<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] Annual Report
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Fee Required)
For the fiscal year ended December 31, 1999
OR
[_] Transition report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(No Fee Required)
Commission File Number 33-26867
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
(Title of the Plan)
LYONDELL CHEMICAL COMPANY
1221 McKinney Street
Suite 700
Houston, Texas 77010
(Name and address of principal executive
office of the issuer of the securities)
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants 2
Financial Statements:
Statements of Net Assets Available for Benefits 3
Statement of Changes in Net Assets Available for
Benefits 4
Notes to Financial Statements 5
Supplemental Schedules are not required at the plan level and have been omitted.
</TABLE>
1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Benefits Administrative Committee of the
Lyondell Chemical Company 401(k) and Savings Plan:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Lyondell Chemical Company 401(k) and Savings Plan (the "Plan") at
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
June 27, 2000
2
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Investments, at fair value:
Investment in Lyondell Chemical, Equistar Chemicals,
and Lyondell-Citgo Plans Master Trust $303,253,909 $ --
Investment in Lyondell Chemical Company Master Trust -- 20,449,051
------------- -------------
Net assets available for benefits $303,253,909 $20,449,051
============= =============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Participant Nonparticipant Plan
Directed Directed Total
-------- -------- -----
<S> <C> <C> <C>
Contributions:
Employer $ -- $ 8,300,034 $ 8,300,034
Participant 9,677,210 1,009,470 10,686,680
Rollover 682,854 -- 682,854
--------------------------------- ---------------
Total 10,360,064 9,309,504 19,669,568
--------------------------------- ---------------
Investment income (loss):
Lyondell Chemical Company Master Trust 40,383 (598,980) (558,597)
Lyondell Chemical, Equistar Chemicals,
and Lyondell-Citgo Plans Master Trust 42,800,640 (1,785,522) 41,015,118
--------------------------------- ---------------
Net investment income (loss) 42,841,023 (2,384,502) 40,456,521
--------------------------------- ---------------
Benefits paid to participants (18,437,296) (508,744) (18,946,040)
--------------------------------- ---------------
Loan activity:
Participant borrowings 1,344,918 (1,344,918) --
Participant repayments (698,741) 698,741 --
--------------------------------- ---------------
Net loan activity 646,177 (646,177) --
--------------------------------- ---------------
Transfer activity:
Transfers from ARCO Chemical Company
plans 220,474,460 20,432,419 240,906,879
Net transfers from (to) Equistar Chemicals, LP
Savings and Investment Plan 1,138,606 (105,364) 1,033,242
Net transfers from LYONDELL-CITGO
Refining Company Ltd. Master Trust 65,228 -- 65,228
Other transfers, net (8,842) (371,698) (380,540)
Net transfers between investment options (2,376,196) 2,376,196 --
--------------------------------- ---------------
Net transfer activity 219,293,256 22,331,553 241,624,809
--------------------------------- ---------------
Net increase 254,703,224 28,101,634 282,804,858
Net assets:
Beginning of period 17,788,364 2,660,687 20,449,051
--------------------------------- ---------------
End of period $ 272,491,588 $30,762,321 $303,253,909
================================= ===============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. Description of Plan
General - The Lyondell Chemical Company 401(k) and Savings Plan ("Plan") is a
defined contribution plan for employees and vested former employees of Lyondell
Chemical Company ("Lyondell" or "Company"). The Plan was adopted as of January
1, 1998 as the successor to the Lyondell Petrochemical Company 401(k) and
Savings Plan ("Prior Plan"), which was originally adopted July 1, 1995. With the
formation of Equistar Chemicals, LP ("Equistar") as of December 1, 1997, a
substantial number of Lyondell employees became employees of Equistar. As of
January 1, 1998, Equistar became the sponsor of the Prior Plan and changed the
name to the Equistar Chemicals, LP Savings and Investment Plan, thereby creating
the need to adopt the successor plan for Lyondell employees. During 1998,
Lyondell participants' account balances previously held in the Prior Plan were
transferred to the Plan. Effective March 15, 1999, the ARCO Chemical Company
Capital Accumulation Plan was merged into the Plan. Participants should refer to
the plan document for a complete description of the Plan.
Contributions - Participants are allowed to contribute from 1 percent to 14
percent of their base pay to the Plan through pre-tax payroll deductions
("Elective Deferrals") and from 1 percent to 10 percent of their base pay
through after-tax payroll deductions ("Savings Contributions"). Lyondell makes
matching contributions to the participant's account at the rate of 160 percent
of the Elective Deferrals up to a maximum Company contribution of 8 percent of
the participant's eligible base pay. All contributions and earnings thereon are
fully vested and nonforfeitable. All earnings are allocated to individual
participant accounts on the basis of the units held in the investment fund.
Investment Election - All participant assets are held in trust. Participant
contributions and earnings thereon ("Participant Directed") are invested by the
Trustee (see Plan Administration below) in accordance with the options selected
by each participant. The Plan does not own specific securities or other assets
in the trust, but has an ownership interest in each selected fund within the
trust. Contributions to, withdrawals from and transfers between investment
options by the participants are appropriately charged or credited to each fund.
When investing in Lyondell common stock, the participant may designate that the
common stock be held either in the Lyondell Common Stock - Dividend Payout Fund
("ESOP") portion of the Plan (an employee stock ownership plan under Section
4975(e)(7) of the Internal Revenue Code) or in the Lyondell Common Stock -
Dividend Reinvestment Fund ("non-ESOP stock fund"). Dividends on common stock
held in the non-ESOP stock fund are reinvested in Lyondell common stock and held
in the participant's plan account. Dividends on common stock held in the ESOP
are reinvested in a money market fund and are payable to the participant
annually as allowed by the Plan. All Company matching contributions
("Nonparticipant Directed") are made in the form of Lyondell common stock or
cash to be used to purchase Lyondell common stock and are invested in the ESOP
and may not be transferred to other investment options.
Employees of Atlantic Richfield Company ("ARCO") who became employees of
Lyondell had the assets attributable to their participation in the ARCO Capital
Accumulation Plan II (which assets included ARCO common stock) transferred to
the Plan. ARCO common stock could be held or sold; however, no new purchases of
ARCO common stock could be elected by the participant except upon reinvestment
of dividends from the shares of ARCO common stock (see Note 6).
Withdrawals and Borrowings - If a participant terminates employment for any
reason, the participant's account balance will be distributed upon attainment of
age 65 or anytime the participant makes application to receive the funds prior
to age 65. If the participant's account balance is $5,000 or less, the
participant's account balance will be distributed as soon as practicable.
5
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Plan permits withdrawals of Elective Deferrals under certain hardship
conditions as defined by the Plan and granted by the Benefits Administrative
Committee. Savings Contributions may be withdrawn in total or partial amounts
as defined by the Plan.
Withdrawals are made in a lump sum cash payment, although a participant may
elect to receive Lyondell or, prior to April 18, 2000, ARCO common stock to the
extent assets are held in the form of such stock. Distributions upon retirement
or termination have generally been in Lyondell or ARCO common stock to the
extent assets were held in the form of such stock, and in cash to the extent
invested in any other investment funds maintained under the Plan.
The Plan provides for employees to borrow up to 50 percent of their account
balance, as defined by the Plan and subject to a minimum and maximum borrowing
level. The interest rate currently charged for loans is a fixed rate equal to
the average prime rate reported in The Wall Street Journal as of the last
-----------------------
business day of the month preceding the date the loan application was received
by the Benefits Administrative Committee. Interest rates on loans outstanding at
December 31, 1999 and 1998 range from 6 percent to 9.5 percent. Repayment
periods range from one to five years for general loans and one to ten years for
residential loans. Repaid principal and interest are added to investment funds
according to the current investment elections of the participant. The loans are
carried at their face amount.
Plan Administration - The Plan is administered by the Lyondell Benefits
Administrative Committee. During 1999, Plan assets were maintained in the
Lyondell Chemical Company Master Trust ("Lyondell Master Trust"; see Note 4)
under the custody of State Street Bank and Trust Company until April 1, at which
time the assets were transferred to the Lyondell Chemical, Equistar Chemicals,
and Lyondell-Citgo Plans Master Trust ("New Master Trust"; see Note 5) under the
custody of Fidelity Management Trust Company (collectively, the two custodians,
or trustees, are referred to as "Trustee"). The Trustee makes payments as
authorized by the Plan. Administrative expenses of the plan are paid by
Lyondell.
Termination Provision - Although it has not expressed any intent to do so,
Lyondell has the right to terminate the Plan at any time subject to the
provisions of the Employee Retirement Income Security Act of 1974. In the event
of Plan termination, all participants will be fully vested in their accounts and
all assets of the Plan will continue to be held for distribution to participants
as provided in the Plan.
2. Summary of Significant Accounting Policies
Basis of Accounting - The financial statements of the Plan are prepared using
the accrual method of accounting.
Investment Valuation and Income Recognition - The Plan's investments are stated
at fair value. Quoted market prices are used to value investments. Investment
funds are valued at net asset value as of the last business day of the periods
presented, which is the fair value of all securities held plus accruals for
dividend income and interest income. Short-term and certain other investments
are valued at cost, which approximates fair value. Purchases and sales of
securities are accounted for on the settlement date. Gains or losses on the sale
or distribution of securities are computed on an average cost basis. Dividend
income is accrued on the ex-dividend date and interest income is accrued as
earned. The net appreciation or depreciation in the fair value of investments,
which consist of the realized gains or losses and the unrealized appreciation or
depreciation on those investments, is included in "Investment income (loss)" in
the statement of changes in net assets.
Payment of Benefits - Benefits are recorded when paid.
6
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS-(Continued)
Reclassifications - Certain previously reported amounts have been restated to
conform to classifications adopted in 1999.
Use of Estimates - The preparation of the Plan's financial statements in
conformity with generally accepted accounting principles requires the Plan's
management to make significant estimates and assumptions that affect the
reported amounts of net assets available for benefits at the date of the
financial statements and the changes in net assets available for benefits during
the reporting period and, when applicable, disclosures of contingent assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
Risks and Uncertainties - The Plan provides for investment options in various
combinations of stocks and mutual funds. Investment securities are exposed to
various risks, such as market and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably
possible that changes in the values of investment securities will occur in the
near term and that such changes could materially affect the amounts reported in
the statement of net assets available for plan benefits.
3. Tax Status
The Plan is a qualified plan under Sections 401(a) and (k) of the Internal
Revenue Code of 1986, as amended ("Code") and is a qualified employee stock
ownership plan under Section 4975(e)(7) of the Code. The Benefits
Administrative Committee believes that the Plan as currently designed and
operated, is in compliance with the applicable requirements of the Code.
Accordingly, no provision is made for federal income taxes.
4. Lyondell Chemical Company Master Trust
The Lyondell Master Trust was established in July 1995 and was a pooled
investment trust composed of the beneficial interests of certain participating
defined contribution plans of Lyondell and Equistar. Investments of the
Lyondell Master Trust consisted of ownership interests in various investment
funds and equity securities of Lyondell, ARCO and Millennium Chemicals Inc., an
entity related to Equistar.
Net assets of the Lyondell Master Trust at December 31, 1998 were as follows:
ASSETS
Investments, at fair value:
Participant directed:
Common stock $ 56,831,374
Mutual funds 237,538,824
Participant loans receivable, at cost 19,545,619
Nonparticipant directed:
Common stock 2,660,687
--------------
Total investments 316,576,504
Interest and dividends receivable 5,473
--------------
Total assets 316,581,977
LIABILITIES
Other liabilities 15,200
--------------
NET ASSETS $316,566,777
==============
Plan percentage 6.46%
==============
7
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS-(Continued)
The following investments represented 5 percent or more of the Lyondell Master
Trust's net assets at December 31, 1998:
<TABLE>
<S> <C>
State Street Short-Term Investment Fund $60,488,653
IDS New Dimensions Fund
(1,913,339 shares) 55,304,304
Seven Seas S&P 500 Fund
(2,362,936 shares) 52,118,870
Dodge & Cox Balanced Fund
(462,194 shares) 30,231,924
Lyondell Chemical Company common stock
(1,468,633 shares) 26,464,343 *
Millennium Chemicals Inc. common stock
(1,230,026 shares) 24,425,549
PBHG Growth Fund
(692,873 shares) 17,727,418
Participant loans receivable, at cost 19,545,619
* Includes $2,660,687 (149,358 shares) that is nonparticipant directed.
</TABLE>
Beneficial interest activity in the Lyondell Master Trust for the period from
January 1, 1999 to April 1, 1999 is presented below:
Net appreciation in fair value of investments $1,439,229
Interest 1,198,970
Dividends 346,372
------------
Total $2,984,571
============
On April 1, 1999, the assets of the Lyondell Master Trust were transferred to
the Lyondell Chemical, Equistar Chemicals, and Lyondell-Citgo Plans Master
Trust.
5. Lyondell Chemical, Equistar Chemicals, and Lyondell-Citgo Plans Master Trust
The New Master Trust was established on March 15, 1999 and is a pooled
investment trust composed of the beneficial interests of certain participating
defined contribution plans of Lyondell, Equistar and LYONDELL-CITGO Refining LP,
all of which are related entities. It was formed by combining the assets of ARCO
Chemical Company Capital Accumulation Plan, which were transferred to the New
Master Trust on March 15, 1999, and the assets formerly held in the Lyondell
Master Trust, the LYONDELL-CITGO Refining Company Ltd. Master Trust and the
Equistar Chemicals, LP Savings Plan for Former Occidental Petroleum Corporation
Employees, which were transferred to the New Master Trust on April 1, 1999.
8
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS-(Continued)
Net assets of the New Master Trust at December 31, 1999 were as follows:
ASSETS
Investments, at fair value:
Participant directed:
Common stock $ 119,954,255
Mutual funds 781,886,517
Participant loans receivable, at cost 50,558,066
Nonparticipant directed:
Common stock 31,176,966
----------------
Total investments 983,575,804
Other receivables 519,984
----------------
Total assets 984,095,788
LIABILITIES
Other liabilities 414,645
----------------
NET ASSETS $ 983,681,143
================
Plan percentage 30.83%
================
The following investments represented 5 percent or more of the New Master
Trust's net assets at December 31, 1999:
Fidelity Retirement Money Market Fund $ 177,395,339
Fidelity Fund
(3,781,968 shares) 161,149,647
Spartan US Equity Index Fund
(2,131,237 shares) 111,016,115
Fidelity BrokerageLink 77,224,722
Atlantic Richfield Company common stock
(649,639 shares) 56,193,771
Participant loans receivable, at cost 50,558,066
9
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS-(Continued)
Changes in net assets of the New Master Trust for the period from March 15, 1999
(inception) to December 31, 1999 are presented below.
<TABLE>
<CAPTION>
Participant Nonparticipant Trust
Directed Directed Total
-------- -------- -----
<S> <C> <C> <C>
Contributions:
Employer $ 18,959,168 $ 8,239,113 $ 27,198,281
Participant 33,823,932 1,005,761 34,829,693
Rollover 3,881,225 -- 3,881,225
------------------------------------- ---------------
Total 56,664,325 9,244,874 65,909,199
------------------------------------- ---------------
Investment income (loss):
Dividend income 2,657,612 363,669 3,021,281
Interest income 10,807,422 181,820 10,989,242
Net appreciation (depreciation)
in the fair value of investments 133,736,325 (2,331,011) 131,405,314
------------------------------------- ---------------
Net investment income (loss) 147,201,359 (1,785,522) 145,415,837
------------------------------------- ---------------
Benefits paid to participants (51,303,619) (409,051) (51,712,670)
------------------------------------- ---------------
Loan activity:
Participant borrowings 1,344,918 (1,344,918) --
Participant repayments (696,332) 696,332 --
------------------------------------- ---------------
Net loan activity 648,586 (648,586) --
------------------------------------- ---------------
Transfer activity:
Transfers from Lyondell Master Trust 320,021,167 2,048,459 322,069,626
Transfers from ARCO Chemical Company
plans 220,474,461 20,432,418 240,906,879
Transfers from LYONDELL-CITGO
Refining Company Ltd. Master Trust 165,727,835 -- 165,727,835
Transfers from the Equistar Chemicals, LP
Savings Plan for Former Occidental
Petroleum Corporation Employees 88,418,022 -- 88,418,022
Transfers from Millennium Chemicals Inc. plans 11,207,400 -- 11,207,400
Transfers related to sale of business (3,973,476) -- (3,973,476)
Other transfers, net (2,167,238) 1,879,729 (287,509)
------------------------------------- ---------------
Net transfer activity 799,708,171 24,360,606 824,068,777
------------------------------------- ---------------
Net increase 952,918,822 30,762,321 983,681,143
Net assets:
Beginning of period -- -- --
------------------------------------- ---------------
End of period $952,918,822 $30,762,321 $983,681,143
===================================== ===============
</TABLE>
6. Subsequent Event
On April 18, 2000, pursuant to the terms of a merger agreement between BP Amoco
p.l.c. (BP Amoco) and ARCO, each share of outstanding common stock of ARCO was
converted into the right to receive 1.64 BP Amoco American Depositary Receipts
(ADRs) or, subject to the timely receipt of elections therefor, 9.84 BP Amoco
Ordinary Shares. In addition, ARCO common stock was delisted from the exchanges
on which it had been listed.
10
<PAGE>
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
LYONDELL CHEMICAL COMPANY
401(K) AND SAVINGS PLAN
By: /s/ ALLEN C. HOLMES
-----------------------------------------
ALLEN C. HOLMES
Chairman, Benefits Administrative Committee
Date: June 28, 2000
11
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EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
No. Exhibit Where Located
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23 Consent of PricewaterhouseCoopers LLP 13
12
