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
Item 4.
Plan Financial Statements and Shedule Prepared in Accordance with teh Financial Reporting Requirements of ERISA.
DONTECH PROFIT PARTICIPATION PLAN
INDEX TO FORM 11-K
Page(s)
Report of Independent Accountants 3
Financial Statements:
Statements 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 6-10
Supplemental Schedule: 11
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
Other Schedules required by 29CFR Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosures
under ERISA have been omitted because they are not applicable to the DonTech Profit Participation Plan
Signature 12
Exhibit 23 - Consent of Independent Accountants
Exhibit 99 - Certification of Periodic Financial Reports
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, 2002 and 2001, and the changes in net assets available for benefits for the year
ended December 31, 2002 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. This 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 16, 2003
DONTECH PROFIT PARTICIPATION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AT DECEMBER 31, 2002 and 2001
(Dollars in Thousands)
December 31,
2002 2001
---- ------
Assets:
Investments, at fair value $ 37,399 $ 42,432
Accrued interest 15 14
Cash 5 41
Participant contributions receivable 139 118
Employer contributions receivable 48 36
--------- ---------
Total assets 37,606 42,641
------- ------
Net assets available for
benefits $ 37,606 $42,641
======== ========
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, 2002
(Dollars in Thousands)
Additions to net assets attributed to:
Investment income:
Interest $ 695
Dividends 416
---
Total Investment income 1,111
-----
Contributions:
Participant 2,861
Employer 879
-----
Total Contributions 3,740
-----
Total Additions 4,851
Deductions from net assets attributed to:
Net depreciation
in fair value of investments (7,273)
Net distributions to participants (2,613)
-------
Total Deductions (9,886)
-------
Decrease in net assets (5,035)
Net assets available for benefits,
at beginning of the year 42,641
------
Net assets available for benefits
at the end of the year $37,606
=======
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 Reuben H. Donnelley Inc. ("RHD") and Ameritech Publishing of
Illinois, Inc. ("API/IL"), a unit 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 year 2002 the IRC limit on
before tax contributions was $11,000.
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 year ended
December 31, 2002.
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 $200,000 for the plan year
ended December 31, 2002. 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.
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 are entitled to a lump sum distribution of the vested portion of their
account balance. Upon retirement or if a participant becomes totally and permanently disabled or dies, the participant or their
beneficiary is entitled to their entire account balance. Retired and terminated Participants who have an account balance in excess of
$5,000 may elect various forms of deferred distribution.
Withdrawals
- ------------
The Plan allows withdrawals of after-tax and rollover contributions while an active employee. The Plan also allows for a "financial
hardship" withdrawal for participants under age 59 1/2 years of before-tax contributions in cases of demonstrated "financial
hardship".
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, 2002 and 2001 was 145 and 158, respectively.
Forfeitures
- -----------
Amounts forfeited by non-vested Participants who terminated during the year were $18,000 for the year ended December 31, 2002.
Forfeited amounts reduce future Company contributions. The forfeitures are related to Participants who terminated prior to June 1,
2000 (the date the plan was amended to change the vesting of Matching contributions to be fully vested when made), but did not take a
distribution until the 2002 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, 2002 and 2001, 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).
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.
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, but not received, 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, 2002 and 2001.
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,
2002 2001
---- ----
R.H. Donnelley Corporation Common Stock Fund $ 1,919 $ 2,160
SBC Communications Inc. Common Stock Fund 5,845 10,089
DonTech Stable Value Fund 11,808 10,626
Merrill Lynch Equity Index Fund 9,750 13,176
PIMCO Total Return Fund 2,345 872
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
During 2002, 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 $ (1,256)
Common Stock (3,111)
Common Collective Trusts (2,906)
-------
Total $ (7,273)
=======
At December 31, 2002 and 2001, 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, 2002 and 2001. 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, 2002 and 2001. The average interest rate was approximately 5.35% and 6.07% for the years ended December 31, 2002 and
2001, respectively.
Note 6. Related Party Transactions
Shares of the Merrill Lynch Equity Index Fund, the Merrill Lynch Fundamental Growth Fund, the Merrill Lynch Global Small Cap Fund and
the Merrill Lynch Retirement Preservation Trust 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, 2002.
Note 7. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of the net assets available for benefits per the financial statements at December 31, 2002 and 2001
to Form 5500 (dollars in thousands):
2002 2001
------ ------
Net Assets available for benefits $37,606 $42,641
per the financial statements
Amounts allocated to withdrawing participants (169) (13)
--------- ---------
Net Assets available for benefits per Form 5500 $ 37,437 $ 42,628
========= =========
The following is a reconciliation of the benefits paid to participants per the financial statements for the year ended December 31,
2002 to Form 5500 (dollars in thousands):
Benefits paid to participants $ 2,613
per the financial statements
Add: Amounts allocated to withdrawing participants 169
at December 31, 2002
Less: Amounts allocated to withholding participants (13)
-------
at December 31, 2001
Benefits paid to participants per Form 5500 $2,769
=======
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved
for payment prior to December 31, 2002 but not yet paid as of that date.
DONTECH PROFIT PARTICIPATION PLAN
EIN 36-4190375, PLAN NO. 002
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2002
Description of Current
Issuer/borrower/lessor Investment Value
- ---------------------------------------------------- ------------------------------ --------------
( in Thousands)
* R.H. Donnelley Corp New Common Stock $ 1,919
* SBC Communications Inc Common Stock 5,845
* ML Equity Index Trust 1 Common/Collective Trusts 9,361
* ML Equity Index Trust 1 GM Common/Collective Trusts 389
*DonTech Stable Value Fund Pooled Separate A/C (GICS) 11,670
*DonTech Stable Value Fund Pooled Separate A/C (GICS) 138
Lord Abbett Mid Cap Value CL P Mutual Funds 112
*ML Fundamental Growth FD CL A Mutual Funds 598
Van Kampen American Value FD Mutual Funds 1,029
Van Kampen American Value A GM Mutual Funds 299
Van Kampen Emerg GR FD CL A Mutual Funds 661
PIMCO Total Return Fund CL A Mutual Funds 1,684
PIMCO Total Return Fund CL A GM Mutual Funds 661
Fidelity Adv Small Cap Fd CL T Mutual Funds 340
*ML Global Small Cap Fund CL A Mutual Funds 58
Oppen Quest Bal Val CL A Mutual Funds 363
AIM Basic Value FD CL A Mutual Funds 95
ING Pilgrim INTL Value CL A Mutual Funds 674
ING Pilgrim INTL Value CL A - GM Mutual Funds 218
* Loan Fund Participant Loans, at rates 1,136
ranging from 6.25% to 11.5%
Pending Settlement Fund Pending Settlements 149
--------------
Total $ 37,399
==============
* 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 16, 2003
EXHIBIT INDEX
Exhibits identified below, Exhibit 23 is filed herein as an exhibit hereto and Exhibit 99 is furnished and attached hereto.
Exhibit
Number
------
23 Consent of Independent Accountants
99 Certification of Periodic Financial Reports
