<PAGE>   1

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]      Annual Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

         For the Fiscal Year Ended December 31, 1999

[ ]      Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

                        Commission file number 333-17961
                          ARISTECH CHEMICAL CORPORATION
             (Exact name of Registrant as specified in its charter)

       Delaware                                        25-1534498
(State of Incorporation)                 (I.R.S. Employer Identification Number)

              210 Sixth Avenue, Pittsburgh, Pennsylvania 15222-2611
                    (Address of principal executive offices)

                  Registrant's Telephone Number: (412) 316-2747

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X]  NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 30, 2000: Not determinable.

Common Stock outstanding at March 30, 2000:  14,908 shares.

Documents Incorporated by Reference:  None



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                                     INDEX

<TABLE>
<CAPTION>
                                                                                                Page
                                                                                                ----
<S>  <C>                                                                                        <C>
PART I

     Item 1.   Business                                                                            3

     Item 2.   Properties                                                                         12

     Item 3.   Legal Proceedings                                                                  12

     Item 4.   Submission of Matters to a Vote of Security Holders                                12

PART II

     Item 5.   Market for Registrant's Common Equity and Related
                 Stockholder Matters                                                              12

     Item 6.   Selected Financial Data                                                            13

     Item 7.   Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                                              13

     Item 7A.  Quantitative and Qualitative Disclosures About Market Risk                         19

     Item 8.   Financial Statements                                                               20

     Item 9.   Changes in and Disagreements with Accountants On
                 Accounting and Financial Disclosure                                              39

PART III

     Item 10.  Directors and Executive Officers of the Registrant                                 39

     Item 11.  Executive Compensation                                                             42

     Item 12.  Security Ownership of Certain Beneficial Owners and
                 Management                                                                       49

     Item 13.  Certain Relationships and Related Transactions                                     50

PART IV

     Item 14.  Exhibits, Financial Statement Schedules, and Reports
                 on Form 8-K                                                                      50

SIGNATURES                                                                                        52
</TABLE>



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PART I

ITEM 1. BUSINESS


THE COMPANY

Aristech Chemical Corporation ("Aristech") was incorporated under the laws of
the State of Delaware on October 14, 1986, and began doing business on December
4, 1986.

On October 1, 1997, Aristech formed a joint venture with Mitsubishi Rayon Co.,
Ltd. ("MRC") to manufacture and sell acrylic sheet and decorative surfacing
products. Aristech's former acrylic sheet division was reorganized as Aristech
Acrylics LLC ("AALLC"), a Kentucky limited liability company in which Aristech
holds a 90% ownership interest. Dianal America, Inc. ("DAI"), a wholly owned
U.S. subsidiary of MRC, holds a 10% ownership interest in AALLC.

The "Company" refers to Aristech and Avonite, Inc. (a New Mexico corporation and
a 60% owned consolidated subsidiary, hereinafter "Avonite", for on and after
July 1, 1996) and AALLC (for on and after October 1, 1997).

GENERAL

The Company is a producer and marketer of chemical and polymer products with
total annual rated production capacity in excess of four billion pounds. The
Company's operations are divided into two reportable operating segments:
Chemicals and Polymers. The Company's Chemicals reportable operating segment
consists of the aggregation of its Phenol and Plasticizer and related products.
The Polymers reportable operating segment consists of the aggregation of its
polypropylene and acrylic sheet products. These chemical and polymer products
provide the Company with a diversified revenue base. While many of the Company's
products are considered commodities, the Company's production of polypropylene
and acrylic sheet has been increasingly directed toward more specialized, higher
margin products. There is significant vertical integration among the Company's
products, providing the Company with supplies of certain of its raw materials.
The Company also has a diverse customer base, with no single customer comprising
more than 8% of gross revenues during 1999. End-use markets for the Company's
products include automotive components, home and office construction,
appliances, modular tubs/showers, whirlpools, spas, apparel, packaging, medical
supplies, signs and a wide range of consumer products. Each segment has its own
dedicated sales force responsible for domestic sales. Sales for export markets,
which accounted for approximately 21% of total sales in 1999, are either handled
directly, through distributors or with independent representatives. Financial
information concerning the Company's two reportable operating segments are
included herein under Item 8, Note J to the Consolidated Financial Statements.






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PLANT PROFILE

The following table lists the products produced by the Company and the locations
of the plants where such products are produced. A narrative description of each
product follows the table.

<TABLE>
<CAPTION>
                                   (Million Pounds)
                                    Annual Current                    Typical End                              Plant
        Product Produced            Rated Capacity                  Use of Product                           Locations
        ----------------            --------------                  --------------                           ---------
<S>                                <C>                 <C>                                                 <C>
CHEMICALS

     2-Ethylhexanol                            280     Plasticizers, Acrylates, Resins, Surfactants        Pasadena, TX
                                                       Defoamers and Lube Additives

     Acetone                                   584     Solvent, Acrylic Plastic and Bisphenol-A            Haverhill, OH

     Alphamethylstyrene                         52     ABS Plastic and Resins                              Haverhill, OH

     Aniline                                   150     Rigid Polyurethane and Rubber Chemicals             Haverhill, OH

     Bisphenol-A                               215     Engineering Plastics, Epoxy Resins and              Haverhill, OH
                                                       Flame Retardants

     Cumene Hydroperoxide                       16     Polymerization Catalyst                             Haverhill, OH

     Diphenylamine                              25     Rubber Chemicals and Lube Additives                 Haverhill, OH

     Phenol                                    942     Phenolic Resins and Bisphenol-A                     Haverhill, OH

     Plasticizers                              210     Flexible Vinyl                                      Neville Island, PA

     Phthalic Anhydride                        265     Plasticizers, Unsaturated Polyester Resins,         Pasadena, TX
                                                       Alkyd Paints and Molding Resins


POLYMERS

     AALLC-Acrylic Sheet                       120     Outdoor Signs, Lighting Fixtures, Modular           Florence, KY
                                                       Tub and Shower Units, Spas, Whirlpool Units,
                                                       Vanity and Kitchen Countertops, and
                                                       Interior and Exterior Wall Cladding

     Avonite-Polyester Sheet           2.5 million     Vanity and Kitchen Countertops and Other            Belen, NM
                                       Square Feet     Decorative Architectural Applications

     Polypropylene                           1,378     Automotive Parts, Fibers, Battery Casings           LaPorte, TX
                                                       Consumer and Medical Products, Packaging            Neal, WV
                                                       Films, Strapping and Housewares
</TABLE>



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CHEMICALS

The following is a narrative of the chemicals produced and marketed by Aristech.
Aristech's chemical products are produced with processes using licensed
technology, except for cumene hydroperoxide ("CHP") and diphenylamine ("DPA")
technologies that were developed internally by Aristech.

2-ETHYLHEXANOL. 2-Ethylhexanol ("2-EH") is a commodity intermediate chemical
used in the manufacture of organic chemical products. Plasticizers are the major
market for 2-EH and account for approximately half of total domestic 2-EH
consumption and over three-quarters of global consumption. The main raw
materials used in 2-EH are propylene and natural gas. Aristech has entered into
supply contracts for natural gas and propylene, and both are also available on
the spot market. Aristech used approximately 30% of its 2-EH production in 1999
as a raw material for plasticizers. The remainder of the 2-EH produced by
Aristech is sold primarily in the merchant export market. Competition is based
primarily on price.

ACETONE. Acetone is used as a solvent for paints, varnishes, lacquers and vinyl
resins, and as a raw material for a wide range of chemicals such as methyl
methacrylate ("MMA"), bisphenol-A ("BPA"), methyl isobutyl ketone and others.
Approximately 37% of Aristech's acetone production was used as a raw material
for the toll production of MMA for AALLC and internally for BPA in 1999, with
the remainder being sold to the merchant market. Aristech's 1997 phenol unit
expansion resulted in increased acetone production capacity by 44 million pounds
annually. Aristech completed the addition of a third unit at the Haverhill, Ohio
plant in November of 1999. The new unit is capable of producing 150 million
pounds of acetone annually, increasing the total annual acetone capacity to 584
million pounds.

ALPHAMETHYLSTYRENE. High-purity alphamethylstyrene ("AMS"), a low volume
product, is used to increase heat distortion temperature and provide strength in
ABS resins. Capital expansions increased AMS production capacity by nearly 50%
in 1997. Aristech's production is sold in the merchant market or hydrogenated to
cumene.

ANILINE. Aniline is predominantly consumed in the production of MDI-based rigid
polyurethane foams and coating resins. Polymeric isocyanates have been growth
products used in construction, mainly as building insulation and in the
automotive industry. Aniline is also consumed in the production of rubber,
photographic developers, agricultural chemicals and dyes. Aniline is produced
from internally produced phenol and purchased ammonia that is available from
nearby sources. Aristech is one of two companies worldwide that produces aniline
from phenol.

BPA. BPA is an organic chemical intermediate that is produced from phenol and
acetone. BPA is consumed mainly in the production of polycarbonate and epoxy
resins, but increasing amounts are used to produce flame retardants, polysulfone
resins, phenoxy resins and polyester resins. The raw materials for BPA are
internally produced phenol and acetone. Approximately 65% of Aristech's BPA
trade sales were sold to export markets during 1999. Aristech also purchases and
resells BPA through agreements with Mitsubishi Chemical Corporation ("MCC") to
supplement its own production.

CHP. CHP is a low volume, intermediate compound extracted from Aristech's phenol
and acetone facilities that is purified using a process developed by Aristech's
research group. CHP is sold in the domestic market primarily for use as a
polymerization catalyst.

DPA. DPA is low volume product used to make rubber chemicals as well as
lubricant additives, dyes and to make a stabilizer for acrylates. Aristech
produces DPA by its own proprietary process from internally produced aniline.
Aristech is one of two domestic producers of DPA selling to the merchant market.

PHENOL. The largest single use of phenol is as a raw material for BPA. Other
important uses are phenolic resins for plywood, chipboard, foundry and
industrial applications. Phenol, when used as a chemical intermediate, becomes a
component of nylon, and surfactants. Aristech uses phenol as a raw material for
its production of BPA and aniline. Competition is based primarily on price.

The main raw material for phenol is cumene, which is first oxidized to form CHP
and then cleaved to produce phenol, acetone and AMS. Cumene is obtained by
Aristech from several sources under supply agreements, and is also available on
the spot market. Aristech also obtains phenol through arms'-length purchases
from MCC to supplement its own production.



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<PAGE>   6


In 1999, Aristech sold approximately 59% of its total production of phenol into
the merchant market. Exports of phenol represented approximately 12% of
Aristech's total phenol trade sales in 1999. An expansion in the phenol unit,
completed in the fourth quarter of 1997, increased annual production capacity at
the Haverhill, Ohio plant by 70 million pounds. During 1999, a significant
capital expansion occurred through the addition of a third phenol unit.
Completed in November of 1999, the new unit is capable of producing 242 million
pounds of phenol annually, increasing the total annual phenol capacity at the
Haverhill, Ohio plant to 942 million pounds.

PLASTICIZERS. Plasticizers are organic esters produced primarily in high volume
commodity grades. Plasticizers are used principally in the manufacture of
flexible polyvinyl chloride ("PVC") plastic products. PVC products are sold into
a wide variety of applications, including consumer (rainwear, toys and boots),
housing (flooring and wall coverings), automotive (seat and dashboard covers and
vinyl roofs) and industrial (wire and cable insulation).

Plasticizers are made from a variety of dibasic acids (primarily phthalic
anhydride) and alcohols, including 2-EH. Aristech produces its own supply of
phthalic anhydride and 2-EH that are used in large volumes in plasticizers.

Aristech produces a complete line of plasticizers, for both general and
specialized applications, all of which are sold into the merchant market.
Competition is based primarily on price. Aristech manufactures plasticizers
utilizing well-developed batch process technology at its facility located on the
Ohio River at Neville Island, Pennsylvania.

PHTHALIC ANHYDRIDE. Phthalic anhydride ("PA") is a commodity intermediate
chemical used in the manufacture of organic chemical products, such as
plasticizers, unsaturated polyester resins, alkyd paint and molding resins. PA
is manufactured from orthoxylene, a petrochemical commodity purchased from a
number of sources under supply agreements, and it is also available on the spot
market. Aristech consumed approximately 27% of PA production in 1999 as a raw
material for plasticizers, with the remainder sold to the merchant market.
Competition is based primarily on price.

POLYMERS

The following is a narrative of the polymers produced and marketed by Aristech.
The Company's polymers consist of AALLC's acrylic sheet products, Avonite's
polyester sheet products and Aristech's polypropylene products.

AALLC-ACRYLIC SHEET. AALLC produces acrylic sheet. Acrylic sheet is a polymeric
product produced in specialty and commodity grades. Applications include
bathtubs, modular tubs/showers, spas, whirlpool units, glazing, skylights, sign
facia, vanity and kitchen countertops, interior and exterior wall cladding, and
other decorative uses. All sales of acrylic sheet are in the merchant market.

The primary feedstock for acrylic sheet is MMA, which is currently obtained
through third party toll conversion using acetone produced at Aristech's
Haverhill, Ohio plant.

AALLC produces acrylic sheet using the continuous cast method. This process
permits AALLC to produce cross-linked sheet products of significantly greater
widths and lengths than are obtainable from the more commonly used cell-cast or
extrusion methods. AALLC's acrylic sheet is produced at its Florence, Kentucky
plant that is equipped with four continuous casters. Design, operation and
maintenance of the continuous casters represent significant proprietary
technology of AALLC. AALLC is one of five domestic producers of cast acrylic
sheet products and one of two that use the continuous cast method. The Florence
plant completed an expansion in February of 2000, which added 44.5 million
pounds of capacity, increasing the total annual capacity at the plant to 120
million pounds.

AVONITE-POLYESTER SHEET. Avonite produces premium solid surface polyester sheet
under the tradename Avonite(R). Avonite(R) is used for countertops, wall
cladding and other decorative architectural applications. Avonite's production
facility is in Belen, New Mexico. Avonite produces its sheet from unsaturated
polyester resins purchased in the highly competitive resin market. In addition,
Avonite purchases and resells certain of AALLC's Acrystone(R) acrylic solid
surface sheet products.



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POLYPROPYLENE. Polypropylene is a thermoplastic resin produced by Aristech in
both commodity and specialty grades. The major markets for polypropylene are:
synthetic fibers used in carpet backing, carpet face yarns, upholstery fabrics,
geotextiles and disposable diapers; automotive applications, including battery
cases and interior trim parts; packaging films for food and non-food
applications; injection-molded caps and closures; medical applications (syringes
and vials); and a wide range of other consumer products.

Propylene is the principal raw material used in the production of polypropylene.
The LaPorte, Texas plant obtains its supply of chemical and polymer grade
propylene primarily via pipeline under agreements with Mobil Oil Corporation
("Mobil") and Equistar Chemicals LP, and the remainder on the spot market. The
Neal, West Virginia plant is supplied with refinery grade propylene via pipeline
from the nearby refinery of Marathon Ashland Petroleum LLC and refinery and
chemical grade propylene by rail from other producers in the northern tier of
the United States and Canada. Both plants operate propylene splitters that
permit the upgrading of lower cost refinery and chemical grade propylene to
polymer grade raw materials.

Aristech sells substantially all of its output of polypropylene to the merchant
market. Exports, primarily to the Far East, represented approximately 6% of
polypropylene sales in 1999. Imports are not a significant factor in the
domestic market.

Aristech is one of 12 producers of polypropylene in the United States.
Competition among producers of commodity grade polypropylene is primarily on the
basis of price, as well as quality and service. In specialty grades, competition
is based primarily on product development, quality and service. To help direct
Aristech's product mix toward the more specialized, higher margin products, a
technical services group provides assistance to customers to develop specialty
formulations to meet their specific product requirements. A new polypropylene
technical center was opened in November 1997, in Pittsburgh, Pennsylvania,
further strengthening Aristech's commitment to customer service and focus on
specialty products. Control of raw materials supply and cost, utilization of the
latest production technology, and proximity to markets are also important
competitive factors.

The Neal, West Virginia plant utilizes Spheripol-technology developed by
Montedison S.p.A. and licensed from Technipol B.Y. The LaPorte, Texas plant
utilizes both Spheripol-technology and licensed high-yield catalyst technology.
A significant expansion occurred at the LaPorte, Texas plant during 1999 with
the construction of a new polypropylene unit. The new unit, completed in
September of 1999, is capable of producing 550 million pounds of polypropylene
annually, increasing Aristech's total annual polypropylene capacity to
approximately 1.4 billion pounds.

ORDER BACKLOG

Normally, significant customer orders are placed during the same month that
shipment is requested and orders placed for future delivery are subject to
revision or cancellation. For these reasons, the Company does not consider order
backlog to be a meaningful indication of future business activity for its
businesses.

EMPLOYEE RELATIONS

The Company employs approximately 1,550 people. This is a decrease from the
prior year of approximately 200 employees as a result of the Company's voluntary
early retirement and involuntary separation programs. The majority of these
reductions occurred in the salaried workforce and specifically targeted a
reduction in selling general and administrative expenses. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further discussion.

The operating personnel at Neal, West Virginia, Neville Island, Pennsylvania and
AALLC's Florence, Kentucky facilities are represented by the Oil, Chemical and
Atomic Workers International Union, the United Steelworkers of America, and the
International Chemical Workers, respectively. Historically, operations have
generally not been interrupted by strikes. The Company's other facilities are
not represented by unions.




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RESEARCH AND DEVELOPMENT

The Company's research and development activities are conducted at research
centers at Monroeville, Pennsylvania and Pittsburgh, Pennsylvania, and augmented
by product development and technical service groups directly attached to the
polypropylene and plasticizers businesses and AALLC. In June of 2000, the
research functions performed at the Monroeville location will be moved to the
Pittsburgh location and the Monroeville facility will be closed.

PATENTS AND TRADEMARKS

The Company possesses a substantial body of technical know-how and trade secrets
and owns approximately 118 United States patents applicable to all phases of its
business, including product formulations and production processes. The Company
considers its know-how, trade secrets and patents important to the conduct of
its business, although no individual item is considered to be material to the
business. Certain plants use technology licensed from others. Royalty expense on
these licenses amounted to $4.8 million in 1999, $4.5 million in 1998, and $3.9
million in 1997. AALLC also has licensed its Acrysteel(R) technology to MRC.
Aristech is entitled to receive royalties under certain circumstances for two
stage cleavage technology used in the production of phenol and acetone, which is
licensed by a third party to MCC.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

The Company (and the industry in which it competes) is subject to pervasive
environmental laws and regulations concerning the production of chemicals,
emissions to the air, discharges to waterways and the generation, handling,
storage, transportation, treatment and disposal of waste materials, and is also
subject to other Federal and state laws and regulations regarding health and
safety matters. These laws and regulations are constantly evolving and it is
impossible to predict accurately the effect these laws and regulations will have
on the Company in the future.

Each of the Company's production facilities has permits and licenses regulating
air emissions and water discharges. Each of these production facilities that
requires permits for the treatment, storage or disposal of hazardous waste has
interim or final permits. Some permits and licenses, including all for hazardous
waste treatment, storage or disposal, require that the holder meet financial
responsibility criteria. The Company currently meets the financial
responsibility criteria required for holding hazardous waste permits and
licenses by meeting the requirements of a financial test mechanism under
applicable state or federal regulation.

It is the Company's policy to comply with all applicable environmental, health
and safety laws and regulations. Nonetheless, in the course of conducting its
business, regulatory compliance issues can arise with regard to the Company's
operations or its products. In addition, environmental laws and regulations
establish requirements for recordkeeping and other administrative efforts.
Resolving such issues and satisfying recordkeeping and other administrative
requirements can require the Company to incur ongoing operating costs and/or
make capital expenditures to achieve or maintain compliance with such laws and
regulations. The Company has expended substantial funds for such compliance in
the past, and expects to continue to do so. Future requirements arising from new
laws and regulations can also give rise to additional compliance costs. The
Company is unable to predict the magnitude of its aggregate future compliance
costs. Violations of environmental permits or licenses could result in
substantial sanctions, which could be civil, criminal, or both. Violations could
also result in the revocation of such permits or licenses. In addition, the
operation of any chemical manufacturing plant entails risk of adverse
environmental effect, including exposure to chemical products and by-products
from the Company's operations.

In some cases, compliance can only be achieved by capital expenditures. In 1999,
the Company spent approximately $3.6 million for environmentally related capital
expenditures. Based upon preliminary estimates of capital expenditures for
environmental projects at existing facilities and without any detailed
engineering or other technical planning, the Company broadly estimates that
expenditures for 2000 and 2001 will total $4.6 million in the aggregate.




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The Company's facilities for many years have shipped waste materials to third
party sites for treatment and/or disposal. As a result of these practices, the
Company is currently involved in investigative or cleanup projects under the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
or comparable state laws at 28 sites. Based on currently available information,
the Company initially reserved $6.0 million in aggregate for its share of costs
associated with certain of these sites. The Company spent approximately $1.0
million on cleanup at these sites during 1999, reducing the liability balance to
$5.0 million at year end. No amount has been reserved for a majority of such
sites, since amounts are included only when costs are reasonably estimable. At
seventeen of the sites, either the regulatory agency has indicated that no
further action will be required or the Company has settled out as a de minimis
party. It is possible that the Company may be involved in future investigations
and cleanups of other sites to which the Company sent waste materials. The
Company cannot predict such future liabilities with accuracy.

The Resource Conservation and Recovery Act ("RCRA") requires the Company to
estimate the closure and post-closure costs for its hazardous waste treatment,
storage and disposal facilities. The Company estimates total closure and
post-closure costs for its existing facilities, and any former facilities for
which the Company contractually retained liability, to be approximately $9.7
million. The Company revises these costs at least annually to reflect inflation,
and at other times to address changed conditions. The Company has closed
hazardous waste management facilities at its Linden, New Jersey and Florence,
Kentucky facilities. The Company is awaiting regulatory acceptance of these
closures and it is not known whether additional closure requirements will be
imposed.

The New Jersey Industrial Sites Recovery Act requires that Aristech investigate
site conditions at its former manufacturing facility in Linden, New Jersey
(currently operated as a warehouse and distribution facility) to assess the type
and extent of contamination that may be present. Aristech has submitted a
Remedial Investigation/Remedial Action Plan (the "Plan") to the New Jersey
Department of Environmental Protection (the "NJDEP") with respect to this
facility. Aristech has performed certain remedial actions pursuant to the Plan
with the approval of the NJDEP at a cost of approximately $0.5 million. The
remaining remedial actions proposed by the Plan, currently estimated to cost
$0.5 million, have not been approved by the NJDEP. Aristech cannot predict
whether the NJDEP will approve the remainder of the Plan as proposed, whether
additional cleanup conditions, if any, may be imposed, or the costs of any such
additional cleanup conditions.

Aristech has been investigating an area of its former Colton, California
facility at the request of the Santa Ana Regional Water Quality Control Board
("Water Board"). Soil sampling has revealed residual contamination and
groundwater monitoring wells have been installed. In October 1997, the Water
Board requested that Aristech and the owner of a neighboring facility conduct an
off-site, downgradient investigation of the groundwater. Aristech and the owner
of the neighboring facility have agreed to this request. Aristech estimates its
share of the investigation requested by the Water Board will not be material. It
is not possible to estimate the costs of further investigation or cleanup at
this time.

RCRA can also impose corrective action requirements at facilities where
hazardous waste treatment, storage and disposal occurs or has occurred.
Corrective action requirements include investigation, and remedial action for
impacted soils and groundwater. While preliminary investigations have occurred
at some of the Company's facilities, it is not possible to predict the timing or
extent of the remedial actions that ultimately might be required.

Some studies suggest that certain industrial chemicals, including phthalates and
BPA, mimic the effect of hormones in people and animals, and adversely influence
the reproductive process. Some phthalate esters have been implicated in
unverified screening tests. Aristech believes that this effect is not associated
with its phthalate ester product line, based on the results of independent and
industry sponsored testing. BPA has also been implicated by the same screening
tests. To address this allegation, Aristech and the other United States BPA
producers have established an extensive reproductive health testing program that
Aristech believes will demonstrate that BPA does not cause estrogenic effects in
animals or humans. Newly enacted legislation associated with the safety of
drinking water and the food supply contains requirements for performing
estrogenicity screens. While BPA and certain phthalate esters will most likely
be targeted by these requirements, Aristech believes that voluntary testing
completed or currently underway will mitigate or obviate the need for additional
estrogenicity testing. Certain plasticizers, particularly DEHP (di-ethylhexyl
phthalate, also known as dioctyl phthalate, or DOP) have been under public
attention and close scrutiny by health and environmental agencies during recent
years. While there are no government regulations in force or proposed that
restrict their marketing, sale or use, public perception may eventually affect a
segment of the market for DOP and other plasticizers.






                                       9
<PAGE>   10


The Company's domestic competitors are subject to the same environmental, health
and safety laws and regulations and the Company believes that its issues and
potential expenditures are comparable to those faced by its major domestic
competitors. As noted in the discussion of individual product lines, the markets
for most of the Company's products are very price competitive. Therefore, future
environmentally related capital expenditure requirements, liabilities and costs
could be a major factor in the Company's future sales and income, since it may
not always be possible to pass costs on to customers.

DISPOSITION OF CERTAIN BUSINESSES

COAL CHEMICALS BUSINESS

In March 1996, Aristech sold to Koppers Industries, Inc. ("Koppers")
substantially all of its assets related to the production and sale of coal
chemicals (the "Coal Chemicals Business"), and Koppers assumed certain of the
liabilities in connection with the Coal Chemicals Business. Aristech agreed to
indemnify Koppers against liabilities arising from (i) breaches of Aristech's
representations, warranties and covenants contained in the asset purchase
agreement and (ii) claims relating to the Coal Chemicals Business arising out of
events occurring prior to the sale. The representations and warranties expired
on September 30, 1997, and any claim by Koppers for indemnification for breach
of the expired representations and warranties had to be made by an October 15,
1997 deadline. No such claims were made. Under a reorganization agreement dated
October 14, 1986, under which the Coal Chemicals Business was transferred from
USX Corporation ("USX") to Aristech, USX generally retained responsibility for
pre-1986 environmental conditions on the properties. Koppers generally assumed
(with certain exceptions) all environmental compliance, toxic exposure,
environmental damage and environmental response cost liabilities arising after
1986 with respect to the Coal Chemicals Business. Aristech retained, and agreed
to indemnify Koppers for, liabilities arising from specific listed environmental
"incidents," although Aristech is not aware of any asserted or overtly
threatened claims likely to lead to material liabilities related to any of the
enumerated incidents.

Aristech also agreed to retain liabilities related to: (i) claims of personal
injury arising from exposure to regulated substances released between December
4, 1986 and the sale; (ii) claims of property value diminution arising from
releases to the air of regulated substances by Aristech occurring between
December 4, 1986 and the sale (but only if those claims are asserted within 24
months of the sale); (iii) claims related to the shipment, treatment or disposal
of regulated substances at off-site locations during the period of Aristech's
operations of the facilities; and (iv) enforcement actions and penalties
relating to violations of environmental laws resulting from operations of the
business or use of the property during the period of Aristech's ownership. As of
the date of this filing, Aristech is not aware of any actual or threatened claim
for indemnification arising under these provisions.

POLYESTER BUSINESS

In April 1995, Aristech sold to Ashland, Inc. ("Ashland") substantially all of
its assets related to the manufacture and sale of unsaturated polyester resins
("UPR") and maleic anhydride ("MA") and the distribution of UPR and other
polyester products (collectively, the "Polyester Business"). Ashland also
assumed certain of Aristech's liabilities in connection with the Polyester
Business. Aristech retained ownership of the land underlying the production
facility for the Polyester Business located at Neville Island, Pennsylvania.
Aristech continues to manufacture plasticizers at Neville Island. Ashland
generally purchased all physical assets at the Neville Island facility primarily
used in the production of UPR and MA, and Aristech retained those primarily used
to manufacture plasticizers. Aristech granted to Ashland an irrevocable easement
for the land beneath the structures transferred to Ashland and certain areas
around and between those structures, and each party granted the other rights to
permit access to and maintenance of the other party's assets, as necessary.

Ashland and Aristech also entered into a service agreement whereby each agreed
to supply the other with certain services related to the other party's
operations at the Neville Island facility. The prices charged for such services
are generally designed to approximate the supplier's cost of providing the
services. The services agreement contains a mutual release and indemnification
provision whereby each party, as a recipient of services, releases and
indemnifies the other, as a service provider, from and against claims arising
from the acts of the service provider's employees or claims asserted by such
employees in connection with the furnishing of services under the agreement.




                                       10
<PAGE>   11

Aristech agreed to indemnify Ashland against liabilities arising from (i)
breaches of Aristech's representations, warranties and agreements contained in
the asset purchase agreement and related documents and (ii) Aristech's operation
of the Polyester Business prior to the sale. Most of Aristech's representations
and warranties have expired. Aristech's indemnification obligations for breach
of any representation or warranty (whether or not expired) are capped at $30.0
million. The parties' respective obligations with respect to environmental
matters are not covered by the foregoing provisions.

With respect to environmental matters, Aristech: (1) retained liability for any
claims that might be asserted regarding previous shipments of regulated
substances from the business to off-site treatment and disposal facilities; (2)
agreed to indemnify Ashland from enforcement proceedings or penalties arising
from alleged violations of environmental laws resulting from business operations
that may have occurred prior to the closing; and (3) agreed to make certain
modifications of the incinerator at the Jacksonville, Arkansas site to assure
compliance with applicable air quality permit requirements and performance
criteria.

With respect to the Neville Island facility: (1) Aristech agreed (subject to a
number of limitations) to indemnify Ashland against claims arising from
pre-closing environmental contamination conditions, if any, and any
contamination caused by future releases from Aristech's operations; (2) Ashland
agreed to indemnify Aristech from environmental conditions arising from future
releases caused by Ashland; and (3) an allocation arrangement is established
under which responsibility for an environmental condition may be shared. Because
an environmental assessment has not been completed at the Neville Island
facility, the nature and extent of potential environmental contamination has not
been ascertained.

With respect to the other UPR and MA production facilities, Aristech agreed to
indemnify Ashland for any required investigation and remediation of: (1) certain
former waste management units at the Colton, California site; (2) phosphate
contamination in groundwater at the Bartow, Florida site, caused by nearby
mining operations; and (3) contamination in a former waste pond at Bartow.
Aristech also agreed to complete closure of certain listed former waste
management units at those production facilities, and to be responsible for
certain additional assessments or investigations of specifically identified
areas affected by various former solid waste management units and
previously-removed underground storage tanks. Aristech has reserved sufficient
amounts for the estimated costs of completing the presently required
investigations and closure work, although any estimate of the costs associated
with work required in the future cannot be made until further investigations
have been completed. As to remediation of environmental conditions arising from
previous solid waste units, Aristech and Ashland agreed to share such expenses
in excess of an annual deductible amount, under a sliding scale that reduces
Aristech's share from 100% to 0% over 25 years. With respect to other
environmental conditions (including presently unknown and unidentified
conditions), Aristech agreed to share with Ashland costs of additional
investigations and remedial actions, with Aristech's share of such costs based
on a sliding scale that decreases over a 21-year period. Those obligations to
indemnify Ashland are subject to a minimal annual deductible amount.

As to the distribution facilities (all of which were leased properties),
Aristech retained liability for pre-closing environmental conditions, if any,
only until the expiration of the then pending leases. The last of those leases
expired on October 30, 1998. Special provisions govern the allocation of
responsibilities at the leased Ankeny, Iowa distribution facility, as to
contamination resulting from the former operations of the Albaugh Chemical
Company, to the extent that such matters are not covered under an
indemnification provided by the lessor of that property.

All of Aristech's indemnification obligations relating to environmental
conditions at the former UPR and MA business facilities, including Neville
Island, are subject to a cap of $34.0 million, which value is escalated on a
quarterly basis based upon the producer price index.

Mitsubishi Corporation ("MC") entered into a letter agreement with Ashland to
provide certain assurances to Ashland with respect to Aristech's environmental
indemnification obligations to Ashland. The letter agreement prohibits MC, in
its capacity as a controlling stockholder of Aristech, from (i) dissolving
Aristech or (ii) causing Aristech to transfer assets such that the value of its
remaining tangible assets falls below $40.0 million, unless MC provides to
Ashland reasonable security or other financial assurance regarding such
obligations. The letter agreement expires the earliest of (i) April 28, 2020,
(ii) effectuation by Aristech of a public offering of its equity securities,
(iii) MC and its subsidiaries ceasing to own over 50% of Aristech's outstanding
equity securities and (iv) Aristech becoming the subject of a bankruptcy
proceeding.



                                       11
<PAGE>   12


ITEM 2. PROPERTIES

The location and general character of the principal plants and other important
physical properties of the Company are described in Item 1. The plants are
located on properties that are held in fee simple. The executive offices,
research facility at Monroeville, Pennsylvania, polypropylene technical center,
sales offices and warehouses are leased from third parties. The plants and other
facilities have been constructed or acquired from time to time over a period of
years and vary in age and operating efficiency. The Company considers its
properties to be in suitable condition for their intended use and purpose.

In an effort to reduce future selling, general and administrative expenses, the
Company terminated the lease for its executive offices in the USX Tower building
in downtown Pittsburgh. The lease, originally set to expire on July 31, 2001,
was terminated effective March 31, 2000. The Company incurred a net penalty for
early termination of the lease in the amount of $.4 million. The Company signed
a new ten-year lease for office space at the One Oliver Plaza building, also
located in downtown Pittsburgh. The new lease commenced on March 15, 2000, and
the executive offices were relocated to One Oliver Plaza on March 17, 2000. The
Company anticipates that this move will save approximately $18.4 million on
lease payments over the next ten years.

The Company also terminated its lease of the research facility in Monroeville
effective June 26, 2001. This lease was originally set to expire on June 26,
2006. The Company will incur an early cancellation fee of $.4 million. The
research functions currently performed at the Monroeville site will be
transferred to the polypropylene technical center, which will be renamed the
research and technology center, and the Monroeville facility will be closed.

ITEM 3. LEGAL PROCEEDINGS

The Company becomes involved from time to time in various claims and lawsuits
incidental to the ordinary course of its business. A discussion with regards to
these matters is included in Note K to the Consolidated Financial Statements at
Item 8, and "Environmental, Health and Safety Matters" at Item 1.

Aristech is involved, often along with other defendants, in product liability
lawsuits filed in federal and state courts in several jurisdictions; many of
these cases involve multiple plaintiffs. Although Aristech is sometimes a named
defendant, more typically Aristech has assumed the defense for USX Corporation
in these cases as a result of contractual obligations to do so for claims
arising out of the business of the former USS Chemicals Division of USX
Corporation. A majority of these cases have typical and similar factual
allegations, that during the course of the plaintiffs' employment with other
companies they were exposed to benzene or benzene-containing products
manufactured by the various defendants, including the former USS Chemicals
Division of USX Corporation or Aristech. Plaintiffs contend that the alleged
exposures caused physical injuries. Plaintiffs in these cases typically seek
relief in the form of monetary damages, often in unspecified amounts. The
claimed monetary damages in these cases, when taken in the aggregate may be
substantial; however, Aristech does not believe that the claimed monetary
damages are a realistic measure of either the cost to defend or resolve the
cases.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is not an established public trading market for Aristech's shares of
common stock. Aristech declared a cash dividend of $242 per common share on
March 10, 1999, to stockholders of record on that date, payable on March 31,
2000. The total amount of the dividend declared was $3.6 million. Cash dividends
of $4.0 million were paid during the year ended December 31, 1998. At December
31, 1999, there were four holders of Aristech's common stock (See Item 12).



                                       12
<PAGE>   13


ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                   Year Ended December 31:
                                                             (In millions except per share data)

                                        1999               1998              1997              1996              1995
                                     ----------         ----------        ----------        ----------        ----------
<S>                                  <C>                <C>               <C>               <C>               <C>
INCOME STATEMENT DATA
    Sales                            $    786.1         $    830.8        $    897.4        $    906.6        $  1,023.3
    Net Income (Loss) From
      Continuing Operations               (34.9)              14.4               8.0              33.3              60.2


BALANCE SHEET DATA
    Total Assets                     $  1,348.4         $  1,182.1        $  1,097.5        $  1,013.8        $  1,090.0
    Long-term Obligations
      Due After One Year                  593.3              451.0             365.7             309.9             623.2

    Cash Dividends Declared
      Per Common Share               $      242         $      268        $      558        $    1,990        $       --
</TABLE>

See Item 1. "Business - Disposition of Certain Businesses"


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

This discussion should be read in connection with the information contained in
the Consolidated Financial Statements and the notes thereto.

FORWARD-LOOKING INFORMATION

This Form 10-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are intended to come within the safe harbor protection
provided by these sections. These forward-looking statements can be identified
by the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "projected," "contemplates" or "anticipates" or other
comparable terminology and appear throughout this report. The forward-looking
statements are based on management's current views and assumptions regarding
future events and operating performance. No assurance can be given that actual
results covered by forward-looking statements will be achieved. Actual results
may differ materially from those expressed in forward-looking statements due to
the inherent risks and uncertainty in predicting future events, such as the
general state of the economy and political and economic stability in foreign
countries. Changes in prevailing governmental policies and regulatory actions
such as new accounting standards, changes in taxation requirements (including
rate changes, new tax laws, or revised tax law interpretation) and new laws in
domestic or foreign jurisdictions could also adversely impact the accuracy of
forward-looking statements. Additional important factors that could cause the
Company's results to differ from those expressed in its forward-looking
statements include, but are not limited to, the following:

ABILITY TO PASS THROUGH FEEDSTOCK PRICE INCREASES AND PRICE VOLATILITY. Raw
materials account for approximately two-thirds of the Company's total production
cost. As a result, the Company's ability to pass on increases in feedstock costs
to customers has a significant impact on operating results. The ability to pass
on increases in feedstock costs is, to a large extent, related to market
conditions. While the Company generally has been able to pass increases in
feedstock costs on to customers, there can be no assurance that the Company will
be able to do so in the future. The Company's ability to pass on increases in
feedstock costs is particularly subject to uncertainty with respect to the
Company's commodity products. Substantial increases in capacity, both actual and
planned, in certain of the commodity and specialty chemical markets in which the
Company participates can be expected to affect such ability. In addition, prices
of feedstock can be subject to significant price fluctuations. Increases in
costs may not be accompanied by corresponding increases in selling prices for
the Company's products in all instances, regardless of market conditions.



                                       13
<PAGE>   14


DEPENDENCE ON SIGNIFICANT SUPPLIERS. A number of the Company's suppliers provide
a significant amount of raw materials, and if one significant supplier or a
number of significant suppliers were unable to meet their obligations under
present supply contracts, or if such contracts could not be renewed or replaced
upon expiration, raw materials costs incurred by the Company could increase
substantially.

CYCLICALITY OF INDUSTRIES. A substantial portion of the Company's sales are to
customers that manufacture products having end-use applications in the
automotive, housing or construction industries, and such manufacturers are
significantly affected by cyclical fluctuations in those industries. It is
anticipated that reductions in the business levels of these industries would
impact negatively on the Company's sales and profits.

COMPETITIVE INDUSTRY. The Company faces competition from a substantial number of
global and regional competitors, some of which have greater financial, research
and development, production and other resources than the Company. Although
competitive factors vary among the Company's product lines, in general the
Company's competitive position is based primarily on selling prices, product
quality, manufacturing technology, access to raw materials, proximity to markets
and customer service and support. The Company's competitors can be expected in
the future to improve technologies, expand capacity, and, in certain product
lines, develop and introduce new products. While there can be no assurances of
its ability to do so, the Company believes that it will have sufficient
resources to maintain its current position.

POTENTIAL LIABILITIES RELATING TO ENVIRONMENTAL, HEALTH AND SAFETY REGULATIONS.
The chemical industry is subject to numerous federal, state and local laws
relating to the storage, handling, emission, transportation, manufacture and use
of chemicals, the discharge of materials into the environment and the
maintenance of safe conditions in the workplace. United States chemical
manufacturers, including the Company, have expended substantial funds for
compliance with such laws and regulations. Future legislation and regulations
could impose additional costs on the industry. Company production facilities
require permits and licenses that are subject to renewal or modification.
Violations of such permits or licenses could result in substantial sanctions,
which could be civil, criminal, or both. Violations could also result in the
revocation of such permits or licenses. In addition, the operation of any
chemical manufacturing plant entails risk of adverse environmental effect,
including exposure to chemical products or by-products from the Company's
operations. The Company is also involved in investigative or cleanup projects at
waste disposal sites owned by other parties. The Company has agreed to indemnify
certain third parties against certain claims or liabilities, including
liabilities under laws relating to the protection of the environment and the
workplace, relating to assets acquired or divested by the Company. The markets
for most of the Company's products are very price competitive. Therefore, future
environmentally related capital expenditure requirements, liabilities and costs
could be a major factor in the Company's future sales and income, since it may
not always be possible to pass costs on to customers. See Item 1,
"Environmental, Health and Safety Matters" and "Disposition of Certain
Businesses."

RELIANCE ON CONTINUED OPERATION AND SUFFICIENCY OF MANUFACTURING FACILITIES. The
Company's revenues are dependent on the continued operation of its various
manufacturing facilities. Although presently all operating plants are considered
to be in good condition, the operation of manufacturing plants involves many
risks, including the breakdown, failure or substandard performance of equipment,
power outages, the improper installation or operation of equipment, natural
disasters and the need to comply with directives of governmental agencies.
Except for polypropylene, each of the Company's product lines is manufactured at
only a single facility and production could not be transferred to another site.
The occurrence of material operational problems, including but not limited to
the above events, may adversely affect the profitability of the Company during
the period of such operational difficulties. See Item 1, "Plant Profile."

EFFECT OF PLANNED MAINTENANCE TURNAROUNDS. In addition to its routine repair and
maintenance activities, the Company has a program of planned maintenance
turnarounds under which certain facilities are temporarily taken out of
production for repairs and maintenance. To the degree that the cost of planned
maintenance turnarounds is not evenly spread over the program's normal cycle,
year-to-year and quarterly variations in the income can result. Subject to
regulatory inspections and maintaining the Company's safety standards, the
timing of maintenance turnarounds is largely at the discretion of management. In
determining the schedule of maintenance turnarounds, management considers, among
other things, the level of product demand, catalyst life and the operating
performance of the production facility.



                                       14
<PAGE>   15


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1998.

During 1999, the Company's net sales decreased by $44.7 million or 5% from
$830.8 million in 1998 to $786.1 million in 1999. This decrease is primarily due
to a 6% decline in average net selling price per pound shipped, partially offset
by a 1% increase in overall shipment volumes from 1998 to 1999. Net sales for
Chemicals decreased by $53.2 million or 11% from 1998, which was caused by a 9%
decline in the average selling price per pound shipped and a 2% decrease in
shipment volumes. The average net selling prices for Polymers decreased by 3% in
1999, but shipment volumes increased by 7%. This resulted in a net $11.5 million
or 3% increase in Polymers sales.

Total operating costs increased by $32.9 million or 4% from $781.1 million in
1998 to $814.0 million in 1999. Cost of sales increased by $26.9 million in 1999
primarily due to a 5% increase in the average cost per pound for raw materials.
Raw materials account for approximately two-thirds of the Company's total cost
of sales. The average cost per pound for cumene, the Chemicals operating
segment's primary raw material, increased by approximately 7%, while the cost
per pound for propylene, the Polymers operating segment's primary raw material,
increased approximately 1% in 1999. Conversion costs, which represent the
remaining one-third of the Company's cost of sales, increased by $7.6 million or
3% in 1999. This increase was due primarily to one time charges associated with
voluntary early retirement and involuntary separation programs instituted during
1999, start-up costs for the new production units at the Haverhill, Ohio and
LaPorte, Texas plants during the fourth quarter, and increased costs associated
with planned maintenance turnarounds. Partially offsetting was a favorable lower
of cost or market inventory adjustment of $7.6 million.

Selling, general and administrative expenses decreased by $3.0 million or 5%
primarily due to the Company's efforts to aggressively control and reduce these
expenditures in 1999, which included an 11% reduction in the Company's headcount
through the voluntary early retirement and involuntary separation programs. Also
contributing to the overall increase in total operating costs was a $9.0 million
or 17% increase in depreciation and amortization as a result of the capital
expansions completed during 1999.

Operating income (loss) decreased by $77.6 million or 156%, from operating
income of $49.7 million in 1998 to an operating loss of $27.9 million in 1999.
Both the Chemicals and Polymers segments sustained operating losses during 1999
primarily due to declining margins in several major product lines.

Gain (loss) on disposal of assets, net increased by $2.7 million from a loss of
$1.3 million in 1998 to a gain of $1.4 million in 1999. This increase was
primarily due to the $1.5 million gain on the sale of the Company's specialty
polymers division in July 1999.

The Company's total interest expense before interest capitalization increased by
$9.0 million or 26% from $34.1 million in 1998 to $43.1 million in 1999. The
additional interest expense reflects net increased long-term borrowings of
$142.3 million since December 31, 1998. The additional debt was utilized
primarily to finance the Company's ongoing production capacity expansion
program. Partially offsetting the impact of the increased debt levels was a
decrease in interest rates. The Company's weighted-average cost of borrowing
before interest capitalization was 6.2% in 1999 and 6.4% in 1998. The Company
capitalized interest in connection with the capacity expansions of $11.2 million
and $7.4 million in 1999 and 1998, respectively.

The Company's provision (benefit) for income taxes decreased by $32.9 million
from an expense of $6.3 million in 1998 to a benefit of $26.6 million in 1999.
The decrease in income tax expense was caused primarily by a pre-tax operating
loss of $56.2 million in 1999 versus pre-tax operating income of $23.0 million
in 1998. The Company carried these tax losses back two prior years to recover
federal income taxes paid during those periods. The Company filed for, and
received, this refund of income taxes in January 2000. The amount of the refund
was $18.4 million.


                                       15
<PAGE>   16


YEAR ENDED DECEMBER 31, 1998 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1997.

During 1998, the Company's net sales decreased by 7% from $897.4 million in 1997
to $830.8 million in 1998. This decrease is primarily due to a 14% decline in
average net selling prices per pound shipped, despite a 7% increase in overall
shipment volumes from 1997 to 1998. Net sales for Chemicals decreased by $24.0
million or 5% from 1997, which was caused primarily by a 13% decline in the
average selling price per pound shipped, offset by an 8% increase in shipment
volumes. Average net selling prices for Polymers decreased by 14% offset by a 4%
increase in shipment volumes resulting in a 10% or $38.1 million decrease in net
Polymers sales.

Total operating costs decreased by $64.6 million or 8% from $845.7 million in
1997 to $781.1 million in 1998. Feedstock costs, which comprise approximately
two-thirds of the Company's total cost of sales, decreased by $76.7 million and
was primarily attributable to a 28% decrease in the Company's average cost per
pound for raw materials. The Chemicals operating segment's average raw materials
cost per pound, which includes primarily cumene, decreased by approximately 24%,
while the Polymers average raw materials cost per pound, which includes
primarily propylene, decreased by approximately 31%. The Company's conversion
costs, which represent the remaining one-third of costs of sales, remained
consistent with 1997. Partially offsetting the decrease in production costs was
the 1998 recognition of a $9.5 million adjustment to reduce its LIFO inventory
value to the lower of aggregate cost or market value and a $2.4 million LIFO
adjustment; increased selling, general and administrative expenses, that
reflected primarily increased sales and marketing efforts and costs associated
with the Company's year 2000 readiness plan; and increased depreciation expense
due to the Company's ongoing efforts to expand its business.

Operating income (loss) for 1998 remained consistent with 1997; however, the
Chemicals operating segment increased its operating income by $14.8 million,
while Polymers operating income decreased by $16.8 million. The Chemicals
increase came primarily as a result of the increased shipment volumes in
addition to higher margins for Phenol and BPA. For Polymers, the 4% increase in
shipment volumes from 1997 to 1998 was not sufficient to offset the decline in
the spread between net selling prices and raw material costs.

Gain (loss) on disposal of assets, net decreased by $7.9 million from 1997 to
1998 from a loss of $9.2 million to a loss of $1.3 million, primarily due to the
1997 write-off of deferred engineering costs associated with the Company's
consideration of a cumene/phenol complex at Garyville, Louisiana.

The Company's total interest expense before interest capitalization increased by
$9.6 million or 39% from $24.5 million in 1997 to $34.1 million in 1998. The
additional interest expense primarily reflects net increased borrowings to fund
the Company's production capacity expansions. The Company's weighted-average
cost of borrowing before interest capitalization was 6.4% in 1998 and 6.5% in
1997. The Company capitalized interest in connection with the capacity
expansions of $7.4 million and $0.9 million in 1998 and 1997, respectively.

The effective rates on the Company's provision (benefit) for income taxes were
27% and 53% for 1998 and 1997, respectively. The decrease in the effective rate
from 1997 to 1998 was caused primarily by the recognition of income tax benefits
resulting from the anticipated utilization of tax credits originating from the
Company's ongoing production capacity expansions, income tax refunds related to
prior years' foreign sales and lower pretax income during 1997.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996.

Operating income (loss) for 1997 was income of $51.7 million on sales of $897.4
million compared with income of $107.6 million in 1996 on sales of $906.6
million. The reduction in operating income reflects reduced margins in most of
the Company's product lines compared to the prior year. Higher raw materials and
conversion costs more than offset slightly higher product selling prices. Raw
materials and conversion costs increased 8% in 1997 compared to 1996 while
overall average net selling prices increased just 1% in 1997 over 1996. Sales
volumes declined 1% in 1997 compared with the prior year period. In addition,
the Company's operating income in 1997 declined compared to 1996 due to the sale
of the Coal Chemicals Business in March 1996. That business contributed $2.6
million in operating income in 1996.

Selling prices increased slightly in Chemicals and Polymers; however, raw
materials and conversion costs increased at a greater rate. Chemicals raw
materials and conversion costs increased 9% in 1997 while selling prices
increased less than one percent. Raw materials and conversion costs were also



                                       16
<PAGE>   17
higher in Polymers increasing 7% compared with the prior year period. Polymers
overall pricing increased less than one percent in 1997 compared to 1996. Sales
volumes increased 2% for Polymers but declined 2% in Chemicals.

Selling, general and administrative expenses increased $3.9 million or 8% in
1997 compared to the prior year due, in large part, to the consolidation of
expenses relating to Avonite. Selling, general and administrative expenses for
Avonite were $5.7 million in 1997 as compared to $2.3 million in 1996. Avonite
became a consolidated subsidiary on July 1, 1996.

Gain (loss) on disposal of assets, net was a loss of $9.2 million in 1997, an
increase of $1.3 million compared to the prior year period. The loss on disposal
of assets in 1997 was primarily attributable to the write-off of deferred
engineering costs associated with the Company's consideration of a cumene/phenol
complex at Garyville, Louisiana.

Interest expense was $23.6 million in 1997 as compared to $37.9 million for the
prior year. The $14.3 million decrease in interest expense resulted primarily
from the conversion of $179.5 million in principal amount of the Company's
payment-in-kind debentures to common stock on September 30, 1996.

The provision (benefit) for income taxes for 1997 was a provision of $9.3
million compared with a provision of $27.6 million for the prior year. The
Company's effective tax rate has increased to 53% in 1997 from 45% in 1996 as a
result of the amortization of excess of cost over assets acquired and lower
pre-tax income.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital balance at December 31, 1999, was $13.2 million,
as compared to $5.6 million and $74.6 million at December 31, 1998 and 1997,
respectively. The $7.6 million increase in working capital during 1999 was due
primarily to the increase in cash and equivalents, receivables, and the
subordinated note receivable from a related party, partially offset by a $57.5
million increase in current liabilities. The increase in cash and equivalents
was primarily due to the timing of cash payments and corresponds with the
increase in accounts payable. The increase in receivables was due primarily to
the recording of an $18.4 million tax refund receivable as a result of the
Company's net taxable loss in 1999. Also contributing was the increased sales
activity at the end of the year as a result of the start-up of the new phenol
line at the Haverhill, Ohio plant and the new polypropylene line at the LaPorte,
Texas plant. The increased sales activity also resulted in increased activity
with Aristech Receivables Company LLC, resulting in the increase in the
subordinated note receivable from a related party. The increase in current
liabilities was driven by a $53.1 million increase in accounts payable resulting
primarily from an increase in the prices of raw materials. The $69.0 million
decrease in working capital from 1997 to 1998 was primarily due to the sale of
receivables in 1998 to finance a portion of the Company's capacity expansion
program.

The Company's net cash provided by operating activities was $41.9 million, $49.9
million and $68.3 million for the years ended December 31, 1999, 1998 and 1997,
respectively. The $8.0 million decrease from 1998 to 1999 was primarily due to
the negative cash flow impact of the $49.3 million decrease in net income from
1998. Partially offsetting was the favorable impact of the increase in accounts
payable previously mentioned and an increase in depreciation expense as a result
of the recent capital expansions. The $18.4 million decrease in operating cash
flows from 1997 to 1998 occurred primarily as a result of changes in the
Company's working capital requirements.

The Company during 1997 and 1998 funded its short-term working capital
requirements primarily through borrowings on a $50.0 million discretionary line
of credit with a commercial bank. During the first half of 1999, the Company
obtained two additional discretionary lines of credit with commercial banks to
supplement the existing line of credit. The total aggregate borrowing capacity
on the new lines of credit was $40.0 million and the Company had fully drawn on
these lines of credit by September 30, 1999. Effective September 17, 1999, the
amount of the $50.0 million discretionary line of credit was reduced by the
commercial bank to $44.9 million. The commercial bank notified Aristech on
October 20, that it was terminating the $44.9 million discretionary line of
credit in view of conditions in the chemical markets in which Aristech
participates in general, the recent financial performance of Aristech in
particular, and the bank's insufficient returns on its loaned capital. Pursuant
to an agreement between Aristech and the commercial bank regarding such
termination of the facility, Aristech made principal repayments of $15.0 million
on October 29, and $29.9 million on November 30, extinguishing this line of
credit.



                                       17
<PAGE>   18


On November 30, 1999, the Company entered into a second $70.0 million revolving
loan agreement with MIC ("Revolving Loan 2"). This loan was arranged to repay
the balance outstanding under the $50.0 million short-term discretionary line of
credit with a commercial bank and to provide increased operating flexibility.
This is a variable-rate loan with an original maturity date of March 31, 2000,
subject to renewal. In accordance with MC's intent to provide funding support to
the Company, the loan was renewed by MC effective as of March 29, 2000, and
extended to March 31, 2001. As of December 31, 1999, the outstanding balance on
Revolving Loan 2 was $28.0 million. This revolving loan is unconditionally and
irrevocably guaranteed by MC.

During November 1999, MC provided additional support to the Company by
committing to guarantee up to $190.0 million of the Company's obligations to
March 31, 2000. Revolving Loan 2 utilized $70.0 million of this commitment.
Effective as of March 15, 2000, this $190.0 million commitment was renewed to
March 31, 2001.

Effective as of March 6, 2000, the Company arranged for a third revolving loan
with MIC in the amount of $30.0 million ("Revolving Loan 3"). This is a
variable-rate loan with an original maturity date of March 31, 2000, subject to
renewal. In accordance with MC's intent to provide funding support to the
Company, the loan was renewed by MIC effective as of March 29, 2000, and
extended to March 31, 2001. The loan utilized a portion of MC's commitment to
guarantee up to $190.0 million of the Company's obligations to March 31, 2001.
As of March 30, 2000, there were no outstanding borrowings under Revolving Loan
3.

Effective as of March 29, 2000, the Company increased the maximum borrowing
limit of the trade receivables financing facility between Aristech Receivables
Company LLC and Morgan Guaranty Trust Company of New York to $100.0 million and
renewed the facility for an additional 364 days to March 28, 2001.

The Company's financing activities during the past three years have primarily
consisted of additional net borrowings on long-term debt of $279.8 million and
the sale of receivables with net proceeds of $83.8 million. The proceeds from
financing activities have been utilized primarily to fund the Company's capital
expansion program.

During the first quarter of 1999, the Company implemented measures to reduce
future operating costs, including selling, general and administrative expenses.
As one of the measures, incentives were offered to employees covered under the
Aristech Salaried Pension Plan to voluntarily elect early retirement in exchange
for certain increased pension benefits. In addition to the voluntary retirement
programs, the Company instituted an involuntary termination program during 1999.
In connection with these programs, the Company has recorded one-time estimated
charges totaling $10.5 million and reduced its headcount by approximately 200
employees or 11%. The Company anticipates that any remaining costs associated
with these programs will not have a material adverse effect on the Company's
financial position, results of its operations or its cash flows. The Company
anticipates future annual cost savings of approximately $14.9 million associated
with the reduction in personnel.

The Company anticipates that the remaining outstanding fixed capital commitments
connected to the capacity expansion program, and future working capital
requirements will be funded by cash flows from operations or, if necessary,
additional borrowings from existing or replacement facilities.

CAPITAL EXPENDITURES

The Company's capital expenditures were $162.4 million in 1999, $231.8 million
in 1998 and $101.9 million in 1997. Capital expenditures in the three-year
period ended December 31, 1999 primarily reflect production capacity expansions
within the phenol product line at the Haverhill, Ohio plant, the polypropylene
product line at the LaPorte, Texas plant, and the acrylic sheet product line at
AALLC's Florence, Kentucky plant. The capacity expansions at the LaPorte, Texas
and Haverhill, Ohio plants were completed in September and November of 1999,
respectively. The capacity expansion at AALLC was completed in February of 2000.
Capital expenditures in 1999 were funded by cash flows from operations and net
additional long-term borrowings of $142.3 million. Capital expenditures in 1998
were funded from cash flows from operations, net additional long-term borrowings
of $97.4 million and $82.1 million in proceeds from the sale of trade
receivables. The 1997 capital expenditures were funded by cash flows from
operations and net additional long-term borrowings of $40.1 million. At December
31, 1999, the Company had remaining outstanding fixed commitments for capital
expenditures totaling $10.8 million.



                                       18
<PAGE>   19


RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS No. 133 as amended by SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" is effective for fiscal quarters of fiscal years
beginning after June 15, 2000. The Company has not yet determined the effect of
this standard on its financial position or results of operations.

YEAR 2000 DISCLOSURE

The Company's Year 2000 ("Y2K") preparations were substantially completed in
late 1999 at a total cost of approximately $8.0 million. Remaining expenditures
related to system upgrades and other Y2K projects are expected to be minimal.
The Company experienced no significant problems as a result of Y2K, either
internally or from external sources such as suppliers and customers, and does
not anticipate any future problems to occur as a result of Y2K.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Approximately 79% of the Company's sales are sold domestically, with the
remaining 21% representing export sales. Sales in currencies other than the US
dollar are insignificant thereby minimizing any market risk exposure due to
changes in foreign exchange rates. However, the Company, in connection with its
ongoing capacity expansion, purchased certain machinery and equipment at amounts
denominated in foreign currencies that were hedged to optimize the US dollar
value. Any gain or loss resulting from the purchased machinery will not have a
significant effect on the Company's results of operations.

The Company does not currently engage in any significant investing activities as
available funds are used for business expansion, thereby eliminating any
investment-related market risk exposure.

The Company does, however, focus on interest rate risk management primarily to
manage the overall cost of funding provided to the Company. The Company has
strategically financed its business expansion with diverse and cost-effective
debt instruments at both fixed and variable interest rates. The majority of the
Company's variable-rate, long-term debt is currently based on the London
Interbank Offered Rate ("LIBOR"). During 1999, the Company entered into three
interest rate swap agreements aggregating $100.0 million in notional principal
amount with a commercial bank. The purpose of the agreements is to help the
Company further manage its overall cost of borrowing. The swap structure
involves the exchange of interest cash flows for a minimum of three years and
potentially a maximum of seven years. For the first three years beginning
November 15, 1999, the Company will pay a weighted average fixed interest rate
of 6.185% in exchange for receiving a fixed interest rate of 6.875%, resulting
in total savings to the Company of approximately $2.1 million over the first
three years. Interest expense was correspondingly reduced by $.1 million in
1999. Subsequently, for the last four years of the agreements, the Company is
obligated to pay a variable interest rate equal to the six-month LIBOR in
exchange for receiving a fixed interest rate of 6.875%. The swap counterparty
has the option to terminate the agreements on selected dates during the final
four years of the agreements.

A hypothetical 1% increase in the interest rate for the Company's variable-rate,
long-term debt would increase annual interest expense by approximately $3.3
million. Actual changes in interest rates may differ from hypothetical changes.
This analysis does not take into effect other changes that might occur in the
economic environment due to such changes in short-term interest rates. The
Company's debt instruments are monitored daily to eliminate, to the extent
possible, any significant interest rate risk exposure. At December 31, 1999, the
fair value of the Company's outstanding long-term debt was $582.6 million
compared to its respective carrying amount of $594.0 million.

The Company does not enter into any material fixed purchase or fixed supply
contracts with its suppliers or customers, or engage in any material hedging
activities to mitigate any related commodity price risk.



                                       19
<PAGE>   20


ITEM 8.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Index to the Consolidated Financial Statements:                            Page
                                                                           ----
<S>                                                                        <C>
Independent Auditors' Report                                                20

Consolidated Statements of Operations For the Years Ended
     December 31, 1999, 1998 and 1997                                       21

Consolidated Balance Sheets, December 31, 1999 and 1998                     22

Consolidated Statements of Cash Flows For the Years Ended
     December 31, 1999, 1998 and 1997                                       23

Consolidated Statements of Stockholders' Equity For the Years
     Ended December 31, 1999, 1998 and 1997                                 24

Notes to the Consolidated Financial Statements                              25
</TABLE>

INDEPENDENT AUDITORS' REPORT


Aristech Chemical Corporation:


We have audited the accompanying consolidated balance sheets of Aristech
Chemical Corporation and its subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1999.
Our audits also included the consolidated financial statement schedule listed in
the Exhibit at Item 14. These consolidated financial statements and consolidated
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on the consolidated financial
statements and consolidated financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Aristech Chemical Corporation and
its subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.



Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 7, 2000 (except for Note F and Note O,
as to which the date is March 29, 2000)



                                       20
<PAGE>   21


                          ARISTECH CHEMICAL CORPORATION
                      Consolidated Statements of Operations
              For the Years Ended December 31, 1999, 1998 and 1997
                              (Dollars in Millions)


<TABLE>
<CAPTION>
                                                            1999           1998           1997
                                                           ------         ------         ------
<S>                                                        <C>            <C>            <C>
Sales                                                      $786.1         $830.8         $897.4
                                                           ------         ------         ------

Operating Costs:
     Cost of sales                                          695.4          668.5          745.6
     Selling, general and administrative expenses            56.9           59.9           50.8
     Depreciation and amortization                           61.7           52.7           49.3
                                                           ------         ------         ------

         Total Operating Costs                              814.0          781.1          845.7
                                                           ------         ------         ------

Operating Income (Loss)                                     (27.9)          49.7           51.7

Gain (Loss) on Disposal of Assets, Net                        1.4           (1.3)          (9.2)
Other Expense, Net                                           (0.1)          (1.0)          (1.7)
Interest Income                                               2.3            2.3            0.5
Interest Expense                                            (31.9)         (26.7)         (23.6)
                                                           ------         ------         ------

Income (Loss) Before Income Taxes                           (56.2)          23.0           17.7

Provision (Benefit) for Income Taxes                        (26.6)           6.3            9.3
                                                           ------         ------         ------

Income (Loss) Before Minority Interest                      (29.6)          16.7            8.4

Minority Interest                                            (5.3)          (2.3)          (0.4)
                                                           ------         ------         ------

Net Income (Loss)                                          $(34.9)        $ 14.4         $  8.0
                                                           ======         ======         ======


Related Party Transactions:
     Sales                                                 $ 62.2         $ 52.9         $ 70.9
     Purchases                                               27.0           26.4           24.2
     Interest Expense                                        12.4           11.0            9.9
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                       21
<PAGE>   22


                      ARISTECH CHEMICAL CORPORATION
                       Consolidated Balance Sheets
                        December 31, 1999 and 1998
                          (Dollars in Millions)


<TABLE>
<CAPTION>
                                                                           1999             1998
                                                                         --------         --------
<S>                                                                      <C>              <C>
ASSETS
Current Assets:
     Cash and equivalents                                                $   22.5         $    1.1
     Receivables (less allowance for doubtful accounts of $.3
        and $.2 at December 31, 1999 and 1998, respectively)                 36.7              4.4
     Subordinated note receivable - related party                            24.2             17.9
     Inventories                                                            128.8            124.3
     Other current assets                                                     1.7              1.1
                                                                         --------         --------
        Total Current Assets                                                213.9            148.8

Property, plant and equipment, net                                          950.4            845.5
Long-term receivables                                                         7.8              8.0
Excess cost over assets acquired                                            156.4            162.2
Deferred income taxes                                                         8.2              1.4
Other assets                                                                 11.7             16.2
                                                                         --------         --------
        Total Assets                                                     $1,348.4         $1,182.1
                                                                         ========         ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable                                                    $  107.7         $   54.6
     Accounts payable - related parties                                       5.6              3.9
     Payroll and benefits payable                                             8.8              9.3
     Accrued taxes                                                            8.6              7.3
     Deferred income taxes                                                    3.3              0.5
     Short-term borrowings                                                   40.0             45.9
     Long-term debt due within one year                                       0.7              0.7
     Other current liabilities                                               26.0             21.0
                                                                         --------         --------
        Total Current Liabilities                                           200.7            143.2

Long-term debt - related parties                                            278.0            135.0
Long-term debt - other                                                      315.3            316.0
Deferred income taxes                                                       155.8            160.3
Other liabilities                                                            43.9             38.7
                                                                         --------         --------
        Total Liabilities                                                   993.7            793.2
                                                                         --------         --------

Minority Interest                                                            11.7              7.4
                                                                         --------         --------

Common stock ($.01 par value, 20,000 shares authorized, 14,908
     shares issued at December 31, 1999 and 1998, respectively)              --               --
Additional paid-in capital                                                  382.5            382.5
Retained deficit                                                            (39.5)            (1.0)
                                                                         --------         --------
        Total Stockholders' Equity                                          343.0            381.5
                                                                         --------         --------

        Total Liabilities and Stockholders' Equity                       $1,348.4         $1,182.1
                                                                         ========         ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.



                                       22
<PAGE>   23


                         ARISTECH CHEMICAL CORPORATION
                     Consolidated Statements of Cash Flows
              For the Years Ended December 31, 1999, 1998 and 1997
                             (Dollars in Millions)


<TABLE>
<CAPTION>
                                                                    1999             1998             1997
                                                                  -------          -------          -------
<S>                                                               <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income (Loss)                                            $ (34.9)         $  14.4          $   8.0
Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
       Depreciation                                                  56.5             47.5             44.1
       Amortization of excess cost over assets acquired               5.2              5.2              5.2
       Amortization of merger expenses                                2.0              2.0              2.0
       Deferred income taxes                                         (7.7)            (6.0)             1.5
       Discount on sale of receivables                                6.2              5.2               --
       (Gain) loss on disposal of assets                             (1.4)             1.3              9.2
       Income from equity investment                                 (0.5)            (0.2)              --
       (Increase) decrease in receivables                           (46.5)             4.6             (4.0)
       Increase in inventories                                       (4.5)            (0.8)           (10.4)
       Increase (decrease) in accounts payable
          and other current liabilities                              56.2            (26.5)            10.0
       Minority interest in consolidated subsidiary                   5.3              2.3              0.4
       Other                                                          6.0              0.9              2.3
                                                                  -------          -------          -------
Net Cash Provided by Operating Activities                            41.9             49.9             68.3

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                          (162.4)          (231.8)          (101.9)
     Proceeds from disposal of assets                                 1.8               --               --
     Long-term receivables                                            0.2               --             (8.3)
                                                                  -------          -------          -------
Net Cash Used in Investing Activities                              (160.4)          (231.8)          (110.2)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net increase (decrease) in short-term borrowings                (5.9)             3.6              1.9
     Repayment of long-term debt                                    (92.9)          (259.6)          (167.3)
     Proceeds from issuance of long-term debt                       235.2            357.0            207.4
     Net proceeds from sale of receivables                            1.7             82.1               --
     Long-term debt issuance costs                                     --               --              0.2
     Dividends paid                                                    --             (4.0)            (8.3)
     Distribution to minority interest partner                       (1.0)              --               --
     Proceeds from equity contribution to AALLC                        --               --             10.0
     Other                                                            2.8               --               --
                                                                  -------          -------          -------
Net Cash Provided by Financing Activities                           139.9            179.1             43.9

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                      21.4             (2.8)             2.0
Cash and Equivalents, Beginning of Year                               1.1              3.9              1.9
                                                                  -------          -------          -------
Cash and Equivalents, End of Year                                 $  22.5          $   1.1          $   3.9
                                                                  =======          =======          =======


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the year for:
       Interest (net of amount capitalized)                       $  29.5          $  26.5          $  23.2
       Income taxes                                                   0.8             11.7             14.5
</TABLE>


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
     On March 10, 1999, the Board of Directors declared a cash dividend of $242
     per common share payable on March 31, 2000, to stockholders of record as of
     March 10, 1999. The total amount of the dividend was $3.6 million.

     During 1998, Avonite converted the Note payable to an Avonite stockholder
     of $12.4 million and Notes Payable to Aristech totaling $9.0 million to
     shares of common stock of Avonite (see Note L).

     During 1997, the Company acquired property, plant and equipment with a cost
     of $16.2 million financed through a capital lease obligation.


   The accompanying notes are an integral part of these financial statements.



                                       23
<PAGE>   24


                         ARISTECH CHEMICAL CORPORATION
                Consolidated Statements of Stockholders' Equity
              For the Years Ended December 31, 1999, 1998 and 1997
                             (Dollars in Millions)


<TABLE>
<CAPTION>
                                                                       Additional                          Total
                                                         Common         Paid-in          Retained       Stockholders'
                                                         Stock          Capital          Deficit           Equity
                                                         ------        ----------        --------       -------------
<S>                                                      <C>           <C>               <C>            <C>
Balance, January 1, 1997                                   $--           $378.8           $(25.2)           $353.6

Net income                                                  --               --              8.0               8.0

Dividend - common stock                                     --               --             (8.3)             (8.3)

Proceeds from equity contribution to AALLC                  --              7.5               --               7.5
                                                           ---           ------           ------            ------

Balance, December 31, 1997                                  --            386.3            (25.5)            360.8

Net income                                                  --               --             14.4              14.4

Dividend - common stock                                     --               --             (4.0)             (4.0)

Conversion of Note Payable to Avonite
     Stockholder to Avonite common stock                    --             12.4               --              12.4

Avonite capital restructuring                               --            (16.2)            14.1              (2.1)
                                                           ---           ------           ------            ------

Balance, December 31, 1998                                  --            382.5             (1.0)            381.5

Net loss                                                    --               --            (34.9)            (34.9)

Dividend declared - common stock                            --               --             (3.6)             (3.6)
                                                           ---           ------           ------            ------

Balance, December 31, 1999                                 $--           $382.5           $(39.5)           $343.0
                                                           ===           ======           ======            ======
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       24
<PAGE>   25


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Aristech Chemical Corporation ("Aristech") was incorporated under the laws of
the State of Delaware on October 14, 1986 as a wholly owned subsidiary of USX
Corporation ("USX"). On December 4, 1986, USX transferred substantially all of
the assets and liabilities of its USS Chemicals Division to Aristech, and
Aristech's common stock was offered and sold to the public. The USS Chemicals
Division was formed by USX in 1966. On March 7, 1990, Mitsubishi Corporation
("MC"), certain other investors and certain members of Aristech's management
acquired Aristech in a going-private transaction. The interest of certain of the
investors, including the management investors, has subsequently been reacquired
and MC beneficially owns 82.3% of Aristech's outstanding common stock. The
"Company" refers to Aristech and its majority-owned consolidated subsidiaries
(see Note L).

NATURE OF OPERATIONS

The Company is a producer and marketer of chemical and polymer products that are
generally sold for further processing by manufacturers of automotive components,
construction materials and consumer products.

BASIS OF PRESENTATION

The accompanying consolidated financial statements of Aristech Chemical
Corporation include the accounts of the Company and its majority-owned
consolidated subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation. Investments in unconsolidated subsidiaries are
accounted for under the equity method.

Certain reclassifications were made to the prior years' consolidated financial
statements to conform to the classifications used in the 1999 consolidated
financial statements.

ACCOUNTING CHANGES

In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" was issued. SFAS No. 133 as amended by SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" is effective for fiscal quarters of fiscal years
beginning after June 15, 2000. The Company has not yet determined the effect of
this standard on its financial position or results of operations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

CASH EQUIVALENTS

The Company considers all highly liquid instruments with a maturity of three
months or less at the date of purchase to be cash equivalents. Such investments
are carried at cost which approximates fair value.

INVENTORIES

Inventories are stated at the lower of aggregate cost or market. Cost is
determined primarily by the last-in, first-out ("LIFO") method.




                                       25
<PAGE>   26


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Major replacements and
improvements that extend the life of the property are capitalized, while
maintenance and repairs are expensed as incurred. The Company capitalizes the
interest cost ($11.2 million in 1999 and $7.4 million in 1998) associated with
major property additions while in progress and amortizes the amount over the
useful lives of the related assets. Depreciation of plant and equipment is
computed on the straight-line method.

When a plant or major facility within a plant is sold or otherwise disposed of,
any gain or loss is reflected in the consolidated statement of income. Proceeds
from the sale of other facilities depreciated on a group basis are credited to
the depreciation reserve.

EXCESS COST OVER ASSETS ACQUIRED

The acquisition of Aristech by MC was accounted for as a purchase transaction
with the purchase price being allocated to assets and liabilities based on their
fair values as of the date of acquisition. The excess cost over the fair value
of assets acquired is generally amortized on a straight-line basis over a period
of 40 years. Such amount associated with the 1990 acquisition has been allocated
to each of the Company's businesses based on historical operating results prior
to the acquisition. Accumulated amortization of the excess cost over assets
acquired was $64.8 million and $59.6 million at December 31, 1999 and 1998,
respectively.

INCOME TAXES

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, deferred income taxes are recognized for the
estimated taxes ultimately payable or recoverable based on enacted tax law. The
deferred income taxes are computed annually for differences between book and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future.

PENSIONS

The Company maintains defined benefit pension plans for substantially all of its
employees with benefits based on compensation and years of service. The
Company's funding practice is to contribute annually not less than the
actuarially determined minimum funding requirements of the Employee Retirement
Income Security Act of 1974 nor more than the maximum funding limitation under
the Internal Revenue Code. Contributions are intended to provide for benefits
for service to date and for benefits expected to be earned in the future.

The Company also maintains defined contribution plans that cover certain
eligible salaried and hourly employees. The Company's cost is determined based
on a percentage of compensation as defined by the plans.

FINANCIAL INSTRUMENTS

The Company uses foreign currency contracts to manage its exposure against
foreign currency rate fluctuations on sales and purchases denominated in foreign
currencies. Gains and losses on foreign currency contracts are recognized in the
period in which the hedged transactions are settled.

The Company enters into interest rate swap agreements as part of its program to
manage its overall cost of borrowing. Interest rate swaps are agreements to
exchange interest rate payment streams based on a notional principal amount. The
Company utilizes settlement accounting principles for interest rate swaps in
which the interest rate differentials to be paid or received caused by
fluctuations in interest rates are recorded currently as adjustments to interest
expense.




                                       26
<PAGE>   27


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME RECOGNITION

Sales and related costs of sales are included in income when goods are shipped
or services are rendered to the customer.

ENVIRONMENTAL COMPLIANCE AND REMEDIATION

Environmental compliance costs include maintenance, monitoring and similar
costs. Such costs are expensed as incurred. Costs for long-term operations and
maintenance obligations at sites subject to a regulatory agreement are accrued
in advance based upon management's estimate. Except to the extent costs can be
capitalized, environmental remediation costs are fully accrued when
environmental assessments and/or remedial efforts are probable and the cost can
be reasonably estimated.

NOTE B - RECEIVABLES

On April 1, 1998, Aristech entered into an agreement with Morgan Guaranty Trust
Company of New York and Delaware Funding Corporation ("DFC") to finance its
trade receivables. Pursuant to the agreement, Aristech sells its trade
receivables, as generated through operations, to Aristech Receivables Company
LLC ("ARC"), a Delaware limited liability company. ARC is a 100% owned
unconsolidated subsidiary of Aristech. ARC, in turn, sells an undivided interest
in the trade receivables to DFC on a nonrecourse basis, that provides for a
revolving financing facility to ARC for a maximum of $100.0 million. Effective
March 1, 1999, the Company and DFC agreed to reduce the maximum borrowing limit
from $100.0 million to $90.0 million, and effective April 12, 1999, the limit
was further reduced to $80.0 million. Effective November 17, 1999, the Company
and DFC agreed to increase the maximum borrowing limit back to the $90.0 million
level. Collections received on the receivables reduce the amount owed under the
facility. As new trade receivables are generated through operations, those
receivables are sold to ARC and then an undivided interest in those receivables
is sold to DFC. The agreement expires on March 29, 2000, and may be extended for
additional periods not to exceed 364 days from the extension date.

Initial proceeds from the sale amounted to $91.5 million and were used primarily
to reduce the amount outstanding on the Revolving Loan - Mitsubishi
International Corporation ("MIC"). Ongoing costs of the financing will
approximate DFC's cost of issuing asset-backed commercial paper to fund the
purchase plus a program fee. Aristech accounted for the sale of receivables to
ARC as a sale under the provisions of SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". At December
31, 1999, Aristech had $111.6 million of its outstanding trade receivables sold
to ARC for cash proceeds of $83.8 million and a subordinated note receivable due
from ARC of $24.2 million. The amount of the subordinated note receivable due to
Aristech from ARC is subordinated to ARC's ultimate repayment of the amount
outstanding ($83.8 million at December 31, 1999) to DFC under the revolving
financing facility.

NOTE C - INVENTORIES

Inventories consist of the following at December 31:

<TABLE>
<CAPTION>
                                          1999           1998
                                         ------         ------
(In millions)
<S>                                      <C>            <C>
Raw materials                            $ 36.8         $ 34.9
Finished products                          73.3           79.4
Supplies and sundry items                  20.6           19.5
Lower of cost or market reserve            (1.9)          (9.5)
                                         ------         ------
    Total Inventory                      $128.8         $124.3
                                         ======         ======
</TABLE>

The current cost of inventories at December 31, 1999 and 1998 was $123.0 million
and $112.2 million, respectively.

LIFO liquidations had a $.7 million favorable impact on the results of
operations in 1999 and an unfavorable impact of $1.2 million during 1998. There
were no significant LIFO liquidations in 1997.



                                       27
<PAGE>   28


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE D - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                              Estimated Useful
                                              Lives (In Years)           1999                 1998
                                              ----------------         --------             --------
(In millions)
<S>                                           <C>                      <C>                  <C>
Land                                                  --               $   13.9             $   14.1
Buildings                                             35                   75.0                 66.7
Machinery and equipment                             4 to 22             1,189.7                860.3
Construction in process                               --                   44.0                224.4
                                                                       --------             --------
                                                                        1,322.6              1,165.5
Accumulated depreciation                                                 (372.2)              (320.0)
                                                                       --------             --------
    Property, plant and equipment, net                                 $  950.4             $  845.5
                                                                       ========             ========
</TABLE>


The Company had contract commitments for capital expenditures for property,
plant and equipment totaling $10.8 million at December 31, 1999.

Of the total property, plant and equipment at December 31, 1999 and 1998, the
Company has the following leased under capital lease agreements:


<TABLE>
<CAPTION>
                                          1999            1998
                                         -----           -----
(In millions)
<S>                                      <C>             <C>
     Land                                $ 0.2           $ 0.2
     Buildings                            15.9            16.0
     Machinery and equipment               2.2             2.1
                                         -----           -----
                                          18.3            18.3
     Accumulated depreciation             (2.9)           (2.1)
                                         -----           -----
                                         $15.4           $16.2
                                         =====           =====
</TABLE>


The Company leases certain property and equipment, primarily railway equipment
and buildings, under operating lease agreements generally with terms ranging
from five to twenty years including certain renewal options (see Note F).
Operating lease rental expense for the years ended December 31, 1999, 1998 and
1997 was $11.2 million, $12.1 million and $10.8 million, respectively.

The Company had the following other operating costs at December 31:


<TABLE>
<CAPTION>
(In millions)                                                 1999         1998         1997
                                                             -----        -----        -----
<S>                                                          <C>          <C>          <C>
     Maintenance and repairs of plant and equipment          $30.2        $26.4        $32.0
     Research and development costs                           16.0         16.2         13.0
</TABLE>


NOTE E - LONG-TERM RECEIVABLES

In May of 1996, the Company entered into an agreement with the Pittsburgh
Economic and Industrial Development Corporation ("PEIDC") which provided that
the Company would assist in financing the construction of its leased
polypropylene technical center. Under this agreement, the Company advanced a
total of $8.4 million to PEIDC during 1997. The advance is scheduled to be
repaid monthly including interest at a rate of 8.25% per annum over the
Company's 20 year lease term for the facility, which commenced in November 1997.
At December 31, 1999 and 1998, $7.8 million and $8.0 million were outstanding
under this agreement as long-term receivables with an additional $0.2 million
included in other current assets.




                                       28
<PAGE>   29


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE F - LONG-TERM DEBT

Long-term debt consisted of the following at December 31:


<TABLE>
<CAPTION>
                                                                                         1999           1998
                                                                                        ------         ------
(In millions)
<S>                                                                                     <C>            <C>
Revolving Loan - MIC, $200.0 maximum commitment amount, due April 18, 2002,
     bearing interest at a variable rate (effectively 6.0%
     and 6.1% for 1999 and 1998, respectively)                                          $   --         $ 85.0

Revolving Loan 1 - MIC, $70.0 maximum commitment amount, due April 18, 2002,
     bearing interest at a variable rate (effectively 6.0%
     for 1999)                                                                            70.0             --

Revolving Loan 2 - MIC, $70.0 maximum commitment amount, due March 31, 2001,
     bearing interest at a variable rate (effectively 7.0%
     for 1999)                                                                            28.0             --

Term Loan - MIC, due April 18, 2002, bearing interest at a variable
     rate (effectively 6.0% for 1999)                                                    130.0             --

Term Loan - MIC, due April 18, 2002, bearing interest at a variable
     rate (effectively 6.1% for 1999 and 1998)                                            50.0           50.0
                                                                                        ------         ------

         Total long-term debt - related parties                                          278.0          135.0
                                                                                        ------         ------

Revolving Loan - Gotham Funding Corporation ("GFC") and Broadway Capital
     Corporation ("BCC"), unsecured, $150.0 million maximum commitment amount,
     due March 31, 2001, bearing interest at a variable rate (effectively 5.7%
     and 6.0% for 1999 and 1998, respectively)  The facility is unconditionally
     and irrevocably guaranteed by MC                                                    150.0          150.0

6-7/8% Notes, dated November 25, 1996, due November 15, 2006, with semiannual
     interest payments due May 15 and November
     15 of each year                                                                     149.2          149.1

Capital lease obligations, maturing at various dates from 1999 to 2017,
     with a weighted average interest rate of 6.0% at December 31, 1999                   15.3           15.9

Other                                                                                      1.5            1.7
                                                                                        ------         ------
                                                                                         594.0          451.7
     Less amount due within one year                                                      (0.7)          (0.7)
                                                                                        ------         ------
         Total Long-term debt                                                           $593.3         $451.0
                                                                                        ======         ======
</TABLE>



                                       29
<PAGE>   30


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE F - LONG-TERM DEBT (CONTINUED)

Maturities of the Company's long-term debt and minimum annual rental commitments
for non-cancelable leases with initial or remaining lease terms in excess of one
year as of December 31, 1999 are as follows:


<TABLE>
<CAPTION>
                                                               Long-term Debt
                                                           ----------------------
                                                           Capital          All           Operating
         (In Millions)                                      Leases         Other            Leases
                                                           -------         ------         ---------
         <S>                                               <C>             <C>            <C>
            2000                                            $ 1.6          $  0.1           $ 15.0
            2001                                              1.5           178.1             10.4
            2002                                              1.4           250.1              9.0
            2003                                              1.4             0.1              8.0
            2004                                              1.4             0.1              6.9
            Thereafter                                       17.5           150.3             64.2
              Amount representing interest                   (9.6)             --               --
                                                            -----          ------           ------
                 Total                                      $15.2          $578.8           $113.5
                                                            =====          ======           ======
</TABLE>


On November 30, 1999, the Company entered into a second $70.0 million revolving
loan agreement with MIC ("Revolving Loan 2"). This loan was arranged to repay
the balance outstanding under the $50.0 million short-term, discretionary line
of credit with a commercial bank (see Note G) and to provide increased operating
flexibility. This is a variable-rate loan with an original maturity date of
March 31, 2000, subject to renewal. In accordance with MC's intent to provide
funding support to the Company, the loan was renewed by MIC effective as of
March 29, 2000, and extended to March 31, 2001 (see Note O). As of December 31,
1999, the outstanding balance on Revolving Loan 2 was $28.0 million. This
revolving loan is unconditionally and irrevocably guaranteed by MC.

During November 1999, MC provided additional support to the Company by
committing to guarantee up to $190.0 million of the Company's obligations to
March 31, 2000. Revolving Loan 2 utilized $70.0 million of this commitment.
Effective as of March 15, 2000, this $190.0 million commitment was renewed to
March 31, 2001 (see Note O).

On April 1, 1999, the $200.0 million Revolving Loan with MIC was restructured
into a $130.0 million Term Loan and a $70.0 million Revolving Loan ("Revolving
Loan 1"), both due on April 18, 2002. As of December 31, 1999, the outstanding
balance on the Term Loan was $130.0 million and the outstanding balance on
Revolving Loan 1 was $70.0 million. Both loans have variable interest rates and
are unconditionally and irrevocably guaranteed by MC.

On August 3, 1998, the Company entered into a revolving credit agreement (or
"loan") with GFC as lender and the Bank of Tokyo-Mitsubishi Trust Company
("BTM") as agent to provide a revolving credit facility in the maximum amount of
$150.0 million. The agreement expires on March 31, 2001 and is unconditionally
and irrevocably guaranteed by MC. The entire amount of the loan was drawn with
the proceeds used to reduce the amount outstanding under the Company's revolving
loan with MIC. On November 23, 1998 and February 26, 1999, in conjunction with
the BTM agreement, the Company also entered into unsecured, uncommitted credit
facilities with BCC. Outstanding advances under the 1998 BCC agreement are
unconditionally and irrevocably guaranteed by MC and under the 1999 BCC
agreement advances are based on the Company's creditworthiness. Under both BCC
agreements, advances are limited to the unused available borrowings under the
Company's revolving credit agreement with GFC, not to exceed the GFC loan
maximum amount of $150.0 million. There were $150.0 million in aggregate
outstanding advances drawn under these agreements at December 31, 1999 and 1998.
Outstanding advances drawn under the uncommitted facilities with BCC are
renewable at the option of BCC. Should the advances not be renewed by BCC, any
amounts outstanding would be renewed under the committed facility from GFC.

The Company has agreed to pay MC a guarantee fee on the outstanding principal
balance of all financing obtained from MIC, GFC and BCC. The guarantee fee is
calculated on a daily basis based on the amount outstanding under the guaranteed
loans. The guarantee fee expense for 1999, 1998 and 1997 was $0.6 million, $0.4
million and $0.3 million, respectively.



                                       30
<PAGE>   31


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE G - SHORT-TERM BORROWINGS

In December of 1996, Aristech arranged for a $50.0 million short-term,
discretionary line of credit with a commercial bank bearing interest at a
variable rate. Effective September 17, 1999, the amount of the discretionary
line of credit was reduced by the commercial bank from $50.0 million to $44.9
million. On October 20, 1999, the commercial bank notified Aristech that in view
of conditions in the chemical markets in which Aristech participates in general,
the recent financial performance of Aristech in particular, and the bank's
insufficient returns on its loaned capital, it was terminating the $44.9 million
discretionary line of credit. Pursuant to an agreement between Aristech and the
commercial bank regarding such termination of the facility, Aristech made
principal repayments of $15.0 million on October 29, and $29.9 million on
November 30, extinguishing this line of credit. The effective annual interest
rate under this line was 5.8% for 1999 and 5.7% for 1998.

On February 26, 1999, the Company arranged for an unsecured, uncommitted line of
credit with Allomon Funding Corporation (a commercial paper issuing conduit
administered by Mellon Bank, N.A.) in the amount of $25.0 million. Subsequently,
this facility was replaced by an unsecured, uncommitted line of credit directly
with Mellon Bank. In addition, on February 26, 1999, the Company obtained an
unsecured, uncommitted line of credit with Fifth Third Bank in the amount of
$5.0 million. This line of credit was subsequently increased to $15.0 million
effective May 31, 1999. The total balance outstanding under these lines of
credit at December 31, 1999 was $40.0 million. The weighted average interest
rate under these two lines of credit in 1999 was 6.1%.

NOTE H - INCOME TAXES

Provision for income taxes consists of the following for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                        1999           1998          1997
                                                                       ------         -----         -----
<S>                                                                    <C>            <C>           <C>
(In millions)
     Current federal income tax expense (benefit)                      $(18.7)        $11.2         $ 6.4
     Current state and local income tax expense (benefit)                (0.2)          1.2           1.4
     Deferred income tax expense (benefit)                               (0.3)         (4.3)          1.0
                                                                       ------         -----         -----
         Total provision (benefit) before change in
            valuation allowance                                         (19.2)          8.1           8.8
     Change in valuation allowance                                       (7.4)         (1.8)          0.5
                                                                       ------         -----         -----
         Total provision (benefit) for income taxes                    $(26.6)        $ 6.3         $ 9.3
                                                                       ======         =====         =====
</TABLE>


Following is a reconciliation of the differences between income taxes computed
at the federal statutory rate to the total provision for income taxes for the
years ended December 31:

<TABLE>
<CAPTION>
                                                                        1999           1998          1997
                                                                       ------         -----         -----
<S>                                                                    <C>            <C>           <C>
(In millions)
     Income tax expense (benefit) at statutory rate                    $(20.5)        $ 6.5         $ 6.1
     Foreign Sales Corporation benefits and other tax credits              --          (0.1)         (1.7)
     Amortization of excess cost over assets acquired                     1.8           1.8           1.8
     Goodwill adjustment - change in valuation allowance                  0.7            --            --
     State income taxes after federal income tax benefit                 (1.2)         (2.7)          2.8
     Utilization of net operating losses                                   --           2.6            --
     Other                                                                 --            --          (0.2)
                                                                       ------         -----         -----
         Total provision (benefit) before change in
            valuation allowance                                         (19.2)          8.1           8.8
     Change in valuation allowance                                       (7.4)         (1.8)          0.5
                                                                       ------         -----         -----
         Total provision (benefit) for income taxes                    $(26.6)        $ 6.3         $ 9.3
                                                                       ======         =====         =====
</TABLE>



                                       31
<PAGE>   32



                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE H - INCOME TAXES (CONTINUED)

The tax effects of the significant temporary differences that comprise the
deferred tax assets and liabilities are as follows for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                                 1999          1998
                                                                                ------        ------
(In millions)
<S>                                                                             <C>           <C>
     Deferred tax assets:
         Accruals different than payments                                       $ 14.3        $ 17.8
         Net operating loss carryforwards                                         32.0           7.8
         Other                                                                     5.1           2.6
                                                                                ------        ------
            Deferred tax assets before valuation allowance                        51.4          28.2
         Valuation allowance                                                        --          (7.4)
                                                                                ------        ------
            Total deferred tax assets                                             51.4          20.8
                                                                                ------        ------

     Deferred tax liabilities:
                                                                                ------        ------
         Property and inventory                                                  201.8         180.2
                                                                                ------        ------

                                                                                ------        ------
            Net deferred tax liabilities                                        $150.4        $159.4
                                                                                ======        ======
</TABLE>


During 1999, the Company had a loss of $124.9 million for income tax purposes.
This loss will be carried back to 1997 and 1998 to offset $58.1 million of
taxable income. The remaining $66.8 million will be carried forward and expires
in 2019.

Avonite, Inc. (see Note L) has net operating loss carryforwards of $19.8 million
which expire in the years 2004 through 2012. Since Avonite is not consolidated
with the Company for income tax purposes, utilization of these carryforwards is
limited to the taxable income of Avonite.

NOTE I - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Substantially all of the Company's employees are covered by various defined
benefit or defined contribution pension plans.

In addition to pension benefits, the Company provides eligible retired employees
with certain postretirement benefits consisting primarily of life insurance and
either medical coverage or a Defined Dollar Benefit Plan ("DDBP"). The DDBP
provides credits to be used by the retirees exclusively for medical expenses.
During 1998, the Company amended its DDBP to increase by 50%, the amount of
credits provided by the Company. The increase in credits provided will not
significantly increase the DDBP's annual service cost. Under the terms of these
unfunded benefit plans, the Company reserves the right to modify or discontinue
the plans.



                                       32
<PAGE>   33


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements

NOTE I - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)

The following relates to the Company's defined benefit and other postretirement
benefits as of and for the years ended December 31:

<TABLE>
<CAPTION>
                                                                Pension Benefits                  Other Benefits
                                                             ----------------------          ----------------------
                                                              1999            1998            1999            1998
                                                             ------          ------          ------          ------
(In millions)
<S>                                                          <C>             <C>             <C>             <C>
Change in benefit obligation:
      Benefit obligation, beginning of year                  $ 76.9          $ 70.9          $ 23.3          $ 18.8
      Service cost                                              5.0             5.1             0.6             0.4
      Interest cost                                             4.5             4.4             1.5             1.3
      Actuarial (gain) loss                                   (12.4)           (0.5)           (3.8)            0.6
      Amendments                                                0.5             0.6              --             3.1
      Curtailments                                              3.2              --             0.6              --
      Special termination benefits                              0.9              --              --              --
      Benefits paid                                           (25.8)           (3.6)           (1.6)           (0.9)
                                                             ------          ------          ------          ------
      Benefit obligation, end of year                          52.8            76.9            20.6            23.3
                                                             ------          ------          ------          ------

Change in plan assets:
      Fair value of plan assets, beginning of year             56.6            48.7              --              --
      Actual return on plan assets                              3.5             7.1              --              --
      Employer contribution                                     4.2             4.4             1.6             0.9
      Benefits paid                                           (25.8)           (3.6)           (1.6)           (0.9)
                                                             ------          ------          ------          ------
      Fair value of plan assets, end of year                   38.5            56.6              --              --
                                                             ------          ------          ------          ------

Funded status                                                 (14.3)          (20.3)          (20.6)          (23.3)
Unrecognized net actuarial loss                                 0.1             8.2            (1.8)            1.4
Unrecognized transition obligation                               --              --             2.9             3.2
Unrecognized prior service cost                                 1.6             4.3             3.1             3.6
                                                             ------          ------          ------          ------
Prepaid (accrued) benefit cost                               $(12.6)         $ (7.8)         $(16.4)         $(15.1)
                                                             ======          ======          ======          ======

Amounts recognized in consolidated
  balance sheet:
      Prepaid benefit cost included in other assets          $  0.5          $  0.6          $   --          $   --
      Intangible asset                                          0.1              --              --              --
      Accrued benefit liability included in
         other liabilities                                    (13.2)           (8.4)          (16.4)          (15.1)
                                                             ------          ------          ------          ------
      Prepaid (accrued) benefit cost                         $(12.6)         $ (7.8)         $(16.4)         $(15.1)
                                                             ======          ======          ======          ======

Additional year end information for plans with
  benefit obligations in excess of plan assets:
      Benefit obligation                                     $ 48.9          $ 72.6          $ 20.6          $ 23.3
      Fair value of plan assets                                34.0            52.2              --              --
</TABLE>



                                       33
<PAGE>   34


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE I - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>
                                                                Pension Benefits                  Other Benefits
                                                             ----------------------          ----------------------
                                                              1999            1998            1999            1998
                                                             ------          ------          ------          ------
(In millions)
<S>                                                          <C>             <C>             <C>             <C>
Additional year end information for pension plans
  with accumulated benefit obligations in excess
  of plan assets:
      Projected benefit obligation                           $  1.3          $  5.0             n/a             n/a
      Accumulated benefit obligation                            0.9             4.4             n/a             n/a
      Fair value of plan assets                                  --              --             n/a             n/a

Weighted-average assumptions:
      Discount rate                                            8.00%           6.75%           8.00%           6.75%
      Expected return on plan assets                           9.50%           9.50%            n/a             n/a
      Rate of compensation increase                            4.25%           4.25%           4.25%           4.25%
</TABLE>


<TABLE>
<CAPTION>
                                                              Pension Benefits                      Other Benefits
                                                    ---------------------------------         ----------------------------
                                                     1999          1998          1997         1999        1998        1997
                                                    -----         -----         -----         ----        ----        ----
<S>                                                 <C>           <C>           <C>           <C>         <C>         <C>
(In millions)
Components of net periodic
  benefit cost:
     Service cost                                   $ 5.0         $ 5.1         $ 4.2         $0.6        $0.4        $0.4
     Interest cost                                    4.5           4.4           4.5          1.5         1.3         1.2
     Expected return on plan assets                  (4.5)         (4.3)         (4.1)          --          --          --
     Amortization of prior service cost               0.5           0.5           0.5          0.3         0.1          --
     Amortization of transition obligation             --            --            --          0.2         0.2         0.2
     Recognized actuarial (gain) loss                 0.1           0.1           0.1           --          --          --
                                                    -----         -----         -----         ----        ----        ----
         Total defined benefit cost                   5.6           5.8           5.2          2.6         2.0         1.8
     Defined contribution cost                        1.7           1.7           0.8           --          --          --
                                                    -----         -----         -----         ----        ----        ----
         Total benefit cost                         $ 7.3         $ 7.5         $ 6.0         $2.6        $2.0        $1.8
                                                    =====         =====         =====         ====        ====        ====


Additional (gain) loss recognized due to:
     Curtailment                                    $ 2.5         $ 0.2         $  --         $0.3        $ --        $ --
     Settlement                                       0.1          (0.3)           --           --          --          --
     Special termination benefits                     0.9            --            --           --          --          --
</TABLE>


Amounts recognized in the 1999 consolidated statements of operations due to the
curtailment of pension plans resulted from voluntary and involuntary employee
separations during 1999.


<TABLE>
<CAPTION>
                                                                    Pension Benefits                   Other Benefits
                                                                 ---------------------             ---------------------
                                                                 1999             1998             1999             1998
                                                                 ----             ----             ----             ----
<S>                                                              <C>              <C>              <C>              <C>
Assumed health care cost trend:
      Initial trend rate                                          n/a              n/a             5.80%            6.20%
      Ultimate trend rate                                         n/a              n/a             4.50%            4.00%
      Year ultimate trend reached                                 n/a              n/a              2005             2005
</TABLE>


                                       34
<PAGE>   35


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE I - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (CONTINUED)

A one-percentage-point change in the assumed health care cost trend rates would
have the following effects:

<TABLE>
<CAPTION>
                                                                            One Percentage-        One Percentage-
                                                                            Point Increase         Point Decrease
                                                                            --------------         --------------
(In millions)
<S>                                                                         <C>                    <C>
     Effect on total service and interest cost components for 1999               $0.1                  $(0.1)
     Effect on postretirement benefit obligation                                  1.0                   (0.9)
</TABLE>


NOTE J - SEGMENT INFORMATION

The Company domestically produces a broad range of chemical products within two
reportable operating segments: Chemicals and Polymers. Management evaluates each
segment's overall operating performance based on its respective operating
incomes, and earnings before taxes and depreciation. The Company has a diverse
customer base with no single customer comprising more than 8% of gross revenues
during 1999. Intersegment sales are recorded at cost plus applicable profit and
are eliminated upon consolidation. The Company allocates corporate income and
expense to its operating segments as follows: selling, general and
administrative expenses based on each segment's pro rata share of corporate
headcount; interest income and expense based on each segment's pro rata share of
operating income; and provision for incomes taxes based on each segment's pro
rata share of income before income taxes.

The Chemicals reportable operating segment consists of the aggregation of the
Company's Phenol and Plasticizer and related products. Chemicals are used as key
ingredients for a wide variety of applications, including automotive parts,
consumer goods, construction materials, vinyl plastics, food wrap, flooring and
medical applications. The major chemical products include phenol, acetone,
bisphenol-A, aniline, phthalic anhydride, 2-ethylhexanol and plasticizer.
Chemical products are manufactured at the Company's facilities located in
Haverhill, Ohio; Pasadena, Texas; and Neville Island, Pennsylvania and shipped
primarily by railcar or truck.

The Polymers reportable operating segment consists of the aggregation of the
Company's polypropylene and acrylic sheet products. Polymers are major
thermoplastic materials that are used in a wide variety of applications,
including synthetic fibers for carpets, upholstery fabrics, disposable diapers,
automotive applications, packaging films for food and non-food applications,
injection molded caps and closures; syringes and vials for medical use,
countertops, outdoor signs, and many other consumer products. Polymer products
are manufactured at the Company's facilities located in Neal, West Virginia,
LaPorte, Texas, Florence, Kentucky and Belen, New Mexico.

Financial information about the Company's industry segments is summarized as
follows for the years ended December 31:


<TABLE>
<CAPTION>
                                                      1999             1998             1997
                                                    --------         --------         --------
(In millions)
<S>                                                 <C>              <C>              <C>
     Sales:
         Chemicals                                  $  434.5         $  487.7         $  511.7
         Polymers                                      360.5            349.0            387.1
         Intersegment sales                             (8.9)            (5.9)            (1.4)
                                                    --------         --------         --------
                                                    $  786.1         $  830.8         $  897.4
                                                    ========         ========         ========

     Depreciation and amortization:
         Chemicals                                  $   38.0         $   34.1         $   32.8
         Polymers                                       23.7             18.6             16.5
                                                    --------         --------         --------
                                                    $   61.7         $   52.7         $   49.3
                                                    ========         ========         ========
</TABLE>



                                       35
<PAGE>   36


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE J - SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                      1999             1998             1997
                                                    --------         --------         --------
(In millions)
<S>                                                 <C>              <C>              <C>
     Operating income (loss):
         Chemicals                                  $  (27.1)        $   41.6         $   26.8
         Polymers                                       (0.8)             8.1             24.9
                                                    --------         --------         --------
                                                    $  (27.9)        $   49.7         $   51.7
                                                    ========         ========         ========


     Interest expense, net:
         Chemicals                                  $   20.4         $   12.4         $   11.6
         Polymers                                        9.2             12.0             11.5
                                                    --------         --------         --------
                                                    $   29.6         $   24.4         $   23.1
                                                    ========         ========         ========


     Provision (benefit) for income taxes:
         Chemicals                                  $  (16.8)        $    7.8         $    2.5
         Polymers                                       (9.8)            (1.5)             6.8
                                                    --------         --------         --------
                                                    $  (26.6)        $    6.3         $    9.3
                                                    ========         ========         ========


     Segment Assets
         Chemicals                                  $  677.0         $  658.4         $  667.1
         Polymers                                      671.4            523.7            430.4
                                                    --------         --------         --------
                                                    $1,348.4         $1,182.1         $1,097.5
                                                    ========         ========         ========


     Segment capital expenditures:
         Chemicals                                  $   43.0         $  100.2         $   35.4
         Polymers                                      119.4            131.6             66.5
                                                    --------         --------         --------
                                                    $  162.4         $  231.8         $  101.9
                                                    ========         ========         ========
</TABLE>


The Company's sales by geographic area are summarized as follows:

<TABLE>
<CAPTION>
                                                      1999             1998             1997
                                                    --------         --------         --------
     <S>                                            <C>              <C>              <C>
     United States                                  $  677.0         $  721.6         $  760.7
     Canada                                             48.5             52.6             54.1
     Other foreign countries                            60.6             56.6             82.6
                                                    --------         --------         --------
                                                    $  786.1         $  830.8         $  897.4
                                                    ========         ========         ========
</TABLE>


NOTE K - COMMITMENTS AND CONTINGENT LIABILITIES

Aristech is obligated to indemnify USX against certain claims or liabilities
which USX may incur relating to USX's prior ownership and operation of the
business and facilities transferred to Aristech in 1986, including liabilities
under laws relating to the protection of the environment and the workplace. Such
known liabilities have been provided for in the consolidated financial
statements.

As of December 31, 1999 and 1998, the Company had outstanding irrevocable
standby letters of credit and surety bonds in the amount of $1.2 million and
$4.7 million, respectively, primarily in connection with environmental matters.



                                       36
<PAGE>   37


                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE K - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

The Company is subject to pervasive environmental laws and regulations
concerning the production, handling, storage, transportation, emission and
disposal of waste materials and is also subject to other federal and state laws
and regulations regarding health and safety matters. These laws and regulations
are constantly evolving, and it is impossible to predict accurately the effect
these laws and regulations will have on the Company in the future.

The Company is also the subject of, or party to, a number of other pending or
threatened legal actions involving a variety of matters. In the opinion of
management, any ultimate liability arising from these contingencies, to the
extent not otherwise provided for, should not have a material adverse effect on
the consolidated financial position, results of operations, or cash flows of the
Company.

NOTE L - CONSOLIDATED SUBSIDIARIES

ARISTECH ACRYLICS LLC

On October 1, 1997, Aristech formed a joint venture with Mitsubishi Rayon Co.,
Ltd. ("MRC") to manufacture and sell acrylic sheet and decorative surface
products. Aristech's former acrylic sheet product line was reorganized as
Aristech Acrylics LLC ("AALLC"), a Kentucky limited liability company in which
Aristech holds a 90% ownership interest. Dianal America, Inc. ("DAI"), a wholly
owned U.S. subsidiary of MRC, holds the remaining 10% ownership interest in
AALLC. DAI contributed $10.0 million for its 10% ownership interest that
exceeded the proportionate share of the book value purchased by $7.5 million
that has been recorded as additional paid-in capital.

AVONITE, INC.

On December 15, 1987, the Company acquired for $5.0 million a 50% ownership
interest in Avonite, Inc. ("Avonite") of Belen, New Mexico, a producer and
marketer of premium unsaturated polyester sheet. The investment was accounted
for under the equity method.

On July 1, 1996, the Company acquired an additional 10% of the outstanding
common stock of Avonite in exchange for the assignment to the Avonite minority
owners of a $1.0 million note owed by Avonite to the Company. As a result,
Avonite became a consolidated subsidiary of the Company. Excess cost over assets
acquired of $3.5 million was recorded and the Company absorbed the minority
deficit of $14.1 million in its entirety.

In 1998, an agreement was executed whereby Avonite exchanged Notes Payable to
Aristech totaling $9.0 million and the Note Payable to Avonite Stockholder of
$12.4 million for common stockholders' equity of Avonite. Aristech's overall
ownership interest in Avonite was not changed as a result of this transaction.
However, the exchange did result in positive stockholders' equity at Avonite and
Aristech reassigned, through retained earnings, the previously assumed $14.1
million minority deficit in Avonite to minority interest.

NOTE M - FINANCIAL INSTRUMENTS

INTEREST RATE SWAPS

During 1999, the Company entered into three interest rate swap agreements
aggregating $100.0 million in notional principal amount with a commercial bank
as the swap counterparty. The purpose of the agreements is to help the Company
manage its overall cost of borrowing. The swap structure involves the exchange
of interest cash flows for a minimum of three years and potentially a maximum of
seven years. For the first three years beginning November 15, 1999, the Company
will pay a weighted average fixed interest rate of 6.185% in exchange for
receiving a fixed interest rate of 6.875%, resulting in total savings to the
Company of approximately $2.1 million over the first three years. Interest
expense was correspondingly reduced by $.1 million in 1999. Subsequently, for
the last four years of the agreements, the Company is obligated to pay a
variable interest rate equal to the six-month LIBOR in exchange for receiving a
fixed interest rate of 6.875%. The swap counterparty has the option to terminate
the agreements on selected dates during the final four years of the agreements.



                                       37
<PAGE>   38
                          ARISTECH CHEMICAL CORPORATION
                 Notes to the Consolidated Financial Statements


NOTE M - FINANCIAL INSTRUMENTS (CONTINUED)


FOREIGN CURRENCY CONTRACTS

The Company uses foreign currency contracts to manage its exposure against
foreign currency rate fluctuations on sales and purchases denominated in foreign
currencies. The primary business objective of this hedging program is to fix
commitments and profitability relative to transactions denominated in foreign
currency. Foreign currency contracts at December 31, 1999 were denominated in
Japanese yen, Canadian dollars and Austrian schillings.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of significant financial instruments,
including interest rate swaps, at December 31, 1999, and 1998, are shown below.
The fair value of long-term debt is based on current estimated borrowing rates
for similar instruments to discount the cash flows to their present values. The
fair values of interest rate swaps are based on quoted market prices, which
reflect the present values of the net differences between estimated future
fixed-rate and variable-rate payments versus future fixed-rate receipts. The
fair values of foreign currency contracts are based on the respective currency
spot exchange rate at December 31, 1999. The fair values of the company's
remaining assets and liabilities on the balance sheet have carrying values that
approximate fair value due to their short maturity or the financial nature of
these instruments.

<TABLE>
<CAPTION>
                                                                       1999                              1998
                                                             -----------------------          ------------------------
                                                             Carrying          Fair           Carrying           Fair
                                                              Amount           Value           Amount            Value
                                                             --------          -----          --------           -----
<S>                                                            <C>             <C>              <C>              <C>
Financial Liability:
     Long-term debt                                            594.0           582.6            451.7            446.8

Off-balance sheet derivative financial
     instruments held for purposes other
     than trading:
         Interest rate swaps                                      --            (1.3)              --               --
         Foreign currency contracts                              6.2             6.0              7.1              7.2
</TABLE>

NOTE N - PHANTOM STOCK OPTION PLAN

The Company has adopted a Phantom stock option plan (the "Plan") effective
January 1, 1999, which expires on December 31, 2003, unless extended by the
Compensation Committee of the Board of Directors. The Plan provides for the
annual grant of options on phantom stock ("Shares") to selected executives
based upon target grant levels. A participant is vested in and may exercise 50%
of the options granted three years after the date of grant and vests in the
remaining 50% after four years. Options remain exercisable for eight years
from the date of the grant. Vesting of options may be accelerated under certain
circumstances such as retirement, disability, the sale of assets, death,
involuntary termination without cause, or a change in control. A total of
250,000 Phantom Shares will be subject to options granted under the Plan. As of
December 31, 1999, a total of 49,300 options had been granted with an initial
value of $100 per Share. The Shares are not dividend bearing and are non-voting
and the value of the shares will be determined annually based upon a
predetermined formula. Amounts due upon the exercise of options for Shares will
be paid in cash, although Plan participants may defer receipt of such awards,
if and to the extent permitted under the Company's deferred compensation
plan(s).

NOTE O - SUBSEQUENT EVENTS

Effective as of March 6, 2000, the Company arranged for a third revolving loan
with MIC in the amount of $30.0 million ("Revolving Loan 3"). This is a
variable-rate loan with an original maturity date of March 31, 2000, subject to
renewal. In accordance with MC's intent to provide funding support to the
Company, the loan was renewed by MIC effective as of March 29, 2000, and
extended to March 31, 2001. The loan utilized a portion of MC's commitment to
guarantee up to $190.0 million of the Company's obligations to March 31, 2001
(see Note F). As of March 30, 2000, there were no outstanding borrowings under
Revolving Loan 3.

Effective as of March 29, 2000, the Company increased the maximum borrowing
limit of the trade receivables financing facility between ARC and DFC to $100.0
million and renewed the facility for an additional 364 days to March 28, 2001
(see Note B).




                                       38
<PAGE>   39


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Aristech's by-laws provide that the Board of Directors ("Board") will consist of
13 members, which number may be increased or decreased by an amendment to the
by-laws, but in any event the number of directors may not be less than three.
There are currently seven members of Aristech's Board. The members of the Board
will serve until the year 2001 annual Board of Directors meeting or until their
successors are elected and qualified. Aristech's Board of Directors has
established an Executive Committee to act between meetings of the Board on all
matters that may be legally delegated to a committee of the Board. Aristech's
Board members do not currently receive any fees or remuneration of their service
as a Board member or a member of any Board committee. Information with respect
to those persons who serve as directors is set forth below:

                            NAME, AGE AND OCCUPATION

<TABLE>
<S>                                           <C>
Takeru Ishibashi (58)                         Takeru Ishibashi became Director and Chairman of the
    Chairman of the Board;                    Board in March 2000. He became Group Senior Vice
    Member of the Executive                   President-Chemicals of MC in January 2000. Mr.
    Committee                                 Ishibashi has been a Director of MC since 1997 and
                                              has held the following positions with MC: Deputy
                                              General Manager-Kainsai Branch from 1998 to 2000;
                                              General Manager-Fine & Specialty Chemical Division
                                              from 1995 to 1998; and General Manager-Chlor-Alkali
                                              Department from 1990 to 1995.


Masatake Bando (57)                           Masatake Bando has been the Chief Executive Officer
    Chief Executive Officer;                  since March 1999 and a Director since 1996. Mr.
    Member of Executive                       Bando was Chairman and Chief Executive Officer
    Committee                                 from March 1999 to March 2000; Chairman Elect from
                                              January 1998 to March 1998; Vice Chairman from
                                              September 1997 to December 1997; Senior Vice
                                              President and Chief Operating Officer-Chemicals of
                                              MIC from June 1996 to August 1997; and General
                                              Manager of Aromatics Petrochemicals Department of
                                              MC from May 1994 to June 1996.
</TABLE>


                                       39
<PAGE>   40


<TABLE>
<S>                                           <C>
Yasuo Sone (60)                               Yasuo Sone became a Director in August 1996. Mr.
    Director                                  Sone has been Managing Director-Chemicals of MC
                                              since April 1996. Mr. Sone was Director and Senior
                                              Assistant to Managing Director-Chemicals of MC from
                                              March 1995 to March 1996; and Director of MC and
                                              Executive Vice President of MIC from June 1994 to
                                              February 1995.


Muneo Suzuki (61)                             Muneo Suzuki became a Director in July 1996.  Mr.
    Director                                  Suzuki has been Managing Director and President of
                                              Industrial Chemicals Company of MCC since June
                                              1996. Mr. Suzuki was Managing Director and
                                              President of Fiber Intermediates Company of MCC
                                              from June 1995 to June 1996; and Director and
                                              President of Fiber Intermediates Company of MCC
                                              from October 1994 to June 1995.


Tatsuo Suzuki (59)                            Tatsuo Suzuki became a Director in July 1997.  Mr.
    Director                                  Suzuki has been President of MRC Holdings America,
                                              Inc. since December 1998 and a Board Member and
                                              General Manager Affiliated Companies Administration
                                              and Planning of Mitsubishi Rayon Co., Ltd. ("MRC")
                                              since June 1997.  Mr. Suzuki was General Manager
                                              Affiliated Companies Administration and Planning of
                                              MRC from June 1996 to June 1997; Director Affiliated
                                              Companies Administration and Planning from June
                                              1995 to June 1996; General Manager Metablen and
                                              Film Division from April 1993 to June 1995.



Takuji Nakamura (55)                          Takuji Nakamura became a Director in March 1998.
    Director; Member of Executive             Mr. Nakamura has been Senior Vice President and
    Committee                                 Chief Operating Officer-Chemicals of MIC since
                                              September 1997. Mr. Nakamura was General Manager,
                                              Fine Chemicals Department of MC from July 1996 to
                                              August 1997; General Manager, Pharmaceuticals and
                                              Agrochemical Department of MC from April 1996 to
                                              June 1996; General Manager, Fine Chemicals
                                              Business Development Department of MC, March of
                                              1996; and General Manager, Fine Chemicals Business
                                              Development Department and Bio-Chemicals Department
                                              of MC from October 1994 to February 1996.
</TABLE>



                                       40
<PAGE>   41


<TABLE>
<S>                                           <C>
Noriyoshi Kondo (59)                          Noriyoshi Kondo became a Director in June 1999.
    Director                                  Mr. Kondo has been Senior Vice President and
                                              General Manager of the Chemicals Division at
                                              Mitsubishi Chemical America, Inc. (MCA) since
                                              1996. He also was a Board member of the MCA group
                                              companies during this time period with
                                              responsibility for total management of the MCA
                                              group companies. Mr. Kondo was General Manager
                                              Project Development Department for MCC from 1993
                                              to 1996. Prior to that, Mr. Kondo held various
                                              positions at Mitsubishi Petrochemicals Company.
</TABLE>


EXECUTIVE OFFICERS

Set forth below is certain information relating to the ages and business
experience of the non-director officers of the Company.

                            NAME, AGE AND OCCUPATION

<TABLE>
<S>                                           <C>
H. Patrick Jack (47)                          H. Patrick Jack became President and Chief
   President and Chief                        Operating Officer in September 1998. Prior to
   Operating Officer                          joining the Company, Mr. Jack was Senior Vice
                                              President-Chemicals of Fina Oil & Chemical Company
                                              ("Fina") from 1995 to 1998 and Vice President-
                                              Chemicals from 1988 to 1995.

Dennis R. Henderson (50)                      Dennis R. Henderson became Senior Vice
   Senior Vice President-                     President-Chemicals in June 1999. Mr. Henderson
   Chemicals                                  was Vice President-Chemicals from December 1997 to
                                              June 1999; Division Vice President Chemicals
                                              in 1997; Division Vice President-Intermediate
                                              Chemicals from 1996 to 1997; and General
                                              Manager-Intermediate Chemicals from 1994 to 1996.

Kevin A. Rupp (44)                            Kevin A. Rupp became Vice President and Chief
   Vice President and                         Financial Officer in February 2000. Prior to
   Chief Financial Officer                    joining the Company, Mr. Rupp was Vice President
                                              and Controller of Fina since 1995. Prior to that,
                                              Mr. Rupp held various financial positions at Fina
                                              and ARCO Chemical.

Edwar S. Shamshoum (47)                       Edwar S. Shamshoum became Senior Vice-
   Senior Vice President-                     President-Research & Technology in December 1999
   Research & Technology                      and had been Vice President of Research and
                                              Technology since joining the Company in March
                                              1999. Prior to joining the Company, Mr. Shamshoum
                                              was the Director of Technology and Business
                                              Development at Engelhard Corporation and had
                                              worked for Fina, Union Carbide and the Goodyear
                                              Tire and Rubber Company.

Gary C. Reed (45)                             Gary C. Reed became Vice President-Polymers in May
   Senior Vice President-Polymers             1999. Prior to joining the Company, Mr. Reed was
                                              employed by Fina for over 23 years in a wide
                                              variety of positions. He was a plant manager at
                                              two different polymer facilities, a regional sales
                                              manager for polypropylene and polystyrene resins,
                                              and a general manager of both the styrene and
                                              polystyrene business units.
</TABLE>



                                       41
<PAGE>   42


<TABLE>
<S>                                           <C>
Gregory Cummings (35)                         Gregory Cummings became Corporate Comptroller in
   Corporate Comptroller                      April 1999. Mr. Cummings was Acting Chief
                                              Financial Officer from November 1999 to February
                                              2000. Prior to April 1999, Mr. Cummings was
                                              Director-Financial Analysis and Strategic Support
                                              from 1997 to April 1999; General Manager-Strategic
                                              Support in 1997; Manager Accounting Research and
                                              Strategic Planning in 1996; and has held various
                                              other financial positions since joining the Company.

Michael P. DiClemente (46)                    Michael P. DiClemente became Treasurer in November
   Treasurer                                  1999. Mr. DiClemente was Director-Banking and
                                              Finance from September 1996 to November 1999, and
                                              Director-Cash, Finance and International Treasury
                                              from March 1993 to September 1996. Prior to 1993,
                                              Mr. DiClemente held a variety of financial
                                              positions since joining the Company in 1986.

Matthew C. Cairone (41)                       Matthew C. Cairone became Vice President, General
   Vice President , General Counsel           Counsel and Secretary in March 2000. Mr. Cairone
   and Secretary                              was General Counsel and Secretary from October
                                              1999 to March 2000; Assistant General Counsel from
                                              May 1995 to October 1999; and Senior Counsel from
                                              1994 to May 1995.
</TABLE>


ITEM 11.  EXECUTIVE COMPENSATION

The following table summarizes all compensation paid to and earned by the
Company's chief executive officer and each of the Company's four most highly
compensated executive officers other than the chief executive officer for
services rendered to the Company for the years ended December 31, 1999, 1998 and
1997.



                                       42
<PAGE>   43


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                  Long-term
                                             Annual Compensation                                Compensation
                                ----------------------------------------------     ---------------------------------------
                                                                       Other        Securities
                                                                      Annual        Underlying                  All Other
                                                                      Compen-        Options/        LTIP        Compen-
          Name and                          Salary         Bonus    sation (5)         SARs        Payouts     sation (1)
     Principal Position         Year          ($)           ($)         ($)              #           ($)           ($)
----------------------------    ----        -------       -------   ----------     -----------     -------     ----------
<S>                             <C>         <C>           <C>       <C>            <C>             <C>         <C>
Masatake Bando (3)(4)           1999        365,004            --      82,961          7,400        48,632           --
    Chief Executive             1998        326,061            --      75,962           --             --            --
    Officer                     1997         83,335            --      25,531           --             --         9,010

H. Patrick Jack                 1999        375,004       150,000      57,823          7,600            --       16,400
    President and Chief         1998             --            --          --           --              --           --
    Operating Officer           1997             --            --          --           --              --           --

Dennis R. Henderson             1999        168,656            --       8,350          2,000        24,354        7,680
    Senior Vice President-      1998             --            --          --           --              --           --
    Chemicals                   1997             --            --          --           --              --           --

Edwar S. Shamshoum (6)          1999        140,833            --      57,751          2,000            --           --
    Senior Vice President-      1998             --            --          --           --              --           --
    Research & Technology       1997             --            --          --           --              --           --

Gary C. Reed (2)
    Senior Vice President-      1999        131,250        50,000       65,387         2,000            --           --
    Polymers                    1998             --            --          --           --              --           --
                                1997             --            --          --           --              --           --
</TABLE>

The following two individuals were corporate officers during 1999, but were
terminated prior to December 31, 1999. They are disclosed pursuant to
Regulation S-K, Section 229.402(a)(3)(iii).

<TABLE>
<S>                             <C>         <C>           <C>          <C>             <C>         <C>           <C>
Charles P. Costanza             1999        174,017            --      210,803          --          75,639       6,400
    Senior Vice President-      1998        192,500            --        9,928          --          99,816       4,000
    Manufacturing               1997        185,000       185,612        2,940          --          99,816       5,517

Mark K. McNally
    Senior Vice President,      1999        168,698            --       74,576          --          78,441       6,400
    General Counsel and         1998        196,000            --       13,846          --         105,461       4,006
    Corporate Secretary         1997        190,000       197,990        6,770          --         105,461       9,458
</TABLE>


(1)  Includes matching contributions under Aristech's 401(k) savings and
     deferred compensation plans.
(2)  Mr. Reed joined the Company effective May 1, 1999.
(3)  Mr. Bando is a participant in the LTIP and Phantom Stock Option Plans,
     however, he does not participate in any other executive benefit plans.
(4)  Mr. Bando is under agreement with MC to remit quarterly to MC, the amount
     necessary to reconcile his total compensation to the MC executive pay
     scale.
(5)  For 1999 and 1998, amounts include allowances under Aristech's welfare
     cafeteria plan, imputed income related to Company provided life insurance
     and long-term disability coverage, and other taxable fringe benefits. Mr.
     Bando's other annual compensation also includes reimbursement for housing
     and automobile costs. For 1997, the allowances under the welfare cafeteria
     plan, imputed income related to Company provided life insurance and
     long-term disability coverage were included as all other long-term
     compensation. For 1999, amounts for Messrs. Jack, Shamshoum and Reed
     include allowances under Aristech's relocation policy. For 1999, amounts
     for Messrs. Costanza and McNally include allowances under Aristech's
     severance policy.
(6)  Mr. Shamshoum joined the Company effective March 1, 1999.

                                       43
<PAGE>   44


DEFERRED COMPENSATION PLAN

The Aristech Chemical Corporation Deferred Compensation Plan (the "Deferral
Plan") is a nonqualified deferred compensation plan that is designed to permit
eligible highly compensated employees of Aristech to defer current compensation.
Members of the Corporate Management Committee and other key employees designated
by the Executive Committee of the Board of Directors are eligible to participate
in the Deferral Plan. The Deferral Plan was adopted effective February 22, 1996.

A participant can defer up to 50% of his base salary and 90% of his or her
incentive bonus payments on an annual basis. In addition, a participant will
receive credit to his account from Aristech under the Deferral Plan of matching
contributions in an amount equal to the matching contributions Aristech would
have made on his or her behalf to Aristech's Savings Plan without regard to
Internal Revenue Code maximums had the participant's Deferral Plan contributions
been contributed to the Savings Plan. Deemed interest is credited on all
deferred amounts and matching credits at an annual effective rate equal to 120%
of the 60-month rolling average rate of 10-year U.S. Treasury Notes or such
other rate as Aristech determines. A participant is always entitled to receive
100% of the compensation he or she defers through the Deferral Plan if he or she
leaves Aristech for any reason. The participant becomes entitled to Aristech
credits accumulated in his or her account on the first day of the calendar year
following the year in which the matching credit was earned. Regardless of years
of service, a participant is entitled to the full value of his or her matching
credits if he or she retires, becomes disabled or dies or upon a change in
control (as defined in the Deferral Plan) or termination of the Deferral Plan.

Aristech has established a grantor trust with Wachovia Bank of North Carolina,
N. A., to accumulate assets in the form of corporate-owned life insurance for
the payments of the benefits established under the Deferral Plan. The assets of
the trust are subject to the claims of Aristech's creditors in bankruptcy.

LONG TERM INCENTIVE PLAN

Aristech's Long Term Incentive Plan ("LTIP") provides designated members of
Aristech's management team with an opportunity to earn cash bonuses based on the
long-term performance of Aristech. In general, performance cycles under the LTIP
will be four years in length. A new four-year cycle will begin every two years
so two cycles are active at any given time. There was an initial two year
transition cycle for 1995-1996 as well as a four-year cycle for 1995-1998. A
target award, expressed as a percentage of base salary, will be established for
each participating executive at the beginning of each performance cycle.

The performance measures used under the LTIP are relative return on gross assets
(involving a comparison of Aristech's return on gross assets with the median
return on gross assets of a group of comparable chemical manufacturing
companies) and growth in gross assets. For purposes of determining the actual
awards, relative return on gross assets is weighted 75% and growth in gross
assets is weighted 25%. The total target award that is earned by a participant
depends upon the levels of relative return on gross assets and growth in gross
assets attained by Aristech for the performance period. The Board of Directors
is permitted to make discretionary adjustments in payments to be made to
participants upon completion of a performance cycle, but such adjustments,
whether positive or negative, may not exceed 10% of the total target award pool.

Awards earned under the LTIP will be paid 50% as soon as practicable after the
close of the performance cycle and 50% during January of the following year.
Participants are permitted to defer a portion of each of the awards under the
terms of the Deferral Plan.

If a participant dies, retires, becomes disabled or is involuntarily terminated
without cause during a performance cycle, the participant (or his or her
beneficiary) is entitled to a pro-rated award for such performance cycle. If a
participant voluntarily terminates or is involuntarily terminated for cause, the
participant will receive no award for the then-current performance period and
will forfeit all rights to payments not yet made with respect to any other
performance periods. If a change in control of Aristech (as defined in the LTIP)
or an initial public offering occurs during a performance period, the LTIP shall
terminate and each participant shall receive a pro-rated award payment in cash.

In addition to the provisions of the LTIP concerning awards to key executives of
Aristech, the LTIP authorizes the establishment of a supplemental award pool for
distribution to top line and staff executives who are not eligible for
individual target awards as described above. The selection of recipients and



                                       44
<PAGE>   45


amounts of individual awards under this supplemental pool shall be determined by
the Corporate Management Committee at the conclusion of a performance period
based on each participating individual's contribution to Aristech's performance.
The Board of Directors has the authority to establish the amount of this
supplemental award pool, and accordingly, established a supplemental award pool
of $1,000,000 for the current cycles.

The LTIP was terminated with the completion of the 1995-1998 performance cycle,
and was replaced with a phantom stock option plan discussed below.

PHANTOM STOCK OPTION PLAN

The Phantom Stock Option Plan (the "Plan") was adopted during 1999, retroactive
to January 1, 1999, and will expire on December 31, 2003, unless extended by the
Compensation Committee of the Board of Directors. The Plan is intended to
replace Aristech's LTIP with a long term incentive plan of at least equivalent
value that better satisfies the Company's business goals. The Plan has the
following key objectives: focus executives on measures of performance that lead
to sustained creation of value in the commodity chemicals industry; allow the
Company to attract and retain talented executives; provide executives with
competitive total remuneration in comparison to chemical industry norms,
contingent on both Company and personal performance; and align long term
incentive payments with creation of shareholder value.

The Plan provides for the annual grant of options on phantom stock ("Share(s)")
to selected executives based on target grant levels that are intended to be
competitive with opportunities granted to similar executives at comparable
companies. The size of the grants to individual participants will be determined
primarily as a percentage of salary, and secondarily based on the number of
phantom stock shares, with the actual number of option shares granted based on
the participant's performance and contribution to the success of the Company. A
participant is vested in and may exercise 50% of the options granted three years
after the date of grant and vests in the remaining 50% after four years. Options
remain exercisable for up to eight years from the date of grant, absent earlier
exercise or cancellation. Vesting of options may be accelerated under certain
circumstances such as retirement, disability, the sale of assets, death,
involuntary termination without cause, or a change in control. Participants may
exercise vested options during annual exercise periods. Upon exercise, a
participant will receive the amount, if any, by which the then current value of
the Shares exceeds the value of the Shares at the time of the initial grant.
Therefore, the options operate as Stock Appreciation Rights ("SARs"). The Shares
are not dividend bearing and are non-voting. Multiples of the Company's book
value, defined as total assets less liabilities, and earnings before interest,
taxes, depreciation and amortization ("EBITDA") shall be equally weighted to
determine share value. Amounts due upon exercise of options will be paid in
cash, although Plan participants may defer receipt of such awards, if and to the
extent permitted under the Company's deferred compensation plan(s).

A total of 250,000 Shares will be subject to options granted under the Plan. If,
during the term of the Plan, an option is cancelled prior to exercise, a new
option or options may be granted with respect to the Shares underlying such
cancelled option(s). Based on estimated market and Company factors, the number
of Shares authorized for grant under the Plan are intended to be sufficient for
annual grant cycles of five years or more.

Options under the Plan will be granted within the first quarter of each year
that the Plan is in effect. The Compensation Committee shall attribute a fixed
number of Shares to which each participant shall be granted options, based upon
recommendations of the CEO. The number of Shares attributed to participants in
any year shall be the number of Shares required to produce the target award
recommended by the CEO for that participant for the year, expressed as a
percentage of base salary. The target award level shall be set annually at an
amount equal to the 50th percentile for the Chemical Industry. The CEO has the
discretion to determine an appropriate individual award recommendation within
25% above or below the target amount. The recommended target shall be structured
to result in the participant's total compensation falling within the 25th to
75th percentile of compensation for executives with comparable duties and
responsibilities in the Chemical Industry. The percentiles shall be determined
by the Hay Executive Compensation Survey, or such other executive compensation
survey as may designated by the Compensation Committee; provided however, that
the CEO may recommend that a participant shall not receive any grant in a given
year.



                                       45
<PAGE>   46


STOCK OPTION/SAR GRANTS

The following table sets forth certain information on stock appreciation rights
in fiscal 1999 to the CEO of Aristech and each of the other most highly
compensated employees as of December 31, 1999.


                          Option Grants in Fiscal 1999

<TABLE>
<CAPTION>
                                                            Individual Grants
------------------------------------------------------------------------------------------------------------------------
                                                  % of Total                                       Potential Realizable
                                                   Options/                                          Value at Assumed
                                                     SARs                                          Annual Rates of Share
                                    Options/      Granted to      Exercise                        Price Appreciation for
                                      SARs        Employees       or Base                              Option Term
                                     Granted      in Fiscal        Price       Expiration        -----------------------
            Name                       (#)           Year          ($/SH)        Date             5% ($)         10% ($)
------------------------------      --------      ----------      --------     ----------        -------        --------
<S>                                 <C>           <C>             <C>          <C>               <C>            <C>
Masatake Bando                        7,400          15.0%         100.00       12/31/07         301,254        702,038
H. Patrick Jack                       7,600          15.4%         100.00       12/31/07         309,396        721,012
Dennis R. Henderson                   2,000           4.1%         100.00       12/31/07          81,420        189,740
Edwar S. Shamshoum                    2,000           4.1%         100.00       12/31/07          81,420        189,740
Gary C. Reed                          2,000           4.1%         100.00       12/31/07          81,420        189,740
</TABLE>


STOCK OPTION/SAR EXERCISES

The table below sets forth the following information with respect to stock
option/SAR exercises during fiscal 1999 by each of the named executive officers
and the status of their options at December 31, 1999.

     o    The number of securities with respect to which the options/SARs were
          exercised;
     o    The aggregate dollar value realized upon exercise of such
          options/SARs;
     o    The total number of exercisable and unexercisable options/SARs at
          December 31, 1999; and
     o    The aggregate dollar value of in-the-money unexercised options/SARs at
          December 31, 1999.


               Aggregated Option/SAR Exercises in Last Fiscal Year
                      and Fiscal Year End Option/SAR Values

<TABLE>
<CAPTION>
                                                                                                     Value of
                                                                                Number of           Unexercised
                                                                               Unexercised         In-the-Money
                                                                              Options/SARs         Options/SARs
                                                                              at FY-End (#)        at FY-End ($)

                                  Shares Acquired       Value Realized        Exercisable/         Exercisable/
            Name                  on Exercise (#)             ($)             Unexercisable        Unexercisable
----------------------------      ---------------       --------------        -------------        -------------
<S>                               <C>                   <C>                   <C>                  <C>
Masatake Bando                          0                      0               0  /  7,400            0  /  0
H. Patrick Jack                         0                      0               0  /  7,600            0  /  0
Dennis R. Henderson                     0                      0               0  /  2,000            0  /  0
Edwar S. Shamshoum                      0                      0               0  /  2,000            0  /  0
Gary C. Reed                            0                      0               0  /  2,000            0  /  0
</TABLE>



                                       46
<PAGE>   47


EXECUTIVE LIFE INSURANCE PLAN

Aristech's Executive Life Insurance Plan (the "Life Insurance Plan") was
established to provide members of the Corporate Management Committee or other
designated key employees of Aristech with supplemental life insurance benefits.
Under the Life Insurance Plan, Aristech obtains life insurance policies on the
lives of participating employees. Such policies provide each participant with a
basic survivor benefit equal to three times the participant's annual base
salary, less $50,000, provided that after the participant's retirement, but
before the 15th anniversary date of the insurance policy, the participant's
basic survivor benefit will equal one times the participant's annual base salary
in effect prior to retirement. After the participant's retirement and after the
policy's 15th anniversary date, Aristech will withdraw from the policy's cash
value an amount equal to Aristech's share of cumulative premiums, and ownership
of the policy will then be transferred to the participant.

While employed by Aristech, a participant may elect to purchase optional
coverage in addition to the basic survivor benefit. During the participant's
active employment, optional coverage may be in an amount equal to either one
times or two times the participant's annual base salary. After retirement, the
participant may elect to reimburse Aristech for its cumulative premiums and take
ownership of the policy. Aristech will pay all the necessary premiums for the
basic survivor benefit for all participants. Each participant must contribute to
Aristech the premium amount attributable to optional coverage.

LONG-TERM DISABILITY

Aristech's Executive Long Term Disability Plan was established to provide
members of the Corporate Management Committee or other designated key employees
of Aristech with disability insurance benefits covering the continuation of
income in the event the eligible employee is unable to work due to accident or
sickness. The disability benefit is based on 60% of the covered employee's
eligible compensation that includes base annual salary and any annual variable
bonus up to a maximum benefit of $15,000 per month.

PENSION BENEFITS

Aristech maintains the Aristech Salaried Pension Plan (the "Salaried Pension
Plan") for eligible salaried and hourly employees not otherwise covered by
hourly or pre-existing special purpose pension plans. The Salaried Pension Plan
is a non-contributory defined benefit plan for salaried and hourly employees who
were participants in the USX Employee Pension Plan on December 4, 1986, and new
salaried employees on the first of January following date of hire. Benefits
under the Salaried Pension Plan are payable in the form of a monthly annuity or
lump sum.

Aristech adopted the 1996 Supplemental Pension Plan (the "Supplemental Pension
Plan") effective February 22, 1996 to provide certain supplemental pension
benefits on a nonqualified basis to key employees designated as eligible by the
Board of Directors. A grantor trust established with Wachovia Bank of North
Carolina, N.A. allows for the accumulation of assets in the form of corporate
owned life insurance to pay benefits under the Supplemental Pension Plan. The
assets of this trust are subject to the claims of Aristech's creditors in
bankruptcy. Benefits under the Supplemental Pension Plan are payable in the form
of a monthly annuity or lump sum.



                                       47
<PAGE>   48


The following table shows the total annual non-contributory pension benefits for
retirement at age 65 (or earlier under certain circumstances) under the Salaried
Pension Plan and the Supplemental Pension Plan, before any deduction for Social
Security and certain other government-administered benefits, where applicable,
and reductions for benefits payable under the USX Employee Pension Plan or
certain other pre-existing pension plans or benefit plans, for various levels of
covered compensation which would be payable to employees retiring with
representative years of service.

                                YEARS OF SERVICE

<TABLE>
<CAPTION>
      Covered
      Compen-
       sation        5 Years      10 Years      15 Years      20 Years      25 Years     30 Years      35 Years      40 Years
       ------        -------      --------      --------      --------      --------     --------      --------      --------
     <S>             <C>          <C>           <C>           <C>           <C>          <C>           <C>           <C>
     $ 125,000       $ 9,375      $ 31,250      $ 56,250      $ 62,500      $ 68,750     $ 75,000      $ 81,250      $ 87,500
       150,000        11,250        37,500        67,500        75,000        82,500       90,000        97,500       105,000
       175,000        13,125        43,700        78,750        87,500        96,250      105,000       113,750       122,500
       200,000        15,000        50,000        90,000       100,000       110,000      120,000       130,000       140,000
       225,000        16,875        56,250       101,250       112,500       123,750      135,000       146,250       157,500
       250,000        18,750        62,500       112,500       125,000       137,500      150,000       162,500       175,000
       300,000        22,500        75,000       135,000       150,000       165,000      180,000       195,000       210,000
       350,000        26,250        87,500       157,500       175,000       192,500      210,000       227,500       245,000
       400,000        30,000       100,000       180,000       200,000       220,000      240,000       260,000       280,000
       450,000        33,750       112,500       202,500       225,000       247,500      270,000       292,500       315,000
       500,000        37,500       125,000       225,000       250,000       275,000      300,000       325,000       350,000
</TABLE>


Covered compensation for purposes of the Salaried Pension Plan includes salary
and some other forms of compensation from Aristech, but excludes incentive
bonuses and other recognition-type payments. Benefits under the Salaried Pension
Plan are offset by benefits payable under the USX Employee Pension Plan, but are
not offset by Social Security benefits. Covered compensation under the
Supplemental Pension Plan includes base salary and incentive compensation.
Benefits under the Supplemental Pension Plan are offset by benefits payable
under the Salaried Pension Plan, the USX Employee Pension Plan and 50% of the
participant's Social Security old age insurance benefits. Messrs. Jack and
Henderson had one and 25 years of service, respectively, and $484,004 and
$143,821 in covered compensation, respectively, for purposes of the Supplemental
Pension Plan. Messrs. Shamshoum and Reed joined the Company during 1999 and have
less than one year of service. However, both Mr. Shamshoum and Mr. Reed
participated in the plan during 1999 and accordingly had $140,833 and $181,250
in covered compensation, respectively.

Mr. Bando, who joined Aristech on September 1, 1997 and became Chairman and
Chief Executive Officer on March 18, 1998, participates in the Salaried Pension
Plan but not the Supplemental Pension Plan. The following table shows the total
annual non-contributory pension benefits for retirement at age 65 (or earlier
under certain circumstances) under the Salaried Pension Plan, before any
deduction for Social Security and certain other government-administered
benefits, where applicable, and reductions for benefits payable under the USX
Employee Pension Plan or certain other pre-existing pension plans or benefit
plans, for various levels of covered compensation which would be payable to
employees retiring with representative years of service.

                                YEARS OF SERVICE


<TABLE>
<CAPTION>
     Covered
   Compensation      5 Years      10 Years     15 Years    20 Years     25 Years     30 Years      30 Years
   ------------      -------      --------     --------    --------     --------     --------      --------
   <S>               <C>          <C>          <C>          <C>          <C>         <C>           <C>
    $ 125,000        $ 9,375      $18,750      $28,125      $37,500      $46,875     $ 56,250      $65,625
      150,000         11,250       22,500       33,750       45,000       56,250       67,500       78,750
      160,000         12,000       24,000       36,000       48,000       60,000       72,000       84,000
</TABLE>


Directors who have not been employees of Aristech will not receive any benefits
under the Salaried Pension Plan or the Supplemental Pension Plan.




                                       48
<PAGE>   49


CHANGE IN CONTROL AGREEMENTS

Aristech has entered into change in control agreements with Messrs. Jack,
Henderson, Shamshoum, Reed and Rupp. Each such agreement has an initial term of
three years, subject to automatic annual renewals, but the agreements will
become operative only if and when a change in control (as defined in the
agreements) occurs during the term of the agreement or if the executive's
employment is terminated in connection with or in anticipation of a change in
control. From the date of any change in control until the third anniversary of
such date the executive shall be entitled to remain employed by Aristech and
receive compensation at least as favorable as that in effect prior to the change
in control.

Upon a discharge of the executive other than for cause (as defined in the
agreements) or a resignation by the executive for good reason (as defined in the
agreements) during this three-year employment period, the executive will be
entitled to receive (i) payment of certain obligations accrued at the effective
date of termination (e.g., salary, earned but unpaid bonus, vacation pay and
other cash entitlements), (ii) benefits payable under plans, practices, programs
and policies of Aristech and (iii) a lump sum cash payment consisting of: (a) a
proportionate bonus based upon the executive's average bonus for the three most
recent completed fiscal years and (b) the product of 2.99 times the sum of the
executive's base salary and the executive's average bonus for the three most
recent completed fiscal years. In addition, the executive is entitled to
continued employee welfare benefits for three years after the date of
termination. Payments under the agreements are capped so that no excise tax will
be payable under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), provided that this cap will only apply if it
results in the executive receiving greater benefits on an after-tax basis than
if the cap does not apply.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning the beneficial
ownership of shares of the Company's common stock as of December 31, 1999 by
each person known to Aristech to be a beneficial owner of the Company's
outstanding common stock.

<TABLE>
<CAPTION>
                                                                 Number of           Percent
          Name of Stockholder                                     Shares             of Class
---------------------------------------                          ---------           --------
<S>                                                              <C>                 <C>
Mitsubishi Corporation
    6-3, Marunouchi 2-Chome
    Chiyoda-Ku, Tokyo 100-8086  Japan                             11,589 (1)          77.74% (1)

Mitsubishi Chemical Corporation (2)
    Mitsubishi Building
    5-2, Marunouchi 2-Chome
    Chiyoda-ku, Tokyo 100-0005  Japan                              2,200              14.76%

Mitsubishi International Corporation
    520 Madison Avenue
    New York, NY  10022                                              678               4.55%

Mitsubishi Rayon Co., Ltd. (2)
    6-41, Konan 1-Chome
    Minato-ku, Tokyo 108-8506  Japan                                 441               2.96%
                                                                  ------             -------
                         Total                                    14,908             100.00%
                                                                  ======             =======
</TABLE>


(1)  Excludes 678 shares held by MIC, a New York corporation and a wholly owned
     subsidiary of MC. Including the shares owned by MIC, MC beneficially owns
     82.3% of the Company's outstanding common stock.
(2)  MC does not have a controlling interest in either MCC or MRC.




                                       49
<PAGE>   50


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 8 - Financial Statements for the Company's related party information
and transactions.


PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A. FINANCIAL STATEMENTS

Financial statements filed as part of this report are listed on the index to the
consolidated financial statements included in Item 8 - Financial Statements.


B. FINANCIAL STATEMENT SCHEDULES

Consolidated Valuation and Qualifying Accounts (Schedule II)

All other schedules are omitted as they are not applicable or required
information is contained in the financial statements and notes thereto.


          SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
                         ARISTECH CHEMICAL CORPORATION
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                        Additions
                                                -------------------------
                                 Balance at     Charged to     Charged to                    Balance
                                 beginning      costs and        other                      at end of
         Description             of period       expense        accounts     Deductions       period
-----------------------------    ---------      ----------     ----------    ----------     ---------
<S>                              <C>            <C>            <C>           <C>            <C>
Year ended 12/31/99
    Reserve for bad debts           $0.2           $0.2           $--          $(0.1)          $0.3

Year ended 12/31/98
    Reserve for bad debts           $0.6           $ --           $--          $(0.4)          $0.2

Year ended 12/31/97
    Reserve for bad debts           $0.6           $0.2           $--          $(0.2)          $0.6
</TABLE>


C. EXHIBIT INDEX

3.01     Restated Certificate of Incorporation of Aristech Chemical Corporation,
         as amended (See Exhibit 3.01 of the Company's Form S-4 filed December
         16, 1996)

3.02     By-Laws of Aristech Chemical Corporation, as amended (See Exhibit 3.02
         of the Company's Form S-4 filed December 16, 1996)

4.01     Indenture dated as of November 1, 1996 between Aristech Chemical
         Corporation, as Issuer, and Merrill Lynch & Co., Merrill Lynch, Pierce,
         Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and Morgan
         Stanley & Co. Incorporated, as Initial Purchasers (See Exhibit 4.01 of
         the Company's Form S-4 filed December 16, 1996)



                                       50
<PAGE>   51


4.02     Registration Rights Agreement dated as of November 25, 1996 among
         Aristech Chemical Corporation, as Issuer, and Merrill Lynch & Co.,
         Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
         Securities Inc. and Morgan Stanley & Co. Incorporated, as Initial
         Purchasers (See Exhibit 4.02 of the Company's Form S-4 filed December
         16, 1996)

4.03     Form of Security for 6 7/8% Notes due 2006, originally issued by
         Aristech Chemical Corporation on November 25, 1996 (See Exhibit 4.03 of
         the Company's Form S-4 filed December 16, 1996)

4.04     Form of Security for 6 7/8% Notes due 2006, issued by Aristech Chemical
         Corporation on March 12, 1997 and registered under the Securities Act
         of 1933 (See Exhibit 4.04 of the Company's Form S-4 filed December 16,
         1996)

10.01    Term Loan Agreement dated as August 1, 1994 between Aristech Chemical
         Corporation and Mitsubishi Corporation, as amended through September
         30, 1996 (See Exhibit 10.01 of the Company's Form S-4 filed December
         16, 1996)

10.02    Term Loan and Revolving Credit Agreement dated as of August 1, 1994
         between Aristech Chemical Corporation and Mitsubishi International
         Corporation, as amended through October 1, 1997 (See Exhibit 10.02 of
         the Company's Form S-4 filed December 16, 1996)

10.03    CP Conduit Facility Agreement (See Exhibit 10.03 of the Company's Form
         S-4 filed December 16, 1996)

10.04    Agreement regarding Guarantees dated January 4, 1995 among Aristech
         Chemical Corporation and Mitsubishi Corporation, as amended through
         March 3, 1997 (See Exhibit 10.04 of the Company's Form S-4 filed
         December 16, 1996)

10.05    Asset Purchase Agreement dated as of April 28, 1995 between Ashland
         Inc. and Aristech Chemical Corporation (See Exhibit 10.05 of the
         Company's Form S-4 filed December 16, 1996)

10.06    Form of Change in Control Agreement between Aristech Chemical
         Corporation and each of H. Patrick Jack, Dennis R. Henderson, Edwar S.
         Shamshoum and Gary C. Reed and Kevin A. Rupp (See Exhibit 10.06 of the
         Company's Form S-4 filed December 16, 1996)

10.07    Aristech Chemical Corporation Deferred Compensation Plan (See Exhibit
         10.07 of the Company's Form S-4 filed December 16, 1996)

10.08    Aristech Chemical Corporation Long Term Incentive Plan (See Exhibit
         10.08 of the Company's Form S-4 filed December 16, 1996)

10.09    Aristech Chemical Corporation Executive Life Insurance Plan (See
         Exhibit 10.09 of the Company's Form S-4 filed December 16, 1996)

10.10    Summary of Aristech Chemical Corporation Long Term Disability Plan (See
         Exhibit 10.10 of the Company's Form S-4 filed December 16, 1996)

10.11    Aristech Chemical Corporation 1996 Supplemental Pension Plan (See
         Exhibit 10.11 of the Company's Form S-4 filed December 16, 1996)

10.12    Aristech Chemical Corporation Variable Bonus Program (See Exhibit 10.12
         of the Company's Form S-4 filed December 16, 1996)

10.13    Aristech Chemical Corporation Phantom Stock Option Plan

12.01    Statement re: Computation of Ratio of Consolidated Earnings to Fixed
         Charges

21.01    Significant Subsidiaries of Aristech Chemical Corporation

27.01    Financial Data Schedule



                                       51
<PAGE>   52


SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                   ARISTECH CHEMICAL CORPORATION

Date: 3/30/00                                      By /s/ KEVIN A. RUPP
     -------------------------------                 ---------------------------
                                                         Kevin A. Rupp
                                                         Vice President and
                                                         Chief Financial Officer

Pursuant to the requirements of the securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
         SIGNATURE                                           TITLE                                   DATE
         ---------                                           -----                                   ----
<S>                                                 <C>                                             <C>
   /s/   TAKERU ISHIBASHI                           Chairman of the Board                           3/30/00
-----------------------------------                 and Director
         Takeru Ishibashi


   /s/   MASATAKE BANDO                             Chief Executive Officer                         3/30/00
-----------------------------------                 and Director
         Masatake Bando                             (Principal Executive Officer)

   /s/   H. PATRICK JACK                            President and Chief Operating                   3/30/00
-----------------------------------                 Officer
         H. Patrick Jack

   /s/   KEVIN A. RUPP                              Vice President and                              3/30/00
-----------------------------------                 Chief Financial Officer
         Kevin A. Rupp                              (Principal Financial Officer)

   /s/   GREGORY CUMMINGS                           Corporate Comptroller                           3/30/00
-----------------------------------                 (Principal Accounting Officer)
         Gregory Cummings

   /s/   YASUO SONE                                 Director                                        3/30/00
-----------------------------------
         Yasuo Sone

   /s/   MUNEO SUZUKI                               Director                                        3/30/00
-----------------------------------
         Muneo Suzuki

   /s/   TATSUO SUZUKI                              Director                                        3/30/00
-----------------------------------
         Tatsuo Suzuki

   /s/   NORIYOSHI KONDO                            Director                                        3/30/00
-----------------------------------
         Noriyoshi Kondo

   /s/   TAKUJI NAKAMURA                            Director                                        3/30/00
-----------------------------------
         Takuji Nakamura
</TABLE>





                                       52
<PAGE>   53


    SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
                SECTION 15(d) OF THE EXCHANGE ACT BY REGISTRANTS
                WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
                         SECTION 12 OF THE EXCHANGE ACT


The Registrant has not provided an annual report to its security holders
covering the Registrant's last fiscal year other than its Form 10-K, and has not
provided a proxy statement, form of proxy or other proxy soliciting material to
more than ten of the Registrant's security holders with respect to any annual or
other meeting of security holders.





                                       53