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, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED].
For the transition period from ___________ to ____________
Commission file number 1-4473
------
The Savings Plan for Employees of
Arizona Public Service Company
and
The Savings Plan for Union Employees of
Arizona Public Service Company
(Full titles of the plans)
400 North Fifth Street
Station 8478, P.O. Box 53999
Phoenix, Arizona 85004
(Address of the plans)
Pinnacle West Capital Corporation
(Name of issuer)
400 East Van Buren
P.O. Box 52132
Phoenix, Arizona 85072
(Address of issuer's principal executive office)
THE SAVINGS PLAN FOR EMPLOYEES
OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES OF
ARIZONA PUBLIC SERVICE COMPANY
AND
THE SAVINGS PLAN FOR EMPLOYEES OF
PINNACLE WEST CAPITAL CORPORATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
Independent Auditors' Report 1
Combined Statements of Net Assets Available
for Benefits with Supplemental
Combining Information as of
December 31, 1997 and 1996 2 - 3
Combined Statements of Changes in Net Assets
Available for Benefits with Supplemental
Combining Information for Each of the Three
Years in the Period Ended December 31, 1997 4 - 6
Notes to Combined Financial Statements 7 - 15
Exhibits Filed 16
INDEPENDENT AUDITORS' REPORT
Arizona Public Service Company
Phoenix, Arizona
We have audited the accompanying combined statements of net assets available for
benefits of The Savings Plan for Employees of Arizona Public Service Company,
The Savings Plan for Union Employees of Arizona Public Service Company and The
Savings Plan for Employees of Pinnacle West Capital Corporation (the "Plans") as
of December 31, 1997 and 1996, and the related combined statements of changes in
net assets available for benefits for each of the three years in the period
ended December 31, 1997. These combined financial statements are the
responsibility of the Plans' management. 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
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, such combined financial statements present fairly, in all
material respects, the net assets available for benefits of the Plans as of
December 31, 1997 and 1996, and the changes in net assets available for benefits
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
combined financial statements taken as a whole. The supplemental combining
information by fund is presented for the purpose of additional analysis of the
basic combined financial statements rather than to present information regarding
the net assets available for benefits and changes in net assets available for
benefits of the individual funds, and is not a required part of the basic
financial statements. This supplemental information is the responsibility of the
Plans' management. Such supplemental combining information by fund has been
subjected to the auditing procedures applied in our audits of the basic combined
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic combined financial statements
taken as a whole.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
June 22, 1998
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY AND
THE SAVINGS PLAN FOR EMPLOYEES OF PINNACLE WEST CAPITAL CORPORATION
- --------------------------------------------------------------------------------------------------------------------------------
COMBINED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH SUPPLEMENTAL COMBINING INFORMATION
DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
------------- ------------- ------------- ------------- -------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$64,852,152;
Index Fund,
$55,556,633;
Fixed Income Fund,
$53,078,299;
Aggressive Equity Fund,
$36,416,877;
International Equity Fund,
$7,067,988;
Lifestyle Conservative Fund,
$2,184,528;
Lifestyle Moderate Fund,
$5,994,426;
Lifestyle Aggressive Fund,
$6,698,117;
Participant Loan Feature,
$19,767,046) $ 388,014,445 $ 141,053,827 $ 106,580,249 $ 53,078,299 $ 44,685,290
Temporary investments (at cost
which approximates fair value) 7,548,392 1,906,886 5,638,399
Interest/Other receivable 314,277 9,229 305,048
------------- ------------- ------------- ------------- -------------
Total assets 395,877,114 142,969,942 106,580,249 59,021,746 44,685,290
------------- ------------- ------------- ------------- -------------
LIABILITIES:
Interfund transfers and other liabilities 612,967 585,513 (180,210) 192,865 1,480
------------- ------------- ------------- ------------- -------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 395,264,147 $ 142,384,429 $ 106,760,459 $ 58,828,881 $ 44,683,810
============= ============= ============= ============= =============
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------------------------------
LIFESTYLE LIFESTYLE LIFESTYLE
INTERNATIONAL CONSERVATIVE MODERATE AGGRESSIVE PARTICIPANT
EQUITY FUND FUND FUND FUND LOAN FEATURE
------------- ------------- ------------- ------------- -------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$64,852,152;
Index Fund,
$55,556,633;
Fixed Income Fund,
$53,078,299;
Aggressive Equity Fund,
$36,416,877;
International Equity Fund,
$7,067,988;
Lifestyle Conservative Fund,
$2,184,528;
Lifestyle Moderate Fund,
$5,994,426;
Lifestyle Aggressive Fund,
$6,698,117;
Participant Loan Feature,
$19,767,046) $ 6,633,636 $ 2,293,984 $ 6,592,923 $ 7,329,191 $ 19,767,046
Temporary investments (at cost
which approximates fair value) 3,107
Interest/Other receivable
------------- ------------- ------------- ------------- -------------
Total assets 6,633,636 2,293,984 6,596,030 7,329,191 19,767,046
------------- ------------- ------------- ------------- -------------
LIABILITIES:
Interfund transfers and other liabilities 42,145 (9,259) (18,518) (38,349) 37,300
------------- ------------- ------------- ------------- -------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 6,591,491 $ 2,303,243 $ 6,614,548 $ 7,367,540 $ 19,729,746
============= ============= ============= ============= =============
See notes to combined financial statements.
-2-
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY AND
THE SAVINGS PLAN FOR EMPLOYEES OF PINNACLE WEST CAPITAL CORPORATION
- -----------------------------------------------------------------------------------------------
COMBINED STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH SUPPLEMENTAL COMBINING INFORMATION
DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------
COMBINED
------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$67,839,594;
Index Fund,
$43,143,965;
Fixed Income Fund,
$52,542,392;
Aggressive Equity Fund,
$33,506,467;
International Equity Fund,
$3,159,997;
Lifestyle Conservative Fund,
$1,297,857;
Lifestyle Moderate Fund,
$3,483,624;
Lifestyle Aggressive Fund,
$2,496,232;
Participant Loan Feature,
$18,564,771) $306,635,785
Temporary investments (at cost
which approximates fair value) 15,173,420
Interest receivable 336,604
------------
Total assets 322,145,809
------------
LIABILITIES:
Interfund transfers and other liabilities 543,692
------------
NET ASSETS AVAILABLE
FOR BENEFITS $321,602,117
============
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE BALANCED
STOCK FUND INDEX FUND INCOME FUND EQUITY FUND FUND
------------ ------------ ------------ ------------ ------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$67,839,594;
Index Fund,
$43,143,965;
Fixed Income Fund,
$52,542,392;
Aggressive Equity Fund,
$33,506,467;
International Equity Fund,
$3,159,997;
Lifestyle Conservative Fund,
$1,297,857;
Lifestyle Moderate Fund,
$3,483,624;
Lifestyle Aggressive Fund,
$2,496,232;
Participant Loan Feature,
$18,564,771) $114,661,023 $ 73,255,751 $ 52,542,392 $ 36,879,918 $
Temporary investments (at cost
which approximates fair value) 1,703,669 13,469,751
Interest receivable 6,821 329,783
------------ ------------ ------------ ------------ ------------
Total assets 116,371,513 73,255,751 66,341,926 36,879,918
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Interfund transfers and other liabilities 534,074 9,070 (14,520) (19,464)
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $115,837,439 $ 73,246,681 $ 66,356,446 $ 36,899,382 $
============ ============ ============ ============ ============
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------------------------
LIFESTYLE LIFESTYLE LIFESTYLE
INTERNATIONAL CONSERVATIVE MODERATE AGGRESSIVE PARTICIPANT
EQUITY FUND FUND FUND FUND LOAN FEATURE
------------ ------------ ------------ ------------ ------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$67,839,594;
Index Fund,
$43,143,965;
Fixed Income Fund,
$52,542,392;
Aggressive Equity Fund,
$33,506,467;
International Equity Fund,
$3,159,997;
Lifestyle Conservative Fund,
$1,297,857;
Lifestyle Moderate Fund,
$3,483,624;
Lifestyle Aggressive Fund,
$2,496,232;
Participant Loan Feature,
$18,564,771) $ 3,269,793 $ 1,284,840 $ 3,574,423 $ 2,602,874 $ 18,564,771
Temporary investments (at cost
which approximates fair value)
Interest receivable
------------ ------------ ------------ ------------ ------------
Total assets 3,269,793 1,284,840 3,574,423 2,602,874 18,564,771
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Interfund transfers and other liabilities 860 (2,820) 943 35,549
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 3,268,933 $ 1,284,840 $ 3,577,243 $ 2,601,931 $ 18,529,222
============ ============ ============ ============ ============
See notes to combined financial statements.
-3-
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY AND
THE SAVINGS PLAN FOR EMPLOYEES OF PINNACLE WEST CAPITAL CORPORATION
- ----------------------------------------------------------------------------------------------------------------------
COMBINED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH SUPPLEMENTAL COMBINING INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
---------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
------------- ------------- ------------- ------------- -------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 7,934,514 $ 3,872,745 $ 2,630,859
Interest/other income 5,610,801 75,931 $ 19,288 $ 3,809,025 6,050
Realized gain on sale of
investments 11,404,543 5,727,161 4,166,257 1,234,978
Unrealized appreciation
(depreciation) of
investments (Note 5) 55,797,490 29,380,243 20,911,830 4,894,962
------------- ------------- ------------- ------------- -------------
Total investment income 80,747,348 39,056,080 25,097,375 3,809,025 8,766,849
------------- ------------- ------------- ------------- -------------
Contributions (Note 2):
Employers 7,068,458 7,068,458
Participants 22,670,941 3,063,982 7,183,166 4,170,698 5,456,080
------------- ------------- ------------- ------------- -------------
Total contributions 29,739,399 10,132,440 7,183,166 4,170,698 5,456,080
------------- ------------- ------------- ------------- -------------
Total additions 110,486,747 49,188,520 32,280,541 7,979,723 14,222,929
------------- ------------- ------------- ------------- -------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 36,772,690 15,124,527 6,933,307 9,960,275 2,546,306
Administrative expenses 52,027 3,533 13,052 31,408 3,403
Interfund transfers 7,513,470 (8,179,596) 5,515,605 3,888,792
------------- ------------- ------------- ------------- -------------
Total deductions 36,824,717 22,641,530 (1,233,237) 15,507,288 6,438,501
------------- ------------- ------------- ------------- -------------
Net increase (decrease) 73,662,030 26,546,990 33,513,778 (7,527,565) 7,784,428
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 321,602,117 115,837,439 73,246,681 66,356,446 36,899,382
------------- ------------- ------------- ------------- -------------
End of year $ 395,264,147 $ 142,384,429 $ 106,760,459 $ 58,828,881 $ 44,683,810
============= ============= ============= ============= =============
SUPPLEMENTAL COMBINING INFORMATION
---------------------------------------------------------------------------------
LIFESTYLE LIFESTYLE LIFESTYLE
INTERNATIONAL CONSERVATIVE MODERATE AGGRESSIVE PARTICIPANT
EQUITY FUND FUND FUND FUND LOAN FEATURE
------------- ------------- ------------- ------------- -------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 740,870 $ 106,997 $ 307,271 $ 275,772
Interest/other income 1,538 130 434 367 $ 1,698,038
Realized gain on sale of
investments 49,201 17,845 134,060 75,041
Unrealized appreciation
(depreciation) of
investments (Note 5) (544,148) 122,473 507,698 524,432
------------- ------------- ------------- ------------- -------------
Total investment income 247,461 247,445 949,463 875,612 1,698,038
------------- ------------- ------------- ------------- -------------
Contributions (Note 2):
Employers
Participants 868,477 154,334 776,314 997,890
------------- ------------- ------------- ------------- -------------
Total contributions 868,477 154,334 776,314 997,890
------------- ------------- ------------- ------------- -------------
Total additions 1,115,938 401,779 1,725,777 1,873,502 1,698,038
------------- ------------- ------------- ------------- -------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 404,798 285,061 499,308 205,874 813,234
Administrative expenses 194 31 200 206
Interfund transfers (2,611,612) (901,716) (1,811,036) (3,098,187) (315,720)
------------- ------------- ------------- ------------- -------------
Total deductions (2,206,620) (616,624) (1,311,528) (2,892,107) 497,514
------------- ------------- ------------- ------------- -------------
Net increase (decrease) 3,322,558 1,018,403 3,037,305 4,765,609 1,200,524
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 3,268,933 1,284,840 3,577,243 2,601,931 18,529,222
------------- ------------- ------------- ------------- -------------
End of year $ 6,591,491 $ 2,303,243 $ 6,614,548 $ 7,367,540 $ 19,729,746
============= ============= ============= ============= =============
See notes to combined financial statements.
-4-
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY AND
THE SAVINGS PLAN FOR EMPLOYEES OF PINNACLE WEST CAPITAL CORPORATION
- ----------------------------------------------------------------------------------------------------------
COMBINED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH SUPPLEMENTAL COMBINING INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------------
COMBINED
------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 6,557,131
Interest income 5,370,324
Income from settlement (Note 3) 957,427
Realized gain on sale of
investments 5,832,026
Unrealized appreciation
(depreciation) of
investments (Note 5) 19,357,421
------------
Total investment income (loss) 38,074,329
------------
Contributions (Note 2):
Employers 7,225,732
Participants 22,693,280
------------
Total contributions 29,919,012
------------
Total additions 67,993,341
------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 15,425,820
Administrative expenses 44,653
Interfund transfers
------------
Total deductions 15,470,473
------------
Net increase (decrease) 52,522,868
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 269,079,249
------------
End of year $321,602,117
============
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE BALANCED
STOCK FUND INDEX FUND INCOME FUND EQUITY FUND FUND
------------ ------------ ------------ ------------ ------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 3,761,585 $ 2,322,589 $ 158,356
Interest income 59,289 $ 3,747,325
Income from settlement (Note 3) 351,831 $ 154,273 324,919 101,025
Realized gain on sale of
investments 3,180,929 1,977,669 489,947 96,850
Unrealized appreciation
(depreciation) of
investments (Note 5) 7,818,099 11,146,619 386,776 (288,293)
------------ ------------ ------------ ------------ ------------
Total investment income (loss) 15,171,733 13,278,561 4,072,244 3,300,337 (33,087)
------------ ------------ ------------ ------------ ------------
Contributions (Note 2):
Employers 7,225,732
Participants 3,720,945 6,509,011 5,416,753 5,809,125 627,436
------------ ------------ ------------ ------------ ------------
Total contributions 10,946,677 6,509,011 5,416,753 5,809,125 627,436
------------ ------------ ------------ ------------ ------------
Total additions 26,118,410 19,787,572 9,488,997 9,109,462 594,349
------------ ------------ ------------ ------------ ------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 8,533,725 1,863,410 3,741,062 669,266 128,928
Administrative expenses 3,444 8,217 30,082 1,975 935
Interfund transfers 11,023,622 (2,772,928) 3,225,332 (7,682,903) 6,648,209
------------ ------------ ------------ ------------ ------------
Total deductions 19,560,791 (901,301) 6,996,476 (7,011,662) 6,778,072
------------ ------------ ------------ ------------ ------------
Net increase (decrease) 6,557,619 20,688,873 2,492,521 16,121,124 (6,183,723)
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 109,279,820 52,557,808 63,863,925 20,778,258 6,183,723
------------ ------------ ------------ ------------ ------------
End of year $115,837,439 $ 73,246,681 $ 66,356,446 $ 36,899,382 $
============ ============ ============ ============ ============
SUPPLEMENTAL COMBINING INFORMATION
----------------------------------------------------------------------------
LIFESTYLE LIFESTYLE LIFESTYLE
INTERNATIONAL CONSERVATIVE MODERATE AGGRESSIVE PARTICIPANT
EQUITY FUND FUND FUND FUND LOAN FEATURE
------------ ------------ ------------ ------------ ------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 109,897 $ 42,362 $ 77,063 $ 85,279
Interest income $ 1,563,710
Income from settlement (Note 3) 6,662 1,980 8,351 8,386
Realized gain on sale of
investments 1,454 552 74,490 10,135
Unrealized appreciation
(depreciation) of
investments (Note 5) 109,796 (13,017) 90,799 106,642
------------ ------------ ------------ ------------ ------------
Total investment income (loss) 227,809 31,877 250,703 210,442 1,563,710
------------ ------------ ------------ ------------ ------------
Contributions (Note 2):
Employers
Participants 163,786 32,290 199,787 214,147
------------ ------------ ------------ ------------ ------------
Total contributions 163,786 32,290 199,787 214,147
------------ ------------ ------------ ------------ ------------
Total additions 391,595 64,167 450,490 424,589 1,563,710
------------ ------------ ------------ ------------ ------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 12,741 264 83,506 15,224 377,694
Administrative expenses
Interfund transfers (2,890,079) (1,220,937) (3,210,259) (2,192,566) (927,491)
------------ ------------ ------------ ------------ ------------
Total deductions (2,877,338) (1,220,673) (3,126,753) (2,177,342) (549,797)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) 3,268,933 1,284,840 3,577,243 2,601,931 2,113,507
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 16,415,715
------------ ------------ ------------ ------------ ------------
End of year $ 3,268,933 $ 1,284,840 $ 3,577,243 $ 2,601,931 $ 18,529,222
============ ============ ============ ============ ============
See notes to combined financial statements.
-5-
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY AND
THE SAVINGS PLAN FOR EMPLOYEES OF PINNACLE WEST CAPITAL CORPORATION
- ---------------------------------------------------------------------------------------------------------------
COMBINED STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH SUPPLEMENTAL COMBINING INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
-------------------------------------------
PINNACLE WEST FIXED
COMBINED STOCK FUND INDEX FUND INCOME FUND
------------ ------------ ------------ ------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 4,831,483 $ 3,548,574
Interest income 5,117,786 75,680 $ 3,813,463
Realized gain on sale of
investments 2,859,474 1,552,878 $ 1,161,262
Unrealized appreciation
of investments (Note 5) 47,736,651 32,727,519 11,670,607
------------ ------------ ------------ ------------
Total investment income 60,545,394 37,904,651 12,831,869 3,813,463
------------ ------------ ------------ ------------
Contributions (Note 2):
Employers 6,747,587 6,747,587
Participants 20,204,098 4,043,616 5,077,110 6,757,160
------------ ------------ ------------ ------------
Total contributions 26,951,685 10,791,203 5,077,110 6,757,160
------------ ------------ ------------ ------------
Total additions 87,497,079 48,695,854 17,908,979 10,570,623
------------ ------------ ------------ ------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 15,932,169 9,015,731 1,727,992 4,533,469
Administrative expenses 43,968 4,085 3,855 33,552
Interfund transfers 9,646,105 (4,799,352) 6,468,018
------------ ------------ ------------ ------------
Total deductions 15,976,137 18,665,921 (3,067,505) 11,035,039
------------ ------------ ------------ ------------
Net increase (decrease) 71,520,942 30,029,933 20,976,484 (464,416)
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 197,558,307 79,249,887 31,581,324 64,328,341
------------ ------------ ------------ ------------
End of year $269,079,249 $109,279,820 $ 52,557,808 $ 63,863,925
============ ============ ============ ============
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------
AGGRESSIVE BALANCED PARTICIPANT
EQUITY FUND FUND LOAN FEATURE
------------ ------------ ------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 1,084,332 $ 198,577
Interest income $ 1,228,643
Realized gain on sale of
investments 128,349 16,985
Unrealized appreciation
of investments (Note 5) 2,957,516 381,009
------------ ------------ ------------
Total investment income 4,170,197 596,571 1,228,643
------------ ------------ ------------
Contributions (Note 2):
Employers
Participants 3,185,022 1,141,190
------------ ------------ ------------
Total contributions 3,185,022 1,141,190
------------ ------------ ------------
Total additions 7,355,219 1,737,761 1,228,643
------------ ------------ ------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 345,062 115,316 194,599
Administrative expenses 1,376 1,100
Interfund transfers (7,402,443) (1,475,470) (2,436,858)
------------ ------------ ------------
Total deductions (7,056,005) (1,359,054) (2,242,259)
------------ ------------ ------------
Net increase (decrease) 14,411,224 3,096,815 3,470,902
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 6,367,034 3,086,908 12,944,813
------------ ------------ ------------
End of year $ 20,778,258 $ 6,183,723 $ 16,415,715
============ ============ ============
See notes to combined financial statements.
-6-
THE SAVINGS PLAN FOR EMPLOYEES
OF ARIZONA PUBLIC SERVICE COMPANY,
THE SAVINGS PLAN FOR UNION EMPLOYEES
OF ARIZONA PUBLIC SERVICE COMPANY
AND
THE SAVINGS PLAN FOR EMPLOYEES OF
PINNACLE WEST CAPITAL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting - The financial statements in this report reflect the
combined assets, liabilities and net assets available for benefits of The
Savings Plan for Employees of Arizona Public Service Company (the "APS
Savings Plan"), The Savings Plan for Union Employees of Arizona Public
Service Company (the "APS Union Plan"), and The Savings Plan for Employees of
Pinnacle West Capital Corporation (the "Pinnacle West Plan"). The APS Savings
Plan, the APS Union Plan, and the Pinnacle West Plan are collectively
referred to as the "Plans." The combined financial statements have been
prepared on the accrual basis of accounting. Investment transactions are
recorded as of the trade date. Dividend income is recorded as of ex-dividend
dates. All the outstanding shares of common stock of Arizona Public Service
Company ("APS") are owned by Pinnacle West Capital Corporation ("Pinnacle
West").
Investments - The Plans consist of a salary reduction arrangement and an
employer matching contribution feature. The investment programs for the Plans
consist of:
Pinnacle West Stock Fund -- The fund consists primarily of common stock
of Pinnacle West. The common stock is stated at fair value based on quoted
market prices in an active market.
Index Fund -- The fund consists of common stocks maintained by the
Trustee (defined below) as part of a commingled fund. The fund is stated
at fair value generally based on the last reported sales price on the last
business day of the calendar year.
Fixed Income Fund -- The fund consists primarily of several guaranteed
investment contracts with varying rates of interest and varying
maturities. The fund is stated at contract value which approximates fair
value.
-7-
Aggressive Equity Fund -- The fund consists primarily of common stocks
maintained by Putnam Investments as part of the Putnam Voyager Fund, Class
A. The fund is stated at fair value generally based on the last reported
sales price on the last business day of the calendar year.
Balanced Fund -- The fund consists of common and preferred stocks and
bonds managed by Fidelity Investments as part of the Fidelity Balanced
Fund. The fund is stated at fair value generally based on the last
reported sales price on the last business day of the calendar year.
Effective June 27, 1996, the fund was no longer offered as an investment
choice.
International Equity Fund -- The fund consists primarily of stocks
outside the United States and maintained by Franklin Templeton as part of
the Templeton Foreign Fund. The fund is stated at fair value generally
based on the last reported sales price on the last business day of the
calendar year. The fund was added as an investment choice effective July
1, 1996. The APS Union Plan does not participate in the International
Equity Fund.
Conservative, Moderate and Aggressive Lifestyle Funds -- The funds
consist primarily of cash, domestic stocks, international stocks, and
domestic bonds and are maintained by the Vanguard Group as part of the
Lifestrategy Portfolios: Conservative Growth Portfolio, Moderate Growth
Portfolio, and Growth Portfolio. The funds are stated at fair value
generally based on the last reported sales price on the last business day
of the calendar year. The funds were added as an investment choice
effective July 1, 1996. The APS Union Plan does not participate in the
Conservative and Aggressive Lifestyle Funds.
Payment of Benefits - Benefits are recorded when paid.
Realized Gain (Loss) and Unrealized Appreciation (Depreciation) - Realized
gains (losses) are determined based on the average historical cost.
Unrealized appreciation (depreciation) is determined based on the fair value
of assets at the beginning of the Plan year.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles necessarily 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 these
estimates.
-8-
2. DESCRIPTION OF THE PLANS
General - The APS Savings Plan and APS Union Plan (collectively, the "APS
Plans") are administered by a committee appointed by the APS Board of
Directors. The Pinnacle West Plan is administered by a committee appointed by
the Pinnacle West Board of Directors. The Plans are subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA"). State
Street Bank and Trust Company (the "Trustee") is the Trustee for the Plans
under a master trust agreement.
Eligibility - All employees of APS and salaried employees of Pinnacle West
(collectively, the "Companies" or the "Employer") are eligible to participate
in the pre-tax and after-tax features of the Plans upon attaining age 21 and
completing thirty-one days of consecutive employment for the APS Plans and
thirty days of consecutive employment for the Pinnacle West Plan, and are
eligible to participate in the matching feature upon attaining age 21 and
completing one year of service. The Pinnacle West Plan allows participation
by employees of a company that becomes an affiliate of Pinnacle West if such
employees were formerly participants in a certain type of qualified plan
sponsored by their employer, regardless of whether they have satisfied the
Pinnacle West Plan's other eligibility requirements.
Contributions - Participants in the APS Union Plan may direct APS to
contribute any whole percentage from 1% to 10% of the participants' pre-tax
base pay as their tax deferred contribution to the Plan. In addition to or in
lieu of making tax deferred contributions to the APS Union Plan, participants
may elect to make contributions of up to 10% of their after-tax base pay as a
voluntary contribution, provided that in no event can the total tax deferred
and voluntary contributions made by any participant in any year exceed 16% of
his or her base pay. Effective January 1, 1996, the APS Savings Plan and the
Pinnacle West Plan were changed to allow employees to contribute up to 16% of
their pre-tax base pay and up to 16% of their after-tax base pay, provided
that in no event would the total tax deferred and voluntary contributions
made by any participant in any year exceed 16% of his or her base pay.
Previously, the maximum allowable contribution for participants in the APS
Savings Plan and the Pinnacle West Plan were the same as the APS Union Plan.
The maximum allowable base pay ($160,000 in 1997, $150,000 in 1996) and tax
deferred contribution ($9,500) are linked to the cost of living index and
could change on an annual basis.
Prior to March 1, 1995, for the APS Savings Plan and the Pinnacle West
Plan, and April 1, 1995, for the APS Union Plan, the Companies contributed to
the account of each participant in the Plans' matching feature a minimum
amount equal to 30% of such participant's contribution of up to 6% of the
participant's pre-tax base pay (defined here as the participant's "required
contribution"). Employer contributions were increased (i) by an additional
one percent for each one percent increase in Pinnacle West consolidated net
income from continuing operations over the prior year and (ii) by an
additional amount determined at the sole discretion of each Company's Board
of Directors, up to a total
-9-
Employer contribution of not more than 50% of participant required
contributions. Effective March 1, 1995, for the APS Savings Plan and the
Pinnacle West Plan, and April 1, 1995, for the APS Union Plan, Employer
contributions were fixed at 50% of the first 6% of an employee's pre-tax
contributions. The Employer contributions may be in cash, common stock or
other property acceptable to the Trustee.
The Plans allow rollover contributions from another qualified plan or
individual retirement rollover account, subject to certain criteria.
Investment Programs - Participants' contributions may be invested in one
or more of the following funds: Pinnacle West Stock Fund, Index Fund, Fixed
Income Fund, Aggressive Equity Fund, International Equity Fund, Lifestyle
Conservative Fund, Lifestyle Moderate Fund, and Lifestyle Aggressive Fund.
Participants in the APS Union Plan may not invest in the International Equity
Fund, Lifestyle Conservative Fund, or Lifestyle Aggressive Fund. The balance
of non-participant-directed contributions and related earnings represents
approximately $88,436,178 and $68,028,037 of the net assets available for
benefits in the Pinnacle West Stock and Fixed Income Funds for 1997 and 1996,
respectively.
The Balanced Fund was no longer offered as an investment choice as of June
27, 1996. Employee funds invested in the Balanced Fund were automatically
transferred into the Fixed Income Fund on June 27, 1996. Participants had the
opportunity to make a one-time special interfund transfer between July 1,
1996 and July 14, 1996, to transfer the funds out of the Fixed Income Fund.
Loan Feature - Participants may borrow money from their pre-tax
contributions account, vested Employer contributions account and rollover
account (if any). Participants may not borrow against their Employer transfer
account or their after-tax contributions accounts.
The minimum participant loan available is $1,000, and the maximum
available is 50% of the participant's vested account balance, up to $50,000,
reduced by the participant's highest outstanding loan balance in the 12-month
period ending on the day before the loan is made. Only one loan per
participant may be outstanding at any one time. Loan terms range from six
months to five years, or up to 15 years for the purchase of a principal
residence. An administrative fee is charged to the participant's account for
each loan.
The interest rate is determined at the time the loan is requested and is
fixed for the life of the loan. The interest rate is the State Street Bank
and Trust Company's prime interest rate plus one percent, determined as of
the first business day of the month in which the loan is issued. Interest
rates for loans issued during 1997 ranged from 9.25% to 9.50%.
Loans are treated as transfers from the participant's investment funds on
a pro-rata basis to the Participant Loan Feature. Loan repayments are treated
as transfers from the
-10-
Loan Feature to the participant's investment funds, based on the
participant's current investment election. Loan repayments, including
interest, are generally made through irrevocable semi-monthly (for the APS
Plans) or bi-weekly (for the Pinnacle West Plan) payroll deductions.
Vesting - Each participant is fully vested as to the participant's
contribution account (consisting of the participant's contributions and
related income and appreciation or depreciation). The participants become
vested in their Employer contribution account (consisting of Employer
contributions and related income and appreciation or depreciation) in the
event of termination of service by death, disability or retirement, upon
attaining the age of sixty-five, upon completion of five years of service,
upon termination of the Plans, or upon complete discontinuance of Employer
contributions; otherwise, participants vest in graduated amounts with 100
percent vesting in five years of Plan participation, beginning with the first
Plan year of Employee participation.
Withdrawals and Distributions - A participant may at any time make a full
or partial withdrawal of the balance in the participant's after-tax
contribution account and rollover contribution account. No withdrawals are
permitted from a participant's transfer account. No withdrawals are permitted
from the participant's pre-tax contribution account, except under certain
limited circumstances relating to financial hardship. If an employee
withdraws pre-tax contributions, the only earnings on those contributions
that can be withdrawn are those credited prior to 1989. Generally,
participants who are fully vested and who have participated in the Plans for
five complete Plan years may withdraw the amount in their Employer
contribution account. When the participant's employment with the Companies is
terminated, the participant generally can elect to receive a distribution, as
soon as administratively possible, of the vested portion of his or her
Employer contribution account together with the participant's contribution
accounts.
Forfeitures - Forfeitures of nonvested Employer contributions will occur
upon distribution following termination of employment with the Companies.
However, if a former participant again becomes an employee of the Companies
prior to the end of the fifth calendar year following the calendar year in
which the participant's earlier termination of employment occurred (and, in
the case of the APS Plans, only if the participant, upon reemployment, repays
in full the amount previously distributed from the APS Plans), the forfeited
Employer contributions will be restored to the participant's Employer
contribution account. Forfeitures are used to reduce future Employer
contributions to the Plans.
Termination of the Plans - It is the Companies' present expectation that
these Plans and the payment of Employer contributions will be continued
indefinitely. However, continuance of any feature of the Plans is not assumed
as a contractual obligation. The Companies, at their discretion, may
terminate their respective plans and distribute net assets. In this event,
the balance credited to the accounts of participants at the date of
termination shall be fully vested and nonforfeitable.
-11-
3. INCOME FROM SETTLEMENT
Pursuant to the settlement of a class action lawsuit, payment was made
during 1996 on behalf of certain purchasers of Pinnacle West common stock,
and certain participants in the Plans were entitled to receive a portion of
the settlement. A settlement check of $903,751 was deposited into the
Lifestyle Moderate Fund on September 20, 1996. Earnings within the Lifestyle
Moderate Fund on the settlement distribution were $53,676. On December 20,
1996, the settlement distribution and related earnings were transferred out
of the Lifestyle Moderate Fund and allocated into the respective participant
accounts, based on each participant's current election option. If an
individual previously received a full distribution from the TRAYSOP\PAYSOP
Plan, which was previously liquidated and terminated, the settlement
attributable to that plan was distributed by separate check in 1997.
4. INCOME TAX STATUS
The Plans have been determined by the Internal Revenue Service to be
qualified plans under the provisions of the Internal Revenue Code. As long as
the Plans continue to be so qualified, under present Federal income tax laws
and regulations: (a) participants will not be currently taxed on Employer
contributions, on their own pre-tax contributions (see Note 2), or on
investment earnings on any contributions at the time such investment earnings
are received by the Trustee, but will be subject to tax thereon at such time
as they receive actual benefits from the Plans; and (b) the Plans will not be
taxed on their dividend and interest income or any capital gains realized by
them or on any unrealized appreciation of investments.
5. UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
Changes in unrealized appreciation (depreciation) of investments for each
of the three years in the period ended December 31, 1997 were as follows:
Unrealized Appreciation (Depreciation)
--------------------------------------
Beginning of Year End of Year Change
----------------- ----------------- -----------------
1997
----
Pinnacle West Stock Fund $ 46,821,429 $ 76,201,672 $ 29,380,243
Index Fund 30,111,786 51,023,616 20,911,830
Aggressive Equity Fund 3,373,451 8,268,413 4,894,962
International Equity Fund 109,796 (434,352) (544,148)
Lifestyle Conservative Fund (13,017) 109,456 122,473
Lifestyle Moderate Fund 90,799 598,497 507,698
Lifestyle Aggressive Fund 106,642 631,074 524,432
------------- ------------- -------------
Total $ 80,600,886 $ 136,398,376 $ 55,797,490
============= ============= =============
-12-
1996
----
Pinnacle West Stock Fund $ 39,003,330 $ 46,821,429 $ 7,818,099
Index Fund 18,965,167 30,111,786 11,146,619
Aggressive Equity Fund 2,986,675 3,373,451 386,776
Balanced Fund 288,293 0 (288,293)
International Equity Fund 0 109,796 109,796
Lifestyle Conservative Fund 0 (13,017) (13,017)
Lifestyle Moderate Fund 0 90,799 90,799
Lifestyle Aggressive Fund 0 106,642 106,642
------------ ------------ ------------
Total $ 61,243,465 $ 80,600,886 $ 19,357,421
============ ============ ============
1995
----
Pinnacle West Stock Fund $ 6,275,811 $ 39,003,330 $ 32,727,519
Index Fund 7,294,560 18,965,167 11,670,607
Aggressive Equity Fund 29,159 2,986,675 2,957,516
Balanced Fund (92,716) 288,293 381,009
------------ ------------ ------------
Total $ 13,506,814 $ 61,243,465 $ 47,736,651
============ ============ ============
6. GUARANTEED INVESTMENT CONTRACTS
Under the contracts, interest rates on guaranteed investment contracts
(GICs) vary within the Fixed Income Fund. The contracts have a weighted
average crediting interest rate at December 31, 1997, 1996, and 1995 of
6.82%, 6.31%, and 6.05%, respectively. The average yield for 1997
approximated the weighted average crediting interest rate. The crediting
interest rates on the GICs may be reset on a quarterly or semi-annual basis,
or may be fixed, based on the terms of the contract.
Four of the GICs are managed synthetic investment contracts. The fair
value of the trust assets related to these contracts is $10,553,461. The
contract value of the trust assets is $10,487,314.
7. BENEFITS PAYABLE
As of December 31, 1997 and 1996, net assets available for benefits
included benefits of $1,958 and $125,711, respectively, due to participants
who had withdrawn from participation in the Plans.
8. PARTICIPATING EMPLOYEES
As of December 31, 1997 and 1996, the aggregate number of employees
participating in the Plans was 5,417 and 5,346, respectively.
-13-
9. NET ASSET VALUE PER UNIT
In accordance with the provisions of the Plans, the Trustee maintains
separate units of participation in the Plans and related net asset value per
unit for the Pinnacle West Stock, Index, Fixed Income, Aggressive Equity,
International Equity, and Lifestyle Conservative, Moderate and Aggressive
Funds. The number of units and related net asset value per unit at December
31 are:
Net Asset Value
Per Unit Number of Units
---------------- ---------------
1997
----
Pinnacle West Stock Fund $ 23.231300 6,128,991
Index Fund 20.346475 5,247,123
Fixed Income Fund 5.290992 11,118,686
Aggressive Equity Fund 84.349358 529,747
International Equity Fund 40.307033 163,532
Lifestyle Conservative 18.656291 123,457
Lifestyle Moderate 25.870800 255,676
Lifestyle Aggressive 33.196047 221,940
1996
----
Pinnacle West Stock Fund $ 16.880499 6,862,205
Index Fund 15.263426 4,798,836
Fixed Income Fund 4.969295 13,353,292
Aggressive Equity Fund 66.977409 550,923
International Equity Fund 37.843382 86,381
Lifestyle Conservative 15.979735 80,404
Lifestyle Moderate 21.594078 165,659
Lifestyle Aggressive 27.182799 95,720
10. RELATED PARTY TRANSACTIONS
Costs of Administration - Substantially all costs of administration of the
Plans have been paid by the Companies except for loan administration fees.
Pinnacle West Stock Fund
------------------------
1997 1996 1995
---- ---- ----
Shares of Pinnacle West common stock held by the Plans 3,328,704 3,611,371 3,747,471
Employer cash contributions $ 7,068,458 $ 7,225,732 $ 6,747,587
Investments by the Plans in Pinnacle West common stock $ 5,675,942 $ 4,494,219 $ 3,274,433
Sales made by the Plans of Pinnacle West common stock $14,390,546 $ 8,572,009 $ 7,459,282
Aggregate cost of Pinnacle West common stock sold $ 8,663,385 $ 5,391,080 $ 5,906,404
-14-
Index Fund
----------
1997 1996 1995
---- ---- ----
Investments by the Plans in Trustee's Index Fund $17,339,038 $13,147,476 $11,841,434
Sales made by the Plans of Trustee's Index Fund $ 9,092,627 $ 5,243,720 $ 3,804,238
Aggregate cost of Trustee's Index Fund sold $ 4,926,370 $ 3,266,052 $ 2,642,976
Temporary Investments in Funds Managed by the Trustee
-----------------------------------------------------
1997 1996 1995
---- ---- ----
Investments by the Plans in temporary investment funds $50,617,593 $46,840,277 $51,411,186
Sales made by the Plans of temporary investment funds $58,245,727 $33,293,798 $55,197,746
The temporary investments are bought and sold at par.
-15-
Exhibits Filed.
- ---------------
Exhibit No. Description
- ----------- -----------
23.1 Independent Auditors' Consent
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Committee has duly caused this annual report to be signed by the
undersigned hereunto duly authorized.
THE SAVINGS PLAN FOR EMPLOYEES OF
ARIZONA PUBLIC SERVICE COMPANY
THE SAVINGS PLAN FOR UNION EMPLOYEES
OF ARIZONA PUBLIC SERVICE COMPANY
(Name of Plans)
Date: June 29, 1998 By Armando B. Flores
--------------------------------
Armando B. Flores
Chairman of the Committee
and Senior Vice President,
Corporate Business Services,
Arizona Public Service Company