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, 1996
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)
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, 1996 and 1995 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, 1996 4 - 6
Notes to Combined Financial Statements 7 - 15
Exhibits Filed 16
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the changes in net assets available for benefits
for each of the three years in the period ended December 31, 1996 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, 1997
-1-
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, 1996
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
---------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND
------------- --------------- ------------ ------------- -------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$67,839,594;
Index Fund,
$43,143,965;
Fixed Income Fund,
$52,542,392;
Aggressive Equity Fund,
$33,506,467;
International Equity Fund,
$3,159,997;
Lifestyle Conservative Fund,
$1,297,857;
Lifestyle Moderate Fund,
$3,483,624;
Lifestyle Aggressive Fund,
$2,496,232;
Participant Loan Feature,
$18,564,771) $ 306,635,785 $ 114,661,023 $ 73,255,751 $ 52,542,392 $ 36,879,918
Temporary investments (at cost
which approximates fair value) 15,173,420 1,703,669 13,469,751
Interest receivable 336,604 6,821 329,783
------------- --------------- ------------ ------------- -------------
Total assets 322,145,809 116,371,513 73,255,751 66,341,926 36,879,918
------------- --------------- ------------ ------------- -------------
LIABILITIES:
Interfund transfers and other
liabilities 543,692 534,074 9,070 (14,520) (19,464)
------------- --------------- ------------ ------------- -------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 321,602,117 $ 115,837,439 $ 73,246,681 $ 66,356,446 $ 36,899,382
============= =============== ============ ============= =============
------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
------------------------------------------------------------------------------------------
LIFESTYLE LIFESTYLE LIFESTYLE
BALANCED INTERNATIONAL CONSERVATIVE MODERATE AGGRESSIVE PARTICIPANT
FUND 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,
$67,839,594;
Index Fund,
$43,143,965;
Fixed Income Fund,
$52,542,392;
Aggressive Equity Fund,
$33,506,467;
International Equity Fund,
$3,159,997;
Lifestyle Conservative Fund,
$1,297,857;
Lifestyle Moderate Fund,
$3,483,624;
Lifestyle Aggressive Fund,
$2,496,232;
Participant Loan Feature,
$18,564,771) $ $ 3,269,793 $ 1,284,840 $ 3,574,423 $ 2,602,874 $ 18,564,771
Temporary investments (at cost
which approximates fair value)
Interest receivable
------------- --------------- -------------- -------------- -------------- ------------
Total assets 3,269,793 1,284,840 3,574,423 2,602,874 18,564,771
------------- --------------- -------------- -------------- -------------- ------------
LIABILITIES:
Interfund transfers and other
liabilities 860 (2,820) 943 35,549
------------- --------------- -------------- -------------- ------------- ------------
NET ASSETS AVAILABLE
FOR BENEFITS $ $ 3,268,933 $ 1,284,840 $ 3,577,243 $ 2,601,931 $ 18,529,222
============= ===============. ============== ============== ============= ============
-2-
See notes to combined financial statements.
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, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
------------------------------------------------------------
PINNACLE WEST FIXED
COMBINED STOCK FUND INDEX FUND INCOME FUND
-------------- ---------------- ---------------- ----------------
ASSETS:
Investments at fair value except
for Fixed Income Fund that is
at contract value which approximates
fair value (cost,
Pinnacle West Stock Fund,
$68,736,455;
Index Fund, $33,262,541;
Fixed Income Fund, $63,401,164;
Aggressive Equity Fund,
$17,706,804;
Balanced Fund, $5,881,302;
Participant Loan Feature,
$16,679,670) $ 266,911,402 $ 107,739,786 $ 52,227,708 $ 63,401,164
Temporary investments (at cost
which approximates fair value) 1,626,939 1,505,568 121,371
Contributions receivable 1,103,604 432,779 230,289 229,659
Interest receivable 310,179 8,634 301,545
-------------- ---------------- ---------------- ----------------
Total assets 269,952,124 109,686,767 52,457,997 64,053,739
-------------- ---------------- ---------------- ----------------
LIABILITIES:
Interfund transfers and other liabilities 872,875 406,947 (99,811) 189,814
-------------- ---------------- ---------------- ----------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 269,079,249 $ 109,279,820 $ 52,557,808 $ 63,863,925
============== ================ ================ ================
----------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
----------------------------------------------------------
AGGRESSIVE BALANCED PARTICIPANT
EQUITY 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,
$68,736,455;
Index Fund, $33,262,541;
Fixed Income Fund, $63,401,164;
Aggressive Equity Fund,
$17,706,804;
Balanced Fund, $5,881,302;
Participant Loan Feature,
$16,679,670) $ 20,693,479 $ 6,169,595 $ 16,679,670
Temporary investments (at cost
which approximates fair value)
Contributions receivable 162,733 48,144
Interest receivable
-------------- -------------- ---------------
Total assets 20,856,212 6,217,739 16,679,670
-------------- -------------- ---------------
LIABILITIES:
Interfund transfers and other liabilities 77,954 34,016 263,955
-------------- -------------- ---------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 20,778,258 $ 6,183,723 $ 16,415,715
============== ============== ===============
See notes to combined financial statements.
- 3 -
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
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
---------------------------------------------------------------------------
PINNACLE WEST FIXED AGGRESSIVE BALANCED
COMBINED STOCK FUND INDEX FUND INCOME FUND EQUITY FUND FUND
------------- --------------- ------------ ------------- ------------- -----------
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
================ ================ ================ ================ ===============
See notes to combined financial statements.
-4-
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, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
---------------------------------------------------------------
PINNACLE WEST FIXED
COMBINED STOCK FUND INDEX FUND INCOME FUND
-------------- ---------------- ---------------- ----------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 4,831,483 $ 3,548,574
Interest income 5,117,786 75,680 $ 3,813,463
Realized gain on sale of
investments 2,859,474 1,552,878 $ 1,161,262
Unrealized appreciation
of investments (Note 5) 47,736,651 32,727,519 11,670,607
-------------- ---------------- ---------------- ----------------
Total investment income 60,545,394 37,904,651 12,831,869 3,813,463
-------------- ---------------- ---------------- ----------------
Contributions (Note 2):
Employers 6,747,587 6,747,587
Participants 20,204,098 4,043,616 5,077,110 6,757,160
-------------- ---------------- ---------------- ----------------
Total contributions 26,951,685 10,791,203 5,077,110 6,757,160
-------------- ---------------- ---------------- ----------------
Total additions 87,497,079 48,695,854 17,908,979 10,570,623
-------------- ---------------- ---------------- ----------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 15,932,169 9,015,731 1,727,992 4,533,469
Administrative expenses 43,968 4,085 3,855 33,552
Interfund transfers 9,646,105 (4,799,352) 6,468,018
-------------- ---------------- ---------------- ----------------
Total deductions 15,976,137 18,665,921 (3,067,505) 11,035,039
-------------- ---------------- ---------------- ----------------
Net increase (decrease) 71,520,942 30,029,933 20,976,484 (464,416)
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 197,558,307 79,249,887 31,581,324 64,328,341
-------------- ---------------- ---------------- ----------------
End of year $ 269,079,249 $ 109,279,820 $ 52,557,808 $ 63,863,925
============== ================ ================ ================
-------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
-------------------------------------------------------
AGGRESSIVE BALANCED PARTICIPANT
EQUITY FUND FUND LOAN FEATURE
-------------- -------------- ---------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 1,084,332 $ 198,577
Interest income $ 1,228,643
Realized gain on sale of
investments 128,349 16,985
Unrealized appreciation
of investments (Note 5) 2,957,516 381,009
-------------- -------------- ---------------
Total investment income 4,170,197 596,571 1,228,643
-------------- -------------- ---------------
Contributions (Note 2):
Employers
Participants 3,185,022 1,141,190
-------------- -------------- ---------------
Total contributions 3,185,022 1,141,190
-------------- -------------- ---------------
Total additions 7,355,219 1,737,761 1,228,643
-------------- -------------- ---------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 345,062 115,316 194,599
Administrative expenses 1,376 1,100
Interfund transfers (7,402,443) (1,475,470) (2,436,858)
-------------- -------------- ---------------
Total deductions (7,056,005) (1,359,054) (2,242,259)
-------------- -------------- ---------------
Net increase (decrease) 14,411,224 3,096,815 3,470,902
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 6,367,034 3,086,908 12,944,813
-------------- -------------- ---------------
End of year $ 20,778,258 $ 6,183,723 $ 16,415,715
============== ============== ===============
See notes to combined financial statements.
-5-
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, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
-------------------------------------------------------------
PINNACLE WEST FIXED
COMBINED STOCK FUND INDEX FUND INCOME FUND
-------------- ---------------- --------------- -----------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 3,381,906 $ 3,080,527
Interest income 4,099,965 62,785 $ 3,513,769
Realized gain (loss) on sale of
investments 2,579,519 693,572 $ 1,885,449
Unrealized appreciation
(depreciation) of
investments (Note 5) (10,965,410) (9,324,625) (1,577,228)
-------------- ---------------- --------------- -----------------
Total investment income (loss) (904,020) (5,487,741) 308,221 3,513,769
-------------- ---------------- --------------- -----------------
Contributions (Note 2):
Employers 6,552,535 6,552,535
Participants 19,076,462 4,562,379 5,002,389 7,664,070
-------------- ---------------- --------------- -----------------
Total contributions 25,628,997 11,114,914 5,002,389 7,664,070
-------------- ---------------- --------------- -----------------
Total additions 24,724,977 5,627,173 5,310,610 11,177,839
-------------- ---------------- --------------- -----------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 11,620,088 4,787,183 1,690,764 4,816,488
Administrative expenses 66,117 5,216 2,783 57,439
Interfund transfers 5,743,751 6,597,380 7,774,601
-------------- ---------------- --------------- -----------------
Total deductions 11,686,205 10,536,150 8,290,927 12,648,528
-------------- ---------------- --------------- -----------------
Net increase (decrease) 13,038,772 (4,908,977) (2,980,317) (1,470,689)
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year 184,519,535 84,158,864 34,561,641 65,799,030
-------------- ---------------- --------------- -----------------
End of year $ 197,558,307 $ 79,249,887 $ 31,581,324 $ 64,328,341
============== ================ =============== =================
---------------------------------------------------------
---------------------------------------------------------
SUPPLEMENTAL COMBINING INFORMATION
---------------------------------------------------------
AGGRESSIVE BALANCED PARTICIPANT
EQUITY FUND FUND LOAN FEATURE
-------------- ------------- --------------
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income (Note 1):
Dividends $ 248,031 $ 53,348
Interest income $ 523,411
Realized gain (loss) on sale of
investments 4,540 (4,042)
Unrealized appreciation
(depreciation) of
investments (Note 5) 29,159 (92,716)
-------------- ------------- --------------
Total investment income (loss) 281,730 (43,410) 523,411
-------------- ------------- --------------
Contributions (Note 2):
Employers
Participants 1,130,011 717,613
-------------- ------------- --------------
Total contributions 1,130,011 717,613
-------------- ------------- --------------
Total additions 1,411,741 674,203 523,411
-------------- ------------- --------------
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Benefit payments 64,788 70,317 190,548
Administrative expenses 679
Interfund transfers (5,020,081) (2,483,701) (12,611,950)
-------------- ------------- --------------
Total deductions (4,955,293) (2,412,705) (12,421,402)
-------------- ------------- --------------
Net increase (decrease) 6,367,034 3,086,908 12,944,813
NET ASSETS AVAILABLE FOR
BENEFITS:
Beginning of year
-------------- ------------- --------------
End of year $ 6,367,034 $ 3,086,908 $ 12,944,813
============== ============= ==============
See notes to combined financial statements.
-6-
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 common stock of Arizona Public Service Company ("APS") 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 during 1996 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 comingled 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.
-7-
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.
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.
Balanced Fund -- The fund consists of common and preferred
stocks and bonds managed by Fidelity Investments as part of the
Fidelity Balanced 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. Effective June 27, 1996, the fund was no longer
offered as an investment choice.
International Equity Fund -- The fund consists primarily of
stocks outside the United States and maintained by Franklin
Templeton as part of the Templeton Foreign 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. The fund was added as
an investment choice effective July 1, 1996. 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
funds were added as an investment choice effective July 1, 1996.
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
-8-
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.
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'
pre-tax 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 after-tax base pay as a voluntary contribution, 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. Effective
January 1, 1996, the APS Savings Plan and the Pinnacle West Plan were
changed to allow employees to contribute up to 16% of their pre-tax base
pay and up to 16% of their after-tax base pay, 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. Previously,
the maximum allowable contribution for participants in the APS Savings
Plan and the Pinnacle West Plan were the same as the APS Union Plan. The
maximum allowable base pay ($150,000 in 1996) and tax deferred
contribution ($9,500 in 1996) are linked to the cost of living index and
could change on an annual basis.
Prior to March 1, 1995, for the APS Savings Plan and the Pinnacle
West Plan, and April 1, 1995, for the APS Union Plan, the Companies
contributed to the account of each participant in the Plans' matching
feature a minimum amount equal to 30% of such participant's contribution
of up to 6% of the participant's pre-tax base pay (defined here as the
participant's "required contribution"). Employer contributions were
increased (i) by an additional one percent for each one percent increase
in Pinnacle West consolidated net income from continuing operations over
the prior year
-9-
and (ii) by an additional amount determined at the sole discretion of
each Company's Board of Directors, up to a total Employer contribution
of not more than 50% of participant required contributions. Effective
March 1, 1995, for the APS Savings Plan and the Pinnacle West Plan, and
April 1, 1995, for the APS Union Plan, Employer contributions were 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 $68,028,037
and $58,835,852 of the net assets available for benefits in the Pinnacle
West Stock and Fixed Income Funds for 1996 and 1995, respectively.
The Balanced Fund was no longer offered as an investment choice as
of June 27, 1996. Employee funds invested in the Balanced Fund were
automatically transferred into the Fixed Income Fund on June 27, 1996.
Participants had the opportunity to make a one-time special interfund
transfer between July 1, 1996 and July 14, 1996, to transfer the funds
out of the Fixed Income Fund.
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 1996 ranged from 9.25%
to 9.50%.
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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 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,
-11-
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 was no longer an employee and had
previously received a full distribution of his or her funds from the
Plans, a separate check was issued 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 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, 1996 were as
follows:
Unrealized Appreciation (Depreciation)
--------------------------------------
Beginning of Year End of Year Change
---------------------- --------------------- -------------------
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)
-12
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
============ ============== =============
1995
----
Pinnacle West Stock Fund $ 6,275,811 $ 39,003,330 $ 32,727,519
Index Fund 7,294,560 18,965,167 11,670,607
Aggressive Equity Fund 29,159 2,986,675 2,957,516
Balanced Fund (92,716) 288,293 381,009
------------ ------------ -------------
Total $ 13,506,814 $ 61,243,465 $ 47,736,651
============ ============ =============
1994
----
Pinnacle West Stock Fund $ 15,600,436 $ 6,275,811 $ (9,324,625)
Index Fund 8,871,788 7,294,560 (1,577,228)
Aggressive Equity Fund 0 29,159 29,159
Balanced Fund 0 (92,716) (92,716)
------------ ------------ -------------
Total $ 24,472,224 $ 13,506,814 $ (10,965,410)
============ ============ =============
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, 1996, 1995, and
1994 of 6.31%, 6.05%, and 5.94%, respectively. The average yield for
1996 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.
One of the GICs is a managed synthetic investment contract. The fair
value of the trust assets related to this contract is $11,987,668. The
contract value of the trust assets is $11,922,862.
7. BENEFITS PAYABLE
As of December 31, 1996 and 1995, net assets available for benefits
included benefits of $125,711 and $0, respectively, due to participants
who had withdrawn from participation in the Plans.
8. PARTICIPATING EMPLOYEES
As of December 31, 1996 and 1995, the aggregate number of employees
participating in the Plans was 5,346 and 5,317, respectively.
-13-
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, Balanced, 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
---------------- ---------------
1996
----
Pinnacle West Stock Fund $ 16.880499 6,862,205
Index Fund 15.263426 4,798,836
Fixed Income Fund 4.969295 13,353,292
Aggressive Equity Fund 66.977409 550,923
International Equity Fund 37.843382 86,381
Lifestyle Conservative 15.979735 80,404
Lifestyle Moderate 21.594078 165,659
Lifestyle Aggressive 27.182799 95,720
1995
----
Pinnacle West Stock Fund $ 14.766694 7,400,426
Index Fund 12.412044 4,234,420
Fixed Income Fund 4.681795 13,640,906
Aggressive Equity Fund 59.391589 349,852
Balanced Fund 56.305337 109,825
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.
Pinnacle West Stock Fund
------------------------
1996 1995 1994
---- ---- ----
Shares of Pinnacle West common stock held by the Plans 3,611,371 3,747,471 3,931,354
Employer cash contributions $ 7,225,732 $ 6,747,587 $ 6,552,535
Investments by the Plans in Pinnacle West common stock $ 4,494,219 $ 3,274,433 $ 10,533,406
Sales made by the Plans of Pinnacle West common stock $ 8,572,009 $ 7,459,282 $ 7,339,602
Aggregate cost of Pinnacle West common stock sold $ 5,391,080 $ 5,906,404 $ 6,646,030
Index Fund
----------
1996 1995 1994
---- ---- ----
Investments by the Plans in Trustee's Index Fund $ 13,147,476 $11,841,434 $ 5,251,808
Sales made by the Plans of Trustee's Index Fund $ 5,243,720 $ 3,804,238 $ 8,197,947
Aggregate cost of Trustee's Index Fund sold $ 3,266,052 $ 2,642,976 $ 6,312,498
-14-
Temporary Investments in Funds Managed by the Trustee
-----------------------------------------------------
1996 1995 1994
---- ---- ----
Investments by the Plans in temporary investment funds $ 46,840,277 $51,411,186 $44,448,076
Sales made by the Plans of temporary investment funds $ 33,293,798 $55,197,746 $48,088,440
The temporary investments are bought and sold at par.
-15-
Exhibits Filed.
- ---------------
Exhibit No. Description
- ----------- -----------
23.1 Independent Auditors' Consent
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 26, 1997 By Armando B. Flores
---------------------
Armando B. Flores
Chairman of the Committee
and Senior Vice President,
Human Resources and Corporate Services,
Arizona Public Service Company