FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the year ended DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from____________________to___________________
Commission file number 333-98681
RETIREMENT SAVINGS PLAN OF CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS PLAN
OF PHILLIPS PETROLEUM COMPANY)
(Full title of the Plan)
CONOCOPHILLIPS
(Name of issuer of securities)
600 NORTH DAIRY ASHFORD
HOUSTON, TEXAS 77079
(Address of principal executive office) (Zip code)
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial statements of the Retirement Savings Plan of ConocoPhillips Company
(formerly the Retirement Savings Plan of Phillips Petroleum Company), filed as a
part of this annual report, are listed in the accompanying index.
(b) Exhibits
Exhibit 23 Consent of Independent Auditors.
Exhibit 99 Certifications Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Retirement Savings Plan Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
RETIREMENT SAVINGS PLAN OF
CONOCOPHILLIPS COMPANY
/s/ J. W. Sheets
-------------------------------
J. W. Sheets
Plan Financial Administrator
June 25, 2003
1
INDEX TO FINANCIAL STATEMENTS RETIREMENT SAVINGS PLAN OF
AND SCHEDULES CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
Page
Report of Independent Auditors ........................................... 3
Financial Statements
Statement of Net Assets Available for Benefits at December 31, 2002 .... 4
Statement of Net Assets Available for Benefits at December 31, 2001 .... 5
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2002 ......................................... 6
Notes to Financial Statements .......................................... 7
Supplemental Schedules*
Schedule of Assets (Held at End of Year) as of December 31, 2002,
Schedule H, Line 4i .................................................. 12
Schedule of Reportable Transactions for the Year Ended
December 31, 2002, Schedule H, Line 4j ............................... 13
Exhibit Index ............................................................ 14
--------------------------------------------------------------------------------
* Other supplemental schedules required by Section 2520.103-10 of the Department
of Labor Rules and Regulations for Reporting and Disclosure under ERISA have
been omitted because they are not applicable.
2
REPORT OF INDEPENDENT AUDITORS
The Retirement Savings Plan Committee
Retirement Savings Plan of ConocoPhillips Company
We have audited the accompanying statements of net assets available for benefits
of the Retirement Savings Plan of ConocoPhillips Company (formerly the
Retirement Savings Plan of Phillips Petroleum Company) (Plan) as of December 31,
2002 and 2001, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2002. These financial statements are
the responsibility of the Retirement Savings Plan Committee (Committee). 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 Committee, 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 at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2002, and reportable transactions for
the year then ended, are presented for purposes of additional analysis and are
not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Committee. The
supplemental schedules have been subjected to the auditing procedures applied in
our audits of the financial statements and, in our opinion, are fairly stated in
all material respects in relation to the financial statements taken as a whole.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Houston, Texas
June 25, 2003
3
STATEMENT OF NET ASSETS RETIREMENT SAVINGS PLAN OF
AVAILABLE FOR BENEFITS CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
At December 31, 2002
Fixed
Investment Stock
Total Fund Fund
--------------------------------
ASSETS
Investments
Insurance contract $6,864,037 6,864,037 -
Common stock 545,549 - 545,549
Accounts receivable 20 - 20
--------------------------------------------------------------------------------
Total Assets 7,409,606 6,864,037 545,569
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $7,409,606 6,864,037 545,569
================================================================================
See Notes to Financial Statements.
4
STATEMENT OF NET ASSETS RETIREMENT SAVINGS PLAN OF
AVAILABLE FOR BENEFITS CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
At December 31, 2001
Fixed
Investment Stock
Total Fund Fund
--------------------------------
ASSETS
Investments
Insurance contract $7,671,613 7,671,613 -
Common stock 665,030 - 665,030
Money market fund 3,088 - 3,088
--------------------------------------------------------------------------------
Total Assets 8,339,731 7,671,613 668,118
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $8,339,731 7,671,613 668,118
================================================================================
See Notes to Financial Statements.
5
STATEMENT OF CHANGES IN NET RETIREMENT SAVINGS PLAN OF
ASSETS AVAILABLE FOR BENEFITS CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
Year Ended December 31, 2002
Fixed
Investment Stock
Total Fund Fund
--------------------------------
ADDITIONS
Investment Income
Interest and dividends $ 409,790 393,569 16,221
Net depreciation in fair
value of common stock (132,889) - (132,889)
-------------------------------------------------------------------------------
Total 276,901 393,569 (116,668)
-------------------------------------------------------------------------------
DEDUCTIONS
Withdrawals and distributions 1,207,026 1,201,145 5,881
-------------------------------------------------------------------------------
NET CHANGE (930,125) (807,576) (122,549)
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 8,339,731 7,671,613 668,118
-------------------------------------------------------------------------------
End of Year $7,409,606 6,864,037 545,569
================================================================================
See Notes to Financial Statements.
6
NOTES TO FINANCIAL STATEMENTS RETIREMENT SAVINGS PLAN OF
CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
NOTE 1--PLAN DESCRIPTION
The following description of the Retirement Savings Plan of ConocoPhillips
Company (formerly the Retirement Savings Plan of Phillips Petroleum Company)
(Plan) is subject to and qualified by the more complete information appearing in
the Plan document.
The Plan is a defined contribution plan sponsored by ConocoPhillips Company
(Company) for any domestic subsidiary or division that the Company approves for
participation in the Plan and that has adopted and become a party to the Plan
for the current participation of their active employees (Participating
Employer). The Plan had no Participating Employers in 2002 and 2001.
Generally, employees of a Participating Employer may become a participant after
completing a six-month period of service of 500 or more hours. Participation in
the Plan by each eligible employee is mandatory. Each month the Participating
Employer or the Company would contribute an amount equal to 5 percent of each
participant's regular monthly earnings. A participant can make after-tax
deposits, in whole percentages, ranging from 1 to 10 percent of his regular
monthly earnings. Participants can elect to change their deposit rates once each
six months.
Plan assets consist of the Stock Fund, the Fixed Investment Fund and the
Temporary Investment Fund. Investments for each fund are: Stock Fund (common
stock of ConocoPhillips, the parent of the Company, and the Vanguard Prime Money
Market Fund), Fixed Investment Fund (an insurance contract with Travelers
Insurance Company (Travelers) under which Travelers guarantees repayment of the
principal paid to it and a minimum effective rate of interest thereon as
determined by Travelers annually), and Temporary Investment Fund (specified
short-term securities--currently, this Fund is inactive). The Trustee for all
Plan assets is Vanguard Fiduciary Trust Company (Vanguard). The interests of
participants in each fund are represented by units allocated to them.
7
If a Participating Employer allowed participant deposits into the Plan, those
deposits would be placed first in the Temporary Investment Fund and remain there
until the valuation date on or about the 20th day of the following month.
Deposits and earnings thereon would be paid into the Stock Fund or the Fixed
Investment Fund as directed by the participant. No investment directions may be
made with respect to Participating Employer contributions, all of which are
invested only in the Fixed Investment Fund. The Plan allows limited transfers
between the Stock Fund and the Fixed Investment Fund.
A participant's interest in his own deposits is vested at all times, and his
interest in Participating Employer contributions becomes fully vested on the
earliest of the following dates: (a) upon attainment of age 65 or upon normal
retirement; (b) upon completing five years of vesting service; (c) upon death;
(d) upon becoming totally and permanently disabled; (e) upon being laid off for
lack of work; (f) upon termination or partial termination of the Plan or
discontinuance of Participating Employer contributions; or (g) upon certain
other events.
Partial vesting in Participating Employer contributions takes place in one year
increments, with complete vesting after five years of vesting service. A
participant who has made deposits may withdraw any amount attributable to those
deposits. Withdrawals of deposits may be made only once each six months.
Suspensions of employee deposits for three and six months apply for partial and
complete withdrawals, respectively.
A participant's interest in the contributions of a Participating Employer
becomes available for distribution upon specified events, including severance of
employment or retirement. Termination of employment will result in forfeiture of
Participating Employer contributions if a participant's interest attributable to
those Participating Employer contributions is not vested. Forfeitures are used
to reduce employer contributions. A participant who retires generally may
postpone distribution until no later than the first valuation date in October of
the year age 69 is attained. Effective January 1, 2003, the distribution
postponement age was changed to 70 1/2.
Distributions from the Fixed Investment Fund are made in cash while those from
the Stock Fund are in whole shares of the Company's common stock, plus cash for
fractional shares, unless the participant directs that the distribution be
wholly or partially in cash. Distribution in the form of an annuity is also
available, as set forth in the Plan.
8
In the event of termination of the Plan, participants and beneficiaries of
deceased participants will be vested with respect to, and will receive, within a
reasonable time, any funds in their accounts as of the date of the termination.
The Plan is administered by the Retirement Savings Plan Committee, a Plan
Financial Administrator and a Plan Benefits Administrator. The members of the
Committee are appointed by the Board of Directors of the Company. The Plan
Financial Administrator and Plan Benefits Administrator are the persons who
occupy, respectively, the ConocoPhillips positions of Treasurer and Compensation
and Benefits Manager. The Committee has power to interpret the Plan and the Plan
Benefits Administrator has the authority to determine eligibility for benefits.
The Plan Financial Administrator has the responsibility to manage and control
the assets of the Plan in accordance with the terms of the Plan. Brokerage fees,
commissions, stock transfer taxes and other charges and expenses incurred in
connection with the purchase or sale of securities, if any, are paid by the
Plan, and would be reflected as administrative expenses on the statement of
changes in net assets available for benefits. The cost of administering the Plan
is paid by the Company.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Plan's financial statements are presented on the accrual basis of
accounting. Withdrawals and distributions are recorded when paid.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes
and schedules. Actual results could differ from those estimates and assumptions.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year balances to conform to
current year presentation.
NOTE 3--INVESTMENTS
Common stock of ConocoPhillips is valued at the closing quoted market price on
the valuation date. The value of the insurance contract is recorded at contract
value, which approximates fair
9
value, and represents contributions, plus interest credited, less distributions.
The money market fund is valued at the current redemption price determined by
the Trustee.
Investment securities are exposed to various risks, such as interest rate,
market, and credit risk. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in risks
in the near term could materially affect the amounts reported in the Statement
of Net Assets Available for Benefits.
On March 12, 2002, stockholders of Phillips Petroleum Company and Conoco Inc.
approved a merger of the two companies to form ConocoPhillips. The merger was
consummated on August 30, 2002. Under the terms of the merger agreement, each
outstanding share of Phillips Petroleum Company common stock, including all
those held by the Plan, was automatically converted into one share of the new
ConocoPhillips common stock.
NOTE 4--NON-PARTICIPANT-DIRECTED INVESTMENTS
The only non-participant-directed investments in the Plan are held in the Fixed
Investment Fund, which also holds participant-directed investments. The
investment activity cannot be segregated between participant and non-participant
directed transactions.
NOTE 5--TAX STATUS
The Internal Revenue Service (IRS) determined on July 3, 2002, that the Plan was
qualified under Section 401(a) of the Internal Revenue Code of 1986 and the
Trust was exempt from federal income tax under Section 501(a). Subsequent
amendments have been adopted, but are not expected to affect the qualified
status of the Plan. The Committee is not aware of any activity that would affect
the qualified status of the Plan.
NOTE 6--INSURANCE CONTRACT
The average yield and crediting interest rate of the Fixed Investment Fund
insurance contract was 5.60 percent in 2002 and 6.20 percent in 2001. The
crediting interest rate, which is determined by Travelers, is reset annually,
with the new rate going into effect on January 1 of each year. There is no
contractually guaranteed minimum interest rate and the contract with Travelers
does not provide a basis for determining the crediting interest rate. The
crediting interest rate for 2003 will be 5.25 percent.
10
NOTE 7--PARTY-IN-INTEREST TRANSACTIONS
The majority of the Plan's assets are invested in an insurance contract with
Travelers, qualifying transactions between the Plan and Travelers as
party-in-interest transactions. Certain of the Plan's assets are invested in
ConocoPhillips stock. Because ConocoPhillips is the parent of the Company, these
transactions qualify as party-in-interest transactions. In addition, certain
investments of the Plan are in shares of a mutual fund managed by Vanguard.
Because Vanguard is the Plan's trustee, these transactions also qualify as
party-in-interest transactions.
11
SCHEDULE OF ASSETS (HELD AT END OF YEAR) RETIREMENT SAVINGS PLAN OF
SCHEDULE H, LINE 4i CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
EIN 73-0400345, PLAN 010
At December 31, 2002
(a, b) Identity of (c) Description of investment
issue, borrower, including maturity date,
lessor, or similar rate of interest, collateral, (d) Historical (e) Current
party par or maturity value Cost Value
-------------------- ------------------------------ -------------- -----------
The Travelers Group Annuity Contract
Insurance Company* GR-10462, deposit
administration fund $ 6,864,037 6,864,037
ConocoPhillips* 11,274 shares of common stock,
$0.01 par value 234,880 545,549
-------------------------------------------------------------------------------
$ 7,098,917 7,409,586
===============================================================================
*Party-in-interest
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SCHEDULE OF REPORTABLE TRANSACTIONS RETIREMENT SAVINGS PLAN OF
SCHEDULE H, LINE 4j CONOCOPHILLIPS COMPANY
SERIES OF TRANSACTIONS IN (FORMERLY THE RETIREMENT SAVINGS
EXCESS OF 5 PERCENT OF PLAN OF PHILLIPS PETROLEUM COMPANY)
NET ASSETS EIN 73-0400345, PLAN 010
(CATEGORY iii)
Year Ended December 31, 2002
(a, b) Identity of party involved (c) Value of (d) Value (i) Net gain
and description of asset purchases* of sales* or (loss)
--------------------------------- ------------ ---------- ------------
The Travelers Insurance Company** $ 393,569 1,201,145 -
-------------------------------------------------------------------------------
*This is also the cost of purchases and current value of sales at time of
transaction.
**Party-in-interest
Columns (e) and (f) are not applicable.
There were no category (i), (ii) or (iv) reportable transactions during 2002.
13
EXHIBIT INDEX RETIREMENT SAVINGS PLAN OF
CONOCOPHILLIPS COMPANY
(FORMERLY THE RETIREMENT SAVINGS
PLAN OF PHILLIPS PETROLEUM COMPANY)
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23 Consent of Independent Auditors.
99 Certifications Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
14