Item 3. Legal Proceedings
A. The company and its wholly owned subsidiary Kerr-McGee Chemical LLC have been named in 22 lawsuits in three states in connection with present and former forest products operations. The lawsuits seek recovery under a variety of common law and statutory legal theories for personal injuries and property damages allegedly caused by exposure to and/or release of creosote and other substances used in the wood-treatment process. Some of the lawsuits are filed on behalf of specifically named individual plaintiffs, while others purport to be filed on behalf of classes of allegedly similarly situated plaintiffs. Lead lawyers for the plaintiffs claim that in the aggregate about 10,000 persons are involved or otherwise represented as plaintiffs in these cases.
There are seven cases pending in Mississippi. Two cases are pending in the United States District Court for the Northern District: Andrews v. Kerr-McGee (filed September 8, 1999) and Conner v Kerr-McGee (filed March 7, 2001). Three cases are pending in the Circuit Court of Lowndes County: Spirit of Prayer v. Kerr-McGee (filed March 16, 2000), Burgin v. Kerr-McGee (filed March 6, 2001) and Maranatha Faith Center v. Kerr-McGee (filed February 18, 2000). Two cases are pending in Circuit Court of Hinds County: Jamison v. Kerr-McGee (filed February 18, 2000) and Cockrell v. Kerr-McGee (filed March 6, 2001).
There are seven cases pending in Louisiana. One case is pending in the United States District Court for the Western District: Shirlean Taylor, et al. v. Kerr-McGee (filed June 15, 2000). Five cases are pending in the United States District Court for the Western District, subject to remand to 26th District Court of Bossier Parish and all were filed on October 25, 2001: Brenda Sue Adams, et al. v. Kerr-McGee, J.C. Adams, et al. v. Kerr-McGee, Linda Paul Anderson, et al. v. Kerr-McGee, Shirley Marie Austin, et al. v. Kerr-McGee and Ronald Donald Bailey, et al. v. Kerr-McGee. One case is pending in the 26th District Court of Bossier Parish: T. J. Allen, et al. v. Kerr-McGee, (filed October 25, 2001).
There are eight cases pending in the Court of Common Pleas, Luzerne County, Pennsylvania. Five cases were filed on October 23, 2001: Mary Beth Marriggi, et al. v. Kerr-McGee, Delores Kuzbasko, et al. v. Kerr-McGee, Barbara Fromet, et al. v. Kerr-McGee, Ann Culp, et al. v. Kerr McGee and Robert Battista, et al. v. Kerr-McGee. Three cases were filed on November 15, 2001: Stacey Berkoski, et al. v. Kerr-McGee, Kenneth Battista, et al. v. Kerr-McGee and James Butcher, et al. v. Kerr-McGee.
The company has denied the allegations and is vigorously defending the cases. In light of the inherent uncertainties associated with court proceedings, however, there is no assurance that the company will not incur liability with respect to these matters. Although the liability that may result from the cases cannot be reasonably estimated, the lawsuits are not expected to have a material adverse effect on the company.
B. In December, 2001, Kerr-McGee North Sea (U.K.) Limited received notice of violation of the Prevention of Oil Pollution Act 1971 and of the Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention) Regulations 1998 from the authorities in Scotland. This matter is currently pending in the Sheriff Court, Aberdeen, Scotland, and concerns a subsea pipeline leak associated with the company's North Sea Hutton facility. As currently filed, the minimum fine and penalty is (pound)100,000. The eventual fine and penalty are not certain, but are not expected to have a material adverse effect on the company.
For a discussion of contingencies, reference is made to the Environmental Matters section of Management's Discussion and Analysis and Note 15 to the Consolidated Financial Statements in the 2001 Annual Report to Stockholders, which are incorporated by reference in Items 7 and 8, respectively.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None submitted during the fourth quarter of 2001.
There is no family relationship between any of the executive officers.
FORWARD-LOOKING INFORMATION
Statements in this Form 10-K regarding the company's or management's intentions, beliefs or expectations, or that otherwise speak to future events, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Future results and developments discussed in these statements may be affected by numerous factors and risks, such as the accuracy of the assumptions that underlie the statements, the success of the oil and gas exploration and production program, drilling risks, the market value of Kerr-McGee's products, uncertainties in interpreting engineering data, demand for consumer products for which Kerr-McGee's businesses supply raw materials, general economic conditions, and other factors and risks discussed in the company's SEC filings. Actual results and developments may differ materially from those expressed or implied in this Form 10-K.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Information relative to the market in which the company's common stock is traded, the high and low sales prices of the common stock by quarters for the past two years, and the approximate number of holders of common stock is furnished in Note 33 to the Consolidated Financial Statements in the 2001 Annual Report to Stockholders, which note is incorporated by reference in Item 8.
Quarterly dividends declared totaled $1.80 per share for the years 2001, 2000 and 1999. Cash dividends have been paid continuously since 1941 and totaled $173 million in 2001, $166 million in 2000 and $138 million in 1999.
Item 6.
Item 6. Selected Financial Data
Information regarding selected financial data required in this item is presented in the schedule captioned "Eight-Year Financial Summary" in the 2001 Annual Report to Stockholders and is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Management's Discussion and Analysis" in the 2001 Annual Report to Stockholders is incorporated herein by reference.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosure about Market Risk
For information required under this section, reference is made to the "Market Risks" section of Management's Discussion and Analysis in the 2001 Annual Report to Stockholders, which discussion is incorporated by reference above.
Item 8.
Item 8. Financial Statements and Supplementary Data
The following financial statements and supplementary data included in the 2001 Annual Report to Stockholders are incorporated herein by reference:
Report of Independent Public Accountants Consolidated Statement of Income Consolidated Statement of Comprehensive Income and Stockholders' Equity Consolidated Balance Sheet Consolidated Statement of Cash Flows Notes to Financial Statements
Item 9.
Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure
On March 12, 2002, the Board of Directors of the company decided to no longer engage Arthur Andersen LLP ("Arthur Andersen" or "AA") as the company's independent public accountants and engaged Ernst & Young LLP ("E & Y") to serve as the company's independent public accountants for the year 2002, in accordance with the recommendation of the Board's Audit Committee. The determination to change independent public accountants followed the company's decision to seek proposals from independent public accountants to audit the company's financial statements for the year ending December 31, 2002. The appointment of E & Y is subject to stockholder ratification at the 2002 Annual Meeting of Stockholders to be held on May 14, 2002.
Arthur Andersen's audit reports on the company's consolidated financial statements for each of the fiscal years ended December 31, 2001 and 2000, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
During the company's two fiscal years ended December 31, 2001 and 2000, and through the date hereof, there were no disagreements with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to AA's satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with the audit reports on the company's consolidated financial statements for such years, and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
In the years ended December 31, 2001 and 2000, and through the subsequent interim period preceding the decision to change independent public accountants, the company did not consult E & Y with respect to the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company's consolidated financial statements, or any other matters or reportable events as set forth in Items 304 (a)(2)(i) and (ii) of Regulation S-K.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of directors -
For information required under this section, reference is made to the "Director Information" section of the company's proxy statement for 2002 made in connection with its Annual Stockholders' Meeting to be held on May 14, 2002.
(b) Identification of executive officers -
The information required under this section is set forth in the caption "Executive Officers of the Registrant" on pages 25 and 26 of this Form 10-K pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) to Form 10-K.
(c) Compliance with Section 16(a) of the 1934 Act -
For information required under this section, reference is made to the "Section 16(a) Beneficial Ownership Reporting Compliance" section of the company's proxy statement for 2002 made in connection with its Annual Stockholders' Meeting to be held on May 14, 2002.
Item 11.
Item 11. Executive Compensation
For information required under this section, reference is made to the "Executive Compensation and Other Information" section of the company's proxy statement for 2002 made in connection with its Annual Stockholders' Meeting to be held on May 14, 2002.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
For information required under this section, reference is made to the "Security Ownership" portion of the "Director Information" section of the company's proxy statement for 2002 made in connection with its Annual Stockholders' Meeting to be held on May 14, 2002.
Item 13.
Item 13. Certain Relationships and Related Transactions
For information required under this section, reference is made to the "Director Information" section of the company's proxy statement for 2002 made in connection with its Annual Stockholders' Meeting to be held on May 14, 2002.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements -
The following consolidated financial statements of Kerr-McGee Corporation and its subsidiary companies, included in the company's 2001 Annual Report to Stockholders, are incorporated by reference in Item 8:
Report of Independent Public Accountants
Consolidated Statement of Income for the Years Ended December 31, 2001, 2000 and 1999
Consolidated Statement of Comprehensive Income and Stockholders' Equity for the Years Ended December 31, 2001, 2000 and 1999
Consolidated Balance Sheet at December 31, 2001 and 2000
Consolidated Statement of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999
Notes to Financial Statements
(a) 2. Financial Statement Schedules -
Report of Independent Public Accountants on Financial Statement Schedule
Schedule II - Valuation Accounts and Reserves for the Years Ended December 31, 2001, 2000 and 1999
Schedules I, III, IV and V are omitted as the subject matter thereof is either not present or is not present in amounts sufficient to require submission of the schedules in accordance with instructions contained in Regulation S-X.
(a) 3. Exhibits -
The following documents are filed under Commission file numbers 1-16619 and 1-3939 as a part of this report.
Exhibit No. ----------- 3.1 Amended and restated Certificate of Incorporation of Kerr-McGee Corporation, filed as Exhibit 4.1 to the company's Registration Statement on Form S-4 dated June 28, 2001, and incorporated herein by reference.
3.2 Amended and restated Bylaws of Kerr-McGee Corporation, filed as Exhibit 4.2 to the company's Registration Statement on Form S-4 dated June 28, 2001, and incorporated herein by reference.
4.1 Rights Agreement dated as of July 26, 2001, by and between the company and UMB Bank, N. A., filed as Exhibit 4.1 to the company's Registration Statement on Form 8-A filed on July 27, 2001, and incorporated herein by reference.
4.2 First Amendment to Rights Agreement, dated as of July 30, 2001, by and between the company and UMB Bank, N.A., filed as Exhibit 4.1 to the company's Registration Statement on Form 8-A/A filed on August 1, 2001, and incorporated herein by reference.
4.3 Indenture dated as of November 1, 1981, between the company and United States Trust Company of New York, as trustee, relating to the company's 7% Debentures due November 1, 2011, filed as Exhibit 4 to Form S-16, effective November 16, 1981, Registration No. 2-772987, and incorporated herein by reference.
4.4 Indenture dated as of August 1, 1982, filed as Exhibit 4 to Form S-3, effective August 27, 1982, Registration Statement No. 2-78952, and incorporated herein by reference, and the first supplement thereto dated May 7, 1996, between the company and Citibank, N.A., as trustee, relating to the company's 6.625% notes due October 15, 2007, and 7.125% debentures due October 15, 2027, filed as Exhibit 4.1 to the Current Report on Form 8-K filed July 27, 1999, and incorporated herein by reference.
4.5 The company agrees to furnish to the Securities and Exchange Commission, upon request, copies of each of the following instruments defining the rights of the holders of certain long-term debt of the company: the Note Agreement dated as of November 29, 1989, among the Kerr-McGee Corporation Employee Stock Ownership Plan Trust (the Trust) and several lenders, providing for a loan guaranteed by the company of $125 million to the Trust; the Revolving Credit Agreement dated as of August 1, 2001, between Kerr-McGee China Petroleum Ltd., as borrower, and Kerr-McGee Corporation, as guarantor, and several banks providing for revolving credit of up to $100 million through March 3, 2003; the 364-day $20 million Credit Agreement dated as of October 4, 2001, between Kerr-McGee Canada Ltd., as borrower, and Kerr-McGee Corporation, as guarantor, and the Royal Bank of Canada; the $100 million, 8% Note Agreement entered into by Oryx Energy Company (Oryx) dated as of October 20, 1995, and due October 15, 2003; the $150 million, 8.375% Note Agreement entered into by Oryx dated as of July 17, 1996, and due July 15, 2004; the $150 million, 8-1/8% Note Agreement entered into by Oryx dated as of October 20, 1995, and due October 15, 2005; the $11 million, 9-1/4% Series A Note Agreement entered into by Oryx and due January 2, 2002; the $2.2 million, 9-1/2% Series A Note Agreement entered into by Oryx and due February 1, 2002; the amended and restated Revolving Credit Agreement dated as of January 11, 2002, between the company or certain subsidiary borrowers and various banks providing for revolving credit up to $650 million through January 12, 2006; the $700 million Credit Agreement dated as of January 11, 2002, between the company or certain subsidiary borrowers and various banks providing for a 364-day revolving credit facility; and the $200 million variable-interest rate Note Agreement dated June 26, 2001, and due June 28, 2004. The total amount of securities authorized under each of such instruments does not exceed 10% of the total assets of the company and its subsidiaries on a consolidated basis.
4.6 Kerr-McGee Corporation Direct Purchase and Dividend Reinvestment Plan filed on September 9, 2001, pursuant to Rule 424(b)(2) of the Securities Act of 1933 as the Prospectus Supplement to the Prospectus dated August 31, 2001, and incorporated herein by reference.
4.7 Second Supplement to the August 1, 1982, Indenture dated as of August 2, 1999, between the company and Citibank, N.A., as trustee, relating to the company's 5-1/2% exchangeable notes due August 2, 2004, filed as Exhibit 4.11 to the report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference.
4.8 Fifth Supplement to the August 1, 1982, Indenture dated as of February 11, 2000, between the company and Citibank, N.A., as trustee, relating to the company's 5-1/4% Convertible Subordinated Debentures due February 15, 2010, filed as Exhibit 4.1 to Form 8-K filed February 4, 2000, and incorporated herein by reference.
4.9 Indenture dated as of August 1, 2001, between the company and Citibank, N.A., as trustee, relating to the company's $325 million, 5-7/8% notes due September 15, 2006; $675 million, 6-7/8% notes due September 15, 2011; and $500 million 7-7/8% notes due September 15, 2031, filed as Exhibit 4.1 to Form S-3 Registration Statement No. 333-68136 Pre-effective Amendment No. 1, and incorporated herein by reference.
10.1* Deferred Compensation Plan for Non-Employee Directors as amended and restated effective October 1, 1990, filed as Exhibit 10(1) to the report filed on Form 10-K for the year ended December 31, 1990, and incorporated herein by reference.
10.2* Kerr-McGee Corporation Stock Deferred Compensation Plan for Non-Employee Directors as amended and restated effective August 1, 1995, filed as Exhibit 10.2 to the report filed on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.
10.3* The Long Term Incentive Plan as amended and restated effective May 9, 1995, filed as Exhibit 10.5 on Form 10-Q for the quarter ended March 31, 1995, and incorporated herein by reference.
10.4* Benefits Restoration Plan as amended and restated effective September 13, 1989, filed as Exhibit 10(6) to the report on Form 10-K for the year ended December 31, 1992, and incorporated herein by reference.
10.5* Kerr-McGee Corporation Executive Deferred Compensation Plan as amended and restated effective January 1, 1996, filed as Exhibit 10.6 to the report on Form 10-K for the year ended December 31, 1995, and incorporated herein by reference.
10.6* Kerr-McGee Corporation Supplemental Executive Retirement Plan as amended and restated effective February 26, 1999.
10.7* First Supplement to the Kerr-McGee Corporation Supplemental Executive Retirement Plan as amended and restated effective February 26, 1999.
10.8* Second Supplement to the Kerr-McGee Corporation Supplemental Executive Retirement Plan as amended and restated effective February 26, 1999.
10.9* The Kerr-McGee Corporation Annual Incentive Compensation Plan effective January 1, 1998, filed as Exhibit 10.3 on Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by reference.
10.10* The Kerr-McGee Corporation 1998 Long Term Incentive Program effective January 1, 1998, filed as Exhibit 10.4 on Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by reference.
10.11* The Kerr-McGee Corporation 2000 Long Term Incentive Program effective May 1, 2000, filed as Exhibit 10.4 on Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by reference.
10.12* Amended and restated Agreement, restated as of January 11, 2000, between the company and Luke R. Corbett filed as Exhibit 10.10 on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
10.13* Amended and restated Agreement, restated as of January 11, 2000, between the company and Kenneth W. Crouch filed as Exhibit 10.11 on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
10.14* Amended and restated Agreement, restated as of January 11, 2000, between the company and Robert M. Wohleber filed as Exhibit 10.12 on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
10.15* Amended and restated Agreement, restated as of January 11, 2000, between the company and William P. Woodward filed as Exhibit 10.13 on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
10.16* Amended and restated Agreement, restated as of January 11, 2000, between the company and Gregory F. Pilcher filed as Exhibit 10.14 on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
10.17* Form of agreement, amended and restated as of January 11, 2000, between the company and certain executive officers not named in the Summary Compensation Table contained in the company's definitive Proxy Statement for the 2001 Annual Meeting of Stockholders filed as Exhibit 10.15 on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
12 Computation of ratio of earnings to fixed charges.
13 2001 Annual Report to Stockholders.
16 A letter from Arthur Andersen dated March 15, 2002, stating its concurrence with the statements made by the company concerning the change in independent accountants filed as Exhibit 16.1 to Form 8-K filed March 15, 2002, and incorporated herein by reference.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
24 Powers of Attorney.
99 Letter from Registrant to the Securities and Exchange Commission relating to Arthur Andersen LLP.
*These exhibits relate to the compensation plans and arrangements of the company.
(b) Reports on Form 8-K -
The following Current Reports on Form 8-K were filed by the company during the quarter ended December 31, 2001.
* Current Report dated October 2, 2001, for purposes of reporting under Items 5 and 7.
* Current Report dated October 3, 2001, for purposes of reporting under Items 5 and 7.
* Current Report dated October 18, 2001, for purposes of reporting under Items 5 and 7.
* Current Report dated November 19, 2001, for purposes of reporting under Items 5 and 7.
* Current Report dated December 4, 2001, for purposes of reporting under Items 5 and 7.
* Current Report dated December 18, 2001, for purposes of reporting under Items 5 and 7.
Report of Independent Public Accountants on Financial Statement Schedule - ------------------------------------------------------------------------
To Kerr-McGee Corporation:
We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in Kerr-McGee Corporation's 2001 Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 22, 2002. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The Schedule of Valuation Accounts and Reserves is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
(ARTHUR ANDERSEN LLP) ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma, February 22, 2002
SCHEDULE II
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KERR-McGEE CORPORATION
By: Luke R. Corbett* ------------------------------ Luke R. Corbett, Chief Executive Officer
March 28, 2002 By: (Robert M. Wohleber) - -------------- ------------------------------ Date Robert M. Wohleber Senior Vice President and Chief Financial Officer
By: (John M. Rauh) ------------------------------ John M. Rauh Vice President and Controller and Chief Accounting Officer
*By his signature set forth below, John M. Rauh has signed this Annual Report on Form 10-K as attorney-in-fact for the officer noted above, pursuant to power of attorney filed with the Securities and Exchange Commission.
By: (John M. Rauh) ------------------------------ John M. Rauh
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated.
By: Luke R. Corbett* ---------------------------------- Luke R. Corbett, Director
By: William E. Bradford* ---------------------------------- William E. Bradford, Director
By: Sylvia A. Earle* ---------------------------------- Sylvia A. Earle, Director
By: David C. Genever-Watling* ---------------------------------- David C. Genever-Watling, Director
March 28, 2002 By: Martin C. Jischke* - -------------- ---------------------------------- Date Martin C. Jischke, Director
By: William C. Morris* ---------------------------------- William C. Morris, Director
By: John J. Murphy* ---------------------------------- John J. Murphy, Director
By: Leroy C. Richie* ---------------------------------- Leroy C. Richie, Director
By: Matthew R. Simmons* ---------------------------------- Matthew R. Simmons, Director
By: Nicholas J. Sutton* ---------------------------------- Nicholas J. Sutton, Director
By: Farah M. Walters* ---------------------------------- Farah M. Walters, Director
By: Ian L. White-Thomson* ---------------------------------- Ian L. White-Thomson, Director
*By his signature set forth below, John M. Rauh has signed this Annual Report on Form 10-K as attorney-in-fact for the directors noted above, pursuant to the powers of attorney filed with the Securities and Exchange Commission.
By: (John M. Rauh) -------------------------------- John M. Rauh