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, 1999
------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-50134
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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)
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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 23, 2000
1
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Index To Financial Statements Thrift Plan Of Phillips
And Schedules Petroleum Company
Page
Report of Independent Auditors .............................. 3
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 1999 and 1998 ........................... 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 1999 .................... 5
Notes to Financial Statements ............................. 6
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at End
of Year as of December 31, 1999, Schedule H, Line 4i .... 13
Schedule of Reportable Transactions for the Year Ended
December 31, 1999, Schedule H, Line 4j .................. 14
2
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Report Of Independent Auditors
The Thrift Plan Committee
Thrift Plan of Phillips Petroleum Company
We have audited the accompanying statements of net assets
available for benefits of the Thrift Plan of Phillips Petroleum
Company (Plan) as of December 31, 1999 and 1998, and the related
statement of changes in net assets available for benefits for the
year ended December 31, 1999. 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 auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by 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, 1999 and 1998,
and the changes in its net assets available for benefits for the
year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion
on the financial statements taken as a whole. The accompanying
supplemental schedules of assets held for investment purposes at
end of year as of December 31, 1999, and reportable transactions
for the year then ended, are presented for purposes of additional
analysis and are not a required part of the financial statements
but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These
supplemental schedules are the responsibility of the Committee.
The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the financial statements and,
in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 23, 2000
3
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Statement Of Net Assets Thrift Plan Of Phillips
Available For Benefits Petroleum Company
Thousands of Dollars
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At December 31 1999 1998
------------------------
Assets
Investments
Vanguard Total Bond Market
Index Fund $ 63,633 82,451
Phillips Petroleum Company
common stock 667,173 745,862
Insurance contracts 103 219
Vanguard 500 Index Fund 239,155 211,822
Vanguard Prime Money Market Fund 134,929 171,541
Vanguard Balanced Index Fund 10,996 -
Vanguard Total International Stock
Index Fund 3,762 -
Vanguard Extended Market Index Fund 5,385 -
Loans to Plan participants 24,500 25,679
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1,149,636 1,237,574
Contributions Receivable 508 632
Employee Deposits Receivable 33 38
Loan Repayments Receivable 66 64
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Total Assets 1,150,243 1,238,308
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Net Assets Available for Benefits $1,150,243 1,238,308
=================================================================
See Notes to Financial Statements.
4
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Statement Of Changes In Net Thrift Plan Of Phillips
Assets Available For Benefits Petroleum Company
Thousands
Year Ended December 31, 1999 of Dollars
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Additions
Contributions and Deposits
Company contributions
Matching $ 5,934
Before-tax deposits 26,032
Employee deposits 13,808
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45,774
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Investment Income
Dividends 38,863
Interest
Participant loans 1,906
Other 12
Net appreciation in fair value
of investments 121,022
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161,803
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Total 207,577
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Deductions
Distributions to
Participants or Their
Beneficiaries
Cash 215,346
Phillips Petroleum Company
common stock 80,207
Administrative Expense 89
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Total 295,642
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Net Decrease (88,065)
Net Assets Available for
Benefits
Beginning of Year 1,238,308
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End of Year $1,150,243
=================================================================
See Notes to Financial Statements.
5
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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.
The Company has a trust agreement with Vanguard Fiduciary Trust
Company (Vanguard), P.O. Box 2900, Valley Forge, Pennsylvania,
19482-2900. Under the trust agreement with Vanguard, the assets
of Fund A, also known as the Vanguard Bond Index-Total Bond
Market Portfolio Fund (Bond Index Fund), are invested in the
Vanguard Total Bond Market Index Fund. The assets of Funds B and
C are invested in the Phillips Stock Fund, a single investment
fund consisting of two separate accounts, which is invested only
in the common stock of Phillips Petroleum Company (Phillips) and
holds cash reserves as determined by the Trustee.
Assets of Fund E, also known as the Vanguard Index Trust 500
Portfolio Fund (S&P 500 Fund), are invested in the Vanguard 500
Index Fund. Assets of Fund F, also known as the Vanguard Money
Market Reserves-Prime Portfolio Fund (Money Market Fund), are
invested in the Vanguard Prime Money Market Fund. Assets of the
Temporary Investment Fund are invested in the Vanguard Prime
Money Market Fund. In addition to the Plan assets held in the
trust, there are Plan funds in the Deferred Settlement Account
held by the Travelers Insurance Company.
Effective January 1, 1999, the Plan was amended to add Funds G,
H, and I. Assets of Fund G, also known as the Vanguard Balanced
Index Fund (Balanced Index Fund), are invested in the Vanguard
Balanced Index Fund. Assets of Fund H, also known as the
Vanguard Total International Portfolio Fund (International Fund),
are invested in the Vanguard Total International Stock Index
Fund. Assets of Fund I, also known as the Vanguard Extended
Market Fund, are invested in the Vanguard Extended Market Index
Fund.
6
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Dividends represent earnings from the various Vanguard mutual
funds in which the Plan participates. For the Phillips Stock
Fund, dividends include not only dividends on the Phillips common
stock held, but also 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 or a combination of both.
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
directions and deposit rates 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 to the Phillips Stock Fund--Fund B
account and 15 percent of regular deposits to any other
investment fund. These Company matching contributions are
invested in the Phillips Stock Fund--Fund C account.
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,
F, G, H or I 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
held in the Temporary Investment Fund are credited monthly, in
the same manner, to each participant who made deposits or loan
repayments during the month and still maintains an account in the
Plan. 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, F, G, H or I as directed by the participant.
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.
7
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The Plan provides for daily transfers among funds; however,
generally, Plan participants may not direct transfers to or from
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, F,
G, H or I on any valuation date. A participant may direct the
transfer of any dollar amount, whole percentage or number of
units to or from his Fund B account in the Phillips Stock Fund to
or from Funds A, E, F, G, H, or I on any valuation date, but then
must wait 10 calendar days to make another transfer involving
Fund B.
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
percentage, or number of units in any Investment Fund (except the
Temporary Investment Fund) to any other Investment Fund (except
to the Temporary Investment Fund or Investment Fund C).
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, subject to the
10-calendar-day waiting period for transfers.
A participant is vested at all times with respect to his deposits
and his interest in Company contributions. Company contributions
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.
Distributions generally occur upon separation from service, but
may be deferred. For a participant who retires or becomes
totally disabled, unless a request for withdrawal is made as of
any earlier date, distribution generally will be deferred to a
date not later than the first valuation date in October of the
year age 69 is attained. If the participant dies, distribution
to a surviving spouse beneficiary will be deferred to the first
valuation date in October in the year in which the participant
would have attained age 69. 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:
8
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(a) from Funds A, E, F, G, H, or I 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 the Plan--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 the
Company. The Plan Financial Administrator and Plan Benefits
Administrator are the persons who occupy, respectively, the
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.
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.
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.
9
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Note 2--Non-participant-Directed Investments
The Phillips Stock Fund (Funds B and C) is the only non-
participant-directed fund in the Plan. The Company's matching
contributions are invested in the Phillips Stock Fund--Fund C
Account. Information about the net assets and the significant
components of the changes in net assets relating to the Phillips
Stock Fund follows:
Thousands of Dollars
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At December 31 1999 1998
--------------------
Net Assets:
Phillips Petroleum Company common stock $ 667,173 745,862
Vanguard Prime Money Market Fund 2,032 372
Due from Temporary Investment Fund--Fund B 2,455 2,891
Contributions receivable--Fund C 465 542
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$ 672,125 749,667
====================
Year Ended December 31, 1999
Changes in Net Assets:
Matching company contributions--Fund C $ 5,934
Allocation of deposits and earnings from
Temporary Investment Fund--Fund B 27,726
Dividends 21,059
Net appreciation in fair value of
investments 85,019
Distributions to participants or their
beneficiaries (127,581)
Transfer to participant-directed investments (89,665)
Administrative expense (34)
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$ (77,542)
=========
Note 3--Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes and
schedules. Actual results could differ from those estimates and
assumptions.
10
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Note 4--Investments
Valuation
All securities are valued at their quoted market price.
Insurance contracts are valued pursuant to their terms; the
value, which approximates fair value, represents fund deposits
plus interest credited, less distributions. Shares of mutual
funds are valued at the net asset value of shares held by the
Plan at year-end. Participant loans are valued at cost, which
approximates fair value.
Appreciation
During 1999, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated in value by about $121 million as follows:
Thousands
of Dollars
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Vanguard Total Bond Market Index Fund $ (5,315)
Phillips Petroleum Company Common Stock 85,019
Vanguard 500 Index Fund 39,382
Vanguard Balanced Index Fund 738
Vanguard Total International Stock Fund 535
Vanguard Extended Market Index Fund 663
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$121,022
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Note 5--Contributions Receivable
Contributions receivable at December 31 included the following:
Thousands of Dollars
--------------------
1999 1998
--------------------
Receivable from the Company for
Matching contributions $465 542
Before-tax deposits 43 90
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$508 632
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11
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Note 6--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, F, G, H or I based on
a participant's regular deposits investment direction, except
that funds borrowed from Fund C are repaid only to Fund C.
Note 7--Transactions with Parties-in-Interest
During 1999, the Plan received $20,748,000 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.
Note 8--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.
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<TABLE>
<CAPTION>
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Schedule of Assets Held for Thrift Plan Of Phillips
Investment Purposes at End of Year Petroleum Company
Schedule H, Line 4i EIN 73-0400345, Plan No. 002
At December 31, 1999
(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
--------------------- ----------------------------- -------------- -----------
<C> <C> <C> <C>
Phillips Petroleum Common Stock, $1.25 par
Company* value, 14,195,165 shares $313,345 667,173
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The Vanguard Group* 1,767,201.248 units, Vanguard
500 Index Fund ** 239,155
6,656,209.555 units, Vanguard
Total Bond Market Index Fund ** 63,633
543,762.445 units, Vanguard
Balanced Index Fund ** 10,996
262,890.043 units, Vanguard
Total International Stock
Fund ** 3,762
145,293.923 units, Vanguard
Extended Market Index Fund ** 5,385
134,928,804.80 units, Vanguard
Prime Money Market Fund 134,929 134,929
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134,929 457,860
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Thrift Plan of Loans to Plan participants*
Phillips Petroleum at 6% - 9%
Company* - 24,500
Travelers Insurance Group Annuity Contract GR-1966A,
Company* deferred settlement account ** 103
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$448,274 1,149,636
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*Party-in-interest
**Historical cost information is not required for participant-directed
investments.
</TABLE>
13
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<TABLE>
<CAPTION>
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Schedule of Reportable Transactions Thrift Plan of Phillips
Schedule H, Line 4j Petroleum Company
Series of Transactions in Excess EIN 73-0400345, Plan 002
of 5 Percent of Net Assets
Year Ended December 31, 1999
Thousands of Dollars
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(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)
--------------- ------------ ----------- ------------ -------- ----------- -------
<C> <C> <C> <C> <C> <C> <C>
Phillips
Petroleum
Company*
Common Stock $ 44,873 - Net $ - 44,873 -
- 128,373 Net 53,497 128,373 74,876
The Vanguard
Group,*
Vanguard
Prime Money
Market Fund 266,866 - Net - 266,866 -
- 303,660 Net 303,660 303,660 -
*Party-in-interest
Column (e) is not applicable.
</TABLE>
14
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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. 33-50134) pertaining to the Thrift
Plan of Phillips Petroleum Company and in the related Prospectus
of our report dated June 23, 2000, 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, 1999.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 23, 2000
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