10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Fiscal year ended December 31, 1994 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 (I.R.S. Employer of incorporation or organization) Identification No.) KERR-MCGEE CENTER, OKLAHOMA CITY, OKLAHOMA 73125 (Address of principal executive offices) Registrant's telephone number, including area code: (405)270-1313 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED Common Stock $1 Par Value New York Stock Exchange 8-1/2% Sinking Fund Debentures, Due June 1, 2006 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $2.6 billion as of February 28, 1995. The number of shares of common stock outstanding as of February 28, 1995, was 51,707,171. DOCUMENTS INCORPORATED BY REFERENCE Specified sections of the Kerr-McGee Corporation 1994 Annual Report to Stockholders, as described herein, are incorporated by reference in Parts I and II of this Form 10-K. The definitive Proxy Statement for the 1995 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 1994, is incorporated by reference in Part III of this Form 10-K. KERR-McGEE CORPORATION PART I Items 1. and 2. Business and Properties GENERAL DEVELOPMENT OF BUSINESS Kerr-McGee Corporation, an energy and chemical company, had its beginning in 1929 with the formation of Anderson & Kerr Drilling Company. The company was incorporated in Delaware in 1932. With oil and gas exploration and production as its base, the company has expanded into refining and marketing and chemical manufacturing, and coal and mineral mining. Kerr-McGee owns a large inventory of natural resources that includes oil, gas, and coal reserves and chemical and mineral deposits. During the past two years, the company has been involved in discussions and negotiations to sell, merge, or restructure its refining and marketing operations. Letters of intent were signed in January 1995 to sell the Corpus Christi, Texas, and Cotton Valley, Louisiana, refineries and Cato Oil and Grease Co. Offers for certain other refining and marketing assets are being evaluated, but no agreements have been entered into. The company does not believe that the disposals would have a material adverse effect on its future consolidated operations and cash flow. INDUSTRY SEGMENTS For information as to business segments of the company, reference is made to Note 22 to the Consolidated Financial Statements on pages 43 and 44 of the 1994 Annual Report to Stockholders, which note is incorporated by reference in Item 8. EXPLORATION AND PRODUCTION The Exploration and Production Division manages Kerr-McGee's oil and gas operations worldwide. This division acquires leases and concessions and explores for, develops, produces, and markets crude oil, natural gas, and natural gas liquids. The areas of Kerr-McGee's offshore oil and gas exploration and production activities are the Gulf of Mexico, North Sea, and China. Onshore exploration and production operations are in the United States, primarily in Louisiana, Texas, and Wyoming; Canada; Indonesia; and Papua New Guinea. ____________ Except as indicated under Items 1 through 3, 5 through 8, and 10 through 14, no other information appearing in either the company's 1994 Annual Report to Stockholders or its 1995 Proxy Statement is deemed to be filed as part of this annual report on Form 10-K. For 1994, the Exploration and Production Division, including Gas Processing, recorded revenues(1) and operating profit of $633 million and $74 million, respectively, compared with $564 million and $82 million, respectively, for 1993. Net operating profit was $49 million for 1994, compared with $52 million for 1993. Operating profit for 1994 was lower principally due to lower crude oil sales prices, lower natural gas deliveries and sales prices, and higher exploration expense, partially offset by higher crude oil sales volumes. Total expenditures for property acquisitions, exploration, and development were $379 million for 1994, a 5% increase from $360 million the previous year. The company's average crude oil sales price was $14.81 per barrel for 1994, down 5% from the prior year's price of $15.64. The 1994 average natural gas sales price was $1.76 per thousand cubic feet, down 8% from the prior year's price of $1.92. Kerr-McGee's crude oil and condensate production averaged 67,300 barrels per day for 1994, compared with 53,200 barrels per day for 1993. Deliveries of natural gas averaged 271 million cubic feet per day, compared with 286 million cubic feet of gas per day for 1993. Kerr-McGee's spot sales of natural gas in 1994 represented approximately 74% of its total natural gas sold, approximately the same as last year. Undeveloped Acreage As of December 31, 1994, the company had interests in undeveloped oil and gas acreage in the Gulf of Mexico and nine states in the United States, onshore Canada, the United Kingdom sector of the North Sea, and other international areas as follows: (1)Includes intersegment sales, primarily crude oil sales, of $151 million in 1994 and $195 million in 1993. Gross Net Location Acreage Acreage Domestic - Onshore 340,262 237,203 Offshore 423,834 262,267 764,096 499,470 Canada 266,498 153,696 North Sea 961,783 363,037 Other international - Onshore Indonesia 2,029,722 676,574 Papua New Guinea 1,900,000 632,700 Offshore China 563,398 281,699 4,493,120 1,590,973 Total Undeveloped Acreage 6,485,497 2,607,176 The company also owned North American onshore undeveloped oil and gas mineral and royalty interests totaling 855,361 gross or 158,171 net acres. Developed Acreage At December 31, 1994, the company had interests in developed oil and gas acreage in the Gulf of Mexico and 20 states in the United States, onshore Canada, the United Kingdom sector of the North Sea, and offshore China areas as follows: Gross Net Location Acreage Acreage Domestic - Onshore 857,092 369,686 Offshore 383,745 171,604 1,240,837 541,290 Canada 276,428 165,265 North Sea 162,446 21,057 Offshore China 78,332 19,191 Total Developed Acreage 1,758,043 746,803 The company also owned developed oil and gas mineral and royalty interests in North America totaling 622,149 gross or 60,457 net acres. Net Exploratory and Development Wells Domestic and international exploratory and development wells drilled during the three years ended December 31, 1994, are reflected in the following table: 1994 1993 1992 Exploratory Wells - Net(1) Domestic Productive 7.53 1.40 .98 Dry holes 5.26 5.30 3.80 12.79 6.70 4.78 Canada Productive 1.73 - 1.00 Dry holes 1.31 1.75 1.33 3.04 1.75 2.33 North Sea Productive .35 .82 .61 Dry holes .62 2.29 .40 .97 3.11 1.01 Other international Dry holes 1.28 .75 - Total 18.08 12.31 8.12 Development Wells - Net(1) Domestic Productive 17.26 33.10 20.38 Dry holes 1.36 .83 1.97 18.62 33.93 22.35 Canada Productive 3.39 9.52 6.20 Dry holes 3.02 1.50 1.00 6.41 11.02 7.20 North Sea Productive 1.62 .91 .19 Dry holes .25 - .08 1.87 .91 .27 Other international Productive - .37 .49 Total 26.90 46.23 30.31 (1)Net wells - The total of the company's fractional working interests in "gross wells" expressed as the equivalent number of full-interest wells. Gross and Net Wells The company's interest in productive oil and gas wells at December 31, 1994, is shown in the following table. These wells include 7,823 gross or 479.55 net wells associated with secondary-recovery projects and 347 gross or 122.77 net wells that have multiple completions but are included as single wells. Of the net wells below, 85% are domestic, 14% in Canada, and 1% in the North Sea. Of the domestic wells, approximately 58% are in Texas, 11% in Oklahoma, 11% in Wyoming, 9% in Louisiana, 9% offshore in Federal waters, and 2% in other areas. Gross Net Location Wells Wells Crude Oil Domestic 9,934 625.97 Canada 948 122.23 North Sea 66 9.36 10,948 757.56 Natural Gas Domestic 2,292 515.93 Canada 194 62.26 North Sea 19 1.47 2,505 579.66 Total Wells 13,453 1,337.22 Results of Operations, Capitalized Costs, and Costs Incurred Reference is made to Notes 23, 24, and 25 to the Consolidated Financial Statements on pages 45, 46, and 47 of the 1994 Annual Report to Stockholders, which notes are incorporated by reference in Item 8. These notes contain information on the results of operations from crude oil and natural gas activities for the past three years, capitalized costs of crude oil and natural gas activities at December 31, 1994 and 1993, and costs incurred in crude oil and natural gas activities for the past three years. Crude Oil and Natural Gas Sales The following table summarizes the sales of the company's crude oil and natural gas production (including intersegment sales) for the three years ended December 31, 1994: (In millions) 1994 1993 1992 Crude oil and condensate - barrels Domestic 9.3 10.1 9.3 Canada 1.7 1.7 1.7 North Sea 12.4 5.8 6.1 Other international 1.0 1.5 1.6 24.4 19.1 18.7 Crude oil and condensate Domestic $136.3 $159.6 $169.7 Canada 23.2 25.3 26.9 North Sea 187.2 92.9 113.6 Other international 14.4 21.7 28.4 $361.1 $299.5 $338.6 Natural gas - MCF Domestic 76.8 85.1 88.2 Canada 18.1 18.4 18.9 North Sea 4.1 .9 1.1 99.0 104.4 108.2 Natural gas Domestic $140.4 $172.7 $146.9 Canada 24.9 26.2 19.5 North Sea 8.6 1.2 1.9 $173.9 $200.1 $168.3 Sales of Production Most of the company's domestic crude oil production is exchanged at market prices for crude oil used in the company's refineries. The company's North Sea crude oil is sold at spot prices or utilized by the company's refining and marketing operations, while Canadian crude oil is sold in Canada at spot prices. The company's share of other international crude oil was sold to the company's refining and marketing operations. Natural gas production is sold to the company's gas marketing affiliates and ultimately resold to or sold directly to utilities, industrial customers, and marketing companies under variable-term contracts. Average Sales Prices and Production Costs Reference is made to Note 23 to the Consolidated Financial Statements on page 46 of the 1994 Annual Report to Stockholders, which note is incorporated by reference in Item 8, for information regarding average sales prices per unit of crude oil and natural gas and production costs per barrel of oil equivalent for each of the past three years. Secondary Recovery The company continues to initiate and/or participate in secondary-recovery projects where geological, engineering, and economic conditions are favorable. Most of the company's operations outside North America incorporate water injection. Pressure-maintenance operations began at the time of initial production from these fields. As of December 31, 1994, the company was participating in 76 active secondary-recovery projects worldwide. These projects are located in all of the principal areas of Kerr-McGee's oil and gas production activities. Wells in Process of Drilling At December 31, 1994, the company had 76 gross or 35.29 net wells classified as temporarily suspended or in the process of drilling. Of these totals, 48 gross or 29.31 net wells were located in the United States, 3 gross or .76 net wells were in Canada, 5 gross or .31 net wells were in the North Sea, and 20 gross or 4.91 net wells were offshore China. Reserves Kerr-McGee's estimated proved crude oil, condensate, and natural gas reserves at December 31, 1994, and the changes in net quantities of such reserves for the three years then ended are shown in Note 26 to the Consolidated Financial Statements on page 48 of the 1994 Annual Report to Stockholders, which note is incorporated by reference in Item 8. From time to time, reports are filed with the United States Department of Energy relating to the company's reserves. The reserves reported in the Notes to Consolidated Financial Statements are consistent with other filings pertaining to proved net reserves. Minor differences in gas volumes occur due to different pressure bases being required in the reports. However, the difference in estimates does not exceed 5% of the total estimated reserves. Exploration and Development Activities Exploration in the Gulf of Mexico continues to target natural gas in shallow waters and both oil and gas in deep water. At year- end 1994, the company held interests in approximately 262,000 net undeveloped acres. Domestic activities onshore in the United States emphasize natural gas, while use of enhanced and secondary methods maximizes oil production from several mature fields. The United Kingdom sector of the North Sea remains the primary area of international exploration and production for Kerr-McGee. The company holds approximately 363,000 net undeveloped acres in the North Sea with working interest in 28 licenses. Kerr-McGee operates 11 of these licenses and plans an active North Sea exploration program over the next five years. The company also holds sizeable working interests in several concessions in other international areas. Kerr-McGee continues to look for acquisitions in core areas where the company has existing operations and can add value. Elsewhere, the disposal of marginal and non-core properties continues. During 1994, interests in more than 200 U.S. onshore properties and five gas processing plants, one of which was operated by the company, were sold. These properties represented production of approximately 400 net barrels of oil equivalent (BOE) per day and reserves of approximately 600,000 BOE. The company also sold its 12.3% interest in the Abu Al Bu Khoosh oil field in the Arabian Gulf, completing withdrawal from that area. North Sea Approximately half of the company's 1994 oil production was from North Sea fields. Gryphon, Scott, and East Brae, which came on stream in late 1993, contributed 21,300 barrels per day of the company's 1994 North Sea production of 34,300 barrels of liquids per day. The start of natural gas deliveries in October 1994 from the Brae area through the expanded SAGE (Scottish Area Gas Evacuation) pipeline system (4% interest) resulted in net North Sea deliveries of 27 million cubic feet per day at year-end. Gryphon field, Block 9/18b (25% interest) - Production from Gryphon averaged 32,000 barrels of oil per day for 1994. The field uses a permanently-moored floating production facility that can be expanded to process third-party production. Scott field, blocks 15/21a and 15/22 (5.2%) - Average daily production was 168,000 barrels of oil per day for 1994. Scott is the largest field developed in the North Sea in the last decade. The development of a South Scott extension has been approved. South Scott will be tied to the existing facility, and first production is expected in mid-1995. East Brae field, blocks 16/3a and 16/3b (7.3%) - Production averaged 64,000 barrels of liquids per day for 1994. Development drilling should continue through most of 1995. Gas sales through the SAGE pipeline began in the fourth quarter of 1994. Beinn field, Block 16/7a (8%) - Drilled from the North Brae platform, this field averaged 55 million cubic feet of gas and 6,200 barrels of liquids per day in 1994. Ivanhoe/Rob Roy fields, Block 15/21a (10.8%) - These fields averaged 60,000 barrels of oil per day in 1994 and continue to exceed expectations. Gulf of Mexico The Gulf of Mexico was the source of one-fourth of Kerr- McGee's 1994 oil production and 44% of natural gas deliveries. Use of existing infrastructure is bringing new fields on stream more quickly and at lower cost. Successful development wells, workovers, and facility upgrades and consolidations are adding to production and enhancing efficiency. Vermilion Block 398 (100%) - Appraisal of the 1993 discovery has been successful. Development activity is scheduled through 1995, with first oil and gas production expected in mid-1996. Garden Banks Block 21 (100%) - A discovery encountered gas pay. Kerr-McGee will evaluate development options while testing other plays on the block. First production is expected in late 1996. Viosca Knoll 989 field (25%) - The company's first deepwater project is expected to be the gulf's largest contributor to 1995 oil production. Initial oil in October 1994 from a platform in 1,300 feet of water completed the first development phase of this five-block field. Daily production reached 20,000 barrels of oil at year-end. Work continues on engineering for the second development phase - subsea systems in 1,900 feet of water - expected to come on stream in early 1996. Ship Shoal Block 241 (64.5%) - A discovery-to-production cycle of four and one-half months set a company record. The block was acquired in March 1994, and the discovery well was drilled in August, followed by production start-up in January 1995. Production was 35 million cubic feet of gas per day in early 1995. Ewing Bank Block 989 (75%)- Use of new subsea technology and hook-up to an existing platform brought this two-well project on stream in December 1994, only 11 months after project approval. The subsea completions in 600 feet of water are the first in the Gulf of Mexico to use the horizontal Christmas tree system pioneered at the Gryphon field in the North Sea. This technology provides cost benefits over conventional subsea wellhead systems. Main Pass Block 93 (50%) - Three high-angle development wells added more than 20 million cubic feet of gas per day to Kerr- McGee's production. U.S. Onshore The search for new U.S. onshore reserves emphasized natural gas, while use of enhanced and secondary recovery methods maximized oil production from several mature fields. Domestic onshore fields supplied 13% of Kerr-McGee's 1994 oil production and 34% of natural gas deliveries. West Park, Wheeler County, Texas, and Dockray Rivers, Hemphill County, Texas (100%) - Discoveries were made in the Granite Wash formation during 1994. Appraisal of West Park continued with a successful offset in December 1994. The field was producing at a rate of more than 13 million cubic feet of gas per day in early 1995. Sand Dunes (Muddy) Unit, Converse County, Wyoming (26.7%) - Production from this miscible gas injection project operated by Kerr-McGee averaged 7,300 barrels of oil per day in 1994. Canada Natural gas remains the focus of our exploration efforts in Canada, which accounted for 18% of Kerr-McGee's 1994 natural gas sales. The Gift Lake (Alberta) property received renewed interest with the successful drilling of a horizontal producer/injector pair which produced approximately 400 barrels of oil per day. China Liuhua 11-1 field (24.5%) - Development of Kerr-McGee's largest capital project for 1995 is proceeding on schedule in the South China Sea. The development plans for the estimated reserves of 125 million barrels of oil include subsea completion of 20 horizontal wells and a floating production, storage, and offloading vessel similar to that used at the Gryphon field in the North Sea. The company's share of the estimated $660 million project cost is $160 million. First oil production is expected in early 1996. Bohai, Block 04/36 (50%) - In August 1994, Kerr-McGee as operator signed a production-sharing contract with the China National Offshore Oil Corporation for a concession in the Gulf of Bohai, 100 miles southeast of Beijing. With an average water depth of about 50 feet, the area's operating environment is similar to the Gulf of Mexico, where the company has operated since 1947. The first well in the Gulf of Bohai is planned for mid-1995. Indonesia South Sumatra Basin (33.3%) - The first of two planned exploratory wells on the 2 million-acre onshore block in Indonesia was successfully completed and tested in March 1995. Additional appraisal drilling will be required. Gas Processing At year-end 1994, the company operated both a gas processing plant and an intrastate gas pipeline in the United States and also had interests in five plants that are operated by others. These plants produce natural gas liquids, including ethane, propane, propylene, isobutane, normal butane, and natural gasoline. Kerr- McGee's interest in the gas processed at gas plants, including those that were sold during 1994, averaged 54 million cubic feet per day during 1994, compared with 67 million cubic feet per day during 1993. The company's total net production of natural gas liquids during 1994 averaged 3,000 barrels per day, compared with 3,600 barrels per day in 1993. The company's share of residue gas sold was 14 million cubic feet per day and 18 million cubic feet per day for 1994 and 1993, respectively. REFINING AND MARKETING Kerr-McGee Refining Corporation is engaged in the purchase, gathering, transportation, and refining of crude oil and the transportation, distribution, and wholesale and retail marketing of petroleum products. The company's gasolines, distillates, lubricating oils, and allied products are marketed under the brand names Kerr-McGee, Mystik, and various other trade names, according to the territory where sold. In a highly competitive industry, Kerr-McGee Refining Corporation considers its products to be competitive in quality, service, and price and has been able to compete successfully with other products offered in the markets it serves. See General Development of Business on page 2 of this Form 10-K for information on the possible sale of certain assets of Kerr-McGee Refining Corporation. Kerr-McGee Corporation is not crude oil self-sufficient and must supplement its production with spot purchases and crude oil purchased under short-term agreements. Also, spot purchases of intermediate feedstocks are made to meet refining requirements. While the company's three refineries all process domestic crude oil, the Corpus Christi, Texas, and Wynnewood, Oklahoma, refineries also process foreign crude oil and other feedstocks. Total runs to stills at the company's three refineries averaged 146,000 barrels per day for 1994. The company's 1994 refined- product sales averaged 233,000 barrels per day. Refining and marketing recorded an operating profit of $35 million for 1994, compared with an operating loss of $28 million for 1993. Revenues were $1.9 billion, compared with $2 billion for 1993. Net operating profit was $22 million for 1994, compared with a 1993 net operating loss of $19 million. The 1994 operating profit reflected improved wholesale gasoline and distillate margins resulting from lower crude oil costs, partially offset by lower sales prices. Revenues for 1994 were lower than for the prior year due to the lower sales prices. Refining The company owns and operates three refineries with total crude oil distillation capacity of 181,000 barrels per day. The following table lists the company's refinery locations, processing capacities, and 1994 utilizations: Refinery Capacities Crude Oil Downstream Distillation Units Processing Units(1) Barrels Percent Barrels Percent Plant Per Day Utilized Per Day Utilized Corpus Christi, Texas 120,000 81 104,000 94 Wynnewood, Oklahoma 50,000 88 43,000 103 Cotton Valley, Louisiana 11,000 44 7,800 62 181,000 81 154,800 94 (1)Adjusted for normal turnaround. The crude oil distillation capacity represents throughput capacity of the crude oil stills. The downstream refinery processing capacity recognizes a practical limit on the ability to absorb output of the crude oil distillation facilities. The downstream rating method is in conformance with the American Petroleum Institute's definition for rating refinery capacity. The capacities of the refineries did not change in 1994. The Corpus Christi refinery produces gasoline, kerosene, diesel fuel, heating oil, heavy fuel, jet fuel, and petrochemical feedstocks. Desulfurization/hydrotreating and sulfur-recovery units provide the ability to process higher-sulfur crude and gas oils and improve product yields. A capital project to minimize benzene emissions was completed at the Corpus Christi refinery during 1994. The refinery also began production of reformulated gasoline for delivery to east coast terminals. The refinery produces 1,100 barrels per day of MTBE, an oxygenate for cleaner-burning fuels, which is sufficient to reformulate approximately 20% of gasoline produced at the Corpus Christi refinery. The refinery at Wynnewood produces gasoline, solvent, diesel fuel, jet fuel, heavy fuel, light burner fuel, and asphalt. A waste-water segregation project was completed during the year. The Cotton Valley facility is a specialty-products plant producing a full range of high-quality naphtha solvents, diesel fuel, and jet fuel components. In March 1995, the company signed a contract for the sale of the Cotton Valley refinery. The sale is expected to close on or before March 31, 1995. Crude Oil Supply In 1994, approximately 165,000 barrels per day of crude oil and intermediate feedstocks were delivered to the company's refineries. Of the crude oil delivered, 57% was domestic and 43% was foreign. This supply is acquired primarily from the company's crude oil gathering system in Oklahoma and long-standing purchase relationships with both domestic and foreign producers and resellers. The imported crude oil consisted largely of Kerr- McGee's equity production from the North Sea and purchases of additional light sweet crudes from West Africa and South America. About 26% of the 53 million barrels of crude oil processed by the refineries was supplied by Kerr-McGee production operations. The company operates a crude oil pipeline system in Oklahoma that contains approximately 1,500 miles of gathering and trunk lines. This system is used to gather and deliver domestic crude oil to the Wynnewood refinery. In addition, spot-market and futures-market domestic crude oil is purchased at Cushing, Oklahoma, where the company's crude oil storage capacity is 580,000 barrels. Kerr-McGee Refining also operates a fleet of trucks in Louisiana and Oklahoma to gather and deliver crude oil and transport petroleum products. Marketing and Product Distribution Products from the Wynnewood refinery are sold in the Midwest and Southwest under the Kerr-McGee brand. Gasoline, diesel fuel, and heating oil are marketed through independent jobbers, dealers, and company-operated stations. Kerr-McGee Refining markets to independent distributors and bulk rack accounts in 30 states east of the Rocky Mountains, selling a complete line of petroleum products in unbranded markets. At the retail level, gasoline and other products are marketed through 51 company-operated retail service stations and approximately 1,175 branded stations operated by jobbers and independent dealers. Products are transported for distribution through various common-carrier pipeline systems and by cargo ships and barges. A total of 12 waterway and pipeline terminals were owned and operated by the company at the end of 1994. The company has joint ownership in two additional terminals and sells products at approximately 200 additional exchange terminals. The sale of the New Hyde Park, New York, terminal was completed during 1994; terminaling and transportation agreements were executed in conjunction with the sale. Cato Oil and Grease Co., a wholly owned subsidiary of Kerr- McGee Refining, produces and markets automotive, marine, industrial, mining, and agricultural lubricants and specialty petroleum products at plants in Oklahoma City and Atlanta. Most of these products are marketed under the Kerr-McGee and Mystik brand names throughout the United States. Cato also manufactures and packages lubricants and specialty petroleum products under private label for several major-brand marketers and markets bulk lubricants for use by industrial and mining operations. CHEMICALS Kerr-McGee Chemical Corporation produces and markets inorganic industrial and specialty chemicals, forest products, and heavy minerals. Many of these products are processed using proprietary technology developed by the company. Industrial chemicals include titanium dioxide pigment, synthetic rutile, sodium chlorate, ammonium perchlorate, manganese products, and vanadium. Specialty chemicals are boron trichloride and elemental boron. Forest-product operations produce railroad crossties and other hardwood products and provide wood-treating services. Heavy minerals produced are ilmenite, leucoxene, zircon, and rutile. Kerr-McGee Chemical had revenues and operating profit of $639 million and $92 million, respectively, for 1994, compared with $556 million and $70 million, respectively, for 1993. Net operating profit was $59 million for 1994, compared with $44 million the previous year. The increase in 1994 revenues was due to higher sales volumes for most chemical products and higher international titanium dioxide pigment sales prices, partially offset by lower domestic pigment sales prices. The increase in 1994 operating profit was due to lower per-unit production costs for most products and higher revenues. Pigment The company's synthetic rutile plant at Mobile, Alabama, has a production capacity of 162,000 tons per year. This product serves as feedstock for the company's titanium dioxide pigment plant at Hamilton, Mississippi, which has a production capacity of 128,000 tons per year. An expansion started in the first half of 1995 will increase the Hamilton plant's production capacity to 160,000 tons at the end of three years. KMCC Western Australia Pty. Ltd., a wholly owned subsidiary of Kerr-McGee Chemical Corporation, owns a 50% interest in a joint venture that operates the world's first integrated titanium dioxide project. The project consists of a heavy-minerals mine and mill and facilities for the production of synthetic rutile and titanium dioxide pigment, located on three sites within 120 miles of Perth. Heavy minerals are mined from a lease that totals 10,350 acres. The property's remaining 173 million tons of sand contains an estimated 3.5% heavy minerals. The heavy minerals contained within this 6 million-ton, heavy-mineral deposit are composed of 4.3% rutile, 61.2% ilmenite, 3.5% leucoxene, 11% zircon, and 20% minerals which are not presently produced or have no value. Changes in deposit economics required new long-term mine plans, which reduced the reported heavy minerals in the deposit by approximately 1.3 million tons compared with last year. Additional drilling is required to determine the actual quantities and grade of heavy minerals contained in a second 2,540-acre property and the extent to which it may be feasible to mine this deposit. The company holds a 50% interest in both properties. The heavy minerals separation mill has a capacity of 559,000 tons per year. The recovered ilmenite is processed into synthetic rutile at the plant, which has production capacity of 176,000 tons per year. Due to weak demand for synthetic rutile, the plant was shut down from September 1993 through February 1994. The plant was operating at near capacity by mid-year 1994. Production from the synthetic rutile plant serves as feedstock for the domestic and international pigment operations. The pigment plant in Australia has a production capacity of 72,000 tons per year. An expansion of this plant was begun in the fourth quarter of 1994 to increase capacity to 88,000 tons per year by the end of 1995. The company also owns a 25% interest in a pigment plant in Yanbu, Saudi Arabia, which has a capacity of 64,000 tons per year. Electrolytic Products The company's major electrolytic products are manganese dioxide, manganese metal, sodium chlorate, and ammonium perchlorate. The sodium chlorate plant at the company's Hamilton, Mississippi, complex has production capacity of 123,000 tons per year. Also at Hamilton is a manganese metal plant that has a capacity of 12,000 tons per year. Facilities at Henderson, Nevada, include electrolytic cells and processing equipment for the manufacture of manganese dioxide, a plant for the manufacture of ammonium perchlorate, and a specialty boron products plant. An expansion of the manganese dioxide plant, completed mid-1994, increased capacity from 16,000 tons to 24,500 tons. Production capacity for ammonium perchlorate is 20,000 tons per year. Ammonium perchlorate blending and storage facilities are located 25 miles north of the Henderson plant. At the Soda Springs, Idaho, plant, the company recovers vanadium pentoxide from phosphate byproducts of other operations in the area. Due to market conditions, one production line was shut down during 1994, effectively reducing annual capacity at the Soda Springs plant from 4.3 million pounds to 3.2 million pounds. Forest Products The company's principal forest product is railroad crossties. Other products include crossing materials, bridge timber, and utility poles. The company owns seven wood-preserving plants located along major railroads in the United States. Six of the plants are east of the Rocky Mountains. Production of crossties with built-in rail fasteners began in the fourth quarter of 1993 at a pilot plant in Madison, Illinois. As a result of testing, the company believes this innovative RAILFAST (Registered Trademark) system has good potential for use with both wood and concrete ties. Marketing Titanium dioxide pigment is the world's preferred white opacifier and is used primarily in paint, plastics, and paper. With net production capacity of 180,000 tons per year, Kerr-McGee has 10% of the United States and 5% of the world markets. The company's plant in Hamilton, Mississippi, one of the industry's lower cost-producers, primarily serves the Americas. The majority of the pigment production from the company's 50% joint venture in Western Australia is sold in Southeast Asia and Australia. The company's plant (25% interest) in Saudi Arabia sells primarily to customers located in the Middle East and Europe. A marketing subsidiary sells all of the pigment production from the Western Australia joint venture and approximately 50% of the total production from the Saudi Arabia plant. World demand increased by 6% in 1994 after only slight growth in 1993. Manganese dioxide is a major component of alkaline dry-cell batteries. The company's current production meets approximately 33% of North American demand. The demand is driven by the need for alkaline batteries for portable electronic devices. Worldwide, Kerr-McGee is the third-largest manganese dioxide producer. Manganese metal is used in specialty and stainless steel alloys. Manganese-aluminum briquettes are used as an alloy to strengthen aluminum beverage cans. Kerr-McGee supplied about 50% of the U.S. aluminum industry's manganese requirements in 1994. Demand improved substantially during 1994 for sodium chlorate, which is used in the environmentally preferred chlorine dioxide process for bleaching pulp. North American demand for sodium chlorate should grow 6% to 8% per year over the near term as the pulp and paper industry continues conversion to the chlorine dioxide process. The company has a 7% share of the North American market and its plant in Mississippi is a low-cost producer. The company's share of the U.S. railroad crosstie market is approximately 45%. For information regarding heavy-mineral reserves, production, and average market prices for each of the years 1990 through 1994, reference is made to Note 28 to the Consolidated Financial statements on page 50 of the 1994 Annual Report to Stockholders, which note is incorporated by reference in Item 8. COAL The company's coal operations are conducted by a subsidiary, Kerr-McGee Coal Corporation, which produces coal from the Jacobs Ranch and Clovis Point surface mines in the Wyoming Powder River Basin; Galatia Mine, an underground mine in the Illinois Basin; and Pioneer Fuel Corporation, a combined surface and underground operation in West Virginia. The majority of coal sold in 1994 was to electric utilities under long-term contracts. The company also makes spot sales to domestic and foreign customers. The company owns or leases coal reserves in Illinois, West Virginia, and Wyoming. Coal operating profit totaled $45 million and $80 million for 1994 and 1993, respectively, on revenues of $294 million and $328 million, respectively. The 1994 decrease in revenues from the prior year was due to lower average sales prices resulting from 1993 contract renegotiations, partially offset by higher sales volumes. Operating profit for 1994 declined due to the decrease in revenues. Net operating profit was $34 million and $58 million for 1994 and 1993, respectively. Reserves and Production As of December 31, 1994, the company's coal reserves were as follows (in millions of tons): In-Place Recoverable Demonstrated Demonstrated Classifi- Mining State/Mining Unit Tons Tons cation Method Wyoming - Jacobs Ranch Mine 327 294 Steam Surface Clovis Point Mine 326 294 Steam Surface Illinois - Galatia Mine - Met./ Under- Harrisburg No. 5 129 82 Steam ground Under- Herrin No. 6 267 174 Steam ground West Virginia - Under- Pioneer Fuel Met./ ground/ Composite 29 20 Steam Surface 1,078 864 Of the Wyoming reserves, 91% are held under Federal leases, and the remaining 9% are leased from the State of Wyoming. The Illinois coal reserves are owned by Kerr-McGee or held under leases with private parties. West Virginia coal reserves are all held under leases with private parties. Production from Kerr-McGee mines for 1994 and 1993 was as follows: (In millions of tons) 1994 1993 Jacobs Ranch Mine 20.6 18.4 Clovis Point Mine .2 - Galatia Mine 4.0 4.1 West Virginia Operations .8 .8 Total Production 25.6 23.3 For information regarding coal reserves, production, and average market prices for each of the years 1990 through 1994, reference is made to Note 28 to the Consolidated Financial Statements on page 50 of the 1994 Annual Report to Stockholders, which note is incorporated by reference in Item 8. Jacobs Ranch Mine Jacobs Ranch Mine is located 50 miles southeast of Gillette, Wyoming, in the South Powder River Basin. The coal lease area contains 7,514 acres of land, of which 3,585 acres are underlain by 294 million recoverable tons of coal. The company also owns or controls the surface rights to 1,684 acres of a buffer zone, or overstrip area. The mine permit was renewed on August 31, 1994, for a five-year period and expanded to incorporate additional leased acreage and the buffer zone. Shipments began in 1978 and totaled more than 215 million tons through December 1994. All deliveries were made via the Burlington Northern or Chicago Northwestern railroads. Jacobs Ranch Mine coal is sold primarily under long-term contracts for ultimate use by electric utilities. The terms of the Jacobs Ranch Mine Federal leases were adjusted by the Bureau of Land Management in 1990. Clovis Point Mine Clovis Point Mine is located eight miles east of Gillette, Wyoming. In 1988, the company consolidated its Wyoming mining operations at Jacobs Ranch Mine and ceased shipments from Clovis Point Mine. The facility was reopened in 1994 and produced 200,000 tons toward meeting due diligence lease requirements. The mine permit has been renewed until 1999. The Clovis Point mining area consists of 3,143 acres leased from the Federal government and 640 acres leased from the State of Wyoming. The company either owns or has surface-owner consent to mine 71% of the Federal lease permit area. The remaining 29% is positioned so that it would be mined near the end of the mine life; however, before mining, surface-owner consent must be obtained and the mine permit amended. The terms of one of the two Federal leases at Clovis Point Mine were adjusted by the Bureau of Land Management in 1990, and the terms of the other Federal lease will be renewed and extended without change in 1995. The terms of the state lease, which contains the mine pit, were renewed for an additional 10-year period in 1993. The state royalty rate may be adjusted for the last five years of the lease. The three Clovis Point leases are held in a logical mining unit. The provisions of the leases require that an additional 600,000 tons of coal be mined by September 1996. Galatia Mine The Galatia Mine is located in southern Illinois near the town of Galatia in Saline County. It produces coal from the Harrisburg No. 5 seam, a coal which can be used as either a semi-soft coking coal or a high-BTU, relatively low-sulfur steam coal. Its use as a steam coal allows utilities to comply with Phase I of the Clean Air Act Amendments of 1990 without installing flue gas desulfurization units or blending with other coals. Shipments from the mine began in January 1984 and totaled more than 30 million tons through December 1994. Shipments are primarily by rail, although the mine loadout is capable of loading trucks, and weighing facilities are on-site. The Illinois Central railroad is the originating carrier for rail shipments, most of which are comprised of 100-car unit trains. An independent commercial laboratory is also on-site, and its coal quality analyses are accepted by most customers as verification of compliance with contract specifications. Within the mine area, Kerr-McGee controls nearly 33,000 acres through leases and mineral ownership. This also includes control of the Herrin No. 6 seam which, until July 1994, was also mined at Galatia. Its higher sulfur content and resultant decrease in demand by the utilities, because of the emission requirements of the Clean Air Act Amendments of 1990, led to the cessation of mining in the No. 6 seam and transfer of the mining equipment to the lower-sulfur/higher-value Harrisburg No. 5 seam. In anticipation of an increase in market demand for lower- sulfur coal, an expansion was begun in 1992 to extend production in the No. 5 seam to the north, on the other side of an ancient river channel bounding the then-current mining area. Completed in 1994, the project provided underground access to lower-sulfur coal reserves and included ventilation and access shafts, tunnels through the mile-wide river channel that displaced the coal, and complete surface electrical, communication, borehole, and access facilities. Longwall mining is utilized at Galatia. It was first installed in the No. 6 seam in 1989, and its high recovery, high productivity, and low operating cost represented a significant improvement over the continuous miner room-and-pillar method of mining previously used. A second longwall was installed in 1992 in the No. 5 seam. With the cessation of mining in the No. 6 seam in July 1994, its longwall was moved to the No. 5 seam, where both longwalls operate today. The production capabilities of the longwalls, combined with a coal processing plant expansion also completed in 1994, have expanded the mine's capacity to 6 million tons of high-BTU, relatively low-sulfur coal per year. Pioneer Fuel Corporation Pioneer Fuel Corporation operates both surface and underground mines near Oceana, West Virginia, in Wyoming County. Within the mine area, the company controls 7,709 acres through leases with private parties. Shipments since acquisition in late 1990 totaled approximately 2.6 million tons at year-end 1994 and were made via the Norfolk and Southern Railroad. The mines currently operate in the No. 2 Gas, Hernshaw, and Winifrede seams. Coal from the No. 2 Gas and Hernshaw seams is suitable as mid- to high-volatile, low-sulfur coking coal. Coal from the Winifrede seam is sold primarily as a low-sulfur, high quality steam coal. Current facility capacity is approximately 1 million tons of clean coal per year. Marketing Coal is sold primarily under long-term contracts, although spot sales were made in 1994 to domestic and foreign customers. During 1994, the company had export sales of semi-soft coking coal to Japan. Domestic deliveries of steam coal will continue, primarily under long-term contracts with electric utilities in Arkansas, Florida, Indiana, Louisiana, Missouri, Oklahoma, and Texas. While coal sales include sales of coal purchased from third parties, the company is not dependent on this purchased coal to meet its contract obligations. A total of 220 million tons of coal is committed to delivery under contracts expiring between 1996 and 2014. Coal markets continue to experience competitive pricing. Kerr-McGee's existing long-term contracts have provided profitable sales even under these competitive conditions. Although domestic markets are affected by the Clean Air Act Amendments of 1990, the company is well positioned with its reserves of low-sulfur coal. Approximately 70% of the company's coal will continue to be considered compliance coal after the year 2000. Uncommitted reserves and existing production capacity should permit the company to expand its export sales and participate in the expected growth in domestic demand for low-sulfur coal. OTHER Research and Development The company performs research and development in support of its existing businesses and in the pursuit of new products and processes. These programs continue to concentrate on improvements to chemical plant processes and exploratory research. The company's Technical Center is located in Oklahoma City. Research and development expenditures totaled $10 million in 1994, $14 million in 1993, and $16 million in 1992. Employees The company had 5,524 employees on December 31, 1994. Approximately 400, or 7%, of these employees were represented by four collective bargaining agreements through the refining and marketing operations. One of these agreements representing approximately 140 employees expired during 1994; negotiations continue. The status of labor relations within the company continues to be stable. No strikes or work stoppages have occurred within the past seven years. Competitive Conditions In the petroleum industry, competition exists from the initial process of bidding for leases to the sales of refined products. Competitive factors include finding and developing petroleum hydrocarbons, transporting raw materials, distributing and pricing refined products, and developing successful marketing strategies. During the past several years, crude oil and natural gas supplies and refining capacities have exceeded demand. This excess of supply over demand has resulted in lower prices, compared with the prices received prior to 1985. The volatility of crude oil prices during the past few years has placed increased emphasis on all competitive aspects of the petroleum industry. The company is one of eight chloride-process producers of titanium dioxide pigment in the world. The chloride process results in significantly less waste than the more costly sulfate process. Pigment customers worldwide have increasingly preferred the chloride product due to environmental restrictions. We expect demand for pigment to grow at about 3% per year through the end of the century. Manganese dioxide and sodium chlorate are in a reasonable supply/demand position. Excess capacity currently exists for ammonium perchlorate and manganese metal worldwide. Most of the company's coal customers are domestic electric utilities, an extremely competitive market. Cost efficiencies, transportation strategies, and product quality are key competitive factors in the coal industry. It is not possible to predict the effect of future competition on Kerr-McGee's operating and financial results. GOVERNMENT REGULATIONS AND ENVIRONMENTAL RESERVES General The company is subject to extensive regulation by Federal, state, local, and foreign governments. The production and sale of crude oil and natural gas in the United States are subject to regulation by Federal and state authorities, particularly with respect to allowable rates of production, offshore production, and environmental matters. Stringent environmental protection laws and regulations apply to refining and chemical operations. In addition, there are special taxes that apply to the oil, gas, and coal mining industries. Environmental Matters Federal, state, and local laws and regulations relating to environmental protection affect almost all plants and facilities of the company. During 1994, direct capital and operating expenditures related to environmental protection and cleanup of existing sites totaled $45 million. Additional expenditures totaling $60 million were charged to environmental reserves. While it is extremely difficult to estimate the total direct and indirect costs to the company of government environmental regulations, it is presently estimated that the direct capital and operating expenditures and expenditures charged to reserves will be approximately $140 million in 1995 and $130 million in 1996. Some expenditures to reduce the occurrence of releases to the environment, such as replaced or upgraded underground storage tanks, may result in increased efficiency; however, most of these expenditures produce no significant increase in production capacity, efficiency, or revenue. Operation of pollution-control equipment installed for these purposes usually entails additional expense. Moreover, there are costs associated with staff and management time that cannot be calculated or estimated with any assurance of accuracy. Based on present information, the company believes that it has accrued and is accruing reasonable reserves for expenditures that may have to be made in the future for environmental protection. Because of continually changing laws and regulations, the nature of the company's businesses, and pending proceedings, it is not possible to reliably estimate the amount or timing of all future expenditures relating to environmental matters. The company provides for costs related to environmental contingencies when a loss is probable and the amount is reasonably estimable. Although management believes adequate reserves have been provided for all known environmental contingencies, it is possible, due to the above noted uncertainties, that 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 environmental contingencies, to the extent not previously provided for, should not have a material adverse effect on the company's financial position. Also see "Item 3. Legal Proceedings," which follows. Item 3. Legal Proceedings The company continues its efforts to obtain the necessary approvals to decommission a facility located in West Chicago, Illinois, which processed thorium ores and was closed in 1973. Currently, the State of Illinois has jurisdiction of this site, and the company has agreed to offsite disposal of the waste material. For a discussion of contingencies, including a detailed discussion of the West Chicago matter, reference is made to the Environmental Matters section of Management's Discussion and Analysis and Note 10 to the Consolidated Financial Statements beginning on pages 24 and 34, respectively, of the 1994 Annual Report to Stockholders, which discussion and note are incorporated by reference in Item 7 and Item 8, respectively. Item 4. Submission of Matters to a Vote of Security Holders None submitted during the fourth quarter of 1994. Executive Officers of the Registrant The following is a list of executive officers, their ages, and their positions and offices as of January 1, 1995: Name Age Office Frank A. McPherson 61 Chairman of the Board and Chief Executive Officer since May 1983. Luke R. Corbett 47 Group Vice President since May 1992. President of Kerr-McGee China Petroleum Ltd. since July 1994. President of Kerr-McGee Canada Ltd. since July 1989. President of Kerr-McGee Oil (U.K.) PLC since August 1987. Senior Vice President from March 1991 until May 1992. Vice President, Oil and Gas Exploration from August 1987 until March 1991. C. C. Stewart, Jr. 51 Group Vice President since May 1992. President of Southwestern Refining Company, Inc. since November 1992. Senior Vice President from March 1991 until May 1992. Vice President, Oil and Gas Operations from February 1990 until March 1991. Senior Vice President, Technical for Hamilton Brothers Oil and Gas Ltd. from July 1988 until January 1990. George R. Hennigan 59 Senior Vice President since October 1991. President of Kerr-McGee Chemical Corporation since October 1991. Executive Vice President, Kerr-McGee Chemical Corporation from October 1984 until October 1991. John C. Linehan 55 Senior Vice President and Chief Financial Officer since October 1987. Tom J. McDaniel 56 Senior Vice President since June 1986 and Secretary since March 1989. L. V. McGuire 52 Senior Vice President since December 1993. Senior Vice President, Production, Exploration and Production Division since May 1992. Vice President and Managing Director, Kerr-McGee Oil (U.K.) PLC from February 1992 to January 1993. Vice President, Production from July 1992 to December 1993. Vice President, Gulf Coast Production Operations, Exploration and Production Division from January 1991 until February 1992. Vice President, Production for Hamilton Brothers Oil and Gas Ltd. from July 1990 until January 1991. Vice President, Operations for Hamilton Brothers Oil and Gas Ltd. from June 1988 until July 1990. Robert C. Scharp 47 Senior Vice President since October 1991. President of Kerr-McGee Coal Corporation since October 1991. Vice President of Operations for Kerr-McGee Coal Corporation from June 1990 until October 1991. General Manager of Galatia Mine for Kerr-McGee Coal Corporation from May 1988 until June 1990. Michael G. Webb 47 Senior Vice President since December 1993. Senior Vice President, Exploration, Exploration and Production Division since May 1992. Vice President, Exploration from July 1992 to December 1993. Vice President, North American Onshore Exploration from May 1991 until May 1992. Exploration Manager, Kerr-McGee Canada Ltd. from November 1988 until May 1991. R. G. Horner, Jr. 55 Vice President and General Counsel since June 1986. J. Michael Rauh 45 Vice President and Controller since October 1987. Donald F. Schiesz 57 Vice President, Safety and Environment since August 1994. Senior Vice President of Kerr-McGee Chemical Corporation from March 1991 to August 1994. Vice President and General Manager of the Pigment Division for Kerr-McGee Chemical Corporation from March 1984 to March 1991. Thomas B. Stephens 50 Vice President and Treasurer since January 1985. Jean B. Wallace 40 Vice President, Human Resources since November 1989. Dale E. Warfield 51 Vice President, General Administration since August 1994. Vice President, Materials Management and Transportation from April 1991 until August 1994. Director of Purchasing and Materials Management from March 1990 until April 1991. Director of Purchasing from July 1985 until March 1990. Ray A. Freels 66 President, Kerr-McGee Refining Corporation since July 1993. Independent consultant from October 1992 until July 1993. Senior Vice President, Kerr-McGee Corporation from January 1986 until he retired in October 1992. President, Kerr-McGee Refining Corporation from December 1985 until October 1992. There is no family relationship between any of the executive officers. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Information relative to the market on which the company's common stock is traded, the high and low sales prices of the common stock by quarters for the past two years, and the approximate number of holders of common stock is furnished in Note 29 to the Consolidated Financial Statements on page 50 of the 1994 Annual Report to Stockholders, which note is incorporated by reference in Item 8. Quarterly dividends declared totaled $1.52 per share for each of the years 1994, 1993, and 1992. Cash dividends have been paid continuously since 1941 and totaled $78 million in 1994 and $73 million in each of the years 1993 and 1992. Item 6. Selected Financial Data Information regarding selected financial data required in this item is presented in the schedule captioned "Six-Year Financial Summary" on page 51 of the 1994 Annual Report to Stockholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations "Management's Discussion and Analysis" on pages 22 through 26 of the 1994 Annual Report to Stockholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The following financial statements and supplementary data included in the 1994 Annual Report to Stockholders are incorporated herein by reference: Annual Report Item Page No. Report of Independent Public Accountants 26 Consolidated Statement of Income 27 Consolidated Statement of Retained Earnings 27 Consolidated Balance Sheet 28 Consolidated Statement of Cash Flows 29 Notes to Financial Statements 30-50 Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant (a) Identification of directors - For information required under this section, reference is made to the "Election of Directors" section of the company's proxy statement for 1995 made in connection with its Annual Stockholders' Meeting to be held on May 9, 1995. (b) Identification of executive officers - The information required under this section is set forth in the caption "Executive Officers of the Registrant" on pages 25 through 27 of this Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) to Form 10-K. (c) Compliance with Section 16(a) of the 1934 Act - For information required under this section, reference is made to the "Compliance with Section 16(a) of the Securities Exchange Act of 1934" section of the company's proxy statement for 1995 made in connection with its Annual Stockholders' Meeting to be held on May 9, 1995. Item 11. Executive Compensation For information required under this section, reference is made to the "Executive Compensation" section of the company's proxy statement for 1995 made in connection with its Annual Stockholders' Meeting to be held on May 9, 1995. Item 12. Security Ownership of Certain Beneficial Owners and Management For information required under this section, reference is made to the "Security Ownership" section of the company's proxy statement for 1995 made in connection with its Annual Stockholders' Meeting to be held on May 9, 1995. Item 13. Certain Relationships and Related Transactions For information required under this section, reference is made to the "Election of Directors" section of the company's proxy statement for 1995 made in connection with its Annual Stockholders' Meeting to be held on May 9, 1995. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements - The following consolidated financial statements of Kerr- McGee Corporation and its subsidiary companies, included in the company's 1994 Annual Report to Stockholders, are incorporated by reference in Item 8: Report of Independent Public Accountants Consolidated Statement of Income for the Years Ended December 31, 1994, 1993, and 1992 Consolidated Statement of Retained Earnings for the Years Ended December 31, 1994, 1993, and 1992 Consolidated Balance Sheet at December 31, 1994 and 1993 Consolidated Statement of Cash Flows for the Years Ended December 31, 1994, 1993, and 1992 Notes to Financial Statements (a) 2. Financial Statement Schedules - Page Report of Independent Public Accountants on Financial Statement Schedule 35 Schedule II - Valuation Accounts and Reserves for the Years Ended December 31, 1994, 1993, and 1992 36 Schedules I, III, IV, and V are omitted as the subject matter thereof is either not present or is not present in amounts sufficient to require submission of the schedules in accordance with instructions contained in Regulation S-X. (a) 3. Exhibits - Exhibit No. 3.1 Restated Certificate of Incorporation of Kerr-McGee Corporation, filed as Exhibit 3.1 to the report on Form 10-Q for the quarter ended June 30, 1987, and incorporated herein by reference. 3.2 Bylaws of Kerr-McGee Corporation, as amended, filed as Exhibit 3(b) to the report on Form 10-K for the year ended December 31, 1986, and incorporated herein by reference. 4.1 Amended and Restated Rights Agreement dated as of July 11, 1989, filed as Exhibit 1 to the report on Form 8-K dated July 13, 1989, and incorporated herein by reference. 4.2 The company agrees to furnish to the Securities and Exchange Commission, upon request, copies of each of the following instruments defining the rights of the holders of certain long-term debt of the company: the Indenture dated as of June 1, 1976, between the company and Citibank, N.A., as trustee, relating to the company's 8-1/2% Sinking Fund Debentures due June 1, 2006; the Indenture dated as of November 1, 1981, between the company and United States Trust Company of New York, as trustee, relating to the company's 7% Debentures due November 1, 2011; the Note Agreement dated as of November 29, 1989, among the Kerr-McGee Corporation Employee Stock Ownership Plan Trust (the Trust) and several lenders, providing for a loan guaranteed by the company of $125 million to the Trust; the Facilities Agreement dated March 3, 1991, providing for borrowings of up to $65 million through September 3, 1993, by National Titanium Dioxide Company Limited (Cristal), a Saudi Arabian limited liability company (owned 25% by a wholly owned subsidiary of the company), and several banks with 25% of the loans guaranteed on a several basis by a wholly owned subsidiary; the $325 million Credit Agreement dated as of August 25, 1994, providing for a five- year revolving credit facility with a bullet maturity on the fifth anniversary of the execution of the Credit Agreement; the Revolving Credit Agreement dated as of October 16, 1992, and the first amendment to the Credit Agreement dated as of December 21, 1994, among Kerr-McGee Corporation, Kerr-McGee Oil (U.K.) PLC, and several banks providing for revolving credit of up to $230 million through December 31, 1999; and the Revolving Credit Agreement dated as of February 24, 1995 between Kerr-McGee China Petroleum Ltd., as borrower, and Kerr-McGee Corporation, as guarantor, and several banks providing for revolving credit of up to $105 million through February 24, 1998. The total amount of securities authorized under each of such instruments does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis. 4.3 Kerr-McGee Corporation Direct Purchase and Dividend Reinvestment Plan filed on Form S-3 effective August 19, 1993, Registration No. 33-66112, and incorporated herein by reference. 10.1* Deferred Compensation Plan for Non- Employee Directors as amended and restated effective October 1, 1990, filed as Exhibit 10(1) to the report filed on Form 10-K for the year ended December 31, 1990, and incorporated herein by reference. 10.2* Kerr-McGee Corporation Stock Deferred Compensation Plan for Non-Employee Directors effective October 1, 1988, filed as Exhibit 10(2) to the report filed on Form 10-K for the year ended December 31, 1988, and incorporated herein by reference. 10.3* Description of the company's Annual Incentive Compensation Plan, filed as Exhibit 10(3) to the report filed on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 10.4* The 1984 Employee Stock Option Plan filed as Exhibit 4.2 to Form S-8 Registration No. 2-90981 and incorporated herein by reference. 10.5* The Long Term Incentive Program effective July 1, 1987, filed as Exhibit 4.1 to Form S-8 Registration No. 33-24274 and incorporated herein by reference. 10.6* Benefits Restoration Plan as amended and restated effective September 13, 1989, filed as Exhibit 10(6) to the report on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10.7* Kerr-McGee Corporation Executive Deferred Compensation Plan as amended and restated February 1, 1994, filed as Exhibit 10(7) to the report on Form 10-Q for the quarter ended March 31, 1994, and incorporated herein by reference. 10.8* Kerr-McGee Corporation Supplemental Executive Retirement Plan as amended and restated effective May 3, 1994. 10.9* Amended and restated Agreement, restated as of December 31, 1992, between the company and Frank A. McPherson filed as Exhibit 10(9) on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10.10* Amended and restated Agreement, restated as of December 31, 1992, between the company and John C. Linehan filed as Exhibit 10(10) on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10.11* Amended and restated Agreement, restated as of December 31, 1992, between the company and Luke R. Corbett filed as Exhibit 10(11) on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 10.12* Agreement effective January 2, 1990, between the company and C. C. Stewart, Jr., filed as Exhibit "A" within Exhibit 10(14) to the report on Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. 10.13* Amended and restated Agreement, restated as of December 31, 1992, between the company and Tom J. McDaniel. 10.14* Form of agreement, amended and restated as of December 31, 1992, between the company and certain executive officers not named in the Summary Compensation Table contained in the company's definitive Proxy Statement for the 1994 Annual Meeting of Stockholders, filed as Exhibit 10(14) on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference. 12 Computations of ratio of earnings to fixed charges. 13 1994 Annual Report to Stockholders. 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen LLP. 24 Powers of attorney. *These exhibits relate to the compensation plans and arrangements of the company. (b) Reports on Form 8-K - No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1994. Report of Independent Public Accountants On Financial Statement Schedule To Kerr-McGee Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Kerr- McGee Corporation's 1994 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 17, 1995. Our report on the consolidated financial statements includes an explanatory paragraph with respect to changes in accounting for postretirement benefits other than pensions and income taxes in 1992, as discussed in Note 2 to the financial statements. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The Schedule of Valuation Accounts and Reserves is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. (Arthur Andersen LLP) ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma, February 17, 1995 SCHEDULE II KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES VALUATION ACCOUNTS AND RESERVES
Additions Balance at Charged to Charged to Deductions Balance at Beginning Profit and Other from End of (In millions of dollars) of Year Loss Accounts Reserves Year Year Ended December 31, 1994 a. Deducted from asset accounts Allowance for doubtful notes and accounts receivable $ 5 $ 9 $ - $ 3 $ 11 Warehouse inventory obsolescence 1 1 - - 2 $ 6 $ 10 $ - $ 3 $ 13 b. Not deducted from asset accounts Environmental $255 $ 21 $(50)(A) $ 60 $166 Postretirement benefits 103 11 - 6 108 Oil and gas site dismantlement and coal site reclamation and restoration 81 13 3(B) 3 94 Surface mine stripping cost 14 30 - 32 12 Pension benefits - 4 6(C) 1 9 Other 7 2 - 1 8 $460 $ 81 $(41) $103 $397 Year Ended December 31, 1993 a. Deducted from asset accounts Allowance for doubtful notes and accounts receivable $ 3 $ 2 $ - $ - $ 5 Warehouse inventory obsolescence 1 1 - 1 1 $ 4 $ 3 $ - $ 1 $ 6 b. Not deducted from asset accounts Environmental $281 $ 3 $ (1)(A) $ 28 $255 Postretirement benefits 99 11 - 7 103 Oil and gas site dismantlement and coal site reclamation and restoration 71 12 2(B) 4 81 Surface mine stripping cost 15 27 - 28 14 Petroleum product pricing 2 - - 2 - Other 8 1 (1) 1 7 $476 $ 54 $ - $ 70 $460 Year Ended December 31, 1992 a. Deducted from asset accounts Allowance for doubtful notes and accounts receivable $ 4 $ 2 $ - $ 3 $ 3 Warehouse inventory obsolescence 2 1 - 2 1 $ 6 $ 3 $ - $ 5 $ 4 b.Not deducted from asset accounts Environmental $102 $205(D) $ (1)(A) $ 25 $281 Postretirement benefits - 112(E) (6)(A) 7 99 Oil and gas site dismantlement and coal site reclamation and restoration 63 12 - 4 71 Surface mine stripping cost 19 23 - 27 15 Petroleum product pricing 2 - - - 2 Other 9 - - 1 8 $195 $352 $ (7) $ 64 $476 (A) Transfer (to) from current liabilities. (B) Obligation assumed in connection with property acquisition. (C) Additional minimum liability offset by an intangible asset in deferred charges. (D) Provision for reclamation and remediation of inactive sites. (E) Includes $101 million recognized for the accumulated postretirement benefit obligation at January 1, 1992, in connection with the adoption of Statement of Financial Accounting
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: Frank A. McPherson* Frank A. McPherson, Chairman of the Board and Chief Executive Officer March 29, 1995 By: (John C. Linehan) Date John C. Linehan, Senior Vice President and Chief Financial Officer By: (J. Michael Rauh) J. Michael Rauh, Vice President and Controller and Chief Accounting Officer * By his signature set forth below, John C. Linehan has signed this Annual Report on Form 10-K as attorney-in-fact for the officer noted above, pursuant to power of attorney filed with the Securities and Exchange Commission. By: (John C. Linehan) John C. Linehan Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated. By: Bennett E. Bidwell* Bennett E. Bidwell, Director By: E. H. Clark, Jr.* E. H. Clark, Jr., Director By: Martin C. Jischke* Martin C. Jischke, Director By: Robert S. Kerr, Jr.* Robert S. Kerr, Jr., Director March 29, 1995 By: Frank A. McPherson* Date Frank A. McPherson, Director By: William C. Morris* William C. Morris, Director By: John J. Murphy* John J. Murphy, Director By: John J. Nevin* John J. Nevin, Director By: Farah M. Walters* Farah M. Walters, Director * By his signature set forth below, John C. Linehan has signed this Annual Report on Form 10-K as attorney-in-fact for the directors noted above, pursuant to power of attorney filed with the Securities and Exchange Commission. By: (John C. Linehan) John C. Linehan EX-10 2 EX-10.8 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN KERR-McGEE CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (Amended and Restated Effective May 3, 1994) ARTICLE 1 ESTABLISHMENT AND PURPOSE 1.1 Establishment and Purpose. The following are the provisions of the Kerr-McGee Corporation Supplemental Executive Retirement Plan which was established by Kerr-McGee Corporation effective as of January 1, 1991, and is amended and restated hereby, effective as of May 3, 1994, in order to provide for the payment of supplemental retirement benefits to certain eligible key senior executives. Benefits under this Plan are stated as life annuities calculated under a benefit formula. Nevertheless, this Plan pays all but Disability benefits only in lump sums. 1.2 Pre May 3, 1994 Participants. Participants in the Superseded Plan as of May 2, 1994 will receive supplemental retirement benefits under the Superseded Plan or this Plan, whichever provides the greater benefits. ARTICLE II DEFINITIONS Whenever used in this Plan, the following words and phrases shall have the meanings set forth below unless a different meaning is plainly required by the context. The masculine gender, where appearing in this Plan, shall be deemed to include the feminine gender, the singular may include the plural, and vice versa, unless the context clearly indicates to the contrary. 2.1 "Actuarial Equivalence" means the actuarial assumptions and methods that are used to determine actuarially equivalent values under the Plan and shall be the same as those that are used at that time to determine corresponding values under the provisions of the Retirement Plan. 2.2 "Affiliate" means: (a) any corporation other than Kerr-McGee Corporation which together with Kerr-McGee Corporation is a member of a "controlled group of corporations" within the meaning of Section 414(b) of the Internal Revenue Code; (b) any organization that is under "common control" with Kerr-McGee Corporation as determined under Section 414(c) of the Internal Revenue code; (c) any organization which together with Kerr-McGee Corporation is a member of an "affiliated service group" within the meaning of Section 414(m) of the Internal Revenue Code; or (d) any foreign affiliate of Kerr-McGee Corporation which is covered by an agreement under Section 3121(1) of the Internal Revenue Code. 2.3 "Anticipated Monthly Primary Insurance Amount" means the amount computed under Section 2.3.1 or 2.3.2, below. The Committee shall determine a Participant's average monthly wage to compute his Anticipated Monthly Primary Insurance Amount based on the Participant's actual compensation for all years prior to his retirement or termination of employment as reflected in the Employer's records for such years. The Anticipated Monthly Primary Insurance Amount computed by the Committee shall be binding for the purpose of determining benefits payable under the Plan. Increases in benefits under the Social Security Act or Railroad Retirement Act due to automatic cost-of-living adjustments, benefit levels, wage or benefit bases after the Participant's retirement or termination of employment shall not be considered. A Participant's Anticipated Monthly Primary Insurance Amount will not be altered by his failure to apply for such Social Security benefit or Railroad Retirement benefit on his Normal Retirement Date or his ineligibility for such Social Security benefit or Railroad Retirement benefit for any reason. 2.3.1 Retirement or Termination on or After Normal Retirement Date. If a Participant retires or terminates employment on or after his Normal Retirement Date, his Anticipated Monthly Primary Insurance Amount shall equal (a) the monthly old-age insurance benefit payable upon his actual retirement date under the provisions of the Social Security Act in effect on his Normal Retirement Date; and/or (b) the amount of the monthly retirement annuity benefit, excluding supplemental annuities, which is payable to the Participant (and not his spouse or other dependents) on his actual retirement date under the provisions of the Railroad Retirement Act as in effect on his Normal Retirement Date. 2.3.2 Retirement or Termination Before Normal Retirement Date. If a Participant retires or terminates employment before his Normal Retirement Date, his Anticipated Monthly Primary Insurance Amount shall equal (a) the monthly old-age insurance benefit payable upon his Normal Retirement Date under the provisions of the Social Security Act in effect on the date of his retirement or termination of employment and computed as if he continued employment with the Employer until his Normal Retirement Date at the same regular rate of compensation as in effect on the date of his retirement or termination of employment; and/or (b) the amount of the monthly retirement annuity benefit, excluding supplemental annuities, which would be payable to the Participant (and not his spouse or other dependents) on his Normal Retirement Date under the provisions of the Railroad Retirement Act, as in effect on the date of his retirement or termination of employment, computed as if said Participant had continued employment with the Employer until his Normal Retirement Date and as if his last regular rate of compensation prior to the date of his retirement or termination of employment were the rate of compensation he would receive until his Normal Retirement Date. 2.4 "Beneficiary" means the trust, person or persons on whose behalf benefits may be payable under the Plan after a Participant's death. Unless a specific designation to the contrary has been made by the Participant and filed with the Committee, a Participant's Beneficiary under this Plan shall be the same person that is his beneficiary to receive corresponding benefits under the Retirement Plan. 2.5 "Cause" means willful and gross misconduct on the part of the Participant that has a materially adverse effect on the Company and its Subsidiaries, as defined in Section 2.6, taken as a whole, or the conviction of the Participant of a felony under United States federal, state or local criminal law, as determined in good faith by a written resolution duly adopted by the affirmative vote of not less than 2/3 of all of the directors who are not employees, officers, or otherwise Affiliates, as defined in Section 2.6, of the Company. 2.6 "Change of Control" means any one of the following: (a) a change in any two year period in a majority of the members of the Board of Directors of Kerr-McGee Corporation resulting from the election of directors who were not directors at the beginning of such period (other than the election of directors to fill vacancies created by death or disability, or the election of a director to replace a director who by virtue of his age is not eligible for election under the By-laws of Kerr-McGee Corporation as in effect on January 1, 1991); (b) any Person or Group, together with its Affiliates, becomes the Beneficial Owner, directly or indirectly, of 25% or more of Kerr-McGee Corporation's then outstanding Common Stock or 25% or more of the voting power of Kerr-McGee Corporation's then outstanding securities entitled to vote generally for the election of Kerr-McGee Corporation's directors; (c) Kerr-McGee Corporation's stockholders approve (i) the merger or consolidation of Kerr-McGee Corporation with any other corporation (other than a merger or consolidation of Kerr-McGee Corporation and a wholly-owned Subsidiary in which the holders of Kerr-McGee Corporation Common Stock immediately prior to such merger or consolidation have the same proportionate ownership of common stock of the surviving corporation immediately after the merger or consolidation), (ii) the sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Kerr-McGee Corporation or (iii) the liquidation or dissolution of Kerr-McGee Corporation; or (d) a majority of the members of the Board of Directors in office immediately prior to the proposed transaction determine, by written resolution, that such proposed transaction, if taken, will be deemed a Change of Control and such proposed transaction is effected. For the purposes of this definition, "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended ("SEC Rules"); "Beneficial Owner" has the meaning set forth in Rules 13d-3 and 13d-5 of the SEC Rules; "Person" means any individual, firm, corporation or other entity; "Group" has the meaning set forth in Rule 13d-5 of the SEC Rules; and "Subsidiary" with respect to the Company has the meaning set forth in Rule 12b-2 of the SEC Rules. 2.7 "Committee" means the Executive Compensation Committee of the Board of Directors of Kerr-McGee Corporation, which shall administer the Plan in accordance with Article VIII. 2.8 "Company" means Kerr-McGee Corporation and its Affiliates, or any successor thereto. 2.9 "Credited Service" means, except as modified in other provisions of the Plan, the total period of a Participant's service with the Company as an employee, computed in completed months, until his date of actual retirement or termination of employment or, where applicable, until such other date as is specified hereunder; provided: (a) any complete calendar month that the Participant is absent from the service of the Company shall be excluded from his Credited Service unless he receives regular compensation from the Employer as an employee for all or any portion of such month; provided, however, that any absence due to the employee's engagement in military service will, except as provided below, be included in his Credited Service if such absence is covered by a leave of absence granted by the Company or is by reason of compulsory military service and provided that such Participant is entitled under applicable Federal laws to reemployment by the Company upon his discharge from active duty and he returns to the active service of the Company within the period of time during which he has reemployment rights under applicable Federal law or within 60 days from and after discharge or separation from such engagement if no Federal law is applicable; (b) Credited Service shall never be calculated in a manner which would result in a duplication of credit for any service of any Participant with the Company; and (c) Except for the determination of eligibility under Section 4.1(a) hereof, Credited Service shall not include service as an employee after the Participant has reached his Normal Retirement Date. 2.10 "Disability" means a mental or physical condition which qualifies the Participant as being disabled for purposes of any of the plans or programs of the Employer that employs the Participant under which benefits, compensation, or awards are contingent upon a finding of disability or, in the opinion of the committee, causes the Participant to be unable to perform his usual duties for the Employer. Such a Participant shall be considered as suffering a Disability for benefit entitlement purposes regardless of whether the Participant's employment with the Employer has actually terminated. 2.11 "Employer" means, collectively or separately as the context may indicate, the Company. 2.12 "Final Average Monthly Pay" means the same amount as is determined under the Retirement Plan except that any portion of a bonus or salary that is deffered under a deferred compensation plan maintained by the Company shall be included for purposes of determining Final Average Monthly Pay. These amounts shall be included in the calendar year for which the amount could have been received by the Participant whether or not the Participant elects to defer such compensation. Deferred compensation shall be excluded in the calendar year actually paid. The foregoing notwithstanding, Final Average Monthly Pay shall exclude all compensation received or deferred after a Participant's Normal Retirement Date. 2.13 "Good Reason" means: (a) without the Participant's express written consent (i) the assignment to the Participant of any duties or any limitation of the Participant's responsibilities, inconsistent with the Participant's positions, duties, responsibilities and status with the Company that employs the Participant immediately prior to the date of the Change of Control, or (ii) any removal of the Participant from, or any failure to re-elect the Participant to, any of the Participant's positions with the Company or any Subsidiary that employs the Participant immediately prior to the Change of Control, except in connection with the involuntary termination of the Participant's employment hereunder for Cause or as a result of the Participant's death or Disability or the termination of the Participant's employment on or after the Participant's Normal Retirement Date; (b) any failure by the company to pay, or any reduction by the Company of, the Participant's base annual salary in effect immediately prior to the Change of Control; (c) any failure by the Company to (i) continue to provide the Participant with the opportunity to participate, on terms no less favorable than those in effect immediately prior to the Change of Control, in any benefit plans and compensation programs in which the Participant was participating immediately prior to the Change of Control, or their equivalent, including but not limited to participation in pension, profit sharing, stock grants, stock option, savings, employee stock ownership, incentive compensation, group insurance plans, this Plan or similar plans or programs, or (ii) provide the Participant with all other fringe benefits (or their equivalent), including paid vacation, from time to time in effect for the benefit of any executive, management or administrative group which customarily includes a person holding the employment position with the Company then held by the Participant; (d) without the Participant's express written consent, the relocation of the Company's headquarters or of the principal place of the Participant's employment to a location that is more than 35 miles further from the Participant's principal residence than such principal place of employment immediately prior to the Change of Control; (e) any change in the sick leave policy for salaried employees or employees generally of the Company which has an adverse effect on the Participant's rights and benefits pursuant to such policy; (f) any reduction in the travel and accommodation benefits provided to the Participant pursuant to a written employment agreement or other written agreement; (g) any reduction to the extent applicable in benefits offered under an income protection insurance plan for salaried employees or employees generally of the Company; (h) any change in the pay policy for salaried employees or employees generally of the Company which has an adverse effect on the Participant's rights and benefits pursuant to such policy; (i) with respect to a Subsidiary that employs the Participant, the sale by the Company of 25% or more of such Subsidiary's common stock or 25% or more of the Subsidiary's then outstanding securities entitled to vote generally for the election of the Subsidiary's directors, or the sale by the Company of all or substantially all of the assets of such Subsidiary; (j) the breach of any provision of any written employment agreement or other written agreement the Participant has with the Company, other than a breach by the Participant; or (k) the failure of any successor company to the Company to expressly assume such a written employment agreement or other written agreement. The term "Subsidiary" shall have the meaning prescribed in Section 2.6. 2.14 "Monthly Offset Amount" determined as of any specified date means the sum of: (a) the monthly amount of retirement income or other benefit which is payable to or on behalf of the Participant on or after such specified date under any qualified defined benefit pension plan maintained by the Company; (b) the monthly amount of retirement income or other benefit which represents a "Restored Defined Benefit Plan Benefit" within the meaning of the Kerr-McGee Corporation Benefits Restoration Plan and is payable to or on behalf of the Participant on or after such specified date under such Restoration Plan; and (c) the Anticipated Monthly Primary Insurance Amount. If the retirement income or other benefit described in (a) through (c) is payable to the Participant in a form other than a straight life annuity, such retirement income or other benefit shall be converted to an Actuarially Equivalent amount that is payable in the form of a straight life annuity. If the retirement income or other benefit described in (a)through (c) is due to commence at a date that is subsequent to the specified date, such retirement income or other benefit shall be converted to an Actuarially Equivalent amount that is payable in the form of a straight life annuity beginning at such specified date. If the Participant has received all or a portion of the retirement income or other benefit described in (a) through (c) prior to such specified date, the amount that he has received prior to such specified date shall be converted to an Actuarially Equivalent amount that is payable in the form of a straight life annuity beginning at such specified date and shall be added to the amount, if any, of the retirement income described in (a) through (c) that is payable to him on and after such specified date. Any provisions above to the contrary notwithstanding, the Monthly Offset Amount that is applied in determining the amount of the monthly retirement income that is payable under Section 4.2(b) hereof to a disabled Participant prior to his attainment of the age of 62 years shall be equal to the sum of the amounts described in (a) through (c) that the Committee anticipates that he will actually receive during each such month. The Monthly Offset Amount shall be redetermined as of the first day of the month coincident with or next following the date on which such Participant attains the age of 62. 2.15 "Normal Retirement Date" means the first day of the month coincident with or next following the date on which a Participant attains the age of 65 years. 2.16 "Participant" means any key senior executive of the Employer who is participating in the Plan in accordance with the provisions of Article III. 2.17 "Plan" means this Kerr-McGee Corporation Supplemental Executive Retirement Plan, as set forth herein and as it may be amended from time to time. The Plan's "plan year" is the calendar year. 2.18 "Reason" means (a) action by a Participant involving willful malfeasance, (b) failure to act by a Participant involving material nonfeasance having a material adverse effect on the Company or the Subsidiary (as defined in Section 2.6) that employs the Participant, (c) the Participant being convicted of a felony under United States federal, state, or local criminal law, or (d) the material breach by the Participant of any written employment agreement or other written agreement he has with the Company or Subsidiary (as defined in Section 2.6) that employs the Participant. 2.19 "Retirement Plan" means the Kerr-McGee Corporation Retirement Plan, as amended from time to time, or any successor plan. 2.20 "Superseded Plan" means the Kerr-McGee Corporation Supplemental Executive Retirement Plan as in effect from January 1, 1991, through May 2, 1994, a copy of which is attached hereto as Exhibit 2.20. of the Participant's employment term, determined as of the date of the Change of Control under a written employment agreement or other written agreement, if any, under which he is serving the Employer; or (e) his service is terminated because of his death. A Participant who retires or whose service is terminated other than as specified in Subsections (a) through (e) shall not be entitled to any benefit under the Plan. ARTICLE III PARTICIPATION 3.1 Participation. Participation in this Plan shall be limited to those key senior executives of the Employer who are recommended by management for participation in the Plan and are designated as Participants in the Plan by the Committee. No person shall have the right to be selected as a Participant. Prior to a Change of Control, a person who is selected to be a Participant may be deprived of that status by the Committee at any time prior to his attainment of age 62, except while suffering a Disability. If a Participant terminates employment with the Employer for any reason at any age, the individual shall not become a Participant again if he is subsequently rehired unless he is then again selected to participate in the Plan in accordance with this Section. ARTICLE IV BENEFITS 4.1 Eligibility for Benefits. A Participant shall, subject to the other provisions of this Plan, be eligible for a benefit as described in Section 4.2 if: (a) he retires from the service of the Employer on or after his attainment of the age of 62 years and completion of five years of Credited Service; (b) he retires from the service of the Employer before his attainment of the age of 62 years and, in the sole opinion of the Committee, it would be in the best interest of both the Employer and the Participant for the Participant to receive a benefit under the Plan; (c) his active service with the Employer is terminated prior to his attainment of the age of 62 years and the reason for his termination is, in the opinion of the Committee, because of his Disability; (d) his service with the Employer is terminated by the Employer for any reason, other than for Cause, or by the Participant for Good Reason during the period starting with a Change of Control and ending on the later of the second anniversary thereof or the expiration of the remaining period 4.2 Amount of Benefits. The benefits provided under the Plan on behalf of a Participant who is eligible for a benefit under the provisions of Section 4.1 shall be determined in accordance with the following provisions of this Section 4.2. If in the Committee's sole opinion there are circumstances which warrant the payment of a larger benefit to a Participant than otherwise would be computed hereunder such benefit may be increased. Such percentage may not, however, be increased to exceed 65% of Final Average Monthly Pay. The Committee, in its sole discretion, may also decrease the Monthly Offset Amount and/or the actuarial reduction required under this Section. Except in the case of Disability benefits, the amounts described below are only payable as Actuarially Equivalent lump sums, despite being described below for benefit computation purposes as life annuities. (a) Retirement: The benefit provided under the Plan on behalf of an eligible Participant described in Section 4.1(a) or 4.1(b) who retires from the service of the Employer shall be a monthly retirement income payable to him for life commencing on the first day of the month coincident with or next following the date of his retirement in an amount equal to the excess, if any, of; (i) an amount determined by multiplying the years and fraction of years of the Participant's Credited Service by 2.5% and multiplying such product by the Participant's Final Average Monthly Pay, over (ii) his Monthly Offset Amount determined as of the date of his retirement or, in the case of a Participant who retires after attaining age 65, any earlier date the Committee in its sole discretion elects to use. or (i) - (ii) = Benefit Received (b) Termination Due to Disability: The benefit provided under the Plan on behalf of an eligible Participant described in Section 4.1(c) whose active service is terminated prior to his attainment of the age of 62 years by reason of Disability shall be determined as follows. Monthly Income Provided: The amount of monthly retirement income provided under this Section 4.2(b) shall be equal to the excess, if any, of: (i) an amount determined by multiplying the years and fraction of years of the Participant's anticipated Credited Service determined as if the Participant had continued in active service with the Company until retirement at age 62 by 2.5% and multiplying such product by the Participant's Final Average Monthly Pay; over (ii) his Monthly Offset Amount determined as of (1) the date of each payment with respect to payments due prior to his attainment of the age of 62 years and (2) his attainment of the age of 62 years with respect to payments due after his attainment or such age. or (i) - (ii) = Monthly Benefit Such amount of monthly retirement income shall commence on the first day of the month coincident with or next following the date of termination of such Participant's active service due to Disability and shall be payable to him for life; provided, if, in the opinion of the Committee, the Participant has recovered from his Disability prior to his attainment of the age of 62 years, such monthly retirement income shall cease with the payment due on the first day of the month immediately preceding the date as of which the Committee deems the Participant to have recovered from his Disability. If the Participant resumes active duties for the Company immediately after his Disability ceases, he shall remain a Participant. If he does not immediately resume active duties for the Employer, he shall cease to be a Participant. The lump sum form of payment described in Section 5.1 hereof shall not apply with respect to the payments provided under this Section 4.2(b) prior to the date as of which the Participant will attain the age of 62 years, but a Disabled participant who attains the age of 62 years without recovering from his Disability shall receive a lump sum payment under Section 5.1 upon attaining age 62. (c) Termination Due to Change of Control: The benefit provided under the Plan on behalf of an eligible Participant described in Section 4.1(d), shall be equal to a monthly retirement income, payable to him for life commencing on the first day of the month coincident with or next following the date of termination of his service, in an amount equal to the excess, if any, of: (i) an amount determined by multiplying the years and fraction of years of the Participant's Credited Service by 2.5%, multiplying such product by the Participant's Final Average Monthly Pay, and multiplying such product by a factor of one (1) if the Participant has attained the age of 62 as of the date of his termination of service or a factor which will convert a monthly retirement income payable for life commencing at age 62 to an Actuarially Equivalent amount of monthly retirement income payable for life commencing at the Participant's attained age as of the date of his termination of service; over (ii) his Monthly Offset Amount determined as of the date of termination of his service. or (i) - (ii) = Monthly Benefit Notwithstanding anything to the contrary, following a Change of Control, each Participant described in Section 4.1(d) shall upon termination of employment following a Change of Control have a nonforfeitable right to benefits under the Plan. For purposes of computing such benefits under this Section 4.2(c) (but not under Section 4.2(d), each such Participant shall be credited with five additional years of Credited Service (but Credited Service shall not exceed the anticipated Credited Service at Normal Retirement Date) and five years shall be added to the Participant's age (for determining actuarial reduction for commencement prior to age 62). (d) Termination Due to Death: The benefit provided under the Plan on behalf of an eligible Participant who is either described in Section 4.1(e) or a Disabled Participant who dies prior to attaining age 62 shall be equal to the monthly retirement income, payable to the Beneficiary for life commencing on the first day of the month coincident with or next following the Participant's death, which can be provided on an Actuarially Equivalent basis by the actuarially computed present value, determined as of the date of the Participant's death, of the monthly retirement income computed under Section 4.2(c); provided, the Participant's date of death shall be used in lieu of his date of termination of service. Final Average Monthly Pay and Monthly Offset Amounts shall be determined as of the date of the Participant's death. Credited Service shall be the greater of the amount determined at the Participant's death and the amount determined as if the Participant had continued in active service with the Company until retirement at age 62. In the case of the death of a Disabled Participant, the benefit shall be computed as if he had remained in the active service of the Employer until his death and his Final Average Monthly Pay at the date of his death was the same as his Final Average Monthly Pay at the date of his termination of active service due to Disability. The lump sum amount due under this Section shall be paid to the Participant's Beneficiary promptly following the Participant's death. 4.3 Benefit Limits. Notwithstanding anything to the contrary the benefit provided under this Plan shall not be less than 40%, nor more than 65% of Final Average Monthly Pay, but any benefit provided prior to age 62 will be subject to actuarial reduction, less the Participant's Monthly Offset Amount. ARTICLE V FORM OF PAYMENT 5.1 Lump-Sum Tax Equalization Payments. The life annuity benefits described in Article IV are merely set forth in the Plan to establish lifetime income replacement targets for Participants. Except as to benefits payable on account of Disability under Section 4.2(b) prior to age 62, cash benefits payable under this Plan shall be paid as an immediate tax-equalized lump sum, to be paid as soon as practicable, as determined by the Committee, following the occurrence of the event which makes the benefit payable. The amount of the lump sum shall be calculated as follows: the amount shall equal the amount that would be required to pay the single premium (plus the federal and state income taxes that would be due on such single premium if it were paid to the recipient in a lump sum) for a single-life annuity, commencing on the first day of the calendar month following the Participant's termination of service (or attainment of age 62 in the case of Disability) which caused the benefits to be payable (the "Annuity Commencement Date") in an amount equal to the monthly annuity described in the following sentence. The amount of monthly annuity to be used in determining the single premium described above shall be equal to that amount that would enable the recipient to have the same amount of monthly income remaining, after the payment of federal and state income taxes on such monthly income (and taking into account the exclusion ratio within the meaning of Section 72(b) of the Internal Revenue Code that would apply if such income were being paid under an annuity purchased by the recipient from an insurance company), as he would have remaining, after the payment of federal and state income taxes on monthly income payments, if the monthly lifetime income to which he is entitled under the Plan were payable directly from the Employer commencing on the Annuity Commencement Date. The federal and state income taxes that would be due on such single premium and monthly incomes described above shall be based on the maximum tax rates that are in effect during the calendar year during which the Annuity Commencement Date occurs or upon such other tax rates which, in the opinion of the Committee based on the circumstances of the recipient, are appropriate with respect to the recipient for such calendar year. The single premium determined under this Section that is required to purchase the monthly annuity described above shall be equal to the lump-sum amount that would be required to purchase such monthly annuity at the Annuity Commencement Date from an insurance or annuity company selected by the Committee that has a rate of AA+ or better by a recognized rating agency selected by the Committee. ARTICLE VI LIMITATIONS ON BENEFITS 6.1 Limitations Due to IRC Section 280G. Any provisions of Articles IV and V above to the contrary notwithstanding, the benefits under the Plan shall be reduced, but only to the extent necessary, so that no portion thereof shall constitute an "excess parachute payment," within the meaning of Section 280G of the Internal Revenue Code of 1986, that is subject to the excise tax imposed by Section 4999 of said Code; provided, however, that such a reduction will apply only if, by reason of such reduction, the amount of the Participant's Net After Tax Benefit exceeds the amount of the Net After Tax Benefit that would apply if such reduction were not made. For the purpose of this Section, the Participant's Net After Tax Benefit shall be equal to the sum of (i) the total amounts payable to the Participant under this Plan, plus (ii) all other payments and benefits which the Participant receives or is then entitled to receive from the Company or any Subsidiary (within the meaning set forth in rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended) of the Company that would constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Participant (based upon the rate in effect for such year, as set forth in the Internal Revenue Code at the time of termination of his employment), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Internal Revenue Code. The calculations under this Section shall be made, at the Company's expense, by the Committee and the Participant. If no agreement on the calculations is reached within five days of the date of termination of the Participant's service, then the Participant and the Committee will agree to the selection of an accounting firm to make the calculations. If no agreement can be reached regarding the selection of an accounting firm, the Committee shall select a major national accounting firm which has offices in at least 15 principal cities in the United States and which has no current or recent business relationship with the Company or with the Participant. The determination of any such firm selected by the Committee will be conclusive and binding on all parties. 6.2 Termination for Cause or Reason. If a Participant's service with the Employer is terminated for Cause or, prior to a Change of Control, for Reason, the Committee may terminate such Participant's interest and benefits under this Plan, notwithstanding anything in Section 9.1 to the contrary. ARTICLE VII PROVISIONS FOR BENEFITS 7.1 Provisions for Benefits. Benefits provided by this Plan shall constitute general obligations of the Employer in accordance with the terms hereof. No amounts in respect of such benefits shall be set aside or held in trust and no recipient of any benefit shall have any right to have the benefit paid out of any particular assets of the Employer; provided, however, that nothing herein shall be construed to prevent a transfer of funds to a grantor trust for the purpose of paying benefits or any part thereof as directed by the Committee under this Plan. ARTICLE VIII ADMINISTRATION 8.1 Administration by Committee. The Executive Compensation Committee shall, unless otherwise determined by the Board of Directors of Kerr-McGee Corporation, administer this Plan. The Committee shall be the "plan administrator" with respect to the Plan. The Company shall be the "named fiduciary" of the Plan. 8.2 Rules of Conduct. Except as provided at Section 8.4, the Committee shall adopt such rules for the conduct of its business and the administration of this Plan as it considers desirable, provided they do not conflict with the provisions of this Plan. 8.3 Legal, Accounting, Clerical and Other Services. The Committee may authorize one or more if its members or any agent to act on its behalf and may contract for legal, accounting, clerical and other services to carry out this Plan. All expenses of the Committee shall be paid by the Employer. 8.4 Interpretation of Provisions. Prior to a Change of Control the Committee shall have the authority to make rules to administer and interpret the Plan in any fashion it, in its discretion, determines to be appropriate, and the decisions and interpretations of the Committee shall be final and binding on the Employer, Participants and all other persons. 8.5 Records of Administration. The committee shall keep records reflecting the administration of this Plan which shall be subject to audit by the Employer. 8.6 Expenses. The expenses of administering the Plan shall be borne by the Employer. 8.7 Indemnification and Exculpation. The officers and directors of the Employer, members of the Committee, and any employees of the Employer who administer the Plan (including in- house counsel who interprets the Plan) shall be indemnified and held harmless by the Employer against and from any and all loss, cost, liability, or expense that may be imposed upon or reasonably incurred by them in connection with or resulting from any claim, action, suit, or proceeding to which they may be a party or in which they may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by them in settlement with the Employer's written approval or paid by them in satisfaction of a judgment in any such action, suit, or proceeding. The foregoing provision shall not be applicable to any person if the loss, cost, liability, or expense is due to such person's fraud or willful misconduct. 8.8 Claims Review Procedures. The following claim procedures shall apply until such time as a Change of Control has occurred. Thereafter, these procedures shall apply only to the extent the claimant requests their applications: (a) Denial of Claim. If a claim for benefits is wholly or partially denied, the claimant shall be given notice in writing of the denial within a reasonable time after the receipt of the claim, but not later than 90 days after the receipt of the claim. However, if special circumstances require an extension, written notice of the extension shall be furnished to the claimant before the termination of the 90-day period. In no event shall the extension exceed a period of 90 days after the expiration of the initial 90-day period. The notice of the denial shall contain the following information written in a manner that may be understood by a claimant: (i) the specific reasons for the denial; (ii) specific reference to pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect his claim and an explanation of why such material or information is necessary; (iv) an explanation that a full and fair review by the Committee of the denial may be requested by the claimant or his authorized representative by filing a written request for a review with the Committee within 60 days after the notice of the denial is received; and (v) if a request for review is filed, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the 60-day period described in Section 8.8(a)(iv). (b) Decisions After Review. The decision of the Committee with respect to the review of the denial shall be made promptly, but not later than 60 days after the Committee receives the request for the review. However, if special circumstances require an extension of time, a decision shall be rendered not later than 120 days after the receipt of the request for review. A written notice of the extension shall be furnished to the claimant prior to the expiration of the initial 60-day period. The claimant shall be given a copy of the decision, which shall state, in a manner calculated to be understood by the claimant, the specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based. (c) Other Procedures. Notwithstanding the foregoing, the Committee may, in its discretion, adopt different procedures for different claims without being bound by past actions. Any procedures adopted, however, shall be designed to afford a claimant a full and fair review of his claim and shall comply with applicable regulations under ERISA. 8.9 Finality of Determinations; Exhaustion of Remedies. To the extent permitted by law, decisions reached under the claims procedures set forth in Section 8.8 shall be final and binding on all parties. No legal action for benefits under the Plan shall be brought unless and until the claimant has exhausted his remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which the claimant does not in good faith pursue though the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of a claimant's denied claim shall be limited to a determination of whether the denial was an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure. This Section shall have no application following a Change of Control as to a claim which is first asserted or first denied after the Change of Control and, as to such a claim, the de novo standard of judicial review shall apply. 8.10 Effect of Fiduciary Action. The Plan shall be interpreted by the Committee and all Plan fiduciaries in accordance with the terms of the Plan and their intended meanings. However, the Committee and all Plan fiduciaries shall have the discretion to make any findings of fact needed in the administration of the Plan, and shall have the discretion to interpret or construe ambiguous, unclear or implied (but omitted) terms in any fashion they deem to be appropriate in their sole judgment. The validity of any such finding of fact, interpretation, construction or decision shall not be given de novo review if challenged in court, by arbitration or in any other forum, and shall be upheld unless clearly arbitrary or capricious. To the extent the Committee or any Plan fiduciary has been granted discretionary authority under the Plan, the Committee's or Plan fiduciary's prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. If, due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent, or as determined by the Committee in its sole and exclusive judgment, the provision shall be considered ambiguous and shall be interpreted by the Committee and all Plan fiduciaries in a fashion consistent with its intent, as determined by the Committee in its sole discretion. The Committee, without the need for Board of Directors' approval, shall amend the Plan retroactively to cure any such ambiguity. This Section may not be invoked by any person to require the Plan to be interpreted in a manner which is inconsistent with its interpretation by the Committee or by any Plan fiduciaries. All actions taken and all determinations made in good faith by the Committee or by Plan fiduciaries shall be final and binding upon all persons claiming any interest in or under the Plan. This Section shall not apply to fiduciary or Committee actions or interpretations which take place or are made following a Change of Control. ARTICLE IX MISCELLANEOUS PROVISIONS 9.1 Plan Amendment, Suspension and/or Termination. The Board of Directors of Kerr-McGee Corporation may, by resolution, in its absolute discretion, from time to time, amend, suspend or terminate in whole or in part, and if terminated, reinstate any or all of the provisions of this Plan, except that no amendment, suspension or termination may apply so as to decrease the amount then payable (1) to a Participant who already has at least attained his sixty-second birthday, (2) the Disability benefits payable to a Participant who, at the time the amendment, etc., is adopted, is receiving Disability benefits, or (3) the Beneficiary or Beneficiaries of a deceased Participant who died before the amendment, etc., is adopted. Any such amendment, suspension or terminations shall become effective on such date as shall be specified in such resolution and, except as expressly limited in this Section 9.1, shall include provisions and shall have such effect as the Board of Directors of the Company, in its absolute discretion, deems desirable. Notwithstanding the foregoing, on or after a Change of Control, any amendment, suspension or termination of the Plan shall not apply to any Participant or Beneficiary in any way in which the Participant or Beneficiary reasonably considers to be personally detrimental if the Participant objects to such application in writing within thirty days after notice of the amendment, etc., unless the Participant or Beneficiary theretofore had consented, or thereafter consents, to the amendment, etc., in writing. 9.2 Plan Not an Employment Contract. The Plan is strictly a voluntary undertaking on the part of the Company and shall not constitute a contract between the Company and any Employee, or consideration for, or an inducement or condition of, the employment of an Employee. Except as otherwise required by statute, nothing contained in the Plan shall give any Employee the right to be retained in the service of the Company or its Affiliates or to interfere with or restrict the right of the Company or its Affiliates, which is hereby expressly reserved, to discharge or retire any Employee at any time for any reason not prohibited by statute, without the Company or its Affiliates being required to show cause for the termination. Except as otherwise required by statute, inclusion under the Plan will not give any Employee any right or claim to any benefit hereunder except to the extent such right has specifically become fixed under the terms of the Plan. The doctrine of substantial performance shall have no application to Employees, Participants or Beneficiaries. Each condition and provision, including numerical items, has been carefully considered and constitutes the minimum limit on performance which will give rise to the applicable right. 9.3 Non-alienation of Benefits. Except as provided in this Section and to the extent permitted by law, benefits payable under this Plan shall not, without Committee consent, be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary. Any unauthorized attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void. No part of the assets of the Employer shall be subject to seizure by legal process resulting from any attempt by creditors of or claimants against any Participant (or Beneficiary), or any person claiming under or through the foregoing, to attach his interest under this Plan. The anti- alienation restrictions of this Section shall not apply to "qualified domestic relations order" described in Section 206(d) of the Employee Retirement Income Security Act of 1974. The Committee shall establish procedures to determine whether domestic relations orders are "qualified domestic relations orders" and to administer distributions under such qualified domestic relations orders. Nothing in this Section shall preclude the Employer from withholding from amounts payable to a Participant or his Beneficiary under this Plan amounts the Participant owes the Employer. Following a Change of Control, the Employer shall not be entitled to withhold amounts in the manner described in the preceding sentence. 9.4 Accelerated Payment. In connection with termination of the Plan or otherwise, the Committee may elect to accelerate the time for payment of benefits to any Participant, in which case the Employer shall pay the Participant the amount, if any, that would then be payable to the Participant if he then terminated employment with the Employer other than for Cause or Reason. If such a Participant is receiving Disability benefits, the Participant may be paid the Actuarial Equivalent of (a) the remaining disability benefits he would have received prior to age 62 if those benefits continued at the level then in effect and (b) the lump sum the individual would have received at age 62 if he continued to receive Disability benefits until that time. 9.5 Tax Consequences Not Guaranteed. The Employer does not warrant that this Plan will have any particular tax consequences for Participants or Beneficiaries and shall not be liable to them if tax consequences they anticipate do not actually occur. The Employer shall have no obligation to indemnify a Participant or Beneficiary for lost tax benefits (or other damage or loss) in the event benefits are cancelled as permitted under Section 9.1, or are accelerated under Section 9.4 or because of change in Plan design or funding; e.g., establishment of a "secular trust". 9.6 Plan Spinoffs. If, prior to a Change of Control, all or a portion of the Employer is sold, the buyer may, with the Company's consent, assume sponsorship of the portion of the Plan that covered a Participant who transfers to the buyer's employ. The Employer shall thereafter have no obligations whatsoever under this Plan with respect to the portion of the Plan assumed by the buyer even if the buyer fails to satisfy its obligations under this Plan. For example, if following such an assumption, the buyer is unable to pay benefits when due, the Employer shall not be liable for such amounts. 9.7 Special Payment Situations. (a) Missing Participant or Beneficiary. Payment of benefits to the person entitled thereto may be sent by first class mail, address correction requested, to the last known address on file with the Committee. If, within two months from the date of issuance of the payment, the payment letter cannot be delivered to the person entitled thereto or the payment has not been negotiated, the payment shall be treated as forfeited. However, if the person to whom the benefit became payable subsequently appears and identifies himself to the satisfaction of the Committee, the amount forfeited (without earnings thereon) shall be distributed to the person entitled thereto. The right of any person to restoration of a benefit which was forfeited pursuant to this Section shall cease upon termination of this Plan. (b) Private Investigators, etc. If the Committee retains a private investigator or other person or service to assist in locating a missing person, all costs incurred for such services shall be charged against the benefit to which the missing person was believed to be entitled and the benefit shall be reduced by the amount of the costs incurred, except as the Committee may otherwise direct. (c) Delayed Payment. Payments to Participants or Beneficiaries may be postponed by the Committee until any anticipated taxes, expenses or amounts to be paid under a qualified domestic relations order have been paid in full or until it is determined that such charges will not be imposed. A payment to a Participant or Beneficiary may also be delayed in the event payment might defeat an adverse potential or asserted claim by some other person to the payment. The cost incurred by the Employer in dealing with any such adverse claim shall be charged against the benefit to which the claim relates, except as the Committee otherwise directs. 9.8 Termination of Employment. (a) General Rule. A Participant's employment with the Employer shall terminate upon the first to occur of his resignation from or discharge by the Employer (except as provided in subsection (c) with respect to business dispositions) or his death or retirement. A Participant's employment shall not terminate on account of an authorized leave of absence, disability leave, sick leave, vacation, on account of a military leave described in subsection (b), or transfers between the Company and its Affiliates. However, failure to return to work upon expiration of any leave of absence, sick leave, disability leave, or vacation shall be considered a resignation effective as of the expiration of such leave of absence, sick leave, disability leave, or vacation. (b) Military Leaves. Any Participant who leaves the Company or its Affiliates directly to perform service in the Armed Forces of the United States or in the United States Public Health Service under conditions entitling the Participant to reemployment rights, as provided in the laws of the United States, shall be on military leave. A Participant's military leave shall expire if the Participant voluntarily resigns from the Company and its Affiliates during the leave or if he fails to make application for reemployment within the period specified by such law for the preservation of reemployment rights. In such event, the individual's employment shall be deemed to terminate by resignation on the date the military leave expired. (c) Spinoffs. Special rules shall apply to a Participant who ceases to be employed by the Company or its Affiliates because of the disposition by the Company or an Affiliate of its interest in a subsidiary, plant, facility or other unit. These rules also apply when the entity which employs a Participant ceases to be Affiliate. Such a Participant's employment shall be considered terminated for all Plan purposes, except as provided below. If the buyer assumes the Plan with respect to the Participant, his employment shall be considered terminated under the circumstances prescribed under the Plan as then maintained by the buyer. See Section 9.6. This Section shall not apply to the extent it is overridden by any contrary or inconsistent provision in applicable sales documents or any related documents, whether adopted before or after the sale and any such contrary or inconsistent provision shall instead apply and is hereby incorporated in the Plan by this reference. 9.9 Duty to Provide Data. (a) Data Requests. Every person with an interest in the Plan or claiming benefits under the Plan shall furnish the Committee on a timely and accurate basis with such documents, evidence or information as it considers necessary or desirable for the purpose of administering the Plan. The Committee may postpone payment of benefits (without accrual of interest) until such information and such documents have been furnished. (b) Addresses. Every person claiming a benefit under this Plan shall given written notice to the Committee of his post office address and each change of post office address. Any communication, statement or notice addressed to such a person at his latest post office address as filed with the Committee will, on deposit in the United States mail with postage prepaid, be as binding upon such person for all purposes of the Plan as if it had been received, whether actually received or not. If a person fails to give notice of his correct address, the Committee, the Company and its Affiliates and Plan fiduciaries shall not be obliged to search for, or to ascertain, his whereabouts. (c) Failure to Comply. If benefits which are otherwise currently payable cannot be paid to the person entitled to the benefits because the individual has failed to comply with this Section or other Plan provisions relating to claims for benefits, any unpaid past due amount shall be forfeited on the individual's death or presumed death. 9.10 Tax Withholding. The Company or other payor may withhold from a benefit payment under this Plan any Federal, state or local taxes required by law to be withheld with respect to such payment and may withhold such sum as the payor may reasonably estimate as necessary to cover any taxes for which the Company or any Affiliate may be liable and which may be assessed with regard to such payment. 9.11 Liability. No member of the Board of Directors of Kerr-McGee Corporation or of the Committee shall be liable for any act or action, whether of commission or omission, taken by any other member, or by any officer, agent, or employee of the Employer or of any such body, nor, except in circumstances involving his bad faith, for anything done or omitted to be done by himself. 9.12 Governing Law. This Plan is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), but is exempt from most parts of ERISA since it is an unfunded deferred compensation plan maintained for a select group of management or highly compensated employees. In no event shall any references to ERISA in the Plan be construed to mean that the Plan is subject to any particular provisions of ERISA. The Plan shall be governed and construed in accordance with federal law and the laws of the State of Oklahoma, except to the extent such laws are preempted by ERISA. IN WITNESS WHEREOF, KERR-McGEE CORPORATION has caused this Plan to be duly adopted and executed, effective as of May 3, 1994. KERR-McGEE CORPORATION By Bennett G. Bidwell, Chairman of the Executive Compensation Committee EX-10 3 EX-10.13 AGREEMENT - THE COMPANY & TOM J. MCDANIEL AGREEMENT AMENDED AND RESTATED AGREEMENT, restated as of December 31, 1992 (the "Agreement") between KERR-McGEE CORPORATION, a Delaware corporation having its executive offices at Oklahoma City, Oklahoma (the "Company"), and Tom J. McDaniel, residing in Oklahoma City, Oklahoma (the "Executive"). Unless otherwise indicated, terms used herein and defined in Schedule A and Schedule I-A to Annexure 1 shall have the meanings assigned to them in said Schedules, as applicable. WHEREAS, the Executive is currently employed by the Company and/or its Subsidiaries pursuant to an amended and restated agreement, restated as of February 1, 1988 (the "Existing Agreement"); and WHEREAS, the Executive and the Company's Board of Directors believe that such Existing Agreement, which is a three-year self-renewing employment agreement, should be amended and restated as of December 31, 1992; and WHEREAS, the Company's Board of Directors has determined that it wishes to continue the employment of the Executive and that it is appropriate to reinforce the continued attention and dedication of the Executive to his assigned duties without distraction in potentially disturbing circumstances arising from the possibility of a Change of Control of the Company; and WHEREAS, the Company and the Executive now wish to amend and restate the Existing Agreement. NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the Company and the Executive agree as follows: 1. Operation of Agreement: From the effective date of this Agreement through and including January 31, 1996, or the occurrence of a Change of Control as defined in Schedule A, whichever occurs earlier (the earlier of such dates being referred to as the "Annexure 1 Effective Date"), the operative provisions of this Agreement shall be as set forth in Sections 2 through 19 below and Schedule A hereto. Beginning the Annexure 1 Effective Date, the operative provisions of this Agreement shall be as set forth in Annexure 1 hereto, including Schedule I-A thereto (the "Annexure 1 Provisions"). When used in Annexure 1, the term "Agreement" shall refer to and mean Annexure 1. Beginning the Annexure 1 Effective Date, the operative provisions of this Agreement as set forth in Sections 2 through 19 and Schedule A shall be superseded and replaced by the Annexure 1 Provisions. 2. Employment: The Company agrees to continue to employ the Executive and he agrees to continue to serve the Company and its Subsidiaries, upon the terms and conditions stated herein, for the term of employment commencing on the date hereof and ending on January 31, 1996, unless such employment is (i) prior to a Change of Control, involuntarily terminated hereunder for Reason or as a result of the Executive's death or disability or (ii) subsequent to a Change of Control, involuntarily terminated hereunder for Cause or as a result of the Executive's death or Disability or terminated hereunder by the Executive for Good Reason. Following a Change of Control any involuntary termination of the Executive's employment hereunder for any reason other than death shall be communicated by a Notice of Termination. The Executive will be employed in an executive capacity and will perform the duties of Senior Vice President and Secretary or such other duties as may be assigned to him from time to time by the Company. The Executive shall devote substantially all of his business time, attention, skill and efforts to the business of the Company and its Subsidiaries while employed hereunder and shall perform the duties of his position and any other duties assigned to him by the Company to the best of his ability. 3. Compensation: As compensation for his services, the Company agrees to pay the Executive, so long as he shall be employed hereunder, a salary determined from time to time by the Company, but at a rate not less than per annum, payable either biweekly or in equal semimonthly installments on the fifteenth and last day of the month, provided that if at any time while the Executive is employed hereunder he should receive an increase in the annual base salary being paid him by the Company, the above specified minimum salary rate shall thereupon increase by a corresponding amount. The Executive shall also be eligible for participation in any employee benefit plans and compensation programs available to salaried employees or employees generally of the Company or any Subsidiary that employs the Executive. 4. Noncompetition: The Executive agrees that at any time while employed hereunder he will not engage in any activity competitive with any business carried on by the Company or its Subsidiaries and Affiliates, without obtaining the specific prior written consent of the Company. He, however, shall be free without the consent of the Company to purchase stocks or other securities of any corporation listed on a national securities exchange or included in a published "over the counter" list. 5. Compensation During Illness: If while employed hereunder the Executive shall become unable to perform his duties hereunder due to illness or other incapacity, compensation during such period shall be provided in accordance with the sick leave policy for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive, or if applicable, under an income protection insurance plan for salaried employees and employees generally of the Company or any Subsidiary that employs the Executive. Subject to the other terms of this Agreement, no other compensation shall be provided during the period of such illness or incapacity. 6. Death: In the event of the Executive's death while employed hereunder, his spouse, or personal representative if such spouse shall have died, shall be entitled to receive his salary at the rate then in effect through the date of his death plus one additional pay period as provided under the Company's pay policy, as well as any amounts previously earned and not paid for the periods of service prior to his date of death. 7. Successors: Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation or the sale by the Company of all or substantially all of its properties or assets, or the assignment by the Company of this Agreement in connection with any of the above mentioned actions; provided that the Company will require any successor (whether direct or indirect, by merger, consolidation or otherwise) to all or substantially all of the properties or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession has taken place. This Agreement shall not be assignable by the Executive or by the Company or its successors except as provided herein. 8. Retirement: Notwithstanding the Executive's agreement herein to serve for the term of his employment under this Agreement, the Executive may retire under a retirement plan available to salaried employees or employees generally of the Company or any Subsidiary that employs the Executive when entitled to do so, except that he may elect early retirement under any such plan only upon giving the Company (or a Subsidiary employing the Executive) six months' written notice; and upon his retirement his term of employment hereunder shall terminate. Notwithstanding the foregoing, following a Change of Control, (i) the Executive may elect early retirement under a retirement plan available to salaried employees or employees generally of the Company or any Subsidiary that employs the Executive upon giving the Company (or a Subsidiary employing the Executive) two days' written notice and (ii) any retirement under such plan that is coincident with or subsequent to an involuntary termination of the Executive's employment for any reason other than Cause, death or Disability or the Executive's termination of his employment hereunder for Good Reason, will not preclude payments under this Agreement to which the Executive is entitled in respect of such termination. 9. Compensation Upon Termination Following a Change of Control: In addition to the rights and benefits accruing to the Executive as otherwise described in this Agreement, in the event that (a) a Change of Control shall have occurred while the Executive is employed hereunder and (b) the Executive's employment hereunder shall be involuntarily terminated for any reason other than Cause, death or Disability or the Executive shall terminate his employment hereunder for Good Reason, then the Company shall make a lump sum payment in cash to the Executive as severance pay on the fifth day following the Date of Termination equal to three times the Executive's annual base salary (including for these purposes any amounts previously deferred under any qualified or nonqualified deferred compensation plan, program or arrangement) in effect immediately prior to the date that either a Change of Control shall occur or such termination, whichever salary is higher; provided, however, that if all or any portion of the payments or benefits provided under this Section 9, either alone or together with other payments and benefits which the Executive receives or is then entitled to receive from the Company or any Subsidiary, would constitute a "parachute payment" within the meaning of Section 280G of the Code, then the payments and benefits provided to the Executive under this Section 9 shall be reduced but only to the extent necessary that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code; but only if, by reason of such reduction, the Executive's Net After Tax Benefit shall exceed the Net After Tax Benefit if such reduction were not made. The foregoing calculations (and any calculations required under the definition of Net After Tax Benefit) shall be made, at the Company's expense, by the Company and the Executive. If no agreement on the calculations is reached within five days of the Date of Termination then the Executive and the Company will agree to the selection of an accounting firm to make the calculations. If no agreement can be reached regarding the selection of an accounting firm, the Company shall select a "big six" accounting firm which has no current or recent business relationship with the Company or with the Executive. The determination of any such firm selected will be conclusive and binding on all parties. 10. Acceleration and Vesting of Stock Plans, Stock Options and SAR's Following a Change of Control: In the event a Change of Control of the Company shall have occurred while the Executive is employed hereunder, then, notwithstanding the terms and conditions of any benefit plan or compensation program of the Company or any Subsidiary that employs the Executive including but not limited to any purchase plan, stock grant plan, stock option plan, employee stock ownership plan or similar plan or program (excluding any plan qualified under Section 401(a) of the Code), the Company agrees (i) to accelerate, vest, and make immediately exercisable in full (to the extent not already provided for under the terms of such applicable plans or programs) all unexercisable installments of all options to acquire securities of the Company and any accompanying stock appreciation rights, which are Beneficially Owned by the Executive on the date of such Change of Control, and (ii) to waive any applicable restrictions, including resale restrictions or rights of repurchase, relating to or imposed on securities granted by the Company to the Executive pursuant to such plans or programs which securities are Beneficially Owned by the Executive on such date. 11. Benefits Restoration Plan Following Change of Control: To the extent that the Executive is or becomes a participant in the Benefits Restoration Plan, the Company shall amend or have amended the Benefits Restoration Plan, which amendment shall thereafter remain in effect, to provide that in the event a Change of Control shall have occurred while the Executive is employed hereunder and the Executive's employment hereunder shall be involuntarily terminated for any reason other than Cause, death or Disability or the Executive shall terminate his employment hereunder for Good Reason, then the Executive shall be entitled to a nonforfeitable right to all benefits credited to such Executive to such additional years of credit for purposes of calculating the years of service and age of such Executive under the terms of the Benefits Restoration Plan equal to the lesser of (i) five years or (ii) the number of years necessary to bring the Executive to age 65 under the terms of the Benefits Restoration Plan. 12. Mitigation: If at any time the Executive's employment hereunder shall be terminated for any reason, then all payments and benefits to which the Executive is entitled under this Agreement shall be made and provided without offset, deduction or mitigation on account of income the Executive could or may receive from other employment or otherwise; provided, however, that if the Executive is involuntarily terminated for any reason other than Reason, prior to the Change of Control, then, until the term of this Agreement ends, the amount payable under this Agreement shall be reduced by any compensation actually received by the Executive from comparable employment (as to position, compensation and responsibility) with any person or entity that is engaged in a business that is competitive with the Company or its Subsidiaries and Affiliates. 13. Legal Expenses: The Company shall pay (at least monthly) all costs and expenses, including reasonable attorneys' fees and disbursements, which the Executive may incur in connection with any litigation, arbitration or similar proceeding, whether instituted by the Company or the Executive, with respect to the interpretation or enforcement of any provision under this Agreement. 14. Accommodations and Travel Expenses: The Company agrees that while the Executive is employed hereunder he shall be furnished office space and accommodations suitable to the character of his position and adequate for the performance of his duties. Reasonable traveling expenses incurred by him in traveling on business of the Company and its Subsidiaries will be reimbursed in accordance with the established traveling expense policy of the Company or any Subsidiary that employs the Executive. 15. Notices: Any notices required under the terms of this Agreement shall be effective when mailed, postage prepaid, by certified mail, addressed: If to Kerr-McGee: R. G. Horner, Jr. Vice President and General Counsel Kerr-McGee Corporation Kerr-McGee Center Oklahoma City, Oklahoma 73102 If to the Executive: Tom J. McDaniel 16. Entire Agreement: This Agreement comprises the entire agreement between the Company and its Subsidiaries and the Executive and shall supersede any and all previous contracts, agreements or understandings between the Company and its Subsidiaries and the Executive with respect to the subject matter hereof. This Agreement may not be modified except by written agreement between the parties. Subject to Section 1 hereof, any inconsistency between Sections 9, 10, 11, 12, 13, 16, 17, 18 and 19 of this Agreement and any other provisions of this Agreement shall be resolved in favor of such Sections. 17. Arbitration: Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Oklahoma City, Oklahoma, or, at the option of the Executive, in the county where the Executive resides, in accordance with the Rules of the American Arbitration Association then in effect; provided, however, that if the Executive institutes an action relating to this Agreement the Executive may, at his option, bring such action in an Oklahoma court of competent jurisdiction. Judgment may be entered on the arbitrator's award in any such court having jurisdiction. 18. Separability: Any provision of this Agreement which is held to be unenforceable or invalid in any respect in any jurisdiction shall be ineffective in such jurisdiction to the extent that it is unenforceable or invalid without affecting the remaining provisions hereof, which shall continue in full force and effect. The enforceability or invalidity of a provision of this Agreement in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 19. Section and Other Headings: The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement on the 31st day of March, 1993. KERR-McGEE CORPORATION By (F.A. McPherson) F.A. McPherson (Tom J. McDaniel) Chairman of the Board and Tom J. McDaniel Chief Executive Officer Schedule A Certain Definitions As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Beneficial Owner" has the meaning set forth in Rules 13d-3 and 13d-5 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Benefits Restoration Plan" means the Company's Benefits Restoration Plan, effective September 12, 1989, as amended. "Cause" means willful and gross misconduct on the part of the Executive that has a materially adverse effect on the Company and its Subsidiaries, taken as a whole, or the conviction of the Executive of a felony under United States federal, state or local criminal law, as determined in good faith by a written resolution duly adopted by the affirmative vote of not less than 2/3 of all of the directors who are not employees, officers, or otherwise Affiliates of the Company. "Change of Control" means any one of the following: (a) a change in any two year period in a majority of the members of the Board of Directors of the Company resulting from the election of directors who were not directors at the beginning of such period (other than the election of directors to fill vacancies created by death or Disability, or the election of a director to replace a director who by virtue of his age is not eligible for election under the By-laws of the Company as in effect on the date of this Agreement); (b) any Person or Group, together with its Affiliates, becomes the Beneficial Owner, directly or indirectly, of 25% or more of the Company's then outstanding Common Stock or 25% or more of the voting power of the Company's then outstanding securities entitled to vote generally for the election of the Company's directors; (c) the approval by the Company's stockholders of (i) the merger or consolidation of the Company with any other corporation (other than a merger or consolidation of the Company and a wholly-owned subsidiary in which the holders of the Company's Common Stock immediately prior to such merger or consolidation have the same proportionate ownership of common stock of the surviving corporation immediately after the merger or consolidation), (ii) the sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of the assets of the Company or (iii) the liquidation or dissolution of the Company; or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determined by written resolution that such proposed transaction, if taken, will be deemed a Change of Control and such proposed transaction is effected. "Code" means the Internal Revenue Code of 1986, as amended. "Date of Termination" means (i) if the Executive's employment is terminated under this Agreement due to Disability, thirty days after Notice of Termination is given to the Executive (provided the Executive shall not have returned to the performance of the Executive's duties on a full-time basis during such thirty-day period) or (ii) if the Executive's employment is involuntarily terminated under this Agreement for any other reason, the date on which a Notice of Termination is given; provided, however, that if within thirty days after any Notice of Termination is given to the Executive, the Executive notifies the Company or the Subsidiary that employs the Executive that a dispute exists concerning the termination, the Date of Termination shall be the date the dispute is finally determined, whether by mutual agreement by the parties or upon final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). "Disability" means that (i) a person has been totally incapacitated by bodily injury or physical or mental disease so as to be prevented thereby from engaging in a comparable occupation or employment for remuneration or profit, (ii) such person will be subject to such total incapacity for a period of at least eighteen consecutive months and (iii) such person is disabled for purposes of any and all of the plans or programs of the Company or any Subsidiary that employs the Executive under which benefits, compensation or awards are contingent upon a finding of disability. The determination with respect to whether the Executive is suffering from a Disability will be determined by a mutually acceptable physician or, if there is no physician mutually acceptable to the Company and the Executive, by a physician selected by the Dean of the University of Oklahoma Medical School. "Good Reason" means (a) without the Executive's express written consent, (i) (A) the assignment to the Executive of any duties, or any limitation of the Executive's responsibilities, inconsistent with the Executive's positions, duties, responsibilities and status with the Company or any Subsidiary that employs the Executive immediately prior to the date of the Change of Control, or (B) any removal of the Executive from, or any failure to re-elect the Executive to, any of the Executive's positions with the Company or any Subsidiary that employs the Executive immediately prior to the Change of Control, except in connection with the involuntary termination of the Executive's employment hereunder for Cause or as a result of the Executive's death or Disability or the termination of the Executive's employment on the Executive's normal retirement date; (b) any failure by the Company to pay, or any reduction by the Company of, the Executive's base annual salary or bonus compensation in effect immediately prior to the Change of Control; (c) any failure by the Company or any Subsidiary that employs the Executive to (i) continue to provide the Executive with the opportunity to participate, on terms no less favorable than those in effect immediately prior to the Change of Control, in any benefit plans and compensation programs in which the Executive was participating immediately prior to the Change of Control, or their equivalent, including but not limited to participation in pension, profit sharing, stock grants, stock option, savings, employee stock ownership, incentive compensation, group insurance plans or similar plans or programs or (ii) provide the Executive with all other fringe benefits (or their equivalent), including paid vacation, from time to time in effect for the benefit of any executive, management or administrative group which customarily includes a person holding the employment position with the Company or its Subsidiaries then held by the Executive; (d) without the Executive's express written consent, the relocation of the Company's headquarters or of the principal place of the Executive's employment to a location that is more than 35 miles further from the Executive's principal residence than such principal place of employment immediately prior to the Change of Control; (e) any change in the sick leave policy for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive which has an adverse effect on the Executive's rights and benefits pursuant to such policy; (f) any reduction in the benefits provided to the Executive pursuant to Section 14 of this Agreement; (g) any reduction to the extent applicable in benefits offered under an income protection insurance plan for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive; (h) any change in the pay policy for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive which has an adverse effect on the Executive's rights and benefits pursuant to such policy; (i) with respect to a Subsidiary that employs the Executive, the sale by the Company of 25% or more of such Subsidiary's common stock or 25% or more of the Subsidiary's then outstanding securities entitled to vote generally for the election of the Subsidiary's directors, or the sale by the Company of all or substantially all of the assets of such Subsidiary; (j) the breach of any provision of this Agreement by the Company or (k) the failure of any successor company to the Company to expressly assume this Agreement. "Group" has the meaning set forth in Rule 13d-5 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Net After Tax Benefit" means the sum of (i) the total amounts payable to the Executive under Section 9 of this Agreement, plus (ii) all other payments and benefits which the Executive receives or is then entitled to receive from the Company or any Subsidiary that would constitute a "parachute payment" within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Executive (based upon the rate in effect for such year as set forth in the Code at the time of termination of his employment), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code. "Notice of Termination" means a written notice which shall indicate those specific provisions in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. "Person" means any individual, firm, corporation, group (as such term is used in Rule 13d of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended) or other entity. "Reason" means (a) action by the Executive involving willful malfeasance, (b) failure to act by the Executive involving material nonfeasance having a material adverse effect on the Company or the Subsidiary that employs the Executive, (c) the Executive being convicted of a felony under United States federal, state, or local criminal law, or (d) the material breach of any provision of this Agreement by the Executive. "Subsidiary" with respect to the Company has the meaning set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. Annexure 1 Operative Provisions beginning the Annexure 1 Effective Date 1. OPERATION OF AGREEMENT The operative provisions of this Agreement shall become effective February 1, 1996, or immediately upon a Change of Control occurring after December 31, 1992, whichever occurs earlier, provided that the Executive is employed by the Company immediately prior to such Change of Control. Once the provisions become effective, this Agreement shall not terminate until the third anniversary of the Change of Control. Notwithstanding the termination of this Agreement, the Company shall remain liable for any rights or payments arising prior to such termination to which the Executive is entitled under this Agreement. 2. SERVICE AFTER CHANGE OF CONTROL Following a Change of Control, the Company will not terminate the Executive's employment with the Company except on account of Cause prior to the third anniversary of the Change of Control. Upon any termination of employment of the Executive, other than for Cause or upon death, a Notice of Termination shall be provided by the party causing such termination of employment. 3. BENEFITS UPON CHANGE OF CONTROL (a) Stock Plans. Notwithstanding the terms and conditions of any benefit plan or compensation program of the Company or any Subsidiary that employs the Executive including but not limited to any purchase plan, stock grant plan, stock option plan, employee stock ownership plan or similar plan or program (excluding any plan qualified under Section 401(a) of the Code), the Company shall, upon the occurrence of the Change of Control which causes this Agreement to become effective (i) accelerate, vest and make immediately exercisable in full (to the extent not already provided for under the terms of such applicable plans or programs) all unexercisable installments of all options to acquire securities of the Company and any accompanying stock appreciation rights, of which the Executive is the Beneficial Owner on the date of such Change of Control and (ii) waive any applicable restrictions including resale restrictions or rights of repurchase, relating to or imposed on securities granted by the Company to the Executive pursuant to such plans or programs which securities the Executive is the Beneficial Owner of on the date of such Change of Control. (b) Pension Plan. Following a Change of Control, the Executive may elect early retirement under a retirement plan available to salaried employees or employees generally of the Company or any Subsidiary that employs the Executive upon giving the Company (or a Subsidiary employing the Executive) two days' written notice. (c) Benefits Restoration Plan. To the extent that the Executive is or becomes a participant in the Benefits Restoration Plan, the Company shall amend or have amended the Benefits Restoration Plan, which amendment shall thereafter remain in effect, to provide in the event of an Executive's Termination for the benefits specified in Section 4(b) hereof. (d) Death of an Executive. In the event of the Executive's death prior to Termination, but while employed by the Company or any Subsidiary, as the case may be, his spouse or personal representative, if such spouse shall have died, shall be entitled to receive his salary at the rate then in effect through the date of his death, plus one additional pay period, as provided under the Company's pay policy, as well as any amounts previously earned and not paid for the periods of service prior to his date of death. 4. PAYMENTS AND BENEFITS UPON TERMINATION The Executive shall be entitled to the following payments and benefits following Termination: (a) Termination Payment. In recognition of past services to the Company by the Executive and in consideration for the undertaking by the Executive to provide services to the Company, pursuant to Section 2 hereof, the Company shall make a lump sum payment in cash to the Executive as severance pay on the fifth day following the Date of Termination equal to three times the Executive's annual base salary (including for these purposes any amounts previously deferred under any qualified or nonqualified deferred compensation plan, program or arrangement) in effect immediately prior to the date that either a Change of Control shall occur or such Date of Termination, whichever salary is higher. Notwithstanding the foregoing, if all or any portion of the payments or benefits provided under this Section 4(a), either alone or together with other payments and benefits which the Executive receives or is then entitled to receive from the Company or any Subsidiary, would constitute a Parachute Payment, then the payments and benefits provided to the Executive under this Section 4(a) shall be reduced but only to the extent necessary to ensure that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code; but only if, by reason of such reduction, the Executive's Net After Tax Benefit shall exceed the Net After Tax Benefit if such reduction were not made. The foregoing calculations (and any calculations required under the definition of Net After Tax Benefit) shall be made, at the Company's expense, by the Company and the Executive. If no agreement on the calculations is reached within five days of the Date of Termination, then the Executive and the Company will agree to the selection of an accounting firm to make the calculations. If no agreement can be reached regarding the selection of an accounting firm, the Company shall select a "big six" accounting firm which has no current or recent business relationship with the Company or with the Person or Group responsible for the Change of Control. The determination of any such firm selected will be conclusive and binding on all parties. (b) Benefits Restoration Plan. The Executive shall be entitled to additional years of credit for purposes of calculating the years of service and age of such Executive under the terms of the Benefits Restoration Plan equal to the lesser of (i) five years or (ii) the number of years necessary to bring the Executive to age 65 under the terms of the Benefits Restoration Plan, and the Executive shall have a nonforfeitable right to any and all benefits credited to such Executive under the Benefits Restoration Plan. (c) Death of the Executive. In the event of the Executive's death subsequent to Termination, all payments and benefits required by this Agreement shall be paid to the Executive's designated beneficiary or beneficiaries or, if he has not designated a beneficiary or beneficiaries, to his estate. 5. CONFIDENTIALITY The Executive agrees to hold in confidence any and all confidential information known to him concerning the Company and its Subsidiaries and their respective businesses so long as such information is not otherwise publicly disclosed. 6. ARBITRATION Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Oklahoma City, Oklahoma, or, at the option of the Executive, in the county where the Executive resides, in accordance with the Rules of the American Arbitration Association then in effect; provided, however, that if the Executive institutes an action relating to this Agreement the Executive may, at his option, bring such action in an Oklahoma court of competent jurisdiction. Judgment may be entered on the arbitrator's award in any such court having jurisdiction. 7. CONFLICT IN BENEFITS This Agreement is not intended to and shall not adversely affect, limit or terminate any other agreement or arrangement between the Executive and the Company presently in effect or hereafter entered into, including any employee benefit plan under which the Executive is entitled to benefits. 8. MISCELLANEOUS (a) No Mitigation. All payments and benefits to which the Executive is entitled under this Agreement shall be made and provided without offset, deduction or mitigation on account of income the Executive could or may receive from other employment or otherwise. (b) Legal Expenses. The Company shall pay all costs and expenses, including reasonable attorneys' fees and disbursements, of the Executive, at least monthly, in connection with any litigation, arbitration or similar proceeding, whether or not instituted by the Company or the Executive, with respect to the interpretation or enforcement of any provision of this Agreement. (c) Notices. Any notices required under the terms of this Agreement shall be effective when mailed, postage prepaid, by certified mail and addressed to, in the case of the Company: R. G. Horner, Jr. Vice President and General Counsel Kerr-McGee Corporation Kerr-McGee Center Oklahoma City, Oklahoma 73102 and to, in the case of the Executive: Tom J. McDaniel Either party may designate a different address by giving written notice of change of address in the manner provided above. (d) Waiver. No waiver or modification in whole or in part of this Agreement, or any term or condition hereof, shall be effective against any party unless in writing and duly signed by the party sought to be bound. Any waiver of any breach of any provision hereof or any right or power by any party on one occasion shall not be construed as a waiver of, or a bar to, the exercise of such right or power on any other occasion or as a waiver of any subsequent breach. (e) Binding Effect; Successors. Subject to the provisions hereof, nothing in the Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation or the sale by the Company of all or substantially all of its properties and assets, or the assignment of this Agreement by the Company in connection with any of the foregoing actions. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and the Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 8(e) shall continue to apply to each subsequent employer of the Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. (f) Separability. Any provision of this Agreement which is held to be unenforceable or invalid in any respect in any jurisdiction shall be ineffective in such jurisdiction to the extent that it is unenforceable or invalid without affecting the remaining provisions hereof, which shall continue in full force and effect. The enforceability or invalidity of a provision of this Agreement in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (g) Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma applicable to contracts made and to be performed therein. (h) Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. (i) Entire Agreement. This Agreement comprise the entire agreement between the Company and its Subsidiaries and the Executive and shall supersede any and all previous contracts, agreements or understandings between the Company and its Subsidiaries and the Executive with respect to the subject matter hereof. Schedule I-A to Annexure 1 CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Beneficial Owner" has the meaning set forth in Rules 13d-3 and 13d-5 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Benefits Restoration Plan" means the Company's Benefits Restoration Plan, As Amended and Restated Effective September 12, 1989, as amended. "Cause" means willful and gross misconduct on the part of the Executive that has a materially adverse effect on the Company and its Subsidiaries, taken as a whole, or the conviction of the Executive of a felony under United States federal, state or local criminal law, as determined in good faith by a written resolution duly adopted by the affirmative vote of not less than two-thirds of all of the directors who are not employees, officers, or otherwise Affiliates of the Company. "Change of Control" means any one of the following: (a) a change in any two year period in a majority of the members of the Board of Directors of the Company resulting from the election of directors who were not directors at the beginning of such period (other than the election of directors to fill vacancies created by death or Disability, or the election of a director to replace a director who by virtue of his age is not eligible for election under the by-laws of the Company as in effect on the date of this Agreement); (b) any Person or Group, together with its Affiliates, become the Beneficial Owner, directly or indirectly, of 25% or more of the Company's then outstanding Common Stock or 25% or more of the voting power of the Company's then outstanding securities entitled to vote generally for the election of the Company's directors; (c) the approval by the Company's stockholders of (i) the merger or consolidation of the Company with any other corporation (other than a merger or consolidation of the Company and a wholly-owned Subsidiary in which the holders of the Company's Common Stock immediately prior to such merger or consolidation have the same proportionate ownership of common stock of the surviving corporation immediately after the merger or consolidation), (ii) the sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of the assets of the Company; or (d) a majority of the members of the Board of Directors in office immediately prior to a proposed transaction determined by written resolution that such proposed transaction, if taken, will be deemed a Change of Control and such proposed transaction is affected. "Code" means the Internal Revenue Code of 1986, as amended. "Date of Termination" means if the Executive's employment is terminated during the term of this Agreement, the date on which a Notice of Termination is given; provided, however, that if within thirty days after any Notice of Termination is given to the Executive, the Executive notifies the Company or the Subsidiary that employs the Executive that a dispute exists concerning the termination, the Date of Termination shall be the date the dispute is finally determined, whether by mutual agreement by the parties or upon final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). "Disability" means that (i) a person has been totally incapacitated by bodily injury or physical or mental disease so as to be prevented thereby from engaging in a comparable occupation or employment for remuneration or profit, (ii) such person will be subject to such total incapacity for a period of at least eighteen consecutive months and (iii) such person is disabled for purposes of any and all of the plans or programs of the Company or any Subsidiary that employs the Executive under which benefits, compensation or awards are contingent upon a finding of disability. The determination with respect to whether the Executive is suffering from a Disability will be determined by a mutually acceptable physician or, if there is no physician mutually acceptable to the Company and the Executive, by a physician selected by the Dean of the University of Oklahoma Medical School. "Good Reason" means (a) without the Executive's express written consent, (i) the assignment to the Executive of any duties, or any limitation of the Executive's responsibilities, inconsistent with the Executive's positions, duties, responsibilities and status with the Company or any Subsidiary that employs the Executive immediately prior to the date of the Change of Control, or (ii) any removal of the Executive from, or any failure to re-elect the Executive to, any of the Executive's positions with the Company or any Subsidiary that employs the Executive immediately prior to the Change of Control, except in connection with the involuntary termination of the Executive's employment by the Company for Cause or as a result of the Executive's death or Disability; (b) any failure by the Company to pay, or any reduction by the Company of, the Executive's base annual salary or bonus compensation in effect immediately prior to the Change of Control; (c) any failure by the Company or any Subsidiary that employs the Executive to (i) continue to provide the Executive with the opportunity to participate, on terms no less favorable than those in effect immediately prior to the Change of Control, in any benefit plans and compensation programs in which the Executive was participating immediately prior to the Change of Control or their equivalent, including, but not limited to, participation in pension, profit- sharing, stock grants, stock option, savings, employee stock ownership, incentive compensation, group insurance plans or similar plans or programs, or (ii) provide the Executive with all other fringes benefits (or their equivalent) including paid vacation, from time to time in effect for the benefit of any executive, management or administrative group which customarily includes a person holding the employment position with the Company or its Subsidiaries then held by the Executive; (d) without the Executive's express written consent, the relocation of the Company's headquarters or of the principal place of the Executive's employment to a location that is more than 35 miles further from the Executive's principal residence than such principal place of employment immediately prior to the Change of Control; (e) any change in the sick leave policy for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive which has an adverse effect on the Executive's rights and benefits pursuant to such policy; (f) any reduction to the extent applicable in benefits offered under an income protection insurance plan for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive; (g) any change in the pay policy for salaried employees or employees generally of the Company or any Subsidiary that employs the Executive which has an adverse effect on the Executive's rights and benefits pursuant to such policy; (h) with respect to a Subsidiary that employs the Executive, the sale by the Company of 25% or more of such Subsidiary's common stock or 25% or more of the Subsidiary's then outstanding securities entitled to vote generally for the election of the Subsidiary's directors, or the sale by the Company of all or substantially all of the assets of such Subsidiary; (i) the breach of any provision of this Agreement by the Company or (j) the failure of any successor company to the Company to expressly assume this Agreement. "Group" has the meaning set forth in Rule 13d-5 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Net After Tax Benefit" means the sum of (i) the total amounts payable to the Executive under Section 4(a) of this Agreement, plus (ii) all other payments and benefits which the Executive receives or is then entitled to receive from the Company or any Subsidiary that would constitute a Parachute Payment, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Executive (based upon the rate in effect for such year as set forth in the Code at the time of termination of his employment), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code. "Notice of Termination" means a written notice to the Executive or to the Company, as the case may be, which shall indicate those specific provisions in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination of the Executive's employment constituting a Termination under the provision so indicated. "Parachute Payment" means any payment deemed to constitute a "parachute payment" as defined in Section 280G of the Internal Revenue Code of 1986, as amended. "Person" means any individual, firm, corporation, group (as such term is used in Rule 13d of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended) or other entity. "Subsidiary" with respect to the Company has the meaning set forth in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended. "Termination" means following the occurrence of any Change of Control by the Company (i) the involuntary termination of the employment of the Executive for any reason other than for Cause, death or Disability, or (ii) the termination of employment by the Executive for Good Reason; provided, however, that any retirement under a retirement plan available to salaried employees or employees generally of the Company or any Subsidiary that employs the Executive that is coincident with or subsequent to a Termination, will not preclude payments under this Agreement to which the Executive is entitled in respect of such Termination. EX-12 4 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In millions of dollars) 1994 1993 1992 1991 1990 Income (loss) from continuing operations $ 90 $ 77 $(26) $102 $113 Add - Provision (benefit) for income taxes 42 41 (38) 64 43 Interest expense 59 47 66 78 86 Rental expense representa- tive of interest factor 5 5 6 6 6 Earnings $196 $170 $ 8 $250 $248 Fixed Charges - Interest expense $ 59 $ 47 $ 66 $ 78 $ 86 Rental expense representa- tive of interest factor 5 5 6 6 6 Interest capitalized 10 20 15 16 19 Total fixed charges $ 74 $ 72 $ 87 $100 $111 Ratio of earnings to fixed charges 2.6 2.4 -(1) 2.5 2.2 (1)Earnings in 1992 were inadequate to cover fixed charges by $79 million. EX-13 5 FINANCIAL STMTS & MD&A - ANNUAL REPROT TO STOCKHOLDERS Management's Discussion and Analysis Results of Consolidated Operations The company's net income for 1994 was $90 million, or $1.74 per common share, compared with 1993 net income of $77 million, or $1.57 per common share, and a 1992 net loss of $101 million, or $2.08 per common share. The 1992 loss included after-tax charges for the cumulative effect on prior years of changes in accounting principles of $70 million, or $1.45 per common share (see Note 2), and $5 million, or $.10 per common share, for the early extinguishment of the 9-3/4% debt (see Note 9). Excluding these charges, the net loss was $26 million, or $.53 per common share. The 1992 net loss also included a provision of $205 million, or $130 million after income tax benefits, for environmental reclamation and remediation of inactive sites. Operating profit for 1994 was $245 million, compared with $199 million and $229 million for 1993 and 1992, respectively. The $46 million increase in 1994 operating profit was due to improved results from refining and marketing and chemical operations, which more than offset the decreased operating profit from exploration and production and coal. The $30 million decrease in 1993 operating profit, compared with 1992, resulted from lower operating profit from all segments except coal, which increased slightly. Consolidated sales totaled $3.4 billion for 1994, compared with $3.3 billion for 1993 and $3.4 billion for 1992. The slight improvement in 1994 revenues was primarily due to higher crude oil and titanium dioxide pigment sales volumes and higher international pigment sales prices partially offset by lower crude oil, natural gas, and coal sales prices and lower natural gas sales volumes. Costs and operating expenses decreased $11 million in 1994, primarily due to lower crude oil costs for refining and marketing operations, partially offset by higher costs for exploration and production resulting from increased crude oil production and higher costs for chemical operations due to higher production volumes. The $90 million decrease in 1993 costs and operating expenses, compared with 1992, was due to lower crude oil and feedstock costs for refining and marketing operations, partially offset by higher costs resulting from increased sales volumes of coal and certain chemical products. Selling, general, and administrative expenses for 1994 were $20 million higher than 1993 due to restructuring costs and higher provisions for bad debts. The $16 million decrease in selling, general, and administrative expenses in 1993, compared with 1992, resulted from 1992 restructuring costs and lower costs associated with assets sold in prior years. Exploration costs for 1994, 1993, and 1992 were $85 million, $71 million, and $55 million, respectively. The 1994 increase resulted primarily from higher geophysical and dry hole costs. The increase in 1993 resulted primarily from higher dry holes costs. Provisions for environmental reclamation and remediation of inactive facilities totaled $10 million, $4 million, and $205 million in 1994, 1993, and 1992, respectively. These amounts represented additional provisions established for the removal of low-level radioactive materials from the company's inactive facility in West Chicago, Illinois, and reclamation of several other inactive facilities. Interest and debt expense of $59 million for 1994 was $12 million higher than for the prior year, primarily due to lower capitalized interest, higher average interest rates, and higher debt. Interest and debt expense for 1993 decreased $19 million from the prior year, primarily due to lower average interest rates, lower debt, and higher capitalized interest. Other income for 1994 increased $4 million from 1993 due to higher interest income. Other income totaled $19 million for 1993, a $23 million decrease from 1992. This decrease was primarily due to lower foreign currency transaction gains. Segment Operations Operating profit (loss) from each of the company's segments is summarized in the following table: (In millions of dollars) 1994 1993 1992 Exploration and production $ 74 $ 82 $ 91 Refining and marketing 35 (28) (21) Chemicals 92 70 79 Coal 45 80 77 Other (1) (5) 3 Total $245 $199 $229 Exploration and Production Exploration and production operating profit was $74 million for 1994, compared with $82 million for 1993 and $91 million for 1992. Operating profit for 1994 was lower due principally to lower crude oil sales prices, lower natural gas deliveries and sales prices, and higher exploration expense, partially offset by higher crude oil sales volumes. The decline in 1993, compared with 1992, resulted from lower crude oil sales prices, higher exploration costs, and lower natural gas deliveries, partially offset by higher natural gas sales prices and higher crude oil sales volumes. Revenues and crude oil and natural gas volumes and prices are summarized in the following table: 1994 1993 1992 Revenues, including intersegment sales (millions of dollars) $ 633 $ 564 $ 560 Crude oil and condensate produced (thousands of barrels per day) 67.3 53.2 50.5 Average price per barrel of crude oil sold $14.81 $15.64 $18.11 Natural gas deliveries (MMCF per day) 271 286 296 Average price per MCF of natural gas delivered $ 1.76 $ 1.92 $ 1.56 Refining and Marketing Refining and marketing had operating profit of $35 million for 1994, compared with operating losses of $28 million and $21 million for 1993 and 1992, respectively. Revenues were $1.9 billion, $2 billion, and $2.2 billion in 1994, 1993, and 1992, respectively. The 1994 operating profit reflected improved wholesale gasoline and distillate margins resulting from lower crude oil costs, partially offset by lower sales prices. The 1993 operating loss resulted from negative margins due to product prices declining faster than feedstock costs and a reduction in LIFO inventory carrying value in 1993. The lower 1994 revenues resulted from lower sales prices. Revenues for 1993 were lower than the prior year due to lower sales prices and volumes. Chemicals Operating profit from chemicals totaled $92 million, $70 million, and $79 million for 1994, 1993, and 1992, respectively, on revenues of $639 million, $556 million, and $515 million, respectively. The increase in 1994 revenues was due to higher sales volumes for most chemical products and higher international titanium dioxide pigment sales prices, partially offset by lower domestic pigment sales prices. The increase in 1994 operating profit was due to lower per-unit production costs for most products and higher revenues. The increase in 1993 revenues, compared with 1992, was due primarily to higher sales volumes, partially offset by lower sales prices for pigment and most other products. Operating profit for 1993 was less than 1992 due to higher operating expenses resulting from the increased sales volumes, partially offset by lower per-unit cost of sales for synthetic rutile and most other products. Coal Coal operating profit was $45 million for 1994, compared with $80 million for 1993 and $77 million for 1992. Revenues were $294 million, $328 million, and $307 million in 1994, 1993, and 1992, respectively. Revenues decreased in 1994 due to lower average sales prices resulting from contract renegotiations in 1993, partially offset by higher sales volumes. Operating profit for 1994 declined due to the decrease in revenues. The increase in 1993 revenues, compared with 1992, was due to higher sales volumes, partially offset by lower average sales prices. The increased 1993 operating profit, compared with 1992, was primarily due to the increased revenues that more than offset higher operating expenses. Financial Condition Cash Flow Net cash provided by operating activities totaled $355 million for 1994, compared with $424 million and $277 million for 1993 and 1992, respectively. The company's net cash provided by operating activities for 1994 included net income of $90 million; depreciation, depletion, and amortization of $345 million; an environmental provision for inactive sites of $18 million; and other noncash charges of $73 million. These noncash charges were partially offset by a net increase in working capital items, excluding cash and short-term debt. Net cash provided by operating activities for 1993 reflects net income of $77 million; depreciation, depletion, and amortization of $321 million; and a net decrease in working capital items, excluding cash and short-term debt. Net cash provided by operating activities for 1992 consisted of the net loss of $101 million which included noncash charges for depreciation, depletion, and amortization of $312 million; an after-tax environmental provision for inactive sites of $130 million; and the cumulative effect of accounting changes of $70 million. These noncash charges were partially offset by changes in working capital items, excluding cash and short-term debt. Net cash used by the company in investing activities totaled $389 million, $396 million, and $325 million for 1994, 1993, and 1992, respectively. The major investing activity during each of the three years was for cash capital expenditures, which totaled $411 million in 1994, $451 million in 1993, and $373 million in 1992. Partially offsetting were investing inflows of $39 million in 1993 from the sale of the contract drilling operations and $35 million in 1992 from a contract settlement. Financing activities include dividends paid to common stockholders of the company totaling $78 million in 1994, and $73 million in both 1993 and 1992. In 1994 and 1993, increases in short-term borrowings exceeded long-term debt repayments by $99 million and $79 million, respectively; and in 1992, an additional $15 million was used for the net repayment of debt. Liquidity The net working capital position of the company at year-end 1994 of $73 million did not significantly change from the end of 1993. The current ratio was 1.1 to 1 at both December 31, 1994 and 1993, and was 1.3 to 1 at December 31, 1992. The percentage of total debt to total capitalization was 39% at December 31, 1994, compared with 37% and 42% at year-end 1993 and 1992, respectively. The year-end 1994 percentage increased from the prior year due to the increase in debt. The company has several revolving credit agreements. One provides for combined borrowings by the company and Kerr-McGee Credit Corporation, a wholly owned subsidiary, of up to $325 million through August 25, 1999, of which $70 million was outstanding at year-end 1994. Another agreement entered into by the company and Kerr-McGee Oil (U.K.) PLC, a wholly owned subsidiary, is a revolving credit agreement with several banks providing for combined borrowings of up to $230 million through December 21, 1999, of which $80 million was outstanding at year- end 1994. Both of these agreements require that the principal amounts outstanding be paid in full on the respective termination dates. Interest is payable at varying rates. The company's wholly owned subsidiary, Kerr-McGee Canada Ltd., has revolving credit agreements with three banks each to provide borrowings of up to U.S. $30 million. Interest is payable at varying rates. These agreements may be extended for one-year terms if mutually agreed to by the company and the banks. During 1994, these agreements were extended for one year. The company is the guarantor for each of these agreements. At December 31, 1994, amounts outstanding pursuant to these agreements were as follows: Amount Outstanding Date of Agreement Termination Date (In millions of dollars) September 20, 1993 September 19, 1995 $28 October 4, 1993 October 3, 1995 15 October 20, 1993 October 19, 1995 23 At year-end 1994, the company had available unused lines of credit and revolving credit facilities of $480 million. Of this amount, $285 million and $171 million can be used to support the commercial paper borrowings of Kerr-McGee Credit Corporation and Kerr-McGee Oil (U.K.) PLC, respectively. In February 1995, the company's wholly owned subsidiary, Kerr-McGee China Petroleum Ltd., entered into a revolving credit agreement with several banks. This facility is in conjunction with the exploration and production activities in China. The agreement provides for borrowings up to $105 million and has a three-year term with interest at varying rates. Capital expenditures for the three years ended December 31, 1994, totaled $1.2 billion and have been financed through internally generated funds and various borrowings. For the three-year period ended December 31, 1994, net cash provided by operating activities, excluding working capital changes, was approximately the same as the total capital expenditures during the same period. Management anticipates that the cash requirements for the 1995 capital expenditures program, currently estimated to be $420 million, excluding acquisitions, and the capital expenditures programs for the next several years can be provided through internally generated funds and selective short-term and/or long-term borrowings. It is the company's intent to hedge a portion of its monetary assets, liabilities, and commitments denominated in foreign currencies; therefore, from time to time, the company purchases foreign currency forward contracts to provide funds for known or anticipated operating and capital requirements that will be denominated in foreign currencies. Additionally, the company uses commodity futures and options to minimize the price risks associated with producing and holding petroleum products. Outstanding futures, forward, and option contracts are described in Note 12 to the financial statements. Coal markets continue to experience competitive pricing. Although domestic markets are affected by the Clean Air Act Amendments of 1990, the company is well positioned with its reserves of low-sulfur coal. Approximately 70% of the company's present reserves will continue to be considered compliance coal after the year 2000. Uncommitted reserves and existing production capacity should permit the company to expand its export sales and participate in the expected growth in domestic demand for low-sulfur coal. During the past two years, the company has been involved in discussions and negotiations to sell, merge, or restructure its refining and marketing operations. Letters of intent were signed in January 1995 to sell the Corpus Christi, Texas, and Cotton Valley, Louisiana, refineries and a lubricant manufacturing company. Offers for certain other refining and marketing assets are being evaluated, but no agreements have been entered into. The company does not believe the disposals would have a material adverse effect on its future consolidated operations and cash flow. Environmental Matters The company's operations are subject to various environmental laws and regulations. Under these laws, the company is subject to possible obligations to remove or mitigate the effects on the environment of the disposal or release of certain chemical, petroleum, or low-level radioactive substances at various sites, including sites that have been designated Superfund sites by the United States Environmental Protection Agency (EPA) pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), as amended. At December 31, 1994, the company had received notices that it has been named a potentially responsible party (PRP) with respect to the remediation of 13 existing EPA Superfund sites and may share liability at certain of these sites. During 1994, the company received notification from the EPA that it was no longer considered a PRP with respect to one site. In addition, the company and/or its subsidiaries have executed consent orders, operate under a license, or have reached agreements to perform or have performed remediation or remedial investigations and feasibility studies on sites not included as EPA Superfund sites. The company does not consider the number of sites for which it has been named a PRP to be a relevant measure of liability. Because of continually changing environmental laws and regulations, the nature of the company's businesses, the large number of other PRPs, the present state of the law which, under CERCLA, imposes joint and several liability on all PRPs, and pending legal proceedings, the company is uncertain as to its involvement in many of the sites. Therefore, the company is unable to reliably estimate the potential liability and the timing of future expenditures that may arise from many of these environmental sites. Reserves have been established for the remediation and reclamation of active and inactive sites where it is probable that future costs will be incurred and the liability is estimable. In 1994, $21 million was added to the reserve for active and inactive sites. At December 31, 1994, the company's reserve for these sites totaled $239 million. In addition, at year-end 1994, the company had reserves of $78 million for the future costs for the abandonment and removal of offshore well and production facilities at the end of their productive lives and $16 million for the decommissioning and reclamation of coal mining locations. In the Consolidated Balance Sheet, $260 million of the total reserve is classified as a deferred credit, and the remaining $73 million is included in current liabilities. Expenditures for the environmental protection and cleanup of existing sites for each of the last three years and for the three-year period ended December 31, 1994, were as follows: (In millions of dollars) 1994 1993 1992 Total Capital expenditures $ 17 $13 $16 $ 46 Recurring expenses 28 26 26 80 Charges to environmental reserves 60 30 26 116 Total $105 $69 $68 $242 The company has not recorded in the financial statements potential reimbursements from governmental agencies (see Note 10) or other third parties. The following table reflects the known estimated cost of investigation and/or remediation that is probable and estimable. The table includes all EPA Superfund sites where the company has been notified it is a PRP under CERCLA and other sites where the company believes it has some financial involvement in investigation and/or remediation.
Total Known Total Total Number Stage of Investigation/ Estimated Expenditures of Identifiable Location of Site Remediation Cost Through 1994 PRPs (In millions of Dollars) EPA Superfund sites Milwaukee, Wis. Executed consent decree to remediate the site of a former wood-treating facility. Conducting pre- design studies under EPA oversight. $ 19 $ 3 3 West Chicago, Ill., Agreed to begin cleanup outside the of a portion of the site facility in 1995 (see Note 10). 22 - 1 11 sites Various stages of individually not investigation. 7 3 489 material Total 48 6 493 Non-EPA Superfund sites under consent order, license, or agreement West Chicago, Ill., Pursuing a license to facility decommission a former facility (see Note 10). Began shipments to a permanent disposal facility during 1994. 252 95 Three sites Agreed to remediation individually plans for a major not material portion of these sites. 48 39 Total 300 134 Non-EPA Superfund sites individually not material 119 88 Total for all sites $467 $228
Although management believes adequate reserves have been provided for environmental and all other known contingencies, it is possible, due to the previously noted uncertainties, that additional reserves could be required in the future that could have a material effect on the 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. Accounting Matters During 1994, the company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," issued by the Financial Accounting Standards Board which expands the use of fair value accounting for certain investments in debt and equity securities but retains the use of the amortized cost method for investments in debt securities that the company has the positive intent and ability to hold to maturity. There was no effect on net income as the result of adopting the standard (see Note 12). Responsibility for Financial Reporting The company's management is responsible for the integrity and objectivity of the financial data contained in the financial statements. These financial statements have been prepared in conformity with generally accepted accounting principles appropriate under the circumstances and, where necessary, reflect informed judgments and estimates of the effects of certain events and transactions based on currently available information at the date the financial statements were prepared. The company's management depends on the company's system of internal accounting controls to assure itself of the reliability of the financial statements. The internal control system is designed to provide reasonable assurance, at appropriate cost, that assets are safeguarded and transactions are executed in accordance with management's authorizations and are recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Periodic reviews are made of internal controls by the company's staff of internal auditors, and corrective action is taken if needed. The Board of Directors reviews and monitors financial statements through its audit committee, which is composed solely of directors who are not officers or employees of the company. The audit committee meets with the independent public accountants, internal auditors, and management to review internal accounting controls, auditing, and financial reporting matters. The independent public accountants are engaged to provide an objective and independent review of the company's financial statements and to express an opinion thereon. Their audits are conducted in accordance with generally accepted auditing standards, and their report is included below. Report of Independent Public Accountants To the Stockholders and Board of Directors of Kerr-McGee Corporation: We have audited the accompanying consolidated balance sheet of Kerr-McGee Corporation (a Delaware corporation) and subsidiary companies as of December 31, 1994 and 1993, and the related consolidated statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 financial position of Kerr-McGee Corporation and subsidiary companies as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As explained in Note 2 to the financial statements, effective January 1, 1992, the company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Prior years' financial statements were not restated. (ARTHUR ANDERSEN LLP) ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma, February 17, 1995 Kerr-McGee Corporation Consolidated Statement of Income (In millions of dollars, except per-share amounts) 1994 1993 1992 Sales $3,353 $3,281 $3,382 Costs and Expenses Costs and operating expenses 2,533 2,544 2,634 Selling, general, and administrative expenses 154 134 150 Depreciation and depletion 328 303 294 Exploration, including dry holes and amortization of undeveloped leases 85 71 55 Provision for environmental reclamation and remediation of inactive sites 10 4 205 Taxes, other than income taxes 75 79 84 Interest and debt expense 59 47 66 Total Costs and Expenses 3,244 3,182 3,488 109 99 (106) Other Income 23 19 42 Income (Loss) before Income Taxes, Extraordinary Charge, and Cumulative Effect on Prior Years of Changes in Accounting Principles 132 118 (64) Provision (Benefit) for Income Taxes 42 41 (38) Income (Loss) before Extraordinary Charge and Cumulative Effect on Prior Years of Changes in Accounting Principles 90 77 (26) Extraordinary Charge, Net of Income Taxes - - (5) Cumulative Effect on Prior Years of Changes in Accounting Principles, Net of Income Taxes - - (70) Net Income (Loss) $ 90 $ 77 $ (101) Net Income (Loss) per Common Share: Income (Loss) before Extraordinary Charge and Cumulative Effect on Prior Years of Changes in Accounting Principles $1.74 $ 1.57 $ (.53) Extraordinary Charge - - (.10) Cumulative Effect on Prior Years of Changes in Accounting Principles - - (1.45) Total $ 1.74 $ 1.57 $(2.08) The accompanying notes are an integral part of these statements. Kerr-McGee Corporation Consolidated Statement of Retained Earnings (In millions of dollars, except per-share amount) 1994 1993 1992 Balance at Beginning of Year $1,309 $1,306 $1,480 Net income (loss) 90 77 (101) Dividends declared - $1.52 per common share (79) (74) (73) Balance at End of Year $1,320 $1,309 $1,306 The accompanying notes are an integral part of these statements. Kerr-McGee Corporation Consolidated Balance Sheet (In millions of dollars) 1994 1993 ASSETS Current Assets Cash $ 82 $ 94 Notes and accounts receivable 422 373 Inventories 399 349 Deposits and prepaid expenses 60 50 Total Current Assets 963 866 Investments and Other Assets 95 101 Property, Plant, and Equipment - Net 2,552 2,513 Deferred Charges 88 67 $3,698 $3,547 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 312 $ 265 Accounts payable 375 328 Long-term debt due within one year 8 43 Taxes, other than income taxes 33 39 Accrued liabilities 162 112 Total Current Liabilities 890 787 Long-Term Debt 673 590 Deferred Credits and Reserves Income taxes 179 172 Other 413 486 Total Deferred Credits and Reserves 592 658 Stockholders' Equity Common stock, par value $1.00 - 150,000,000 shares authorized, 53,304,076 shares issued in 1994 and 53,268,181 shares issued in 1993 53 53 Capital in excess of par value 309 308 Preferred stock purchase rights 1 1 Retained earnings 1,320 1,309 Unrealized gain on available-for- sale securities 12 - Common stock in treasury, at cost - 1,610,438 shares in 1994 and 1,612,688 shares in 1993 (63) (63) Deferred compensation (89) (96) Total Stockholders' Equity 1,543 1,512 $3,698 $3,547 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. Kerr-McGee Corporation Consolidated Statement of Cash Flows (In millions of dollars) 1994 1993 1992 Cash Flow from Operating Activities Net income (loss) $ 90 $ 77 $(101) Adjustments to reconcile to net cash provided by operating activities - Depreciation, depletion, and amortization 345 321 312 Deferred income taxes 3 2 (88) Cumulative effect on prior years of changes in accounting principles - - 70 Provision for environmental reclamation and remediation of inactive sites 18 4 205 Noncash items affecting net income 73 54 47 Retirements and gain on sale of assets (4) (9) (2) Changes in current assets and liabilities and other - (Increase) decrease in accounts receivable (48) 34 (57) (Increase) decrease in inventories (51) 36 (23) (Increase) decrease in deposits and prepaids (2) 7 2 Increase (decrease) in accounts payable and accrued liabilities 26 (9) (13) Decrease in taxes payable (3) (21) (18) Other (92) (72) (57) Net cash provided by operating activities 355 424 277 Cash Flow from Investing Activities Capital expenditures (411) (451) (373) Proceeds from sale of assets 27 17 25 Proceeds from sale of drilling operations - 39 - Proceeds from contract settlement - - 35 Purchase of long-term investments (35) (25) (16) Proceeds from sale of long-term investments 30 24 4 Net cash used in investing activities (389) (396) (325) Cash Flow from Financing Activities Increase in short-term borrowings 146 95 135 Proceeds from issuance of long-term debt - - 3 Repayment of long-term debt (47) (16) (153) Issuance of common stock 1 3 1 Dividends paid (78) (73) (73) Net cash provided (used) in financing activities 22 9 (87) Net Increase (Decrease) in Cash and Cash Equivalents (12) 37 (135) Cash and Cash Equivalents at Beginning of Year 94 57 192 Cash and Cash Equivalents at End of Year $ 82 $ 94 $ 57 The accompanying notes are an integral part of this statement. Notes to Financial Statements 1. Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of all subsidiary companies that are more than 50% owned and the proportionate share of joint ventures in which Kerr-McGee has an undivided interest. Investments in affiliated companies that are 20% to 50% owned are carried as Investments and Other Assets in the Consolidated Balance Sheet at cost adjusted for equity in undistributed earnings. Except for dividends, changes in equity in undistributed earnings are included in the Consolidated Statement of Income. All material intercompany transactions have been eliminated. Foreign Currencies As the U.S. dollar has been adopted as the functional currency for each of the company's international operations, foreign currency transaction gains or losses are recognized in the period incurred. Total foreign currency transaction gains and losses in 1994 and 1993 were immaterial. The company recorded net foreign currency transaction gains of $20 million in 1992. Net Income (Loss) per Common Share After adding the dilutive effect of the conversion of stock options to the weighted average number of shares outstanding, the shares used to compute net income per common share were 51,739,880 in 1994 and 49,281,023 in 1993. The weighted average number of shares used to compute the 1992 net loss per common share was 48,275,913. Cash Equivalents The company considers all investments purchased with a maturity of three months or less to be cash equivalents. Cash includes time deposits, certificates of deposit, and U.S. government securities all totaling $45 million in 1994 and $39 million in 1993. Inventories The cost of substantially all crude oil and refined petroleum product inventories is determined by the last-in, first-out (LIFO) method, and the cost of remaining inventories is determined by the first-in, first-out (FIFO) method. Inventory carrying values include material costs, labor, and indirect manufacturing expenses associated therewith. Materials and supplies are valued at average cost. Property, Plant, and Equipment Oil and Gas - Exploration expenses, including geological and geophysical costs, rentals, and exploratory dry holes, are charged against income as incurred. Costs of successful wells and related production equipment and developmental dry holes are capitalized and amortized on a field basis using the unit-of-production method as the oil and gas are produced. Proved properties are evaluated on an area-of-interest basis and impaired when capitalized costs exceed estimated future revenues, computed by applying current oil and gas prices to estimated future production, less estimated future expenditures to develop and produce the reserves. Undeveloped acreage costs are capitalized and amortized at rates that provide full amortization on abandonment of unproductive leases. Costs of abandoned leases are charged to the accumulated amortization accounts, and costs of productive leases are transferred to the developed property accounts. Other - Property, plant, and equipment is stated at original cost less reserves for depreciation, depletion, and amortization. Maintenance and repairs are expensed as incurred, except that costs of replacements or renewals that improve or extend the lives of existing properties are capitalized. Costs of nonproducing mineral acreage surrendered or otherwise disposed of are charged to expense at the time of disposition. Individual properties are written down when impairments are deemed to have occurred. Depreciation, Depletion, and Amortization - Property, plant, and equipment is depreciated, depleted, or amortized over its estimated life by application of the unit-of-production or the straight-line method. In arriving at rates under the unit-of-production method, the quantities of recoverable oil, gas, and other minerals are established based on estimates made by the company's geologists and engineers. Retirements and Sales - The cost and related depreciation, depletion, and amortization reserves are removed from the respective accounts upon retirement or sale of property, plant, and equipment. The resulting gain or loss is included in other income. Interest Capitalized - The company capitalizes interest costs on major projects that require a considerable length of time to complete. Interest capitalized in 1994, 1993, and 1992 was $10 million, $20 million, and $15 million, respectively. Income Taxes Deferred income taxes are provided to reflect the future tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Research and Development Costs Research and development costs are charged against earnings as incurred. Such costs totaled $10 million in 1994, $14 million in 1993, and $16 million in 1992. Site Dismantlement, Reclamation, and Remediation Costs The company provides for the estimated cost at current prices of final reclamation and land restoration at coal mining locations and the dismantlement and removal of oil and gas production and related facilities. Such costs are being accumulated over the estimated lives of the facilities by the use of the unit-of-production method. As sites of environmental concern are identified, the company assesses the existing conditions, claims, and assertions, generally related to former operations, and records an estimated liability when environmental assessments and/or remedial efforts are probable and the associated costs can be reasonably estimated. Gas-Balancing Arrangements Gas-balancing arrangements with partners in natural gas wells are accounted for by the entitlements method. At December 31, 1994 and 1993, neither the quantity nor dollar amount of such arrangements recorded in the Consolidated Balance Sheet was material. Lease Commitments The company utilizes various leased properties in its operations, principally for marketing facilities and buildings. Net lease rental expense was $16 million in each of the years 1994 and 1993 and $19 million in 1992. The aggregate minimum annual rentals under noncancelable leases in effect on December 31, 1994, totaled $33 million, of which $8 million is due in 1995, $8 million in 1996, $14 million in the period 1997 through 1999, and $3 million thereafter. Futures, Forward, and Option Contracts To minimize the price risks associated with producing and holding refined products, the company uses commodities futures and option contracts to hedge a portion of its crude oil, natural gas, and refined-product sales. These contracts generally have maturities of one year or less. Since the contracts qualify as hedges and correlate to price movements of crude oil, natural gas, and refined products, any gains or losses from these contracts are explicitly deferred and recognized as part of the hedged transaction. The company also hedges a portion of crude oil purchased for refineries and natural gas purchased for other operations. The company hedges a portion of its monetary assets, liabilities, and commitments denominated in foreign currencies. Periodically, the company purchases foreign currency forward contracts to provide funds for operating and capital expenditure requirements that will be denominated in foreign currencies and sells foreign currency forward contracts to convert receivables that will be paid in foreign currencies to U.S. dollars. Since these contracts qualify as hedges and correlate to currency movements, any gain or loss resulting from market changes will be offset by gains or losses on the hedged receivable, capital item, or operating cost. Management of price risks must consider market conditions and availability. As these factors change, the company adjusts its hedging strategy and modifies its futures, forward, and option contract positions. 2. Accounting Changes Effective January 1, 1992, the company adopted the provisions of Statement of Financial Accounting Standards (FAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and FAS No. 109, "Accounting for Income Taxes." The full amount of the company's accumulated postretirement benefit obligation of $64 million ($1.32 per common share) was recognized in 1992 as the cumulative effect on prior years of changes in accounting principles, net of income taxes, along with $6 million ($.13 per common share) related to the adoption of the liability approach in accounting for income taxes. 3. Cash Flow Information Net cash provided by operating activities reflects cash payments for interest and income taxes as follows: (In millions of dollars) 1994 1993 1992 Interest paid $76 $69 $74 Income taxes paid 42 59 52 During 1993, $149 million of the company's 7-1/4% convertible debentures due in 2012 was converted into common stock of the company. The common stock was issued from the company's treasury (see Note 17). During 1992, the company added coal reserves in a $20 million acquisition of additional leased acreage. A portion of the acquisition cost was paid in each of the years 1994, 1993, and 1991, and the remaining $8 million will be paid over the next two years. Other capital expenditures for which payment will be made in the subsequent year totaled $20 million, $10 million, and $32 million at year- end 1994, 1993, and 1992, respectively. Transactions affecting the debt and deferred compensation associated with the Employee Stock Ownership Plan as well as the revaluation of certain investments to fair value are noncash transactions and are not reflected in the Consolidated Statement of Cash Flows (see Notes 19 and 12, respectively). The effect of foreign currency exchange rate fluctuations on cash and cash equivalents was not material. 4. Notes and Accounts Receivable Notes and accounts receivable, net of the related allowance for doubtful accounts, at year-end 1994 and 1993 are: (In millions of dollars) 1994 1993 Notes receivable $ 1 $ 5 Accounts receivable 424 373 425 378 Allowance for doubtful accounts (3) (5) Total $422 $373 5. Inventories Major categories of inventories at year-end 1994 and 1993 are: (In millions of dollars) 1994 1993 Crude oil and refined products $181 $144 Chemicals and other products 147 134 Materials and supplies 71 71 Total $399 $349 Substantially all inventories of crude oil and refined products are valued using the LIFO method. If these inventories had been valued at current cost rather than on the LIFO basis at year-end 1994, their value would have been higher by approximately $5 million. At year-end 1993, market prices were lower than LIFO values, and the company recorded a $2 million charge to income to reduce the carrying value of these inventories to market value. During each of the years in the three-year period ended December 31, 1994, certain LIFO inventory quantities were reduced. The effect of the reductions was not material in 1994 or 1992. For 1993, the effect of the reduction was to decrease net income by $5 million. 6. Investments and Other Assets Investments and other assets consisted of the following at December 31, 1994 and 1993: (In millions of dollars) 1994 1993 Long-term receivables - net(1) $ 4 $ 17 Net deferred tax asset(2) 24 23 Investment in and advances to equity affiliates 9 10 U. S. government obligations 17 26 Corporate stocks 34 14 Other 7 11 Total $95 $101 (1)During 1994, the company provided an $8 million allowance for doubtful notes. (2)For a discussion of the net deferred tax asset, see Note 14. 7. Deferred Charges The cost of injected gas is deferred until sold at completion of miscible gas flood projects. The deferral of preoperating and startup costs associated with new plants and facilities is generally amortized over the first five years of operations. Deferred charges are as follows at year-end 1994 and 1993: (In millions of dollars) 1994 1993 Cost of injected gas $33 $31 Pension plan prepayment 20 - Preoperating and startup costs 6 12 Intangible assets 6 - Other 23 24 Total $88 $67 8. Property, Plant, and Equipment Fixed assets and related reserves by business segment at December 31, 1994 and 1993, are as follows:
Reserves for Depreciation, Depletion, and Gross Property Amortization Net Property (In millions of dollars) 1994 1993 1994 1993 1994 1993 Exploration and production $3,920 $3,783 $2,366 $2,294 $1,554 $1,489 Refining and marketing 577 561 366 340 211 221 Chemicals 755 760 355 357 400 403 Coal 532 517 267 249 265 268 Other 226 231 104 99 122 132 Total $6,010 $5,852 $3,458 $3,339 $2,552 $2,513
9. Debt Lines of Credit and Short-Term Borrowings At year-end 1994, the company had available unused bank lines of credit and revolving credit facilities of $480 million. Of this amount, $285 million and $171 million can be used to support commercial paper borrowing arrangements of Kerr-McGee Credit Corporation and Kerr-McGee Oil (U.K.) PLC, respectively. The company has arrangements to maintain compensating balances with certain banks that provide credit. At year-end 1994, the aggregate amount of such compensating balances was not material, and the company was not legally restricted from withdrawing all or a portion of such balances at any time during the year. At year-end 1994, short-term borrowings consisted of notes payable totaling $110 million (6% average interest rate) and commercial paper totaling $202 million (6.3% average interest rate). Outstanding at year-end 1993 were notes payable totaling $101 million (3.76% average interest rate) and commercial paper totaling $164 million (3.56% average interest rate). Long-Term Debt The company's policy is to classify borrowings under revolving credit facilities and commercial paper of up to $400 million in 1994 and $300 million in 1993 as long-term debt since the company has the ability under certain revolving credit agreements and the intent to maintain these obligations for longer than one year. Long-term debt consisted of the following at year-end 1994 and 1993: (In millions of dollars) 1994 1993 Debentures - 7% Debentures due November 1, 2011, net of unamortized debt discount of $114 million in 1994 and $116 million in 1993 (14.25% effective rate) $136 $134 8-1/2% Sinking fund debentures due June 1, 2006 56 68 Commercial Paper (6.29% at December 31, 1994) 250 15 Guaranteed Debt of Employee Stock Ownership Plan - 9.47% Series A notes due in installments through January 2, 2000 38 44 9.61% Series B notes due in installments through January 2, 2005 51 51 Notes Payable - Variable interest rate revolving credit agreements with banks (6.4% average rate at December 31, 1994) $70 million due August 25, 1999; $80 million due December 21, 1999 150 285 Variable interest rate loan with banks - 36 681 633 Long-Term Debt Due Within One Year (8) (43) Total $673 $590 Maturities of long-term debt due after December 31, 1994, are $8 million in 1995, $9 million in 1996, $10 million in 1997, $12 million in 1998, $412 million in 1999, and $230 million thereafter. In addition to the debt shown in the preceding table, the company guaranteed its ratable portion of the debt of unconsolidated affiliates accounted for by the equity method totaling $17 million at year-end 1994 and $16 million at year- end 1993. No loss is anticipated by reason of these guarantees. During 1993, the company called its 7-1/4% convertible debentures due June 15, 2012. Virtually all of the debt was converted into common stock of the company at the conversion price of $45.30 per share. The common stock was issued from the company's treasury. This conversion resulted in no gain or loss (see Notes 3 and 17). During 1992, the company redeemed its 9- 3/4% debentures due April 1, 2016. This early retirement resulted in an extraordinary charge of $8 million ($5 million after income taxes). Additional information regarding the major changes in debt during the periods and unused commitments for financing is included in the Financial Condition discussion in Management's Discussion and Analysis. 10. Contingencies West Chicago Since August 1979, when the company filed a plan with the Nuclear Regulatory Commission to decommission a former operation in West Chicago, Illinois, the company has been involved in a number of judicial and administrative proceedings. The operation, which was closed in 1973, processed thorium ores, leaving ore residues, process buildings, and equipment with some low-level radioactivity on site. While a number of these proceedings has been settled or resolved, the following discusses the remaining proceedings. Decommissioning - Several approvals have been received for the decommissioning process, but a license amendment to decommission has not been issued. The State of Illinois (the State) has jurisdiction over the site and requires offsite disposal of contaminated material. In July 1994, the company, the City of West Chicago and the State executed a Settlement Agreement (the Agreement) regarding the decommissioning of the closed West Chicago facility. Pursuant to the Agreement, the company leased appropriate support facilities during the summer of 1994 and began shipments of material from the site to a licensed permanent disposal facility in Utah in September 1994. Under the Illinois Uranium and Thorium Mill Tailings Control Act (the Act), the company is obligated to pay an annual storage fee of $2.00 per cubic foot of byproduct material located at the former facility. Under the Agreement, the amount of the storage fee paid each year shall not exceed $26 million, and all amounts paid pursuant to the Act are to be reimbursed to the company as decommissioning expenditures are incurred. The company has received reimbursement for all amounts paid under the Act to the State in 1994 and will continue to seek reimbursement for future amounts paid under the Act as decommissioning costs are incurred. The aggregate cost to decommission the former facility is difficult to estimate because of the many contingencies, including the terms of the license amendment required to complete the decommissioning process. Decommissioning costs to the company will be reduced by any amounts recovered pursuant to the Energy Policy Act of 1992 (which could total up to $40 million, of which $7 million was received in 1994). At December 31, 1994, the remaining reserves provided for the cost to decommission the site under the plan proposed by the company were $157 million (before any further recovery under the Energy Policy Act of 1992), payable over the time necessary to relocate the materials, presently estimated at between four and six years. Offsite Areas - The U.S. Environmental Protection Agency (EPA) has listed four areas in the vicinity of the West Chicago facility on the National Priority List that the EPA promulgates under authority of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and has designated the company as a potentially responsible party in these four areas. The EPA issued a unilateral administrative order for one of these areas (referred to as the residential area), which requires the company to conduct a removal action to excavate contaminated soils and to ship the soil elsewhere for disposal. While the company has agreed to conduct the cleanup, the company continues to assert all of its rights, including the right to seek compensation from the EPA for its expenses. Judicial Proceedings - Several personal injury lawsuits have been filed against the company's wholly owned subsidiary, Kerr-McGee Chemical Corporation, by residents of West Chicago seeking compensation for illnesses allegedly caused by exposure to thorium wastes from the former West Chicago facility. One case was settled in 1994 with a payment by the company. The remaining cases are in the early stages of discovery. The company will continue its defense of these cases and its efforts to recover insurance proceeds from policies on the former facility. Summary The company's plants and facilities are subject to various environmental laws and regulations. The company has been notified that it may be responsible in varying degrees for a portion of the costs to clean up certain waste disposal sites and former plant sites. At year-end 1994, the remaining reserves provided for the cost to investigate and/or remediate all presently identified sites of former or current operations, including $179 million for the former facility and offsite areas in West Chicago, were $239 million. Expenditures through December 31, 1994, totaled $228 million. In addition to the environmental issues previously discussed, the company is also a party to a number of other legal proceedings pending in various courts or agencies in which it or a subsidiary appears as plaintiff or defendant. Because of continually changing laws and regulations, the nature of the company's businesses, and pending legal proceedings, it is not possible to reliably estimate the amount or timing of all future expenditures relating to contingencies. The company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. Although management believes, after consultation with general counsel, that adequate reserves have been provided for all known contingencies, it is possible, due to the above-noted uncertainties, additional reserves could be required in the future that could have a material effect on results of operations in a particular quarter or annual period. However, the ultimate resolution of these commitments and contingencies, to the extent not previously provided for, should not have a material adverse effect on the company's financial position. 11. Other Deferred Credits and Reserves Other deferred credits and reserves consisted of the following at year-end 1994 and 1993: (In millions of dollars) 1994 1993 Reserves for site dismantlement, reclamation, and remediation $260 $336 Postretirement benefit obligations 108 103 Other 45 47 Total $413 $486 During 1994, the company provided $10 million, net of $8 million for reimbursements received pursuant to the Energy Policy Act of 1992 ($7 million related to the former facility in West Chicago, Illinois, see Note 10), for environmental reclamation and remediation of former plant sites. A provision of $4 million was made in 1993. During 1992, $205 million was provided principally for the West Chicago, Illinois, facility decommissioning project and former chemical and refining operating sites. 12. Financial Instruments and Hedging Activities Investments in Certain Debt and Equity Securities During the first quarter of 1994, the company adopted the accounting requirements of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which affects the company's accounting for investments in certain obligations of the U.S. government and equity securities that are considered to be available for sale. These financial instruments are carried in the Consolidated Balance Sheet at fair value, which is based on quoted market prices. Prior to the adoption of the new accounting method, these securities were carried at cost. Net income was not affected by this change in accounting principle since unrealized holding gains and losses, net of income taxes, are classified as a separate component of Stockholders' Equity. The company held no securities classified as held to maturity or trading during the year. At December 31, 1994 and 1993, these U.S. government obligations and equity securities were as follows: 1994 1993 Gross Unrealized (In millions of Fair Holding Gains Carrying Fair dollars) Cost Value (Losses) Amount Value Equity securities $12 $32 $20 $12 $43 U.S. government obligations - Maturing within one year 11 11 - 2 2 Maturing between one year and four years 19 17 (2) 26 26 Total $42 $60 $18 $40 $71 Equity securities are carried in the Consolidated Balance Sheet as Investments and Other Assets. U.S. government obligations are carried as Current Assets or Investments and Other Assets, depending upon their maturity. The change in the equity component for unrealized holding gains and losses, net of income taxes, during 1994 was as follows: (In millions of dollars) Balance January 1, 1994 $ - Effect of change in accounting principle 20 Net unrealized holding losses (8) Balance December 31, 1994 $12 Financial Instruments for Other than Trading Purposes In addition to the investments discussed above, the company holds or issues financial instruments for other than trading purposes. At December 31, 1994 and 1993, the carrying amount and estimated fair value of such financial instruments for which fair value can be determined, are as follows: 1994 1993 Carrying Fair Carrying Fair (In millions of dollars) Amount Value Amount Value Cash and cash equivalents $82 $82 $94 $94 Long-term notes receivable 2 2 2 1 Contracts to sell foreign currencies - 19 - 10 Contracts to purchase foreign currencies - 95 - 202 Short-term borrowings 312 312 265 265 Long-term debt 681 759 633 764 The carrying amount of cash and cash equivalents approximates fair value of those instruments due to their short maturity. The fair value of notes receivable is based on discounted cash flows. The fair value of the company's short- term and long-term debt is based on the quoted market prices for the same or similar debt issues or on the current rates offered to the company for debt with the same remaining maturity. The fair value of foreign currency forward contracts represents the aggregate replacement cost based on financial institutions' quotes. It was not practicable to estimate the fair value of financial instruments including investments in untraded, closely held entities that are carried in the Consolidated Balance Sheet at original cost of $4 million at both December 31, 1994 and 1993. It was not practicable to estimate the fair value of a $10 million long-term note receivable held in connection with the sale of a discontinued operation as the instrument is not marketable. At December 31, 1994 and 1993, the average interest rates were 4.8% and 3.8%, respectively. This note is scheduled to mature in November 1997. Hedging Activities The company's foreign currency contracts are hedges principally for chemicals' accounts receivable generated from pigment sales denominated in foreign currencies ($56 million in 1994) and operating costs and capital expenditures in international chemical and exploration and production joint- venture operations ($117 million in 1994). The purpose of these foreign currency hedging activities is to protect the company from the risk that the eventual U.S. dollar amount from sales to foreign customers and purchases from foreign suppliers will be adversely affected by foreign currency exchange rates. During 1994, the company's net foreign currency hedging gains and losses were immaterial. At year-end 1994, the company had foreign currency contracts maturing between January and December 1995 to purchase for $86 million various foreign currencies (42 million British pounds sterling and $38 million Australian). The company also had contracts to sell for $19 million various currencies, principally European currencies, maturing between January and April 1995. Net unrealized gains on these contracts totaled $9 million at year-end 1994. At December 31, 1993, the company had foreign currency contracts maturing between January 1994 and December 1995 to purchase for $209 million various foreign currencies (105 million British pounds sterling and $72 million Australian). Additionally, at December 31, 1993, the company had contracts to sell for $10 million various currencies, principally European currencies, which matured between January and May 1994. Contract amounts do not quantify risk or represent assets or liabilities of the company, but are used in the calculation of cash settlements under the contracts. These financial instruments are with major financial institutions, limit the company's market risks, expose the company to credit risks, and may at times be concentrated with certain institutions or groups of institutions. However, the credit worthiness of these institutions is subject to continuing review, and full performance is anticipated. The company also uses futures and option contracts to reduce the effect of the price volatility of crude oil, natural gas, and refined products. The futures contracts permit settlement by delivery of commodities. At year-end 1994, the aggregate value and quantities of open crude oil and refined-product contracts were insignificant. During 1994, the company sold forward approximately 25% and 11% of its worldwide natural gas and crude oil production, respectively, and 32% of refined-product sales. Additionally, the company purchased forward contracts covering 9% of crude runs at the refineries. Net hedging gains and losses are recognized as a part of the transactions hedged and were immaterial during 1994. The company also hedges a portion of natural gas purchased for other operations; however, these amounts were not material to the cost of enhanced recovery or the total annual throughput volume of the operations. Year-end hedge positions and activity during 1994 are not necessarily indicative of future activities and results. 13. Taxes, Other than Income Taxes Taxes, other than income taxes, during the years ended December 31, 1994, 1993, and 1992, are composed of the following: (In millions of dollars) 1994 1993 1992 Production/severance $ 27 $ 28 $ 33 Payroll 18 19 19 Property 18 17 17 Other 12 15 15 Total 75 79 84 Motor fuel and other excise taxes(1) 372 239 219 Total $447 $318 $303 (1)These taxes are excluded from both sales and costs. 14. Income Taxes The taxation of a company that has operations in several countries involves many complex variables, such as differing tax structures from country to country and the effect on U.S. taxation of international earnings. These complexities do not permit meaningful comparisons between the domestic and international components of income before income taxes and the provision for income taxes, and disclosures of these components do not provide indicators of relationships in future periods. Income (loss) before income taxes, extraordinary charge, and cumulative effect on prior years of changes in accounting principles is composed of the following: (In millions of dollars) 1994 1993 1992 Domestic $ 90 $120 $(99) International 42 (2) 35 Total $132 $118 $(64) During 1993, legislation was enacted that, among other things, increased the U.S. Federal income tax rate by 1% effective January 1, 1993. Separately, the income tax rate in Australia was reduced from 39% to 33%. The deferred income tax balances were adjusted to reflect these revised rates, which increased the 1993 U.S. Federal deferred provision by $2 million and decreased the international deferred benefit by $3 million. The 1994, 1993, and 1992 provision (benefit) for income taxes on income (loss) before extraordinary charge and cumulative effect on prior years of changes in accounting principles is summarized below: (In millions of dollars) 1994 1993 1992 U. S. Federal - Current $22 $12 $ 20 Deferred (3) 15 (67) 19 27 (47) International - Current 16 20 23 Deferred 2 (13) (14) 18 7 9 State 5 7 - Total $42 $41 $(38) Deferred tax liabilities (assets) at December 31, 1994 and 1993, are composed of the following: (In millions of dollars) 1994 1993 Net deferred tax liability - Accelerated depreciation $362 $325 Exploration and development 65 61 Undistributed earnings of foreign subsidiaries 29 28 Postretirement benefits (44) (41) Dismantlement, reclamation, remediation, and other reserves (109) (110) Foreign operating loss carryforwards (81) (62) Other (43) (29) 179 172 Net deferred tax asset - Accelerated depreciation 9 8 Other 5 1 Foreign operating loss carryforward (38) (32) (24) (23) Total deferred taxes $155 $149 The net deferred tax asset shown in the preceding table represents the net deferred taxes in certain foreign tax jurisdictions and therefore is classified as Investments and Other Assets in the Consolidated Balance Sheet. At December 31, 1994, the company had foreign net operating loss carryforwards totaling $360 million that have no expiration dates. The Internal Revenue Service has examined the company's Federal income tax returns for all years through 1989, and the years have been closed through 1983. The company believes that it has made adequate provision for income taxes that may become payable with respect to open tax years. In the following table, the U.S. Federal income tax rate is reconciled to the company's effective tax rates for income before extraordinary charge and cumulative effect on prior years of changes in accounting principles as reflected in the Consolidated Statement of Income. 1994 1993 1992 U.S. statutory rate 35.0% 35.0% (34.0)% Increases (decreases) resulting from - Statutory depletion in excess of cost depletion (3.6) (4.9) (4.7) Taxation of foreign operations (.5) 3.8 2.4 State income taxes 2.7 4.4 (2.7) Adjustment of prior years' accruals - (6.3) (12.6) Federal income tax credits (1.1) (2.1) (4.6) Adjustment of deferred tax balances due to tax rate changes - 4.8 - Other - net (.8) - (3.5) Total 31.7% 34.7% (59.7)% 15. Postretirement Benefits The company sponsors contributory plans to provide certain health care and life insurance benefits for retired employees. Substantially all the company's employees may become eligible for these benefits if they reach retirement age while working for the company; however, benefits available and costs to individual employees vary depending on the employee's date of retirement and date of employment with the company. At December 31, 1994 and 1993, the actuarial and recorded liabilities for postretirement benefits, none of which has been funded, are as follows: 1994 1993 (In millions of dollars) Health Life Health Life Actuarial present value of accumulated postretirement benefit obligations - Retirees $(60) $(14) $(58) $(18) Fully eligible active participants (14) (2) (11) (2) Other active participants (19) (3) (19) (3) Total (93) (19) (88) (23) Unrecognized net (gain) loss 2 (5) - 1 Accrued postretirement expense $(91) $(24) $(88) $(22) For the years ended December 31, 1994, 1993 and 1992, the components of net periodic expense for postretirement benefits were as follows: 1994 1993 1992 (In millions of dollars) Health Life Health Life Health Life Service cost - benefits earned during the period $2 $1 $2 $1 $2 $1 Interest cost on accumulated post- retirement benefit obligation 7 1 7 1 7 1 Net postretirement expense $9 $2 $9 $2 $9 $2 The following assumptions were used in estimating the actuarial present value of the accumulated postretirement benefit obligations and net periodic postretirement benefit expense: 1994 1993 1992 Future compensation increases 5.0% 5.0% 6.0% Discount rate 8.5 7.5 8.5 The health care cost trend rate used to determine the year- end 1994 accumulated postretirement obligation was 10% in 1995, gradually declining to 5% in the year 2009 and thereafter. The assumed trend rate used in measuring the year-end 1993 obligation was 12% in 1994, gradually declining to 4.5% in the year 2008 and thereafter. A 1% increase in the assumed health care cost trend rates for each future year would increase the accumulated postretirement benefit obligation by $11 million at December 31, 1994, and $10 million at December 31, 1993. In addition, the aggregate of the service and interest cost components of net periodic postretirement expense would increase by $1 million for each of the years 1994 and 1993 and $2 million for 1992 as a result of a 1% assumed increase. 16. Retirement Plans Most of the company's employees are covered under noncontributory retirement plans of the company and certain of its subsidiaries. The benefits of these plans are based primarily on years of service and employees' remuneration near retirement. The company's policy is to fund the minimum amounts as permitted by the Employee Retirement Income Security Act of 1974 (ERISA). The funded status of plans with assets in excess of accumulated benefits at December 31, 1994 and 1993, is as follows: (In millions of dollars) 1994 1993 Plan assets at fair value $ 402 $ 415 Actuarial present value of accumulated benefit obligations - Vested (263) (262) Nonvested (14) (18) Total (277) (280) Plan assets in excess of accumulated benefit obligations $ 125 $ 135 Plan assets at fair value $ 402 $ 415 Projected benefit obligations - Actuarial present value of accumulated benefit obligations (277) (280) Projected salary increases (45) (45) Total (322) (325) Plan assets in excess of projected benefit obligations 80 90 Unrecognized net asset at January 1, 1987 (26) (30) Unrecognized prior service costs 17 20 Unrecognized net gain (51) (65) Pension prepayment at end of year $ 20 $ 15 Net periodic pension credit, excluding a $2 million charge in 1994 related to the restructuring program (see Note 21), for each of the three years ended December 31, 1994, 1993, and 1992, is summarized as follows: (In millions of dollars) 1994 1993 1992 Service cost - benefits earned during the period $10 $ 9 $ 9 Interest cost on projected benefit obligations 24 23 20 Return on plan assets (6) (69) (35) Net amortization and deferral (35) 33 (1) Net pension credit $(7) $(4) $(7) The amount of benefits that can be covered by the funded plans is limited by ERISA and the Internal Revenue Code. Therefore, the company has unfunded supplemental plans designed to maintain benefits for all employees at the plan formula level and to provide senior executives with benefits equal to a specified percentage of their final average compensation. The projected benefit obligation for these unfunded plans totaled $13 million and $11 million at December 31, 1994 and 1993, respectively. An additional liability of $6 million was recognized in 1994 with an offsetting intangible asset (see Note 7) to record the amount by which the accumulated benefit obligation exceeded the accrued pension expense for these plans. Although not considered plan assets, the company has established a grantor trust with a balance of $4 million at December 31, 1994, from which payments for certain of these supplemental plans will be made. Net periodic pension expense for these plans was $4 million for 1994 and $3 million for each of the years 1993 and 1992. In estimating the actuarial present value of the projected benefit obligation and net periodic pension costs, the following rates were used: 1994 1993 1992 Future compensation increases 5.0% 5.0% 6.0% Discount rate 8.5 7.5 8.5 Long-term rate of return on plan assets 9.0 9.0 9.0 17. Stockholders' Equity Changes in common stock, capital in excess of par value, and treasury stock for 1994, 1993, and 1992 are as follows:
Common Stock Capital in Treasury Stock (In millions of dollars and Shares Par Excess of thousands of shares) Issued Value Par Value Shares Cost Balance December 31, 1991 53,169 $53 $282 4,940 $192 Exercise of stock options and stock appreciation rights 23 - 1 - - Issuance of restricted stock, net of forfeitures - - - (32) (1) Balance December 31, 1992 53,192 53 283 4,908 191 Exercise of stock options and stock appreciation rights 76 - 2 - - Issuance of restricted stock, net of forfeitures - - - (1) - Issuance of shares upon debt conversion(1) - - 23 (3,294) (128) Balance December 31, 1993 53,268 53 308 1,613 63 Exercise of stock options and stock appreciation rights 36 - 1 - - Issuance of shares for achievement awards - - - (3) - Balance December 31, 1994 53,304 $53 $309 1,610 $ 63 (1)See Note 9 for a discussion of the debt conversion.
The company has 40 million shares of preferred stock without par value authorized, and none is issued. Treasury stock totaling 1,100 shares and 33,350 shares was issued as restricted stock to certain employees during 1993 and 1992, respectively. The restrictions on these shares lapse three years from the date of issue. The restrictions on 28,325 shares issued in 1991 lapsed in 1994. In 1986, the company's Board of Directors adopted a stockholder-rights plan, which was subsequently amended and restated as of July 11, 1989. Such rights were distributed as a dividend at the rate of one right for each share of the company's common stock. Generally, the rights may be redeemed at $.05 per right 10 days after a person or group acquires 15% or more of the company's common stock. After the rights are no longer redeemable, each right would then entitle the holder (other than a 15% holder) to buy the company's common stock having a market value of twice the exercise price of $85. In the event the company is acquired in a merger or other business combination transaction, each right would entitle the holder to buy, at the exercise price of $85, the number of shares of the acquiring company's common stock having a market value of twice the right's exercise price. Unless redeemed earlier, the rights expire in 1996. 18. Employee Stock Option Plans As amended in May 1992, the 1987 Long Term Incentive Program authorized the issuance of 1,790,000 shares of the company's common stock through December 31, 2002, in the form of stock options, restricted stock, or long-term performance awards. The options may be accompanied by stock appreciation rights. In January 1995, the company's Board of Directors approved a proposal to be brought before the stockholders to amend this plan to restore the number of shares available to be granted to one million. The proposal to amend the plan will be voted on by the stockholders at the 1995 annual meeting. The 1984 and the 1978 Employee Stock Option Plans authorized the granting of options over 10-year periods for up to 1,000,000 and 800,000 shares, respectively, of common stock and accompanying stock appreciation rights. The 1984 plan was terminated on May 3, 1988, and the 1978 plan was terminated on May 1, 1984. After those dates, no further options could be granted under either plan, although options and any accompanying stock appreciation rights outstanding at those times can be exercised prior to their respective expiration dates. Transactions during the past three years under these plans are summarized below:
1978 Stock Option Plan 1984 Stock Option Plan 1987 Incentive Program Shares Price per Share Shares Price per Share Shares Price per Share Balance outstanding December 31, 1991 25,550 $27.38-$34.00 107,000 $27.06-$33.38 530,185 $32.38-$50.50 Options granted - - - - - - 142,550 36.69- 40.81 Options exercised (1,000) 27.38 - (4,750) 33.38 - (8,481) 32.38- 39.56 Options surrendered upon exercise of stock appreciation rights (24,550) 27.38- 34.00 (14,250) 27.06 - (3,001) 32.38 - Options cancelled - - - - - - (17,350) 32.38- 49.25 Balance outstanding December 31, 1992 - 88,000 27.06- 33.38 643,903 32.38- 50.50 Options granted - - - 327,300 43.00- 51.69 Options exercised (6,000) 27.06 - (61,333) 32.38- 49.25 Options surrendered upon exercise of stock appreciation rights (24,500) 27.06- 33.38 (40,733) 32.38- 49.25 Options cancelled - - - (9,515) 39.56- 49.25 Balance outstanding December 31, 1993 57,500 27.06- 33.38 859,622 32.38- 51.69 Options granted - - - 380,900 44.00- 46.88 Options exercised (13,000) 27.06 - (21,151) 32.38- 46.00 Options surrendered upon exercise of stock appreciation rights (11,500) 33.38 - (8,500) 42.63- 47.63 Options cancelled - - - (32,468) 38.06- 50.56 Balance outstanding December 31, 1994 33,000 27.06- 29.50 1,178,403 32.38- 51.69 Options exercisable December 31, 1994 33,000 27.06- 29.50 561,534 32.38- 51.69 Shares available to be granted December 31, 1994 - 264,644
With respect to all option outstanding on December 31, 1994, the average option price was $44.64; expiration dates ranged from January 22, 1995, to March 8, 2004; and the market value of each share subject to options was $46.19, based on the average of the high and low prices as reported in the NYSE Composite Transactions of the Wall Street Journal on December 30, 1994. 19. Employee Stock Ownership Plan In 1989, the company's Board of Directors approved a leveraged Employee Stock Ownership Plan (ESOP) into which is paid the company's matching contribution for the employees' contribution to the Kerr-McGee Corporation Savings Investment Plan (SIP). Most of the company's employees are eligible to participate in both the ESOP and the SIP. Although the ESOP and the SIP are separate plans, matching contributions to the ESOP are contingent upon participants' contributions to the SIP. In 1989, the ESOP borrowed $125 million from a group of lending institutions and used the proceeds to purchase 2.7 million shares of the company's treasury stock. The borrowings are guaranteed by the company and are reflected in the Consolidated Balance Sheet as Long-Term Debt and offset by a like amount of Deferred Compensation in Stockholders' Equity. The company used the $125 million proceeds from the sale of the stock to reacquire shares of its common stock on the open market and in privately negotiated transactions. The company stock acquired with the proceeds of the loan is held by the ESOP trust in a loan suspense account. The company's matching contribution and dividends on the shares held by the ESOP are used to repay the loan. Stock is released from the loan suspense account as the principal and interest are paid. The stock is then allocated to participants' accounts at market value as the participants' contributions are made to the SIP. Both the Long-Term Debt and the Deferred Compensation reflected in the company's Consolidated Balance Sheet are reduced in equal amounts as the ESOP loan is repaid. Dividends paid on the common stock held in participants' accounts are also used to repay the loan. Stock with a market value equal to the amount of the dividend is allocated to the participants' accounts. At December 31, 1994, the ESOP held 1,054,076 shares of stock allocated to participants' accounts and 1,659,373 shares in the loan suspense account. The shares allocated to participants include 7,835 that were released in January 1995. All ESOP shares are considered outstanding for earnings per share calculations. Dividends on ESOP shares are charged to retained earnings. Compensation expense is recognized on the cash method and is reduced for dividends paid on the ESOP shares. The company recognized ESOP-related expense of $15 million in each of the years 1994, 1993, and 1992. These amounts include interest expense incurred on the ESOP debt of $9 million in 1994, $9 million in 1993, and $10 million in 1992. The company contributed $14 million cash to the ESOP in 1994, $12 million in 1993, and $14 million in 1992. The cash contributions are net of $4 million for the dividends paid on the company stock held by the ESOP in each of the years 1994, 1993, and 1992. 20. Other Financial Information Condensed financial information relating to the company's previously unconsolidated, wholly owned finance and insurance subsidiaries is summarized below: (In millions of dollars) 1994 1993 1992 Results of operations - Interest income $ 20 $ 13 $ 12 Net income 4 3 3 Financial position - Assets $460 $245 $357 Liabilities (362) (151) (266) Stockholder's equity $ 98 $ 94 $ 91 21. Restructuring Charges During 1994, the company implemented a restructuring program consisting principally of a reorganization of corporate support functions. As a result of the program, 237 employees were terminated during the year. The company accrued a total of $8 million for future compensation, outplacement, and the cost of special termination benefits for retiring employees to be paid from retirement plan assets. The year-end reserve balance of $2 million represents primarily future compensation, which is expected to be paid and charged to the reserve during 1995. 22. Reporting by Business Segments (In millions of dollars) 1994 1993 1992 Sales - Exploration and production(1) $ 482 $ 369 $ 349 Refining and marketing 1,893 1,992 2,175 Chemicals 639 556 515 Coal 294 328 307 Other 45 36 36 Total $3,353 $3,281 $3,382 Operating profit (loss) - Exploration and production $ 74 $ 82 $ 91 Refining and marketing 35 (28) (21) Chemicals 92 70 79 Coal 45 80 77 Other (1) (5) 3 Total $ 245 $ 199 $ 229 Net operating profit (loss) - Exploration and production $ 49 $ 52 $ 53 Refining and marketing 22 (19) (13) Chemicals 59 44 50 Coal 34 58 53 Other (1) (3) 3 Total 163 132 146 Net interest expense (30) (27) (34) Net nonoperating expense(2) (43) (28) (138) Extraordinary charge, net of income taxes - - (5) Cumulative effect on prior years of changes in accounting principles, net of income taxes - - (70) Net income (loss) $ 90 $ 77 $ (101) Sales to unaffiliated customers - U.S. operations $2,958 $3,045 $3,174 International operations:(3) Canada - exploration and production 54 53 48 North Sea - exploration and production 191 81 92 Australia - chemicals 114 100 67 Other 36 2 1 395 236 208 Total $3,353 $3,281 $3,382 Operating profit (loss) - U.S. operations $186 $210 $217 International operations: Canada - exploration and production 8 2 2 North Sea - exploration and production 54 3 6 Australia - chemicals 7 (13) (13) Other (10) (3) 17 59 (11) 12 Total $245 $199 $229 (1)Excludes intersegment sales, primarily crude oil sales, of $151 million in 1994, $195 million in 1993, and $211 million in 1992. (2)Includes provision for reclamation and remediation of $6 million in 1994 and $130 million in 1992. The 1993 amount was not material. (3)Excludes international crude oil sales to domestic affiliates of $28 million in 1994, $39 million in 1993, and $55 million in 1992. (In millions of dollars) 1994 1993 1992 Depreciation, depletion, and amortization expense - Exploration and production $228 $206 $201 Refining and marketing 28 26 23 Chemicals 51 49 49 Coal 24 26 25 Other 14 14 14 Total $345 $321 $312 Capital expenditures - Exploration and production $318 $318 $264 Refining and marketing 18 34 40 Chemicals 51 39 33 Coal 27 28 69 Other 3 6 9 Total capital expenditures 417 425 415 Exploration expenses - Petroleum exploration and production: Dry hole costs 30 28 5 Amortization of undeveloped leases 17 18 18 Other 35 22 29 Total 82 68 52 Minerals and other 3 3 3 Total exploration expenses 85 71 55 Less - Amortization of oil and gas and minerals leases and other noncash expenses (18) (18) (18) 67 53 37 Total capital expenditures and cash exploration expenses $ 484 $ 478 $ 452 Identifiable assets - Exploration and production $1,781 $1,669 $1,547 Refining and marketing 579 541 595 Chemicals 735 733 753 Coal 320 335 327 Other 118 135 127 Total 3,533 3,413 3,349 Corporate assets 165 134 172 Total $3,698 $3,547 $3,521 Identifiable assets - U.S. operations $2,292 $2,223 $2,256 International operations: Canada - exploration and production 193 206 233 North Sea - exploration and production 679 681 516 Australia - chemicals 257 256 300 Other 112 47 44 1,241 1,190 1,093 Total $3,533 $3,413 $3,349 23. Results of Operations from Crude Oil and Natural Gas Activities The results of operations from crude oil and natural gas activities for the three years ended December 31, 1994, consisted of the following:
Gross Revenues Results of Sales to Sales to Production Other Depreciation Operations, (In millions Unaffiliated Affiliated (Lifting) Related Exploration and Depletion Income Tax Producing of dollars) Entities Entities Total Costs Costs Expenses Expenses Expenses Activities 1994 - Domestic $169 $108 $277 $ 96 $ 6 $45 $115 $ 4 $11 Canada 48 - 48 13 1 6 26 1 1 North Sea 182 14 196 70 - 17 61 17 31 Other international - 14 14 5 1 14 5 (3) (8) Total crude oil and natural gas activities 399 136 535 184 8 82 207 19 35 Other(1) 83 15 98 73 1 - 4 6 14 Total $482 $151 $633 $257 $ 9 $82 $211 $25 $49 1993 - Domestic $203 $129 $332 $105 $ 8 $36 $119 $20 $44 Canada 50 2 52 17 1 8 24 - 2 North Sea 77 17 94 45 - 13 36 - - Other international - 22 22 7 - 11 5 5 (6) Total crude oil and natural gas activities 330 170 500 174 9 68 184 25 40 Other(1) 39 25 64 43 - - 4 5 12 Total $369 $195 $564 $217 $ 9 $68 $188 $30 $52 1992 - Domestic $187 $130 $317 $111 $ 8 $28 $109 $19 $42 Canada 44 2 46 17 1 8 20 - - North Sea 89 27 116 47 8 14 44 2 1 Other international - 28 28 8 - 2 7 12 (1) Total crude oil and natural gas activities 320 187 507 183 17 52 180 33 42 Other(1) 29 24 53 34 - - 3 5 11 Total $349 $211 $560 $217 $17 $52 $183 $38 $53 (1)Includes brokered gas marketing, gas processing plants, pipelines, and other items that do not fit the definition of crude oil and natural gas activities but have been included above to reconcile to the segment presentations.
The table below presents the average sales price per unit of crude oil and natural gas produced and the production costs per barrel of oil equivalent during each of the past three years. 1994 1993 1992 Average sales price - Crude oil (per barrel) Domestic $14.64 $15.76 $18.17 Canada 13.39 14.65 16.24 North Sea 15.15 15.90 18.71 Other international 14.48 14.97 17.44 Average 14.81 15.64 18.11 Natural gas (per MCF) Domestic 1.83 2.03 1.67 Canada 1.37 1.42 1.03 North Sea 2.11 1.39 1.73 Average 1.76 1.92 1.56 Production costs - (per barrel of oil equivalent)(1) Domestic 4.34 4.32 4.61 Canada 2.75 3.44 3.51 North Sea 5.25 7.24 7.80 Other international 4.91 5.11 4.98 Average 4.47 4.73 5.01 (1)Natural gas production has been converted to a barrel of oil equivalent based on approximate relative heating value (6 MCF equals 1 barrel). 24. Capitalized Costs of Crude Oil and Natural Gas Activities Capitalized costs of crude oil and natural gas activities and the related reserves for depreciation, depletion, and amortization at the end of 1994 and 1993 are set forth below: (In millions of dollars) 1994 1993 Capitalized costs - Proved properties $3,746 $3,602 Unproved properties 101 103 Other 73 78 3,920 3,783 Reserves for depreciation, depletion, and amortization - Proved properties 2,261 2,195 Unproved properties 60 53 Other 45 46 2,366 2,294 Net capitalized costs $1,554 $1,489 25. Costs Incurred in Crude Oil and Natural Gas Activities Total expenditures, both capitalized and expensed, for crude oil and natural gas property acquisition, exploration, and development activities for the three years ended December 31, 1994, are reflected in the following table: Property Acquisition Exploration Development (In millions of dollars) Costs(1) Costs(2) Costs(3) 1994 - Domestic $43 $ 67 $125 Canada 1 5 9 North Sea - 16 39 China - 1 56 Other international 3 12 2 Total $47 $101 $231 1993 - Domestic $ 5 $ 48 $93 Canada - 5 6 North Sea - 16 172 China - 5 - Other international 3 4 3 Total $ 8 $ 78 $274 1992 - Domestic $11 $ 29 $ 87 Canada 1 6 8 North Sea - 22 123 Other international - 1 2 Total $12 $ 58 $220 (1)Includes $36 million and $8 million applicable to purchases of reserves in place in 1994 and 1992, respectively. (2)Exploration costs include delay rentals, exploration staff, exploratory dry holes, dry hole and bottom hole contributions, geological and geophysical studies, costs of carrying and retaining properties, etc., plus capital expenditures, such as costs of drilling and equipping successful exploratory wells, etc. (3)Development costs include costs incurred to obtain access to proved reserves (surveying, clearing ground, building roads, etc.), to drill and equip development wells, and to acquire, construct, and install production facilities and improved recovery systems. Development costs also include costs of developmental dry holes. 26. Crude Oil, Condensate, and Natural Gas Net Reserves (Unaudited) The estimates of proved reserves have been prepared by the company's geologists and engineers. Such estimates include reserves on certain properties that are partially undeveloped and reserves that may be obtained in the future by secondary recovery operations now in operation or for which successful testing has been demonstrated. The company has no proved reserves attributable to long-term supply agreements with governments, consolidated subsidiaries in which there are significant minority interests, or affiliates accounted for by the equity method. The following table summarizes the changes in the estimated quantities of the company's crude oil and condensate and natural gas reserves for the three years ended December 31, 1994: Crude Oil and Condensate (In millions of barrels) North Domestic Canada Sea China Other Total Proved developed and undeveloped reserves- Balance December 31,1991 80.4 14.3 61.0 - 4.7 160.4 Revisions of previous estimates .5 .9 5.1 - 1.2 7.7 Purchases of reserves in place 2.1 .1 - - - 2.2 Sales of reserves in place (.3) (.7) - - - (1.0) Extensions, discoveries, and other additions 1.2 .6 20.0 - - 21.8 Production (9.3) (1.7) (5.9) - (1.6) (18.5) Balance December 31, 1992 74.6 13.5 80.2 - 4.3 172.6 Revisions of previous estimates 5.2 .7 6.4 - .3 12.6 Purchases of reserves in place .3 - - 26.1 - 26.4 Sales of reserves in place (.4) (.1) - - - (.5) Extensions, discoveries, and other additions 5.9 .6 .8 - - 7.3 Production (10.1) (1.7) (6.1) - (1.5) (19.4) Balance December 31, 1993 75.5 13.0 81.3 26.1 3.1 199.0 Revisions of previous estimates 4.9 1.4 5.7 - - 12.0 Purchases of reserves in place 1.3 .1 - - .1 1.5 Sales of reserves in place (1.0) (.1) - - (2.1) (3.2) Extensions, discoveries, and other additions 5.7 .2 - - - 5.9 Production (9.3) (1.7) (12.6) - (1.0) (24.6) Balance December 31, 1994 77.1 12.9 74.4 26.1 .1 190.6 Proved developed reserves - December 31, 1991 42.7 12.8 20.9 - 4.4 80.8 December 31, 1992 40.1 13.4 16.3 - 3.9 73.7 December 31, 1993 44.8 12.9 40.5 - 2.7 100.9 December 31, 1994 44.5 12.4 48.8 - .1 105.8 Natural Gas (In billions of cubic feet) North Domestic Canada Sea Other Total Proved developed and undeveloped reserves- Balance December 31,1991 540.6 137.7 159.7 4.0 842.0 Revisions of previous estimates 19.8 3.4 2.6 - 25.8 Purchases of reserves in place 1.2 .1 - - 1.3 Sales of reserves in place (5.7) (8.0) - - (13.7) Extensions, discoveries, and other additions 17.7 9.6 - - 27.3 Production (88.2) (18.9) (.9) - (108.0) Balance December 31, 1992 485.4 123.9 161.4 4.0 774.7 Revisions of previous estimates (6.2) (7.2) 16.2 (4.0) (1.2) Purchases of reserves in place .2 - - - .2 Sales of reserves in place (3.3) (1.7) - - (5.0) Extensions, discoveries, and other additions 21.7 14.2 8.2 - 44.1 Production (85.2) (18.4) (.9) - (104.5) Balance December 31, 1993 412.6 110.8 184.9 - 708.3 Revisions of previous estimates 36.0 (16.6) 18.5 - 37.9 Purchases of reserves in place 16.3 .9 - - 17.2 Sales of reserves in place (.9) (1.0) - - (1.9) Extensions, discoveries, and other additions 181.0 6.0 - - 187.0 Production (76.8) (18.1) (4.4) - (99.3) Balance December 31, 1994 568.2 82.0 199.0 - 849.2 Proved developed reserves - December 31, 1991 378.4 131.5 56.9 4.0 570.8 December 31, 1992 345.5 120.4 56.8 4.0 526.7 December 31, 1993 346.8 107.4 113.2 - 567.4 December 31, 1994 345.9 78.6 134.3 - 558.8 The following presents the company's barrel of oil equivalent proved developed and undeveloped reserves based on approximate relative heating value (6 MCF equals 1 barrel). (In millions of North equivalent barrels) Domestic Canada Sea China Other Total December 31, 1991 170.5 37.2 87.6 - 5.4 300.7 December 31, 1992 155.5 34.1 107.1 - 5.0 301.7 December 31, 1993 144.3 31.5 112.1 26.1 3.1 317.1 December 31, 1994 171.8 26.6 107.5 26.1 .1 332.1 27. Standardized Measure of and Reconciliation of Changes in Discounted Future Net Cash Flows (Unaudited) The standardized measure of future net cash flows presented in the following table was computed using year-end prices and costs and a 10% discount factor. The future income tax expense was computed by applying the appropriate year-end statutory rates, with consideration of future tax rates already legislated, to the future pre-tax net cash flows less the tax basis of the properties involved. However, the company cautions that actual future net cash flows may vary considerably from these estimates. Although the company's estimates of total reserves, development costs, and production rates were based upon the best information available, the development and production of the oil and gas reserves may not occur in the periods assumed. Actual prices realized and costs incurred may vary significantly from those used. Therefore, such estimated future net cash flow computations should not be considered to represent the company's estimate of the expected revenues or the current value of existing proved reserves.
Standardized Future Measure of Development 10% Discounted (In millions Future and Production Future Future Net Annual Future Net of dollars) Cash Inflows Costs Income Taxes Cash Flows Discount Cash Flows 1994 - Domestic $2,124 $1,013 $257 $ 854 $312 $ 542 Canada 297 79 65 153 63 90 North Sea 1,679 596 280 803 237 566 China 418 193 52 173 77 96 Other international 3 - 1 2 1 1 Total $4,521 $1,881 $655 $1,985 $690 $1,295 1993 - Domestic $1,822 $ 968 $189 $ 665 $251 $ 414 Canada 352 141 58 153 51 102 North Sea 1,542 662 161 719 256 463 China 309 258 17 34 55 (21) Other international 41 30 6 5 1 4 Total $4,066 $2,059 $431 $1,576 $614 $ 962 1992 - Domestic $2,285 $1,038 $323 $ 924 $372 $ 552 Canada 410 138 83 189 80 109 North Sea 1,854 828 309 717 280 437 Other international 75 46 21 8 2 6 Total $4,624 $2,050 $736 $1,838 $734 $1,104
The changes in the standardized measure of future net cash flows are presented below for each of the past three years: (In millions of dollars) 1994 1993 1992 Net change in sales and transfer prices and in production costs $ 265 $ (433) $ 149 Changes in estimated future development costs (44) (137) (32) Sales and transfers less production costs (351) (326) (324) Purchases of reserves in place 20 (9) 9 Changes due to extensions, discoveries, etc. 97 96 99 Changes due to revisions in quantity estimates 131 86 32 Current period development costs 231 274 220 Accretion of discount 120 150 122 Changes in income taxes (135) 156 (71) Timing and other (1) 1 3 Net change 333 (142) 207 Total at beginning of year 962 1,104 897 Total at end of year $1,295 $ 962 $1,104 28. Supplementary Mineral Ore Reserve and Price Data (Unaudited) The following table represents selected statistics related to the company's mineral operations. Mineral reserves presented in the following table represent those estimated quantities of proved and probable ore that, under presently anticipated conditions, may be profitably recovered and processed for the extraction of their mineral content. Future production of these resources is dependent on many factors, including market conditions and governmental regulations. (In thousands of tons) 1994 1993 1992 1991 1990 Proved and probable (demonstrated) reserves, December 31 - Coal 864,180 887,900 906,400 774,900 793,600 Heavy minerals 6,000(1) 8,000 8,600 9,000 9,500 Production - Coal 25,607 23,325 20,756 21,750 19,782 Heavy minerals 268 263 262 251 139 Average market price (per ton) - Coal $10.73 $13.78 $14.57 $ 14.18 $ 13.52 Heavy minerals 85.43 69.47 77.99 101.35 101.53 (1)Represents 173 million tons of sand containing 3.5% heavy minerals in Western Australia. The percentages of valuable heavy minerals within the heavy mineral concentrate are 4.3% rutile, 61.2% ilmenite, 3.5% leucoxene, and 11% zircon. 29. Quarterly Financial Information (Unaudited) A summary of quarterly consolidated results for 1994 and 1993 is presented below:
Net Income (In millions of dollars, Operating Net Per Common except per-share amounts) Sales Profit Income Share 1994 Quarter Ended - March 31 $ 801 $ 55 $22 $ .42 June 30 865 74 30 .58 September 30 858 62 18 .35 December 31 829 54 20 .39 Total $3,353 $245 $90 $1.74 1993 Quarter Ended - March 31 $ 783 $ 55 $24 $ .50 June 30 846 71 34 .70 September 30 819 49 19 .39 December 31 833 24 - - Total $3,281 $199 $77 $1.57(1) (1)The 1993 quarterly amounts do not add to the annual per-share amount due to shares issued during the year (see Note 17).
The company's common stock is listed for trading on the New York Stock Exchange and on December 31, 1994, was held by approximately 12,000 shareholders. The ranges of sales prices and dividends declared during the last two years were as follows: Market Prices Dividends 1994 1993 per Share High Low High Low 1994 1993 Quarter Ended - March 31 48-1/4 41 49-3/8 41-3/4 $.38 $.38 June 30 48-1/2 40 53-1/4 47-3/4 .38 .38 September 30 51 46-1/8 56 48 .38 .38 December 31 49-1/4 43-3/4 54 43-5/8 .38 .38 Six-Year Financial Summary (In millions of dollars, except per-share amounts) 1994 1993 1992 1991 1990 1989 Summary of Net Income (Loss) Sales $3,353 $3,281 $3,382 $3,274 $3,683 $3,000 Operating costs and expenses 3,185 3,135 3,422 3,090 3,374 2,732 Interest expense 59 47 66 78 86 72 Total costs and expenses 3,244 3,182 3,488 3,168 3,460 2,804 109 99 (106) 106 223 196 Other income (expense) 23 19 42 60 (67) 19 Provision (benefit) for income taxes 42 41 (38) 64 43 81 Income (loss)from continuing operations before extraordinary charge and cumulative effect on prior years of changes in accounting principles 90 77 (26) 102 113 134 Income from discontinued operations - - - - 37 22 Extraordinary charge - - (5) - - - Cumulative effect on prior years of changes in accounting principles - - (70) - - - Net income (loss) $ 90 $ 77 $ (101) $ 102 $ 150 $ 156 Common Stock Information, per Share Net income (loss) per common share Continuing operations $ 1.74 $ 1.57 $ (.53) $ 2.10 $ 2.26 $ 2.75 Discontinued operations - - - - .75 .45 Extraordinary charge - - (.10) - - - Cumulative effect on prior years of changes in accounting principles - - (1.45) - - - Total $ 1.74 $ 1.57 $(2.08) $ 2.10 $ 3.01 $ 3.20 Dividends declared 1.52 1.52 1.52 1.50 1.41 1.27 Stockholders' equity 29.82 29.24 27.93 31.43 30.70 29.31 Market high for the year 51.00 56.00 46.38 46.88 53.63 52.00 Market low for the year 40.00 41.75 35.63 35.13 42.38 37.38 Market price at year-end $46.25 $45.25 $45.00 $38.63 $44.88 $50.75 Shares outstanding at year-end (thousands) 51,694 51,655 48,284 48,229 48,453 50,144 Balance Sheet Information Working capital $ 73 $ 79 $ 210 $ 343 $ 472 $ 328 Property, plant, and equipment, net 2,552 2,513 2,422 2,299 2,169 2,373 Total assets 3,698 3,547 3,521 3,421 3,473 3,332 Long-term debt 673 590 792 926 805 858 Total debt 993 898 971 983 820 886 Stockholders' equity 1,543 1,512 1,350 1,516 1,491 1,476 Cash Flow Information Net cash provided by operating activities 355 424 277 194 579 346 Capital expenditures 411 451 373 504 488 365 Dividends paid 78 73 73 72 69 58 Sale (purchase) of treasury stock, net $ - $ - $ - $ (13) $ (98) $ 83 Ratios and Percentage Current ratio 1.1 1.1 1.3 1.6 1.7 1.6 Average price/earnings ratio 26.1 31.1 NM 19.5 15.9 14.0 Total debt to total capitalization 39% 37% 42% 39% 34% 37% Six-Year Operating Summary 1994 1993 1992 1991 1990 1989 Exploration and Production Net production of crude oil and condensate (thousands of barrels per day) Domestic 25.5 27.8 25.5 23.0 20.7 21.4 Canada 4.7 4.7 4.5 4.6 4.3 3.1 North Sea 34.3 16.7 16.0 18.6 21.2 17.2 Other international 2.8 4.0 4.5 4.2 4.2 4.1 Total 67.3 53.2 50.5 50.4 50.4 45.8 Average price of crude oil sold (per barrel) Domestic $14.64 $15.76 $18.17 $19.24 $22.22 $17.73 Canada 13.39 14.65 16.24 17.36 20.58 15.71 North Sea 15.15 15.90 18.71 19.64 21.84 17.64 Other international 14.48 14.97 17.44 16.71 20.43 15.71 Average $14.81 $15.64 $18.11 $19.01 $21.77 $17.35 Natural gas deliveries (MMCF per day) 271 286 296 281 255 249 Average price of natural gas delivered (per MCF) $ 1.76 $ 1.92 $ 1.56 $ 1.44 $ 1.66 $ 1.63 Net exploratory wells drilled Oil 2.10 1.22 .86 3.22 2.07 5.31 Gas 7.51 1.00 1.73 2.41 10.41 1.66 Dry 8.47 10.09 5.53 9.18 16.15 15.97 Total 18.08 12.31 8.12 14.81 28.63 22.94 Net development wells drilled Oil 9.60 17.81 11.33 26.18 16.61 16.39 Gas 12.67 26.09 15.93 14.01 35.18 21.53 Dry 4.63 2.33 3.05 3.04 1.71 3.30 Total 26.90 46.23 30.31 43.23 53.50 41.22 Undeveloped net acreage (thousands) Domestic onshore 237 277 362 409 333 401 Domestic offshore 262 246 258 281 257 221 Canada 154 161 184 209 237 287 North Sea 363 243 184 188 113 123 Other international 1,591 1,926 217 4,092 4,166 3,421 Total 2,607 2,853 1,205 5,179 5,106 4,453 Developed net acreage (thousands) Domestic onshore 370 384 418 447 385 406 Domestic offshore 172 155 131 144 157 148 Canada 165 156 163 202 203 208 North Sea 21 21 18 17 17 14 Other international 19 43 24 24 24 24 Total 747 759 754 834 786 800 Estimated proved reserves Crude oil and condensate (millions of barrels) 191 199 173 160 136 117 Natural gas (billions of cubic feet) 849 708 775 842 826 794 Refining and Marketing Refining capacity (thousands of barrels per day) Crude oil distillation 181 181 181 181 181 181 Downstream processing units 155 155 155 155 155 155 Refinery runs (thousands of barrels per day) 146 140 135 130 142 147 Refined products produced (thousands of barrels per day) Unleaded gasoline 82.1 77.8 75.9 77.2 84.0 66.7 Leaded gasoline - - - - 3.0 15.2 Distillate 45.6 41.0 39.7 41.3 43.4 46.1 Residual fuel 11.4 13.2 13.5 13.7 13.1 11.0 Solvents, LPG, and asphalt 10.2 10.0 9.5 8.3 9.7 10.0 Other 13.0 14.3 12.7 10.3 9.9 13.9 Total 162.3 156.3 151.3 150.8 163.1 162.9 Refined products sold (thousands of barrels per day) Unleaded gasoline 115.1 113.1 119.5 110.0 108.5 86.8 Leaded gasoline - - - .3 4.2 15.7 Distillate 75.9 85.6 83.3 72.2 66.1 66.0 Residual fuel 9.7 12.4 11.3 11.7 11.3 8.6 Solvents, LPG, and asphalt 18.0 16.0 19.1 15.9 14.2 11.2 Other 14.7 11.5 9.6 10.6 11.0 12.7 Total 233.4 238.6 242.8 220.7 215.3 201.0 Refined-product sales prices (cents per gallon) Unleaded gasoline 53.06 55.51 61.50 65.78 74.06 59.32 Leaded gasoline - - - 70.56 69.70 60.10 Distillate 50.78 53.78 57.17 61.60 71.18 56.03 Residual fuel 29.88 30.61 31.72 27.30 41.25 39.92 Solvents, LPG, and asphalt 39.59 41.16 38.00 44.46 45.27 39.19 Other 68.16 60.66 69.06 69.58 86.48 77.75 Average 51.27 52.89 57.07 61.02 70.11 57.51 Chemicals Industrial and specialty chemical sales (thousands of tons) 381 331 314 263 233 196 Heavy-mineral sales (thousands of tons) 89 191 92 114 86 22 Treated forest-product sales (millions of board feet) 207 223 237 202 228 205 Coal Sales (millions of tons) 27.5 23.5 20.8 21.9 19.8 17.5 Recoverable reserves (millions of tons) 864 888 906 775 794 785 Employees Number of employees at year-end 5,524 5,812 5,866 6,072 6,756 7,942 Total wages and benefits (millions of dollars) $319 $319 $326 $323 $398 $361
EX-21 6 SIGNIFICANT SUBSIDIARIES EXHIBIT 21 KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES SUBSIDIARIES State or Country Percent Name of Subsidiary of Incorporation Owned Kerr-McGee Canada Ltd. Canada 100% Kerr-McGee Chemical Corporation Delaware 100% Kerr-McGee Coal Corporation Delaware 100% Kerr-McGee Credit Corporation Delaware 100% Kerr-McGee Oil (U.K.) PLC England 100% Kerr-McGee Refining Corporation Delaware 100% Cato Oil and Grease Co. Oklahoma 100%(1) Southwestern Refining Company, Inc. Delaware 100%(1) Kerr-McGee China Petroleum Ltd. Bahamas 100% (1)Owned by Kerr-McGee Refining Corporation A number of additional subsidiaries are omitted since, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary as of December 31, 1994. EX-23 7 ACCOUNTANTS' CONSENT EXHIBIT 23 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our reports dated February 17, 1995, included on page 26 of the company's 1994 Annual Report to Stockholders and incorporated by reference in this Form 10-K and on page 35 of this Form 10-K, into the company's previously filed Form S-8's numbered 2-90981, 33-18268, 33-24274, and 33-50949, and the company's previously filed Form S-3's numbered 2-78952, 33-5473, and 33-66112. (ARTHUR ANDERSEN LLP) ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma March 29, 1995 EX-24 8 POWERS OF ATTORNEY KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (John J. Murphy) John J. Murphy, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (Bennett E. Bidwell) Bennett E. Bidwell, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (John J. Nevin) John J. Nevin, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (Robert S. Kerr, Jr.) Robert S. Kerr, Jr., Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (William C. Morris) William C. Morris, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (E. H. Clark, Jr.) E. H. Clark, Jr., Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, his true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (Martin C. Jischke) Martin C. Jischke, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in her capacity as a director of the Company does hereby appoint F. A. McPherson and John C. Linehan, and each of them severally, her true and lawful attorneys or attorney-in-fact and agents or agent with power to act with or without the other and with full power of substitution and resubstitution, to execute for her and in her name, place and stead, in her capacity as a director of the Company, the Form 10-K and any and all amendments thereto, as said attorneys or each of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney or attorneys. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (Farah M. Walters) Farah M. Walters, Director KERR-McGEE CORPORATION POWER OF ATTORNEY WHEREAS, Kerr-McGee Corporation, a Delaware corporation (the "Company"), intends to file with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Act"), an annual report on Form 10K for the year ended December 31, 1994 (the "Form 10K") with such amendment or amendments thereto as may be necessary or appropriate from time to time, together with any and all exhibits and other relevant or associated documents; NOW THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company does hereby appoint John C. Linehan, his true and lawful attorney-in-fact and agent with power to act and with full power of substitution and resubstitution, to execute for him and in his name, place and stead, in his capacity as a director or officer or both, as the case may be, of the Company, the Form 10-K and any and all amendments thereto, as said attorney or any of them shall deem necessary or appropriate, together with all instruments necessary or incidental in connection therewith, and to file the same or cause the same to be filed with the Commission. The said attorney shall have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, each act whatsoever necessary or desirable to be done in the premises, as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorney. IN WITNESS WHEREOF, the undersigned has executed this instrument this 14th day of March, 1995. (F. A. McPherson) F. A. McPherson, Chairman of the Board and Chief Executive Officer and Director EX-27 9 ART. 5 FDS FOR YEAR-END 1994
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at December 31, 1994, and the Consolidated Statement of Income for the year ended December 31, 1994, and is qualified in its entirety by reference to such From 10-K. 0000055458 KERR-MCGEE CORPORATION 1,000,000 YEAR DEC-31-1994 DEC-31-1994 82 0 425 3 399 963 6010 3548 3698 890 0 53 0 0 1490 3698 3353 3353 2533 3244 711 0 59 132 42 90 0 0 0 90 1.74 0 See Note 1 to the Consolidated Financial Statements. See Note 12 to the Consolidated Financial Statements. See Note 4 to the Consolidated Financial Statements. See Notes 12 and 17 to the Consolidated Financial Statements. See Schedule II to Form 10-K.