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, 1999
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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 33-50283
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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)
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FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
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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
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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
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Rand C. Berney
Member
Long-Term Stock Savings
Plan Committee
June 23, 2000
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Index To Financial Statements Long-Term Stock Savings Plan
And Schedules Of Phillips 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 ... 10
Schedule of Reportable Transactions for the Year Ended
December 31, 1999, Schedule H, Line 4j ................. 11
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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, 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 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 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
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Statement Of Net Assets Long-Term Stock Savings Plan
Available For Benefits Of Phillips Petroleum Company
Thousands of Dollars
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At December 31 1999 1998
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Assets
Investments
Common stock $1,297,487 1,250,844
Money market fund 837 6,917
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1,298,324 1,257,761
Company Contributions Receivable
Before-tax deposits 35 37
Interest Receivable 15 32
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Total Assets 1,298,374 1,257,830
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Liabilities
Securities Acquisition Loans 377,850 396,850
Interest Payable 1,806 1,516
Administrative Expenses Payable 107 127
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Total Liabilities 379,763 398,493
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Net Assets Available for Benefits $ 918,611 859,337
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See Notes to Financial Statements.
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Statement Of Changes In Net Long-Term Stock Savings Plan
Assets Available For Benefits Of Phillips Petroleum Company
Thousands
Year Ended December 31, 1999 of Dollars
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Additions
Company Contributions
Funds for debt service $ -
Basic allocation requirements 37,660
Before-tax deposits 5,967
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43,627
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Investment Income
Dividends 38,481
Interest 440
Net appreciation in fair value
of common stock 131,910
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170,831
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Total 214,458
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Deductions
Distributions to Participants
or Their Beneficiaries 133,015
Interest Expense 22,116
Administrative Expense 53
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Total 155,184
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Net Change 59,274
Net Assets Available for Benefits
Beginning of Year 859,337
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End of Year $918,611
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See Notes to Financial Statements.
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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.
Vanguard Fiduciary Trust Company, P.O. Box 2900, Valley Forge,
Pennsylvania 19482-2900, is 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 in the Vanguard Prime Money Market Fund. 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 (Leveraged Shares), with certain
Company contributions, or with certain dividends received from
the Company. The Leveraged Shares are 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 of 477,876 shares is made as of June 30 and
December 31 each year, through 2005. In December 1995, the
Company extended the Plan 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 of Phillips Stock to be delivered to the Plan.
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 Plan is eligible to receive shares from the Company's
Compensation and Benefits Trust (CBT). In 1999, the Company
utilized the CBT to contribute 767,605 shares of Phillips Stock
to the Plan. The fair value of the shares was $36 million.
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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 $20.2 million in
dividends on allocated shares to make loan payments and allocated
427,492 shares in dividend replacement allocations to
participants' Fund L and Fund EP accounts in 1999. A
supplemental allocation is made each year end if all shares
released for allocation, based on loan payment provisions, have
not been allocated. No supplemental allocation was required in
1999.
The Company makes contributions to the Plan which, when
aggregated with certain Plan 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 is credited monthly to
each participant who still maintains an account in the Plan and
who made deposits during the month. 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
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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 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. 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 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 (Phillips). 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 are paid by
the Trustee from assets of the Plan to the extent allowable by
law, unless paid by the Company. In January 1999, reimbursement
of administrative expenses for plan years 1996 and 1997 was paid
to Phillips from Fund EP totaling $74,061. Plan administrative
expenses of approximately $145,000 were paid by Phillips to the
Trustee in 1999.
Note 2--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.
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, 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, 1999 and 1998, the market value of unallocated
shares was $475 million and $457 million, respectively. The
amount of total assets that was not allocated to participants at
December 31, 1999 and 1998, was $476 million and $463 million,
respectively.
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Loan 1
Loan 1 was fully repaid in June 1998, after the final principal
payment of $28 million was made. Loan 1 provided for variable
interest rates. The weighted-average interest rate for 1998 was
4.8717 percent.
Loan 2
Loan 2 was amended late in 1995 to extend its term from 15 to
25 years, 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, 1999, was
$378 million. Loan 2 provides for variable interest rates. The
rates were 6.375 percent and 5.5 percent at December 31, 1999 and
1998, respectively.
Loan 2 is guaranteed by Phillips. It is being repaid through
contributions made by the Company, dividends on certain allocated
and unallocated shares, and earnings on the short-term investment
of dividends. Loan 2's carrying amount approximates fair value.
Note 4--Investments
Phillips Stock is valued at fair value, using the New York Stock
Exchange closing quoted market price. Money market funds are
valued at cost, which approximates fair market value.
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.
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Schedule of Assets Held for Long-Term Stock Savings Plan Of
Investment Purposes at End of Year Phillips Petroleum Company
Schedule H, Line 4i EIN 73-0400345, Plan 022
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
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Phillips Petroleum 27,606,102 shares of common
Company* stock, $1.25 par value $691,021 1,297,487
Vanguard Fiduciary 837,456 units of participation
Trust Company* in the Vanguard Prime Money
Market Fund, $1.00 par value 837 837
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$691,858 1,298,324
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*Party-in-interest
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Schedule of Reportable Transactions Long-Term Stock Savings
Schedule H, Line 4j Plan of Phillips
Series of Transactions in Excess Petroleum Company
of 5 Percent of Net Assets EIN 73-0400345, Plan 022
Year Ended December 31, 1999
Thousands of Dollars
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(a, b) Identity of
party involved and (c) Value of (d) Value (i) Net gain
description of asset purchases* of sales* or (loss)
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Vanguard Fiduciary
Trust Company,**
Vanguard Prime
Money Market Fund $71,432 77,512 -
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*This is also the cost of purchases and current value of sales
at time of transaction.
**Party-in-interest
Columns (e) and (f) are not applicable.
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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. 33-50283) pertaining to the Long-
Term Stock Savings 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 Long-
Term Stock Savings 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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