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
NISOURCE INC. RETIREMENT SAVINGS PLAN
NiSource Inc.
801 E. 96th Avenue
Merrillville, IN 46410
NISOURCE INC. RETIREMENT
SAVINGS PLAN
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
NISOURCE INC. RETIREMENT SAVINGS PLAN
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 11
* 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
NiSource Inc. Retirement Savings Plan
Merrillville, Indiana
We have audited the accompanying statements of net assets available for benefits
of the NiSource Inc. Retirement Savings Plan (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
NISOURCE INC. RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2002 AND 2001
ASSETS 2002 2001
Investments--at fair value:
Mutual funds $ 335,679,560 $ 374,171,354
Money market funds 173,271,705 179,412,054
Common stock fund 127,485,260 141,595,231
Participant loans 10,302,240 9,482,810
------------- -------------
Total investments 646,738,765 704,661,449
------------- -------------
Receivables:
Participant contributions 1,171,757
Employer contributions 590,620
Transfers from merged plans 42,954,678
------------- -------------
Total receivables 1,762,377 42,954,678
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 648,501,142 $ 747,616,127
============= =============
See notes to financial statements.
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NISOURCE INC. RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002
ADDITIONS:
Contributions:
Participant $ 28,046,464
Employer 13,186,280
------------
Total contributions 41,232,744
Transfers from merged plans 5,808,684
Transfers from other plans 211,156
------------
Total transfers 6,019,840
------------
Total additions 47,252,584
------------
DEDUCTIONS:
Investment income (loss):
Net depreciation in fair value of investments (97,455,967)
Dividends and interest 17,221,801
------------
Investment loss--net (80,234,166)
Benefits paid to participants (66,072,345)
Administrative expenses (61,058)
------------
Total deductions (146,367,569)
------------
NET DECREASE (99,114,985)
NET ASSETS AVAILABLE FOR BENEFITS--Beginning of year 747,616,127
------------
NET ASSETS AVAILABLE FOR BENEFITS--End of year $648,501,142
============
See notes to financial statements.
-3-
NISOURCE INC. RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF PLAN
NiSource Inc. (the "Company") is a holding company whose major subsidiary
companies are Northern Indiana Public Service Company ("NIPSCO"), Columbia
Energy Group, Bay State Gas Company, Northern Indiana Fuel and Light, and
Kokomo Gas ("Kokomo").
Effective January 1, 2002, the following plans, administered by the
Company, merged into the Columbia Savings Plan: NiSource Inc. Tax Deferred
Savings Plan, Kokomo Gas and Fuel Company Bargaining Unit Tax Deferred
Savings Plan, Northern Indiana Fuel and Light Company ("NIFL") Savings
Plan, and Bay State Gas Company Employee Savings Plan and Trust.
Substantially all of the assets of the NiSource Inc. Tax Deferred Savings
Plan and all of the assets of the Kokomo Gas and Fuel Company Bargaining
Unit Tax Deferred Savings Plan were transferred into the Plan on December
31, 2001, which was prior to the effective date. Assets of the NIFL
Savings Plan and Bay State Gas Company Employee Savings Plan and Trust
were transferred into the Plan on January 2, 2002. The name of the
Columbia Savings Plan was subsequently changed to NiSource Inc. Retirement
Savings Plan (the "Plan").
The following description of 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 is a defined contribution plan available to each
eligible employee who works for the Company. 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. The Company maintains an administrative committee appointed by
the Board of Directors, which has the responsibility to assist the Company
in administering the Plan. Fidelity Management Trust Company (the
"Trustee") holds all the Plan's assets and executes all investment
transactions.
Contributions--Each year, participants may contribute up to 50% of
compensation (as defined in the Plan) on a pre-tax basis and 25% on an
after-tax basis, up to 75% in total. Contributions are subject to certain
limitations. Participants direct the investment of their contributions
into various investment options by the Plan. The Plan offers twenty-seven
mutual funds, one money market fund and one common stock fund as
investment options for participants.
The Company contributes an amount determined as follows:
a. For the accounts of all participants who participate in the Final
Pay Option of the Retirement Plan of Columbia Energy Group
Companies, or any successor plan (as defined therein):
(1) during the first 120 months of participation, an amount equal
to 50% of the first 6% of the participant's contribution;
(2) from the 121st through the 240th month of participation, an
amount equal to 75% of the first 6% of the participant's
contribution;
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(3) from the 241st month onward of participation, an amount equal
to 100% of the first 6% of the participant's contribution.
b. For the accounts of all participants who participate in the Final
Pay Option of the NiSource Inc. and NIPSCO Pension Plan Provisions
Pertaining to Salaried and Non-Exempt Employees and Kokomo nonunion
employees who participate in the Final Pay Option of the NiSource
Inc. Subsidiary Pension Plan and Kokomo union employees, or any
successor plans (as defined therein), an amount equal to 11.1% of
all pre-tax contributions made by the participant to the Plan.
c. For the accounts of all participants who participate in the Final
Pay Options of the Bay State Gas Company Pension Plan, or any
successor plan (as defined therein), an amount equal to 100% of the
first 2 1/2% of pre-tax participant contributions plus 50% of the
next 5% of participant pre-tax contributions. Certain employees, who
were 45 or older on September 1, 1990 and employed on that date, are
grandfathered into a match of 50% of the first 5% of participant
pre-tax contributions.
d. For accounts of all employees of the NIFL, who participate in the
Final Pay Option of the NiSource Inc. Pension Plan, or any successor
plan (as defined therein), an amount equal to 50% of the first 6% of
participant pre-tax contributions.
e. For the accounts of all participants who participate in the Account
Balance Option of the Retirement Plan of Columbia Energy Group
Companies, the NiSource Inc. and NIPSCO Pension Plan Provisions
Pertaining to Salaried and Non-Exempt Employees, the NiSource Inc.
Subsidiary Pension Plan, or the Bay State Gas Company Pension Plan,
or any successor plans (as defined therein), an amount equal to 75%
of the first 6% of participant's contributions.
The matching contribution is invested directly into the NiSource Inc.
Common Stock Fund. Employees age 50 or older may direct matching
contributions among any of the funds available in the Plan.
Rollovers from Other Qualified Employer Plans--The Plan allows for
employees to transfer certain of their other qualified employer retirement
plan assets to the Plan. These amounts are reflected in participant
contributions in the accompanying statement of changes in net assets
available for benefits.
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 may borrow from their accounts a minimum
of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of
their account balance, whichever is less. The loans are secured by the
balance in the participant's account and bear interest at prime rate plus
1% based on the last day of the previous month they take out the loan.
Principal and interest are paid ratably through payroll deductions over a
period not to exceed five years, unless the loan is to purchase the
participant's primary residence which allows repayment up to 15 years.
-5-
Participant Withdrawals--Withdrawals from the Plan are generally permitted
when the participant terminates employment, retires, or becomes
permanently disabled. The Plan offers the following options for
withdrawals while still employed:
Age 59 1/2 withdrawals;
Voluntary withdrawals from after-tax, rollover and matching
contributions; and
Hardship withdrawals, subject to the Plan rules.
A company matching contribution or hardship withdrawal may result in the
suspension of the participant's deferral and company matching
contributions for six months.
Payment of Benefits--At the direction of the participant or beneficiary,
distribution will be made in a lump sum payment in cash, or by such other
method of payment as may be adopted by the committee according to uniform
standards. Any distribution consisting of units in the NiSource Inc.
Common Stock Fund may be paid in cash or in whole shares of common stock
represented by such units plus a cash amount equal to the fair market
value of any fraction of a share of the 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 from other plans 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.
Reclassifications--Certain amounts in the 2001 financial statements have
been reclassified to conform with the 2002 presentation.
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.
-6-
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 and broker fees are paid by the Plan.
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 $127,485,260 $141,595,231
Fidelity Retirement Money Market Fund 173,271,705 179,412,054
Fidelity Magellan Fund 62,292,747 89,371,284
Fidelity Growth and Income Fund 46,775,971 59,516,924
Fidelity Spartan U.S. Equity Index Fund 46,693,614 58,788,070
Fidelity Intermediate Bond Fund 35,046,997 -
* Includes nonparticipant-directed investments
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 $ (78,455,336)
NiSource Inc. Common Stock Fund (19,000,631)
-------------
$ (97,455,967)
=============
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.
-7-
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the assets and the significant components of the changes
in assets relating to the nonparticipant-directed investments is as
follows:
December 31,
-------------------------------------------
2002 2001
* Net assets:
NiSource Inc. Common Stock Fund $ 127,485,260 $ 141,595,231
============= =============
Year Ended
December 31, 2002
* Changes in net assets:
Participant contributions $ 2,679,431
Employer contributions 11,635,980
Dividends and interest 7,254,988
Net depreciation (19,000,631)
Benefits paid to participants (9,513,212)
Net exchanges between investment options (16,235,840)
Transfers in, including receivables 9,416,118
Fees (23,279)
Participant loans, net (323,526)
-------------
$ (14,109,971)
=============
* Includes participant-directed assets
5. 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. 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.
6. 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.
7. TAX STATUS
The Internal Revenue Service (the "IRS") has issued a determination letter
dated November 28, 1990, stating that the Plan is qualified under
applicable sections of the Internal Revenue Code (the "IRC"). The Plan has
been amended since receiving the determination letter. However, the Plan
administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC. The
Plan administrator submitted a letter to the IRS, dated February 28, 2002,
requesting a new determination.
-8-
8. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of assets available for benefits per the
financial statements at December 31, 2001 to Form 5500.
Assets available for benefits per the financial statements $ 747,616,127
Transfers from merged plans (42,954,678)
-------------
Assets available for benefits per the Form 5500 $ 704,661,449
=============
The following is a reconciliation of transfers from merged plans per the
financial statements for the year ended December 31, 2002 to Form 5500.
2002
Transfers from merged plans, per the financial statements $ 5,808,684
Less: Amounts allocated to merged plan 42,954,678
-----------
Transfers from merged plans, per Form 5500 $48,763,362
===========
Amounts allocated to transfers from merged plans are not recorded on the
Form 5500 for transfers that have been approved prior to December 31,
2001, but not yet paid as of that date.
******
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SUPPLEMENTAL SCHEDULE
NISOURCE INC. RETIREMENT SAVINGS PLAN
EIN: 35-2108964, PLAN 002
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 Cost Value
* NiSource Inc. Common Stock Fund $ 96,158,448 $ 127,485,260
* Fidelity Investments Retirement Money Market Fund ** 173,271,705
* Fidelity Investments Magellan Fund ** 62,292,747
* Fidelity Investments Contrafund ** 19,859,412
* Fidelity Investments Equity Income Fund ** 3,747,728
* Fidelity Investments Growth Fund ** 25,098,283
* Fidelity Investments Growth & Income Fund ** 46,775,971
* Fidelity Investments Intermediate Bond Fund ** 35,046,997
* Fidelity Investments Overseas Fund ** 10,426,629
* Fidelity Investments Europe Fund ** 2,650,522
* Fidelity Investments Pacific Basin Fund ** 1,646,400
* Fidelity Investments Balanced Fund ** 14,322,314
* Fidelity Investments Puritan Fund ** 1,695,650
* Fidelity Investments Small Cap Independent Fund ** 2,156,065
* Fidelity Investments Spartan U.S. Equity Index Fund ** 46,693,614
* Fidelity Investments Freedom Income Fund ** 863,451
* Fidelity Investments Freedom 2010 Fund ** 2,878,122
* Fidelity Investments Freedom 2020 Fund ** 2,174,534
* Fidelity Investments Freedom 2030 Fund ** 942,490
* Fidelity Investments Freedom 2040 Fund ** 1,005,966
PIMCO Investments Total Return Fund (institutional) ** 10,735,645
PIMCO Investments Long-term Government Fund ** 8,366,499
PIMCO Investments Low-duration Fund (institutional) ** 7,604,414
PIMCO Investments StockPLUS Fund (institutional) ** 1,727,376
Berger Investments SmallCap Value Fund (institutional) ** 14,232,112
Dreyfus Investments Emerging Leaders Fund ** 4,649,569
Morgan Stanley Investments U.S. SmallCap Core Fund ** 1,427,945
Vanguard Investments U.S. Growth Investor Shares Fund ** 4,372,638
American Funds Investments EuroPacific Growth Fund ** 2,286,467
* Various Plan participants Participant loans, with interest rates ranging from 4.75% to 11%
maturity dates ranging from January 1, 2003 to August 22, 2031. ** 10,302,240
-------------
Total assets (held at end of year) $ 646,738,765
=============
* Denotes a party-in-interest
** Cost omitted for participant directed investments
-11-
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.
NISOURCE INC. RETIREMENT SAVINGS PLAN
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. ss.1350, that, to his knowledge, the
accompanying annual report on Form 11-K of the NiSource Inc. Retirement Savings
Plan for the fiscal year ended on December 31, 2002 fully complies with the
requirements of 15 U.S.C. ss.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