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: July 15, 1997
Commission File Number 1-3423
ENRON CORP.
(Exact name of registrant as specified in its charter)
Oregon 76-0511381
(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>
Item 2. Acquisition or Disposition of Assets.
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 March
31, 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.
Pursuant to the Amended Merger Agreement, Portland
General Electric Company ("PGE") is now a wholly-owned
subsidiary of Enron. Prior to the merger and pursuant to
the Amended Merger Agreement, the PGC Board of Directors
nominated PGC Board members Jerome J. Meyer and Bruce G.
Willison to join Ken L. Harrison as members of the Enron
Board of Directors. Also pursuant to the terms of the
Amended Merger Agreement, Ken L. Harrison, previously
Chairman of the Board and Chief Executive Officer of PGC,
has assumed the office of Vice Chairman of the Board of
Enron.
PGC was an electric utility holding company organized
in 1985. PGE, now a wholly-owned subsidiary of Enron, was
PGC's principal operating subsidiary which accounted for
substantially all of PGC's assets, revenues and net income.
PGC was exempt from regulation under the Public Utility
Holding Company Act of 1935, except Section 9(a)(2) thereof
relating to the acquisition of securities of other public
utility companies. PGE, incorporated in 1930, is an
electric utility company engaged in the generation,
purchase, transmission, distribution and sale of electricity
in the State of Oregon. PGE also sells energy to wholesale
customers throughout the western United States. For further
discussion of PGE and its properties, see PGC's Annual
Report on Form 10-K for the year ended December 31, 1996,
which is incorporated by reference herein. PGE will
continue to operate its assets as an electric utility.
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.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of the Acquired Business.
Reference is made to the PGC consolidated
financial statements for the year ended December
31, 1996, which are included in PGC's Form 10-K
for the year ended December 31, 1996, incorporated
by reference herein (see Exhibit list, Item 7(c)).
(b) Pro Forma Financial Information.
The following unaudited pro forma combined balance
sheet as of March 31, 1997 and the unaudited pro
forma combined statements of income for the three
months ended March 31, 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 March 31,
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>
<TABLE>
ENRON CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 1997
(in millions)
<CAPTION>
PRO FORMA
ENRON PGC ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 255 $ 66 $ (19)(A) $ 294
(8)(B)
Trade and other receivables 1,802 183 1,985
Assets from price risk
management activities 657 -- 657
Other 559 62 621
Total Current Assets 3,273 311 (27) 3,557
Investments and Other Assets
Investments in and advances
to unconsolidated subsidiaries 1,685 -- 1,685
Assets from price risk
management activities 1,266 -- 1,266
Unamortized regulatory assets 55 877 932
Other 1,790 648 (11)(A) 2,427
Total Investments and
Other Assets 4,796 1,525 (11) 6,310
Property, Plant and Equipment, net 7,079 1,785 8,864
Goodwill -- -- 983 (C) 983
Total Assets $15,148 $3,621 $ 945 $19,714
Current Liabilities
Accounts payable and accrued
liabilities $ 1,608 $ 143 $ $ 1,751
Liabilities from price risk
management activities 699 -- 699
Other 475 259 17 (D) 751
Total Current Liabilities 2,782 402 17 3,201
Long-Term Debt 3,564 931 20 (E) 4,515
Deferred Credits and Other
Liabilities
Deferred income taxes 2,359 610 (70)(F) 2,899
Liabilities from price risk
management activities 531 -- 531
Trojan decommissioning and
transition obligation -- 355 355
Other 480 276 131 (D) 887
Total Deferred Credits
and Other Liabilities 3,370 1,241 61 4,672
Minority Interests 754 -- 754
Company-Obligated Preferred Stock
of Subsidiaries 764 30 1 (E) 795
Shareholders' Equity
Convertible preferred stock 137 -- 137
Common stock 26 193 1,670 (G) 3,768
1,879 (H)
Additional paid in capital 1,879 586 (586)(G) --
(1,879)(H)
Retained earnings 2,172 240 (232)(G) 2,172
(8)(B)
Other (300) (2) 2 (G) (300)
3,914 1,017 846 5,777
Total Liabilities and Shareholders'
Equity $15,148 $3,621 $ 945 $19,714
Common Stock outstanding as of
March 31, 1997 256 51 306
<FN>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
</TABLE>
<PAGE>
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
A. To reflect approximately $30 million for transaction
costs related to the PGC Merger incurred by Enron, of
which $11 million has been paid and deferred, including
Enron's required contribution to the PGC Foundation of
$10 million.
B. To reflect approximately $8 million for PGC transaction
costs related to the Mergers expected to be incurred
subsequent to March 31, 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>
<S> <C>
Consideration paid in excess of PGC's net
book value $854
Increase in long-term debt and preferred stock 21
Guaranteed obligation to PGE customers 148
Decrease in deferred income tax liability (70)
Transaction costs 30
$983
</TABLE>
For purposes of these Pro Forma Combined Financial
Statements, the assets and liabilities acquired reflect
their current net book value, 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.
Additionally, as a condition to the Oregon Public Utility
Commission's ("OPUC") approval of the Mergers, Enron will
file a disaggregation plan to separate PGC's generating
assets from its transmission and distribution assets
within 60 days after the effective date of the Mergers.
As a result, certain of PGC's operations may no longer be
regulated and therefore will not be subject to the
provisions of Statement of Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of
Regulation." Enron is preparing its disaggregation plan
and has not completed its estimate of the impact of such
plan on the recorded assets and liabilities of PGC. As of
March 31, 1997, PGC's net regulatory assets were $742
million.
As a result of the above matters, the 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.
Therefore, Enron is currently unable to estimate the fair
value of PGC's assets and liabilities and the ultimate
impact 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 incremental current borrowing rate.
E. To increase long-term debt and preferred stock 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.
G. 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 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 $1,017 million.
H. To reflect the reclassification of Enron's additional
paid in capital to common stock due to the Enron Common
Stock being without a par value upon completion of the
Reincorporation Merger.
<PAGE>
<TABLE>
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Three Months Ended March 31, 1997
(in millions, except per share amounts)
<CAPTION>
PRO FORMA
ENRON PGC ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Revenues $5,344 $ 368 $ $5,712
Costs and Expenses
Costs of gas and other products 4,632 157 4,789
Operating expenses 273 53 326
Oil and gas exploration expenses 22 -- 22
Depreciation, depletion and
amortization 124 39 7 (A) 170
Taxes, other than income taxes 36 15 51
5,087 264 7 5,358
Operating Income 257 104 (7) 354
Other Income and Deductions, net 172 25 1 (B) 198
Income before Interest, Minority
Interests and Income Taxes 429 129 (6) 552
Interest and Related Charges, net 70 19 2 (C) 91
Dividends on Preferred Stock of
Subsidiaries 15 1 16
Minority Interests 19 -- 19
Income Taxes 103 50 (1)(D) 152
Net Income 222 59 (7) 274
Preferred Stock Dividends 4 -- 4
Earnings on Common Stock $ 218 $ 59 $(7) $ 270
Earnings Per Share of Common Stock
Primary $ 0.88 $1.16 $ 0.91
Fully diluted $ 0.81 $1.16 $ 0.85
Average Number of Common Shares
Used in Primary Computation 248 51 298
<FN>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
</TABLE>
<PAGE>
<TABLE>
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Year Ended December 31, 1996
(in millions, except per share amounts)
<CAPTION>
PRO FORMA
ENRON PGC ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Revenues $13,289 $1,112 $ $14,401
Costs and Expenses
Costs of gas and other products 10,478 317 10,795
Operating expenses 1,421 253 1,674
Oil and gas exploration expenses 89 -- 89
Depreciation, depletion and
amortization 474 155 25 (A) 654
Taxes, other than income taxes 137 52 189
12,599 777 25 13,401
Operating Income 690 335 (25) 1,000
Other Income and Deductions, net 548 (21) 23 (B) 550
Income before Interest, Minority
Interests and Income Taxes 1,238 314 (2) 1,550
Interest and Related Charges, net 274 78 8 (C) 360
Dividends on Preferred Stock of
Subsidiaries 34 3 37
Minority Interests 75 -- 75
Income Taxes 271 103 7 (D) 381
Net Income 584 130 (17) 697
Preferred Stock Dividends 16 -- 16
Earnings on Common Stock $ 568 $ 130 $(17) $ 681
Earnings Per Share of Common Stock
Primary $ 2.31 $ 2.53 $ 2.30
Fully diluted $ 2.16 $ 2.53 $ 2.17
Average Number of Common Shares
Used in Primary Computation 246 51 296
<FN>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
</TABLE>
<PAGE>
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 three months ended March
31, 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
preferred stock 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 New Enron Common Stock for each
share of PGC Common Stock.
Item 7. Financial Statements and Exhibits (continued).
(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).
(i) Employment Agreement dated July 20,
1996 between Enron and Ken L. Harrison (Annex C
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:
(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.
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: July 15, 1997 By: RICHARD A. CAUSEY
Richard A. Causey
Senior Vice President
and Chief Accounting and
Information Officer
