<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _________________
COMMISSION FILE NUMBER 1-3187
A. Full title of the plan and address of the plan, if different from that
of the issuer named below:
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
HOUSTON INDUSTRIES INCORPORATED
1111 LOUISIANA STREET
HOUSTON, TEXAS 77002
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Reports, Deloitte & Touche LLP Page 1
Report Of Independent Accountants, Coopers & Lybrand LLP Page 2
Financial Statements:
Statement of Net Assets Available for Benefits, December 31, 1997 Page 3
Statement of Net Assets Available for Benefits, December 31, 1996 Page 4
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 1997 Page 5
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 1996 Page 6
Notes to Financial Statements for the Years Ended
December 31, 1997 and 1996 Page 7
Supplemental Schedules:
Supplemental Schedule of Investments, December 31, 1997 (Item 27a) Page 12
Supplemental Schedule of 5% Reportable Transactions for the
Year Ended December 31, 1997 (Item 27d) Page 13
</TABLE>
Pursuant to Item 4 of Form 11-K, the financial statements and schedules
referred to above have been prepared in accordance with regulations of the
Employee Retirement Income Security Act of 1974.
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN:
We have audited, by fund and in total, the accompanying financial statements of
the NorAm Energy Corp. Employee Savings and Investment Plan (the "Plan") as of
December 31, 1997 for the year then ended, listed in the Table of Contents.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, by fund and in total,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 1997, and the changes in net assets available for benefits for
the year then ended in conformity with generally accepted accounting principles.
Our audit is conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules,
listed in the Table of Contents, are presented for the purpose of additional
analysis and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the auditing procedures
applied in our audit of the basic 1997 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Houston, Texas
June 24, 1998
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN:
We have audited the accompanying statement of net assets available for benefits
of the NorAm Energy Corp. Employee Savings and Investment Plan as of December
31, 1996, and the related statement of changes in net assets available for
benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the NorAm Energy
Corp. Employee Savings and Investment Plan as of December 31, 1996, and the
changes in net assets available for benefits for the year then ended, in
conformity with generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statement of
net assets available for benefits as of December 31, 1996 and the 1996 statement
of changes in net assets available for benefits for the year then ended is
presented for the purpose of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
of each fund. The fund information has been subjected to the auditing procedures
applied in the audit of the basic 1996 financial statements and, in our opinion,
is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
COOPERS & LYBRAND L.L.P.
Houston, Texas
June 6, 1997
2
<PAGE> 5
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
-----------------------------------------------------------------------------------
AMERICAN
NORAM ENERGY HII EXPRESS AMERICAN
CORP. COMMON TRUST U.S. EXPRESS AMERICAN
POOLED GIC STOCK GOVERNMENT SELECTIVE EXPRESS
FUND FUND SECURITIES FUND FUND, INC. MUTUAL
------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
FEDERAL INCOME FUND $ 144
AETNA LIFE INSURANCE
CONTRACT GIC 11,668
HII COMMON STOCK $ 74,254
MONEY MARKET TRUST FUNDS 375 126
EQUITY FUNDS $ 41,838
FIXED INCOME FUNDS $ 49,947 $ 20,242
LOANS TO PARTICIPANTS
------------- -------------- -------------- ------------- -------------
TOTAL INVESTMENTS 12,187 74,380 49,947 20,242 41,838
------------- -------------- -------------- ------------- -------------
RECEIVABLES
PARTICIPANT CONTRIBUTIONS 79 42 28 61
EMPLOYER CONTRIBUTIONS 66 33 24 50
ACCRUED INVESTMENT
INCOME 1,284 1,034 236
------------- -------------- -------------- ------------- -------------
TOTAL RECEIVABLES 1,284 1,179 311 52 111
------------- -------------- -------------- ------------- -------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 13,471 $ 75,559 $ 50,258 $ 20,294 $ 41,949
============= ============== ============== ============= =============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
---------------------------------------------------------------------------------------------------
AMERICAN AMERICAN AMERICAN
AMERICAN EXPRESS EXPRESS IDS EXPRESS
EXPRESS NEW DIVERSIFIED TEMPLETON
TRUST EQUITY DIMENSIONS PARTICIPANT EQUITY FOREIGN
FUND I FUND, INC. LOANS INCOME FUND FUND TOTAL
------------- ------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
FEDERAL INCOME FUND $ 144
AETNA LIFE INSURANCE
CONTRACT GIC 11,668
HII COMMON STOCK 74,254
MONEY MARKET TRUST FUNDS 501
EQUITY FUNDS $ 40,064 $ 80,258 $ 5,368 $ 4,881 172,409
FIXED INCOME FUNDS 70,189
LOANS TO PARTICIPANTS $10,106 10,106
------------- ------------- ------------- -------------- ------------- -------------
TOTAL INVESTMENTS 40,064 80,258 10,106 5,368 4,881 339,271
------------- ------------- ------------- -------------- ------------- -------------
RECEIVABLES
PARTICIPANT CONTRIBUTIONS 59 119 14 14 416
EMPLOYER CONTRIBUTIONS 47 99 10 10 339
ACCRUED INVESTMENT
INCOME 2,554
------------- ------------- ------------- -------------- ------------- -------------
TOTAL RECEIVABLES 106 218 24 24 3,309
------------- ------------- ------------- -------------- ------------- -------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 40,170 $ 80,476 $ 10,106 $ 5,392 $ 4,905 $ 342,580
============= ============= ============= ============== ============= =============
</TABLE>
See notes to financial statements.
3
<PAGE> 6
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
-------------------------------------------------------------------------------------------------
NORAM ENERGY AMERICAN
NORAM ENERGY CORP. POOLED EXPRESS AMERICAN AMERICAN
CORP. COMMON TRUST U.S. EXPRESS AMERICAN EXPRESS
POOLED GIC STOCK GOVERNMENT SELECTIVE EXPRESS TRUST EQUITY
FUND FUND SECURITIES FUND FUND, INC. MUTUAL FUND I
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
MASSACHUSETTS MUTUAL LIFE
INSURANCE CONTRACT GIC FUND $ 18,875
AETNA LIFE INSURANCE
CONTRACT GIC 17,856
NorAm COMMON STOCK $ 61,933
MONEY MARKET TRUST FUNDS 1,197 5,959 $ 6 $ 19 $ 140
EQUITY FUNDS 25,953
FIXED INCOME FUNDS $ 38,922 16,882
BALANCED FUNDS 32,495
LOANS TO PARTICIPANTS
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INVESTMENTS 37,928 67,892 38,922 16,888 32,514 26,093
-------------- -------------- -------------- -------------- -------------- --------------
RECEIVABLES
PARTICIPANT CONTRIBUTIONS 79 40 32 64 49
EMPLOYER CONTRIBUTIONS 66 34 27 54 40
ACCRUED INVESTMENT
INCOME 175
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL RECEIVABLES 145 249 59 118 89
-------------- -------------- -------------- -------------- -------------- --------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 37,928 $ 68,037 $ 39,171 $ 16,947 $ 32,632 $ 26,182
============== ============== ============== ============== ============== ==============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
----------------------------------------------------------------------------------
AMERICAN AMERICAN AMERICAN
EXPRESS EXPRESS IDS EXPRESS
NEW DIVERSIFIED TEMPLETON
DIMENSIONS PARTICIPANT EQUITY FOREIGN
FUND, INC. LOANS INCOME FUND FUND TOTAL
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
MASSACHUSETTS MUTUAL LIFE
INSURANCE CONTRACT GIC FUND $ 18,875
AETNA LIFE INSURANCE
CONTRACT GIC 17,856
NorAm COMMON STOCK 61,933
MONEY MARKET TRUST FUNDS $ 413 $ 6 46,662
EQUITY FUNDS 56,273 $ 1,702 1,635 85,563
FIXED INCOME FUNDS 16,882
BALANCED FUNDS 32,495
LOANS TO PARTICIPANTS $ 9,019 9,019
-------------- -------------- -------------- -------------- --------------
TOTAL INVESTMENTS 56,686 9,019 1,702 1,641 289,285
-------------- -------------- -------------- -------------- --------------
RECEIVABLES
PARTICIPANT CONTRIBUTIONS 117 9 9 399
EMPLOYER CONTRIBUTIONS 97 7 6 331
ACCRUED INVESTMENT
INCOME 175
-------------- -------------- -------------- -------------- --------------
TOTAL RECEIVABLES 214 16 15 905
-------------- -------------- -------------- -------------- --------------
NET ASSETS AVAILABLE
FOR BENEFITS $ 56,900 $ 9,019 $ 1,718 $ 1,656 $ 290,190
============== ============== ============== ============== ==============
</TABLE>
See notes to financial statements.
4
<PAGE> 7
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
----------------------------------------------------------------------------------------------
AMERICAN
NORAM ENERGY HII EXPRESS AMERICAN
CORP. COMMON TRUST U.S. EXPRESS AMERICAN
POOLED GIC STOCK GOVERNMENT SELECTIVE EXPRESS
FUND FUND SECURITIES FUND FUND, INC. MUTUAL
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 3,568 $ 1,389 $ 6,014
Interest $ 520 $ 2,474
NET APPRECIATION/(DEPRECIATION)
IN FAIR VALUE OF INVESTMENTS 55 17,721 186 579
-------------- -------------- -------------- -------------- --------------
Total 575 21,289 2,474 1,575 6,593
-------------- -------------- -------------- -------------- --------------
CONTRIBUTIONS
Participants 2,193 1,209 820 1,690
Employer 1,812 1,210 691 1,404
-------------- -------------- -------------- -------------- --------------
Total 4,005 2,419 1,511 3,094
-------------- -------------- -------------- -------------- --------------
ROLLOVERS 4 7 81 79 51
FUND TRANSFERS (23,597) (12,979) 14,950 2,069 2,967
-------------- -------------- -------------- -------------- --------------
Total (23,593) (12,972) 15,031 2,148 3,018
-------------- -------------- -------------- -------------- --------------
PARTICIPANT DISTRIBUTIONS (1,439) (4,800) (8,837) (1,887) (3,388)
-------------- -------------- -------------- -------------- --------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS (24,457) 7,522 11,087 3,347 9,317
-------------- -------------- -------------- -------------- --------------
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 37,928 68,037 39,171 16,947 32,632
-------------- -------------- -------------- -------------- --------------
END OF YEAR $ 13,471 $ 75,559 $ 50,258 $ 20,294 $ 41,949
============== ============== ============== ============== ==============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
--------------------------------------------------------------------------------------------------
AMERICAN AMERICAN AMERICAN
AMERICAN EXPRESS EXPRESS IDS EXPRESS
EXPRESS NEW DIVERSIFIED TEMPLETON
TRUST EQUITY DIMENSIONS PARTICIPANT EQUITY FOREIGN
FUND I FUND, INC. LOANS INCOME FUND FUND TOTAL
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 5,986 $ 649 $ 542 $ 18,148
Interest $ 807 3,801
NET APPRECIATION/(DEPRECIATION)
IN FAIR VALUE OF INVESTMENTS $ 9,290 8,983 (13) (491) 36,310
-------------- -------------- -------------- -------------- -------------- --------------
Total 9,290 14,969 807 636 51 58,259
-------------- -------------- -------------- -------------- -------------- --------------
CONTRIBUTIONS
Participants 1,546 3,324 321 327 11,430
Employer 1,232 2,710 241 237 9,537
-------------- -------------- -------------- -------------- -------------- --------------
Total 2,778 6,034 562 564 20,967
-------------- -------------- -------------- -------------- -------------- --------------
ROLLOVERS 23 74 29 51 399
FUND TRANSFERS 4,768 6,497 2,705 2,620
-------------- -------------- -------------- -------------- -------------- --------------
Total 4,791 6,571 2,734 2,671 399
-------------- -------------- -------------- -------------- -------------- --------------
PARTICIPANT DISTRIBUTIONS (2,871) (3,998) 280 (258) (37) (27,235)
-------------- -------------- -------------- -------------- -------------- --------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 13,988 23,576 1,087 3,674 3,249 52,390
-------------- -------------- -------------- -------------- -------------- --------------
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 26,182 56,900 9,019 1,718 1,656 290,190
-------------- -------------- -------------- -------------- -------------- --------------
END OF YEAR $ 40,170 $ 80,476 $ 10,106 $ 5,392 $ 4,905 $ 342,580
============== ============== ============== ============== ============== ==============
</TABLE>
See notes to financial statements.
5
<PAGE> 8
NORAM ENERGY CORPORATION EMPLOYEE SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
-----------------------------------------------------------------------------------------------
NORAM ENERGY AMERICAN
NORAM ENERGY CORP. POOLED EXPRESS AMERICAN
CORP. COMMON TRUST U.S. EXPRESS AMERICAN
POOLED GIC STOCK GOVERNMENT SELECTIVE EXPRESS
FUND FUND SECURITIES FUND FUND, INC. MUTUAL
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,211 $ 1,300 $ 3,025
Interest $ 4,037 $ 1,843
NET APPRECIATION/(DEPRECIATION)
IN FAIR VALUE OF INVESTMENTS 28,108 (860) 784
--------------- --------------- --------------- --------------- ---------------
Total 4,037 29,319 1,843 440 3,809
--------------- --------------- --------------- --------------- ---------------
CONTRIBUTIONS
Participants 2,057 1,146 948 1,766
Employer 1,725 872 795 1,477
--------------- --------------- --------------- --------------- ---------------
Total 3,782 2,018 1,743 3,243
--------------- --------------- --------------- --------------- ---------------
ROLLOVERS 56 13 31 42
FUND TRANSFERS (17,312) 887 6,572 241 1,504
--------------- --------------- --------------- --------------- ---------------
Total (17,312) 943 6,585 272 1,546
--------------- --------------- --------------- --------------- ---------------
PARTICIPANT DISTRIBUTIONS (5,231) (3,611) (5,061) (1,857) (2,781
--------------- --------------- --------------- --------------- ---------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS (18,506) 30,433 5,385 598 5,817
--------------- --------------- --------------- --------------- ---------------
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 56,434 37,604 33,786 16,349 26,815
--------------- --------------- --------------- --------------- ---------------
END OF YEAR $ 37,928 $ 68,037 $ 39,171 $ 16,947 $ 32,632
=============== =============== =============== =============== ===============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
------------------------------------------------------------------------------------------------
AMERICAN AMERICAN AMERICAN
AMERICAN EXPRESS EXPRESS IDS EXPRESS
EXPRESS NEW DIVERSIFIED TEMPLETON
TRUST EQUITY DIMENSIONS PARTICIPANT EQUITY FOREIGN
FUND I FUND, INC. LOANS INCOME FUND FUND TOTAL
--------------- --------------- ------------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 212 $ 2,162 $ 135 $ 61 $ 8,106
Interest $ 691 6,571
NET APPRECIATION/(DEPRECIATION)
IN FAIR VALUE OF INVESTMENTS 4,335 8,343 24 95 40,829
--------------- --------------- ------------- ------------- --------------- ----------
Total 4,547 10,505 691 159 156 55,506
--------------- --------------- ------------- ------------- --------------- ----------
CONTRIBUTIONS
Participants 1,398 3,050 121 140 10,626
Employer 1,141 2,531 95 105 8,741
--------------- --------------- ------------- ------------- --------------- ----------
Total 2,539 5,581 216 245 19,367
--------------- --------------- ------------- ------------- --------------- ----------
ROLLOVERS 32 11 1 3 189
FUND TRANSFERS 2,047 2,980 405 1,386 1,290
--------------- --------------- ------------- ------------- --------------- ----------
Total 2,079 2,991 405 1,387 1,293 189
--------------- --------------- ------------- ------------- --------------- ----------
PARTICIPANT DISTRIBUTIONS (1,872) (3,101) (537) (44) (38) (24,133)
--------------- --------------- ------------- ------------- --------------- ----------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 7,293 15,976 559 1,718 1,656 50,929
--------------- --------------- ------------- ------------- --------------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 18,889 40,924 8,460 239,261
--------------- --------------- ------------- ------------- --------------- ----------
END OF YEAR $ 26,182 $ 56,900 $ 9,019 $ 1,718 $ 1,656 $ 290,190
=============== =============== ============= ============= =============== ==========
</TABLE>
See notes to financial statements.
6
<PAGE> 9
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1. ACCOUNTING POLICIES
In accordance with the provisions of the NorAm Energy Corp. ("Company")
Employee Savings and Investment Plan ("Plan"), the financial records of
the Plan are kept and the valuations of accounts of participating
employees ("Participants") are determined on the accrual basis.
The Plan recognizes net appreciation or depreciation in the fair value
of its investments. Investments are reflected at fair value in the
financial statements. Fair value for securities listed on a national
exchange is principally determined using the closing price on the New
York Stock Exchange. Fair value for mutual funds is determined using
net asset value. The Plan's guaranteed investment contracts are not
fully-benefit responsive and, as such are valued at fair value as of
December 31, 1997 and 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions that
affect the reported amounts as well as certain disclosures. The Plan's
financial statements include amounts that are based on management's
best estimates and judgments. Actual results could differ from those
estimates.
Benefit payments are recorded when paid.
2. SUMMARY OF THE PLAN
DESCRIPTION OF PLAN
The following description of the Plan provides only general
information. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering all qualified
Employee's of the Company. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's contribution and, (b)
Plan earnings, and charged with an allocation of administrative
expenses. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account.
PARTICIPATION
Houston Industries Incorporated ("HII") merged with the Company during
1997 (see Note 6). The Plan covers qualified employees of the Company.
The Plan is designed to comply in all material respects with ERISA. An
employee is eligible for participation as of the first day of the
calendar quarter coincident with or next following (i) his rehire date
or (ii) one month and one day following his hire date. Temporary and
part-time employees are eligible to participate after completion of at
least 1,000 Hours of Service in a year. The Plan excludes nonresident
aliens with
7
<PAGE> 10
no earned income from U.S. sources, employees (other than hourly paid
Entex Division employees) who are covered by a collective bargaining
agreement that does not expressly provide for participation in the Plan
and leased employees. Each Participant may contribute to the Plan
annually an amount equal to any whole percentage from 1% to 12% of
their pre-tax compensation.
The maximum amount that a taxpayer may elect to defer as a pre-tax
contribution for any taxable year under all cash or deferred
arrangements (such as the Plan) in which the taxpayer participates was
limited to $9,500 in 1997 and $9,500 in 1996. The limit for 1998 is
$10,000, to be adjusted annually thereafter for inflation. The Company
matches the Participant's contributions to a maximum of 6% of a
Participant's compensation.
INVESTMENT PROGRAM
In accordance with the Plan, various investment funds are maintained by
the trust. Investment of the Plan's assets into each of the separate
funds is based on the specifications of the Participant, in 5%
increments. The objective of each of the funds is outlined below:
NORAM ENERGY CORP. POOLED GIC FUND: Invested primarily in a fixed
dollar return with little market risk to capital.
HII COMMON STOCK FUND (FORMERLY NORAM ENERGY CORP. POOLED COMMON STOCK
FUND): Invested primarily in shares of common stock of HII and the
Company in 1997 and 1996, respectively. See Note 6 regarding the Merger
of HII and NorAm Energy Corp.
AMERICAN EXPRESS TRUST U.S. GOVERNMENT SECURITIES FUND: Invests in
short-term bond or debt instruments guaranteed as to principal and
interest by the U.S. Government or its agencies or instrumentalities.
AMERICAN EXPRESS SELECTIVE FUND, INC.: Invests in a portfolio of
primarily high-quality corporate bonds, government securities and money
market securities.
AMERICAN EXPRESS MUTUAL: Invests in a portfolio of common stocks, which
offer capital appreciation, and in senior securities, such as bonds and
preferred stocks, that offer fixed interest and dividend payments.
AMERICAN EXPRESS TRUST EQUITY FUND I: Invests primarily in
medium-to-large, well-established companies offering both long-term
capital appreciation and income potential.
AMERICAN EXPRESS NEW DIMENSIONS FUND, INC.: Invests in a portfolio of
primarily common stocks of U.S. and foreign companies in which powerful
economic and technical changes may take place. Such companies may also
have demonstrated excellent technology, marketing or management
expertise.
AMERICAN EXPRESS IDS DIVERSIFIED EQUITY INCOME FUND: Invests in a
portfolio of medium to large, well-established companies that offer
long-term capital growth potential as well as reasonable income from
dividends and interest.
AMERICAN EXPRESS TEMPLETON FOREIGN FUND: Invests primarily in common
stocks of companies outside the U.S., as well as preferred stocks and
certain debt securities.
8
<PAGE> 11
At December 31, the number of participants in each fund was as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
NorAm Energy Corp. Pooled GIC Fund 2,302 2,549
HII Common Stock Fund (NorAm Energy Corp. for 1996) 3,612 3,807
American Express Trust U.S. Government Securities Fund 2,012 1,940
American Express Selective Fund, Inc. 1,657 1,762
American Express Mutual 2,751 2,835
American Express Trust Equity Fund I 2,476 2,377
American Express New Dimensions Fund, Inc. 3,584 3,494
American Express IDS Diversified Equity Income Fund 632 322
American Express Templeton Foreign Fund 522 268
</TABLE>
As of December 31, 1997, the Plan had a concentration of investments in
the common stock of HII and American Express New Dimensions Fund, Inc.
The disclosed fair value of these investments and others were subject
to the economic viability of the active marketplace.
GUARANTEED INVESTMENT CONTRACT
The American Institute of Certified Public Accountants issued Statement
of Position 94-4, "Reporting of Investment Contracts Held by Health and
Welfare Benefit Plans and Defined Contribution Pension Plans"
("Statement"), which was implemented by the Plan during the year ended
December 31, 1996. This Statement requires that investment contracts
with insurance companies which are fully-benefit responsive be recorded
at contract value and contracts which are not fully-benefit responsive
be recorded at fair value. The Plan's guaranteed investment contracts
are not fully-benefit responsive and, as such are valued at fair value
as of December 31, 1997 and 1996. Contract value represents
contributions made under the contracts plus interest, less withdrawals
made by Participants and distributions to former Participants. Fair
value, which does not differ materially from cost, is based upon the
net present value of the guaranteed investment contracts at December
31, 1997 and 1996. The Plan's guaranteed investment contracts contain
penalties for early withdrawal or termination. One guaranteed
investment contract matured in January 1997, resulting in approximately
$18.8 million being received by the Plan.
PLAN ADMINISTRATION
The Benefits Committee appointed by the Board of Directors of HII, is
responsible for directing American Express Bank & Trust (the
"Trustee"), in the day to day administration of the Plan. All
administrative expenses not paid by the Company are borne by the Plan.
9
<PAGE> 12
DISTRIBUTIONS AND FORFEITURES
A terminated Participant or the beneficiary of a deceased Participant
is entitled to a distribution of the value of the Participant's entire
account in case of death, disability, or retirement at or after the
Participant's attainment of age 65. In case of termination of service
for other reasons, a Participant is entitled to a distribution of the
entire value of his contribution account plus the vested portion of his
Employer Contribution account. Vesting is determined by vesting service
years in accordance with the following schedule:
<TABLE>
<CAPTION>
PARTICIPANT'S
YEARS OF VESTED
SERVICE PERCENTAGE
<S> <C>
Less than 2........................ 0%
Two but less than three.......... 20%
Three but less than four......... 40%
Four but less than five........... 60%
Five but less than six............ 80%
Six or more........................ 100%
</TABLE>
Amounts forfeited upon distribution are held separately until the end
of the plan year in which the terminated employee incurs five
consecutive one year breaks in service. Subsequently, the amount
forfeited by a Participant is applied to reduce the Company's
contribution to the Plan.
A terminated Participant may receive a lump sum final distribution of
the vested amount accumulated in each Participant's account upon
written request. Immediate lump sum distributions are made for accounts
which do not exceed $3,500.
PARTICIPANT LOANS
A Participant may borrow against amounts attributable to his vested
account balance. The maximum amount that a Participant may borrow is
the lesser of (i) $50,000, reduced by the excess, if any, of the
highest outstanding balance of loans to the Participant from all plans
maintained by the Company or an affiliated entity during the one-year
period ending on the day before the date on which such loan is made
over the outstanding balance of loans from the Plan on the date on
which such loan is made, or (ii) 50% of the value of the Participant's
vested account balance under the Plan. The minimum borrowing is $1,000.
A Participant may have only one loan outstanding at any one time.
Interest rates are fixed at the prime rate prevailing at the loan's
inception plus one percent. Interest rates are fixed for the term of
the loan at the time of loan origination and ranged from 7% to 10% for
loans outstanding as of December 31, 1997. Principal and interest
payments are paid ratably through monthly payroll deductions over a
term not to exceed sixty months. Participants' account balances are
used as collateral for the loans.
TERMINATION OF THE PLAN
The Company may terminate the Plan at any time and must give written
notice to the Trustee. In the event of termination of the Plan, the
assets held by the Trustee under the Plan will be valued and each
Participant will become fully vested and entitled to distributions
respecting his account.
10
<PAGE> 13
3. FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the financial
statements of the Plan. The Internal Revenue Service ("IRS") determined
and informed the Company by a letter dated October 10, 1995, that the
Plan and related trust are designed in accordance with applicable
sections of the Internal Revenue Code ("Code"). Although the Plan was
amended subsequent to that date, the Benefits Committee and the
Company's counsel believe that the Plan was designed and operated in
compliance with the requirements of the Code. As a result, the
Participant's Pre-tax Contributions, up to a specified maximum amount
each calendar year, and the Employer Contributions to the Trust on
behalf of a Participant are not currently taxable to a Participant when
made, and income from any source accruing to a Participant's account is
not taxable when realized by the Trust. Participant withdrawals of
after-tax contributions made to the Plan prior to 1987, are excludable
from the Participant's gross income for federal income tax purposes.
The After-tax Contributions made by a Participant will not be
deductible by the Participant. However, Participant withdrawals of
amounts attributable to earnings on such After-tax Contributions are
subject to federal income tax. Participant withdrawals of amounts
attributable to Pre-tax Contributions or Employer Contributions are
subject to federal income tax when distributed.
4. EARLY RETIREMENT AND SEVERANCE PROGRAMS
During the first quarter of 1996, the Company instituted a
reorganization plan affecting its NorAm Gas Transmission Company and
Mississippi River Transmission Company subsidiaries, pursuant to which
a total of approximately 275 positions were eliminated. Also during the
first quarter of 1996, NorAm's Entex division instituted an early
retirement program which was accepted by approximately 100 employees.
As a result of these early retirement programs, a number of former
employees were terminated from the Plan, thus resulting in an increase
in distributions during 1996.
5. RELATED PARTY TRANSACTIONS
The Trustee is authorized under contract provisions and by ERISA
regulations providing administrative and statutory exemptions, to
invest in funds under its control and in securities of HII. During 1997
and 1996, the Trustee purchased and sold units of HII and the Company's
common stock and American Express Trust Funds as temporary investments,
which are shown below:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C> <C>
Purchases (HII) $ 11,497,638 Purchases (NorAm) $13,920,000
(Trustee) 134,156,049 (Trustee) 65,619,000
Sales (HII) $ 23,155,437 Sales (NorAm) $11,391,000
(Trustee) 91,680,576 (Trustee) 46,941,000
</TABLE>
6. MERGER WITH HOUSTON INDUSTRIES INCORPORATED
On August 6, 1997, the Company merged with and into a subsidiary of HII
and became a wholly owned subsidiary of HII. Consideration for the
purchase of NorAm's Common Stock was a combination of cash and HII
Common Stock. As a result of the merger the Plan Participants received
cash and HII Common Stock as merger consideration in exchange for their
NorAm Common Stock. The cash portion of the merger consideration was
automatically invested based upon Participant investment elections. The
Merger Agreement stipulates that HII, for a period of one year
subsequent to the consummation of the Merger will continue or cause to
be continued, without adverse change to any employee or former
employee, all NorAm benefit plans.
11
<PAGE> 14
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARES AND UNITS)
<TABLE>
<CAPTION>
MATURITY RATE OF PAR CURRENT
DESCRIPTION OF ASSET DATE INTEREST VALUE/SHARES COST VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Guaranteed Investment Contracts
Aetna #LT-13938 01/04/99 8.75% 11,667,638 $ 11,668 $ 11,668
*Houston Industries Incorporated Common Stock Fund 3,322,164 36,829 74,254
*American Express Trust Money Market Fund I 501,131 501 501
*American Express Trust Federal Income Fund 9,429 129 144
*American Express Trust U.S. Government Securities Fund 49,947,419 49,947 49,947
*American Express Trust Equity Index Fund I 1,469,039 26,183 40,064
*American Express Selective Fund, Inc. 2,210,954 20,077 20,242
*American Express Mutual 3,049,120 39,912 41,838
*American Express New Dimensions Fund, Inc. 3,365,958 62,328 80,258
*American Express Diversified Equity Income Fund 570,639 5,412 5,368
*American Express Templeton Foreign Fund 490,040 5,297 4,881
-------- --------
TOTAL $258,283 $329,165
======== ========
Participant Loans, 7% to 10% interest $ 10,106 $ 10,106
======== ========
</TABLE>
*Party-in-interest
12
<PAGE> 15
NORAM ENERGY CORP. EMPLOYEE SAVINGS AND INVESTMENT PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
5% REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
CURRENT VALUE
PURCHASE SELLING EXPENSE COST OF ON TRANSACTION NET GAIN
DESCRIPTION PRICE PRICE INCURRED ASSET DATE OR (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS
Massachusetts Mutual Life Insurance
Contract #5794 $18,875,233 $18,875,233
Money Market Fund I 18,875,233 18,875,233
SERIES OF TRANSACTIONS
*American Express Mutual Fund
94 Purchases 17,869,059 17,869,059
168 Sales 9,084,961 8,138,780 946,181
*American Express New Diminsions
Fund, Inc.
129 Purchases 30,365,121 30,365,121
148 Sales 15,303,074 11,432,502 3,870,572
*American Express Selective Fund, Inc.
234 Purchases 9,139,163 9,139,163
162 Sales 5,911,012 5,884,441 26,571
*American Express U.S. Government
Securities Fund
309 Purchases 35,473,937 35,473,937
140 Sales 25,076,814 25,076,814
*American Express Trust Equity Fund I
118 Purchases 15,107,694 15,107,694
133 Sales 10,037,274 6,786,053 3,251,221
*Houston Industries Incorporated
Common Stock Fund
83 Purchases 11,497,638 11,497,638
164 Sales 23,155,437 13,742,863 9,412,574
*American Express Money Market Fund I
23 Purchases 26,201,075 26,201,075
206 Sales 26,267,441 26,267,441
</TABLE>
*Party-in-interest
13
<PAGE> 16
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the Plan) have duly caused this
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
NORAM ENERGY CORP. EMPLOYEE SAVINGS
AND INVESTMENT PLAN
By /s/ LEE W. HOGAN
---------------------------------------
(Lee W. Hogan, Chairman of the
Benefits Committee of
Houston Industries Incorporated,
Plan Administrator)
Dated: June 24, 1998
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.1 Independent Auditors' Consent Deloitte & Touche L.L.P.
23.2 Consent of Independent Accountants Coopers & Lybrand L.L.P.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-11329 of NorAm Energy Corp. and Subsidiaries on Form S-8 of our report dated
June 24, 1998, appearing in the Annual Report on Form 11-K of the NorAm Energy
Corp. Employee Savings and Investment Plan for the year end December 31, 1997.
DELOITTE & TOUCHE LLP
Houston, Texas
June 29, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
NorAm Energy Corp. and Subsidiaries on Form S-3 (File Nos. 33-64001, 33-41493,
33-52853, and 33-55071) and Form S-8 (File Nos. 2-61923, 33-10806, 33-20594,
33-38063, 33-38064, 33-54241, 33-54247, and 33-54253) of our report dated June
6, 1997, on our audit of the NorAm Energy Corp. Employee Savings and Investment
Plan as of December 31, 1996, and for the year then ended, which report is
included in this Annual Report on Form 11-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
June 29, 1998
