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 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)
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, 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. 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)
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 SAVINGS INVESTMENT 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 SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(Thousands of dollars)
December 31,
-------------------------
2001 2000
-------- --------
ASSETS:
Investments $264,599 $291,030
Dividends receivable 473 468
Receivable from investment sales 721 1,090
Other assets 371 807
-------- --------
Total assets 266,164 293,395
LIABILITIES:
Purchases pending settlement 13 24
-------- --------
NET ASSETS AVAILABLE FOR BENEFITS $266,151 $293,371
======== ========
The accompanying notes are an integral part of these statements.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(Thousands of dollars)
Year Ended
December 31, 2001
-----------------
Additions:
Additions to net assets attributed to:
Investment income:
Dividends $ 7,016
Interest 531
--------
7,547
Employee contributions 14,640
Transfer from ESOP 3,894
Transfer from Savannah plan 161
Transfer from prior trustee 10,522
--------
Total additions 36,764
--------
Deductions:
Deductions from net assets attributed to:
Net depreciation in fair value of investments 43,536
Distributions to terminating and
withdrawing participants 20,448
--------
Total deductions 63,984
--------
Net decrease (27,220)
Net assets available for benefits:
Beginning of year 293,371
--------
End of year $266,151
========
The accompanying notes are an integral part of this statement.
KERR-McGEE CORPORATION SAVINGS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(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 April 2000, the Company completed the purchase of a titanium dioxide
pigment plant in Savannah, Georgia, from Kemira Oyj of Finland
(Kemira). Prior to the acquisition, Kemira had a defined contribution
plan, the Kemira Pigments, Inc. Employee Savings Plan, which included
assets for both bargaining and non-bargaining employees. The assets of
the non-bargaining employees were transferred into the Plan during
February 2001. The amount transferred is shown as Transfer from prior
trustee on the Statement of Changes in Net Assets Available for
Benefits. The assets of the bargaining employees will remain in a
separate plan, the Kerr-McGee Pigments (Savannah), Inc. Employees'
Savings Plan (Savannah plan). The assets of employees that change
classification from bargaining to non-bargaining are transferred into
the Plan and shown as Transfer from Savannah plan 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 2001, the Company paid $15,000
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 2001 totaled
$12,162,000. Common stock of the Company held by the ESOP and allocated
to participant's accounts totaled 1,325,180 shares with a market value
of $72,677,000 at December 31, 2001. 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 2001 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
2001 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 during 2001:
Kerr-McGee Stock Fund - common stock of the Company.
Putnam Bond Index Fund - seeks to approximate the return of
the Lehman Brothers Aggregate Bond Index.
Vanguard Windsor II Fund - investments in a diversified group
of undervalued stocks of large-capitalization companies.
Harbor Capital Appreciation Fund - invests primarily in equity
securities of U.S. companies with market capitalizations of at
least $1 billion.
Vanguard Balanced Index Fund - invests 60% of its assets in
stocks and 40% of its assets in bonds.
Putnam Stable Value Fund - primarily investments in contracts
issued by insurance companies, banks and similar financial
institutions.
Putnam Vista Fund - shares of stock in companies believed to
have the potential for above-average growth.
Putnam Growth and Income Fund - primarily stocks of mature
companies that offer long-term growth while providing income.
Putnam International Growth Fund - primarily stocks and bonds
of companies and governments outside of the United States.
Putnam S&P 500 Index Fund - mirrors the performance and
composition of Standard & Poor's 500 Composite Index through
investments in common stocks.
Putnam Asset Allocation Growth Fund - asset allocation for
capital appreciation typically consisting of 80% domestic and
international stocks and 20% bonds and money market
investments.
Putnam Asset Allocation Balanced Fund - asset allocation for
total return typically consisting of 65% domestic and
international stocks and 35% bonds and money market
investments.
Putnam Asset Allocation Conservative Fund - asset allocation
for capital preservation typically consisting of 35% domestic
and international stocks and 65% bonds and money market
investments.
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 salary, 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
salary, 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 $10,500 for 2001 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
salary, after income taxes. If a participant has authorized less than
15% of their salary 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 national
average interest rate for five-year certificates of deposit (as
published in The Wall Street Journal), plus 1.5%. 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
6.37% for 2001. 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 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.
Payment of Benefits - Distributions to terminating and withdrawing
participants are recorded when paid.
(3) LOANS TO PARTICIPANTS
Loan activity during 2001 and 2000 is set forth below:
(Thousands of dollars) 2001 2000
------- -------
Balance at beginning of year $ 7,656 $9,156
New loans 2,792 3,042
Principal repayments (3,318) (3,393)
Loans included as distributions
to terminated participants (366) (1,154)
Transfer from prior trustee 384 5
------- -------
Balance at end of year $ 7,148 $7,656
======= ======
Interest income applicable to these loans during 2001 was $531,000.
(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) 2001 2000
--------- -------
Net Assets:
Common stock $ 14,331 $18,677
========= =======
Year ended
December 31, 2001
-----------------
Changes in Net Assets:
Dividends $ 449
Net depreciation (2,792)
Distributions (2,003)
-------
$(4,346)
=======
(5) INVESTMENTS
The following presents investments that represent five percent or more
of the Plan's net assets at December 31, 2001 or 2000.
December 31,
--------------------------
(Thousands of dollars) 2001 2000
--------- --------
Kerr-McGee Corporation Common Stock -
1,039,386 shares in 2001 and 1,029,736
shares in 2000 $56,958(a) $68,928(a)
Vanguard Windsor II Fund - 775,263 shares
in 2001 and 688,217 shares in 2000 19,839 18,719
Harbor Capital Appreciation Fund - 501,883 shares
In 2001 14,670 - (b)
Vanguard U.S. Growth Fund - 704,377 shares
in 2000 - (b) 19,476
Vanguard Balanced Index Fund - 789,314 shares
in 2001 and 804,140 shares in 2000 14,097 15,343
Putnam Stable Value Fund - 58,163,098 shares in
2001 and 51,646,584 shares in 2000 58,163 51,647
Putnam Vista Fund - 3,359,221 shares in 2001
and 3,485,142 shares in 2000 29,897 45,377
Putnam Growth & Income Fund - 1,163,678 shares
in 2001 and 1,159,726 shares in 2000 20,667 22,649
Putnam International Growth Fund - 608,890 shares
in 2000 - (b) 15,046
S&P 500 Index Fund - 651,069 shares in 2001 18,132 - (b)
(a) A portion of which is nonparticipant-directed (see Note 4)
(b) Asset does not represent 5% or more of the Plan's net assets for
the indicated year end.
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
depreciated in value by $43,536,000 as follows:
(Thousands of dollars)
Common stock $11,283
Mutual funds 32,253
-------
$43,536
=======
(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 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 until the receipt of a distribution.
(7) SUBSEQUENT EVENTS
In August 2001, the Company completed the acquisition of all of the
outstanding shares of common stock of HS Resources, Inc. (HSR). HSR had
a defined contribution plan, the HS Resources, Inc. 401(k) & Profit
Sharing Plan (HSR plan). It is anticipated that the HSR plan will be
merged into the Plan during October 2002. The total effect of the
merger on the Plan and its net assets is not currently known.
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, 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 - 1,039,386 shares $49,516 $ 56,958
* Putnam Investments Putnam Bond Index Fund - 330,125 shares nr 3,925
* Vanguard Investments Vanguard Windsor II Fund - 775,263 shares nr 19,839
* Harbor Investments Harbor Capital Appreciation Fund - 501,883 shares nr 14,670
* Vanguard Investments Vanguard Balanced Index Fund - 789,314 shares nr 14,097
* Putnam Investments Putnam Stable Value Fund - 58,163,098 shares nr 58,163
* Putnam Investments Putnam Vista Fund - 3,359,221 shares nr 29,897
* Putnam Investments Putnam Growth & Income Fund - 1,163,678 shares nr 20,667
* Putnam Investments Putnam Asset Allocation Balanced Fund - 487,796 shares nr 4,790
* Putnam Investments Putnam International Growth Fund - 581,990 shares nr 11,611
* Putnam Investments Putnam S&P 500 Index Fund - 651,069 shares nr 18,132
* Putnam Investments Putnam Asset Allocation Growth Fund - 321,515 shares nr 3,100
* Putnam Investments Putnam Asset Allocation Conservative Fund - 128,429 shares nr 1,117
* Various Participants Participant loans - interest rates from 5.9% to 10.5% nr 7,148
* Putnam Investments Collective Short-term Investment Fund nr 485
--------
$264,599
========
*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, 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 $23,138 $ - $ - $ - $23,138 $23,138 $ -
*Kerr-McGee Corporation Common Stock - 23,818 - - 19,785 23,818 4,033
*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 (John M. Rauh)
--------------------------------------
John M. Rauh
Chairman of the Kerr-McGee Corporation
Benefits Committee
Date: June 26, 2002