International Paper Company
Deferred Compensation
Savings Plan
Financial Statements
as of December 31, 2002 and 2001, and for the
Years Ended December 31, 2002, 2001, and 2000,
and Independent Auditors' Reports
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Year Ended December 31, 2002 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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Special Note with Respect to Report of Arthur Andersen LLP for the Year Ended
December 31, 2000
In connection with International Paper Company's ("Company") change of auditors
by its Board of Directors on April 9, 2002, the employee benefit plans sponsored
by the Company have also changed auditors. The auditor of International Paper
Company Deferred Compensation Savings Plan (formerly International Paper Company
Unfunded Savings Plan) (the "Plan") for fiscal years 2001 and 2002 is Deloitte &
Touche LLP. During the fiscal year ended December 31, 2000, the Plan did not
have any disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosures or auditing scope or
procedures which, if not resolved to Arthur Andersen LLP's satisfaction, would
have caused it to make reference to the disagreement in connection with its
report.
SEC rules require us to present our audited financial statements in various SEC
filings, along with Arthur Andersen LLP's consent to our inclusion of its audit
report in those filings. The SEC has provided regulatory relief designed to
allow companies that file reports with the SEC to dispense with the requirement
to file a consent of Arthur Andersen LLP in certain circumstances. We have not
been able to obtain, after reasonable efforts, the written consent of Arthur
Andersen LLP to our incorporating its report as having certified our financial
statements for the Plan for the year ended December 31, 2000. The report of
Arthur Andersen LLP included herein is a copy of a previously issued Arthur
Andersen LLP report and this report has not been reissued by Arthur Andersen
LLP.
Because Arthur Andersen LLP has not consented to such incorporation, you may
have no effective remedy against Arthur Andersen LLP for any untrue statements
of a material fact contained in the financial statements audited by Arthur
Andersen LLP, or any omissions to state a material fact required to be stated
therein. In addition, the ability of Arthur Andersen LLP to satisfy any claims
(including claims arising from its provision of auditing and other services to
us) may be limited as a practical matter due to recent events regarding Arthur
Andersen LLP.
INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORTS 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 2002
and 2001 3
Statements of Changes in Net Assets Available for Benefits for the Years
Ended December 31, 2002, 2001, and 2000 4
Notes to Financial Statements 5
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, 2002 and 2001, and the related statements of changes in net assets available
for benefits for the years then ended. 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. The financial
statements of the Plan for the year ended December 31, 2000 were audited by
other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those statements in their report dated June 11, 2001.
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, the 2002 and 2001 financial statements present fairly, in all
material respects, the net assets available for benefits of the Plan as of
December 31, 2002 and 2001, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
June 24, 2003
This report is a copy of a previously issued Arthur Andersen LLP report and this
report has not been reissued by Arthur Andersen LLP.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the International Paper Company
Unfunded Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the International Paper Company Unfunded Savings Plan (the "Plan") as of
December 31, 2000 and 1999, and the related statements of changes in net assets
available for benefits for the years then ended. 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. 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States.
/s/ Arthur Andersen LLP
Memphis, Tennessee
June 11, 2001
INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001 (In Thousands)
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2002 2001
ASSETS - Receivable from International Paper Company (Note 2) $100,005 $87,828
-------- -------
NET ASSETS AVAILABLE FOR BENEFITS $100,005 $87,828
======== =======
See notes to financial statements.
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INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000 (In Thousands)
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2002 2001 2000
ADDITIONS:
Participant deferrals $ 8,041 $11,290 $ 8,507
Company matching deferrals 2,088 2,119 1,536
Integration benefit program deferrals (Note 1) - - 2,303
Transfer from other plans (Note 1) 14,957 - 3,453
-------- ------- -------
Total additions 25,086 13,409 15,799
DEDUCTIONS:
Investment loss 8,094 1,441 7,157
Benefits paid to participants 4,815 6,531 4,686
-------- ------- -------
Total deductions 12,909 7,972 11,843
NET INCREASE 12,177 5,437 3,956
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 87,828 82,391 78,435
-------- ------- -------
End of year $100,005 $87,828 $82,391
======== ======= =======
See notes to financial statements.
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INTERNATIONAL PAPER COMPANY
DEFERRED COMPENSATION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 AND 2001,
AND FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
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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 July 1, 2000, former Union Camp Corporation (a company acquired
by the Company during 1999) salaried employees became eligible to
participate in the Plan. Also on July 1, 2000, the Union Camp Corporation
Supplemental Retirement Plan merged into 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.
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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.
Other Deferrals - During 2000, approximately $2,303,000 was transferred
into the Plan under the Company's Integration Benefit Program ("IBP").
Under the IBP, certain employees of the combined company of Union Camp
Corporation and the Company were identified for termination. Outside the
IBP, benefits were offered to certain senior executives and managers, of
which several elected to transfer their benefits into the Plan rather than
receiving annuity payments.
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.
-6-
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.
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.
-7-
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 a
hardship withdrawal if they have already requested a hardship withdrawal
from the SSP for the same event. 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. Certain conditions are necessary for a participant
to qualify for 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.
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.
-8-
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.
-9-
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
---------------------------------------
Jerome N. Carter, Senior Vice President
and Plan Administrator
Date: June 27, 2003
Stamford, Connecticut
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as ...............................'SS'