UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 10549
FORM 11-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR END DECEMBER 31, 2001
----------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ___________
Commission file number 1-8038
KEY ENERGY SERVICES, INC. 401(k) SAVINGS AND RETIREMENT PLAN
(Full title of the plan and the address of the plan,
if different from that of the issuer named below)
KEY ENERGY SERVICES, INC.
6 DESTA DRIVE, SUITE 4400
MIDLAND, TX 79705
(Name of Issuer of the securities held pursuant to the plan
and the address of its principal executive office)
-1-
REQUIRED INFORMATION
The Key Energy Services, Inc. 401(k) Savings and Retirement Plan (the
"Plan") is subject to the Employee Retirement Income Security Act of 1974
(ERISA). Therefore, in lieu of the requirements of Items 1-3 of Form 11-K,
the audited statements of financial condition as of December 31, 2001 and
2000, and the related statements of income and changes in plan equity of the
Plan for each of the three years in the period end December 31, 2001 are
filed herewith.
EXHIBIT
Designations Description Method of Filing
------------ ----------- ----------------
Exhibit 23.1 Consent of Robinson Burdette Martin Filed with this Report
Seright & Burrows, L.L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Key
Energy Services, Inc. 401(k) Savings and Retirement Plan has duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
KEY ENERGY SERVICES, INC.
401(k) SAVINGS AND RETIREMENT PLAN
Date June 28, 2002 By: /s/ Jack Loftis
------------------- --------------------------------
Jack Loftis
Corporate General Counsel
EXHIBIT INDEX
Designations Description
------------ -----------
Exhibit 23.1 Consent of Robinson Burdette Martin Seright & Burrows, L.L.P.
-2-
KEY ENERGY SERVICES, INC.
401(k) SAVINGS AND RETIREMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
TABLE OF CONTENTS
Page
----
Independent Auditors' Report .................................................................................4
Financial Statements:
Statements of Net Assets Available for Benefits .........................................................5
Statements of Changes in Net Assets Available for Benefits ..............................................6
Notes to Financial Statements ...........................................................................8
Supplementary Schedule:
1. Schedule of Assets Held for Investment Purposes as
of December 31, 2001 ...............................................................................13
Exhibit 23.1
Consent of Independent Auditors ........................................................................14
-3-
Robinson a professional services firm of 1500 Broadway telephone (806) 744-3333
Burdette certified public accountants Suite 1300 fax (806) 747-2106
Martin Lubbock, Texas 79401-3107 www.rbmsb.com
Seright &
Burrows,L.L.P.
Independent Auditors' Report
To the Trustees
Key Energy Services, Inc. 401(k) Savings and Retirement Plan
Midland, Texas
We have audited the accompanying statements of net assets available for benefits
of Key Energy Services, Inc. 401(k) Savings and Retirement Plan ("the Plan") as
of December 31, 2001 and 2000, and the related statements of changes in net
assets available for benefits for the years ended December 31, 2001 and 2000 and
1999. 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
the 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 the Plan as of
December 31, 2001 and 2000, and the changes in net assets available for benefits
for the years ended December 31, 2001 and 2000 and 1999 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 Purposes as of December 31, 2001 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but are supplementary information required by the United States 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 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.
ROBINSON BURDETTE MARTIN SERIGHT & BURROWS, L.L.P.
Lubbock, Texas
April 17, 2002
-4-
KEY ENERGY SERVICES, INC.
401(k) SAVINGS AND RETIREMENT PLAN
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
----------- -----------
Receivables:
Sponsor contributions $ 93,082 $ 95,566
Participant contributions 250,595 300,937
----------- -----------
Total receivables 343,677 396,503
----------- -----------
Investments, at fair value:
Participant directed
Guaranteed investment contract (Note 3) 15,580,961 13,411,929
Pooled separate accounts (Note 3) 19,983,335 21,018,276
Nonparticipant directed:
Key Energy Stock Fund (Note 3) 3,682,038 1,670,672
----------- -----------
Total investments 39,246,334 36,100,877
----------- -----------
Participant loans 2,449,246 2,480,780
----------- -----------
ASSETS 42,039,257 38,978,160
----------- -----------
LIABILITIES - -
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $42,039,257 $38,978,160
=========== ===========
The accompanying NOTES TO FINANCIAL STATEMENTS are an integral part of these statements. -5-
KEY ENERGY SERVICES, INC.
401(k) SAVINGS AND RETIREMENT PLAN
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2001, 2000 and 1999
2001
----------------------------------------------------
Participant Nonparticipant
Directed Directed Total
------------ -------------- -------------
Net appreciation/(depreciation) in fair value of investments $(2,693,775) $ (396,409) $ (3,090,184)
Interest 951,298 4,792 956,090
------------ -------------- -------------
Investment loss, net (1,742,477) (391,617) (2,134,094)
------------ -------------- -------------
Sponsor (1,510) 2,207,079 2,205,569
Participants 6,785,301 275,434 7,060,735
------------ -------------- -------------
Contributions 6,783,791 2,482,513 9,266,304
------------ -------------- -------------
Transferred assets:
Investments transferred from merged plans - - -
Loans transferred from merged plans - - -
Other transfers net (103,292) 103,292 -
------------ -------------- -------------
(103,292) 103,292 -
------------ -------------- -------------
ADDITIONS TO NET ASSETS 4,938,022 2,194,188 7,132,210
------------ -------------- -------------
Benefits paid to participants 3,791,980 153,272 3,945,252
Third-party administrator charges 103,748 22,113 125,861
------------ -------------- -------------
DEDUCTIONS FROM NET ASSETS 3,895,728 175,385 4,071,113
------------ -------------- -------------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 1,042,294 2,018,803 3,061,097
Net Assets Available for Benefits:
Beginning of year 37,221,842 1,756,318 38,978,160
------------ -------------- -------------
End of year $38,264,136 $ 3,775,121 $ 42,039,257
============ ============== =============
The accompanying NOTES TO FINANCIAL STATEMENTS are an integral part of these statements. -6-
KEY ENERGY SERVICES, INC.
401(k) SAVINGS AND RETIREMENT PLAN
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2001, 2000 and 1999
2000
----------------------------------------------------
Participant Nonparticipant
Directed Directed Total
------------ -------------- -------------
Net appreciation/(depreciation) in fair value of investments $(1,867,359) $ 197,630 $ (1,669,729)
Interest 908,135 3,905 912,040
------------ -------------- -------------
Investment loss, net (959,224) 201,535 (757,689)
------------ -------------- -------------
Sponsor 740 987,912 988,652
Participants 5,552,848 103,007 5,655,855
------------ -------------- -------------
Contributions 5,553,588 1,090,919 6,644,507
------------ -------------- -------------
Transferred assets:
Investments transferred from merged plans 24,877 - 24,877
Loans transferred from merged plans - - -
Other transfers net (506,033) 506,033 -
------------ -------------- -------------
(481,156) 506,033 24,877
------------ -------------- -------------
ADDITIONS TO NET ASSETS 4,113,208 1,798,487 5,911,695
------------ -------------- -------------
Benefits paid to participants 5,570,197 30,860 5,601,057
Third-party administrator charges 164,947 11,309 176,256
------------ -------------- -------------
DEDUCTIONS FROM NET ASSETS 5,735,144 42,169 5,777,313
------------ -------------- -------------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS (1,621,936) 1,756,318 134,382
Net Assets Available for Benefits:
Beginning of year 38,843,778 - 38,843,778
------------ -------------- -------------
End of year $37,221,842 $ 1,756,318 $ 38,978,160
============ ============== =============
1999
----------------------------------------------------
Participant Nonparticipant
Directed Directed Total
------------ -------------- -------------
Net appreciation/(depreciation) in fair value of investments $ 2,767,702 $ - $ 2,767,702
Interest 894,832 - 894,832
------------ -------------- -------------
Investment loss, net 3,662,534 - 3,662,534
------------ -------------- -------------
Sponsor 43,522 - 43,522
Participants 5,460,641 - 5,460,641
------------ -------------- -------------
Contributions 5,504,163 - 5,504,163
------------ -------------- -------------
Transferred assets:
Investments transferred from merged plans 9,829,877 - 9,829,877
Loans transferred from merged plans 1,041,855 - 1,041,855
Other transfers net - - -
------------ -------------- -------------
10,871,732 - 10,871,732
------------ -------------- -------------
ADDITIONS TO NET ASSETS 20,038,429 - 20,038,429
------------ -------------- -------------
Benefits paid to participants 8,798,923 - 8,798,923
Third-party administrator charges 49,980 - 49,980
------------ -------------- -------------
DEDUCTIONS FROM NET ASSETS 8,848,903 - 8,848,903
------------ -------------- -------------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 11,189,526 - 11,189,526
Net Assets Available for Benefits:
Beginning of year 27,654,252 - 27,654,252
------------ -------------- -------------
End of year $38,843,778 $ - $ 38,843,778
============ ============== =============
The accompanying NOTES TO FINANCIAL STATEMENTS are an integral part of these statements. -7-
KEY ENERGY SERVICES, INC. 401(k) SAVINGS AND RETIREMENT PLAN
Notes to Financial Statements
For the Years Ended December 31, 2001, 2000 and 1999
NOTE 1: PLAN DESCRIPTION
The description of Key Energy Services, Inc. 401(k) Savings and Retirement Plan
("the Plan") provides only general information. Participants should refer to the
plan document for a complete description of the provisions of the Plan.
GENERAL. The Plan is a contributory, defined contribution plan covering
substantially all employees of Key Energy Services, Inc. ("the Sponsor"). It is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA), as amended.
TAX STATUS. The Internal Revenue Service ("IRS") has determined and informed the
Sponsor by a letter dated September 7, 2001, that the Plan and related Trust are
designed in accordance with applicable sections of the Internal Revenue Code
("IRC").
CONTRIBUTIONS. Participants may contribute up to 15% of pretax compensation,
as defined in the Plan, annually. Participants may also contribute amounts
representing distributions from other qualified plans. Participants direct
the investment of their contributions into various investment options offered
by the Plan. The Plan currently offers 17 investment options, including a Key
Energy Stock Fund. The Sponsor contributes 100% of the first 3% of base
compensation that a participant contributes to the Plan up to $1,000 in 2001.
The matching Sponsor contribution is invested directly in Key Energy
Services, Inc. common stock. Additional profit sharing amounts may be
contributed at the option of the Sponsor's board of directors and are
invested in a portfolio of investments as directed by the Participant.
Contributions are subject to certain limitations.
PARTICIPANT ACCOUNTS. Each participant's account is credited with the
participant's contributions and allocations of the Sponsor's contributions and
earnings on the participant's account investments. Sponsor contribution
allocations are based on pro rata participant compensation.
VESTING. Participants are always vested in their contributions and earnings
thereon. Participants vest in the Sponsor's contribution portion of their
accounts (including earnings thereon) based on years of continuous service
within a 4-year graded vesting schedule.
PARTICIPANT LOANS. Participants may borrow a minimum of $1,000, up to a maximum
equal to the lesser of $50,000 or 50% of their vested account balance, whichever
is less. The loans are secured by the balance in the participant's account and
bear interest at rates that range from 4% to 11%, which are commensurate with
local prevailing rates as determined quarterly by the Plan administrator.
Principal and interest are paid ratably through payroll deductions.
PAYMENT OF BENEFITS. On termination of service due to death, disability or
retirement, a participant will receive a lump-sum amount equal to the value
of the participant's vested interest in his or her account. A participant may
receive the value of the vested interest in his or her account as a lump-sum
distribution upon termination for other reasons.
FORFEITED ACCOUNTS. At December 31, 2001 and 2000, forfeited nonvested accounts
totaled $43,911 and $111,103 respectively. These accounts will be used to reduce
administrative expenses and future employer contributions. During the year ended
December 31, 2001 and 2000, administrative expenses and employer contributions
were reduced by $57,429 and $2,522, and $116,448 and $9,919, respectively from
forfeited nonvested accounts.
-8-
KEY ENERGY SERVICES, INC. 401(k) SAVINGS AND RETIREMENT PLAN
Notes to Financial Statements
For the Years Ended December 31, 2001, 2000 and 1999
NOTE 1: PLAN DESCRIPTION (CONTINUED)
AMENDMENT OR TERMINATION. Although it has no intent to do so, the Sponsor has
the right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions set forth in ERISA. In the event of
Plan termination, participants would automatically become 100% vested in their
Sponsor contributions.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Plan's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
including specialized industry practices as specified in the American Institute
of Certified Public Accountants audit and accounting guide titled AUDITS OF
EMPLOYEE BENEFIT PLANS.
USE OF ESTIMATES. Financial statements prepared in conformity with GAAP require
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
INVESTMENT VALUES. Investments are stated at fair value. Quoted market prices
are used to value investments. Shares of mutual funds are valued at the net
asset value of shares held by the Plan at year end. Purchases and sales of
securities are recorded on a trade-date basis. Dividends are recorded on the
ex-dividend date.
PAYMENT OF BENEFITS. Benefits are recorded when paid.
ADMINISTRATIVE COSTS. Certain administrative services and the use of office
fixtures and equipment are provided to the Plan by the Sponsor and no provision
for these costs are included in the accompanying financial statements. All other
administrative expenses are recognized when incurred.
PROHIBITED TRANSACTIONS. A "party-in-interest" is a fiduciary or employee of the
Plan, any person who provides services to the Plan, the Sponsor or an employee
association whose members are covered by the Plan, a person who owns 50 percent
or more of the Sponsor or such employee association or relatives of such person
just listed. Under ERISA, a Plan fiduciary is prohibited from causing the Plan
to engage in the following transactions with a party-in-interest, with certain
conditional exemptions provided by ERISA:
- A sale, exchange or lease of property;
- A loan or other extension of credit;
- The furnishing of goods, services or facilities;
- A transfer of plan assets to a party-in-interest for the use or benefit
of a party-in-interest; or
- An acquisition of employer securities or real property.
A fiduciary is also generally prohibited from using the Plan's assets for his or
her own interest or account, acting in any Plan transactions on behalf of a
party whose interests are adverse to those of the Plan or its participants and
receiving consideration for his or her own account from a party dealing with the
Plan in connection with a transaction involving the Plan's assets.
The Plan has not engaged in any prohibited transactions in the years ended
December 31, 2001 or 2000.
-9-
KEY ENERGY SERVICES, INC. 401(k) SAVINGS AND RETIREMENT PLAN
Notes to Financial Statements
For the Years Ended December 31, 2001, 2000 and 1999
NOTE 3: INVESTMENTS
Components of the Plan's investments are presented below. Individual investments
that represent 5 percent or more of the Plan's net assets are separately
identified with an asterisk (*). Investments at fair value as determined by
quoted market price are identified with "QMP." Investments at estimated fair
value are identified with "Est." Key Energy Stock Fund is a nonparticipant-
directed fund identified by (**).
Fair Value
Determined By 2001 2000
------------- ------------- -------------
* Stock Index Fund QMP $ 2,222,464 $ 2,191,298
* Janus Worldwide Account QMP 1,804,311 1,967,327
* Fidelity Advisor Growth Opportunities QMP 3,857,711 4,662,556
* Balanced-Wellington Management QMP 2,969,407 3,042,527
* INVESCO Dynamics QMP 2,204,302 3,181,604
Other Funds QMP 6,925,140 5,972,964
------------- -------------
Mutual funds 19,983,335 21,018,276
------------- -------------
* Key Energy Stock Fund QMP ** 3,682,038 ** 1,670,672
* CIGNA Guaranteed Income Account Est 15,580,961 13,411,929
------------- -------------
Other investments 19,262,999 15,082,601
------------- -------------
Investments, at fair value $ 39,246,334 $ 36,100,877
============= =============
During the years ended December 31, 2001, 2000, and 1999 the Plan's investments
in participant directed funds (including gains and losses realized and
unrealized) appreciated/(depreciated) in value by ($2,693,775), ($1,867,359),
and $2,767,702 respectively.
During the years ended December 31, 2001, 2000, and 1999 the Plan's investments
in nonparticipant-directed investments, Key Energy Stock Fund, (including gains
and losses realized and unrealized) appreciated/(depreciated) in value by
($396,409), $197,630, and $0 respectively.
INVESTMENT CONTRACT WITH INSURANCE COMPANY. The plan has entered into an
investment contract with CIGNA (Guaranteed Income Fund). CIGNA maintains the
contributions in a general account. The account is credited with earnings on
the underlying investments and charged for participant withdrawals and
administrative expenses charged by CIGNA. The contract is included in the
financial statements at fair value as reported to the plan by CIGNA. Fair
value is deemed to approximate contract value which represents contributions
made under the contracts, plus earnings, less participant withdrawals and
administrative expenses. Participants may ordinarily direct withdrawal or
transfer all or a portion of their investment at contract value, however,
CIGNA has the right to defer such withdrawals or transfers.
There are no reserves against contract value for credit risk of the contract
issuer or otherwise. The average yield and interest rates were approximately
5.12% for 2001 and 2000. The crediting interest rate is based on a formula
agreed upon with the issuer. Such interest rates are reviewed on a semi-annual
basis for resetting.
-10-
KEY ENERGY SERVICES, INC. 401(k) SAVINGS AND RETIREMENT PLAN
Notes to Financial Statements
For the Years Ended December 31, 2001, 2000 and 1999
NOTE 4: PLAN MERGERS
During the years ended December 31, 2000 and 1999, certain employee benefit
plans sponsored by the companies that had been previously acquired by Key Energy
Services, Inc. were merged into the Plan. In connection with these mergers,
investments of $24,877 and $9,829,877 respectively, were transferred into the
Plan. In addition participant loans of $1,041,855 were transferred into the Plan
for the year ended December 31, 1999
NOTE 5: RELATED PARTY TRANSACTIONS
The Employer pays certain administrative expenses of the Plan. In addition, the
Employer provides certain administrative services to the Plan at no cost. The
amounts of these expenses for the years ended December 31, 2001, 2000, and 1999
were not significant.
-11-
KEY ENERGY SERVICES, INC. 401(k) SAVINGS AND RETIREMENT PLAN
SUPPLEMENTARY SCHEDULE
FOR THE YEAR ENDED:
DECEMBER 31, 2001
-12-
SUPPLEMENTAL SCHEDULE I:
KEY ENERGY SERVICES, INC.
401(k) SAVINGS AND RETIREMENT PLAN
Schedule H Line 4i - Schedule of Assets Held for Investment Purposes
as of December 31, 2001
(c)
(b) Description of investment
Identity of issue, including maturity date, (e)
borrower, lessor rate of interest, collateral, (d) Current
(a) or similar party [1] par or maturity value Cost Value
--- ------------------------------------------- ------------------------------------------------- --------- ---------------
* Connecticut General Life Insurance Company Guaranteed Income Fund $ $ 15,580,961
* Connecticut General Life Insurance Company Pooled Separate Accounts with CIGNA
Stock Index Fund 2,222,464
Fidelity Advisor Value Strategies A 183,099
Janus Worldwide Account 1,804,311
State Street Global Advisors Intermediate Bond
Account 2,010,293
Templeton Foreign Account 298,513
Fidelity Advisor Growth Opportunities 3,857,711
Wellington Management Balanced 2,969,407
John A. Levin Large Cap Value 1,551,452
Putnam Large Cap Growth 227,649
Morgan Stanley Large Cap Growth 199,457
Janus Advisor Growth Account 491,982
INVESCO Dynamics 2,204,302
BERGER Small Cap Value 966,686
Timessquare Small Cap Growth 227,844
INVESCO Small Company Growth Account 768,165
* National Financial Services Key Energy Employer Stock Fund 3,682,038
Loans to Participants (1) 2,449,246
---------------
[2] $ 41,695,580
===============
* An asterisk (*) in column "a" indicates a party-in-interest to the Plan.
[1] Participant loans are aggregated and presented with a general description
of terms and interest rates.
[2] Cost information is ommitted with respect to participant and/or
beneficiary-directed transactions.
See accompanying INDEPENDENT AUDITORS' REPORT. -13-
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