UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _________________
COMMISSION FILE NUMBER 1-9513 (CMS ENERGY CORPORATION)
COMMISSION FILE NUMBER 1-5611 (CONSUMERS ENERGY COMPANY)
EMPLOYEES' SAVINGS PLAN AND
EMPLOYEE STOCK OWNERSHIP PLAN OF
CONSUMERS ENERGY COMPANY
ONE ENERGY PLAZA
JACKSON, MICHIGAN 49201
-----------------------
(FULL TITLE OF THE PLAN AND ADDRESS OF THE PLAN, IF
DIFFERENT FROM THAT OF THE ISSUER NAMED BELOW)
CMS ENERGY CORPORATION
ONE ENERGY PLAZA
JACKSON, MICHIGAN 49201
-----------------------
(NAME OF ISSUER OF THE SECURITIES HELD
PURSUANT TO THE PLAN AND THE ADDRESS
OF ITS PRINCIPAL EXECUTIVE OFFICE)
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
Audited Financial Statements and Supplemental Schedule
December 31, 2004 and 2003 and
Year ended December 31, 2004
CONTENTS
Report of Independent Registered Public Accounting Firm......................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits................................. 2
Statement of Changes in Net Assets Available for Benefits....................... 3
Notes to Financial Statements................................................... 4
Supplemental Schedule
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year)................. 10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
We have audited the accompanying statements of net assets available for benefits
of Employees' Savings Plan and Employee Stock Ownership Plan of Consumers Energy
Company as of December 31, 2004 and 2003, and the related statement of changes
in net assets available for benefits for the year ended December 31, 2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also 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 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 at
December 31, 2004 and 2003, and the changes in its net assets available for
benefits for the year ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2004, is presented for purposes of
additional analysis and is not a required part of the 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 our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Detroit, Michigan
June 3, 2005
1
Employees' Savings Plan and Employee Stock
Ownership Plan of Consumers Energy Company
Statements of Net Assets Available for Benefits
DECEMBER 31
2004 2003
---------------- ----------------
ASSETS
Investments:
Guaranteed investment contracts (at contract value) $ 130,736,865 $ 132,664,682
Fidelity Managed Income Portfolio II 41,291,721 33,777,215
CMS Energy Corporation Common Stock 121,554,041 106,921,647
Fidelity Dividend Growth Fund 150,679,815 150,917,774
Comerica Small Cap Index Fund 2,633,789 569,783
Comerica Large Cap Growth Index Fund 12,155,574 11,487,580
Comerica Large Cap Value Index Fund 11,386,982 9,037,178
Comerica Midcap Index Fund 1,785,889 840,724
Comerica 500 Index Fund 14,394,383 12,760,323
Calamos Growth Fund 57,289,067 44,078,782
Janus Mid Cap Value Fund 8,105,451 2,797,972
Fidelity Intermediate Bond Fund 6,203,158 5,431,304
Fidelity Low Price Stock Fund 10,999,072 5,755,548
Fidelity Diversified International Fund 24,500,289 17,313,392
Fidelity Small Cap Stock Fund 14,408,657 11,496,264
Fidelity Freedom Income Fund 1,329,472 901,377
Fidelity Freedom 2010 Fund 3,619,498 2,648,264
Fidelity Freedom 2020 Fund 2,678,603 1,270,879
Fidelity Freedom 2030 Fund 723,534 253,399
Fidelity Freedom 2040 Fund 409,553 284,550
Short term investments 12,658 119,713
Loans to participants 22,891,867 24,813,736
---------------- ----------------
Total investments 639,789,938 576,142,086
Receivables:
Other receivables 71,839 157,045
---------------- ----------------
71,839 157,045
LIABILITY
Other 83,248 65,167
---------------- ----------------
Net assets available for benefits $ 639,778,529 $ 576,233,964
================ ================
See accompanying notes.
2
Employees' Savings Plan and Employee Stock
Ownership Plan of Consumers Energy Company
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2004
ADDITIONS
Interest and dividend income $ 9,025,571
Participant contributions 38,322,292
----------------
Total additions 47,347,863
DEDUCTIONS
Benefits payments, withdrawals and distributions 38,335,563
Administrative expenses 197,705
----------------
Total deductions 38,533,268
Net realized and unrealized appreciation
in fair value of investments 54,729,970
----------------
Net increase 63,544,565
Net assets available for benefits:
Beginning of year 576,233,964
----------------
End of year $ 639,778,529
================
See accompanying notes.
3
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
Notes to Financial Statements
December 31, 2004 and 2003
and Year Ended December 31, 2004
1. DESCRIPTION OF PLAN
The following description of the Employees' Savings Plan and Employee Stock
Ownership Plan of Consumers Energy Company (the Plan) provides only general
information. Participants should refer to the Plan document for a complete
description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan designed to encourage and assist
employees of CMS Energy Corporation and its subsidiaries, which are at least 80%
owned and have adopted the Plan (the Company or Employer) in saving for the
future. The Plan is a voluntary program that allows eligible participants to
invest their contributions in various investment funds. All regular employees of
the Company as defined by the Plan, may participate in the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
CONTRIBUTIONS
Participants in the Plan may elect to make pre-tax or after-tax contributions
up to 25% of their eligible compensation, as defined by the Plan. If a
participant's annual salary is equal to or more than $90,000, the most that can
be contributed by the Employer on behalf of the participant to the Plan is
12.5%. All percentage contributions are subject to certain dollar limitations as
set forth in the Internal Revenue Code (the Code).
The Company will make matching employer contributions in an amount equal to $.50
for each $1.00 contributed by a participant, up to a maximum of 6% of the
participant's eligible compensation.
Effective September 1, 2002, the matching employer contributions to the Plan
were suspended. The matching employer contributions resumed on the first pay
attributable to work on or after January 1, 2005.
Effective September 1, 2002 all participant balances became eligible for
reallocation at the discretion of the participant.
Effective September 1, 2002, incentive contributions to the Plan were
eliminated.
Effective September 1, 2004, the savings portion of the Plan was amended to
provide that authorized but unissued shares of common stock of CMS Energy
Corporation or other securities convertible to such common stock may be used to
satisfy allocations elected by participants.
4
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
Notes to Financial Statements
1. DESCRIPTION OF PLAN (CONTINUED)
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions,
matching employer contributions and allocations of Plan earnings. The benefit to
which a participant is entitled is the benefit that can be provided from the
vested value of the participant's account.
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the matching employer contributions and the incentive
contributions of their accounts are based on years of service. A participant
becomes 10% vested for each of the first two years of service with the Company,
and 20% for each of the next four years of service.
PARTICIPANT LOANS
Participants may borrow from their fund accounts up to a maximum of $50,000 or
50% of their vested account balance, whichever is less. Loan terms range up to
five years for a general purpose loan or up to 15 years for the purchase of a
primary residence. The loans are secured by the balance of the participant's
account and bear interest at a rate commensurate with local prevailing rates as
determined quarterly by the Plan administrator. Principal and interest are paid
ratably through payroll deductions.
PAYMENT OF BENEFITS
Upon termination of service, death, disability or retirement, a participant may
receive a lump-sum amount equal to the vested value of his or her account.
FORFEITURES AND ADMINISTRATIVE EXPENSES
Forfeitures result from matching employer contributions and incentive
contributions remaining in the Plan for terminated participants' nonvested
account balances. Forfeitures generated are added to a forfeiture reserve
account and are available to offset matching employer contributions. Such
amounts forfeited in 2004 and 2003 were $55,386 and $59,392, respectively, and
are treated as a reduction of the Employer's contribution. As of December 31,
2004, the cumulative unallocated forfeitures were $158,358; as of December 31,
2003 they were $103,042. Expenses related to the administration and investment
management of the Plan are charged against the assets of the investment funds
offered to plan participants. Brokerage fees, commissions, stock transfer taxes
and other expenses in connection with the purchases, sales and distributions of
5
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
Notes to Financial Statements
1. DESCRIPTION OF PLAN (CONTINUED)
FORFEITURES AND ADMINISTRATIVE EXPENSES (CONTINUED)
securities for each investment fund are charged to the fund that incurred the
cost. Fees for obtaining loans are charged to the participant that requested the
loan.
PLAN TERMINATION
Although it has not expressed the intention to do so, the Company has reserved
the right to terminate the Plan at any time by resolution of its Board of
Directors. The value of the participant accounts will be determined as of the
effective date of the termination and be distributed as provided by the Plan.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION AND INCOME RECOGNITION
Except for the investment contracts, the Plan's investments are stated at fair
value which equals the quoted market price on the last business day of the plan
year. The shares of registered investment companies are valued at quoted market
prices which represent the net asset values of shares held by the Plan at
year-end. The fair value of the participation units owned by the Plan in the
common trust fund accounts are based on quoted redemption values on the last
business day of the plan year. The participant loans are valued at their
outstanding balances, which approximate fair value.
Investment contracts are recorded at their contract values, which represent
contributions and reinvested income, less any withdrawals plus accrued interest,
because these investments have fully benefit-responsive features. For example,
participants may ordinarily direct the withdrawal or transfer of all or a
portion of their investment at contract value. However, withdrawals influenced
by Company-initiated events, such as in connection with the sale of a business,
may result in a distribution at other than contract value. There are no reserves
against contract values for credit risk of contract issues or otherwise.
Contract value approximates fair value. The average yield for these contracts
was 6.11% in 2004 and 6.20% in 2003. The crediting interest rate for these
investment contracts ranged from approximately 5.40% to 6.99% in 2004 and 5.40%
to 7.10% in 2003. Rates on contracts remain fixed for the life of each contract.
Upon completion of the recordkeeping transfer to Fidelity Investments, as
described in Note 3, Investments, the valuation of participant accounts was
changed to daily pricing from monthly pricing.
6
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
3. INVESTMENTS
As of January 3, 2003, Fidelity Investments became the trustee and recordkeeper
for the Plan. After December 31, 2002, Consumers Energy Company ceased
recordkeeping services for the Plan. As of the close of business on December 31,
2002, Comerica Bank of Detroit, Michigan ceased providing trustee services to
the Plan and the Plan assets were transferred to Fidelity Investments.
During 2004, the Plan's investments (including investments purchased and sold,
as well as held, during the year) appreciated (depreciated) in fair value as
determined by quoted market prices as follows:
NET REALIZED
AND UNREALIZED
APPRECIATION
IN FAIR VALUE
OF INVESTMENTS
--------------
Mutual funds $ 31,627,844
CMS Energy Corporation Common Stock 23,102,126
--------------
$ 54,729,970
==============
4. CONTINGENCY
CMS Energy Corporation is a named defendant, along with Consumers Energy
Company, CMS Marketing, Services and Trading Company and certain named and
unnamed officers and directors, in two lawsuits brought as purported class
actions on behalf of participants and beneficiaries of the Plan. The two cases,
filed in July 2002 in the U.S. District Court for the Eastern District of
Michigan, were consolidated by the trial judge and an amended consolidated
complaint was filed. Plaintiffs allege breaches of fiduciary duties under ERISA
and seek restitution on behalf of the Plan with respect to a decline in value of
the shares of the CMS Energy Corporation Common Stock held in the Plan.
Plaintiffs also seek other equitable relief and legal fees. In March 2004, the
judge granted in part, but denied in part, CMS Energy Corporation's motion to
dismiss the complaint. The judge has conditionally granted plaintiffs' motion
for class certification. A trial date has not been set, but is expected to be no
earlier than
7
Employees' Savings Plan and Employee
Stock Ownership Plan of Consumers Energy Company
Notes to Financial Statements
4. CONTINGENCY (CON'T)
mid-2006. CMS Energy Corporation and Consumers Energy Company will defend
themselves vigorously in this litigation but cannot predict its outcome.
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated April 24, 2002, stating that the Plan is qualified under Section 401(a) of
the Code and, therefore, the related trust is exempt from taxation. Once
qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt.
6. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in statements of net
assets available for benefits.
7. SUBSEQUENT EVENTS
Effective March 28, 2005, the Company amended the savings portion of the Plan to
reduce the amount paid out in a lump sum without the consent of the participant
upon termination from $5,000 to $500 based on changes to the federal laws
relating to treatment of de minimis distributions from a qualified plan and for
administrative ease.
Effective September 30, 2005, the matching employer contribution for union
employees will increase from $.50 for each $1.00 contributed by a participant to
$.60 for each $1.00 contributed by a participant. The maximum portion of the
participant's eligible compensation eligible for the match remains at 6%.
8
Supplemental Schedule
Employees' Savings Plan and Employee Stock
Ownership Plan of Consumers Energy Company
EIN: 38-0442310 Plan Number: 002
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year)
December 31, 2004
CONTRACT
DESCRIPTION OF INVESTMENT INCLUDING OR
IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST VALUE
-------------------------------------------- --------------------------------------- ---- ------------
New York Life Insurance Company 6.99% Matures 06/27/2005 $ 14,600,920
Principal Mutual Life Insurance Company 6.00% Matures 02/14/2005 21,142,716
Principal Mutual Life Insurance Company 6.18% Matures 11/14/2006 12,448,283
Principal Mutual Life Insurance Company 6.28% Matures 05/14/2007 12,491,152
Principal Mutual Life Insurance Company 5.85% Matures 01/30/2008 11,818,858
The Prudential Mutual Life Insurance Company 5.40% Matures 11/15/2006 11,846,514
The Prudential Mutual Life Insurance Company 5.70% Matures 11/15/2007 17,933,246
Travelers Life and Annuity 6.45% Matures 05/12/2005 28,455,176
* Fidelity Investments Fidelity Managed Income Portfolio II 41,291,721
Fidelity Dividend Growth 150,679,815
Fidelity Intermediate Bond Fund 6,203,158
Fidelity Low Price Stock Fund 10,999,072
Fidelity Diversified International Fund 24,500,289
Fidelity Small Cap Stock Fund 14,408,657
Fidelity Freedom Income Fund 1,329,472
Fidelity Freedom 2010 Fund 3,619,498
Fidelity Freedom 2020 Fund 2,678,603
Fidelity Freedom 2030 Fund 723,534
Fidelity Freedom 2040 Fund 409,553
Short Term Investments 12,658
* CMS Energy Corporation Common Stock of CMS Energy Corporation 121,554,041
Comerica Bank, N.A. Comerica Small Cap Index Fund 2,633,789
Comerica Large Cap Growth Index Fund 12,155,574
Comerica Large Cap Value Index Fund 11,386,982
Comerica Midcap Index Fund 1,785,889
Comerica 500 Index Fund 14,394,383
Calamos Asset Management, Inc. Calamos Growth Fund 57,289,067
Berger Financial Group, LLC Janus Mid Cap Value Fund 8,105,451
* Participant Loans Interest rate range: 3.00% to 8.75%
with various maturity dates through 2019 22,891,867
---- ------------
$ - $639,789,938
==== ============
* Party-in-interest.
Note: Historical cost information is not shown as all investments are
participant-directed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
EMPLOYEES' SAVINGS PLAN AND
EMPLOYEE STOCK OWNERSHIP PLAN OF
CONSUMERS ENERGY COMPANY
By: /s/ John F. Drake
----------------------------------------
John F. Drake
Plan Administrator and
Senior Vice President of Human Resources
and Administrative Services
CMS Energy Corporation and
Consumers Energy Company
Dated: June 24, 2005
EXHIBITS
Exhibit Number Description
-------------- -----------
(23) Consent of Independent Registered Public Accounting
Firm