001-7155 (R.H. Donnelley Corporation)
DonTech Profit Participation Plan, 200 East Randolph Drive, Chicago, Illinois 60601
SBC Communications Inc., 175 E. Houston Street, San Antonio, TX 78205 and
R.H. Donnelley Corporation, One Manhattanville Road, Purchase, NY 10577
The required financial statements are attached to this report.
DONTECH PROFIT PARTICIPATION PLAN
INDEX TO FORM 11-K
Page(s)
Report of Independent Accountants 3
Statement of Net Assets Available for Benefits
at December 31, 2001 and 2000 4
Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2001 5
Notes to Financial Statements 6-10
Supplemental Schedule - 11
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
Signature 12
Exhibit 23 - Consent of Independent Accountants
Report of Independent Accountants
To the Participants of the DonTech Profit Participation Plan and the Employee
Benefits Committee of the Board of Directors of DonTech II
In our opinion, the accompanying statements of net assets available for benefits and
the related statement of changes in net assets available for benefits present
fairly, in all material respects, the net assets available for benefits of the
DonTech Profit Participation Plan (the "Plan") at December 31, 2001 and 2000, and
the changes in net assets available for benefits for the year ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. 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 of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Assets Held at
End of Year is presented for the purpose of additional analysis and is not a
required part of the basic 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. The
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule 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.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
May 24, 2002
DONTECH PROFIT PARTICIPATION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AT DECEMBER 31, 2001 and 2000
(Dollars in Thousands)
December 31,
2001 2000
Assets:
Investments, at fair value $ 42,432 $ 44,682
Accrued interest 14 12
Cash 41 464
Participant contributions receivable 118 85
Employer contributions receivable 36 29
---------- -----------
Total assets 42,641 45,272
Net assets available for
benefits $ 42,641 $45.272
======== ========
The accompanying notes are an integral part of these financial statements.
DONTECH PROFIT PARTICIPATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2001
(Dollars in Thousands)
Additions:
Investment income:
Net realized and unrealized (depreciation)
in fair value of investments $ (4,120)
Interest 716
Dividends 333
Contributions:
Participant 3,244
Employer 907
------
Total Additions 1,080
Deductions:
Net distributions to participants (3,711)
-------
Total Deductions (3,711)
-------
(Decrease) in net assets (2,631)
Net assets available for benefits
as of January 1 45,272
------
Net assets available for benefits
as of December 31 $42,641
=======
The accompanying notes are an integral part of these financial statements.
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1. Plan Description
Overview
DonTech II (the "Partnership") is a general partnership between R.H. Donnelley
Corporation ("RHD") and Ameritech Publishing of Illinois, Inc. ("API/IL"), an
indirect, wholly-owned subsidiary of SBC Communications Inc. The Partnership does
business under the name DonTech and is hereinafter referred to as "DonTech" or the
"Company".
DonTech, as the Plan Administrator, has adopted the DonTech Profit Participation
Plan (the "Plan") for the benefit of its eligible employees. The Plan is a defined
contribution plan and is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The Plan was established to provide a
convenient way for eligible employees to save on a regular and long-term basis. The
following summary provides an overview of major Plan provisions and is provided for
general informational purposes. Employees who contribute to the Plan
("Participants") or former employees who have assets in the Plan should refer to the
Plan document for more complete information and a full description of the Plan
provisions and qualifications.
Eligibility
Full-time employees of the Company are immediately eligible to participate in the
Plan on their date of hire. Part-time employees who work at least one thousand
hours during the consecutive twelve-month period following employment or in any
calendar year thereafter are eligible to participate in the Plan on the first day of
the following January.
Contributions
Contributions are made to the Plan by the Company on behalf of each eligible
participant based upon the participant's elected compensation deferral through
payroll deductions. Participants in the Plan authorize direct payroll deductions of
between 1% and 6%, in whole percent increments, of their included compensation, as
defined by the Plan document ("Basic Contributions"). Participants may make
additional contributions ("Investment Contributions") up to a maximum of 10% of
included compensation.
Participants' Basic Contributions and Investment Contributions may be made from
before-tax earnings, which has the effect of reducing current taxable earnings for
federal income tax purposes, and/or after tax earnings. In any Plan year, a
Participant may contribute up to a maximum of 16% of his or her included
compensation (up to 6% in Basic Contributions and 10% in Investment Contributions)
or the maximum allowed by the Internal Revenue Code, as amended ("IRC"), whichever
is less. For the Plan years 2001 and 2000, the IRC limit on before-tax
contributions was $10,500.
The Company makes contributions ("Matching Contributions") equal to a minimum of 50%
of aggregate Basic Contributions. Investment Contributions are not eligible for
Matching Contributions. In accordance with the provisions of the Plan, the Company
may contribute an additional percentage of the Participant's aggregate Basic
Contribution if the Company's profit for a Plan year is greater than budgeted profit
for that Plan year. The Company made no such additional profit-sharing matching
contributions during the years ended December 31, 2001 and 2000.
To comply with certain provisions of the Tax Reform Act of 1986, as amended (the
"Act"), the Plan limits covered compensation for purposes of determining Basic,
Investment and Matching Contributions (collectively, "Contributions") to $170,000
for each of the Plan years ended December 31, 2001 and 2000.
All contributions are subject to limitations imposed by the IRC and ERISA.
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Vesting
Basic, Investment and Matching Contributions are fully vested when made. Effective
June 1, 2000, the Plan was amended to change the vesting of Matching contributions
to be fully vested when made. All Participants of the Plan who were actively
employed on June 1, 2000 were fully vested in all Matching contributions existing in
their Participant accounts on that date.
Investment Options
The Plan allows Participants to allocate their Contributions to various investment
options available under the Plan. These elections must be made in 1% increments.
Participants are able to reallocate their entire account balances in multiples of 1%
among the Plan's investment options.
Payment of Benefits
Upon termination of service with the Company, Participants become eligible for a
lump sum distribution of the vested portion of their account. Retired and
terminated Participants who have an account balance in excess of $5,000 may elect
various forms of deferred distribution.
Participant Loans
Participants may borrow from their vested account balance a minimum of $500 up to a
maximum of $50,000, or 50% of the vested account balance, whichever is less. Loan
terms range from 1 to 5 years or up to 10 years if the proceeds of the loan are used
for the purchase of the participant's primary residence. Loans are secured by the
balance in the Participant's account and bear interest at the Prime rate, as quoted
in the Wall Street Journal as of the last day of the month immediately preceding the
receipt of the loan application, plus 2%. Principal and interest payments are
payable ratably through direct payroll deductions. The total number of Participants
with outstanding loans at December 31, 2001 and 2000 was 158 and 149, respectively.
Forfeitures
Amounts forfeited by non-vested Participants who terminated during the year were
$24,000 and $19,000 for the years ended December 31, 2001 and 2000, respectively.
Forfeited amounts reduce future Company contributions. The forfeitures are related
to Participants who terminated prior to June 1, 2000, but did not take a
distribution until the 2001 Plan year.
Note 2. Investments
Investment Funds
Participants of the Plan can elect to have Contributions credited to their Plan
accounts invested in one or more of the various investment fund options of the Plan.
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Trust and Master Trust
Merrill Lynch is the Trustee of the Plan assets, recordkeeper and investment
advisor. As of December 31, 2001 and 2000 all cash and investments of the Plan are
in the DonTech Profit Participation Plan Trust (the "Trust").
Note 3. Summary of Significant Accounting Policies
Method of Accounting
The Plan's financial statements are prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of
America (GAAP). Certain prior year balances have been reclassified to conform to
current year presentation.
Investment Valuation and Income Recognition
The fair value of the Plan assets in the Trust is determined based on quoted market
prices for shares of mutual funds and collective trusts, quoted market prices for
shares of stock, and contract value, which approximates fair value, for investment
contracts. Participant loans are stated at amortized costs. The net appreciation
or depreciation in the fair value of the investments, as applicable, consists of
realized and unrealized appreciation and depreciation for the specified period. Net
unrealized appreciation or depreciation is determined based on the difference
between the average cost of the investments and the market value as of each
valuation date of such investment. Average cost is determined based on the
weighted-average cost of all investments purchased less any dispositions. Dividend
income is recorded on the ex-dividend date. Interest earned on investments is
recorded on the accrual basis. Purchases and sales of securities are recorded on
the trade date.
Contributions
Participant contributions represent the amounts withheld each pay period. Company
contributions are based upon amounts required under the provisions of the Plan.
Benefit Payments
Benefits are recorded when paid. Liabilities relating to Participants who have
elected to withdraw from the Plan but have not yet been paid were $13,000 and
$436,000 as of December 31, 2001 and 2000, respectively. These amounts will be
reflected on the Form 5500 to be filed by the Plan Administrator.
Expenses and Administrative Costs
All expenses and administrative costs are paid by the Company.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 changes in net assets available for
benefits during the reporting period. Actual results could differ from those
estimates.
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Risks and Uncertainties
The Plan provides for various investment options in a number of funds which invest
in stocks, bonds, fixed income securities, mutual funds, and other investment
securities. Certain investment securities are exposed to risks such as changes in
interest rates, fluctuations in market conditions and credit risk. The level of
risk associated with certain investment securities and uncertainty related to
changes in value of these securities could materially affect Participant account
balances and amounts reported in the financial statements and accompanying notes.
Plan Termination
While the Company has not expressed any intent to do so, it may discontinue its
contributions or terminate the Plan at any time, subject to the provisions of ERISA
and the IRC. These provisions state that in such an event, all Participants of the
Plan shall be fully vested in the current market value of amounts credited to their
accounts as of the date of termination.
Note 4. Tax Status
The Internal Revenue Service ("IRS") has determined and informed the Company by a
letter dated June 9, 1999, that the Plan and related Trust are designed in
accordance with applicable sections of the IRC. Although the Plan has been amended
since the date of the letter, the Plan Administrator and the Administrator's legal
counsel believe the amendments do not alter the tax status of the Plan and the Plan
is currently being operated in compliance with section 401(a) of the IRC and the
related Trust is exempt from federal income tax under section 501(a) of the IRC.
On March 9, 2002, the Plan filed for a new tax determination letter with the IRS due
to changes made to certain Plan provisions during 2001 and to comply with IRC
regulations .
Note 5. Investments
The investments reflected in the Statement of Net Assets Available for Benefits
represents the total assets in the Trust as of December 31, 2001 and 2000.
The following presents investments that represent 5 percent or more of the Plan's
net assets at fair value (dollars in thousands):
December 31, December 31,
2001 2000
---- ----
R.H. Donnelley Corporation Common Stock Fund $ 2,160 $ -
SBC Communications Inc. Common Stock Fund 10,089 11,876
DonTech Stable Value Fund 10,626 9,641
Merrill Lynch Equity Index Fund 13,176 14,989
During 2001, the Plan's investments (including gains and losses on investments
bought, sold, and held during the year) depreciated in value as follows: (dollars in
thousands)
Mutual Funds $ (636)
Common Stock (1,665)
Common Collective Trusts (1,819)
-------
Total $ (4,120)
=======
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2001 and 2000, the Plan has entered into benefit responsive
investment contracts with various insurance companies ("Insurers"). The fair value
of these contracts is recorded in the DonTech Stable Value Fund at December 31, 2001
and 2000. The Insurers maintain the contributions in a pooled account, which is
credited with earnings on the underlying assets and charged for Participant
withdrawals and administrative expenses. The contracts are included in the
financial statements at contract value which approximates fair value and there are
no reserves against contract value for credit risk of the contract insurer or other
risks at December 31, 2001 and 2000. The average interest rate was approximately
6.07% and 6.49% for the years ended December 31, 2001 and 2000, respectively.
Note 6. Related Party Transactions
Shares of the Merrill Lynch Equity Index Fund are managed by the Trustee and
therefore, these transactions qualify as party-in-interest transactions. Fees paid
by the Company for the investment management services were nominal for the year
ended December 31, 2001.
DONTECH PROFIT PARTICIPATION PLAN
EIN 36-4190375, PLAN NO. 002
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD AT END OF YEAR
December 31, 2001
Description of Price Current
Issuer/borrower/lessor Investment /NAV Value
- ------------------------------------ --------------------- ----------
( in Thousands)
* R.H. Donnelley Corp New Common Stock 29.05 $ 2,160
* SBC Communications Inc Common Stock 39.17 10,089
* ML Equity Index Trust 1 Common/Collective 80.60 12,856
Trusts
* ML Equity Index Trust 1 GM Common/Collective 80.60 320
Trusts
DonTech Stable Value Fund Pooled Separate A/C 1.000 10,511
(GICS)
DonTech Stable Value Fund Pooled Separate A/C 1.000 115
(GICS)
GAM International FD CL A Mutual Funds 15.11 326
GAM International FD CL A GM Mutual Funds 15.11 140
Van Kampen American Value FD Mutual Funds 18.83 1,148
Van Kampen American Value A GM Mutual Funds 18.83 263
Van Kampen Emerg GR FD CL A Mutual Funds 42.32 819
PIMCO Total Return Fund CL A Mutual Funds 10.46 386
PIMCO Total Return Fund CL A GM Mutual Funds 10.46 486
Fidelity Adv Small Cap Fd CL T Mutual Funds 18.00 269
Fidelity Advisor Growth Mutual Funds 28.76 157
Oppen Quest Bal Val CL A Mutual Funds 16.01 307
Alliance Prem GR FD CL A Mutual Funds 20.32 504
ING Pilgrim INTL Value CL A Mutual Funds 12.86 359
* Loan Fund Participant Loans 1.000 1,217
----------
Total $ 42,432
==========
* Party-in Interest
DONTECH PROFIT PARTICIPATION PLAN
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the DonTech II
general partnership (the administrator of the DonTech Profit Participation Plan) has
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
DonTech Profit Participation Plan
BY: /s/ Robert A. Gross
Robert A. Gross
Vice President - Finance &
Chief Financial Officer
Date: June 17, 2002
EXHIBIT INDEX
Exhibit identified below, is filed herein as exhibit hereto.
Exhibit
Number
23 Consent of Independent Accountants
