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. Union 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. UNION SAVINGS PLAN
TABLE OF CONTENTS
--------------------------------------------------------------------------------
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 January 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 ................................................. 7
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. Union Savings Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the Reliant Resources, Inc. Union 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 January 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 January 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
-1-
RELIANT RESOURCES, INC. UNION SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2002
--------------------------------------------------------------------------------
ASSETS:
Investments, at fair value $19,945,069
Participant Loans 590,443
Contributions Receivable-Employer 150,275
Contributions Receivable-Employee 72,735
-----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $20,758,522
===========
See notes to financial statements.
-2-
RELIANT RESOURCES, INC. UNION SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE PERIOD BEGINNING JANUARY 1, 2002 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 2002
--------------------------------------------------------------------------------
ADDITIONS:
Contributions:
Employer $ 1,783,115
Participant 5,764,577
Investment Income (Loss):
Interest 18,469
Dividends 389,081
Realized and unrealized losses, net (2,285,285)
Assets transferred in 15,592,860
------------
Total additions 21,262,817
DEDUCTIONS:
Benefits paid to participants 466,811
Administrative expenses 33,813
Assets transferred out 3,671
------------
Total deductions 504,295
------------
NET INCREASE 20,758,522
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
BEGINNING OF PERIOD --
------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
END OF PERIOD $ 20,758,522
============
See notes to financial statements.
-3-
RELIANT RESOURCES, INC. UNION SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
GENERAL - The Reliant Resources, Inc. Union Savings Plan (the "Plan"),
became effective January 1, 2002. The Plan is a defined contribution plan
sponsored by Reliant Resources, Inc. (the "Company") covering
substantially all of the eligible union employees of the Company or an
affiliate of the Company (excluding bargaining employees of Orion Power
Holdings, Inc. and its subsidiaries) that has adopted the Plan, and whose
employment is covered by a collective bargaining agreement. 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 - Under the provisions of the Plan, represented employees are
eligible to participate in the Plan if provided in the terms of their
respective collective bargaining agreements.
CONTRIBUTIONS - Under the provisions of the Plan, union participants from
the International Brotherhood of Electrical Workers, AFL-CIO, Locals 47,
66, 327, 459 and 777 may elect to contribute on a pre-tax and/or after-tax
basis as permitted under the terms of their respective collective
bargaining agreements. The annual eligible compensation limit for 2002 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 Internal Revenue Code (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. The Company
makes matching contributions in accordance with the terms of the
participants' respective collective bargaining agreement. Some collective
bargaining agreements provide for discretionary profit sharing
contributions. At December 31, 2002, the Plan had a profit sharing
contribution receivable of approximately $118 thousand. Plan participants
who are eligible for profit sharing contributions do not have to
contribute to the Plan to receive a profit sharing contribution.
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.
VESTING - Participants are fully vested in their contributions as of their
entrance date to the Plan. Participants vest in Company matching
contributions according to their respective collective bargaining
agreements.
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.
-4-
PAYMENT OF BENEFITS - On termination of service due to 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, which 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 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.
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 January 1, 2002, the Reliant Energy New Jersey Holdings, LLC
Savings Plan for IBEW Local 327, Reliant Energy Mid-Atlantic Savings Plan
for IBEW Local 459, and Reliant Energy Mid-Atlantic Power Holdings, LLC
Savings Plan for IBEW Local 777 (collectively, the "REMA Union Plans")
merged into the Plan. As a result, approximately $13 million in assets of
the REMA Union Plans transferred into the Plan. During 2002, approximately
$3 million in plan assets of the CenterPoint Energy, Inc. Savings Plan
that related to account balances of the Company employees 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.
-5-
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:
Columbia Small Cap Fund, Inc, $1,075,577
Fidelity Securities Fund: Fidelity Dividend Growth Fund 1,719,319
Neuberger Berman Genesis Trust 2,379,855
PIMCO Funds: Pacific Investment Mgmt. Series: Total Return 1,945,620
Vanguard 500 Index Fund Investor Shares 1,230,317
Vanguard Growth Equity Fund 1,577,847
Vanguard LifeStrategy Moderate Growth Fund 1,253,173
Vanguard Retirement Savings Trust 3,906,857
Reliant Resources Stock Fund 1,369,353
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 $ (2,565,026)
Common stocks 279,741
------------
$ (2,285,285)
============
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 become 100 percent vested in their
account.
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.
-6-
RELIANT RESOURCES, INC. UNION 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 )
-------------------------------------------------------------------------------------------------------------------------
Description of investment including
Identity of issue, borrower, lessor or maturity date, rate of interest,
similar party collateral, par, or maturity value Cost Current value
-------------------------------------------------------------------------------------------------------------------------
* American Funds EuroPacific Growth Registered Investment Company (1) $ 408,708
* American Funds New Perspective Registered Investment Company (1) 13,425
* American Funds Growth Fund America Registered Investment Company (1) 19,341
* Artisan International Registered Investment Company (1) 10,130
* Columbia Small Cap Fund, Inc. Registered Investment Company (1) 1,075,577
* Davis New York Venture Registered Investment Company (1) 17,804
* Dodge & Cox Balanced Fund Registered Investment Company (1) 412,413
* Fidelity Securities Fund: Dividend Growth
Fund Registered Investment Company (1) 1,719,319
* Oakmark Fund Registered Investment Company (1) 110,163
* Janus Worldwide Fund Registered Investment Company (1) 692,718
* Neuberger Berman Genesis Trust Registered Investment Company (1) 2,379,855
* PIMCO Funds: Pacific Investment Mgmt.
Series: Total Return Registered Investment Company (1) 1,945,620
* T. Rowe Equity Income Advisor Registered Investment Company (1) 25,136
* T. Rowe Small Cap Advisor Registered Investment Company (1) 47,345
* Gabelli Growth Fund Registered Investment Company (1) 7,802
* Vanguard 500 Index Fund Investor Shares Registered Investment Company (1) 1,230,317
* Vanguard Capital Opportunity Registered Investment Company (1) 76,955
* Vanguard Growth Equity Fund Registered Investment Company (1) 1,577,847
* Vanguard LifeSt Conserv Growth Registered Investment Company (1) 54,798
* Vanguard LifeSt Growth Fund Registered Investment Company (1) 120,400
* Vanguard LifeStrategy Moderate Growth Fund Registered Investment Company (1) 1,253,173
* Vanguard PRIMECAP Fund Registered Investment Company (1) 46,319
* Vanguard Total Bond Mkt Index Registered Investment Company (1) 240,287
* Vanguard Total Stock Mkt Inv Registered Investment Company (1) 1,202
* Vanguard Windsor II Fund Inv Registered Investment Company (1) 248,275
* Vanguard Retirement Savings Trust Common/Collective Trust (1) 3,906,857
* CenterPoint Energy Stock Company Stock Fund (1) 933,930
* Reliant Resources Stock Fund Company Stock Fund (1) 1,369,353
* Participant Loans Interest rates between 5.25% - 10.50% (1) 590,443
------------
Total assets held for investment purposes $ 20,535,512
============
----------
* Party in interest.
(1) Cost information has been omitted because all investments are
participant-directed.
-7-
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. UNION SAVINGS
PLAN
By /s/ JAMES A. AJELLO
---------------------------------
James A. Ajello, Chairman of the
Benefits Committee of Reliant
Resources, Inc., Plan Administrator
June 27, 2003
-8-
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23.1 Independent Auditors' Consent - Deloitte & Touche LLP
99.1 Section 906 Certification of James A. Ajello