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 Period February 1, 2002 Through February 28, 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 Schedule
Page
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Independent Auditors' Report .............................................. 1
Statements of Net Assets Available for Plan Benefits
at February 28, 2002 and January 31, 2002 ............................. 2
Statements of Changes in Net Assets Available for Plan Benefits for
the Month Ended February 28, 2002 and Year Ended January 31, 2002 ..... 3
Notes to Financial Statements February 28, 2002 and January 31, 2002 ...... 4
Exhibits:
23 - Consent of KPMG LLP ............................................. 11
* All other schedules required by Section 2520.103-10 of the Department of
Labor's 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 statements of net assets available for plan
benefits of the Mitchell Energy & Development Corp. Thrift and Savings Plan (the
Plan) as of February 28, 2002, and January 31, 2002, and the related statements
of changes in net assets available for plan benefits for the month ended
February 28, 2002, and the year ended January 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 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 audits provide a
reasonable basis for our opinion.
As described in Note 2, on February 28, 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
month ended February 28, 2002, and 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 February 28, 2002, and January 31, 2002, and the changes in its net assets
available for plan benefits for the month ended February 28, 2002, and the year
ended January 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Oklahoma City, Oklahoma
July 12, 2002
Mitchell Energy & Development Corp. Thrift and Savings Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AT FEBRUARY 28, 2002 AND JANUARY 31, 2002
February 28, January 31,
2002 2002
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Investments, at fair value:
Mutual funds $ - $ 58,005,519
Common collective trusts ................ - 97,160,465
Devon Energy Corporation common stock ... - 8,054,044
Participants' loans ..................... - 4,616,316
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Total Investments - 167,836,344
Receivables:
Accrued interest and dividends .......... - 6,478
Other receivables ....................... - 76,543
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Net assets available for Plan benefits ....... $ - $167,919,365
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See accompanying notes to financial statements.
2
Mitchell Energy & Development Corp. Thrift and Savings Plan
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE MONTH ENDED FEBRUARY 28, 2002 AND YEAR ENDED JANUARY 31, 2002
Month Ended Year Ended
February 28, January 31,
2002 2001
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Earnings on investments:
Mutual fund dividend distributions ..................................... $ 9,119 $ 1,697,231
Interest income from investments ....................................... 29,736 4,149,846
Cash dividends on common stock ......................................... - 353,022
Interest income from participant loans ................................. 18,034 498,635
Net appreciation (depreciation) of investments:
Mutual funds ...................................................... (417,884) (10,995,271)
Common collective trusts .......................................... (110,923) (990,249)
Company's common stock ............................................ (4,987,427) 4,752,027
Contributions
Employee ............................................................... 163,757 3,734,221
Employer ............................................................... 119,796 2,499,611
Distributions to withdrawing members ....................................... (16,076,128) (12,992,706)
Participant services charges and other ..................................... (38,626) 4,265
Transfer to other plan ..................................................... (146,628,819) -
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Decrease in net assets ..................................................... (167,919,365) (7,289,368)
Net assets available for Plan benefits, beginning of period ................ 167,919,365 175,208,733
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Net assets available for Plan benefits, end of period ...................... $ - $ 167,919,365
==================== =====================
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See accompanying notes to financial statements.
3
Mitchell Energy & Development Corp. Thrift and Savings Plan
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2002 AND JANUARY 31, 2002
(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 (the Plan
Administrator).
(2) Merger of the Plan and the Devon Energy Corporation Incentive Savings Plan
On February 28, 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.
(3) Summary of the Plan and Significant Accounting Policies
General
The Plan was a defined contribution plan covering only former employees of MEDC
and was subject to the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Full-time employees were eligible to become members of the Plan
on the first of the month following their completion of a one-month eligibility
period. Other employees were eligible to become members 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) had broad responsibilities regarding the supervision and
administration of the Plan. The Plan Administrator received no compensation from
the Plan for its services. Except for fees for loan processing and investment
advice services charged to participants, administrative expenses were paid by
the Plan Administrator.
4
Trustee
Plan investments were held by Merrill Lynch Trust Company of Somerset, New
Jersey (Trustee), as trustee of the Plan. The Trustee received contributions and
made payments to participants in accordance with the terms of the Plan.
Basis of accounting
The records of the Plan were 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.
Investment valuation
For financial statement purposes, mutual funds and Devon Common Stock were
carried at market values which were determined based upon published market
quotations. The Merrill Lynch Retirement Preservation Trust (MLRPT) was valued
at $1 per unit. MLRPT invested in guaranteed investment contracts which were
valued at contract value which approximated fair value. The effective yield of
MLRPT for the month ended February 28, 2002 was 6.1% and for the year ended
January 31, 2002 was 6.4%. The Merrill Lynch Equity Index Trust I Fund was
valued at quoted market prices of its underlying investments and participant
loans were valued at their principal amounts which approximated market.
Investment income and recognition
Purchases and sales were recorded on the trade date. Realized gains (losses) on
sales of investments and unrealized appreciation (depreciation) of investments
were reported as net appreciation (depreciation) of investments in the
statements of changes in net assets available for plan benefits. The average
cost method was used to determine the cost of securities sold. Interest income
was recorded on an accrual basis, and dividends were 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.
Contributions and investment options
Participants could 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
period the income was deferred and contributed to the Plan. Participants could
also make after-tax contributions to the Plan which did not receive the
favorable tax treatment. The total of a participant's pretax and after-tax
contributions could not exceed 19% of base salary.
The Plan Administrator made contributions to the Plan of an amount equal to 100%
of a participant's contributions, up to 6% of base salary. Each participant's
account was credited with his or her contributions and the applicable matching
contributions and an allocation of the Plan's earnings. Allocations of earnings
were based on the proportion that each participant's account balance bore to the
total of all participant account balances for each investment.
Members could direct the Trustee to invest their contributions in one or more of
the investment options offered by the Plan. The investment options included
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 were three goal manager options that invested in certain of the
available investment options.
5
Vesting
Participants were fully vested in their contributions, and the earnings or loss
generated therefrom, at all times. A participant became vested in the Plan
Administrator's matching contributions upon completing five years of vesting
service. A year of vesting service was defined as the performance of 1,000 hours
of service in a Plan year.
Forfeitures
When a member who had not yet vested terminated employment, the value of his/her
share of Plan Administrator contributions was forfeited and used to reduce the
Plan Administrator's future contributions.
Distributions, withdrawals and loans
A withdrawing participant was 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, was also entitled to
receive 100% of the value of applicable matching contributions.
Distributions of participant account balances in the Common Stock Fund were made
in kind with fractional shares paid in cash. Participants could request that
distributions from the Common Stock Fund be in cash, subject to certain
established procedures. Distributions from all other investment funds were paid
in cash.
Withdrawals of participants' pretax contributions were limited by Section
1.401(k)-1 of the Internal Revenue Code to instances of a participant's death,
retirement, disability, separation from service, attainment of age 59-1/2 or
conditions of severe hardship. One withdrawal could be made during a
twelve-month period. Fund balances arising from a participants' rollover of
balances from other plans could be withdrawn at any time.
Participants were eligible to borrow up to the lesser of 50% of the vested value
of their total Plan investments or $50,000. Such loans were evidenced by
promissory notes, which were secured by the participant's account and bore
interest at a quoted prime rate plus two percent. Account balances pledged to
secure loans could not be withdrawn from the Plan.
(4) Federal Income Tax Status
Since the Plan was 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 February 28, 2002 and January 31, 2002.
6
(5) 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, $2,085
of approved distributions remained unpaid. These approved distributions were
paid in February 2002. 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 one month ended February 28, 2002 and the year
ended January 31, 2002:
Net Assets Available Distributions to
For Plan Benefits Withdrawing Members
-------------------- -----------------------------------
Month Ended Year Ended
January 31, 2002 February 28, 2002 January 31, 2002
---------------- ----------------- ----------------
Amounts per financial statements .......... $167,919,365 $16,076,128 $12,992,706
Balance of/change in
accrued distributions .................. (2,085) (2,085) 2,085
---------------- --------------- ---------------
Form 5500 amounts ......................... $167,917,280 $16,074,043 $12,994,791
================ =============== ===============
(6) 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.
Merrill Lynch Retirement Preservation Trust Fund ......... $91,660,792
Davis New York Venture Fund .............................. 8,728,792
7
The following exhibits have been filed as part of this Form 11-K, and are
incorporated herein by reference.
Exhibit No. Description
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23 Consent of KPMG LLP
8
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: Devon Energy Corporation,
Plan Administrator
By: /s/ Danny J. Heatly
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Danny J. Heatly
Vice President-Accounting
August 27, 2002
9
EXHIBIT INDEX
Exhibit No. Description Method of Filing
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23 Consent of KPMG LLP Filed herewith electronically
10