<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:
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS 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' Report, 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
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN:
We have audited, by fund and in total, the accompanying financial statements of
the Minnegasco Division Employee Retirement Savings Plan ("Plan") as of December
31, 1997 and 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 provide 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 was 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 Plan's
management. Such 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
1
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN:
We have audited the accompanying statement of net assets available for benefits
of the Minnegasco Division Employees' Retirement Savings 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 Minnegasco
Division Employees' Retirement Savings 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 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.
Minneapolis, Minnesota
June 20, 1997
2
<PAGE> 5
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1997
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
----------------------------------------------------------------------------------------
HII IDS U.S. IDS
COMMON GOVERNMENT IDS IDS DIVERSIFIED IDS EQUITY
STOCK SECURITIES SELECTIVE MUTUAL EQUITY INCOME INDEX
FUND FUND FUND, INC. FUND FUND FUND I
------------ ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
HII COMMON STOCK $ 23,039,385
IDS U.S. GOVERNMENT SECURITIES FUND $ 8,149,090
IDS SELECTIVE FUND $ 5,417,098
IDS MUTUAL FUND $ 14,352,963
IDS DIVERSIFIED EQUITY INCOME FUND $ 18,651,647
IDS EQUITY INDEX FUND $ 14,651,014
IDS NEW DIMENSIONS FUND
TEMPLETON FOREIGN FUND
PARTICIPANT LOANS
------------ ----------- ----------- ------------ ------------ ------------
TOTAL 23,039,385 8,149,090 5,417,098 14,352,963 18,651,647 14,651,014
------------ ----------- ----------- ------------ ------------ ------------
RECEIVABLES
ACCRUED INCOME RECEIVABLE 302,685 38,256
FUND TRANSFERS (77,250) 2,214 (3,414) 20,400 20,200
------------ ----------- ----------- ------------ ------------ ------------
TOTAL 225,435 40,470 (3,414) 20,400 20,200
------------ ----------- ----------- ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 23,264,820 $ 8,189,560 $ 5,413,684 $ 14,373,363 $ 18,671,847 $ 14,651,014
============ =========== =========== ============ ============ ============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
----------------------------------------------------------------
IDS NEW TEMPLETON
DIMENSIONS FOREIGN PARTICIPANT
FUND FUND LOANS TOTAL
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS
HII COMMON STOCK $ 23,039,385
IDS U.S. GOVERNMENT SECURITIES FUND 8,149,090
IDS SELECTIVE FUND 5,417,098
IDS MUTUAL FUND 14,352,963
IDS DIVERSIFIED EQUITY INCOME FUND 18,651,647
IDS EQUITY INDEX FUND 14,651,014
IDS NEW DIMENSIONS FUND $ 24,239,079 24,239,079
TEMPLETON FOREIGN FUND $ 4,253,357 4,253,357
PARTICIPANT LOANS $ 1,860,430 1,860,430
------------ ----------- ----------- -------------
TOTAL 24,239,079 4,253,357 1,860,430 114,614,063
------------ ----------- ----------- -------------
RECEIVABLES
ACCRUED INCOME RECEIVABLE 340,941
FUND TRANSFERS 18,950 18,900
------------ ----------- ----------- -------------
TOTAL 18,950 18,900 340,941
------------ ----------- ----------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 24,258,029 $ 4,272,257 $ 1,860,430 $ 114,955,004
============ =========== =========== =============
</TABLE>
See notes to financial statements.
3
<PAGE> 6
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1996
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
----------------------------------------------------------------------------------------
NorAm ENERGY
CORP. POOLED IDS U.S. IDS
COMMON GOVERNMENT IDS IDS DIVERSIFIED IDS EQUITY
STOCK SECURITIES SELECTIVE MUTUAL EQUITY INCOME INDEX
FUND FUND FUND, INC. FUND FUND FUND I
------------ ----------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS
NorAm ENERGY CORP. COMMON STOCK $ 28,829,351
IDS U.S. GOVERNMENT SECURITIES FUND $ 7,876,110
IDS SELECTIVE FUND $ 4,653,187
IDS MUTUAL FUND $ 11,421,006
IDS DIVERSIFIED EQUITY INCOME FUND $ 13,643,397
IDS EQUITY INDEX FUND $ 9,733,364
IDS NEW DIMENSIONS FUND
TEMPLETON FOREIGN FUND
CASH, NON-INTEREST BEARING 14,860 16,148 15,134 38,116 51,738 27,811
PARTICIPANT LOANS
------------ ----------- ----------- ------------ ------------ -----------
TOTAL 28,844,211 7,892,258 4,668,321 11,459,122 13,695,135 9,761,175
------------ ----------- ----------- ------------ ------------ -----------
RECEIVABLES
ACCRUED INCOME RECEIVABLE 34,152
FUND TRANSFERS 152,326
------------ ----------- ----------- ------------ ------------ -----------
TOTAL 186,478
------------ ----------- ----------- ------------ ------------ -----------
NET ASSETS AVAILABLE FOR BENEFITS $ 28,844,211 $ 8,078,736 $ 4,668,321 $ 11,459,122 $ 13,695,135 $ 9,761,175
============ =========== =========== ============ ============ ===========
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
-------------------------------------------------------------
IDS NEW TEMPLETON
DIMENSIONS FOREIGN PARTICIPANT
FUND FUND LOAN FUND TOTAL
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS
NorAm ENERGY CORP. COMMON STOCK $ 28,829,351
IDS U.S. GOVERNMENT SECURITIES FUND 7,876,110
IDS SELECTIVE FUND 4,653,187
IDS MUTUAL FUND 11,421,006
IDS DIVERSIFIED EQUITY INCOME FUND 13,643,397
IDS EQUITY INDEX FUND 9,733,364
IDS NEW DIMENSIONS FUND $ 16,895,399 16,895,399
TEMPLETON FOREIGN FUND $ 2,608,013 2,608,013
CASH, NON-INTEREST BEARING 70,408 22,196 256,411
PARTICIPANT LOANS $ 1,757,546 1,757,546
------------ ----------- ----------- ------------
TOTAL 16,965,807 2,630,209 1,757,546 97,673,784
------------ ----------- ----------- ------------
RECEIVABLES
ACCRUED INCOME RECEIVABLE 34,152
FUND TRANSFERS (152,326)
------------ ----------- ----------- ------------
TOTAL (152,326) 34,152
------------ ----------- ----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 16,813,481 $ 2,630,209 $ 1,757,546 $ 97,707,936
============ =========== =========== ============
</TABLE>
See notes to financial statements.
4
<PAGE> 7
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
---------------------------------------------------------------------------------------
HII IDS U.S. IDS
COMMON GOVERNMENT IDS IDS DIVERSIFIED IDS EQUITY
STOCK SECURITIES SELECTIVE MUTUAL EQUITY INCOME INDEX
FUND FUND FUND, INC. FUND FUND FUND I
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 432,344
Dividends
Common Stock $ 1,119,457
Mutual Funds $ 365,840 $ 2,042,715 $ 2,361,847 $ 94
NET APPRECIATION/
(DEPRECIATION) IN FAIR
VALUE OF INVESTMENTS 5,524,255 (27,047) 43,914 98,520 508,521 3,287,985
------------ ------------ ------------ ------------ ------------ ------------
Total 6,643,712 405,297 409,754 2,141,235 2,870,368 3,288,079
------------ ------------ ------------ ------------ ------------ ------------
CONTRIBUTIONS
Participants 286,411 281,591 232,120 633,297 900,207 516,879
Employer 104,152 97,311 85,307 218,361 305,933 180,610
------------ ------------ ------------ ------------ ------------ ------------
Total 390,563 378,902 317,427 851,658 1,206,140 697,489
------------ ------------ ------------ ------------ ------------ ------------
FUND TRANSFERS (9,210,730) 625,180 501,524 1,072,918 1,842,203 1,643,849
------------ ------------ ------------ ------------ ------------ ------------
FORFEITURES APPLIED
AGAINST ADMINISTRATIVE
EXPENSES (7,987) 28,887 (1,944) (4,469) (2,296) (1,451)
------------ ------------ ------------ ------------ ------------ ------------
BENEFIT PAYMENTS (3,394,949) (1,327,442) (481,398) (1,147,101) (939,703) (738,127)
------------ ------------ ------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS (5,579,391) 110,824 745,363 2,914,241 4,976,712 4,889,839
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 28,844,211 8,078,736 4,668,321 11,459,122 13,695,135 9,761,175
------------ ------------ ------------ ------------ ------------ ------------
END OF YEAR $ 23,264,820 $ 8,189,560 $ 5,413,684 $ 14,373,363 $ 18,671,847 $ 14,651,014
============ ============ ============ ============ ============ ============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
---------------------------------------------------------
IDS NEW TEMPLETON
DIMENSIONS FOREIGN PARTICIPANT
FUND FUND LOANS TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 432,344
Dividends $ 102,884 102,884
Common Stock 1,119,457
Mutual Funds $ 1,798,065 $ 472,544 7,041,105
NET APPRECIATION/
(DEPRECIATION) IN FAIR
VALUE OF INVESTMENTS 2,528,029 (279,795) 11,684,382
------------ ------------ ------------ ------------
Total 4,326,094 192,749 102,884 20,380,172
------------ ------------ ------------ ------------
CONTRIBUTIONS
Participants 1,214,287 431,339 4,496,131
Employer 417,467 138,137 1,547,278
------------ ------------ ------------ ------------
Total 1,631,754 569,476 6,043,409
------------ ------------ ------------ ------------
FUND TRANSFERS 2,441,793 1,083,263
------------ ------------ ------------ ------------
FORFEITURES APPLIED
AGAINST ADMINISTRATIVE
EXPENSES (8,711) (2,029)
------------ ------------ ------------ ------------
BENEFIT PAYMENTS (946,382) (201,411) (9,176,513)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 7,444,548 1,642,048 102,884 17,247,068
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS:
BEGINNING OF YEAR 16,813,481 2,630,209 1,757,546 97,707,936
------------ ------------ ------------ ------------
END OF YEAR $ 24,258,029 $ 4,272,257 $ 1,860,430 $114,955,004
============ ============ ============ ============
</TABLE>
See notes to financial statements.
5
<PAGE> 8
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
---------------------------------------------------------------------------------------
NorAm ENERGY
CORP. POOLED IDS U.S IDS
COMMON GOVERNMENT IDS IDS DIVERSIFIED IDS EQUITY
STOCK SECURITIES SELECTIVE MUTUAL EQUITY INCOME INDEX
FUND FUND FUND, INC. FUND FUND FUND I
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest
Net Increase in Collective
Investment Funds $ 355,338 $ 1,805,300
NET APPRECIATION IN
FAIR VALUE OF INVESTMENTS
$ 13,394,223 $ 101,695 $ 1,405,913 $ 2,142,570
------------ ------------ ------------ ------------ ------------ ------------
Total 13,394,223 355,338 101,695 1,405,913 2,142,570 1,805,300
------------ ------------ ------------ ------------ ------------ ------------
CONTRIBUTIONS
Participants 213,542 229,913 252,282 640,580 812,023 438,568
Employer 70,800 86,351 89,840 221,715 279,359 152,272
------------ ------------ ------------ ------------ ------------ ------------
Total 284,342 316,264 342,122 862,295 1,091,382 590,840
------------ ------------ ------------ ------------ ------------ ------------
FUND TRANSFERS (1,500,971) 1,314,430 (501,887) (291,607) 37,120 85,695
------------ ------------ ------------ ------------ ------------ ------------
FORFEITURES APPLIED
AGAINST ADMINISTRATIVE
EXPENSES (1,456) (12,276) (1,340) (2,175) (2,875) (5,647)
------------ ------------ ------------ ------------ ------------ ------------
BENEFIT PAYMENTS (2,619,117) (1,079,719) (409,282) (845,285) (665,144) (966,311)
------------ ------------ ------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 9,557,021 894,037 (468,692) 1,129,141 2,603,053 1,509,877
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS
BEGINNING OF YEAR 19,287,190 7,184,699 5,137,013 10,329,981 11,092,082 8,251,298
------------ ------------ ------------ ------------ ------------ ------------
END OF YEAR $ 28,844,211 $ 8,078,736 $ 4,668,321 $ 11,459,122 $ 13,695,135 $ 9,761,175
============ ============ ============ ============ ============ ============
<CAPTION>
PARTICIPANT INVESTMENT FUNDS
------------------------------------------------------------------------
IDS NEW IDS TEMPLETON
DIMENSIONS INTERNATIONAL FOREIGN PARTICIPANT
FUND FUND FUND LOANS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 148,534 $ 148,534
Net Increase in Collective
Investment Funds 2,160,638
NET APPRECIATION IN
FAIR VALUE OF INVESTMENTS
$ 3,187,018 $ 7,947 $ 317,919 20,557,285
------------ ------------ ------------ ------------ ------------
Total 3,187,018 7,947 317,919 148,534 22,866,457
------------ ------------ ------------ ------------ ------------
CONTRIBUTIONS
Participants 1,088,757 380,227 4,055,892
Employer 373,615 117,504 1,391,456
------------ ------------ ------------ ------------ ------------
Total 1,462,372 497,731 5,447,348
------------ ------------ ------------ ------------ ------------
FUND TRANSFERS 439,789 (1,543,418) 1,960,849
------------ ------------ ------------ ------------ ------------
FORFEITURES APPLIED
AGAINST ADMINISTRATIVE
EXPENSES (7,071) (1,285) (34,125)
------------ ------------ ------------ ------------ ------------
BENEFIT PAYMENTS (754,180) (145,005) 4,783 (7,479,260)
------------ ------------ ------------ ------------ ------------
CHANGE IN NET ASSETS
AVAILABLE FOR BENEFITS 4,327,928 (1,535,471) 2,630,209 153,317 20,800,420
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS
BEGINNING OF YEAR 12,485,553 1,535,471 1,604,229 76,907,516
------------ ------------ ------------ ------------ ------------
END OF YEAR $ 16,813,481 $ 0 $ 2,630,209 $ 1,757,546 $ 97,707,936
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
6
<PAGE> 9
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1. ACCOUNTING POLICIES
In accordance with the provisions of the Minnegasco Division Employees'
Retirement Savings Plan ("Plan"), of the Minnegasco Division (the
"Company" or "Minnegasco") of NorAm Energy Corp. ("NorAm") (see Note
5), the financial records of the Plan are generally kept and the
valuations of accounts of participating employees ("Participants") are
determined on the accrual basis. Interest income is recorded as earned
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. Investments in common stock are stated at quoted
market prices of the stock on the last day of business of the year.
Purchases and sales of investments are recorded on their trade date.
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
GENERAL
The Plan is a defined contribution plan formed by the combination of
two previously separate benefit programs. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The Plan is an eligible individual account plan as
defined by ERISA Section 407((d)(3)) which is authorized to acquire and
hold qualifying employee securities (as defined by ERISA Section
407((d)(3)) with a value in excess of ten percent of the fair market
value of the assets of the Plan.
The Retirement Savings Plan program was added to the Plan in 1983 to
provide employees a pre-tax savings option. As of January 1, 1990, the
Stock Purchase Plan is no longer available to employees as the
collective bargaining groups who previously participated in the Stock
Purchase Plan have elected to participate in the Retirement Savings
Plan. Contributions are no longer made to the Stock Purchase Plan.
The Benefits Committee ("Committee") appointed by the Board of
Directors of Houston Industries Incorporated ("HII"), is responsible
for directing American Express Bank & Trust ("Trustee"), in the day to
day administration of the Plan. All administrative expenses not paid by
Minnegasco are borne by the Plan.
7
<PAGE> 10
INVESTMENT PROGRAMS
Retirement Savings Plan participants direct the investment of
contributions allocated to their accounts to one or more of the
following investment funds held by the Trustee:
HII COMMON STOCK FUND: Invested primarily in shares of common stock of
HII (formerly NorAm Energy Corp. Pooled Common Stock Fund). See note 5
regarding the merger of HII and NorAm.
IDS 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.
IDS SELECTIVE FUND INC.: Invests in a portfolio of primarily
high-quality corporate bonds, government securities and money market
securities.
IDS MUTUAL FUND: 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.
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.
IDS EQUITY INDEX FUND I: Invests primarily in medium-to-large,
well-established companies offering both long-term capital appreciation
and income potential.
IDS NEW DIMENSIONS FUND: 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.
Templeton Foreign Fund: Invests primarily in common stocks of companies
outside the U.S., as well as preferred stocks and certain debt
securities.
As of December 31, 1997 and 1996, the number of participants in each
fund was as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
HII Common Stock Fund (NorAm Energy Corp. for 1996) 1,218 1,207
IDS U.S. Government Securities Fund 867 889
IDS Selective Fund, Inc. 854 894
IDS Mutual Fund 1,059 1,023
IDS Diversified Equity Income Fund 1,195 1,110
IDS Equity Index Fund I 1,035 933
IDS New Dimensions Fund 1,278 1,173
Templeton Foreign Fund 679 575
</TABLE>
8
<PAGE> 11
PARTICIPANT ACCOUNTS
Each Participant's account is credited with the Participant's and
Minnegasco's contributions, and an allocation of the Plan's earnings.
Earnings allocations are based on Participant account balances as
defined by the Plan.
The allocation of the Participant's contributions to the investment
funds is selected by the Participant and may be changed at any time.
Allocation between funds is at the discretion of the Participant.
Contributions for each calendar month shall be deemed to have been
deposited as of the last day of such month for purposes of allocating
investment earnings.
PARTICIPATION
Eligible employees may contribute up to 12% of their earnings to the
Retirement Savings Plan as pre-tax savings contributions. Company's
matching contributions are equal to 50% of the first 6% of employee
pre-tax contributions. Participants of the Retirement Savings Plan can
also designate that their portion of the Company contribution to the
DEI Flexible Benefits Plan be contributed to the Retirement Savings
Plan. The Company does not match these additional contributions.
However, by Resolution of the Board of Directors of HII, HII has the
discretion to determine the matching contribution from year to year and
may specify a zero percentage.
The Retirement Savings Plan is available to all full-time employees
with at least 30 days of service, part-time employees scheduled to work
more than 1,000 hours per year with at least 30 days of experience, and
other part time employees with one year of service. The Plan is not
available to employees covered by a collective bargaining agreement
unless the bargaining agreement expressly provides that such employee
will be eligible to participate. In addition the Plan is not available
to non-resident aliens, interns, temporary employees, seasonal
employees, and leased employees.
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
later of (i) the Participant's attainment of age 65 or (ii) the fifth
anniversary of the Participant's commencement of participation in the
Plan. 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>
Vesting Service Vested
Years Percentage
--------------- ----------
<S> <C>
Less than three ............................ 0%
Three but less than four ................... 50%
Four but less than five .................... 75%
Five or more ............................... 100%
</TABLE>
Any portion of the value of the Company's contributions not vested will
be forfeited. The amount forfeited by a Participant is applied to
reduce the respective Company's subsequent contribution to the Plan.
A terminated Participant may elect a lump sum distribution or
installment payments of the vested amount accumulated in each
participant's account. Immediate lump sum distributions are made for
accounts which do not exceed $3,500.
9
<PAGE> 12
PARTICIPANT LOANS
A Participant may borrow up to 50% of their vested account balance, up
to a maximum of $50,000, reduced by the excess, if any, of the highest
outstanding loan balance during the previous 12 months of loans issued
to the Participant from all plans maintained by Minnegasco 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
loan from the Plan on the date on which such loan is made ($1,000
minimum). A Participant may have only one loan outstanding at any one
time. Interest rates are fixed for the term of the loan at the time of
loan origination and ranged from 9.25% to 9.5% on loans originated
during 1997 and ranged from 8.25% 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
Although it has not expressed any intent to do so, HII has the right
under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, Participants will become 100% vested in their
accounts and the Plan assets will be distributed by the trustee only
after the occurrence of death, disability, retirement or other
termination of employment or pursuant to the Plan's withdrawal
provisions.
3. FEDERAL INCOME TAXES
No provision for federal income taxes has been made in the financial
statements of the Plan. The Internal Revenue Service determined and
informed Minnegasco, by letter dated October 10, 1995 that the Plan, as
amended, qualifies under Section 401(a) and 401(k) of the Internal
Revenue Code ("Code") and is exempt from federal taxes under the
provisions of Section 501 (a). Although the Plan was amended, the
Committee and the Minnegasco'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. The
After-tax Contributions made by a Participant will not be deductible by
the Participant. However, Participant withdrawals of After-tax
Contributions made to the Plan prior to May 3, 1994, are excludable
from the Participant's gross income for federal income tax purposes.
The continued status of the Trust as a tax-exempt trust and the Plan as
a qualified plan are contingent upon the continuing operation of the
Trust and the Plan in accordance with applicable provisions of the
Code.
4. 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 NorAm Common
Stock and IDS Trust Funds as temporary investments, which are shown
below (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C> <C>
Purchases (HII) $ 3,524,761 Purchases (NorAm) $ 2,444,166
(Trustee) 33,691,803 (Trustee) 14,825,298
Sales (HII) $ 32,300,714 Sales (NorAm) $ 4,844,911
(Trustee) 17,711,722 (Trustee) 11,255,745
</TABLE>
10
<PAGE> 13
5. MERGER WITH HOUSTON INDUSTRIES INCORPORATED
On August 6, 1997, Minnegasco's parent NorAm 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 merger consideration received 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
Item 27a-Schedule of Assets Held for Investment Purposes
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
CURRENT
DESCRIPTION OF ASSET SHARES COST VALUE
- ---------------------------------------------- --------- ------------- -------------
<S> <C> <C> <C>
*Houston Industries Incorporated Common Stock 1,002,937 $ 8,928,820 $ 23,039,385
*IDS U.S. Government Securities Fund 8,149,090 8,149,090 8,149,090
*IDS Selective Fund, Inc. 590,098 5,338,855 5,417,098
*IDS Mutual Fund 1,047,351 13,513,276 14,352,963
*IDS Diversified Equity Income Fund 1,985,484 16,717,554 18,651,647
*IDS Equity Index Fund I 537,612 9,028,602 14,651,014
*IDS New Dimensions Fund 1,015,803 18,589,583 24,239,079
Templeton Foreign Fund 427,473 4,450,785 4,253,357
------------- -------------
TOTAL $ 84,716,565 $ 112,753,633
============= =============
Participant Loans, 8.25% to 10% $ 1,860,430 $ 1,860,430
============= =============
</TABLE>
*Party-in-interest
12
<PAGE> 15
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
SUPPLEMENTAL SCHEDULE OF INVESTMENTS
LINE 27(d)--SCHEDULE OF 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> <C>
SINGLE TRANSACTIONS
*HII Common Stock Fund
1 Sale (303,083 Shares) $ 5,351,846 $ 2,431,635 $2,920,211
SERIES OF TRANSACTIONS-SAME BROKER
*HII Common Stock Fund
59 Purchases (72,457 Shares) $ 1,347,548 $ 1,347,548
135 Sales (767,105 Shares) 13,466,379 6,139,665 7,326,714
SERIES OF TRANSACTIONS-SAME SECURITY
*HII Common Stock Fund
64 Purchases (118,141 Shares) 2,177,213 2,177,213
138 Sales (768,040 Shares) 13,482,489 6,147,206 7,335,283
*IDS Mutual Fund
110 Purchases (346,757 Shares) 4,938,832 4,938,832
105 Sales (146,464 Shares) 2,081,266 1,825,524 255,742
*IDS Diversified Equity Income Fund
194 Purchases (624,797 Shares) 6,036,843 6,036,843
96 Sales (158,625 Shares) 1,536,907 1,277,218 259,689
*IDS New Dimensions Fund
127 Purchases (359,038 Shares) 8,562,214 8,562,214
107 Sales (159,110 Shares) 3,747,587 2,638,062 1,109,525
Templeton Foreign Fund
123 Purchases (308,456 Shares) 3,384,611 3,384,611
76 Sales (132,732 Shares) 1,479,906 1,362,435 117,471
*IDS U.S. Government Securities Fund
203 Purchases (6,622,128 Shares) 6,622,128 6,622,128
136 Sales (6,349,151 Shares) 6,349,151 6,349,151 0
*IDS Equity Index Fund I
120 Purchases (167,382 Shares) 4,147,175 4,147,175
84 Sales (104,426 Shares) 2,516,905 1,575,720 941,185
</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.
MINNEGASCO DIVISION EMPLOYEES' RETIREMENT SAVINGS PLAN
By /s/ LEE W. HOGAN
-----------------------------------------------
(Lee W. Hogan, Chairman of the
Benefits Committee of
Houston Industries Incorporated,
Plan Administrator)
June 24, 1998
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
23.1 Independent Auditors' Consent Deloitte & Touche LLP
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 Minnegasco
Division Employees' Retirement Savings 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 HII 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 20, 1997,
on our audit of the Minnegasco Division Employees' Retirement Savings 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
