UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
Commission File Number 1-3423
ENRON CORP.
(Exact name of registrant as specified in its charter)
Delaware 47-0255140
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Enron Building
1400 Smith Street
Houston, Texas 77002
(Address of principal executive (Zip Code)
offices)
(713) 853-6161
(Registrant's telephone number, including area code)
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 12 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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at October 31, 1994
Common Stock, $.10 Par Value 252,961,891 shares
1 of 28
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ENRON CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Income - Three
Months Ended September 30, 1994 and 1993 and
Nine Months Ended September 30, 1994 and 1993 3
Consolidated Balance Sheet - September 30, 1994
and December 31, 1993 4
Consolidated Statement of Cash Flows - Nine
Months Ended September 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 27
ITEM 6. Exhibits and Reports on Form 8-K 27
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues $1,997,399 $1,933,666 $6,344,887 $5,698,236
Costs and Expenses
Cost of gas sold 1,012,190 923,969 3,259,130 2,695,590
Cost of other products sold 464,699 400,875 1,371,695 1,262,441
Operating expenses 241,860 301,518 714,128 749,408
Amortization of deferred contract
reformation costs 20,593 21,667 65,490 65,745
Oil and gas exploration expenses 19,531 16,196 57,814 43,899
Depreciation, depletion and amortizatio 103,350 111,343 328,222 329,571
Taxes, other than income taxes 23,703 17,755 77,873 75,934
1,885,926 1,793,323 5,874,352 5,222,588
Operating Income 111,473 140,343 470,535 475,648
Other Income and Deductions
Equity in earnings of unconsolidated
subsidiaries 36,505 7,059 74,183 53,821
Interest income 8,068 7,570 25,560 20,035
Other, net 48,523 13,774 139,063 39,166
Income before Interest, Minority Interest
and Income Taxes 204,569 168,746 709,341 588,670
Interest and Related Charges, net 64,783 74,188 201,875 222,496
Dividends on Preferred Stock of Subsidiary 5,362 - 13,912 -
Minority Interest 8,193 7,151 21,088 19,897
Income Taxes 30,236 66,499 127,807 117,895
Net Income 95,995 20,908 344,659 228,382
Preferred Stock Dividends 3,702 4,132 11,145 12,947
Earnings on Common Stock $ 92,293 $ 16,776 $ 333,514 $ 215,435
Earnings Per Share of Common Stock
Primary $ 0.38 $ 0.07 $ 1.37 $ 0.90
Fully diluted $ 0.36 $ 0.07 $ 1.30 $ 0.86
Average Number of Common Shares Used in
Primary Computation 243,858 239,688 243,150 238,400
Average Number of Common Shares Used in
Fully Diluted Computation 266,465 244,764 265,992 266,352
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
3
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<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 199,342 $ 140,240
Trade receivables 511,357 783,603
Other receivables 146,879 205,956
Transportation and exchange gas receivable 81,421 102,887
Inventories 134,910 197,737
Deferred contract reformation costs 60,197 103,520
Assets from price risk management activities 603,503 279,715
Other 180,411 204,952
1,918,020 2,018,610
Investments and Other Assets
Investments in and advances to
unconsolidated subsidiaries 1,156,991 697,084
Deferred contract reformation costs 138,672 168,479
Assets from price risk management activities 1,191,173 887,342
Other 1,072,326 1,010,028
3,559,162 2,762,933
Property, Plant and Equipment, at cost 10,936,750 10,886,858
Less accumulated depreciation, depletion
and amortization 4,254,941 4,164,086
6,681,809 6,722,772
Total Assets $12,158,991 $11,504,315
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
4
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<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
1994 1993
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 696,938 $ 1,477,290
Transportation and exchange gas payable 105,710 98,569
Accrued taxes 81,202 88,837
Accrued interest 56,642 53,292
Liabilities from price risk management
activities 848,255 609,403
Other 228,657 348,198
2,017,404 2,675,589
Long-Term Debt 3,417,664 2,661,240
Deferred Credits and Other Liabilities
Deferred income taxes 1,955,456 1,860,237
Deferred revenue 267,549 327,802
Liabilities from price risk management
activities 528,132 330,209
Other 610,540 615,839
3,361,677 3,134,087
Minority Interests 202,646 196,275
Preferred Stock of Subsidiary Company 288,750 213,750
Shareholders' Equity
Preferred stock, cumulative, $100 par value - -
Preference stock, cumulative, $1 par value - -
Second preferred stock, cumulative,
$1 par value 141,078 149,668
Common stock, $0.10 par value 25,251 24,910
Additional paid in capital 1,785,840 1,707,938
Retained earnings 1,294,861 1,104,986
Cumulative foreign currency translation
adjustment (151,225) (138,704)
Other, including Flexible Equity Trust (224,955) (225,424)
2,870,850 2,623,374
Total Liabilities and Shareholders' Equity $12,158,991 $11,504,315
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Cash Flows From Operating Activities
Reconciliation of net income to net cash
provided by (used in) operating activities
Net income $ 344,659 $ 228,382
Depreciation, depletion and amortization 328,222 329,571
Oil and gas exploration expenses 57,813 43,899
Amortization of deferred contract
reformation costs 65,490 65,745
Deferred income taxes 66,046 40,970
Gain on sale of assets (79,691) (24,138)
Regulatory, litigation and other contingency
adjustments (27,106) 12,235
Changes in components of working capital (471,238) (24,830)
Deferred contract reformation costs (46,030) (115,398)
Deferred revenues (5,320) 9,193
Net assets from price risk management activities (190,844) (135,733)
Other, net (72,486) (193,462)
Net Cash Provided by (Used in) Operating Activities (30,485) 236,434
Cash Flows From Investing Activities
Proceeds from sale of assets and investments 272,830 192,126
Additions to property, plant and equipment (448,316) (434,972)
Amortization of production payments (32,419) (70,351)
Equity investments (375,859) (268,978)
Other investments (39,624) (61,811)
Net Cash Used in Investing Activities (623,388) (643,986)
Cash Flows From Financing Activities
Issuance of long-term debt 39,871 566,402
Net increase in short-term borrowings 876,146 366,125
Decrease in long-term debt (159,966) (317,689)
Acquisition of treasury stock (3,124) (87,956)
Issuance of treasury stock - 18,913
Issuance of common stock 60,080 12,063
Issuance of preferred stock 72,787 -
Dividends paid (172,819) (140,605)
Decrease in other long-term obligations - (22,757)
Decrease in receivable from ESOP - 10,000
Net Cash Provided by Financing Activities 712,975 404,496
Increase (Decrease) in Cash and Cash Equivalents 59,102 (3,056)
Cash and Cash Equivalents, Beginning of Period 140,240 141,689
Cash and Cash Equivalents, End of Period $ 199,342 $ 138,633
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
6
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein
have been prepared by Enron Corp. (Enron) without audit
pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, these statements reflect
all adjustments (consisting only of normal recurring
entries) which are, in the opinion of management, necessary
for a fair statement of the financial results for the
interim periods. Certain information and notes normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
Enron believes that the disclosures are adequate to make the
information presented not misleading. These consolidated
financial statements should be read in conjunction with the
financial statements and the notes thereto incorporated into
Enron's Annual Report on Form 10-K for the year ended
December 31, 1993 (Form 10-K).
Certain reclassifications have been made in the 1993
amounts to conform with the 1994 presentation.
"Enron" is used from time to time herein as a collective
reference to Enron Corp. and its subsidiaries and
affiliates, which are from time to time referenced herein
for reporting purposes as business segments. In material
respects, the businesses of Enron are conducted by the
subsidiaries and affiliates whose operations are managed by
their respective officers.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes for the first nine months of
1994 and 1993 was $44.8 million and $15.9 million,
respectively. Cash paid for interest expense for the same
periods, net of amounts capitalized, was $192.1 million and
$187.3 million, respectively.
Changes in components of working capital for the first
nine months of 1994 and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Receivables $ (52,967) $(70,004)
Inventories (23,357) (5,125)
Prepayments 16,300 (19,285)
Payables (327,251) (28,322)
Accrued taxes 2,475 38,218
Accrued interest 3,350 17,322
Other (89,788) 42,366
$(471,238) $(24,830)
</TABLE>
7
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PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. LITIGATION
As reported in the Form 10-K, TransAmerican Natural Gas
Corporation (TransAmerican) has filed a petition against
Enron Corp. and Enron Oil & Gas Company (EOG) alleging
breach of confidentiality agreements, misappropriation of
trade secrets and unfair competition with respect to four
tracts in Webb County, Texas, which EOG leased for their oil
and gas exploration and development potential.
TransAmerican seeks actual damages of $100 million and
exemplary damages of $300 million. EOG has filed claims
against TransAmerican and its sole shareholder alleging
common law fraud, negligent misrepresentation and breach of
state antitrust laws. On April 6, 1994, Enron Corp. was
granted summary judgment, wherein the court ordered that
TransAmerican take nothing on its claims against Enron Corp.
As to EOG, the trial date, which was most recently set for
September 12, 1994, has been continued and there is no
current setting. Although no assurances can be given, Enron
Corp. and EOG believe that TransAmerican's claims are
without merit. Enron Corp. believes that the ultimate
resolution of this matter will not have a materially adverse
effect on its financial position or results of operations.
As reported in the Form 10-K, a pipeline company in which
an Enron affiliate has a minority interest and for which an
Enron affiliate has served as operator, has filed a petition
against Enron and certain affiliates alleging an unspecified
amount of damages relating to the operation of such pipeline
company. Based upon information currently available, it is
not possible to predict the outcome of such litigation;
however, Enron believes that the result will not have a
materially adverse effect on Enron's financial position or
results of operations.
In connection with Florida Gas Transmission's (FGT, an
indirect 50% owned subsidiary of Enron) Phase III pipeline
expansion, on September 16, 1994, the Florida Department of
Environmental Protection (FDEP) entered an order suspending
FGT's construction activities in wetland areas in Florida
alleging that certain construction activities failed to
conform with permits previously issued by that agency. The
FDEP also instituted administrative proceedings for the
imposition of civil penalties for such alleged violations.
On September 23, 1994, FGT and the FDEP entered into a
consent order in which the FDEP lifted its suspension of
construction south of Suwannee County, Florida and agreed to
lift its suspension on northern Florida wetlands areas
construction upon FGT's adoption of certain oversight,
training and wetlands restoration and mitigation practices,
payment of $210,000 into the FDEP's Pollution Recovery Fund
and reimbursement of another $16,000 in administrative
expenses. The consent order was effective as of September
23, 1994.
8
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Concluded)
ENRON CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On October 7, 1994, the FDEP issued notice of its
intention to assess FGT with an additional civil penalty of
$365,400 for alleged violations of wetlands permits and
regulations in northern Florida. FGT is not contesting the
alleged violations or civil penalties assessed by the FDEP,
and FGT has agreed to pay such penalty. FGT has
substantially increased its efforts to comply with all
requirements for construction in wetlands areas, and
currently estimates that the in-service date for the Phase
III expansion will be February 1, 1995.
4. EOTT ENERGY PARTNERS, L.P.
During March 1994, EOTT Energy Corp. (EOTT), a wholly-
owned subsidiary of Enron, sold its crude oil trading and
transportation operations to EOTT Energy Partners, L.P. (the
EOTT Partnership) in exchange for common and subordinated
units in the EOTT Partnership. EOTT continues to own
approximately 40% of the EOTT Partnership. Accordingly, the
EOTT Partnership's results of operations are reflected as
equity in earnings of unconsolidated subsidiaries for
periods subsequent to March 1994.
5. OTHER INCOME
Significant components of Other Income, Net are as
follows (in millions):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Gains on sales of oil and
gas properties 33.3 11.5 52.2 11.6
Gain on sales of other assets
and investments 2.8 8.7 27.5 12.5
Regulatory litigation and
other contingency adjustments 3.4 (3.8) 27.1 (12.2)
Foreign exchange gains (losses) (1.5) .1 8.2 4.9
Other 10.5 (2.7) 24.1 22.4
48.5 13.8 139.1 39.2
</TABLE>
6. SUBSEQUENT EVENTS
During November 1994, FGT completed the issuance and sale
of $700 million principal amount of Senior Notes in a
privately placed transaction. Proceeds from the offering
were used to refinance funds advanced to FGT in connection
with Phase III (including $150 million advanced from Enron).
9
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Concluded)
ENRON CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the issuance of the FGT Senior Notes,
Enron has agreed to purchase 50% of the FGT Senior Notes
(the Purchase Agreement) at par plus accrued interest in the
event that FGT's largest customer exercises its right to
terminate its Phase III transportation agreement because the
Phase III facilities are not in service to deliver the total
minimum daily transportation quantity specified under the
transportation agreement prior to January 14, 1996. Should
the in-service date of Phase III occur prior to such date,
Enron will be released from its obligation under the
Purchase Agreement. Enron anticipates that the Phase III
expansion will be in service by February 1, 1995 and that it
will incur no liability under the terms of this agreement.
During September 1994, Enron formed Enron Global Power &
Pipelines L.L.C. (EGPP), a Delaware limited liability
company, to own and manage Enron's operating power plant and
natural gas pipeline businesses conducted outside the United
States, Canada and Western Europe. EGPP's initial assets
were contributed by Enron and consist of interests in two
power plants in the Philippines, a power plant in Guatemala
and a natural gas pipeline system in Argentina.
On October 18, 1994, EGPP filed a registration statement
with the Securities and Exchange Commission for the offering
of 8.7 million common shares representing limited liability
interests in EGPP. The registration statement has not yet
become effective. If the proposed offering is completed,
Enron will continue to own a majority interest in EGPP.
Anticipated proceeds from the offering are estimated to be
approximately $200 million and will be used by Enron and
EGPP to reduce indebtedness and for other corporate
purposes.
During October 1994, an explosion occurred at Enron's
methanol plant in Pasadena, Texas. The plant produces
approximately 420,000 gallons of methanol per day,
approximately half of which is used at Enron's MTBE plant.
Enron is currently investigating the explosion to determine
the full extent of any damages; however, based upon business
interruption and casualty insurance coverages, Enron
currently anticipates that the explosion will not have a
material adverse effect on its financial position or results
of operations.
10
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENRON CORP. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Third Quarter 1994
vs. Third Quarter 1993
The following review of Enron's results of operations
should be read in conjunction with the Consolidated
Financial Statements.
CONSOLIDATED NET INCOME
Enron's third quarter 1994 net income increased to
approximately $96.0 million as compared to approximately
$74.9 million during the third quarter of 1993, exclusive of
a primarily non-cash charge to income of $54.0 million to
adjust accumulated deferred tax liabilities due to the
increase in the Federal corporate income tax rate from 34%
to 35%. Net income in the third quarter of 1994 benefited
from increased earnings in all operating segments except
domestic gas processing combined with lower interest
expense. Earnings per share rose to $0.38 in the third
quarter of 1994 from $0.30 in the same period in 1993,
exclusive of $0.23 per share applicable to the primarily non-
cash charge to adjust deferred tax liabilities discussed
above.
INCOME BEFORE INTEREST, MINORITY INTERESTS AND INCOME TAXES
The following table presents income before interest,
minority interests and income taxes (IBIT) for each of
Enron's operating segments (in millions).
<TABLE>
<CAPTION>
Third Quarter Increase
1994 1993 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $ 87 $ 73 $14
Gas Services 47 38 9
Gas Processing (3) 9 (12)
Exploration and Production 53 40 13
International Gas and Power Services 23 22 1
Corporate and Other (2) (13) 11
Total $205 $169 $36
</TABLE>
TRANSPORTATION AND OPERATION
The transportation and operation segment includes Enron's
regulated natural gas pipelines, construction, management
and operation of pipelines, liquids plants and power
facilities and Enron's investment in crude oil marketing and
transportation operations and liquids pipeline operations.
The segment's IBIT increased $14 million during the third
quarter of 1994 as compared to the same period in 1993. The
increase was due primarily to increases in IBIT realized by
the regulated natural
gas pipelines offset by decreases in earnings from Northern
Border
11
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
Pipeline (Northern Border) and EOTT Energy Corp. (EOTT),
resulting from changes in ownership interest discussed
below. Subsequent to the third quarter of 1993, Enron
contributed its investment in Northern Border to Northern
Border Partners, L.P., a master limited partnership (the
Northern Border Partnership) and subsequently sold a portion
of its interest in the Northern Border Partnership.
Additionally, in the first quarter of 1994 EOTT, a wholly-
owned subsidiary of Enron, sold its crude oil trading and
transportation operations to EOTT Energy Partners, L.P. (the
EOTT Partnership). EOTT continues to own approximately 40%
of the EOTT Partnership. The following discussion analyzes
the significant changes in the various components of IBIT
for the transportation and operation segment.
REVENUES
Revenues of the transportation and operation segment
decreased approximately $129 million (38%) during the third
quarter of 1994 as compared to the same period in 1993. The
decrease in revenues primarily reflects reduced sales
revenue at Northern Natural Gas Company (Northern Natural)
as that pipeline is now primarily a transporter of natural
gas. Northern Natural's sales volumes decreased from 351
million cubic feet per day (Mmcf/d) to 78 Mmcf/d and total
transport volumes increased from 3,799 Mmcf/d to 4,130
Mmcf/d when comparing the third quarter of 1993 to the same
period in 1994. Additionally, revenues decreased as a
result of decreased ownership interest in the EOTT
Partnership.
COST OF GAS AND OTHER PRODUCTS SOLD
The cost of gas and other products sold by the
transportation and operation segment decreased by $74
million (87%) during the third quarter of 1994 compared to
the same period in 1993 primarily as a result of decreased
gas purchases by Northern Natural as that pipeline is now
primarily a transporter of natural gas.
OPERATING EXPENSES
Operating expenses in the transportation and operation
segment declined 35% during the third quarter of 1994 as
compared to the same period in 1993. The decline primarily
reflects operating expenses of EOTT being included in the
1993 period and excluded from the 1994 period due to a
decreased ownership interest in the EOTT Partnership,
combined with lower operating expenses of the regulated
natural gas pipelines. The decline in operating expenses of
the regulated natural gas pipelines reflects system
modernization and lower transmission, compression and
storage cost of gas purchased for resale as a result of the
previously discussed transition to being primarily
transporters of natural gas.
Depreciation expense for the transportation and operation
segment decreased $3 million (12%) during the third quarter
of 1994 as compared to the same period in 1993 primarily as
a result of the decreased ownership interest in the EOTT
Partnership.
12
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased $19 million during the third quarter of 1994 as
compared to the same period in 1993 primarily reflecting
increased earnings from Citrus Corp. The increased earnings
are a result of increased allowance for funds used during
construction related to the Phase III expansion of Florida
Gas Transmission's pipeline system (Phase III), improved
sales margins as a result of the renegotiation of the
pricing terms of Citrus' gas sales contract with its largest
customer and a $5.0 million charge recorded by Citrus during
the third quarter of 1993 in connection with the 1% increase
in the corporate Federal income tax rate. In addition,
increased equity earnings from the formation of the EOTT
Partnership during the first quarter of 1994 were offset by
reduced earnings resulting from the decreased ownership
interest in the Northern Border Partnership.
GAS SERVICES
Enron's gas services segment had a $9 million increase in
income before interest, minority interest and income taxes
for the third quarter of 1994 as compared to the third
quarter of 1993. This increase was due primarily to
increased earnings in the Finance business and in the clean
fuels portion of the Liquids business, partially offset by
decreased earnings in the gas operations. The following
discussion analyzes the contributions from the Gas, Finance,
Liquids, and Power business units.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Third Quarter
1994 1993
<S> <C> <C>
Physical/Notional Quantities (BBtu/d) (1)
Firm (2) 6,683 4,617
Interruptible 581 1,069
Transport Volumes 611 620
Financial Settlements (Notional) 18,048 6,029
Total 25,923 12,335
Production Payments and Financings
Arranged (In Millions) $102.0 $ 66.3
Fixed Price Contract Originations
(TBtue) (3) 1,810 872
Liquids Marketing (MMgal) (4)
Domestic NGL Marketed 536 524
International NGL Marketed 118 136
MTBE Marketed 97 76
13
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
<FN>
(1) Billion British thermal units per day.
(2) Commitments to deliver a specified volume of gas at a
fixed or market responsive price.
(3) Trillion British thermal units equivalent.
(4) Million gallons.
</TABLE>
The Gas operations include price risk management and gas
marketing activities as well as physical natural gas trading
and transportation activities. Earnings from these
activities decreased in the third quarter of 1994 as
compared to the third quarter of 1993 as a result of lower
income from fixed price contract originations in 1994.
The Finance business includes activities associated with
production payments and financings arranged. Earnings from
this business increased for the third quarter of 1994 due
primarily to gains associated with certain equity
investments.
The Liquids business of gas services includes the natural
gas liquids (NGL) marketing activities and the Clean Fuels
business, which consists of the methanol and methyl tertiary
butyl ether (MTBE) businesses. Earnings increased in 1994
due to success and development of new products and service
offerings, as well as increased market prices in the Clean
Fuels business. This increase was partially offset by
a decline in the NGL marketing activities due to lower product
prices.
The Power business includes activities such as managing
power-related assets, and marketing and supplying
electricity. This business is continuing the development of
the electric power markets. Earnings were unchanged in
third quarter 1994 as compared to the same period in 1993.
Expenses such as rent, systems expenses and other support
group costs increased in 1994 as compared to 1993 due to
continued expansion into new markets, system upgrades, and
fees for operational asset management.
GAS PROCESSING
The gas processing segment's IBIT decreased $12 million
primarily due to decreased gross margins realized as a
result of hedges placed on production to reduce the price
volatility in this business.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Third Quarter
1994 1993
<S> <C> <C>
Total Production Volumes (MMgal) 341 330
Processing Margin ($/Gal) (1) $0.090 $0.093
<FN>
(1)The 1994 processing margins do not reflect the effects of
hedging.
</TABLE>
14
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT increased
33% to $53 million in the third quarter of 1994 from $40
million in the same period of 1993. The following
discussion analyzes the significant changes in the segment's
results.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Third Quarter
1994 1993
<S> <C> <C>
Wellhead Volumes
Natural Gas (MMcf/d) (1)(3) 672 703
Crude Oil and Condensate (MBbl/d) (1) 12.8 8.4
Natural Gas Liquids (MBbl/d) (1) 0.7 0.5
Wellhead Average Prices
Natural Gas ($/Mcf) (2)(4) $ 1.49 $ 1.92
Crude Oil and Condensate ($/Bbl) (2) 16.70 15.94
Natural Gas Liquids ($/Bbl) (2) 9.68 10.38
Other Natural Gas Marketing
Volumes (MMcf/d) (1)(3) 306 295
Average Gross Revenue ($/Mcf) (2) $ 2.32 $ 2.55
Associated Costs ($/Mcf) (2)(5) 1.96 2.27
Margin ($/Mcf) (2) $ 0.36 $ 0.28
<FN>
(1) Million cubic feet per day or thousand barrels per day,
as applicable.
(2) Dollars per thousand cubic feet or per barrel, as
applicable.
(3) Includes 48 MMcf per day and 103 MMcf per day for the
three-month periods ended September 30, 1994 and 1993,
respectively, delivered under the terms of volumetric
production payment and exchange agreements effective
October 1, 1992, as amended.
(4) Includes an average equivalent wellhead value of
$1.13/Mcf and $1.44/Mcf for the three-month periods ended
September 30, 1994 and 1993, respectively, for the
volumes described in note (3), net of transportation
costs.
(5) Including transportation and exchange differentials.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
decreased from $170 million in the third quarter of 1993 to
$155 million in the third quarter of 1994. The decline
reflects a 22% reduction in wellhead natural gas prices
combined with a 4% reduction in wellhead natural gas
volumes. Volume reductions reflect voluntary curtailments
of up to 25% of maximum deliverability in the United States
during portions of the third quarter of 1994 due to
unfavorable market prices, partially offset by increased
natural gas deliveries in Trinidad and Canada. Increases of
5% and 52% in crude oil and condensate prices and volumes,
respectively, partially offset the decline in wellhead
natural gas revenues discussed above. The crude oil and
condensate volume increases reflect new deliveries from
offshore Trinidad and increased production in the United
States. Other natural gas marketing revenues declined
slightly reflecting lower average prices offset in part by
increased volumes.
15
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities declined from the third quarter of 1993
compared to the same period in 1994 due to 14% lower average
associated costs per Mcf offset in part by a 4% increase in
other natural gas marketing volumes.
Operating and exploration expenses for the exploration
and production segment increased $3 million (6%) during the
third quarter of 1994 when compared to the same period in
1993 primarily reflecting impairments associated with
certain offshore leases.
Depreciation, depletion and amortization (DD&A) expense
decreased $10 million reflecting lower North American
production volumes and a decline in the average DD&A rate
from $0.92 per thousand cubic feet equivalent (Mcfe) in the
third quarter of 1993 to $0.79 per Mcfe in the third quarter
of 1994. The DD&A rate decrease is primarily due to
production from offshore Trinidad at an average DD&A rate
significantly less than the North American average rate and
a tempering of the North American rate as a result of the
curtailment of production associated with higher cost
reserves.
Taxes other than income increased approximately 20%
primarily due to a reduction of franchise taxes resulting
from a refund in the third quarter of 1993 which was
essentially equal to the reductions in state severance taxes
in 1994 due to lower taxable United States wellhead volumes
and lower average prices.
Other income, net increased $21 million due primarily to
gains on sales of oil and gas properties as the exploration
and production segment continued its strategy of fully
utilizing its assets through selected property sales in
optimizing profitability, cash flow and return on
investments.
INTERNATIONAL GAS AND POWER SERVICES
The international segment includes international power,
gas liquids processing and pipeline operations. The
segment's IBIT increased $1 million during the third quarter
of 1994 as compared to the same period in 1993. The
following discussion analyzes the significant changes in the
segment's results.
REVENUES
Revenues for the international segment decreased
primarily due to the transfer of the international gas
liquids marketing operations to gas services in the second
quarter of 1994.
16
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
COSTS AND EXPENSES
The cost of gas and other products sold by the
international segment decreased as a result of the transfer
discussed above. Operating expense increased primarily as a
result of increased international activities.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased by $7 million during the third quarter of 1994
compared to the same period in 1993 reflecting earnings from
two Philippine power plants which began operations in mid
1993 and early 1994, combined with increased earnings from
the Teesside power project and the Argentine pipeline.
INTEREST AND RELATED CHARGES, NET
Interest and related charges, shown net of capitalized
interest, decreased from approximately $74 million in the
third quarter of 1993 to $65 million in the third quarter of
1994. The decrease in interest expense is primarily due to
lower interest rates.
DIVIDENDS ON PREFERRED STOCK OF SUBSIDIARY COMPANY
Dividends on preferred stock of subsidiary company are
related to the issuance of 8.55 million shares of Enron
Capital L.L.C. 8% Cumulative Guaranteed Monthly Income
Preferred Shares in November 1993 and the issuance of 3
million shares of Enron Capital Resources, L.P. 9%
Cumulative Preferred Securities, Series A in August 1994.
INCOME TAXES
Income taxes decreased during the third quarter of 1994
as compared to the third quarter of 1993 primarily as a
result of the adjustment of deferred tax liabilities
recorded in the third quarter of 1993 in connection with the
increase in the corporate Federal income tax rate from 34%
to 35% offset in part by higher pre-tax income.
17
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1994
vs. Nine Months Ended September 30, 1993
The following review of Enron's results of operations
should be read in conjunction with the Consolidated
Financial Statements.
CONSOLIDATED NET INCOME
Enron's net income for the nine months ended September
30, 1994 (the 1994 Period) increased to approximately $345
million as compared to approximately $282 million during the
nine months ended September 30, 1993 (the 1993 Period),
exclusive of a primarily non-cash charge to income of $54
million to adjust accumulated deferred tax liabilities due
to the increase in the corporate Federal income tax rate
from 34% to 35%. The increase in consolidated net income
primarily reflects improved income before interest, minority
interests and income taxes for all of Enron's operating
segments except domestic gas processing as well as lower
interest and related charges. This increase was partially
offset by dividends on preferred stock of subsidiary and
increased income tax expense. Earnings per share rose to
$1.37 in the 1994 Period from 1.13 in the 1993 Period,
exclusive of $0.23 per share applicable to the primarily non-
cash charge to adjust deferred tax liabilities discussed
above.
INCOME BEFORE INTEREST, MINORITY INTERESTS AND INCOME TAXES
The following table presents income before interest,
minority interests and income taxes (IBIT) for each of
Enron's operating segments (in millions).
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Increase
1994 1993 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $314 $278 $ 36
Gas Services 157 109 48
Gas Processing (18) 29 (47)
Exploration and Production 132 103 29
International Gas and Power Services 86 74 12
Corporate and Other 38 (4) 42
Total $709 $589 $120
</TABLE>
TRANSPORTATION AND OPERATION
The transportation and operation segment realized a $36
million increase in IBIT for the 1994 Period as compared to
the 1993 Period. The following discussion analyzes the
significant changes in the various components of IBIT for
the transportation and operation segment.
18
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
REVENUES
Revenues of the transportation and operation segment
decreased approximately $335 million (31%) during the 1994
Period as compared to the 1993 Period. The decrease in
revenues primarily reflects reduced sales revenue at
Northern Natural as that pipeline is now primarily a
transporter of natural gas. Northern Natural's sales
volumes decreased from 415 Mmcf/d to 97 Mmcf/d and total
transport volumes increased from 3,918 Mmcf/d to 4,414
Mmcf/d when comparing the 1993 Period to the 1994 Period.
Additionally, the decreased ownership interest in the EOTT
Partnership contributed to the decline in revenue.
COST OF GAS AND OTHER PRODUCTS SOLD
The cost of gas and other products sold by the
transportation and operation segment decreased by $226
million (81%) during the 1994 Period as compared to the 1993
Period primarily as a result of decreased gas purchases by
Northern Natural.
OPERATING EXPENSES
Operating expenses in the transportation and operation
segment declined 27% during the 1994 Period as compared to
the 1993 Period. The decline primarily reflects the
decreased ownership interest in the EOTT Partnership,
combined with lower operating expenses of the regulated
natural gas pipelines due to system modernization and lower
transmission, compression and storage cost of gas purchased
for resale as a result of the previously discussed
transition to become primarily transporters of natural gas.
Additionally, operating expenses decreased as a result of
the decreased ownership interest in the EOTT Partnership.
Depreciation expense for the transportation and operation
segment decreased $12 million (15%) during the 1994 Period
as compared to the 1993 Period primarily as a result of a
the sale of certain assets, full depreciation of certain
offshore pipeline assets and a decreased ownership interest
in the EOTT Partnership.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased by $13 million (67%) during the 1994 Period as
compared to the 1993 Period reflecting increased earnings
from Citrus Corp. The increased earnings are a result of
increased allowances for funds used during construction
related to the Phase III expansion, improved sales margins
as a result of the renegotiation of the pricing terms of
Citrus' gas sales contract with its largest customer and a
$5.0 million charge recorded by Citrus during the third
quarter of 1993 in connection with the 1% increase in the
corporate Federal income tax rate. In addition, increased
equity earnings from the formation of the EOTT Partnership
during the first quarter of 1994 were offset by reduced
earnings resulting from the decreased ownership interest in
the Northern Border Partnership. Other
19
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
income, net, increased $19 million primarily due to the
continued resolution of regulatory and contractual matters
on Enron's interstate natural gas pipelines. Interest
income increased due to carrying charges associated with
recoverable deferred transition costs.
GAS SERVICES
The gas services segment had a $48 million increase in
income before interest, minority interest and income taxes
for the 1994 Period as compared to the 1993 Period. This
increase was due primarily to significant contract
originations from selling natural gas to power plants, as
well as increased earnings in the clean fuels portion of the
Liquids businesses. The following discussion analyzes the
contributions from the Gas, Finance, Liquids and Power
business units.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Physical/Notional Quantities (BBtu/d) (1)
Firm (2) 6,630 4,189
Interruptible 576 880
Transport Volumes 603 555
Financial Settlements (Notional) 14,136 4,041
Total 21,945 9,665
Production Payments and Financings
Arranged (In Millions) $312.7 $254.2
Fixed Price Contract Originations
(TBtue) (3) 4,817 2,661
Liquids Marketing (MMgal) (4)
Domestic NGL Marketed 1,701 1,805
International NGL Marketed 337 470
MTBE Marketed 235 187
<FN>
(1) Billion British thermal units per day.
(2) Commitments to deliver a specified volume of gas at a
fixed or market responsive price.
(3) Trillion British thermal unit equivalent.
(4) Million gallons.
</TABLE>
The earnings from gas related activities increased during
the 1994 Period primarily as a result of long-term contract
origination activity, as well as earnings from its portfolio
of price risk commitments and finance transactions.
20
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
Although total production payments and financings
arranged in the Finance business were greater in 1994 than
1993, earnings were slightly lower in the 1994 Period as
compared to the 1993 Period primarily due to the difference
in the types of transactions originated in each of these
periods and the timing of the income recognition from those
transactions.
Earnings for the Liquids business increased in the 1994
Period as compared to the 1993 Period due to contract
originations associated with new product offerings,
commodity price risk management activities, increased clean
fuels market prices and the reflection of Clean Fuels
contractual commitments at market value. These increases
were slightly offset by a decrease in the NGL marketing
activities due to lower product prices.
The earnings contributions from the Power business were
virtually unchanged for the 1994 Period as compared to the
1993 Period.
Expenses such as rent, systems expenses and other support
group costs increased in the 1994 Period as compared to the
1993 Period due to continued expansion into new markets,
system upgrades and fees for operational asset management.
GAS PROCESSING
The gas processing segment's IBIT decreased $47 million
during the 1994 Period as compared to the 1993 Period
primarily due to decreased margins primarily reflecting
lower product prices and as a result of hedges placed on
production to reduce the price volatility in this business.
Production levels were also reduced due to unfavorable
margins.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Total Production Volumes (MMgal) 917 999
Processing Margin ($/Gal) (1) $0.072 $0.100
<FN>
(1) The 1994 amounts do not reflect the effects of hedging.
</TABLE>
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT increased
28% to $132 million in the 1994 Period from $103 million in
the 1993 Period. The following discussion analyzes the
significant changes in the segment's results.
21
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Wellhead Volumes
Natural Gas (MMcf/d) (1)(3) 743 701
Crude Oil and Condensate (MBbl/d) (1) 12.0 9.2
Natural Gas Liquids (MBbl/d) (1) 0.7 0.6
Wellhead Average Prices
Natural Gas ($/Mcf) (2)(4) $ 1.69 $ 1.90
Crude Oil and Condensate ($/Bbl) (2) 15.24 17.05
Natural Gas Liquids ($/Bbl) (2) 9.43 11.83
Other Natural Gas Marketing
Volumes (Mmcf/d) (1)(3) 327 287
Average Gross Revenue ($/Mcf) (2) $ 2.41 $ 2.56
Associated Costs ($/Mcf) (2)(5) 2.13 2.29
Margin ($/Mcf) (2) $ 0.28 $ 0.27
<FN>
(1) Million cubic feet per day or thousand barrels per day,
as applicable.
(2) Dollars per thousand cubic feet or per barrel, as
applicable.
(3) Includes 48 MMcf per day and 103 MMcf per day for the
nine-month periods ended September 30, 1994 and 1993,
respectively, delivered under the terms of volumetric
production payment and exchange agreements effective
October 1, 1992, as amended.
(4) Includes an average equivalent wellhead value of
$1.32/Mcf and $1.56/Mcf for the nine-month periods ended
September 30, 1994 and 1993, respectively, for the
volumes described in note (3), net of transportation
costs.
(5) Including transportation and exchange differentials.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
were essentially unchanged during the 1994 Period as
compared to the 1993 Period. Increased revenues attributable
to a 6% increase in average wellhead natural gas volumes
were substantially offset by an 11% decrease in average
wellhead natural gas prices and 11% lower average prices for
crude oil and condensate. Crude and condensate volumes rose
30% during the 1994 Period primarily reflecting production
from operations in Trinidad.
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities increased $3 million (3%) from the 1993
Period compared to the 1994 Period reflecting a 14% increase
in other natural gas marketing volumes partially offset by
7% lower average associated costs per Mcf.
22
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
Operating and exploration expenses for the exploration
and production segment increased $19 million (16%) during
the 1994 Period when compared to the 1993 Period primarily
reflecting increased exploration activities, an unsuccessful
well drilled in the Gulf of Mexico during the second quarter
of 1994, higher lease impairments associated with certain
offshore leases and higher general and administrative
expenses resulting from higher costs associated with
expanded international and domestic activities.
DD&A expense declined slightly reflecting an average DD&A
rate decrease from $0.88 per Mcfe in the 1993 Period to
$0.81 per Mcfe in the 1994 Period partially offset by an
increase in production volumes. The DD&A rate decrease is
primarily due to production from Trinidad operations at an
average DD&A rate significantly less than the North American
operations average DD&A rate.
Taxes other than income decreased approximately $4
million primarily due to reductions in state severance taxes
due to lower taxable United States wellhead volumes and
prices.
Other income, net increased $39 million due primarily to
gains on sales of oil and gas properties as the exploration
and production segment continued its strategy of fully
utilizing assets through selected property sales in
optimizing profitability, cash flows and return on
investments.
INTERNATIONAL GAS AND POWER SERVICES
The international segment's IBIT increased $12 million
during the 1994 Period as compared to the 1993 Period. The
following discussion analyzes the significant changes in the
segment's results.
REVENUES
Revenues for the international segment decreased
primarily due to the transfer of the international gas
liquids marketing operations to gas services in the second
quarter of 1994. The decline was partially offset by
revenues from the promotion on the sale of certain liquids
processing facilities at Teesside, as well as revenues from
liquids processing activities.
COSTS AND EXPENSES
The cost of gas and other products sold by the
international segment decreased primarily as a result of the
transfer of liquids marketing operations discussed above,
partially offset by product costs incurred in connection
with liquids processing activities.
23
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
Operating expenses increased $10 million during the 1994
Period as compared to the 1993 Period primarily as a result
of increased international activities. Depreciation expense
increased $5 million as a result of increased investment in
certain international natural gas liquids assets. Operating
income of the international segment remained virtually
unchanged during the 1994 Period as compared to the 1993
period.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased $4 million primarily reflecting earnings from two
Philippine power plants which began operation in mid 1993
and early 1994, combined with increased earnings from
Teesside and the Argentine pipeline, offset by decreased
earnings from the Venezuelan manufacturing operations.
Other income, net increased $10 million due primarily to
foreign exchange gains realized by Enron Americas partially
offset by decreased other income from the Argentina
pipeline.
CORPORATE AND OTHER
The corporate and other segment's IBIT increased $42
million in the first nine months of 1994 as compared to the
first nine months of 1993. The increase reflects a $15
million gain from the formation of the EOTT Partnership and
general and administrative expense reductions, including
benefits related to the renegotiation of certain lease
obligations.
INTEREST AND RELATED CHARGES, NET
Interest and related charges, shown net of capitalized
interest, decreased from approximately $222 million in the
1993 Period to $202 million in the 1994 Period. The
decrease in interest is primarily due to lower interest
rates.
DIVIDENDS ON PREFERRED STOCK OF SUBSIDIARY COMPANY
Dividends on preferred stock of subsidiary company are
related to the issuance of 8.55 million shares of Enron
Capital L.L.C. 8% Cumulative Guaranteed Monthly Income
Preferred Shares in November 1993 and the issuance of 3
million shares by Enron Capital Resources, L.P. of 9%
Cumulative Preferred Securities, Series A in August 1994.
INCOME TAXES
Income taxes increased during the 1994 Period as compared
to the 1993 Period primarily as a result of increased pretax
income and a decrease in tight gas sand Federal tax credits.
24
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
FINANCIAL CONDITION
Cash used in operating activities totaled approximately
$30 million during the first nine months of 1994 as compared
to $236 million of cash provided during the same period last
year. The increase in cash used in operating activities
primarily reflects increased working capital requirements.
Cash used in investing activities totaled $623 million
during the first nine months of 1994 as compared to $644
million during the same period in 1993. The change
primarily reflects increased proceeds from sales of assets
and lower capital expenditures, offset by higher investments
in and advances to unconsolidated subsidiaries. The
increase in capital expenditures during the 1994 Period
primarily reflects increased expenditures by the exploration
and production segment for development activities associated
with operations outside the United States and exploration
expenditures incurred primarily within the United States.
The increase in exploration and development expenditures was
partially offset by lower capital expenditures in the
International segment.
The amount of investments in and advances to
unconsolidated subsidiaries during 1994 primarily reflects
investments in and advances to Citrus Corp. (50% owned) in
connection with FGT's Phase III project, investments in the
50% owned Joint Energy Development Investments Limited
Partnership, as well as advances made in connection with
various international power and pipeline projects. The 1993
amount primarily reflects investments made in connection
with the Teesside power project and the Argentina pipeline.
Proceeds from sales of assets during 1994 primarily
reflect sales of oil and gas properties and proceeds
received in connection with the formation of the EOTT
Partnership. The 1993 amount reflects proceeds from sales
of oil and gas properties and information technology assets.
Cash provided by financing activities totaled $713
million during the first nine months of 1994 as compared to
$404 million during the same period in 1993. During the
first nine months of 1994, net issuances of short- and long-
term debt totaled $756 million. Net proceeds from the sale
of preferred securities by Enron Capital Resources, L.P.
during August 1994 totaled $73 million. Proceeds from these
issuances were used primarily to fund capital and other
expenditures and to meet working capital requirements.
Enron is able to fund its normal working capital
requirements mainly through operations or, when necessary,
through the utilization of credit facilities and its ability
to sell commercial paper and accounts receivable.
25
<PAGE>
PART I. FINANCIAL INFORMATION - (Concluded)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded)
ENRON CORP. AND SUBSIDIARIES
Total capitalization at September 30, 1994 was $6.78
billion. Debt as a percentage of total capitalization was
50.4% at September 30, 1994 as compared to 46.7% at year-end
1993. The increase from year-end primarily reflects the
increase in debt levels as discussed above.
26
<PAGE>
PART II. OTHER INFORMATION
ENRON CORP. AND SUBSIDIARIES
ITEM 1. Legal Proceedings
See Note 3 of the Notes to the Consolidated Financial
Statements included herein.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 11 Calculation of Earnings Per Share
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
Current Report on Form 8-K dated August 3, 1994
containing certain documentation in connection with the
offering by Enron Capital Resources, L.P. of 9% Cumulative
Preferred Securities, Series A.
27
<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.
ENRON CORP.
(Registrant)
Date: November 11, 1994 By: Jack I. Tompkins
Jack I. Tompkins
Senior Vice President and
Chief Information, Administrative
and Accounting Officer
(Principal Accounting Officer)
28
Exhibit 11
<TABLE>
ENRON CORP. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Earnings on common stock
Net income $ 95,995 $ 20,908 $344,659 $228,382
Preferred stock dividends (3,702) (4,132) (11,145) (12,947)
$ 92,293 $ 16,776 $333,514 $215,435
Average number of common shares
outstanding 243,858 239,688 243,150 238,400
Primary earnings per share of
common stock $ 0.38 $ 0.07 $ 1.37 $ 0.90
Fully Diluted Earnings Per Share (1)
Adjusted earnings on common stock
Net income $ 95,995 $ 20,908 $344,659 $228,382
Preferred stock dividends (3,702) (4,132) (11,145) (12,947)
Add back:
Dividends on convertible
preferred stock 3,702 - 11,145 12,947
$ 95,995 $ 16,776 $344,659 $228,382
Average number of common shares
outstanding on a fully diluted basis
Average number of common shares
outstanding 243,858 239,688 243,150 238,400
Additional shares issuable upon:
Conversion of preferred stock 19,283 - 19,490 22,876
Exercise of stock options reduced
by the number of shares which
could have been purchased with
the proceeds from exercise of
such options 3,324 5,076 3,352 5,076
266,465 244,764 265,992 266,352
Fully diluted earnings per share
of common stock $ 0.36 $ 0.07 $ 1.30 $ 0.86
<FN>
(1)The convertible preferred stock and related dividend
effect had an anti-dilutive effect on earnings per share
in the three months ended September 30, 1993 and are,
therefore, excluded from the computation.
</TABLE>
Exhibit 12
<TABLE>
ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months
Ended Year Ended December 31,
9/30/94 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $344,659 $332,522 $328,800 $232,146 $202,180 $226,109
Less:
Undistributed earnings and losses
of less than 50% owned affiliates (6,036) (20,232) (32,526) (8,890) (15,468) 5,809
Capitalized interest of
nonregulated companies (6,847) (25,434) (66,401) (36,537) (8,145) (5,107)
Add:
Fixed charges (1) 356,781 471,278 452,014 454,607 425,177 428,579
Minority interest 21,088 27,605 17,632 7,210 7,129 335
Income tax expense 139,640 148,104 88,630 105,859 62,739 71,850
Total $849,285 $933,843 $788,149 $754,395 $673,612 $727,575
Fixed Charges
Interest expense (1) $325,500 $436,211 $430,406 $425,945 $400,548 $405,013
Rental expense representative of
interest factor 31,281 35,067 21,608 28,662 24,629 23,566
Total $356,781 $471,278 $452,014 $454,607 $425,177 $428,579
Ratio of earnings to fixed charges 2.38 1.98 1.74 1.66 1.58 1.70
<FN>
(1) Amounts exclude costs incurred on sales of accounts
receivables.
</TABLE>
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<PERIOD-END> SEP-30-1994
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0
141,078
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