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
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 2001
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 1-14287
USEC SAVINGS PROGRAM
(Full title of the plan)
USEC Inc.
2 Democracy Center
6903 Rockledge Drive
Bethesda, MD 20817
(Name of issuer of the securities held pursuant to
the plan and the address of its principal executive office)
Table of contents
Reports of Independent Accountants....................................1-2
Statements of net assets available for benefits
As of December 31, 2001 and 2000...............................3
Statements of changes in net assets available for benefits
For the years ended December 31, 2001 and 2000.................4
Notes to financial statements...........................................5
Schedule of assets (held at end of year)
As of December 31, 2001.......................................10
Schedules omitted because there were no such items:
For the year ended December 31, 2001:
Reportable transactions
Nonexempt transactions
Leases in default or classified as uncollectible
Loans or fixed-income obligations in default
Report of Independent Accountants
To the USEC Benefit Plan Administrative and Investment Committees and
Participants of the USEC Savings Program
In our opinion, the accompanying statement 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 USEC Savings Program (the "Plan") at December 31, 2001 and the changes in
net assets available for benefits for the year 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 on
our audit. We conducted our audit 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 audit provides a
reasonable basis for our opinion.
Our audit was 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. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit 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
PricewaterhouseCoopers LLP
McLean, VA
November 6, 2002
1
Report of independent public accountants
To the Trustees of the
USEC Inc. 401(k) Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the USEC Inc. 401(k) Retirement Savings Plan (the Plan) as of December 31,
2000 and 1999, and the related statements of changes in net assets available for
benefits for the years ended December 31, 2000 and 1999. These financial
statements are the responsibility of the plan 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. 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Supplemental schedule of assets held for investment
purposes is presented for purposes 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. This supplemental
schedule is the responsibility of the Plan administrator. The 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/ Arthur Anderson LLP
Vienna, Virginia
September 14, 2001
This report of independent public accountants was issued by Arthur Andersen LLP
on September 14, 2001, and has not been reissued
2
USEC Savings Program
Statements of net assets available for benefits
As of December 31, 2001 and 2000
In thousands
2001 2000
-------------- --------------
Assets:
Investments (Note 3) $ 132,003 $ 9,024
-------------- --------------
Net assets available for benefits $ 132,003 $ 9,024
============== ==============
The accompanying notes are an integral part of these statements.
3
USEC Savings Program
Statements of changes in net assets available for benefits
For the years ended December 31, 2001 and 2000
In thousands
2001 2000
---------------- --------------
Additions to net assets:
Investment income $ 4,999 $ 969
Contributions-
Participants 8,139 1,103
Company 3,414 478
Rollovers 41 148
---------------- --------------
Total additions 16,593 2,698
---------------- --------------
Deductions from net assets:
Net depreciation in fair value of investments 6,297 1,703
Distributions to participants 12,745 361
Administrative expenses 13 --
---------------- --------------
Total deductions 19,055 2,064
---------------- --------------
Net (decrease) increase prior to net transfers
from other plans (2,462) 634
Net transfers from other plans 125,441 --
---------------- --------------
Net increase 122,979 634
Net assets available for benefits, beginning of
year 9,024 8,390
---------------- --------------
Net assets available for benefits, end of year $ 132,003 $ 9,024
================ ==============
The accompanying notes are an integral part of these statements.
4
USEC Savings Program
Notes to financial statements
1. Plan description:
The following description of the USEC Savings Program (the Plan), formerly known
as the USEC Inc. 401(k) Retirement Savings Plan, provides only general
information. Plan participants should refer to the Plan document for a more
complete description of the Plan's provisions.
General
Effective January 1, 1994, USEC Inc. (the Company) established a defined
contribution retirement savings plan pursuant to Section 401(k) of the Internal
Revenue Code (IRC). Until December 31, 2000, the Plan covered all full-time
employees of USEC Inc., except certain employees participating in other federal
government retirement plans.
Effective January 1, 2001, the Plan was amended and restated to allow
participation by noncollectively bargained employees of United States Enrichment
Corporation, a subsidiary of USEC Inc. As of this date, the name of the Plan was
changed to the USEC Savings Program and assets with respect to eligible
employees of United States Enrichment Corporation were merged with and into the
Plan. The provisions of the restated Plan are intended to include all provisions
necessary to preserve such benefits, rights, and features of the United States
Enrichment Corporation Savings Program that are required to be preserved under
IRS Code Section 411.
Net assets transferred to the Plan as a result of the aforementioned amendment
were approximately $125 million.
The Plan is administered by the Company through its plan administrator. USEC
Inc. and the United States Enrichment Corporation are participating employers.
The USEC Benefit Plan Administrative and Investment Committees monitor and
oversee administration of the Plan. Fidelity Management Trust Company (the
Trustee or FMTC) acts as Trustee and recordkeeper.
Contributions
Effective January 1, 2001, participants may contribute between 1 percent and 21
percent of eligible compensation in .5% increments up to the maximum annual
amount allowed under the IRC. Prior to January 1, 2001 before tax contributions
were limited to 15% of eligible compensation. Participants may elect either
before tax contributions, after-tax contributions or a combination of both. For
each payroll period, the participating employer provides a 100 percent matching
contribution for the first 3 percent of each participant's eligible earnings and
a 50 percent matching contribution for the next 2 percent.
Participant accounts and loans
Participant's accounts are credited with the participant's and participating
employer's matching contributions, and the respective investment earnings
(losses) of the individual funds. Allocations are based on participant earnings
on account balances, as defined. The benefit to which a participant is entitled
is the benefit that can be provided from the participant's vested account.
5
Participants may borrow from the Plan in any amount greater than $1,000 but less
than 50 percent of the participants' vested account balance. In no event can the
participant borrow more than $50,000. Loan terms are for a period not to exceed
five years, except for loans taken for the purchase of a primary residence (home
loans) which may have terms up to ten years. Loans are secured by the balance in
the participant's account and bear a reasonable rate of interest. Principal and
interest on the loan are repaid in substantially level installments. As of
December 31, 2001, interest rates ranged from 6.0 percent to 10.5 percent.
Expenses
Expenses of the Plan, except participant loan costs and fund investment
management expenses that are paid by the participant, are paid by the Company
and amounted to $18,315 and $15,361 in 2001 and 2000, respectively.
Vesting
Participants are immediately vested in their contributions and associated
earnings (losses). Effective January 1, 2001, vesting in the participating
employer's matching contributions and associated earnings (losses) is based on
years of service, as follows:
Years of
credited
service Percentage
--------- ----------
Less than 2 0%
2 50
3 100%
Prior to January 1, 2001, vesting in the participating employer's matching
contributions and associated earnings (losses) were based on years of service,
as follows:
Years of
credited
service Percentage
--------- ----------
Less than 2 0%
2 50
3 75
4 100%
Forfeitures
At December 31, 2001 and 2000, forfeited non-vested accounts totaled $57,068 and
$12,615, respectively. Forfeitures are used to reduce current or future matching
employer contributions. In 2001 and 2000, employer contributions were reduced by
$45,676 and $28,872, respectively, from forfeited non-vested accounts.
Investment options
Participants direct FMTC to invest their contributions, the participating
employer's matching contributions and associated earnings (losses) among
twenty-two investment options. Investment options consist of 19 mutual funds,
two stock funds and a managed fund of guaranteed investment contracts (the
Stable Value Fund).
Participants may make exchanges among the investment options at any time by
contacting FMTC directly.
6
Benefit payments
On termination of service due to retirement (participant eligible for an
immediate pension under a deferred benefit plan maintained by a participating
employer) or disability, a participant may elect to receive either a lump sum
amount equal to the value of the participant's vest interest in his or her
account, monthly installments over a fixed number of years or life expectancy or
in a series of partial payments. If a participant dies before the entire vested
portion of the account is distributed, the remaining vested portion of the
account is payable to a beneficiary. For termination of service for other
reasons, the vested portion of a participant's account is paid as a lump sum.
The amount of any payment from a participant account is reduced as appropriate
to satisfy tax withholding requirements.
Participants may make hardship withdrawals from their contributions under
certain circumstances allowed by the Plan.
Plan termination
Although it has not expressed any intent to do so, the participating employers
have the right to discontinue their contributions at any time and to terminate
the Plan subject to the provisions of the IRC. In the event of Plan termination,
participants will become 100 percent vested in participating employer matching
contributions and associated earnings.
2. Summary of significant accounting policies:
Basis of accounting
The financial statements of the Plan are prepared based on the accrual method of
accounting except that benefits are recorded when paid, as required by
accounting principles generally accepted in the United States of America.
Guaranteed investment contracts
Guaranteed investment contracts in the USEC Stable Value Fund are fully benefit
responsive, as defined in the American Institute of Certified Public
Accountants' Statement of Position 94-4, Reporting of Investment Contracts Held
--------------------------------------
by Health and Welfare Benefit Plans and Defined Contribution Pension Plans. A
- -----------------------------------------------------------------------------
fully benefit responsive investment contract provides a liquidity guarantee, by
a financially responsible third party, of principal and previously accrued
interest for liquidations, transfers, loans or hardship withdrawals initiated by
plan participants exercising their rights to withdraw, borrow or transfer funds
under the terms of the Plan. Investments in guaranteed investment contracts are
stated at contract value, which represents the initial investment plus
accumulated interest, plus earnings, less participant withdrawals and
administrative expenses and approximates fair value. There are no valuation
reserves recorded to adjust contract values. The crediting interest rates for
contracts as of December 31, 2001 and 2000, ranged from 5.42 percent to 7.16
percent. The average stable value fund yield as of December 31, 2001 was 6.1
percent. These contracts' maturity dates range from February 28,2002 through
August 2, 2004.
Investment valuation and income recognition
The Plan's fund investments are stated at fair value, based on quoted closing
market prices, other than the USEC Stable Value Fund. Purchases and sales of
investments are recorded on the trade date. Interest income is recorded on the
accrual basis. Dividend income is recognized on the ex-dividend date.
7
The Plan presents in the statements of changes in net assets the net
appreciation (depreciation) in the fair value of its investments, which consists
of the realized gains or losses and the unrealized appreciation (depreciation)
on those investments.
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 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. Such estimates include those regarding fair value.
Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3. Investments:
The following table presents investments that represent 5 percent or more of the
Plan's net assets on December 31, 2001 and 2000:
In thousands
--------------------------
2001 2000
---------- ----------
Stable Value Fund:
Fidelity Managed Income Portfolio II $ 34,865 $ (n/a)
Metropolitan Life Insurance Company GAC 25771 (7.16%, matures 6/15/04) 6,811 (n/a)
Fidelity Dividend Growth Fund, 630,644 and n/a shares, respectively 17,866 (n/a)
Growth Fund of America, 623,280 and n/a shares, respectively 14,778 (n/a)
Spartan US Equity Index Fund, 203,802 and n/a shares, respectively 8,283 (n/a)
Fidelity Contrafund, n/a and 84,531 mutual fund shares, respectively (n/a) 4,156
Fidelity Asset Manager Portfolio, n/a and 73,707 shares, respectively (n/a) 1,240
Fidelity Retirement Money Market Portfolio, n/a and 794,707 shares,
respectively (n/a) 795
Fidelity Intermediate Bond Fund, n/a and 71,182 shares, respectively (n/a) 715
Fidelity Diversified International Fund, n/a and 24,375 shares,
respectively (n/a) 535
Fidelity Aggressive Growth Fund, n/a and 29,572 shares, respectively (n/a) 1,070
The following table presents the components of the net (depreciation) on
investments for the years ended December 31, 2001 and 2000:
In thousands
----------------------------
2001 2000
------------ ------------
Registered investment companies $ (7,121) $ (1,708)
Common stock 824 5
---------- --------
Net depreciation $ (6,297) $ (1,703)
========== ========
8
The Plan provides for investments in various forms of mutual funds, common stock
and a stable value fund that holds individual guaranteed investment contracts.
In general, investments are exposed to various risks, such as interest rate,
credit, and overall market volatility risks. 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 the amounts reported in the statements of net
assets available for benefits.
4. Tax status:
The Plan has received a determination letter dated February 15, 2002, from the
Internal Revenue Service (IRS) that the Plan is qualified to be exempt from
federal income taxes under certain provisions of the Internal Revenue Code
(IRC). Pursuant to such provisions, participants are not subject to federal
income taxes on their contributions to the Plan, participating employer
contributions to the Plan, or on income accruing to their accounts, until such
time as they receive distributions from the Plan. 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.
5. Related-party transactions:
Certain Plan investments are shares of mutual funds managed by FMTC. FMTC is the
Trustee as defined by the Plan and therefore, these transactions qualify as
party-in-interest transactions. USEC as a Participating Employer is a related
party. At December 31, 2001 and 2000, the Plan held an investment of 41,094 and
9,909 shares of USEC Inc. common stock, respectively. The fair market value of
the common stock at December 31, 2001 and 2000 was $294,233 and $37,555,
respectively. The dollar value of purchases and sales of USEC stock for the year
ended December 31, 2001 was $2,771,568 and $2,491,869, respectively, and the
dollar value of purchases and sales for the year ended December 31, 2000 was
$119,952 and $88,764, respectively.
6. Subsequent events:
The Plan was amended to eliminate the Lockheed Martin Stock Fund as an
investment option.
9
USEC Savings Program
Employer Identification Number 52-2107911, Plan Number 001
Schedule of assets (held at end of year)
As of December 31, 2001
ERISA Form 5500 Schedule H, line 4(i)
In thousands
Current
Issuer Description of asset Cost* value
-------------------------------------------------------------------------------------------------------------
Fidelity Managed Income Portfolio Commingled fund of investment contracts and $ 34,865
II** short-term investment products. Weighted
average maturity is approximately 2.5 years
Allstate Guaranteed Investment Contract (GIC) 546
#GA-6312, matures 9/30/02, 6.66%
CDC Financial Products GIC # BR-405-01, matures 11/15/02, 6.42% 543
Continental Insurance GIC # GP-13333-006, matures 10/31/02, 6.92% 561
Continental Insurance GIC # GP-13333-016, matures 7/1/02, 6.67% 678
GE Life & Annuity GIC # GS3500, matures 4/30/03, 6.15% 612
GE Life & Annuity GIC # 3501, matures 1/31/03, 5.61% 464
GE Life & Annuity GIC #GS3499, matures 6/2/03, 6.17% 615
John Hancock Mutual Life Insurance GIC # GAC-15131, matures 4/3/02, 6.50% 214
Metropolitan Life Insurance GIC # 25771, matures 6/15/04, 7.16% 6,811
Metropolitan Life Insurance GIC # GAC 25772, matures 5/15/02, 6.89% 5,391
AEGON GIC # MDA00224FR, matures 2/17/03, 5.74% 232
New York Life GIC # GA-30234, matures 3/31/03, 6.25% 199
New York Life GIC # GA-30235, matures 9/2/02, 6.02% 484
Pacific Mutual Life GIC # G-2633-01, matures 12/31/02, 6.98% 546
Principal Financial Group GIC # 4-45445-02, matures 4/30/02, 6.56% 915
Principal Financial Group GIC # 4-45445-03 matures 12/2/02, 6.98% 452
Principal Financial Group GIC # 4-45445-04, matures 4/1/02, 6.80% 332
Principal Financial Group GIC # 4-45445-05, matures 2/28/02, 5.75% 587
Principal Financial Group GIC # 4-45445-06, matures 1/31/03, 5.71% 440
Protective Life Insurance GIC # GA1508-C2, matures 10/31/02, 5.42% 468
Protective Life Insurance GIC # 1466-C2, matures 8/2/04, 6.10% 606
Protective Life Insurance GIC # GA-1484-C2, matures 9/30/03, 5.76% 474
10
In thousands
Current
Issuer Description of asset Cost* value
-------------------------------------------------------------------------------------------------------------
AEGON GIC # GA-55560-00, matures 2/28/02, 6.41% 450
AEGON GIC # GA-55560-02, matures 4/30/02, 6.56% 264
AEGON GIC # GA55560-03, matures 7/31/02, 6.40% 322
Travelers Insurance GIC # GR-17903, matures 6/30/03, 6.38% 316
Managers Special Equity Fund Diversified Stock Mutual Fund - portfolio of 582
small capitalization US equities
Morgan Stanley Midcap Growth Fund Diversified Stock Mutual Fund - portfolio of 767
Institutional Shares mid-cap US equities
Weitz Partners Value Fund Diversified Stock Mutual Fund - portfolio of 2,036
mid-cap US equities
Growth Fund of America Diversified Stock Mutual Fund - portfolio of 14,778
large cap US common stocks
Investment Company of America Diversified Stock Mutual Fund - portfolio of 5,211
large cap US common stocks
New Perspective Fund Diversified Stock Mutual Fund - global 4,863
portfolio of common stocks
USEC Stock Fund** Company stock fund for USEC Inc 301
Lockheed Martin Stock Fund Company stock fund for Lockheed Martin Inc. 2,784
Fidelity Contrafund** Diversified Stock Mutual Fund - portfolio of 3,454
large cap US common stocks
Fidelity Growth Company Fund** Diversified Stock Mutual Fund - portfolio of 2,004
large cap US common stocks with potential for
growth
Fidelity Diversified Diversified Stock Mutual Fund - global 651
International Fund** portfolio of common stocks
Fidelity Dividend Growth Fund** Diversified Stock Mutual Fund - portfolio of 17,866
large cap US common stocks
Fidelity Freedom Income Fund** Balanced Mutual Fund - diversified portfolio 53
of primarily fixed income
Fidelity Freedom 2000** Balanced Mutual Fund - diversified portfolio 33
of primarily fixed income.
Fidelity Freedom 2010** Balanced Mutual Fund - diversified portfolio 2,859
of stocks and bonds
Fidelity Freedom 2020** Balanced Mutual Fund - diversified portfolio 367
of stocks and bonds
Fidelity Freedom 2030** Balanced Mutual Fund - diversified portfolio
of stocks and bonds 187
Fidelity Freedom 2040** Balanced Mutual Fund - diversified portfolio
of stocks and bonds 109
Spartan Extended Market Index Fund Stock Index Mutual Fund - replicates the
return of the Wilshire 4500 equity index 205
Spartan US Equity Index Fund Stock Index Mutual Fund - replicates the 8,283
return of the S&P 500 equity index
11
In thousands
Current
Issuer Description of asset Cost* value
------------------------------------------------------------------------------------------------------------
Fidelity US Bond Market Index Fixed Income Mutual Fund - replicates the 3,708
Fund** return of the US Bond Market
Participant Loans** Participant notes at interest rates ranging 2,515
from 6.5% to 10.5% maturing between 1/2002
and 1/2016
----------------------
$132,003
======================
* Cost Information is not required as all accounts are participant directed
** Party-in-interest
12
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No.333-101094) of USEC Inc. of our report dated November
6, 2002 relating to the financial statements of the USEC Savings Program, which
appears in this Form 11-K for the year ended December 31, 2001.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
McLean, VA
November 7, 2002
13
RISK RELATING TO THE LACK OF AN UPDATED CONSENT OF ARTHUR ANDERSEN LLP
The statement of net assets available for benefits of the USEC Inc. 401(k)
Retirement Savings Plan as of December 31, 2000 and the related statement of
changes in net assets available for benefits for the year ended December 31,
2000, included in this Report on Form 11-K was audited by Arthur Andersen LLP.
Due to the status of Arthur Andersen LLP, we have not been able to obtain, after
reasonable efforts, the written consent of Arthur Andersen LLP to the inclusion
of their report in this Report on Form 11-K, and we have dispensed with the
requirement to file their consent in reliance on Rule 437a promulgated under the
Securities Act. Because Arthur Andersen LLP has not consented to the inclusion
of its report in this Report on Form 11-K, investors' ability to assert claims
against Arthur Andersen LLP may be limited. In particular, because of this lack
of consent, investors will not be able to sue Arthur Andersen under Section
11(a)(4) of the Securities Act for any untrue statements of a material fact
contained in, or an omission to state a material fact required to be stated in,
the financial statements audited by Arthur Andersen LLP that are included in
this Report on Form 11-K and incorporated by reference into the registration
statement (No. 333-101094) on Form S-8 of USEC Inc.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
USEC SAVINGS PROGRAM
Date: November 7, 2002
By: /s/ Dennis J. Blair
-------------------
Name: Dennis J. Blair
Title: V.P. - HR & Admin
Chairman - Benefits
Administration Committee
15
