International Paper Company
Deferred Compensation
Savings Plan
Financial Statements
as of December 31, 2003 and 2002, and for the
Years Ended December 31, 2003, 2002, and 2001,
and Independent Auditors' Report
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Year Ended December 31, 2003 Commission file number 1-3157
INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
(Full title of the plan)
INTERNATIONAL PAPER COMPANY
400 Atlantic Street
Stamford, CT 06921
Telephone: (203) 541-8000
(Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office)
13-0872805
(I.R.S. Employer Identification No.)
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INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as
of December 31, 2003 and 2002 2
Statements of Changes in Net Assets Available for Benefits for the
years ended December 31, 2003, 2002 and 2001 3
Notes to Financial Statements 4
INDEPENDENT AUDITORS' REPORT
To the Plan Administrator of
International Paper Company
Deferred Compensation Savings Plan
We have audited the accompanying statements of net assets available for benefits
of International Paper Company Deferred Compensation Savings Plan (formerly
International Paper Company Unfunded Savings Plan) (the "Plan") as of December
31, 2003 and 2002, and the related statements of changes in net assets available
for benefits for the years ended December 31, 2003, 2002 and 2001. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003 and 2002, and the changes in net assets available for benefits for the
years ended December 31, 2003, 2002 and 2001 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
March 30, 2004
INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002 (In thousands)
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2003 2002
NET ASSETS AVAILABLE FOR BENEFITS--Receivable
from International Paper Company (Note 2) $126,125 $100,005
======== ========
See notes to financial statements.
-2-
INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (In thousands)
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2003 2002 2001
ADDITIONS:
Participant deferrals $ 11,342 $ 8,041 $ 11,290
Company matching deferrals 3,130 2,088 2,119
Investment income 19,091 - -
Transfer from other plans (Note 1) - 14,957 -
--------- -------- -------
Total additions 33,563 25,086 13,409
DEDUCTIONS:
Investment loss - 8,094 1,441
Benefits paid to participants 7,443 4,815 6,531
--------- -------- -------
Total deductions 7,443 12,909 7,972
NET INCREASE 26,120 12,177 5,437
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 100,005 87,828 82,391
--------- -------- -------
End of year $126,125 $100,005 $87,828
========= ======== =======
See notes to financial statements.
-3-
INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002,
AND FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
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1. DESCRIPTION OF THE PLAN
The following description of the International Paper Company Deferred
Compensation Savings Plan (the "Plan") provides only general information
about the provisions of the Plan. The Plan was formerly referred to as the
International Paper Company Unfunded Savings Plan. Participants should refer
to the Plan's summary plan description for a more complete description of the
Plan's provisions.
General--The Plan is available to senior managers and certain highly
compensated employees of International Paper Company and certain of its
subsidiaries (the "Company") who participate in the International Paper
Company Salaried Savings Plan ("SSP"). The Plan is an unfunded deferred
compensation plan providing employees an opportunity to save for their
retirement through employee deferrals and Company matching deferrals. The
Plan was amended, effective, April 1, 2002, changing the name from
International Paper Company Unfunded Savings Plan to International Paper
Company Deferred Compensation Savings Plan.
Participation in the Plan is voluntary. Employees are eligible to participate
in the Plan if they are eligible to participate in the SSP and are employed
at a certain level or have SSP plan compensation in excess of certain amounts
for the preceding calendar year. In order to participate, an eligible
employee must enroll in the Plan and be actively contributing to the SSP. If
an employee chooses to participate in the Plan, contributions are first made
to the SSP and, upon reaching a statutory limit on contributions to the SSP,
deferrals will be made to the Plan for the remainder of the calendar year
based on the percentage of compensation which the employee elects to defer to
the Plan. The employee must choose to either maximize before-tax
contributions or to maximize contributions to the SSP, which choice will
determine when deferrals commence to the Plan. If a participant transfers to
a subsidiary or group that does not participate in the Plan, the participant
is no longer eligible to make deferrals under the Plan or receive Company
matching deferrals. However, his or her account will remain in the Plan until
the designated distribution date. All deferred amounts and all Plan benefits
are paid directly by the Company from its general assets at the time benefits
become due and payable under the Plan.
Effective April 1, 2002, former Champion International Corporation (a company
acquired by the Company during 2000) salaried employees became eligible to
participate in the Plan. Also on April 1, 2002, the Champion International
Corporation Non-Qualified Supplemental Savings Plan and the Champion
International Corporation Management Incentive Deferral Plan merged into the
Plan.
Deferrals--Eligible employees may defer 1% - 85% of their total pay to the
Plan. Effective April 1, 2002, the Company will credit Company matching
deferrals in an amount equal to 70% of the participant's deferral on the
first 4% of compensation and an additional 50% of the participant's deferral
on the next 4% of compensation. Prior to April 1, 2002, the amount of Company
matching deferrals varied by location. In addition, employees eligible to
participate in the Plan may elect to defer their bonuses paid under the
Company's Management Incentive Plan ("MIP") to the Plan. Deferral elections
must be made by August 31 of the year the bonus is earned.
-4-
Investments--Participants direct the investment of their deferrals into
various investment fund equivalents offered by the Plan. The Plan currently
offers mutual funds, pooled accounts, and the Company's common stock
("Company Stock Fund Equivalent") as investment options for participants.
Effective April 1, 2002, 50% of the Company matching deferrals is invested in
the Company Stock Fund Equivalent and the remaining 50% may be invested in
any investment fund equivalent selected by the participant. Prior to April 1,
2002, 100% of the Company matching deferrals was invested in the Company
Stock Fund Equivalent.
Beginning in the year a participant reaches age 55, or upon termination of
employment, a participant may diversify all or part of the deferrals
restricted to investment in the Company Stock Fund Equivalent to any of the
other investment fund equivalents.
Participant Accounts--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the participant's
deferrals, the Company's matching deferrals and an allocation of plan
earnings, and is charged with benefit distributions, if applicable, and
allocations of plan losses and administrative expenses. The benefit to which
a participant is entitled is the benefit that can be provided from the
participant's vested account.
Participants are immediately vested in their deferrals, plus earnings or
losses thereon. Vesting in the Company's matching deferral portion of their
accounts is based on years of continuous service, according to the following
schedules:
Effective April 1, 2002
Years of Completed Service Percent Vested
Less than 3 0%
3 or more 100%
Prior to April 1, 2002
Years of Completed Service Percent Vested
Less than 3 0%
3 but less than 4 35%
4 but less than 5 70%
5 or more 100%
Participants also are fully vested in the Company matching deferrals upon
attainment of age 65, termination of employment due to death or total
disability, or termination of employment due to permanent closing of the work
facility.
Payment of Benefits--Distributions are normally made when a participant
retires, terminates employment, becomes permanently disabled or dies. All
distributions are paid in cash.
A participant who is terminating employment may elect to defer distribution
up to age 70 1/2 and/or may elect to receive distribution in a lump-sum
payment or through installments over 5 to 20 years. If the participant fails
to make an election before termination of employment, distribution is made in
a lump-sum payment in January following termination of employment.
Prior to April 1, 2002, only employees who were eligible for retirement or
who were disabled could elect to defer distribution up to age 70 1/2 or elect
distribution through installments over 5 to 20 years.
-5-
Death benefits to a beneficiary are generally paid in a lump-sum. If a
participant dies while receiving installment payments, the remaining
installment payments continue to be paid to the designated beneficiary.
Prior to April 1, 2002, active employees could make partial or full
withdrawals of the value of basic or supplemental deferrals as follows:
(a) At initial plan participation, an eligible employee could designate
specific dollar amounts to be paid at specific future dates. These
withdrawal designations were irrevocable. These withdrawals were
available provided the designated dates occurred before termination of
employment. There were no penalties associated with this type of
withdrawal.
(b) After initial plan participation, a participant could request a
withdrawal of a specific dollar amount to be paid at a date in the
year following the request. A participant's deferrals to the Plan were
suspended during the year in which the withdrawal was paid. Any
withdrawal amount designated after initial Plan participation was
reduced by 10% (forfeiture) prior to payment.
Effective April 1, 2002, active employees may request a withdrawal, for any
reason and in any amount. Provided that the request is made at least six
months prior to the designated payment date and payment is made in the
calendar year following the request, there are no penalties assessed against
the amount of the requested withdrawal. Any withdrawal requested not meeting
these requirements will be assessed a 10% (forfeiture) penalty. A requested
withdrawal may be cancelled if notice of cancellation is made at least six
months prior to the designated payment date and in the calendar year
preceding the year in which the designated payment date is to occur.
Otherwise, a withdrawal request is irrevocable.
In addition, effective April 1, 2002, active employees may request an extreme
hardship withdrawal if they have already requested a hardship withdrawal from
the SSP for the same event that must be either (i) a payment necessary to
prevent eviction from or foreclosure on the mortgage of the employee's
principal residence or (ii) an uninsured and otherwise unreimbursed loss
arising from natural causes or Acts of God, crime where the employee,
employee's spouse or dependent is a victim of the crime or fire. The amount
is to be paid from the balance of employee deferrals and cannot exceed the
excess of the amount of the financial hardship over the amount of the
hardship withdrawal from the SSP. There is a 12-month suspension of all
deferrals to the Plan following a hardship withdrawal.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements of the Plan have
been prepared in accordance with accounting principles generally accepted in
the United States of America.
Use of Estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of net assets available for benefits and changes therein.
Actual results could differ from those estimates.
Net Assets Available for Benefits--The Plan's net assets available for
benefits consist of a receivable from the Company as all Plan benefits are
paid directly from the Company's general assets.
Expenses--Administrative expenses of the Plan are charged to participant
accounts or may be paid by the Company.
Payment of Benefits--Benefit payments to participants are recorded upon
distribution.
-6-
3. INCOME TAX STATUS
Because the Plan is unfunded with benefits paid solely out of the general
assets of the Company, no provision for federal income taxes has been made in
the accompanying financial statements. The Plan is not required to maintain
its assets in a trust. The Plan is an unfunded employee pension benefit
savings plan which is maintained by the Company for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees; and the Plan is, therefore, exempt from Parts 2, 3 and 4 of
Subtitle B of Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), which pertain to participation, vesting, funding and
fiduciary responsibilities. Pursuant to regulations issued by the Secretary
of Labor in 29 CFR 2520.104-23, the Plan is exempt from the reporting and
disclosure provisions of Part 1 of Subtitle B of Title I of ERISA, except for
providing Plan documents to the Secretary of Labor upon request. Title IV of
ERISA, relating to plan termination insurance, does not apply to the Plan.
The Plan is a nonqualified plan for federal income tax purposes and is not
subject to the qualification requirements of Section 401 of the Internal
Revenue Code of 1986, as amended.
4. PLAN TERMINATION
It is the Company's intention to continue the Plan. However, the Company has
the right under the Plan to amend, suspend, or terminate the Plan at any
time. In the event of termination, Plan benefits will be used solely for the
benefit of the participants and their beneficiaries.
-7-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
person who administers the Plan has duly caused this annual report to be signed
by the undersigned, thereunto duly authorized.
INTERNATIONAL PAPER COMPANY DEFERRED COMPENSATION
SAVINGS PLAN
By: /s/ Jerome N. Carter
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Jerome N. Carter
Senior Vice President and Plan Administrator
Dated: March 30, 2004
Stamford, Connecticut