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
For the fiscal year ended December 31, 2000
OR
[_] Transition report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
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)
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
PAGE
----
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.
1
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, 2000 and 1999, and the changes in net assets available for benefits
for the year ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. 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 of America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
June 28, 2001
2
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
-----------------------------------------
2000 1999
--------------- ---------------
ASSETS
Investments, at fair value:
Investment in Lyondell Chemical, Equistar Chemicals,
and Lyondell-Citgo Plans Master Trust $331,555,509 $303,253,909
------------ ------------
Net assets available for benefits $331,555,509 $303,253,909
============ ============
See Notes to Financial Statements.
3
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2000
PARTICIPANT NONPARTICIPANT PLAN
DIRECTED DIRECTED TOTAL
----------- ---------------- ------------------
Contributions:
Employer $ - - $10,946,028 $ 10,946,028
Participant 13,261,520 1,097,642 14,359,162
Rollover 1,664,481 51,541 1,716,022
------------- ----------- ------------
Total 14,926,001 12,095,211 27,021,212
------------- ----------- ------------
Investment income (loss):
Lyondell Chemical, Equistar Chemicals,
and Lyondell-Citgo Plans Master Trust (13,808,537) 10,403,486 (3,405,051)
------------- ----------- ------------
Net investment income (loss) (13,808,537) 10,403,486 (3,405,051)
------------- ----------- ------------
Benefits paid to participants (29,015,451) (1,918,384) (30,933,835)
------------- ----------- ------------
Administrative expenses (79,517) (11,583) (91,100)
------------- ----------- ------------
Loan activity:
Participant borrowings 1,258,525 (1,258,525) - -
Participant repayments (1,298,224) 1,298,224 - -
------------- ----------- ------------
Net loan activity (39,699) 39,699 - -
------------- ----------- ------------
Transfer activity:
Net transfers from Equistar Chemicals, LP
Savings and Investment Plan 36,260,801 (505,665) 35,755,136
Net transfers from LYONDELL-CITGO
Refining Company Ltd. 401(K) and Savings
Plan for Non-Represented Employees 691,064 (5,619) 685,445
Other transfers, net (39,699) (690,508) (730,207)
Net transfers between investment options (125,440) 125,440 - -
------------- ----------- ------------
Net transfer activity 36,786,726 (1,076,352) 35,710,374
------------- ----------- ------------
Net increase 8,769,523 19,532,077 28,301,600
Net assets available for benefits:
Beginning of period 272,491,588 30,762,321 303,253,909
------------- ----------- ------------
End of period $281,261,111 $50,294,398 $331,555,509
============ =========== ============
See Notes to Financial Statements.
4
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"). It is subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA"). 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 payable to the participant quarterly as allowed by the Plan. All Company
matching contributions ("Nonparticipant Directed") are used to purchase Lyondell
common stock in the ESOP and may only be transferred to other investment options
under certain limited circumstances, as defined in the Plan.
Employees of the former Atlantic Richfield Company ("ARCO") and the former ARCO
Chemical Company who became employees of Lyondell had the assets attributable to
their participation in the ARCO Capital Accumulation Plan II and ARCO Chemical
Company Capital Accumulation Plan (which assets included ARCO common stock)
transferred to the Plan. On April 18, 2000, pursuant to the terms of a merger
agreement between BP Amoco p.l.c. ("BP") and ARCO, each share of outstanding
common stock of ARCO was converted into the right to receive 1.64 BP American
Depositary Receipts (ADRs) or, subject to the timely receipt of elections
therefor, 9.84 BP Ordinary Shares. In addition, ARCO common stock was delisted
from the exchanges on which it had been listed.
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.
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.
5
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(Continued)
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, 2000 and 1999 ranged from 7.75 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" 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 ("Master Trust") 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. Lyondell pays administrative expenses of the Plan.
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.
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.
6
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(Continued)
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, EQUISTAR CHEMICALS, AND LYONDELL-CITGO PLANS MASTER TRUST
The 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 Chemicals, LP 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 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 Master Trust on
April 1, 1999.
Net assets of the Master Trust were as follows:
December 31,
-------------------------------------------
2000 1999
-------------- ------------
ASSETS
Investments, at fair value:
Participant directed investments
Common stock $108,367,679 $119,954,255
Mutual funds 681,536,602 781,886,517
Participant loans receivable, at cost 45,711,733 50,558,066
Nonparticipant directed:
Common stock 50,294,398 31,176,966
------------ ------------
Total investments 885,910,412 983,575,804
Other receivables 498,769 519,984
------------ ------------
Total assets 886,409,181 984,095,788
LIABILITIES
Other liabilities - - 414,645
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $886,409,181 $983,681,143
============ ============
Plan percentage 37.40% 30.83%
============ ============
7
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(Continued)
During 2000, the Master Trust's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by $88,526,072 as follows:
Common stocks $ 21,811,058
Mutual funds (110,337,130)
--------------
$ (88,526,072)
==============
The following investments represented 5 percent or more of the Master Trust's
net assets:
DECEMBER 31,
----------------------------------------
2000 1999
------------- ------------
Fidelity Retirement Money Market Fund $139,963,321 $177,395,339
Fidelity Fund
(3,598,678 and 3,781,968 shares, respectively) 117,892,695 161,149,647
Fidelity Brokerage Link 93,733,498 77,224,722
Spartan US Equity Index Fund
(1,647,642 and 2,131,237 shares, respectively) 77,126,116 111,016,115
Lyondell Chemical Company common stock
Participant directed: (3,588,076 shares) 54,944,201
Nonparticipant directed: (3,284,425 shares) 50,294,398
------------
Total Lyondell Chemical Company common stock 105,238,599
Atlantic Richfield Company common stock
(649,639 shares) 56,193,771
Participant loans receivable, at cost 45,711,733 50,558,066
8
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(Continued)
Changes in net assets of the Master Trust for the year ended December 31, 2000
are presented below.
PARTICIPANT NONPARTICIPANT TRUST
DIRECTED DIRECTED TOTAL
------------------ ------------------ ------------------
Contributions:
Employer $ 21,482,835 $10,946,028 $ 32,428,863
Participant 41,207,532 1,097,642 42,305,174
Rollover 4,708,929 51,541 4,760,470
------------- ----------- -------------
Total 67,399,296 12,095,211 79,494,507
------------- ----------- -------------
Investment income (loss):
Interest income 12,956,646 273,418 13,230,064
Dividend income 3,310,461 690,508 4,000,969
Net appreciation (depreciation)
in the fair value of investments (97,965,632) 9,439,560 (88,526,072)
------------- ----------- -------------
Net investment income (loss) (81,698,525) 10,403,486 (71,295,039)
------------- ----------- -------------
Benefits paid to participants (102,470,203) (1,918,384) (104,388,587)
------------- ----------- -------------
Administrative expenses (375,948) (11,583) (387,531)
------------- ----------- -------------
Loan activity:
Participant borrowings 1,258,525 (1,258,525) - -
Participant repayments (1,298,224) 1,298,224 - -
------------- ----------- -------------
Net loan activity (39,699) 39,699 - -
------------- ----------- -------------
Transfer activity:
Net transfers to Equistar Chemicals, LP
Savings and Investment Plan 505,665 (505,665) - -
Net transfers to LYONDELL-CITGO
Refining Company Ltd. 401(K) and Savings
Plan for Non-Represented Employees 5,619 (5,619) - -
Intra-plan transfers (125,440) 125,440 - -
Other transfers, net (4,804) (690,508) (695,312)
------------- ----------- -------------
Net transfer activity 381,040 (1,076,352) (695,312)
------------- ----------- -------------
Net (decrease) increase (116,804,039) 19,532,077 (97,271,962)
Net assets available for assets:
Beginning of period 952,918,822 30,762,321 983,681,143
------------- ----------- -------------
End of period $ 836,114,783 $50,294,398 $ 886,409,181
============= =========== =============
9
LYONDELL CHEMICAL COMPANY 401(K) AND SAVINGS PLAN
SIGNATURE
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/ GERALD A. O'BRIEN
----------------------------------------
Gerald A. O'Brien
Benefits Administrative Committee
Date: June 28, 2001
10
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED PAGE
NO. EXHIBIT WHERE LOCATED
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23 Consent of PricewaterhouseCoopers LLP 12
11