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UNITED STATES
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
For the fiscal year ended December 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 001-14039
A. Full title of plan and the address of the plan, if different from that
of the issuer named below:
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS & PROTECTION PLAN
B: Name of the issuer of the securities held pursuant to the plan and the
address of its executive office:
CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET
NATCHEZ, MISSISSIPPI 39120
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The Callon Petroleum Company Employee Savings and Protection Plan (the "Callon
Petroleum Company Employee Savings and Protection Plan") is subject to the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Attached hereto are the financial statements of the Callon Petroleum
Company Employee Savings and Protection Plan for the fiscal year ended December
31, 2002 prepared in accordance with the financial reporting requirements of
ERISA.
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND
PROTECTION PLAN
Employer I. D. Number 94-0744280
Plan Number 002
December 31, 2002 and 2001 and
Year Ended December 31, 2002
CONTENTS
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Independent Auditor's Report 1
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Financial Statements
Statements of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 9
Supplementary Information
Schedule of Assets (Held at End of Year) 10 - 13
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INDEPENDENT AUDITOR'S REPORT
Plan Administrators
Callon Petroleum Company
Employee Savings and Protection Plan
We have audited the accompanying statements of net assets available for benefits
of Callon Petroleum Company Employee Savings and Protection 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 audits 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 Callon Petroleum
Company Employee Savings and Protection 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 made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment as of December 31, 2002 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 United States
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 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.
/s/ Horne CPA Group
Jackson, Mississippi
October 6, 2003
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
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ASSETS
Investments
Participant directed
Pooled separate accounts $7,106,627 $4,362,802
Participant loans 778,344 650,256
Deposit with insurance company at contract value - 2,863,758
Cash value of life insurance 79,777 85,808
Employer securities 595,504 -
Nonparticipant directed
Employer securities - 853,565
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Total Investments 8,560,252 8,816,189
---------- ----------
Employer Contribution Receivable 81,729 94,734
---------- ----------
Total assets $8,641,981 $8,910,923
========== ==========
Net Assets Available for Benefits $8,641,981 $8,910,923
========== ==========
See accompanying notes.
2
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
Statement of Changes in Net Assets
Available for Benefits
Year Ended December 31, 2002
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Additions to Net Assets Attributed to
Investment Income (Loss)
Net depreciation in fair value of investments $(1,559,934)
Interest 39,986
Dividends 84,296
Decrease in cash surrender value of life insurance (6,031)
-----------
(1,441,683)
-----------
Contributions
Employer -- cash 358,412
Employer -- noncash 274,738
Employee 573,216
Rollovers 9,120
Insurance premiums 8,309
-----------
1,223,795
-----------
Other Income 1,002
-----------
Total Net Additions (216,886)
-----------
Deductions from Net Assets Attributed to
Benefits paid to participants 40,987
Insurance premiums 8,309
Administrative expenses 2,760
-----------
Total Deductions 52,056
-----------
Net Decrease (268,942)
Net Assets Available for Plan Benefits
Beginning of Year 8,910,923
-----------
End of Year $ 8,641,981
===========
See accompanying notes.
3
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
December 31, 2002 and 2001 and
Year Ended December 31, 2002
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF THE PLAN
The following description of the Callon Petroleum Company Employee Savings and
Protection Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of the Plan's
provisions.
GENERAL
Employees become eligible to participate in the Plan on the first eligibility
date of their employment and attainment of age twenty-one (21). Effective
January 1, 2002, eligibility dates are the first day of each month. Prior to
2002, eligibility dates were the first day of each calendar quarter. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
CONTRIBUTIONS
Participating employees may defer up to $11,000 ($12,000 if over age 50) in 2002
and $10,500 in 2001 of their eligible compensation. For the year ended December
31, 2002, the Company contributed a 2.5 percent non-matching contribution in
cash and a 2.5 percent non-matching contribution in the form of Callon Petroleum
Company common stock for each employee's eligible compensation. The Company also
contributed a matching contribution at the rate of .3125 percent in cash and
..3125 percent in stock for every 1 percent that was deferred by the participant,
limited to a maximum matching contribution by the company of 2.5 percent in cash
and 2.5 percent in stock. For the year ended December 31, 2001, the Company
contributed a 1 percent non-matching contribution in cash and a 1 percent
non-matching contribution in the form of Callon Petroleum Company common stock
for each eligible employee. The Company made a 50 percent matching cash
contribution of each employee's deferred income. This Company matching
contribution was limited to 4 percent of the employee's eligible compensation.
In addition, the Company contributed Callon Petroleum Company common stock equal
to its matching cash contributions.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution and
earnings thereon and an allocation of (a) the Company's contribution, and (b)
Plan earnings. Allocations are based on participant compensation or account
balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's account.
4
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
December 31, 2002 and 2001 and
Year Ended December 31, 2002
NOTES TO FINANCIAL STATEMENTS
NOTE 1. CONTINUED
INVESTMENT OPTIONS
Effective August 1, 2002, participants direct contributions, including employer
cash matching contributions, into any of the investment options offered by ING.
Prior to August 2002, participants could direct their contributions into
investment options offered by Equitable Life Assurance Society ("Equitable").
Participants may change their investment options daily.
Vesting
Participants are immediately vested in their voluntary contributions plus
earnings thereon and in the Company's contributions and earnings thereon.
Participant Loans
Loans are available to participants on a reasonably equivalent basis, at a
minimum amount of $1,000 and bearing interest at a reasonable rate. Participants
have up to 5 years to repay the loan unless it is for a principal residence, in
which case the repayment period is 30 years. Each loan is secured by the
borrowing participant's vested account balance; however, additional collateral
may also be required. For the year ended December 31, 2002, the Plan allows
participants to borrow up to seven loans at a time, which consist of five
regular loans and two residential loans. The maximum of any new loans, when
added to the outstanding balance of all other loans from the Plan, will be
limited to the lesser of (a) $50,000 reduced by the excess, if any, of the
participant's highest outstanding balance of loans from the Plan during the
one-year period ending on the day before the date of the new loan over the
participant's current outstanding balance of loans as of the date of the new
loan, or (b) one-half of the participant's vested interest in the Plan. For the
year ended December 31, 2001, the Plan allowed participants to borrow up to 50
percent of their total account balance, provided that the participant had
participated in the Plan for at least 12 consecutive months and did not have any
other loans outstanding at the time of the request.
Payment of Benefits
Upon termination of service, a participant may elect to (a) receive a lump sum
equal to the value of his or her account, or (b) receive installments over a
period not to exceed the employee's and beneficiary's assumed life expectancy.
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.
5
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
December 31, 2002 and 2001 and
Year Ended December 31, 2002
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Principles
Basis of Presentation
The accompanying financial statements of the Plan have been prepared on the
accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.
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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
INVESTMENTS
All Plan investments as of December 31, 2002 are held by ING, the Plan
custodian. Investments in pooled separate accounts are reported at the value
reported to the Plan by ING, which approximates fair value. Investments in
Callon Petroleum Company common stock is reported at quoted market values.
Participant's loans are reported at the outstanding principal balance which
approximates fair value. All Plan investments as of December 31, 2001 were held
by Equitable.
Investment security transactions are accounted for on the date the securities
are purchased or sold (trade date). Interest income is recorded as it is earned.
Dividends are recorded on the ex-dividend date.
In 2001, the Plan had a deposit contract with Equitable Life Assurance Society.
The account was credited with actual earnings on the underlying investments and
charged for plan withdrawals and administrative expenses charged by Equitable.
The contract was included in the financial statements at the December 31, 2001
contract value, as reported to the Plan by Equitable.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
The employer absorbs substantially all administrative expenses of the Plan.
6
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
December 31, 2002 and 2001 and
Year Ended December 31, 2002
NOTES TO FINANCIAL STATEMENTS
Note 3. Investments
..
The following table presents the fair value of the Plan's investments that
represent 5 percent or more of the Plan's net assets at December 31, 2002 and
2001.
2002 2001
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Pooled Separate Accounts
Alliance Common Stock Fund $ - $ 973,954
EQ Aggressive Stock Fund - 714,444
ING Fixed Account 4,115,776 -
ING VP Index Plus LargeCap Portfolio 490,606 -
Fidelity VIP Growth Portfolio 646,284 -
Deposit Contract
Equitable Guaranteed Interest Account - 2,863,758
Employer Securities
Callon Petroleum Company Stock 595,504 853,565
Participant loans 778,344 650,256
The Plan's investments (including gains and losses on investments bought, sold, and held during the year) depreciated
$1,559,934 during the year ended December 31, 2002 as follows:
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Pooled Separate Accounts $(1,124,204)
Deposit Contract
Equitable Guaranteed Interest Account 87,060
Employer Securities
Callon Petroleum Company Stock (522,790)
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Net Depreciation in Fair Value of Investments $(1,559,934)
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7
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
December 31, 2002 and 2001 and
Year Ended December 31, 2002
NOTES TO FINANCIAL STATEMENTS
Note 4. Nonparticipant Directed Investments
The significant components of the changes in net assets relating to the
nonparticipant directed investments are as follows:
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Changes in Net Assets
Contributions $ 259,873
Net depreciation (494,920)
Benefits paid to participants (4,755)
Transfers to participant directed investments (613,763)
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$(853,565)
=========
As of December 31, 2002, all Plan investments are participant directed.
Note 5. Tax Status of Plan
The trust established under the Plan to hold the Plan's assets is qualified
pursuant to the appropriate section of the Internal Revenue Code, and,
accordingly, the trust's net investment income is exempt from income taxes. The
Plan has obtained a favorable tax determination letter from the Internal Revenue
Service. Although the Plan has been amended since receiving the determination
letter, the Plan's Administrator believes that the Plan is currently designed
and being operated in compliance with the applicable requirements of the
Internal Revenue Code.
Note 6. Related-Party Transactions
Certain Plan investments are units of pooled separate accounts managed by ING.
ING is the custodian of the Plan assets as defined by the Plan and, therefore,
these transactions qualify as party-in-interest transactions.
8
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
December 31, 2002 and 2001 and
Year Ended December 31, 2002
NOTES TO FINANCIAL STATEMENTS
Note 7. Reconciliation of Financial Statements to Form 5500
The financial information included in the Plan's Form 5500 is reported on the
cash basis of accounting. Therefore, the following reconciliation is included to
reconcile the net assets available for benefits and the net decrease in net
assets available for benefits per the financial statements to the Form 5500.
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
DECEMBER 31,
----------------------------
2002 2001
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Net assets available for benefits per
the financial statements $ 8,641,981 $ 8,910,923
Employer contribution receivable (81,729) (94,734)
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Net assets available for benefits per
the Form 5500 $ 8,560,252 $ 8,816,189
=========== ===========
The following is a reconciliation of net decrease in net assets available for
benefits per the financial statements to the Form 5500:
YEAR ENDED
DECEMBER 31,
2002
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Net decrease in net assets available for
benefits per the financial statements $(268,942)
Less current year employer contribution
receivable (81,729)
Plus prior year employer contribution
receivable 94,734
---------
Net decrease in net assets available for
benefits per the Form 5500 $(255,937)
=========
9
Page 1 of 4
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
Employer I.D. Number 94-0744280
Plan Number 002
Schedule of Assets (Held at End of Year)
December 31, 2002
(b) IDENTITY OF (d) CURRENT
(a) ISSUER, BORROWER (c) DESCRIPTION VALUE
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Pooled Accounts
* ING Separate Account, ING
Fixed Account $ 4,115,776
* ING Separate Account, ING VP
Money Market Portfolio --
1,974.830 Units 19,950
* ING Separate Account, ING
GNMA Income Fund --
3,125.554 Units 33,653
* ING Separate Account, ING
PIMCO Total Return
Portfolio -- 366.179 Units 3,959
* ING Separate Account, Pioneer
High Yield Fund -- 41.274
Units 414
* ING Separate Account, ING UBS
Tactical Asset Allocation --
194.905 Units 1,576
* ING Separate Account, ING VP
Strategic Allocation Balanced
Portfolio -- 1,215.847 Units 11,274
* ING Separate Account, ING VP
Strategic Allocation Income
Portfolio -- 169.559 Units 1,640
* ING Separate Account,
Oppenheimer Capital Income
Fund -- 40,696.350 Units 362,737
10
Page 2 of 4
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
Employer I.D. Number 94-0744280
Plan Number 002
Schedule of Assets (Held at End of Year)
December 31, 2002
(b) IDENTITY OF (d) CURRENT
(a) ISSUER, BORROWER (c) DESCRIPTION VALUE
--------------------------------------------------------------------------------------------------------------------------
Pooled Accounts (Continued)
* ING Separate Account, Alliance
Growth and Income
Portfolio -- 42,778.099 Units $ 352,815
* ING Separate Account, ING Van
Kempen Comstock
Portfolio -- 225.179 Units 1,890
* ING Separate Account, ING VP
Index Plus LargeCap
Portfolio -- 59,452.303 Units 490,606
* ING Separate Account, Fidelity
VIP Growth Portfolio --
86,300.701 Units 646,284
* ING Separate Account, Fidelity
VIP II Contrafund --
4,051.437 Units 37,204
* ING Separate Account, ING T.
Rowe Price Growth Equity
Portfolio -- 7,290.058 Units 59,985
* ING Separate Account, Ariel
Appreciation Fund --
2,321.060 Units 19,323
* ING Separate Account, Ariel
Fund -- 22,031.207 Units 207,851
* ING Separate Account, Baron
Growth Fund -- 7,666.661 Units 69,163
* ING Separate Account, Fidelity
Advisor Mid Cap Fund --
4,190.828 Units 36,057
11
Page 3 of 4
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
Employer I.D. Number 94-0744280
Plan Number 002
Schedule of Assets (Held at End of Year)
December 31, 2002
(b) IDENTITY OF (d) CURRENT
(a) ISSUER, BORROWER (c) DESCRIPTION VALUE
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Pooled Accounts (Continued)
* ING Separate Account, Franklin
Balance Sheet Investment
Fund -- 3,966.426 Units $ 37,186
* ING Separate Account, Franklin
Small-Mid Cap Growth
Fund -- 37,250.506 Units 292,164
* ING Separate Account, ING
American Century Small
Cap Value Portfolio --
225.678 Units 1,841
* ING Separate Account, ING
VP Index Plus SmallCap
Portfolio -- 387.922 Units 3,441
* ING Separate Account, Lord
Abbett Mid-Cap Value
Fund -- 667.163 Units 6,152
* ING Separate Account, Prudential
Jennison Equity Opportunity
Fund -- 5,011.423 Units 40,592
* ING Separate Account, ING VP
International Value
Portfolio -- 14,810.917 Units 131,226
* ING Separate Account,
Oppenheimer Global Fund --
1.972 Units 16
* ING Separate Account, Templeton
Foreign Fund -- 0.824 Units 8
12
Page 4 of 4
CALLON PETROLEUM COMPANY
EMPLOYEE SAVINGS AND PROTECTION PLAN
Employer I.D. Number 94-0744280
Plan Number 002
Schedule of Assets (Held at End of Year)
December 31, 2002
(b) IDENTITY OF (d) CURRENT
(a) ISSUER, BORROWER (c) DESCRIPTION VALUE
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* ING Separate Account, Templeton
Growth Fund -- 13,207.511 units $ 121,844
--------------------
Total Pooled Accounts 7,106,627
* Participant Loans 4.75 percent -- 7.5 percent
interest , maturity ranging 0-5
years, with residential
maturing in 30 years 778,344
* Callon Petroleum Company 173,969 shares 595,504
Equitable Life Assurance
Society Life Insurance Policies 79,777
---------------------
$ 8,560,252
=====================
*Party-in-interest
13
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Plan Administrator has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CALLON PETROLEUM COMPANY
(Registrant)
Date: October 15, 2003 By: /s/ John S. Weatherly
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John S. Weatherly
Senior Vice President and Chief Financial Officer
(on behalf of the registrant and as the principal
financial officer
EXHIBIT INDEX
Exhibit Index Description
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23.1 Consent of Horne CPA Group, independent accountants