UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the plan year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
------- -------
Commission file number 1-8349
SAVINGS PLAN FOR EMPLOYEES
OF
FLORIDA PROGRESS CORPORATION
Full title plan and the address of the
plan, if different from that of the issuer named below
FLORIDA PROGRESS CORPORATION
100 Central Ave.
St. Petersburg, Florida 33701
Name of issuer of the securities held pursuant to the
plan and address of its principal executive office
Financial Statements as of and for the
Years ended December 31, 2002 and 2001
SAVINGS PLAN FOR EMPLOYEES OF FLORIDA PROGRESS CORPORATION
Table of Contents
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Page Number
Report of Independent Accountants 1
Basic Financial Statements
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 8
Additional Information *
Schedule I - Schedule of Assets (Held at End of Year) 9
* Other supplemental schedules required by Section 2520.103-10 of the
Department of Labor Rules and Regulations for Reporting and Disclosure under
Employee Retirement Income Security Act of 1974 have been omitted because
they are not applicable.
Report of Independent Auditors
To the Participants and Administrator of
Savings Plan for Employees of Florida Progress Corporation
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Savings Plan for Employees of Florida Progress Corporation (the "Plan") at
December 31, 2002 and 2001, and the changes in net assets available for benefits
for the years then ended, 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
Philadelphia, Pennsylvania
June 24, 2003
SAVINGS PLAN FOR EMPLOYEES OF FLORIDA PROGRESS CORPORATION
Statements of Net Assets Available for Benefits
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(in thousands)
As of December 31,
2002 2001
----------------- -----------------
Investments, at fair value Registered investment companies:
Putnam New Opportunities Class A Shares $ 26,008 * $ 42,226 *
Vanguard 500 Index Fund 37,545 * 53,351 *
Vanguard Extended Market Index Fund 2,819 3,253
Vanguard Federal Money Market Fund - 30,746 *
Vanguard International Growth Fund 1,767 2,143
Vanguard LifeStrategy Conservative Growth Fund 2,913 4,222
Vanguard LifeStrategy Growth Fund 7,872 9,571
Vanguard LifeStrategy Moderate Growth Fund 10,951 14,368
Vanguard Total Bond Market Index Fund 5,430 5,706
----------------- -----------------
95,305 165,586
Vanguard Retirement Savings Trust 113,134 * 82,655 *
Progress Energy Company Stock Fund 44,186 * 44,424 *
Florida Progress Contingent Value Obligation Fund 142 499
Participant Loans 8,251 8,527
----------------- -----------------
261,018 301,691
----------------- -----------------
Receivables
Employer's contributions 135 138
Employees' contributions 309 318
----------------- -----------------
Total receivables 444 456
----------------- -----------------
----------------- -----------------
Net assets available for benefits $ 261,462 $ 302,147
================= =================
*Represents 5% or more of net assets available for benefits.
The accompanying notes are an integral part of the financial statements.
2
SAVINGS PLAN FOR EMPLOYEES OF FLORIDA PROGRESS CORPORATION
Statements of Changes in Net Assets Available for Benefits
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Year Ended December 31,
2002 2001
------------------ ------------------
Additions
Investment income (loss):
Interest and dividend income, investments $ 9,449 $ 20,250
Interest income, participant loans 597 1,308
Net appreciation (depreciation) in fair value of investments (31,190) (61,634)
------------------ ------------------
(21,144) (40,076)
------------------ ------------------
Contributions:
Employer 3,596 8,476
Participant 8,399 19,267
------------------ ------------------
11,995 27,743
------------------ ------------------
Total additions (9,149) (12,333)
------------------ ------------------
Deductions
Payment of benefits 31,521 76,718
Asset transfers out - 212,565
Administrative expenses 15 32
------------------ ------------------
Total deductions 31,536 289,315
------------------ ------------------
Net increase (decrease) (40,685) (301,648)
Net assets available for plan benefits:
Beginning of period 302,147 603,795
------------------ ------------------
End of period $ 261,462 $ 302,147
================== ==================
The accompanying notes are an integral part of the financial statements.
3
SAVINGS PLAN FOR EMPLOYEES OF FLORIDA PROGRESS CORPORATION
Notes to Financial Statements
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NOTE 1 - DESCRIPTION OF PLAN
The following description of the Savings Plan for Employees of Florida Progress
Corporation (the "Plan") provides only general information. Participants should
refer to the Savings Plan Summary Plan Description/Prospectus, as amended, which
is part of the Employee Handbook and the "Plan Highlights" booklet, which is
part of the "Measure Up" package from The Vanguard Group, Inc. for more complete
descriptions of the Plan's provisions.
General
The Plan is a qualified defined contribution plan subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA"). The Plan provides
employees of the Participating Companies (as defined below) immediate
eligibility upon employment for making employee contributions (either pre-tax or
after-tax). Employees become eligible to receive matching employer contributions
on employee contributions made after completing at least six months of
uninterrupted employment or having worked at least 1,000 hours in a twelve-month
period. Participation in the Plan is voluntary. The following companies
participated in the Plan at December 31, 2001 (the "Participating Companies"):
o Progress Fuels Corporation ("Progress Fuels") - corporate employees only
o Florida Progress Corporation ("Florida Progress")
o Florida Power Corporation ("Florida Power")
o Progress Telecommunications Corporation ("Progress Telecom")
Effective December 31, 2001, all non-bargaining participants of the Plan and
their balances totaling $212,564,805 were transferred to the Progress Energy,
Inc. 401(k) Savings and Stock Ownership Plan. Such participants include
non-bargaining employees of Florida Power, Progress Telecom, and corporate
employees of Progress Fuels. As of January 1, 2002, the remaining Participating
Company in the plan was Florida Power. Only bargaining unit employees of Florida
Power are eligible to participate in the plan.
Effective January 1, 2002, any dividends in Common Stock shall be 100% vested.
Dividends not distributed in cash to the participant shall be invested in
Company Stock in the Common Stock Fund.
As of January 1, 2003, Florida Power Corporation is known as Progress Energy
Florida Inc.
Contributions
Eligible employees may elect to contribute up to 16% of their annual base pay
and may designate these contributions as either regular savings after-tax and/or
401(k) pretax dollars. The Participating Company contributes each pay period an
amount equal to 75% of the employees' contributions, up to 6% of base pay.
Participant Accounts
A separate account is maintained for each investment option of a participant by
type of contribution. Each participant's account is credited with the
participant's contribution and allocations of (a) the Participating Company's
contribution and, (b) Plan earnings, and charged with administrative expenses.
Plan earnings are allocated and credited to the account daily based on the
adjusted balance of each participant's account. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
4
Vesting
Participants are immediately vested in their Regular Savings and 401(k)
contributions and earnings thereon. The Company Match Account and the earnings
thereon vest gradually based on the following Years of Continuous Service
schedule:
Years of Continuous Service Vested Percentage
Less than 2 0%
2 but less than 3 25%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
Effective January 1, 2002, a participant shall be vested 100% of all dividends
earned on amounts invested in the Company Stock Fund.
A year of continuous service is earned when a participant works at least 1,000
hours in a calendar year. A participant will also become fully vested in the
employer contributions and earnings thereon upon death, disability, attainment
of normal retirement or termination of the Plan.
Participant Loans
All actively employed Plan participants with available account balances may
apply for a loan from their own Plan account. No loan shall exceed the lesser of
$50,000 or one-half of the participant's vested Plan account balance. This
amount will be transferred from the participant's account and placed in a
separate Participant Loan Fund. A participant is permitted a maximum of four
outstanding loans at any one time. Each new loan shall bear a fixed rate of
interest, as determined on a quarterly basis, using the Florida Savings
Certificate of Deposit rate as published in The Wall Street Journal. Based on
this method of determining the interest rate for the initiation of new loans
each quarter, there are outstanding loans with interest rates ranging from 5% to
9.5% as of December 31, 2002. Interest charged on employee loans is credited to
the individual participant accounts.
A participant can choose repayment terms on a new loan ranging from 6 to 60
months. Repayments are made via payroll deduction for active regular employees,
by Automated Clearing House payment for active non-regular employees and by
direct payment to the Plan for inactive participants. Additionally, participants
can elect to prepay all or a portion of their outstanding loan balance at any
time during the term of the loan. Repayments are returned to each participant
account (reducing the outstanding Participant Loan Fund balance). Excess loan
repayments of principal and interest over new loans issued during the year are
reflected as interfund transfers for reinvestment to the respective investment
funds. New loans are reflected as transfers out of the investment funds to the
Participant Loan Fund.
Payment of Benefits
Upon separation of service due to termination, death, disability or retirement
(after age 55), participants may make a written election to leave their account
balance within the Plan, for any length of time up to age 70 if their vested
balance is greater than $5,000, or elect to receive a lump-sum amount equal to
the value of their account balance, or select from a menu of installment payment
options. Although no further employee contributions or partial withdrawals are
allowed, terminated or retired employees may continue to exchange amounts among
the investment options.
5
A participant can apply for a hardship withdrawal from the before-tax savings of
their account within the limits specified by the Internal Revenue Service
("IRS"). A participant must satisfy the requirements in the plan document as to
the hardship in order to obtain the withdrawal. The amount of the withdrawal
cannot exceed the amount of employee contributions.
Forfeited Accounts
Forfeitures of non-vested employer contributions by terminated participants may
be used to reduce employer matching contributions. Forfeited non-vested accounts
totaled $475,453 and $393,678, respectively, at December 31, 2002 and 2001. In
2002 and 2001, $236 and $0, respectively, of forfeited non-vested accounts were
used to offset company contributions.
Plan Termination
It is the intention of the Plan Sponsor that the Plan continue in operation;
however, the Participating Company have the right to amend the Plan, discontinue
its contributions at any time, and /or to terminate the Plan subject to the
provisions of ERISA. In the event of Plan termination, participants will become
100% vested in their accounts.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
The following accounting policies, which conform to accounting principles
generally accepted in the United States of America, have been used consistently
in the preparation of the Plan's financial statements:
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting.
Use of Estimates
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at quoted market prices, which represent the net asset
value of shares held by the Plan at year-end. The Progress Energy Company Stock
Fund and the Contingent Value Obligation ("CVO") Fund are valued at their
year-end unit closing prices (constituting market value of shares owned or CVOs,
respectively, plus un-invested cash position). Company common stock is valued at
its closing market price as of the end of the day. CVOs are valued at their last
traded price which management believes is an estimate of their fair value at the
valuation date. CVOs do not trade frequently. Therefore, the values presented
are not necessarily indicative of what the Plan could have recognized if CVOs
were traded on the valuation date. Participant loans are valued at cost, which
approximates fair value. Purchases and sales of investments are recorded on a
trade-date basis. Interest income is accrued when earned. Dividend income is
recorded on the ex-dividend date. Capital gain distributions are included in
dividend income. When Progress Energy Company common stock is distributed from
the Progress Energy Company Stock Fund to participants in settlement of their
accounts, distributions are recorded at the value of shares distributed.
6
Payment of Benefits
Benefits are recorded when paid.
NOTE 3 - INVESTMENTS
During 2002 and 2001, 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:
Year Ended December 31,
2002 2001
----------------- ---------------
(in thousands)
Registered Investment Companies $ (16,708) $ (57,912)
Common Stock (14,482) (3,722)
----------------- ---------------
$ (31,190) $ (61,634)
================= ===============
All investments are participant-directed.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Plan invests in shares of mutual funds managed by an affiliate of Vanguard
Fiduciary Trust Company ("VFTC"). VFTC acts as trustee for certain investments
of the Plan. Transactions in such investments qualify as party-in-interest
transactions and are exempt from the prohibited transaction rules.
Pursuant to an acquisition of Florida Progress by Progress Energy during 2000,
participants with investments in the Florida Progress Stock Fund were given the
option of either cashing in their investments or exchanging their existing
Florida Progress Stock Fund shares for shares of the Progress Energy Company
Stock Fund and cash. In addition, Florida Progress Stock Fund shareholders
received shares of the Florida Progress CVO Fund. The CVO Fund invests in
contingent value obligations, each of which represents the right to receive
contingent payments based on the performance of four synthetic fuel facilities
owned by Progress Energy Company. While the Plan does not allow additional
contributions to the CVO Fund, participants are permitted to withdraw or
exchange our all or a portion of their account balance in accordance with
applicable Plan Provisions.
U.S. Trust Company, National Association ("U.S. Trust") serves as an independent
fiduciary of the CVO Fund. Among other responsibilities, U.S. Trust instructs
VFTC as to the management and disposition of the CVO Fund. Transactions in the
CVO Fund qualify as party-in-interest transactions. During 2000, the Plan was
informed by legal counsel that the establishment of the CVO Fund represented a
prohibited transaction in accordance with ERISA. The Plan was granted a
prohibited transaction exemption by the United States Department of Labor by a
letter dated October 22, 2001.
7
NOTE 5 - PLAN EXPENSES
The Company and the participants in the Plan share the expenses associated with
the Plan. The Company pays the fees for services necessary for the
administration of the Plan.
NOTE 6 - TAX STATUS
The Internal Revenue Service has determined and informed the Company by letter
dated July 23, 2002, that the Plan is qualified under Internal Revenue Code
("IRC") Section 401(a). Although the Plan has subsequently been amended since
receiving the determination letter, the Company believes that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
NOTE 7 - SUBSEQUENT EVENT
Effective February 1, 2003, eligible employees of the Participating Company
(bargaining unit employees who would be age 50 or older at year-end) were
allowed to make Catch-Up Contributions in excess of the annual limit on pre-tax
contributions. For 2003, the annual limit was the lesser of 20% of eligible
earnings, or $12,000.
NOTE 8 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The 2002 Form 5500 for the Plan was not available in connection with preparing
these financial statements. Management estimates that net assets available for
benefits per the financial statements will not equal the net assets available
for benefits per the Form 5500 due to amounts to be reported in the Form 5500 as
deemed distributions. These distributions are recorded in the Form 5500 when
taxes are paid on the loans and in the financial statements when the participant
accounts are terminated from the Plan. Such amounts are estimated to be $43,000.
8
Additional Information
Required for Form 5500
SAVINGS PLAN FOR EMPLOYEES OF FLORIDA PROGRESS CORPORATION Schedule I
Schedule of Assets (Held at End of Year)
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Savings Plan for Employees of Florida Progress Corporation, EIN 59-6769223
Attachment to Form 5500, Schedule H, Part IV, line i
Identity of Issue Investment Type Current Value
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities Class A Shares Registered Investment Company $ 26,008
* Vanguard 500 Index Fund Registered Investment Company 37,545
* Vanguard Extended Market Index Fund Registered Investment Company 2,819
* Vanguard International Growth Fund Registered Investment Company 1,767
* Vanguard LifeStrategy Conservative Growth Fund Registered Investment Company 2,913
* Vanguard LifeStrategy Growth Fund Registered Investment Company 7,872
* Vanguard LifeStrategy Moderate Growth Fund Registered Investment Company 10,951
* Vanguard Total Bond Market Index Registered Investment Company 5,430
* Vanguard Retirement Savings Trust Common/Collective Trust 113,134
* Progress Energy Company Common Stock 44,186
* Florida Progress Corporation Contingent Value Obligations 142
* Savings Plan for Employees of Florida Progress Corporation Participant Loans (5.0% - 9.5%) 8,251
-------------------
Total assets $ 261,018
===================
*Party in Interest
9
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Investment Committee of the Savings Plan for Employees of Florida Progress
Corporation has duly caused this Annual Report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAVINGS PLAN FOR EMPLOYEES OF
FLORIDA PROGRESS CORPORATION
/s/ Brenda F. Castonguay, Chairperson
---------------------------------------
Brenda F. Castonguay, Chairpersion
Savings Plan for Employees of Florida
Progress Corporation
Date: June 25, 2003
EXHIBITS INDEX
Exhibit Number
Exhibit No. 23 Consent of PRICEWATERHOUSECOOPERS LLP
Exhibit No. 99 Certification for Section 906 of the Sarbanes-Oxley Act of 2002
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of Florida Progress Corporation of our report dated June
24, 2003 relating to the financial statements of the Savings Plan for Employees
of Florida Progress Corporation, which appears in this Form 11-K.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 25, 2003
Exhibit 99
CERTIFICATION FURNISHED PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 11-K of Florida Progress
Corporation, Inc. (the "Company") for the period ending December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Brenda Castonguay, Chairperson of the Administrative Committee for
the Savings Plan for Employees of Florida Progress Corporation, certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of Savings
Plan for Employees of Florida Progress Corporation.
/s/ Brenda F. Castonguay
- ------------------------
Brenda F. Castonguay
Chairperson
Savings Plan for Employees of Florida Progress Corporation
Administrative Committee
June 25, 2003
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Progress Energy, Inc. and will be
retained by Progress Energy, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.