-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, t0Kf7vfjsFM+S4aYB70/SJ9swZNywZVApdyORcTbhcAVTIIeK9QWOEc8EklQ22nv cJ6G58RT7wy2yfBwnIzLsA== 0000055458-95-000022.txt : 19950517 0000055458-95-000022.hdr.sgml : 19950516 ACCESSION NUMBER: 0000055458-95-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR MCGEE CORP CENTRAL INDEX KEY: 0000055458 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 730311467 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03939 FILM NUMBER: 95538099 BUSINESS ADDRESS: STREET 1: KERR MCGEE CTR STREET 2: 123 ROBERT S KERR CITY: OKLAHOMA CITY STATE: OK ZIP: 73102 BUSINESS PHONE: 4052701313 MAIL ADDRESS: STREET 1: P O BOX 25861 CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 FORMER COMPANY: FORMER CONFORMED NAME: KERR MCGEE OIL INDUSTRIES INC DATE OF NAME CHANGE: 19671227 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 1-3939 KERR-McGEE CORPORATION (Exact Name of Registrant as Specified in its Charter) A Delaware Corporation 73-0311467 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) Kerr-McGee Center, Oklahoma City, Oklahoma 73125 (Address of Principal Executive Offices and Zip Code) Registrant's telephone number, including area code (405) 270-1313 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of common stock, $1.00 par value, outstanding as of April 28, 1995: 51,724,838 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Three Months Ended March 31, (Millions of dollars, except per-share amounts) 1995 1994 Sales $463.9 $373.3 Costs and Expenses Costs and operating expenses 254.5 219.3 Selling, general, and administrative expenses 18.3 20.6 Depreciation and depletion 80.5 72.3 Exploration, including dry holes and amortization of undeveloped leases 21.2 23.1 Provision for environmental reclamation and remediation of inactive sites 8.1 2.2 Taxes, other than income taxes 16.0 18.5 Interest and debt expense 18.6 12.8 Total Costs and Expenses 417.2 368.8 46.7 4.5 Other Income 5.8 4.9 Income from Continuing Operations before Income Taxes 52.5 9.4 Provision for Income Taxes 15.7 2.5 Income from Continuing Operations 36.8 6.9 Income from Discontinued Operations (net of provision for income taxes of $.5 in 1995 and $8.2 in 1994) .9 14.7 Net Income $37.7 $21.6 Net Income per Common Share Continuing operations $.71 $.13 Discontinued operations .02 .29 Total $.73 $.42 Cash Dividends Declared per Common Share $.38 $.38 Average Number of Shares Outstanding (thousands) 51,706 51,656 The accompanying notes are an integral part of this statement. KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) March 31, December 31, (Millions of dollars) 1995 1994 ASSETS Current Assets Cash $ 96.5 $ 81.7 Notes and accounts receivable 411.5 421.7 Inventories 358.7 398.7 Deposits and prepaid expenses 49.7 60.3 Total Current Assets 916.4 962.4 Property, Plant, and Equipment 6,086.8 6,009.5 Less reserves for depreciation, depletion, and amortization 3,535.0 3,457.8 2,551.8 2,551.7 Investments and Other Assets 187.7 184.1 $3,655.9 $3,698.2 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term borrowings and accounts payable $ 586.6 $ 686.9 Other current liabilities 210.8 202.7 Total Current Liabilities 797.4 889.6 Long-Term Debt 669.8 672.8 Deferred Credits and Reserves 620.4 592.4 Stockholders' Equity Common stock, par value $1 - 150,000,000 shares authorized, 53,325,576 shares issued at 3-31-95 and 53,304,076 shares issued at 12-31-94 53.3 53.3 Capital in excess of par value 310.2 309.3 Preferred stock purchase rights .5 .5 Retained earnings 1,338.4 1,320.3 Unrealized gain on securities available-for-sale 13.8 11.5 Common shares in treasury, at cost - 1,610,088 shares at 3-31-95 and 1,610,438 at 12-31-94 (62.6) (62.6) Deferred compensation (85.3) (88.9) Total Stockholders' Equity 1,568.3 1,543.4 $3,655.9 $3,698.2 The "successful efforts" method of accounting for oil and gas exploration and production activities has been followed in preparing this balance sheet. The accompanying notes are an integral part of this statement. KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, (Millions of dollars) 1995 1994 Operating Activities Net income $ 37.7 $ 21.6 Adjustments to reconcile to net cash provided by operating activities - Depreciation, depletion, and amortization 92.6 83.2 Deferred income taxes 15.5 (5.8) Provision for reclamation and remediation of inactive sites 8.1 2.2 Noncash items affecting net income 17.4 15.7 Other net cash provided by (used in) operating activities 26.0 (50.6) Net Cash Provided by Operating Activities 197.3 66.3 Investing Activities Capital expenditures (124.4) (129.4) Purchase of long-term investments (.1) (35.2) Other investing activities 34.2 11.1 Net Cash Used in Investing Activities (90.3) (153.5) Financing Activities Increase (decrease) in short-term borrowings (73.5) 148.9 Repayment of debt - (36.1) Dividends paid (19.6) (19.6) Other financing activities .9 - Net Cash Provided by (Used in) Financing Activities (92.2) 93.2 Net Increase in Cash and Cash Equivalents 14.8 6.0 Cash and Cash Equivalents at Beginning of Period 81.7 94.4 Cash and Cash Equivalents at End of Period $ 96.5 $100.4 The accompanying notes are an integral part of this statement. KERR-McGEE CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1995 A. The condensed financial statements included herein have been prepared by the company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments, consisting only of normal recurring accruals, necessary to present fairly the resulting operations for the indicated periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the company's latest annual report on Form 10-K. B. After adding the dilutive effect of the conversion of options to the weighted average number of shares outstanding, the shares used to compute net income per common share were 51,816,492 and 51,731,887 for the three months ended March 31, 1995 and 1994, respectively. C. The company has entered into various contracts or letters of intent to sell certain refining and marketing assets. The sale of a small refinery was completed in the first quarter of 1995. The sale of other refining and marketing assets are scheduled for closing or are in various stages of negotiations. The company intends to complete its plan to exit the refining and marketing business in 1995; therefore, refining and marketing operations are reported as a discontinued operation. No material gain or loss is expected to result from the disposal of the segment. Revenues applicable to the discontinued operations totaled $449.1 million and $461.6 million for the three months ended March 31, 1995 and 1994, respectively. Refining and marketing assets not yet sold are included as part of the appropriate line items in the Consolidated Balance Sheet. Included are accounts receivable of $137.5 million; inventories of $176 million; net property, plant, and equipment of $206.9 million; accounts payable of $127.4 million; and other current liabilities of $39 million. D. The crude oil and refined petroleum products inventories of the refining and marketing operations are priced at cost under the LIFO method. The carrying values of these inventories under the LIFO method are based on an annual determination of quantities and costs as of the last day of the fiscal year. However, since these inventories are held for sale, the carrying values at March 31, 1995, were based on quantities and costs expected to exist at the date of disposition. E. Net cash provided by operating activities reflects cash payments for income taxes and interest as follows: Three Months Ended March 31, (Millions of dollars) 1995 1994 Income taxes $2.2 $20.7 Interest 23.2 19.5 F. The Kerr-McGee Corporation Employee Stock Ownership Plan (ESOP) was established in 1989. A leveraged employee stock ownership plan, the ESOP invests only in the common stock of the company. Most of the company's employees are eligible to participate in both the ESOP and the Kerr-McGee Savings Investment Plan (SIP). Participants' contributions to the SIP are matched by company contributions to the ESOP. Although the SIP and the ESOP are separate plans, matching contributions to the ESOP are contingent upon participants' contributions to the SIP. In 1989, the ESOP purchased 2.7 million shares of the company's common stock at market value. To finance the purchase, the ESOP incurred indebtedness to a group of institutional investors in the aggregate principal amount of $125 million. The borrowings are guaranteed by the company. At March 31, 1995 and 1994, the ESOP held company stock as follows: 1995 1994 Allocated to participants 1,092,019 918,877 Loan suspense account 1,561,689 1,755,844 Released but not allocated 51,769 8,704 All ESOP shares are considered outstanding for earnings per share calculations. Dividends on ESOP shares are charged to retained earnings. Compensation expense, recognized by the cash method, is reduced for dividends paid on the ESOP shares. Total expenses recognized in connection with the ESOP (which includes interest expense incurred on the ESOP debt guaranteed by the company) are set forth below: Three Months Ended March 31, (Millions of dollars) 1995 1994 Total expenses recognized $3.6 $4.0 Interest expense (included in above total) 2.1 2.2 The company's total cash contribution to the ESOP for the first quarter of 1995 was $7.3 million, net of $2.1 million for dividends paid on the company's stock held by the ESOP. For the 1994 first quarter, the company's cash contribution was $6.2 million, net of $2 million for dividends. G. The company held U.S. government obligations and equity securities considered to be available for sale at March 31, 1995 and December 31, 1994. These financial instruments are carried in the Consolidated Balance at fair value, which is based on quoted market prices. The company held no securities classified as held to maturity or trading during the respective periods. At March 31, 1995 and December 31, 1994, these financial instruments were as follows: March 31, 1995 Gross Unrealized Fair Holding Gains (Millions of dollars) Cost Value (Losses) Equity Securities $12.0 $35.1 $23.1 U.S. Government Obligations Maturing within one year 11.0 10.9 (.1) Maturing between one and four years 18.8 18.1 (.7) Total $41.8 $64.1 $22.3 December 31, 1994 Gross Unrealized Fair Holding Gains (Millions of dollars) Cost Value (Losses) Equity Securities $12.0 $32.5 $20.1 U.S. Government Obligations Maturing within one year 11.2 11.1 (.1) Maturing between one and four years 18.9 17.0 (1.9) Total $42.1 $60.6 $18.5 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, for the first quarter of 1995 and 1994 was as follows: March 31, March 31, (Millions of dollars) 1995 1994 Balance, January 1 $11.5 $ - Effect of change in accounting principle - 20.3 Net unrealized holding gains (losses) 2.3 (5.6) Balance, March 31 $13.8 $14.7 H. 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 have been settled or resolved, the following discusses the remaining proceedings. Decommissioning - Several approvals have been received for the decommissioning process, but a license amendment to decommission has not been issued. 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 $42 million, of which $7 million has been received). It was reported in the most recent Form 10-K that 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, which was estimated at year-end 1994 to be 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. Without waiving any of its rights or defenses, in May 1995 the company began the cleanup of this site. 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 continue in the judiciary process. 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. As reported in the most recent Form 10-K, 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 at December 31, 1994. Expenditures through December 31, 1994, totaled $228 million. During the first quarter of 1995, expenditures charged to the reserves totaled $14.4 million and additional provisions for environmental reserves were $9.5 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. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Comparison of 1995 Results with 1994 Results CONSOLIDATED OPERATIONS First-quarter 1995 income from continuing operations totaled $36.8 million, compared with $6.9 million for the same 1994 period. Net income for the 1995 first quarter totaled $37.7 million, compared with $21.6 million for the same 1994 period. Operating profit in the 1995 first quarter increased 161% compared with the same 1994 period as results from operations improved for all business units. The improved results were due primarily to higher crude oil and natural gas sales volumes, higher crude oil sales prices, higher pigment sales volumes and prices, lower per- unit coal production costs, and higher coal sales volumes. Partially offsetting were lower natural gas sales prices and lower coal sales prices. First-quarter 1995 nonoperating expense was $31.1 million, compared with $22.6 million for the 1994 quarter. The increase was due primarily to higher environmental reserve provisions, losses on foreign currency transactions compared with 1994 gains, and higher interest expense. SEGMENT OPERATIONS Following is a summary of sales and operating profit and a discussion of major factors influencing the results of each of the company's business segments for the first quarter of 1995, compared with the same period last year. Three Months Ended March 31, (Millions of dollars) 1995 1994 Sales Exploration and production(1) $171.5 $144.0 Chemicals 193.8 145.3 Coal 86.7 74.0 Other 11.9 10.0 Total Sales $463.9 $373.3 Operating Profit (Loss) Exploration and production $31.9 $4.9 Chemicals 31.3 16.9 Coal 17.1 12.6 Other 3.3 (2.4) Total Operating Profit 83.6 32.0 Nonoperating Expense 31.1 22.6 Income before Discontinued Operations and Income Taxes 52.5 9.4 Provision for Income Taxes 15.7 2.5 Income from Continuing Operations 36.8 6.9 Discontinued Operations, Net of Tax .9 14.7 Net Income $37.7 $21.6 (1)Includes sales of primarily crude oil to discontinued operations in the amount of $37.6 and $34.0 for the three months ended March 31, 1995 and 1994, respectively. Exploration and Production - Operating profit for the first quarter of 1995 was $31.9 million, compared with $4.9 million for the same 1994 period. First-quarter 1995 operating profit was up due primarily to higher crude oil and natural gas sales volumes and higher crude oil sales prices, partially offset by lower natural gas sales prices. Revenues, including sales to discontinued operations, were $171.5 million and $144.0 million for the three months ended March 31, 1995 and 1994, respectively. The following table shows the company's average crude oil and natural gas sales prices and volumes for the first quarter of 1995 and 1994. Three Months Ended Percent March 31, Increase 1995 1994 (Decrease) Crude oil sales (thousands of bbls/day) United States 30.0 25.5 18 Canada 4.7 4.9 (4) North Sea 38.7 31.0 25 Other international (1) - 4.0 NM Total 73.4 65.4 12 (1)Sales were from the ABK field in the Arabian Gulf, which was sold in late 1994. Three Months Ended Percent March 31, Increase 1995 1994 (Decrease) Average crude oil sales price (per barrel) United States $15.68 $12.19 29 Canada 14.98 11.47 31 North Sea 16.11 13.18 22 Other international - 13.71 NM Average $15.86 $12.70 25 Natural gas sold (MMCF/day) 312 264 18 Average natural gas sales price (per MCF) $1.40 $2.04 (31) Chemicals - Chemicals' first-quarter 1995 operating profit was $31.3 million on revenues of $193.8 million, compared with operating profit of $16.9 million on revenues of $145.3 million for the same 1994 quarter. Revenues and operating profit improved primarily due to higher pigment sales volumes and prices. Coal - First-quarter 1995 operating profit for coal was $17.1 million on revenues of $86.7 million, compared with operating profit of $12.6 million on revenues of $74.0 million for the same 1994 quarter. The increased revenues resulted from higher sales volumes, partially offset by lower sales prices. Operating profit increased due to higher revenues and lower per-unit production costs. Nonoperating Expense - Nonoperating expense was $31.1 million for the first three months of 1995, compared with $22.6 million for the same 1994 period. The increase was principally due to higher environmental reserve provisions, losses on foreign currency transactions compared with 1994 gains, and higher interest expense. Provision for Income Taxes - The provision for income taxes was $15.7 million, compared with $2.5 million for the same 1994 period. The increased tax provision was due to higher pretax income and higher effective tax rate. FINANCIAL CONDITION At March 31, 1995, the company's net working capital was $119 million, compared with $72.8 million at December 31, 1994. The current ratio was 1.1 to 1 at March 31, 1995, which is unchanged from both December 31, 1994 and March 31, 1994. The company's percentage of total debt to total capitalization was 37% at March 31,1995, compared with 39% at December 31, 1994, and 40% at March 31, 1994. For the first three months of 1995, net cash provided by operating activities of $197.3 million was comprised principally of net income of $37.7 million; depreciation, depletion, and amortization of $92.6 million; and a decrease in current assets and liabilities, excluding cash and debt, of $45.7 million. Net cash provided by operating activities for the same 1994 period was $66.3 million. On February 24, 1995, Kerr-McGee China Petroleum Ltd., a wholly owned subsidiary, entered into a revolving credit agreement with various banks to provide borrowings of up to U.S. $105 million at a rate equal to the Singapore Interbank Offered Rate plus 1/4% through February 24, 1998. The agreement requires that the amount outstanding on the termination date be paid in full on that date. The company is the guarantor of the agreement. No amount was outstanding under the agreement at March 31, 1995. The company had unused lines of credit and revolving credit facilities of $565 million at March 31, 1995. Of this amount, $250 million and $179 million can be used to support commercial paper borrowings of Kerr-McGee Credit Corporation and Kerr-McGee (U.K.) PLC, respectively. First-quarter 1995 cash capital expenditures totaled $124.4 million, compared with $129.4 million for the same period last year. Exploration and production expenditures, principally in the Gulf of Mexico, North Sea, and offshore China, were 81% of the 1995 amount. Chemicals expenditures were 10% of the total. Management anticipates that the cash requirements for the next several years can be provided through internally generated funds and selective long- and/or short-term borrowings. The company has adopted a plan to dispose of its refining and marketing assets and exit this business. Accordingly, the company is reporting refining and marketing as a discontinued operation. The company has sold the Cotton Valley, Louisiana, refinery and Cato Oil and Grease Company. Additionally, the company has signed letters of intent for the sale of the Corpus Christi, Texas, and Wynnewood, Oklahoma, refineries, the pipeline gathering system associated with the Wynnewood refinery, most of the retail service stations, and several of the terminals, including the high volume Sewaren, New Jersey, facility, all of which represent most of the refining and marketing assets. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Region Six of the United States Environmental Protection Agency (EPA) and Kerr-McGee Refining Corporation (KMRC), a wholly owned subsidiary of the Company, are finalizing negotiations regarding the findings of an inspection of the refinery in Wynnewood, Oklahoma, in May 1992. KMRC anticipates the issuance of a Consent Agreement and Consent Order providing for monetary sanctions of $150,000. 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. Reference is made to the West Chicago matter on page 24 of the company's Form 10-K for the year ended December 31, 1994. For the report on the current status of this matter, reference is made to Note H to the Consolidated Financial Statements beginning on page 7 of this Form 10-Q. Item 4. Submission of Matters to a Vote of Security Holders. (a) The 1995 annual meeting of stockholders was held on May 9, 1995. (b) The following matters were voted upon at the annual meeting: (1) Following are the directors elected at the 1995 annual meeting and the tabulation of votes related to each nominee. Votes Affirmative Withheld Bennett E. Bidwell 43,230,357 799,900 Earnest H. Clark, Jr. 43,227,269 802,988 Luke R. Corbett 43,232,760 797,497 Martin C. Jischke 43,258,865 771,392 Robert S. Kerr, Jr. 43,290,600 739,657 Frank A. McPherson 43,233,949 796,308 William C. Morris 43,303,944 726,313 John J. Murphy 43,250,083 780,174 John J. Nevin 43,274,326 755,931 Farah M. Walters 43,221,354 808,903 (2) The stockholders ratified the appointment of Arthur Andersen LLP as independent public accountants for 1995. Affirmative votes were 43,328,870; negative votes were 634,486; and abstentions were 66,901. (3) The stockholders approved the Long Term Incentive Program, as amended and restated effective May 9, 1995. Affirmative votes were 37,598,090; negative votes were 5,749,596; and abstentions were 682,571. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - Exhibit No. 4.2 The company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of the $105 million Credit Agreement dated February 24, 1995, among Kerr-McGee China Petroleum Ltd. and various banks providing for revolving credit through February 24, 1998. 10.5 The Long Term Incentive Program, as Amended and Restated effective May 9, 1995. (b) Reports on Form 8-K None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KERR-McGEE CORPORATION Date May 12, 1995 By: (John M. Rauh) John M. Rauh Vice President and Controller and Chief Accounting Officer EX-10 2 EX-10.5 LONG TERM INCENTIVE PROGRAM Kerr-McGee Corporation Long Term Incentive Program As Amended and Restated May 9, 1995 1. PURPOSE The purpose of the Kerr-McGee Corporation Long Term Incentive Program (the "Plan") is to provide incentive opportunities for key employees and to increase their personal financial identification with the interests of the Company's stockholders. The Plan includes provisions for stock options and stock and performance related awards. 2. DEFINITIONS (a) "Award" shall mean the award which an LTPP Participant is entitled to receive under the Long Term Performance Plan (the "LTPP"). (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (d) "Company" shall mean Kerr-McGee Corporation and any successor corporation by merger or otherwise. (e) "Committee" shall mean the committee of the Board referred to in Section 3 hereof as appointed from time to time, and consisting of not less than three Board members. Each member of the Committee shall be a "disinterested person" as that term is defined in Rule 16(b)(3) promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, or any successor definition adopted by the Commission. (f) "Employee" shall mean any person employed by the Company or a Subsidiary on a full-time salaried basis, including officers and employee directors thereof. (g) "Fair Market Value" of Stock shall be the mean of the highest price and the lowest price at which Stock shall have been sold on the applicable date as reported in the Wall Street Journal as New York Stock Exchange Composite Transactions for that date. In the event that the applicable date is a date on which there were no such sales of Stock, the Fair Market Value of Stock on such date shall be the mean of the highest price and the lowest price at which Stock shall have been sold on the last trading day preceding such date. (h) "Incentive Stock Option" or "ISO" shall mean an Option grant which meets or complies with the terms and conditions set forth in Section 422A of the Code and Treasury regulations. (i) "Indicators of Performance" shall mean the criteria used by the Committee to evaluate the Company's performance with respect to each Performance Period as described in Section 10(b) of this Plan. (j) "Long Term Performance Plan Participant" or "LTPP Participant" shall mean any eligible Employee so designated by the Committee. (k) "Option" or "Stock Option" shall mean a right granted under the Plan to an Optionee to purchase a stated number of shares of Stock at a stated exercise price. (l) "Optionee" shall mean an Employee who has received a Stock Option granted under the Plan. (m) "Performance Period" shall mean a period established by the Committee of not less than one year, at the conclusion of which settlement will be made with an LTPP Participant with respect to the Award. (n) "Restricted Stock" shall mean Stock which is issued pursuant to Section 9 of the Plan. (o) "Restriction Period" shall mean that period of time as determined by the Committee during which Restricted Stock is subject to such terms, conditions and restrictions as shall be assigned by the Committee. (p) "Retirement" shall mean retirement under a retirement program of the Company or a Subsidiary. (q) "Stock" shall mean the common stock of the Company. (r) "Stock Appreciation Right" or "SAR" shall mean a right granted in connection with an Option in accordance with Section 8 of the Plan. (s) "Subsidiary" shall mean any corporation, a majority of the voting stock of which is "beneficially owned" (as that term is defined in the Securities Exchange Act of 1934 and its accompanying regulation), either directly or indirectly, by the Company. (t) "Total Disability" and "Totally Disabled" shall normally have such meaning as that defined under the Company's group insurance program covering total disability and determinations of Total Disability normally shall be made by the insurance company providing such coverage on the date on which the employee, whether or not eligible for benefits under such insurance plan, becomes Totally Disabled. In the absence of such insurance plan or company, or at the sole discretion of the Committee, the Committee shall make such determination. 3. ADMINISTRATION Subject to such approvals and other authority as the Board may reserve to itself from time to time, the Committee shall, consistent with the provisions of the Plan, from time to time establish such rules and regulations and appoint such agents as it deems appropriate for the proper administration of the Plan, and make such determinations under, and such interpretations of, and take such steps in connection with the Plan or the Options or Stock Appreciation Rights or the Restricted Stock Plan or the Long Term Performance Plan as it deems necessary or advisable. Each determination, interpretation, or other action made or taken pursuant to the Plan by the Committee and/or the Board shall be final and shall be binding and conclusive for all purposes and upon all persons. 4. ELIGIBILITY Those Employees who, in the judgment of the Committee, may have a significant effect on the profitability and growth of the Company, shall be eligible to receive Options, Stock Appreciation Rights, grants of Restricted Stock and Awards under the Plan. 5. MAXIMUM SHARES AVAILABLE The Stock to be distributed under the Plan may be either authorized and unissued shares or issued shares of the Company, but grants of Restricted Stock shall be made in treasury shares. The maximum amount of Stock which may be issued under the Plan in satisfaction of exercised Options or SARs, issued as Restricted Stock or issued under the Long Term Performance Plan shall not exceed, in the aggregate, two million seven hundred forty thousand (2,740,000) shares. Stock subject to an Option which for any reason is cancelled or terminated without having been exercised, or Stock awarded as Restricted Stock which is forfeited, shall again be available for grants and Awards under the Plan. Stock not issued because the holder of any Option exercises the accompanying SAR shall not again be subject to award by the Committee. 6. STOCK OPTIONS (a) Grant of Options. (i) The Committee may, at any time and from time to time prior to December 31, 2002, grant Options under the Plan to eligible Employees, for such numbers of shares and having such terms as the Committee shall designate, subject however, to the provisions of the Plan. The Committee will also determine the type of Option granted (e.g. ISO, non-statutory, other statutory Options as from time to time may be permitted by the Code) or a combination of various types of Options. Options designated as ISOs shall comply with all the provisions of Section 422A of the Code and applicable Treasury Department rules and regulations. The aggregate Fair Market Value (determined at the time the Option is granted) of Stock with respect to which ISOs are exercisable for the first time by an individual during a calendar year under all plans of the Company and any Subsidiary shall not exceed $100,000. The date on which an Option shall be granted shall be the date of the Committee's authorization of such grant. Any individual at any one time and from time to time may hold more than one Option granted under the Plan or under any other Stock plan of the Company. (ii) Each Option shall be evidenced by a Stock Option Agreement in such form and containing such provisions consistent with the provisions of the Plan as the Committee from time to time shall approve. (b) Exercise Price. The price at which shares of Stock may be purchased under an Option shall not be less than 100 percent of the Fair Market Value of the Stock on the date the Option is granted. (c) Option Period. The period during which an Option may be exercised shall be determined by the Committee; provided, that such period will not be longer than ten years from the date on which the Option is granted in the case of ISOs, and ten years and one day in the case of other Options. The date or dates on which installment portion(s) of an Option may be exercised during the term of an Option shall be determined by the Committee and may vary from Option to Option. The Committee may also determine to accelerate the time at which installment portion(s) of an outstanding Option may be exercised. The foregoing notwithstanding, and subject to Section 7, no Option or portion of an Option shall be exercisable within six months of its grant date. (d) Termination of Employment. An Option shall terminate and may no longer be exercised three months after the Optionee ceases to be an Employee for any reason other than Total Disability, death or Retirement. If an Optionee's employment is terminated by reason of Total Disability or Retirement to the extent that the Option was exercisable at the time of the Optionee's Retirement or Total Disability, such Option may be exercised within the period, not to exceed four years, specified by the Committee in the instrument evidencing the Option. If the Optionee dies while in the employ of the Company or of a Subsidiary, or within three months after the termination of such employment, to the extent that the Option was exercisable at the time of the Optionee's death, such Option may, within one year after the Optionee's death, be exercised by the executor or administrator of his estate, or if it has been distributed as part of the estate, by the person or persons to whom the Optionee's rights under the Option shall pass by will or by the applicable laws of decent and distribution. In no event may an Option be exercised to any extent by anyone after the expiration or termination of the Option. (e) Payment for Shares. (i) The exercise price for all shares of Stock purchased upon the exercise of an Option, or a portion thereof, shall be paid in full at the time of such exercise. Such payment may be made in cash, by tendering shares of Stock having a Fair Market Value on the date of exercise equal to the exercise price, or tendering shares of Restricted Stock having a Fair Market Value on the date of exercise equal to the exercise price. The Committee may limit the extent to which shares of Stock or shares of Restricted Stock may be used in exercising Options. (ii) If shares of Restricted Stock are used to pay the exercise price of an Option, an equal number of shares of Stock delivered to the Optionee upon exercise of an Option, shall be subject to the same restrictions for the remainder of the Restriction Period. 7. TENDER OFFERS Notwithstanding any other provision of this Plan, an Option may, if the Optionee has agreed in writing, provide that the Option shall be automatically repurchased by the Company if any person or persons has made a successful tender offer for shares of Stock which, together with shares then owned directly or indirectly by such person or persons, would constitute 25% or more of the outstanding shares of Stock. In such case, the purchase date shall be the date preceding the last date (including any extension thereof) on which stockholders of the Company could tender their shares for purchase by the offeror pursuant to the terms of the tender offer; the Fair Market Value of each share covered by the Option shall be the highest price per share at which shares could have been tendered for cash pursuant to the offer, or, if higher, the mean between the high and the low prices of the Stock reported in the Wall Street Journal as the New York Stock Exchange Composite Transactions for such day, or, if there were no sales on such day, the next preceding day on which there was a sale; and the Optionee shall receive in cash as full satisfaction of his rights under the Option a payment equal to the excess of such Fair Market Value of the shares then covered by the Option (including any installments not then exercisable) over the total Option exercise price of such shares. Options may also provide that upon the commencement of any tender offer for such number of shares, the Option and any accompanying SAR shall, to the extent they are not then exercisable, become immediately exercisable in full until the tenth day following the expiration of such offer or any extension thereof, and at the conclusion of said period the Option and any accompanying SAR shall, to the extent not theretofore exercised, revert back to their status as in effect immediately prior to the commencement of said offer. 8. STOCK APPRECIATION RIGHTS (a) Grant. The Committee may affix Stock Appreciation Rights to an Option, either at the time of its initial granting to the Optionee or at a later date. The addition of such SARs must be accomplished prior to the completion of the period during which the Option may be exercised and such exercise period may not be extended beyond that which was initially established. The Committee may establish SAR terms and conditions at the time such SAR is established, provided that, notwithstanding any provision of this Plan to the contrary, the terms and conditions of an SAR affixed to an ISO shall be the same as the terms and conditions applicable to the underlying ISO. (b) Exercise. (i) A Stock Appreciation Right shall be exercisable at such time as may be determined by the Committee, and provided that an SAR shall be exercisable only to the extent that the related Option could be exercised. Upon the exercise of an SAR, that portion of the Option underlying the SAR will be considered as having been surrendered. An SAR shall be automatically exercised at the end of the last business day prior to the stated expiration date of the unexercised portion of the related Option if on such date the Fair Market Value of Stock exceeds the Option exercise price per share. (ii) The Committee may impose any other conditions upon the exercise of an SAR, consistent with the Plan, which it deems appropriate. Such rules and regulations may govern the right to exercise SARs granted prior to the adoption or amendment of such rules and regulations as well as SARs granted thereafter. (iii) Upon the exercise of an SAR, the Company shall give to an Optionee an amount (less any applicable withholding taxes) equivalent to the excess of the Fair Market Value of the shares of Stock for which the right is exercised on the date of such exercise over the exercise price of such shares under the related Option. Such amount shall be paid to the Optionee either in cash or in shares of Stock or both as the Committee shall determine. Such determination may be made at the time of the granting of the SAR and may be changed at any time thereafter. No fractional shares of Stock shall be issued and the Committee shall determine whether cash shall be given in lieu of such fractional share or whether such fractional share shall be eliminated. (c) Expiration or Termination. (i) Subject to (c)(ii), each Stock Appreciation Right and all rights and obligations thereunder shall expire on a date to be determined by the Committee. (ii) An SAR shall terminate and may no longer be exercised upon the exercise, termination or expiration of the related Option. 9. RESTRICTED STOCK PLAN (a) At the time of making a grant of Restricted Stock or making payment of an Award in Restricted Stock to an Employee, the Committee shall establish a Restriction Period and assign such terms, conditions and other restrictions to the Restricted Stock as it shall determine applicable to the Restricted Stock to be issued in settlement of such grant or Award. (b) Restricted Stock will be represented by a Stock certificate registered in the name of the Restricted Stock recipient. Such certificate, accompanied by a separate duly endorsed stock power, shall be deposited with the Company. The recipient shall be entitled to receive dividends during the Restriction Period and shall have the right to vote such Restricted Stock and all other shareholder's rights, with the exception that (i) the recipient will not be entitled to delivery of the Stock certificate during the Restriction Period, (ii) the Company will retain custody of the Restricted Stock during the Restriction Period, and (iii) a breach of the terms and conditions established by the Committee pursuant to the Award will cause a forfeiture of the Restricted Stock. Subject to Section 6(e), Restricted Stock may be used to exercise Options. The committee may, in addition, prescribe additional restrictions, terms and conditions upon or to the Restricted Stock. (i) Termination of Employment. The Committee may establish such rules concerning the termination of employment of a recipient of Restricted Stock (by reason of Retirement, Total Disability, death, or otherwise) prior to the expiration of the applicable Restriction Period, as it may deem appropriate from time to time. (ii) Restricted Stock Agreement. Each grant of, or payment of an Award in, Restricted Stock shall be evidenced by a Restricted Stock Agreement in such form and containing such terms and conditions not inconsistent with the provisions of the Plan as the Committee from time to time shall approve. 10. LONG TERM PERFORMANCE PLAN (a) Administrative Procedure. The committee shall designate Employees as LTPP Participants to become eligible to receive Awards under the plan and shall establish Performance Periods under the LTPP. (b) Indicators of Performance. The Committee shall establish Indicators of Performance applicable to the Performance Period. Indicators of Performance are utilized to determine amount and timing of Awards, and may vary between Performance Periods. Indicators of Performance may include, but shall not be limited to, various financial and operating measures, and may be based on the Company's performance compared to one or more selected companies during the same Performance Period or may be related solely to the Company's performance during the Performance Period, or a combination of such indicators. The Committee may take into consideration, and make appropriate adjustments for, events occurring during the Performance Period which the Committee concludes have affected the performance of the Company or any selected company with respect to any of the Indicators of Performance. (c) Award Adjustment. Subject to the terms of the Plan, the Committee may make adjustments in Awards to LTPP Participants. (d) Performance Awards. Awards may be in the form of performance shares, which are units valued by reference to shares of stock, or performance units which are units valued by reference to financial measures or property other than stock and shall be subject to such terms and conditions and other restrictions as the Committee shall assign. At the time of making grants of Awards, the Committee shall establish such terms and conditions as it shall determine applicable to such Awards. Awards may be paid-out in cash, Stock, Restricted Stock, other property or combination thereof. Recipients of Awards are not required to provide consideration other than the rendering of service. (e) Partial Performance Period Participation. The Committee shall determine the extent to which an Employee shall participate in a partial Performance Period because of becoming eligible to be a LTPP Participant after the beginning of such Performance Period. 11. ADJUSTMENT UPON CHANGES IN STOCK The number of shares of Stock which may be issued pursuant to this Plan, the number of shares covered by each outstanding Option, the Option exercise price per share, the number of shares granted as Restricted Stock, and the number of shares representing an LTPP Participant's Award under the Long Term Performance Plan, shall be adjusted proportionately, and any other appropriate adjustments shall be made, for any increase or decrease in the total number of issued and outstanding Stock (or change in kind) resulting from any change in the Stock or Options through a merger, consolidation, reorganization, recapitalization, a subdivision or consolidation of shares or other capital adjustment or the payment of a Stock dividend or other increase or decrease (or change in kind) in such shares. In the event of any such adjustment, fractional shares shall be eliminated. Appropriate adjustment shall also be made by the Committee in the terms of Stock Appreciation Rights to reflect the foregoing changes. 12. CHANGE IN CONTROL Notwithstanding anything to the contrary in the Plan, in the event of a Change in Control: (i) if during a Restriction Period(s) applicable to Restricted Stock issued under the Plan, all restrictions imposed hereunder on such Restricted Stock shall lapse effective the date of the Change in Control; and (ii) if during a Performance Period(s) applicable to an Award granted under the Plan, a Participant shall earn no less than the number of performance shares or performance units which the participant would have earned if the Performance Period(s) had terminated as of the date of the Change in Control. For purposes of the Plan, a "Change in Control" shall be deemed to have occurred if any "person" or "group" (as those terms are used in Sections 13(d) and 14(d), respectively, of the Securities Exchange Act of 1934 --- the "Exchange Act"), is or becomes the "beneficial owner" (as defined in Rule 13(d)-3 issued under the Exchange Act), directly or indirectly, of shares of Stock of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding shares of Stock. 13. MISCELLANEOUS (a) Except as otherwise required by law, no action taken under the Plan shall be taken into account in determining any benefits under any pension, retirement, thrift, profit sharing, group insurance, or other benefit plan maintained by the Company or any Subsidiaries, unless such other plan specifically provides for such inclusion. (b) No Option or Stock Appreciation Right, grant of Restricted Stock or Award under the Long Term Performance Plan shall be transferrable other than by will or the laws of descent and distribution. Any Option or Stock Appreciation Right shall be exercisable (i) during the lifetime of an Optionee, only by the Optionee or, to the extent permitted by the Code, by an appointed guardian or legal representative of the Optionee, and (ii) after death of the Optionee, only by the Optionee's legal representative or by the person who acquired the right to exercise such Option or Stock Appreciation Right by bequest or inheritance or by reason of the death of the Optionee. (c) The Company shall have the right to withhold from any settlement hereunder any federal, state, or local taxes required by law to be withheld, or require payment in the amount of such withholding. If settlement hereunder is in the form of Stock, such withholding may be satisfied by the withholding of shares of Stock by the Company, unless the Optionee shall pay to the Corporation an amount sufficient to cover the amount of taxes required to be withheld, and such withholding of shares does not violate any applicable laws, rules or regulations of federal, state or local authorities. (d) Transfer of employment between the Company and a Subsidiary or between Subsidiaries shall not constitute termination of employment for the purpose of the Plan. Whether any leave of absence shall constitute termination of employment for the purposes of the Plan shall be determined in each case by the Committee. (e) All administrative expenses associated with the administration of the Plan shall be borne by the Company. (f) The titles and headings of the sections in this Plan are for convenience of reference only and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. (g) No grant or Award to an employee under the Plan or any provisions thereof, shall constitute any agreement for or guarantee of continued employment by the Company. 14. AMENDMENT AND TERMINATION The Board may at any time terminate or amend this Plan in such respect as it shall deem advisable, provided, the Board may not, without further approval of the stockholders of the Company amend the Plan so as to (i) increase the number of shares of Stock which may be issued under the plan, except as provided for in Section 11, or change Plan provisions relating to establishment of the exercise prices under Options granted; (ii) materially modify the requirements as to eligibility for participation; (iii) materially increase the benefits accruing to Participants under the plan; (iv) extend the duration of the Plan beyond the date approved by the stockholders; or (v) increase the maximum dollar amount of ISOs which an individual Optionee may exercise during any calendar year beyond that permitted in the Code and applicable rules and regulations of the Treasury Department. No amendment or termination of the Plan shall, without the consent of the Optionee or Plan participant, alter or impair any of the rights or obligations under any Options or other rights theretofore granted such person under the Plan. 15. DURATION OF THE PLAN This Plan became effective July 1, 1987. If not sooner terminated by the Board this Plan shall terminate on December 31, 2002, but Options and other rights theretofore granted and any Restriction Period may extend beyond that date and the terms of the Plan shall continue to apply. EX-27 3 ART. 5 FDS FOR THREE MONTHS ENDED MARCH 31, 1995 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at March 31, 1995, and the Consolidated Statement of Income for the three months ended March 31, 1995, and is qualified in its entirety by reference to such Form 10-Q. 0000055488 KERR-MCGEE CORPORATION 1,000 3-MOS DEC-31-1995 MAR-31-1995 96,500 0 415,400 3,900 358,700 916,400 6,086,800 3,535,000 3,655,900 797,400 0 53,300 0 0 1,515,000 3,655,900 463,900 463,900 272,800 417,200 0 0 18,600 52,500 15,700 36,800 900 0 0 37,700 .73 0
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