<PAGE> 1
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 [No Fee Required]
For the Fiscal Year ended December 31, 1999
Or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Act
of 1934 [No Fee Required]
For the transition period from to
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Commission File No. 1-13726
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below
CHESAPEAKE ENERGY CORPORATION SAVINGS AND INCENTIVE STOCK BONUS PLAN
6100 NORTH WESTERN AVENUE
OKLAHOMA CITY, OK 73118
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office
CHESAPEAKE ENERGY CORPORATION
6100 NORTH WESTERN AVENUE
OKLAHOMA CITY, OK 73118
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustee has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
/s/ MARY WHITSON
---------------------------------------
Mary Whitson, Trustee
Date: June 28, 2000
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CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
WITH REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 31, 1999 and 1998 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 1999 and 1998 3
Notes to Financial Statements 4
Additional Information (Note A):
Assets Held for Investment Purposes as of December 31, 1999 Schedule I
Reportable Transactions for the Year Ended December 31, 1999 Schedule II
</TABLE>
Note A - Schedules not included with this additional
information have been omitted because they are not applicable.
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and the Members of the Oversight Committee of the
Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan
In our opinion the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan (the
"Plan") at December 31, 1999 and 1998, and the changes in net assets available
for benefits for the years ended December, 31 1999 and 1998, in conformity with
accounting principles generally accepted in the United States. 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 of these statements in accordance with auditing standards
generally accepted in the United States which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of these basic financial statements but is additional information
required by the Employee Retirement Income Security Act of 1974 ("ERISA").
Schedules I and II have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, are fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
PricewaterhouseCoopers LLP
Oklahoma City, Oklahoma
June 28, 2000
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CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
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ASSETS
<S> <C> <C>
Investments (See Note 3) $8,143,689 $4,757,625
Employer contribution receivable -- 111,826
Cash 154,011 53,308
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Total assets $8,297,700 $4,922,759
========== ==========
LIABILITIES
Accrued liabilities $ 1,086 $ 15,219
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Total liabilities 1,086 15,219
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Net assets available for benefits $8,296,614 $4,907,540
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 7
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1999 1998
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<S> <C> <C>
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Interest and dividends $ 100,094 $ 101,174
Income on participants loans 15,668 12,983
Net appreciation (depreciation) in fair value
of investments 1,933,141 (1,753,344)
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Total investment income 2,048,903 (1,639,187)
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Contributions:
Employer 1,162,678 1,366,282
Participants 1,626,821 1,889,775
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Total contributions 2,789,499 3,256,057
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Total additions 4,838,402 1,616,870
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 1,396,360 281,808
Administrative expenses 52,968 56,152
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Total deductions 1,449,328 337,960
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Net increase 3,389,074 1,278,910
Net assets at beginning of year 4,907,540 3,628,630
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Net assets at end of year $ 8,296,614 $ 4,907,540
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 8
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following is a brief summary of the various provisions of the
Chesapeake Energy Corporation Savings and Incentive Stock Bonus Plan
(the "Plan"). Participants should refer to the Plan agreement for a
complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering all employees of
Chesapeake Energy Corporation and its subsidiaries (the "Company") who
have completed six consecutive months of employment and are age
twenty-one or older. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Approximately 556 employees were actively participating in the Plan as
of December 31, 1999.
CONTRIBUTIONS
Each year, participants may contribute up to 15 percent of pre-tax
annual compensation, as defined in the Plan. Participants may also
contribute amounts representing rollover distributions from other
qualified plans. The Company contributes 100 percent of the first 10
percent of base compensation that a participant contributes to the
Plan. Additional amounts may be contributed at the option of the
Company's board of directors. Contributions are subject to certain
limitations. The Company's matching contribution is used to purchase
shares of Chesapeake Energy Common Stock on the open market.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution and allocations of the Company's contribution and Plan
earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account.
VESTING
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's matching portion of their
accounts plus actual earnings thereon is based on years of credited
service. A participant is 100 percent vested after seven years of
credited service.
4
<PAGE> 9
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. DESCRIPTION OF THE PLAN, CONTINUED
PARTICIPANT NOTES RECEIVABLE
Participants may borrow from their fund accounts a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50 percent of their
vested account balance. Loan terms range from 1-5 years or up to 10
years for the purchase of a primary residence. The loans are
collateralized by the balance in the participant's account and bear
interest at the Prime Interest Rate. Principal and interest is paid
ratably through semi-monthly payroll deductions.
PAYMENT OF BENEFITS
Upon termination a participant may elect to receive either a lump-sum
amount equal to the value of the participant's vested interest in his
or her account, annual installments, annuity payments or have the value
rolled over to another qualified plan or IRA.
AMOUNTS FORFEITED
Forfeited nonvested amounts are used to pay administrative expenses of
the Plan or to restore such amounts to re-employed Participants. If
there are any Amounts Forfeited remaining, they will be allocated to
other Participants during the last quarter of the year in the same
manner as other Company contributions. Forfeited nonvested accounts
totaled $227,002 and $49,721 at December 31, 1999 and 1998,
respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
method of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of net assets
available for benefits at the date of the financial statements and the
changes in net assets available for benefits during the reporting
period. Actual results could differ from those estimates.
5
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CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INVESTMENTS VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value except for the
guaranteed interest contract which is valued at contract 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
year-end. Participant loans receivable are valued at cost.
Purchases and sales of securities are recorded on a trade-date basis.
Investment income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
The Plan presents, in the statement of changes in net assets available
for benefits, the net appreciation (depreciation) in the fair value of
investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
INVESTMENT CONTRACT WITH INSURANCE COMPANY
Included as an investment option for participants is a
benefit-responsive contract with Mass Mutual. Mass Mutual maintains the
contributions in a pooled separate account. The account is credited
with earnings on the underlying investments and charged for Plan
withdrawals and administrative expenses. The contract is included in
the financial statements at contract value as reported to the Plan by
Mass Mutual. Contract value represents contributions made under the
contract, plus earnings, less participant withdrawals and
administrative expenses. Participants may ordinarily direct the
withdrawal or transfer of all or a portion of their investment at
contract value.
There are no reserves against contract value for credit risk of the
contract issuer or otherwise. The average yield and crediting interest
rates were approximately 6.2% and 6.4% for 1999 and 1998, respectively.
The crediting interest rate is based on an agreed-upon formula with the
issuer, but will not be less than 4.5% over the contract period. The
crediting interest rate is reset annually by the contract issuer.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
6
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CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RISKS AND UNCERTAINTIES
Investment securities are exposed to various risks, such as interest
rate, market, and credit risk. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that
changes in value of investment securities will occur in the near term
and that such changes could materially affect participant's account
balances and the amounts reported in the statement of net assets
available for plan benefits and the statement of changes in net assets
available for plan benefits. For example, the quoted market price of
Chesapeake Energy Common Stock included in the December 31, 1999
financial statements was $2.25 per share. Subsequently, the quoted
market price of the stock increased to $6.06 per share as of June 15,
2000.
3. INVESTMENTS
The following investments were held by the Plan at:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
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<S> <C> <C>
Guaranteed Interest Contract $ 628,000* $ 707,000*
Core Equity Fund Separate Investment Account 1,861,000* 1,601,000*
Small Cap Fund Separate 830,000 867,000*
Intermediate Bond Fund Separate Investment Account 388,000* 297,000*
International Equity Fund Separate Investment Account 889,000* 464,000*
Participant loans 196,000 177,000
Chesapeake Energy Common Stock 3,352,000* 645,000*
</TABLE>
* Investments which represent 5 percent or more of total net assets
available for benefits
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:
<TABLE>
<CAPTION>
YEAR ENDED
12/31/99 12/31/98
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<S> <C> <C>
Mutual funds $ 216,000 $ 120,000
Chesapeake Energy Common stock 1,717,000 (1,873,000)
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$ 1,933,000 $(1,753,000)
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</TABLE>
7
<PAGE> 12
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. NONPARTICIPANT - DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed
investments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Net assets:
Chesapeake Energy Common stock $3,352,000 $ 645,000
---------- ----------
$3,352,000 $ 645,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
12/31/99 12/31/98
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<S> <C> <C>
Changes in net assets:
Contributions $ 1,163,000 $ 1,605,000
Net apreciation (depreciation) 1,717,000 (1,873,000)
Benefits paid to participants (269,000) (31,000)
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$ 2,611,000 $ (299,000)
=========== ===========
</TABLE>
5. TAX STATUS
The Plan obtained its latest determination letter on April 22, 1997, 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 Plan has been amended since receiving the
determination letter. However, the plan administrator and the plan's
tax counsel believe the Plan is currently designed and being operated
in compliance with the applicable requirements of the Internal Revenue
Code. Therefore, no provision for income taxes has been included in the
plan's financial statements.
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds and a guaranteed
interest contract managed by Mass Mutual. Walter C. Wilson serves as
the Company's Mass Mutual agent and has also served as a director of
the Company since 1993. Approximately $13,000 in commissions were paid
to Mass Mutual by the Plan during the year.
8
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CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. SUBSEQUENT EVENT
Effective February 1, 2000 all assets previously held by Mass Mutual
and Smith Barney were transferred to Fidelity Investments as was the
record keeping function previously performed by an outside third party.
9
<PAGE> 14
ADDITIONAL INFORMATION
<PAGE> 15
CHESAPEAKE ENERGY CORPORATION
SAVINGS AND INCENTIVE STOCK BONUS PLAN
SCHEDULE I
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at
December 31, 1999
<TABLE>
<CAPTION>
Cost at Market Value at
12/31/99 12/31/99
---------- ---------------
<S> <C> <C>
Chesapeake Energy Common Stock $2,642,902 $ 3,351,878
---------- ---------------
$2,642,902 $ 3,351,878
========== ===============
</TABLE>
<PAGE> 16
CHESAPEAKE ENERGY CORPORATION SAVINGS AND INCENTIVE STOCK BONUS PLAN
SCHEDULE II
Schedule H, Line 4j - Schedule of Reportable Transactions for the Year Ended
December 31, 1999
<TABLE>
<CAPTION>
CURRENT
VALUE OF
ASSETS ON NET
# OF PURCHASE SELLING COST OF TRANSACTION GAIN
NAME OF PARTY DESCRIPTION OF ASSET SHARES/UNITS PRICE PRICE ASSET DATE (LOSS)
------------- ------------------------------ ------------ ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Smith Barney Chesapeake Energy Common Stock 739,020 $ 999,010 $ -- $ 999,010 $ 999,010 $ --
Purchased
</TABLE>
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
23.1 Consent of PriceWaterhouseCoopers L.L.P.
</TABLE>
