UNITED STATES 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
(Mark One)
[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 (No Fee Required)
For the transition period from ____________ to ___________
Commission File Number: 001 - 11639
A. Full title of the plan and address of the plan if different from that of
the issuer named below:
LUCENT SAVINGS PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NJ 07974
The total # of pages contained
in this 11-K filing is 17
Exhibit Index can be found on page 3
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Form 11K
Lucent Savings Plan
INDEX
Report of Independent Accountants
Audited Financial Statements
Notes to Financial Statements
Supplemental Schedule
Signatures
Exhibit Index
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Lucent Savings Plan
Financial Statements
As of December 31, 2002 and 2001 and for the Year Ended
December 31, 2002 and Supplemental Schedule as of
December 31, 2002
Table of Contents
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Pages
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Report of Independent Accountants........................................ 4
Audited Financial Statements:
Statements of Net Assets Available for Benefits As of
December 31, 2002 and 2001......................................... 5
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002............................... 6
Notes to Financial Statements............................................ 7 - 12
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at End of Year) As of
December 31, 2002.................................................. 13
* Other schedules required by Section 2520.103-5 have been omitted because
they are not applicable.
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Report of Independent Accountants
To the Lucent Technologies Inc.
Employee Benefits Committee:
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 Lucent Savings Plan (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. 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 audits 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 Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule is the responsibility of the Plan's management. This
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
June 23, 2003
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Lucent Savings Plan
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
(Thousands of Dollars)
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2002 2001
---------- ----------
Assets
Investments in Group Trust, at
fair value $5,568,864 $7,729,451
Participant loans receivable 33,548 53,521
---------- ----------
Total investments 5,602,412 7,782,972
---------- ----------
Company contributions receivable 2,336 --
Employee contributions receivable 19,252 --
---------- ----------
Total assets 5,624,000 7,782,972
---------- ----------
Net assets available for benefits $5,624,000 $7,782,972
========== ==========
The accompanying notes are an integral part of these financial statements.
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Lucent Savings Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002
(Thousands of Dollars)
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Additions to net assets attributed to
Contributions
Employee contributions $ 237,618
Company contributions 51,000
Interest from participant loans 3,072
Transfers from other plans, net 175
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Total additions 291,865
-----------
Deductions from net assets attributed to
Distributions to participants 852,082
Plan's share of Group Trust investment loss 1,048,478
Transfers to Agere Systems Inc. Management 401(k) Plan, net 548,350
Transfers to the Long Term Savings and Security Plan, net 1,797
Administrative expenses 130
-----------
Total deductions 2,450,837
-----------
Net decrease (2,158,972)
Net assets available for benefits
Beginning of year 7,782,972
-----------
End of year $ 5,624,000
-----------
The accompanying notes are an integral part of these financial statements.
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Lucent Savings Plan
Notes to Financial Statements
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1. Plan Description
General
The Lucent Savings Plan (the "Plan"), formerly known as the Lucent
Technologies Inc. Long Term Savings Plan for Management Employees, is a
defined contribution plan established as of October 1, 1996 by Lucent
Technologies Inc. ("Lucent" or the "Company") to provide a convenient way
for most management employees (i.e., employees whose pay is at monthly or
annual fixed rates and whose wages are not subject to automatic wage
progression) to save on a regular and long-term basis. In connection with
the separation of the Company from AT&T Corp., the assets and liabilities
of the AT&T Long Term Savings Plan for Management Employees (the "AT&T
LTSPME") which related to the Company's employees and retirees were
transferred to a group trust (the "Group Trust") managed by Fidelity
Management Trust Company (the "Trustee"), effective October 1, 1996. The
Group Trust consists of the assets of the Lucent Technologies Inc. Long
Term Savings and Security Plan ("LTSSP") and the Plan.
On April 2, 2001, the Company consummated an initial public offering as
part of its plan to divest its microelectronics business, Agere Systems
Inc. ("Agere"). The Company completed a subsequent spin-off of its
remaining ownership interest in Agere by distributing a dividend of Agere
common stock to its shareholders on June 1, 2002. The assets of the Plan
which related to Agere employees totaling $548,350,000 were transferred to
the Agere Systems Inc. Management 401(k) Plan during 2002. Participant
balances and participant loans receivable of $538,926,000 and $5,387,000,
respectively, were transferred to the Agere plan on January 1, 2002.
Additional true-up related net transfers out in the amount of $4,037,000
were also processed during 2002.
Participants with a balance in the Lucent Employer Stock Fund, held in the
Group Trust as of May 31, 2002, received a spin-off dividend of Agere
Common Stock Class A and Agere Common Stock Class B. The shares of Class A
and Class B stock were unitized and credited to two new Agere Common Stock
Funds, established on June 1, 2002. No contributions or transfers in will
be permitted with regard to these new funds.
The Plan is summarized in the Summary Plan Description (the "SPD") which
has been distributed to all participants. For a complete description of the
Plan, participants should refer to the plan document. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
Eligibility
An eligible employee (generally an active, salaried management employee)
enters the Plan by authorizing a payroll contribution and directing a
contribution among the different funds of the Plan.
Contributions
Employee contributions of 1% to 16% of salary may be authorized. An
employee may designate contributions as pre-tax contributions, after-tax
contributions or a combination of pre-tax and after-tax contributions. The
Internal Revenue Code ("IRC") limits the maximum amount of an employee's
contribution on a pre-tax basis to $11,000 and $10,500 in 2002 and 2001
respectively. For taxpayers age 50 and over, an additional catch-up
contribution of $1,000 could be contributed to the Plan during 2002.
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Lucent Savings Plan
Notes to Financial Statements
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The Company matching contribution includes a fixed and a variable matching
contribution. The participant contributions eligible for the Company
matching contributions are the lesser of the amount actually contributed or
the first 6% of the participant's eligible compensation, as defined in the
SPD. The fixed matching contribution is 50% of eligible employee
contributions and the variable matching contribution ranges from 0% to 100%
of eligible employee contributions. The fixed matching contribution is
capped at $2,500 per year. The variable matching contribution is determined
annually by the Company's Board of Directors based upon the overall
performance of the Company for the just concluded fiscal year. The Company
elected not to pay any variable match in 2002 and 2001. Employees are
eligible for Company matching contributions immediately, without regard to
time of service, in accordance with the participant's investment elections.
Effective January 1, 2001, Company matching contributions were immediately
vested in the Plan. Company contributions, which were made prior to the
January 1, 2001 vesting date and related earnings in which a terminated
participant is not vested are forfeited to the Company. These forfeitures
can be used to reduce future Company contributions. At December 31, 2002
and 2001, forfeited amounts totaled approximately $108,000 and $476,000,
respectively.
Participant Loans
Loans are available to all active, retired, and terminated employees in an
amount not less than $1,000, up to a maximum of the lesser of $50,000 or
50% of the participant's vested account balance. Upon default as defined in
the plan document, participants are considered to have received a
distribution and are subject to income taxes on the distributed amount.
Loan terms are between 12 and 56 months. The loans are collateralized by
the balance in the participant's account and generally bear interest at the
prime rate at the time the loan was originated. Interest rates on
outstanding loans ranged from 4.25% to 10.5% at December 31, 2002.
Principal and interest are paid through payroll deductions, coupon
remittances and electronic fund transfers.
Distributions
When a participant retires with a service pension from the Lucent
Retirement Income Plan or terminates employment because of disability, the
entire vested amount in the participant's account can be distributed, at
the participant's election, in a single payment or in Retiree Withdrawals
as directed by the participant. If no distribution election is made by the
participant, the account balance will remain in the Plan until a later date
but not beyond age 70-1/2. When a participant dies, the entire amount in
the participant's account is allocated to the participant's beneficiaries.
In the case of other terminations of employment (where the participant is
not entitled to retire on an immediate pension or does not terminate
because of disability), a single distribution can be made of all vested
amounts in the participant's account. However, if the participant does not
request a distribution, the participant's account shall remain in the Plan
and shall be distributed only at (1) the participant's request, (2) when
the participant attains age 70-1/2 through the payment of Minimum Required
Distributions, as defined in the SPD, or (3) upon the participant's death,
whichever is earliest.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method
of accounting.
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Lucent Savings Plan
Notes to Financial Statements
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Payment of Benefits
Benefits are recorded when paid.
Valuation of Investments
The net asset value of the Plan's proportionate share of the Group Trust is
calculated by the Trustee. The Trustee determines fair value of the
underlying assets in the investment manager portfolios, taking into account
values supplied by a reputable pricing or quotation service or quotations
furnished by one or more reputable sources, such as securities brokers,
dealers or investment bankers, mutual fund administrators, or other
relevant information. Investments in registered investment companies are
stated at fair value as determined by quoted market prices. Investments in
the Company's common shares and other securities listed on a national stock
exchange are carried at fair value determined on the basis of the New York
Stock Exchange closing price on December 31. Securities traded in
over-the-counter markets and government obligations are carried at fair
value based on the last bid prices or closing prices on December 31, as
listed in published sources where available and, if not available, from
other sources considered reliable. Contracts with insurance companies and
financial institutions, which are fully benefit responsive, are carried at
contract value (representing contributions made under the contracts plus
accumulated interest at the contract rates) which approximates fair value.
All other investments are carried at their fair value at close of business
on December 31 as determined by the Trustee. Participant loans receivable
are valued at the cost which approximates fair value.
Purchases and Sales of Investments
Purchases and sales of investments are recorded on a trade-date basis.
Plan's Share of Group Trust Investment Loss
The Plan's reported investment loss from Group Trust presented in the
Statement of Changes in Net Assets Available for Benefits represents its
interest in the Group Trust's investment loss, which consists of the Group
Trust's interest, dividends and net depreciation in fair value of
investments. The Group Trust records dividend income on investments held as
of the ex-dividend dates and records interest income on the accrual basis.
The Group Trust's net depreciation in fair value of investments consists of
the net realized gains (losses) and the unrealized appreciation
(depreciation).
Transfers from Other Plans, Net
The Plan presents in the Statement of Changes in Net Assets Available for
Benefits the net amount of transfers from other plans.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Risks and Uncertainties
Investments held by the Group Trust are exposed to various risks, such as
interest rate, market and credit. Due to the level of risk associated with
certain investment securities and the level of
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Lucent Savings Plan
Notes to Financial Statements
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uncertainty related to changes in the value of investment securities, it is
at least reasonably possible that changes in risks in the near term would
materially affect participants' account balances and the amounts reported
in the Statements of Net Assets Available for Benefits and the Statement of
Changes in Net Assets Available for Benefits.
Derivatives
From time to time investment fund managers may use derivative financial
instruments including forward exchange contracts and future contracts.
Derivative instruments are used primarily to mitigate exposure to foreign
exchange rate and interest rate fluctuations as well as to manage the
investment mix in the portfolio.
3. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated January 14, 1998, that the Plan and related Group Trust are
designed in accordance with applicable sections of the IRC. Although the
Plan has been amended since receiving the determination letter, the Plan
administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been made.
4. Termination Priorities
Although it has not expressed any intent to do so, the Company reserves the
right under the Plan to amend or terminate the Plan subject to the
provisions of ERISA. In the event of Plan termination, the Plan provides
that the net assets are to be distributed to participating employees in
amounts equal to their respective interests in such assets.
5. Plan Expenses
Plan participants pay investment manager and trustee fees and share certain
other administrative costs of the Plan with the Company. Investment manager
and trustee fees are generally reflected in the calculation of each fund's
net asset value per unit.
6. Group Trust Investments
The LTSSP and the Plan each have an interest in the assets of the Group
Trust. Investment income and the Plan's interest in the net assets of the
Group Trust are allocated based upon the respective participant balances
within each fund for each plan. The Plan's interest in the Group Trust was
approximately 86% and approximately 84% as of December 31, 2002 and 2001,
respectively.
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Lucent Savings Plan
Notes to Financial Statements
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The following tables present the fair value of investments held by the
Group Trust as of December 31, 2002 and 2001 (in thousands):
December 31,
-----------------------
2002 2001
---------- ----------
Investments, at fair value
Avaya Stock Fund $ 15,882 $ 94,113
Lucent International Equity Fund 167,949 239,736
Lucent Asset Allocation Income Fund 40,659 52,944
Lucent Asset Allocation Fund 2000 122,328 169,668
Lucent Asset Allocation Fund 2010 299,091 421,370
Lucent Asset Allocation Fund 2020 271,919 414,919
Lucent Asset Allocation Fund 2030 91,490 145,667
Lucent Asset Allocation Fund 2040 6,712 6,530
Lucent Employer Stock Fund - Common Shares 200,685 909,377
Fidelity Equity Index Fund 801,736 1,306,896
Fidelity Magellan Fund 682,036 1,160,317
Fidelity Equity Income Fund 390,283 593,916
Lucent Bond Fund 247,150 211,517
Fidelity Institutional Cash Portfolio 581,776 666,995
Lucent Growth Equity Fund 41,447 63,467
Lucent Self Directed Brokerage 46,047 48,702
Small Cap Fund 50,168 41,769
Agere Class A Stock 1,852 --
Agere Class B Stock 44,231 --
Lucent Employer Shares Fund I 6,134 32,102
Lucent Employer Shares Fund II 12,793 78,242
---------- ----------
4,122,368 6,658,247
Investments, at contract value
Guaranteed investment contracts 2,358,565 2,551,648
---------- ----------
Total investments $6,480,933 $9,209,895
========== ==========
Investment income for the Group Trust is as follows:
Year Ended
December 31,
2002
-----------
Investment Loss
Net depreciation in
fair value of investments $(1,330,723)
Interest and dividends 24,840
-----------
$(1,305,883)
-----------
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Lucent Savings Plan
Notes to Financial Statements
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Investments in the Group Trust include $.3 billion in stock, $1.5 billion
in equity funds, $2.4 billion in guaranteed insurance contracts, $1.0
billion in bonds, and $1.3 billion in mutual funds as of December 31, 2002.
Investments in the Group Trust include $1.1 billion in stock, $2.3 billion
in equity funds, $2.6 billion in guaranteed insurance contracts, $1.2
billion in bonds, and $2.0 billion in mutual funds as of December 31, 2001.
Investment loss in the Group Trust includes $.7 billion net loss
related to stock, $.4 billion net loss related to equity funds,
$.1 billion net gain related to guaranteed insurance contracts,
and $.3 billion net loss related to mutual funds.
7. Related Party Transactions
Certain Plan investments are shares of mutual funds managed by affiliates
of the Trustee and, therefore, these transactions qualify as
party-in-interest transactions.
The Group Trust and the Plan invest in shares of Lucent common stock.
-12-
Lucent Savings Plan
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
As of December 31, 2002
--------------------------------------------------------------------------------
Name of Issuer and Title of Issue Description Cost Fair Value
--------------------------------- ----------------------------------------- ---- ------------
Participant loans receivable* (Interest rates range from 4.25% - 10.5%) $ 33,547,617
* Party-in-interest
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Lucent Savings Plan
Signatures
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Employee Benefit Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
LUCENT SAVINGS PLAN
Date: June 27, 2003 By: /s/ Raymond M. Goldberg
------------------------------------------
Raymond M. Goldberg
Vice President-Human Resources
North American Region Operations
(Plan Administration)
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Exhibit Index
Exhibit
Number
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23 Consent of Independent Accountants
99 Certification, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002