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, 1998
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. DIRECTORS' DEFERRED COMPENSATION 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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TABLE OF CONTENTS
Page No.
Financial Statements
Report of Independent Public Accountants 3
Statements of Financial Condition as of
December 31, 1998 and 1997 4
Statements of Income and Other Changes in Plan Equity
for the Years Ended December 31, 1998, 1997, and 1996 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. Directors'
Deferred Compensation Plan:
We have audited the accompanying statements of financial condition of the
CINERGY CORP. DIRECTORS' DEFERRED COMPENSATION PLAN as of December 31, 1998 and
1997, and the related statements of income and other changes in plan equity for
each of the three years in the period ended December 31, 1998. 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,
1998 and 1997, and the results of its operations and changes in plan equity for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
March 29, 1999
3
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<TABLE>
<CAPTION>
CINERGY CORP. DIRECTORS' DEFERRED COMPENSATION PLAN
STATEMENTS OF FINANCIAL CONDITION
<S> <C>
Totals
(Note C)
AS OF DECEMBER 31, 1998
ASSETS
Amounts due from participating employers (Note A) $1 163 824
==========
PLAN EQUITY $1 163 824
==========
AS OF DECEMBER 31, 1997
ASSETS
Amounts due from participating employers (Note A) $1 066 974
==========
PLAN EQUITY $1 066 974
==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
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<TABLE>
<CAPTION>
CINERGY CORP. DIRECTORS' DEFERRED COMPENSATION PLAN
STATEMENTS OF INCOME AND OTHER CHANGES IN PLAN EQUITY
<S> <C>
Totals
(Note C)
PLAN EQUITY AT DECEMBER 31, 1995 $ 489 414
Theoretical investment income (Note C)
Dividends earned 31 615
Theoretical stock appreciation 53 877
Contributions from participants (Note C) 191 500
Participant withdrawals (Note E) (26 730)
----------
PLAN EQUITY AT DECEMBER 31, 1996 $ 739 676
Theoretical investment income (Note C)
Dividends earned 42 629
Theoretical stock appreciation 128 128
Contributions from participants (Note C) 188 500
Participant withdrawals (Note E) (31 959)
----------
PLAN EQUITY AT DECEMBER 31, 1997 $1 066 974
Theoretical investment income (Note C)
Dividends earned 52 698
Theoretical stock depreciation (115 569)
Contributions from participants (Note C) 193 750
Participant withdrawals (Note E) (34 029)
----------
PLAN EQUITY AT DECEMBER 31, 1998 $1 163 824
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
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CINERGY CORP. DIRECTORS' DEFERRED COMPENSATION PLAN
NOTES TO FINANCIAL STATEMENTS
Note A - Plan Description
The Cinergy Corp. Directors' Deferred Compensation Plan the ("Plan") was
established to enable non-employee directors of Cinergy Corp. ("Cinergy" or
"Company") and its subsidiaries to defer the receipt of all or a portion of the
compensation payable for services performed as a member of the board of
directors of Cinergy or any of its subsidiaries. The Plan is not a funded plan;
therefore, Cinergy and its subsidiaries have not segregated any assets to pay
the contractual obligations to participants under the Plan. The administrative
expenses of the Plan are paid by the Company. Further details of the Plan are
provided in the Plan prospectus which has been distributed to all eligible 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 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, eligible participants may elect to defer all or any portion of
the compensation payable for services performed as a member of the board of
directors of Cinergy or its subsidiaries. Except as discussed in note F,
participants accounts are 100% vested at all times. Each participant elects to
have amounts deferred credited among two different accounts - a "Stock Account"
and a "Cash Account" - as follows:
Stock Account -
A participant may elect to have any portion of deferred amounts treated
as if invested in a number of shares of Cinergy Corp. Common Stock,
$.01 par value ("Common Stock"). When a participant elects to have
amounts treated as if invested in Common Stock, the deferred amounts
are deemed to be invested in a number of theoretical shares of Common
Stock determined using the market price per share existing on the date
each amount would otherwise have been payable to the participant.
Dividends on the theoretical shares are assumed to be reinvested into
additional theoretical shares determined using the existing market
price per share as and when dividends on Common Stock are paid. A total
of 33,856.687 theoretical shares at a market value of $34.375 per share
were allocated to participants' Stock Accounts at December 31, 1998. A
total of 27,849.243 theoretical shares at a market value of $38.3125
per share were allocated to participants' Stock Accounts at December
31, 1997.
6
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Cash Account -
A participant may elect to have any portion of deferred amounts treated
as if invested in an interest-bearing account. When a participant
elects to have amounts treated as if invested in an interest-bearing
account, the deferred amounts are deemed to be invested in a
theoretical account on the date each amount would otherwise have been
payable to the participant. Interest is accrued on and credited to the
theoretical account at a rate that is equivalent to the interest rate
for a one-year certificate of deposit of $100,000 as quoted in The Wall
Street Journal. The rate of interest is adjusted and compounded
quarterly.
Upon six-month prior notice, a participant may change the amount of compensation
to be deferred and the allocation of amounts among the two accounts. However,
any change in allocation among the two accounts will only apply to future
deferred amounts and not to existing account balances.
The number of active participants in each account is provided in the following
table:
Cash Stock
December 31 Account Account
----------- ------- -------
1996 None 5
1997 None 5
1998 None 4
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 also is not a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended. The Plan is
subject to Federal income taxes; however, the unfunded nature of the Plan
precludes the occurrence of a taxable event arising from the Plan's operation.
Amounts deferred, along with any theoretical dividends and theoretical interest
accrued thereon, are not considered taxable income to a participant until
distributed (see Note E). Amounts distributed from the Plan are considered
compensation taxable as ordinary income in the year distributed, in an amount
equal to the total of all cash and the existing fair market value of all shares
of Common Stock distributed.
Subsequent dispositions of shares of Common Stock received from the Plan may
result in capital gains (losses) equal to the amount realized over (under) the
tax basis in the shares. The tax basis is generally considered to be the amount
of ordinary income recognized in conjunction with the distribution from the Plan
of the shares of Common Stock.
Note E - Participant Withdrawals
At the participant's election, amounts deferred under the Plan, together with
earnings thereon will be distributed either in a single lump sum payment or in
equal annual installments of two to 10 years. At the participant's election, the
single lump sum payment or the first installment payment will be payable on the
first business day of the calendar year immediately following the year in which
the participant either (a) ceases to be a director, or (b) attains that age
7
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specified by Paragraph 203(f)(3) of the Social Security Act or its equivalent
then in effect. Any additional installment(s) will be payable on the first
business day of each succeeding year.
All payments to be made under the Plan from a participant's Stock Account are to
be made in the form of new issue shares of Common Stock or shares of Common
Stock purchased on the open market, as determined by the Company, and cash in
lieu of any fractional shares. All payments to be made under the Plan from a
participant's Cash Account are to be paid in cash.
In the event of the death of a participant, all amounts due the participant are
to be distributed within 90 days of the participant's death to the designated
beneficiary or to the decedent's estate in accordance with the preceding
paragraph.
Note F - Change in Control, Amendment, Termination, and Forfeiture
In the event of a "change in control" of Cinergy, as defined in the Plan as
amended, the Compensation Committee of Cinergy's Board of Directors, in its sole
discretion, may elect to accelerate the distribution of all compensation
deferred under the Plan.
Cinergy, at any time by action of its board of directors, may alter, amend,
modify, revoke, or terminate the Plan, or suspend payment of benefits under the
Plan, except with respect to provisions relating to a "change in control" for a
three-year period following such "change in control".
Any amounts remaining in a participant's Stock Account or Cash Account will be
forfeited if the participant becomes affiliated with any utility or other
company in Indiana, Ohio, or Kentucky that competes with Cinergy or its
subsidiaries. Amounts will also be forfeited if a participant refuses a
reasonable request to become a consultant after retiring as a member of the
Company's or its subsidiaries' board(s) of directors.
8
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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. DIRECTORS' DEFERRED COMPENSATION PLAN
(The Plan)
Date: March 30, 1999
/s/ Van P. Smith
Van P. Smith
(Chairman, Compensation
Committee)
9
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated March 29, 1999, included in this Form 11-K
into Cinergy Corp.'s previously filed Registration Statement File No. 33-56089.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
March 29, 1999
