11-K 1 d11k.txt FORM 11-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2001 [_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-3559 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Atlantic Electric 401(K) Savings and Investment Plan-B 800 King Street P.O. Box 231 Wilmington, DE 19899 B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Custom Stable Value Fund Spectrum Growth Fund T. Rowe Price Associates, Inc. T. Rowe Price Associates, Inc. 100 East Pratt Street 100 East Pratt Street Baltimore, MD 21202 Baltimore, MD 21202 Equity Income Fund Conectiv Class A Common Stock Fund T. Rowe Price Associates, Inc. Conectiv 100 East Pratt Street 800 King Street Baltimore, MD 21202 Wilmington, DE 19899-0231 International Stock Fund Conectiv Common Stock Fund T. Rowe Price Associates, Inc. Conectiv 100 East Pratt Street 800 King Street Baltimore, MD 21202 Wilmington, DE 19899-0231 Equity Index Fund T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202 Atlantic Electric 401(k) Savings and Investment Plan - B As of December 30, 2001 and 2000 and for the Year Ended December 30, 2001 and Supplemental Schedules Atlantic Electric 401(k) Savings and Investment Plan - B Table of Contents December 30, 2001 and 2000 Page(s) Report of Independent Accountants 1 Financial Statements: Statements of Net Assets Available for Benefits at December 30, 2001 and 2000 2 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 30, 2001 3 Notes to Financial Statements 4-8 Supplemental Schedules: Schedule of Assets (Held at End of Year) - Schedule H - Item 4(i) 10 Schedule of Reportable Transactions - Schedule H - Item 4(j) 11 Signature 12 Report of Independent Accountants To the Personnel and Compensation Committee of the Board of Directors of Conectiv In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Atlantic Electric 401(k) Savings and Investment Plan - B at December 30, 2001 and 2000, and the changes in its net assets available for benefits for the year ended December 30, 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 at End of Year) and Reportable Transactions 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 ------------------------------ PricewaterhouseCoopers LLP May 21, 2002 -1- Atlantic Electric 401(k) Savings and Investment Plan - B Statements of Net Assets Available for Benefits At December 30, 2001 and 2000 2001 2000 Investments $43,630,471 $43,282,975 Receivables: Employer contributions 14,491 13,929 Participant contributions 51,883 46,489 ----------- ----------- Net assets available for benefits $43,696,845 $43,343,393 =========== =========== The accompanying notes are an integral part of these financial statements. -2- Atlantic Electric 401(k) Savings and Investment Plan - B Statement of Changes in Net Assets Available for Benefits For the Year Ended December 30, 2001 Additions: Participant contributions $ 2,985,953 Employer contributions 722,005 Interest income 127,504 Dividend income 1,587,346 Net depreciation in fair value of investments (2,817,215) ------------ Total additions 2,605,593 ------------ Deductions: Benefits paid to participants 2,249,891 Administrative fees 2,250 ------------ Total deductions 2,252,141 ------------ Net increase in net assets available for benefits 353,452 Net assets available for benefits, at beginning of year 43,343,393 ------------ Net assets available for benefits, at end of year $ 43,696,845 ============ The accompanying notes are an integral part of these financial statements. -3- Atlantic Electric 401(k) Savings and Investment Plan - B Notes to Financial Statements December 30, 2001 and 2000 1. Description of Plan General The following description of the Atlantic Electric 401(k) Savings and Investment Plan - B (the "Plan"), a defined contribution plan, provides only general information. Participants should refer to the Plan document for a more comprehensive description of the Plan's provisions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Contributions All full-time bargaining unit employees of the Atlantic City Electric Company (the "Company"), a wholly-owned subsidiary of Conectiv, Inc., are eligible to participate in the Plan. Additionally, any employee who is not a regular full-time employee shall be eligible to participate upon completion of 1,000 hours of service. Employees may contribute up to 10% of base pay. Upon enrollment in the Plan, a participant may direct employee contributions in any of seven investment options. The tax savings portion of participant contributions (up to 6% of an employee's base pay) is matched by the Company at a rate of 50% not to exceed 3% of the employee's compensation. The Company's matching contribution is invested in the Custom Stable Value Fund. Beginning in December 2000, an employee who elects to invest in Conectiv's common stock and holds the common stock for one year will receive an employer match of 15%, which will be invested in Conectiv's common stock. At December 30, 2001, $12,536 was included in Conectiv's common stock that related to employee contributions under the one year holding period. Federal income taxes on these contributions and the related income are deferred until withdrawn. Benefits from the tax savings portion of the Plan can be withdrawn upon the attainment of age 59-1/2, retirement, separation from service, death or in special financial hardship situations. In addition, employees may contribute up to an additional 10% of base pay on an after-tax basis to the supplemental savings portion of the Plan, which also earns income that is not subject to Federal income tax until withdrawn. These contributions may be withdrawn once a quarter subject to the provisions of the Internal Revenue Code. Participant Accounts Participants' contributions are recorded in the period of the related payroll deductions. The Company's matching contributions are recorded in the period of the related participants' contributions. Participants are fully vested in employee and employer contributions in their respective accounts at all times. Termination of Plan Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time subject to the provisions of ERISA. Administration Fees Certain professional fees and administrative expenses incurred in connection with the Plan are paid by the Company. The facilities of the Company are used by the Plan at no charge. Loan processing fees are paid by the participants and deducted from Plan assets. -4- Atlantic Electric 401(k) Savings and Investment Plan - B Notes to Financial Statements December 30, 2001 and 2000 Participant Loans Receivable Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their account balance. Loan terms range from one to five years and up to fifteen years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates as determined quarterly by the Plan Administrator. Principal and interest is paid ratably through weekly payroll deductions. 2. Summary of Significant Accounting Policies Basis of Accounting The financial statements of the Plan are prepared under the accrual basis of accounting. 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 carrying value of participant loans approximates fair value. Common stock is valued at closing price on its principal exchange, shares of common collective trusts are valued at net asset value. Purchases and sales of investments are recorded on the trade-date. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Investment in Common/Collective Trust The Custom Stable Value Fund invests in various term guaranteed insurance contracts and maintains a cash reserve balance with all excess funds. The average yield and the weighted average crediting interest rate are based on the underlying contracts. Payment of Benefits Benefits are recorded when paid. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Plan's management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. -5- Atlantic Electric 401(k) Savings and Investment Plan - B Notes to Financial Statements December 30, 2001 and 2000 Risks and Uncertainties The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds, and other 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 and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants' account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits. 3. Investments The investment options available to plan participants have the following objectives: (i) T. Rowe Price Custom Stable Value Fund - to provide principal stability and a high level of monthly income; (ii) T. Rowe Price Equity Income Fund - to provide substantial dividend income and secondarily, long-term capital appreciations; (iii) T. Rowe Price Equity Index Fund - to match the performance of the Standard & Poor's Stock Index; (iv) T. Rowe Price International Stock Fund - to provide the diversifications of an international fund as well as the opportunity for long-term capital growth; (v) T. Rowe Price Spectrum Growth Fund - to provide long-term growth of capital; (vi) Conectiv Common Stock - to provide maximum capital appreciation and dividend income from Conectiv Common Shares; (vii) Conectiv Class A Common Stock - to provide maximum capital appreciation and dividend income from Conectiv Class A Common Shares. -6- Atlantic Electric 401(k) Savings and Investment Plan - B Notes to Financial Statements December 30, 2001 and 2000 The following presents investments that represent 5 percent or more of the Plan's net assets: December 30, ---------------------------- 2001 2000 Custom Stable Value Fund $13,147,024 $11,294,587 Equity Index Fund 12,870,493 14,889,604 Equity Income Fund 12,175,782 10,824,727 Spectrum Growth Fund 2,389,247 2,921,336 ----------- ----------- $40,582,546 $39,930,254 =========== =========== During 2001, the Plan's investments (including investments bought, sold and held during the year) depreciated in value by $2,817,215 as follows: Registered investment companies $(2,943,190) Conectiv common stock 125,975 ----------- $(2,817,215) =========== 4. Nonparticipant-Directed Investments Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments is as follows: December 30, ---------------------------- 2001 2000 Net assets: Custom Stable Value Fund $13,173,448 $11,318,415 Conectiv common stock 199,369 111,587 ----------- ----------- $13,372,817 $11,430,002 =========== =========== -7- Atlantic Electric 401(k) Savings and Investment Plan - B Notes to Financial Statements December 30, 2001 and 2000 Year Ended December 30, 2001 Changes in net assets: Contributions $ 1,504,477 Interest income 36,136 Dividend income 660,170 Benefits paid to participants (1,232,322) Net appreciation 31,676 Administrative fees (1,108) Net transfers from participant-directed investments 943,786 ----------- $ 1,942,815 =========== 5. Tax Status The Plan obtained its latest determination letter on March 23, 1995, in which the Internal Revenue Service (IRS) stated that the Plan was in compliance with the applicable requirements of the Internal Revenue Code. 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 currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. 6. Merger On February 9, 2001, the Boards of Directors of Conectiv, Inc and Potomac Electric Power Company (Pepco) approved an Agreement and Plan of Merger (the "Merger") under which Pepco will acquire Conectiv for a combination of cash and stock and Conectiv and Pepco will become wholly-owned subsidiaries of Pepco Holdings, Inc. Under the Merger, holders of Conectiv common stock and Conectiv Class A common stock may elect to exchange their shares for cash, Pepco Holdings, Inc. common stock, or a combination of cash and Pepco Holdings, Inc. common stock. Management currently expects the Merger to close in the third quarter of 2002, subject to timely receipt of various statutory and regulatory approvals. -8- Supplemental Schedules -9- Atlantic Electric 401(k) Savings and Investment Plan - B EIN#: 51-0377417, PLAN#: 003 Schedule H - Item 4(i) Schedule of Assets (Held at End of Year) December 30, 2001
Current Identity of Issue Investment Type Cost Value T. Rowe Price: Custom Stable Value Fund Common/Collective Trust $13,147,024 $13,147,024 Equity Index Fund Mutual Fund 11,226,479 12,870,493 Equity Income Fund Mutual Fund 11,952,991 12,175,782 Spectrum Growth Fund Mutual Fund 2,683,241 2,389,247 International Stock Fund Mutual Fund 1,429,408 1,002,588 Conectiv* Common Stock 163,111 198,980 Conectiv Class A Common Stock* Common Stock 238,875 238,115 Participant Loans Various loans ranging from 7.74% to 9.00% maturing January 2002 through October 2015 - 1,608,242 ----------- ----------- Total $40,841,129 $43,630,471 =========== ===========
* Parties-in-interest -10- Atlantic Electric 401(k) Savings and Investment Plan - B EIN#: 51-0377417, PLAN#: 003 Schedule H - Item 4(j) Schedule of Reportable Transactions* For the Year Ended December 30, 2001
Current Value of Asset on Historical Identity of Purchase Selling Historical Transaction Gain/ Party Involved Description of Assets Price Price Cost Date Loss T. Rowe Price Custom Stable Value Fund: Purchases $6,387,635 $6,387,635 $6,387,635 Sales $4,535,197 4,535,197 4,535,197
* Non-participant directed transactions or series of transactions in excess of 5% of the current value of the Plan's assets as of the beginning of the Plan year as defined in Section 2520.103-6 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA. -11- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. Atlantic Electric 401(K) Savings and Investment Plan-B Date: June 25, 2002 /s/ John C. van Roden ------------- ------------------------------------------ John C. van Roden, Chief Financial Officer -12-