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, 2001
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 AUDITORS
Kerr-McGee Corporation Benefits Committee
Kerr-McGee Corporation Employee Stock Ownership Plan
We have audited the accompanying statement of net assets available for
benefits of Kerr-McGee Corporation Employee Stock Ownership Plan (the Plan) as
of December 31, 2001, and the related statement of changes in net assets
available for benefits for the year then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 2001 financial statements referred to above present
fairly, in all material respects, the net assets available for benefits of the
Plan at December 31, 2001, and the changes in its net assets available for
benefits for the year then ended, in conformity with accounting principles
generally accepted in the United States.
Our audit was performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedule of
assets (held at end of year) as of December 31, 2001, and the supplemental
schedule of reportable transactions for the year ended December 31, 2001, are
presented for the purposes of additional analysis and are not a required part of
the 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
are the responsibility of the Plan's management. These supplemental schedules
have been subjected to the auditing procedures applied in our audit of the
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the financial statements taken as a whole.
(ERNST & YOUNG LLP)
ERNST & YOUNG LLP
Oklahoma City, Oklahoma,
June 21, 2002
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, 2000. This financial statement is the responsibility of the
Plan's management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the net assets available for benefits as of December
31, 2000, in conformity with accounting principles generally accepted in the
United States.
(ARTHUR ANDERSEN LLP)
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
June 7, 2001
KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2001
(Thousands of dollars)
ASSETS Unallocated Allocated Total
------ ----------- --------- --------
Common stock of Kerr-McGee Corporation $ 51,603 $72,677 $124,280
Short-term investments 1,036 - 1,036
--------- ------- --------
Total investments 52,639 72,677 125,316
Dividends receivable 430 - 430
Interfund contributions receivable (payable) (688) 688 -
Interfund dividends receivable (payable) (598) 598 -
Interfund receivable (payable) for
excess released shares (3,052) 3,052 -
Other assets 2 - 2
--------- ------- --------
Total assets 48,733 77,015 125,748
--------- ------- --------
LIABILITIES
-----------
Notes payable 101,001 - 101,001
Interest payable 1,121 - 1,121
--------- ------- --------
Total liabilities 102,122 - 102,122
--------- ------- --------
Net assets (liabilities) available for benefits $ (53,389) $77,015 $ 23,626
========= ======= ========
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, 2000
(Thousands of dollars)
ASSETS Unallocated Allocated Total
------ ----------- --------- --------
Common stock of Kerr-McGee Corporation $ 78,393 $83,386 $161,779
Short-term investments 1,117 - 1,117
-------- ------- --------
Total investments 79,510 83,386 162,896
Dividends receivable 531 - 531
Interfund contributions receivable (payable) (624) 624 -
Interfund dividends receivable (payable) (559) 559 -
Other assets 12 - 12
-------- ------- --------
Total assets 78,870 84,569 163,439
-------- ------- --------
LIABILITIES
-----------
Notes payable 117,751 - 117,751
Interest payable 1,698 - 1,698
-------- ------- --------
Total liabilities 119,449 - 119,449
-------- ------- --------
Net assets (liabilities) available for benefits $(40,579) $84,569 $ 43,990
======== ======= ========
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, 2001
(Thousands of dollars)
Unallocated Allocated Total
----------- --------- --------
Company contributions $ 22,237 $ - $ 22,237
Dividend income 1,893 2,290 4,183
Interest income 12 - 12
--------- -------- --------
Total additions 24,142 2,290 26,432
--------- -------- --------
Interest expense 9,309 - 9,309
Distributions to participants - 5,621 5,621
Transfers to (from) other fund 15,285 (15,285) -
Transfer to SIP - 3,894 3,894
Transfer to Savannah plan - 5 5
Depreciation of common stock 12,358 15,609 27,967
--------- -------- --------
Total deductions 36,952 9,844 46,796
--------- -------- --------
Net decrease (12,810) (7,554) (20,364)
Net assets (liabilities) available for benefits -
Beginning of year (40,579) 84,569 43,990
--------- -------- --------
End of year $ (53,389) $ 77,015 $ 23,626
========= ======== ========
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(1) PLAN DESCRIPTION
The Kerr-McGee Corporation Employee Stock Ownership Plan (the Plan) was
established in September 1989, and is designed to comply with the
Internal Revenue Code (the Code) Section 4975(e) and is subject to the
applicable provisions of the Employee Retirement Income Security Act of
1974, as amended (ERISA). The Plan was amended and restated effective
January 1, 2001. 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. In addition, effective September 1, 2001, participant
contributions by bargaining employees to the Kerr-McGee Pigments
(Savannah) Inc., Employees Savings Plan (Savannah plan) are matched at
a rate of $.50 for every dollar contributed by the participant up to 6%
of the participant's salary. Although the Plan, SIP and the Savannah
plan are separate plans, matching contributions to the Plan are
contingent upon participants' contributions to the SIP or Savannah
plan. Participants are not permitted to make contributions under the
terms of the Plan.
Effective January 1, 2000, all participants in the SIP have an annual
option to diversify up to 25% of their year-end Kerr-McGee stock
balance in the Plan into investment options available in the SIP. This
option must be exercised by March 31 of each year. The amount
diversified during 2001 is shown as Transfers to SIP on the Statement
of Changes in Net Assets Available for Benefits. Participants who are
at least age 55 with 10 years of participation in the Pan may withdraw
their 25% instead of diversifying within the SIP. They have this option
for the first six years after meeting the eligibility requirements.
Prior to the September 1, 2001, establishment of company matching
contributions for the Savannah plan being made into the Plan, the Plan
assets of employees that change classification from non-bargaining to
bargaining were transferred into the Savannah plan and shown as
Transfer to Savannah plan on the Statement of Changes in Net Assets
Available for Benefits.
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 4).
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 the company matches
contributions 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.
Employees who are or become participants on or after January 1, 2000,
are 100% vested in all company matching contributions. A participant
will receive a distribution of his vested interest in his account only
upon termination of employment, retirement, death or permanent
disability. No other withdrawals are permitted, except for
diversification after age 55.
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. During 2001, the Company paid $78,000
of administrative and trust expenses on behalf of the Plan.
The Company intends to continue the Plan indefinitely, but reserves the
right to alter, amend, modify, revoke or terminate the Plan at any time
upon the direction of the Company's Board of Directors. If the Plan is
terminated for any reason, the Committee will direct that the
participants' account balances be distributed as soon as practical. Any
unallocated funds remaining in the Plan after all participants have
received their account balances may be disposed of as directed by the
Company. 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 in accordance with accounting
principles generally accepted in the United States.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that
affect the reported amounts of net assets available for benefits and
changes therein. Actual results could differ from those estimates.
Investment 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,
2001 and 2000, was as follows:
(Dollars in thousands) Unallocated Allocated Total
----------- --------- -----------
2001
----
Number of Shares 941,660 1,326,224 2,267,884
Cost $71,255 $65,799 $137,054
Market $51,603 $72,677 $124,280
2000
----
Number of Shares 1,171,135 1,245,727 2,416,862
Cost $88,626 $58,621 $147,247
Market $78,393 $83,386 $161,779
(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 2003. Principal payments on the 9.61%
fixed-rate Series B notes began in July 1998 and continue through
January 2005.
Following the merger of Kerr-McGee Corporation and Oryx Energy Company
(Oryx), the Oryx Capital Accumulation Plan (CAP plan) was merged into
the Plan and the SIP during 1999. On August 1, 1989, the CAP plan
borrowed $110 million by privately placing ESOP notes with Oryx. The
borrowing consisted of Series A, Series B and Series C sponsor notes
with interest rates ranging from 8.35% to 8.70%. Scheduled principal
payments on the Series A notes continue through July 2006. Principal
payments on the Series B notes begin in August 2005 and continue
through July 2008. Principal payments on the Series C notes begin in
August 2008 and continue through July 2011.
Notes payable consisted of the following at year end:
(Thousands of dollars) 2001 2000
-------- --------
Sponsor note $ 3,630 $ 3,640
Series B notes 20,750 32,750
Oryx Series A sponsor notes 26,587 31,327
Oryx Series B sponsor notes 19,318 19,318
Oryx Series C sponsor notes 30,716 30,716
-------- --------
$101,001 $117,751
======== ========
Maturities of notes payable due after December 31, 2001, are
$15,763,000 in 2002, $14,722,000 in 2003, $9,962,000 in 2004,
$8,638,000 in 2005, $7,775,000 in 2006 and $44,141,000 thereafter.
(5) TAX STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated November 5, 1999, that the Plan is qualified and the
trust established under the Plan is tax-exempt, under the appropriate
sections of the Code. The Plan has been amended and restated since
receiving the determination letter. However, the Plan administrator and
the Plan's tax counsel believe that the plan is currently designed and
being operated in compliance with the applicable requirements of the
Code and continues to be tax-exempt.
(6) CONTRIBUTIONS
The Company's 2001 cash contributions to the Plan totaled $22,237,000.
In addition, the Company declared $4,183,000 in dividends on the
Company's stock held in the Plan. Of the total contributions,
$12,162,000 represents the Company's matching contributions for
employees' savings in the SIP and $70,000 represents the Company's
matching contributions for employees' savings in the Savannah plan.
KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
(Employer Identification Number 73-1612389)
(Plan Number 014)
DECEMBER 31, 2001
(Thousands of dollars)
(b) (c) (e)
Identity of issue, borrower, Description of investment including maturity date, (d) Current
(a)* lessor or similar party rate of interest, collateral, par or maturity value Cost Value
---- ---------------------------------- --------------------------------------------------- --------- ---------
* Kerr-McGee Corporation Common stock (2,267,884 shares) $137,054 $124,280
* State Street Bank and Trust Company Short-term investment fund 1,036 1,036
*Party-in-interest
KERR-McGEE CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
SCHEDULE H, LINE 4j- SCHEDULE OF REPORTABLE TRANSACTIONS
(Employer Identification Number 73-1612389)
(Plan Number 014)
FOR THE YEAR ENDED DECEMBER 31, 2001
(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
-------------------------- -------------------- -------- ------- ------ ----------- ------- ----------- --------
Kerr-McGee Corporation Common Stock $30,270 - - - $30,270 $30,270 -
Kerr-McGee Corporation Common Stock - $40,722 - - $40,463 $40,722 $259
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 M. Rauh)
--------------------------------------
John M. Rauh
Chairman of the Kerr-McGee Corporation
Benefits Committee
Date: June 26, 2002