1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-68136
PROSPECTUS SUPPLEMENT
(To prospectus dated August 31, 2001)
$1,500,000,000
[KERR-MCGEE CORPORATION Logo]
KERR-MCGEE CORPORATION
$325,000,000 5 7/8% Notes due 2006
$675,000,000 6 7/8% Notes due 2011
$500,000,000 7 7/8% Notes due 2031
--------------------------------------------------------------------------------
This is a public offering by Kerr-McGee Corporation ("Kerr-McGee") of
$325,000,000 of 5 7/8% notes due 2006, $675,000,000 of 6 7/8% notes due 2011 and
$500,000,000 of 7 7/8% notes due 2031.
Interest on the notes is payable March 15 and September 15 of each year,
beginning March 15, 2002. Kerr-McGee may redeem some or all of the notes, at any
time, at the "make-whole" prices described in this prospectus supplement. The
notes have no sinking fund provisions.
The notes will be guaranteed by Kerr-McGee's direct wholly-owned subsidiaries,
Kerr-McGee Operating Corporation and Kerr-McGee Rocky Mountain Corporation, as
more fully described in this prospectus supplement.
AN INVESTMENT IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
5 OF THE PROSPECTUS.
PUBLIC OFFERING UNDERWRITING NET PROCEEDS TO
PRICE DISCOUNT KERR-MCGEE
--------------- ------------ ---------------
Per 5 7/8% note due 2006................................... 99.944% 0.600% 99.344%
Total...................................................... $324,818,000 $1,950,000 $322,868,000
Per 6 7/8% note due 2011................................... 99.849% 0.650% 99.199%
Total...................................................... $673,980,750 $4,387,500 $669,593,250
Per 7 7/8% note due 2031................................... 99.630% 0.875% 98.755%
Total...................................................... $498,150,000 $4,375,000 $493,775,000
Neither the Securities and Exchange Commission nor any other body has approved
or disapproved of these securities or passed upon the adequacy or accuracy of
this prospectus supplement or the accompanying prospectus. Any representation to
the contrary is a criminal offense.
The notes should be delivered on or about October 3, 2001 through the book-entry
facilities of The Depository Trust Company.
--------------------------------------------------------------------------------
Sole Book-Running Lead Manager Joint Lead Manager
LEHMAN BROTHERS JPMORGAN
ABN AMRO INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
RBC DOMINION SECURITIES
SALOMON SMITH BARNEY
September 26, 2001
2
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT
RELY ON ANY OTHER REPRESENTATIONS. OUR AFFAIRS MAY CHANGE AFTER THIS PROSPECTUS
SUPPLEMENT IS DISTRIBUTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THIS DOCUMENT.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Summary................................ S-3
Use of Proceeds........................ S-5
Ratio of Earnings to Fixed Charges..... S-5
Capitalization......................... S-6
Selected Financial and Operating Data
of Kerr-McGee........................ S-7
Unaudited Pro Forma Financial
Statements........................... S-8
Selected Financial and Operating Data
of HS Resources...................... S-14
Description of the Notes............... S-15
Underwriting........................... S-18
Legal Matters.......................... S-19
PROSPECTUS
About This Prospectus.................. 3
Where You Can Find Information......... 3
Risk Factors........................... 5
Cautionary Statement Concerning
Forward-Looking Statements........... 7
The Company............................ 8
Use of Proceeds........................ 8
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividend
Requirements......................... 8
Description of Debt Securities......... 9
Description of Preferred Stock......... 15
Description of Common Stock............ 17
Description of Stock Purchase Contracts
and Stock Purchase Units............. 18
Description of Warrants................ 18
Plan of Distribution................... 18
Legal Matters.......................... 19
Experts................................ 19
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SUMMARY
The following summary contains basic information about us and the notes. It
does not contain all the information that is important to you. You should read
the following summary together with the more detailed information and financial
statements and notes to the financial statements appearing elsewhere in this
prospectus supplement or incorporated by reference into the attached prospectus.
References to "$" in this prospectus supplement and in the accompanying
prospectus are to U.S. dollars. Except as the context may otherwise require, the
terms "Kerr-McGee," "we," "our" and "us" as used in this prospectus supplement
and the attached prospectus refer to Kerr-McGee Corporation and its
subsidiaries. Kerr-McGee Rocky Mountain Corporation (formerly named HS
Resources, Inc.), a subsidiary of Kerr-McGee, is sometimes referred to in this
prospectus supplement and the attached prospectus as "HS Resources."
KERR-MCGEE CORPORATION
Kerr-McGee is an energy and inorganic chemical company with worldwide
operations. It acquires leases and concessions and explores for, develops,
produces and markets crude oil and natural gas onshore in the United States and
in the Gulf of Mexico, the U.K. sector of the North Sea, Southeast Asia, and
other areas. Kerr-McGee's chemical operations produce and market titanium
dioxide pigment and certain other specialty chemicals, heavy minerals and
treating services for forest products.
Our executive offices are located at Kerr-McGee Center, Oklahoma City,
Oklahoma 73125.
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THE OFFERING
Issuer........................Kerr-McGee Corporation
Securities Offered............$325,000,000 principal amount of 5 7/8% notes due
2006,
$675,000,000 principal amount of 6 7/8% notes due
2011 and
$500,000,000 principal amount of 7 7/8% notes due
2031.
Maturity Date.................The notes due 2006 will mature on September 15,
2006. The notes due 2011 will mature on September
15, 2011. The notes due 2031 will mature on
September 15, 2031.
Interest Payment Dates........Each March 15 and September 15, commencing March
15, 2002.
Optional Redemption...........We may redeem all or any portion of the notes at
our option at any time at the "make-whole"
redemption prices described below. See
"Description of the Notes - Redemption" for a
description of the calculation of the amount you
will receive upon a redemption of the notes due
2006, notes due 2011 or notes due 2031. We are not
required to establish a sinking fund to retire the
notes prior to maturity.
Ranking.......................The notes will be our unsecured obligations and
will rank on a parity with all of our other
unsecured, unsubordinated indebtedness, including
all other unsubordinated debt securities issued
under the indenture.
Certain Covenants.............The indenture governing the notes contains
covenants that, among other things, limit our
ability to:
- incur, or permit any of our restricted
subsidiaries to incur, liens on our or their
property or assets to secure debt, and
- merge or consolidate with another company or
sell, lease or convey all or substantially all
of our assets.
Guarantees....................Kerr-McGee Operating Corporation, from and after
the date of issuance of the notes, and Kerr-McGee
Rocky Mountain Corporation, jointly and severally
with Kerr-McGee Operating Corporation from and
after November 15, 2001, will guarantee our
obligations under the notes. Kerr-McGee Operating
Corporation and Kerr-McGee Rocky Mountain
Corporation are both direct wholly-owned
subsidiaries of Kerr-McGee.
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USE OF PROCEEDS
The net proceeds from the offering of the notes are estimated to be
approximately $1,485,636,250 after expenses. We will use the proceeds we receive
from the sale of the notes to repay borrowings incurred to fund the cash portion
of the consideration for the HS Resources acquisition and various other
short-term borrowings. Borrowings under a bank credit facility were incurred in
connection with our acquisition of HS Resources and bear interest at 4.40% per
annum. Other short-term borrowings bear interest at variable rates ranging from
3.25% to 4.10% per annum.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31,(1) JUNE 30,(1)
-------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ------- -------
4.1 3.9 N/A(2) 2.2 6.8 4.8 9.2
---------------
(1) At no time during the periods indicated has Kerr-McGee Operating Corporation
had any preferred stock outstanding. Therefore, unless otherwise indicated,
ratio of earnings to combined fixed charges and preferred dividend
requirements will be the same.
(2) Earnings were inadequate to cover fixed charges by $548 million for the year
ended December 31, 1998.
For purposes of computing the ratios, the earnings calculation is: income
from continuing operations + income taxes + fixed charges - capitalized
interest. The fixed charges calculation is: all interest + interest factor of
rental expense.
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CAPITALIZATION
The following table sets forth our unaudited capitalization, which includes
our consolidated subsidiaries, as of June 30, 2001 on an actual basis and as
adjusted (i) for the acquisition of HS Resources and (ii) to give effect to the
sale of the notes and the application of the estimated net proceeds from this
sale as described in "Use of Proceeds."
AS OF JUNE 30, 2001
---------------------------------------------
AS ADJUSTED FOR AS ADJUSTED
ACTUAL ACQUISITION FOR OFFERING
------ --------------------- ------------
(MILLIONS OF DOLLARS)
Short-term borrowings....................................... $ 7 $ 7 $ 7
====== ====== ======
Long-term debt
Debentures:
5 1/4% Convertible subordinated debentures due 2010..... $ 600 $ 600 $ 600
7.125% Debentures due 2027.............................. 150 150 150
7% Debentures due 2011, net of unamortized debt discount
of $97................................................. 153 153 153
Notes payable:
9 1/4% Series A senior subordinated notes due 2006...... -- 154 154
9 1/4% Series B senior subordinated notes due 2006...... -- 85 85
5 1/2% Exchangeable notes due 2004, net of unamortized
debt discount of $24................................... 306 306 306
6.625% Notes due 2007................................... 150 150 150
8.375% Notes due 2004................................... 150 150 150
8.125% Notes due 2005................................... 150 150 150
8% Notes due 2003....................................... 100 100 100
Variable interest rate notes due 2004................... 200 200 200
Variable interest rate revolving credit agreement with
banks due 2002......................................... -- 1,069 --
5 7/8% Notes due 2006................................... -- -- 325
6 7/8% Notes due 2011................................... -- -- 675
7 7/8% Notes due 2031................................... -- -- 500
Commercial paper.......................................... 60 189 --
Euro commercial paper..................................... 160 160 --
Guaranteed debt of Employee Stock Ownership Plan 9.61%
notes due in installments through 2005.................. 16 16 16
------ ------ ------
Total................................................. 2,195 3,632 3,714
Long-term debt due within one year........................ 198 211 143
------ ------ ------
Total long-term debt.................................. $2,393 $3,843 $3,857
====== ====== ======
Minority interest in subsidiary companies................... $ 3 $ 3 $ 3
====== ====== ======
Stockholders' equity
Common stock -- 300,000,000 shares
authorized -- 101,948,393 shares issued, 100,206,533
shares issued as adjusted for
acquisition............................................. $ 102 $ 100 $ 100
Restricted stock.......................................... 12 12 12
Capital in excess of par value............................ 1,682 1,664 1,664
Preferred stock rights.................................... 1 1 1
Accumulated other comprehensive loss...................... (69) (69) (69)
Retained earnings......................................... 1,659 1,659 1,659
Common stock in treasury, at cost, 6,832,090 shares....... (378) -- --
Deferred compensation..................................... (92) (92) (92)
------ ------ ------
Total stockholders' equity......................... $2,917 $3,275 $3,275
====== ====== ======
Total capitalization............................... $5,320 $7,128 $7,142
====== ====== ======
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SELECTED FINANCIAL AND OPERATING DATA OF KERR-MCGEE
The following table sets forth certain information regarding our
consolidated results of operations, financial position and operating data as of
and for the periods indicated. You should read the data presented below in
conjunction with our consolidated financial statements and the notes thereto,
which are incorporated by reference into the attached prospectus. The following
financial information is not necessarily indicative of our future results.
KERR-MCGEE HISTORICAL FINANCIAL INFORMATION
SIX MONTHS ENDED}
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Oil sales................................... $ 888 $ 1,001 $ 2,091 $ 1,256 $ 790 $ 1,154 $ 1,246
Gas sales................................... 510 296 752 504 453 612 603
Other revenues.............................. 599 600 1,278 983 1,011 901 943
-------- -------- -------- ------- ------- ------- -------
Total revenues.............................. $ 1,997 $ 1,897 $ 4,121 $ 2,743 $ 2,254 $ 2,667 $ 2,792
======== ======== ======== ======= ======= ======= =======
Income (loss) from continuing operations.... $ 530 $ 295 $ 842 $ 146 $ (345) $ 351 $ 358
Income from discontinued operations......... -- -- -- -- 277 33 56
Extraordinary items......................... -- -- -- -- -- (2) --
Cumulative effect of accounting changes..... (20) -- -- (4) -- -- --
-------- -------- -------- ------- ------- ------- -------
Net income (loss)........................... $ 510 $ 295 $ 842 $ 142 $ (68) $ 382 $ 414
======== ======== ======== ======= ======= ======= =======
Diluted earnings per share:
Continuing operations..................... $ 5.11 $ 3.02 $ 8.37 $ 1.69 $ (3.98) $ 4.02 $ 4.05
Discontinued operations................... -- -- -- -- 3.20 0.38 0.63
Extraordinary items....................... -- -- -- -- -- (0.02) --
Cumulative effect of accounting changes... (0.19) -- -- (0.05) -- -- --
-------- -------- -------- ------- ------- ------- -------
Net income (loss)......................... $ 4.92 $ 3.02 $ 8.37 $ 1.64 $ (0.78) $ 4.38 $ 4.68
======== ======== ======== ======= ======= ======= =======
Average common shares outstanding, including
dilution (thousands)...................... 106,623 101,909 103,987 86,497 86,688 87,114 88,505
BALANCE SHEET DATA
Total assets................................ $ 8,141 $ 7,220 $ 7,666 $ 5,899 $ 5,451 $ 5,339 $ 5,194
Total debt.................................. 2,400 2,804 2,425 2,525 2,250 1,766 1,849
Total debt less cash........................ 2,203 2,689 2,281 2,258 2,129 1,574 1,719
Stockholders' equity........................ $ 2,917 $ 2,141 $ 2,633 $ 1,492 $ 1,346 $ 1,558 $ 1,279
Common shares outstanding (thousands)....... 95,116 94,231 94,484 86,483 86,367 86,794 87,032
Cash dividends declared per common share.... $ 0.90 $ 0.90 $ 1.80 $ 1.80 $ 1.80 $ 1.80 $ 1.64
Total debt to capitalization ratio.......... 45% 56% 48% 62% 62% 53% 59%
Debt less cash to capitalization ratio...... 43% 55% 46% 60% 61% 50% 57%
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the
acquisition of HS Resources based on the factors set forth below and after
giving effect to the pro forma adjustments described in the accompanying notes.
The unaudited pro forma financial statements have been prepared from, and should
be read in conjunction with, the historical consolidated financial statements
and notes thereto of Kerr-McGee and HS Resources, which are incorporated by
reference into the attached prospectus.
The unaudited pro forma financial statements and related notes are
presented for illustrative purposes only. If the shares of Kerr-McGee common
stock issuable in the acquisition had been issued at the dates indicated, Kerr-
McGee's financial position or results of operations might have been different
from those presented in the unaudited pro forma financial statements. The
unaudited pro forma financial statements should not be relied upon as an
indication of the financial position or results of operations that Kerr-McGee
would have achieved if this issuance and the acquisition had occurred at the
dates indicated. You also should not rely on the unaudited pro forma financial
statements as an indication of the future operating results or financial
position that the combined companies will achieve after the acquisition.
The unaudited pro forma financial statements were prepared based on the
following:
- Kerr-McGee purchased all the outstanding shares of common stock of HS
Resources and assumed its outstanding debt. Kerr-McGee paid an aggregate
of $833 million in cash (at $66 per share) and issued an aggregate of
5,090,230 shares of Kerr-McGee common stock (at a fixed exchange ratio of
.9404 shares of Kerr-McGee common stock for each share of HS Resources
common stock). The cash portion of the acquisition consideration was
financed under existing Kerr-McGee debt facilities.
- The unaudited pro forma balance sheet has been prepared as if the
acquisition occurred on June 30, 2001. The unaudited pro forma statement
of income has been prepared as if the acquisition occurred on January 1,
2000.
- The acquisition was accounted for as a purchase of HS Resources by
Kerr-McGee.
- Kerr-McGee and HS Resources utilize the successful efforts method of
accounting for oil and gas activities.
- In June 2001, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard No. 142, "Goodwill and Other Intangible
Assets," which provided that goodwill acquired in a business combination
occurring after June 30, 2001, should not be amortized. Instead, the FASB
required impairment tests for goodwill balances (comparison of the fair
value of a reporting unit to its carrying amount). Since the acquisition
of HS Resources occurred after June 30, 2001, no amortization of goodwill
has been reflected in the pro forma statements.
- Targeted annual selling and general expense savings of $5 to $10 million
have not been reflected as an adjustment to the historical data. These
cost savings are expected to result from the consolidation of certain
offices and the elimination of duplicative corporate staff and expenses.
No pro forma adjustments have been made with respect to the following
unusual items. These items are reflected in the historical results of Kerr-McGee
and HS Resources, as applicable, and should be considered when making
period-to-period comparisons.
- On January 1, 2001, both Kerr-McGee and HS Resources adopted Financial
Accounting Standard No. 133, as amended (FAS 133), "Accounting for
Derivative Instruments and Hedging Activities." This standard requires
all derivative instruments to be recorded as assets or liabilities,
measured at fair value, and changes in the derivative's fair value to be
recognized currently in earnings unless specific hedge accounting
criteria are met.
Kerr-McGee hedges certain foreign currency risks (future cash flows for
certain non-U.S. capital expenditures and operating expenses). Kerr-McGee
also has derivative instruments that are not hedges (options associated
with Kerr-McGee debt exchangeable for the Devon Energy Corporation
(Devon) common stock owned by Kerr-McGee and foreign currency forward
sales contracts associated with certain foreign currency denominated
chemical accounts receivable). In adopting FAS 133, Kerr-McGee recognized
an expense of $20 million in the first quarter of 2001 as a cumulative
effect of the accounting change. This amount is not reflected in the pro
forma income statement. Also in adopting FAS 133, Kerr-McGee chose to
reclassify 85% of the Devon shares
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owned from the "available for sale" category of investments to "trading"
and recognized other income of $181 million ($118 million after tax) on
January 1, 2001, for the unrealized appreciation on the Devon shares
reclassified to "trading." After adoption of FAS 133, the "trading"
securities are marked to market through income each month. A more
complete description of Kerr-McGee's derivatives is contained in
Kerr-McGee's Quarterly Report on Form 10-Q for the quarter ended June 30,
2001, which is incorporated by reference into the attached prospectus.
HS Resources uses derivative instruments to mitigate commodity price
risks related to the purchase or sale of oil and natural gas and interest
rate swaps to hedge the interest rates on certain borrowings. For the six
months ended June 30, 2001 and for the year ended December 31, 2000,
sales were reduced by $65 million and $72 million, respectively, for
these commodity price hedges. The change in the fair value of the
interest rate swaps has been reflected in the fair value of the
derivatives in the historical HS Resources balance sheet, but will not
affect income until the swaps are settled. Additional information
concerning these derivatives is contained in the Form 8-K/A filed by the
Kerr-McGee on August 29, 2001, under Item 7.(a), which contains the HS
Resources June 30, 2001 financial statements, and in the HS Resources
Annual Report on Form 10-K for the year ended December 31, 2000, which
are incorporated by reference into the attached prospectus.
- During the six months ended June 30, 2001, Kerr-McGee recognized a
pre-tax special item of $25 million for the termination of manganese
metal production at the Hamilton, Mississippi electrolytic chemical
facility. This expense primarily related to plant and equipment
write-offs and other closings costs, including severance.
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UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 2001
KERR-MCGEE HSR PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
---------- ---------- ----------- ---------
(MILLIONS OF DOLLARS)
ASSETS
Current assets
Cash..................................................... $ 197 $ 3 $ -- $ 200
Notes and accounts receivable............................ 613 72 -- 685
Inventories.............................................. 434 1 -- 435
Deposits, prepaids, and other............................ 114 50 -- 164
------- ------ ------ -------
Total current assets............................. 1,358 126 -- 1,484
------- ------ ------ -------
Property, plant and equipment.............................. 13,553 1,261 872(a) 15,686
Less reserves for depreciation, depletion and
amortization............................................. 7,710 330 (330)(a) 7,710
------- ------ ------ -------
5,843 931 1,202 7,976
------- ------ ------ -------
Goodwill................................................... -- 2 300(a) 302
Investments and other assets............................... 940 23 (6)(a) 957
------- ------ ------ -------
Total assets..................................... $ 8,141 $1,082 $1,496 $10,719
======= ====== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings.................................... $ 7 $ -- $ -- $ 7
Accounts payable......................................... 803 94 -- 897
Long-term debt due within one year....................... 198 13 -- 211
Other current liabilities................................ 486 95 -- 581
------- ------ ------ -------
Total current liabilities........................ 1,494 202 -- 1,696
------- ------ ------ -------
Long-term debt............................................. 2,195 468 969(a) 3,632
------- ------ ------ -------
Deferred credits and reserves.............................. 1,535 153 428(a) 2,116
------- ------ ------ -------
Stockholders' equity
Common stock............................................. 102 -- 5(a) 100
(7)(c)
Restricted stock......................................... 12 -- -- 12
Capital in excess of par value........................... 1,682 209 (209)(b) 1,664
353(a)
(371)(c)
Preferred stock rights................................... 1 -- -- 1
Retained earnings........................................ 1,659 102 (102)(b) 1,659
Accumulated other comprehensive income (loss)............ (69) (23) 23(b) (69)
Common stock in treasury, at cost........................ (378) (22) 22(b) --
378(c)
Deferred compensation.................................... (92) (7) 7(b) (92)
------- ------ ------ -------
Total stockholders' equity....................... 2,917 259 99 3,275
------- ------ ------ -------
Total liabilities and stockholders' equity....... $ 8,141 $1,082 $1,496 $10,719
======= ====== ====== =======
See accompanying Notes to Unaudited Pro Forma Financial Statements.
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UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2001 TWELVE MONTHS ENDED DECEMBER 31, 2000
------------------------------------------------- -------------------------------------------------
KERR-MCGEE HSR PRO FORMA KERR-MCGEE HSR PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- --------- ---------- ---------- ----------- ---------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Sales..................... $ 1,997 $ 208 $ -- $ 2,205 $ 4,121 $ 459 $(136)(g) $ 4,444
-------- ------- ------ -------- -------- ------- ----- --------
Costs and expenses
Costs and operating
expenses.............. 605 20 -- 625 1,269 170 (133)(g) 1,306
Selling, general and
administrative
expenses.............. 114 4 -- 118 298 9 -- 307
Shipping and handling
expenses.............. 57 10 -- 67 97 16 -- 113
Depreciation and
depletion............. 341 34 28(d) 403 684 60 51(d) 795
Exploration, including
dry holes and
amortization of
undeveloped leases.... 94 14 -- 108 170 30 -- 200
Taxes, other than
income taxes.......... 63 14 -- 77 122 26 -- 148
Purchased in-process
research and
development........... -- -- -- -- 32 -- -- 32
Interest and debt
expense............... 80 21 35(e) 136 208 49 70(e) 327
-------- ------- ------ -------- -------- ------- ----- --------
Total costs and
expenses............ 1,354 117 63 1,534 2,880 360 (12) 3,228
-------- ------- ------ -------- -------- ------- ----- --------
643 91 (63) 671 1,241 99 (124) 1,216
Other income.............. 201 -- -- 201 58 -- 3(g) 61
-------- ------- ------ -------- -------- ------- ----- --------
Income from operations
before income taxes and
change in accounting
principle............... 844 91 (63) 872 1,299 99 (121) 1,277
Taxes on income........... (314) (34) 23(f) (325) (457) (38) 44(f) (451)
-------- ------- ------ -------- -------- ------- ----- --------
Income from continuing
operations.............. $ 530 $ 57 $ (40) $ 547 $ 842 $ 61 $ (77) $ 826
======== ======= ====== ======== ======== ======= ===== ========
Income from continuing
operations per share
Basic................. $ 5.58 $ 3.13 $ 5.47 $ 9.01 $ 3.29 $ 8.39
Diluted............... $ 5.11 $ 2.98 $ 5.03 $ 8.37 $ 3.18 $ 7.83
HS Resources pro forma
equivalent earnings per
share................... $ 4.73 $ 7.36
Average common shares
outstanding (thousands)
Basic................. 94,843 18,238 99,933 93,406 18,420 98,496
Diluted............... 106,623 19,126 111,713 103,987 19,092 109,077
See accompanying Notes to Unaudited Pro Forma Financial Statements.
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. METHOD OF ACCOUNTING FOR THE ACQUISITION
Kerr-McGee accounted for the acquisition using the purchase method of
accounting for business combinations. Accordingly, HS Resources' assets acquired
and liabilities assumed by Kerr-McGee were revalued and recorded at their
estimated fair values. In the acquisition, Kerr-McGee assumed the outstanding
debt of HS Resources and converted each share of HS Resources common stock
outstanding to Kerr-McGee common stock or cash, as provided in the merger
agreement. HS Resources stockholders were entitled to elect to receive either
cash at $66 per share or Kerr-McGee common stock at a fixed exchange ratio of
.9404 of a share of Kerr-McGee common stock for each share of HS Resources
common stock. The cash consideration in the acquisition for the outstanding
shares of HS Resources was limited to a maximum of $833 million; thus, the pro
forma Kerr-McGee common shares to be issued to HS Resources' stockholders total
5,090,230.
2. PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION
The unaudited consolidated pro forma balance sheet includes the following
adjustments:
(a) This entry adjusts the historical book values of HS Resources'
assets and liabilities to their estimated fair values as of June 30, 2001.
The calculation of the total purchase price and preliminary allocation to
assets and liabilities are shown below:
(DOLLARS IN MILLIONS,
EXCEPT SHARE PRICE)
---------------------
Calculation and preliminary allocation of purchase price:
Number of shares of common stock to be issued............. 5,090,230
Average of Kerr-McGee common stock price two days before
and after merger announcement.......................... $ 70.33
----------
Fair value of common stock to be issued..................... 358
Add: Portion of the purchase price paid in cash This
amount is added to long-term debt in the pro forma
balance sheet.......................................... 833
Add: Fair value of HS Resources options, unvested
performance shares and restricted stock to be settled
in cash, net of exercise proceeds of approximately $25
million. This amount is added to long-term debt in the
pro forma balance sheet................................ 86
----------
Fair value of consideration to be issued in the merger...... 1,277
Add: Estimated merger costs, which includes $15 million of
legal, accounting, and registration costs and $28
million of severance costs. This amount is added to
long-term debt in the pro forma balance sheet.......... 43
----------
Total purchase price.............................. $ 1,320
==========
Allocation of purchase price:
Current assets......................................... $ 126
Property, plant and equipment.......................... 2,133
Other assets........................................... 17
Goodwill............................................... 302
Current liabilities.................................... (202)
Long-term debt......................................... (475)
Deferred credits....................................... (581)
----------
$ 1,320
==========
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price allocation is subject to change in:
- The fair value of HS Resources' working capital and other assets and
liabilities on the effective date, and
- The actual merger costs incurred.
These items will not be known until after the effective date of the merger.
Management does not believe the final purchase price allocation will differ
materially from the estimated purchase price allocation.
(b) These adjustments eliminate HS Resources' historical book values.
(c) Adjustment to reflect cancellation of all Kerr-McGee's treasury
shares.
The unaudited consolidated pro forma statement of income includes the
following adjustments:
(d) These adjustments increase the depreciation and depletion expense
using the successful efforts method of accounting and are based on the
preliminary allocation of the purchase price.
(e) These adjustments increase interest expense due to the $969
million of additional long-term debt, which results from financing the cash
consideration ($833 million), the fair value of the HS Resources options,
unvested performance shares and restricted stock to be settled in cash net
of the exercise prices of the HS Resources options ($86 million), and the
estimated merger and other costs ($50 million). These are assumed to be
funded with borrowings from existing credit facilities.
(f) These adjustments record the net tax effect of all pro forma
adjustments at an effective income tax rate of 36.5%.
(g) Amounts represent reclassification of $3 million for interest
income to "Other Income" to be consistent with the Kerr-McGee
classification and $133 million for the cost of trading and transportation
to offset trading and transportation income to be consistent with the
second quarter 2001 historical reclassification by HS Resources.
S-13
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SELECTED FINANCIAL AND OPERATING DATA OF HS RESOURCES
The following table sets forth certain information regarding HS Resources'
consolidated results of operations, financial position and operating data as of
and for the periods indicated. You should read the data presented below in
conjunction with HS Resources' consolidated financial statements and the notes
thereto, which are incorporated by reference into the attached prospectus. The
following financial information is not necessarily indicative of HS Resources'
future results.
HS RESOURCES HISTORICAL FINANCIAL INFORMATION
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Oil sales........................... $ 37 $ 32 $ 74 $ 38 $ 38 $ 48 $ 40
Gas sales........................... 154 97 219 141 125 95 73
Other revenues...................... 17 15 33 15 14 8 4
------- ------- ------- ------- ------- ------- -------
Total revenues...................... $ 208 $ 144 $ 326 $ 194 $ 177 $ 151 $ 117
======= ======= ======= ======= ======= ======= =======
Income (loss) from continuing
operations........................ $ 57 $ 22 $ 61 $ 12 $ (19) $ (16) $ 2
Extraordinary items................. (1) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)................... $ 56 $ 22 $ 61 $ 12 $ (19) $ (16) $ 2
======= ======= ======= ======= ======= ======= =======
Diluted earnings per share:
Continuing operations............. $ 2.98 $ 1.12 $ 3.18 $ 0.62 $ (1.00) $ (0.91) $ 0.15
Extraordinary items............... (0.05) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ 2.93 $ 1.12 $ 3.18 $ 0.62 $ (1.00) $ (0.91) $ 0.15
======= ======= ======= ======= ======= ======= =======
Average common shares outstanding,
including dilution (thousands).... 19,126 19,173 19,092 18,888 18,609 17,119 14,552
BALANCE SHEET DATA
Total assets........................ $ 1,082 $ 976 $ 1,008 $ 909 $ 832 $ 956 $ 696
Total debt.......................... 481 588 520 580 536 637 399
Total debt less cash................ 478 581 518 579 526 630 390
Stockholders' equity................ $ 259 $ 186 $ 222 $ 165 $ 153 $ 174 $ 169
Common shares outstanding less
treasury (thousands).............. 18,294 18,304 18,079 18,797 18,326 18,495 17,006
Cash dividends declared per common
share............................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Total debt to capitalization
ratio............................. 65% 76% 70% 78% 78% 79% 70%
Debt less cash to capitalization
ratio............................. 65% 76% 70% 78% 78% 78% 70%
S-14
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DESCRIPTION OF THE NOTES
GENERAL
The following description of the terms of the notes summarizes certain
general terms that will apply to the notes. The notes will be issued under an
indenture between us and Citibank, N.A., as trustee, dated August 1, 2001. This
description is not complete, and we refer you to the attached prospectus and the
indenture. Defined items have the meanings assigned to them in the indenture.
The referenced sections of the indenture and the defined terms are incorporated
by reference in the following summary.
Purchases of notes or beneficial interests therein may be made in
denominations of $1,000 or any integral multiples of $1,000 in excess thereof.
The notes will be issued in an aggregate principal amount of $1,500,000,000.
We may from time to time, without the consent of existing holders, create
and issue further notes having the same terms and conditions as the notes being
offered hereby in all respects, except for issue date, issue price and, if
applicable, the first payment of interest thereon. Additional notes issued in
this manner will be consolidated with and will form a single series with the
previously outstanding notes.
MATURITY, INTEREST AND PAYMENT
- The notes due 2006 will mature on September 15, 2006 and will bear
interest at a rate of 5 7/8% per annum.
- The notes due 2011 will mature on September 15, 2011 and will bear
interest at a rate of 6 7/8% per annum.
- The notes due 2031 will mature on September 15, 2031 and will bear
interest at a rate of 7 7/8% per annum.
Interest shall be payable semi-annually on March 15 and September 15 of
each year, commencing March 15, 2002. If an interest payment date falls on a day
that is not a business day, interest will be payable on the next succeeding
business day with the same force and effect as if made on such interest payment
date. Interest will be paid to the persons in whose names the notes are
registered at the close of business on the fifteenth calendar day next preceding
each semi-annual interest payment date. Interest will be calculated on the basis
of a 360-day year, consisting of twelve 30-day months, and will accrue from
October 3, 2001 or from the most recent interest payment date to which interest
has been paid.
REDEMPTION
The notes may be redeemed at any time at our option, in whole or in part,
at a redemption price equal to the sum of: (i) the principal amount of the notes
being redeemed plus accrued interest thereon to the redemption date; and (ii)
the Make-Whole Amount (as defined below), if any, with respect to the notes.
Interest installments on a note due on or prior to such redemption date
will be payable to the holders of record on the relevant record date.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption
of any notes, the excess, if any, of: (a) the aggregate present value as of
the date of such redemption of each dollar of principal being redeemed and
the amount of interest (exclusive of interest accrued to the date of
redemption) that would have been payable in respect of each such dollar if
such redemption had not been made, determined by discounting, on a
semi-annual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date notice of such
redemption is given) from the respective dates on which such principal and
interest would have been payable if such redemption had not been made, to
the date of redemption; over (b) the aggregate principal amount of the
notes being redeemed.
S-15
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"Reinvestment Rate" means the yield on Treasury securities at a
constant maturity corresponding to the remaining life (as of the date of
redemption, rounded to the nearest month) to the stated maturity of the
principal being redeemed (the "Treasury Yield") plus 0.25%. For purposes
hereof, the Treasury Yield shall be equal to the arithmetic mean of the
yields published in the Statistical Release (as defined below) under the
heading "Week Ending" for "U.S. Government Securities -- Treasury Constant
Maturities" with a maturity equal to such remaining life; provided, that if
no published maturity exactly corresponds with such remaining life, then
the Treasury Yield shall be interpolated or extrapolated on a straight-line
basis from the arithmetic means of the yields for the next shortest and
next longest published maturities. For purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to
the date of determination of the Make-Whole Amount shall be used. If the
format or content of the Statistical Release changes in a manner that
precludes determination of the Treasury Yield in the above manner, then the
Treasury Yield shall be determined in the manner that most closely
approximates the above manner, as reasonably determined by the Kerr-McGee.
"Statistical Release" means the statistical release designated "H.15
(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which reports yields on
actively traded United States government securities adjusted to constant
maturities, or, if such statistical release is not published at the time of
any determination, then such other reasonably comparable index which shall
be designated by Kerr-McGee.
If less than all the notes are to be redeemed, the particular notes or
portions thereof to be redeemed shall be selected not more than 60 days and not
less than 30 days prior to the redemption date by the Trustee from the
outstanding notes not previously called for redemption, either pro rata, by lot
or by another method the trustee shall deem fair and reasonable, and the
aggregate principal amounts to be redeemed must be equal to $1,000 or any
integral multiple thereof.
SINKING FUND
There is no provision for a sinking fund applicable to the notes.
GUARANTEES
Kerr-McGee Operating Corporation, from and after the date of issuance of
the notes, and Kerr-McGee Rocky Mountain Corporation, jointly and severally with
Kerr-McGee Operating Corporation from and after November 15, 2001, will
guarantee our obligations under the notes. The indenture generally permits a
sale of a guarantor of the notes and a sale of a guarantor's assets.
PAYMENT AND PAYING AGENTS
Interest on each note on each interest payment date will be paid to the
person in whose name such note is registered as of the close of business on the
regular record date relating to such interest payment date.
The principal of and interest on, the notes at maturity will be payable
upon presentation of the notes at the corporate trust office of Citibank, N.A.,
in New York, New York, as paying agent for Kerr-McGee. Kerr-McGee may change the
place of payment on the notes, may appoint one or more additional paying agents
(including Kerr-McGee) and may remove any paying agent, all at its discretion.
BOOK-ENTRY
Denomination and Registration. The notes will be issued in fully
registered form, without coupons, in denominations of $1,000 principal amount
and whole multiples of $1,000.
Global Notes, Book-Entry Form. Notes initially will be evidenced by one or
more global notes deposited with the trustee as custodian for The Depository
Trust Company (which we sometimes refer to as DTC), and registered in the name
of Cede & Co. as DTC's nominee.
S-16
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Record ownership of the global notes may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
So long as Cede & Co., as nominee of DTC, is the registered owner of the
global notes, Cede & Co. for all purposes will be considered the sole holder of
the global notes. Except as described in the accompanying prospectus, owners of
beneficial interests in the global notes:
- will not be entitled to have certificates registered in their names;
- will not receive or be entitled to receive physical delivery of
certificates in definitive form; and
- will not be considered holders of the global notes.
The laws of some states require that certain persons take physical delivery
of securities in definitive form. Consequently, the ability of an owner of a
beneficial interest in a global note to transfer the beneficial interest in the
global note to such persons may be limited.
We will wire, through the facilities of the trustee, payments of principal,
premium, if any, and interest payments on the global notes to Cede & Co., the
nominee of DTC, as the registered owner of the global notes. Neither Kerr-McGee,
the trustee nor any paying agent will have any responsibility or be liable for
paying amounts due on the global notes to owners of beneficial interests in the
global notes.
It is DTC's current practice, upon receipt of any payment of principal and
premium, if any, and interest on the global notes, to credit participants'
accounts on the payment date in amounts proportionate to their respective
beneficial interests in the notes represented by the global notes, as shown on
the records of DTC, unless DTC believes that it will not receive payment on the
payment date. Payments by DTC participants to owners of beneficial interests in
notes represented by the global notes held through DTC participants will be the
responsibility of DTC participants, as is now the case with notes held for the
accounts of customers registered in "street name".
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants and other banks, your ability to pledge your
interest in the notes represented by global notes to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate.
Neither Kerr-McGee nor the trustee (nor any registrar or paying agent under
the indenture) will have any responsibility for the performance by DTC or direct
or indirect DTC participants of their obligations under the rules and procedures
governing their operations. DTC has advised us that it will take any action
permitted to be taken by a holder of notes only at the direction of one or more
direct DTC participants to whose account with DTC interests in the global notes
are credited and only for the principal amount of the notes for which directions
have been given.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created
to hold securities for DTC participants and to facilitate the clearance and
settlement of securities transactions between DTC participants through
electronic book-entry changes to the accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations, such as the underwriters of the
notes. Certain DTC participants or their representatives, together with other
entities, own DTC. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a participant, either directly or indirectly.
GOVERNING LAW
The indenture and the notes will be governed by, and construed in
accordance with, the laws of the State of New York.
S-17
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the notes, we have agreed to sell to each of the underwriters listed
below, and each of the underwriters has severally agreed to purchase from us,
the respective principal amount of notes shown opposite its name below:
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES DUE 2006 OF NOTES DUE 2011 OF NOTES DUE 2031
------------ ----------------- ----------------- -----------------
Lehman Brothers Inc. .................. $195,000,000 $405,000,000 $300,000,000
J.P. Morgan Securities Inc. ........... 97,500,000 202,500,000 150,000,000
ABN AMRO Incorporated.................. 10,400,000 21,600,000 16,000,000
Banc One Capital Markets, Inc. ........ 5,850,000 12,150,000 9,000,000
RBC Dominion Securities Corporation.... 10,400,000 21,600,000 16,000,000
Salomon Smith Barney Inc. ............. 5,850,000 12,150,000 9,000,000
------------ ------------ ------------
Total........................ $325,000,000 $675,000,000 $500,000,000
============ ============ ============
The underwriting agreement provides that the obligations of the
underwriters to purchase the notes are subject to certain conditions and that,
if any notes are purchased by the underwriters under the underwriting agreement,
all of the notes agreed to be purchased by the underwriters under the
underwriting agreement must be so purchased.
We have been advised by the underwriters that they propose to offer the
notes offered hereby initially at the public offering price set forth on the
cover page of this prospectus supplement, and to certain selected dealers (who
may include the underwriters) at such public offering price less a concession
not to exceed 0.35% of the principal amount of the notes due 2006, 0.40% of the
principal amount of the notes due 2011 or 0.50% of the principal amount of the
notes due 2031. The underwriters or such selected dealers may reallow a
commission to certain other dealers not to exceed 0.20% of the principal amount
of the notes due 2006, 0.20% of the principal amount of the notes due 2011 or
0.25% of the principal amount of the notes due 2031. After the initial public
offering, the public offering price, the concession to selected dealers and the
reallowance to other dealers may be changed by the underwriters.
The following table shows, for each of the notes, the underwriting
discounts (expressed as a percentage of the principal amount of the notes) to be
paid by us to the underwriters in connection with this offering.
PAID BY
KERR-MCGEE
----------
Per note due 2006. ......................................... 0.600%
Per note due 2011. ......................................... 0.650%
Per note due 2031. ......................................... 0.875%
There is no public market for the notes, and we have no plans to list the
notes on a securities exchange. We have been advised by each underwriter that it
presently intends to make a market in the notes; however, none of the
underwriters is obligated to do so. Any such market-making may be discontinued
at any time, for any reason and without notice. If any of the underwriters
ceases to act as a market-maker for the notes for any reason, there can be no
assurance that another firm or person will make a market in the notes. There can
be no assurance that an active market for the notes will develop or, if a market
does develop, at what prices the notes will trade.
In connection with this offering and in compliance with applicable law, the
underwriters may sell more notes than the total amount shown on the list of
underwriters and participations which appears above. The underwriters may also
effect transactions which stabilize, maintain or otherwise affect the market
price of the notes at levels above those which might otherwise prevail in the
open market. Such transactions may include placing bids for the notes or
effecting purchases of the notes for the purpose of pegging, fixing or
maintaining the price of the notes or for the purpose of reducing a syndicate
short
S-18
19
position created in connection with the offering. Finally, the underwriters may
reclaim selling concessions allowed to dealers for distributing the notes in
this offering, if they repurchase previously distributed notes in transactions
to cover short positions, in stabilization transactions or otherwise. The
underwriters are not required to engage in any of these activities and such
activities, if commenced, may be discontinued at any time.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither we nor
any of the underwriters makes any representation that the underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
Lehman Brothers Inc. and J.P. Morgan Securities Inc. will make the notes
available for distribution on the Internet through a proprietary web site and/or
a third party system operated by Market Axess Inc., an Internet based
communications technology provider. Market Axess Inc. is providing the system as
a conduit for communications between Lehman Brothers Inc. and its customers and
J.P. Morgan Securities Inc. and its customers and is not a party to any
transactions. Market Axess Inc., a registered broker-dealer, will receive
compensation from Lehman Brothers Inc. and J.P. Morgan Securities Inc. based on
transactions that Lehman Brothers Inc. and J.P. Morgan Securities Inc. transact
through the system. Lehman Brothers Inc. and J.P. Morgan Securities Inc. will
make notes available to their customers through the Internet, whether made
through a proprietary or third party system, on the same terms as distributions
made through other channels.
We estimate that our total expenses for this offering will be approximately
$600,000.
The underwriters or their affiliates have from time to time provided
investment banking and/or financial advisory services to us and our affiliates
in the ordinary course of business, for which they have received customary fees,
and they may continue to do so in the future. In addition, The Chase Manhattan
Bank, an affiliate of J.P. Morgan Securities Inc., is one of the lenders under
our bank credit facilities of approximately $900 million due July 2002. Because
more than ten percent of the net proceeds of this offering will be paid to
members or affiliates of members of the National Association of Securities
Dealers, Inc. participating in this offering, this offering will be conducted in
accordance with NASD Conduct Rule 2710(c)(8). Citibank, N.A., the trustee under
the indenture, is an affiliate of Salomon Smith Barney Inc.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the underwriters may be required to make in respect of
such liabilities.
It is expected that delivery of the notes will be made against payment
therefor on or about the date specified in the last paragraph of the cover page
of this prospectus supplement, which will be the fifth business day in the
United States following the date hereof ("T+5"). Under Rule 15c6-1 under the
Exchange Act, trades in the secondary market generally are required to settle in
three business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade notes on the date hereof
will be required, by virtue of the fact that the notes initially will settle in
T+5, to specify an alternate settlement cycle at the time of any such trade to
prevent a failed settlement. Purchasers of notes which wish to trade notes on
the date hereof should consult their own advisors.
LEGAL MATTERS
Certain legal matters with respect to the notes will be passed upon for us
by Gregory F. Pilcher, Esq., Senior Vice President, General Counsel and
Secretary of Kerr-McGee and Simpson Thacher & Bartlett, New York, New York and
for the underwriters by Baker Botts L.L.P., Houston, Texas.
S-19
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PROSPECTUS
[KM LOGO]
$2,000,000,000
KERR-MCGEE CORPORATION
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK, STOCK PURCHASE CONTRACTS,
STOCK PURCHASE UNITS, WARRANTS
KERR-MCGEE OPERATING CORPORATION
GUARANTEES
KERR-MCGEE ROCKY MOUNTAIN CORPORATION
GUARANTEES
------------------------
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer and sale is not permitted.
By this prospectus, we may offer up to $2,000,000,000 of debt securities
(which may be guaranteed by Kerr-McGee Operating Corporation and/or Kerr-McGee
Rocky Mountain Corporation), preferred stock, common stock, stock purchase
contracts, stock purchase units and warrants on terms to be determined at the
time of sale. We will provide more specific information regarding these
securities in supplements to this prospectus.
YOU SHOULD READ THIS PROSPECTUS, PARTICULARLY THE RISK FACTORS BEGINNING ON
PAGE 5, AND ANY SUPPLEMENT CAREFULLY BEFORE INVESTING.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAVE THOSE ORGANIZATIONS
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
August 31, 2001
21
TABLE OF CONTENTS
PAGE
----
ABOUT THIS PROSPECTUS....................................... 3
WHERE YOU CAN FIND INFORMATION.............................. 3
RISK FACTORS................................................ 5
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 7
THE COMPANY................................................. 8
USE OF PROCEEDS............................................. 8
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND
REQUIREMENTS.............................................. 8
DESCRIPTION OF DEBT SECURITIES.............................. 9
DESCRIPTION OF PREFERRED STOCK.............................. 15
DESCRIPTION OF COMMON STOCK................................. 17
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE
UNITS..................................................... 18
DESCRIPTION OF WARRANTS..................................... 18
PLAN OF DISTRIBUTION........................................ 18
LEGAL MATTERS............................................... 19
EXPERTS..................................................... 19
22
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement that Kerr-McGee
Corporation (which we refer to as "Kerr-McGee", "the Company", "we" or "us")
filed with the Securities and Exchange Commission (which we refer to as the
"SEC") utilizing a shelf registration process. Under this shelf process, we may
sell the unsecured Debt Securities (which may be guaranteed under Guarantees
issued by Kerr-McGee Operating Corporation and/or Kerr-McGee Rocky Mountain
Corporation), Preferred Stock, Common Stock, Stock Purchase Contracts, Stock
Purchase Units and Warrants (which we collectively refer to as the "Offered
Securities") described in this prospectus, in one or more offerings up to a
total dollar amount of $2,000,000,000. This prospectus provides you with a
general description of the Offered Securities we may offer. Each time we sell
Offered Securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described below under "Where You Can Find Information."
WHERE YOU CAN FIND INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any materials on file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549. Our filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Room.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until we sell all of the securities:
- Our Proxy Statement-Prospectus included in our registration statement on
Form S-4 (declared effective on June 28, 2001).
- Our Current Report on Form 8-K dated August 1, 2001, and our related
Current Report on Form 8-K/A filed on August 29, 2001.
The following documents, which have been filed by Kerr-McGee Operating
Corporation (formerly named Kerr-McGee Corporation) with the SEC (SEC file
number 001-03939), are also incorporated by reference into this prospectus:
- Kerr-McGee Operating Corporation's Annual Report on Form 10-K for the
year ended December 31, 2000.
- Kerr-McGee Operating Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
- Kerr-McGee Operating Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001.
- Kerr-McGee Operating Corporation's Current Reports on Form 8-K dated
January 16, 2001, February 20, 2001, March 19, 2001, March 23, 2001,
April 10, 2001, April 15, 2001, May 13, 2001, May 14, 2001, May 21, 2001,
June 20, 2001 and July 18, 2001.
3
23
The following documents, which have been filed by Kerr-McGee Rocky Mountain
Corporation (formerly named HS Resources, Inc.) with the SEC (SEC file number
001-13152), are also incorporated by reference into this prospectus:
- Kerr-McGee Rocky Mountain Corporation's Annual Report on Form 10-K for
the year ended December 31, 2000.
- Kerr-McGee Rocky Mountain Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001.
- Kerr-McGee Rocky Mountain Corporation's Current Reports on Form 8-K dated
February 15, 2001, March 20, 2001, April 25, 2001 and May 13, 2001.
You can get a free copy of any of the documents incorporated by reference
by making an oral or written request directed to:
Investor Relations
Kerr-McGee Corporation
P. O. Box 25861
Oklahoma City, Oklahoma 73125
Telephone (405) 270-3125
You should rely only on the information contained or incorporated in this
prospectus or any supplement. We have not authorized anyone else to provide you
with different information. You should not rely on any other representations.
Our affairs may change after this prospectus or any supplement is distributed.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
You should read all information supplementing this prospectus.
4
24
RISK FACTORS
Prospective purchasers of the Offered Securities should carefully review
the information contained elsewhere in this prospectus and should particularly
consider the following matters.
VOLATILE PRODUCT PRICES AND MARKETS COULD ADVERSELY AFFECT RESULTS
Our results of operations are highly dependent upon the prices of and
demand for oil and gas and our chemical products. Historically, the markets for
oil and gas have been volatile and are likely to continue to be volatile in the
future. Accordingly, the prices received by us for our oil and gas production
are dependent upon numerous factors which are beyond our control. These factors
include, but are not limited to, the level of ultimate consumer product demand,
governmental regulations and taxes, the price and availability of alternative
fuels, the level of imports and exports of oil and gas, actions of the
Organization of Petroleum Exporting Countries and the overall economic
environment. Any significant decline in prices for oil and gas could have a
material adverse effect on our financial condition, results of operations and
quantities of reserves recoverable on an economic basis. Demand for titanium
dioxide is dependent on the demand for ultimate products utilizing titanium
dioxide pigment. This demand is generally dependent on the status of the
economy. The profitability of our products is dependent on the price realized
for them, the efficiency of our manufacturing costs, and the ability to acquire
feedstock at a competitive price. Should the industries in which we operate
experience significant price declines or other adverse market conditions, we may
not be able to generate sufficient cash flow from operations to meet our
obligations and make planned capital expenditures. In order to manage our
exposure to price risks in the sale of our oil and gas, we may from time to time
enter into commodities futures or option contracts to hedge a portion of our
crude oil and natural gas sales volume. Any such hedging activities may prevent
us from realizing the benefits of price increases above the levels reflected in
such hedges.
STATE AND LOCAL REGULATION OF OIL AND GAS DEVELOPMENT AND SURFACE DEVELOPMENT
CONFLICTS COULD ADVERSELY AFFECT RESULTS
State regulatory authorities have established rules and regulations
governing, among other things, permits for drilling and production, operations,
performance bonds, reports concerning operations, discharge, disposal and other
waste-related permits, well spacing, unitization and pooling of operations,
taxation, environmental and conservation matters. In general, these measures and
development activities make oil and gas development more difficult and their
application to our operations could adversely affect our results of operations.
FAILURE TO FUND CONTINUED CAPITAL EXPENDITURES COULD ADVERSELY AFFECT RESULTS
If our revenues substantially decrease as a result of lower oil and gas
prices or otherwise, we may have a limited ability to expend the capital
necessary to replace our reserves or to maintain production at current levels,
resulting in a decrease in production over time. We expect that we will continue
to make capital expenditures for the acquisition, exploration and development of
oil and gas reserves. Historically, we have financed these expenditures
primarily with cash flow from operations and proceeds from debt and equity
financings, asset sales and sales of partial interests in foreign concessions.
We believe that we will have sufficient cash flow from operations, available
drawings under our credit facilities and other debt financings to fund capital
expenditures. However, if our cash flow from operations is not sufficient to
satisfy our capital expenditure requirements, there can be no assurance that
additional debt or equity financing or other sources of capital will be
available to meet these requirements. If we are not able to fund our capital
expenditures, our interests in some of our properties may be reduced or
forfeited and our future cash generation may be materially adversely affected as
a result of the failure to find and develop reserves.
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COSTS OF LEGAL MATTERS, ENVIRONMENTAL LIABILITIES AND REGULATION COULD EXCEED
ESTIMATES
We and/or our subsidiaries are or may become parties to a number of legal
and administrative proceedings involving environmental and/or other matters
pending in various courts or agencies. These include proceedings associated with
facilities currently or previously owned, operated or used by us, our
subsidiaries and/or our predecessors, and include claims for personal injuries
and property damages. Our current and former operations also involve management
of regulated materials and are subject to various environmental laws and
regulations. These laws and regulations obligate us and/or our subsidiaries to
clean up various sites at which petroleum and other hydrocarbons, chemicals,
low-level radioactive substances and/or other materials have been disposed of or
released. Some of these sites have been designated Superfund sites by the
Environmental Protection Agency pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act. Similar environmental regulations
exist in foreign countries in which we and/or our subsidiaries operate. Of note,
environmental regulations in the North Sea are particularly stringent.
It is not possible for us to estimate reliably the amount and timing of all
future expenditures related to environmental and legal matters and other
contingencies because:
- some sites are in the early stages of investigation, and other sites may
be identified in the future;
- cleanup requirements are difficult to predict at sites where remedial
investigations have not been completed or final decisions have not been
made regarding cleanup requirements, technologies or other factors that
bear on cleanup costs;
- environmental laws frequently impose joint and several liability on all
potentially responsible parties, and it can be difficult to determine the
number and financial condition of other potentially responsible parties
and their share of responsibility for cleanup costs;
- environmental laws and regulations are continually changing, and court
proceedings are inherently uncertain; and
- some legal matters are in the early stages of investigation or
proceedings, and other legal matters may be identified in the future.
Although our management believes that it has established appropriate
reserves for cleanup costs, due to these uncertainties we could be required to
make additional reserves in the future.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made certain forward-looking statements in this document and in the
documents referred to in this document which are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of our
management and on the information currently available to our management.
Forward-looking statements include information concerning our possible or
assumed future results and may be preceded by, followed by, or otherwise include
the words "believes," "expects," "anticipates," "intends," "plans," "estimates"
or similar expressions.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and values of our stock
and other securities may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Stockholders
and holders of other securities of the Company are cautioned not to put undue
reliance on any forward-looking statements. Except for our ongoing obligations
to disclose material information as required by the federal securities laws, we
do not have any intention or obligation to update forward-looking statements
after we distribute this document, even if new information, future events or
other circumstances have made them incorrect or misleading. For those
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
You should understand that various factors, in addition to those discussed
elsewhere in this document and in the documents referred to in this document,
could affect our future results and could cause results to differ materially
from those expressed in such forward-looking statements, including:
- materially adverse changes in general economic conditions or in the
markets served by us, including changes in the prices of oil, natural
gas, titanium dioxide pigments and other chemicals;
- the success of our oil and natural gas exploration, development and
production programs;
- uncertainties about estimates of reserves;
- the financial resources of competitors;
- changes in laws and regulations, including environmental laws, or changes
in the administration of such laws and regulations;
- the quality of future opportunities that may be presented to or pursued
by us;
- the ability to generate cash flows or obtain financing to fund growth and
the cost of such financing;
- the ability to respond to challenges in international markets, including
changes in currency exchange rates, political or economic conditions, and
trade and regulatory matters; and
- the ability to complete and integrate appropriate acquisitions, strategic
alliances and joint ventures.
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THE COMPANY
As a result of the August 1, 2001 merger involving Kerr-McGee Operating
Corporation (formerly named Kerr-McGee Corporation) and Kerr-McGee Rocky
Mountain Corporation (formerly named HS Resources, Inc.), we are a holding
company with two wholly owned subsidiaries, Kerr-McGee Operating Corporation and
Kerr-McGee Rocky Mountain Corporation. We are the fourth largest independent,
nonintegrated oil and gas exploration, development and production company based
in the United States in terms of proved oil and gas reserves on a pro forma
basis as of December 31, 2000. Proved reserves as of December 31, 2000 on a pro
forma basis totaled 1.3 billion barrels of oil equivalent with 84% of these
located in our core operating areas of the United States and the North Sea. We
also conduct offshore oil and gas exploration and/or production activities in
Algeria, Australia, Benin, Brazil, China, Gabon, the Gulf of Mexico, Morocco,
North Sea and Thailand. We conduct onshore exploration and/or production
operations in the United States, Ecuador, Indonesia, the United Kingdom,
Kazakhstan and Yemen.
Our operations originated in 1929 with the formation of Anderson & Kerr
Drilling Company. With oil and gas exploration, development and production as
our base, we have expanded into titanium dioxide pigment manufacturing and
marketing and into the mining and marketing of minerals. We own a large
inventory of natural resources that includes oil and gas reserves and mineral
deposits.
Our primary chemical product is titanium dioxide pigment, which is produced
at six titanium dioxide plants located in Australia, Belgium, Germany, the
Netherlands and the United States. In addition, our chemical operations produce
and market inorganic industrial and specialty chemicals, heavy minerals and
forest products. We produce and market other industrial chemicals including
synthetic rutile, manganese products and sodium chlorate and specialty chemicals
including boron trichloride and elemental boron. We produce the heavy minerals
ilmenite, synthetic and natural rutile, zircon and leucoxene. Our forest
products operations treat railroad crossties and other hardwood products and
provide wood treating services.
Our executive offices are located at Kerr-McGee Center, Oklahoma City,
Oklahoma 73125.
USE OF PROCEEDS
We will use the proceeds we receive from selling these Offered Securities
for acquisitions or for other general corporate purposes. General corporate
purposes may include capital expenditures, payment of debt, or any other
purposes that may be stated in the supplements. The proceeds may be invested
temporarily until they are used for their stated purpose.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31,(1) JUNE 30,(1)
-------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ------- -------
4.1 3.9 N/A(2) 2.2 6.8 4.8 9.2
---------------
(1) At no time during the periods indicated has Kerr-McGee Operating Corporation
had any preferred stock outstanding. Therefore, unless otherwise indicated,
ratio of earnings to combined fixed charges and preferred dividend
requirements will be the same.
(2) Earnings were inadequate to cover fixed charges by $548 million for the year
ended December 31, 1998.
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For purposes of computing the ratios, the earnings calculation is: income
from continuing operations + income taxes + fixed charges - capitalized
interest. Fixed charges calculation is: all interest + interest factor of rental
expense.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities summarizes
certain general terms that will apply to the Debt Securities. The description is
not complete, and we refer you to the Indenture, a copy of which is an exhibit
to the Registration Statement of which this prospectus is a part. For your
reference, in several cases below we have noted the section in the Indenture
that the paragraph summarizes. Capitalized items have the meanings assigned to
them in the Indenture. The referenced sections of the Indenture and the
definitions of capitalized terms are incorporated by reference in the following
summary.
We may issue Debt Securities either separately, or together with, upon
conversion of or in exchange for other securities. The Debt Securities will be
issued under an Indenture between Kerr-McGee and Citibank, N.A., as Trustee.
This summary of the Indenture is qualified by reference to the Indenture. You
should refer to the Indenture in addition to reading this summary. The summary
is not complete and is subject to the specific terms of the Indenture.
GENERAL
Under the Indenture, we can issue an unlimited amount of Debt Securities.
Each time that we issue a new series of Debt Securities, the supplement to the
prospectus relating to that new series will specify the terms of those Debt
Securities, including:
- Designation, amount and denominations;
- Percentage of principal amount at which Debt Securities will be issued;
- Maturity date;
- Interest rate and payment dates;
- Terms and conditions of exchanging or converting Debt Securities for
other securities;
- Currency of issue;
- Redemption terms; and
- Whether the Debt Securities and/or any Guarantees will be senior, senior
subordinated or subordinated.
Payments relating to the Debt Securities generally will be paid at
Citibank's corporate trust office. However, we may elect to pay interest by
mailing checks directly to the registered holders of the Debt Securities. You
can transfer your Debt Securities at Citibank's corporate trust office.
RANKING
Unless otherwise described in the prospectus supplement for any series, the
Debt Securities will be unsecured and will rank on a parity with all of our
other unsecured and unsubordinated indebtedness.
We are a holding company and conduct substantially all of our operations
through subsidiaries. Our right to participate as a shareholder in any
distribution of assets of any subsidiary (and thus the ability of holders of the
Debt Securities to benefit as creditors of the Company from such distribution)
is junior to creditors of that subsidiary. As a result, claims of holders of the
Debt Securities will generally have a junior position to claims of creditors of
our subsidiaries, except to the extent that we may be recognized as a creditor
of those subsidiaries or those subsidiaries guarantee the Debt Securities.
Claims of creditors of our subsidiaries include substantial amounts of long-term
debt.
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We will issue the Debt Securities in registered form without coupons, which
Debt Securities may be in the form of a global security (see Description of Debt
Securities -- Global Securities). You can transfer or exchange your Debt
Securities without a service charge, but we may require advance payment of any
tax or other governmental transfer or exchange charge.
REOPENING OF ISSUE
We may, from time to time, reopen an issue of Debt Securities without the
consent of the holders of the Debt Securities and issue additional Debt
Securities with the same terms (including maturity and interest payment terms)
as Debt Securities issued on an earlier date. After such additional Debt
Securities are issued they will be fungible with the previously issued Debt
Securities to the extent specified in the applicable prospectus supplement.
DEBT GUARANTEES
Kerr-McGee Operating Corporation and/or Kerr-McGee Rocky Mountain
Corporation may guarantee the payment of principal, premium, if any, and
interest, if any, on the Debt Securities and the payment of mandatory sinking
fund payments, if any. (Section 14.01)
DEFINITIONS
The covenants in the Indenture, which we summarize below, use the following
terms:
- Subsidiary: A corporation of which we own a majority of the voting stock
either directly or indirectly. (Section 1.01)
- Restricted Subsidiary: Any subsidiary which we designate as a Restricted
Subsidiary or which owns or leases any Principal Property (see the next
definition). The term does not include a subsidiary if its principal
business is leasing assets, financing the sale of products or holding the
securities of other subsidiaries. (Section 1.01)
- Principal Property: Any U.S. mineral property owned by the Company or any
Restricted Subsidiary capable of producing in paying quantities and any
manufacturing plant owned by the Company or any Restricted Subsidiary in
the U.S. (including the land and fixtures), unless our board of directors
determines that the property or plant is not material to our total
business. The term does not include any facility acquired to control or
abate air, water, noise, odor, or other pollution, or facilities financed
through industrial revenue bonds or similar financing. (Section 1.01)
- Consolidated Net Tangible Assets: The total amount of assets on our
consolidated balance sheet and the balance sheets of our Restricted
Subsidiaries, less any reserves and after deducting: (1) current
liabilities and (2) goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles.
(Section 1.01)
- Funded Debt: Money borrowed or debt evidenced by bonds or debentures, or
similar instruments or agreements having a maturity of more than one year
(or less than one year but which is renewable after that year at the
borrower's option). (Section 1.01)
- Debt: Notes, bonds, debentures or other similar evidences of
indebtedness. (Section 10.08)
- Mortgage: A pledge, mortgage or other lien securing a debt. (Section
10.08)
CERTAIN COVENANTS
The Indenture includes the following covenants. These covenants use certain
terms that are defined above. The covenants for a series of Debt Securities may
differ from those described below. If they do, this will be described in the
supplement to this prospectus relating to that series.
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Restrictions on Secured Debt
After the date of the Indenture, if we or any of our Restricted
Subsidiaries incur or guarantee a debt secured by either a mortgage on any of
our Principal Property or on a Restricted Subsidiary's stock or debt, we will
secure the Debt Securities on the same basis, unless the amount of the new debt
plus the value of all sale and leaseback transactions involving Principal
Properties would not exceed 5% of Consolidated Net Tangible Assets. The
restrictions do not apply to debt secured by the following:
- Mortgages on our property or the property of a Restricted Subsidiary,
which existed on the date of the Indenture.
- Mortgages on the property, stock or debt of a corporation that existed
when the corporation became a Restricted Subsidiary.
- Mortgages on the property of a Restricted Subsidiary, which only secures
indebtedness owed by the Subsidiary to another Restricted Subsidiary or
us.
- Mortgages in favor of governmental bodies to secure progress, advance or
other payments.
- Mortgages on acquired property, stock or debt which existed at the time
of the acquisition (including acquisition through merger or
consolidation) and certain purchase money and construction mortgages.
- Mortgages on our property or the property of a Restricted Subsidiary to
secure payment of the costs of operations, increase the production and
disposition of minerals from the property or indebtedness incurred to
provide funds for such purposes.
- Any extension, renewal or refunding of the foregoing.
The debt listed above will be excluded when computing our secured debt.
The restrictions will not apply to sale and leaseback transactions if the
proceeds are applied to the retirement of Funded Debt. Secured debt will not be
deemed to be created by the transfer of an interest in property in the form
commonly referred to as a "production payment". (Sections 10.08 and 10.09)
Restrictions on Sales and Leasebacks
We may not enter into any sale and leaseback transaction involving any
Principal Property after the date of the Indenture unless:
- The sale or transfer occurs within 120 days after construction is
complete and the Principal Property is fully operational.
- We could mortgage the property under Section 10.08 of the Indenture for
an amount equal to the proceeds of the sale and leaseback transaction
without securing the Debt Securities on the same basis.
- We use an amount equal to the market value of the Principal Property
being leased to retire Funded Debt within 120 days. This restriction will
not apply to any sale and leaseback transaction between us (or a
Restricted Subsidiary) and a Restricted Subsidiary, or involving the
taking back of a lease for a period of less than three years. (Section
10.09)
Merger and Consolidation
The Indenture generally permits a consolidation or merger between
Kerr-McGee and another corporation. It also permits the sale by Kerr-McGee of
all or substantially all of our property and assets. If this happens, the
resulting or acquiring corporation will assume all of our responsibilities and
liabilities under the Indenture. If the resulting or acquiring corporation has
outstanding Debt secured by a Mortgage on any Principal Property, or shares of
stock of a Restricted Subsidiary, the Debt Securities will be equally and
ratably secured with (or prior to) the Debt secured by such Mortgage. This
restriction will not apply
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if the Mortgage could be created pursuant to Section 10.08 of the Indenture (see
"Restrictions on Secured Debt" above) without equally and ratable securing the
Debt Securities. (Section 8.03)
MODIFICATION
Generally, our rights and obligations and the holders' rights may be
modified if the holders of a majority of the outstanding Debt Securities
consent. However, no modification or amendment may occur without the consent of
the affected holder of the Debt Security if that modification or amendment would
do any of the following:
- Change the stated maturity date of the principal of, or any installment
of interest on, any of the holder's Debt Security.
- Reduce the principal amount of, or the interest (or premium, if any) on,
the Debt Security (including in the case of a discounted Debt Security,
the amount payable upon acceleration of maturity or provable in
bankruptcy).
- Change the currency of payment of the Debt Security.
- Impair the right to institute suit for the enforcement of any payment on
the Debt Security or adversely affect the right of repayment, if any, at
the option of the holder.
- Reduce the percentage of holders of Debt Securities necessary to modify
or amend the Indenture.
A modification which changes a covenant or provision expressly included
solely for the benefit of holders of one or more particular series will not
affect the rights of holders of Debt Securities of any other series. (Section
9.02)
Kerr-McGee or Citibank may make modifications without the consent of the
Debt Securities holders in order to do the following: (Section 9.01)
- Evidence that another corporation has succeeded to Kerr-McGee and assumed
our obligations.
- Convey security for the Debt Securities to Citibank.
- Add covenants, restrictions or conditions for the protection of the Debt
Security holders.
- Provide for the issuance of Debt Securities in coupon or fully registered
form.
- Establish the form or terms of Debt Securities of any series.
- Cure any ambiguity or correct any defect in the Indenture which does not
adversely affect the interests of a holder.
- Evidence the appointment of a successor trustee or more than one trustee.
EVENTS OF DEFAULT
In the Indenture, an Event of Default means any one of the following:
- Failure to pay interest on a Debt Security for 30 days;
- Failure to pay principal and premium, if any, when due;
- Failure to pay sinking fund installment when due;
- Failure by us or by a guarantor of the Debt Securities to perform any
other covenant in the Indenture that continues for 60 days after receipt
of notice;
- Certain events in bankruptcy, insolvency or reorganization; or
- A Guarantee ceasing to be in effect in accordance with its terms, or the
denial by a guarantor of its obligations under a Guarantee.
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An Event of Default relating to one series of Debt Securities does not
necessarily constitute an Event of Default with respect to any other series
issued under the Indenture. If an Event of Default exists with respect to a
series of Debt Securities, Citibank or the holders of at least 25% of the
outstanding Debt Securities of that series (or of all the outstanding Debt
Securities in the case of defaults due to failure to perform a covenant in the
Indenture or certain events in bankruptcy, insolvency, or reorganization) may
declare the principal of that series (or of all outstanding Debt Securities, as
the case may be) due and payable.
Any Event of Default with respect to a particular series of Debt Securities
may be waived by the holders of a majority of the outstanding Debt Securities of
that series (or of all the outstanding Debt Securities as the case may be),
except for a failure to pay principal, premium or interest on the Debt Security.
(Sections 5.01, 5.02 and 5.08)
Citibank may withhold notice to the holders of the Debt Securities of any
default (except in payment of principal, premium, interest or sinking fund
payment) if Citibank thinks it is in the interest of the holders. (Section 6.02)
Subject to the specific duties that arise under the Indenture if an Event
of Default exists, Citibank is not obligated to exercise any of its rights or
powers under the Indenture at the request of the holders of the Debt Securities,
unless they provide reasonable indemnity satisfactory to it (Sections 6.01 and
6.03). Generally, the holders of a majority of the outstanding Debt Securities
can direct the proceeding for a remedy available to Citibank or for exercising
any power conferred on Citibank as the trustee. (Section 5.08)
TRUSTEE'S RELATIONSHIP
Citibank has loaned us substantial amounts of money in the past and may
continue to do so. Citibank serves as a depository for us and performs other
services for us in the normal course of business. The Indenture provides that we
will indemnify Citibank against any loss, liability or expense incurred that
arises from the trust created by the Indenture unless the loss, liability or
expense results from Citibank's negligence or willful misconduct. (Section 6.07)
GLOBAL SECURITIES
We may issue some of the Debt Securities as Global Securities that will be
deposited with a depository identified in a prospectus supplement. Global
Securities may be issued in either registered or bearer form and may be either
temporary or permanent. A prospectus supplement will contain additional
information about depository arrangements.
Registered Global Securities will be registered in the depositary's name or
in the name of its nominee. When we issue a Global Security, the depositary will
credit that amount of Debt Securities to the investors that have accounts with
the depository or its nominee. The underwriters or the Debt Security holders'
agent will designate the accounts to be credited, unless the Debt Securities are
offered and sold directly by Kerr-McGee, in which case, we will designate the
appropriate account to be credited.
Investors who have accounts with a depository, and people who have an
interest in those institutions, are the beneficial owners of Global Securities
held by that particular depository.
Kerr-McGee will not maintain records regarding ownership or the transfer of
Global Securities held by a depository or to nominee. If you are the beneficial
owner of Global Securities held by a depository, you must get information
directly from the depository.
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As long as a depositary is the registered owner of a Global Security, that
depository will be considered the sole owner of the Debt Securities represented
by that Global Security. Except as set forth below, beneficial owners of Global
Securities held by a depository will not be entitled to:
- Register the represented Debt Securities in their names;
- Receive physical delivery of the Debt Securities; or
- Be considered the owners or holders of the Global Security under the
Indenture.
Payments on Debt Securities registered in the name of a depositary or its
nominee will be made to the depositary or its nominee. (Section 2.03)
When a depositary receives a payment, it must immediately credit the
accounts in amounts proportionate to the account holders' interests in the
Global Security. The beneficial owners of a Global Security should, and are
expected to, establish standing instructions and customary practices with their
investor that has an account with the depository, so that payments can be made
with regard to securities beneficially held for them, much like securities held
for the accounts of customers in bearer form or registered in "street name."
A Global Security can only be transferred in whole by the depository to a
nominee of such depository, or to another nominee of a depository. If a
depositary is unwilling or unable to continue as a depository and we do not
appoint a successor depository within ninety (90) days, we will issue Debt
Securities in exchange for all of the Global Securities held by that depository.
In addition, we may eliminate all Global Securities at any time and issue Debt
Securities in exchange for them. Further, we may allow a depository to surrender
a Global Security in exchange for Debt Securities on any terms that are
acceptable to us and the depositary. Finally, an interest in the Global Security
is exchangeable for a definitive Debt Security if an event of default has
occurred as described above under "Events of Default". (Section 3.07)
If any of these events occur, we will execute and Citibank will
authenticate and deliver to the beneficial owners of the Global Security in
question a new registered security in an amount equal to and in exchange for
that person's beneficial interest in the exchanged Global Security. The
depository will receive a new Global Security in an amount equal to the
difference, if any, between the amount of the surrendered Global Security and
the amount of Debt Securities delivered to the beneficial owners. Debt
Securities issued in exchange for Global Securities will be registered in the
same names and in the same denominations as indicated by the depository's
records and in accordance with the instructions from its direct and indirect
participants. (Section 3.07)
The laws of certain jurisdictions require some people who purchase securities to
actually take physical possession of those securities. The limitations imposed
by these laws may impair your ability to transfer your beneficial interests in a
Global Security.
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DESCRIPTION OF PREFERRED STOCK
GENERAL
Our Certificate of Incorporation authorizes our Board of Directors or a
committee of our Board of Directors to cause Preferred Stock to be issued in one
or more series, without stockholder action. The Board of Directors is authorized
to issue up to 40,000,000 shares of Preferred Stock, $1 par value per share, and
can determine the number of shares of each series, and the rights, preference
and limitations of each series. We may amend the Charter to increase the number
of authorized shares of preferred stock in a manner permitted by the Charter and
the Delaware General Corporation Law.
The particular terms of any series of preferred stock being offered by us
under this shelf registration will be described in the prospectus supplement
relating to that series of Preferred Stock. Those terms may include:
- The number of shares of the series of Preferred Stock being offered;
- The title and liquidation preference per share of that series of the
Preferred Stock;
- The purchase price of the Preferred Stock;
- The dividend rate (or method for determining such rates);
- The dates on which dividends will be paid;
- Whether dividends on that series of Preferred Stock will be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall
commence to accumulate;
- Any redemption or sinking fund provisions applicable to that series of
preferred stock;
- Any conversion or exchange provisions applicable to that series of
preferred stock;
- Whether we have elected to offer Depositary Shares with respect to that
series of preferred stock; and
- Any additional dividend, liquidation, redemption, sinking fund and other
rights and restrictions applicable to that series of preferred stock.
If the terms of any series of Preferred Stock being offered differ from the
terms set forth herein, those terms will also be disclosed in the prospectus
supplement relating to that series of Preferred Stock. The following summary is
not complete. You should refer to the Certificate of Designations relating to
the series of the Preferred Stock for the complete terms of that Preferred
Stock. That Certificate of Designations will be filed with the SEC promptly
after the offering of the Preferred Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the prospectus supplement, in the event we
liquidate, dissolve or wind-up our business, each series of Preferred Stock will
have the same rank as to dividends and distributions as each other series of the
Preferred Stock we may issue in the future. The Preferred Stock will have no
preemptive rights.
DIVIDEND RIGHTS
Holders of Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors, cash dividends at the rates
and on the dates set forth in the prospectus supplement. Dividend rates may be
fixed or variable or both. Different series of Preferred Stock may be entitled
to dividends at different dividend rates or based upon different methods of
determination. Each dividend will be payable to the holders of record as they
appear on our stock books on record dates determined by the Board of Directors.
Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as specified in the prospectus supplement. If the Board of
Directors fails to declare a dividend on any series of Preferred Stock for which
dividends are noncumulative, then the right to receive that dividend
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will be lost, and we will have no obligation to pay the dividend for that
dividend period, whether or not dividends are declared for any future dividend
period.
No full dividends will be declared or paid on any series of Preferred
Stock, unless full dividends for the dividend period commencing after the
immediately preceding dividend payment date (and cumulative dividends still
owing, if any) have been or contemporaneously are declared and paid on all other
series of Preferred Stock that have the same rank as, or rank senior to, that
Preferred Stock. When those dividends are not paid in full, dividends will be
declared pro rata, so that the amount of dividends declared per share on that
series of Preferred Stock and on each other series of preferred stock having the
same rank as, or ranking senior to, that series of Preferred Stock will in all
cases bear to each other the same ratio that accrued dividends per share on that
series of Preferred Stock and the other preferred stock bear to each other. In
addition, generally, unless full dividends, including cumulative dividends still
owing, if any, on all outstanding shares of any series of Preferred Stock have
been paid, no dividends will be declared or paid on the Common Stock and
generally we may not redeem or purchase any Common Stock. No interest, or sum of
money in lieu of interest, will be paid in connection with any dividend payment
or payments which may be in arrears.
Unless otherwise described in the prospectus supplement, the amount of
dividends payable for each dividend period will be computed by annualizing the
applicable dividend rate and dividing by the number of dividend periods in a
year, except that the amount of dividends payable for the initial dividend
period or any period shorter than a full dividend period shall be computed on
the basis of a 360-day year consisting of twelve 30-day months and, for any
period less than a full month, the actual number of days elapsed in the period.
RIGHTS UPON LIQUIDATION
In the event we liquidate, dissolve or wind-up our affairs, either
voluntarily or involuntarily, the holders of each series of Preferred Stock will
be entitled to receive liquidating distributions in the amount set forth in the
prospectus supplement relating to each series of Preferred Stock, plus an amount
equal to accrued and unpaid dividends, if any, before any distribution of assets
is made to the holders of Common Stock. If the amounts payable with respect to
Preferred Stock of any series and any stock having the same rank as that series
of Preferred Stock are not paid in full, the holders of Preferred Stock and of
such other stock will share ratably in any such distribution of assets in
proportion to the full respective preferential amounts to which they are
entitled. After the holders of each series of Preferred Stock and any stock
having the same rank as the Preferred Stock are paid in full, they will have no
right or claim to any of our remaining assets. Neither the sale of all or
substantially all our property or business nor a merger or consolidation by us
with any other corporation will be considered a dissolution, liquidation or
winding up by us of our business or affairs.
REDEMPTION
Any series of Preferred Stock may be redeemable, in whole or in part, at
our option. In addition, any series of Preferred Stock may be subject to
mandatory redemption pursuant to a sinking fund. The redemption provisions that
may apply to a series of Preferred Stock, including the redemption dates and the
redemption prices for that series, will be set forth in the prospectus
supplement.
If a series of Preferred Stock is subject to mandatory redemption, the
prospectus supplement will specify the year we can begin to redeem shares of the
Preferred Stock, the number of shares of the Preferred Stock we can redeem each
year, and the redemption price per share. We may pay the redemption price in
cash, stock or in cash that we have received specifically from the sale of our
capital stock, as specified in the prospectus supplement. If the redemption
price is to be paid only from the proceeds of the sale of our capital stock, the
terms of the series of Preferred Stock may also provide that, if no such capital
stock is sold or if the amount of cash received is insufficient to pay in full
the redemption price then due, the series of Preferred Stock will automatically
be converted into shares of the applicable capital stock pursuant to conversion
provisions specified in the prospectus supplement.
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If fewer than all the outstanding shares of any series of Preferred Stock
are to be redeemed, whether by mandatory or optional redemption, the Board of
Directors will determine the method for selecting the shares to be redeemed,
which may be by lot or pro rata or by any other method determined to be
equitable. From and after the redemption date, dividends will cease to accrue on
the shares of Preferred Stock called for redemption and all rights of the
holders of those shares (except the right to receive the redemption price) will
cease.
In the event that full dividends, including accrued but unpaid dividends,
if any, have not been paid on any series of Preferred Stock, we may not redeem
that series in part and we may not purchase or acquire any shares of that series
of Preferred Stock, except by any offer made on the same terms to all holders of
that series of Preferred Stock.
VOTING RIGHTS
Except as indicated in the prospectus supplement, or except as expressly
required by applicable law, the holders of Preferred Stock will not be entitled
to vote.
DESCRIPTION OF COMMON STOCK
As of the date of this prospectus, we are authorized to issue up to
300,000,000 shares of Common Stock. As of June 30, 2001, we had 95,116,303
shares of Common Stock issued and outstanding.
The following summary is not complete. You should refer to the applicable
provisions of the Charter, including the Certificates of Designations pursuant
to which any outstanding series of Preferred Stock may be issued, and the
Delaware General Corporation Law for a complete statement of the terms and
rights of the Common Stock.
Dividends. Holders of Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors, out of funds legally available for
their payment (subject to the rights of holders of the preferred stock, if any).
Voting Rights. Each holder of Common Stock is entitled to one vote per
share. Subject to the rights, if any, of the holder of any series of preferred
stock pursuant to applicable law or the provision of the Certificate of
Designations creating that series, all voting rights are vested in the holders
of shares of Common Stock.
Rights Upon Liquidation. In the event of our voluntary or involuntary
liquidation, dissolution or winding up, the holders of Common Stock will be
entitled to share equally in any of our assets available for distribution after
the payment in full of all debts and distributions and after the holders of all
series of outstanding preferred stock, if any, have received their liquidation
preferences in full.
Rights Agreement. We have adopted a Rights Agreement, which provides for
the issuance of a right (which we refer to as a Kerr-McGee Right), to the holder
of each of our shares of Common Stock. If anyone acquires 15% or more of our
outstanding Common Stock (which we refer to as an Acquiring Person), each holder
of the Kerr-McGee Right (other than the Acquiring Person) will be entitled to
purchase additional shares of Common Stock (or, in certain cases, other of our
securities, or cash or other property) having a current market value of two
times the exercise price of $215. Otherwise, prior to an Acquiring Person
acquiring 50% or more of the outstanding Common Stock, we may elect to issue a
share of Common Stock in exchange for each Kerr-McGee Right (other than
Kerr-McGee Rights held by the Acquiring Person). In addition, if we are acquired
in a merger or other business combination or 50% or more of our assets or
earning power are sold, each holder of a Kerr-McGee Right will be entitled to
buy, at the exercise price, common stock of the acquirer having a current market
value of two times the exercise price. At any time before there is an Acquiring
Person, we can redeem the Kerr-McGee Rights in whole, but not in part, for $0.01
per each Kerr-McGee Right, or may amend the Rights Agreement in any way without
the consent of the holders of the Kerr-McGee Rights.
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Miscellaneous. The issued and outstanding shares of Common Stock are fully
paid and nonassessable. Holders of shares of Common Stock are not entitled to
preemptive rights or cumulative rights. Shares of Common Stock are not
convertible into shares of any other class of capital stock.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue Stock Purchase Contracts representing contracts obligating
holders to purchase from us and us to sell to the holders a specified number of
shares of Common Stock or Preferred Stock at a future date or dates. The price
per share of Common Stock or Preferred Stock may be fixed at the time the Stock
Purchase Contracts are issued or may be determined by reference to a specific
formula set forth in the Stock Purchase Contracts.
The Stock Purchase Contracts may be issued separately or as a part of
units, often known as Stock Purchase Units, consisting of a Stock Purchase
Contract and either
- Debt Securities, or
- debt obligations of third parties, including U.S. Treasury securities,
securing the holder's obligations to purchase the Common Stock or Preferred
Stock under the Stock Purchase Contracts. The Stock Purchase Contracts may
require us to make periodic payments to the holders of the Stock Purchase Units
or vice versa, and such payments may be unsecured or prefunded on some basis.
The Stock Purchase Contracts may require holders to secure their obligations in
a specified manner and in certain circumstances we may deliver newly issued
prepaid Stock Purchase Contracts, often known as prepaid securities, upon
release to a holder of any collateral securing each holder's obligations under
the original Stock Purchase Contract.
The applicable prospectus supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units and, if applicable, prepaid
securities. The description in the prospectus supplement will not contain all of
the information that you may find useful. For more information, you should
review the Stock Purchase Contracts, the collateral arrangements and depositary
arrangements, if applicable, relating to such Stock Purchase Contracts or Stock
Purchase Units and, if applicable, the prepaid securities and the document
pursuant to which the prepaid securities will be issued, which will be filed
with the SEC promptly after the offering of such Stock Purchase Contracts or
Stock Purchase Units and, if applicable, prepaid securities.
DESCRIPTION OF WARRANTS
We may issue Warrants for the purchase of Debt Securities, Preferred Stock
or Common Stock. We may issue Warrants independently or together with other
securities. Each series of Warrants will be issued under a separate Warrant
Agreement to be entered into between us and a bank or trust company, as warrant
agent. You should refer to the Warrant Agreement relating to the specific
Warrants being offered for the complete terms of the Warrant Agreement and the
Warrants.
Each Warrant will entitle the holder to purchase the principal amount of
Debt Securities, or the number of shares of Preferred Stock, or Common Stock at
the exercise price set forth in, or calculable as set forth in, the prospectus
supplement. The exercise price may be subject to adjustment upon the occurrence
of certain events, as set forth in the prospectus supplement. After the close of
business on the expiration date of the Warrant, unexercised Warrants will become
void. The place or places where, and the manner in which, Warrants may be
exercised shall be specified in the prospectus supplement.
PLAN OF DISTRIBUTION
We may sell the Offered Securities through underwriters, dealers or agents,
or we may sell directly to one or more purchasers including through a dividend
reinvestment program. The prospectus supplement names any underwriters, states
the purchase price and the proceeds received by us, any underwriting
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discounts and other items constituting underwriters' compensation, the initial
public offering price, any discounts or concessions to dealers, and any
securities exchanges on which the Offered Securities may be listed.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account. The underwriters may resell
the Offered Securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The Offered Securities may be offered through an
underwriting syndicate represented by many underwriters. The obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions. The underwriters will be obligated to purchase all the Offered
Securities if any are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
These Offered Securities may be sold directly by us or through agents. Any
agent will be named, and any commissions payable to that agent will be set forth
in the prospectus supplement. Unless otherwise indicated in the prospectus
supplement, any agent will be acting on a best efforts basis.
We may authorize agents, underwriters or dealers to solicit offers by
specified institutions to purchase Offered Securities pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. These contracts will be subject only to those conditions set forth in
the prospectus supplement. The prospectus supplement will set forth the
commission payable for soliciting such contracts.
We may agree to indemnify underwriters, dealers or agents against certain
civil liabilities, including liabilities under the Securities Act of 1933, and
may also agree to contribute to payments which the underwriters, dealers or
agents may be required to make.
LEGAL MATTERS
Simpson Thacher & Bartlett will issue an opinion about the legality of the
securities for us. Any underwriters will be advised about issues relating to
this offering by their own legal counsel.
EXPERTS
The audited financial statements and schedule of Kerr-McGee Operating
Corporation (formerly named Kerr-McGee Corporation) incorporated by reference or
included in Kerr-McGee Corporation's Annual Report on Form 10-K for the year
ended December 31, 2000 have been incorporated by reference in this prospectus
and elsewhere in the registration statement and have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
The audited financial statements of Kerr-McGee Rocky Mountain Corporation
(formerly named HS Resources, Inc.) included in HS Resources, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2000 have been incorporated
by reference in this prospectus and elsewhere in the registration statement and
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
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LOGO
$1,500,000,000
KERR-MCGEE CORPORATION
5 7/8% Notes due 2006
6 7/8% Notes due 2011
7 7/8% Notes due 2031
---------------------------
PROSPECTUS SUPPLEMENT
September 26, 2001
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[Kerr-McGee Corporation Logo]
LEHMAN BROTHERS
JPMORGAN
ABN AMRO INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
RBC DOMINION SECURITIES
SALOMON SMITH BARNEY