-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IZpx/Q9aC90yK2BQi7YQCbVYbzR3mMD06sHMYx4z8QrXnjtrWJjy8DeYolLteLFY 50Pnx4S0tHd/bKVSGIy6dw== 0000055458-99-000020.txt : 19990701 0000055458-99-000020.hdr.sgml : 19990701 ACCESSION NUMBER: 0000055458-99-000020 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR MCGEE CORP CENTRAL INDEX KEY: 0000055458 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 730311467 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-03939 FILM NUMBER: 99656778 BUSINESS ADDRESS: STREET 1: KERR MCGEE CTR STREET 2: 123 ROBERT S KERR CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 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 11-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the Year Ended December 31, 1998 Commission File Number 1-3939 Kerr-McGee Corporation Employee Stock Ownership Plan (full title of the Plan) Kerr-McGee Corporation Kerr-McGee Center Oklahoma City, Oklahoma 73102 (Name of the issuer of the securities held pursuant to the Plan and address of its principal executive office) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Kerr-McGee Corporation Benefits Committee: We have audited the accompanying Statement of Net Assets Available for Benefits of the KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN (the Plan) as of December 31, 1998 and 1997, and the related Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 1998. These financial statements and the schedules referred to below are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and the schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits as of December 31, 1998 and 1997, and the changes in the net assets available for benefits for the year ended December 31, 1998, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets Held for Investment Purposes as of December 31, 1998, and the supplemental Schedule of Reportable Transactions for the year ended December 31, 1998, are presented for purposes of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. (ARTHUR ANDERSEN LLP) ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma, June 16, 1999 KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS December 31, 1998 (Thousands of dollars) ASSETS Unallocated Allocated Total ------ ----------- --------- ------- Common stock of Kerr-McGee Corporation $ 35,719 $44,007 $79,726 Short-term investments 424 1,405 1,829 -------- ------- ------- Total investments 36,143 45,412 81,555 Contributions receivable 1,752 - 1,752 Dividends receivable 420 553 973 Due from (to) other fund (1,752) 1,752 - Other assets 2 7 9 -------- ------- ------- Total assets 36,565 47,724 84,289 -------- ------- ------- LIABILITIES ----------- Notes payable 57,650 - 57,650 Interest payable 2,658 - 2,658 -------- ------- ------- Total liabilities 60,308 - 60,308 -------- ------- ------- Net assets available for benefits $(23,743) $47,724 $23,981 ======== ======= ======= The accompanying notes are an integral part of this statement. KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS December 31, 1997 (Thousands of dollars) ASSETS Unallocated Allocated Total ------ ----------- --------- -------- Common stock of Kerr-McGee Corporation $70,286 $84,051 $154,337 Short-term investments 507 1,138 1,645 ------- ------- -------- Total investments 70,793 85,189 155,982 Contributions receivable 950 - 950 Dividends receivable 500 599 1,099 Due from (to) other fund (950) 950 - Other assets 3 5 8 ------- ------- -------- Total assets 71,296 86,743 158,039 ------- ------- -------- LIABILITIES ----------- Notes payable 65,900 - 65,900 Interest payable 2,961 - 2,961 -------- ------- -------- Total liabilities 68,861 - 68,861 -------- ------- -------- Net assets available for benefits $ 2,435 $86,743 $ 89,178 ======== ======= ======== The accompanying notes are an integral part of this statement. KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS For the Year Ended December 31, 1998 (Thousands of dollars) Unallocated Allocated Total ----------- --------- -------- Company contributions $ 10,634 $ - $ 10,634 Dividend income 1,801 2,387 4,188 Interest income 12 64 76 Gain on sale of common stock - 763 763 Release of 181,737 shares of common stock for allocation - 12,285 12,285 -------- -------- -------- Total additions 12,447 15,499 27,946 -------- ------- -------- Unrealized depreciation of common stock 23,126 35,911 59,037 Interest expense 5,482 - 5,482 Distributions to participants - 16,339 16,339 Transfers to (from) other fund (2,268) 2,268 - Release of 181,737 shares of common stock for allocation 12,285 - 12,285 -------- ------- -------- Total deductions 38,625 54,518 93,143 -------- ------- -------- Net decrease (26,178) (39,019) (65,197) Net assets available for benefits - Beginning of year 2,435 86,743 89,178 -------- ------- -------- End of year $(23,743) $47,724 $ 23,981 ======== ======= ======== The accompanying notes are an integral part of this statement. KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 (1) PLAN DESCRIPTION The Kerr-McGee Corporation Employee Stock Ownership Plan (the Plan) was established in September 1989, as permitted by Internal Revenue Code Section 4975(e). The Plan, a leveraged employee stock ownership plan, invests only in the common stock of Kerr-McGee Corporation (the Company). The Plan covers all employees of the Company and its subsidiaries who make salary deferrals to the Kerr-McGee Savings Investment Plan (the SIP). Effective January 1, 1990, participant contributions to the SIP are matched by Company contributions to the Plan. These participant contributions are matched dollar-for-dollar by the Company, up to 6% of the participants' salaries as defined under the Plan. Although the Plan and the SIP are separate plans, matching contributions to the Plan are contingent upon participants' contributions to the SIP. Participants are not permitted to make contributions under the terms of the Plan. The Company may direct State Street Bank and Trust Company (the Trustee) to enter into acquisition loans for the purpose of acquiring Company stock for the benefit of participants. Pursuant to that authority, the Trustee and the Company entered into a Stock Purchase Agreement as of September 12, 1989. Under this agreement, the Plan purchased 2,680,965 shares of the Company's common stock at $46.625 per share on November 29, 1989, the market value on that date. To finance the purchase, the Plan incurred indebtedness to a group of institutional investors in the aggregate principal amount of $125,000,000 (see Note 3). The borrowings are guaranteed by the Company. Effective June 3, 1996, the Plan issued a $24,500,000 note to the Company and used the funds to prepay a portion of the Series A notes. The balance of the Series A notes was paid July 1, 1996. Company stock acquired with the proceeds of the initial loan is held in a suspense account. The Company's matching contributions and dividends paid on the common stock held in the loan suspense account 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 contributions are made to the SIP by participants. 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. If the value of shares of Company stock released from the loan suspense account is not sufficient to make the required matching and dividend allocations to participants' accounts, the Company will contribute additional shares of common stock or cash which may be used to purchase shares or to make additional payments on the loan. All stock released from the loan suspense account within the year must be allocated to participants' accounts by year end. If the number of shares released is more than the required matching and dividend allocation, the excess will be allocated to participants. The Plan provides for vesting of participants on the basis of 20% for each completed year of vesting service. Vesting service is completed years of company service reduced in certain limited situations as defined by the Plan. Company contributions are fully vested in the event of retirement, death or disability. A participant will receive a distribution of his vested interest in his account only upon termination of employment. In the event of death or permanent disability, a participant is deemed to be fully vested in their share of Company contributions. No other withdrawals are permitted. When certain terminations of participation in the Plan occur, the nonvested portion of the participant's account, as defined by the Plan, represents a forfeiture. However, if the participant is re-employed and fulfills certain requirements, as defined in the Plan, the participant's account will be reinstated. Forfeitures may be used to reduce employer matching contributions for the plan year, to pay administrative expenses relating to the Plan, or to restore amounts previously forfeited by participants who have been re-employed. Forfeitures used during the year and unused forfeitures at year-end 1998 and 1997 were not material to the Plan. Distributions to participants are paid in a single sum consisting of shares of stock or cash, at the election of the participant. Distributions are recorded at the approximate market value as of the date of distribution. Terminating participants with more than $5,000 in the Plan may defer distribution until age 70 1/2. Investments relating to these participants remain in the Trust until the terminated participant requests distribution. Participants who defer distribution continue to share in earnings and losses of the Plan. The Plan is administered by the Kerr-McGee Corporation Benefits Committee (the Committee), which is appointed by the Board of Directors of the Company. Accounting and administration for the Plan are provided by the Company at no cost to the Plan. In addition, all expenses of the Trust are borne by the Company except for expenses that may be paid from any forfeitures of ESOP accounts arising under the Plan. During 1998, the Company paid $80,000 of administrative and trust expenses. The Company intends to continue the Plan indefinitely, but reserves the right to alter, amend, modify, revoke or terminate the Plan at any time upon the direction of the Company's Board of Directors. If the Plan is terminated for any reason, the interest of all participants will be fully vested, and the Committee will direct that the participants' account balances be distributed as soon as practical. The Company has no continuing liability under the Plan after the final disposition of the assets of the Plan. (2) SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The financial statements of the Plan are prepared under the accrual method of accounting. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates as additional information becomes known. Investment Valuations and Income Recognition - The Plan's investments are stated at fair value, and the Company stock is valued at its quoted market price. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Payment of Benefits - Distributions to terminating and withdrawing participants are recorded when paid. (3) INVESTMENTS The Plan's investment in the Company's common stock at December 31, 1998 and 1997, was as follows: (Dollars in thousands) Unallocated Allocated Total ----------- --------- --------- 1998 ---- Number of Shares 933,827 1,150,514 2,084,341 Cost $43,541 $53,674 $97,215 Market $35,719 $44,007 $79,726 1997 ---- Number of Shares 1,110,149 1,327,562 2,437,711 Cost $51,762 $61,734 $113,496 Market $70,286 $84,051 $154,337 (4) NOTES PAYABLE On November 29, 1989, the Plan borrowed $125,000,000 from a group of institutional investors for the purpose of acquiring the Company's common stock. This borrowing consisted of Series A notes in the amount of $74,000,000 and Series B notes in the amount of $51,000,000. The Company has guaranteed the Plan's indebtedness. In June 1996, the Plan issued a $24,500,000 note, which bears interest at a fixed rate of 6.85%, to the Company (the Sponsor note) and used the funds to prepay a portion of the 9.47% fixed-rate Series A notes. The remaining balance of the Series A notes was paid on July 1, 1996, as scheduled. Scheduled principal payments on the Sponsor note began in January 1997 and continue through January 2005. A prepayment of $1,300,000 was made in December 1996. Principal payments on the 9.61% fixed-rate Series B notes are scheduled to begin in July 1998 and continue through January 2005. Debt consisted of the following at year end: (Thousands of dollars) 1998 1997 -------- --------- Sponsor note $ 8,150 $14,900 Series B notes 49,500 51,000 -------- --------- $ 57,650 $65,900 ======== ======= Maturities of debt due after December 31, 1998, are $9,250,000 in 1999, $10,010,000 in 2000, $12,010,000 in 2001, $10,500,000 in 2002, $10,880,000 in 2003, and $5,000,000 thereafter. (5) TAX STATUS The Plan is a qualified plan under provisions of Section 401(a) of the Internal Revenue Code (the Code) and is exempt from Federal income taxes under provisions of Section 501(a) of the Code. The Plan has been amended since receiving the latest determination letter, dated June 24, 1996. However, the Company is of the opinion that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code. Therefore, the Company believes the Plan is qualified and continues to be tax-exempt. Company contributions and income earned thereon are not taxed until the receipt of a distribution pursuant to the terms of the Plan. Federal income taxes applicable to participants or their beneficiaries upon distribution are prescribed by the Code. (6) CONTRIBUTIONS The Company's 1998 contributions to the Plan totaled $10,634,000. In addition, the Company paid $4,188,000 in dividends on the Company's stock held in the Plan. Of the total contributions, $8,535,000 represented the Company's matching contributions for employees' savings in the SIP. (7) SUBSEQUENT EVENTS In February 1999, the Company merged with Oryx Energy Company (Oryx). The total effect of the merger on the Plan and its net assets is not currently known. Oryx had a defined contribution plan, the Oryx Capital Accumulation Plan (Oryx CAP), which contained a leveraged employee stock ownership plan (LESOP). The LESOP portion of the Oryx CAP will be merged into the Plan on August 2, 1999. All Company contributions beginning January 1999 are 100% vested in participants' accounts. KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (Employer Identification Number 73-0311467) (Plan Number 014) DECEMBER 31, 1998 (Thousands of dollars)
(b) (c) (e) Identity of issue, borrower, lessor Description of investment including maturity date, (d) Current (a)* or similar party rate of interest, collateral, par or maturity value Cost Value ---- ------------------------------------ ----------------------------------------------------- -------- ------- * Kerr-McGee Corporation Common stock (2,084,341 shares) $97,215 $79,726 * State Street Bank and Trust Company Short-term investment fund 1,829 1,829 * Party-in-interest
KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS (Employer Identification Number 73-0311467) (Plan Number 014) FOR THE YEAR ENDED DECEMBER 31, 1998 (Thousands of dollars)
(h) (f) Current Expense Value (c) (d) (e) incurred (g) of asset on (i) (a) (b) Purchase Selling Lease with Cost of transaction Net gain Identity of party involved Description of asset price price rental transaction asset date or loss -------------------------- -------------------- -------- ------- ------- ----------- ------- ----------- -------- State Street Bank Short-Term Investment Fund $8,641 - - - $8,641 $8,641 - State Street Bank Short-Term Investment Fund - $8,457 - - $8,457 $8,457 - Kerr-McGee Corporation Common Stock $62,537 - - - $62,537 $62,537 - Kerr-McGee Corporation Common Stock - $79,580 - - $78,818 $79,580 $762
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Kerr-McGee Corporation Benefits Committee has duly caused this annual report to be signed by the undersigned thereunto duly authorized. KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN By (JOHN C. LINEHAN) John C. Linehan Chairman of the Kerr-McGee Corporation Benefits Committee Date: June 30, 1999 EX-23 2 CONSENT OF ACCOUNTANT EXHIBIT Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our report dated June 16, 1999, included in the Kerr-McGee Corporation Employee Stock Ownership Plan 1998 annual report in this Form 11-K, into the Company's previously filed Form S-8 File No. 333-28235. (ARTHUR ANDERSEN LLP) ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma June 30, 1999 -----END PRIVACY-ENHANCED MESSAGE-----