FORM 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 333-98681
TOSCO CORPORATION CAPITAL ACCUMULATION PLAN
(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 Tosco Corporation Capital Accumulation Plan, 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 Capital
Accumulation Plan Committee has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
TOSCO CORPORATION
CAPITAL ACCUMULATION PLAN
/S/ J. W. Sheets
---------------------------
J. W. Sheets
Plan Financial Administrator
June 25, 2003
1
INDEX TO FINANCIAL STATEMENTS TOSCO CORPORATION
AND SCHEDULE CAPITAL ACCUMULATION PLAN
Page
Report of Independent Auditors ............................................ 3
Financial Statements
Statement of Net Assets Available for Benefits at December 31, 2002
and 2001 .............................................................. 4
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2002 .......................................... 5
Notes to Financial Statements ........................................... 6
Supplemental Schedule*
Schedule of Assets (Held at End of Year) as of December 31, 2002,
Schedule H, Line 4i ................................................... 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 Capital Accumulation Plan Committee
Tosco Corporation Capital Accumulation Plan
We have audited the accompanying statements of net assets available for benefits
of the Tosco Corporation Capital Accumulation Plan (Plan) as of December 31,
2002 and 2001, and the related statement of changes in net assets available for
Tbenefits for the year ended December 31, 2002. These financial statements are
the responsibility of the Capital Accumulation 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 schedule of assets
(held at end of year) as of December 31, 2002 is presented for purposes of
additional analysis and is not a required part of the financial statements but
is 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. This supplemental schedule is the responsibility of the
Committee. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is 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 TOSCO CORPORATION
AVAILABLE FOR BENEFITS CAPITAL ACCUMULATION PLAN
Thousands of Dollars
--------------------
At December 31 2002 2001
--------------------
ASSETS
Investments
Vanguard PRIMECAP Fund $ 524 116,204
Vanguard Wellington Fund 457 52,503
Vanguard Federal Money Market Fund 330 27,441
Vanguard 500 Index Fund 491 71,023
Vanguard Long-Term Treasury Fund 38 12,211
Vanguard International Growth Fund 107 11,697
Vanguard Explorer Fund 5 1,784
Vanguard Total Bond Market Index Fund 20 2,929
Vanguard Extended Market Index Fund 1 805
American Express Income Fund 1,951 43,037
Credit Suisse Warburg Pincus
Value II 49 7,024
ConocoPhillips common stock - 104,347
Loans to Plan participants - 7,583
--------------------------------------------------------------------------------
3,973 458,588
Contributions receivable - 10
--------------------------------------------------------------------------------
Total Assets 3,973 458,598
--------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 3,973 458,598
================================================================================
See Notes to Financial Statements.
4
STATEMENT OF CHANGES IN NET TOSCO CORPORATION
ASSETS AVAILABLE FOR BENEFITS CAPITAL ACCUMULATION PLAN
Thousands
Year Ended December 31, 2002 of Dollars
----------
ADDITIONS
Contributions
Company $ 8,239
Participants 5,864
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14,103
-------------------------------------------------------------------------------
Investment Income
Interest and dividend income 9,216
Interest on participant loans 595
-------------------------------------------------------------------------------
9,811
-------------------------------------------------------------------------------
Total 23,914
-------------------------------------------------------------------------------
DEDUCTIONS
Distributions to participants or their beneficiaries 28,009
Net depreciation in fair value of investments 74,502
Asset transfers out 376,010
Other, net 18
-------------------------------------------------------------------------------
Total 478,539
-------------------------------------------------------------------------------
NET CHANGE (454,625)
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 458,598
-------------------------------------------------------------------------------
End of Year $ 3,973
===============================================================================
See Notes to Financial Statements.
5
NOTES TO FINANCIAL STATEMENTS TOSCO CORPORATION
CAPITAL ACCUMULATION PLAN
NOTE 1--PLAN DESCRIPTION
The following describes the Tosco Corporation Capital Accumulation Plan (the
Plan) at December 31, 2002, subject to and qualified by the more complete
information appearing in the Plan document as of that date.
GENERAL
The Plan was a defined contribution, 401(k) profit sharing plan, covering
eligible, full-time employees of Tosco Corporation, which merged into
ConocoPhillips Company on January 1, 2003 (Sponsor), and subsidiaries. Highly
compensated employees (employees who made more than $120,000 in 2002) could
enroll in and contribute to the Plan after one continuous year of employment
with the Sponsor. All other eligible employees could enroll in and contribute to
the Plan in the month following their date of hire, but had to complete one
continuous year of service to receive company contributions. The Plan was
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA) and the Internal Revenue Code as amended by the Tax Reform Act of 1986
and subsequent legislation.
On March 12, 2002, stockholders of Phillips Petroleum Company and Conoco Inc.
approved a merger of the two companies to form ConocoPhillips, the parent of
ConocoPhillips Company. The merger was finalized 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.
The Sponsor had a trust agreement with the Vanguard Fiduciary Trust Company
(Vanguard). Vanguard also maintained the individual participant account records
and served as custodian for the Plan's investments. Additionally, the Sponsor
had an auxiliary trust agreement with the American Express Trust Company
(American Express), which appointed them trustee of the American Express Income
Fund.
The Plan was administered by the Capital Accumulation Plan Committee, the
members of which were appointed by the Board of Directors of ConocoPhillips
Company. The Plan Financial Administrator and Plan Benefits Administrator were
the persons who occupied, respectively, the ConocoPhillips positions of
Treasurer and Compensation and Benefits Manager. Members of the Committee and
the Plan Administrators served without compensation, but were reimbursed by the
Sponsor for necessary expenditures incurred in the discharge of their duties.
The Chief Financial Officer of
6
ConocoPhillips had sole discretion to select at least three investment funds
representing a broad range of investment alternatives.
Effective January 1, 2002, the Plan was amended to make all participants not
covered by a collective bargaining agreement ineligible to make or receive any
contribution, except the Pension Contribution, which certain participants were
still eligible to receive. The participants immediately became eligible to
contribute to another defined contribution plan maintained by the Plan Sponsor.
On December 31, 2002, the Plan was amended to approve the transfer of the
majority of the participants' account balances to the ConocoPhillips Savings
Plan (CPSP) accounts in similar funds or investments, as directed by the
participants. The exceptions were certain employees in the Plan who were also in
the Tosco Pension Plan with a Pension Equity Retirement Contribution (PERC).
Additionally, participants who were receiving Contributions in Lieu of Pension
(CILP) continued to have those contributions made to the Plan.
CONTRIBUTIONS
In 2002, participants could contribute between 2 and 15 percent of their
eligible compensation (up to $200,000) to the Plan on a pre-tax basis, after-tax
basis, or a combination of both, in 1 percent increments. Prior to January 1,
2002, for participants who had completed one year of continuous service, the
Sponsor contributed an amount equal to the first 6 percent of compensation
contributed by a participant during each pay period (Matching Contribution). The
Matching Contribution level was reduced from 100 percent to 75 percent if an
employee had participated in the Plan for less than five years, unless certain
conditions were met. In addition, the Sponsor contributed 2 percent (Profit
Sharing Contribution) of eligible compensation to certain participants. On
January 1, 2002, the Plan was amended to exclude the Sponsor's Matching
Contribution and their Profit Sharing Contribution.
Also after the completion of one year of continuous service, the Sponsor made
additional non-matching contributions of 5 percent to certain eligible employees
who did not participate in the Tosco Pension Plan, a defined benefit pension
plan. Contributions in Lieu of Pension (CILP) were sponsor non-matching
contributions of 5 percent for participants not covered by a qualified defined
benefit plan maintained by the Company or an Affiliate, excluding certain
participants in categories of employment as defined in the Plan document.
Pension Equity Retirement Contributions (PERC) were 5 percent non-matching
contributions for specific participants, as defined in the Plan document, who
were former employees of Exxon Mobil Corporation (a Predecessor Employer).
7
Participant investment choice dictated the allocation of the Sponsor's
contributions. Earnings on investments held by the Plan in the name of a
participant were automatically invested in the respective fund from which the
earnings were derived.
PARTICIPANT ACCOUNTS
Separate accounts were maintained for each participant. Each participant's
account was directly credited with the participant's contribution, the Sponsor's
matching contribution, and the Sponsor's pension and profit sharing
contributions, if applicable. Net earnings from investments in investment funds,
which include appreciation (depreciation) in fair value, were allocated to each
participant's account based on the ratio of that participant's account balance
by investment fund to the total of the investment fund portion of all
participants' account balances. The benefit to which a participant was entitled
was solely that which could be provided from the participant's account.
VESTING
Employees were immediately vested in their individual and in the Matching and
Profit Sharing Contributions, including earnings thereon. Employees hired prior
to January 1, 2000 were 100 percent vested in any CILP contributions. Employees
hired on or after January 1, 2000, became vested in CILP contributions based on
their years of service as follows:
Years of Service Percent Vested
---------------- --------------
Fewer than 2 -%
2 25%
3 50%
4 75%
5 or more 100%
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LOANS TO PARTICIPANTS
The Plan, with certain limitations, could make loans to participants with an
interest rate approximately equal to the prime interest rate on the origination
date, plus 1 percent. A loan from the Plan could be made for up to the lesser of
100 percent of the participant's pretax contributions or 50 percent of the
participant's total account balance, with a maximum of $50,000 and a minimum of
$1,000. The maturity on these loans could not exceed five years. The
participants were required to pay all loan origination and administrative fees.
All interest payments made under the terms of the loan were credited to the
participant's account and not considered general earnings of the Plan.
Participants' loans were repaid through payroll deductions and were
collateralized by the participants' vested account balances. Loans outstanding
were included in the Loans to Plan participants in the accompanying financial
statements.
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PAYMENT OF BENEFITS
Benefits of the Plan were payable upon reaching normal retirement, early
retirement, termination, or in the event of death or disability. Benefits could
be provided through the purchase of a 50 percent joint and survivor annuity (in
the case of a married participant) or a life annuity (in the case of a single
participant). Participants could also elect to receive benefits in a lump sum,
another form of annuity, or any other form approved by the Committee of the
Plan. Married participants could not elect such other forms without the consent
of their spouses. Any whole shares of stock in a participant's stock fund
account were distributed in the form of shares of stock, at the participant's
discretion. All other amounts, including fractional shares of stock, were
distributed to the participant in cash.
ADMINISTRATION FEES
All Plan investment management fees were paid from the investment earnings of
the individual investment funds and all other administration fees were paid by
the Sponsor and are not reflected in the Plan's financial statements.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Plan's financial statements are presented on the accrual basis of
accounting. Distributions to participants or their beneficiaries were 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 schedule. Actual results could differ from those estimates and assumptions.
NOTE 3--INVESTMENTS
In 2002, participants could designate, in 5 percent increments, the portion of
their contributions to be placed in various investment funds. Loan repayments
were allocated to these funds based on the participant's current contribution
designation.
Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
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VALUATION
At December 31, 2002 and 2001, common stock and mutual fund securities were
valued at fair value, using their quoted market price. Common collective trust
fund holdings were stated at the values reported by the applicable custodian,
which were market values for marketable securities and contract values, which
approximated fair value, for insurance contracts. Participant loans were valued
at cost, which approximated fair value. Purchases and sales of investments were
recorded on a trade date basis.
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.
APPRECIATION (DEPRECIATION)
During 2002, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated (depreciated) in
value as follows:
Thousands
of Dollars
-----------
Vanguard PRIMECAP Fund $ (28,842)
Vanguard Wellington Fund (5,173)
Vanguard 500 Index Fund (16,719)
Vanguard Long-term Treasury Fund 1,218
Vanguard International Growth Fund (2,210)
Vanguard Explorer Fund (575)
Vanguard Total Bond Market Index Fund 88
Vanguard Extended Market Index Fund (184)
Credit Suisse Warburg Pincus Value II (1,547)
ConocoPhillips common stock (20,558)
-------------------------------------------------------------------------------
$ (74,502)
===============================================================================
NOTE 4--ASSET TRANSFERS OUT
At the close of business on December 31, 2002, approximately
$376 million of assets were transferred out of the plan as part of the merger
with the ConocoPhillips Savings Plan.
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NOTE 5--PLAN TERMINATION
The Sponsor had the right under the Plan to (i) discontinue its contributions at
any time, which it did with respect to contributions to CILP on January 1, 2003,
and to PERC on March 31, 2003, and (ii) to terminate the Plan subject to the
provisions of ERISA, which was done, effective April 14, 2003. Upon termination,
the Plan's assets were distributed to the participants, as soon as possible and
legally permitted, on the basis of their account balances existing on the date
of termination, as adjusted for investment gains and losses.
NOTE 6--TAX STATUS
The Internal Revenue Service (IRS) determined on September 21, 1995, that the
Plan, as amended through December 19, 1994, 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 were adopted, but were
not expected to affect the qualified status of the Plan. The Committee was not
aware of any activity that affected the qualified status of the Plan.
NOTE 7--PARTY-IN-INTEREST TRANSACTIONS
Certain investments of the Plan were in shares of mutual funds managed by
Vanguard. Because Vanguard was the Plan's trustee, these transactions qualified
as party-in-interest transactions. Because American Express was the trustee of
the American Express Income Fund, American Express also qualified as a
party-in-interest. In addition, certain Plan investments were in ConocoPhillips'
common stock or were in Phillips Petroleum Company common stock prior to August
30, 2002. These transactions also qualified as party-in-interest transactions.
NOTE 8--RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits as of
December 31, 2002 and 2001, as reflected in these financial statements, to the
amounts reflected in the Plan's Form 5500:
Thousands of Dollars
--------------------
2002 2001
--------------------
Net assets available for benefits as
reported in the financial statements $ 3,973 458,598
Amounts allocated to withdrawing
Participants at December 31 - (469)
-------------------------------------------------------------------------------
Net assets available for benefits
as reported in the Form 5500 $ 3,973 458,129
===============================================================================
11
The following is a reconciliation of distributions to participants for the year
ended December 31, 2002, as reflected in these financial statements to the
amount reflected in the Plan's Form 5500:
Thousands of
Dollars
------------
Distributions to participants as reported
in the financial statements $ 28,009
Amount allocated to withdrawing
participants at December 31, 2001 (469)
-------------------------------------------------------------------------------
Distributions to participants as reported
in the Form 5500 $ 27,540
===============================================================================
NOTE 9--SUBSEQUENT EVENTS
Effective January 1, 2003, (i) Tosco Corporation, the Plan Sponsor, merged into
ConocoPhillips Company, which became the Plan Sponsor, and (ii) CILP
contributions ceased. Effective March 31, 2003, the final Pension Equity
Retirement Contribution (PERC) was made.
Effective April 14, 2003, the Plan was terminated. The remaining Plan accounts
were distributed or rolled over into the ConocoPhillips Savings Plan, as
directed by the participants.
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SCHEDULE OF ASSETS (HELD AT END OF YEAR) TOSCO CORPORATION
SCHEDULE H, LINE 4i CAPITAL ACCUMULATION PLAN
At December 31, 2002
(a)(b) Identity of (c) Description of investment Thousands of Dollars
issue, borrower, including maturity date, --------------------------
lessor, or similar rate of interest, collateral, (d) Historical (e) Current
party par or maturity value Cost Value
------------------- ------------------------------ -------------- ----------
The Vanguard Group* 13,558 units, Vanguard
PRIMECAP Fund ** $ 524
18,581 units, Vanguard
Wellington Fund ** 457
330,359 units, Vanguard
Federal Money Market Fund ** 330
6,048 units, Vanguard
500 Index Fund ** 491
3,213 units, Vanguard
Long-Term Treasury Fund ** 38
8,816 units, Vanguard
International Growth Fund ** 107
112 units, Vanguard
Explorer Fund ** 5
1,880 units Vanguard
Total Bond Market Index Fund ** 20
67 units, Vanguard
Extended Market Index Fund ** 1
-------------------------------------------------------------------------------
1,973
-------------------------------------------------------------------------------
American Express* 1,950,962 units, American Express
Income Fund ** 1,951
Credit Suisse 4,670 units, Credit Suisse
Warburg Pincus Value II ** 49
-------------------------------------------------------------------------------
$ 3,973
-------------------------------------------------------------------------------
* Party-in-interest
** Historical cost information is not required for participant-directed
investments.
13
EXHIBIT INDEX TOSCO CORPORATION
CAPITAL ACCUMULATION PLAN
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