<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
RETIREMENT 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 Retirement Savings Plan
and the report of Arthur Andersen LLP with respect thereto are as follows:
<TABLE>
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
Retirement Savings Plan:
We have audited the accompanying statements of net assets available for
benefits, with fund information, of the International Paper Company Retirement
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 RETIREMENT 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>
Equity in net assets of International
Paper Company Defined Contribution
Plans Master Trust (Note 1) $ 32,606 $ 36,359 $ 11,497 $ 3,225 $ 760 $ 1,659 $ 86,106
-------- -------- -------- -------- ----- -------- ---------
Receivables:
Interest receivable - 25 11 1 - 1 38
Employee contributions 192 67 28 - - 25 312
Loan repayments - 169 87 9 3 11 279
Loans 3,362 2,083 1,214 290 24 12 6,985
Interfund transfers - 253 52 29 3 152 489
Transfers from other plans 19 - 2 - - - 21
-------- -------- -------- -------- ----- -------- ---------
Total receivables 3,573 2,597 1,394 329 30 201 8,124
-------- -------- -------- -------- ----- -------- ---------
Total assets 36,179 38,956 12,891 3,554 790 1,860 94,230
Liabilities:
Loans payable (195) (165) (62) (12) (5) (13) (452)
Interfund transfers (489) - - - - - (489)
Administrative expenses (4) (9) (1) - - - (14)
Contributions refundable and other (86) (54) - (17) (35) - (192)
-------- -------- -------- -------- ----- -------- ---------
Total liabilities (774) (228) (63) (29) (40) (13) (1,147)
-------- -------- -------- -------- ----- -------- ---------
NET ASSETS AVAILABLE FOR BENEFITS $ 35,405 $ 38,728 $ 12,828 $ 3,525 $ 750 $ 1,847 $ 93,083
-------- -------- -------- -------- ----- -------- ---------
-------- -------- -------- -------- ----- -------- ---------
The accompanying notes are an integral part of this financial statement.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY RETIREMENT 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>
Equity in net assets of International
Paper Company Defined Contribution
Plans Master Trust (Note 1) $20,128 $31,768 $5,417 $1,754 $ - $59,067
------- ------- ------ ------ ------- -------
Investments at fair value:
Federal Paper Board Retirement
Savings Plan for Non-Union
Hourly Employees (Note 7) - - - - 18,813 18,813
------- ------- ------ ------ ------- -------
Receivables:
Employee contributions - - - 3 - 3
Loan repayments - 11 - - - 11
Loans 1,921 1,525 835 193 - 4,474
Interfund transfers - - 90 15 - 105
Transfers from other plans 453 - - - - 453
------- ------- ------ ------ ------- -------
Total receivables 2,374 1,536 925 211 - 5,046
------- ------- ------ ------ ------- -------
Total assets 22,502 33,304 6,342 1,965 18,813 82,926
------- ------- ------ ------ ------- -------
Liabilities:
Contributions refundable and other (96) (94) (9) - - (199)
Interfund transfers - (105) - - - (105)
Transfers to other plans (102) (15) - - - (117)
------- ------- ------ ------ ------- -------
Total liabilities (198) (214) (9) - - (421)
------- ------- ------ ------ ------- -------
NET ASSETS AVAILABLE FOR BENEFITS $22,304 $33,090 $6,333 $1,965 $18,813 $82,505
------- ------- ------ ------ ------- -------
------- ------- ------ ------ ------- -------
The accompanying notes are an integral part of this financial statement.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY RETIREMENT 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> <C>
Increase (decrease) attributable to:
Equity in investment activities of
International Paper Company
Defined Contribution Plans
Master Trust (Note 1) $ 2,319 $ 2,517 $ 2,735 $ 565 $ 53 $ 205 $ - $ 8,394
Participant contributions 1,801 2,837 1,949 764 273 917 - 8,541
Company contributions (net
of forfeitures of $44) 480 3,354 - - - - - 3,834
Distributions and withdrawals (2,721) (3,566) (514) (197) (20) (30) - (7,048)
Administrative fees (157) (160) (29) (1) (1) (3) - (351)
Transfers from (to) other funds 11,548 3,252 2,375 435 445 758 (18,813) -
Transfers to other plans (169) (2,596) (21) (6) - - - (2,792)
------- ------- ------ ------ ---- ------ ------- --------
Increase (decrease) in net assets 13,101 5,638 6,495 1,560 750 1,847 (18,813) 10,578
NET ASSETS AVAILABLE FOR BENEFITS:
December 31, 1996 22,304 33,090 6,333 1,965 - - 18,813 82,505
------- ------- ------ ------ ---- ------ ------- --------
December 31, 1997 $35,405 $38,728 $12,828 $3,525 $750 $1,847 $ - $ 93,083
======= ======= ======= ====== ==== ====== ======= ========
The accompanying notes are an integral part of this financial statement.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL PAPER COMPANY RETIREMENT 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) $ 1,643 $ 3,156 $ 811 $ 185 $ - $ 5,795
Participant contributions 407 4,281 551 224 - 5,463
Company contributions (net of
forfeitures of $40) 460 2,165 - - - 2,625
Distributions and withdrawals (2,597) (2,390) (97) 24 - (5,060)
Administrative fees (78) (111) (14) (5) - (208)
Transfers (to) from other funds (309) (270) 548 31 - -
Transfers (to) from other plans (Note 7):
Federal Paper Board Retirement
Savings Plan for Non-Union
Hourly Employees:
Fixed Income Fund - - - - 11,967 11,967
Index 500 Portfolio - - - - 1,144 1,144
Life Strategy Growth Portfolio - - - - 199 199
Life Strategy Conservative Growth
Portfolio - - - - 20 20
Life Strategy Moderate Groh
Portfolio - - - - 202 202
Life Strategy Income Portfolio - - - - 5 5
Vanguard Windsor II - - - - 485 485
Total Bond Market - - - - 32 32
Company Stock Fund - - - - 3,197 3,197
International Growth Portfolio - - - - 147 147
Loans to participants - - - - 1,415 1,415
Other plans (1,899) (2,424) (539) (62) - (4,924)
------- ------- ------ ----- ------- -------
Increase (decrease) in net assets (2,373) 4,407 1,260 397 18,813 22,504
Net assets available for benefits:
December 31, 1995 24,677 28,683 5,073 1,568 - 60,001
------ ------ ----- ----- ------- -------
December 31, 1996 $22,304 $33,090 $6,333 $1,965 $18,813 $82,505
======= ======= ====== ====== ======= =======
The accompanying notes are an integral part of this financial statement.
-6-
</TABLE>
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY RETIREMENT
---------------------------------------------------------
SAVINGS PLAN
------------
The following description of the International Paper Company Retirement 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 is a defined contribution plan providing retirement benefits to certain
designated groups of non-bargaining employees of International Paper Company and
its subsidiaries (the "Company"). The Plan was established January 1, 1991, and
was amended and restated effective January 1, 1994, for certain designated
employees not eligible to contribute to any other tax-qualified defined
contribution plan of the Company, to provide an incentive for them to accumulate
funds for their future needs and to assist them in developing a proprietary
interest in the success of the Company.
The assets of the Plan are held by State Street Bank and Trust Company (the
"Trustee") and 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 Non-Union Hourly
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:
Percent of Equity
-----------------------
Investment Fund 1997 1996
--------------- ---- ----
Stable Value Fund 6% 5%
Company Stock Fund 4% 4%
S & P 500 Index Fund 4% 3%
Balanced Fund 3% 2%
International Stock Fund 3% -
Growth Fund 4% -
-7-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY RETIREMENT
---------------------------------------------------------
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
- -------------
Participants in the Plan can make basic contributions on either a before-tax or
after-tax basis (but not both). The Company will make a matching contribution as
a percentage of the participants' basic contributions. In addition, participants
can make supplemental contributions on a before-tax or after-tax basis (but not
both), provided the participant has made the maximum basic contributions. The
Company does not make any contributions matching the supplemental contributions.
Employee contributions are subject to statutory limitations on annual
contributions.
Participants from the Company's Androscoggin, Lock Haven and Nicolet locations
can make basic contributions from 1% to 4% of prior year's total pay and
supplemental contributions from 1% to 8% of their prior year's total pay. The
Company makes matching contributions equal to 50% of the participants' basic
contributions.
For all other participants, basic and supplemental contributions may be made
on a set weekly dollar amount (usually $3, $6, $9, $12 and $15).
Company matching contributions are made according to the following schedule:
Years of Service Company Matching Contributions
---------------- ------------------------------
Less than 10 50% of basic contributions
10 but less than 15 75% of basic contributions
15 or more 100% of basic contributions
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.
-8-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY RETIREMENT
---------------------------------------------------------
SAVINGS PLAN (Continued)
------------------------
For those participants covered by a pension formula based on the former
Retirement Thrift Plan - Defined Benefit Portion, a Company fixed contribution
is made for each week worked, based on a set dollar amount which varies by
location, and is invested in the Stable Value Fund.
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 or savings plans.
Vesting
- -------
Participants are immediately 100% vested in their basic contributions,
supplemental contributions and rollover contributions.
A participant becomes vested in the shares of Company stock purchased with
Company matching contributions, including shares purchased with reinvested
dividends, and, if applicable, in Company fixed contributions made on his or
her bahalf, according to the following schedule:
Vesting Years of Service Percent Vested
------------------------ --------------
Less than 3 0%
3 but less than 4 35%
4 but less than 5 70%
5 or more 100%
A participant also becomes fully vested if one of the following occurs: (1)
attainment of age 65 while employed by the Company; (2) termination of
employment due to permanent closing of the participant's work facility or
department; or (3) the participant's death or total disability. 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 hourly 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 8,857 and 8,238
employees, respectively, participating in the Plan.
-9-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY RETIREMENT
---------------------------------------------------------
SAVINGS PLAN (Continued)
------------------------
Valuation of Participants' Accounts
- -----------------------------------
Participants' accounts in each fund are adjusted to reflect their contributions
during each month and the effect of income (collected and accrued), realized and
unrealized gains and losses, expenses and all other transactions during such
month. 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.
In the event of retirement, disability, layoff, closing of a work facility or
department, or other termination of employment with at least 15 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
monthly 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 future Company matching
contributions; (2) all or part of the value of the basic after-tax
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) all or part of the value of vested Company
matching contributions made prior to January 1, 1993, 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.
-10-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 1. DESCRIPTION OF THE INTERNATIONAL PAPER COMPANY RETIREMENT
---------------------------------------------------------
SAVINGS PLAN (Continued)
------------------------
If the total amount available to a participant under a general withdrawal is
insufficient to meet his or her financial needs, a participant 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 before 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 who have attained age 59-1/2 may withdraw the value of their
before-tax contributions and the value of all vested Company matching
contributions, in addition to other amounts available under a general
withdrawal, with all contributions suspended for six months.
Withdrawals may be made at intervals of at least 12 months.
Subject to statutory limitations, loans are also available to participants up
to (on a cumulative outstanding basis) the lesser of 50% of the vested value
of a participant's account 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 the loan is made. Loans are
repayable through payroll deduction 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 7.5% to 10.75% 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.
Reclassifications
- -----------------
Certain prior year balances have been reclassified to conform with current year
presentation.
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.
-11-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
------------------------------------------------------
The financial statements of the Plan have been prepared on the accrual basis of
accounting. The Plan's net assets available for benefits consists primarily of
the Plan's equity in the net assets of the Defined Contribution Plans Master
Trust and, as of December 31, 1996, includes assets of the FPB Plan. Investments
in the Company Stock Fund, the S & P 500 Index Fund, the Balanced Fund, the
International Stock Fund, the 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.
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 years
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 within
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.
-12-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
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.
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.
Dividends, interest and other property received by the Trustee with respect to
any fund are reinvested in the same fund.
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. In
January 1997, the investments in these funds were transferred to the Trustee.
Occasionally, the funds hold cash on a temporary basis pending investment or
withdrawals. Cash balances are invested in the Trustee's short-term investment
fund.
-13-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT SAVINGS PLAN
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
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.
Note 6. PLAN AMENDMENTS
---------------
Effective January 1, 1997, the following changes were made to the Plan. Two
additional investment funds, the International Stock Fund and the Growth 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 MERGER
------------------
Effective December 31, 1996, assets totaling approximately $18,813,000 for the
accounts of employees in the Federal Paper Board Retirement Savings Plan for
Non-Union Hourly Employees were merged into the Plan.
-14-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT 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 $933,000 and
$528,000, 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>
(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 $ - $7,048 $ 93,083 $82,505
Accrued Benefit Payments 933 933 (933) (528)
Reversal of 1996 Accrual
for Benefit Payments - (528) - -
------ ------ -------- -------
Per Form 5500 $933 $7,453 $ 92,150 $81,977
------ ------ -------- -------
------ ------ -------- -------
</TABLE>
-15-
<PAGE>
INTERNATIONAL PAPER COMPANY RETIREMENT 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 $508,283) - 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 $25,082) - - - - - 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 RETIREMENT 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 (loss) 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 RETIREMENT 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 RETIREMENT 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
RETIREMENT 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 Retirement Savings Plan, into the
Company's previously filed Form S-8 Registration No. 33-38133.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 26, 1998.
-21-
