FORM 11-K
(Mark One)
[x ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-12905
EEX CORPORATION EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
(Full Title of Plan)
EEX CORPORATION
(Name of Issuer of Securities Held Pursuant to the Plan)
2500 CityWest Blvd., Suite 1400, Houston, Texas 77042
(Address of Plan and Principal Executive Office of Issuer)
EEX CORPORATION EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
REQUIRED INFORMATION
Page No.
Independent Auditors' Report 1
Financial Statements:
Statement of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3-4
Notes to Financial Statements 5-8
Supplemental Schedules:
Line 27a - Schedule of Assets Held for Investment Purposes
at December 31, 1997 10
Line 27d - Schedule of Reportable Transactions for the
Period from August 5, 1997 (date of inception)
through December 31, 1997 11
Exhibit 23 - Independent Auditors' Consent 13
INDEPENDENT AUDITORS' REPORT
EEX Corporation Employee Stock Purchase and Savings Plan Committee:
We have audited the accompanying statement of net assets available
for benefits of the EEX Corporation Employee Stock Purchase and Savings Plan
("the Plan") as of December 31, 1997, and the related statement of changes in
net assets available for benefits for the period from August 5, 1997
(date of inception) through December 31, 1997. 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 audit.
We conducted our audit 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 audit provides 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, 1997, and the changes in net assets available for benefits
for the period from August 5, 1997 (date of inception) through December 31,
1997, in conformity with generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental
schedules of assets held for investment purposes as of December 31, 1997,
and reportable transactions for the period from August 5, 1997 (date of
inception) through December 31, 1997, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974,
and are not a required part of the basic financial statements. The Fund
information in the statement of changes in net assets available for benefits
is presented for purposes of additional analysis rather than to present the
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audit of the basic financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
ERNST & YOUNG LLP
Houston, Texas
June 10, 1998
EEX CORPORATION EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
[S] [C]
ASSETS
Investments:
EEX Corporation ("EEX") Common Stock $1,951,845
Texas Utilities Company ("TXU") Common Stock 1,073,231
Fidelity Mutual Funds:
Equity Funds:
Magellan 2,888,428
Puritan 3,227,233
Equity Income 852,610
Spartan U.S. Equity Index 974,368
U.S. Bond Index 536,603
Retirement Government Money Market Portfolio 818,833
Participant Loans 236,897
---------
Total Investments 12,560,048
Employee Contributions Receivable 113,676
Employer Contributions Receivable 29,331
Loan Payments Withheld 6,537
Accrued Investment Income 7,178
---------
Total Assets 12,716,770
----------
LIABILITIES
Accrued Expense 266
----------
NET ASSETS AVAILABLE FOR BENEFITS $ 12,716,504
-----------
See accompanying notes to financial statements.
EEX CORPORATION EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE PERIOD FROM AUGUST 5, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997
WITH FUND INFORMATION
Fidelity Mutual Funds (Participant Directed)
-------------------------------------------------------
Retirement
Government
Spartan U. S. Money
Equity U.S.Equity Bond Market
Magellan Puritan Income Index Index Portfolio
-------- ------- ------ --------- ------ ---------
Transfer of Assets
from ENSERCH
Corporation
Employee Stock
Purchase and
Savings Plan $2,672,787 $3,071,102 $834,757 $862,498 $517,632 $1,103,894
Additions:
Interest and
dividend income 122,968 211,621 31,672 11,886 9,063 14,017
Net appreciation
(depreciation)
in fair value of
investments 21,250 (13,276) 28,883 65,548 11,356
Contributions:
Employee 103,186 98,948 70,424 64,664 16,320 28,083
Employer
Rollovers from
participants'
previous plans
--------- --------- ------- --------- ------ ---------
2,920,191 3,368,395 965,736 1,004,596 554,371 1,145,994
Participant loan
payments 13,809 10,302 13,897 13,615 1,072 8,198
Participant loan
withdrawals (17,349) (16,878) (935) (80) (189)
Interfund transfers 40,053 26,760 (42,644) 54,852 6,682 72,178
Deductions:
Distributions to
plan participants (68,081) (161,155) (83,390) (98,564)(25,485) (407,274)
Administrative
expenses (195) (191) (54) (51) (37) (74)
Net increase
(decrease) $2,888,428 $3,227,233 $852,610 $974,368 $536,603 $818,833
========== ========== ======== ======== ======== ========
Net assets
available for
benefits at
December 31,
1997 $2,888,428 $3,227,233 $852,610 $974,368 $536,603 $818,833
========== ========== ======== ======== ======== ========
See accompanying notes to financial statements.
EEX CORPORATION EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE PERIOD FROM AUGUST 5, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997
WITH FUND INFORMATION
Non-
Participant Participant
Directed Directed
--------- -----------
EEX EEX TXU
Common Common Common Participant
Stock Stock Stock Loans Other Total
------ ----- ------ -------- ------ -----
Transfer of Assets
from ENSERCH
Corporation
Employee Stock
Purchase and
Savings Plan
- $2,020,429 $1,048,866 $262,972 $12,394,937
Additions:
Interest and
dividend income 15,789 5,491 $7,178 429,685
Net appreciation
(depreciation)
in fair value
of investments $(1,033) 2,763 180,032 295,523
Contributions:
Employee 44,247 120,213 546,085
Employer 111,101 29,331 140,432
Rollovers from
participants'
previous plans 25,830 25,830
------- -------- --------- ------- ------- ----------
110,068 2,093,269 1,244,687 268,463 156,722 13,832,492
Participant loan
payments 955 (61,848) -
Participant loan
withdrawals (659) (410) 36,500 -
Interfund
transfers 16,408 (110,265) (63,361) (663) -
Deductions:
Distributions
to plan
participants (4,527) (153,194) (107,582) (5,555) (1,114,807)
Administrative
expenses (210) (103) (266) (1,181)
Net increase
(decrease) $121,949 $1,829,896 $1,073,231 $236,897 $156,456 $12,716,504
======== ========== ========== ======== ======== ==========
Net assets
available for
benefits at
December 31,
1997 $121,949 $1,829,896 $1,073,231 $236,897 $156,456 $12,716,504
======== ========== ========== ======== ========= ===========
See accompanying notes to financial statements.
EEX CORPORATION EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. OVERVIEW
Enserch Exploration, Inc. ("Old EEI"), a Texas corporation, was a
participating employer under the ENSERCH Corporation ("ENSERCH")
Employee Stock Purchase and Savings Plan. In 1996, ENSERCH entered into
a merger agreement with Texas Utilities Company ("TXU") under which ENSERCH
agreed to exit the oil and gas business and divest all of its interests in
Old EEI. This divestiture was accomplished in two steps. First, Old EEI was
merged into Lone Star Energy Plant Operations ("LSEPO"), a Delaware
corporation, with LSEPO being the surviving company ("Merger"). In the Merger,
LSEPO changed its name to Enserch Exploration, Inc. ("EEI"). Second, ENSERCH
distributed its entire 83% ownership interest in EEI pro rata (1.4995056 shares
of EEI common stock per share of ENSERCH) to its shareholders in a tax-free
distribution ("Distribution"). Simultaneously, each share of ENSERCH stock
was exchanged for .255 shares of TXU common stock. The Merger and the
Distribution were each effective and EEI ceased to be a part of the controlled
group of companies that included ENSERCH on August 5, 1997. As a result, EEI
established the EEX Corporation Employee Stock Purchase and Savings Plan
("Plan") as a spin-off from said prior plan effective on the date of the Merger.
The assets and liabilities of said prior plan attributable to existing EEI
employees were transferred to the Plan as of September 1, 1997.
At a special shareholder's meeting held on December 19, 1997, EEI
changed its name to EEX Corporation.
2. PLAN DESCRIPTION
The Plan is a combination profit sharing and employee stock ownership plan
under Sections 401 (a), 401 (k), 401 (m) and 4975 (e) (7) of the Internal
Revenue Code ("Code"). The Plan is subject to the applicable provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
The following description is provided for general information only.
Participants should refer to the Plan document for more complete information.
General - The Plan is a defined contribution combination employee stock
ownership and profit sharing plan established by EEX Corporation and its
participating subsidiary companies ("EEX" or "the Corporation") to encourage
and assist employees in establishing an individual savings and investment
program. All full time employees of EEX and its participating subsidiaries
are eligible to participate in the Plan. Participation is voluntary.
A committee appointed by the EEX Board of Directors is responsible
for the general administration, management and operation of the Plan ("plan
committee"). Chase Bank of Texas, formerly Texas Commerce Bank
("the Trustee"), a federally chartered bank, has served as trustee since
September 1, 1997 and manages the assets of the Plan.
Participants' Contributions - Under the Plan, a participant may invest
pre-tax and/or after-tax dollars through payroll deductions each pay period
in increments of one percent up to a maximum of 16 percent of regular monthly
salary or wages ("base pay"). The Omnibus Budget Reconciliation Act of 1993
placed an annual limitation of $160,000 for 1997 on the base pay which can be
used in computing benefits for participants under the Plan. The maximum
contribution for certain highly compensated participants is subject to further
reduction pursuant to limitations under the Internal Revenue Code.
Eligible employees can rollover to the Plan any distributions received from
other qualified retirement plans. Individual Retirement Account ("IRA")
distributions are not eligible for rollover into the Plan.
Each participant is entitled to direct the allocation of his or
her contributions among the common stock of EEX or six mutual fund investment
options: the Fidelity Puritan Fund, the Fidelity Magellan Fund, the Fidelity
Equity Income Fund and the Fidelity Spartan U.S. Equity Index Fund, all of
which invest in equity securities; the Fidelity U.S. Bond Index Fund, which
invests in fixed income bond securities; and the Fidelity Retirement Government
Money Market Portfolio, which invests in short-term U.S. government securities.
A participant can change investment elections for future contributions and can
transfer (or exchange) any existing mutual fund balances among the offered
investment elections at any time, in accordance with the Plan guidelines.
Employer's Matching Contributions ("company matching") - The maximum
participant contribution eligible for company matching ranges from 3% to 6% of
the participant's eligible compensation, depending on length of service.
Company matching contributions as a percentage of participant contributions
are at a rate of 50% or 60% depending on length of service. Employees are
100% vested in the matching contributions. All company matching contributions
are invested in EEX common stock and are non-participant directed.
Investment of Funds - All assets of the Plan are held by the Trustee for the
exclusive benefit of participants and their beneficiaries. Separate account
records for each participant are maintained by the Trustee. The Trustee
provides a summary of financial performance by investment fund directly to
Plan participants. Individual investments greater than five per cent of net
assets available for benefits at December 31, 1997 are separately identified
in the financial statements.
Participant Loans - Participants may borrow up to 50% of the fair value of
their pre-tax employee contribution account; however, the loan cannot exceed
$50,000 less the maximum outstanding loan balance in the previous one-year
period. The interest rate on the loan is equal to the prime interest rate of
the Trustee that is in effect on the date the loan is made. The interest rate
on loans outstanding at the end of the year ranged from 6% to 9.5%. Loans
are funded by withdrawals from the individual's investment accounts as
determined by the plan committee. The maximum term of a loan cannot exceed
5 years or, if earlier, severance from service.
Withdrawal from the Plan - Withdrawals from the Plan are governed by
applicable IRS regulations and provisions of ERISA. Penalties may apply in
certain instances.
A participant who terminates employment and has an account balance
of more than $3,500 can retain the funds in the Plan or withdraw them at any
time. Participants that terminate with balances of less than $3,500 are
required to receive a distribution after termination. To avoid taxation,
the taxable portion of any withdrawal made upon termination can be rolled
into an IRA or a qualified retirement plan sponsored by another
employer.
The Internal Revenue Service ("IRS") has established rules governing
distributions from the Plan after the participant has attained 70 1/2 years
of age.
Termination of Plan - The Board of Directors of the Corporation has the right
under the Plan to amend or modify the Plan at any time and may terminate the
Plan in its entirety, subject to the provisions of ERISA. Participants are
100% vested in their accounts at all times.
Expenses - All charges and expenses incurred in the administration of the
Plan and fees and expenses of the Trustee are paid by the Corporation. Record
keeping fees are deducted from participants' accounts.
3. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared under
the accrual method of accounting.
Use of Estimates - The preparation of financial statements requires the use
of significant estimates and assumptions by management; actual results could
differ from those estimates.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value. Investments in common stock of EEX and TXU are valued at
their quoted market value. Investments in Fidelity mutual funds are valued at
quoted net asset value of the respective funds reflecting the closing sales
price of the underlying securities. Participants do not have beneficial
ownership in specific underlying securities or other assets in the various
mutual funds, but have an interest therein represented by units valued as of
the last business day of the period. Generally, contributions to and
withdrawals from each fund are converted to units by dividing the amounts of
such transactions by the unit value as last determined, and the participants'
accounts are charged or credited with the number of units properly
attributable to each participant. Security transactions are recorded on the
trade date. Income and expenses are recognized on the accrual basis of
accounting.
Benefits Payable - Benefits are recorded when paid.
4. TAX STATUS OF THE PLAN
EEX has filed for a determination letter with the IRS that the Plan meets the
requirements of Section 401(a) of the Code. EEX believes that the plan is
designed and currently being operated in compliance with the applicable
requirements of the Code.
5. YEAR 2000 (Unaudited)
EEX is continuing its efforts towards addressing the Year 2000
issue as it relates to any potential impact on the Company's operations.
Evaluations of the Company's internal systems, primarily focused on the
financial systems, have been initiated and will be complete by the end of
1998. To date, preliminary studies have yielded potential problem areas with
some applications. Most of these applications which have potential Year 2000
deficiencies are third party applications provided by outside vendors, and in
each case the deficiencies are being addressed by the software vendor. Any
in-house applications developed by EEX will be modified before the end of
1998 and reviewed by an independent entity with expertise in this area.
In all cases the cost of Year 2000 compliance is considered immaterial.
During 1998 the Company will be conducting an independent review
of operational (field) systems which are the responsibility of third party
companies doing business with EEX. This Year 2000 review will include any
operational system on which any EEX-sanctioned work is performed, and will
include both hardware and software subsystems. Any third party companies
doing business with EEX found not to be adequately addressing the Year 2000
issue will be identified in the review, along with the potential impact of
non-compliance by the vendor. As such, the Company at this time cannot
adequately assess the extent to which further actions will be required, and
cannot at this time make any statements as to whether or not this issue will
have a material effect upon future operations.
SUPPLEMENTARY SCHEDULES
EEX CORPORATION EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(dollar amounts rounded to nearest whole dollar)
(a) (b) (c) (d) (e)
Description or
Identity Of Issuer Description of Investment Cost Current Value
- ------------------------------------------------------------------------------
* EEX Corporation 215,376 shares,
Common Stock par value of
$0.01 per share $1,788,270 $1,951,845
* Texas Utilities Co.
Common Stock 25,861 shares,
par value of
$1.00 per share 892,038 1,073,231
Fidelity Mutual Funds:
Number of
Fund Shares
-------- -----------
Magellan 30,318.334 2,871,366 2,888,428
Puritan 166,523.891 3,240,751 3,227,233
Equity Income 16,268.079 826,614 852,610
Spartan U.S.
Equity Index 27,855.024 918,614 974,368
U.S. Bond Index 49,731.486 525,825 536,603
Retirement
Government 818,832.710 818,833 818,833
Money Market
Portfolio
* Loans to Participants
Interest Rate -
Ranges from 6%-9.5%
(based on Prime on
date of loan) - 236,897
----------- -----------
TOTAL $11,882,311 $12,560,048
=========== ===========
*Party-in-Interest
EEX CORPORATION EMPLOYEE STOCK PURCHASE PLAN
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
(dollar amounts rounded to nearest whole dollar)
(a) (b) (c) (d) (g) (h) (i)
Current Value
of Asset
Identity of Description Purchase Selling Cost of on Transaction Net Gain
Party Involved of Assets Price Price Asset Date or Loss
- ------------------------------------------------------------------------------
Category (i) - Individual transactions in excess of five percent
of initial plan transfer in amounts
* Chase Bank of Texas, N.A.
EEX Corporation
Common Stock $2,020,429 - $2,020,429 $2,020,429 -
* Chase Bank of Texas, N.A.
Texas Utilities
Common Stock 1,048,866 - 1,048,866 1,048,866 -
Fidelity Mutual Funds
Magellan Fund 2,672,787 - 2,672,787 2,672,787 -
Fidelity Mutual Funds
Puritan Fund 3,071,102 - 3,071,102 3,071,102 -
Fidelity Mutual Funds
Equity Income
Fund 834,757 - 834,757 834,757 -
Fidelity Mutual Funds
Spartan U. S.
Equity Index
Fund 862,498 - 862,498 862,498 -
Fidelity Mutual Funds
Retirement
Government
Money Market
Portfolio
Fund 1,103,693 - 1,103,693 1,103,693 -
Category (iii) - Series of securities transactions in excess of
five percent of initial plan transfer in amounts
* Chase Bank of Texas, N.A.
EEX Corporation
Common Stock
Purchases $2,142,077 $2,142,077
Sales $363,129 353,807 $363,129 $9,322
* Chase Bank of Texas, N.A.
Texas Utilities
Common Stock
Purchases 1,052,872 1,052,872
Sales 172,093 160,834 172,093 11,259
Fidelity Mutual Funds
Magellan Fund
Purchases 2,976,341 2,976,341
Sales 109,164 104,976 109,164 4,188
Fidelity Mutual Funds
Puritan Fund
Purchases 3,439,288 3,439,288
Sales 198,780 198,538 198,780 242
Fidelity Mutual Funds
Equity Income
Fund
Purchases 980,574 980,574
Sales 156,848 153,960 156,848 2,888
Fidelity Mutual Funds
Spartan U.S.
Equity Index
Fund
Purchases 1,100,614 1,100,614
Sales 191,793 182,000 191,793 9,793
Fidelity Mutual Funds
Retirement
Government
Money Market
Portfolio
Fund
Purchases 1,271,427 1,271,427
Sales 452,594 452,594 452,594 -
Fidelity Mutual Funds
U. S. Bond
Index Fund
Purchases 565,595 565,595
Sales 40,348 39,770 40,349 578
* Indicates a party in interest
There were no category (ii) or (iv) reportable transactions.
Columns (e) and (f) are not applicable.
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.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
Date: June 10, 1998 By /s/ T. M Hamilton
--------------------------------
T. M Hamilton, Member
EEX Corporation Employee
Stock Purchase and Savings
Plan Committee