899
======= ======
Year ended
December 31, 1999
Changes in Net Assets:
Dividends $ 607
Net appreciation 8,026
Transfer from affiliated plan 3,768
Distributions (1,737)
-------
$10,664
=======
(6) TAX STATUS
The Plan is a qualified plan under provisions of Section 401(a) of the
Code and is exempt from Federal income taxes under provisions of
Section 501(a) of the Code. The Plan's latest determination letter is
dated November 5, 1999. Prior Company contributions and employee
contributions to the SMART Savings Program are not taxed until the
receipt of a distribution pursuant to the terms of the Plan. Taxes on
any income earned thereon are also deferred until the receipt of a
distribution.
(7) CONTRIBUTIONS
Contributions to the Plan during 1999 totaled $11,527,000. This total
amount represents contributions made by employees to the SMART and
CAPITAL Savings Programs.
The Company's matching contributions to the ESOP during 1999 totaled
$7,460,000. Common stock of the Company held by the ESOP and allocated
to participant's accounts totaled 1,347,615 shares with a market value
of $83,552,000 at December 31, 1999.
(8) SUBSEQUENT EVENTS
Effective January 1, 2000, all participants in the ESOP have an annual
option to diversify up to 25% of their year-end Kerr-McGee stock
balance in the ESOP into investment options available in the Plan. This
option must be exercised by March 31 of each year. The amount
diversified will be shown as distributed from the ESOP and transferred
to the Plan.
Employees who are or become participants in the ESOP on or after
January 1, 2000 are 100% vested in all company matching contributions.
<TABLE>
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(Employer Identification Number 73-0311467)
(Plan Number 007)
DECEMBER 31, 1999
(Thousands of dollars)
<CAPTION>
(b) (c) (e)
Identity of issue, borrower, Description of investment including maturity date, (d) Current
(a)* lessor or similar party rate of interest, collateral, par or maturity value Cost Value
---- ---------------------------- ------------------------------------------------------------ ------- --------
<S> <C> <C> <C>
* Kerr-McGee Corporation Common Stock - 1,097,655 shares $44,521 $68,055
* Putnam Investments Putnam Bond Index Fund - 186,747 shares nr 1,841
* Vanguard Investments Vanguard Windsor II Fund - 872,064 shares nr 21,775
* Vanguard Investments Vanguard U.S. Growth Fund - 536,726 shares nr 23,364
* Vanguard Investments Vanguard Balanced Index Fund - 887,949 shares nr 17,954
* Putnam Investments Putnam Income Fund - 16 shares nr -
* Putnam Investments Putnam Stable Value Fund - 62,019,067 shares nr 62,019
* Putnam Investments Putnam Vista Fund - 2,247,810 shares nr 39,247
* Putnam Investments Putnam Growth & Income Fund - 1,331,405 shares nr 24,964
* Putnam Investments Putnam Asset Allocation Balanced Fund - 313,194 shares nr 4,059
* Putnam Investments Putnam International Growth Fund - 497,302 shares nr 14,760
* Putnam Investments Putnam S&P 500 Index Fund - 392,996 shares nr 13,731
* Putnam Investments Putnam Asset Allocation Growth Fund - 170,659 shares nr 2,594
* Putnam Investments Putnam Asset Allocation Conservative Fund - 112,342 shares nr 1,184
* Various Participants Participant loans - interest rates from 5.9% to 10%,
maturity dates from January 2000 to November 2026 nr 9,156
* Putnam Investments Collective Short-term Investment Fund nr 46
*Party-in-interest
nr - not required
</TABLE>
<TABLE>
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
SCHEDULE H, LINE 4j - SCHEDULE OF REPORTABLE TRANSACTIONS
(Employer Identification Number 73-0311467)
(Plan Number 007)
FOR THE YEAR ENDED DECEMBER 31, 1999
(Thousands of dollars)
<CAPTION>
(h)
(f) Current
Expense value
(c) (d) (e) incurred (g) of asset on (i)
(a) (b) Purchase Selling Lease with Cost of transaction Net gain
Identity of party involved Description of asset price price rental transaction asset date or loss
-------------------------- -------------------- ---------- -------- ------ ----------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
*Kerr-McGee Corporation Common Stock $17,153 $ - $ - $ - $17,153 $17,153 $ -
*Kerr-McGee Corporation Common Stock - 24,702 - - 20,373 24,702 4,329
*Includes both participant-directed and nonparticipant-directed portions.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Kerr-McGee Corporation Benefits Committee has duly caused this annual report
to be signed by the undersigned thereunto duly authorized.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
By (JOHN M. RAUH)
-------------------
John M. Rauh
Chairman of the Kerr-McGee Corporation
Benefits Committee
Date: June 28, 2000
