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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number 1-11377
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
(Full title of the plan)
CINERGY CORP.
(Name of issuer of the securities held pursuant to the plan)
139 East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices)
FINANCIAL STATEMENTS AND EXHIBITS
Page No.
Financial Statements
Report of Independent Public Accountants 3
Statements of Financial Condition as of
December 31, 1998 and 1997 4
Statements of Income and Other Changes in Plan Equity
for the Years Ended December 31, 1998, 1997, and 1996 5
Notes to Financial Statements 6-8
Financial Statement Schedules:
Schedules I, II, and III are not applicable
Signatures 9
Exhibits
23) Consent of Independent Public Accountants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
the Cinergy Corp. Employee Stock
Purchase and Savings Plan:
We have audited the accompanying statements of financial condition of the
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN as of December 31, 1998
and 1997, and the related statements of income and other changes in plan equity
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Plan Administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 the
Plan Administrator, 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 financial position of the Plan as of December 31,
1998 and 1997, and the results of its operations and changes in plan equity for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
March 29, 1999
3
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
December 31
1998 1997
---- ----
Receivable from Company (Purchase
Savings Accounts) (Note C) $8 781 293 $4 857 087
========== ==========
Plan Equity $8 781 293 $4 857 087
========== ==========
The accompanying notes are an integral part of these financial statements.
4
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENTS OF INCOME AND OTHER CHANGES IN PLAN EQUITY
1998 1997 1996
---- ---- ----
Interest income (Purchase
Savings Accounts) (Note C) $ 383 021 $ 139 909 $ 390 381
Contributions from participants
(Note C) 4 410 387 4 997 770 4 618 713
Distributions to participants
(Note E) (869 202) (9 550 621) (867 802)
---------- ---------- ----------
Net change in Plan equity
for the period 3 924 206 (4 412 942) 4 141 292
Plan equity at beginning of the
period 4 857 087 9 270 029 5 128 737
---------- ---------- ----------
Plan equity at end of the period $8 781 293 $4 857 087 $9 270 029
========== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
5
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note A - Plan Description
On October 18, 1994, the board of directors of Cinergy Corp. ("Cinergy" or
"Company") adopted, and the holders of Cinergy's common stock ("Common Stock")
subsequently approved, the Cinergy Corp. Employee Stock Purchase and Savings
Plan ("the Plan") for the benefit of eligible employees (see the Plan prospectus
for eligibility criteria) of Cinergy and its subsidiaries. Under the Plan,
eligible employees may be granted stock options within the meaning of Section
423 of the Internal Revenue Code of 1986 (" Code"), as amended, to purchase
Common Stock. In conjunction with the merger of PSI Resources, Inc.,
("Resources") with and into the Company on October 24, 1994, the PSI Resources,
Inc. Employee Stock Purchase and Savings Plan the ("Resources Plan") was merged
into the Plan. The RESOURCES Plan contained provisions substantially similar to
the Plan. The administrative expenses of the Plan are paid by the Company. The
assets of the Plan are commingled with the assets of Cinergy and its
subsidiaries. Further details of the Plan are provided in the Plan prospectus
which has been distributed to all Plan participants.
Note B - Accounting Principles
The accounts of the Plan are maintained on an accrual basis. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the Plan Administrator to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the 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.
Note C - Investment Program
Under the Plan, at the participant's discretion, after-tax funds withheld from a
participant's compensation during a 26-month offering period are deposited in an
interest-bearing account ("Purchase Savings Account") in the participant's name,
either in a bank the ("Bank") selected by the Company or in such an account
maintained by the Company, as determined by the Plan's administration committee.
Interest will be paid by the Bank or the Company at a rate at least equal to the
rate a bank would pay on a regular statement savings account or at a comparable
rate if paid by the Company. The amounts deposited in the Purchase Savings
Account, plus interest paid thereon, will equal the total dollar amount the
eligible employee may apply toward the purchase of shares of Common Stock
pursuant to the Plan. At the end of the offering period, each participant
specifies the portion of the Purchase Savings Account to be applied to the
purchase of Common Stock at a previously established purchase price. Funds not
used to purchase Common Stock, including any interest earned over the 26-month
offering period, are returned to the participant.
Under the Plan, the purchase price of each share of Common Stock is equal to the
fair market value of a share of Common Stock on the first date of the offering
period, less 5%. The fair market value of a share of Common Stock is the average
of the high and low sales prices of a share of Common Stock as reported in the
New York Stock Exchange Composite Transactions published in The Wall Street
Journal for such date or, if no trading occurs on such date, the last date on
which trading occurred.
The initial offering under the Plan was a continuation of the third offering
period under the RESOURCES Plan. The share price established for this offering,
which began November 1, 1994, for PSI Energy, Inc. employees and February 1,
1995, for The Cincinnati Gas & Electric Company employees, was $21.7312. The
initial offering was deemed to have commenced on the first day of the third
offering period under the RESOURCES Plan and ended on December 31, 1996. The
Plan equity at December 31, 1996, was $9,270,029. This balance was used by the
participants to purchase, subsequent to December 31, 1996, a total of 414,284
shares of Common Stock with the remaining $267,141 distributed in cash.
The second offering under the Plan commenced on January 1, 1997, and ended on
February 28, 1999. The purchase price for this offering period was established
at $31.825 per share. At the end of the second offering of the Plan, the market
price was below the established share price; therefore in accordance with the
Plan provisions, all cash funds were distributed to plan participants in March
1999.
The number of employees enrolled in the Plan at December 31, 1998, 1997, and
1996, were 2,081, 2,694, and 2,399, respectively.
The third offering under the Plan commenced on March 1, 1999. The purchase price
for this offering period has been established at $27.7282.
Note D - Income Tax Status
The Plan is not regarded as an "employee benefit plan" under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and,
therefore, is not subject to ERISA. The Plan is intended to qualify as an
employee stock purchase plan under Section 423 of the Code. Amounts withheld
from a participant's compensation for deposit in the participant's Purchase
Savings Account are from after-tax dollars. Interest on the Purchase Savings
Account is taxable to the participant in the year earned. Dividends paid after
the shares are purchased are taxable to the participant in the year received.
Subsequent dispositions of shares of Common Stock purchased from the Plan may
result in gains or losses equal to the amount realized over or under the tax
basis in the shares. The tax basis is generally considered to be the amount of
ordinary income recognized, plus the purchase price in conjunction with the
purchase of shares from the Plan.
Note E - Distributions to Participants
A participant may at any time, before the end of an offering period, terminate
participation in the Plan. Upon termination, all funds, including interest, in
the participant's Purchase Savings Account are returned to the participant
without penalty. There were no material outstanding termination requests at the
end of 1998, 1997, or 1996.
If a participant's employment with the Company or its subsidiaries is
terminated, all funds, including interest, in the participant's Purchase Savings
Account are returned to the participant. If termination is due to retirement,
the participant may purchase all or fewer than all of the shares of Common Stock
which may be purchased with the funds then on deposit in the participant's
Purchase Savings Account within three months from the date of retirement but not
later than the last day of the offering period. Funds not applied to purchase
Common Stock are returned to the participant.
If termination is due to death, the participant's legal representative or
beneficiary may purchase all or fewer than all of the shares of Common Stock
which may be purchased with the funds then on deposit in the participant's
Purchase Savings Account within 12 months of the participant's death but not
later than the last day of the offering period. Funds not applied to purchase
Common Stock will be paid to the participant's legal representative or
beneficiary.
Distributions to participants increased in 1997 due to the completion of the
initial offering, which is discussed in Note C.
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Note F - Change in Control, Amendment, and Termination
In the event of a "change in control" of Cinergy as defined in the Plan as
amended, each participant has the right within three months from the "change in
control" or the purchase date (as defined in the Plan prospectus), whichever is
earlier, to elect to purchase all or fewer than all of the eligible shares.
Cinergy, at any time by action of its board of directors, may alter, amend,
modify, revoke, or terminate the Plan in whole or in part, or alter or amend any
and all terms of participation in an offering made under the Plan, except with
respect to provisions related to a "change in control" of the Company for a
three-year period following such "change in control".
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SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of
1934, the Plan Committee has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
(The Plan)
Date: March 30, 1999
/s/ Van P. Smith
Van P. Smith
(Chairman, Compensation
Committee)
8