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
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 1-7534
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
STORAGE TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Storage Technology Corporation
One StorageTek Drive
Louisville, CO 80028-4309
STORAGE TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN
INDEX TO FINANCIAL STATEMENTS AND EXHIBIT
Page
Report of Independent Accountants..................................... 2
Financial Statements:
Statement of Accumulated Plan Obligations.................... 3
Statement of Changes in Accumulated Plan Obligations......... 4
Notes to Financial Statements................................ 5
Exhibit 23 - Consent of Independent Accountants....................... 9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee for the Storage Technology Corporation Deferred
Compensation Plan has duly caused this annual report to be signed by the
undersigned hereunto duly authorized.
STORAGE TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN
Date: April 1, 2002 By: Roger C. Gaston
Chairman of the Administrative
Committee
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Report of Independent Accountants
To the Participants and Administrator of
Storage Technology Corporation
Deferred Compensation Plan
In our opinion, the accompanying statement of accumulated plan obligations and
the related statement of changes in accumulated plan obligations present fairly,
in all material respects, the accumulated plan obligations of Storage Technology
Corporation Deferred Compensation Plan (the "Plan") at December 31, 2001 and
2000, and the changes in accumulated plan obligations for each of the three
years in the period ended December 31, 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 the opinion expressed
above.
PricewaterhouseCoopers LLP
Denver, Colorado
March 8, 2002
2
STORAGE TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN
STATEMENT OF ACCUMULATED PLAN OBLIGATIONS
December 31, December 31,
2001 2000
------------ ------------
Deferred compensation, payable in:
Cash $ 26,292,141 $ 25,708,004
Common stock 262,282 -
---------- ----------
Total deferred compensation 26,554,423 25,708,004
---------- ----------
Accumulated plan obligations $ 26,554,423 $ 25,708,004
========== ==========
The accompanying notes are an integral part of these financial statements.
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STORAGE TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN
STATEMENT OF CHANGES IN ACCUMULATED PLAN OBLIGATIONS
December 31, December 31, December 31,
2001 2000 1999
------------ ------------ ------------
Additions:
Participant contributions $ 3,504,506 $ 3,909,381 $ 6,293,565
Employer contributions 209,383 205,464 201,025
Unrealized appreciation in
market value of stock 52,786 - -
Interest income 1,911,399 2,350,839 1,998,779
---------- ---------- ----------
Total Additions 5,678,074 6,465,684 8,493,369
---------- ---------- ----------
Deductions:
Benefits paid to participants 4,831,655 9,470,147 6,421,450
---------- ---------- ----------
Total Deductions 4,831,655 9,470,147 6,421,450
---------- ---------- ----------
Net increase (decrease) in
liability 846,419 (3,004,463) 2,071,919
Accumulated plan obligations
Beginning of year 25,708,004 28,712,467 26,640,548
---------- ---------- ----------
End of year $26,554,423 $25,708,004 $28,712,467
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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STORAGE TECHNOLOGY CORPORATION
DEFERRED COMPENSATION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF PLAN
The following description of the Storage Technology Corporation Deferred
Compensation Plan (the Plan) provides only general information. Participants
should refer to the Plan agreement for a complete description of the Plan's
provisions.
GENERAL
The Plan, established January 1, 1989, covers a select group of management
and highly compensated employees and outside directors of Storage Technology
Corporation (StorageTek or the Employer). The Plan allows for the
participants to defer the receipt of certain compensation and receive
distributions of such amounts in the future, together with applicable
credited earnings. StorageTek intends that the Plan shall be treated as an
unfunded plan for purposes of both the Internal Revenue Code (the Code) and
the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Effective April 1, 1998, the deferred compensation plans of a company
acquired by StorageTek were merged into the Plan (Merged Plans). The terms
and provisions of the Merged Plans were extinguished at the time of the
merger, except that participants who had an earned and accrued benefit and
were in payout status at the time of the merger continued to receive their
benefits under the terms and provisions of the Merged Plans that existed
prior to the merger.
PLAN ADMINISTRATION
The Plan is administered by the Storage Technology Corporation Employees
Profit-Sharing and Thrift Plan Committee (Committee), which is appointed by
StorageTek's Board of Directors.
ELIGIBILITY
In its sole discretion, the Committee determines the eligibility requirements
for Plan participation and designates the individuals to whom the opportunity
to participate will be extended.
CONTRIBUTIONS
A participant may elect to defer the following percentages of their
compensation:
-------------------------------- --------------------------------------------
Type of participant Deferral percentage allowed
-------------------------------- --------------------------------------------
All Up to 50% of base salary and up to 75% of
the cash portion of bonus paid under
StorageTek's Management By Objective (MBO)
Bonus Program
Marketing or sales executives Up to 75% of any marketing bonus
Sales executives Up to 75% of commissions
Outside director Up to 100% of retainer and meeting fees
-------------------------------- --------------------------------------------
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All deferrals are credited to the participant's Plan account at the time that
the compensation would otherwise have been paid to the participant. A
participant's deferral election is effective for an entire calendar year and
cannot be changed after the calendar year begins.
In addition to the amounts above, a participant may also elect to contribute
to the Plan any profit-sharing and thrift plan amounts that are in excess of
statutory limits. StorageTek provides a matching contribution to the Plan as
if the participant's deferral had been contributed to the profit-sharing and
thrift plan. Effective January 1, 2000, StorageTek provides a matching
contribution equal to 100% of the first 3% of compensation contributed by the
participant, and 50% of the next 4% of compensation contributed by the
participant, up to a maximum match of 5% of the participant's compensation
each pay period. Prior to January 1, 2000, StorageTek provided a matching
contribution equal to 50% of the compensation contributed by the participant,
up to a maximum match of 3% of the participant's compensation each pay
period.
CREDITED EARNINGS
The rate of credited earnings in a calendar year is equal to the monthly
average of ten-year Treasury Notes for the prior calendar year, plus 2.50%.
Credited earnings rates were 9.03% for 2001, 8.42% for 2000, and 8.13% for
1999. Credited earnings are only accrued on account balances that will be
distributed in cash.
VESTING
Participant and Employer contributions, as well as earnings credited to
participant accounts, are 100% vested at the time of contribution.
DEATH AND SURVIVOR BENEFITS
If a participant dies prior to the full distribution of his or her account
balance, the Plan provides for the payout of that account balance to the
participant's designated beneficiary.
For participants who continue to receive their benefits under the terms and
provisions of certain of the Merged Plans, if the participant dies prior to
retirement, the participant's beneficiary is entitled to receive a monthly
benefit amount over ten years based on the participant's compensation
deferrals and age at time of death. If the participant dies after retirement
distributions have begun, the surviving spouse is entitled to receive the
remaining monthly benefit amounts payable to the participant, as well as an
additional monthly benefit for the rest of the surviving spouse's life.
DISTRIBUTIONS
Participants elect the method of distribution for their deferred compensation
on an annual basis. Participants may elect to receive lump-sum distributions
three, five, or ten years after the date of deferral or they may elect to
receive a post-termination distribution in one of the following two methods:
1) a lump-sum distribution or 2) if the participant has at least four years
of service with the Employer, in five or ten equal annual installments.
For participants who continue to receive their benefits under the terms and
provisions of certain of the Merged Plans, distributions are made subsequent
to retirement, generally over a period of five, ten, or fifteen years.
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The Plan and the Merged Plans allow for hardship withdrawals as decided by
the Committee in its sole discretion. The Plan also allows for early
distributions of participant accounts. A ten percent penalty is imposed on
the early distribution of a participant's account balance.
Prior to May 23, 2001, all distributions were distributed in cash. On May 23,
2001, certain participants received the opportunity to make a one-time,
irrevocable election to have all or a portion of their outstanding account
balances deemed to be invested in the Employer's common stock (Stock
Investment Alternative). Four participants elected to receive all or a
portion or their balances distributed in common stock of the Employer at the
date of distribution. Account balances under the Stock Investment Alternative
receive the same treatment as outstanding common stock of the Employer,
including dividend earnings or corporate transactions such as a merger, stock
split, or other similar event.
PLAN EXPENSES
Management and administration fees incurred by the Plan are paid by
StorageTek. Plan expenses were $86,165 in 2001, $37,307 in 2000, and $42,353
in 1999.
PLAN FUNDING
All amounts payable to participants under the Plan are paid from the general
assets of the Employer, except for distributions made under the Stock
Investment Alternative, which will be distributed in common stock of the
Employer.
StorageTek holds company-owned life insurance policies in a rabbi trust to
protect the participants from a change of heart, change of control, or
weakening financial condition on the part of StorageTek. These policies are
not considered assets of the Plan, as the cash surrender value would be
subject to StorageTek's general creditors if StorageTek were to become
insolvent.
PLAN TERMINATION
StorageTek currently intends to continue the Plan indefinitely, but reserves
the right to amend or terminate the Plan or any part of the Plan at any time,
except that no amendment may decrease any already accrued benefit. In the
event of termination, all Plan accounts would be distributed as soon as
practicable.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Plan financial statements are prepared on an accrual basis of accounting.
Participant and Employer contributions are recorded each pay period. Interest
income is recorded when earned. Expenses are recorded when the obligations
are incurred.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amount of assets as of the date of
the financial statements, including, but not limited to, obligations
associated with death and survivor benefits. Actual results could differ
materially from these estimates and assumptions.
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ACTUARIAL ASSUMPTIONS ASSOCIATED WITH DEATH AND SURVIVOR BENEFITS
The deferred compensation liability to be distributed in cash includes an
actuarial assessment of the Plan's liability for death and survivor benefits
associated with certain of the Merged Plans. The Plan made significant
assumptions with respect to interest rates, turnover rates, and mortality
rates.
RISKS AND UNCERTAINTIES
Participant accounts that are to be distributed in cash are exposed to
various risks, including interest rate and credit risk. Participant accounts
that are to be distributed in stock are also exposed to various risks,
including market and credit risk. Due to the level of uncertainty related to
changes in these risks, it is reasonably possible that changes in these risks
in the near term would materially affect the amounts reported in the
statement of accumulated plan obligations and the statement of changes in
accumulated plan obligations.
The Plan is unfunded, and although StorageTek currently intends to maintain
assets in the Plan trust that are sufficient to cover cash distributions,
StorageTek is not obligated to place any funds or shares of common stock into
the trust to fund these obligations. If StorageTek becomes insolvent,
participant benefits will become claims against the insolvent company, and
participants will become general creditors of the insolvent company without
any preference or prior claims to the entity's assets, whether or not held in
the Plan trust. In addition, all participant balances payable in common stock
will be subject to the prior claims of StorageTek's general creditors.
COMMON STOCK
The obligation to distribute common stock under the Stock Investment
Alternative is reported at the market value of the common stock on the last
business day of the Plan year. In the statement of changes in accumulated
plan obligations, the Plan presents the net appreciation in the fair value
of the stock, which consists solely of the unrealized appreciation on the
stock.
NOTE 3 - TAX STATUS OF THE PLAN
The Plan is not a qualified deferred compensation plan under Section 401(a) of
the Code. No provision for federal or state income taxes has been made because
the Plan has no taxable income. Participants are not taxed until benefits are
distributed, as the participants have not received any economic benefit or
constructive receipt of those benefits prior to distribution.
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Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-19426, 33-32235, 33-32243, 33-37464, 33-42817,
33-51756, 33-61777, 33-42818, 33-51764, 33-50777, 33-59165, 33-52197, 2-60117,
2-80183, 2-61333, 2-89417, 333-08116, 333-08497, 333-08118, 333-08495,
333-53973, 333-53995, 333-38514, 333-61156 and 333-65078) of Storage Technology
Corporation of our report dated March 8, 2002 relating to the financial
statements, which appear in this Form 11-K.
PricewaterhouseCoopers LLP
Denver, Colorado
April 1, 2002
9