UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended DECEMBER 31, 2003
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
CONOCOPHILLIPS STORE SAVINGS 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 ConocoPhillips Store Savings Plan, filed as a part
of this annual report, are listed in the accompanying index.
(b) Exhibits
Exhibit 23 Consent of Independent Registered Public Accounting Firm.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
ConocoPhillips Store Savings Plan Committee has duly caused this annual report
to be signed on its behalf by the undersigned hereunto duly authorized.
CONOCOPHILLIPS
STORE SAVINGS PLAN
/s/ J. W. Sheets
----------------------------
J. W. Sheets
Plan Financial Administrator
June 28, 2004
1
INDEX TO FINANCIAL STATEMENTS CONOCOPHILLIPS
AND SCHEDULE STORE SAVINGS PLAN
Page
Report of Independent Registered Public Accounting Firm ................... 3
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 2003 and 2002 ......................................... 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2003 .................................. 5
Notes to Financial Statements ........................................... 6
Supplemental Schedule*
Schedule of Assets (Held at End of Year)
as of December 31, 2003, 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 the Employee
Retirement Income Security Act of 1974 (ERISA) have been omitted because they
are not applicable.
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The ConocoPhillips Store Savings Plan Committee
ConocoPhillips Store Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the ConocoPhillips Store Savings Plan (Plan) as of December 31, 2003 and
2002, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2003. These financial statements are the
responsibility of the Store 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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, 2003 and 2002, and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles.
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, 2003 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 28, 2004
3
STATEMENT OF NET ASSETS CONOCOPHILLIPS
AVAILABLE FOR BENEFITS STORE SAVINGS PLAN
Thousands of Dollars
--------------------
At December 31 2003 2002
------- -------
ASSETS
Investments
Vanguard Funds:
500 Index Fund $ 680 --
Balanced Index Fund 5,038 --
Extended Market Index Fund 734 --
Growth Index Fund 151 --
Prime Money Market Fund 14,718 --
Total Bond Market Index Fund 316 --
Total International Stock Index Fund 2,897 --
Value Index Fund 5,720 --
Plan Interest in Master Trusts
ConocoPhillips Stock Fund 2,140 --
DuPont Stock Fund 121 --
Stable Value Fund 1,732 --
ConocoPhillips Common Stock -- 1,344
Loans to Plan Participants 1,699 2,087
------- -------
35,946 3,431
Cash -- 27,245
Interest and Dividends Receivable -- 31
------- -------
Total Assets 35,946 30,707
------- -------
NET ASSETS AVAILABLE FOR BENEFITS $35,946 30,707
======= =======
See Notes to Financial Statements.
4
STATEMENT OF CHANGES IN NET CONOCOPHILLIPS
ASSETS AVAILABLE FOR BENEFITS STORE SAVINGS PLAN
Thousands
Year Ended December 31, 2003 of Dollars
----------
ADDITIONS
Contributions
Participants $ 2,302
Rollovers 69
----------
2,371
----------
Investment Income
Interest and dividend income 475
Interest on participant loans 114
Plan interest in Master Trusts
Stable Value Fund 20
DuPont Stock Fund 13
ConocoPhillips Stock Fund 587
Net appreciation in fair value
of investments 2,682
----------
3,891
----------
Asset transfers in 2,495
Other additions 31
----------
2,526
----------
Total 8,788
----------
DEDUCTIONS
Distributions to
participants or their
beneficiaries 3,267
Asset transfers out 19
Other deductions 262
Administrative expenses 1
----------
Total 3,549
----------
NET CHANGE 5,239
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of Year 30,707
----------
End of Year $ 35,946
==========
See Notes to Financial Statements.
5
NOTES TO FINANCIAL STATEMENTS CONOCOPHILLIPS
STORE SAVINGS PLAN
NOTE 1--PLAN DESCRIPTION
The following description of the ConocoPhillips Store Savings Plan (Plan)
provides only general information. Participants should refer to the Plan
document for a more complete description of the Plan's provisions.
GENERAL
The Plan was established in 1985 as the Circle K Kash Plus Plan and has been
amended and restated at various times since its formation. Effective January 1,
1998, the Plan was amended to change its name to the Tosco Corporation Store
Savings Plan. Effective January 1, 2003, the Plan sponsor, Tosco Corporation,
was merged into the ConocoPhillips Company (formerly Phillips Petroleum
Company), and the Plan was amended to change its name to the ConocoPhillips
Store Savings Plan and ConocoPhillips Company (Sponsor) became the Plan sponsor.
On October 3, 2003, the Thrift Plan for Retail Employees of Conoco Inc. merged
into the Plan.
The Plan is a defined contribution, 401(k) profit sharing plan. In 2003, the
Plan covered substantially all of the retail store and marketing job outlet
employees on the payroll of Circle K Stores Inc. and Kayo Oil Company, who have
reached the age of 18 and completed one continuous year of employment. The Plan
is 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.
ADMINISTRATION
The Plan is administered by the ConocoPhillips Store Savings Plan Committee
(Committee), a Plan Financial Administrator, a Plan Benefits Administrator, and
the Chief Financial Officer of ConocoPhillips. The members of the Committee are
appointed by the Board of Directors of ConocoPhillips 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. Members of the Committee and the Plan Administrators serve
without compensation, but are reimbursed by the Sponsor for necessary
expenditures incurred in the discharge of their duties.
TRUST AGREEMENTS
On January 1, 2003, ConocoPhillips entered into both a Trust Agreement and a
Master Trust Agreement with Vanguard Fiduciary
6
Trust Company, as Trustee, both were superceded by a Trust Agreement and a
Master Trust Agreement dated October 3, 2003. This Master Trust Agreement
provides for the administration by the Trustee of the ConocoPhillips Stock Fund.
The Trust Agreement provides for the administration of all other assets in the
Trust Fund by the Trustee or any Successor Trustee. An additional Master Trust
Agreement with the Trustee, effective October 3, 2003, provides for the
administration by the Trustee of the DuPont Stock Fund. Effective October 3,
2003, pursuant to a Master Trust Agreement, the custodial trustee for the Stable
Value Fund is State Street Bank and Trust Company.
EXPANDED INVESTMENT FUND OPTIONS
The Plan currently includes 11 investment funds, including the Stable Value Fund
and the DuPont Stock Fund; however, the DuPont Stock Fund is closed to new
investment elections.
CONTRIBUTIONS
In 2003, participants could contribute between 1 and 30 percent of their
eligible compensation (up to $200,000) to the Plan. The maximum participant
contribution percentage was previously 20 percent. Earnings on investments held
by the Plan in the name of a participant are automatically invested in the
respective fund from which the earnings were derived.
A new Plan provision for 2003 allows participants who reach age 50 or over in
2003 to make catch-up contributions of up to $2,000 to the Plan. This additional
amount will increase by $1,000 per year through 2006. An annual election is
required to make catch-up deposits.
On January 1, 2003, participants in the Thrift Plan for Retail Employees of
Conoco Inc. became eligible to participate in the Plan.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution and
Plan earnings, and charged with an allocation of investment expenses.
Allocations are based on participant earnings or account balances, as defined.
The benefit to which a participant is entitled is the benefit that could be
provided from the participant's vested account.
VESTING
Participants were fully vested in their account balances.
LOANS TO PARTICIPANTS
Active employee participants can request a loan from their account in the Plan.
In 2003, a loan from the Plan was limited to the lesser of 50 percent of the
participant's account balance
7
or $50,000, both adjusted for outstanding loan balances. All interest payments
made under the terms of the loan are credited to the participant's account and
are not considered general earnings of the Plan. Participants' loans are repaid
through payroll deductions. Participant loans are collateralized by the
participants' vested account balances. Effective January 1, 2003, the maturity
on these loans can not exceed 58 months. Also, participants who transferred from
the Conoco Retail Thrift Plan with more than one loan are permitted to continue
their loans until paid off.
SHARE ACCOUNTING METHOD FOR COMPANY STOCK
Any shares purchased or sold on any business day are valued at the Participant
Transaction Price, which is calculated using the weighted-average price of the
ConocoPhillips stock traded on that business day and any carryover impact from
the previous trading day.
DISTRIBUTIONS
Benefits under the Plan are payable upon reaching age 59 1/2 or termination, or
in the event of total disability or hardship. Effective January 1, 2003,
distributions from the Plan are available in lump sums or installment payments.
Any whole shares of stock in a participant's stock fund account can be
distributed in the form of shares of stock at the participant's discretion. All
other amounts, including fractional shares of stock, are distributed to the
participant in cash.
Effective as of January 1, 2003, the age at which distributions are deferred to
was changed to February 1st of the year following the year the participant
reaches 70 1/2. For a surviving spouse, it was changed to the later of December
31st of the year the participant would have reached 70 1/2 or December 31st of
the year following the year the participant died.
Installment distribution options offered under the Conoco Retail Thrift Plan and
exercised by a participant were grandfathered into the Plan.
ADMINISTRATION FEES
The Plan pays all reasonable expenses necessary for the operation
8
of the Plan, unless such expenses are paid by the Sponsor. Fees paid by the
Sponsor 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 are recorded
when paid.
USE OF ESTIMATES
The preparation of financial statements in conformity with U. S. generally
accepted accounting principles requires estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes and
schedules. Actual results could differ from the estimates and assumptions used.
NOTE 3--INVESTMENTS
Prior to 2003, participants could designate, in 5 percent increments, the
portion of their contributions to be placed in various funds. The percentage was
changed to 1 percent effective January 1, 2003. Loan repayments are 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.
VALUATION
Common stock and mutual fund securities are valued at fair value, based on their
quoted market prices. The Stable Value Fund managed under the ConocoPhillips
Company Defined Contribution Plans Master Trust. The assets in this fund include
investment contracts and money market instruments. The guaranteed investment
contracts are valued at contract value and the money market instruments are
valued at amortized cost, both of which approximate fair value. Participant
loans are valued at carrying value, which approximates fair value. Purchases and
sales of investments are 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 participant account balances and the
amounts reported in the Statement of Net Assets Available for Benefits.
APPRECIATION
During 2003, the Plan's investments (including gains and losses
9
on investments bought and sold, as well as held during the year) appreciated in
value as follows:
Thousands
of Dollars
----------
Mutual Funds $ 2,682
----------
$ 2,682
==========
NOTE 4--TAX STATUS
The Internal Revenue Service (IRS) determined on March 23, 2004, that the Plan,
as amended and restated as of October 3, 2003, 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 5--PLAN TERMINATION
Although it has not expressed any intent to do so, the Sponsor has the right
under the Plan to terminate the Plan subject to the provisions of ERISA. Upon
termination, the Plan's assets would be 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--PARTY-IN-INTEREST TRANSACTIONS
In 2003, certain investments of the Plan were in shares of mutual funds managed
by Vanguard. Because Vanguard was the Plan's trustee, these transactions qualify
as party-in-interest transactions. In addition, certain Plan investments are in
ConocoPhillips common stock. These transactions also qualify as
party-in-interest transactions. Additional Plan assets are invested in DuPont
Stock. Transactions involving DuPont Stock also qualify as party-in-interest
transactions as certain contracts in the Stable Value Fund were managed by
DuPont Capital Management during 2003. All of these types of transactions were
exempt from the prohibited transaction rules.
NOTE 7--MASTER TRUSTS
Three investment options of the Plan are held in Master Trusts and administered
under Master Trust agreements entered into on January 1, 2003. These
investment options include the Stable Value Fund, Conoco Phillips Stock Fund,
and DuPont Stock Fund.
STABLE VALUE FUND
The Stable Value Fund option provided by the Plan is also available to
participants in the ConocoPhillips Savings Plan.
10
Each plan's beneficial interest in the commingled Master Trust funds is based on
that plan's proportionate share of the value of the total net assets in the
Master Trust. Investment income for each plan is calculated using this same
basis. The Plan's proportionate share of Master Trust net assets and investment
income was approximately 0.1% as of December 31, 2003.
The Stable Value Fund consisted of "guaranteed investment contracts (GICs),
separate account guaranteed investment contracts (SAGICs), synthetic contracts
(SYNs), common collective trusts (CCTs)," and short-term investments and cash.
The crediting interest rates for the Stable Value Fund's investment contracts
ranged from 3.23% to 7.68% as of December 31, 2003. The fund's blended rate of
return for 2003 was 5.33%.
The crediting rates for most SAGIC and SYN contracts were reset quarterly and
were based on the market value of the underlying portfolio of assets backing
these contracts. Inputs used to determine the crediting rate included each
contract's portfolio market value, current yield-to-maturity, duration (i.e.,
the present value of the weighted average life), and market value relative to
contract value. All contracts had a guaranteed rate of 0.0% or higher.
The Master Trust (Stable Value Fund) values as of December 31, 2003 were as
follows:
THOUSANDS
OF DOLLARS
----------
At Contract Value, which approximates fair value:
GICs $ 181,510
SAGICs 183,861
SYNs 1,502,584
CCTs 65,056
At Fair Value:
Short-term investments and cash 15,951
----------
$1,948,962
==========
The contract values of synthetic guaranteed investment contracts were net of
($46,176) at December 31, 2003 related to wrapper contracts, which guarantee the
contract value of the synthetic guaranteed investment contracts for participant
initiated withdrawal events.
MILLIONS
OF DOLLARS
----------
Stable Value Fund
Years Ended December 31, 2003
Contributions 17
Net Appreciation 23
Net Realized Gain 1
Asset Transfers In 2,015
Distributions (42)
Participant Loans (1)
Asset Transfer Out (63)
-----
Net Change Beginning of Year 1,950
-----
End of Year 1,950
=====
11
CONOCOPHILLIPS STOCK FUND
The ConocoPhillips Stock Fund is comprised of ConocoPhillips stock held in a
Master Trust. This investment option provided by the Plan is also available to
participants in the ConocoPhillips Savings Plan and the Retirement Savings Plan
of ConocoPhillips Company. Each plan's beneficial interest in the commingled
Master Trust funds is based on that plan's proportionate share, determined by
participant-directed balances, of the value of the total net assets in the
Master Trust. Investment income for each plan is calculated using this same
basis. The Plan's proportionate share of Master Trust net assets and investment
income was approximately 0.16% as of December 31, 2003.
Millions
of Dollars
----------
Conoco Phillips Stock Fund
Year Ended December 31, 2003
Contributions 138
Investment Income 5
Net Appreciation 265
Net Realized Gain 65
Asset Transfers In 1,185
Distributions (106)
Participant Loans (20)
Asset Transfers Out (173)
- --------------------------------------------------------------------------------
Net Change 1,359
Beginning of Year -
- --------------------------------------------------------------------------------
End of Year $1,359
================================================================================
DUPONT STOCK FUND
The DuPont Stock Fund is comprised of DuPont stock held in a Master Trust. This
investment option provided by the Plan is also available to participants in the
ConocoPhillips Savings Plan. Each plan's beneficial interest in the commingled
Master Trust funds is based on that plan's proportionate share of the value of
the total net assets in the Master Trust. Investment income for each plan is
calculated using this same basis. The Plan's proportionate share of Master Trust
net assets and investment income was approximately 0.1% as of December 31, 2003.
Millions
of Dollars
----------
DuPont Stock Fund
Year Ended December 31, 2003
Investment Income 2
Net Appreciation 28
Net Realized Gain 1
Asset Transfers In 247
Distributions (4)
Asset Transfers Out (15)
- --------------------------------------------------------------------------------
Net Change 259
Beginning of Year -
- --------------------------------------------------------------------------------
End of Year $259
================================================================================
12
SCHEDULE OF ASSETS (HELD AT END OF YEAR) CONOCOPHILLIPS
SCHEDULE H, LINE 4i STORE SAVINGS PLAN
At December 31, 2003
(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
- ------------------ ----------------------------- -------------- -----------
Vanguard* 6,623 units, Vanguard
500 Index Fund ** $ 680
275,755 units, Vanguard
Balanced Index Fund ** 5,038
27,524 units, Vanguard
Extend Market Index Fund ** 734
6,056 units, Vanguard
Growth Index Fund ** 151
14,718,150 units, Vanguard
Prime Money Market Fund ** 14,718
30,624 units, Vanguard
Total Bond Market Index Fund ** 316
272,277 units, Vanguard
Total International
Stock Index Fund ** 2,897
301,866 units, Vanguard
Value Index Fund ** 5,720
Participants* Loans to Plan participants -- 1,699
-----------
$ 31,953
===========
- ----------
*Party-in-interest
**Historical cost information is not required for participant-directed
investments.
13
EXHIBIT INDEX CONOCOPHILLIPS
STORE SAVINGS PLAN
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23 Consent of Independent Registered Public Accounting Firm
14
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8, File No. 333-98681) pertaining to the ConocoPhillips Store Savings Plan of
our report dated June 28, 2004, with respect to the financial statements and
schedule of the ConocoPhillips Store Savings Plan included in this Annual Report
(Form 11-K) for the year ended December 31, 2003.
/s/ ERNST & YOUNG LLP
Houston, Texas ERNST & YOUNG LLP
June 28, 2004
