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, 2003
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, 2003 and 2002
Savings Plan for Employees of Florida Progress Corporation
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 3-4
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002:
Statements of Net Assets Available for Benefits 5
Statements of Changes in Net Assets Available for Benefits 6
Notes to Financial Statements 7-11
ADDITIONAL INFORMATION FOR THE YEAR ENDED
DECEMBER 31, 2003:
Form 5500, Schedule H, Part IV, Line 4i -
Schedule of Assets (Held at End of Year) 12
2
INDEPENDENT AUDITORS' REPORT
Participants and Administrator of
Savings Plan for Employees of Florida Progress Corporation
We have audited the accompanying statement of net assets available for benefits
of the Savings Plan for the Employees of Florida Progress Corporation ("the
Plan") as of December 31, 2003 and the related statement of changes in net
assets available for benefits for the year then ended. 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. The
financial statements of the Plan for the year ended December 31, 2002 were
audited by other auditors whose report, dated June 24, 2003, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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 management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2003, and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
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 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 schedule is the responsibility of
the Plan's management. This schedule has been subjected to the auditing
procedures applied in our audit of the basic 2003 financial statements and, in
our opinion, is fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.
June 8, 2004
3
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Savings Plan for Employees of Florida Progress Corporation
In our opinion, the accompanying statement 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 Savings Plan for Employees of Florida Progress Corporation (the "Plan") at
December 31, 2002, and the changes in net assets available for benefits for the
year 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 audit. We conducted our audit of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and auditing standards generally accepted in the
United States of America. 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 24, 2003
4
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
(In thousands)
- ------------------------------------------------------------------------------------------------
2003 2002
INVESTMENTS--At fair value
Registered investment companies:
Putnam New Opportunities Class A Shares $ - $ 26,008
American Funds Growth Fund 292 -
Dodge & Cox Stock Fund 1,125 -
Fidelity Devonshire Trust: Fidelity Mid-Cap Stock Fund 33,016 -
Vanguard 500 Index Fund 46,950 37,545
Vanguard Extended Market Index Fund 6,602 2,819
Vanguard International Growth Fund 2,463 1,767
Vanguard LifeStrategy Conservative Growth Fund 4,573 2,913
Vanguard LifeStrategy Growth Fund 10,437 7,872
Vanguard LifeStrategy Moderate Growth Fund 12,852 10,951
Vanguard Total Bond Market Index Fund 5,248 5,430
--------- ---------
123,558 95,305
Vanguard Retirement Savings Trust 113,108 113,134
Progress Energy Company Stock Fund 44,735 44,186
Florida Progress Contingent Value Obligation Fund 207 142
Participant Loans 7,991 8,251
--------- ---------
Total investments 289,599 261,018
--------- ---------
RECEIVABLES:
Employer's contributions 151 135
Employees' contributions 378 309
--------- ---------
Total receivables 529 444
--------- ---------
NET ASSETS AVAILABLE FOR BENEFITS $ 290,128 $ 261,462
========= =========
See notes to financial statements.
5
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2003 AND 2002
(In thousands)
- ----------------------------------------------------------------------------------------
2003 2002
ADDITIONS:
Investment income:
Interest and dividend income--investments $ 8,614 $ 9,449
Interest income, participant loans 496 597
Net appreciation in fair value of investments 27,727 -
--------- ---------
36,837 10,046
--------- ---------
Contributions:
Employer 3,675 3,596
Employee 9,358 8,399
--------- ---------
13,033 11,995
--------- ---------
Total additions 49,870 22,041
--------- ---------
DEDUCTIONS:
Net depreciation in fair value of investments - 31,190
Payment of benefits 21,189 31,521
Administrative expenses 15 15
--------- ---------
Total deductions 21,204 62,726
--------- ---------
NET INCREASE (DECREASE) 28,666 (40,685)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of period 261,462 302,147
--------- ---------
End of period $ 290,128 $ 261,462
========= =========
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
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 bargaining unit employees of Florida Power
Corporation ("the Company"), a wholly-owned subsidary of Florida Progress
Corporation, 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.
As of January 1, 2003, Florida Power Corporation began doing business under
the assumed name Progress Energy Florida, Inc.
Contributions--Eligible employees may elect to contribute up to 20% of
their annual base pay and may designate these contributions as either
regular savings after-tax and/or 401(k) pretax dollars. The Company
contributes each pay period an amount equal to 75% of the employees'
contributions, up to 6% of base pay.
Participants Accounts--A separate account is maintained for each investment
option of a participant type of contribution. Each participant's account is
credited with the participant's contribution and allocations of (a) the
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.
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:
Vested
Years of Continuous Service Percentage
Less than two 0 %
Two but less than three 25
Three but less than four 50
Four but less than five 75
Five or more 100
7
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.
Effective January 1, 2002, a participant shall be 100% vested in all
dividends earned on amounts invested in the Company Stock Fund. Dividends
not distributed in cash to the participant shall be invested in Progress
Energy Company Stock in the Company Stock Fund.
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 Saving 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 4.25% to 9.5% as of
December 31, 2003. 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, 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 contribution or partial withdrawals are allowed, terminated or
retired employees may continue to exchange amounts among the investment
options.
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 $432,229 and $475,453,
respectively, at December 31, 2003 and 2002. In 2003 and 2002, $100,000 and
$236 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 Company has the right to amend the
Plan, discontinue its contributions at any time, and/or to terminate the
Plan subject to the provisions of ERISA and the Bargaining Unit's
Memorandum of Agreement. In the event of Plan termination, participants
will become 100% vested in their accounts.
8
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 uninvested cash position). Progress Energy 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.
3. INVESTMENTS
The following represents investments that represent 5 percent or more of
the plan's net assets (in thousands):
2003 2002
Putnam New Opportunities Class A Shares $ - $ 26,008
Fidelity Devonshire Trust: Fidelity Mid-Cap Stock Fund 33,016 -
Vanguard 500 Index Fund 46,950 37,545
Vanguard Retirement Savings Trust 113,108 113,134
Progress Energy Company Stock Fund 44,735 44,186
During 2003 and 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 (in thousands):
2003 2002
Registered investment companies $ 25,424 $ (16,708)
Common stock 2,303 (14,482)
--------- -----------
$ 27,727 $ (31,190)
========= ===========
9
All investments are participant-directed.
During 2003, the Investment Committee replaced the Putnam New Opportunities
Fund with the Fidelity Mid-Cap Stock Fund as a result of a performance
review, and added the American Funds Growth Fund and Dodge & Cox Stock Fund
to provide for additional diversification.
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, Inc
("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. While the Plan does not allow additional contributions
to the CVO Fund, participants are permitted to withdraw or exchange out 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 dispositions 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.
5. PLAN EXPENSES
Plan Expenses include trustee, audit, and investment management fees as
well as any other reasonable fees or expenses incurred for the
administration of the Plan and Trust. Plan Expenses are paid by the Plan to
the extent not paid by the Company.
6. TAX STATUS
The IRS 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. Therefore, it is believed that the Plan was
qualified and the related trust was tax-exempt as of the financial
statement date. As such, no provision for income taxes has been included in
the Plan's financial statements.
10
7. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities
are exposed to various risks such as interest rate, market, and credit
risks. Due to the level of risk associated with certain investment
securities, it is at least reasonably possible that changes in the values
of investment securities will occur in the near term and that such changes
could materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits.
******
11
EMPLOYER IDENTIFICATION NUMBER: 59-2147112
PLAN NUMBER: 002
FORM 5500, SCHEDULE H, PART IV, LINE 4I - SCHEDULE OF ASSETS
(HELD AT END OF YEAR)
YEAR ENDED DECEMBER 31, 2003
- -----------------------------------------------------------------------------------------------------
IDENTITY OF ISSUE INVESTMENT TYPE VALUE **
* American Funds Growth Fund (R5) Registered Investment Company $ 292
* Dodge & Cox Stock Fund Registered Investment Company 1,125
* Fidelity MidCap Stock Fund Registered Investment Company 33,016
* Vanguard 500 Index Fund Registered Investment Company 46,950
* Vanguard Extended Market Index Fund Registered Investment Company 6,602
* Vanguard International Growth Fund Registered Investment Company 2,463
* Vanguard LifeStrategy Conservative Growth Fund Registered Investment Company 4,573
* Vanguard LifeStrategy Growth Fund Registered Investment Company 10,437
* Vanguard LifeStrategy Moderate Growth Fund Registered Investment Company 12,852
* Vanguard Total Bond Market Index Fund Registered Investment Company 5,248
* Vanguard Retirement Savings Trust Fund Common/Collective Trust 113,108
* Progress Energy Company Stock Fund Company Stock Fund 44,735
* Florida Progress Contingent Value
Obligation Fund Company Stock Fund 207
* Various participants Participant loans (maturing 2004
to 2008 at interest rates
of 4.25% to 9.5%) 7,991
----------
Total Assets Held for Investment Purposes $ 289,599
==========
* Party in Interest as defined by ERISA
** Cost data omitted with respect to participant or beneficiary directed
transactions under an individual account plan.
12
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 15, 2004
13
EXHIBITS INDEX
Exhibit Number
Exhibit No. 23 Consent of Independent Registered Public Accounting Firm
Exhibit No. 24 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 Registration Statement
No.333-52328 of Florida Progress Corporation on Form S-8 of our report dated
June 8, 2004 appearing in this Annual Report on Form 11-K of the Savings Plan
for Employees of Florida Progress Corporation for the year ended December 31,
2003.
/s/ DELOITTE & TOUCHE LLP
Raleigh, North Carolina
June 15, 2004
15
Exhibit 24
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 as of and for the year ended December 31, 2002,
which appears in this Form 11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
June 18, 2004
16