UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ___________
COMMISSION FILE NUMBER 000-30176
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MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
(FULL TITLE OF THE PLAN AND ADDRESS OF THE PLAN, IF DIFFERENT FROM
THAT OF THE ISSUER NAMED BELOW)
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DEVON ENERGY CORPORATION
20 N. BROADWAY
OKLAHOMA CITY, OKLAHOMA 73102
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND
THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE)
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Page
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Financial Statements:
Independent Auditors' Reports.......................................................... 1
Statements of Net Assets Available for Plan Benefits at January 31, 2002 and 2001...... 3
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended January 31, 2002 and 2001........................................ 4
Notes to Financial Statements.......................................................... 5
Supplemental Schedule:*
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) at January 31, 2002..... 9
Exhibits:
23 - Consent of KPMG LLP............................................................... 13
23.1 - Consent of Arthur Andersen LLP.................................................. 14
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* All other schedules required by Section 2520.103-10 of the Department of
Labor Rules and Regulations for Reporting and Disclosure under ERISA have
been omitted because they are not applicable or the required information is
shown in the financial statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
The Plan Administrator and Participants
Mitchell Energy & Development Corp. Thrift and Savings Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the Mitchell Energy & Development Corp. Thrift and Savings Plan (the
Plan) as of January 31, 2002, and the related statement of changes in net assets
available for plan benefits for the year then ended. 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 audit.
We conducted our audit 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 misstatements. 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 the Plan's management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As described in Note 6, on March 1, 2002 the Plan was merged into the Devon
Energy Corporation Incentive Savings Plan. The merger had no effect on the basis
of accounting used to prepare the Plan's financial statements as of and for the
year ended January 31, 2002.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of January 31, 2002, and the changes in its net assets available for plan
benefits for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audit was made 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) as of January 31, 2002, is presented for the purposes 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. The 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 financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
KPMG LLP
Oklahoma City, Oklahoma
July 12, 2002
1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(THIS REPORT IS A COPY OF A REPORT ISSUED BY ARTHUR ANDERSEN LLP ON JULY 25,
2001. REPRESENTATIVES OF ARTHUR ANDERSEN LLP ARE NOT AVAILABLE TO REISSUE THIS
REPORT FOR THIS FORM 11-K.)
To the Administrative Committee of the Mitchell
Energy & Development Corp. Thrift and Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Mitchell Energy & Development Corp. Thrift and Savings Plan at
January 31, 2001 and 2000, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
and the supplemental schedule referred to below are the responsibility of the
Administrative Committee. Our responsibility is to express an opinion on these
financial statements and the supplemental 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 plan benefits of the
Mitchell Energy & Development Corp. Thrift and Savings Plan at January 31, 2001
and 2000, and the changes in net assets available for plan benefits for the
years then ended 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 of assets (held
at end of year) at January 31, 2001 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. 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.
ARTHUR ANDERSEN LLP
Houston, Texas
July 25, 2001
2
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AT JANUARY 31, 2002 AND 2001
2002 2001
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ASSETS
Investments, at fair value:
Mutual funds $ 58,005,519 $ 64,809,493
Common collective trusts 97,160,465 61,596,923
Devon Energy Corporation common stock 8,054,044 --
Mitchell Energy & Development Corp. common stock -- 43,359,299
Participants' loans 4,616,316 5,173,934
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Total Investments 167,836,344 174,939,649
Receivables:
Accrued interest and dividends 6,478 1,709
Other receivables 76,543 267,375
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $167,919,365 $175,208,733
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See accompanying notes to financial statements.
3
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED JANUARY 31, 2002 AND 2001
2002 2001
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Earnings on investments:
Mutual fund dividend distributions $ 1,697,231 $ 5,641,291
Interest income from investments 4,149,846 3,307,090
Cash dividends on common stock 353,022 830,636
Interest income from participant loans 498,635 512,226
Net appreciation (depreciation) of investments:
Mutual funds (10,995,271) (5,263,147)
Common collective trusts (990,249) (105,160)
Company's common stock 4,752,027 30,847,710
Contributions
Employee (including rollovers of $63,258 and $222,566) 3,734,221 3,614,089
Employer 2,499,611 2,369,899
Distributions to withdrawing members (12,992,706) (15,477,321)
Participant services charges and other 4,265 (9,873)
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Increase (decrease) in net assets (7,289,368) 26,267,440
NET ASSETS AVAILABLE FOR PLAN BENEFITS, BEGINNING OF YEAR 175,208,733 148,941,293
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NET ASSETS AVAILABLE FOR PLAN BENEFITS, END OF YEAR $ 167,919,365 $ 175,208,733
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See accompanying notes to financial statements.
4
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
Notes To Financial Statements
January 31, 2002 and 2001
(1) MERGER OF MITCHELL ENERGY & DEVELOPMENT CORP. AND DEVON ENERGY CORPORATION
On January 24, 2002, Mitchell Energy & Development Corp. (MEDC) and Devon Energy
Corporation (Devon) closed their merger of the two companies. As a result, MEDC
shareholders, including the Mitchell Energy & Development Corp. Thrift and
Savings Plan (the Plan), received .585 shares of Devon common stock and $31 cash
for each share of MEDC common stock owned. The Plan name has remained intact;
however, all active participants of the Plan are now employed by Devon.
(2) SUMMARY OF THE PLAN AND SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The Plan is a defined contribution plan covering only former employees of MEDC
and is subject to the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Full-time employees are eligible to become participants of the
Plan on the first of the month following their completion of a one-month
eligibility period. Other employees are eligible to become participants after
completing one year of participation service as defined in the Plan's
provisions. Participants should refer to the Plan document for a complete
description of the Plan's provisions.
AMENDMENT TO THE PLAN
The Plan was restated effective February 1, 2000, to incorporate all prior Plan
amendments. On May 1, 2001, the Plan was amended to remove a benefit
disbursement option that provided for periodic payments.
ADMINISTRATION
The Plan Administrator (MEDC prior to January 24, 2002, and Devon subsequent to
that date) has broad responsibilities regarding the supervision and
administration of the Plan. The Plan Administrator receives no compensation from
the Plan for its services. Except for fees for loan processing and investment
advice services charged to participants, administrative expenses have been paid
by the Plan Administrator. Should the Plan Administrator choose not to pay such
expenses in the future, however, they would be paid by the Plan and charged to
the participants' accounts.
TRUSTEE
Plan investments are held by Merrill Lynch Trust Company of Somerset, New Jersey
(Trustee), as trustee of the Plan. The Trustee receives contributions and makes
payments to participants in accordance with the terms of the Plan.
BASIS OF ACCOUNTING
The records of the Plan are maintained on the accrual basis of accounting in
conformity with accounting principles and practices as permitted by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
ERISA and accounting principles generally accepted in the United States of
America.
5
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
Notes To Financial Statements
January 31, 2002 and 2001
INVESTMENT VALUATION
For financial statement purposes, mutual funds and Devon Common Stock are
carried at fair values which are determined based upon published market
quotations. The Merrill Lynch Retirement Preservation Trust (MLRPT) is valued at
$1 per unit. MLRPT invests in guaranteed investment contracts which are valued
at contract value which approximates fair value. The effective yield of MLPRT
for the years ended January 31, 2002 and 2001, was 6.4% and 6.7%, respectively.
The Merrill Lynch Equity Index Trust I Fund is valued at quoted market prices of
its underlying investments and participant loans are valued at their principal
amounts which approximate fair value.
INVESTMENT INCOME AND RECOGNITION
Purchases and sales are recorded on the trade date. Realized gains (losses) on
sales of investments and unrealized appreciation (depreciation) of investments
are reported as net appreciation (depreciation) of investments in the statements
of changes in net assets available for plan benefits. The average cost method is
used to determine the cost of securities sold. Interest income is recorded on an
accrual basis, and dividends are recorded on the ex-dividend date.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the use of estimates
and assumptions that affect the accompanying financial statements and
disclosures. Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various investments in common collective trusts, mutual
funds and common stocks. Investment securities, in general, are exposed to
various risks, including interest rate, credit and overall market volatility
risks. Because of the risks associated with investment securities, it is
reasonably possible that changes in their values will occur in the near term.
CONTRIBUTIONS AND INVESTMENT OPTIONS
Participants may elect, with certain limitations, to contribute from 1% to 19%
of their base salary to the Plan on a pretax basis. Amounts so deferred, as
limited by applicable Federal income tax regulations, are not included in a
participant's adjusted gross income for Federal income tax purposes in the year
the income is deferred and contributed to the Plan. Participants may also make
after-tax contributions to the Plan which do not receive the favorable tax
treatment. The total of a participant's pretax and after-tax contributions may
not exceed 19% of base salary.
The Plan Administrator makes contributions to the Plan of an amount equal to
100% of a member's contributions, up to 6% of base salary. Each participant's
account is credited with his or her contributions and the applicable matching
contributions and an allocation of the Plan's earnings. Allocations of earnings
are based on the proportion that each participant's account balance bears to the
total of all participant account balances for each investment.
Participants may direct the Trustee to invest their contributions in one or more
of the investment options offered by the Plan. The investment options include
Devon (MEDC prior to January 24, 2002) common stock, fifteen mutual funds and
two common collective trusts trusteed by Merrill Lynch Trust Company. In
addition, there are three goal manager options that invest in certain of the
available investment options.
6
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
Notes To Financial Statements
January 31, 2002 and 2001
VESTING
Participants are fully vested in their contributions, and the earnings or loss
generated therefrom, at all times. A participant becomes vested in the Plan
Administrator's matching contributions upon completing five years of vesting
service. A year of vesting service is defined as the performance of 1,000 hours
of service in a Plan year.
FORFEITURES
When a participant who has not yet vested terminates employment, the value of
his/her share of Plan Administrator contributions is forfeited and used to
reduce Devon's future contributions. During the Plan years ended January 31,
2002 and 2001, forfeitures of $186,014 and $131,358 including interest occurred,
and forfeitures of $177,387 and $159,866 were used to reduce the Plan
Administrator's contributions. At January 31, 2002 and 2001, an additional
$9,668 and $1,041, respectively, was available to reduce the Plan
Administrator's future contributions.
DISTRIBUTIONS, WITHDRAWALS AND LOANS
A withdrawing participant is entitled to receive the value of his/her
contributions and, upon retirement, death, permanent disability or termination
after having completed five years of vesting service, is also entitled to
receive 100% of the value of applicable matching contributions.
Distributions of participant account balances invested in the Common Stock Fund
are made in kind with fractional shares paid in cash. Participants may request
that distributions from the Common Stock Fund be in cash, subject to certain
established procedures. Distributions from all other investment funds are paid
in cash.
Withdrawals of participants' pretax contributions are limited by Section
1.401(k)-1 of the Internal Revenue Code to instances of a member's death,
retirement, disability, separation from service, attainment of age 59-1/2 or
conditions of severe hardship. One withdrawal may be made during a twelve-month
period. Fund balances arising from a participant's rollover of balances from
other plans may be withdrawn at any time.
Participants are eligible to borrow up to the lesser of 50% of the vested value
of their total Plan investments or $50,000. Such loans are evidenced by
promissory notes, which are secured by the participant's account and bear
interest at a quoted prime rate plus two percent. Account balances pledged to
secure loans may not be withdrawn from the Plan.
TERMINATION
The Plan may be terminated, amended or modified by the Board of Directors of
Devon, subject to the provisions of ERISA. If the Plan is terminated, and after
all expenses are paid, any unallocated contributions, forfeitures, income and
expenses would be allocated among the participants' accounts. All participants
would then be fully vested and would be entitled to receive all of their
then-existing account balances.
(3) FEDERAL INCOME TAX STATUS
Since the Plan is designed to operate as a non-tax-paying entity, income taxes
have not been provided in its financial statements. The Plan obtained its latest
determination letter on February 7, 2002, 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 Code). Therefore, the Plan
Administrator believes that the Plan was qualified and the related trust was
tax-exempt as of January 31, 2002 and 2001.
7
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
Notes To Financial Statements
January 31, 2002 and 2001
(4) FORM 5500 REPORTING
Although distributions to participants must be reported on a cash basis in the
Plan's financial statements, the instructions for Form 5500 require that such
transactions be reported when approved for payment. At January 31, 2002 and
2001, $2,085 and $138,450 of approved distributions remained unpaid,
respectively. A reconciliation follows of resultant differences between amounts
included in the accompanying financial statements and amounts reported in the
Plan's Form 5500 for the year ended January 31:
Net Assets Available Distributions to
For Plan Benefits Withdrawing Member
-------------------------------- --------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Amounts per financial statements $ 167,919,365 $ 175,208,733 $ 12,992,706 $ 15,477,321
Balance of/change in accrued distributions (2,085) (138,450) (136,365) 51,309
-------------- -------------- -------------- --------------
Form 5500 amounts $ 167,917,280 $ 175,070,283 $ 12,856,341 $ 15,528,630
============== ============== ============== ==============
(5) PLAN INVESTMENT ASSETS
The following table presents the fair values of investments that exceeded 5% of
the Plan's assets available for plan benefits at January 31, 2002 and 2001.
January 31, 2002 January 31, 2001
---------------- ----------------
Company Stock Fund (a)(b) 8,054,044 43,359,299
Merrill Lynch Retirement Preservation Trust Fund 91,660,792 56,017,847
Davis New York Venture Fund 8,728,792 9,504,112
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(a) Devon common stock at January 31, 2002. MEDC common stock at January 31,
2001.
(b) Represents an investment that exceeded 5% of the Plan's net assets available
for Plan benefits at January 31, 2001, but was less than 5% of the Plan's
net assets available for Plan benefits at January 31, 2002.
(6) SUBSEQUENT EVENT
On March 1, 2002, the Plan was merged into the Devon Energy Corporation
Incentive Savings Plan (the Devon Plan). Participants' accounts were transferred
to the Devon Plan and participants became eligible to participate under the
agreement and amendments of the Devon Plan. Under the provisions of the Devon
Plan, participants may elect to contribute from 1% to 15% of their annual base
pay, subject to limitations under the Internal Revenue Code. Devon may match
participants' contributions in amounts determined annually by the Board of
Directors. Currently, Devon is contributing amounts equal to 100% of each
participant's contribution, with such matching contribution being limited to the
lesser of 6% of the participant's contribution or $11,000 for participants under
age 50 and $12,000 for participants over age 50.
8
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
SCHEDULE H, LINE 4i -SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AT JANUARY 31, 2002
Current Shares/
Identity of Issue/Description Value Units
----------------------------- --------------- ----------
Mutual Funds
AIM Value Fund $ 6,432,268 614,940
Alger MidCap Growth Retirement Portfolio 5,139,809 358,175
Alliance Premier Growth Fund, Inc. 1,461,785 75,897
Davis New York Venture Fund, Inc. 8,728,792 355,552
Franklin Income Fund 1,305,200 598,716
John Hancock Small Cap Growth Fund 3,999,821 427,331
Massachusetts Investors Growth Stock Fund 3,166,105 254,920
Merrill Lynch Basic Value Fund, Inc.* 7,289,737 253,644
Merrill Lynch Capital Fund, Inc.* 5,893,592 222,148
Merrill Lynch Global Allocation Fund, Inc.* 2,284,939 178,930
Oppenheimer Main Street Growth and Income Fund 5,723,696 177,920
Pilgrim Worldwide Growth Fund 2,077,948 130,771
PIMCO Long-term U.S. Government Fund 932,309 89,818
PIMCO Total Return Fund 1,237,687 117,316
Templeton Foreign Fund 2,331,831 328,232
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58,005,519
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Common Collective Trusts
Merrill Lynch Equity Index Trust I Fund* 5,499,673 69,257
Merrill Lynch Retirement Preservation Trust* 91,660,792 91,660,792
---------------
97,160,465
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Devon Energy Corporation Common Stock* 8,054,044 216,390
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Participants' loans, at interest rates ranging from 6.75% to 11.5%* 4,616,316
---------------
$ 167,836,344
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* Party-in-interest to the Plan.
See accompanying independent auditors' report.
9
The following exhibits have been filed as part of this Form 11-K, and are
incorporated herein by reference.
Exhibit No. Description
23 Consent of KPMG LLP
23.1 Consent of Arthur Andersen LLP LLP
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, persons who
administer the Plan have duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
MITCHELL ENERGY & DEVELOPMENT CORP. THRIFT AND SAVINGS PLAN
By: /s/ DANNY J. HEATLY
--------------------------------------
Danny J. Heatly
Vice President - Accounting
July 29, 2002
11
EXHIBIT INDEX
Exhibit No. Description Method of Filing
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23 Consent of KPMG LLP Filed herewith electronically
23.1 Consent of Arthur Andersen LLP Filed herewith electronically