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
(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
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Commission File No. 1-13726
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
CHESAPEAKE ENERGY CORPORATION SAVINGS AND INCENTIVE
STOCK BONUS PLAN
6100 North Western Avenue
Oklahoma City, OK 73118
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CHESAPEAKE ENERGY CORPORATION
6100 North Western Avenue
Oklahoma City, OK 73118
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
INDEX
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Page
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits
As of December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for
Benefits for the Years Ended
December 31, 2001 and 2000 3
Notes to Financial Statements 4
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year),
As of December 31, 2001 9
Schedule H, Line 4j - Schedule of Reportable Transactions,
For the Year Ended December 31, 2001 10
Report of Independent Accountants
To the Participants and the Members of the Oversight Committee of the
Chesapeake Energy Corporation Savings and Incentive Stock Bonus 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 Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan (the
"Plan") at December 31, 2001 and 2000, and the changes in net assets available
for benefits for the years 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 audits. We
conducted our audits of these financial 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 schedules of Assets
(Held at End of Year) and Reportable Transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are 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. These supplemental schedules are the
responsibility of the Plan's management. These supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
June 19, 2002
Oklahoma City, Oklahoma
1
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31, 2001 and 2000
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December 31,
2001 2000
ASSETS ------------- -------------
Investments $ 20,727,877 $ 23,481,297
Contributions receivable:
Employer - 51,460
Participants - 50,393
Cash 20,530 10,746
------------- -------------
Total Assets $ 20,748,407 $ 23,593,896
============= =============
LIABILITIES
Accrued liabilites $ 27,319 $ -
------------- -------------
Net assets available for benefits $ 20,721,088 $ 23,593,896
============= =============
The accompanying notes are an integral part of these financial statements.
2
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Years Ended December 31, 2001 and 2000
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December 31,
2001 2000
----------- ------------
Additions to net assets attributed to:
Investment income:
Interest and dividends $ 216,172 $ 90,497
Net appreciation (depreciation) in
fair value of investments (6,773,115) 12,510,887
----------- ------------
Total investment income (loss) (6,556,943) 12,601,384
----------- ------------
Contributions:
Employer 1,837,636 1,383,109
Participants 2,298,617 1,866,900
----------- ------------
Total contributions 4,136,253 3,250,009
----------- ------------
Total additions (2,420,690) 15,851,393
----------- ------------
Deductions from net assets attributed to:
Benefits paid to participants 392,858 478,499
Administrative expenses 59,260 75,612
----------- ------------
Total deductions 452,118 554,111
----------- ------------
Net increase (decrease) (2,872,808) 15,297,282
Net assets at beginning of year 23,593,896 8,296,614
----------- ------------
Net assets at end of year $ 20,721,088 $ 23,593,896
============ ============
The accompanying notes are an integral part of these financial statements.
3
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE PLAN
The following is a brief summary of the various provisions of the
Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan
(the "Plan"). Participants should refer to the Plan agreement for a
complete description of the Plan's provisions.
GENERAL - The Plan is a defined contribution plan, and, as of December
31, 2001, covered all employees of Chesapeake Energy Corporation and
its subsidiaries (the "Company") who have completed three consecutive
months of employment and are age twenty-one or older. Effective January
1, 2002 the Plan was amended to exclude from the plan employees of
NOMAC Drilling Corporation, a subsidiary of the Company. The Plan is
subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
CONTRIBUTIONS - Each year, participants may contribute up to 15 percent
of pre-tax annual compensation, as defined in the Plan. Participants
may also contribute amounts representing rollover distributions from
other qualified plans. During 2001 and 2000, the Company contributed
100 percent of the first 10 percent of base compensation that a
participant contributed to the Plan. Effective January 1, 2002 the Plan
was amended to increase the maximum of employer matching contributions
to 100 percent of the first 15 percent of participant contributions.
Profit sharing contributions may be made at the discretion of the
Company's board of directors. No discretionary profit sharing
contributions were made in 2001 and 2000. Contributions are subject to
certain limitations.
The Company's matching contribution is used to purchase shares of
Chesapeake Energy Corporation Common Stock (the "Common Stock") on the
open market. Participants may also elect to direct all or a portion of
their contributions into the Common Stock.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contribution and allocations of the Company's
contribution and Plan earnings. Allocations are based on participant
earnings or 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 balance.
VESTING - Participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Company's matching and
profit sharing contributions plus actual earnings thereon is based on
years of credited service or participant's age. A participant will be
100 percent vested after seven years of credited service. Additionally,
a participant will become fully vested upon attaining age 55, early
retirement age under the plan, and completing 5 years of service.
PARTICIPANT NOTES RECEIVABLE - Participants may borrow from their
accounts a minimum of $1,000 up to a maximum equal to the lesser of
$50,000 or 50 percent of their vested account balance. Loan terms range
from one to five years or up to ten years for the purchase of a primary
residence. The loans are collateralized by the balance in the
participant's account and bear interest at the Prime Interest Rate.
Principal and interest is paid ratably through semi-
4
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE PLAN, Continued
monthly payroll deductions. Interest rates on loans outstanding at
December 31, 2001 ranged from 5.00% to 9.75%.
PAYMENT OF BENEFITS - Upon termination of service due to death,
retirement or separation from service, a participant may elect to
receive either a lump-sum amount equal to the value of the
participant's vested interest in his or her account, annual
installments, or have the value rolled over to another qualified plan
or IRA. Those participants who were Plan participants as of December
31, 1999 may elect to receive benefits in the form of annuity payments.
AMOUNTS FORFEITED - Forfeited nonvested amounts are first used to pay
administrative expenses of the Plan or to restore such amounts to
re-employed participants. Any remaining forfeitures are used to reduce
Company contributions into the Plan. Forfeited nonvested accounts
totaled $151,097 and $104,548 at December 31, 2001 and 2000,
respectively. During 2001 forfeited nonvested accounts of $124,957 were
used to reduce employer matching contributions and $28,540 to pay
administrative expenses of the Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared
under the accrual method of accounting.
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 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. Actual results could differ from
those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments
are stated at fair value. Shares of registered investment companies are
valued at quoted market prices which represent the net asset value of
shares held by the Plan at year-end. Participant loans receivable are
valued at outstanding principal balance, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Investment income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
The Plan presents, in the statement of changes in net assets available
for benefits, the net appreciation (depreciation) in the fair value of
investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
PAYMENT OF BENEFITS - Benefits are recorded when paid.
RISKS AND UNCERTAINTIES - Investment securities are exposed to various
risks, such as interest rate, market, and credit risk. Due to the level
of risk associated with certain investment
5
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
securities, it is at least reasonably possible that changes in value of
investment securities will occur in the near term and that such changes
could materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits.
3. INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's net assets:
December 31,
2001 2000
-------------- --------------
Chesapeake Energy Corporation Common Stock $ 13,066,600 * $ 17,295,431 *
Fidelity Retirement Money Market Fund 1,444,950 1,237,554
Spartan US Equity Index Fund 1,432,729 1,559,308
*Balances include nonparticipant-directed investments
The Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
For the Year Ended
December 31,
2001 2000
------------ ------------
Mutual funds $ (574,569) $ (306,466)
Chesapeake Energy Corporation Common Stock (6,198,546) 12,817,353
------------ ------------
$ (6,773,115) $ 12,510,887
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6
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS
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4. NONPARTICIPANT - DIRECTED INVESTMENTS
Investment in the Chesapeake Energy Corporation common stock includes
balances arising from nonparticipant-directed employer matching
contributions, as well as participant-directed contributions and
transfers from other investment options. Information about the net
assets and the significant components of the changes in net assets
relating to investments in the Chesapeake Energy Corporation common
stock is as follows:
For the Year Ended
December 31,
2001 2000
------------ ------------
Net assets - Chesapeake Energy
Corporation common stock $ 13,066,600 $ 17,346,891
------------ ------------
For the Year Ended
December 31,
2001 2000
------------ ------------
Changes in net assets:
Contributions $ 2,288,132 $ 1,782,750
Net appreciation (depreciation) (6,198,546) 12,817,353
Benefits paid to participants (218,364) (236,770)
Transfers from (to)
other investment options, net (151,513) (368,320)
------------ ------------
$ (4,280,291) $ 13,995,013
============ ============
5. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of Chesapeake Energy Corporation
common stock. These transactions represent investments in the Company,
and, therefore, qualify as party-in-interest transactions. Further,
certain Plan investments are shares of mutual funds managed by Fidelity
Investments. Fidelity Management Trust Company is the trustee as
defined by the Plan, and, therefore, transactions in mutual funds
managed by Fidelity Investments qualify as party-in-interest
transactions.
6. TAX STATUS
The Plan obtained its latest determination letter on April 22, 1997, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code (the "IRC"). The Plan has been amended since
receiving the determination letter. However, the plan administrator and
the plan's tax counsel believe the Plan is currently designed and being
operated in compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been included in the
plan's financial statements.
7
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS
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7. PLAN TERMINATION
Although the Company has not expressed any intent to do so, the Company
reserves the right to change, amend or discontinue the Plan at any
time, subject to the provisions of ERISA. In the event of
discontinuance of the Plan, participants will become 100 percent vested
in their accounts.
8. CONCENTRATION OF INVESTMENTS
As of December 31, 2001 net assets available for benefits in the amount
of $13,066,600 and $6,988,243 were invested in Chesapeake Energy Common
Stock and mutual funds managed by Fidelity Investments, respectively.
9. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
as of December 31, 2001, as reflected in the accompanying financial
statements to the Form 5500:
December 31,
2001
-------------
Net assets available for benefits per the
financial statements $ 20,721,088
Add: Accrued administrative expenses 27,319
-------------
Net assets available for benefits per the
Form 5500 $ 20,748,407
=============
The following is a reconciliation of administrative expenses for the
year ended December 31, 2001, as reflected in the accompanying
financial statements to the Form 5500:
Year Ended
December 31,
2001
-------------
Administrative expenses per the
financial statements $ 59,260
Less: Accrued administrative expenses 27,319
-------------
Administrative expenses per the Form 5500 $ 31,941
=============
Administrative expenses are recorded on the Form 5500 when paid.
8
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
Schedule H, Line 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
As of December 31, 2001
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Description of
Investment Including
Maturity Date,
Rate of Interest,
Identity of Issue, Borrower, Collateral, Par or Current
Lessor, or Similar Party Maturity Value Cost Value
------------------------ -------------- ---- -----
*Chesapeake Energy Corporation Common Stock $ 6,583,237 $ 13,066,600
*Fidelity Equity Inc. Mutual Funds ** 324,389
*Fidelity Growth Co. Mutual Funds ** 488,225
*Fidelity OTC Portfolio Mutual Funds ** 257,151
*Fidelity Low Priced Stock Fund Mutual Funds ** 996,245
*Fidelity Aggressive Growth Mutual Funds ** 382,581
*Fidelity Diversified
International Fund Mutual Funds ** 809,919
*Fidelity Freedom Income Mutual Funds ** 20,325
*Fidelity Freedom 2000 Mutual Funds ** 45,262
*Fidelity Freedom 2010 Mutual Funds ** 367,469
*Fidelity Freedom 2020 Mutual Funds ** 280,107
*Fidelity Freedom 2030 Mutual Funds ** 138,891
*Fidelity Retirement Money Market Mutual Funds ** 1,444,950
*Spartan US Equity Index Mutual Funds ** 1,432,729
Brokeragelink participant-
directed brokerage accounts Common Stock ** 175,725
Alger Small Cap Institutional Mutual Funds ** 44,238
Templeton Foreign A Mutual Funds ** 43,818
Participant Loans Interest Rates Ranging
From 5.00% to 9.75% ** 409,253
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$ 20,727,877
=============
*Identifies parties-in-interest
**Identifies participant-directed investment options
for which presentation of cost in the Schedule
of Assets (Held at End of Year) is not required.
9
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
Schedule H, Line 4j - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 2001
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Description Total Total
of Number of Number of Purchase Selling Net Gain
Asset Purchases Sales Price Price (Loss)
Chesapeake Energy
Corporation
Stock Purchases: 30 - $2,031,011 - -
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS
PLAN
/s/ Mary Whitson
---------------------------------
Mary Whitson, Trustee
Date: June 27, 2002
EXHIBIT INDEX
Exhibit Description
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23.......................................Consent of PricewaterhouseCoopers LLP
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-07255 and 333-30324) of Chesapeake Energy
Corporation of our report dated June 19, 2002 relating to the financial
statements of Chesapeake Energy Corporation Savings and Incentive Stock Bonus
Plan, which appears in this Form 11-K.
PricewaterhouseCoopers LLP
Oklahoma City, Oklahoma
June 26, 2002