UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 001-09120
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
EMPLOYEE SAVINGS PLAN
80 PARK PLAZA
NEWARK, NEW JERSEY 07102
MAILING ADDRESS: P.O. Box 1171
NEWARK, NEW JERSEY 07101-1171
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office.
N/A
INDEX
PAGE
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INDEPENDENT AUDITORS' REPORT 3
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2002 AND 2001 4
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002 5
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 AND 2001
AND FOR THE YEAR ENDED DECEMBER 31, 2002 6
SIGNATURES 15
EXHIBIT INDEX 16
2
INDEPENDENT AUDITORS' REPORT
Employee Benefits Committee of
Public Service Enterprise Group Incorporated:
We have audited the accompanying statements of net assets available for benefits
of the Public Service Enterprise Group Incorporated Employee Savings Plan (the
Plan) as of December 31, 2002 and 2001, and the related statement of changes in
net assets available for benefits for the year ended December 31, 2002. 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 in accordance with 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. 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 audits provide 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 at December 31, 2002
and 2001, and the changes in net assets available for benefits for the year
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
June 13, 2003
3
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
EMPLOYEE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31,
-----------------------------
2002 2001
------------- -------------
ASSETS
Investments, at fair value-
Plan Interest in Master Employee Benefit Plan Trust $409,465,667 $421,192,783
Receivables:
Deposits and Contributions - employee 698,505 1,261,490
Deposits and Contributions - employer 220,317 358,228
Receivables from investments sold 151,620 110,159
Interest and dividends 1,060 2,068
------------ ------------
410,537,169 422,924,728
------------ ------------
LIABILITIES
Payable for investments purchased 25,123 22,390
Accrued expenses 470,666 187,832
------------ ------------
495,789 210,222
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $410,041,380 $422,714,506
============ ============
See notes to financial statements.
4
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002
ADDITIONS:
Net Investment loss
Plan Interest in Master Employee Benefit Plan Trust $(41,259,931)
Deposits and Contributions
Employee 34,963,088
Employer 11,650,800
------------
Total Deposits and Contributions 46,613,888
Transfer from the Wisvest 401(k) Plan 7,433,274
------------
Total Additions 12,787,231
------------
DEDUCTIONS:
Benefit payments to participants 23,361,470
Administrative expenses 643,425
Transfers to Thrift and Tax-Deferred Savings Plan-net 1,455,462
------------
Total Deductions 25,460.357
------------
DECREASE IN NET ASSETS AVAILABLE FOR BENEFITS (12,673,126)
NET ASSETS AVAILABLE FOR BENEFITS
BEGINNING OF YEAR 422,714,506
------------
NET ASSETS AVAILABLE FOR BENEFITS
END OF YEAR $410,041,380
============
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2002 and 2001 and
for the year ended December 31, 2002
1. DESCRIPTION OF THE PLAN
General
The following description of the Public Service Enterprise Group Incorporated
(Company) Employee Savings Plan (Plan) is provided for general information
purposes only. Participants (any person who has an interest in the Trust Fund)
should refer to the Plan Document for more complete information.
The Plan is a defined contribution plan covering substantially all bargaining
unit employees of the Company, and its participating affiliates, who are
eligible on the date of hire. The Company's Employee Benefits Committee is the
named fiduciary of the Plan and controls and manages its operation and
administration. Deutsche Bank Trust Company Americas (Trustee) serves as the
trustee of the Plan. Hewitt Associates is the recordkeeper of the Plan. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
The majority of the Plan's investment assets are held in a trust account by the
Trustee, and consist of an undivided interest in an investment account of the
Master Employee Benefit Trust (the Master Trust), a master trust established by
the Company and administered by the Trustee.
During 2002, through a subsidiary, the Company acquired Wisvest Connecticut LLC.
As a result of this transaction, the savings plan of the acquired company was
merged with and into the Plan and the PSEG Thrift and Deferred Tax Saving Plan
(Thrift Plan), effective December 31, 2002, and Participant account balances of
$7,433,274 were transferred into the Plan as of December 31, 2002.
The Plan was amended effective January 1, 2002. Effective with that date,
catch-up contributions of an additional $1,000 in pre-income tax deposits for
employees age 50 or older in 2002 were permitted, maximum permitted employee
contributions increased from 25% to 50%, acceptance of after-tax rollovers and
rollovers from financial institutions were permitted, Internal Revenue Service
(IRS) minimum distribution requirements were adopted for post age 70 1/2
distributions, the suspension period for making deposits to the Plan after a
hardship withdrawal was decreased from one year to six months and the Enterprise
Stock Fund was converted to an Employee Stock Ownership Plan (ESOP) with the
result that Participants were permitted to elect to have dividends on Company
stock held in that Fund made in cash.
Contributions
A Participant's Employer begins matching contributions when that Participant has
completed a Year of Service, as defined by the Plan, with his/her Employer.
6
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Each year, Participants may contribute from 1% to 7 % of their pretax annual
compensation, as defined in the Plan, subject to certain Internal Revenue Code
(IRC) limitations. The Company contributes 50% as its matching contribution to
the Plan. Participants may also contribute amounts representing distributions
from other qualified defined benefit or defined contribution plans.
Prior to March 1, 2002, employer contributions in excess of 5% and up to 7% of
compensation were made in shares of the Company's Common Stock and were not
available for transfer to any other investment fund or withdrawal from the Plan
prior to the Participant's termination of employment.
Effective March 1, 2002, employer contributions are made in cash and invested
according to the Participant's then current investment election and all shares
of Company Stock held in a Participant's account are eligible for transfer to
any other investment fund. In addition, a Participant may elect to make
supplemental deposits to his/her Savings Account Fund in increments of 1% of
compensation up to an additional 43% (18% prior to January 1, 2002) of
compensation (Supplemental Deposits), subject to certain limitations, without
any corresponding matching employer contribution. Participants may designate
such Basic and/or Supplemental Deposits as post-income tax contributions
(Nondeferred Deposits) or pre-income tax contributions (Deferred Deposits).
Each Participant may also, within any Plan Year, make one or more additional
lump sum deposits on a nondeferred basis in minimum amounts of $250 and in such
total amounts which, when aggregated with such Participant's Basic Deposits and
Supplemental Deposits, do not exceed 50% of his or her Compensation for that
Plan Year and subject to the limitations of the IRC. Prior to January 1, 2002,
the maximum permitted annual employee contribution was limited to 25%.
Participant Accounts
Individual accounts are maintained for each Plan Participant. Each Participant's
account is credited with the Participant's contributions, the Company's matching
contributions, and Plan earnings, and charged with withdrawals and an allocation
of Plan losses and administrative expenses. Allocations are based on Participant
earnings or account balances, as defined. The benefit to which a Participant is
entitled under the Plan is the accrued vested balance of his/her individual
account as of any date.
ESOP Participants receive quarterly payments directly from the Trustee equal
to the dividends paid to the Trustee on the shares of the Company's Common Stock
held for their account in the ESOP Fund.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Participant Loans
Participants may borrow from their fund accounts up to a maximum of $50,000
reduced by the highest outstanding loan balance during the past twelve months,
whichever is less. The loans are secured by the balance in the Participant's
account and bear interest at rates commensurate with local prevailing rates.
Principal and interest is paid ratably through payroll deductions. During
2002, the rate of interest on loans granted to Participants was 4.75%.
During 2001, the rate of interest on loans ranged from 6.0% to 9.5%.
No amounts may be loaned directly from any ESOP Account, from any portion of a
Participant's Savings Account attributable to transfers from the Cash Balance
Plan for Represented Employees of Public Service Enterprise Group Incorporated
(Cash Balance Plan), from assets held in the Schwab Personal Choice Retirement
Account (PCRA) Fund, or, prior to March 1, 2002, from any portion of the
Enterprise Common Stock Fund attributable to employer contributions made in
shares of Company Common Stock. No Participant may have more than two loans
outstanding at any time.
Payment of Benefits
On termination of service due to death, disability, or retirement, a Participant
may elect to receive a lump-sum amount equal to the value of the Participant's
vested interest in his or her account.
Forfeitures
Any nonvested portion of the Participant's Account, determined as of the date of
severance from employment, shall be forfeited and shall be applied thereafter to
reduce a subsequent contribution or contributions of the Employer as provided in
the Plan. If such former Participant is rehired by an Employer on or before the
end of and is employed by an Employer at the end of the fifth Plan Year after
the Plan Year in which such severance occurred, then such nonvested portion of
the Participant's Account shall be reinstated by the Employer and the
Participant's right thereto shall be determined as if the Participant had not
terminated employment, provided that the Participant repays to the Plan the
amount of any distribution paid to him or her on account of the severance from
employment. Unallocated forfeitures are used to reduce future contributions. For
the years ending December 31, 2002 and 2001, these forfeitures amounted to
$121,372 and $95,968, respectively.
Vesting
Except for amounts transferred from the Cash Balance Plan into the Plan, since
May 1, 2002, Employer Contributions to a Participant's Savings Account are fully
vested. Prior to that time, Employer Contributions vested according to a 5-year
cliff vesting schedule. Amounts transferred from the Cash Balance Plan follow
the Cash Balance Plan vesting regulations and vest upon a Participant's
completion of five years of service with an Employer. All amounts credited to a
Participant's ESOP Fund are fully vested.
8
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Penalties Upon Withdrawal
If a Participant withdraws vested Employer Contributions and/or Deposits before
they have been in the Plan for twenty-four months, such Participant will lose
the matching Employer Contributions on Deposits made during the subsequent three
months. Distributions to Participants electing to withdraw Nondeferred Deposits
and Employer Contributions are made as soon as practicable after such elections
are received by the Plan's Record Keeper. Nondeferred Deposits may be withdrawn
at any time, but certain penalties may apply. Deferred Deposits may not be
withdrawn during employment prior to age 59-1/2 except for reasons of
extraordinary financial hardship and to the extent permitted by the IRC
(hardship withdrawals). Distributions to Participants of approved hardship
withdrawals are made as soon as practicable after such approval.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan have been prepared on an accrual basis in
accordance with accounting principles generally accepted in the United States of
America.
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 net assets
available for benefits and changes therein. Actual results could differ from
those estimates.
Risks and Uncertainties
The Plan provides for various investment options. The mutual funds invest in
various securities including U.S. Government securities, corporate debt
instruments and corporate stocks. Investment securities, in general, are exposed
to various risks, such as interest rate, credit and overall market volatility.
Due to the level of risk associated with certain investment securities, it is
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 amount reported in the statement of net
assets available for Plan benefits.
Investment Valuation and Income Recognition (Master Trust Fund)
The investments in the Master Trust are stated at fair value except for its
benefit-responsive investment contracts with the Stable Value Fund, which are
recorded at contract value, which approximates fair value. The Plan's
investments in the guaranteed annuity contracts of the Stable
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Value Fund are with various insurance companies and other financial
institutions, and are recorded at contract value, which approximates fair value,
and is calculated as cost plus accumulated interest less withdrawals. Quoted
market prices are used to value all other investments. Shares of mutual funds
are valued at the net asset value of shares held by the Plan at year-end.
Purchases and sales of securities are recorded on a trade-date basis. Temporary
investments are stated at cost, which approximates fair market value. Dividend
income is recorded on the ex-dividend date. The loans to participants are valued
at outstanding principal balance plus accrued interest, which approximates fair
value.
Investment gains and losses from securities transactions are computed using an
adjusted cost basis as prescribed by the Department of Labor's (DOL) Rules and
Regulations for Reporting and Disclosure.
Payment of Benefits
Benefit payments to Participants are recorded upon distribution. Amounts
allocated to accounts of persons who have elected to withdraw from the plan but
have not yet been paid were $175,778 and $249,211 as of December 31, 2002 and
2001, respectively.
Administrative Expenses of Plan
All expenses incurred for the administration of the Plan, including taxes and
brokerage costs, are deducted from the Master Trust Fund.
Transfers of the ESOP Fund to Savings Account
Participants are permitted to transfer all, but not less than all, of the shares
of the Company's Common Stock from their ESOP Fund to their Savings Accounts. To
effect such transfers, the Trustee will sell the shares of the Company's Common
Stock held in the ESOP Fund and invest the proceeds in the Savings Account
Investment Funds designated by the Participant. The cash value of each share of
the Company's Common Stock transferred will be equal to the price per share of
the Company's Common Stock actually received by the Trustee. Any such transfer
is treated as a rollover contribution.
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT OF THE PLAN AND THRIFT PLAN IN THE MASTER TRUST
Certain of the Plan's investment assets are held in a trust account by the
Trustee and consist of an undivided interest in an investment account of the
Master Trust. Use of the Master Trust permits the commingling of trust assets
with the assets of the Thrift Plan for investment and administrative purposes.
Although assets of both plans are commingled in the Master Trust, the Trustee
maintains supporting records for the purpose of allocating the net gain or loss
of the investment account to the participating plans. The net investment income
of the investment assets is allocated by the Trustee to each participating plan
based on the relationship of the interest of each plan to the total of the
interests of the participating plans. As of December 31, 2002 and 2001, the
Plan's interests in such assets of the Master Trust were approximately 39%.
December 31,
-------------------------------
2002 2001
-------------- --------------
Investments at fair value:
Participant loans $32,248,249 $31,729,786
Cash and cash equivalents 35,714,345 21,516,751
Common Stock of
Public Service Enterprise Group Incorporated 131,765,788 151,220,984
Mutual funds 386,914,157 470,642,487
Guaranteed Investment Contracts 449,586,297 392,214,802
Schwab PCRA Fund (a) 20,363,052 24,676,728
-------------- --------------
Total Investments $1,056,591,888 $1,092,001,538
============== ==============
December 31,
2002
------------
Investment income/(loss):
Net depreciation in fair value of Mutual Funds $(87,376,771)
Net depreciation in fair value of Common Stock
of Public Service Enterprise Group Incorporated (33,891,406)
Net depreciation in fair value of Schwab PCRA Fund (a) (8,570,434)
Interest on Participant Loans 2,320,310
Interest from Enterprise Common Stock Funds 54,809
Interest from Guaranteed Investment Contracts 21,153,762
Dividends from Common Stock of Public
Service Enterprise Group Incorporated 8,067,846
------------
Total Investment loss, net $(98,241,884)
============
(a) Amounts primarily relate to equity investments in stocks and through
mutual funds. The net depreciation in fair value is primarily
comprised of realized/unrealized gains or losses and dividends earned
on these equity investments.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Master Trust includes the following GIC's in the Stable Value Fund as of
December 31, 2002 and 2001:
A. Savings Account Investment Funds
(1) The assets of the Stable Value Fund are primarily invested in
Traditional GICs or Synthetic GICs with additional investments in the
Trustee's short-term investment fund. All GIC contract values
approximate fair values. At December 31, 2002, the Stable Value Fund
was comprised of the following:
---------------------------------------------------------------------------------------------------------------------
Prudential Life Insurance Company Traditional November 30, 2005 6.99% $5,749,978.05
Caisse des Depots Synthetic February 3, 2003 2.89% 3,013,846.78
Bank of America (A) Synthetic Open-Ended 5.69% 25,453,497.34
Bank of America (B) Synthetic Open-Ended 4.31% 34,948,400.84
Bank of America (B) Synthetic Open-Ended 4.94% 32,412,640.98
Continental Assurance Company (B) Synthetic Open-Ended 4.94% 6,451,015.04
ING Life Insurance & Annuity Co.(B) Synthetic Open-Ended 2.44% 18,059,081.75
Allstate Life Insurance Company Synthetic Open-Ended 5.54% 47,559,808.29
State Street Bank and Trust Company Synthetic Open-Ended 4.63% 58,362,323.63
John Hancock Synthetic Open-Ended 5.62% 10,234,629.91
Monumental Life Synthetic Open-Ended 5.89% 56,631,169.28
JP Morgan Chase (B) Synthetic Open-Ended 4.25% 51,136,404.43
JP Morgan Chase (B) Synthetic Open-Ended 4.81% 27,812,584.88
JP Morgan Chase (A) Synthetic Open-Ended 6.71% 21,987,437.85
UBS AG Synthetic Open-Ended 6.45% 49,773,477.51
---------------
Total GICs $449,586,296.56
Investment in Bankers Trust Short Term Investment Fund (1.36%) 19,501,794.94
---------------
Total Stable Value Fund $469,088,091.50
===============
(A) Managed by PIMCO Investment Management Company
(B) Managed by INVESCO Institutional, Inc.
(2) The assets of the Enterprise Common Stock Fund are invested in the
Company's Common Stock.
B. ESOP Fund
During 2002 and 2001, no contributions to or transfers into the ESOP Fund were
permitted.
C. Schwab PCRA Fund
The Schwab PCRA Fund is a self-directed brokerage account in which Participants
can select and manage a wide selection of investments including mutual funds,
stocks and bonds. Deposits
12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
into the Schwab PCRA Fund must come from balances transferred from the other
options in the Plan. Participants may transfer up to 100% of their account
balance, less $500 to pay for certain fees, to the Schwab PCRA Fund.
4. NON-PARTICIPANT DIRECTED INVESTMENTS
As stated previously, prior to March 1, 2002, Employer Contributions for
Participants with respect to Basic Deposits in excess of 5% and up to 7% of
Compensation were made in shares of the Company's Common Stock into the
Enterprise Common Stock Fund and were not available for transfer to any other
Investment Fund or withdrawal from the Plan prior to the Participant's
termination of employment. Information about the net assets and the significant
components of the changes in net assets relating to the Plan's interest in the
Enterprise Common Stock Fund is as follows:
As of December 31,
-----------------------------
2002 2001
-----------------------------
Net Assets:
Enterprise Common Stock Fund $54,686,823 $62,276,657
=========== ===========
Changes in Net Assets:
Deposits and Contributions $ 4,795,372
Dividends and Interest 3,250,362
Net Depreciation (13,821,385)
Benefits paid to Participants (3,341,232)
Loan Repayments 1,220,960
Loans to Participants (1,133,842)
Forfeitures (4,685)
Administrative Expenses (94,084)
Transfers from participant-directed investments 1,538,700
-----------
Total Net Change $(7,589,834)
===========
5. FEDERAL INCOME TAX STATUS
The Plan is intended to be qualified under Section 401(a) of the IRC and is
intended to be exempt under Section 501(a) of the IRC. The Plan received a
favorable IRS determination letter dated April 8, 1998. The Plan has since been
amended. The Plan filed an application for a determination letter with the IRS
in February 2002. To date, no action has been taken by the IRS on this
application. However, the Plan Administrator believes that the Plan is currently
being operated in compliance with the applicable requirements of the IRC.
13
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are in the Company's Common Stock. As the Company is
the Plan Sponsor, these transactions qualify as party-in-interest transactions.
Certain administrative functions are performed by the officers and employees of
the Company (who may also be Participants in the Plan) at no cost to the Plan.
These transactions are not deemed prohibited party-in-interest transactions,
because they are covered by statutory or administrative exemptions from ERISA's
rules on prohibited transactions.
At December 31, 2002 and 2001, the Trust held 10,924,899 and 9,442,794 shares,
respectively, of the Common Stock of Public Service Enterprise Group
Incorporated, the sponsoring employer stock, with a cost basis per unit of
$11.48 and $15.03, respectively.
At December 31, 2002 and 2001, the Trust held 308,532 and 325,810 shares,
respectively, of the Common Stock of Public Service Enterprise Group
Incorporated in the ESOP Fund, the sponsoring employer stock, and with a cost
basis of $32.10 and $42.19 respectively.
During the year ended December 31, 2002, the Trust recorded dividend income of
$8 million from the Common Stock of Public Service Enterprise Group
Incorporated.
7. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions set forth in ERISA. In the event that the Plan is
terminated, all Participants would become 100 percent vested in their account.
14
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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
================================================================================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed by the undersigned thereunto duly authorized.
Public Service Enterprise Group Incorporated
Employee Savings Plan
(Name of Plan)
By: Margaret M. Pego
-------------------------------
Margaret M. Pego
Chairperson of Employee
Benefits Committee
Date: June 27, 2003
15
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PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
================================================================================
EXHIBIT INDEX
Exhibit Number
--------------
99 Independent Auditors' Consent
16