<PAGE> 1
UNITED STATES 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: August 29, 1997
Commission File Number 1-13159
ENRON CORP.
(Exact name of registrant as specified in its charter)
Oregon 47-0255140
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Enron Building
1400 Smith Street
Houston, Texas 77002
- ------------------------------- -------------------------------
(Address of principal executive (Zip Code)
Offices)
(713) 853-6161
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 1, 1997, Enron Corp. acquired Portland General Corporation
("PGC") by merger pursuant to the Amended and Restated Agreement and Plan of
Merger by and among Enron Corp., PGC and Enron Oregon Corp., dated as of July
20, 1996 and amended and restated as of September 24, 1996 and as further
amended by the First Amendment dated April 14, 1997 (the "Amended Merger
Agreement"). Pursuant to the Amended Merger Agreement, on July 1, 1997, Enron
Corp., a Delaware corporation, merged with and into Enron Oregon Corp., an
Oregon corporation (the "Reincorporation Merger"), and the name of Enron Oregon
Corp. was changed to Enron Corp. ("Enron" or, the "Registrant"). Also on July
1, 1997, promptly following the Reincorporation Merger, PGC merged with and
into Enron (the "PGC Merger"), with Enron continuing in existence as the
surviving corporation (the Reincorporation Merger and the PGC Merger are
collectively referred to herein as the "Mergers"). Each share of PGC common
stock issued and outstanding (other than shares owned by PGC, Enron Corp.,
Enron Oregon Corp. or any of their respective subsidiaries, which were
canceled) was converted into 0.9825 shares of Enron common stock. In addition,
pursuant to the terms of the Amended Merger Agreement, Enron consolidated PGC's
debt (approximately $1.1 billion at June 30, 1997) and accounted for the
transaction on a purchase accounting basis. The amount of such consideration
was the result of an agreed negotiation between the two companies, and the
mergers were approved by each company's shareholders.
For a further discussion of PGC, PGE and the Amended Merger Agreement,
see the Amended Merger Agreement included as Annex A to the Proxy
Statement/Prospectus included in the Registrant's Registration Statement on
Form S-4, File No. 333-13791, in addition to the other documents listed in Item
7(c) hereto and incorporated by reference herein.
The following unaudited pro forma combined balance sheet as of June 30, 1997
and the unaudited pro forma combined statements of income for the six months
ended June 30, 1997 and the year ended December 31, 1996, give effect to the
Mergers based on the historical consolidated financial statements of Enron and
PGC under the assumptions and adjustments set forth in the accompanying notes
to the pro forma financial statements.
The unaudited pro forma combined balance sheet assumes the Mergers were
consummated on June 30, 1997. The unaudited pro forma combined statements of
income assume that the Mergers were consummated on January 1, 1996. Enron will
account for the transaction as a purchase for financial reporting purposes.
These unaudited pro forma combined financial statements should be read in
conjunction with the notes thereto and with the historical consolidated
financial statements and related notes thereto of Enron and PGC. The unaudited
pro forma combined financial statements have been prepared based upon
assumptions deemed appropriate by the management of Enron and PGC. These
unaudited pro forma combined financial statements have been prepared for
informational purposes only and are not necessarily indicative of the actual or
future results of operations or financial condition that would have been
achieved had the Mergers occurred at the dates assumed.
<PAGE> 3
ENRON CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
ENRON PGC ADJUSTMENTS COMBINED
-------- ------- --------------- --------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 211 $ 25 $ (19) (A) $ 209
(8) (B)
Trade and other receivables 1,165 169 1,334
Assets from price risk management activities 1,119 -- 1,119
Other 1,327 51 1,378
-------- ------- ------- --------
Total Current Assets 3,822 245 (27) 4,040
-------- ------- ------- --------
Investments and Other Assets
Investments in and advances to unconsolidated 1,927 -- 1,927
subsidiaries
Assets from price risk management activities 999 -- 999
Unamortized regulatory assets 258 856 1,114
Other 1,877 653 (14) (A) 2,516
-------- ------- ------- --------
Total Investments and Other Assets 5,061 1,509 (14) 6,556
-------- ------- ------- --------
Property, Plant and Equipment, net 7,202 1,792 8,994
Goodwill -- -- 1,091 (C) 1,091
-------- ------- ------- --------
Total Assets $ 16,085 $ 3,546 $ 1,050 $ 20,681
======== ======= ======= ========
Current Liabilities
Accounts payable and accrued liabilities $ 1,550 $ 149 $ $ 1,699
Liabilities from price risk management activities 1,006 -- 1,006
Other 724 246 17 (D) 987
-------- ------- ------- --------
Total Current Liabilities 3,280 395 17 3,692
-------- ------- ------- --------
Long-Term Debt 4,537 877 20 (E) 5,434
-------- ------- ------- --------
Deferred Credits and Other Liabilities
Deferred income taxes 1,980 642 (148) (F) 2,474
Liabilities from price risk management activities 581 -- 581
Trojan decommissioning and transition obligation -- 349 349
Other 542 228 131 (D) 1,092
191 (G)
-------- ------- ------- --------
Total Deferred Credits and Other Liabilities 3,103 1,219 174 4,496
-------- ------- ------- --------
Minority Interests 770 -- 770
-------- ------- ------- --------
Company-Obligated Preferred Securities of Subsidiaries 964 30 1 (E) 995
-------- ------- ------- --------
Shareholders' Equity
Convertible preferred stock 134 -- 134
Common stock 26 193 1,670 (H) 3,770
1,881 (I)
Additional paid in capital 1,881 586 (586) (H) --
(1,881) (I)
Retained earnings 1,692 247 (239) (H) 1,692
(8) (B)
Other (302) (1) 1 (H) (302)
-------- ------- ------- --------
3,431 1,025 838 5,294
-------- ------- ------- --------
Total Liabilities and Shareholders' Equity $ 16,085 $ 3,546 $ 1,050 $ 20,681
======== ======= ======= ========
Common Stock outstanding as of June 30, 1997 256 51 307
======== ======= ========
</TABLE>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
<PAGE> 4
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
A. To reflect approximately $33 million for transaction costs related to the
PGC Merger incurred by Enron, of which $14 million has been paid and
deferred, including Enron's required contribution to the Foundation of $10
million.
B. To reflect approximately $8 million for PGC transaction costs related to
the Mergers expected to be incurred subsequent to June 30, 1997.
C. To reflect the recognition of the purchase price allocation to goodwill.
The significant adjustments comprising the purchase price allocated to
goodwill are as follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Consideration paid in excess of PGC's net book value $ 846
Increase in long-term debt and preferred stock 21
Guaranteed obligation to PGE customers 148
Reserves for contractual, environmental and benefit obligations 191
Decrease in deferred income tax liability (148)
Transaction costs 33
-------
$ 1,091
-------
</TABLE>
As a condition to the Oregon Public Utility Commission's ("OPUC") approval
of the Mergers and consistent with Enron's intended use of PGC's assets,
Enron will file a disaggregation plan to separate PGC's generating assets
from its transmission and distribution assets. Enron has not completed its
plan or its estimate of the impact of such plan on the valuation of PGE's
generating assets in a competitive environment. For purposes of these Pro
Forma Combined Financial Statements, the assets and liabilities acquired
reflect their net book value as recorded by PGC, except as reflected above.
The allocation of the purchase price is preliminary because valuations and
other studies related to PGC's regulated and unregulated businesses have
not been finalized. The ultimate fair values of the assets and liabilities
of PGC's regulated and unregulated businesses may vary significantly from
the historical basis of the assets and liabilities recorded by PGC. Enron
is currently unable to estimate the impact of these matters on its purchase
price allocation to goodwill.
D. To reflect Enron's obligation to provide guaranteed merger-related
benefits to PGE's customers. The total undiscounted guaranteed obligation
of $141 million (which will accrue interest at above-market rates) has
been reflected at Enron's current incremental borrowing rate.
E. To increase long-term debt and company-obligated preferred securities of
subsidiary, PGE, by $20 million and $1 million, respectively, to reflect
fair value based on the quoted market prices for the same or similar issues
or on the current rates offered to PGC for debt of similar remaining
maturities.
F. To reduce deferred income tax liabilities for the tax effect of the basis
differences between the fair value of certain liabilities and PGC's
corresponding historical net book values. It is assumed there will be no
change in the tax basis of PGC's assets and liabilities. For purposes of
the pro forma calculations, a statutory income tax rate of 41% has been
utilized.
<PAGE> 5
G To reflect reserves related to valuing certain contractual obligations to
current market values, estimated environmental liabilities and certain
benefit related and other obligations. The determination of these reserves
is preliminary pending completion of Enron's final studies and valuations.
H. To reflect the issuance of approximately 50.5 million shares of Enron
Common Stock, without par value, for the PGC Common Stock issued and
outstanding as of the effective date of the PGC Merger (based upon the PGC
Conversion Ratio of 0.9825 shares of Enron Common Stock for each share of
PGC Common Stock) at $36.88 per share (reflecting the average share price
of Enron Common Stock for two trading days before and after the
announcement of the First Amendment) and to eliminate PGC common
shareholders' equity of $1,025 million.
I. To reflect the reclassification of Enron's additional paid in capital to
common stock due to Enron Common Stock being without a par value upon
completion of the Reincorporation Merger.
<PAGE> 6
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
ENRON PGC ADJUSTMENTS COMBINED
------- ----- ----------- --------
<S> <C> <C> <C>
Revenues $ 8,595 $ 677 $ $ 9,272
------- ----- ------ -------
Costs and Expenses
Costs of gas, electricity and other products 8,018 285 8,303
Operating expenses 581 115 696
Oil and gas exploration expenses 46 -- 46
Depreciation, depletion and amortization 249 78 14 (A) 341
Taxes, other than income taxes 69 29 98
------- ----- ------ -------
8,963 507 14 9,484
------- ----- ------ -------
Operating Income (Loss) (368) 170 (14) (212)
Other Income and Deductions, net 249 20 2 (B) 271
------- ----- ------ -------
Income before Interest, Minority Interests and
Income Taxes (119) 190 (12) 59
Interest and Related Charges, net 149 38 4 (C) 191
Dividends on Company-Obligated Preferred Securities
of Subsidiaries 31 1 32
Minority Interests 36 -- 36
Income Taxes (137) 67 (1) (D) (71)
------- ----- ------ -------
Net Income (Loss) (198) 84 (15) (129)
Preferred Stock Dividends 8 -- 8
------- ----- ------ -------
Earnings (Loss) on Common Stock $ (206) $ 84 $ (15) $ (137)
======= ===== ====== =======
Earnings (Loss) Per Share of Common Stock
Primary $ (0.83) $1.63 $ (0.46)
======= ===== =======
Fully diluted $ (0.83) $1.63 $ (0.46)
======= ===== =======
Average Number of Common Shares Used in Primary Computation
248 51 - 299 (E)
======= ===== ====== =======
</TABLE>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
<PAGE> 7
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
ENRON PGC ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C>
Revenues $13,289 $ 1,112 $ $ 14,401
------- ------- ------ --------
Costs and Expenses
Costs of gas, electricity and other products 10,478 317 10,795
Operating expenses 253 1,674
1,421
Oil and gas exploration expenses 89 -- 89
Depreciation, depletion and amortization 474 155 27 (A) 656
Taxes, other than income taxes 137 52 189
------- ------- ------ --------
12,599 777 27 13,403
------- ------- ------ --------
Operating Income 690 335 (27) 998
Other Income and Deductions, net 548 (21) 23 (B) 550
------- ------- ------ --------
Income before Interest, Minority Interests and
Income Taxes 1,238 314 (4) 1,548
Interest and Related Charges, net 274 78 8 (C) 360
Dividends on Company-Obligated Preferred Securities
of Subsidiaries 34 3 37
Minority Interests 75 -- 75
Income Taxes 271 103 7 (D) 381
------- ------- ------ --------
Net Income 584 130 (19) 695
Preferred Stock Dividends 16 -- 16
------- ------- ------ --------
Earnings on Common Stock $ 568 $ 130 $ (19) $ 679
======= ======= ====== ========
Earnings Per Share of Common Stock
Primary $ 2.31 $ 2.53 $ 2.29
======= ======= ========
Fully diluted $ 2.16 $ 2.53 $ 2.15
======= ======= ========
Average Number of Common Shares Used in Primary Computation 246 51 (1) 296 (E)
======= ======= ====== ========
</TABLE>
- ----------------
* Certain amounts have been reclassified to conform to Enron's presentation.
<PAGE> 8
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
The adjustments to the Unaudited Pro Forma Condensed Combined Statements of
Income do not give effect to any nonrecurring costs directly associated with
the Mergers that might be incurred within the next twelve months. The pro forma
financial data also do not give effect to any potential cost savings and
synergies that could result from the Mergers.
A. To reflect a 40-year amortization of the purchase price allocated to
goodwill.
B. To remove the effect of PGC's recognition of expenses related to the
Mergers in the six months ended June 30, 1997 and the year ended
December 31, 1996.
C. To reflect amortization of the excess of fair value over book value from
revaluation of PGC's long-term debt and company-obligated preferred
securities and interest expense related to Enron's obligation to provide
guaranteed merger-related benefits to PGE's customers.
D. To reflect income tax expense for the effects of the above items except
for item A. For purposes of the pro forma calculations, a statutory income
tax rate of 41% has been utilized.
E. The average number of common shares used in primary computation have been
determined using the PGC Conversion Ratio of 0.9825 shares of Enron
Common Stock for each share of PGC Common Stock.
<PAGE> 9
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following exhibits to the Form 8-K Current
Report are incorporated by reference to the filings indicated
below:
(i) The following documents filed with the Commission by Enron Corp.,
an Oregon corporation, are incorporated herein by reference:
(a) Form 8-B Registration Statement filed on July 2, 1997
pursuant to the Securities Exchange Act of 1934;
(b) Amended and Restated Agreement and Plan of Merger dated
as of July 20, 1996 and amended and restated as of
September 24, 1996 among Enron Corp., Enron Oregon Corp.,
and PGC, as amended by the First Amendment thereto dated
April 14, 1997 (Annex A to the Proxy Statement/Prospectus
included in the Registrant's Registration Statement on
Form S-4, File No. 333-13791).
(c) Restated Articles of Incorporation of Enron (Annex E to
the Proxy Statement/Prospectus included in the
Registrant's Registration Statement on Form S-4, File No.
333-13791).
(d) Articles of Merger of Enron Oregon Corp., an Oregon
corporation, and Enron Corp., a Delaware corporation
(Exhibit 3.02 to Registrant's Post-Effective Amendment
No. 1 to Form S-3 Registration Statement, File No.
33-60417).
(e) Articles of Merger of Enron Corp., an Oregon corporation,
and Portland General Corporation, an Oregon corporation
(Exhibit 3.03 to Registrant's Post-Effective Amendment
No. 1 to Form S-3 Registration Statement, File No.
33-60417).
(f) Bylaws of Enron (Exhibit 3.04 to the Registrant's
Post-Effective Amendment No. 1 to Form S-3 Registration
Statement, File No. 33-60417.
(g) Form of Series Designation for the Enron Convertible
Preferred Stock (Annex F to the Proxy
Statement/Prospectus included in the Registrant's
Registration Statement on Form S-4, File No. 333-13791).
(h) Form of Series Designation for the Enron 9.142% Preferred
Stock (Annex G to the Proxy Statement/Prospectus included
in the Registrant's Registration Statement on Form S-4,
File No. 333-13791).
(ii) The following documents filed by PGC with the Commission are
incorporated herein by reference:
<PAGE> 10
(a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10-K/A Amendment
No. 1; and
(b) Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
<PAGE> 11
SIGNATURES
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 hereunto duly authorized.
ENRON CORP.
Date: August 29, 1997 By: /s/ RICHARD A. CAUSEY
--------------------------
Richard A. Causey
Senior Vice President and Chief
Accounting and Information Officer
