UNITED STATES
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 1-11377
CINERGY CORP. NON-UNION EMPLOYEES' 401(k) PLAN
(Full title of the plan)
CINERGY CORP.
(Name of issuer of the securities held pursuant to the plan)
139 East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices)
Cinergy Corp. Non-Union Employees'
401(k) Plan
Index to Financial Statements and Exhibits
Page
No.
---
(a) Financial Statements
Report of Independent Public Accountants 3
Statements of Net Assets Available for Benefits
as of December 31, 2001 and 2000 4
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 2001 5
Notes to Financial Statements 6-9
Financial Statement Schedule (As required by the
Employee Retirement Income Security Act):
Schedule I - Schedule of Assets Held at End of Year
as of December 31, 2001 10
(b) Exhibit 23 - Consent of Independent Public Accountants
(c) Exhibit 99 - Confirmation Letter of Receipt of Certain
Representations from Arthur Andersen LLP
Report of Independent Public Accountants
- ----------------------------------------
To the Plan Administrator of the
Cinergy Corp. Non-Union Employees' 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Cinergy CORP. Non-Union Employees' 401(k) Plan (the 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 Plan's
management. Our responsibility is to express an opinion on these financial
statements and 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. 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, 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 supplemental schedule (Schedule I) 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 supplemental schedule is
the responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our 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.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
May 20, 2002.
Cinergy Corp. Non-Union Employees' 401(k) Plan
Statements of Net Assets Available for Benefits
As of December 31, 2001 and 2000
December 31,
ASSETS: 2001 2000
- ------- ---- ----
Investments, at fair value (See Notes 3 and 4) 397,982,087 $402,831,213
Employer's contribution receivable 2,985,517 3,539,120
--------- ---------
Net assets available for benefits $400,967,604 $406,370,333
============ ============
The accompanying notes and schedule are an integral part of these statements.
Cinergy Corp. Non-Union Employees' 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2001
ADDITIONS:
Additions to net assets attributed to:
Investment (loss) income:
Net depreciation in fair value
of investments (See Notes 3 and 4) $(29,612,795)
Interest and dividends 15,021,201
----------
Net investment loss (14,591,594)
Contributions:
Participant 17,491,289
Employer 8,981,903
Rollover 503,067
-------
26,976,259
----------
Total additions 12,384,665
DEDUCTIONS:
Deductions from net assets attributed to:
Benefits paid to participants (21,164,621)
-----------
Total deductions (21,164,621)
-----------
Net decrease prior to transfers (8,779,956)
Interplan transfers (See Note 2) 3,377,227
- ---------
(5,402,729)
Net assets available for benefits:
Beginning of year 406,370,333
-----------
End of year $400,967,604
============
The accompanying notes and schedule are an integral part of these statements.
Cinergy Corp. Non-Union Employees' 401(k) Plan
Notes to Financial Statements
December 31, 2001 and 2000
(1) Plan Description-
----------------
The following description of the Cinergy Corp. Non-Union Employees'
401(k) Plan (the Plan) provides only general information. Participants
should refer to the Plan Document for a more complete description of
the Plan's provisions.
(a) General--The Plan is a defined contribution plan covering non-union
-------
employees of Cinergy Corp. and subsidiaries (collectively, the
Company) who meet minimum age and service requirements. The Plan is
administered by the Cinergy Benefits Committee and trusteed by the
Fidelity Management Trust Company (Fidelity). The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
(ERISA), as amended. The administrative expenses of the Plan are paid
by the Company.
Effective January 1, 2000, the Plan was amended to modify the
definition of a change in control of the Company. This amendment
conforms the plan document to a standard definition of what
constitutes a change in control by reducing the concentration of
voting power held by any one person or group from more than 50% to
more than 20%. Also, this amendment clarifies the sources available to
the Company for contributing the employer match to the Cinergy Common
Stock Fund (i.e. authorized and/or unissued shares of common stock,
treasury stock, etc.). Finally, this amendment provides that payroll
deductions that are used to repay a participant loan may only be
stopped under an order from a Federal Bankruptcy Court.
Effective January 1, 2000, the Plan was amended to permit the Company
to automatically enroll new full time employees eligible for the Plan
at a 1% deferral rate. The contributions made to the plan on the
employee's behalf will be invested in one or more funds selected in
accordance with procedures established by the plan administrator. If
an employee chooses not to participate, Fidelity, the recordkeeper
must be contacted by the employee to change the deferral rate to 0%.
Effective January 1, 2001, the Plan was further amended to increase
the 1% tax contribution for automatic enrollment to 3%.
(b) Contributions--Under the Plan, participants may contribute up to 15%
-------------
of annual pre-tax compensation, as defined in the Plan document. In
addition, a participant may make after-tax contributions to the Plan
which, when combined with pre-tax contributions, may not exceed 15% of
base pay. Pre-tax and after-tax contributions are subject to certain
limitations. The pre-tax and after-tax contributions are invested by
the trustee, as directed by each participant, in one or more
investment funds, including the Cinergy Common Stock Fund.
The Company matches 60% of the first 5% of base pay contributed by
each participant. An additional incentive match of up to 40% of the
first 5% of base pay that a participant contributes may be contributed
at the discretion of the Company's Board of Directors. For those
employees who do not contribute to the Plan, the Company contributes
an incentive match assuming the employee contributed 1% of base pay.
All employer contributions are invested by the trustee in the Cinergy
Common Stock Fund. The employer contributions must remain in the
Cinergy Common Stock Fund until the participant reaches age 50 and are
shown in Note 3 as "Non-participant Directed" funds until the
participant elects to transfer the funds to another investment option.
(c) Vesting--Participants are immediately vested in all contributions and
-------
earnings thereon.
(d) Participant Accounts--Each participant's account is credited with the
--------------------
participant's contribution and allocation of the Company's
contribution and plan earnings. Allocations are based on the
participant's account balance or contribution percentage as defined in
the plan document. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested
account.
A participant may elect or change investment funds and/or the
contribution allocation percentage among funds at any time.
(e) Payments of Benefits--Participants are generally eligible to receive
---------------------
distributions of assets from the Plan upon termination of employment
including retirement, death, or disability. Distributions are paid in
a lump sum for vested benefits of $5,000 or less. Distributions are
paid in a lump sum or up to ten annual installments (at the election
of the participant) for vested benefits greater than $5,000. Active
participants are also eligible to apply to the Plan administrator for
"hardship" withdrawals from their pre-tax account in accordance with
Plan provisions.
(f) Participant Loans--Subject to certain limitations, participants may
------------------
apply for loans from their pre-tax account balances. Interest on the
loan is set at the prime rate plus 50 basis points at the time of
borrowing, and the loans are secured by the balance in the
participant's account. Loans are to be repaid within 54 months through
regular payroll deductions.
(2) Significant Accounting Policies-
--------------------------------
(a) Basis of Accounting--The accompanying financial statements of the Plan
-------------------
are prepared on an accrual basis.
(b) Investment Valuation and Income Recognition--Investments of the Plan
--------------------------------------------
are stated at fair value. Shares of registered investment companies
are valued at quoted redemption prices which represent the net asset
value of shares held by the Plan at year-end. Company common stock is
valued at its quoted market price. Participant loans are valued at
cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
Transfers of assets between the Plan, the Cinergy Corp. Union
Employees' 401(k) Plan, and the Cinergy Corp. Union Employee's Savings
Incentive Plan occur as a result of a change in employee status
between the union classification and the exempt and non-exempt
classification. Such transfers are reflected as interplan transfers in
the statement of changes in net assets available for benefits.
(c) 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 reported amounts of assets and liabilities and changes
therein, and disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from
those estimates.
(d) Payments of Benefits--Benefit payments are recorded when paid.
--------------------
(3) Non-participant Directed Investments-
------------------------------------
Information about the net assets and the significant components of the
changes in net assets relating to the non-participant directed investments
is as follows:
December 31,
2001 2000
---- ----
Net assets:
Cinergy Common Stock Fund $105,400,613 $100,582,951
============ ============
Year Ended
December 31, 2001
-----------------
Changes in net assets:
Contributions $8,981,903
Dividends 5,201,112
Net appreciation (4,085,454)
Benefits paid to participants (3,305,081)
Transfers to participant-directed investments (2,649,752)
Inter plan transfers 674,934
-------
$4,817,662
==========
(4) Investments-
-----------
The fair value of individual investments that represent 5% or more of the
Plan's net assets available for benefits as of December 31, 2001 and 2000
are as follows:
2001 2000
---- ----
Fidelity Magellan Fund 82,715,224 90,766,261
Fidelity Equity-Income Fund 58,109,723 62,185,038
* Cinergy Common Stock Fund 173,390,671 174,754,357
* $105,400,613 is non-participant directed funds.
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $29,612,795 as follows:
Mutual funds $21,979,811
Common stock 7,632,984
---------
$29,612,795
===========
(5) Federal Income Tax Status-
-------------------------
The Internal Revenue Service has determined and informed the Plan by letter
dated June 26, 2000, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). The
Plan has been amended since receiving the determination letter. However,
the Plan administrator believes the Plan is designed and being operated in
compliance with the applicable requirements of the IRC.
(6) Plan Termination-
----------------
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
(7) Related Party Transactions-
--------------------------
Certain Plan investments are shares of mutual funds managed by Fidelity.
Fidelity is the Trustee as defined by the Plan and therefore, these
transactions qualify as party-in-interest transactions. The Cinergy Common
Stock Fund holds common stock of the Company as defined by the Plan and
therefore, these transactions qualify as party-in-interest transactions.
(8) Investment Risk-
---------------
Investment securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility risks. Further, 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 accompanying statements of net assets available
for benefits.
(9) Subsequent Event -
-------------------
Effective January 1, 2002, the Plan was restated to allow the portion of
the Plan that is held at any one time in the Cinergy Common Stock Fund to
be designated as an Employee Stock Ownership Plan within the meaning of
Section 4975(e)(7) of the Code designed to invest primarily in Cinergy
Corp. stock and is intended to qualify under Section 401(a) of the Code as
a stock bonus plan.
In addition, the portion of the Plan that at any one time is not held in
the Cinergy Common Stock Fund is a profit sharing plan for purposes of
Section 401(a)(27)(B) of the Code that is intended to qualify under Section
401(a). This profit sharing plan includes a cash or deferred arrangement
intended to qualify under Section 401(k) of the Code.
SCHEDULE I
Cinergy Corp. Non-Union Employees' 401(k) Plan
EIN: 31-1385023
Plan Number: 102
Schedule H, Part IV, Line 4i--Schedule of Assets Held at End of Year
As of December 31, 2001
Identity of Issuer, Borrower, Description of Investment, Including Maturity Date,
Lessor, or Similar Party Rate of Interest, Collateral, and Par or Maturity Value Cost Current Value
------------------------ ------------------------------------------------------- ---- -------------
* Cinergy Corp. Common Stock
Fund $131,603,367 $173,390,671
* Fidelity Investments Magellan Fund ** 82,715,224
* Fidelity Investments Equity-Income Fund ** 58,109,723
* Fidelity Investments U.S. Bond Index Fund ** 8,963,565
* Fidelity Investments Diversified International Stock Fund ** 7,214,921
* Fidelity Investments Low-Priced Stock Fund ** 10,006,246
* Fidelity Investments Freedom Income Fund ** 828,504
* Fidelity Investments Freedom 2000 Fund ** 1,161,639
* Fidelity Investments Freedom 2010 Fund ** 3,072,977
* Fidelity Investments Freedom 2020 Fund ** 2,452,364
* Fidelity Investments Freedom 2030 Fund ** 1,804,957
* Fidelity Investments Freedom 2040 Funds ** 75,909
* Fidelity Investments Blue Chip Fund ** 10,500,112
* Fidelity Investments Spartan U.S. Equity Index Fund ** 4,575,960
Franklin Investments Small Mid-Cap Growth Fund ** 9,138,661
* Fidelity Investments Retirement Money Market Fund ** 16,330,085
* Various Plan Participants Participant Loans (interest rates ranging from 7.00-10.50%) ** 7,640,568
Total assets held at end of year $397,982,087
* Denotes a party-in-interest
** Cost omitted for participant directed investments
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Committee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
CINERGY CORP. NON-UNION EMPLOYEES'
401(K) PLAN
-----------
By /s/ DARLENE HUGHES
--------------
Darlene Hughes
Plan Administrator
May 31, 2002
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated May 20, 2002 included in the Annual Report on Form
11-K for the year ended December 31, 2001 of the Cinergy Corp. Non-Union
Employees' 401(k) Plan, into Cinergy Corp.'s previously filed Registration
Statements File No. 33-56067 and 333-72898.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
May 31, 2002.
CINergy (CIN) Inactive
Filed: 31 May 02, 12:00am