10-K/A 1 essop5.txt ESSOP FORM 11K 2001 ANNUAL FILING As in effect 3/1/61 FORM 10K/A ------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ AMENDMENT TO APPLICATION OR REPORT Filed Pursuant to Section 12, 13, or 15 (d) of THE SECURITIES EXCHANGE ACT OF 1934 OLD REPUBLIC INTERNATIONAL CORPORATION -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) AMENDMENT NO. 2 --- The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its ANNUAL REPORT FOR 2001 on Form ----------------------- 10-K as set forth in the pages attached hereto: (List all such items, financial ---- statements, exhibits or other portions amended). FORM 11-K Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. OLD REPUBLIC INTERNATIONAL CORPORATION -------------------------------------- (Registrant) Date: May 17, 2002 By: /s/ John S. Adams ----------------------------------- (Signature) John Stuart Adams Senior Vice President, Chief Financial Officer Total Pages: 16 --------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------ FORM 11-K ------------ ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For The Fiscal Year Ended December 31, 2001 ------------ OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN OLD REPUBLIC INTERNATIONAL CORPORATION 307 NORTH MICHIGAN AVENUE CHICAGO, ILLINOIS 60601 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Administration Committee has duly caused this Annual Report to be signed on behalf of the undersigned, thereunto duly authorized. THE OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN (Registrant) By: /s/ A.C. Zucaro -------------------------------- A. C. Zucaro, Member of the Administration Committee Date: May 17, 2002 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN REPORT ON AUDITS OF FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES ---------------------- Pages ----- Report of Independent Accountants 1 Financial Statements: Statements of Net Assets Available for Plan Benefits as of December 31, 2001 and 2000 2 Statements of Changes in Net Assets Available for Plan Benefits for the years ended December 31, 2001 and 2000 3 Notes to Financial Statements 4-8 Supplemental Schedules: Schedule of Assets Held for Investment Purposes at End of Year 9 Schedule of Reportable Transactions for the year ended December 31, 2001 10 Note ---- Supplemental schedules required by the Employee Retirement Income Security Act of 1974 that have not been included herein are not applicable. REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Participants and the Administration Committee of the Old Republic International Corporation Employees Savings and Stock Ownership Plan In our opinion, the accompanying statements of net assets available for plan benefits and the related statements of changes in net assets available for plan benefits present fairly, in all material respects, the net assets available for plan benefits of the Old Republic International Corporation Employees Savings and Stock Ownership Plan (the "Plan") at December 31, 2001 and 2000, and the changes in net assets available for plan 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 upon 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 listed in the accompanying index 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 May 17, 2002 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS December 31, 2001 and 2000 -------------------------- 2001 2000 ------------------------------------------ ------------------------------------------ Participant Non-Participant Participant Non-Participant Directed Directed Combined Directed Directed Combined Account Account Account Account Account Account ------------ ------------ ------------ ------------ ------------ ------------ ASSETS Investments, at fair value: Collective Trusts: Short-term Investment Fund $ 0 $ 54,056 $ 54,056 $ 0 $ 488,296 $ 488,296 Old Republic International Corporation: Common shares 370 191,245,614 191,245,984 416 231,056,025 231,056,441 Mutual funds 86,901,285 0 86,901,285 86,597,272 0 86,597,272 ------------ ------------ ------------ ------------ ------------- ------------ 86,901,655 191,299,670 278,201,325 86,597,688 231,544,321 318,142,009 Contributions receivable: Companies 0 4,843,982 4,843,982 0 0 0 Employees 451,820 0 451,820 431,628 0 431,628 Accrued interest and dividends receivable 0 0 0 0 2,602 2,602 ------------ ------------ ------------ ------------ ------------ ------------ $ 87,353,475 $196,143,652 $283,497,127 $ 87,029,316 $231,546,923 $318,576,239 ============ ============ ============ ============ ============ ============ LIABILITIES AND NET ASSETS AVAILABLE FOR PLAN BENEFITS Unpaid withdrawal and termination benefits $ 719,416 $ 0 $ 719,416 $ 215,000 $ 0 $ 215,000 Other payables 0 0 0 0 238,500 238,500 Unpaid administrative expenses 0 10,958 10,958 0 25,491 25,491 ------------ ------------ ------------ ------------ ------------ ------------ Total liabilities 719,416 10,958 730,374 215,000 263,991 478,991 Net assets available for plan benefits 86,634,059 196,132,694 282,766,753 86,814,316 231,282,932 318,097,248 ------------ ------------ ------------ ------------ ------------ ------------ Total liabilities and net assets available for plan benefits $ 87,353,475 $196,143,652 $283,497,127 $ 87,029,316 $231,546,923 $318,576,239 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 2 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR PLAN BENEFITS for the years ended December 31, 2001 and 2000 ---------------------------------------------- 2001 2000 ------------------------------------------ ------------------------------------------ Participant Non-Participant Participant Non-Participant Directed Directed Combined Directed Directed Combined Account Account Account Account Account Account ------------ ------------ ------------ ------------ ------------ ------------ Additions: Employer contributions $ 0 $ 4,861,709 $ 4,861,709 $ 0 $ 2,552,836 $ 2,552,836 Employee contributions 11,768,777 0 11,768,777 11,595,678 0 11,595,678 Interfund transfers 1,404,773 (1,404,773) 0 1,396,972 (1,396,972) 0 Interest income 588 22,938 23,526 0 56,508 56,508 Dividend income 2,226,372 4,104,055 6,330,427 6,496,451 4,057,873 10,554,324 Net appreciation (depreciation) in fair value of investments (6,356,070) (28,871,979) (35,228,049) (5,003,072) 134,797,551 129,794,479 ------------ ------------ ------------ ------------ ------------- ------------ 9,044,440 (21,288,050) (12,243,610) 14,486,029 140,067,796 154,553,825 ------------ ------------ ------------ ------------ ------------- ------------ Deductions: Termination and withdrawal benefits 9,157,619 13,734,133 22,891,752 12,019,289 11,768,350 23,787,639 Interest expense 0 0 0 0 58,685 58,685 Administrative expenses 67,078 128,055 195,133 88,211 116,067 204,278 ------------ ------------ ------------ ------------ ------------- ------------ 9,224,697 13,862,188 23,086,885 12,107,500 11,943,102 24,050,602 ------------ ------------ ------------ ------------ ------------- ------------ NET ADDITIONS (DEDUCTIONS) (180,257) (35,150,238) (35,330,495) 2,378,529 128,124,694 130,503,223 Net assets available for plan benefits, beginning of year 86,814,316 231,282,932 318,097,248 84,435,787 103,158,238 187,594,025 ------------ ------------ ------------ ------------ ------------- ------------ NET ASSETS AVAILABLE FOR PLAN BENEFITS, END OF YEAR $ 86,634,059 $196,132,694 $282,766,753 $ 86,814,316 $231,282,932 $318,097,248 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. 3 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS ------------------- 1. Description of Plan ------------------- A. Basis of Presentation --------------------- The accompanying financial statements of the Old Republic International Corporation Employees Savings and Stock Ownership Plan (the Plan) include plan assets for employees of Old Republic International Corporation and participating subsidiaries (the Corporation, the Plan Sponsor, the Company(ies) or the Employers). These financial statements and accompanying notes together provide only general information about the Plan. The Plan Agreement must be referred to for a complete description of the Plan's provisions. B. General ------- The Plan is a defined contribution plan covering a majority of employees of the Corporation and its Subsidiaries and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended from time-to-time. Employees become participants in the Plan on the first January 1, they are employees and they elect to make contributions to the Plan. C. Contributions ------------- Contributions from employees (savings) are made on a post-tax basis and are recorded in the period in which the Companies make payroll deductions from Plan participants. Participants elect the amount of contribution which ranges from a minimum of 1% to a maximum of 15% of recognized compensation as defined in the Plan. Any employee who does not contribute to the Plan does not receive a Company matching contribution. Only employee contributions up to 6% are matched. However, the maximum amount of contribution which can be matched per employee cannot exceed $9,000 (6% of $150,000) per Plan year. The maximum amount which can be withheld is 15%, but is limited to $22,500 (15% of $150,000). Contributions are also subject to other Internal Revenue Code limitations (including the limits imposed by Internal Revenue Code Section 415). Participants direct the investment of their contributions into various mutual funds offered by the Plan, of which there are currently thirteen. The company matching contribution is based on the following formula: Percentage of If the percentage increase in the Corporation's Recognized Compen- average operating earnings per share for the sation Contributed most recent five year period is: ------------------ ----------------------------------------------- Less Than 6.01% 9.01% 15.01% Over 6% to 9% to 15% to 20% 20% --------- ----- ------ ------ ---- The Resulting Employer Matching Contribution on the First 6% of Employee Savings Will Be: ----------------------------------------------- 1.00% 30% 40% 65% 100% 140% 1.01 to 2.00% 28% 38% 63% 98% 138% 2.01 to 3.00% 26% 36% 61% 96% 136% 3.01 to 4.00% 24% 34% 59% 94% 134% 4.01 to 5.00% 22% 32% 57% 92% 132% 5.01 to 6.00% 20% 30% 55% 90% 130% 6.01 to 15.00% None None None None None ----------------------------------------------- 4 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED ------------------- 1. Description of Plan, Continued ------------------------------ * The percentage increase in the Corporation's average operating earnings per share is obtained by comparing the average diluted operating earnings per share for the Corporation for the five years ending with the calculation year, with the same average for the five years ending the year prior to the calculation year. Operating earnings per share are determined pursuant to generally accepted accounting principles and are equal to net income per share exclusive of realized capital gains or losses and extraordinary items and income taxes applicable thereto. Company matching contributions are allocated on December 31, and a Plan participant receives a matching contribution only if: * the Companies meet certain minimum profit objectives; * the participant completes 1,000 or more hours of service during the year; and * the participant is employed by one of the Companies on December 31 of that year, died or became fully disabled during the year, or retired during the year after attaining age 65. Additional amounts from consolidated annual net profits after taxes or accumulated earnings as the Board of Directors of the Companies may determine from time to time may be added to the contributions resulting from the above formula. The amount of the Companies' contributions are subject to the following limitations: * No contribution shall be made if the Companies' consolidated annual net profit before extraordinary items and taxes is less than $2,500,000. * No contribution shall be made by any Employer for any fiscal year which exceeds the maximum amount currently deductible by that Employer under section 404 of the Internal Revenue Code. * No contribution shall be made by any Employer for any fiscal year which would cause its total contribution to exceed the amount of its annual net profit before taxes and its accumulated earnings. D. Employee Account ---------------- When a plan participant makes employee contributions, the contributions are allocated to the mutual fund(s) designated by the participant. These funds constitute the participants Employee Account (Participant Directed Account). Earnings are allocated to each plan participant's Employee Account on a daily basis, based upon the performance of the mutual fund(s) that the plan participant selected. Following termination of service for any reason, a plan participant receives all amounts in his/her Employee Account. E. Company Account --------------- Each year, the matching contributions and any discretionary contributions are allocated to the Company Account (Non-participant Directed Account) of plan participants. If a plan participant terminates service with the Companies, the amount that he/she receives from his/her Company Account depends upon his/her vested interest in such account. A plan participant vests in his/her Company Account based on his/her "Years of Service," over a seven year period. 5 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED ------------------- 1. Description of Plan, Continued ------------------------------ A plan participant earns a Year of Service for each calendar year during which he/she completes 1,000 or more hours of service for the Companies. However, a plan participant will become 100% vested in his Company Account prior to seven years of service if: * the plan participant has reached age 65, or * termination is caused by death, or * termination is caused by total and permanent disability which renders the employee incapable of performing satisfactory service for the Companies. The amount a plan participant receives from his\her Company Account is also affected by forfeitures and earnings. If a plan participant terminates service prior to full vesting, the non-vested portion of his Company Account is forfeited. Forfeited amounts are re-allocated to remaining participants who made employee contributions, completed 1,000 or more hours of service for the Companies during the year, and are employed by the Companies on December 31 or terminated service due to retirement on or after age 65, death, or total and permanent disability. Forfeitures are allocated based upon the ratio of the plan participant's recognized compensation to the recognized compensation of all plan participants. Effective January 1, 1989, the Tax Reform Act provided that plan participants who reach age 55 and have 10 years of service in the Plan are provided with the option of diversifying a portion of their Company Account balance out of company stock and into alternative investment funds. The diversification is limited to 25% of all company stock acquired after December 31, 1986. After age 60 (and with 10 years of service in the Plan), such participants have the right to diversify up to 50% of all company stock acquired after December 31, 1986. The period to make the election to diversify is during the first 90 days of the calendar year in which a participant attains age 55 and has completed 10 years of service in the plan. The investment options available for diversification at December 31, 2001, are the same Mutual Funds available for investment of Employee contributions. Diversified funds are included in the Participant Directed Account in the financial statements. 2. Summary of Accounting Policies ------------------------------ A. Use of Estimates ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan's administrator 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 additions and deductions during the reporting period. Actual results can differ from those estimates. 6 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED ------------------- B. Investment Valuation and Income Recognition ------------------------------------------- The Plan's investments are stated at fair value. Investments in the Collective Trust-Short-term Investment Fund of the Northern Trust Company (Northern), are valued by the Northern at cost which approximates fair value, and consist of short-term obligations. Shares of mutual funds are valued at the net asset value of shares held by the Plan at the valuation date. Old Republic International Corporation common shares (Company Stock) are stated at closing market value on the last business day of the year. The statements of changes in net assets available for plan benefits reflect the net appreciation (depreciation) in fair value of the Plan's investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. For purposes of accounting principles generally accepted in the United States of America, the Plan uses the historical cost method for determining the basis of its investments, whereas, for ERISA reporting purposes, the Plan uses the current value method for determining the basis of its investments. Purchases and sales of securities are reflected on a trade-date basis. Gains or losses on sales of securities are based on the average cost method. Interest income is recorded as earned and dividend income is recorded as earned on the ex-dividend date. 3. Investments ----------- The following presents investments, the fair value of which, are 5 percent or more of Plan assets at December 31: 2001 2000 ---------------- ---------------- Mutual Funds: Fidelity Dividend Growth Fund $15,360,742 $15,905,891 Fidelity Short-term Bond Fund 20,016,358 19,494,338 Old Republic International Corporation Common Stock (6,827,775 and 7,220,514 shares, respectively) 191,245,984* 231,056,441* * Non-participant directed. Net appreciation (depreciation) in fair value of investments is broken down as follows for the years ended December 31: 2001 2000 ---------------- ---------------- Old Republic International Corporation: Common Stock $ (28,872,030) $ 134,797,742 Mutual funds (6,356,019) (5,003,263) ---------------- ---------------- $ (35,228,049) $ 129,794,479 ================ ================ 4. Administrative and Operating Expenses ------------------------------------- Office personnel, space and equipment are furnished by the Companies at no charge to the Plan. All other administrative expenses of the Plan are paid by and reflected as expenses of the Plan. 7 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN NOTES TO FINANCIAL STATEMENTS, CONTINUED ------------------- 5. Termination Priorities ---------------------- The Corporation reserves the right, either with or without formal action, to terminate the Plan. Each Employer reserves the right to permanently discontinue its contributions to the Plan. In the event that an Employer permanently discontinues its contributions to the Plan, or the Corporation terminates the Plan, or the Plan is partially terminated under operation of law, the accounts of the affected participants shall be fully vested and non-forfeitable. In addition, because the Plan is a defined contribution plan and not a defined benefit plan, no termination priorities apply to the Plan under ERISA. 6. Tax Status ---------- The Internal Revenue Service on April 25, 1995, issued a determination letter stating that the Plan, as amended through December 1, 1994, was qualified under Section 401 of the Internal Revenue Code and the Plan was exempt under the provisions of Section 501(a). Amendments have been made to the Plan in order to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001 and other federal tax law changes. These changes will be effective January 1, 2002. The Plan's Sponsor and Tax Counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. 8 SUPPLEMENTAL SCHEDULES OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS & STOCK OWNERSHIP PLAN FORM 5500-ANNUAL RETURN/REPORT OF EMPLOYEE BENEFIT PLAN SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR DECEMBER 31, 2001 (c) DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE, RATE OF INTEREST, COLLATERAL, PAR OR MATURITY VALUE --------------------------------------------------- (b) RATE OF SHARES, PAR, (e) IDENTITY OF ISSUE, BORROWER, MATURITY INTEREST OR MATURITY (d) CURRENT (a) LESSOR, OR SIMILAR PARTY DATE DIVIDENDS COLLATERAL VALUE COST VALUE ------------------------------------------ --------------------------------------------------- ----------- ------------ COLLECTIVE TRUSTS: SHORT-TERM INVESTMENT FUND N/A VARIABLE N/A 54,056 sh $54,056 ------------ MUTUAL FUNDS: FIDELITY FUND N/A VARIABLE N/A 280,396 sh 8,097,850 FIDELITY EQUITY-INCOME FUND N/A VARIABLE N/A 188,179 sh 9,177,490 FIDELITY INVESTMENT GRADE BOND FUND N/A VARIABLE N/A 149,144 sh 1,094,714 FIDELITY INTERMEDIATE TERM BOND FUND N/A VARIABLE N/A 164,256 sh 1,695,125 FIDELITY CAPITAL & INCOME FUND N/A VARIABLE N/A 59,937 sh 406,371 FIDELITY VALUE FUND N/A VARIABLE N/A 144,960 sh 7,466,906 FIDELITY CASH RESERVES N/A VARIABLE N/A 4,515,801 sh 4,515,801 SPARTAN MARKET INDEX FUND N/A VARIABLE N/A 91,642 sh 7,229,662 FIDELITY AGGRESSIVE GROWTH FUND N/A VARIABLE N/A 161,031 sh 3,062,802 FIDELITY DIVERSIFIED INTERNATIONAL FUND N/A VARIABLE N/A 203,280 sh 3,878,590 FIDELITY DIVIDEND GROWTH FUND N/A VARIABLE N/A 542,208 sh 15,360,742 FIDELITY MID-CAP STOCK FUND N/A VARIABLE N/A 217,052 sh 4,898,872 FIDELITY SHORT-TERM BOND FUND N/A VARIABLE N/A 2,274,586 sh 20,016,358 ------------ 86,901,285 ------------ EMPLOYER SECURITIES: OLD REPUBLIC INTERNATIONAL CORP.: COMMON STOCK N/A N/A N/A 6,827,775 sh $47,007,437 191,245,984 =========== ------------ TOTAL INVESTMENTS HELD $278,201,325 ============
9 OLD REPUBLIC INTERNATIONAL CORPORATION EMPLOYEES SAVINGS AND STOCK OWNERSHIP PLAN FORM 5500-ANNUAL RETURN/REPORT OF EMPLOYEE BENEFIT PLAN SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2001 ------------------------------------------------------------------ Dividend/ Face Value Interest Date of of Amount of Net Identity of Party or Investment Involved Rate Maturity Transaction Investment Transaction Cost Gain (Loss) ---------------------------------------- ---- -------- ----------- ---------- ----------- ---- ----------- Purchases of Investments ------------------------ Old Republic International Corporation Common Stock (556,961 shares) N/A N/A Various N/A $ 6,594,319 $6,594,319 - Sales of Investments -------------------- Old Republic International Corporation Common Stock (949,700 shares) N/A N/A Various N/A $17,532,745 $5,644,684 $11,888,061
Notes: ------ This schedule lists all non-participant directed transactions or series of transactions which aggregate in excess of 5% of the Fund assets at the beginning of the current year, as required by the Department of Labor. 10