SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[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 1-3526
A. Full title of the plan:
THE SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
THE SOUTHERN COMPANY
270 Peachtree Street, NW
Atlanta, Georgia 30303
THE SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
FORM 11-K
DECEMBER 31, 2001
TABLE OF CONTENTS
Page No.
Exhibits 3
Report of Independent Public Accountants 4
Statements of Net Assets Available for Plan Benefits,
as of December 31, 2001 and 2000 5
Statements of Changes in Net Assets Available for Plan Benefits,
for the year ended December 31, 2001 6
Notes to Financial Statements and Schedule 7
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001 14
Signature 16
Consent of Independent Public Accountants 17
2
EXHIBITS
A - Consent of Independent Public Accountants. (Contained herein at Page 17.)
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Savings Plan Committee of
The Southern Company Employee Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of THE Southern Company Employee Savings Plan as of December 31, 2001 and 2000
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2001. These financial statements and the schedule
referred to below are the responsibility of the Committee in its capacity as
administrator of the Plan. Our responsibility is to express an opinion on these
financial statements and the schedule 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 and the
supplemental schedule. 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 Southern
Company Employee Savings Plan as of December 31, 2001 and 2000 and the changes
in net assets available for benefits for the year ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The 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 Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The 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 Andersen LLP
Atlanta, Georgia
April 26, 2002
4
The Southern Company Employee Savings Plan
Statements of net assets available for benefits
for the years ended December 31, 2001 and 2000
2001 2000
CASH $ 439,749 $ 439,749
-------------- --------------
INVESTMENTS, at fair value 2,752,526,215 2,784,203,452
-------------- --------------
RECEIVABLES:
Pending trades 6,227,564 6,411,796
Accrued interest 733,339 616,252
-------------- --------------
6,960,903 7,028,048
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $2,759,926,867 $2,791,671,249
============== ==============
The accompanying notes are an integral part of these statements.
5
The Southern Company Employee Savings Plan
Statement of changes in net assets available for benefits
for the year ended December 31, 2001
NET INVESTMENT INCOME (LOSS):
Dividend income $ 95,571,796
Interest income 6,120,242
Net depreciation in fair value of investments (Note 3) (101,257,878)
Other 262,377
--------------
Total net investment income 696,537
--------------
CONTRIBUTIONS:
Participant 95,497,778
Employer 50,779,717
Rollovers 1,097,864
--------------
Total contributions 147,375,359
--------------
TRANSFER TO PLAN (Note 1) 48,656,813
--------------
TRANSFER FROM PLAN (Note 1) (47,690,121)
--------------
BENEFITS PAID TO PARTICIPANTS OR BENEFICIARIES (180,679,839)
--------------
ADMINISTRATIVE FEES (103,131)
--------------
NET DECREASE (31,744,382)
--------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 2,791,671,249
--------------
End of year $2,759,926,867
===============
The accompanying notes are an integral part of this statement.
6
THe Southern Company Employee Savings Plan
Notes to financial statements and Schedule
December 31, 2001 and 2000
1. Description of the plan
The following description of The Southern Company Employee Savings Plan (the
"Plan") provides only general information. Participants should refer to the plan
document or the summary plan description for a more complete description of the
Plan's provisions.
General
The Plan is a defined contribution plan administered by The Southern Company
Employee Savings Plan Committee (the "Committee"), as designated in the Plan.
Effective January 1, 1999, the Plan was amended to also be an employee stock
ownership plan. The Plan covers substantially all employees, certain former
employees, and retirees of the following subsidiaries of Southern Company (the
"Company"): Alabama Power Company, Georgia Power Company, Gulf Power Company,
Mississippi Power Company, Savannah Electric and Power Company, Southern
Communications Services, Inc., Southern Management Development, Inc. (f/k/a
Southern Company Energy Solutions, Inc.), Southern Company Services, Inc., and
Southern Nuclear Operating Company, Inc. (collectively referred to as the
"Employing Companies"). Effective April 2001, Southern Energy Resources, Inc.
was removed as an employing company. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended.
Mirant Corporation Spin-Off
In early 2001, the Company's board of directors approved the spin-off of Mirant
Corporation ("Mirant") (formerly Southern Energy, Inc.) to Southern Company's
stockholders. To affect this spin-off, the board of directors declared a
dividend consisting of the 272,000,000 shares of Mirant common stock owned by
Southern Company to holders of record of Southern Company common stock as of
March 21, 2001 (record date). The ratio representing the number of shares of
Mirant common stock to be distributed in respect to each share of Southern
Company common stock in the spin-off was .397614. Accordingly, each participant
in the Plan who held Southern Company shares in his/her account at the close of
business on April 2, 2001 (distribution date) received approximately 4/10 of a
share of Mirant common stock for each share of Southern Company common stock
held.
Mirant shares derived from the Plan and the Southern Company Employee Stock
Ownership Plan ("ESOP") were allocated to participant account balances in the
Plan. Because the ESOP, by regulatory design, cannot hold shares of any company
other than Southern Company, the Mirant shares distributed to the ESOP were
transferred to the Plan. Employees who were not in the Plan as of the
distribution date but held ESOP shares were automatically enrolled in the Plan
in order to hold their Mirant shares derived from the spin-off.
7
A new investment category, "Mirant Corporation stock fund," was subsequently
established in the Plan. Participants with investments held in the Mirant
Corporation stock fund will have five years (until July 1, 2006) to liquidate
the stock and transfer it into other investment options within the Plan. This
investment is considered closed; therefore, no new contributions may be made
into this option. The spin-off did not impact the number of Southern Company
shares held in participants' accounts. The Company received a private letter
ruling from the Internal Revenue Service stating that the distribution of Mirant
common stock in connection with the spin-off will be tax-free to the Company and
to its common stockholders for federal income tax purposes.
In conjunction with the Mirant spin-off, if a participant was eligible to
participate in the Mirant Services Employee Savings Plan ("Mirant Plan") on
April 2, 2001, his/her account under the Plan was transferred to the Mirant Plan
on May 1, 2001.
Plan Administration
The trustee and record keeper of the Plan are Merrill Lynch Trust Company, FSB
(the "Trustee") and Merrill Lynch, Fenner & Smith, Inc., respectively.
Participation and Contributions
Effective January 1, 2001, eligible employees may elect to participate in the
Plan immediately after the employee's first day of employment as an eligible
employee or as soon as administratively practicable thereafter. Prior to January
1, 2001, participation in the Plan was voluntary after completing 12 months of
continuous service.
Participants may elect to contribute, on a pretax or after-tax basis, up to 16%
of their eligible compensation, as defined by the Plan. Contributions may be
invested in 1% increments totaling, but not exceeding, 100% into any of the
investment options offered by the Plan. A participant may change the percentage
of his/her contribution at any time. The change becomes effective immediately
and is generally reflected on the participant's next paycheck.
The Employing Companies' contributions ("Employer Matching Contribution") are
discretionary and determined by the Company's board of directors on an annual
basis. These contributions are made by the Employing Companies in shares of the
company stock. A participant may elect at any time on or after the fifth
anniversary of his/her enrollment in the Plan to redirect his/her investment in
Employer Matching Contributions of up to 50% to any other investment option. On
January 14, 2002, the Committee eliminated the five-year participation rule
regarding fund transfers from the Employer Matching Contributions. The Committee
will address this change through an amendment to the Plan and this will become
effective as soon as such changes can be administratively accommodated. For the
year ended December 31, 2001, the Employing Companies contributed, on behalf of
the participants, an amount equal to 75% of each participant's contribution;
however, the match only applied to contributions which did not exceed 6% of
his/her eligible compensation. The board of directors reserves the right to
discontinue or change the Employer Matching Contribution at any time; however,
they have not expressed any intent to do so at the present time.
Participant Accounts and Vesting
Each participant's account is credited his/her contributions, allocations of
Employer Matching Contributions, and his/her share of the Plan's income (loss),
less any related administrative expenses. Participants are immediately vested in
the value of their contributions, Employer Matching Contributions, and actual
earnings (losses) thereon.
8
Participant Loans
Participants may borrow a minimum of $1,000 up to a maximum equal to the lesser
of $50,000 or 50% of his/her account balance. Only two general-purpose loans and
one residential loan may be outstanding concurrently. Loan terms may not be less
than 12 months nor more than 58 months for a general-purpose loan or up to 15
years for a residential loan. Loans are secured by the balance of the
participant's account and bear interest at a fixed rate over the life of the
loan. Loan repayments are made in substantially equal payroll deductions
amortized over the term of the loan. Participants may also elect to repay an
outstanding loan in full with a personal check (if less than $500), a cashier's
check, or a money order.
Withdrawals and Distributions
Upon retirement, a participant may elect to receive a lump-sum distribution or
up to 20 annual installments, provided the installments do not extend beyond the
participant's life expectancy. Under certain conditions of financial emergency,
the Committee may accelerate the payment time of a portion or all of the
remaining installments. In addition, a participant who has retired, become
disabled, or separated from service may elect to leave all his/her funds in the
Plan until mandatory distributions begin at age 70 1/2.
Upon termination of employment for any reason, the value of a participant's
account can be distributed in a single cash lump sum if one of the following
circumstances exists:
o the vested amount in the account is $5,000 or less.
o the participant elects to receive this type of distribution.
o the termination of service is due to disability, death, or
separation of service from the Employing Companies.
If the distribution is made after a participant's death and a beneficiary was
not named or if the beneficiary has predeceased the participant, his/her account
will be distributed in preferential order to the following:
o his/her surviving spouse.
o his/her surviving children (equally).
o his/her surviving parents (equally).
o his/her surviving brothers and sisters (equally).
o his/her executors or administrators.
A participant may elect routine withdrawals from his/her account in the
following order:
o pre-1987 after-tax contributions (excluding earnings).
o other after-tax contributions (including earnings).
o roll-over contributions (including earnings).
9
o "transferred ESOP account," as defined, provided the Southern
Company common stock to which the Mirant stock is attributable has
been held in the transferred ESOP account and the Plan for a total
of at least two years.
o if the participant has participated in the Plan for at least
60 months, up to 50% of Employer Matching Contributions.
o if the participant has not attained age 59 1/2, pretax
contributions (excluding earnings for plan years beginning after
1988) if the participant has incurred a financial hardship.
o if the participant has attained age 59 1/2 or has separated
from service, pretax contributions (including earnings).
In order to withdraw pretax contributions, the participant must attain the age
of 59 1/2, separate from service, or establish that a financial hardship
situation exists.
All distributions will be made in cash; however, a participant may elect to
receive Southern Company common stock or Mirant common stock distributions in
shares of stock.
Each participant may elect to receive a cash distribution of all or a portion of
the dividends payable on the shares of Southern Company common stock credited to
the participant's account as of the record date of the dividend. The dividends
payable on the shares of Southern Company common stock credited to the account
of a participant who does not elect to receive a cash distribution shall be
invested into the Plan. Payments of the cash distributions for dividends payable
shall be made as soon as administratively practicable after the payable date of
the dividend but no later than 90 days after the end of the plan year, which
includes such payable date. A participant's election to receive cash
distributions of dividends payable on Southern Company common stock shall be
revoked automatically upon his/her death.
Rollovers From Other Plans
An eligible employee who has received a distribution of his/her interest in a
qualified retirement plan of a former employer, may elect to deposit all or any
portion of the eligible amount of such distribution as a roll-over contribution
to the Plan during his/her first 18 months of employment.
Plan Termination
Although the Company has not expressed any intent to do so, it has the right to
amend, terminate, or otherwise modify the Plan at any time solely at the
discretion of the Company's board of directors. In the event of plan
termination, each participant's account shall be distributed to the participant
in a nondiscriminatory manner, as soon as practicable.
2. Summary of Significant accounting policies
Basis of Accounting
The accompanying financial statements were prepared on the accrual basis of
accounting.
10
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Administrative Expenses
The Employing Companies normally pay trustee fees related to the administration
of the Plan. Brokerage commissions, transfer taxes, and any other expenses
resulting from the purchases and sales of securities are charged to the various
investment funds. For Employer Matching Contributions, investment management
fees for all investment options except Common Stock are deducted from fund
earnings. For pretax and after-tax participant contributions, investment
management fees for the Merrill Lynch Retirement Preservation Trust and the
Merrill Lynch Equity Index Trust are paid by the Company, and investment
management fees for all other funds are deducted from fund earnings.
Investments and Income Recognition
Investments in marketable securities are valued at quoted market prices.
Investments in common/collective trusts are stated at the fair value of the
underlying assets held by the fund, except for benefit-responsive investment
contracts included in the Merrill Lynch Retirement Preservation Trust, which are
carried at contract value (cost plus accrued interest), which approximates fair
value.
Investment securities, in general, are exposed to various risks, including
credit, interest, and overall market volatility risks. Due to the level of risk
associated with certain investment securities, it is possible that changes in
values of investment securities will occur and that such changes could
materially affect the amount reported in the statements of net assets available
for benefits.
Purchases and sales of investments are recorded on their trade dates. Interest
income is accrued as earned; dividends are recorded as income on the ex-dividend
date.
Net Depreciation in Fair Value of Investments
Net realized gains (losses) and unrealized appreciation (depreciation) are
recorded in the accompanying statement of changes in net assets available for
benefits as net depreciation in fair value of investments.
11
3. investments
The fair market values of individual assets which represent 5% or more of the
Plan's net assets as of December 31, 2001 and 2000 are as follows:
2001 2000
Southern Company common stock--participant-directed $731,119,632 $861,239,103
Southern Company common stock--nonparticipant-directed 702,944,786 890,728,647
Merrill Lynch Equity Index Trust 348,046,763 322,553,206
Merrill Lynch Retirement Preservation Trust 223,720,891 174,686,957
Mirant Corporation common stock 358,182,470 n/a
During the year ended December 31, 2001, the Plan's investments (including gains
and losses on investments bought and sold as well as held during the years)
depreciated in value as follows:
Mutual funds $ (38,374,839)
Common stock (25,670,875)
Common/collective trusts (37,212,164)
--------------
Total $(101,257,878)
==============
4. nonparticipant-directed funds
Information about the net assets and the significant components of the changes
in net assets relating to Southern Company common stock (nonparticipant-directed
investments) as of December 31, 2001 and 2000 and for the year then ended
December 31, 2001 are as follows:
2001 2000
Net assets:
Common stock $ 702,944,786 $890,728,647
------------- ------------
Changes in net assets:
Contributions $ 50,779,717
Interest and dividends 36,270,857
Net depreciation in fair value of Southern Company common stock (583,741)
Benefits paid to participants (277,307,902)
Transfers from participant-directed investments 3,057,208
--------------
$(187,783,861)
==============
12
5. tax status
The Plan received a determination letter dated February 24, 2000 from the
Internal Revenue Service which states that the Plan, as amended through December
20, 1999, is in compliance with Section 401(a) and applicable subsections of
Section 410(b) of the Internal Revenue Code as of that date. The Plan has since
been amended; however, in the opinion of the Company's management, the Plan is
currently operating in compliance with the applicable provisions of the Internal
Revenue Code. Therefore, the plan administrator believes that the Plan is
qualified and the related trust was tax-exempt as of December 31, 2001 and 2000.
Accordingly, no provision for income taxes has been made in the accompanying
financial statements.
6. reconciliation to form 5500
The net assets of the Plan's funds available for benefits at December 31, 2001
and 2000 include $583,756 and $955,834, respectively, for participants who had
requested distributions from their accounts but had not yet been paid at
year-end. These amounts are reflected as benefit claims payable and are included
in benefit payments to participants or beneficiaries in the Form 5500 for the
Plan for the years ended December 31, 2001 and 2000. The following table
reconciles the Form 5500 to the financial statements as of and for the years
ended December 31, 2001 and 2000:
Net Assets Available
Benefits Distributions for Plan Benefits
Payable to Participants 2001 2000
------------ --------------- -------------- ---------------
Per financial statements $ 0 $180,679,839 $2,759,926,867 $2,791,671,249
Accrued benefit payments 583,756 583,756 (583,756) (955,834)
Reversal of 2000 accrual for
benefit payments 0 (955,834) 0 0
Per Form 5500 $583,756 $180,307,761 $2,759,343,111 $2,790,715,415
7. subsequent events
Distribution of 2001 Dividends
The Plan was amended to give participants the option to have distributed to them
all or a portion of the available dividends earned during 2001 on the Southern
Company stock held in their accounts. Payouts were made in March 2002.
Plan Merger
In May 2002, the board of directors approved a resolution to merge the Southern
Company Performance Sharing Plan into the Plan.
13
SCHEDULE I
Page 1 of 2
the southern company employee savings plan
schedule h, line 4i--schedule of assets (held at end of year)
December 31, 2001
Identity of Issuer, Borrower, Lessor,
or Similar Party and Description of Investment Cost Current Value
---------------------------------------------------------- ---- ---------------
*MERRILL LYNCH RETIREMENT PRESERVATION TRUST (a) $ 223,720,891
*MERRILL LYNCH EQUITY INDEX TRUST (Tier III) (a) 348,046,763
*MERRILL LYNCH SMALL CAP VALUE FUND, INC. (Class A) (a) 79,982,132
*MERRILL LYNCH GLOBAL ALLOCATION FUND, INC. (Class A) (a) 40,978,117
BRINSON U.S. EQUITY FUND (Class A) (a) 4,510,640
LOOMIS SAYLES SMALL CAP VALUE FUND (Administrative Class) (a) 6,626,267
FRANKLIN SMALL CAP GROWTH FUND (Class A) (a) 51,712,413
DAVIS REAL ESTATE FUND (Class A) (a) 4,183,847
DAVIS NEW YORK VENTURE FUND, INC. (Class A) (a) 41,319,774
MERCURY HW INTERNATIONAL VALUE FUND (Class I) (a) 18,557,616
PIMCO TOTAL RETURN FUND (Class A) (a) 21,964,431
PUTNAM GROWTH OPPORTUNITIES FUND (Class A) (a) 28,653,501
GOALMANAGER PORTFOLIOS:
Investment in registered securities:
Retirement Preservation Trust GoalManager (a) 983,196
Merrill Lynch Small Cap Value Fund, Inc. GoalManager (a) 1,922,048
Brinson U.S. Equity Fund--Class N GoalManager (a) 3,655,177
Mercury HW International Value Fund--Class I GoalManager (a) 3,280,017
PIMCO Total Return Fund--Class A GoalManager (a) 4,567,326
Merrill Lynch Equity Index Trust GoalManager (a) 4,837,275
14
Identity of Issuer, Borrower, Lessor,
or Similar Party and Description of Investment Cost Current Value
---------------------------------------------------------- ---- ---------------
*LOANS DUE FROM PARTICIPANTS (interest rates vary from
6.5% to 9.5% (a) $ 70,777,896
*MIRANT CORPORATION COMMON STOCK (a) 358,182,470
*SOUTHERN COMPANY COMMON STOCK--PARTICIPANT-DIRECTED PORTION (a) 731,119,632
*SOUTHERN COMPANY COMMON STOCK--NONPARTICIPANT-DIRECTED PORTION $353,605,492 702,944,786
--------------
Total investments $2,752,526,215
==============
*Represents a party in interest to the Plan.
(a) Participant-directed.
The accompanying notes are an integral part of this schedule.
15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Southern Company Employee Savings Plan Committee has duly caused this annual
report to be signed by the undersigned thereunto duly authorized.
THE SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
/s/G. Edison Holland, Jr.
G. Edison Holland Jr.
Executive Vice President and General Counsel
May 14, 2002
16
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated April 26, 2002, included in this annual report of
The Southern Company Employee Savings Plan on Form 11-K for the year ended
December 31, 2001 into the Plan's previously filed Registration Statement No.
333-44261.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
May 10, 2002
17