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
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission file number 001-07155
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
R.H. Donnelley Profit Participation Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
R.H. Donnelley Corporation, One Manhattanville Road, Purchase, NY 10577
R.H. DONNELLEY
PROFIT PARTICIPATION PLAN
INDEX TO FORM 11-K
Page
Report of Independent Auditors............................................ 3
Financial Statements:
Statements of Net Assets Available for Benefits at December 31, 2002 and
December 31, 2001...................................................... 4
Statements of Changes in Net Assets Available for Benefits for the Years
Ended December 31, 2002 and 2001....................................... 5
Notes to Financial Statements.......................................... 6
Supplemental Schedules:
Schedule of Assets Held For Investment Purposes at
December 31, 2002...................................................... 10
Signatures................................................................ 11
Exhibit 23 - Consent of Independent Accountants........................... 12
Exhibit 99.1 - Certification of Annual Report on Form 11-K for the year ended
December 31, 2002 by Steven M. Blondy, Senior Vice President and
Chief Financial Officer for R.H. Donnelley Corporation.....
13
Exhibit 99.2 - Certification of Annual Report on Form 11-K for the year ended
December 31, 2002 by Karen A. Manning, Vice President
Compensation and Benefits for R.H. Donnelley Corporation... 14
2
REPORT OF INDEPENDENT AUDITORS
To the Participants and Administrator of the R.H. Donnelley Profit Participation
Plan:
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 the R.H. DONNELLEY PROFIT PARTICIPATION PLAN (the "Plan") at December 31,
2002 and 2001 and the changes in net assets available for benefits for the years
then ended December 31, 2002 and 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 schedules of assets held
for investment purposes at December 31, 2002 and reportable transactions for the
year ended December 31, 2002 are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but are
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. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
June 27, 2003
3
R.H. DONNELLEY PROFIT PARTICIPATION PLAN
Statements of Net Assets Available for Benefits
December 31,
-----------------------------------
(amounts in thousands) 2002 2001
- ---------------------------------------------------------------------------------- ---------------- ------------------
ASSETS
Investments, at fair value
Mutual funds........................................................... $ 19,617 $ 26,997
Debt securities........................................................ 16,063 15,312
R.H. Donnelley Common Stock Fund....................................... 5,152 5,112
Loans to participants.................................................. 931 1,078
---------------- ------------------
NET ASSETS AVAILABLE FOR BENEFITS................................ $ 41,763 $ 48,499
---------------- ------------------
The accompanying notes are an integral part of these financial statements.
4
R.H. DONNELLEY PROFIT PARTICIPATION PLAN
Statements of Changes in Net Assets Available for Benefits
Year Ended Year Ended
December 31, 2002 December 31, 2001
(amounts in thousands)
- ---------------------------------------------------------------------------------- ----------------------- ----------------------
Additions:
Interest and dividends.................................................. $ 1,174 $ 1,443
Employer contributions.................................................. 654 664
Participant contributions............................................... 1,778 1,840
Rollovers............................................................... 10 35
----------------------- ----------------------
Total additions.................................................. 3,616 3,982
Deductions:
Net realized and unrealized depreciation in fair value of investments..... 5,431 3,516
Distributions to participants............................................. 4,911 8,561
Plan expenses............................................................. 10 13
----------------------- ----------------------
Total deductions................................................. 10,352 12,090
----------------------- ----------------------
Net decrease in net assets....................................... (6,736) (8,108)
Net assets available for benefits at beginning of period..................... 48,499 56,607
----------------------- ----------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF PERIOD........................... $ 41,763 $ 48,499
----------------------- ----------------------
The accompanying notes are an integral part of these financial statements.
5
R.H. DONNELLEY PROFIT PARTICIPATION PLAN
Notes to the Financial Statements
December 31, 2002
Note 1. Plan Description
Overview
The R.H. Donnelley Profit Participation Plan (the "Plan") is a defined
contribution plan established to provide eligible employees of R.H. Donnelley
Corporation and its subsidiaries (the "Company") a way to save on a regular and
long-term basis. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The following summary provides an overview of major Plan provisions in effect
for the years ended December 31, 2002 and 2001 and is provided for general
information purposes. Employees that contribute to the Plan 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 and Contributions
Full-time employees 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 their date of hire or in any
calendar year thereafter are eligible to participate on the first day of the
following January.
Participants may contribute up to a maximum of 16% (in whole percent increments)
of their included compensation or the maximum before-tax contributions allowed
by the Internal Revenue Code ("IRC"), whichever is less, during the Plan year.
Participant contributions may be made from before-tax and/or after-tax earnings.
The company makes a matching contribution of 50 cents for each dollar
contributed by an employee up to a maximum of 6% of the employee's compensation.
The IRC limit on before-tax contributions for 2002 and 2001 was $11,000 and
$10,500, respectively. To comply with certain provisions of the Tax Reform Act
of 1986, as amended (the "Act"), covered compensation for purposes of
determining participant contributions was limited to $200,000 and $170,000 for
2002 and 2001, respectively.
Vesting and Investment Options
Participant contributions are fully vested when made. A participant is fully
vested in the company contribution portion of their account after three years of
service with the company, upon attaining age 65 or in the event of death or
disability.
Participants are allowed to allocate their contributions and company
contributions to various investment options available under the Plan and may
change their allocations at any time. Participants are not permitted to invest
more than 50% of their account balance or contributions in the R.H. Donnelley
Common Stock Fund.
Distributions and Forfeitures
Participants who leave the company and have an account balance greater than
$5,000 may take an immediate lump sum distribution or defer the lump sum
distribution to a later date. Participants who leave the company and have an
account balance less than $5,000 must take an immediate lump sum distribution.
Those participants who retire or become permanently disabled, and have an
account balance in excess of $5,000, also have the option to elect various forms
of deferred distribution.
Participants who leave the company before completing three years of service
forfeit the company contribution portion of their account. Forfeited amounts
reduce future company contributions. Amounts forfeited for the years ended
December 31, 2002 and 2001 totaled $26,000 and $41,000, respectively.
6
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 for the purchase of a
primary residence and are collateralized by the balance in the participant's
account. At December 31, 2002, interest rates for outstanding loans ranged from
9.75% to 10.50%. Principal and interest payments are payable ratably through
payroll deductions.
Note 2. Summary of Significant Accounting Policies
Investment Valuation and Income Recognition
Investments in mutual funds and the R.H. Donnelley Common Stock Fund are valued
at quoted market prices. Investments in debt securities are valued at redemption
prices reported by the fund manager. Participant loans are valued at cost, which
approximates fair value.
Purchases and sales of investments are recorded on the trade-date. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. The net appreciation or depreciation in the fair value of
Plan investments consists of realized and unrealized gains and losses.
Contributions and Distributions
Participant and company contributions are recorded in the period payroll
deductions are made. Distributions to participants are recorded when paid.
Expenses and Adminstrative Costs
Transaction and investment manager fees related to the Plan are charged against
Plan assets. Trustee fees and other miscellaneous expenses of
administering the Plan, are borne by the Company.
Use of Estimates
The accompanying financial statements are prepared on the accrual basis of
accounting in conformity with generally accepted accounting principles, which
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses and disclosures of
contingent assets and liabilities. Actual results could differ from those
estimates.
Risks and Uncertainties
The Plan provides for various investment options in a number of funds that
invest in stocks, bonds, fixed income securities 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 the value of these securities could materially affect participant
account balances and amounts reported in the financial statements and
accompanying notes.
Plan Termination
While we have not expressed any intent to do so, we may discontinue our
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.
7
Note 3. Investment Funds
During 2002 and 2001, participants of the Plan could elect to have their
contributions and the company contributions invested in one or more of the
following investment funds.
Fidelity Puritan Fund A balanced fund that invests in both stocks and bonds with
the potential of income and long-term growth. Provides
income and capital growth consistent with reasonable risk.
Fidelity Equity Income Fund Invests primarily in income-producing common and preferred
stocks and bonds. Provides reasonable income while
considering the potential for capital appreciation.
Fidelity Spartan U.S. Equity Index Fund Invests in companies that are included in the
Standard & Poor's 500 Index ("S&P 500"). The fund
strategy is to match the performance of the S&P 500.
Fidelity Spartan Extended Market Index Fund Invests in companies that are included in the Wilshire
4500 Index. The fund strategy is to provide investment
results that correspond to the total returns of stocks
of small and mid-cap U.S. companies.
Fidelity Blue Chip Growth Fund Seeks growth through capital appreciation by investing
primarily in equity securities of well-known, established blue
chip companies.
Fidelity Diversified International Fund Seeks growth through capital appreciation by investing
in the securities, primarily common stock, of non-U.S.
companies.
Franklin Small Cap Growth Fund I Invests primarily in equity securities of U.S. small
capitalization companies (capitalization of less than
$1.5 billion) and mid capitalization companies
(capitalization of less than $8.5 billion).
R.H. Donnelley Common Stock Fund Invests in the common stock of R.H. Donnelley
Corporation.
Managed Income Fund Invests in investment contracts offered by major
insurance companies and other approved financial
institutions and in certain types of fixed-income
securities. The average interest rate for the years
ended December 31, 2002 and 2001 were 5.2% and 5.9%,
respectively.
8
The fair value of Plan investments was as follows:
December 31,
============================================================ -------------------------------
(amounts in thousands) 2002 2001
- ------------------------------------------------------------ -------------- ----------------
Fidelity Puritan Fund.................................. $ 1,957 $ 2,282
Fidelity Equity Income Fund............................ 822 908
Fidelity Spartan U.S. Equity Index Fund................ 10,934 * 15,639 *
Fidelity Spartan Extended Market Index Fund............ 1,546 2,480
Fidelity Blue Chip Growth Fund......................... 1,463 2,155
Fidelity Diversified International Fund................ 1,893 2,125
Franklin Small Cap Growth Fund I....................... 1,002 1,408
R.H. Donnelley Common Stock Fund....................... 5,152 * 5,112 *
Managed Income Fund.................................... 16,063 * 15,312 *
Participant loans...................................... 931 1,078
-------------- ----------------
Total investments, at fair value.................... $41,763 $48,499
-------------- ----------------
* Investments represent more than 5% of total Plan assets as of the beginning of
the year.
Net realized and unrealized gains (losses) for Plan investments were as follows:
Year ended December 31,
============================================================ -------------------------------
(amounts in thousands) 2002 2001
- ------------------------------------------------------------ -------------- ----------------
Fidelity Puritan Fund.................................. $ (234) $ (160)
Fidelity Equity Income Fund............................ (195) (80)
Fidelity Spartan U.S. Equity Index Fund................ (3,497) (2,623)
Fidelity Spartan Extended Market Index Fund............ (389) (352)
Fidelity Blue Chip Growth Fund......................... (558) (452)
Fidelity Diversified International Fund................ (210) (383)
Franklin Small Cap Growth Fund I....................... (413) (421)
R.H. Donnelley Common Stock Fund....................... 65 955
Managed Income Fund.................................... -- --
-------------- ----------------
Net realized and unrealized loss.................... $ (5,431) $ (3,516)
-------------- ----------------
Note 4. Tax Status
The Internal Revenue Service ("IRS") informed the Company in a letter dated
July 19, 2000, that the Plan was designed in accordance with applicable
requirements of the IRC. The Plan has been amended since receiving the
determination letter. However, the Plan administrator and the Plan's tax counsel
believe that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC.
Note 5. Reportable Transactions
There were no reportable transactions for the year ended December 31, 2002.
Note 6. Subsequent Event
On January 3, 2003, the Company acquired Sprint Corporation's directory
publishing business, Sprint Publishing & Advertising ("SPA"). The employees of
SPA were allowed to rollover assets they had in the Sprint defined contribution
plan into the Plan. As a result of the acquisition, approximately 1,000 new
participants have joined the Plan and approximately $1.5 million of assets have
been rolled over into the Plan.
9
Supplemental Schedules
R.H. DONNELLEY PROFIT PARTICIPATION PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2002
Identity of Issue Shares/Units Cost Fair Value
- ------------------------------------------------------- ------------------- -------------------- ---------------------
Mutual funds:
* Fidelity Puritan.............................. 123,936 $ 2,359,057 $ 1,956,945
* Fidelity Equity Income........................ 20,725 1,053,090 822,163
* Fidelity Blue Chip............................ 45,799 2,281,507 1,462,827
* Fidelity Diversified International............ 110,309 2,244,326 1,892,908
* Fidelity Spartan Extended Market Index........ 80,410 2,188,344 1,546,288
* Fidelity Spartan U.S. Equity Index............ 351,016 15,428,672 10,934,149
* Franklin Small Cap Growth Fund I.............. 45,627 1,840,553 1,001,511
-------------------- ---------------------
Subtotal ................................. 27,395,549 19,616,791
Debt securities:
* Managed Income Fund........................... 16,063,365 16,063,365 16,063,365
R.H. Donnelley Common Stock Fund................... 260,208 3,118,571 5,152,111
Participant loans.................................. 931,010
---------------------
Total Assets Held for Investment Purposes.......... $41,763,277
---------------------
* represents a party-in-interest
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Benefits Committee of R.H. Donnelley Corporation has duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
R.H. DONNELLEY PROFIT PARTICIPATION PLAN
(Name of Plan)
By: /s/ Steven M. Blondy
Steven M. Blondy
Senior Vice President and Chief Financial Officer
Date: June 30, 2003
11
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 33-27144) of R.H. Donnelley Corporation of our
report dated June 27, 2003 relating to the financial statements of the R.H.
Donnelley Profit Participation Plan, which appears in this Form 11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
June 30, 2003
12
Exhibit 99.1
CERTIFICATION 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 the R.H. DONNELLEY
PROFIT PARTICIPATION PLAN (the "Plan") for the year ended December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
such officer's knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Plan.
/s/ Steven M. Blondy
Steven M. Blondy
Senior Vice President and Chief Financial Officer
June 30, 2003
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document. A signed original of this written statement required by
Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon
request.
13
Exhibit 99.2
CERTIFICATION 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 the R.H. DONNELLEY
PROFIT PARTICIPATION PLAN (the "Plan") for the year ended December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
such officer's knowledge:
(3) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(4) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Plan.
/s/ Karen A. Manning
Karen A. Manning
Vice President Compensation and Benefits
June 30, 2003
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
Section 1350 and is not being filed as part of the Report or as a separate
disclosure document. A signed original of this written statement required by
Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon
request.
14