UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 11-K
[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 0-30512
-------
A. Full title of the plan:
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
SAVINGS INCENTIVE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
CH ENERGY GROUP INC.
284 South Avenue
Poughkeepsie, NY 12603
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Audited Financial Statements
and Supplemental Schedule
Years Ended December 31, 2004 and 2003
Central Hudson Gas & Electric Corporation
Savings Incentive Plan (the "Plan")
Audited Financial Statements and Supplemental Schedule
Years Ended December 31, 2004 and 2003
INDEX
-------------------------------------------------------------------------------
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 4(i) - Schedule of Assets (Held at End of Year) 9
Signature 10
Exhibit
23.1 Consent of Independent Registered Public Accounting Firm 11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Plan Administrator and the Participants of the
Central Hudson Gas & Electric Corporation Savings Incentive Plan
We have audited the accompanying statements of net assets available for benefits
of Central Hudson Gas & Electric Corporation Savings Incentive Plan 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. 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 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 Central Hudson
Gas & Electric Corporation Savings Incentive Plan as of December 31, 2004 and
2003, and the changes in net assets available for benefits for the year ended
December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
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
at end of year) as of December 31, 2004, 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 United States
Department of Labor 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.
Respectfully Submitted,
/s/ Insero, Kasperski, Ciaccia & Co., P.C.
Certified Public Accountants
Rochester, New York
May 20, 2005
1
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Statements of Net Assets Available for Benefits
As of December 31,
2004 2003
------------- ------------
Assets:
------
Investments:
Mutual funds $ 67,766,474 $ 42,862,055
Pooled separate account 37,053,811 37,300,599
CH Energy Group stock fund 32,472 -
Participant loans 1,486,441 931,311
------------- -------------
Total investments 106,339,198 81,093,965
Receivables:
Employer contributions 486,257 94,124
Participant contributions 83,699 350,095
Accrued loan repayments - 29,677
------------- -------------
Total receivables 569,956 473,896
------------- -------------
Net assets available for benefits $ 106,909,154 $ 81,567,861
============= =============
See Notes to Financial Statements.
2
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31,
2004
-----------------------
Additions:
----------
Investment income:
Net appreciation in fair value of investments:
Mutual funds $ 5,346,191
CH Energy Group stock fund 1,122
Interest and dividends 3,233,619
-------------
Total investment income 8,580,932
Contributions:
Employer 2,460,223
Participants 6,354,144
Rollovers 788,803
-------------
Total contributions 9,603,170
Amounts merged into the Plan 13,794,787
-------------
Total additions 31,978,889
Deductions:
-----------
Benefits paid to participants 6,614,681
Administrative expenses 11,927
Deemed distributions 10,988
-------------
Total deductions 6,637,596
-------------
Net increase in net assets available for benefits 25,341,293
Net assets available for benefits, beginning of year 81,567,861
-------------
Net assets available for benefits, end of year $ 106,909,154
=============
See Notes to Financial Statements.
3
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Notes to the Financial Statements
Years Ended December 31, 2004 and 2003
1. Description of Plan:
--------------------
The following description of the Central Hudson Gas & Electric Corporation
("Central Hudson") Savings Incentive Plan (the "Plan") provides only general
information. Participants should refer to the Summary Plan Description for a
more complete description of the Plan's provisions.
Organization
The Plan is a defined contribution plan within the meaning of Section 401(a)
and 401(k) of the Internal Revenue Code of 1986. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
For the year ended December 31, 2003, Plan participants included only
full-time employees and certain part-time employees of Central Hudson Gas &
Electric Corporation. Effective January 1, 2004, Griffith Energy Services,
Inc. ("Griffith") Savings Incentive Plan and SCASCO, Inc. ("SCASCO") 401(k)
Profit Sharing Plan (collectively the "merged plans") were merged into the
Plan. The merged plans have maintained their unique plan features relating to
eligibility requirements, company matching percentages and vesting periods.
Each Employee who was eligible to participate in either of the merged plans
immediately prior to the January 1, 2004 transfer shall continue to be
eligible to participate in the Plan. Participants classified as Central
Hudson employees include all full-time employees who have twelve months of
service and certain part-time employees. Participants classified as Griffith
employees include all full-time employees who have twelve months of service
with that company. Participants classified as SCASCO employees include all
full-time employees who have twelve months of service with that company or
employees hired before January 1, 2004 who have attained the age of 20 1/2
years old and have 6 months of consecutive service with that company. See
Contributions section below for further information relating to the unique
company matching plan features and vesting periods for the different classes
of employees.
All participant account balances, including all outstanding participant notes
receivable, of the merged plans were transferred to and made a part of the
Plan. The net assets transferred to the Plan from each of the merged plans
was:
Griffith Energy Services, Inc. Savings Incentive Plan $ 10,449,668
SCASCO, Inc. 401(k) Profit Sharing Plan 3,345,119
-------------
$ 13,794,787
Administration
The Plan is administered by the Administrative Committee (SIP Committee),
which is appointed by the Company's Board of Directors. Effective January 1,
2004, Fidelity Investments Institutional Services Company, Inc. ("Fidelity")
replaced ING Financial Services ("ING") as the Plan's trustee. Fidelity also
replaced ING as the Plan's record keeper of individual participant accounts,
which is based on information provided directly to them by the Company's
payroll and human resources departments.
Administrative expenses are paid by the Plan, unless paid by the Company,
except for costs incurred for the purchase or sale of securities and
investment related costs such as investment manager fees, which are borne by
the respective investment funds. Certain fees for professional services
relating to the Plan were paid by the Company during 2004 and 2003.
Contributions
Contributions to the Plan are based on payroll deductions paid directly by
the company to the trustee, Fidelity. Contributions are classified as either
basic or voluntary. The basic contribution is the individually authorized
pretax percentage (1 percent to 12 percent for the 2003 plan year, subject to
IRS limitations) of a participant's base rate of salary. Effective January 1,
2004, this range was increased to allow participants to contribute 1 percent
to 75 percent of their base rate of salary, subject to IRS limitations. The
Plan also allows for voluntary contributions up to 5 percent of the
participants' base rate of salary. This is an after-tax contribution and is
not matched by the
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Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Notes to the Financial Statements (continued)
Years Ended December 31, 2004 and 2003
1. Description of Plan (continued):
--------------------------------
Contributions (continued)
Company. Additionally, the Plan provides for a Company match of 50 percent of
the first 8 percent of such basic contributions, which are made by management
employees of Central Hudson, 33 percent of the first 6 percent for employees
covered by a collective bargaining agreement of Central Hudson, 100 percent
of the first 4 percent for all Griffith employees and 50 percent of the
first 8 percent for all SCASCO employees. Contributions are invested in the
Plan's authorized investment funds based on participants' designations.
At the discretion of the CH Energy Group Board of Directors, additional
contributions may be made by the companies to their employees account. For
the 2004 Plan Year, this additional discretionary contribution for Griffith
employees totaled $462,314 and is included in the Contribution Receivable as
of December 31, 2004. There were no discretionary contributions for
Central Hudson for the years ended December 31, 2004 and 2003 or SCASCO
employees for the year ended December 31, 2004.
Participant Accounts
Each participant's account is credited with the participant's contribution,
the applicable amount of Company's matching contribution and allocations of
the plan earnings. Each participant account is charged with an allocation of
administrative expenses. 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
All participants are immediately vested in participant contributions.
Participants classified as Central Hudson employees are also immediately and
fully vested in all Company contributions and earnings on such contributions.
Participants classified as Griffith and SCASCO employees vest in Company
contributions over a 5-year period at a rate of 20 percent for each year of
service. Upon attainment of five years of service, all Company matching
contributions are immediately vested. All participants also become 100
percent vested upon disability, death, or upon reaching normal retirement
date (date employment terminated after attaining the age of 65) or early
retirement date (date employment terminated after attaining the age of 55 and
10 years of service). If a participant leaves the Company before becoming
fully vested, the participant will forfeit the non-vested portion of the
Company's matching contributions.
Forfeitures
Forfeitures were directed to the Stable Value Fund under ING. Effective
January 1, 2004 forfeitures are directed to the FID Freedom Income Fund.
Forfeitures are applied to reduce Company matching contributions and totaled
$ 33,403 and $ 0 in 2004 and 2003, respectively.
Distributions
A participant's account may be distributed in a lump-sum payment, in equal
installments over a number of years (up to 20 years), or through a direct
rollover to another qualified plan at the participant's election upon
termination of employment, disability under the Company's disability plan,
retirement or death. In the event of such separation prior to age 65, the
terminated participant may elect to defer the distribution until the
participant reaches age 65, or to an earlier date, provided that the
participant's eligible distribution exceeds $5,000. In all cases, an active
participant's account must be distributed no later than April 1 of the year
following the participant's reaching 70 1/2 years of age.
The participant may elect to withdraw an amount prior to termination of
employment if it is (1) an amount from the participant's voluntary investment
account; (2) an amount equal to the participant's total vested account after
reaching age 59 1/2; or (3) an amount, in the event of hardship, from the
participant's basic
5
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Notes to the Financial Statements (continued)
Years Ended December 31, 2004 and 2003
1. Description of Plan (continued):
--------------------------------
Distributions (continued)
investment account provided the participant first exhausts all other
distribution and loan options of the Plan (minimum hardship withdrawal must
be $1,000). Participant contributions will be suspended for 6 months after
the receipt of a hardship withdrawal.
Participant Notes Receivable
All 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 account
balance. Loan transactions are treated as a transfer to/(from) the investment
fund from/(to) the Participant Notes fund. Loan terms range from 1-5 years
unless loan proceeds are used for the purchase of a primary residence, in
which case repayment terms may exceed 5 years.
The loans are secured by the balance in the participant's account and carry
interest rates 1 percent over prime. Once the rate is established, it remains
fixed over the life of the loan. Principal and interest is paid through
monthly payroll deductions.
Plan Termination
Although it has not expressed any intent 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 Plan
termination, Participants will become immediately vested and their account
balances will be distributed as defined.
Investment Options
The participants direct the investment of both their own and the company
matching contributions into various investment options offered by the Plan.
These investment options for the 2004 plan year included: the ING Stable
Value Fund, the PIMCO Total Return Fund, the PIMCO High Yield Fund, the Van
Kampen Growth and Income Fund, the American Beacon Small Cap Value Fund, the
Fidelity Balanced Fund, the Fidelity Blue Chip Growth Fund, the Fidelity
Low-Priced Stock Fund, the Fidelity Diversified International Fund, the
Fidelity Small Cap Stock Fund, the Fidelity Freedom Income Fund, the Fidelity
Freedom 2000 Fund, the Fidelity Freedom 2010 Fund, the Fidelity Freedom 2020
Fund, the Fidelity Freedom 2030 Fund, the Fidelity Freedom 2040 Fund, the
Fidelity Freedom 2005 Fund, the Fidelity Freedom 2015 Fund, the Fidelity
Freedom 2025 Fund, the Fidelity Freedom 2035 Fund, the Spartan Extended
Market Index Fund, and the Spartan US Equity Index Fund. Effective January
23, 2004, the Plan was amended to allow participants the ability to invest up
to 20 percent of their future contributions in the CH Energy Group Stock Fund
(a unitized stock fund). Prior to this amendment, this stock fund was not
offered as an investment option.
Prior to Fidelity replacing ING as the trustee of the Plan on January 1,
2004, investment options for the participants included: the ING Stable Value
Fund, the American Century Ultra Fund, the Evergreen Foundation Fund, the
Templeton Growth Fund, the ING Index Plus Large Capital Fund, the ING Small
Company Fund, the MFS Total Return Fund, the ING International Value Fund,
the INVESCO Dynamics Fund, the Fidelity Advisor Equity Growth Fund, and the
Lord Abbett Affiliated Fund.
2. Significant Accounting Policies:
--------------------------------
Basis of Accounting
The Plan uses the accrual basis of accounting, which recognizes revenue when
it is earned and expenses as they are incurred.
6
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Notes to the Financial Statements (continued)
Years Ended December 31, 2004 and 2003
2. Significant Accounting Policies (continued):
--------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value except for investments in the
ING Stable Value Option Fund (see Note 3). The fair value of shares in mutual
funds are determined by quoted market price, which represents 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.
Interest income is recorded on the accrual basis. Dividends are recorded on
the ex-dividend date.
Participant Notes Receivable
Participant notes receivable are valued at their outstanding principal
balances, which approximate fair value.
Payment of Benefits
Benefits are recorded when paid.
3. Stable Value Option Fund:
-------------------------
The ING Stable Value Option Fund of the Plan is valued at "book value" or
"stable value" as determined by the fund manager. Its value reflects the
amount of contributions made, minus withdrawals plus interest, but without
immediately reflecting the changes in the market value of the underlying
assets. Interest rates are determined annually by ING.
4. Investments:
------------
Individual investments that represented 5 percent or more of the Plan's net
assets available for benefits at the respective financial statement dates
were as follows:
2004 2003
------------------------------
ING Stable Value Fund $ 37,053,811 $ 37,300,599
VK Growth & Income Fund 7,441,416 5,340,079
Fidelity Balanced Fund 12,803,590 9,676,181
Fidelity Blue Chip Growth Fund 18,706,772 16,874,074
Fidelity Low-Priced Stock Fund 10,181,932 5,108,372
Fidelity Diversified International Fund 6,599,020 N/A*
* Although there was an account balance in this fund as of December 31, 2003,
it did not represent 5 percent or more of the net assets available for
benefits as of that date and therefore is not required to be disclosed
separately.
7
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Notes to the Financial Statements (continued)
Years Ended December 31, 2004 and 2003
5. Risks:
------
The Plan provides for the various investment options as described in Note 1.
Any investment is exposed to various risks, such as interest rate, market and
credit. These risks could result in a material effect on the participants'
account balances and the amounts reported in the statements of net assets
available for benefits and the statements of changes in net assets available
for benefits.
6. Tax Exempt Status:
------------------
The Plan has received a determination letter from the Internal Revenue
Service dated May 31, 2005 based on the Plan document effective October 1,
2001 and covering the Plan amendment dated September 24, 2003, stating that
the Plan is qualified under Section 401(a) of the Internal Revenue Code (the
"Code"). Accordingly, the Plan is exempt from taxation. The Plan was amended
and restated as of January 1, 2004 and a new determination letter has been
applied for. The Plan Sponsor believes the Plan is being operated in
compliance with the applicable requirements of the Code and, therefore,
believes that the Plan is qualified and tax exempt.
7. Deferred Distributions:
-----------------------
As discussed in Note 1, upon termination, retirement or disability under the
Company's disability plan prior to age 65, participants may elect to defer
their distributions until a later date. During this deferral period, the
participant's interest in the Plan will share in the actual experience of
Plan investments and a subsequent valuation will be made immediately prior to
actual distribution. The current value of such deferred distributions
approximated $28,028,246 and $21,848,601 at December 31, 2004 and 2003,
respectively.
8. Subsequent Events:
------------------
On April 21, 2005, the Board passed a resolution to discontinue the CH Energy
Group Stock Fund as an investment option in the Plan effective December 30,
2005. Prior to this date, participants will be asked to re-direct future
contributions from this fund to one of the other investment options. Once
this is completed and the balance of this fund is static (with the exception
of market activity), amounts currently held in the CH Energy Group Stock Fund
will be transferred according to the participants' election. If a participant
fails to make such an election, their account balance in this fund will
automatically be transferred to the ING Stable Value Fund. All amounts will
be transferred out of CH Energy Group Stock Fund by December 30, 2005 and
this fund will no longer be an investment option for participants.
8
Supplemental Schedule
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year)
December 31, 2004
Identity of Issue, Borrower, Description of Investment, Including Maturity
Lessor or Similar Party Date, Rate of Interest, Par or Maturity Value Current Value
----------------------------------------------------------------------------------------------------------
CH Energy Group Stock Fund* 3,190 shares - Unitized Stock Fund $ 32,472
ING Stable Value Fund 37,053,811 shares - Stable Value Fund 37,053,811
PIMCO Total Return Fund 53,894 shares - Mutual Fund 575,053
PIMCO High Yield Fund 75,276 shares - Mutual Fund 750,504
Van Kampen Growth and Income Fund 368,569 shares - Mutual Fund 7,441,416
American Beacon Small Cap Value Fund 44,368 shares - Mutual Fund 883,368
Fidelity Balanced Fund* 718,496 shares - Mutual Fund 12,803,590
Fidelity Blue Chip Growth Fund* 448,496 shares - Mutual Fund 18,706,772
Fidelity Low-Priced Stock Fund* 252,967 shares - Mutual Fund 10,181,932
Fidelity Diversified International Fund* 230,413 shares - Mutual Fund 6,599,020
Fidelity Small Cap Stock Fund* 41,977 shares - Mutual Fund 762,300
Fidelity Freedom Income Fund* 3,106 shares - Mutual Fund 35,004
Fidelity Freedom 2000 Fund* 693 shares - Mutual Fund 8,368
Fidelity Freedom 2010 Fund* 47,427 shares - Mutual Fund 645,950
Fidelity Freedom 2020 Fund* 64,789 shares - Mutual Fund 904,452
Fidelity Freedom 2030 Fund* 22,074 shares - Mutual Fund 310,807
Fidelity Freedom 2040 Fund* 18,739 shares - Mutual Fund 154,975
Fidelity Freedom 2005 Fund* 20,107 shares - Mutual Fund 217,156
Fidelity Freedom 2015 Fund* 42,300 shares - Mutual Fund 467,412
Fidelity Freedom 2025 Fund* 44,340 shares - Mutual Fund 500,150
Fidelity Freedom 2035 Fund* 2,850 shares - Mutual Fund 32,603
Spartan Extended Market Index Fund* 18,867 shares - Mutual Fund 603,354
Spartan US Equity Index Fund* 120,912 shares - Mutual Fund 5,182,288
ParticipantNotes Receivable* Varying interest rates and maturity dates
(interest rates range from 6.00% to 10.75%) 1,486,441
-------------
$ 106,339,198
=============
* Indicates party-in-interest to the Plan.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
Central Hudson Gas & Electric Corporation
Savings Incentive Plan
/s/ Donna S. Doyle
-----------------------------------------
Donna S. Doyle
Chair of Administrative Committee
Dated: June 29, 2005
10