-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HI/5h1RnXk355O2Z6op9KwTvZX5hj6CRlFMDSdKvF4W+Wf0uuUaNzLvG4k/falJW 9UkzEGdrx+/DVX2KT7wy5w== 0000055458-99-000014.txt : 19990517 0000055458-99-000014.hdr.sgml : 19990517 ACCESSION NUMBER: 0000055458-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR MCGEE CORP CENTRAL INDEX KEY: 0000055458 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 730311467 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03939 FILM NUMBER: 99623441 BUSINESS ADDRESS: STREET 1: KERR MCGEE CTR STREET 2: 123 ROBERT S KERR CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052701313 MAIL ADDRESS: STREET 1: P O BOX 25861 CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 FORMER COMPANY: FORMER CONFORMED NAME: KERR MCGEE OIL INDUSTRIES INC DATE OF NAME CHANGE: 19671227 10-Q 1 FIRST QUARTER 1999 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1999 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 30, 1999: 86,372,748 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) 1999 1998 -------------------------- Sales $ 485.9 $ 506.7 --------- ------- Costs and Expenses Costs and operating expenses 225.1 213.0 Selling, general and administrative expenses 52.7 47.7 Depreciation and depletion 131.2 129.7 Exploration, including dry holes and amortization of undeveloped leases 28.8 67.0 Taxes, other than income taxes 15.3 8.7 Merger costs 155.1 - Interest and debt expense 44.7 34.8 --------- ------- Total Costs and Expenses 652.9 500.9 --------- ------- (167.0) 5.8 Other Income 16.4 21.6 --------- ------- Income (Loss) from Continuing Operations before Income Taxes (150.6) 27.4 Provision (Benefit) for Income Taxes (44.1) 11.6 -------- ------- Income (Loss) from Continuing Operations (106.5) 15.8 Income from Discontinued Operations (net of provision for income taxes of $2.4) - 8.0 Cumulative Effect of Change in Accounting Principle (net of benefit for income taxes of $2.2) (4.1) - -------- ------- Net Income (Loss) $ (110.6) $ 23.8 ======== ======= Net Income (Loss) per Common Share Basic and Diluted Continuing operations $ (1.23) $ .18 Discontinued operations - .09 Cumulative effect of change in accounting principle (.05) - -------- ------- Total $ (1.28) $ .27 ======== ======= 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) 1999 1998 ---------------------------- ASSETS Current Assets Cash $ 208.5 $ 121.0 Notes and accounts receivable 402.2 388.4 Inventories 281.5 247.1 Deposits and prepaid expenses 110.6 120.2 --------- --------- Total Current Assets 1,002.8 876.7 --------- --------- Property, Plant and Equipment 10,684.3 10,651.7 Less reserves for depreciation, depletion and amortization 6,562.1 6,498.9 --------- --------- 4,122.2 4,152.8 --------- --------- Investments and Other Assets 417.8 421.8 --------- --------- $5,542.8 $5,451.3 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 10.1 $ 35.8 Accounts payable 364.9 385.3 Long-term debt due within one year 219.3 235.6 Other current liabilities 370.9 393.3 --------- --------- Total Current Liabilities 965.2 1,050.0 --------- --------- Long-Term Debt 2,269.5 1,978.5 --------- --------- Deferred Credits and Reserves 1,124.7 1,077.3 --------- --------- Stockholders' Equity Common stock, par value $1 - 300,000,000 shares authorized, 93,383,538 shares issued at 3-31-99 and 93,378,069 shares issued at 12-31-98 93.4 93.4 Capital in excess of par value 1,279.6 1,282.2 Preferred stock purchase rights .5 .5 Retained earnings 377.5 527.0 Accumulated other comprehensive loss (50.1) (36.0) Common shares in treasury, at cost - 7,010,790 shares at both 3-31-99 and at 12-31-98 (387.8) (387.8) Deferred compensation (129.7) (133.8) --------- --------- Total Stockholders' Equity 1,183.4 1,345.5 --------- --------- $5,542.8 $5,451.3 ======== ======== 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) 1999 1998 -------------------------- Operating Activities Net income (loss) $ (110.6) $ 23.8 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation, depletion and amortization 141.5 143.3 Dry hole costs 4.8 37.4 Deferred income taxes 3.5 4.1 (Gain) Loss on sale and retirement of assets 1.8 (7.1) Noncash items affecting net income 148.1 .1 Other net cash used in operating activities (127.0) (14.8) -------- ------- Net Cash Provided by Operating Activities 62.1 186.8 -------- ------- Investing Activities Capital expenditures (139.1) (287.9) Acquisitions - (97.0) Proceeds from sale of assets - 39.7 Other investing activities (8.8) 3.3 -------- ------- Net Cash Used in Investing Activities (147.9) (341.9) -------- ------- Financing Activities Issuance of long-term debt 619.3 264.1 Repayment of long-term debt (345.3) (61.6) Decrease in short-term borrowings (24.5) - Dividends paid (21.2) (21.5) Other financing activities (41.9) 4.0 -------- ------- Net Cash Provided by Financing Activities 186.4 185.0 -------- ------- Effects of Exchange Rate changes on Cash and Cash Equivalents (13.1) - -------- ------- Net Increase in Cash and Cash Equivalents 87.5 29.9 Cash and Cash Equivalents at Beginning of Period 121.0 192.3 -------- ------- Cash and Cash Equivalents at End of Period $ 208.5 $222.2 ======== ====== The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 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. On February 26, 1999, the company completed the merger with Oryx Energy Company (Oryx). The merger was accounted for using the pooling of interest method of accounting for business combinations. Accordingly, the company's financial statements have been restated to include the combined business activities for the company and Oryx for all periods presented. 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. Effective January 1, 1999, the company adopted Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities." The SOP requires costs of start-up activities to be expensed as incurred. Unamortized start-up costs at the beginning of the year were required to be recognized as cumulative effect of a change in accounting principle, which increased the first quarter after-tax loss by $4.1 million. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS No. 133 establishes accounting and reporting standards that require derivative instruments to be recorded in the balance sheet as either an asset or liability and measured at its fair value. Changes in the derivative's fair value must be recognized currently in earnings unless specific hedge accounting criteria are met. Accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting. FAS No. 133 is effective for fiscal years beginning after June 15, 1999, and early adoption is permitted. The effect of adopting FAS No. 133 has not been determined but is not expected to have a material impact on the company's results of operations. C. Net cash provided by operating activities reflects cash payments for income taxes and interest as follows: Three Months Ended March 31, (Millions of dollars) 1999 1998 --------------------- Income taxes $49.0 $ 4.8 Interest 22.8 21.8 D. During the first quarter of 1999 and 1998, comprehensive income (loss) was $(124.8) million and $23.9 million, respectively. E. Investments in equity affiliates totaled $168.5 million at March 31, 1999, and $170.1 million at December 31, 1998. Equity income related to the investments is included in Other Income in the Consolidated Statement of Income and totaled $2.3 million and $6.5 million for the three months ended March 31, 1999 and 1998, respectively. F. Income (loss) from continuing operations for purposes of computing both basic and diluted earnings per share was $(106.5) million and $15.8 million for the three months ended March 31, 1999 and 1998, 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 both periods is presented below: Three Months Ended March 31, 1999 1998 ------------------------- Averages shares outstanding - basic 86,372,410 86,843,432 Dilutive effect of stock options - 385,309 Dilutive effect of debendures * - - ---------- ---------- Average shares outstanding assuming dilution 86,372,410 87,228,741 ========== ========== * The company has reserved 1,886,121 shares of common stock for issuance to the owners of its 7 1/2% Convertible Subordinated Debentures due 2014 (Debentures). The Debentures were not included in the computation of diluted shares since they have an antidilutive effect for all periods presented. G. CONTINGENCIES WEST CHICAGO - In 1973, a wholly owned subsidiary, Kerr-McGee Chemical Corporation, closed the facility at 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. Following is 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 has indicated approval of this agreement and has issued license amendments authorizing much of the work. Chemical expects most of the work to be completed within five 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 (CERCLA) 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 areas 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 U. S. 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 1998 to increase the amount authorized to $140 million plus inflation adjustments. Through April 30, 1999, Chemical has been reimbursed approximately $69 million under Title X. OTHER MATTERS The company's current and former operations involve management of regulated materials and are subject to various environmental laws and regulations. These laws and regulations will obligate the company to clean up various sites at which petroleum, chemicals, low-level radioactive substances or other regulated materials have been disposed of or released. Some of these sites have been designated Superfund sites by the EPA pursuant to CERCLA. The company is also a party to legal proceedings involving environmental matters pending in various courts and agencies. As of March 31, 1999, 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 $258 million, which includes $175 million for the former West Chicago facility, the residential areas 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 March 31, 1999, totaled $557 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. It is not possible for the company to reliably estimate the amount and timing of all future expenditures related to environmental matters because of the difficulty of estimating cleanup costs, the uncertainty in quantifying liability under environmental laws that impose joint and several liability on all potentially responsible parties, and the continually changing nature of environmental laws and regulations. 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 1999 Results with 1998 Results CONSOLIDATED OPERATIONS First-quarter 1999 net loss totaled $110.6 million, compared with net income of $23.8 million for the same 1998 period. Operating profit for the 1999 first quarter was $48.9 million, compared with $54.7 million in the same 1998 quarter. Higher chemical operating profit, compared with last year's quarter, was more than offset by lower operating profit from exploration and production. The decline in operating profit was due to lower crude oil and natural gas sales prices, lower natural gas sales volumes and transition expenses related to the merger, partially offset by lower exploration expenses, higher crude oil sales volumes and income from the European pigment operations acquired at the end of the 1998 first quarter. Other expenses for the first quarter of 1999 totaled $199.5 million, compared with $27.3 million for the 1998 quarter. The increase was due primarily to merger costs and lower equity income, partially offset by foreign currency transaction gains, compared with 1998 losses. Net interest expense for the 1999 first quarter increased 35% from the same 1998 period due to higher average borrowings. The income tax benefit was $44.1 million for the 1999 first quarter, compared with a provision of $11.6 million for the 1998 period. The 1999 first quarter amount included a tax benefit related to the merger costs. 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 1999, compared with the same period last year. Three Months Ended March 31, (Millions of dollars) 1999 1998 ------------------------- Sales Exploration and production $ 283.1 $328.4 Chemicals 202.7 178.2 -------- ------ 485.8 506.6 All other .1 .1 -------- ------- Total Sales $ 485.9 $506.7 ======== ====== Operating Profit Exploration and production $ 20.8 $ 32.8 Chemicals 28.1 21.9 -------- ------ Total Operating Profit 48.9 54.7 Other Expense (199.5) (27.3) -------- ------- Income (Loss) from Continuing Operations Before Income Taxes (150.6) 27.4 Provision (Benefit) for Income Taxes (44.1) 11.6 -------- ------- Income (Loss) from Continuing Operations (106.5) 15.8 Discontinued Operations, Net of Income Taxes - 8.0 Cumulative Effect of a Change in Accounting Principle, Net of Income Taxes (4.1) - -------- ------- Net Income $ (110.6) $ 23.8 ======== ======= Exploration and Production - Operating profit for the first quarter of 1999 was $20.8 million, compared with $32.8 million for the same 1998 period. First-quarter 1999 operating profit was lower due primarily to lower crude oil and natural gas sales prices, lower natural gas sales volumes and transition expenses related to the merger, partially offset by lower exploration expenses and higher crude oil sales volumes. Revenues were $283.1 million and $328.4 million for the three months ended March 31, 1999 and 1998, respectively. The following table shows the company's average crude oil and natural gas sales prices and volumes for the first quarter of 1999 and 1998.
Three Months Ended Percent March 31, Increase 1999 1998 (Decrease) ------------------------------------- Crude oil sales (thousands of bbls/day) Domestic Offshore 50.2 44.9 12 Onshore 19.1 26.1 (27) North Sea 96.8 71.9 35 Other International 16.4 18.0 (9) ------- ------- Total proprietary sales 182.5 160.9 13 Proportionate interest in equity affiliate's sales 6.9 7.3 (5) ------- ------- Total 189.4 168.2 13 ======= ======= Average crude oil sales price (per barrel) Domestic Offshore $ 9.73 $13.80 (29) Onshore 11.23 14.29 (21) North Sea 11.60 13.85 (16) Other International 8.83 11.41 (23) Average $ 10.89 $14.05 (22) Natural gas sold (MMCF/day) Domestic Offshore 347 313 11 Onshore 165 223 (26) North Sea 58 49 18 ------- ------- Total proprietary sales 570 585 (3) Proportionate interest in equity affiliate's sales 80 62 29 ------- ------- Total 650 647 - ======= ======= Average natural gas sales price (per MCF) Domestic Offshore $ 1.67 $ 2.15 (22) Onshore 1.61 2.13 (24) North Sea 2.52 2.74 (8) Average $ 1.91 $ 2.22 (14)
Chemicals - Chemicals' first-quarter 1999 operating profit was $28.1 million on revenues of $202.7 million, compared with operating profit of $21.9 million on revenues of $178.2 million for the same 1998 quarter. Revenues increased due to higher sales volumes resulting from the acquisition of the European pigment operations and higher domestic pigment sales prices. Operating profit increased primarily due to higher revenues and lower domestic pigment production costs. Financial Condition At March 31, 1999, the company's net working capital position was $37.6 million, compared with $41 million at March 31, 1998, and a negative $173.3 million at December 31, 1998. The current ratio was 1.0 to 1 at March 31, 1999 and 1998, respectively, and .8 to 1 at December 31, 1998. The company's percentage of net debt to capitalization was 62% at March 31, 1999, compared with 49% at March 31, 1998, and 59% at December 31, 1998. The company had unused lines of credit and revolving credit facilities of $802 million at March 31, 1999. Of this amount, $445 million and $250 million can be used to support commercial paper borrowings of Kerr-McGee Credit LLC and Kerr-McGee Oil (U.K) PLC, respectively. On February 26, 1999, the company signed two new revolving credit agreements, a three-year $500 million facility and a 364-day $250 million facility. Initially, one-third of the borrowings under each of these agreements may be in British pounds sterling, euros or other local European Union currencies. Interest for each of the revolving credit agreements is payable at varying rates. A total of $400 million was outstanding under these agreements at March 31, 1999. First-quarter 1999 cash capital expenditures totaled $139.1 million, compared with $287.9 million for the same period last year. Exploration and production expenditures, principally in the Gulf of Mexico and North Sea, were 83% of the 1999 total. Chemical and corporate expenditures were 16% and 1% of the 1999 amount, respectively. Management anticipates that the cash requirements for the next several years can be provided through internally generated funds and selective borrowings. Year 2000 Program In 1996, the company established a formal Year 2000 Program (Program) to assess and correct Year 2000 problems in both information technology and non-information technology systems. The Program is organized into two major areas: Business Systems and Facilities Integrity. Business Systems include replacement and upgrade of computer hardware and software, including major business applications such as purchasing, inventory, engineering, financial, human resources, etc. Facilities Integrity encompasses telecommunications, plant process controls, instrumentation and embedded chip systems as well as an assessment of third-party Year 2000 readiness. The Program is generally divided into the following phases: - - Identification, evaluation and prioritization of systems that need to be modified or replaced. - - Remediation work to modify existing systems or install new systems. - - Testing and validation of the systems and applications. An integral part of the Program is communication with third parties to assess the extent and status of their Year 2000 efforts. Formal communications have been initiated with critical suppliers to determine whether their operations and/or the products and services provided to the company will be Year 2000 ready. In addition, the company has contacted key customers and partners requesting information regarding their Year 2000 readiness. The company continues to evaluate responses and make additional inquiries as needed. The company is also developing contingency plans, which may include items such as activating manual systems, placing operations on standby and other procedures to accommodate significant disruptions that could be caused by system failures. When appropriate, alternative providers are being identified in the event that certain critical suppliers are unable to provide an acceptable level of service to the company. As of March 31, 1999, 100% of the pre-merger work on the Business Systems had been completed. Most of these projects were system replacements to improve business functionality and were not undertaken solely because of Year 2000 issues. The merger with Oryx was completed in the first quarter of 1999, and the Year 2000 Programs for the companies have been combined. Approximately 75% of Oryx's business systems will be transitioned to the Year 2000 compliant systems already in place at Kerr-McGee prior to the merger. The remaining business systems will be modified or replaced. These Year 2000 activities are being incorporated into the Program and are scheduled to be completed by the end of the third quarter of 1999. Approximately 78% of the planned work on Facilities Integrity has also been completed, including additional activities resulting from the merger. Critical activities are expected to be completed by the end of the third quarter of 1999. However, some ongoing work in areas of contingency planning, third-party communications, auditing and year-end communication response planning is expected to continue through the end of 1999. Program expenditures total approximately $48 million from inception through March 31, 1999, which includes the combined company activities. Expenditures for the first quarter of 1999 are approximately $6 million. The total cost to achieve Year 2000 readiness are estimated to be $52 million for the entire Program, which is not material to the company's consolidated results of operations, financial position or cash flows. Program expenditures are provided through internally generated funds and selective short-term and/or long-term borrowings. The failure to correct a material Year 2000 problem could result in disruption to some aspects of the company's normal business activities or operations. Such failures could have a material adverse effect on the company's results of operations and cash flows in a particular quarter or annual period. Management believes that the Program is comprehensive and reduces Year 2000 risks associated with internal systems to a manageable level. Regardless of management's efforts to assess and verify readiness, there can be no assurance that all entities with which the company does business will be Year 2000 compliant. Contingency plans are being developed to address these concerns. However, failure by a third party to remediate Year 2000 issues in a timely manner could have a material adverse effect on the company's results of operations and cash flows in a particular quarter or annual period. Failure of a critical operating or safety system, or the failure of a key third-party supplier, partner or customer, are believed to be the most reasonably likely worst-case scenarios that could impact the company. Forward-Looking Information This report contains certain forward-looking statements, particularly as they relate to the company's Year 2000 readiness, that are based on management's current views and assumptions regarding future events and financial performance. These statements are qualified by reference to the section "Forward-Looking Information" contained in Part I of the company's Form 10-K for the year ended December 31, 1998. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None Item 4. Submission of Matters to a Vote of Security Holders. Special Meeting (a) A special meeting of stockholders was held on February 26, 1999. (c) The stockholders' voted on the proposal to adopt the Agreement and Plan of Merger, dated as of October 14, 1998, between Kerr-McGee Corporation and Oryx Energy Company. Affirmative votes were 29,566,248; negative votes were 8,199,513 and abstentions were 208,668. Annual Meeting (a) The 1999 annual meeting of stockholders' was held on May 11, 1999. (b) Directors elected at the 1999 annual meeting were the following: Tom J. McDaniel John J. Murphy Matthew R. Simmons Ian L. White-Thomson Directors whose term of office continues after the 1999 annual meeting were the following: William E. Bradford Luke R. Corbett Sylvia A. Earle David C. Genever-Watling Martin C. Jischke William C. Morris Leroy C. Richie Farah M. Walters (c) The following matters were voted upon at the annual meeting: (1) Following are the directors elected at the 1999 annual meeting and the tabulation of votes related to each nominee. Votes Affirmative Withheld Tom J. McDaniel 73,045,972 1,093,617 John J. Murphy 72,976,292 1,163,297 Matthew R. Simmons 72,996,849 1,142,740 Ian L. White-Thompson 73,046,296 1,093,293 (2) The stockholders ratified the appointment of Arthur Andersen LLP as independent public accountant for 1999. Affirmative votes were 72,752,690; negative votes were 587,259 and abstentions were 799,640. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - Exhibit No. 27.0 Financial Data Schedule (b) Reports on Form 8-K On January 19, 1999, the company filed a report on Form 8-K announcing the 1999 capital budget, the 1998 fourth-quarter asset impairment and the rescission of the stock repurchase program. On January 26, 1999, the company filed a report on Form 8-K/A providing additional details relating to the 1998 fourth-quarter asset impairment. On February 26, 1999, the company filed a report on Form 8-K announcing the approval of the merger with Oryx by stockholders of both companies and the election of five directors. On March 11, 1999, the company filed a report on Form 8-K reporting under Item 2, "Acquisition or Disposition of Assets", providing additional details related to the merger with Oryx. 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 14, 1999 By: (Deborah A. Kitchens) ------------ -------------------------------- Deborah A. Kitchens Vice President and Controller and Chief Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at March 31, 1999 and 1998 the Consolidated Statement of Income for the period ending March 31, 1999 and 1998, and is qualified in its entirety by by reference to such Form 10-Q. 1000 3-MOS 3-MOS 12-MOS DEC-31-1999 DEC-31-1998 DEC-31-1998 MAR-31-1999 MAR-31-1998 DEC-31-1998 208500 0 121000 0 0 0 402200 0 388400 0 0 0 281500 0 247100 1002800 0 876700 10684300 0 10651700 6562100 0 6498900 5542800 0 5451300 965200 0 1050000 0 0 0 0 0 0 0 0 0 93400 0 93400 1090000 0 1252100 5542800 0 5451300 485900 506700 0 485900 506700 0 225100 213000 0 652900 500900 0 (16400) (21600) 0 0 0 0 44700 34800 0 (150600) 27400 0 (44100) 11600 0 (106500) 15800 0 0 0 0 0 0 0 (4100) 0 0 (110600) 23800 0 (1.28) .27 0 (1.28) .27 0 Amount restated as the result of the merger with Oryx Energy Company accounted for using the pooling of interest method of accounting.
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