<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994 Commission File No. 1-3183
ENSERCH CORPORATION
Incorporated - State of Texas I.R.S. Identification No. 75-0399066
ENSERCH Center, 300 South St. Paul, Dallas, Texas 75201
Registrant's telephone number, including Area Code: 214-651-8700
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
_____ _____
Number of shares of Common Stock of Registrant outstanding as of May 11,
1994: 66,761,042
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<CAPTION>
Three Months Ended
March 31
--------------------------
1994 1993
---- ----
(In thousands except
per share amounts)
<S> <C> <C>
Revenues
Natural gas transmission and distribution . . . $531,138 $498,380
Natural gas and oil exploration and production. 50,737 41,034
Natural gas liquids processing. . . . . . . . . 19,967 22,082
Power and other . . . . . . . . . . . . . . . . 48,202 48,120
Less intercompany revenues. . . . . . . . . . . (44,327) (16,067)
-------- --------
Total . . . . . . . . . . . . . . . . . . . 605,717 593,549
-------- --------
Costs and Expenses
Gas purchase. . . . . . . . . . . . . . . . . . 348,669 336,073
Operating expenses. . . . . . . . . . . . . . . 122,715 119,670
Depreciation and amortization . . . . . . . . . 34,253 29,948
Gross receipts and production taxes . . . . . . 17,596 19,066
Payroll, ad valorem and other taxes . . . . . . 9,642 9,065
-------- --------
Total . . . . . . . . . . . . . . . . . . . 532,875 513,822
-------- --------
Operating Income. . . . . . . . . . . . . . . . 72,842 79,727
Other Income (Expense) - Net. . . . . . . . . . (1,440) (882)
Interest Expense. . . . . . . . . . . . . . . . (16,813) (20,784)
-------- --------
Income before Income Taxes. . . . . . . . . . . 54,589 58,061
Income Taxes. . . . . . . . . . . . . . . . . . 18,663 19,785
-------- --------
Income from Continuing Operations . . . . . . . . 35,926 38,276
Loss from Discontinued Operations . . . . . . . . (66)
-------- --------
Net Income. . . . . . . . . . . . . . . . . . . 35,926 38,210
Provision for Dividends on Preferred Stock. . . 2,844 3,184
-------- --------
Earnings Applicable to Common Stock . . . . . . $ 33,082 $ 35,026
======== ========
Per Share of Common Stock
Income from continuing operations after provision
for dividends on preferred stock. . . . . . . $ .50 $ .53
Discontinued operations . . . . . . . . . . . .
-------- --------
Earnings applicable to common stock. . . $ .50 $ .53
======== ========
Cash dividends declared . . . . . . . . . . . . $ .05 $ .05
======== ========
Average Common and Dilutive Common
Equivalent Shares Outstanding . . . . . . . . 66,817 66,251
======== ========
Operating Income (Loss) of Major Businesses
(Excludes general corporate expenses)
Natural gas transmission and distribution . . $ 65,401 $ 74,182
Natural gas and oil exploration and production 9,597 3,745
Natural gas liquids processing. . . . . . . . (1,022) 3,341
Power and other . . . . . . . . . . . . . . . 1,382 1,006
<FN>
See accompanying Notes.
</TABLE>
1
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<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED STATEMENTS OF CONSOLIDATED
CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended
March 31
-----------------------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations . . . . . . . . . . . . . $ 35,926 $ 38,276
Adjustments to reconcile income to net cash flows
Depreciation and amortization. . . . . . . . . . . . . . . 34,253 29,948
Deferred income tax expense. . . . . . . . . . . . . . . . 18,322 19,253
Recoveries of gas purchase contract settlements - net. . . 17,053 22,562
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,046) 1,795
-------- --------
Net cash flows provided by continuing operating
activities before changes in current operating
assets and liabilities . . . . . . . . . . . . . . . . 104,508 111,834
Cash effect of changes in current operating assets
and liabilities. . . . . . . . . . . . . . . . . . . . . . (104,977) (6,597)
-------- --------
Net cash flows (used for) from operating activities. . . (469) 105,237
-------- --------
INVESTING ACTIVITIES
Property, plant and equipment additions. . . . . . . . . . . (53,200) (44,639)
Proceeds from disposition of significant assets. . . . . . . 7,825
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,681) (10,185)
Discontinued operations. . . . . . . . . . . . . . . . . . . (61,488) 4,095
-------- --------
Net cash flows used for investing activities . . . . . . (129,369) (42,904)
-------- --------
Net cash flows (used for) from operating
and investing activities . . . . . . . . . . . . . . . (129,838) 62,333
-------- --------
FINANCING ACTIVITIES
Change in commercial paper and other short-term borrowings . 152,550 (99,644)
Issuance of senior long-term debt. . . . . . . . . . . . . . 149,117
Retirement of senior long-term debt. . . . . . . . . . . . . (75,067) (7,126)
Retirement of Series D Preferred Stock . . . . . . . . . . . (75,000)
Other financing activities - net . . . . . . . . . . . . . . (25,017) 17,356
Issuance of common stock . . . . . . . . . . . . . . . . . . 1,746 2,832
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . (7,119) (6,495)
-------- --------
Net cash flows from (used for) financing activities. . . 121,210 (93,077)
-------- --------
Net Decrease in Cash and Equivalents . . . . . . . . . . . . . (8,628) (30,744)
Cash and Equivalents at Beginning of Period. . . . . . . . . . 19,203 48,553
-------- --------
Cash and Equivalents at End of Period. . . . . . . . . . . . . $ 10,575 $ 17,809
======== ========
<FN>
See accompanying Notes.
</TABLE>
2
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<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(March 31, 1994 Unaudited)
<CAPTION>
March 31 December 31
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents. . . . . . . . . . . . . . . . . . . $ 10,575 $ 19,203
Accounts receivable . . . . . . . . . . . . . . . . . . . 229,184 224,947
Gas stored underground. . . . . . . . . . . . . . . . . . 89,525 109,615
Gas purchase settlements recoverable from customers . . . 34,823 42,800
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 149,871 111,002
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . 513,978 507,567
---------- ----------
Investments. . . . . . . . . . . . . . . . . . . . . . . . . 81,770 86,208
---------- ----------
Property, Plant and Equipment (full-cost
method for gas and oil properties). . . . . . . . . . . . 3,639,778 3,594,056
Less accumulated depreciation and amortization. . . . . . 1,505,465 1,476,003
---------- ----------
Net property, plant and equipment. . . . . . . . . . 2,134,313 2,118,053
---------- ----------
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . 39,763 48,433
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . $2,769,824 $2,760,261
========== ==========
LIABILITIES
Current Liabilities
Commercial paper and other short-term borrowings. . . . . $ 184,050 $ 31,500
Current maturities of senior long-term debt . . . . . . . 10,600 10,600
Accounts payable and other accrued liabilities. . . . . . 373,403 442,395
Accrued interest. . . . . . . . . . . . . . . . . . . . . 26,256 34,021
Litigation judgment payable . . . . . . . . . . . . . . . 62,035
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 87,554 122,534
---------- ----------
Total current liabilities . . . . . . . . . . . . . . 681,863 703,085
---------- ----------
Senior Long-term Debt. . . . . . . . . . . . . . . . . . . . 704,082 628,227
---------- ----------
Convertible Subordinated Debentures. . . . . . . . . . . . . 90,750 90,750
---------- ----------
Deferred Income Taxes. . . . . . . . . . . . . . . . . . . . 337,075 321,364
---------- ----------
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . 177,377 195,117
---------- ----------
Shareholders' Equity
Adjustable rate preferred stock . . . . . . . . . . . . . 100,000 175,000
---------- ----------
Common shareholders' equity
Common stock (100,000 shares authorized;
66,761 and 66,656 shares outstanding). . . . . . . . 297,087 296,619
Paid in capital . . . . . . . . . . . . . . . . . . . . 340,392 339,115
Retained earnings . . . . . . . . . . . . . . . . . . . 41,198 10,984
---------- ----------
Common shareholders' equity . . . . . . . . . . . . . 678,677 646,718
---------- ----------
Shareholders' equity. . . . . . . . . . . . . . . . 778,677 821,718
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . $2,769,824 $2,760,261
========== ==========
<FN>
See accompanying Notes.
</TABLE>
3
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Notes to Financial Statements
1. Prior period results have been restated to reflect the engineering and
construction business segment as a discontinued operation.
2. Earnings per share applicable to common stock are based on the weighted
average number of common shares, including common equivalent shares when
dilutive, outstanding during the periods. Common equivalent shares
consist of those shares issuable upon the assumed exercise of stock
options under the treasury stock method. The 6 3/8% Convertible
Subordinated Debentures were not common stock equivalents. Fully diluted
earnings per share are not presented since the assumed exercise of stock
options and conversion of debentures would not be dilutive.
3. In March 1994, the Corporation filed a shelf registration statement with
the Securities and Exchange Commission for the sale from time to time of
up to $450 million of its securities, which can be senior or subordinated
debt securities, equity securities or preferred shares of a special
purpose subsidiary.
In April 1994, the Corporation sold three million Depositary Preferred
Shares, Series F, representing $75 million of Adjustable Rate Preferred
Stock, Series F. Each depositary share (stated value $25 per share)
represents 1/40th ownership in one share of the Corporations' Adjustable
Rate Preferred Stock, Series F. Dividend rates are determined quarterly,
in advance, based on the Applicable Rate (being the highest of the three
month U. S. Treasury bill rate, the U. S. Treasury ten-year constant
maturity rate and the U. S. Treasury thirty-year constant maturity rate)
multiplied by 87%. However, the dividend rate for any dividend period
will not be less than 4.50% nor greater than 10.50% per annum. The
dividend rate will be 6.375% through July 31, 1994. Net proceeds were
used to repay a maturing bank loan of $29.3 million with an interest rate
of 8.7% and to reduce commercial paper borrowings.
4. In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair statement of the results of
operations for the interim periods included herein have been made.
4
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INDEPENDENT ACCOUNTANTS' REPORT
ENSERCH Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
ENSERCH Corporation and subsidiary companies as of March 31, 1994, and the
related condensed statements of consolidated income and cash flows for the
three months ended March 31, 1994 and 1993. These financial statements are
the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ENSERCH Corporation and
subsidiary companies as of December 31, 1993, and the related statements of
consolidated income, cash flows and common shareholders' equity for the year
then ended (not presented herein); and in our report dated February 7, 1994,
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1993, is fairly stated
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
DELOITTE & TOUCHE
Dallas, Texas
April 25, 1994
5
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<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
A significant improvement in sales volumes and prices for natural gas
partially offset the negative effects of warmer winter weather and lower oil and
liquids prices. ENSERCH Corporation's earnings applicable to common stock were
$.50 per share for the first quarter of 1994, compared with $.53 per share for
the year-ago period. Income from continuing operations for the first quarter of
1994 was $36 million, compared with $38 million for the first quarter of 1993.
Operating income for the first three months of 1994 was $73 million versus
$80 million for the like period a year ago. First-quarter revenues were
$606 million, compared with $594 million for the year-earlier period.
First-quarter 1994 interest expense of $17 million was 19% below the first-
quarter 1993 expense as a result of reduced debt and the restructuring of long-
term debt at lower rates. The provision for preferred dividends of $2.8 million
was 11% lower than in the prior-year first quarter.
NATURAL GAS TRANSMISSION AND DISTRIBUTION
Transmission and Distribution operations contributed operating income of
$65 million for the first quarter of 1994, a $9 million decline from the prior
year. Although winter weather in much of the nation was severely cold, first-
quarter heating weather in Lone Star Gas Company's service area was 12% below
normal and 5% less than last year. Consequently, residential and commercial
sales volumes were down 4% from the year-earlier period. Overall, however,
total system throughput improved, increasing 27% to 206 billion cubic feet
(Bcf), as gas transportation volumes rose nearly 45% above the 1993 first-
quarter level. New investment to increase pipeline capacity contributed to the
sharp increases in transportation and throughput volumes. Sales volumes for
nonregulated affiliate Enserch Gas Company increased 43% due to higher sales off
of the Lone Star system.
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION
Operating income from Exploration and Production operations was
$9.6 million, more than 2 1/2 times the year-earlier period, reflecting
significantly improved prices and sales volumes for natural gas but lower oil
prices. The average natural-gas sales price of $2.31 per thousand cubic feet
(Mcf) rose 18% from $1.95 per Mcf a year ago. Natural-gas sales volumes were
18 Bcf, a 22% increase from the year-earlier quarter, primarily due to pro-
duction from Mississippi Canyon Block 441, which went on stream after the first
quarter of 1993. Improved production from several East Texas gas fields, the
6
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<PAGE>
result of production optimization and successful in-fill drilling and completion
work in late 1993 and early 1994, also contributed to the higher sales volumes.
Oil sales volumes of 514 thousand barrels were slightly lower than the
year-earlier period, and the average price per barrel of oil declined 20% to
$14.80 from $18.58.
Average production cost per million British thermal units (MMBtu) decreased
to $.54 in 1994 from $.61 in 1993, as fixed costs per unit of production
declined due to a higher level of gas production. The overall rate of amortiza-
tion for the first quarter of 1994 was $.98 per MMBtu produced, slightly higher
than the year-earlier period, principally due to costs of additional offshore
projects and increased development costs associated with older East Texas
fields. At March 31, 1994, the value of ENSERCH's gas and oil properties, as
determined by the method prescribed by the Securities and Exchange Commission,
exceeded the net capitalized cost of such properties by approximately $50 mil-
lion. Product prices are subject to seasonal and other fluctuations.
NATURAL GAS LIQUIDS PROCESSING
Natural gas liquids (NGL) processing activities had an operating loss of
$1 million for the first quarter versus operating income of $3.3 million in the
prior-year period. Higher prices for natural gas, the feedstock used in NGL
production, and continued depressed NGL sales prices caused already weak margins
to decline further. However, NGL prices are showing signs of strengthening due
to more stable oil prices and a modest increase in demand. NGL processing sales
volumes for the first quarter increased slightly to 1.5 million barrels, with
the average sales price per barrel declining 20% to $10.71. In early 1994,
ENSERCH expanded its system's capabilities by acquiring a 150-mile gas gathering
system in central Texas, including 10 compressor stations and related gas-
purchase and sales contracts representing approximately 3 million cubic feet
(MMcf) a day of high-quality gas, which will be routed to one of ENSERCH's
processing plants located near the gathering system.
POWER AND OTHER
ENSERCH's power and other activities, comprised of Enserch Development
Corporation, Lone Star Energy Company and Enserch Environmental Corporation, had
first-quarter operating income of $1.4 million, compared with $1.0 million in
the same period a year ago. Enserch Environmental Corporation, which was
retained when the principal operating assets of Ebasco were sold in late 1993,
had operating income of $1.9 million for the 1994 first quarter, well above the
$1.3 million for the 1993 first quarter. During the first quarter, contract
management negotiations were completed on a $460 million Total Environmental
Restoration Contract, which was awarded in late 1993 by the New England Division
of the U. S. Army Corps of Engineers. Under the four-year contract, an Enserch
Environmental-led team will perform Superfund site remediation services
throughout New England, with primary emphasis on civilian locations.
7
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CASH FLOWS AND FINANCING ACTIVITIES
Operating activities, before the effects of changes in operating assets and
liabilities, provided cash flows of $105 million in the first quarter of 1994.
The $7 million decrease from the prior year's first quarter was primarily due to
lower recoveries of gas-purchase contract settlements. The cash requirement due
to changes in operating assets and liabilities increased $98 million from the
year-earlier period, principally due to the payment in the first quarter of 1994
of the $62 million judgment in litigation, which had been accrued in 1993.
Investing activities required net cash flows of $129 million, including a
$61 million requirement for discontinued operations. The requirement for
discontinued operations included payments in 1994 related to accounts
receivables financings in place in December 1993, payment of expenses accrued
upon the sale of the assets of discontinued operations and accrued tax payments,
principally for state income taxes. Property additions of $53 million were up
$9 million from the 1993 period, with increases of $4 million for transmis-
sion and distribution, $2 million for exploration and production and $3 mil-
lion for natural gas liquids processing.
Planned property, plant and equipment additions for 1994 total
$238 million, including $116 million designated for transmission and
distribution, $116 million for exploration and production, and $6 million for
all other businesses and general requirements. The planned expenditures are
expected to be funded from internal cash flow and external financings as
required. In addition, construction of the offshore platform and related facil-
ities associated with the Garden Banks Block 388 project in the Gulf of Mexico
is being financed through an operating lease arrangement.
The net cash of $130 million required by operating and investing activities
for the 1994 first quarter was financed principally by commercial paper
borrowings. In February 1994, the Corporation issued $150 million of
6 3/8% Notes due 2004 in a public offering. The net proceeds of this issue were
used in March 1994 for the early redemption, including call premiums of
$1.4 million, of all of the $74 million principal amount of outstanding sinking
fund debentures and to fully redeem the $75 million of Series D Adjustable Rate
Preferred Stock at par. The sinking fund debentures had a weighted average
interest rate of 8.5%, and the dividend on the Series D Preferred Stock, which
was reset quarterly, had a minimum per annum rate of 7.5% and a maximum rate of
15.5%.
In April 1994, the Corporation sold $75 million of Adjustable Rate
Preferred Stock, Series F, in a public offering. The Series F Preferred Stock
has a minimum per annum dividend rate of 4.5%, a maximum rate of 10.5% and is
reset quarterly at 87% of the highest of the U. S. Treasury bill rate, the U. S.
Treasury ten-year constant maturity rate and the U. S. Treasury thirty-year
constant maturity rate. The initial dividend rate, which extends through
July 31, 1994, is 6 3/8%. Net proceeds from the sale were used to repay
$29 million of maturing senior long-term debt, with the remainder used to reduce
commercial paper borrowings.
8
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<PAGE>
Senior long-term and convertible debt, including current maturities, as a
percentage of total capitalization was 50.8% at March 31, 1994. The proforma
March 31, 1994 debt ratio, adjusted for the effect of the sale of the Series F
Preferred Stock in mid-April, was 47.6% of total capitalization, compared with
47.0% at the end of 1993. At March 31, 1994, the current ratio was .75, com-
pared with .72 at December 31, 1993.
At March 31, 1994, the Corporation had short- and interim-term bank lines
totaling $650 million, which were all unused.
GAS PURCHASE CONTRACTS
Assuming normal weather conditions, it is expected that normal gas
purchases will substantially satisfy purchase obligations for the year 1994 and
thereafter. At March 31, 1994, the approximate amount of unsettled gas-purchase
contract claims asserted by suppliers, as well as claims that are probable of
assertion, was $80 million. Of this total, approximately $70 million relates to
a claim filed in 1993, primarily related to asserted obligations for purchases
for early through mid-1980s. The possibility exists that additional gas-
purchase contract claims might be asserted by other claimants. Lone Star
expects to resolve the foregoing claims at substantially less than the claimed
amounts.
At March 31, 1994, there was an unrecovered balance of gas-purchase
contract settlements of $94 million, including $57 million that represented
prepayments for gas expected to be recouped under contracts covering future gas
purchases. The remaining $37 million represented amounts expected to be
recovered from customers under the existing gas cost recovery provisions. Lone
Star expects to recoup or recover the remaining balances of gas settlement
payments made to date, as well as future payments to be made in settlement of
remaining claims.
A summary of transactions related to unrecovered gas settlement payments
during the first quarter of 1994 is as follows:
<TABLE>
<CAPTION>
Recoupable Recoverable
Prepayments Settlements Total
----------- ----------- -----
(In millions)
<S> <C> <C> <C>
December 31, 1993 $ 63 $ 48 $ 111
Gas-purchase contract settlements - - -
Recouped or recovered (6) (11) (17)
----- ----- -----
March 31, 1994 $ 57 $ 37 $ 94
===== ===== =====
</TABLE>
9
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DRILLING PROGRAM
The Garden Banks Block 388 project remains on schedule, with initial
production anticipated by mid-1995. The final major contract for the conversion
of the semisubmersible drilling rig to a floating drilling/production facility
was awarded in January. Installation of the offshore facilities, consisting of
the subsea template, gathering and sales pipelines and shallow-water facilities,
will begin in the second quarter.
During the first quarter, a confirmation well on Green Canyon Block 254
was spudded, which is an offset to a discovery well drilled in late 1991 that
encountered 11 sands with a combined thickness of more than 360 feet of oil
pay. The well will test the downdip extent of the pay sands. ENSERCH holds a
25% working interest in this block and a similar working interest in three
adjacent blocks.
ENSERCH continued developing gas reserves in East Texas. In the
Freestone field, three new wells yielded initial deliveries of slightly over
2.0 MMcf of gas per day each. A fourth well is being drilled.
In north central Texas, four wells have been completed this year in the
Boonsville field, with daily production ranging from 0.4 MMcf to 1.0 MMcf of
gas. Additional wells in the field are in various stages of drilling or com-
pletion. A well completed in the Fashing field in South Texas flowed at a daily
rate of 2.7 MMcf of gas.
10
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<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Natural Gas Transmission and Distribution Operating Data (Unaudited)
<CAPTION>
Three Months Ended
March 31
--------------------------
1994 1993
---- ----
<S> <C> <C>
Operating Income (in millions) . . . . . . . . . $ 65.4 $ 74.2
====== ======
Natural Gas Sales Revenues by Customer (in millions):
Residential & commercial . . . . . . . . . . . $321.7 $345.1
Industrial & electric generation . . . . . . . 83.6 80.8
Pipeline & other . . . . . . . . . . . . . . . 107.6 56.0
------ ------
Total gas sales revenues. . . . . . . . . $512.9 $481.9
====== ======
Natural Gas Revenues (in millions):
Lone Star Gas Company sales. . . . . . . . . . $356.7 $383.4
Enserch Gas Company sales. . . . . . . . . . . 156.2 98.5
------ ------
Total gas sales revenues. . . . . . . . . 512.9 481.9
Gas transportation . . . . . . . . . . . . . . 14.1 12.0
------ ------
Total natural gas revenues. . . . . . . . 527.0 493.9
Other. . . . . . . . . . . . . . . . . . . . . 4.1 4.5
------ ------
Total revenues. . . . . . . . . . . . . . $531.1 $498.4
====== ======
Natural Gas Sales Volumes by Customer (Bcf):
Residential & commercial . . . . . . . . . . . 58.4 61.1
Industrial & electric generation . . . . . . . 30.7 32.2
Pipeline & other . . . . . . . . . . . . . . . 49.3 27.7
------ ------
Total gas sales volumes . . . . . . . . . 138.4 121.0
====== ======
Natural Gas Volumes (Bcf):
Lone Star Gas Company sales. . . . . . . . . . 67.0 71.2
Enserch Gas Company sales. . . . . . . . . . . 71.4 49.8
------ ------
Total gas sales volumes . . . . . . . . . 138.4 121.0
====== ======
Gas transportation:
For associated . . . . . . . . . . . . . . . 38.1 32.1
For others (nonassociated) . . . . . . . . . 67.7 41.1
------ ------
Total . . . . . . . . . . . . . . . . . . 105.8 73.2
====== ======
Lone Star system throughput . . . . . . . . . 174.5 147.4
Off-system sales (1) . . . . . . . . . . . . . 31.6 14.7
------ ------
Total throughput (2) . . . . . . . . . . 206.1 162.1
====== ======
Natural Gas Sales Revenues (per Mcf):
Lone Star Gas Company. . . . . . . . . . . . . $ 5.32 $ 5.38
Enserch Gas Company. . . . . . . . . . . . . . 2.19 1.98
Natural Gas Purchase Cost (per Mcf):
Lone Star Gas Company. . . . . . . . . . . . . $ 3.23 $ 3.38
Enserch Gas Company. . . . . . . . . . . . . . 2.12 1.84
Gas Transportation Rate (per Mcf). . . . . . . . $ .13 $ .16
<FN>
(1) Includes off-system sales never entering Lone Star's pipeline system.
(2) Total throughput is the sum of gas sales volumes and gas transportation volumes for others. Gas
transported by Lone Star for Enserch Gas Company is reported in both sales and associated transportation.
</TABLE>
11
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Natural Gas and Oil Exploration and Production Operating Data (Unaudited)
<CAPTION>
Three Months Ended
March 31
-------------------------
1994 1993
------ ------
<S> <C> <C>
Operating Income (in millions) . . . . . . . . . . . . $ 9.6 $ 3.8
====== ======
Revenues (in millions)
Natural gas (1). . . . . . . . . . . . . . . . . . . $ 42.5 $ 29.3
Oil and condensate . . . . . . . . . . . . . . . . . 7.6 10.0
Natural gas liquids. . . . . . . . . . . . . . . . . .5 1.2
Other revenues - net . . . . . . . . . . . . . . . . .1 .5
------ ------
Total revenues. . . . . . . . . . . . . . . . . . $ 50.7 $ 41.0
====== ======
Sales Volumes
Natural gas (MMcf) (1) . . . . . . . . . . . . . . . 18,370 15,051
Oil and condensate (MBbl). . . . . . . . . . . . . . 514 538
Average Sales Price
Natural gas (per Mcf). . . . . . . . . . . . . . . . $ 2.31 $ 1.95
Oil and condensate (per Bbl) . . . . . . . . . . . . 14.80 18.58
Net Wells
Drilled. . . . . . . . . . . . . . . . . . . . . . . 16 16
Productive . . . . . . . . . . . . . . . . . . . . . 8 14
Data in Equivalent Energy Content (MMBtu) (2)
Average sales price. . . . . . . . . . . . . . . . . $ 2.26 $ 2.11
Average production costs (3) . . . . . . . . . . . . .54 .61
Amortization rate. . . . . . . . . . . . . . . . . . .98 .97
<FN>
(1) Excludes products purchased for resale. Includes affiliated revenues and volumes.
(2) For the purpose of providing a common unit of measure, natural gas, oil and natural gas liquids are
converted to an approximate equivalent unit on the basis of relative energy content: one Mcf of natural
gas equals 1.05 MMBtu, one barrel of oil equals 5.6 MMBtu and one barrel of natural gas liquids equals
4.2 MMBtu.
(3) Average production costs declined due to the impact of a higher level of gas production on fixed costs.
</TABLE>
12
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
Natural Gas Liquids Processing Operating Data (Unaudited)
<CAPTION>
Three Months Ended
March 31
-------------------------
1994 1993
------ ------
<S> <C> <C>
Operating Income (Loss) (in millions). . . . . . . . . $ (1.0) $ 3.3
====== ======
Revenues (in millions)
Natural gas liquids (1). . . . . . . . . . . . . . . $ 16.0 $ 19.7
Other. . . . . . . . . . . . . . . . . . . . . . . . 4.0 2.4
------ ------
Total . . . . . . . . . . . . . . . . . . . . . . $ 20.0 $ 22.1
====== ======
Natural Gas Liquids
Sales volumes (MBbl)(1). . . . . . . . . . . . . . . 1,492 1,466
Average sales price (per Bbl). . . . . . . . . . . . $10.71 $13.43
<FN>
(1) Excludes products purchased for resale.
</TABLE>
13
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on May 10, 1994.
(b) Not applicable.
(c) Amendment of the ENSERCH Corporation 1991 Stock Option Plan was
submitted to the shareholders for approval, all as more fully
described in the Proxy Statement of the Corporation dated
March 30, 1994, and Appendix B thereto, as filed with the
Securities and Exchange Commission, which Proxy Statement and
Appendix are incorporated herein by reference. The number of
shares voted for the amendment of such Plan was 53,195,833; the
number of shares voted against the amendment of such Plan was
3,490,999; the number of shares withheld was 1,402,470; and
broker non-vote was one share.
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. 10 -ENSERCH Corporation 1991 Stock Incentive
Plan (formerly ENSERCH Corporation 1991
Stock Option Plan), as amended.
Exhibit No. 15 -Letter of Deloitte & Touche dated
May 13, 1994, regarding unaudited
interim financial statements.
(b) Reports on Form 8-K
Current Report on Form 8-K dated January 18, 1994,
was filed on January 18, 1994 (News release
regarding sale of 6 3/8% Notes Due 2004).
Current Report on Form 8-K dated February 9, 1994,
was filed on February 9, 1994 (News release
regarding year-end earnings).
Current Report on Form 8-K dated March 3, 1994, was
filed on March 3, 1994 (Year-end financial
statements).
14
<PAGE>
<PAGE>
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 thereunto duly authorized.
ENSERCH Corporation
(Registrant)
Date: May 13, 1994 By /s/ S. R. Singer
---------------------------
S. R. Singer, Senior Vice
President, Finance and
Corporate Development, Chief
Financial Officer
Date: May 13, 1994 By /s/ J. W. Pinkerton
---------------------------
J. W. Pinkerton,
Vice President and Controller,
Chief Accounting Officer
15
EXHIBIT 10
ENSERCH CORPORATION
1991 STOCK INCENTIVE PLAN
ARTICLE I. PURPOSE
The purpose of the 1991 Stock Incentive Plan (the "Plan") is
to promote the long-term success of ENSERCH Corporation (the
"Company," which includes its Division, subsidiaries and
affiliates) by providing a means through which the Company can
attract and retain key employees who can contribute materially to
that success. Such purpose shall be accomplished under the Plan by
the (a) grants of stock Options ("Options") to purchase shares of
the Common Stock of ENSERCH Corporation ("Shares"), (b) awards of
Restricted Stock ("Restricted Stock"), or (c) a combination of
both.
ARTICLE II. EFFECTIVE DATE
The Plan became effective on February 12, 1991, (the
"Effective Date") and was approved by shareholders at the 1991
Annual Meeting of Shareholders of ENSERCH Corporation.
ARTICLE III. ADMINISTRATION
The Board of Directors of ENSERCH Corporation (the "Board"),
acting through the Compensation Committee (the "Committee"), shall
have the sole responsibility for the administration of the Plan.
The Committee shall establish any Administrative Guidelines
necessary or advisable for the administration of the Plan. The
Committee shall have the authority to amend or rescind the
Administrative Guidelines and shall have full authority with regard
to the interpretation of the Administrative Guidelines or any other
matters relating to the Plan. The Committee shall act by vote or
consent of a majority of its members. All acts, determinations and
decisions of the Committee shall be final and conclusive as to the
parties concerned unless otherwise determined by the Board.
ARTICLE IV. ELIGIBILITY
(a) Employees: Except as provided in Subparagraph (b) below
with respect to non-employee directors, Grants of Options and
awards of Restricted Stock under the Plan shall be confined to
those persons whom the Committee, in its sole discretion,
determines to be key employees of the Company (including officers
and directors who are also employees of the Company) who devote
substantially their full time to the Company and who can make a
meaningful contribution to the Company's success. No Option shall
be granted to any member of the Committee. The Committee shall,
from time to time and in its sole discretion, select from such
eligible employees, those to whom Options shall be granted and
awards of Restricted Stock shall be made and shall determine the
number of shares to be subject to each Option or award of
Restricted Stock.
<PAGE>
<PAGE>
(b) Non-employee Directors: Each current and subsequently
elected non-employee director who has completed at least one full
year of service (defined to mean service as a non-employee director
from one Annual Meeting of Shareholders to the next succeeding
Annual Meeting of Shareholders and referred to hereinafter as "Full
Year of Service") and who has less than ten Full Years of Service
as a non-employee director on May 9, 1994, shall receive an award
of Restricted Stock following each Full Year of Service. The
maximum number of awards of Restricted Stock that a non-employee
director may receive is ten, reduced by the number of Full Years of
Service completed as a non-employee director on May 9, 1994;
provided, however, that in computing such maximum number of awards
there shall not be counted any annual award that is forfeited
pursuant to Article X(d) hereof. All such awards of Restricted
Stock to non-employee directors shall be made only in accordance
with the formula for such awards as set forth in Article X(d)
hereof.
ARTICLE V. RESERVE OF SHARES
(a) A total of 2,000,000 Shares is the maximum number of
Shares reserved for the Plan, subject to the adjustments authorized
by Subparagraphs (b) and (c) below. Shares available under the
Plan for grants of Options or awards of Restricted Stock may
consist either in whole or in part of authorized but unissued
Shares or Shares held in the treasury of ENSERCH Corporation.
(b) The number of Shares held in reserve for the Plan, the
number of Shares subject to Option that may be granted to any
individual in any calendar year, the number of shares of Restricted
Stock that may be awarded to an Executive Officer with respect to
all performance periods beginning in any calendar year, the number
of Shares and the Option price for Shares covered by each
outstanding Option, and the number of Shares covered by each
outstanding award of Restricted Stock shall be proportionately
adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of the issued
Shares and may, in the absolute discretion of the Board, be
similarly adjusted for any other capital adjustment (including the
reclassification of Shares or recapitalization or reorganization of
the Company), the payment of a stock dividend or the distribution
to holders of the Shares of rights, warrants, assets or evidences
of indebtedness.
(c) If an Option as to any Shares expires, terminates, ceases
to be exercisable or is surrendered before being exercised in full,
or an award of Restricted Stock is forfeited (where the forfeiting
participant received no benefits of ownership), the number of
Shares that were subject to the Option but that were not
transferred pursuant to the Option or the number of Shares covered
by the forfeited award of Restricted Stock shall, unless the Plan
shall have been terminated, again be available for the granting of
2
<PAGE>
<PAGE>
Options or the award of Restricted Stock, subject to the aggrega
maximum stated in Subparagraph (a) above.
ARTICLE VI. TERMS AND CONDITIONS OF OPTIONS
One or more Options can be granted to any employee eligible to
receive such a grant under Article IV. The maximum number of
Shares subject of Options that can be granted to any one individual
during any calendar year shall not exceed 80,000 shares (subject to
adjustment pursuant to Article V hereof). Each Option granted
pursuant to the Plan shall be evidenced by a stock option agreement
(the "Agreement") between the Company and the employee to whom the
Option is granted (the "Optionee"), which Agreements need not be
identical to each other but shall comply with and be subject to the
following terms and conditions:
(a) Option Price: The Option price per Share shall be set at
the date of grant ("Date of Grant") by the Committee but shall in
no instance be less than the Fair Market Value on the date the
Option is granted. As used in the Plan (unless a different method
of calculation is required by applicable law), "Fair Market Value"
on any date shall mean (i) the average of the high and low prices
per share of the Shares as reported in the New York Stock Exchange
Composite Transactions Report (or any other consolidated
transactions reporting system which subsequently may replace such
Composite Transactions Report) (the "Consolidated Tape") for the
New York Stock Exchange (the "NYSE") on the date as of which the
determination is being made or, if there are no sales on such date,
in accordance with applicable Internal Revenue Service Regulations
relating to the determination of fair market value of stock options
or (ii) in the event that the Shares are not listed for trading on
the NYSE, an amount determined in accordance with standards adopted
by the Committee.
(b) Duration of Options: Unless Subparagraph (f) of this
Article VI applies, each Option granted under the Plan shall expire
and all rights to purchase Shares pursuant thereto shall cease on
the tenth anniversary of the Date of Grant of the Option (the
"Expiration Date").
(c) Vesting of Options: Each Option granted hereunder may
only be exercised to the extent that the Optionee is vested in such
Option. An Optionee shall vest separately in each Option granted
hereunder in accordance with a schedule determined by the
Committee, in its sole discretion, which will be incorporated in
the Agreement. Unless otherwise determined by the Committee, each
Agreement will provide that the Option vests in accordance with the
following schedule:
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Number of years the Optionee has remained
in the employ of the Company or Subsidiary Extent to which the
following the grant of the Option Option is vested
<S> <C>
Under one. . . . . . . . . . . . . . . . . . . . . . . . 0%
At least one but less than two . . . . . . . . . . . . . 25%
At least two but less than three . . . . . . . . . . . . 50%
At least three but less than four. . . . . . . . . . . . 75%
Four or more . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
Anything contained in this Subparagraph to the contrary
notwithstanding, an Optionee shall become fully (100%) vested in
each of his or her Options upon his or her termination of
employment with the Company for reasons of death, Disability or
Retirement at or after age 60, upon the sale of a Subsidiary of the
Company to an unaffiliated company such that he or she no longer
remains in the employ of the Company or, if in the sole discretion
of the Committee, the Committee determines that acceleration of the
Option vesting schedule would be desirable for the Company.
(d) Merger, Consolidation, Etc.: In the event that ENSERCH
Corporation shall, pursuant to action by its Board, at any time
propose to merge into, consolidate with or sell or otherwise
transfer all or substantially all of its assets to another
corporation and provision is not made pursuant to the terms of such
transaction for the assumption by the surviving, resulting or
acquiring corporation of outstanding Options, or for the
substitution of new Options with substantially equivalent benefit
therefor, each outstanding Option shall become fully (100%) vested.
The Committee shall advise each Optionee, in writing, of the manner
and terms under which such fully vested Options shall be exercised.
(e) Exercise of Options:
(i) Unless otherwise prohibited by Subparagraph (f) or
the terms of this Plan, an Optionee may exercise, in whole or
in part, the vested portion of an Option at any time by
delivering to the Corporate Secretary of ENSERCH Corporation
written notice specifying the number of Shares with respect to
which the Option is being exercised, together with payment in
full of the purchase price of such Shares plus any federal,
state or local taxes for which the Company has a withholding
obligation in connection with such exercise. In addition to
payment in cash, payment may be made by the exchange of Common
Stock of ENSERCH Corporation previously acquired by the
Optionee and held for at least six months and having a Fair
Market Value on the date of exercise equal to the price for
which the Shares may be purchased pursuant to the Option. The
Committee may, in its sole discretion, authorize such payment,
in whole or in part, in any other form as may be approved by
the Board and in a manner authorized by law.
4
<PAGE>
<PAGE>
(ii) An Optionee may elect to satisfy any withholding
due on the exercise of an Option either (a) in cash (the "cash
method") or (b) by the retention by the Company of a number of
Shares out of the Shares being purchased having a Fair Market
Value equal to the amount to be withheld (the "Share retention
method"). The Compensation Committee shall determine, from
time to time, the amount to be withheld and the time and
manner in which an Optionee may elect to satisfy such
withholding obligation. Such amount shall be not less than
the minimum withholding obligation of the Company or not more
than the amount determined by application of the maximum tax
in effect for individuals under applicable federal, state or
local tax law. Under the "Share retention method," the amount
to be withheld, subject to the discretion of the Committee,
shall be the amount designated by such Optionee within such
maximum and minimum amounts.
(f) Termination of Employment: Unless otherwise determined
by the Committee, the following rules shall apply in the event of
an Optionee's termination of employment with the Company:
(i) In the event of an Optionee's termination of
employment with the Company either (1) for cause or
(2) voluntarily on the part of the Optionee, without the
written consent of the Company and for reasons other than
death, Disability or Retirement (as such terms are defined in
Subparagraphs (f)(iv) and (v) hereof), his or her Options
shall immediately terminate.
(ii) In the event of an Optionee's termination of
employment with the Company under circumstances other than
those specified in Subparagraph (f)(i) hereof and for reasons
other than death, Disability or Retirement (as defined in
Subparagraphs (f)(iv) and (v) hereof), such Options shall
terminate on the earlier of 90 days after the date of such
termination of employment or the Option's Expiration Date.
(iii) In the event of the death of an Optionee while he
or she is employed by the Company or during a period when
Subparagraph (f)(ii), (f)(iv) or (f)(v) hereof is applicable,
such Options shall terminate on the earlier of the first
anniversary of the Optionee's death or the Option's Expiration
Date.
(iv) In the event of the Optionee's termination of
employment with the Company on account of a Disability, as
defined in the Internal Revenue Code, such Options shall
terminate on the earlier of the first anniversary of the
Optionee's termination of employment or the Option's
Expiration Date.
5
<PAGE>
<PAGE>
(v) In the event of the termination of employment of an
Optionee, other than discharge for cause, after age 65 or on
or after age 60 pursuant to the terms of any retirement plan
maintained by the Company in which the Optionee participates
(either of which terminations shall constitute "Retirement"),
such Options shall terminate on the earlier of three years
after the date of such termination of employment or the
Option's Expiration Date, unless the retiring Optionee remains
a director of the Company. In that event, this provision will
be triggered when his directorship terminates.
(vi) Anything contained in this Subparagraph (f) to the
contrary notwithstanding, an Option may only be exercised
following the Optionee's termination of employment with the
Company for reasons other than death, Disability or Retirement
if and to the extent that such Option was exercisable
immediately prior to such termination of employment.
(vii) An Optionee's transfer of employment between
ENSERCH Corporation and its Division or a Subsidiary or
between Subsidiaries or between its Division and Subsidiaries
shall not constitute a termination of employment and the
Committee shall determine in each case whether an authorized
leave of absence for military service or otherwise shall
constitute a termination of employment.
(g) Nontransferability: Options shall not be transferable
other than by will or the laws of descent and distribution, and no
Option may be exercised by anyone other than the Optionee except
that, should the Optionee die or become incapacitated, the Option
may be exercised by his estate, legal representative or beneficiary
subject to all other terms and conditions contained in the Plan.
(h) Change in Control: Anything contained herein to the
contrary notwithstanding, an Optionee shall become fully (100%)
vested in each of his or her Options upon the occurrence of a
change in control, and no Option held by an Optionee at the time a
change in control occurs or at any time thereafter shall terminate
for any reason before the Option's Expiration Date. For this
purpose, "change in control" means one or more of the following
events:
(i) any person within the meaning of Section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"),
other than the Company, has become the beneficial owner,
within the meaning of Rule 13d-3 under the 1934 Act, of 20% or
more of the combined voting power of ENSERCH Corporation's
then outstanding Common Stock or equivalent in voting power of
any class or classes of ENSERCH Corporation's outstanding
securities ordinarily entitled to vote in elections of
directors ("voting securities"), or
6
<PAGE>
<PAGE>
(ii) Shares representing 20% or more of the combined
voting power of ENSERCH Corporation's voting securities are
purchased pursuant to a tender offer or exchange offer (other
than an offer by the Company), or
(iii) the Stockholders of ENSERCH Corporation have:
(A) approved an agreement to merge or consolidate
with or into another corporation or an agreement to sell
or otherwise dispose of all or substantially all of
ENSERCH Corporation's assets (including a plan of
liquidation), or
(B) elected two or more persons to serve as
directors of ENSERCH Corporation who were not nominated
and approved by the Directors' Nominating Committee and
approved by the Board.
ARTICLE VII. ISSUANCE OF SHARES: RESTRICTIONS
Subject to the conditions and restrictions provided in this
Article VII, ENSERCH Corporation shall, as soon as practicable
after an Option has been exercised in whole or in part, deliver to
the Optionee a certificate, registered in the name of such
Optionee, for the number of Shares with respect to which the Option
has been exercised less any Shares which are to be retained in
accordance with Article VI(e) to satisfy tax withholding
requirements. ENSERCH Corporation may legend any stock certificate
issued hereunder to reflect any restrictions necessary under the
terms of any federal or state laws or regulations thereunder.
ARTICLE VIII. RIGHTS AS SHAREHOLDER AND EMPLOYEE
No Optionee shall have any rights as a Shareholder of ENSERCH
Corporation with respect to any Shares prior to the date of
issuance to him or her of the certificate or certificates for such
Shares. Neither the Plan nor any Option granted or Restricted
Stock awarded under the Plan shall confer upon the Optionee any
right to continue in the employment of the Company.
ARTICLE IX. SUBSTITUTE OPTIONS
Anything contained herein to the contrary notwithstanding,
Options may, at the discretion of the Board (or the Committee), be
granted under the Plan in substitution for Options to purchase
Shares of capital stock of another corporation which is merged
into, consolidated with, or all or a substantial portion of the
property or stock of which is acquired by, the Company. The terms,
provisions and benefits to Optionees of such substitute Options may
be identical in all respects to the terms, provisions and benefits
to Optionees of the Options of the other corporation on the date of
7
<PAGE>
<PAGE>
substitution, except that such substitute Options shall provide
the purchase of Shares instead of shares of such other corporation.
ARTICLE X. RESTRICTED STOCK
(a) Awards to Eligible Employees: The Committee may make
awards of Restricted Stock to any eligible employee, for no cash
consideration, for such minimum consideration as may be required by
applicable law, or for such other consideration as may be specified
by the award (an "Award"). The terms and conditions of Restricted
Stock, including the terms of the release of restrictions which may
be performance-based, time-based, or a combination of both, shall
be specified by the Award. The Committee, in its sole discretion,
shall determine what rights, if any, the person to whom an award of
Restricted Stock is made shall have in the Restricted Stock during
the restriction period and the restrictions applicable to the
particular Award, including whether the holder of the Restricted
Stock shall have the right to vote the shares or receive all
dividends and other distributions applicable to the Shares. The
Committee shall determine when the restrictions shall lapse, or
expire and the conditions, if any, under which the Restricted Stock
will be forfeited or sold back to the Company. Each award of
Restricted Stock may have different restrictions and conditions.
The Committee, in its discretion, may prospectively change the
restriction period and the restrictions applicable to any
particular award of Restricted Stock. Restricted Stock may not be
transferred or sold by the recipient until the restrictions
specified in the Award expire.
(b) Issuance of Stock: Any Restricted Stock awarded
hereunder may be evidenced in such manner as the Committee, in its
sole discretion, shall deem appropriate, including, without
limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is
issued in respect of shares of Restricted Stock awarded hereunder,
such certificate shall bear an appropriate legend with respect to
the restrictions applicable to such Award. The Compensation
Committee may also require as a condition to the issuance of any
such certificate the delivery of an agreement in writing between
the Company and the recipient in form and substance as shall be
approved by the Compensation Committee (a "Restricted Stock
Agreement"). The Company may retain, at its option, the physical
custody of the Restricted Stock during the restriction period or
require that the Restricted Stock be placed in an escrow or trust,
along with a stock power endorsed in blank, until all restrictions
are removed or expire.
(c) Awards to Executive Officers of Performance-Based Stock:
The following provisions shall apply to any performance-based
awards of Restricted Stock made under this Plan to any person who
has been designated by the Board of Directors as an Executive
Officer of the Company:
8
<PAGE>
<PAGE>
(i) the performance criteria upon which vesting of the
Restricted Stock is contingent shall be such objective
performance goals as the Compensation Committee shall
establish in writing prior to the commencement of any
performance period to which such performance criteria relate
(provided, however, that performance goals for any performance
period which includes the year 1994 may be established at any
time prior to April 1, 1994, and such date as to future
periods as may be authorized under Treasury Department
Regulations), and while the outcome is substantially
uncertain, and shall be based on total shareholder return,
total shareholder return compared to a group of peer companies
specified by the Compensation Committee, earnings per share,
or operating unit income; and
(ii) the maximum number of Shares that may be awarded to
any Executive Officer with respect to all performance periods
beginning in a calendar year shall not exceed 50,000 Shares
(subject to adjustment pursuant to Article V hereof);
provided, however, that the Compensation Committee may retain
the discretion to reduce an award during or at the conclusion
of the performance period.
(d) Awards to Non-Employee Directors: There shall be made
annually to each eligible non-employee director an award of
Restricted Stock on the following terms and conditions:
(i) Awards shall be made at the time of the first
meeting of the Compensation Committee following the Annual
Meeting of Shareholders;
(ii) the number of Shares that may be awarded shall be
determined by dividing $25,000 by the average of the closing
sale price per share of the Shares as reported on the
Consolidated Tape (the "Closing Price") for the last twenty
trading days in April (the "Award Value"), rounded up to the
next full number of Shares;
(iii) the recipient shall deliver to the Company a
Restricted Stock Agreement and shall also deliver a stock
power endorsed in blank, relating to the Restricted Stock
covered by the Award;
(iv) Shares shall be issued, after delivery of the
agreement and stock power required by (iii) above, and a
certificate for such Shares shall be issued in the recipient's
name but such certificate shall be retained by the Company for
the recipient's account;
(v) the recipient, after issuance of a certificate,
shall thereupon be a shareholder with respect to all the
Shares represented by such certificate and shall have all the
9
<PAGE>
<PAGE>
rights of a shareholder with respect to all such Shares,
including the right to vote such Shares and to receive all
dividends and other distributions paid with respect to such
Shares, except that such Shares shall be restricted as to
transferability and subject to forfeiture as provided in (vi)
below;
(vi) the following restrictions are applicable to the
award of Restricted Stock to non-employee directors:
(A) the recipient shall not be entitled to delivery
of any certificate(s) and shall be prohibited from
transferring the Restricted Stock unless prior to the
tenth anniversary of the date of the Award (the
"Termination Date") the death of the recipient shall
occur or either of the following conditions shall be
satisfied: (x) the Closing Price of the Shares on any
one trading day shall be equal to a value of at least 1.5
times the Award Value or (y) the average Closing Price
for the twenty trading days immediately preceding the
Termination Date is at least equal to the Award Value;
and
(B) if neither condition (x) nor condition (y) shall
have been satisfied by the Termination Date, all
Restricted Stock shall be forfeited and all rights to
such shares shall terminate without further obligation on
the part of the Company or the recipient.
Upon the death of the recipient or upon satisfaction of
either requirement of (A) above, the restriction on
transferability of the Restricted Stock shall be lifted, and
the certificate(s) for the Restricted Stock shall be delivered
as soon as practicable.
(e) Merger, Consolidation, Etc.: In the event that
ENSERCH Corporation shall, pursuant to action by its Board, at
any time propose to merge into, consolidate with or sell or
otherwise transfer all or substantially all of its assets to
another corporation, the restriction on transferability of the
Restricted Stock shall be lifted and the certificate(s) for
the Restricted Stock shall be delivered as soon as
practicable.
(f) Change in Control: In the event of a Change in
Control of the Company as defined in Article VI(h) hereof, the
restriction on transferability of the Restricted Stock shall
be lifted and the certificate(s) for the Restricted Stock
shall be delivered as soon as practicable.
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ARTICLE XI. TERM OF THE PLAN
Barring any action of the Board to the contrary, the Plan
shall terminate on, and no Options shall be granted or award of
Restricted Stock made after, the tenth anniversary of the Effective
Date. The provisions of the Plan, however, shall continue
thereafter to govern all Options theretofore granted until the
exercise, expiration or cancellations of such Options and to govern
all awards of Restricted Stock until all restrictions have lapsed
or such Shares have been forfeited.
ARTICLE XII. AMENDMENT AND TERMINATION OF PLAN
The Plan may be amended or terminated at any time by the Board
except that Article X may not be amended more than once every six
months, other than to comport with changes in the Internal Revenue
Code, or the rules thereunder. However, without further approval
of the Shareholders of ENSERCH Corporation by the affirmative vote
of the majority of the Shares present or represented and entitled
to vote, no amendment shall (i) increase the maximum aggregate
number of Shares with respect to which Options may be granted or
awards of Restricted Stock made under the Plan and the limitations
on individual Option grants under Article VI hereof and Restricted
Stock Awards under Article X hereof, except in accordance with
Article V hereof, (ii) change the Option price provided for in
Article VI(a) hereof or (iii) change the eligibility provisions of
Article IV hereof. Subject to the provisions of Article VI hereof,
no termination of or amendment to the Plan shall adversely affect
the rights of an Optionee or other person holding an Option
previously granted hereunder or a holder of a Restricted Stock
Award without the consent of such person.
ARTICLE XIII. CONSTRUCTION
The Plan and Agreements shall be interpreted and administered
under the laws of the State of Texas.
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EXHIBIT 15
ENSERCH Corporation:
We have made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited interim condensed
consolidated financial information of ENSERCH Corporation and subsidiary
companies for the periods ended March 31, 1994 and 1993, as indicated in our
report dated April 25, 1994; because we did not perform an audit, we expressed
no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, is being
used in Registration Statements No. 2-59259, No. 33-40589, No. 33-47911 and
No. 2-77572 on Form S-8, and in Registration Statements No. 33-15623 and
No. 33-52525 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE
Dallas, Texas
May 13, 1994
