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, 2003.
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 AND 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.
20 Wight Avenue, Suite 100
Hunt Valley, Maryland 21030
Annual Report on Form 11-K
Item 4
Financial Statements
Millennium Savings and Investment Plan
December 31, 2003 and 2002
Millennium Savings and Investment Plan
Table of Contents to the Financial Statements and
Supplemental Schedules
Page
Report of Independent Registered Public Accounting Firm 2
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 2003 and 2002 3
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2003 4
Notes to Financial Statements 5
Supplemental Schedules*:
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year) 10
Schedule H, Line 4j - Schedule of Reportable Transactions 11
* Other supplemental schedules required by Section 2520.103-
10 of the Department of Labor's Rules and Regulations for
Reporting and Disclosure under The Employee Retirement
Income Security Act of 1974 have been omitted because they
are not applicable.
1
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Millennium 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 Savings and Investment Plan (the "Plan") at
December 31, 2003 and 2002, and the changes in net assets
available for benefits for the year ended December 31, 2003 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 the standards of the
Public Company Accounting Oversight Board (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, 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 at End of Year) and
of 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
Philadelphia, PA
June 28, 2004
2
Millennium Savings and Investment Plan
Statements of Net Assets Available for Benefits
(dollars in millions)
December 31,
-----------------
2003 2002
------- -------
Assets
Investments:
Common Stock $ 2.6 $ 2.0
Millennium Chemicals Inc. common stock 22.8 19.7
Mutual Funds 50.0 33.4
Short-Term Investments 27.6 30.3
Participant Loans 3.5 3.2
------- -------
Total Investments 106.5 88.6
Receivables:
Participants' Contributions 0.2 -
Employer's Contributions 0.2 -
------- -------
Total Receivables 0.4 -
------- -------
Net Assets Available for Benefits $106.9 $ 88.6
======= =======
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
For the Year Ended December 31, 2003
(dollars in millions)
Investment Income:
Dividend income $ 0.9
Interest income 0.2
Net appreciation in fair value of investments 18.0
-------
Total Investment Income 19.1
-------
Contributions:
Participants' contributions 8.2
Employer's contributions 4.2
-------
Total Contributions 12.4
-------
Total Additions 31.5
-------
Benefits paid to participants (13.2)
-------
Net increase 18.3
-------
Net Assets Available for Benefits
at beginning of year 88.6
-------
at end of year $ 106.9
=======
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 30% of eligible
compensation in 1% increments for contribution into the Plan
on a pre-tax basis. Prior to January 1, 2003, participants
could contribute up to 17% of eligible compensation. The Plan
sponsor matches 75% of the first 6% of employee contributions.
The Company contribution is funded with Millennium Chemicals
Inc. common stock. Contributions are recorded when withheld
from participants by the Plan sponsor and are deposited twice
each month. Effective January 1, 2003, 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
options offered by the Plan, subject to Plan provisions. The
maximum pre-tax contribution allowed by the Internal Revenue
Service was $12,000 and $11,000 for 2003 and 2002,
respectively.
Vesting
Participants are immediately vested in their contributions,
company contributions and earnings thereon.
Trust
Fidelity Management Trust Company ("Fidelity") is the
recordkeeper and trustee of the Plan.
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.
5
2. 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.
Valuation of Investments and Income Recognition
The Plan's investments are stated at fair value. Quoted market
prices are used to value investments. For those securities with
no quoted market prices, fair value is estimated by the
Trustee. Shares of mutual funds are valued at the net asset
value of shares held by the Plan at year end.
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. Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned. Capital gain
distributions are included in dividend income.
Benefit Payments
Benefit payments are recorded when paid.
Administrative Expenses
Trustee and Plan administration expenses are paid by the
Company. Transaction fees are paid by the participant.
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.
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.
3. 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.
6
4. 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, 2003
------------------
Net assets available for
benefits as reported in these
financial statements $ 106.9
Less:
Loan amounts that have been
deemed distributed -
------------------
Net assets available for
benefits per Form 5500 $ 106.9
==================
5. Investments in Excess of 5% of Assets
The following individual investments represented more than 5%
of Plan assets at December 31, 2003:
Fidelity Retiree Money Market Fund......................$ 26.5
Millennium Chemicals Inc. Stock......................... 22.8
Fidelity Mid-Cap Fund................................... 10.7
Spartan US Equity Index Fund............................ 8.2
Fidelity Freedom 2030 Fund.............................. 7.1
The following individual investments represented more than 5%
of Plan assets at December 31, 2002:
Fidelity Retiree Money Market Fund......................$ 28.9
Millennium Chemicals Inc. Stock......................... 19.7
Fidelity Mid-Cap Fund................................... 8.0
Fidelity Freedom 2030 Fund.............................. 5.8
Spartan US Equity Index Fund............................ 5.6
During 2003, the Plan's investments (including gains and losses on
investments bought, sold, and held during the year) appreciated in
value by $18.0 as follows:
Common stock $ .7
Millennium Chemicals Inc. 6.7
common stock
Mutual funds 10.3
Short-term investments .3
-------------
$ 18.0
=============
The employer matching portion of the Millennium Chemicals Stock
Fund is non-participant directed, except as noted in Note 1.
7
6. 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,
-----------------------------
2003 2002
------------ ------------
Net Assets:
Millennium Chemicals Inc.
common stock $ 22.8 $ 19.7
Short-Term investments .3 .5
------------ ------------
$ 23.1 $ 20.2
============ ============
Year Ended
December 31,
2003
------------
Changes in Net Assets:
Net appreciation $ 6.7
Contributions 4.7
Benefits paid (2.8)
Interfund transfers (5.7)
------------
$ 2.9
============
7. Related-Party Transactions
Certain Plan investments are shares of mutual funds managed by
Fidelity, trustee and recordkeeper of the Plan, and shares of
the Company's common stock, sponsor of the Plan, therefore,
these transactions qualify as party-in-interest transactions.
8. 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
operated in compliance with the applicable requirements of the
IRC. Accordingly, no provision for federal income taxes has
been made.
8
9. Subsequent Events
On March 29, 2004, Lyondell Chemical Company ("Lyondell") and
the Company announced that their Boards of Directors had
approved, and the companies had executed, a definitive
agreement for a stock-for-stock business combination of the
companies, expected to be tax-free to the Company, Lyondell and
their respective shareholders.
The Company's shareholders will receive between 0.95 and 1.05
shares of Lyondell common stock for each share of the Company's
common stock, depending on the volume-weighted average price
for the Lyondell shares for the 20 trading days ending on the
third trading day before closing. The Company's shareholders
will receive 0.95 shares of Lyondell stock if the average
Lyondell stock price is $20.50 per share or greater and 1.05
shares if it is $16.50 per share or less. Between the two
prices, the exchange ratio varies proportionately. The new
shares will be entitled to receive the same cash dividend as
existing outstanding Lyondell shares.
The transaction is subject to customary conditions, including
approval by both companies' shareholders and receipt of
required regulatory approvals and amendments to each of
Lyondell's and the Company's credit agreements and Lyondell's
receivables sales facility. The transaction is expected to
close in the third quarter of 2004. The transaction involves
the merger of Millennium Subsidiary LLC, a newly created
subsidiary of the Company, into the Company, in which the
Company's common stock now held by its public shareholders will
be converted into common stock of Lyondell, and the Company's
preferred stock to be issued to Lyondell immediately before the
merger will be converted into common stock of the surviving
entity. As a result, the Company will become a wholly-owned
subsidiary of Lyondell.
As with all of the Company's outstanding common stock prior to
the business combination, upon the closing of the transaction,
any of the Company's common stock held by the Plan will be
converted into shares of Lyondell common stock pursuant to the
predetermined exchange ratio as described above.
9
Schedule H, Line 4i - Schedule of Assets (Held At End of Year)
December 31, 2003
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 $2,581,080
Mutual Funds 3,172,262
Government Debt 12,829
Rights and Warrants 1,334
Cash and Money Market 854,378
*Millennium Chemicals
Inc. Stock Common Stock $26,495,615 22,842,754
PIMCO Total Return Adm Registered Investment Company 2,340,596
PIMCO High Yield Adm Registered Investment Company 470,523
LM Value Trust FI CL Registered Investment Company 898,821
*Fidelity Equity Inc. Registered Investment Company 909,366
*Fidelity Growth Co Registered Investment Company 997,572
*Fidelity Grow & Inc. Registered Investment Company 663,685
*Fidelity Low PR STK Registered Investment Company 2,804,165
*Fidelity Diversity Intl Registered Investment Company 4,967,967
*Fidelity Mid-Cap Stock Registered Investment Company 10,658,929
*Fidelity Freedom Income Registered Investment Company 141,275
*Fidelity Freedom 2000 Registered Investment Company 230,762
*Fidelity Freedom 2010 Registered Investment Company 2,239,505
*Fidelity Freedom 2020 Registered Investment Company 4,189,130
*Fidelity Freedom 2030 Registered Investment Company 7,081,173
*Fidelity Retirement
Money Market Registered Investment Company 26,458,947
Spartan US Equity Index Registered Investment Company 8,162,218
*Fidelity Freedom 2040 Registered Investment Company 64,576
Short Term Investments 310,709
Participant loans Interest rates ranging from 3,487,961
4.75% - 10.5%, maturity dates ----------
ranging from July 16, 2004
to May 13, 2013
$106,542,517
============
* Indicates a party-in-interest as defined by ERISA.
Information certified as accurate and complete by Fidelity Management
Trust Company.
10
Millennium Savings and Investment Plan
Schedule H, Line 4j - Schedule of Reportable Transactions -
Cumulative Transactions by Issue
December 31, 2003
--------------------------------------------------------------------------------
Disposed Acquired
------------------------------ ------------------------
Security Description Sales Proceeds Gain/ (Loss) Purchases Cost
-------------------- ----- --------- ------------ ------------ ----------
* Millennium Chemical
Common Stock 109 8,182,015 (4,363,538) 36 5,230,803
* Indicates a party-in-interest as defined by ERISA.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the Plan) having
duly caused this annual report to be signed by the undersigned
hereunto duly authorized.
MILLENNIUM SAVINGS & INVESTMENT PLAN
Dated: June 28, 2004 By: /s/ C. William Carmean
-----------------------
C. William Carmean
Member, Benefits Administration Committee
EXHIBIT INDEX
EXHIBIT PAGE
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23 Consent of PricewaterhouseCoopers LLP,
independent accountants, Philadelphia, Pennsylvania