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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) - AUGUST 3, 1998
TEXAS UTILITIES COMPANY
(Exact name of registrant as specified in its charter)
TEXAS 1-12833 75-2669310
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - (214) 812-4600
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FORWARD-LOOKING STATEMENTS
This report and other presentations made by Texas Utilities
Company (Texas Utilities) and its direct or indirect subsidiaries
(together, the Texas Utilities System) contain forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Although Texas Utilities and
such subsidiaries believe that in making any such statement their
expectations are based on reasonable assumptions, any such
statement involves uncertainties and is qualified in its entirety
by reference to the factors contained in the Forward-Looking
Statements section of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations of
Texas Utilities' most recent Annual Report on Form 10-K,
including the following factors, any of which could cause the
actual results of Texas Utilities and such subsidiaries to differ
materially from those projected in such forward-looking
statements: the competitive environment; local, state and
national regulatory initiatives that increase competition,
threaten cost and investment recovery and impact rate structures;
the economic climate and growth in the service territories of
service providers within the Texas Utilities System; the weather
and other natural phenomena; conditions in capital markets; and
changes in technology used and services offered by service
providers within the Texas Utilities System.
ITEM 5. Other Events
On August 4, 1998, Texas Utilities Company (Company)
announced its financial results for the three and twelve months
ended June 30, 1998. The Company's acquisition of
The Energy Group PLC (TEG), which was announced on March 2, 1998,
is expected to be completed as of Friday, August 7, 1998.
Substantially all of TEG's operations are conducted through its
subsidiary Eastern Group PLC (Eastern), one of the largest
integrated electricity and gas groups in the United Kingdom.
Pursuant to accounting guidelines for purchase accounting, the
Company's financial results for the three and twelve months ended
June 30, 1998 include results of operations of TEG from May 19,
1998, the date the Company's offer for TEG was declared
unconditional.
Earnings for the twelve months ended June 30, 1998,
excluding non-recurring items, were $2.81 per share ($2.80 per
share diluted) compared to $3.12 per share for the prior twelve-
month period.
A substantial portion of Eastern's earnings comes during
the first and fourth quarters of the year due to increased
generation during these periods of peak usage. The second and
third quarters are not large contributors to Eastern's earnings.
As a result of the acquisitions of TEG and ENSERCH Corporation
(ENSERCH), the Company's earnings pattern is expected to be strong
in the first and fourth quarters as well as the traditionally
strong third quarter. The second quarter is expected to contribute
to earnings at a reduced level.
Excluding the effect of non-recurring items and
adjustments, earnings for the second quarter of 1998 were 46
cents per share of common stock compared to 72 cents per share
for the second quarter of 1997. The quarter reflects the
seasonal nature of earnings of Eastern and ENSERCH, as noted above.
Earnings for the quarter and twelve months ended June 30,
1998, reflect continued strong core domestic electric sales
growth aided by weather driven electric sales, offset by the
seasonal results of operations of the Company's domestic gas
business, reduced revenues and increased depreciation at Texas
Utilities Electric Company (TU Electric) as a result of a two-
year rate settlement and the results of Eastern's operations
since acquisition, which are typically lower in the second
quarter than in other quarters.
Earnings for both the three and twelve months ended June 30,
1998 also reflect transaction expenses and adjustments related to
the TEG acquisition that were expensed in the second quarter. In
addition, earnings for the twelve months were affected by the
previously announced TU Electric fuel reconciliation disallowance
and related adjustments. Including these items, earnings were 33
cents per share for the quarter and $2.45 per share ($2.44 per
share diluted) for the twelve months ended June 30, 1998.
In accordance with TU Electric's rate settlement agreement,
TU Electric recorded increased depreciation on its nuclear power
plant - Comanche Peak Steam Electric Station - of approximately
$85 million in the second quarter. Of the $85 million of
accelerated depreciation, $46 million is related to the
reallocation of depreciation from transmission and distribution
assets to nuclear generation assets, which does not effect
earnings, and $39 million is related to the cap on TU Electric's
returns as a result of the settlement agreement. Total
accelerated depreciation of approximately $130 million for the
six months ended June 30, 1998, included an additional $45
million of accelerated depreciation in the first quarter related
to the reallocation described above.
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Operating revenues for the three and twelve months ended
June 30, 1998 were $3,236,444,000 and $10,600,160,000,
respectively, as compared to $1,588,485,000 and $6,478,004,000,
respectively, for the corresponding periods in 1997.
Consolidated net income for the three and twelve months ended
June 30, 1998 were $83,023,000 and $594,561,000, respectively, as
compared to $160,746,000 and $700,119,000, respectively, for the
corresponding periods in 1997.
On August 3, 1998, the Gracy Fund, L.P. filed suit in the
United States District Court for the Northern District of Texas
against EEX Corporation, formerly Enserch Exploration, Inc.
(EEX), the Company, David W. Biegler, Gary J. Junco, Erle Nye,
Thomas Hamilton and J. Phillip McCormick. The plaintiff seeks to
represent a class comprised of all purchasers of the common stock
of ENSERCH or EEX between January 26, 1996
and August 4, 1997, including former shareholders of ENSERCH who
received shares of EEX and the Company pursuant to the merger
agreement between ENSERCH and the Company dated April 13, 1996,
all EEX shareholders solicited pursuant to a proxy
statement/prospectus issued by EEX dated October 2, 1996 and all
ENSERCH shareholders solicited by a joint proxy
statement/prospectus issued by ENSERCH and the Company dated
September 23, 1996. The individual defendants are current or
former officers and/or directors of the Company or EEX. The
plaintiffs allege that the defendants participated in a
fraudulent scheme and course of business by disseminating
materially false and misleading statements regarding EEX's and
ENSERCH's business which caused the plaintiffs and other members
of the class to purchase EEX and ENSERCH stock at artificially
inflated prices. In such connection, the plaintiffs allege that
the defendants violated various provisions of the Securities Act
of 1933 and the Securities Exchange of 1934 (Exchange Act). No
amount of damages is specified. The Company is evaluating these
claims and is unable at this time to predict the outcome of this
proceeding, but it intends to vigorously defend this suit.
In addition, the Company has been informed that a suit has
been filed in the Southern District of Texas against EEX, ENSERCH
and DeGolyer & MacNaughton, independent petroleum consultants.
According to a press release issued by counsel for the plaintiff,
the suit has been filed on behalf of persons who acquired the
common stock of EEX between August 3 and August 5, 1997. The
press release indicates that the complaint asserts claims under
the federal securities laws, including the Exchange Act, and
alleges that EEX and certain of its officers and directors
engaged in material misrepresentations and omissions concerning
the amount of proved oil and gas reserves of certain EEX
properties. There is no indication in the press release of the
amount of damages sought. The Company is not aware that ENSERCH
has yet been served with the complaint in this action.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
TEXAS UTILITIES COMPANY
By: /s/ Robert S. Shapard
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Name: Robert S. Shapard
Title: Treasurer and Assistant
Secretary
Date: August 5, 1998
