Weldwood of Canada
Limited Employee Phantom
Share Plan
Financial Statements as of and for the
Years Ended December 31, 2003 and 2002
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
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE 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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WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
TABLE OF CONTENTS
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Page
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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 and 2002 3
Notes to Financial Statements 4-5
INDEPENDENT AUDITORS' REPORT
To the Plan Administrator of
Weldwood of Canada Limited
Employee Phantom Share Plan:
We have audited the accompanying statements of net assets available for benefits
of Weldwood of Canada Limited Employee Phantom Share 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 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 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 then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
March 30, 2004
1
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
2003 2002
NET ASSETS AVAILABLE FOR BENEFITS--Receivable from
Weldwood of Canada Limited (Note 2) $2,636,432 $1,834,806
========== ==========
See notes to financial statements.
2
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
2003 2002
Amounts allocated to participant accounts (Note 1):
Participant contributions $ 82,547 $ 52,586
Phantom investment gain (loss) 476,641 (250,288)
Benefits paid to participants (157,396) --
---------- ----------
401,792 (197,702)
---------- ----------
Translation adjustment (Note 2) 399,834 17,309
---------- ---------
NET INCREASE (DECREASE) 801,626 (180,393)
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 1,834,806 2,015,199
---------- ----------
End of year $2,636,432 $1,834,806
========== ==========
See notes to financial statements.
3
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
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1. DESCRIPTION OF THE PLAN
The following description of the Weldwood of Canada Limited Employee
Phantom Share Plan (the "Plan") is provided for general information
purposes only. Participants should refer to the Plan document for more
complete information.
General--The Plan is an unfunded retirement plan established for the
purpose of encouraging eligible employees of Weldwood of Canada Limited
("Weldwood"), a Canadian corporation and wholly owned subsidiary of
International Paper Company, to contribute to the growth and profitability
of the Company through an equity-based compensation plan. For purposes of
these financial statements, references to "the Company" relate to Weldwood
and International Paper Company. As an unfunded plan, no assets of the
Company have been segregated to pay the amounts due to participants under
the Plan. The Company controls and manages the operation and administration
of the Plan. JP Morgan/American Century Retirement Plan Services performs
certain administrative and recordkeeping functions for the Plan.
Contributions--The Plan provides that the Company will allocate to each
participant's account an amount equal to a percentage of the participant's
incentive compensation, as designated by the participant.
Investments--Each participant's account is treated as if it is invested in
the Company Stock Fund of the Champion International Corporation Savings
Plan #077 through March 31, 2002 and the International Paper Company
Salaried Savings Plan subsequent to March 31, 2002 (the "Company Stock
Fund"). The Company Stock Fund is generally invested in common stock of
International Paper Company.
Participant Accounts--Individual accounts are maintained for each Plan
participant. Although the Plan itself has no investment assets, each
participant's account is credited with the participant's contributions, the
Company's contributions, if applicable, and allocations of earnings, and
charged with benefit payments, if applicable, and allocations of losses.
Earnings and loss allocations are based on the actual earnings and losses
of the Company Stock Fund for the period.
Vesting--Participants are immediately vested in their entire account
balance, as adjusted for earnings and losses.
Payment of Benefits--All vested amounts are distributable to participants
from the assets of the Company upon retirement, death, disability or other
termination of employment in a single lump sum payment or in two cash
installments. In addition, effective January 1, 2003, quarterly
installments may be selected with the final payment being no later than
December 31 of the calendar year following the calendar year in which
termination or retirement occurs. All benefits are payable in Canadian
currency.
4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S.").
Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the U.S. 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 paid by the Company.
Payment of Benefits--Benefit payments to participants are recorded upon
distribution.
Foreign Currency Translation--The functional currency of the Plan is
Canadian dollars. The net assets of the Plan are translated into U.S.
dollars using the year-end exchange rate. The changes in net assets are
translated using the average exchange rate for the year. The resulting
translation adjustment is included in the accompanying statements of
changes in net assets available for benefits.
3. PLAN TERMINATION
It is the Company's intention to continue the Plan. However, the Company
has the right under the Plan to terminate or amend the Plan in whole or in
part at any time. No amendment or termination shall reduce a participant's
benefit under the Plan that has been accrued up to the date of termination
or amendment. As an unfunded Plan, no assets of the Company have been
segregated to pay amounts due to participants under the Plan.
4. INCOME TAX STATUS
The Plan is established pursuant to the provisions of subsection 6801(d) of
the regulations to the Income Tax Act (Canada). The Plan is subject to
income taxes; however, the unfunded nature of the Plan generally precludes
the occurrence of a taxable event arising from the Plan's operations.
Amounts contributed, and earnings credited thereon, are not considered
taxable income to participants until distributed.
5
International Paper Company
Weldwood of Canada Limited
Employee Phantom Share Plan
Financial Statements
As of December 31, 2001 and 2000
Together With Auditors' Report
International Paper Company
Weldwood of Canada Limited
Employee Phantom Share Plan
Table of Contents
Page(s)
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Report of Independent Public Accountants 1
Statements of Net Assets Available for Benefits As of December
31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits For the
Years Ended December 31, 2001, 2000 and 1999 3
Statements of Accumulated Plan Benefits As of December 31, 2001
and 2000 4
Statements of Changes in Accumulated Plan Benefits For the Years
Ended December 31, 2001, 2000 and 1999 5
Notes to Financial Statements 6-7
THIS REPORT SET FORTH BELOW IS A COPY OF A PREVIOUSLY ISSUED AUDIT REPORT BY
ARTHUR ANDERSEN LLP. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH ITS INCLUSION IN THIS FORM 11-K.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the Weldwood of Canada
Limited Employee Phantom Share Plan:
We have audited the accompanying statements of net assets available for benefits
and of accumulated plan benefits of the WELDWOOD OF CANADA LIMITED (a Canadian
corporation and wholly owned subsidiary of International Paper Company) EMPLOYEE
PHANTOM SHARE PLAN (the Plan) as of December 31, 2001 and 2000, and the related
statements of changes in net assets available for benefits and of changes in
accumulated plan benefits for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility of the Plan
Administrator. 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 the Plan Administrator, 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 financial status of the Plan as of December 31, 2001
and 2000, and the changes in its financial status for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.
Memphis, Tennessee,
March 18, 2002.
-1-
INTERNATIONAL PAPER COMPANY
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2001 AND 2000
2001 2000
----------------------- -----------------------
Cdn.$ US $ Cdn.$ US $
---------- ---------- ---------- ----------
ASSETS
Receivable from Weldwood of Canada
Limited (Note 1) $3,209,426 $2,015,199 $2,524,029 $1,682,518
---------- ---------- ---------- ----------
Net assets available for benefits $3,209,426 $2,015,199 $2,524,029 $1,682,518
========== ========== ========== ==========
The accompanying notes to financial statements are an integral part of
these statements.
-2-
INTERNATIONAL PAPER COMPANY
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
----------------------- ----------------------- -------------------
Cdn. $ US $ Cdn. $ US $ Cdn. $ US $
---------- ---------- ---------- ---------- -------- --------
Amounts allocated to participant accounts
(Note 1):
Participant deferrals $ 471,629 $ 304,588 $ 793,688 $ 534,430 $329,621 $222,428
---------- ---------- ---------- ---------- -------- --------
Company-
Additional deferral 47,163 30,459 79,369 53,443 32,962 22,243
Phantom investment earnings 399,753 258,169 1,153,359 776,614 290,325 195,911
---------- ---------- ---------- ---------- -------- --------
Company deferrals 446,916 288,628 1,232,728 830,057 323,287 218,154
---------- ---------- ---------- ---------- -------- --------
Total deferrals 918,545 593,216 2,026,416 1,364,487 652,908 440,582
---------- ---------- ---------- ---------- -------- --------
Benefits paid (Note 1) (233,148) (150,572) (256,946) (173,015) -- --
---------- ---------- ---------- ---------- -------- --------
Net increase in net assets available for
benefits 685,397 442,644 1,769,470 1,191,472 652,908 440,582
---------- ---------- ---------- ---------- -------- --------
Translation adjustment (Note 2) -- (109,963) -- (31,411) -- 15,446
---------- ---------- ---------- ---------- -------- --------
Net assets available for benefits,
beginning of year 2,524,029 1,682,518 754,559 522,457 101,651 66,429
---------- ---------- ---------- ---------- -------- --------
Net assets available for benefits,
end of year $3,209,426 $2,015,199 $2,524,029 $1,682,518 $754,559 $522,457
========== ========== ========== ========== ======== ========
The accompanying notes to financial statements are an integral part of
these statements.
-3-
INTERNATIONAL PAPER COMPANY
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
STATEMENTS OF ACCUMULATED PLAN BENEFITS
AS OF DECEMBER 31, 2001 AND 2000
2001 2000
----------------------- -----------------------
Cdn. $ US $ Cdn. $ US $
---------- ---------- ---------- ----------
Present value of accumulated plan benefits:
Vested benefits-
Vested benefits of participants
currently receiving payments $ -- $ -- -- $ --
Other vested benefits 3,209,426 2,015,199 2,524,029 1,682,518
---------- ---------- ---------- ----------
Total vested benefits 3,209,426 2,015,199 2,524,029 1,682,518
---------- ---------- ---------- ----------
Nonvested benefits -- -- -- --
---------- ---------- ---------- ----------
Total present value of accumulated plan
benefits $3,209,426 $2,015,199 $2,524,029 $1,682,518
========== ========== ========== ==========
The accompanying notes to financial statements are an integral part of
these statements.
-4-
INTERNATIONAL PAPER COMPANY
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
STATEMENTS OF CHANGES IN ACCUMULATED PLAN BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
---------------------- ---------------------- ------------------
Cdn. $ US $ Cdn. $ US $ Cdn. $ US $
---------- ---------- ---------- ---------- -------- --------
Present value of accumulated plan benefits,
beginning of year $2,524,029 $1,682,518 $ 754,559 $ 522,457 $101,651 $ 66,429
---------- ---------- ---------- ---------- -------- --------
Increase (decrease) during the year attributable to:
Amounts allocated to participant accounts (Note 1)-
Participant deferrals 471,629 304,588 793,688 534,430 329,621 222,428
Additional deferral 47,163 30,459 79,369 53,443 32,962 22,243
Phantom investment earnings 399,753 258,169 1,153,359 776,614 290,325 195,911
---------- ---------- ---------- ---------- -------- --------
Total 918,545 593,216 2,026,416 1,364,487 652,908 440,582
---------- ---------- ---------- ---------- -------- --------
Benefits paid (233,148) (150,572) (256,946) (173,015) -- --
---------- ---------- ---------- ---------- -------- --------
Net increase in accumulated plan benefits 685,397 442,644 1,769,470 1,191,472 652,908 440,582
---------- ---------- ---------- ---------- -------- --------
Translation adjustment (Note 2) -- (109,963) -- (31,411) -- 15,446
---------- ---------- ---------- ---------- -------- --------
Present value of accumulated plan benefits,
end of year $3,209,426 $2,015,199 $2,524,029 $1,682,518 $754,559 $522,457
========== ========== ========== ========== ======== ========
The accompanying notes to financial statements are an integral part of
these statements.
-5-
INTERNATIONAL PAPER COMPANY
WELDWOOD OF CANADA LIMITED
EMPLOYEE PHANTOM SHARE PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
1. PLAN DESCRIPTION
The following description of the Weldwood of Canada Limited Employee
Phantom Share Plan (the Plan) provides only summary information. Reference
should be made to the Plan document for a more complete description of the
Plan's provisions. Weldwood of Canada Limited (Weldwood) is a Canadian
Corporation and was a wholly-owned subsidiary of Champion International
Corporation (Champion). On June 20, 2000, International Paper Company
acquired Champion. Under the terms of the agreement, Champion shareholders
received $50 in cash per share and $25 worth of International Paper common
stock for each Champion share. For purposes of the financial statements,
references to "the Company" relate to Weldwood and Champion prior to the
purchase agreement and Weldwood and International Paper thereafter.
The Plan, which became effective on January 1, 1998, is an unfunded
retirement plan established for the purpose of encouraging eligible
employees of Weldwood to contribute to the growth and profitability of the
Company through an equity-based compensation plan. As an unfunded plan, no
assets of the Company have been segregated to pay the amounts due to
participants under the Plan. The Plan is administered by the Company.
Expenses of the Plan are paid by the Company and are not included in the
accompanying financial statements. JP Morgan/American Century Retirement
Plan Services performs certain administrative and record-keeping functions
of the Plan.
Among other things, the Plan provides that the Company will allocate to
each participant's account an amount equal to a percentage of such
participant's incentive compensation, as designated by the participant,
plus an additional allocation equal to 10% of the participant's designated
deferral. The participant's account (and any earnings thereon) is treated
as if it was invested in the Company Stock Fund of the Champion
International Corporation Savings Plan #077 (Plan #077). The Company Stock
Fund is generally fully invested in common stock of Champion or, subsequent
to the acquisition, International Paper. Although the Plan itself has no
investment assets, participant accounts are credited
with earnings or losses, based upon the actual earnings and losses of the
Company Stock Fund for the period.
Effective June 20, 2000, in connection with the acquisition of Champion by
International Paper, all participant balances invested in the phantom
Company Stock Fund of Champion, including the Company additional deferral,
were converted into phantom shares of the Company Stock Fund of
International Paper in an amount equivalent to the Champion purchase
consideration on a per-share basis.
Participants are immediately vested in their entire account balance, as
adjusted for the earnings and losses previously discussed. All vested
amounts are distributable to participants from the assets of the Company
upon retirement, death, or other termination of employment in a single lump
sum cash payment or in two cash installments. All benefits are payable in
Canadian currency.
6
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Accounting--The Plan uses the accrual basis of accounting.
(b) Payment of Benefits--Benefits are recorded when paid.
(c) Present Value of Accumulated Plan Benefits--Accumulated plan benefits
represent the future benefit payments due to participants under the
provisions of the Plan. The present value of accumulated plan benefits
is equal to the total of the estimated fair value of the participants'
account balances (i.e., participant and Company allocation plus
(minus) phantom investment earnings (losses) less benefits paid).
(Note 1)
(d) Foreign Currency Translation--The net assets of the Plan and the
accumulated plan benefits are translated into U.S. dollars using the
year-end exchange rate. The changes in net assets and accumulated plan
benefits are translated using the average exchange rate for the year.
The resulting translation gains or losses are included in the
translation adjustment included in the Statements of Changes In Net
Assets Available for Benefits and the Statements of Changes In
Accumulated Plan Benefits. The cumulative translation adjustment at
December 31, 2001 and 2000 totaled ($127,819) and ($17,856),
respectively.
(e) Use of Estimates--The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that
affect the financial statements. Actual results could differ from
those estimates.
3. PRIORITIES UPON TERMINATION OF THE PLAN
The Company may amend or terminate the Plan in whole or in part at any
time. No amendment or termination of the Plan shall reduce a participant's
benefit under the Plan that has been accrued up to the date of termination
or amendment. As an unfunded Plan, no assets of the Company have been
segregated to pay amounts due to participants under the Plan.
4. TAX STATUS
The Plan is established pursuant to the provisions of subsection 6801(d) of
the regulations to the Income Tax Act (Canada). The Plan is subject to
income taxes; however the unfunded nature of the Plan generally precludes
the occurrence of a taxable event arising from the Plan's operation.
Amounts deferred, and earnings credited thereon, are not considered taxable
income to participants until distributed.
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
Weldwood of Canada Limited
Employee Phantom Share Plan
By: /s/ Jerome N. Carter
--------------------------------
Jerome N. Carter
Senior Vice President
and Plan Administrator
Dated: March 30, 2004
Stamford, Connecticut