<PAGE>
- --------------------------------------------------------------------------------
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, 1997 Commission file number 1-3157
INTERNATIONAL PAPER COMPANY
SALARIED SAVINGS PLAN
(Full title of the plan)
INTERNATIONAL PAPER COMPANY
Two Manhattanville Road
Purchase, NY 10577
Telephone: (914) 397-1500
(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.)
- --------------------------------------------------------------------------------
<PAGE>
Financial Statements.
Financial statements for the International Paper Company Salaried Savings Plan
and the report of Arthur Andersen LLP with respect thereto are as follows:
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Public Accountants 2
Statements of Net Assets Available for Benefits,
with Fund Information
-December 31, 1997 and 1996 3-4
Statements of Changes in Net Assets Available for Benefits,
with Fund Information
-Years Ended December 31, 1997 and 1996 5-6
Notes to Financial Statements 7-19
</TABLE>
1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Plan Administrator of the International Paper Company
Salaried Savings Plan:
We have audited the accompanying statements of net assets available for
benefits, with fund information, of the International Paper Company Salaried
Savings Plan (the "Plan") as of December 31, 1997 and 1996, and the related
statements of changes in net assets available for benefits, with fund
information, 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 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, 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, 1997 and 1996, and the changes in net assets available for benefits
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements of
net assets available for benefits and in the statements of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the net assets available for benefits and changes in net assets
available for benefits of each fund. The fund information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 26, 1998.
2
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
---------------------------------------------------------------------
DECEMBER 31, 1997
-----------------
(in thousands)
Fund Information
--------------------------------------------------------------------
Stable Company S&P 500
Value Stock Index Balanced International Growth
Fund Fund Fund Fund Stock Fund Fund Total
------ ------- ------- -------- ------------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Equity in net assets of International
Paper Company Defined Contribution
Plans Master Trust (Note 1) $309,503 $890,191 $255,074 $118,526 $25,196 $41,450 $1,639,940
-------- -------- -------- -------- ------- ------- -----------
Receivables:
Interest - 26 17 4 1 2 50
Employee contributions - - - - - 137 137
Loan repayments - 246 101 - 8 11 366
Loans 11,377 34,755 4,453 1,512 190 253 52,540
Interfund transfers - 948 - 557 44 625 2,174
-------- -------- -------- -------- ------- ------- -----------
Total receivables 11,377 35,975 4,571 2,073 243 1,028 55,267
-------- -------- -------- -------- ------- ------- -----------
Total assets 320,880 926,166 259,645 120,599 25,439 42,478 1,695,207
-------- -------- -------- -------- ------- ------- -----------
Liabilities:
Loans payable (424) (2,024) (358) - (44) (120) (2,970)
Interfund transfers (1,097) - (1,077) - - - (2,174)
Transfers to other plans (14) (14) - - - - (28)
Contributions refundable and other (462) (491) (229) (185) (24) - (1,391)
-------- -------- -------- -------- ------- ------- -----------
Total liabilities (1,997) (2,529) (1,664) (185) (68) (120) (6,563)
-------- -------- -------- -------- ------- ------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $318,883 $923,637 $ 257,981 $120,414 $25,371 $42,358 $1,688,644
-------- -------- -------- -------- ------- ------- -----------
-------- -------- -------- -------- ------- ------- -----------
The accompanying notes are an integral part of this financial statement.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
---------------------------------------------------------------------
DECEMBER 31, 1996
-----------------
(in thousands)
Fund Information
------------------------------------------------------------
Fixed Company Diversified
Income Stock Equity Balanced Other
Fund Fund Fund Fund Funds Total
------ --------- ------------ --------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Equity in net assets of International
Paper Company Defined Contribution
Plans Master Trust (Note 1) $272,893 $872,417 $163,926 $84,751 $ - $1,393,987
-------- -------- -------- ------- --------- ----------
Investments at fair value:
Federal Paper Board Retirement
Savings Plan for Salaried
Employees (Note 7) - - - - 133,043 133,043
-------- -------- -------- ------- --------- ----------
Receivables:
Employee contributions - 712 552 194 - 1,458
Employer contributions - 653 - - - 653
Loan repayments - 555 134 - - 689
Loans 10,204 31,825 3,482 1,276 - 46,787
Interfund transfers - - 2,340 4,785 - 7,125
Transfers from other plans - 385 - 89 - 474
-------- -------- -------- ------- --------- ----------
Total receivables 10,204 34,130 6,508 6,344 - 57,186
-------- -------- -------- ------- --------- ----------
Total assets 283,097 906,547 170,434 91,095 133,043 1,584,216
-------- -------- -------- ------- --------- ----------
Liabilities:
Interfund transfers (1,503) (5,622) - - - (7,125)
Transfers to other plans (306) - (60) - - (366)
Contributions refundable and other (247) - (349) (62) - (658)
-------- -------- -------- ------- --------- ----------
Total liabilities (2,056) (5,622) (409) (62) - (8,149)
-------- -------- -------- ------- --------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $281,041 $900,925 $170,025 $91,033 $ 133,043 $1,576,067
-------- -------- -------- ------- --------- ----------
-------- -------- -------- ------- --------- ----------
The accompanying notes are an integral part of this financial statement.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
(in thousands)
Fund Information
---------------------------------------------------------------------------
Stable Company S&P 500
Value Stock Index Balanced International Growth Other
Fund Fund Fund Fund Stock Fund Fund Funds Total
------ ------- ------- -------- ------------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) attributable to:
Equity in investment activites of
International Paper Company
Defined Contribution Plans
Master Trust (Note 1) $ 22,624 $ 92,252 $ 64,782 $ 22,016 $ 1,927 $ 5,368 $ - $ 208,969
Participant contributions 9,338 21,420 16,425 7,388 3,936 8,142 - 66,649
Company contributions (net
of forfeitures of $792) - 27,748 - - - - - 27,748
Distributions and withdrawals (53,635) (99,182) (21,320) (11,031) (1,240) (1,044) - (187,452)
Administrative fees (1,304) (2,755) (658) (309) (47) (67) - (5,140)
Transfers (to) from other funds 60,715 (19,069) 29,243 11,461 20,734 29,959 (133,043) -
Transfers (to) from other plans 104 2,298 (516) (144) 61 - - 1,803
--------- -------- -------- -------- -------- -------- --------- -----------
Increase (decrease) in net assets 37,842 22,712 87,956 29,381 25,371 42,358 (133,043) 112,577
NET ASSETS AVAILABLE FOR BENEFITS:
December 31, 1996 281,041 900,925 170,025 91,033 - - 133,043 1,576,067
--------- -------- -------- -------- -------- -------- --------- -----------
December 31, 1997 $318,883 $923,637 $257,981 $120,414 $25,371 $42,358 $ - $1,688,644
--------- -------- -------- -------- -------- -------- --------- -----------
--------- -------- -------- -------- -------- -------- --------- -----------
The accompanying notes are an integral part of this financial statement.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
----------------------------
(in thousands)
Fund Information
------------------------------------------------------------
Fixed Company Diversified
Income Stock Equity Balanced Other
Fund Fund Fund Fund Funds Total
--------- ---------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) attributable to:
Equity in investment activities of
International Paper Company
Defined Contribution Plans
Master Trust (Note 1) $ 21,275 $ 89,037 $ 27,787 $ 7,811 $ - $ 145,910
Participant contributions 3,352 48,670 5,320 2,156 - 59,498
Company contributions (net
of forfeitures of $654) - 25,687 - - - 25,687
Distributions and withdrawals (51,026) (78,363) (12,041) (7,661) - (149,091)
Administrative fees (980) (2,049) (356) (194) - (3,579)
Transfers (to) from other funds (1,788) (44,845) 27,434 19,199 - -
Transfers from other plans (Note 7):
Federal Paper Board Retirement
Savings Plan for Salaried
Employees - - - - 133,043 133,043
Other plans 4,638 4,360 14,707 13,956 - 37,661
--------- --------- --------- --------- --------- ----------
Increase (decrease) in net assets (24,529) 42,497 62,851 35,267 133,043 249,129
NET ASSETS AVAILABLE FOR BENEFITS:
December 31, 1995 305,570 858,428 107,174 55,766 - 1,326,938
--------- --------- --------- --------- --------- ----------
December 31, 1996 $281,041 $900,925 $170,025 $91,033 $133,043 $1,576,067
--------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- ----------
The accompanying notes are an integral part of this financial statement.
</TABLE>
6
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
--------------------------------------------------------------------
The following description of the International Paper Company Salaried Savings
Plan (the "Plan") provides general information about the provisions of the Plan.
Participants should refer to the Plan's Summary Plan Description for detailed
Plan provisions.
General
- -------
The Plan, which was established July 1, 1992 and was amended and restated
effective January 1, 1994, was established to provide an incentive for salaried
employees to accumulate personal funds for their future needs and to assist
employees in developing a strong proprietary interest in the success of
International Paper Company and its subsidiaries (the "Company"). The Plan
allows for contributions by the participating employees and by the Company.
The assets of the Plan are held by State Street Bank and Trust Company (the
"Trustee") and are administered under a master trust agreement (referred to
herein as the "Defined Contribution Plans Master Trust"). All administrative
costs are charged to the Plan. At December 31, 1996, the assets of the Plan
related to the merger of the Federal Paper Board Retirement Savings Plan for
Salaried Employees ("FPB Plan") were held by Vanguard Fiduciary Trust Company
("Vanguard"). In connection with this merger, the Company terminated the
trust agreement with Vanguard and the assets previously held under the FPB
Plan were transferred to the Trustee subsequent to December 31, 1996.
Selected financial data of the Defined Contribution Plans Master Trust are
included in Note 9. The Plan's percent of equity in each fund of the Defined
Contribution Plans Master Trust as of December 31, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
Percent of Equity
-------------------
Investment Fund 1997 1996
----------------- ---- ----
<S> <C> <C>
Stable Value Fund 62% 65%
Company Stock Fund 96% 96%
S&P 500 Index Fund 95% 96%
Balanced Fund 94% 94%
International Stock Fund 97% -
Growth Fund 96% -
</TABLE>
7
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
---------------------------------------------------------------------
(Continued)
-----------
It is the Company's intention to continue the Plan. However, it reserves the
right to amend, suspend or terminate the Plan at any time. In the event of
termination, assets of the Plan will be used solely for the benefit of the
participants and their beneficiaries.
Contributions
- -------------
The Plan provides for employee basic and supplemental contributions and Company
matching contributions. The rates of these contributions vary by location within
the Company. Employee contributions may be made on either a before-tax or
after-tax basis, or in any combination, and are subject to statutory limitations
on annual contributions. The Company matches employee basic contributions, but
does not match employee supplemental contributions. The maximum rate of employee
contributions (basic and supplemental) at all locations is 16% of annual
compensation.
Prior to 1997, all employee basic contributions were invested in the Company
Stock Fund. Effective January 1, 1997, participants may direct their employee
basic contributions among the following six investment options: Stable Value
Fund (formerly the Fixed Income Fund), Balanced Fund, S&P 500 Index Fund
(formerly the Diversified Equity Fund), International Stock Fund, Growth Fund
and Company Stock Fund. Company matching contributions are invested in the
Company Stock Fund. Supplemental contributions may be invested in any of the
six investment options as directed by the participant.
Amounts held in the restricted portion of the Company Stock Fund, which are
subject to diversification, may be invested in the Stable Value Fund, S&P 500
Index Fund or Balanced Fund. Amounts eligible for diversification are limited to
a portion of the value of employee basic contributions and Company matching
contributions, including dividends. Participants who are age 55 or over are
eligible for the annual diversification election. Participants are eligible for
total diversification at age 60.
The Plan is authorized to accept rollover contributions and direct
trust-to-trust transfers of amounts which participants are entitled to
receive from other qualified profit-sharing, stock bonus and savings plans.
Vesting
- -------
Participants are immediately 100% vested in their basic contributions,
supplemntal contributions, and rollover contributions. A participant in the
Plan becomes vested in the shares of Company stock purchased with Company
matching contributions, including shares purchased with reinvested dividends,
according to the following schedule:
<TABLE>
<CAPTION>
Vesting Years of Service Percent Vested
------------------------ --------------
<S> <C>
Less than 3 0%
3 but less than 4 35%
4 but less than 5 70%
5 or more 100%
</TABLE>
8
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
--------------------------------------------------------------------
(Continued)
-----------
A participant also becomes fully vested if one of the following occurs: (1)
attainment of age 65 while employed by the Company; (2) the participant's death
or total disability; (3) layoff for more than 12 consecutive months; or (4)
termination of employment due to permanent closing of the work facility. The
vesting schedule of a merged plan shall be substituted for this schedule if it
is more favorable to an employee who was participating in such plan on the
merger date.
Participation
- -------------
An employee is generally eligible to participate in the Plan if the employee:
(1) is a union-free salaried employee; (2) is not contributing to another
qualified defined contribution plan sponsored by the Company; (3) is employed
on a non-temporary basis; and (4) has completed 12 months of continuous
employment from the date of hire. Participant contributions to the Plan are
voluntary. As of December 31, 1997 and 1996, there were 21,746 and 21,768
employees, respectively, participating in the Plan.
Valuation of Participants' Accounts
- -----------------------------------
Participants' accounts in each fund are adjusted monthly to reflect
contributions, the effect of investment income (collected and accrued),
dividends paid, realized and unrealized gains and losses, expenses and all other
transactions. As of the end of each month, an allocation is made to each
participant's account of the Company common stock provided by Company matching
contributions during such month, and such account is adjusted to reflect
dividends paid or any rights, warrants or options issued on such shares
previously allocated to the participant.
Distributions and Withdrawals
- -----------------------------
Distributions are normally made when a participant retires, terminates
employment or dies. With the exception of the Company Stock Fund, distributions
are in cash for the value of the participant's account. Distributions from the
Company Stock Fund are made in shares of Company common stock, in cash or in a
combination of shares and cash, as selected by the participant.
9
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
--------------------------------------------------------------------
(Continued)
-----------
In the event of retirement, disability, layoff, closing of a work facility or
termination of employment with at least 10 years of service where commencement
of benefit payments is deferred to at least age 55, a participant may choose to
receive payment from the Plan in a lump-sum, in installments for 5 to 20
years, in a combination of lump-sum and installments or through the purchase of
an annuity. Death benefits to a beneficiary are paid in a lump-sum.
A participant may make partial or full general withdrawals in the following
order: (1) all or part of the value of after-tax supplemental contributions, and
all or part of the value of after-tax basic contributions made prior to the last
24 months without a suspension of Company matching contributions; (2) all or
part of the value of after-tax basic contributions made during the last 24
months, with future Company matching contributions suspended for three months;
(3) all or part of the value of a rollover account, if any; and (4) for
participants under certain benefit schedules, all or part of the value of
certain prior vested Company matching contributions which have been held in the
Plan for at least 24 months, with future Company matching contributions
suspended for six months.
Withdrawals of after-tax amounts contributed after 1986 include a pro-rata
portion of earnings on the contributions.
If the total amount available to a participant in the Plan for a general
withdrawal is insufficient to meet his or her financial needs, a participant
with a qualifying need who has not attained age 59 1/2 may apply to the Plan
administrator for a "hardship" withdrawal of part or all of the value of vested
Company matching contributions made prior to the last 24 months, and before-tax
contributions and pre-1989 earnings thereon. Participants who make a hardship
withdrawal must suspend contributions to the Plan for 12 months.
Participants in the Plan who have attained age 59 1/2 may withdraw the value of
before-tax contributions and the value of vested Company matching contributions
in addition to all amounts available under a general withdrawal. Participants
who make such a withdrawal must suspend contributions to the Plan for six
months.
Withdrawals may be made only at intervals of at least 12 months.
10
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
--------------------------------------------------------------------
(Continued)
-----------
Subject to statutory limitations, loans are available to participants up to
(on a cumulative outstanding basis) the lesser of 50% of the vested value of
a participant's account (excluding the Individual Retirement Account balance,
if any) or $50,000 less the excess of the highest outstanding loan balance
during the preceding 12 months over the outstanding balance of loans from the
Plan on the date a loan is made. Loans are repayable through payroll
deductions with a minimum loan period of one year. The interest rate is
determined by the plan administrator based on the greater of the prime
interest rate as published in the Wall Street Journal or the current yield of
the Stable Value Fund at the time the interest rate is established. Interest
rates ranged from 7.0% to 11.5% at December 31, 1997 and 1996.
Forfeitures
- -----------
Any unvested Company contributions forfeited by an employee upon termination of
employment are credited against subsequent Company contributions.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
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 disclosure of
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.
The financial statements of the Plan have been prepared on the accrual basis of
accounting. The Plan's net assets available for benefits consist primarily of
the Plan's equity in the Defined Contribution Plans Master Trust and, as of
December 31, 1996, includes assets of the FPB Plan. Investments in the S&P 500
Index Fund, Balanced Fund, Company Stock Fund, International Stock Fund, Growth
Fund and portions of the Stable Value Fund are reflected at quoted market value
as of the Plan's year-end. As noted in the following paragraph, portions of the
Stable Value Fund invested in certain investment contracts are reflected at
contract value.
11
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
------------------------------------------------------
In accordance with Statement of Position 94-4 ("SOP 94-4"), "Reporting of
Investment Contracts Held by Health and Welfare Benefit Plans and
Defined-Contribution Pension Plans," the Plan reports certain investment
contracts at contract value. Fully benefit-responsive investment contracts (as
defined in SOP 94-4) are valued at contract value, which represents the
principal balance of the investment contracts, plus accrued interest at the
stated contract rate, less payments received and contract charges by the
investment company. All other investment contracts are reported at fair market
value. The crediting interest rate is reset according to the terms of the
investment contracts and is based on the investment company's applicable rate
schedule. The aggregate average yield of the investment contracts for the year
ended December 31, 1997 and 1996, was 6.69% and 7.28%, respectively. The
aggregate crediting interest rate for the investment contracts as of December
31, 1997 and 1996, was 6.75% and 7.57%, respectively.
The Plan accounts for realized and unrealized appreciation or depreciation of
Plan assets using the current value approach, as required by the Department of
Labor. This approach requires that realized and unrealized appreciation or
depreciation of Plan assets be based on the value of the assets as of the
beginning of the Plan year or at the time of purchase during the year.
Contributions, benefit payments and transfers are specifically identified with
the Plan. Net investment income of the Defined Contribution Plans Master Trust
is allocated to the Plan in proportion to the Plan's equity in the Defined
Contribution Plans Master Trust.
Note 3. INVESTMENTS
-----------
The assets of the Stable Value Fund are primarily invested in investment
contracts and investment-grade fixed income securities. The Stable Value
Fund's investment managers are Bankers Trust Company Global Investment
Management, Sanford C. Bernstein and Company, and Pacific Investment
Management Company. At December 31, 1997 and 1996, the Stable Value Fund held
U.S. Treasury Notes futures used primarily to enhance portfolio returns. The
futures represent approximately 6.1% and 4.5% at December 31, 1997 and 1996,
respectively, of the total Stable Value Fund of the Defined Contribution
Plans Master Trust. Futures contracts are contracts for delayed delivery of
securities in which the seller agrees to make delivery on a specified date of
a specified instrument at a specified price. The futures contracts are
recorded on the statement of net assets available for benefits with no cost
or market value, because they are marked-to-market on a daily basis. The Plan
does not hold or issue financial instruments for trading purposes.
The assets of the Company Stock Fund consist of shares of Company common stock.
The assets of the S&P 500 Index Fund consist primarily of an interest in the
Vanguard Institutional Index Fund, a diversified common stock fund managed by
Vanguard.
12
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 3. INVESTMENTS (Continued)
-----------------------
The assets of the Balanced Fund consist primarily of an interest in the Vanguard
Wellington Fund, a mutual fund sponsored by Vanguard.
The assets of the International Stock Fund consist primarily of an interest in a
diversified mutual fund of stocks of companies located outside the United
States.
The assets of the Growth Fund consist primarily of an interest in a managed
mutual fund of common stocks of mid to large capitalization companies exhibiting
above average prospects for growth.
Prior to December 31, 1996, participants in the FPB Plan were able to direct
their contributions into the various funds offered by the FPB Plan. Company
matching contributions made subsequent to March 12, 1996 were invested in
common stock of the Company. The accompanying December 31, 1996, statement of
net assets available for benefits reflects the amounts invested in the FPB
Plan funds. In January 1997, the investments in these funds were transferred
to the Trustee.
Dividends, interest and other property received by the Trustee with respect to
any fund are reinvested in the same fund.
Occasionally, the funds may hold cash on a temporary basis pending investment or
withdrawals. Cash balances are invested in the Trustee's short-term investment
fund.
Note 4. FEDERAL INCOME TAXES
--------------------
On August 22, 1996, the Internal Revenue Service issued a favorable
determination letter regarding the tax status of the Plan, ruling that the Plan
in form satisfies the requirements of Section 401 of the Internal Revenue Code
of 1986, as amended (the "Code"). Because all plans participating in the Defined
Contribution Plans Master Trust have received favorable IRS determination
letters, the trust satisfies the qualification requirements of Section 401 of
the Code and qualifies for tax-exempt status under Section 501 of the Code.
In the opinion of management, the Plan qualifies in operation for favorable
income tax treatment in accordance with the requirements of Sections 401 and 501
of the Code. Accordingly, no provision for Federal income taxes has been made in
the accompanying financial statements.
Note 5. CONTRIBUTIONS RECEIVABLE
------------------------
Contributions receivable from participants and the Company as of December 31,
1997 and 1996, were remitted to the Trustee during 1998 and 1997, respectively.
13
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 6. PLAN AMENDMENTS
---------------
Effective January 1, 1997, the following changes were made to the Plan. Two
additional investment funds, the Growth Fund and the International Stock Fund,
were added, and the names of the Fixed Income Fund and the Diversified Equity
Fund were changed to the Stable Value Fund and the S&P 500 Index Fund,
respectively. Future basic contributions may now be invested among the six
investment funds, at the participant's election. Diversification of the
contributions restricted to investment in the Company Stock Fund was amended so
that a participant may diversify up to 20% a year beginning with the year in
which the participant attains age 55.
Note 7. SIGNIFICANT MERGERS
-------------------
Effective March 31, 1996, assets totaling approximately $7,205,000, $6,590,000
and $3,197,000 for the accounts of participants in the Seaman-Patrick Paper
Company Profit Sharing and Savings Plan, the Seaman-Patrick Paper Company
Employee Stock Ownership Plan and the Carpenter Paper Company Profit Sharing and
Retirement Plan, respectively, were merged into the Plan.
Effective June 30, 1996, assets totaling approximately $16,003,000 for the
accounts of employees in the Kirk Paper Corporation Employee Savings Plan were
merged into the Plan.
Effective December 31, 1996, assets totaling approximately $133,043,000 for the
accounts of employees in the Federal Paper Board Retirement Savings Plan for
Salaried Employees were merged into the Plan.
14
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 8. RECONCILIATION TO FORM 5500
---------------------------
As of December 31, 1997 and 1996, the Plan had approximately $19,000,000 and
$20,300,000, respectively, of pending obligations to participants who had
elected final distributions from the Plan. These amounts are recorded as
liabilities in the Plan's Form 5500; however, these amounts are not recorded as
liabilities in the accompanying financial statements, in accordance with
generally accepted accounting principles.
The following table reconciles net assets available for benefits per the
financial statements to the Form 5500 as filed by the Company for the years
ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
(in thousands)
Net Assets Available
for Benefits
Benefits December 31
Payable to Benefits ---------------------
Participants Paid 1997 1996
------------ --------- ---- -----
<S> <C> <C> <C> <C>
Per Financial Statements $ - $ 187,452 $1,688,644 $ 1,576,067
Accrued Benefit Payments 19,010 19,010 (19,010) (20,281)
Reversal of 1996 Accrual
for Benefit Payments - (20,281) - -
------------ --------- ---------- -----------
Per Form 5500 $ 19,010 $ 186,181 $1,669,634 $ 1,555,786
------------ --------- ---------- -----------
------------ --------- ---------- -----------
</TABLE>
15
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 9. Selected Financial Data of the Defined Contribution Plans Master Trust
----------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY
---------------------------
DEFINED CONTRIBUTION PLANS MASTER TRUST
---------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
---------------------------------------------------------------------
DECEMBER 31, 1997
-----------------
(in thousands)
Fund Information
-----------------------------------------------------------------
Inter-
Stable Company S&P 500 USG national
Value Stock Index Balanced Stock Stock Growth
Fund Fund Fund Fund Fund Fund Fund Total
-------- -------- -------- -------- ----- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value:
Guaranteed investment contracts $ 1,279 $ - $ - $ - $ - $ - $ - $ 1,279
Investments in International Paper Company
common stock (cost $508,263) - 926,452 - - - - - 926,452
Investments in S&P 500 Index Fund (cost
$255,024) - - 268,411 - - - - 268,411
Investments in Balanced Fund (cost $103,795) - - - 125,998 - - - 125,998
Investments in USG Stock Fund (cost $354) - - - - 114 - - 114
Investments in International Stock Fund (cost
$25,062) - - - - - 25,957 - 25,957
Investments in Growth Fund (cost $43,930) - - - - - - 43,110 43,110
Investments, at contract value*:
Guaranteed investment contracts 487,273 - - - - - - 487,273
-------- -------- -------- -------- ----- -------- ------- ----------
Total investments 488,552 926,452 268,411 125,998 114 25,957 43,110 1,878,594
-------- -------- -------- -------- ----- -------- ------- ----------
Receivables:
Dividends and interest 2,612 92 - - - - - 2,704
Receivables for investments sold 12,217 - - - - - - 12,217
-------- -------- -------- -------- ----- -------- ------- ----------
Total receivables 14,829 92 - - - - - 14,921
-------- -------- -------- -------- ----- -------- ------- ----------
Total assets 503,381 926,544 268,411 125,998 114 25,957 43,110 1,893,515
-------- -------- -------- -------- ----- -------- ------- ----------
LIABILITIES
Payable for investments purchased (2) (28) (6) (5) - (1) - (42)
-------- -------- -------- -------- ----- -------- ------- ----------
Total liabilities (2) (28) (6) (5) - (1) - (42)
-------- -------- -------- -------- ----- -------- ------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $503,379 $926,516 $268,405 $125,993 $114 $ 25,956 $43,110 $1,893,473
-------- -------- -------- -------- ----- -------- ------- ----------
-------- -------- -------- -------- ----- -------- ------- ----------
</TABLE>
*The aggregate fair value of these contracts was approximately $504,084 as of
December 31, 1997.
16
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 9. Selected Financial Data of the Defined Contribution Plans Master Trust
----------------------------------------------------------------------
(Continued)
-----------
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY
---------------------------
DEFINED CONTRIBUTION PLANS MASTER TRUST
---------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
---------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
(in thousands)
Fund Information
--------------------------------------------------------------------
Inter-
Stable Company S&P 500 USG national
Value Stock Index Balanced Stock Stock Growth
Fund Fund Fund Fund Fund Fund Fund Total
-------- -------- -------- -------- ----- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Change attributable to:
Investment activities:
Dividend and interest income $ 32,993 $ 22,298 $ 6,253 $ 10,686 $ $ 870 $ 6,132 $ 79,232
Unrealized appreciation (depreciation) of
investments - 10,452 (31,845) 9,837 77 875 (820) (11,424)
Net gain (loss) on sale of investments - 60,269 93,161 2,758 (42) 228 237 156,611
Other income 4 17 - - - - - 21
-------- -------- -------- -------- ----- -------- ------- ----------
Net investment income 32,997 93,036 67,569 23,281 35 1,973 5,549 224,440
Employee contributions 33,375 26,016 19,074 8,529 - 4,201 8,802 99,997
Employer contributions 9,411 32,937 21 8 - - - 42,377
Transfers, net 70,319 (26,038) 34,356 16,165 (3) 21,194 30,035 146,028
-------- -------- -------- -------- ----- -------- ------- ----------
Total 146,102 125,951 121,020 47,983 32 27,368 44,386 512,842
-------- -------- -------- -------- ----- -------- ------- ----------
Distributions and withdrawals (61,679) (100,610) (22,230) (11,669) (5) (1,364) (1,206) (198,763)
Administrative fees (2,034) (3,132) (691) (328) - (48) (70) (6,303)
-------- -------- -------- -------- ----- -------- ------- ----------
Total (63,713) (103,742) (22,921) (11,997) (5) (1,412) (1,276) (205,066)
-------- -------- -------- -------- ----- -------- ------- ----------
Net increase (decrease) in net assets 82,389 22,209 98,099 35,986 27 25,956 43,110 307,776
NET ASSETS AVAILABLE FOR BENEFITS:
December 31, 1996 420,990 904,307 170,306 90,007 87 - - 1,585,697
-------- -------- -------- -------- ----- -------- ------- ----------
December 31, 1997 $503,379 $926,516 $268,405 $125,993 $114 $ 25,956 $43,110 $1,893,473
-------- -------- -------- -------- ----- -------- ------- ----------
-------- -------- -------- -------- ----- -------- ------- ----------
</TABLE>
17
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 9. Selected Financial Data of the Defined Contribution Plans Master Trust
----------------------------------------------------------------------
(Continued)
-----------
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY
DEFINED CONTRIBUTION PLANS MASTER TRUST
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1996
(in thousands)
Fund Information
-----------------------------------------------------
Fixed Company Diversified USG
Income Stock Equity Balanced Stock
Fund Fund Fund Fund Fund Total
-------- --------- ------------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at fair value:
Interest-bearing cash and temporary
investments $ 19,911 $ 1,776 $ 33 $ 28 $ 1 $ 21,749
Guaranteed investment contracts 12,974 - - - - 12,974
Investments in International Paper
Company common stock (cost $511,207) - 902,316 - - - 902,316
Investments in Diversified Equity
Fund (cost $125,031) - - 170,261 - - 170,261
Investments in Balanced Fund (cost $77,608) - - - 89,971 - 89,971
Investments in USG Stock Fund (cost $409) - - - - 86 86
Investments, at contract value*:
Guaranteed investment contracts 388,092 - - - - 388,092
-------- -------- -------- -------- ----- -----------
Total investments 420,977 904,092 170,294 89,999 87 1,585,449
-------- -------- -------- -------- ----- -----------
Receivables:
Dividends and interest 16 215 15 10 - 256
-------- -------- -------- -------- ----- -----------
Total receivables 16 215 15 10 - 256
-------- -------- -------- -------- ----- -----------
Total assets 420,993 904,307 170,309 90,009 87 1,585,705
-------- -------- -------- -------- ----- -----------
LIABILITIES
Administrative fees (3) - (3) (2) - (8)
-------- -------- -------- -------- ----- -----------
Total liabilities (3) - (3) (2) - (8)
-------- -------- -------- -------- ----- -----------
NET ASSETS AVAILABLE FOR BENEFITS $420,990 $904,307 $170,306 $90,007 $ 87 $1,585,697
-------- -------- -------- -------- ----- -----------
-------- -------- -------- -------- ----- -----------
</TABLE>
*The aggregate fair value of these contracts was approximately $390,572 as of
December 31, 1996.
18
<PAGE>
INTERNATIONAL PAPER COMPANY SALARIED SAVINGS PLAN
-------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 9. Selected Financial Data of the Defined Contribution Plans Master Trust
----------------------------------------------------------------------
(Continued)
-----------
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY
DEFINED CONTRIBUTION PLANS MASTER TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND
INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
(in thousands)
Fund Information
---------------------------------------------------
Fixed Company Diversified USG
Income Stock Equity Balanced Stock
Fund Fund Fund Fund Fund Total
------ ------- ----------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Change attributable to:
Investment activities:
Dividend and interest income $ 26,016 $ 24,811 $ 5,651 $ 6,966 $ - $ 63,444
Unrealized appreciation of
investments - 57,234 22,608 4,517 5 84,364
Net gain (loss) on sale of
investments - 2,034 910 318 (1) 3,261
Other income 14 29 60 35 - 138
--------- --------- -------- -------- ----- ---------
Net investment income 26,030 84,108 29,229 11,836 4 151,207
Employee contributions 22,768 54,135 6,502 2,864 - 86,269
Employer contributions 10,077 29,089 358 169 39,693
Interfund transfers (2,022) (35,487) 26,789 10,728 (8) -
Transfers, net 3,620 1,930 14,548 15,502 - 35,600
--------- --------- -------- -------- ----- ---------
Total 60,473 133,775 77,426 41,099 (4) 312,769
--------- --------- -------- -------- ----- ---------
Distributions and withdrawals (54,900) (76,501) (12,820) (8,207) (1) (152,429)
Administrative fees (1,415) (2,161) (411) (217) - (4,204)
--------- --------- -------- -------- ----- ---------
Total (56,315) (78,662) (13,231) (8,424) (1) (156,633)
--------- --------- -------- -------- ----- ---------
Net increase (decrease) in net assets 4,158 55,113 64,195 32,675 (5) 156,136
NET ASSETS AVAILABLE FOR BENEFITS:
December 31, 1995 416,832 849,194 106,111 57,332 92 1,429,561
--------- --------- -------- -------- ----- ---------
December 31, 1996 $420,990 $904,307 $170,306 $90,007 $ 87 $1,585,697
--------- --------- -------- -------- ----- ---------
--------- --------- -------- -------- ----- ---------
</TABLE>
19
<PAGE>
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
SALARIED SAVINGS PLAN
By /s/ ROBERT M. BYRNES
---------------------------------------
Robert M. Byrnes, Senior Vice President
and Administrator of the Plan
Date: June 26, 1998.
Purchase, New York
20
<PAGE>
Exhibit 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated June 26, 1998, included in this Annual Report on
Form 11-K of the International Paper Company Salaried Savings Plan, into the
Company's previously filed Form S-8 Registration No. 33-50438.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 26, 1998
21
