UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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
Commission file number 000-31167
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
Genencor International, Inc. Employee Retirement Investment Plan
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B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
GENENCOR INTERNATIONAL, INC.
925 Page Mill Road
Palo Alto, California 94304
1. Plan financial statements and schedule prepared in accordance with the
financial reporting requirements of ERISA are included below.
2. A Consent of Independent Accountants is included as Exhibit 23.1.
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Index to Financial Statements and Supplemental Schedule
CONTENTS PAGE
-------- ----
Report of Independent Auditors 3
Financial Statements
Statement of Net Assets Available for Benefits
at December 31, 2002 and 2001 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2002 5
Notes to Financial Statements 6
Supplemental Schedule*
Schedule of Assets Held at End of Year - Schedule H 11
Signature 12
Index to Exhibits 13
* Certain schedules required by Section 2520.103-10 of the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act
of 1974 have not been included because they are not
applicable.
2
REPORT OF INDEPENDENT AUDITORS
To the Participants and Administrator of the
Genencor International, Inc.
Employee Retirement Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Genencor International, Inc. Employee Retirement Investment 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 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 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. This
supplemental schedule is the responsibility of the Plan's management. 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/ PricewaterhouseCoopers LLP
San Jose, California
May 23, 2003
3
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Statement of Net Assets Available for Benefits
December 31, 2002 and 2001
ASSETS 2002 2001
------ ---- ----
Interest-bearing cash $ 44,867 $ --
Investments at fair value 50,785,165 55,618,875
----------- -----------
Total investments 50,830,032 55,618,875
Receivables:
Employer contributions 1,879,288 1,607,650
Participant contributions -- 90,981
Interest -- 3,646
----------- -----------
Total receivables 1,879,288 1,702,277
----------- -----------
Net assets available for benefits $52,709,320 $57,321,152
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The accompanying notes are an integral part of the financial statements.
4
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002
INVESTMENT INCOME/(LOSS):
Interest $ 86,856
Dividends 758,061
Net depreciation in fair market value of
investments (11,414,234)
------------
Total investment income/(loss) (10,569,317)
------------
ADDITIONS/(DEDUCTIONS):
Contributions:
Employer 2,911,472
Participant 5,527,981
------------
Total contributions 8,439,453
Benefit distributions (2,480,418)
Administrative expenses (1,550)
------------
Total additions/(deductions) 5,957,485
------------
Net decrease in net assets available
for benefits (4,611,832)
------------
Net assets available for benefits
at beginning of year 57,321,152
------------
Net assets available for benefits
at end of year $ 52,709,320
============
The accompanying notes are an integral part of the financial statements.
5
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Notes to Financial Statements
December 31, 2002
1. PLAN DESCRIPTION
The following description of the Genencor International, Inc. Employee
Retirement Investment Plan (the Plan) is provided for general information
purposes only. Participants should refer to the Plan document for more
complete information.
The Plan is a defined contribution plan covering all eligible employees
of Genencor International, Inc. (the Company) and is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA). The Plan was established effective February 1, 1990. A
Retirement Committee, consisting of members of the Company's management,
acts as Plan Administrator.
Participant Contributions
Substantially all full-time non-union employees of the Company in the
United States are eligible to participate in the Plan. As a result of the
Economic Growth and Tax Relief Reconciliation Act enacted by the United
States Congress during 2002, the Plan was amended as of May 1, 2002 to
allow participants to contribute up to 50% of their pre-tax earnings to
the Plan. Prior to the amendment, participants could contribute up to 15%
of their pre-tax earnings to the Plan. Employee contributions are
allocated at the discretion of the participant among thirteen investment
options.
Employer Contributions
The Company matches participant contributions in the following manner:
100% of the employee's annual cumulative contributions for the first 2%
contributed; and 50% of the participant's annual cumulative contributions
for the next 2% contributed. The matching contributions are allocated to
participant accounts following the end of the pay period to which the
matching contributions apply.
In addition, the Plan requires the Company to contribute, on an annual
basis, 3% of each eligible employee's annual compensation, whether the
participant is otherwise contributing or noncontributing. Employer
contributions are allocated at the discretion of the participant among
thirteen investment options.
Vesting
Participants are immediately 100% vested in their voluntary contributions
and the Company's matching contributions. Participants become vested in
the Company's annual 3% defined contribution based on the following
schedule:
SERVICE PERCENT VESTED
------- --------------
Less than one year 0%
More than one year and less than two years 50%
More than two years 100%
6
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Notes to Financial Statements
December 31, 2002
1. PLAN DESCRIPTION - CONTINUED
Participant Loans
A participant can obtain a loan from the Plan for the lesser of $50,000
or 50% of their vested account balance reduced by any previously
outstanding loans. Interest rates on loans are set at 150 basis points
above the prime rate on the first day of the month in which the loan is
originated. Loans are to be repaid over a period not to exceed five years
with the exception of loans being used to purchase a principal residence,
which may not exceed fifteen years. On December 31, 2002, loans
outstanding have interest rates ranging from 6.3% - 11.0% with maturity
dates ranging from January 3, 2003 through August 19, 2017.
Participant Accounts
Each participant's account is adjusted by (a) the participant's
contributions; (b) the Company's contributions; (c) the participant's
loan principal, interest and origination fees; and (d) a pro-rata
allocation of the respective fund's investment activity. The total
benefit to which a participant is entitled is equal to the vested balance
in the participant's account.
Benefit Payments
Participants (or their beneficiaries) are eligible to receive vested
benefits upon retirement, death, or when they cease to be an employee of
the Company. Participants can also withdraw all or any portion of their
vested amount in the event of undue financial hardship. Normal retirement
age is 65. Participants are entitled to 100% of their account balance at
retirement. Participants may elect to receive their benefits in the form
of a single lump-sum payment or in annual installments.
Forfeitures
Forfeited, non-vested amounts will be used, first, to pay plan expenses
and then to reduce employer contributions to the Plan. After these
offsets, any remaining forfeited, non-vested amounts will be allocated to
participant accounts as employer contributions in addition to employer
matching and 3% contributions stated above. During the year ended
December 31, 2002, $101,411 of forfeitures were used to reduce employer
contributions to the Plan.
Trustee
T. Rowe Price Trust Company (T. Rowe Price) (the Trustee) is trustee for
the Plan. T. Rowe Price holds all plan assets and distributes them among
the various investment options elected by the participants. T. Rowe Price
also makes disbursements from the trust for benefit payments upon
receiving proper authorization and benefit information from the Plan
Administrator.
7
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Notes to Financial Statements
December 31, 2002
1. PLAN DESCRIPTION - CONTINUED
Plan Termination
Termination of the Plan may be effected by a written instrument adopted
by the Board of Directors of the Company (the Board). At such time, the
accounts of all participants shall immediately be fully vested and
nonforfeitable. The Board shall select, and direct the Retirement
Committee to follow, one of the following alternatives: (a) The Board may
keep the Plan in existence, making distributions to participants and
beneficiaries as they become entitled thereto, then liquidate the Plan;
(b) The Board may direct the Trustee to distribute amounts in the
accounts of all participants, then liquidate the Plan after all benefits
have been paid out; or (c) The Board may transfer all assets and
liabilities of the Plan to another continuing employee benefit trust as
described in Section 401(a) of the Internal Revenue Code (the Code).
Plan Amendments
The Board has the right to amend the Plan in any and all respects at any
time. Amendments made to the Plan document during 2002 include Code
changes required by the Economic Growth and Tax Relief Reconciliation
Act. During 2001 the Plan document was restated to include required Code
changes and previous amendments.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan have been prepared on the accrual
basis of accounting. Benefits are recorded when paid. Investments are
valued at fair value based on market quotations. Participant loans
receivable are valued at original loan principal less principal
repayments.
Administrative Expenses
The Company paid substantially all administrative expenses of the Plan in
2002.
Use of Estimates
The preparation of the Plan's financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the Plan Administrator to make significant estimates and
assumptions that affect the reported amounts of net assets available for
benefits at the date of the financial statements and the changes in net
assets available for benefits during the reporting period and, when
applicable, disclosures of contingent assets and liabilities at the date
of the financial statements. Actual results could differ from those
estimates.
8
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Notes to Financial Statements
December 31, 2002
2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Risks and Uncertainties
The Plan provides for various investment options. Investment securities
are exposed to various risks, such as interest rate, market, and credit
risks. Due to the level of risk associated with certain investment
securities, it is possible that changes in the values of investment
securities will occur in the near term and that such changes could
materially affect participant's account balances and the amounts reported
in the Statement of Net Assets Available for Benefits.
Net Depreciation in Fair Value of Investments
The Plan presents in the Statement of Changes in Net Assets Available for
Benefits the net depreciation in the fair value of its investments, which
consists of the realized gains and losses and the unrealized
appreciation/depreciation on those investments.
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's net assets at December 31:
2002 2001
---------- ----------
Prime Reserve Fund $7,366,497 $7,720,361
Growth Stock Fund 6,005,346 8,152,192
Stable Value Fund 3,737,269 --
International Stock Fund 3,746,614 4,506,130
Small Cap Value Fund 3,593,729 --
Science & Technology Fund 5,665,779 9,076,536
Equity Income Fund 5,279,098 5,694,260
Blue Chip Growth Fund 2,614,762 2,949,170
Spectrum Income Fund 2,616,058 --
Equity Index 500 Fund 2,687,796 --
New America Growth Fund -- 3,511,274
During 2002, the Plan's investments depreciated in value by $11,414,234
as follows:
Mutual funds $10,879,927
Common stock 534,307
On April 1, 2001, Genencor International, Inc. Common Stock became
available as an investment option to participants of the Plan.
9
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Notes to Financial Statements
December 31, 2002
4. PARTY-IN-INTEREST
T. Rowe Price, trustee and record keeper for the Plan, also manages
twelve of the thirteen investment options available to participants.
5. FEDERAL INCOME TAX STATUS
The Plan received a favorable determination letter dated May 23, 2002
from the Internal Revenue Service, stating that the Plan, as then
designed, was a qualified plan in accordance with applicable sections of
the Code and its corresponding trust is exempt from taxation. The Plan
Administrator believes the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Code.
6. RECONCILIATION TO FORM 5500
The net assets available for plan benefits included in Form 5500 exclude
$4,396 of deemed distributions. The Statement of Net Assets Available for
Benefits includes these as part of investments as of December 31, 2002
and 2001.
10
GENENCOR INTERNATIONAL, INC.
Employee Retirement Investment Plan
Schedule H, line 4i - "Schedule of Assets (Held at End of Year)"
December 31, 2002
DESCRIPTION OF NUMBER OF
IDENTITY OF ISSUER INVESTMENT SHARES CURRENT VALUE
------------------ -------------- --------- -------------
Prime Reserve Fund * Mutual Fund 7,366,497 $ 7,366,497
International Stock Fund * Mutual Fund 421,916 3,746,614
Growth Stock Fund * Mutual Fund 323,216 6,005,346
New America Growth Fund * Mutual Fund 111,461 2,458,833
Science & Technology Fund * Mutual Fund 455,815 5,665,779
Balanced Fund * Mutual Fund 141,619 2,196,509
Equity Income Fund * Mutual Fund 266,756 5,279,098
Spectrum Income Fund * Mutual Fund 243,128 2,616,058
Stable Value Fund * Common Trust Fund 3,737,269 3,737,269
Equity Index 500 Fund * Mutual Fund 113,553 2,687,796
Blue Chip Growth Fund * Mutual Fund 119,124 2,614,762
Small Cap Value Fund * Mutual Fund 163,798 3,593,729
Genencor International, Inc.* Common Stock 182,721 1,787,013
Participant loans receivable N/A 1,029,862
-----------
Total investments $50,785,165
===========
Cost information omitted, as investments are participant directed.
* Denotes Party-in-Interest
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed by the undersigned hereunto duly
authorized.
GENENCOR INTERNATIONAL, INC.
EMPLOYEE RETIREMENT INVESTMENT PLAN
By: Genencor International, Inc.,
Plan Administrator
Date: June 25, 2003 By: /s/ Raymond J. Land
-------------- -------------------
Raymond J. Land
Senior Vice President and
Chief Financial Officer
12
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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23.1 Consent of Independent Auditors
99.1 Certifications Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
13