SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE
OCTOBER 7, 1996)
For the Fiscal Year Ended December 31, 2002.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______
Commission File Number 333-13143
---------
A. Full title of the Plan and the address of the
Plan, if different from that of the issuer named below:
MILLENNIUM SAVINGS & INVESTMENT PLAN
(the "Plan")
B. Name of the issuer of the securities held
pursuant to the Plan and the address of its principal
executive office:
Millennium Chemicals Inc.
230 Half Mile Road
Red Bank, New Jersey 07701
Annual Report on Form 11-K
Item 4
Financial Statements
Millennium Savings and Investment Plan
December 31, 2002 and 2001
Millennium Savings and Investment Plan
Table of Contents to the Financial Statements and Additional
Information
Page
Financial Statements:
Report of Independent Auditors 2
Statement of Net Assets Available for Benefits
as of December 31, 2002 and 2001 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2002 4
Notes to Financial Statements 5
Additional Information*:
Schedule H, Item 4i - Schedule of Assets Held for
Investment Purposes 12
Schedule H, Item 4j - Schedule of Reportable Transactions 13
* Other schedules required by Section 2520.103-10 of the
Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA have been omitted because they are not
applicable.
1
PricewaterhouseCoopers LLP
400 Campus Drive
P.O. Box 988
Florham Park NJ 07932
Telephone (973)236 4000
Facsimile (973)236 5000
Report of Independent Auditors
To the Participants and Administrator of
Millennium Chemicals Savings and Investment 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 Millennium Chemicals Savings and Investment Plan (the
"Plan") at December 31, 2002 and 2001, and the changes in
net assets available for benefits for the year ended
December 31, 2002 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.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules of assets held for investment
purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part
of the basic 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 Plan's management.
The supplemental schedules have been subjected to the
auditing procedures applied in the 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.
PricewaterhouseCoopers LLP
June 27, 2003
2
Millennium Savings and Investment Plan
Statements of Net Assets Available for Benefits
December 31
----------------------------
2002 2001
------------ ------------
Assets
Investments:
Common Stock $ 1,984,774 $ 7,114,247
Millennium Chemicals Inc. common stock 19,661,311 23,114,133
Mutual Funds 33,402,250 33,365,294
U.S. Government Securities 56,072 -
Commingled Investment Contract Fund at
Contract Value - 782,771
Guaranteed and Synthetic Investment
Contracts - 30,318,080
Short-Term Investments 30,295,293 538,649
Participant Loans 3,227,401 3,436,454
------------ ------------
Total Investments 88,627,101 98,669,628
Receivables/ (Payables):
Dividends and Interest - 138,383
Due to Broker for Unsettled Transactions - (83,036)
------------ -------------
Net Assets Available for Benefits $ 88,627,101 $ 98,724,975
============ =============
The accompanying notes are an integral part of these financial statements.
3
Millennium Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended
December 31, 2002
-----------------
Dividend income $ 930,113
Interest income 1,521,268
Participant contributions 7,444,666
Employer contributions 3,810,780
-----------------
Total additions 13,706,827
Net depreciation in fair value of investments 14,361,965
Benefits paid to participants 9,364,780
Administrative expenses 77,956
-----------------
Total deductions 23,804,701
Net decrease (10,097,874)
-----------------
Net Assets Available for Benefits at beginning of year 98,724,975
-----------------
Net Assets Available for Benefits at end of year $ 88,627,101
=================
The accompanying notes are an integral part of these financial statements.
4
Millennium Savings and Investment Plan
Notes to Financial Statements
1. Description of the Plan
The following description of the Millennium Savings and
Investment Plan (the "Plan") provides only general
information. Participants should refer to the Plan
document for a more complete description of the Plan's
provisions.
General
The Plan is a defined contribution plan available to all
United States employees, 21 years or older, of Millennium
Chemicals Inc. (the "Company") who are regular, full-time,
non-represented employees; part-time employees that have
worked 1,000 hours; and certain regular, full-time
represented employees that are covered under a collective
bargaining agreement that allows eligibility into the
Plan. A participant is eligible to participate effective
immediately.
Contributions
Each year, participants may contribute up to 17% of
eligible compensation in 1% increments for contribution
into the Plan on a pretax basis. The Plan sponsor matches
75% of the first 6% of basic contributions. The match is
funded primarily in Millennium Chemicals Inc. common
stock. There is no employer match on participant
contributions in excess of 6% of wages (supplemental
contributions). Contributions are recorded when withheld
from participants by the Plan sponsor and are deposited
twice each month. On or after February 11, 2002,
participants who are age 50 or older, or who attain age 50
during the calendar year, may sell the employer securities
in his or her Employer Matching Contribution Account and
reinvest the proceeds in any of the core funds or the
BrokerageLink, subject to applicable limitations in the
plan. Additionally, see Note 10 - Subsequent Events
regarding changes to participant eligibility for
diversification of assets in the Plan and participant
contribution limits. The maximum pre-tax contribution
allowed by the Internal Revenue Service was $11,000 and
$10,500 for 2002 and 2001, respectively.
Vesting
Participants are immediately vested in their contributions,
company contributions and earnings thereon.
Trust
On April 1, 2002, Fidelity Management Trust Company
("Fidelity") became the recordkeeper and trustee of the
Plan. Participant account balances were automatically
transferred from Bankers Trust Company of New York, former
trustee, and Metropolitan Life Insurance Company, former
recordkeeper, to Fidelity, which provides similar
investment options.
5
Distributions and Loans
Distributions of any participant's vested account balance
may be made upon the participant attaining certain age
requirements, termination of employment, death, permanent
disability, termination of the Plan or a change in control
as defined in the Plan document. Participants are
permitted to make hardship withdrawals if certain criteria
are met. Generally, only one withdrawal of any type is
allowed in a 12-month period.
Participants may borrow against their account balance.
The minimum amount a participant may borrow is $1,000.
Total loans to a participant cannot exceed the lesser of
$50,000 or 50% of the participant's account balance. The
amount of any loan will be withdrawn in a ratio that is
proportionate to the participant's balance in each
investment fund. Loans shall bear interest at the prime
lending rate (at the date of the loan) plus 1% and are
repayable within 5 years from the date of borrowing, with
the exception of loans in excess of $15,000 used to
acquire a primary residence, which are repayable over a
period of up to 10 years. As loans are repaid, both the
principal and interest are deposited to the participant's
current investment fund elections. A portion of a
participant's investment account is pledged as collateral
for the loan.
2. Plan Transfers and Mergers
On July 1, 2001, a group of participants (United
Steelworkers of America - Local 12200 and PACE Local 2-
0020) in the United Steelworkers of America (USWA) Savings
Program - Millennium Inorganic Chemicals Inc. 401(k) Plan
transferred into the Plan. This represented a transfer of
approximately $.4 million of assets into the Plan.
On March 9, 2001, a group of participants (the
International Union of Painters & Allied Trades - Local
1937 HPP and the United Steelworkers of America - Local
14019 HPP) in the USWA Savings Program - Millennium
Inorganic Chemicals Inc. 401(k) Plan transferred into the
Plan. This represented a transfer of approximately $2.9
million of assets into the Plan.
3. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under
the accrual method of accounting in accordance with
accounting principles generally accepted in the United
States of America.
Reclassifications
Certain prior year amounts have been reclassified to
conform to the current year presentation.
6
Valuation of Investments and Income Recognition
The Plan's investments are stated at fair value. Quoted
market prices are used to value investments. Shares of
mutual funds are valued at the net asset value of shares
held by the Plan at year end.
In 2001, guaranteed and synthetic investment contracts
were recorded at their contract values (which represented
cost plus accrued interest for guaranteed investment
contracts and fair value of the collateral plus the
benefit responsive wrap value for synthetics), as the
contracts were fully benefit responsive. For example,
participants may ordinarily direct the withdrawals or
transfer of all or a portion of their investment at
contract value. Investments in the Bankers Trust Company
BT Pyramid Directed Account Cash Fund and BT Pyramid
Discretionary Account Cash Fund were recorded on the basis
of cost, which approximated fair value.
Investments in the BrokerageLink are recorded at fair
value. Fair value of investments is determined by quoted
market prices in an active market, if available. For
those securities with no quoted market prices, fair value
is estimated by the Trustee. Information included in the
financial statements related to the BrokerageLink
represents the aggregation of individual participant
accounts and, as a result, the investment results
presented are not representative of the results obtained
by each participant in that fund. Individuals
participating in the BrokerageLink should refer to their
individual participant account statements for information
regarding their own investment performance. The Plan
sponsor, the Benefits Administration Committee and Plan
Trustee do not take responsibility for the investment
decisions of individual participants.
Purchases and sales of securities are recorded on a trade-
date basis. Dividends are recorded on the ex-dividend
date. Interest income is recorded as earned on an accrual
basis.
Benefit Payments
Benefit payments are recorded when paid.
Administrative Expenses
Since April 1, 2002, trustee and recordkeeping fees are
paid by the Company. Other expenses are paid by
participants. Prior to April 1, 2002, administrative
expenses of the Plan were paid by the Trust and allocated
to participant accounts on a pro-rata basis based on
account balances.
Use of Estimates
The preparation of the Plan financial statements in
conformity with accounting principles generally accepted
in the United States of America requires the Plan
administrator to make estimates and assumptions that
affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from
these estimates.
7
Risks and Uncertainties
The Plan provides for various investment options in funds,
which includes a combination of stocks, bonds, fixed
income securities, mutual funds and other investment
securities. Due to the level of risk associated with
certain investment securities and the level of uncertainty
related to the changes in the value of investment
securities, it is at least reasonably possible that
changes in risks in the near term would materially affect
participant's account balances and the amounts reported in
the statement of net assets available for benefits and the
statement of changes in net assets available for benefits.
4. Investment Contracts with Insurance Companies
The Plan used a fixed income fund to invest in a number of
guaranteed investment contracts. The average yield for
the investment contracts was 5.60% for the year ended
December 31, 2001. The crediting interest rates were 5.41%
at March 31, 2002 and ranged from 4.62% to 6.95% at
December 31, 2001, and were determined based on the
balance and the activity in the account. All investment
contracts with insurance companies were liquidated during
the 2002 Plan year.
Selected contracts had crediting interest rate resets on a
quarterly or annual basis. There were no limitations on
guarantees under the terms of the contracts. No valuation
reserves had been established to adjust contract amounts
due to the creditworthiness of the contract issuers. The
contracts included in the financial statements were stated
at contract value (which represented contributions made
under the contract plus earnings, less withdrawals and
administrative expenses) because the contracts were fully
benefit responsive. The contract value of the investment
contracts approximated fair value at December 31, 2001.
5. Plan Termination
Although the Plan sponsor has not expressed any intent to
terminate the Plan, it has the right to do so at any time,
subject to the provisions of ERISA.
8
6. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available
for benefits as reported in these financial statements to
the Form 5500:
December 31, 2002
-------------------
Net assets available for benefits $88,627,101
as reported in these financial
statements
Less:
Loan amounts that have been (8,870)
deemed distributed
-------------------
Net assets available for $88,618,231
benefits per Form 5500
===================
7. Investments in Excess of 5% of Assets
The following individual investments represented more than
5% of Plan assets at December 31, 2002:
Fidelity Retiree Money Market Fund $28,817,379
Millennium Chemicals Inc. Stock 19,661,311
Fidelity Mid-Cap Fund 7,970,958
Fidelity Freedom 2030 Fund 5,825,336
Spartan US Equity Index Fund 5,591,816
The following individual investments represented more than
5% of Plan assets at December 31, 2001:
Bankers Trust Company Pyramid Stable Value Gov't Fund II $ 25,832,224
Millennium Chemicals Inc. Stock 23,114,133
Bankers Trust Company Pyramid Mid Cap Fund 10,781,258
Bankers Trust Company Lifecycle Long Range Fund 7,658,113
Bankers Trust Company Pyramid Equity 500 Index Fund 6,876,965
During 2002, the Plan's investments (including gains and
losses on investments bought and sold during the year)
depreciated in value by $14,361,965 as follows:
Common stock $ (735,821)
Millennium Chemicals Inc.common stock (4,852,785)
Mutual funds (8,388,371)
U.S. Government securities (20,803)
Short-term investments (364,185)
--------------
$ (14,361,965)
==============
9
The employer matching portion of the Millennium Chemicals
Stock Fund is non-participant directed, except as noted in
Note 1.
8. Nonparticipant-Directed Investments
Information about the net assets and the significant
components of the changes in net assets relating to the
nonparticipant-directed investments is as follows:
December 31,
------------------
2002 2001
------------ ------------
Net Assets:
Millennium Chemicals Inc. common stock $ 19,661,311 $ 23,114,133
Short-Term investments 517,613 482,773
------------ ------------
$ 20,178,924 $ 23,596,906
============ ============
Year Ended
December
31, 2002
-------------
Changes in Net
Assets:
Contributions $ 4,722,740
Dividends 241,362
Interest 31,030
Administrative expenses (14,467)
Net depreciation (4,852,785)
Benefits paid (1,818,128)
Interfund transfers (1,727,734)
-------------
$ (3,417,982)
=============
9. Tax Status
The Internal Revenue Service (IRS) has issued a
determination letter dated December 2, 2002, indicating
that the Plan qualifies under Section 401(a) of the
Internal Revenue Code (IRC) and, therefore, the Plan is
not subject to tax under Section 501(a) of the IRC.
Although the plan has been amended since receiving the
determination letter, the Plan Sponsor and the Plan's tax
counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable
requirements of the IRC. Accordingly, no provision for
federal income taxes has been made.
10
10. Subsequent Events
Effective January 1, 2003, all participants became
eligible to diversify out of their company match account
within the company stock fund. Under the new
diversification feature, participants have the choice to
retain their company match account within the Millennium
Chemicals Stock Fund, or sell the stock and transfer the
proceeds into one or more of the other investment vehicles
offered in the Plan, subject to Plan provisions.
Effective January 1, 2003, participants may contribute up
to 30% of eligible compensation in 1% increments.
11
Schedule H, Line 4i - Schedule of Assets (Held At End of Year)
December 31, 2002
Description of Investments
Identity of Issuer, Including Maturity Date,
Borrower or Similar Rate of Interest Par or Market
Party Maturity Value Cost Value
------------------------ ----------------------------- ----------- ----------
BROKERAGELINK
Common Stock $1,935,881
Preferred Stock 48,893
Income Oriented Mutual
Funds 276,011
Growth Oriented Mutual
Funds 1,917,898
Government Debt 56,072
Cash and Money Market 960,301
*Millennium Chemicals
Inc. Stock Common Stock $32,819,724 19,661,311
*PIMCO Total Return Adm Registered Investment Company 1,044,596
*PIMCO High Yield Adm Registered Investment Company 51,965
*LM Value Trust FI CL Registered Investment Company 184,486
*Fidelity Equity Inc. Registered Investment Company 312,907
*Fidelity Growth Co Registered Investment Company 236,152
*Fidelity Grow & Inc. Registered Investment Company 153,407
*Fidelity Low PR STK Registered Investment Company 1,065,993
*Fidelity Diversity Intl Registered Investment Company 3,308,972
*Fidelity Mid-Cap Stock Registered Investment Company 7,970,958
*Fidelity Freedom Income Registered Investment Company 93,213
*Fidelity Freedom 2000 Registered Investment Company 182,372
*Fidelity Freedom 2010 Registered Investment Company 1,846,740
*Fidelity Freedom 2020 Registered Investment Company 3,326,537
*Fidelity Freedom 2030 Registered Investment Company 5,825,336
*Fidelity Retirement
Money Market Registered Investment Company 28,817,379
*Spartan US Equity Index Registered Investment Company 5,591,816
*Fidelity Freedom 2040 Registered Investment Company 12,891
*Short Term Investments 517,613
*Participant loans Interest rates ranging from
5.75% - 10.5%, maturity dates
ranging from January 16,
2003 to September 16, 2012 3,227,401
------------
$88,627,101
============
* Indicates a party-in-interest as defined by ERISA.
Information certified as accurate and complete
by Fidelity Management Trust Company
12
Millennium Savings and Investment Plan
Schedule H, Line 4j - Schedule of Reportable Transactions
December 31, 2002
Disposed Acquired
------------------------------ ------------------------
Security Description Sales Proceeds Gain/ (Loss) Purchases Cost
-------------------- ----- --------- ------------ ------------ ----------
* Millennium Chemicals
Inc. Common Stock 58 4,321,354 (1,895,144) 40 39,692,928
* Indicates a party-in-interest as defined by ERISA.
13
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 by the
undersigned thereunto duly authorized.
MILLENNIUM SAVINGS & INVESTMENT PLAN
Date: June 27, 2003 By: /s/ C. William Carmean
------------------------------
C. William Carmean
Member, Benefits Administration Committee
EXHIBIT INDEX
EXHIBIT PAGE
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I Consent of PricewaterhouseCoopers LLP, independent
accountants,
Florham Park, New Jersey