UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number 1-11377
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
(Full title of the plan)
CINERGY CORP.
(Name of issuer of the securities held pursuant to the plan)
139 East Fourth Street
Cincinnati, Ohio 45202
(Address of principal executive offices)
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FINANCIAL STATEMENTS AND EXHIBITS
Page No.
Financial Statements
Report of Independent Public Accountants 3
Statements of Financial Condition as of
December 31, 1997 and 1996 4
Statements of Income and Other Changes in Plan Equity
for the Years Ended December 31, 1997, 1996, and 1995 5
Notes to Financial Statements 6-8
Financial Statement Schedules:
Schedules I, II, and III are not applicable
Signatures 9
Exhibits
23) Consent of Independent Public Accountants
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
the Cinergy Corp. Employee Stock
Purchase and Savings Plan:
We have audited the accompanying statements of financial condition of the
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN as of December 31, 1997
and 1996, and the statements of income and other changes in plan equity for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Plan Administrator. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Plan Administrator, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Plan as of December 31,
1997 and 1996, and the results of its operations and changes in plan equity for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
March 24, 1998
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CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
December 31
1997 1996
Receivable from Company (Purchase
Savings Accounts) (Note C) $4 857 087 $9 270 029
Plan Equity $4 857 087 $9 270 029
The accompanying notes are an integral part of these financial statements.
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CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
STATEMENTS OF INCOME AND OTHER CHANGES IN PLAN EQUITY
1997 1996 1995
Interest income (Purchase
Savings Accounts) (Note C) $ 139 909 $ 390 381 $ 158 164
Contributions from participants
(Note C) 4 997 770 4 618 713 4 835 158
Distributions to participants
(Note E) (9 550 621) (867 802) (232 653)
Net change in Plan equity
for the period (4 412 942) 4 141 292 4 760 669
Plan equity at beginning of the
period 9 270 029 5 128 737 368 068
Plan equity at end of the period $4 857 087 $9 270 029 $5 128 737
The accompanying notes are an integral part of these financial statements.
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CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Note A - Plan Description
On October 18, 1994, the board of directors of Cinergy Corp. (Cinergy or
Company) adopted, and the holders of Cinergy's common stock (Common Stock)
subsequently approved, the Cinergy Corp. Employee Stock Purchase and Savings
Plan (the Plan) for the benefit of eligible employees (see the Plan prospectus
for eligibility criteria) of Cinergy and its subsidiaries. Under the Plan,
eligible employees may be granted stock options within the meaning of Section
423 of the Internal Revenue Code of 1986 (Code), as amended, to purchase Common
Stock. In conjunction with the merger of PSI Resources, Inc., (PSI) with and
into the Company on October 24, 1994, the PSI Resources, Inc. Employee Stock
Purchase and Savings Plan (the PSI Plan) was merged into the Plan. The PSI Plan
contained provisions substantially similar to the Plan. The administrative
expenses of the Plan are paid by the Company. The assets of the Plan are
commingled with the assets of Cinergy and its subsidiaries. Further details of
the Plan are provided in the Plan prospectus which has been distributed to all
Plan participants.
Note B - Accounting Principles
The accounts of the Plan are maintained on an accrual basis. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the Plan Administrator to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Note C - Investment Program
Under the Plan, at the participant's discretion, after-tax funds withheld from a
participant's compensation during a 26-month offering period are deposited in an
interest-bearing account (Purchase Savings Account) in the participant's name,
either in a bank (the Bank) selected by the Company or in such an account
maintained by the Company, as determined by the Plan's administration committee.
Interest will be paid by the Bank or the Company at a rate at least equal to the
rate a bank would pay on a regular statement savings account or at a comparable
rate if paid by the Company. The amounts deposited in the Purchase Savings
Account, plus interest paid thereon, will equal the total dollar amount the
eligible employee may apply toward the purchase of shares of Common Stock
pursuant to the Plan. At the end of the offering period, each participant
specifies the portion of the Purchase Savings Account to be applied to the
purchase of Common Stock at a previously established purchase price. Funds not
used to purchase Common Stock, including any interest earned over the 26-month
offering period, are returned to the participant.
Under the Plan, the purchase price of each share of Common Stock is equal to the
fair market value of a share of Common Stock on the first date of the offering
period, less 5%. The fair market value of a share of Common Stock is the average
of the high and low sales prices of a share of Common Stock as reported in the
New York Stock Exchange Composite Transactions published in The Wall Street
Journal for such date or, if no trading occurs on such date, the last date on
which trading occurred.
The initial offering under the Plan was a continuation of the third offering
period under the PSI Plan. The share price established for this offering, which
began November 1, 1994, for PSI Energy, Inc. employees and February 1, 1995, for
The Cincinnati Gas & Electric Company employees, was $21.7312. The initial
offering was deemed to have commenced on the first day of the third offering
period under the PSI Plan and ended on December 31, 1996. The accumulated
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balance at December 31, 1996 was $9,270,029. This balance was used by the
participants to purchase, subsequent to December 31, 1996, a total of 414,284
shares of Common Stock with the remaining $267,141 distributed in cash.
The second offering under the Plan commenced on January 1, 1997, and will end on
February 28, 1999. The purchase price for this offering period has been
established at $31.825 per share.
The number of employees enrolled in the Plan at December 31, 1997, 1996, and
1995, were 2,694, 2,399, and 2,698, respectively. Employees of The Cincinnati
Gas & Electric Company became eligible for participation in the Plan in February
1995.
Note D - Income Tax Status
The Plan is not regarded as an "employee benefit plan" under Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (ERISA), and,
therefore, is not subject to ERISA.
The Plan is intended to qualify as an employee stock purchase plan under Section
423 of the Internal Revenue Code of 1986, as amended (Code). Amounts withheld
from a participant's compensation for deposit in the participant's Purchase
Savings Account are from after-tax dollars. Interest on the Purchase Savings
Account is taxable to the participant in the year earned. Dividends paid after
the shares are purchased are taxable to the participant in the year received.
Gains or losses on sales of Common Stock purchased pursuant to the Plan must be
reported to the Internal Revenue Service by the participant in the year of sale.
Gains and losses may be characterized as ordinary or capital, as further
described herein.
Capital losses are available for offset against any capital gains, and in
addition, any excess capital losses, whether long- or short-term, are allowed to
offset up to $3,000 of ordinary income. Excess capital losses can be carried
over to offset income in future years, subject to the same limitations.
Section 423 of the Code imposes a holding period of two (2) years from the
commencement of the offering period and one (1) year from the date of purchase.
If the holding period is met, then the difference between the purchase price and
the lesser of the fair market value of the Common Stock (i) on the first day of
the offering period, or (ii) on the date of sale, is taxed as ordinary income in
the year the Common Stock is sold. Any remaining gain is taxed as a capital
gain. If the Common Stock is sold for less than the purchase price, the
participant has a capital loss.
If the holding period is not met, then the difference between the purchase price
and the fair market value at the time of purchase is taxed as ordinary income.
The difference between the amount received upon disposition and the purchase
price plus the amount of ordinary income is a capital gain or loss.
Note E - Distributions to Participants
A participant may at any time, before the end of an offering period, terminate
participation in the Plan. Upon termination, all funds, including interest, in
the participant's Purchase Savings Account are returned to the participant
without penalty. There were no outstanding termination requests at the end of
1997, 1996, or 1995.
If a participant's employment with the Company or its subsidiaries is
terminated, all funds, including interest, in the participant's Purchase Savings
Account are returned to the participant. If termination is due to retirement,
the participant may purchase all or fewer than all of the shares of Common Stock
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which may be purchased with the funds then on deposit in the participant's
Purchase Savings Account within three months from the date of retirement but not
later than the last day of the offering period. Funds not applied to purchase
Common Stock are returned to the participant.
If termination is due to death, the participant's legal representative or
beneficiary may purchase all or fewer than all of the shares of Common Stock
which may be purchased with the funds then on deposit in the participant's
Purchase Savings Account within 12 months of the participant's death but not
later than the last day of the offering period. Funds not applied to purchase
Common Stock will be paid to the participant's legal representative or
beneficiary.
Distributions to participants increased in 1997 due to the completion of the
initial offering, which is discussed in Note C. Distributions to participants
increased in 1996 as a result of voluntary early retirement and severance
programs offered by the Company.
Note F - Change in Control, Amendment, and Termination
In the event of a "change in control" of Cinergy as defined in the Plan as
amended, each participant has the right within three months from the "change in
control" or the purchase date (as defined in the Plan prospectus), whichever is
earlier, to elect to purchase all or fewer than all of the eligible shares.
Cinergy, at any time by action of its board of directors, may alter, amend,
modify, revoke, or terminate the Plan in whole or in part, or alter or amend any
and all terms of participation in an offering made under the Plan, except with
respect to provisions related to a "change in control" of the Company for a
three-year period following such "change in control".
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SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Plan Committee has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
CINERGY CORP. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
(The Plan)
Date: March 24, 1998
/s/ Van P. Smith
(Chairman, Compensation
Committee)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K into Cinergy Corp.'s
previously filed Registration Statement File No. 33-56091.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
March 24, 1998
