FORM 10-K/A
Amendment No. 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ----------------
Commission file number 1-720
-------------------------------------------
Phillips Petroleum Company
(Exact name of registrant as specified in its charter)
Delaware 73-0400345
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Phillips Building, Bartlesville, Oklahoma 74004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918-661-6600
- -----------------------------------------------------------------
Filing Additional Exhibits
<PAGE>
Item 14 - Exhibits
- ------------------
The registrant is filing with this Amendment No. 1 Annual Reports
on Form 11-K for the Thrift Plan of Phillips Petroleum Company,
the Long-Term Stock Savings Plan of Phillips Petroleum Company
and the Retirement Savings Plan of Phillips Petroleum Company.
1
<PAGE>
PHILLIPS PETROLEUM COMPANY
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
3(i) Restated Certificate of Incorporation, as filed with
the State of Delaware July 17, 1989 (incorporated by
reference to Exhibit 3(i) to Annual Report on
Form 10-K for the year ended December 31, 1995).
(ii) Bylaws of Phillips Petroleum Company, as amended
effective July 14, 1997 (incorporated by reference to
Exhibit 3(ii) to Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997).
4(a) Indenture dated as of September 15, 1990, between
Phillips Petroleum Company and U.S. Bank Trust
National Association, as successor to Continental
Bank, National Association, relating to the 9 1/2%
Notes due 1997 and the 9 3/8% Notes due 2011
(incorporated by reference to Exhibit 4(a) to Annual
Report on Form 10-K for the year ended December 31,
1996).
(b) Indenture dated as of September 15, 1990, as
supplemented by Supplemental Indenture No. 1 dated
May 23, 1991, between Phillips Petroleum Company and
U.S. Bank Trust National Association, as successor to
Continental Bank, National Association, relating to
the 9.18% Notes due September 15, 2021; the 9% Notes
due 2001; the 8.86% Notes due May 15, 2022; the 8.49%
Notes due January 1, 2023; the 7.92% Notes due
April 15, 2023; the 7.20% Notes due November 1, 2023;
and the 6.65% Notes due March 1, 2003.*
(c) Preferred Share Purchase Rights as described in the
Rights Agreement dated as of July 10, 1989, between
Phillips Petroleum Company and Chemical Bank
(formerly Manufacturers Hanover Trust Company)
(incorporated by reference to Exhibit 4(c) to Annual
Report on Form 10-K for the year ended December 31,
1995).
(d) Amendment dated May 16, 1990, to the Rights Agreement
dated July 10, 1989, between Phillips Petroleum
Company and Chemical Bank (formerly Manufacturers
Hanover Trust Company) (incorporated by reference to
Exhibit 4(d) to Annual Report on Form 10-K for the
year ended December 31, 1996).
2
<PAGE>
PHILLIPS PETROLEUM COMPANY
INDEX TO EXHIBITS
(Continued)
Exhibit
Number Description
- ------- -----------
The company incurred during 1997 certain long-term
debt not registered pursuant to the Securities
Exchange Act of 1934. No instrument with respect to
such debt is being filed since the total amount of
the securities authorized under any such instrument
did not exceed 10 percent of the total assets of the
company on a consolidated basis. The company hereby
agrees to furnish to the Securities and Exchange
Commission upon its request a copy of such instrument
defining the rights of the holders of such debt.
Material Contracts
10(a) Agreement dated December 23, 1984, among Mesa Partners
and related entities and Phillips Petroleum Company
and the schedules, annexes and exhibit thereto
(incorporated by reference to Exhibit 10(a) to Annual
Report on Form 10-K for the year ended December 31,
1995).
(b) Letter Agreement dated December 23, 1984, among Mesa
Partners and related entities and Phillips Petroleum
Company (incorporated by reference to Exhibit 10(b)
to Annual Report on Form 10-K for the year ended
December 31, 1995).
(c) Trust Agreement dated December 12, 1995, between
Phillips Petroleum Company and Vanguard Fiduciary
Trust Company, as Trustee of the Phillips Petroleum
Company Compensation and Benefits Arrangements Stock
Trust (incorporated by reference to Exhibit 10(c) to
Annual Report on Form 10-K for the year ended
December 31, 1995).
Management Contracts and Compensatory Plans or Arrangements
(d) 1986 Stock Plan of Phillips Petroleum Company.*
(e) 1990 Stock Plan of Phillips Petroleum Company.*
3
<PAGE>
PHILLIPS PETROLEUM COMPANY
INDEX TO EXHIBITS
(Continued)
Exhibit
Number Description
- ------- -----------
10(f) Annual Incentive Compensation Plan of Phillips
Petroleum Company.*
(g) Incentive Compensation Plan of Phillips Petroleum
Company (incorporated by reference to Exhibit 10(g)
to Annual Report on Form 10-K for the year ended
December 31, 1994).
(h) Principal Corporate Officers Supplemental Retirement
Plan of Phillips Petroleum Company (incorporated by
reference to Exhibit 10(h) to Annual Report on
Form 10-K for the year ended December 31, 1995).
(i) Phillips Petroleum Company Supplemental Executive
Retirement Plan (incorporated by reference to Exhibit
10(i) to Annual Report on Form 10-K for the year
ended December 31, 1996).
(j) Key Employee Deferred Compensation Plan of Phillips
Petroleum Company.*
(k) Non-Employee Director Retirement Plan of Phillips
Petroleum Company.*
(l) Omnibus Securities Plan of Phillips Petroleum Company.*
(m) Deferred Compensation Plan for Non-Employee Directors
of Phillips Petroleum Company.*
(n) Key Employee Missed Credited Service Retirement Plan of
Phillips Petroleum Company (incorporated by reference
to Exhibit 10(n) to Annual Report on Form 10-K for
the year ended December 31, 1996).
(o) Phillips Petroleum Company Stock Plan for Non-Employee
Directors.*
12 Computation of Ratio of Earnings to Fixed Charges.*
21 List of Subsidiaries of Phillips Petroleum Company.*
23 Consent of Independent Auditors.*
4
<PAGE>
PHILLIPS PETROLEUM COMPANY
INDEX TO EXHIBITS
(Continued)
Exhibit
Number Description
- ------- -----------
27(a) Financial Data Schedule.*
(b) Restated Financial Data Schedules (restated to reflect
the adoption of Financial Accounting Standards Board
(FASB) Statement No. 128, "Earnings per Share," for
the 1997 interim periods).*
(c) Restated Financial Data Schedules (restated to reflect
the adoption of FASB Statement No. 128, for the years
1995 and 1996, and the interim periods of 1996).*
99(a) Form 11-K, Annual Report, of the Thrift Plan of
Phillips Petroleum Company for the fiscal year ended
December 31, 1997.
(b) Form 11-K, Annual Report, of the Long-Term Stock
Savings Plan of Phillips Petroleum Company for the
fiscal year ended December 31, 1997.
(c) Form 11-K, Annual Report, of the Retirement Savings
Plan of Phillips Petroleum Company for the fiscal
year ended December 31, 1997.
*Filed with the original Annual Report on Form 10-K for the year
ended December 31, 1997.
Copies of the exhibits listed in this Index to Exhibits are
available upon request for a fee of $3.00 per document. Such
request should be addressed to:
Secretary
Phillips Petroleum Company
1234 Adams Building
Bartlesville, OK 74004
5
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
PHILLIPS PETROLEUM COMPANY
/s/ Rand C. Berney
-----------------------------
Rand C. Berney
Vice President and Controller
(Chief Accounting and
Duly Authorized Officer)
June 24, 1998
6
<PAGE>
Exhibit 99(a)
FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ---------
Commission file number 33-50134
--------------------------------
THRIFT PLAN OF PHILLIPS PETROLEUM COMPANY
(Full title of the Plan)
PHILLIPS PETROLEUM COMPANY
(Name of issuer of securities)
Bartlesville, Oklahoma 74004
(Address of principal executive office) (Zip code)
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
--------------------
Financial statements of the Thrift Plan of Phillips Petroleum
Company, filed as a part of this annual report, are listed in the
accompanying index.
(b) Exhibits
--------
Exhibit 1 Consent of Ernst & Young LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Thrift Plan Committee has duly caused this annual
report to be signed on its behalf by the undersigned hereunto
duly authorized.
THRIFT PLAN OF
PHILLIPS PETROLEUM COMPANY
/s/ Rand C. Berney
---------------------------------
Rand C. Berney
Member
Thrift Plan Committee
June 24, 1998
1
<PAGE>
- -----------------------------------------------------------------
Index To Financial Statements Thrift Plan Of Phillips
And Schedules Petroleum Company
Page
Report of Independent Auditors .............................. 3
Financial Statements
Statements of Net Assets Available for Benefits
at December 31, 1997 and 1996
Total Plan ............................................ 4
Fund A (Bond Index Fund) .............................. 6
Funds B and C (Phillips Stock Fund) ................... 8
Fund D (Investment Contracts Fund) -- Deposit
Administration Account .............................. 10
Fund D (Investment Contracts Fund) -- Deferred
Settlement Account .................................. 12
Fund E (S&P 500 Fund) ................................. 14
Fund F (Money Market Fund) ............................ 16
Loan Fund ............................................. 18
Temporary Investment Fund ............................. 20
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 1997 and 1996
Total Plan ............................................ 5
Fund A (Bond Index Fund) .............................. 7
Funds B and C (Phillips Stock Fund) ................... 9
Fund D (Investment Contracts Fund) -- Deposit
Administration Account .............................. 11
Fund D (Investment Contracts Fund) -- Deferred
Settlement Account .................................. 13
Fund E (S&P 500 Fund) ................................. 15
Fund F (Money Market Fund) ............................ 17
Loan Fund ............................................. 19
Temporary Investment Fund.............................. 21
Notes to Financial Statements ............................. 22
Supplemental Schedules
Schedule of Assets Held for Investment Purposes
at December 31, 1997, Line 27(a) ........................ 32
Schedule of Reportable Transactions for the Year
Ended December 31, 1997, Line 27(d) -- Series
of Transactions ......................................... 33
2
<PAGE>
- ------------------------------------------------------------------
Report Of Independent Auditors
The Thrift Plan Committee
Thrift Plan of Phillips Petroleum Company
We have audited the accompanying statement of net assets available
for benefits of the Thrift Plan of Phillips Petroleum Company
(Plan) as of December 31, 1997 and 1996, and the related statement
of changes in net assets available for benefits for the years then
ended, presented on pages 4 and 5. These financial statements are
the responsibility of the Thrift Plan Committee (Committee). Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by the Committee, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan at December 31, 1997 and 1996, and the
changes in its net assets available for benefits for the years
then ended, in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The accompanying
supplemental schedules of assets held for investment purposes as
of December 31, 1997, and reportable transactions for the year
then ended, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial
statements. The fund information presented on pages 6 through 21
listed in the accompanying index to financial statements and
schedules is presented for purposes of additional analysis rather
than to present the net assets available for benefits and changes
in net assets available for benefits of each fund. The
supplemental schedules and fund information have been subjected to
the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
/s/ Ernst & Young LLP
Tulsa, Oklahoma ERNST & YOUNG LLP
June 24, 1998
3
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Vanguard Bond Index-Total Bond
Market Portfolio $ 79,254 74,837
Phillips Petroleum Company
common stock 848,348 797,584
Insurance contracts 23,343 155,955
Vanguard Index Trust 500 Portfolio 171,680 114,578
Vanguard Money Market Reserves-
Prime Portfolio 205,229 158,914
Loans to Plan participants 24,605 21,024
- -----------------------------------------------------------------
1,352,459 1,322,892
Contributions Receivable 522 694
Employee Deposits Receivable 15 104
Loan Repayments Receivable 57 106
Dividends Receivable - 55
- -----------------------------------------------------------------
Total Assets 1,353,053 1,323,851
- -----------------------------------------------------------------
Net Assets Available for Benefits $1,353,053 1,323,851
=================================================================
See Notes to Financial Statements.
4
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Contributions and Deposits
Company contributions
Matching $ 5,759 5,604
Before-tax deposits 21,161 18,840
Employee deposits 15,491 15,697
- -----------------------------------------------------------------
42,411 40,141
- -----------------------------------------------------------------
Investment Income
Dividends 41,910 33,925
Interest
Participant loans 1,696 1,355
Other 6,781 18,911
Net appreciation in fair value
of investments 118,602 209,634
- -----------------------------------------------------------------
168,989 263,825
- -----------------------------------------------------------------
Total Additions 211,400 303,966
- -----------------------------------------------------------------
Deductions
Distributions to
Participants or Their
Beneficiaries
Cash 153,888 167,282
Phillips Petroleum Company
common stock 28,295 47,426
Administrative Expense 15 316
Interest Expense - 6
- -----------------------------------------------------------------
Total Deductions 182,198 215,030
- -----------------------------------------------------------------
Net Increase 29,202 88,936
Net Assets Available for
Benefits
Beginning of Year 1,323,851 1,234,915
- -----------------------------------------------------------------
End of Year $1,353,053 1,323,851
=================================================================
See Notes to Financial Statements.
5
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
FUND A
(Bond Index Fund)
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Vanguard Bond Index-Total Bond
Market Portfolio $79,254 74,837
Due from Temporary Investment Fund 114 116
- -----------------------------------------------------------------
Total Assets 79,368 74,953
- -----------------------------------------------------------------
Net Assets Available for Benefits $79,368 74,953
=================================================================
Number of Units 7,865,967 7,617,326
Unit Value $10.0900 9.8398
- -----------------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
FUND A
(Bond Index Fund)
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Investment Income
Interest $ - 1
Dividends 4,825 3,191
Net appreciation (depreciation)
in fair value of investments 1,875 (1,157)
- -----------------------------------------------------------------
6,700 2,035
Allocation of Deposits and
Earnings from Temporary
Investment Fund 1,139 1,132
- -----------------------------------------------------------------
Total Additions 7,839 3,167
- -----------------------------------------------------------------
Deductions
Cash Distributions to Participants
or Their Beneficiaries 8,802 9,268
Administrative Expense 1 73
- -----------------------------------------------------------------
Total Deductions 8,803 9,341
- -----------------------------------------------------------------
Interfund Transfers 5,379 6,203
- -----------------------------------------------------------------
Net Increase 4,415 29
Net Assets Available for
Benefits
Beginning of Year 74,953 74,924
- -----------------------------------------------------------------
End of Year $79,368 74,953
=================================================================
See Notes to Financial Statements.
7
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
FUNDS B and C
(Phillips Stock Fund)
Thousands of Dollars
--------------------------
At December 31 1997 1996*
--------------------------
Assets
Investments
Phillips Petroleum Company
common stock $ 848,348 797,584
Vanguard Money Market Reserves --
Prime Portfolio 7,818 993
- -----------------------------------------------------------------
856,166 798,577
Due from Temporary Investment Fund --
Fund B 2,812 2,826
Contributions Receivable -- Fund C 508 487
- -----------------------------------------------------------------
Total Assets 859,486 801,890
- -----------------------------------------------------------------
Net Assets Available for Benefits $ 859,486 801,890
=================================================================
Net Assets Available for Benefits
Fund B $ 448,821 414,293
Fund C 410,665 387,597
- -----------------------------------------------------------------
$ 859,486 801,890
=================================================================
Number of Units
Fund B 4,204,684 4,260,519
Fund C 3,847,221 3,985,990
- -----------------------------------------------------------------
8,051,905 8,246,509
- -----------------------------------------------------------------
Unit Value $106.7432 97.2399
- -----------------------------------------------------------------
See Notes to Financial Statements.
*Reclassified to conform to current presentation.
8
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
FUNDS B and C
(Phillips Stock Fund)
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996*
------------------------
Additions
Investment Income
Dividends $ 24,190 23,461
Interest - 324
Net appreciation 81,834 193,528
- -----------------------------------------------------------------
106,024 217,313
Matching Company
Contributions -- Fund C 5,759 5,604
Allocation of Deposits and
Earnings from Temporary
Investment Fund -- Fund B 28,370 26,976
- -----------------------------------------------------------------
Total Additions 140,153 249,893
- -----------------------------------------------------------------
Deductions
Distributions to Participants
or Their Beneficiaries
Cash -- Fund B 15,339 28,096
Cash -- Fund C 13,593 14,356
Phillips Petroleum Company
common stock -- Fund B 15,001 31,389
Phillips Petroleum Company
common stock -- Fund C 13,294 16,037
Administrative Expense 10 109
Interest Expense - 6
- -----------------------------------------------------------------
Total Deductions 57,237 89,993
- -----------------------------------------------------------------
Interfund Transfers (25,320) (73,005)
- -----------------------------------------------------------------
Net Increase 57,596 86,895
Net Assets Available for
Benefits
Beginning of Year 801,890 714,995
- -----------------------------------------------------------------
End of Year $859,486 801,890
=================================================================
Net Assets Available for Benefits
Fund B $448,821 414,293
Fund C 410,665 387,597
- -----------------------------------------------------------------
$859,486 801,890
=================================================================
See Notes to Financial Statements.
*Reclassified to conform to current presentation.
9
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
FUND D (Investment Contracts Fund)
DEPOSIT ADMINISTRATION ACCOUNT
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Insurance contracts
Continental Assurance Company,
Group Annuity, Contract GP-12692 $ - 67,098
Group Annuity, Contract GP-12787 23,005 23,656
Provident National Assurance,
Group Annuity, Contract GC-05048 - 64,731
- -----------------------------------------------------------------
Total Assets 23,005 155,485
- -----------------------------------------------------------------
Net Assets Available for Benefits $ 23,005 155,485
=================================================================
Number of Units (A) (A)
Unit Values (A) (A)
- -----------------------------------------------------------------
(A) See Note 6.
See Notes to Financial Statements.
10
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
FUND D (Investment Contracts Fund)
DEPOSIT ADMINISTRATION ACCOUNT
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996*
------------------------
Additions
Investment Income
Interest $ 6,748 17,140
- -----------------------------------------------------------------
Total Additions 6,748 17,140
- -----------------------------------------------------------------
Deductions
Cash Distributions to Participants
or Their Beneficiaries 17,319 60,681
Administrative Expense - 28
- -----------------------------------------------------------------
Total Deductions 17,319 60,709
- -----------------------------------------------------------------
Interfund Transfers (121,909) (86,846)
- -----------------------------------------------------------------
Net Decrease (132,480) (130,415)
Net Assets Available for
Benefits
Beginning of Year 155,485 285,900
- -----------------------------------------------------------------
End of Year $ 23,005 155,485
=================================================================
See Notes to Financial Statements.
*Reclassified to conform to current presentation.
11
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
FUND D (Investment Contracts Fund)
DEFERRED SETTLEMENT ACCOUNT
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Insurance contract $338 470
- -----------------------------------------------------------------
Total Assets 338 470
- -----------------------------------------------------------------
Net Assets Available for Benefits $338 470
=================================================================
See Notes to Financial Statements.
12
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
FUND D (Investment Contracts Fund)
DEFERRED SETTLEMENT ACCOUNT
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Investment Income
Interest $ 33 44
- -----------------------------------------------------------------
Total Additions 33 44
- -----------------------------------------------------------------
Deductions
Cash Distributions to Participants
or Their Beneficiaries 165 177
- -----------------------------------------------------------------
Total Deductions 165 177
- -----------------------------------------------------------------
Net Decrease (132) (133)
Net Assets Available for
Benefits
Beginning of Year 470 603
- -----------------------------------------------------------------
End of Year $ 338 470
=================================================================
See Notes to Financial Statements.
13
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
FUND E
(S&P 500 Fund)
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Vanguard Index Trust 500 Portfolio $171,680 114,578
Due From Temporary Investment Fund 530 457
- -----------------------------------------------------------------
Total Assets 172,210 115,035
- -----------------------------------------------------------------
Net Assets Available for Benefits $172,210 115,035
=================================================================
Number of Units 1,911,956 1,663,309
Unit Value $90.0701 69.1603
- -----------------------------------------------------------------
See Notes to Financial Statements.
14
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
FUND E
(S&P 500 Fund)
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Investment Income
Dividends $ 3,450 2,032
Interest - 3
Net appreciation in fair value
of investments 34,893 17,263
- -----------------------------------------------------------------
38,343 19,298
Allocation of Deposits and
Earnings from Temporary
Investment Fund 5,206 4,185
- -----------------------------------------------------------------
Total Additions 43,549 23,483
- -----------------------------------------------------------------
Deductions
Cash Distributions to Participants
or Their Beneficiaries 13,460 10,320
Administrative Expense 1 39
- -----------------------------------------------------------------
Total Deductions 13,461 10,359
- -----------------------------------------------------------------
Interfund Transfers 27,087 29,642
- -----------------------------------------------------------------
Net Increase 57,175 42,766
Net Assets Available for
Benefits
Beginning of Year 115,035 72,269
- -----------------------------------------------------------------
End of Year $172,210 115,035
=================================================================
See Notes to Financial Statements.
15
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
FUND F
(Money Market Fund)
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Vanguard Money Market Reserves-
Prime Portfolio $193,114 154,203
Due from Temporary Investment Fund 212 238
- -----------------------------------------------------------------
Total Assets 193,326 154,441
- -----------------------------------------------------------------
Net Assets Available for Benefits $193,326 154,441
=================================================================
Number of Units 193,325,684 154,440,044
Unit Value $1.000 1.000
- -----------------------------------------------------------------
See Notes to Financial Statements.
16
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
FUND F
(Money Market Fund)
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Investment Income
Dividends $ 9,228 5,094
Interest - 1,336
Allocation of Deposits and
Earnings from Temporary
Investment Fund 2,154 2,454
- -----------------------------------------------------------------
Total Additions 11,382 8,884
- -----------------------------------------------------------------
Deductions
Cash Distributions to Participants
or Their Beneficiaries 84,703 43,654
Administrative Expense 3 67
- -----------------------------------------------------------------
Total Deductions 84,706 43,721
- -----------------------------------------------------------------
Interfund Transfers 112,209 122,418
- -----------------------------------------------------------------
Net Increase 38,885 87,581
Net Assets Available for
Benefits
Beginning of Year 154,441 66,860
- -----------------------------------------------------------------
End of Year $193,326 154,441
=================================================================
See Notes to Financial Statements.
17
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
LOAN FUND
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Loans to participants $24,605 21,024
Due from Temporary Investment Fund 715 553
- -----------------------------------------------------------------
Total Assets 25,320 21,577
- -----------------------------------------------------------------
Net Assets Available for Benefits $25,320 21,577
=================================================================
See Notes to Financial Statements.
18
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
LOAN FUND
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Interest -- Participant Loans $ 1,696 1,355
- -----------------------------------------------------------------
Deductions
Cash Distributions to Participants
or Their Beneficiaries 507 730
Loan Repayments from Plan
Participants 10,867 9,368
- -----------------------------------------------------------------
Total Deductions 11,374 10,098
- -----------------------------------------------------------------
Interfund Transfers 13,421 10,956
- -----------------------------------------------------------------
Net Increase 3,743 2,213
Net Assets Available for
Benefits
Beginning of Year 21,577 19,364
- -----------------------------------------------------------------
End of Year $25,320 21,577
=================================================================
See Notes to Financial Statements.
19
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
TEMPORARY INVESTMENT FUND
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Vanguard Money Market Reserves-
Prime Portfolio $4,297 3,718
Contributions Receivable 14 207
Employee Deposits Receivable 15 104
Loan Repayments Receivable 57 106
Dividends Receivable - 55
- -----------------------------------------------------------------
Total Assets 4,383 4,190
- -----------------------------------------------------------------
Liabilities
Due to Fund A 114 116
Due to Fund B 2,812 2,826
Due to Fund E 530 457
Due to Fund F 212 238
Due to Loan Fund 715 553
- -----------------------------------------------------------------
Total Liabilities 4,383 4,190
- -----------------------------------------------------------------
Net Assets Available for Benefits $ - -
=================================================================
See Notes to Financial Statements.
20
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
TEMPORARY INVESTMENT FUND
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Contributions and Deposits
Company contributions --
before-tax deposits $21,161 18,840
Employee deposits 15,491 15,697
Loan repayments from
Plan participants 10,867 9,368
- -----------------------------------------------------------------
47,519 43,905
Investment Income
Dividends 217 147
Interest - 63
- -----------------------------------------------------------------
Total Additions 47,736 44,115
- -----------------------------------------------------------------
Deductions
Allocation of Deposits and
Earnings 36,869 34,747
- -----------------------------------------------------------------
Interfund Transfers (10,867) (9,368)
Net Increase - -
Net Assets Available for
Benefits
Beginning of Year - -
- -----------------------------------------------------------------
End of Year $ - -
=================================================================
See Notes to Financial Statements.
21
<PAGE>
- -----------------------------------------------------------------
Notes To Financial Statements Thrift Plan Of Phillips
Petroleum Company
Note 1 -- Plan Description
The following description of the Thrift Plan of Phillips
Petroleum Company (Plan) is subject to and qualified by the more
complete information appearing in the Plan document.
The Plan is a defined contribution plan available to certain
employees of Phillips Petroleum Company and participating
subsidiaries (Company). Generally, any person on the direct U.S.
dollar payroll of the Company is eligible to participate.
Non-managerial retail outlet marketing employees and certain
other employee classifications are not eligible.
Effective at the close of business on December 31, 1995, the
Trustee for Funds B and C, which were invested primarily in
common stock of the Company, was changed from Bankers Trust
Company (Bankers) to Vanguard Fiduciary Trust Company (Vanguard),
P.O. Box 2900, Valley Forge, Pennsylvania, 19482-2900. Bankers
continued to serve as custodian for those funds until June 28,
1996, when Vanguard became custodian. Effective July 1, 1996,
Vanguard began providing recordkeeping, participant accounting,
and tax reporting services for the Plan, and became Trustee for
all funds except Fund D. Effective June 1, 1996, Phillips
Petroleum Company became contractholder for all Fund D insurance
contracts. This change in contractholder did not affect
participant benefits. Vanguard does provide recordkeeping
services for Fund D as part of the recordkeeping services
provided to the Plan. Funds A, E, F and the Temporary Investment
Fund were transferred to Vanguard for investment management
effective May 1, 1996. With Vanguard as Trustee, participants
are generally permitted to make transfers between investment
funds on any valuation date (each day the New York Stock Exchange
is open for business). Before the change of Trustee, transfers
between investment funds were permitted only on a monthly basis.
Under the trust agreement with Vanguard, assets of Fund A, also
known as the Vanguard Bond Index-Total Bond Market Portfolio
Fund (Bond Index Fund), are invested in the Vanguard Bond Index-
Total Bond Market Portfolio. Assets of Funds B and C are now
invested in the Phillips Stock Fund which is a single investment
fund consisting of two separate accounts. The Phillips Stock
Fund is invested only in the common stock of the Company and
holds cash reserves as determined by the Trustee. Assets of
Fund D, also known as the Investment Contracts Fund, are invested
in contracts guaranteed by insurance companies as to both
principal and interest. Fund D consists of the Deposit
Administration Account and the Deferred Settlement Account.
22
<PAGE>
Assets of Fund E, also known as the Vanguard Index Trust 500
Portfolio Fund (S&P 500 Fund) are invested in the Vanguard Index
Trust 500 Portfolio. Assets of Fund F, also known as the
Vanguard Money Market Reserves-Prime Portfolio Fund (Money Market
Fund), are invested in the Vanguard Money Market Reserves-Prime
Portfolio. Assets of the Temporary Investment Fund, are invested
in the Vanguard Money Market Reserves-Prime Portfolio.
Dividends represent earnings from the various Vanguard mutual
funds in which the Plan participates. The dividends reported for
the Phillips Stock Fund include the dividends on Company stock,
as well as earnings on the small amount of cash reserves in the
fund.
Participants may have up to 15 percent of their pay deposited in
the Plan each month. The first 5 percent is designated as
regular deposits with any excess being designated as supplemental
deposits. Deposits may be further designated by a participant as
before-tax or after-tax deposits. Before-tax deposits are made
by the Company on behalf of a participant who has elected the
before-tax feature of the Plan, voluntarily reducing his salary
by a corresponding amount. Total deposit amounts and allocation
of deposits between after-tax and before-tax accounts are subject
to limitations imposed by the Internal Revenue Code.
Participants may change their investment direction and deposit
rate semiannually during designated enrollment periods. Employee
deposits may be suspended in certain circumstances.
The Company contributes an amount equal to 25 percent of an
employee's regular deposits made to the Phillips Stock Fund --
Fund B account and 15 percent of regular deposits made to any
other investment fund.
Employee deposits, before-tax deposits and loan repayments are
first placed into the Temporary Investment Fund and remain there
until the valuation date on or about the 20th day of the
following month. Employee and before-tax deposits are paid into
the respective investment funds in accordance with the allocation
directions of participants. Loan repayments are transferred to
the Loan Fund and then are generally allocated to Funds A, B, E
or F based on the participant's regular deposits investment
allocation, except that funds borrowed from Fund C are repaid
only to Fund C. Earnings on deposits and loan repayments while
in the Temporary Investment Fund are credited quarterly in the
same manner to each participant who still maintains an account in
the Plan and who made deposits or loan repayments during the
quarter. The allocation of earnings are made to each Participant
in the proportion to which his deposits or loan repayments bears
to all deposits or loan repayments during the period for which
such interest was earned. Employee deposits and earnings are
paid into Funds A, B, E or F as directed by the participant.
After June 30, 1993, Fund D (investment contracts which guarantee
23
<PAGE>
repayment of principal invested and a fixed rate of interest) no
longer accepted deposits. Company matching contributions are
invested in the Phillips Stock Fund -- Fund C account. The Loan
Fund is used to record transactions resulting from loans made to
active employees against their accounts. Except for the
Temporary Investment Fund and the Loan Fund, the interests of
participants in each fund are represented by units allocated to
them.
Effective July 1, 1996, when Vanguard became Trustee, the Plan
provides for daily transfers among funds; however, plan
participants may not direct transfers to Fund C, the Loan Fund,
or the Temporary Investment Fund. A participant may make
unlimited transfers of any dollar amount, whole percentages, or
units to or from Investment Funds A, E or F on any valuation
date. A participant may direct the transfer of any dollar
amount, whole percentages or units of the Phillips Stock Fund to
or from his Fund B account to or from Funds A, E, or F on any
valuation date. The participant must wait 10 calendar days to
make another transfer involving Fund B. Transfers in and out of
Fund D are not permitted.
In addition to the rights described above permitting the transfer
of amounts from one Investment Fund to another, a participant who
has terminated employment and attained age 55 may, on any
valuation date, direct the transfer of any dollar amount, whole
percentages, or units in any Investment Fund (except the
Temporary Investment Fund or Investment Fund D) to any other
Investment Fund (except to the Temporary Investment Fund,
Investment Fund C or Investment Fund D). Provided, however, such
Participant who transfers from Fund C to any other Investment
Fund may transfer that interest back to Fund C on any subsequent
valuation date.
A participant is vested at all times with respect to his deposits
and his interest in Company contributions. Effective January 1,
1996, Company contributions made after December 31, 1995, may not
be withdrawn until 24 months after they are contributed unless
the participant has been in the Plan for at least five years or
becomes eligible to withdraw, for reasons other than a specified
financial hardship, his interest in his before-tax account. A
participant may not withdraw his interest in his before-tax
account unless he is at least age 59 1/2, experiences a specified
financial hardship, becomes totally and permanently disabled, or
separates from service. Upon the death of a participant, his
beneficiary may withdraw the participant's entire account
balance, including his before-tax account.
24
<PAGE>
Distributions generally occur upon separation from service, but
may be deferred. For a participant who retires or becomes
totally disabled, distribution will be deferred to a date not
later than the first valuation date of February of the year after
the year age 70 1/2 is attained. If the participant dies,
distribution to a surviving spouse beneficiary will be deferred
to the first valuation date of the second month preceding the
month in which the participant would have attained age 70 1/2.
This deferral is revocable by the participant or the surviving
spouse. Distributions to non-spouse beneficiaries may be
deferred approximately five years. Distributions are based on
the valuation of the participant's interest in the trust fund.
Available forms of distribution are:
(a) from Funds A, D, E or F in cash;
(b) from Funds B and C in whole shares of common stock
and/or cash;
(c) with respect to a participant who retires under a
Company retirement plan or a beneficiary spouse of a
participant in the event of an active employee
participant's death, in the form of an irrevocable non-
transferable monthly annuity purchased with a specified
dollar amount of the participant's interest in the Plan;
and
(d) with respect to a participant who retired under a
Company retirement plan before July 1, 1992, and who
timely elected a deferred settlement option -- monthly,
quarterly or annual payments irrevocably elected from
his interest in Fund D -- commencing at retirement with,
at the participant's direction, a designated life-
interest beneficiary to receive any unpaid scheduled
payments following the participant's death.
A participant may elect a direct rollover of the taxable portion
of most distributions to an Individual Retirement Account or
another tax-qualified plan. The taxable portion of any such
distribution that is not rolled over directly will be subject to
20 percent federal withholding.
The Plan is administered by the Thrift Plan Committee, the
members of which are appointed by the Board of Directors of
Phillips Petroleum Company. The Plan Financial Administrator and
Plan Benefits Administrator are the persons who occupy,
respectively, the Phillips Petroleum Company positions of
Treasurer and Compensation and Benefits Manager. Members of the
Committee and the Plan Administrators serve without compensation,
but are reimbursed by the Company for necessary expenditures
incurred in the discharge of their duties.
25
<PAGE>
The Plan pays all reasonable expenses necessary for the operation
of the Plan, unless such expenses are paid by the Company. The
Company pays only the Trustee's recordkeeping and accounting fees
and the class year contract administration fees of .15 percent of
the funds invested in the insured contracts in Fund D.
The Company intends to continue the Plan indefinitely, but
reserves the right to amend or terminate it at any time. In the
event of termination of the Plan, participants and beneficiaries
of deceased participants will receive, within a reasonable time,
any funds in their accounts as of the date of the termination.
Note 2 -- Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
Note 3 -- Investments
All securities are valued at their quoted market price or, with
respect to units of participation in commingled funds, redemption
value. Insurance contracts are valued pursuant to their terms;
the value, which approximates fair value, represents fund
deposits plus interest credited, less distributions. Participant
loans are valued at cost, which approximates fair value.
Note 4 -- Contributions Receivable
Contributions receivable at December 31 included the following:
Thousands of Dollars
--------------------
1997 1996
--------------------
Receivable from the Company for
Matching contributions $508 487
Before-tax deposits 14 207
- -----------------------------------------------------------------
$522 694
=================================================================
26
<PAGE>
Note 5 -- Insurance Contracts
A breakdown of the average yields and crediting interest rates
for the insurance contracts by Class Year included in Fund D
follows:
Crediting
Average Interest
Yield Rate
Class ----------- -----------
Year Identity of Issue Contract Description 1997 1996 1997 1996
- ----- --------------------- ---------------------- -------------------------
1992 Continental Assurance Group Annuity Contract
Company GP-12787, deposit
administration
account 7.36% 7.33 7.35 7.35
1991 Continental Assurance Group Annuity Contract
Company GP-12692, deposit
administration
account - 8.33* - 8.30*
Provident National Group Annuity Contract
Assurance GC-027-05048,
deposit
administration
account - 8.33* - 8.30*
- ------------------------------------------------------------------------------
*The average yields and crediting interest rates for the 1991 Class Year are
the combined yields for Group Annuity Contracts GP-12692 and GC-027-05048.
The crediting interest rates, determined by each insurance
company, are guaranteed over their respective six-year contract
terms. However, the effective rates of interest for each
contract year may be different. The contracts may be
discontinued as of any date the Plan has failed to qualify, or
continue to qualify, under Section 401(a) of the Internal Revenue
Code of 1986 as amended, or if the Plan is terminated. Also, the
Company may discontinue the contracts by giving written notice.
The Continental Assurance Company Group Annuity Contract GP-12692
and the Provident National Assurance Group Annuity Contract
GC-027-05048 terminated June 30, 1997. The balances, totaling
approximately $122 million, were transferred from Fund D to
Fund F.
27
<PAGE>
Note 6 -- Class Year Accounts
A breakdown of Fund D (Investment Contracts Fund) -- Deposit
Administration Account by Class Year at December 31 follows:
Thousands
of Dollars
------------
Net Assets
Available Number Unit
for Benefits of Units Values
--------------------------------------
1997
- ----
1992 $ 23,005 9,293,620 $2.4754
- -----------------------------------------------------------------
$ 23,005
=================================================================
1996
- ----
1992 $ 23,656 10,259,372 $2.3058
1991 131,829 44,731,562 2.9471
- -----------------------------------------------------------------
$155,485
=================================================================
Note 7 -- Loan Fund
The Plan allows loans to active employees or parties-in-interest
from their accounts. The minimum loan is $1,000, and generally
the maximum is the lesser of $50,000 or half the participant's
vested account. The loans may extend for up to 60 months (180
months for a home loan) with a rate of interest equal to the
national prime lending rate, as determined on the last valuation
date of the previous month. No more than one home loan and two
regular loans may be outstanding at any given time.
Loan payments and interest are repaid to the borrowing
participant's accounts through the Loan Fund, which records the
outstanding loans and related transactions. Generally,
repayments are allocated to Funds A, B, E or F based on a
participant's regular deposits investment direction, except that
funds borrowed from Fund C are repaid only to Fund C. For the
periods ended December 31, the total of loans made by fund of
origin, principal repaid, and aggregate outstanding loan balances
were:
28
<PAGE>
Thousands of Dollars
---------------------------------------------
Fund A B C D E F Total
---------------------------------------------
Period ended
December 31, 1997
- -----------------
Loans Outstanding
at December 31,
1996 $21,024
Participant Loans $504 9,816 234 151 1,221 1,333 13,259
Principal Repaid 110 8,277 216 - 367 201 9,171
Distributions to
Participants 507
- -----------------------------------------------------------------
Loans Outstanding
at December 31,
1997 $24,605
=================================================================
Period ended
December 31, 1996
- -----------------
Loans Outstanding
at December 31,
1995 $18,868
Participant Loans $396 8,137 179 311 841 1,035 10,899
Principal Repaid 108 6,560 173 - 244 928 8,013
Distributions to
Participants 730
- -----------------------------------------------------------------
Loans Outstanding
at December 31,
1996 $21,024
=================================================================
29
<PAGE>
Note 8 -- Allocation of Deposits and Earnings from Temporary
Investment Fund
Allocation of deposits and earnings from the Temporary Investment
Fund to other investment funds represents the allocation of
employee deposits and before-tax contributions made first to the
Temporary Investment Fund, with related earnings thereon. A
breakdown of the allocation for each of the periods follows:
Thousands of Dollars
-----------------------------------------
Fund A Fund B Fund E Fund F Total
-----------------------------------------
December 31, 1997
- -----------------
Employee deposits $ 576 11,401 2,195 1,319 15,491
Before-tax
contributions 558 16,790 2,988 825 21,161
Interest and dividends 5 179 23 10 217
- -----------------------------------------------------------------
$1,139 28,370 5,206 2,154 36,869
=================================================================
December 31, 1996
- -----------------
Employee deposits $ 602 11,721 1,848 1,526 15,697
Before-tax
contributions 525 15,146 2,293 876 18,840
Interest and dividends 5 109 44 52 210
- -----------------------------------------------------------------
$1,132 26,976 4,185 2,454 34,747
=================================================================
Note 9 -- Credit Facility
In 1995, the Department of Labor issued the Company a Prohibited
Transaction Exemption allowing the Plan to establish a
$25 million credit agreement between Phillips Petroleum Company
and the Thrift Plan of Phillips Petroleum Company and Trust,
effective March 15, 1996. The agreement is used for the purpose
of financing net Funds B and C distributions, participant loans
from the Plan, or transfers of participants' interests to other
funds of the Plan. The agreement requires no commitment fee.
Borrowings are non-interest bearing, without recourse, and must
be repaid within 31 days. There was no balance outstanding under
this agreement at December 31, 1997 or 1996.
Note 10 -- Transactions with Parties-in-Interest
During 1997 and 1996, the Plan received $23,956,300 and
$23,461,000, respectively, in common stock dividends from the
Company. Fees paid for legal, accounting, and other services
rendered by parties-in-interest were based on customary and
reasonable rates for such services.
30
<PAGE>
Note 11 -- Tax Status
The Internal Revenue Service (IRS) determined on November 30,
1995, that the Plan, as amended through June 23, 1994, is
qualified under Section 401(a) of the Internal Revenue Code of
1986 and the Trust is exempt from federal income tax under
Section 501(a). Subsequent amendments have been adopted, but are
not expected to affect the qualified status of the Plan. The
Committee is not aware of any activity that would affect the
qualified status of the Plan.
Note 12 -- Impact of Year 2000 (Unaudited)
In April 1996, Phillips initiated a company-wide Year 2000
project, utilizing both internal and external resources, to
define, assess, convert, or replace various programs, hardware
and instrumentation systems to make them Year 2000 compliant.
The project also includes determining whether third-party service
providers have plans in place to become Year 2000 compliant.
Vanguard, as Plan Trustee, has also initiated a Year 2000
project. Phillips does not expect the Year 2000 issue to have a
significant effect on Plan operations. However, an unexpected
failure to adequately address this issue could result in an
interruption of normal Plan operations and activities.
31
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Assets Held Thrift Plan Of Phillips
for Investment Purposes Petroleum Company
Line 27a EIN 73-0400345, Plan No. 002
At December 31, 1997
(a)(b) Identity of (c) Description of investment Thousands of Dollars
issue, borrower, including maturity date, ---------------------------
lessor, or similar rate of interest, collateral, (d) Historical (e) Current
party par or maturity value Cost Value
- --------------------- ----------------------------- -------------- -----------
Phillips Petroleum Common Stock, $1.25 par
Company* value, 17,446,740 shares $311,948 848,348
- -------------------------------------------------------------------------------
The Vanguard Group* 1,906,075.714 units, Vanguard
Index Trust 500 Portfolio 132,554 171,680
7,854,667.631 units, Vanguard
Bond Index-Total Bond
Market Portfolio 76,546 79,254
197,410,757.40 units,
Vanguard Money Market
Reserves-Prime Portfolio 205,229 205,229
- -------------------------------------------------------------------------------
414,329 456,163
- -------------------------------------------------------------------------------
Thrift Plan of Loans to Plan participants*
Phillips Petroleum at 6% - 9%
Company - 24,605
- -------------------------------------------------------------------------------
Travelers Insurance Group Annuity Contract
Company* GR-1966A, deferred
settlement account 338 338
Continental Assurance Group Annuity Contract
Company* GP-12787, deposit
administration account 23,005 23,005
- -------------------------------------------------------------------------------
23,343 23,343
- -------------------------------------------------------------------------------
$749,620 1,352,459
===============================================================================
*Party-in-interest
32
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Schedule of Reportable Transactions Thrift Plan of Phillips
Line 27d Petroleum Company
Series of Transactions in Excess EIN 73-0400345, Plan 022
of 5 Percent of Net Assets
Year Ended December 31, 1997
Thousands of Dollars
-------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
(a)(b) Identity (h) Current
of party value of
involved and asset on (i) Net
description of (c) Purchase (d) Selling (g) Cost transaction gain or
asset price price (f) Expenses of asset date (loss)
- --------------- ------------ ----------- ------------ -------- ----------- ---------
Phillips
Petroleum
Company*
Common Stock $ 48,229 - Net $ - 48,229 -
- 49,166 Net 18,885 49,166 30,281
The Vanguard
Group*,
Vanguard
Money Market
Reserves-
Prime
Portfolio 349,718 - Net - 349,718 -
- 304,949 Net 304,949 304,949 -
The Vanguard
Group*,
Vanguard
Index Trust
500 Portfolio 61,610 - Net - 61,610 -
- 39,403 Net 34,239 39,403 5,164
*Party-in-interest
Column (e) is not applicable.
</TABLE>
33
<PAGE>
Exhibit 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8, File No. 33-50134) pertaining to the Thrift Plan of Phillips
Petroleum Company and in the related Prospectus of our report dated June 24,
1998, with respect to the financial statements and schedules of the Thrift
Plan of Phillips Petroleum Company included in this Annual Report (Form
11-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 24, 1998
<PAGE>
Exhibit 99(b)
FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ---------
Commission file number 33-50283
--------------------------------
LONG-TERM STOCK SAVINGS PLAN OF
PHILLIPS PETROLEUM COMPANY
(Full title of the Plan)
PHILLIPS PETROLEUM COMPANY
(Name of issuer of securities)
Bartlesville, Oklahoma 74004
(Address of principal executive office) (Zip code)
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
--------------------
Financial statements of the Long-Term Stock Savings Plan of
Phillips Petroleum Company, filed as part of this annual report,
are listed in the accompanying index.
(b) Exhibits
--------
Exhibit 1 Consent of Ernst & Young LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Long-Term Stock Savings Plan Committee has duly caused
this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
LONG-TERM STOCK SAVINGS PLAN
OF PHILLIPS PETROLEUM COMPANY
/s/ Rand C. Berney
-----------------------------
Rand C. Berney
Member
Long-Term Stock Savings
Plan Committee
June 24, 1998
1
<PAGE>
- -----------------------------------------------------------------
Index To Financial Statements Long-Term Stock Savings Plan
And Schedules Of Phillips Petroleum Company
Page
Report of Independent Auditors ............................. 3
Financial Statements
Statements of Net Assets Available for Benefits
at December 31, 1997 and 1996
Total Plan ........................................... 4
Fund EP .............................................. 6
Fund K ............................................... 8
Fund L ............................................... 10
Temporary Fund ....................................... 12
Statements of Changes in Net Assets Available for
Benefits for the Years Ended December 31, 1997
and 1996
Total Plan ........................................... 5
Fund EP .............................................. 7
Fund K ............................................... 9
Fund L ............................................... 11
Temporary Fund ....................................... 13
Notes to Financial Statements ............................ 14
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at
December 31, 1997, Line 27a ............................ 19
Schedule of Reportable Transactions for the Year Ended
December 31, 1997, Line 27d ............................ 20
2
<PAGE>
- ------------------------------------------------------------------
Report Of Independent Auditors
The Long-Term Stock Savings Plan Committee
Long-Term Stock Savings Plan of Phillips Petroleum Company
We have audited the accompanying statement of net assets available
for benefits of the Long-Term Stock Savings Plan of Phillips
Petroleum Company (Plan) as of December 31, 1997 and 1996, and the
related statement of changes in net assets available for benefits
for the years then ended, presented on pages 4 and 5. These
financial statements are the responsibility of the Long-Term Stock
Savings Plan Committee (Committee). Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by the Committee, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan at December 31, 1997 and 1996, and the
changes in its net assets available for benefits for the years
then ended, in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The accompanying
supplemental schedules of assets held for investment purposes as
of December 31, 1997, and reportable transactions for the year
then ended, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial
statements. The fund information presented on pages 6 through 13
listed in the accompanying index to financial statements and
schedules is presented for purposes of additional analysis rather
than to present the net assets available for benefits and changes
in net assets available for benefits of each fund. The
supplemental schedules and fund information have been subjected to
the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
/s/ Ernst & Young LLP
Tulsa, Oklahoma ERNST & YOUNG LLP
June 24, 1998
3
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Long-Term Stock Savings Plan
Available For Benefits Of Phillips Petroleum Company
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Common stock $1,467,488 1,371,686
Money market fund 8,767 1,682
- -----------------------------------------------------------------
1,476,255 1,373,368
Cash - 1,082
Company Contributions Receivable
Funds for debt service 467 2,037
Before-tax deposits 35 33
Interest Receivable 49 24
- -----------------------------------------------------------------
Total Assets 1,476,806 1,376,544
- -----------------------------------------------------------------
Liabilities
Securities Acquisition Loans 425,150 450,850
Interest Payable 1,908 2,165
Administrative Expenses Payable 80 155
- -----------------------------------------------------------------
Total Liabilities 427,138 453,170
- -----------------------------------------------------------------
Net Assets Available for Benefits $1,049,668 923,374
=================================================================
See Notes to Financial Statements.
4
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Long-Term Stock Savings Plan
Assets Available For Benefits Of Phillips Petroleum Company
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Company Contributions
Funds for debt service $ 18,571 15,578
Basic allocation requirements 138 58
Before-tax deposits 5,788 5,773
- -----------------------------------------------------------------
24,497 21,409
- -----------------------------------------------------------------
Investment Income
Dividends 40,927 39,237
Interest 455 358
Net appreciation in fair value
of investment 132,199 318,207
- -----------------------------------------------------------------
173,581 357,802
- -----------------------------------------------------------------
Total Additions 198,078 379,211
- -----------------------------------------------------------------
Deductions
Distributions to Participants
or Their Beneficiaries 45,784 50,310
Interest Expense 25,978 26,779
Administrative Expense 22 58
- -----------------------------------------------------------------
Total Deductions 71,784 77,147
- -----------------------------------------------------------------
Net Increase 126,294 302,064
Net Assets Available for Benefits
Beginning of Year 923,374 621,310
- -----------------------------------------------------------------
End of Year $1,049,668 923,374
=================================================================
See Notes to Financial Statements.
5
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Long-Term Stock Savings Plan
Available For Benefits Of Phillips Petroleum Company
FUND EP
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Common stock $227,217 217,193
Money market fund 421 351
- -----------------------------------------------------------------
227,638 217,544
Interest Receivable 3 2
- -----------------------------------------------------------------
Total Assets 227,641 217,546
- -----------------------------------------------------------------
Liabilities
Administrative Expenses Payable 80 155
- -----------------------------------------------------------------
Total Liabilities 80 155
- -----------------------------------------------------------------
Net Assets Available for Benefits $227,561 217,391
=================================================================
Number of Units 26,518,565 27,811,188
Unit Value $8.5812 7.8167
- -----------------------------------------------------------------
See Notes to Financial Statements.
6
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Long-Term Stock Savings Plan
Assets Available For Benefits Of Phillips Petroleum Company
FUND EP
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Investment Income
Dividends $ 6,370 6,280
Interest 28 15
Net appreciation in fair value
of investment 20,394 51,183
- -----------------------------------------------------------------
Total Additions 26,792 57,478
- -----------------------------------------------------------------
Deductions
Distributions to Participants
or Their Beneficiaries 16,600 20,919
Administrative Expense 22 58
- -----------------------------------------------------------------
Total Deductions 16,622 20,977
- -----------------------------------------------------------------
Net Increase 10,170 36,501
Net Assets Available for
Benefits
Beginning of Year 217,391 180,890
- -----------------------------------------------------------------
End of Year $227,561 217,391
=================================================================
See Notes to Financial Statements.
7
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Long-Term Stock Savings Plan
Available For Benefits Of Phillips Petroleum Company
FUND K
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Common stock $75,736 64,354
Money market fund 211 167
- -----------------------------------------------------------------
75,947 64,521
Due from Temporary Fund 635 635
Interest Receivable 1 1
- -----------------------------------------------------------------
Total Assets 76,583 65,157
- -----------------------------------------------------------------
Net Assets Available for Benefits $76,583 65,157
=================================================================
Number of Units 36,965,486 34,574,082
Unit Value $2.0718 1.8846
- -----------------------------------------------------------------
See Notes to Financial Statements.
8
<PAGE>
- ------------------------------------------------------------------
Statement Of Changes In Net Long-Term Stock Savings Plan
Assets Available For Benefits Of Phillips Petroleum Company
FUND K
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Allocation of Deposits and
Earnings from Temporary Fund $ 5,821 5,804
- ------------------------------------------------------------------
Investment Income
Dividends 2,008 1,741
Interest 12 20
Net appreciation in fair value
of investment 6,688 13,924
- ------------------------------------------------------------------
8,708 15,685
- ------------------------------------------------------------------
Total Additions 14,529 21,489
- ------------------------------------------------------------------
Deductions
Distributions to Participants
or Their Beneficiaries 3,103 3,539
- ------------------------------------------------------------------
Net Increase 11,426 17,950
Net Assets Available for Benefits
Beginning of Year 65,157 47,207
- ------------------------------------------------------------------
End of Year $76,583 65,157
==================================================================
See Notes to Financial Statements.
9
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Long-Term Stock Savings Plan
Available For Benefits Of Phillips Petroleum Company
FUND L
Thousands of Dollars
------------------------
At December 31 1997 1996
------------------------
Assets
Investments
Common stock $1,164,535 1,090,139
Money market fund 7,535 562
- -----------------------------------------------------------------
1,172,070 1,090,701
Cash - 1,082
Company Contributions Receivable
Funds for debt service 467 2,037
Interest Receivable 45 21
- -----------------------------------------------------------------
Total Assets* 1,172,582 1,093,841
- -----------------------------------------------------------------
Liabilities
Securities Acquisition Loans 425,150 450,850
Interest Payable 1,908 2,165
- -----------------------------------------------------------------
Total Liabilities 427,058 453,015
- -----------------------------------------------------------------
Net Assets Available for Benefits $ 745,524 640,826
=================================================================
Number of Units 196,065,907 175,944,066
Unit Value** $2.7818 2.5317
- -----------------------------------------------------------------
See Notes to Financial Statements.
*The amount of total assets that was not allocated to
participants at December 31, 1997 and 1996, was
$627,164 thousand and $648,408 thousand, respectively.
**Unit value calculated on assets allocated to participants only.
10
<PAGE>
- ------------------------------------------------------------------
Statement Of Changes In Net Long-Term Stock Savings Plan
Assets Available For Benefits Of Phillips Petroleum Company
FUND L
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Company Contributions
Funds for debt service $ 18,571 15,578
Basic allocation requirements 138 58
- ------------------------------------------------------------------
18,709 15,636
- ------------------------------------------------------------------
Investment Income
Dividends 32,549 31,216
Interest 382 292
Net appreciation in fair value
of investment 105,117 253,100
- ------------------------------------------------------------------
138,048 284,608
- ------------------------------------------------------------------
Total Additions 156,757 300,244
- ------------------------------------------------------------------
Deductions
Distributions to Participants
or Their Beneficiaries 26,081 25,852
Interest Expense 25,978 26,779
- ------------------------------------------------------------------
Total Deductions 52,059 52,631
- ------------------------------------------------------------------
Net Increase 104,698 247,613
Net Assets Available for
Benefits
Beginning of Year 640,826 393,213
- ------------------------------------------------------------------
End of Year $745,524 640,826
==================================================================
See Notes to Financial Statements.
11
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Long-Term Stock Savings Plan
Available For Benefits Of Phillips Petroleum Company
TEMPORARY FUND
Thousands of Dollars
--------------------
At December 31 1997 1996
--------------------
Assets
Investments
Money market fund $600 602
Company Contributions Receivable
Before-tax deposits 35 33
- -----------------------------------------------------------------
Total Assets 635 635
- -----------------------------------------------------------------
Liabilities
Due to Fund K 635 635
- -----------------------------------------------------------------
Total Liabilities 635 635
- -----------------------------------------------------------------
Net Assets Available for Benefits $ - -
=================================================================
See Notes to Financial Statements.
12
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Long-Term Stock Savings Plan
Assets Available For Benefits Of Phillips Petroleum Company
TEMPORARY FUND
Thousands of Dollars
------------------------
Years Ended December 31 1997 1996
------------------------
Additions
Company Contributions
Before-tax deposits $5,788 5,773
Investment Income
Interest 33 31
- -----------------------------------------------------------------
Total Additions 5,821 5,804
- -----------------------------------------------------------------
Deductions
Allocation of Deposits and
Earnings to Fund K 5,821 5,804
- -----------------------------------------------------------------
Net Increase - -
Net Assets Available for Benefits
Beginning of Year - -
- -----------------------------------------------------------------
End of Year $ - -
=================================================================
See Notes to Financial Statements.
13
<PAGE>
- -----------------------------------------------------------------
Notes To Financial Statements Long-Term Stock Savings Plan
Of Phillips Petroleum Company
Note 1 -- Plan Description
The following description of the Long-Term Stock Savings Plan of
Phillips Petroleum Company (Plan) is subject to and qualified by
the more complete information appearing in the Plan document.
The Plan became effective July 1, 1988, and is a defined
contribution stock bonus plan available to certain employees of
Phillips Petroleum Company and participating subsidiaries
(Company). Generally, any person on the U.S. direct dollar
payroll of the Company is eligible to participate, except
non-managerial retail marketing outlet employees and certain
other employee classifications.
Effective at the close of business on December 31, 1995, Vanguard
Fiduciary Trust Company, P.O. Box 2900, Valley Forge,
Pennsylvania 19482, became the Plan Trustee. Plan investments
are held by the Trustee in the Temporary Fund, Fund K (also known
as the Employee Stock Fund), Fund L (also known as the Employer
Stock Fund) and Fund EP (also known as the EP Stock Fund).
Temporary Fund investments consist of specified short-term
securities. Funds K, L and EP are invested primarily in the
common stock of Phillips Petroleum Company (Phillips Stock).
Fund L consists of Phillips Stock, purchased with the proceeds of
the loans described in Note 3 or with certain Company
contributions. The Phillips Stock is allocated to Fund L or
Fund EP accounts of eligible participants in one of three types
of stock allocations: semiannual basic allocations, dividend
replacement allocations and supplemental allocations. A basic
allocation is made as of June 30 and December 31 each year.
Prior to 1999, 716,846 shares of stock will be divided among or
"allocated to" the Fund L accounts of eligible participants as of
each June 30 and December 31. After 1998 and through 2005, the
number of shares to be allocated semiannually will be 477,876.
In December 1995, the Company extended the LTSSP to the year
2015. Without the extension, allocations of stock to employees
would have been completed in 2005 or before. The new extension
will require additional shares to be delivered to the LTSSP.
After 2005 and through the allocation date following the date the
second loan is repaid, the number of shares to be allocated
semiannually on each basic allocation date will be 3,877 shares
for each 100 employees eligible to make deposits as of the
preceding allocation date. The LTSSP is eligible to receive
shares from the Company's Compensation and Benefits Trust, also
established in December 1995.
14
<PAGE>
A participant's semiannual basic allocation is based on the ratio
of the participant's Fund K before-tax deposits to all eligible
participants' before-tax deposits for the allocation period. If
the Company does not elect to make a special contribution and if
eligible dividends from participants' Fund L or Fund EP accounts
are used to make loan payments, participants will receive a
dividend replacement allocation. The Plan used $18.5 million and
$16.1 million in dividends on allocated shares to make loan
payments and allocated 406,950 shares and 402,774 shares in
dividend replacement allocations to participants' Fund L and
Fund EP accounts in 1997 and 1996, respectively. A supplemental
allocation is made each year-end if all shares released for
allocation, based on loan payment provisions, have not been
allocated.
The Company makes contributions to the Plan which, when
aggregated with the Plan's dividends from Fund L, certain
dividends from Fund EP and certain interest earnings from Fund L,
equal the amount necessary to enable the Plan to make its
regularly scheduled payments of principal and interest due on its
loans. The Company may also elect to make contributions to the
Plan, as an alternative to utilizing the dividends from shares in
Fund EP or from Loan 1 (see Note 3) allocated shares in Fund L.
Finally, the Company may make contributions to the Plan in the
amount necessary to bring the number of shares of stock released
for allocation up to the level required to complete the basic
allocation by contributing cash or by contributing Phillips
Stock.
Eligible employees may elect to have their salaries reduced and
before-tax deposits made by the Company on their behalf equal to
1 percent of pay. These deposits are first placed into the
Temporary Fund and remain there until the valuation date on or
about the 20th day of the following month when they are
transferred into the employee's Fund K account. Interest earned
on deposits while in the Temporary Fund are credited quarterly to
each participant who still maintains an account in the Plan and
who made deposits during the quarter. The interest of
participants in each fund is represented by units allocated to
them.
Assets of the Employee Stock Ownership Plan of Phillips Petroleum
Company (ESOP) and the Payroll Stock Ownership Plan of Phillips
Petroleum Company (PAYSOP), which were merged into the Plan on
July 1, 1988, are held in Fund EP.
Participants are always vested in their deposits and amounts
credited to their accounts. Total withdrawals from Funds K, L
and EP may be made upon the occurrence of specified events,
including the attainment of age 59 1/2 (after December 31, 1998,
for Funds EP and L) or separation from service. Partial
withdrawals are permitted in cases of specified financial
15
<PAGE>
hardship and certain other cases. For a participant who retires
or becomes totally disabled, unless a request for withdrawal is
made as of any earlier date, distribution will be deferred to a
date not later than the first valuation date of February of the
year after the year age 70 1/2 is attained. If the participant
dies, distribution to a surviving spouse beneficiary will be
deferred to the first valuation date of the second month
preceding the month in which the participant would have attained
age 70 1/2. This deferral is revocable by the participant or the
surviving spouse. Distributions to non-spouse beneficiaries may
be deferred approximately five years.
A participant may elect a direct rollover of the taxable portion
of most distributions to an Individual Retirement Account or
another tax-qualified plan. The taxable portion of any such
distribution that is not rolled over directly will be subject to
20 percent federal withholding.
The Plan is administered by the Long-Term Stock Savings Plan
Committee, the members of which are appointed by the Board of
Directors of Phillips Petroleum Company. Members of the
Committee serve without compensation, but are reimbursed by the
Company for necessary expenditures incurred in the discharge of
their duties. Administrative expenses of the Plan will be paid
by the Trustee from assets of the Plan to the extent allowable by
law, unless paid by the Company. In 1997 and 1996, the Trustee
made cash payments of $96,682 and $0, respectively, for
reimbursement of administrative expenses to Phillips from
Fund EP. Plan administrative expenses of approximately $110,000
and $200,000 were paid by Phillips to the Trustee in 1997 and
1996, respectively.
Note 2 -- Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Note 3 -- Securities Acquisition Loans
The Plan borrowed $250 million (Loan 1) and $400 million (Loan 2)
in 1988 and 1990, respectively, and purchased 14,336,918 and
14,159,292 shares of common stock from Phillips Petroleum Company
(Phillips), respectively. The shares are held in a Fund L
suspense account until allocated to eligible participants based
on the provisions of the Plan. At December 31, 1997 and 1996,
the market value of unallocated shares was $619 million and
$645 million, respectively.
16
<PAGE>
The Loans are guaranteed by Phillips. They are being repaid
through contributions made by the Company, dividends on
unallocated and allocated shares, and earnings on the short-term
investment of dividends. The carrying amounts of the Loans
approximate fair value.
Loan 1
During 1994, the Plan signed a $131 million term-loan agreement
that was used to refinance the outstanding notes payable issued
in 1988. The notes were redeemed on May 16, 1994. The new term
loan requires repayment in annual installments through the year
1998, matching the maturities of the refinanced notes, but at a
reduced cost. Principal payments totaling $26 million were made
on Loan 1 in both 1997 and 1996. The outstanding balance of
Loan 1 at December 31, 1997, was $28 million. Loan 1 provides
for variable interest rates. The rates were 4.9875 percent and
4.98 percent at December 31, 1997 and 1996, respectively.
Loan 2
Loan 2 was amended late in 1995 to extend its term from 15 to
25 years. Loan 2 is a bank loan, requiring repayment in annual
installments beginning in 2005, through the year 2015.
Any participating bank in the syndicate of lenders may cease to
participate on December 5, 2004, by giving not less than 180 days
prior notice to the Plan and Phillips. Also, each bank
participating in the loan has the optional right, if the current
directors of Phillips or their approved successors cease to be a
majority of the Board of Directors, and upon not less than 90
days notice, to cease to participate in the loan. Under the
above conditions, such banks' rights and obligations under the
loan agreement must be purchased by Phillips if not transferred
to another bank of Phillips' choice.
The outstanding balance of Loan 2 at December 31, 1997, was
$397 million. Loan 2 provides for variable interest rates. The
rates were 6.1875 percent and 5.775 percent at December 31, 1997
and 1996, respectively.
Note 4 -- Investments
Phillips Stock is valued at fair value, using the New York Stock
Exchange closing quoted market price. For money market funds,
cost and market value are the same.
17
<PAGE>
Note 5 -- Tax Status
The Internal Revenue Service (IRS) determined on January 16,
1996, that the Plan is qualified under Section 401(a) of the
Internal Revenue Code of 1986 and the Trust is exempt from
federal income tax under Section 501(a). Subsequent amendments
have been adopted, but are not expected to affect the qualified
status of the Plan. The Committee is not aware of any activity
that would affect the qualified status of the Plan.
Note 6 -- Impact of Year 2000 (Unaudited)
In April 1996, Phillips initiated a company-wide Year 2000
project, utilizing both internal and external resources, to
define, assess, convert, or replace various programs, hardware
and instrumentation systems to make them Year 2000 compliant.
The project also includes determining whether third-party service
providers have plans in place to become Year 2000 compliant.
Vanguard, as Plan Trustee, has also initiated a Year 2000
project. Phillips does not expect the Year 2000 issue to have a
significant effect on Plan operations. However, an unexpected
failure to adequately address this issue could result in an
interruption of normal Plan operations and activities.
18
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Assets Held for Long-Term Stock Savings Plan Of
Investment Purposes Phillips Petroleum Company
Line 27a EIN 73-0400345, Plan 022
At December 31, 1997
(a, b) Identity of (c) Description of investment Thousands of Dollars
issue, borrower, including maturity date, ---------------------------
lessor, or similar rate of interest, collateral, (d) Historical (e) Current
party par or maturity value Cost Value
- ------------------ ----------------------------- -------------- -----------
Phillips Petroleum 30,179,693 shares of common
Company* stock, $1.25 par value $646,941 1,467,488
Vanguard Fiduciary 8,767,000 units of
Trust Company* participation in the Vanguard
Money Market Reserves-Prime
Portfolio, $1.00 par value 8,767 8,767
- -------------------------------------------------------------------------------
$655,708 1,476,255
===============================================================================
*Party-in-interest
19
<PAGE>
- -----------------------------------------------------------------
Schedule of Reportable Transactions Long-Term Stock Savings Plan
Line 27d of Phillips Petroleum Company
Series of Transactions in Excess EIN 73-0400345, Plan 022
of 5 Percent of Net assets
Year Ended December 31, 1997
Thousands of Dollars
(a, b) Identity of -----------------------------------------
party involved and (c) Value of (d) Value (i) Net gain
description of asset purchases* of sales* or (loss)
- -------------------- ------------ --------- ------------
Vanguard Fiduciary
Trust Company**,
Vanguard Money
Market Reserves-
Prime Portfolio $72,899 65,814 -
- -----------------------------------------------------------------
*This is also the cost of purchases and current value of sales
at time of transaction.
**Party-in-interest
Columns (e), (f), (g) and (h) are not applicable.
20
<PAGE>
Exhibit 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8, File No. 33-50283) pertaining to the Long-
Term Stock Savings Plan of Phillips Petroleum Company and in the
related Prospectus of our report dated June 24, 1998, with
respect to the financial statements and schedules of the
Long-Term Stock Savings Plan of Phillips Petroleum Company
included in this Annual Report (Form 11-K) for the year ended
December 31, 1997.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 24, 1998
<PAGE>
Exhibit 99(c)
FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ---------
Commission file number 33-28669
--------------------------------
RETIREMENT SAVINGS PLAN OF
PHILLIPS PETROLEUM COMPANY
(Full title of the Plan)
PHILLIPS PETROLEUM COMPANY
(Name of issuer of securities)
Bartlesville, Oklahoma 74004
(Address of principal executive office) (Zip code)
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
--------------------
Financial statements of the Retirement Savings Plan of Phillips
Petroleum Company, filed as a part of this annual report, are
listed in the accompanying index.
(b) Exhibits
--------
Exhibit 1 Consent of Ernst & Young LLP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Retirement Savings Plan Committee has duly caused this
annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
RETIREMENT SAVINGS PLAN OF
PHILLIPS PETROLEUM COMPANY
/s/ Rand C. Berney
---------------------------------
Rand C. Berney
Member
Retirement Savings Plan Committee
June 24, 1998
1
<PAGE>
- -----------------------------------------------------------------
Index To Financial Statements Retirement Savings Plan Of
And Schedules Phillips Petroleum Company
Page
Report of Independent Auditors ............................. 3
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 1997 ................................... 4
Statement of Net Assets Available for Benefits
at December 31, 1996 ................................... 5
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1997 ................... 6
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1996 ................... 7
Notes to Financial Statements ............................ 8
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at
December 31, 1997, Line 27a ............................ 12
Schedule of Reportable Transactions for the Year Ended
December 31, 1997, Line 27d ............................ 13
2
<PAGE>
- ------------------------------------------------------------------
Report Of Independent Auditors
The Retirement Savings Plan Committee
Retirement Savings Plan of Phillips
Petroleum Company
We have audited the accompanying statements of net assets
available for benefits of the Retirement Savings Plan of Phillips
Petroleum Company (Plan) as of December 31, 1997 and 1996, and the
related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the
responsibility of the Retirement Savings Plan Committee
(Committee). Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by the Committee, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan at December 31, 1997 and 1996, and the
changes in its net assets available for benefits for the years
then ended, in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The accompanying
supplemental schedules of assets held for investment purposes as
of December 31, 1997, and reportable transactions for the year
then ended, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial
statements. The fund information in the statements of net assets
available for benefits and the statements of changes in net assets
available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for
benefits and changes in net assets available for benefits of each
fund. The supplemental schedules and fund information have been
subjected to the auditing procedures applied in our audits of the
basic financial statements and, in our opinion, are fairly stated
in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 24, 1998
3
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Retirement Savings Plan Of
Available For Benefits Phillips Petroleum Company
At December 31, 1997
Fixed
Investment Stock
Total Fund Fund
-----------------------------------
Assets
Investments
Insurance contract $ 9,969,068 9,969,068 -
Common stock 629,402 - 629,402
Money market fund 1,614 - 1,614
- -----------------------------------------------------------------
10,600,084 9,969,068 631,016
Interest Receivable 13 - 13
Employer Contributions
Receivable 49,987 49,987 -
- -----------------------------------------------------------------
Total Assets 10,650,084 10,019,055 631,029
- -----------------------------------------------------------------
Net Assets Available
for Benefits $10,650,084 10,019,055 631,029
=================================================================
Number of Units 2,223,011 90,539
Unit Values $4.5070 6.9697
- -----------------------------------------------------------------
See Notes to Financial Statements.
4
<PAGE>
- -----------------------------------------------------------------
Statement Of Net Assets Retirement Savings Plan Of
Available For Benefits Phillips Petroleum Company
At December 31, 1996
Fixed
Investment Stock
Total Fund Fund
-----------------------------------
Assets
Investments
Insurance contract $ 9,801,586 9,801,586 -
Common stock 791,898 - 791,898
Money market fund 12,499 - 12,499
- -----------------------------------------------------------------
10,605,983 9,801,586 804,397
Interest Receivable 80 - 80
Employer Contributions
Receivable 75,880 75,880 -
- -----------------------------------------------------------------
Total Assets 10,681,943 9,877,466 804,477
- -----------------------------------------------------------------
Net Assets Available
for Benefits $10,681,943 9,877,466 804,477
=================================================================
Number of Units 2,332,746 129,469
Unit Values $4.2343 6.2137
- -----------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
- -----------------------------------------------------------------
Statement Of Changes In Net Retirement Savings Plan Of
Assets Available For Benefits Phillips Petroleum Company
Year Ended December 31, 1997
Fixed
Investment Stock
Total Fund Fund
--------------------------------------
Additions
Participating Employer
Contributions $ 404,903 404,903 -
- -----------------------------------------------------------------
Investment Income
Interest 623,755 623,496 259
Dividends 20,747 - 20,747
Net appreciation of
common stock 32,832 - 32,832
- -----------------------------------------------------------------
677,334 623,496 53,838
- -----------------------------------------------------------------
Total Additions 1,082,237 1,028,399 53,838
- -----------------------------------------------------------------
Deductions
Withdrawals and
Distributions 1,099,496 872,210 227,286
Forfeitures 14,600 14,600 -
- -----------------------------------------------------------------
Total Deductions 1,114,096 886,810 227,286
- -----------------------------------------------------------------
Net Increase (Decrease) (31,859) 141,589 (173,448)
Net Assets Available
for Benefits
Beginning of Year 10,681,943 9,877,466 804,477
- -----------------------------------------------------------------
End of Year $10,650,084 10,019,055 631,029
=================================================================
See Notes to Financial Statements.
6
<PAGE>
- ---------------------------------------------------------------------
Statement Of Changes In Net Retirement Savings Plan Of
Assets Available For Benefits Phillips Petroleum Company
Year Ended December 31, 1996
Fixed Temporary
Investment Stock Investment
Total Fund Fund Fund
---------------------------------------------
Additions
Participating Employer
Contributions $ 418,159 418,159 - -
- ---------------------------------------------------------------------
Investment Income
Interest 628,693 628,198 459 36
Dividends 22,751 - 22,751 -
Net appreciation of
common stock 182,474 - 182,474 -
- ---------------------------------------------------------------------
833,918 628,198 205,684 36
- ---------------------------------------------------------------------
Total Additions 1,252,077 1,046,357 205,684 36
- ---------------------------------------------------------------------
Deductions
Withdrawals and
Distributions 1,059,430 1,032,212 27,218 -
Forfeitures 6,800 6,800 - -
- ---------------------------------------------------------------------
Total Deductions 1,066,230 1,039,012 27,218 -
- ---------------------------------------------------------------------
Allocation of Deposits
and Earnings - 30 6 (36)
- ---------------------------------------------------------------------
Interfund Transfers - 7,968 (7,968) -
- ---------------------------------------------------------------------
Net Increase 185,847 15,343 170,504 -
Net Assets Available
for Benefits
Beginning of Year 10,496,096 9,862,123 633,973 -
- ---------------------------------------------------------------------
End of Year $10,681,943 9,877,466 804,477 -
=====================================================================
See Notes to Financial Statements.
7
<PAGE>
- -----------------------------------------------------------------
Notes To Financial Statements Retirement Savings Plan Of
Phillips Petroleum Company
Note 1 -- Plan Description
The following description of the Retirement Savings Plan of
Phillips Petroleum Company (Plan) is subject to and qualified by
the more complete information appearing in the Plan document.
The Plan was known as the Retirement Savings Plan of Phillips
Petroleum Company Subsidiaries until December 7, 1994.
The Plan is a defined contribution plan sponsored by Phillips
Petroleum Company (Company) for any domestic subsidiary or
division that the Company approves for participation in the Plan
and that has adopted and become a party to the Plan for the
current participation of their active employees (Participating
Employer). For the years ending December 31, 1997 and 1996,
Phillips Driscopipe (with respect to hourly employees only), a
division of the Company, was the only Participating Employer.
Other subsidiaries or divisions having present or former
employees holding interests in the Plan are Catalyst Resources,
Inc. (sold March 30, 1994), Drilling Specialties Company,
Phillips Coal Company, and Phillips Uranium Corporation (now
liquidated).
Generally, an employee of a Participating Employer becomes a
participant after completing a six-month period of service of 500
or more hours. Participation in the Plan by each eligible
employee is mandatory. Each month the Participating Employer or
the Company contributes an amount equal to 5 percent of each
participant's regular monthly earnings. A participant can make
after-tax deposits, in whole percentages, ranging from 1 to
10 percent of his regular monthly earnings. Participants can
elect to change their deposit rates once each six months.
Effective January 1, 1996, the hourly employees of Phillips
Driscopipe were no longer permitted to make deposits under this
Plan. However, the Participating Employer or the Company
continues to make contributions to this Plan on their behalf.
Plan assets consist of the Stock Fund, the Fixed Investment Fund
and the Temporary Investment Fund. Investments for each fund
are: Stock Fund (common stock of the Company); Fixed Investment
Fund (an insurance contract with Travelers Insurance Company
(Travelers) under which Travelers guarantees repayment of the
principal paid to it and a minimum effective rate of interest
thereon); and Temporary Investment Fund (specified short-term
securities). WestStar Bank, Bartlesville, Oklahoma, served as
Trustee for all plan assets prior to the close of business on
8
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February 28, 1998, when the Trustee was changed to Vanguard
Fiduciary Trust Company, P.O. Box 2900, Valley Forge,
Pennsylvania 19482. Effective with the change in Trustee, the
Company became contractholder of the insurance contract with
Travelers for the Fixed Fund. This change in contractholder does
not affect participant benefits. The interests of participants
in each fund are represented by units allocated to them. Unit
values reflected in the accompanying statements are based on
aggregate fund values and aggregate units.
Participant deposits are placed first in the Temporary Investment
Fund and remain there until the valuation date on or about the
20th day of the following month. Deposits and earnings thereon
are then paid into the Stock Fund or the Fixed Investment Fund as
directed by the participant. No investment directions may be
made with respect to Participating Employer contributions, all of
which are invested only in the Fixed Investment Fund. The Plan
allows limited transfers between the Stock Fund and the Fixed
Investment Fund.
A participant's interest in his own deposits is vested at all
times, and his interest in Participating Employer contributions
becomes fully vested on the earliest of the following dates:
(a) upon attainment of age 65 or upon normal retirement; (b) upon
completing five years of vesting service; (c) upon death;
(d) upon becoming totally and permanently disabled; (e) upon
being laid off for lack of work; (f) upon termination or partial
termination of the Plan or discontinuance of Participating
Employer contributions; or (g) upon certain other events.
Partial vesting in Participating Employer contributions takes
place in one year increments, with complete vesting after five
years of vesting service. A participant who has made deposits
may withdraw any amount attributable to those deposits.
Withdrawals of deposits may be made only once each six months.
Suspensions of employee deposits for three and six months apply
for partial and complete withdrawals, respectively.
A participant's interest in the contributions of a Participating
Employer becomes available for distribution upon specified
events, including separation from service or retirement.
Termination of employment will result in forfeiture of
Participating Employer contributions if a participant's interest
attributable to those Participating Employer contributions is not
vested. Forfeitures are used to reduce employer contributions.
A participant who retires may postpone distribution until no
later than the February valuation date following the year of
attainment of age 70 1/2.
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Distributions from the Fixed Investment Fund are made in cash
while those from the Stock Fund are in whole shares of the
Company's common stock, plus cash for fractional shares, unless
the participant directs that the distribution be wholly or
partially in cash. Distribution in the form of an annuity is
also available, as set forth in the Plan.
In the event of termination of the Plan, participants and
beneficiaries of deceased participants will be vested with
respect to, and will receive, within a reasonable time, any funds
in their accounts as of the date of the termination.
The Plan is administered by the Retirement Savings Plan
Committee, a Plan Financial Administrator and a Plan Benefits
Administrator. The members of the Committee are appointed by the
Board of Directors of the Company. The Committee has power to
interpret the Plan and the Plan Benefits Administrator has the
authority to determine eligibility for benefits. The Plan
Financial Administrator has the responsibility to manage and
control the assets of the Plan in accordance with the terms of
the Plan. Brokerage fees, commissions, stock transfer taxes and
other charges and expenses incurred in connection with the
purchase or sale of securities are paid by the Plan. The cost of
administering the Plan is paid by the Company.
Note 2 -- Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
Note 3 -- Investments
Common stock of the Company is valued at the closing quoted
market price on the valuation date. The value of the insurance
contract is recorded at contract value, which approximates fair
value, and represents contributions, plus interest credited, less
distributions. The money market fund is valued at the current
redemption price determined by the Trustee.
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Note 4 -- Tax Status
The Internal Revenue Service (IRS) determined on December 26,
1995, that the Plan is qualified under Section 401(a) of the
Internal Revenue Code of 1986 and the Trust is exempt from
federal income tax under Section 501(a). Subsequent amendments
have been adopted, but are not expected to affect the qualified
status of the Plan. The Committee is not aware of any activity
that would affect the qualified status of the Plan.
Note 5 -- Insurance Contract
The average yield of the Fixed Fund insurance contract was
6.57 percent and 6.66 percent in 1997 and 1996, respectively.
The crediting interest rate of the insurance contract was
6.50 percent for 1997 and 6.60 percent for 1996. The crediting
interest rate, determined by Travelers, is reset annually, with
the new rate going into effect on January 1 of each year. There
is no contractually guaranteed minimum interest rate and the
contract with Travelers does not provide a basis for determining
the crediting interest rate.
Note 6 -- Impact of Year 2000 (Unaudited)
In April 1996, Phillips initiated a company-wide Year 2000
project, utilizing both internal and external resources, to
define, assess, convert, or replace various programs, hardware
and instrumentation systems to make them Year 2000 compliant.
The project also includes determining whether third-party service
providers have plans in place to become Year 2000 compliant.
Vanguard, as Plan Trustee, has also initiated a Year 2000
project. Phillips does not expect the Year 2000 issue to have a
significant effect on Plan operations. However, an unexpected
failure to adequately address this issue could result in an
interruption of normal Plan operations and activities.
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- ------------------------------------------------------------------------------
Schedule of Assets Held Retirement Savings Plan of
For Investment Purposes Phillips Petroleum Company
Line 27a EIN 73-0400345, Plan 010
At December 31, 1997
(a, b) Identity of (c) Description of investment
issue, borrower, including maturity date,
lessor, or similar rate of interest, collateral, (d) Historical (e) Current
party par or maturity value Cost Value
- -------------------- ------------------------------ -------------- -----------
The Travelers Group Annuity Contract
Insurance Company* GR-10462, deposit
administration fund $ 9,969,068 9,969,068
Phillips Petroleum 12,944 shares of common stock,
Company* $1.25 par value 242,010 629,402
Vanguard Fiduciary 1,614 units of participation
Trust Company* in the Vanguard Money Market
Reserves-Prime Portfolio,
$1.00 par value 1,614 1,614
- ------------------------------------------------------------------------------
$10,212,692 10,600,084
==============================================================================
*Party-in-interest
12
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- -----------------------------------------------------------------
Schedule of Reportable Transactions Retirement Savings Plan of
Line 27d Phillips Petroleum Company
Series of Transactions in Excess EIN 73-0400345, Plan 010
of 5 Percent of Net Assets
Year Ended December 31, 1997
(a, b) Identity of
party involved and (c) Value of (d) Value (i) Net gain
description of asset purchases* of sales* or (loss)
- ----------------------- ------------ --------- ------------
The Travelers Insurance
Company** $1,039,692 872,220 -
- -----------------------------------------------------------------
*This is also the cost of purchases and current value of sales
at time of transaction.
**Party-in-interest
Columns (e), (f), (g) and (h) are not applicable.
13
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Exhibit 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8, File No. 33-28669) pertaining to the
Retirement Savings Plan of Phillips Petroleum Company and in the
related Prospectus of our report dated June 24, 1998, with
respect to the financial statements and schedules of the
Retirement Savings Plan of Phillips Petroleum Company included in
this Annual Report (Form 11-K) for the year ended December 31,
1997.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 24, 1998
<PAGE>
