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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 11-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DEFERRED AND INCENTIVE COMPENSATION PLAN OF THE
TEXAS UTILITIES COMPANY SYSTEM
Commission File No. 1-12833
__________________________
TEXAS UTILITIES COMPANY
Energy Plaza, 1601 Bryan, Dallas, Texas 75201-3411
(Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)
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TABLE OF CONTENTS
FINANCIAL STATEMENTS Page
----
The following financial statements are furnished for the Plan:
Statements of Financial Condition at June 30, 1998 and 1997...... 3
Statements of Income and Changes in Plan Equity for the
years ended June 30, 1998, 1997 and 1996....................... 4
Notes to Financial Statements.................................... 5-7
Schedules I, II and III have been omitted because the
required information is shown in the financial statements,
notes or the information is not applicable to this Plan.
INDEPENDENT AUDITORS' REPORT......................................... 8
PLAN ADMINISTRATOR'S SIGNATURE....................................... 9
EXHIBIT
The following exhibit is filed herewith:
Independent Auditors' Consent.................................... 10
2
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<TABLE>
<CAPTION>
DEFERRED AND INCENTIVE COMPENSATION PLAN OF
THE TEXAS UTILITIES COMPANY SYSTEM
STATEMENTS OF FINANCIAL CONDITION
June 30,
--------------------------
ASSETS AND PLAN EQUITY 1998 1997
---- ----
<S> <C> <C>
Investment in Securities of Participating Employers --
Common stock of Texas Utilities Company,
At fair value as determined by quoted market prices
(Historical cost: 1998 -- $19,097,008; 1997 -- $16,270,478)(Note 2).... $22,138,005 $15,612,400
Dividends receivable..................................................... 292,514 238,011
Cash and cash equivalents................................................ 527 411
----------- -----------
Total Assets and Plan Equity......................................... $22,431,046 $15,850,822
=========== ===========
<FN>
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
DEFERRED AND INCENTIVE COMPENSATION PLAN OF
THE TEXAS UTILITIES COMPANY SYSTEM
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
Year Ended June 30,
---------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Additions (deductions):
Net Investment Income:
Dividends on common stock of Texas Utilities Company........... $ 1,134,883 $ 934,499 $ 751,796
Interest....................................................... 9,817 5,966 2,830
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Net investment income....................................... 1,144,700 940,465 754,626
----------- ----------- ----------
Appreciation (depreciation) of investments....................... 3,701,127 (3,703,481) 2,783,367
Contributions and deposits (Note 3):
Participating employees' salary deferrals...................... 1,285,409 1,261,392 903,000
Employer matching and incentive awards......................... 4,033,114 3,682,871 2,546,370
----------- ----------- ----------
Total contributions and deposits............................ 5,318,523 4,944,263 3,449,370
----------- ----------- ----------
Total additions........................................... 10,164,350 2,181,247 6,987,363
----------- ----------- ----------
Withdrawals, lapses and forfeitures:
Distributions to participants (Note 4)........................ 3,469,831 678,236 3,340,178
Distributions to plan sponsor................................. 9,700 8,500 6,486
Forfeitures................................................... 104,595 309,371 --
----------- ----------- -----------
Total withdrawals, lapses and forfeitures.................. 3,584,126 996,107 3,346,664
----------- ----------- -----------
Net additions............................................ 6,580,224 1,185,140 3,640,699
Plan Equity, Beginning of Year.................................... 15,850,822 14,665,682 11,024,983
----------- ----------- -----------
Plan Equity, End of Year.......................................... $22,431,046 $15,850,822 $14,665,682
=========== =========== ===========
<FN>
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
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DEFERRED AND INCENTIVE COMPENSATION PLAN OF
THE TEXAS UTILITIES COMPANY SYSTEM
NOTES TO FINANCIAL STATEMENTS
1. Plan Description -- The Deferred and Incentive Compensation Plan of the
----------------
Texas Utilities Company System (Plan) allows officers of a participanting
employer with the title of Vice President or above to defer a percentage of
their compensation not to exceed a maximum percentage determined by the
Organization and Compensation Committee of the Board of Directors of the
Company (the Committee) for each plan year and, in any event, not to
exceed 15% of the participant's compensation. The Companies will make a
matching award equal to 150% of the deferred compensation. In addition,
the Committee also provides awards under the Annual Incentive Plan
with 50% of any such awards treated as incentive awards under this
Plan. Amounts credited to a participant's account are invested in shares
of common stock of the Company. On the expiration of the applicable
maturity period (3 years for incentive awards and 5 years for
deferrals and matching awards) the value of the participant's account is
paid in cash. To the extent that the amounts maturing under the Plan
combined with the eligible employee's other remunerations exceeds
$1,000,000, the maturity period shall be extended. In the event a
participant's employment is terminated because of death or permanent and
total disability, all amounts in the participant's account shall mature
immediately. If the participant terminates employment prior to the end of
a Plan Year, the deferred amount and company match will be recomputed
as of the termination date. In the event a participant's employment is
terminated by retirement, the participant will receive a distribution of
his account at the end of the applicable maturity period. If the
participant terminates employment by retirement prior to the end of a Plan
year, the participant may have previously elected to accelerate the balance
of salary reductions. In the event a participant's employment is terminated
because of reasons other than death, disability or retirement, all rights to
any performance units for maturity periods not yet completed shall be
forfeited to the sponsor except for amounts deferred by the participant and
six percent per annum interest on those amounts which is the minimum return
for all participants of the Plan.
The number of participants (current and former employees) at June 30,
1998, 1997 and 1996 were 42, 43, and 54, respectively.
2. Summary of Significant Accounting Policies:
------------------------------------------
Basis of Accounting -- The financial statements of the Plan are prepared
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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.
Expenses -- All costs and expenses of the Plan and its administration, are
--------
paid by the Employer-corporations.
3. Plan Investments -- The cost, market value and appreciation
----------------
(depreciation) of investments at June 30, 1998, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
Number of Historical Market Appreciation
Shares Cost Value (Depreciation)
<S> <C> <C> <C> <C>
June 30, 1998:
Common stock of Texas Utilities Company........ 531,845 (a) $19,097,008 $22,138,005 $3,040,997
June 30, 1997:
Common stock of Texas Utilities Company........ 453,355 (b) $16,270,478 $15,612,400 $ (658,078)
June 30, 1996:
Common stock of Texas Utilities Company........ 339,023 (c) $11,435,143 $14,493,246 $3,058,103
5
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<FN>
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(a) Represents 0.19% of the outstanding shares of common stock of Texas Utilities
Company (279,572,743 at June 30, 1998).
(b) Represents 0.20% of the outstanding shares of common stock of Texas Utilities
Company (224,649,557 at June 30, 1997).
(c) Represents 0.15% of the outstanding shares of common stock of Texas
Utilities Company (224,602,557 at June 30, 1996).
</FN>
</TABLE>
The investment in the Company's common stock (stated in terms of performance
units for each participant) is stated at market value based upon the last
reported sale prices on recognized exchanges on the last business day of the
Plan Year. The cost basis of plan investments is determined on an average
cost basis. All costs and expenses of the Plan and its administration,
except expenses incurred in the acquisition or disposition of investments,
are paid by the Plan sponsors.
Net plan investments value at June 30, 1998, 1997 and 1996 was $41.62,
$34.44 and $42.75 per unit, respectively.
4. Plan Contributions -- Contributions by employer-corporations and
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participating employees' salary deferrals for the years ended June 30, 1998,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998
----
Participating Contributions
Employees' by Employer- Total
Employer-Corporations Salary Deferrals Corporations Contributions
---------------------- ---------------- ------------ -------------
<S> <C> <C> <C>
Texas Utilities Company............. $ 205,659 $ 783,489 $ 989,148
Texas Utilities Services Inc.
and Others........................ 515,150 1,568,225 2,083,375
Texas Utilities Electric Company.... 564,600 1,681,400 2,246,000
---------- ---------- ----------
Total............................ $1,285,409 $4,033,114 $5,318,523
========== ========== ==========
1997
----
Participating Contributions
Employees' by Employer- Total
Employer-Corporations Salary Deferrals Corporations Contributions
---------------------- ---------------- ------------ -------------
Texas Utilities Company............. $ 216,187 $ 667,063 $ 883,250
Texas Utilities Services Inc.
and Others........................ 469,325 1,332,488 1,801,813
Texas Utilities Electric Company 575,880 1,683,320 2,259,200
---------- ---------- ----------
Total............................ $1,261,392 $3,682,871 $4,944,263
========== ========== ==========
1996
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Participating Contributions
Employees' by Employer- Total
Employer-Corporations Salary Deferrals Corporations Contributions
---------------------- ---------------- ------------- -------------
Texas Utilities Company............. $ 183,000 $ 579,500 $ 762,500
Texas Utilities Services Inc.
and Others........................ 365,160 1,015,550 1,380,710
Texas Utilities Electric Company.... 354,840 951,320 1,306,160
---------- ---------- ----------
Total............................ $ 903,000 $2,546,370 $3,449,370
========== ========== ==========
<FN>
The contribution for incentive awards amounted to $2,105,000, $1,790,782,
and $1,191,870 for the Plan Years ended June 30, 1998, 1997 and 1996,
respectively.
</FN>
</TABLE>
6
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5. Plan Distributions -- Maturing in June 1998 were employees' salary deferrals
------------------
and matching awards made for the Plan Year ended June 30, 1994 and the
incentive awards made for the Plan Year ended June 30, 1996. The
distribution of matured deferrals and/or awards of $4,086,849 represent the
net proceeds obtained by the Trustee upon sale of the associated assets
(common stock of the Company) in July 1998. Terminations from the Plan
resulted in net forfeitures for the Plan of $104,595.
Maturing in June 1997 were employees' salary deferrals and matching awards
made for the Plan Year ended June 30, 1993 and the incentive awards made for
the Plan Year ended June 30, 1995. The distribution of matured deferrals
and/or awards of $3,469,831 represent the net proceeds obtained by the Trustee
upon sale of the associated assets (common stock of the Company) in July
1997. Terminations from the Plan resulted in net forfeitures for the Plan of
$309,371.
Maturing in June 1996 were the incentive awards made for the Plan Year ended
June 30, 1994. The distribution of matured deferrals and/or awards of
$601,240 represent the net proceeds obtained by the Trustee upon sale of the
associated assets (common stock of the Company) in July 1996. Additionally,
during the year ended June 30, 1997, $76,996 was distributed to participants
terminating during the year for reasons other than death, disability or
retirement.
6. Federal Income Taxes -- The Plan is not intended to, and the Company has
--------------------
been advised that: the Plan does not meet the requirements of a tax-
qualified plan under Section 401(a) of the Internal Revenue Code; the Trust
established thereunder is not exempt from federal income taxes under Section
501 (a); and the Company will be provided a corresponding federal income tax
deduction for the amount of income recognized by the participant by reason
of distribution under the Plan.
Based on the Internal Revenue Code and regulations promulgated thereunder:
(a) A participant's elective deferrals under the Plan, matching awards,
incentive awards, and any dividends, interest or other income thereon
will not be subject to federal income tax until the year such amounts
are paid or otherwise made available to the participant.
(b) Elective deferrals under the Plan are not deductible by the
participant on his or her federal income tax return, since elective
deferrals are not includable in participant's income until paid or
otherwise made available to the participant.
(c) Amounts distributed under the Plan will be taxable as ordinary income
to the participant in the year of such distribution.
7. Plan Administration Fees -- All administrative fees are paid by Texas
------------------------
Utilities Company, the Plan sponsor.
8. Plan Termination -- The Company's Board of Directors may amend, terminate,
----------------
or suspend the Plan at any time. An amendment or modification of the Plan
may affect active participants as well as future participants, but no
amendment or modification of the Plan for any reason may diminish any
participant's account as of the amendment's effective date. Upon Plan
termination, all amounts credited to a participant's account shall be
deemed to have matured, as described in the Plan document.
7
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INDEPENDENT AUDITORS' REPORT
Organization and Compensation Committee,
Deferred and Incentive Compensation
Plan of the Texas Utilities Company System:
We have audited the statements of financial condition of the Deferred and
Incentive Compensation Plan of the Texas Utilities Company System (the "Plan")
as of June 30, 1998 and 1997, and the related statements of income and changes
in plan equity for each of the three years in the period ended June 30, 1998.
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 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, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Plan at June 30, 1998
and 1997, and the related plan income and changes in plan equity for each of
the three years in the period ended June 30, 1998, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
August 28, 1998
8
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Organization and Compensation Committee has duly caused this annual report to
be signed on its behalf by the undersigned thereunto duly authorized.
DEFERRED AND INCENTIVE COMPENSATION PLAN
OF THE TEXAS UTILITIES COMPANY SYSTEM
By /s/ Peter B. Tinkham
---------------------------------------
Plan Administrator
Organization and Compensation Committee
September 28, 1998
9
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
Texas Utilities Company:
We consent to the incorporation by reference in Registration Statement No.
33-32841 on Form S-8 of our report dated August 28, 1998, appearing in this
Annual Report on Form 11-K of the Deferred and Incentive Compensation Plan of
the Texas Utilities Company System for the year ended June 30, 1998.
DELOITTE & TOUCHE LLP
Dallas, Texas
September 29, 1998
10
