File No. 001-16189
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
ANNUAL REPORT
PURSUANT TO SECTION 15(d)
of the
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
BAY STATE GAS COMPANY SAVINGS PLAN
FOR OPERATING EMPLOYEES AND TRUST
NiSource Inc.
801 E. 96th Avenue
Merrillville, IN 46410
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING
EMPLOYEES AND TRUST
Financial Statements as of December 31, 2002 and
2001 and for the Year Ended December 31, 2002,
Supplemental Schedule as of December 31, 2002,
and Independent Auditors' Report
BAY STATE GAS COMPANY SAVINGS PLAN
FOR OPERATING EMPLOYEES AND TRUST
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 2002 and 2001 2
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2002 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE*:
Form 5500 Schedule H, Line 4i -- Schedule of Assets (Held at End of Year) as of December 31, 2002 8
* Schedules not filed herewith are omitted because of the absence of the
conditions under which they are required by the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974.
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of the
Bay State Gas Company Savings Plan
For Operating Employees and Trust
Merrillville, Indiana
We have audited the accompanying statements of net assets available for benefits
of the Bay State Gas Company Savings Plan for Operating Employees and Trust (the
"Plan") as of December 31, 2002 and 2001, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2002. 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 in accordance with auditing standards generally accepted
in the United States of America. 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of 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.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents 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 audit of the basic 2002 financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic 2002 financial
statements taken as a whole.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
June 1, 2003
BAY STATE GAS COMPANY SAVINGS PLAN
FOR OPERATING EMPLOYEES AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2002 AND 2001
ASSETS 2002 2001
Investments, at fair value:
Mutual funds $13,144,281
NiSource Inc. Common Stock Fund 4,826,318
Money market fund 3,657,011
Interest bearing cash $23,986,691
Participant loans 1,301,057 1,280,622
----------- -----------
Total investments 22,928,667 25,267,313
----------- -----------
Receivables:
Participant contributions 39,873 154,732
Employer contributions 27,319 34,097
Accrued interest and dividends 933
----------- -----------
Total receivables 67,192 189,762
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $22,995,859 $25,457,075
=========== ===========
See notes to financial statements.
-2-
BAY STATE GAS COMPANY SAVINGS PLAN
FOR OPERATING EMPLOYEES AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002
ADDITIONS:
Contributions:
Participant $ 2,057,343
Employer 685,798
-----------
Total additions 2,743,141
-----------
DEDUCTIONS:
Investment income (loss):
Net depreciation in fair value of investments (4,357,282)
Dividends and interest 619,251
-----------
Investment loss, net (3,738,031)
Benefits paid to participants (1,195,846)
Transfers, net (267,557)
Administrative expenses (2,923)
-----------
Total deductions (5,204,357)
-----------
NET DECREASE (2,461,216)
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 25,457,075
-----------
NET ASSETS AVAILABLE FOR BENEFITS--End of year $22,995,859
===========
See notes to financial statements.
-3-
BAY STATE GAS COMPANY SAVINGS PLAN
FOR OPERATING EMPLOYEES AND TRUST
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF THE PLAN
Bay State Gas Company (the "Company") is a wholly owned subsidiary of
NiSource Inc. The following description of the Bay State Gas Company
Savings Plan for Operating Employees and Trust (the "Plan") provides
general information regarding the Plan. Participants should refer to the
Plan document for a more complete description of the Plan's provisions.
GENERAL--The Plan was established effective January 1, 1988. It is a
defined contribution plan available to substantially all employees of the
Company who are covered by a collective bargaining agreement between the
Company and any union that specifically provides for participation in the
Plan. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"), as amended.
PLAN ADMINISTRATION--The Company serves as administrator and sponsor of
the Plan. NiSource Inc. maintains an administrative committee appointed by
the Board of Directors, which has the responsibility to assist the Company
in administering the Plan. Merrill Lynch Trust Company held the Plan's
assets and executed all investment transactions through December 31, 2001.
Effective January 1, 2002, Fidelity Management Trust Company (the
"Trustee") holds all of the Plan's assets and executes all investment
transactions.
CONTRIBUTIONS--Each year, participants may contribute up to 15% of
compensation (as defined in the Plan) on a pre-tax basis. Participants may
also contribute amounts representing distributions from other qualified
defined benefit or defined contribution plans. Contributions are subject
to certain limitations. Participants direct the investment of their
contributions into various investment options offered by the Plan. The
Plan currently offers twenty-seven mutual funds, one money market fund and
one common stock fund as investment options for participants.
The Company makes contributions to the Plan in accordance with the various
governing collective bargaining agreements as set forth in the Plan
document. For certain employees, the Company makes no contribution. For
other employees, the Company makes contributions from 2.5% to 3.5% of
eligible compensation. The matching Company contribution is allocated
according to the participants' directed accounts.
PARTICIPANT ACCOUNTS--Each participant's account is credited with the
participant's contribution and allocations of (a) the Company's
contribution and (b) Plan earnings, and charged with an allocation of
certain administrative expenses.
VESTING--Participants are fully vested in their accounts at all times.
PARTICIPANT LOANS--Participants that have participated in the Plan for at
least one year may borrow up to 50% from their accounts a minimum of
$1,000 up to a maximum of $50,000. The loans are secured by the balance in
the participant's account and bear interest at rates that range from 4.75%
to 10.5%, which are commensurate with local prevailing rates as determined
by the provisions of the Plan and subject to periodic review by the
administrative committee. Principal and interest are paid ratably through
payroll deductions over a period not to exceed five years, unless the loan
is used to purchase the participant's primary residence, which allows
repayment up to 15 years.
-4-
PAYMENT OF BENEFITS--On termination of service due to death, disability,
retirement or other reasons, a participant may elect to receive a
distribution in (1) a single lump sum; (2) a portion paid in a lump sum,
and the remainder paid later (partial payment); or (3) periodic
installments over a period not to exceed the life expectancy of the
participant and his or her beneficiary. Participants may elect that a
distribution in the form of a lump sum payment be made in the form of
whole shares of NiSource Inc. stock and cash in lieu of fractional shares
(to the extent the distribution consists of amounts from the NiSource Inc.
Common Stock Fund). If the amount payable under the Plan to any
participant or beneficiary is less than or equal to $5,000, the committee
will direct that such amount be paid in a lump sum.
TRANSFERS BETWEEN PLANS--Transfers between plans occur when employees
transfer out of the Union but stay with NiSource Inc., which results in a
transfer of any related balances between this Plan and other plans.
Amounts are included in transfers, net on the accompanying statement of
changes in net assets available for benefits.
EMPLOYEE STOCK OWNERSHIP PLAN--Effective January 1, 2002, the NiSource
Inc. Common Stock Fund was changed to operate as an Employee Stock
Ownership Plan (ESOP). As an ESOP, under the terms of this plan,
participants may diversify their investment attributable to employer match
at any time after they reach age 50. Participants may also elect to have
dividends paid to them in cash or reinvested in the fund.
VOTING RIGHTS OF NISOURCE INC. COMMON STOCK FUND PARTICIPANTS--Each
participant in the NiSource Inc. Common Stock Fund is entitled to direct
the Trustee as to the manner of voting at each meeting of shareholders,
all shares of NiSource Inc. common stock (including fractional shares),
represented by the value of the participant's interest in the NiSource
Inc. Common Stock Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING--The financial statements of the Plan were prepared
using the accrual basis of accounting.
USE OF ESTIMATES--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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. Actual results could
differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION--The Plan's investments are
stated at fair value. Participant loans are valued at cost, which
approximates fair value. Quoted market prices are used to value
investments. Purchases and sales of securities are recorded on a
trade-date basis. Dividends are recorded on the record date.
PAYMENT OF BENEFITS--Benefits are recorded when paid.
ADMINISTRATIVE EXPENSES--Most administrative expenses of the Plan are paid
by the Company. Certain other expenses of the Plan such as investment
manager fees and broker fees are paid by the Plan.
-5-
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
net assets.
December 31,
-------------------------------------
2002 2001
NiSource Inc. Common Stock Fund $ 4,826,318
Fidelity Growth Fund 2,126,693
Fidelity Overseas Fund 1,588,822
Fidelity Retirement Money Market Fund 3,657,011
Fidelity Spartan U.S. Equity Fund 3,983,272
Interest bearing cash $ 23,986,691
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value as follows:
Mutual funds $ (3,515,388)
NiSource Inc. Common Stock Fund (841,894)
------------
$ (4,357,282)
============
The Plan provides for investments in mutual funds and common stock that,
in general, are exposed to various risks, such as interest rate, credit
and overall market volatility risks. 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.
4. RELATED-PARTY TRANSACTIONS
The Plan invests in NiSource Inc. common stock. Since NiSource Inc. is the
parent of the Company, any investment transactions involving NiSource Inc.
common stock qualify as party-in-interest transactions. Additionally,
certain Plan investments are shares of mutual funds managed by the
Fidelity Management Trust Company. Fidelity Management Trust Company is
the Trustee, as defined by the Plan and therefore, these transactions
qualify as party-in-interest transactions.
5. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company reserves
the right under the Plan document to terminate the Plan at any time,
subject to the provisions of ERISA. In the event of Plan termination, the
rights of each participant to all amounts then credited to his or her
account will continue to be nonforfeitable.
6. TAX STATUS
The Internal Revenue Service (the "IRS") has determined and informed the
Company by a letter dated January 17, 2001, that the Plan is designed in
accordance with applicable sections of the Internal Revenue Code (the
"IRC"). Although the Plan has been amended since receiving the
determination letter, the Plan administrator believes that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
******
-6-
SUPPLEMENTAL SCHEDULE
BAY STATE GAS COMPANY SAVINGS PLAN
FOR OPERATING EMPLOYEES AND TRUST
EIN: 04-3442797, PLAN NUMBER 011
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR) AS OF
DECEMBER 31, 2002
IDENTITY OF ISSUER, DESCRIPTION OF INVESTMENT,
BORROWER, LESSOR, INCLUDING MATURITY DATE, RATE OF INTEREST, FAIR
OR SIMILAR PARTY COLLATERAL AND PAR OR MATURITY VALUE VALUE
* NiSource Inc. Common Stock Fund $ 4,826,318
* Fidelity Investments Puritan Fund 41,316
* Fidelity Investments Magellan Fund 194,383
* Fidelity Investments Contrafund 259,427
* Fidelity Investments Equity Income Fund 62,452
* Fidelity Investments Growth Fund 2,126,693
* Fidelity Investments Growth & Income Fund 102,814
* Fidelity Investments Intermediate Bond Fund 319,049
* Fidelity Investments Overseas Fund 1,588,522
* Fidelity Investments Europe Fund 13,661
* Fidelity Investments Pacific Basin Fund 16,251
* Fidelity Investments Balanced Fund 87,496
* Fidelity Investments Small Cap Independent Fund 104,369
* Fidelity Investments Freedom Income Fund 276,578
* Fidelity Investments Freedom 2010 Fund 748,862
* Fidelity Investments Freedom 2020 Fund 748,255
* Fidelity Investments Freedom 2030 Fund 451,140
* Fidelity Investments Freedom 2040 Fund 729,292
* Fidelity Investments Retirement Money Market Fund 3,657,011
* Fidelity Investments Spartan U.S. Equity Fund 3,983,272
PIMCO Investments Total Return Fund (institutional) 284,045
PIMCO Investments Long-term Government Fund 236,936
PIMCO Investments Low-duration Fund (institutional) 131,400
PIMCO Investments StockPLUS Fund (institutional) 11,630
Berger Investments Small Cap Value Fund (institutional) 393,823
Dreyfus Investments Emerging Leaders Fund 84,914
American Funds Investments EuroPacific Growth Fund 68,830
Vanguard Investments U.S. Growth Investor Shares Fund 64,167
Morgan Stanley Investments U.S. Small Cap Core Fund 14,704
* Various Plan participants Participant loans, with interest rates ranging from 4.75%
to 10.5% and maturity dates ranging from January 1, 2003
to June 17, 2008. 1,301,057
------------
Total assets (held at end of year) $ 22,928,667
============
* Denotes a party-in-interest
-8-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES AND TRUST
By /s/David J. Vajda
----------------------------------------------------------------
Vice President & Treasurer, NiSource Inc.
Member, Administrative Committee
Each of the undersigned, in his capacity as an officer of NiSource Inc., hereby
certifies as required by 18 U.S.C. Section 1350, that, to his knowledge, the
accompanying annual report on Form 11-K of the Bay State Gas Company Savings
Plan For Operating Employees and Trust for the fiscal year ended on December 31,
2002 fully complies with the requirements of 15 U.S.C. Section 78m and that the
information contained in the accompanying annual report fairly presents, in all
material respects, the net assets of the Plan available for benefits and changes
in those net assets.
/s/ Gary L. Neale /s/ Michael W. O'Donnell
- ---------------------------------- ------------------------------------
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer