UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(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 1-16455
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Reliant Resources, Inc. Savings Plan
P.O. Box 148
Houston, TX 77001-0148
B. Name and issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Reliant Resources, Inc.
1111 Louisiana Street
Houston, TX 77002
RELIANT RESOURCES, INC. SAVINGS PLAN
TABLE OF CONTENTS
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INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS:
Statement of Net Assets Available for Plan Benefits as of December 31, 2002 ................ 2
Statement of Changes in Net Assets Available for Plan Benefits for the Period
Beginning February 1, 2002 (date of inception) through December 31, 2002 ................ 3
Notes to Financial Statements .............................................................. 4
SUPPLEMENTAL SCHEDULE:
Schedule H, line 4(i) - Schedule of Assets (Held at End of Year), December
31, 2002 ................................................................................ 8
The following schedules required by the Department of Labor's regulations are
omitted due to the absence of the conditions under which they are required:
Schedule of Reportable Transactions
Schedule of Nonexempt Transactions
Schedule of Loans or Fixed Income Obligations in Default or Classified as Uncollectible
Schedule of Leases in Default or Classified as Uncollectible
Schedule of Assets Acquired and Disposed of Within the Plan Year
EXHIBITS:
Independent Auditors' Consent - Deloitte & Touche LLP (Exhibit 23.1)
Section 906 Certification of James A. Ajello (Exhibit 99.1)
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants in the
Reliant Resources, Inc. Savings Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the Reliant Resources, Inc. Savings Plan (the "Plan") as of December
31, 2002 and the related statement of changes in net assets available for plan
benefits for the period beginning February 1, 2002 (date of inception) through
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 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 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 audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for plan benefits of the Plan as of December
31, 2002, and the changes in net assets available for plan benefits for the
period beginning February 1, 2002 (date of inception) through December 31, 2002
in conformity with accounting principles generally accepted in the United States
of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying 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. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our 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.
DELOITTE & TOUCHE LLP
Houston, Texas
June 27, 2003
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RELIANT RESOURCES, INC. SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2002
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ASSETS:
Investments, at fair value $ 151,563,214
Participant Loans 4,143,065
Contributions Receivable-Employer 2,538,718
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 158,244,997
=============
See notes to financial statements.
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RELIANT RESOURCES, INC. SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE PERIOD BEGINNING FEBRUARY 1, 2002 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2002
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ADDITIONS:
Contributions:
Employer $ 19,829,656
Participant 22,765,445
Investment Income (Loss):
Interest 327,787
Dividends 1,311,679
Realized and unrealized losses, net (5,308,097)
Assets transferred in 120,270,815
--------------
Total additions 159,197,285
DEDUCTIONS:
Benefits paid to participants 838,367
Administrative expenses 113,921
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Total deductions 952,288
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NET INCREASE 158,244,997
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
DATE OF INCEPTION --
--------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
END OF PERIOD $ 158,244,997
==============
See notes to financial statements.
-3-
RELIANT RESOURCES, INC. SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE PLAN
GENERAL - The Reliant Resources, Inc. Savings Plan (the "Plan"), became
effective February 1, 2002. The Plan is a defined contribution plan
sponsored by Reliant Resources, Inc. (the "Company") covering
substantially all of the eligible non-union employees of the Company or a
subsidiary or an affiliate of the Company that has adopted the Plan. The
following description of the Plan is provided for general information
purposes only. Participants should refer to the Plan document for a more
complete description of the Plan provisions. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
ELIGIBILITY - Employees of the Company or a subsidiary or affiliate of the
Company as of March 27, 2002, other than employees of Reliant Energy
Mid-Atlantic Power Holdings, LLC, Reliant Energy Maryland Holdings, LLC,
Reliant Energy New Jersey Holdings, LLC, Reliant Energy Northeast
Management Company, or Reliant Energy Mid-Atlantic Power Services, Inc.
("REMA Employees"), that has adopted the Plan and were eligible to
participate in the Reliant Energy, Incorporated Savings Plan, were
eligible to participate in the Plan on March 28, 2002. Employees of the
Company on or after March 28, 2002 were eligible to participate in the
Plan on his or her employment date. REMA Employees who, as of January 31,
2002, were eligible to participate in the Reliant Energy Mid-Atlantic
Savings Plan for Non-Represented Employees, became eligible to participate
in the Plan as of February 1, 2002. REMA Employees hired after February 1,
2002 are eligible to participate in the Plan on his or her employment
date.
CONTRIBUTIONS - Participants may elect to contribute to the Plan on a
pre-tax and/or after-tax basis through periodic payroll contributions.
These contributions are limited to an aggregate of 16% of the
participant's eligible compensation up to the Internal Revenue Service
Code (the "Code") section 401(a) (17) limit. For 2002, this limit was
$200,000. Beginning July 1, 2002, active participants who are, or will be,
age 50 or older during a calendar year are eligible to make additional
pre-tax contributions ("Catch-Up Contributions") to the Plan for that year
in excess of the annual pre-tax contribution limit up to a maximum amount
permitted by the Code. The total amount of participant pre-tax
contributions was limited to $11,000 in 2002. For 2002, the maximum
Catch-Up Contribution amount was $1,000. Any contributions in excess of
the $11,000 limit, excluding any Catch-Up Contributions, are made to the
participant's after-tax account, unless the participant elects otherwise.
Plan participants who contribute also receive Company matching
contributions equal to 100% of the first 6% of the participant's
contribution. Under the provisions of the Plan, the Company may make two
types of discretionary profit sharing contributions - one is a payroll
profit sharing contribution ("Payroll Profit Sharing Contribution") and
the other is an annual profit sharing contribution ("Annual Profit Sharing
Contribution"). For any year, the Company may elect, in its sole
discretion, to make Payroll Profit Sharing Contributions to the Plan on
behalf of participants in an amount equal to a prescribed percentage of
pay for each payroll period. The Payroll Profit Sharing Contribution
percentage for 2002 was 2% and was limited to the first $85,000 of the
participant's eligible compensation for the year. The Company may also
elect, in its sole discretion, to make an Annual Profit Sharing
Contribution of up to 3% of the participants' eligible compensation.
Historically, the Annual Profit Sharing Contribution has been invested in
the Reliant Resources Stock Fund. This contribution will generally be made
within 90 days following the end of the Plan year. The Annual Profit
Sharing Contribution receivable at December 31, 2002 was approximately
$2.5 million. Participants do not need to contribute to the Plan to
receive Payroll Profit Sharing or Annual Profit Sharing Contributions.
-4-
PARTICIPANT ACCOUNTS - Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the participant's
contributions, the Company's matching contributions, allocations of
Company discretionary contributions, if applicable, any rollover
contributions made by the participant and Plan earnings, and charged with
an allocation of administration expenses. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
INVESTMENTS - Participants direct the investment of their contributions
into various investment options offered by the Plan. During 2002, the
Annual Profit Sharing Contribution had to remain invested in the Reliant
Resources Stock Fund until the participant attained age 55.
VESTING - Participants are 100% vested in their total account balance,
including Employer contributions, under the Plan.
PARTICIPANT LOANS - Participants may borrow from their fund accounts up to
a maximum 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 rates commensurate with local prevailing rates as
determined under the Plan. Principal and interest is paid ratably through
payroll deductions.
PAYMENT OF BENEFITS - On termination of employment including death,
disability, or retirement, a participant or beneficiary may elect to
receive either a lump-sum amount equal to the value of the participant's
vested interest in his or her account, or monthly, quarterly, semi-annual
or annual installments not to exceed ten years.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL PRESENTATION - The accompanying financial statements of
the Plan are prepared under the accrual basis of accounting in conformity
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, liabilities, and changes therein, as of
the date of the financial statements. Actual results could differ from
those estimates.
MARKET RISK - The Plan provides for investments in various investment
securities, including concentrations of CenterPoint Energy, Inc. (closed
to new investment) and the Company common stock, that are exposed to
certain risks such as interest rate, credit, and overall market
volatility. Due to the level of risk associated with certain investment
securities, changes in the value of investment securities could occur in
the near term, and these changes could materially affect the amounts
reported in the statements of net assets available for Plan benefits.
ADMINISTRATIVE EXPENSES - Administrative expenses of the Plan, are paid by
either the Plan or the Plan's sponsor, as provided in the Plan document.
PAYMENT OF BENEFITS - Benefits are recorded when paid.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are
stated at fair value. Shares of registered investment companies are valued
at quoted market prices which represent the net asset value of shares held
by the Plan at December 31, 2002. Units of the Vanguard Retirement Savings
Trust are valued at net asset value at December 31, 2002. The Company
stock fund is valued at the December 31, 2002 unit closing price
(comprised of the December 31, 2002 market price plus uninvested cash
position). Participant loans are valued at cost which approximates fair
value.
-5-
Purchases and sales of investments are recorded on a trade-date basis.
Interest income is accrued when earned. Dividend income is recorded on the
ex-dividend date. Capital gain distributions are included in dividend
income.
3. ASSETS TRANSFERRED INTO THE PLAN
Effective February 1, 2002, Reliant Energy Mid-Atlantic Savings Plan for
Non-Represented Employees (the "REMA Plan") merged into the Plan. As a
result, approximately $12 million of REMA Plan assets transferred into the
Plan. During 2002, approximately $108 million in plan assets of the
CenterPoint Energy, Inc. Savings Plan that related to account balances of
the Company employees was transferred into the Plan. This transfer was the
result of the September 30, 2002 distribution of all of the 240 million
shares of the Company's common stock that CenterPoint Energy, Inc. owned
to its shareholders of record as of the close of business on September 20,
2002.
4. INVESTMENTS
Plan assets are held at Vanguard Fiduciary Trust Company (the "Trustee").
The following presents investments that represent 5% or more of the Plan's
assets at December 31, 2002:
Neuberger Berman Genesis Trust $ 8,175,544
PIMCO Funds: Pacific Investment Management Series: Total Return Fund 16,680,040
Vanguard 500 Index Fund Investor Shares 12,202,224
Vanguard Growth Equity Fund 18,024,267
Vanguard LifeStrategy Moderate Growth Fund 9,826,568
Vanguard Windsor II Fund Investor Shares 16,737,814
Vanguard Retirement Savings Trust 21,798,189
CenterPoint Energy Stock Fund 19,074,384
Reliant Resources Stock Fund 13,617,004
During 2002, the Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year, appreciated
(depreciated) in value as follows:
Mutual funds $ (6,434,275)
Common stocks 1,126,178
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$ (5,308,097)
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5. PLAN TERMINATION
Although it has not expressed any intention 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. In the event of a
plan termination, participants would remain 100 percent vested in their
account.
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6. RELATED PARTY TRANSACTIONS
The Plan invests in shares of mutual funds managed by an affiliate of the
Trustee. Transactions in such investments qualify as party-in-interest
transactions which are exempt from the prohibited transaction rules.
7. TAX STATUS
The Plan is subject to ERISA and certain provisions of the Code and is
intended to qualify under Section 401(a) of the Code. The Company had
applied for, but has not yet received, a determination letter from the
Internal Revenue Service indicating that the Plan and related trust are
designed in accordance with the applicable sections of the Code. However,
management believes that the Plan is currently designed and operating in
compliance with the applicable requirements of the Code.
-7-
RELIANT RESOURCES, INC. SAVINGS PLAN
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year)
As of December 31, 2002
EIN 76-0655566
( a ) ( b ) ( c ) ( d ) ( e )
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Description of investment including
Identity of issue, borrower, maturity date, rate of interest,
lessor or similar party collateral, par, or maturity value Cost Current value
-------------------------------------------------------------------------------------------------------------------------
* American Funds EuroPacific Growth Registered Investment Company (1) $ 6,298,022
* American Funds New Perspective Registered Investment Company (1) 61,298
* American Funds Growth Fund America Registered Investment Company (1) 322,908
* Artisan International Registered Investment Company (1) 103,952
* Columbia Small Cap Registered Investment Company (1) 1,106,389
* Davis New York Venture Registered Investment Company (1) 54,417
* Dodge & Cox Balanced Fund Registered Investment Company (1) 1,067,378
* Fidelity Dividend Growth Fund Registered Investment Company (1) 1,890,033
* Oakmark Fund Registered Investment Company (1) 518,473
* Janus Worldwide Fund Registered Investment Company (1) 780,474
* Neuberger Berman Genesis Trust Registered Investment Company (1) 8,175,544
* PIMCO Funds: Pacific Investment Management
Series: Total Return Registered Investment Company (1) 16,680,040
* T. Rowe Equity Income Advisor Registered Investment Company (1) 73,145
* T. Rowe Small Cap Advisor Registered Investment Company (1) 171,128
* Gabelli Growth Fund Registered Investment Company (1) 29,109
* Vanguard 500 Index Fund Investor Shares Registered Investment Company (1) 12,202,224
* Vanguard Capital Opportunity Registered Investment Company (1) 333,341
* Vanguard Growth Equity Fund Registered Investment Company (1) 18,024,267
* Vanguard LifeSt Conserv Growth Registered Investment Company (1) 289,800
* Vanguard LifeSt Growth Fund Registered Investment Company (1) 470,912
* Vanguard LifeStrategy Moderate Growth Fund Registered Investment Company (1) 9,826,568
* Vanguard PRIMECAP Fund Registered Investment Company (1) 144,184
* Vanguard Total Bond Mkt Index Registered Investment Company (1) 1,200,796
* Vanguard Total Stock Mkt Inv Registered Investment Company (1) 511,421
* Vanguard Windsor II Fund Investor Shares Registered Investment Company (1) 16,737,814
* Vanguard Retirement Savings Trust Common/Collective Trust (1) 21,798,189
* CenterPoint Energy Stock Fund Company Stock Fund (1) 19,074,384
* Resources Stock Fund Company Stock Fund (1) 13,617,004
* Participant Loans Interest rates between 5.25% - 10.50% (1) 4,143,065
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Total assets held for investment purposes $ 155,706,279
=============
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* Party in interest.
(1) Cost information has been omitted because all investments are
participant-directed.
-8-
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Benefits Committee of Reliant Resources, Inc. has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
RELIANT RESOURCES, INC. SAVINGS PLAN
By /s/ JAMES A. AJELLO
------------------------------------------
James A. Ajello, Chairman of the Benefits
Committee of Reliant Resources, Inc., Plan
Administrator
June 27, 2003
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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23.1 Independent Auditors' Consent - Deloitte & Touche LLP
99.1 Section 906 Certification of James A. Ajello