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, 2002
Commission File Number 1-16619
Kerr-McGee Corporation Savings Investment 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)
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 2002 AND 2001
Report of Independent Auditors
Financial Statements
Statement of Net Assets Available for Benefits as of December 31, 2002 and 2001
Statement of Changes in Net Assets Available for Benefits for the year ended
December 31, 2002
Notes to Financial Statements as of December 31, 2002 and 2001
Supplemental Schedules
Schedule H, Line 4i -Schedule of Assets (Held at End of Year)
Schedule H, Line 4j -Schedule of Reportable Transactions
All other schedules required by the Employee Retirement Income Security Act of
1974 and the regulations promulgated by the Department of Labor have been
omitted since they are inapplicable.
REPORT OF INDEPENDENT AUDITORS
Kerr-McGee Corporation Benefits Committee
Kerr-McGee Corporation Savings Investment Plan
We have audited the accompanying statement of net assets available for
benefits of Kerr-McGee Corporation Savings Investment Plan (the Plan) as of
December 31, 2002 and 2001, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2002. 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 audits.
We conducted our audits 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 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 of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets (held at end of year) as of December 31, 2002, and reportable
transactions for the year then ended, 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. The 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
Oklahoma City, Oklahoma
May 27, 2003
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(Thousands of dollars)
December 31,
--------------------
2002 2001
-------- --------
ASSETS:
Investments $245,200 $264,599
Dividends receivable - 473
Receivable from investment sales - 721
Other assets 415 371
-------- --------
Total assets 245,615 266,164
LIABILITIES:
Purchases pending settlement - 13
-------- --------
NET ASSETS AVAILABLE FOR BENEFITS $245,615 $266,151
======== ========
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(Thousands of dollars)
Year Ended
December 31, 2002
-----------------
Additions:
Additions to net assets attributed to:
Investment income:
Dividends $ 5,959
Interest 507
--------
6,466
Employee contributions 17,098
Transfer from ESOP 6,154
Transfer from prior trustee 15,230
--------
Total additions 44,948
--------
Deductions:
Deductions from net assets attributed to:
Net depreciation in fair value of investments 42,093
Distributions to terminating and withdrawing participants 23,391
--------
Total deductions 65,484
--------
Net decrease (20,536)
Net assets available for benefits:
Beginning of year 266,151
--------
End of year $245,615
========
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(1) DESCRIPTION OF THE PLAN
General -
The Kerr-McGee Corporation Savings Investment Plan (the Plan) is a defined
contribution plan in which eligible employees of Kerr-McGee Corporation and
its affiliated companies (collectively referred to as the Company) may
participate.
In August 2001, the Company completed the acquisition of all of the
outstanding shares of common stock of HS Resources, Inc. (HSR). Prior to
the acquisition, HSR had a defined contribution plan, the HS Resources,
Inc. 401(k) & Profit Sharing Plan (HSR plan). The assets of the HSR plan
were transferred into the Plan during October 2002. The amount transferred
is shown as Transfer from prior trustee on the Statement of Changes in Net
Assets Available for Benefits.
The Plan allows participants to defer taxable earnings through
contributions to the Plan as provided for under Section 401(k) of the
Internal Revenue Code (the Code), and to borrow from their accounts within
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 2002, the Company paid $13,000 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. The Company has no
continuing liability under the Plan after the final disposition of the
assets of the Plan.
Effective January 1, 1990, all employer matching contributions are made to
the Kerr-McGee Corporation Employee Stock Ownership Plan (ESOP), which was
established in September 1989. All matching contributions are invested in
Kerr-McGee Corporation common stock. The ESOP is not part of the Plan;
therefore, the employer contributions to the ESOP and the ESOP assets and
earnings are not included in the accompanying Plan financial statements.
The maximum Company matching contribution is 6% of compensation as defined
in the Plan, and the maximum employee contribution is 15% of compensation
as defined in the Plan. The Company's matching contributions to the ESOP
during 2002 totaled $12,935,000. Common stock of the Company held by the
ESOP and allocated to participant's accounts totaled 1,425,281 shares with
a market value of $63,076,000 at December 31, 2002. Employees are allowed
to participate in the Plan from their initial date of employment.
Effective January 1, 2000, all participants in the ESOP have an annual
option to diversify up to 25% of their year-end Kerr-McGee stock balance in
the ESOP into investment options available in the Plan. This option must be
exercised by March 31 of each year. The amount diversified during 2002 is
shown as Transfer from ESOP on the Statement of Changes in Net Assets
Available for Benefits.
Prior to January 1, 1990, employer matching contributions were made into
the Plan and invested in Kerr-McGee Corporation common stock. The 2002
activity related to these nonparticipant-directed contributions is shown in
Note 4.
The participants' contributions to the Plan and earnings thereon are fully
vested at all times. Each participant's account is credited with the
participant's contributions and an allocation of Plan earnings. With the
exception of the nonparticipant-directed portion of the Kerr-McGee Stock
Fund, participants designate how their balances are invested in any one or
more of several investment options.
On termination of service, including terminations due to death, disability,
or retirement, a participant or participant's beneficiary may elect to
receive an amount equal to the value of the participant's account. The
normal form of such distribution is a single lump sum payment; however,
certain eligible members may elect to have an annuity purchased from an
insurance company in lieu of a lump sum payment. 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 following is a description of the investment options available under
the Plan at December 31, 2002:
Kerr-McGee Stock Fund - common stock of the Company.
Fidelity Growth Company Fund - invest in common stock of companies
believed to have above-average growth potential.
Fidelity Balanced Fund - normally invests 60% of its assets in stocks
and 40% of its assets in bonds.
Fidelity Diversified International Fund - invests primarily in foreign
securities.
Fidelity Dividend Growth Fund - invests at least 80% of its total
assets in companies believed to have the potential for dividend
growth.
Fidelity Mid-Cap Stock Fund - invests at least 80% of its assets in
common stocks of companies with medium market capitalizations.
Managed Income Portfolio II - invests in investment contracts issued
by insurance companies and other financial institutions.
Spartan U.S. Equity Index Fund - invests at least 80% of its assets in
common stocks included in the S&P 500.
Pimco Total Return Fund - invests in all types of bonds.
Baron Growth Fund - invests primarily in small-cap companies with
market values between $100 million and $1.5 billion.
Oakmark Select Fund - invests primarily in common stocks of U.S.
companies.
Liberty Small-Cap Fund - invests primarily in common stock of small
companies believed to be undervalued.
Aim Basic Value Fund - invests 65% of assets in securities of U.S.
issuers with market capitalization of greater than $500 million and
35% of assets in U.S. issuers with market capitalization of less than
$500 million.
Royce Low-Priced Stock Fund - invests in both small- and micro-cap
companies that are trading for less than $20 per share.
SMART and CAPITAL Savings Programs -
All participants participate in the Plan under the SMART and CAPITAL
Savings Programs. Participants may direct their savings, up to a maximum of
15% of compensation, to be invested in 1% increments among one or more of
the funds provided for under the Plan. An unlimited number of transfers are
allowed between funds.
Contributions to the SMART Savings Program are from a participant's
compensation, before income taxes. The participant's income taxes on the
pre-tax contributions are deferred until the contributions are distributed
after termination, at the time of hardship withdrawal, or under minimum
distribution rules at age 70 1/2. The annual SMART Savings Program
contribution limitation is subject to annual adjustments for inflation and
was $11,000 for 2002 in accordance with the Internal Revenue Code (the
Code). Participant contributions in excess of this amount are considered to
be contributions to the CAPITAL Savings Program.
Contributions to the CAPITAL Savings Program are from a participant's
compensation, after income taxes. If a participant has authorized less than
15% of their compensation to be contributed to the SMART Savings Program,
they may contribute the remaining whole percentages up to 15% to the
CAPITAL Savings Program. Participant contributions may be invested in the
same proportions and the same funds as outlined above for the SMART Savings
Program. The maximum contributions allowed to each program may be limited
for highly compensated employees, depending upon the balance of
contributions at all levels.
Participants may borrow from the Plan against their contributions to the
SMART and CAPITAL Savings Programs and against their interest in Company
matching contributions held in the Plan. New loans to participants bear
interest at a fixed rate equal to the prime rate (as published in The Wall
Street Journal), plus 1.0%. Such interest is credited to the participant's
accounts in the Plan when repaid. The average interest rate for new loans,
which is adjusted quarterly, was 5.81% for 2002. The minimum loan amount,
determined periodically by the Committee, is currently $1,000. The maximum
amount of all loans to a participant under the Plan and any other plans of
any employer may not exceed the lesser of (a) $50,000, reduced by an amount
equal to the difference between (i) the participant's highest loan balance
under the Plan during the one-year period ending on the day before the date
on which such loan is made and (ii) the outstanding loan balance of the
participant under the Plan on the date on which such loan was made or (b)
one-half the current value of the participant's interest in their accounts.
Loans must be repaid within five years from the initial date of the loan,
with certain special provisions available for military reservists called to
active duty. In the event of a participant's termination of employment and
subsequent default on the loan, any outstanding balance will be considered
a distribution and will be taxable to the participant as prescribed by the
Code.
(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 Risk - The Plan provides for investments in various investment
securities, which in general, are exposed to various risks, such as
interest rate, credit and overall market volatility risks. Further, due to
the level of risk associated with certain investment securities, it is at
least reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes could
materially effect the amounts reported in the statements of net assets
available for benefits.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value. Shares of registered investment companies and common
collective trusts are valued at quoted market prices, which represent the
net asset value of shares held by the Plan at year-end. The Company stock
is valued at its quoted market price. Loans to participants are valued at
cost which approximates fair value. 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) LOANS TO PARTICIPANTS
Loan activity during 2002 and 2001 is set forth below:
(Thousands of dollars) 2002 2001
------- -------
Balance at beginning of year $ 7,148 $ 7,656
New loans 2,506 2,792
Principal repayments (3,037) (3,318)
Loans included as distributions
to terminated participants (292) (366)
Transfer from prior trustee 382 384
------- -------
Balance at end of year $ 6,707 $ 7,148
======= =======
Interest income applicable to these loans during 2002 was $438,000.
(4) NONPARTICIPANT-DIRECTED INVESTMENTS
The Kerr-McGee Stock Fund is the only fund consisting of both
participant-directed contributions and nonparticipant-directed Company
matching contributions. Information about the net assets and the
significant components of the changes in net assets relating to the
nonparticipant-directed investments, is as follows:
December 31,
------------------------
(Thousands of dollars) 2002 2001
------- -------
Net Assets:
Common stock $10,454 $14,331
======= =======
Year ended
December 31, 2002
-----------------
Changes in Net Assets:
Dividends $ 294
Net depreciation (2,230)
Distributions (1,941)
-------
$(3,877)
=======
(5) INVESTMENTS
The following presents investments of the Plan's net assets at December 31,
2002 and 2001.
December 31,
-------------------------------
(Thousands of dollars) 2002 2001
-------- --------
Kerr-McGee Corporation Common Stock -
1,146,575 shares in 2002 and 1,039,386
shares in 2001 $ 50,793 (a) (b) $ 56,958 (a) (b)
Fidelity Growth Company Fund - 305,832 shares in 2002 10,833 -
Fidelity Balanced Fund - 1,610,966 shares in 2002 21,410 (b) -
Fidelity Diversified International Fund - 571,602 9,809 -
shares in 2002
Fidelity Dividend Growth Fund - 34,372 shares 767 -
in 2002
Fidelity Mid-Cap Stock Fund - 1,106,759 shares 17,996 (b) -
in 2002
Managed Income Portfolio II - 63,798,267 shares 63,798 (b) -
in 2002
Spartan U.S. Equity Index Fund - 516,889 shares 16,101 (b) -
in 2002
Pimco Total Return - 872,644 shares in 2002 9,311 -
Baron Growth Fund - 22,753 shares in 2002 612 -
Oakmark Select Fund - 111,076 shares in 2002 2,646 -
Liberty Small-Cap Fund - 119,783 shares in 2002 1,515 -
AIM Basic Value Fund - 1,443,679 shares in 2002 31,559 (b) -
Royce Low-Priced Stock Fund - 137,770 shares 1,343 -
in 2002
Putnam Bond Index Fund - 330,125 shares in 2001 - 3,925
Vanguard Windsor II Fund - 775,263 shares
in 2001 - 19,839 (b)
Harbor Capital Appreciation Fund - 501,883 shares
in 2001 - 14,670 (b)
Vanguard Balanced Index Fund - 789,314 shares
in 2001 - 14,097
Putnam Stable Value Fund - 58,163,098 shares
in 2001 - 58,163 (b)
Putnam Vista Fund - 3,359,221 shares in 2001 - 29,897 (b)
Putnam Growth & Income Fund - 1,163,678 shares
in 2001 - 20,667 (b)
Putnam Asset Allocation Balanced Fund - 487,796 shares
in 2001 - 4,790
Putnam International Growth Fund - 581,990 shares
in 2001 - 11,611
S&P 500 Index Fund - 651,069 shares in 2001 - 18,132 (b)
Putman Asset Allocation Growth Fund - 321,515 shares
in 2001 - 3,100
Putman Asset Allocation Conservative Fund - 128,429
shares in 2001 - 1,117
Participant Loans 6,707 7,148
Short Term Investment Fund - 485
-------- --------
Total Investments $245,200 $264,599
======== ========
(a) A portion of this amount is nonparticipant-directed (see Note 4).
(b) Asset represents 5% or more of the Plan's net assets as of the
indicated year end.
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $42,093,000 as follows:
(Thousands of dollars)
Kerr-McGee Corporation Common stock $10,833
Registered Investment Companies and
Common Collective Trusts 31,260
-------
$42,093
=======
(6) TAX STATUS
The Plan obtained its latest determination letter dated November 5, 1999,
in which the Internal Revenue Service stated that the Plan is a qualified
plan under provisions of Section 401(a) and is exempt from Federal Income
taxes under provisions of Section 501(a) of the Code. The Plan has been
amended and restated since receiving its latest determination letter to
reflect recent legislation. The Company has requested a determination
letter which will cover the amendments and is of the opinion that the Plan
continues to be operated in compliance with the applicable requirements of
the Code and continues to be tax exempt.
Taxes on any income earned on investment assets attributable to the
participants are deferred until the receipt of a distribution pursuant to
the terms of the Plan. Prior Company contributions and employee
contributions to the SMART Savings Program are also not taxed to the
participants until the receipt of a distribution.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
(Employer Identification Number 73-1612389)
(Plan Number 007)
DECEMBER 31, 2002
(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 - 1,146,575 shares $53,642 $ 50,793
* Fidelity Investments Fidelity Growth Company Fund -305,832 shares nr 10,833
* Fidelity Investments Fidelity Balanced Fund - 1,610,966 shares nr 21,410
* Fidelity Investments Fidelity Diversified Int'l Fund -571,602 shares nr 9,809
* Fidelity Investments Fidelity Dividend Growth Fund -34,372 shares nr 767
* Fidelity Investments Fidelity Mid-Cap Stock Fund -1,106,759 shares nr 17,996
* Fidelity Investments Managed Income Portfolio II -63,798,267 shares nr 63,798
* Fidelity Investments Spartan U.S. Equity Index Fund - 516,889 shares nr 16,101
Pacific Investment Management Company Pimco Total Return Fund- 872,644 shares nr 9,311
BAMCO, Inc. Baron Growth Fund - 22,753 shares nr 612
Harris Associates L.P. Oakmark Select Fund - 111,076 shares nr 2,646
Fleet Investment Advisors Inc. Liberty Small-Cap Fund - 119,783 shares nr 1,515
AIM Advisors, Inc. AIM Basic Value Fund - 1,443,679 shares nr 31,559
Royce & Associates, LLC. Royce Low-Priced Stock Fund -137,770 shares nr 1,343
* Various Participants Participant loans - interest rates from 5.4% to 11.5% nr 6,707
--------
$245,200
========
*Party-in-interest
nr - not required for participant-directed investments
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
SCHEDULE H, LINE 4j- SCHEDULE OF REPORTABLE TRANSACTIONS
(Employer Identification Number 73-1612389)
(Plan Number 007)
FOR THE YEAR ENDED DECEMBER 31, 2002
(Thousands of dollars)
(h)
Current
value
(c) (d) (g) of asset on (i)
(a) (b) Purchase Selling Cost of transaction Net gain
Identity of party involved Description of asset price price asset date or loss
-------------------------- -------------------- -------- ------- ------- ----------- --------
Category (iii) - Series of transactions in excess of 5% of the Plan Assets:
---------------------------------------------------------------------------
*Kerr-McGee Corporation Common Stock $20,383 - $20,383 $20,383 -
*Kerr-McGee Corporation Common Stock - $15,065 $16,257 $15,065 $(1,192)
There were no category (i), (ii) or (iv) reportable transactions during the year
ended December 31, 2002.
Columns (e) and (f) are not applicable.
*Includes both participant-directed and nonparticipant-directed portions.
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 SAVINGS INVESTMENT PLAN
By (Robert M. Wohleber)
--------------------------------------
Robert M. Wohleber
Chairman of the Kerr-McGee Corporation
Benefits Committee
Date: June 27, 2003