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, 1998
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)
<PAGE>
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, 1998 and 1997 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, 1998 4 - 6
Notes to Combined Financial Statements 7 - 14
Exhibits Filed 15
<PAGE>
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the changes in net assets available for benefits
for each of the three years in the period ended December 31, 1998 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 23, 1999
-1-
<PAGE>
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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL COMBINING INFORMATION
-----------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value except for
Fixed Income Fund that is at contract
value which approximates fair value
(cost, Pinnacle West Stock Fund,
$68,965,125;
Index Fund,
$65,075,966;
Fixed Income Fund,
$57,922,524;
Aggressive Equity Fund,
$43,316,881;
International Equity Fund,
$5,716,888;
Lifestyle Conservative Fund,
$3,765,401;
Lifestyle Moderate Fund,
$9,292,635;
Lifestyle Aggressive Fund,
$9,022,549;
Participant Loan Feature,
$21,693,553) $450,665,341 $141,857,042 $140,562,235 $ 57,922,524 $ 56,929,532
Temporary investments (at cost
which approximates fair value) 10,322,875 2,418,190 312,114 7,359,873 105,587
Interest/other receivable 327,981 8,928 3,850 309,080 610
------------ ------------ ------------ ------------ ------------
Total assets 461,316,197 144,284,160 140,878,199 65,591,477 57,035,729
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Interfund transfers and other
liabilities (8,701) (112,200) 21,402 (167,013) 97,980
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $461,324,898 $144,396,360 $140,856,797 $ 65,758,490 $ 56,937,749
============ ============ ============ ============ ============
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 contrac
value which approximates fair value
(cost, Pinnacle West Stock Fund,
$68,965,125;
Index Fund,
$65,075,966;
Fixed Income Fund,
$57,922,524;
Aggressive Equity Fund,
$43,316,881;
International Equity Fund,
$5,716,888;
Lifestyle Conservative Fund,
$3,765,401;
Lifestyle Moderate Fund,
$9,292,635;
Lifestyle Aggressive Fund,
$9,022,549;
Participant Loan Feature,
$21,693,553) $ 5,920,928 $ 4,086,200 $ 10,826,419 $ 10,866,908 $ 21,693,553
Temporary investments (at cost
which approximates fair value) 34,356 31,833 60,138 784
Interest/other receivable 3,020 1,385 1,108
----------- ----------- ------------ ------------ ------------
Total assets 5,955,284 4,121,053 10,887,942 10,868,800 21,693,553
----------- ----------- ------------ ------------ ------------
LIABILITIES:
Interfund transfers and other
liabilities (37,322) (588) 69,930 128,750 (9,640)
----------- ----------- ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 5,992,606 $ 4,121,641 $ 10,818,012 $ 10,740,050 $ 21,703,193
=========== =========== ============ ============ ============
</TABLE>
See notes to combined financial statements.
-2-
<PAGE>
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
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
=========== =========== =========== =========== ============
</TABLE>
See notes to combined financial statements.
-3-
<PAGE>
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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL COMBINING INFORMATION
----------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
-------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 9,528,178 $ 4,030,519 $ 3,842,332
Interest/other income 5,968,437 85,828 $ 9,577 $ 3,921,198 3,626
Realized gain (loss) on sale of
investments 10,084,967 3,159,079 6,193,850 1,559,099
Unrealized appreciation
(depreciation) of
investments (Note 5) 29,495,440 (3,309,756) 24,462,652 5,344,238
------------ ------------- ------------ ------------ -----------
Total investment income 55,077,022 3,965,670 30,666,079 3,921,198 10,749,295
------------ ------------- ------------ ------------ -----------
Contributions (Note 2):
Employers 7,539,003 7,539,003
Participants 24,947,630 3,068,190 8,705,891 3,527,666 5,874,733
------------ ------------- ------------ ------------ -----------
Total contributions 32,486,633 10,607,193 8,705,891 3,527,666 5,874,733
------------ ------------- ------------ ------------ -----------
Total additions 87,563,655 14,572,863 39,371,970 7,448,864 16,624,028
------------ ------------- ------------ ------------ -----------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 21,457,929 10,938,492 3,841,331 3,908,261 1,306,601
Administrative expenses 44,975 9,165 14,748 9,320 8,149
Interfund transfers 1,613,275 1,419,553 (3,398,326) 3,055,339
------------ ------------- ------------ ------------ -----------
Total deductions 21,502,904 12,560,932 5,275,632 519,255 4,370,089
------------ ------------- ------------ ------------ -----------
Net increase (decrease) 66,060,751 2,011,931 34,096,338 6,929,609 12,253,939
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 395,264,147 142,384,429 106,760,459 58,828,881 44,683,810
------------ ------------- ------------ ------------ -----------
End of year $461,324,898 $ 144,396,360 $140,856,797 $ 65,758,490 $56,937,749
============ ============= ============ ============ ===========
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 $ 624,563 $ 196,635 $ 457,138 $ 376,991
Interest/other income 505 227 685 741 $ 1,946,050
Realized gain (loss) on sale of
investments (1,249,133) 97,076 147,665 177,331
Unrealized appreciation
(depreciation) of
investments (Note 5) 638,392 211,343 935,286 1,213,285
----------- ----------- ------------ ------------ ------------
Total investment income 14,327 505,281 1,540,774 1,768,348 1,946,050
----------- ----------- ------------ ------------ ------------
Contributions (Note 2):
Employers
Participants 833,765 302,946 1,192,862 1,441,577
----------- ----------- ------------ ------------ ------------
Total contributions 833,765 302,946 1,192,862 1,441,577
----------- ----------- ------------ ------------ ------------
Total additions 848,092 808,227 2,733,636 3,209,925 1,946,050
----------- ----------- ------------ ------------ ------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 133,578 420,405 492,304 169,535 247,422
Administrative expenses 634 365 1,170 1,424
Interfund transfers 1,312,765 (1,430,941) (1,963,302) (333,544) (274,819)
----------- ----------- ------------ ------------ ------------
Total deductions 1,446,977 (1,010,171) (1,469,828) (162,585) (27,397)
----------- ----------- ------------ ------------ ------------
Net increase (decrease) (598,885) 1,818,398 4,203,464 3,372,510 1,973,447
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 6,591,491 2,303,243 6,614,548 7,367,540 19,729,746
----------- ----------- ------------ ------------ ------------
End of year $ 5,992,606 $ 4,121,641 $ 10,818,012 $ 10,740,050 $ 21,703,193
=========== =========== ============ ============ ============
</TABLE>
See notes to combined financial statements.
-4-
<PAGE>
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL COMBINING INFORMATION
-----------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
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
=========== =========== =========== =========== ============
</TABLE>
See notes to combined financial statements.
-5-
<PAGE>
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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUPPLEMENTAL COMBINING INFORMATION
--------------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE BALANCED
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND FUND
------------ ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 6,557,131 $ 3,761,585 $ 2,322,589 $ 158,356
Interest income 5,370,324 59,289 $ 3,747,325
Income from settlement
(Note 3) 957,427 351,831 $ 154,273 324,919 101,025
Realized gain on sale
of investments 5,832,026 3,180,929 1,977,669 489,947 96,850
Unrealized appreciation
(depreciation) of
investments (Note 5) 19,357,421 7,818,099 11,146,619 386,776 (288,293)
------------ ------------ ----------- ----------- ----------- -----------
Total investment income
(loss) 38,074,329 15,171,733 13,278,561 4,072,244 3,300,337 (33,087)
------------ ------------ ----------- ----------- ----------- -----------
Contributions (Note 2):
Employers 7,225,732 7,225,732
Participants 22,693,280 3,720,945 6,509,011 5,416,753 5,809,125 627,436
------------ ------------ ----------- ----------- ----------- -----------
Total contributions 29,919,012 10,946,677 6,509,011 5,416,753 5,809,125 627,436
------------ ------------ ----------- ----------- ----------- -----------
Total additions 67,993,341 26,118,410 19,787,572 9,488,997 9,109,462 594,349
------------ ------------ ----------- ----------- ----------- -----------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 15,425,820 8,533,725 1,863,410 3,741,062 669,266 128,928
Administrative expenses 44,653 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 15,470,473 19,560,791 (901,301) 6,996,476 (7,011,662) 6,778,072
------------ ------------ ----------- ----------- ----------- -----------
Net increase (decrease) 52,522,868 6,557,619 20,688,873 2,492,521 16,121,124 (6,183,723)
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 269,079,249 109,279,820 52,557,808 63,863,925 20,778,258 6,183,723
------------ ------------ ----------- ----------- ----------- -----------
End of year $321,602,117 $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
=========== =========== =========== =========== ===========
</TABLE>
See notes to combined financial statements.
-6-
<PAGE>
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 Arizona Public
Service Company ("APS") stock 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-
<PAGE>
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.
International Equity Fund -- The fund consists primarily of
stocks outside the United States and was maintained by Franklin
Templeton as part of the Templeton Foreign Trust. Effective December
1, 1998, the fund was maintained by Banker's Trust International
Equity. 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 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 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.
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. Subsequent to the
Plans' year end, the Plans' administrators decided to change the trustee
from State Street Bank and Trust Company to Norwest Bank Minnesota, N.A.
-8-
<PAGE>
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' 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 base pay
as a voluntary contribution on an after tax basis, 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. The APS Savings
Plan and the Pinnacle West Plan allow employees to contribute up to 16% of
their base pay on a pre-tax basis and up to 16% of their base pay on an
after tax basis, 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. The maximum allowable base pay ($160,000) and tax
deferred contribution ($10,000 in 1998) are linked to the cost of living
index and could change on an annual basis.
Employer contributions to the Plans are 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 $89,484,743 and $88,436,178 of
the net assets available for benefits in the Pinnacle West Stock and Fixed
Income Funds for 1998 and 1997, respectively.
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<PAGE>
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 1998 ranged from 8.75% 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 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
-10-
<PAGE>
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.
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
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<PAGE>
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, 1998 were as
follows:
Unrealized Appreciation (Depreciation)
Beginning of Year End of Year Change
------------- ------------- ------------
1998
----
Pinnacle West Stock Fund $ 76,201,672 $ 72,891,916 $ (3,309,756)
Index Fund 51,023,616 75,486,268 24,462,652
Aggressive Equity Fund 8,268,413 13,612,651 5,344,238
International Equity Fund (434,352) 204,040 638,392
Lifestyle Conservative Fund 109,456 320,799 211,343
Lifestyle Moderate Fund 598,497 1,533,783 935,286
Lifestyle Aggressive Fund 631,074 1,844,359 1,213,285
------------- ------------- ------------
Total $ 136,398,376 $ 165,893,816 $ 29,495,440
============= ============= ============
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
============= ============= ============
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
============= ============= ============
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<PAGE>
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, 1998, 1997, and 1996 of
6.65%, 6.82%, and 6.31%, respectively. The average yield for 1998
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.
Nine of the GICs are managed synthetic investment contracts. The fair
value of the trust assets related to these contracts is $26,545,286. The
contract value of the trust assets is $26,581,790.
7. BENEFITS PAYABLE
As of December 31, 1998 and 1997, net assets available for benefits
included benefits of $119 and $1,958, respectively, due to participants who
had withdrawn from participation in the Plans.
8. PARTICIPATING EMPLOYEES
As of December 31, 1998 and 1997, the aggregate number of employees
participating in the Plans was 5,093 and 5,417, respectively.
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
--------------- ---------------
1998
----
Pinnacle West Stock Fund $ 23.887787 6,044,778
Index Fund 26.157241 5,385,002
Fixed Income Fund 5.644700 11,649,599
Aggressive Equity Fund 104.625244 544,207
International Equity Fund 40.791974 146,906
Lifestyle Conservative 21.622221 190,621
Lifestyle Moderate 30.785558 351,399
Lifestyle Aggressive 40.298341 266,513
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<PAGE>
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
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.
<TABLE>
<CAPTION>
Pinnacle West Stock Fund
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Shares of Pinnacle West common stock held by the Plans 3,347,659 3,328,704 3,611,371
Employer cash contributions $7,539,003 $ 7,068,458 $7,225,732
Investments by the Plans in Pinnacle West common stock $6,816,758 $ 5,675,942 $4,494,219
Sales made by the Plans of Pinnacle West common stock $5,862,863 $14,390,546 $8,572,009
Aggregate cost of Pinnacle West common stock sold $2,703,784 $ 8,663,385 $5,391,080
Index Fund
----------
1998 1997 1996
---- ---- ----
Investments by the Plans in Trustee's Index Fund $15,840,086 $17,339,038 $13,147,476
Sales made by the Plans of Trustee's Index Fund $12,514,603 $ 9,092,627 $ 5,243,720
Aggregate cost of Trustee's Index Fund sold $ 6,320,752 $ 4,926,370 $ 3,266,052
Temporary Investments in Funds Managed by the Trustee
-----------------------------------------------------
1998 1997 1996
---- ---- ----
Investments by the Plans in temporary investment funds $53,891,371 $50,617,593 $46,840,277
Sales made by the Plans of temporary investment funds $51,658,594 $58,245,727 $33,293,798
</TABLE>
The temporary investments are bought and sold at par.
-14-
<PAGE>
Exhibits Filed.
Exhibit No. Description
- ----------- -----------
23.1 Independent Auditors' Consent
-15-
<PAGE>
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 25, 1999 By Armando B. Flores
--------------------------------
Armando B. Flores
Chairman of the Administrative Committee
and Executive Vice President,
Corporate Business Services,
Arizona Public Service Company
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-39208 and 33-58372 on Form S-8 of our report dated June 23, 1999 appearing in
this Annual Report on Form 11-K of The Savings Plan for Union Employees of
Arizona Public Service Company and The Savings Plan for Employees of Arizona
Public Service Company for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
June 25, 1999
EXHIBIT 23.1
