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 March 31, 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 April 30,
Common Stock, $.10 Par Value 250,871,368 shares
1 of 19
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ENRON CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Income Statement - Three
Months Ended March 31, 1994 and 1993 3
Consolidated Balance Sheet - March 31, 1994
and December 31, 1993 4
Consolidated Statement of Cash Flows - Three
Months Ended March 31, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of
Security Holders 17
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 18
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Revenues $2,449,725 $1,857,455
Costs and Expenses
Cost of gas and other products sold 1,782,393 1,256,460
Operating expenses 222,385 197,329
Amortization of deferred contract reformation costs 24,368 24,809
Oil and gas exploration expenses 16,050 12,874
Depreciation, depletion and amortization 115,048 110,218
Taxes, other than income taxes 31,336 31,236
2,191,580 1,632,926
Operating Income 258,145 224,529
Other Income and Deductions
Equity in earnings of unconsolidated subsidiaries 14,205 19,301
Interest income 9,427 7,742
Other, net 54,289 16,678
Income before Interest, Minority Interests
and Income Taxes 336,066 268,250
Interest and Related Charges, net 69,689 71,687
Dividends on Preferred Stock of Subsidiary 4,275 -
Minority Interests 6,052 6,041
Income Taxes 82,987 44,293
Net Income 173,063 146,229
Preferred Stock Dividends 3,722 4,521
Earnings on Common Stock $ 169,341 $ 141,708
Earnings per Share of Common Stock
Primary $ .70 $ .60
Fully diluted $ .65 $ .55
Average Number of Common Shares Used in
Primary Computation 242,483 237,530
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
March 31, December 31,
1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 135,728 $ 140,240
Trade receivables 699,540 783,603
Other receivables 166,335 205,956
Transportation and exchange gas receivable 92,241 102,887
Inventories 46,788 197,737
Deferred contract reformation costs 91,460 103,520
Assets from price risk management activities 260,795 279,715
Other 231,317 204,952
Total Current Assets 1,724,204 2,018,610
Investments and Other Assets
Investments in unconsolidated subsidiaries 796,253 697,084
Deferred contract reformation costs 151,794 168,479
Assets from price risk management activities 824,630 887,342
Other 1,018,097 1,010,028
Total Investments and Other Assets 2,790,774 2,762,933
Property, Plant and Equipment, at cost 10,785,228 10,886,858
Less accumulated depreciation, depletion
and amortization 4,176,540 4,164,086
Net Property, Plant and Equipment 6,608,688 6,722,772
Total Assets $11,123,666 $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>
March 31, December 31,
1994 1993
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 822,530 $ 1,477,290
Transportation and exchange gas payable 95,104 98,569
Accrued taxes 140,265 88,837
Accrued interest 59,527 53,292
Billings in excess of costs on uncompleted
contracts 52,178 45,380
Liabilities from price risk management
activities 513,903 609,403
Deferred revenue 31,111 48,804
Other 228,501 254,014
Total Current Liabilities 1,943,119 2,675,589
Long-Term Debt 2,890,818 2,661,240
Deferred Credits and Other Liabilities
Deferred income taxes 1,838,446 1,860,237
Deferred revenue 300,866 327,802
Liabilities from price risk management
activities 295,822 330,209
Other 681,035 615,839
Total 3,116,169 3,134,087
Minority Interests 192,926 196,275
Preferred Stock of Subsidiary Company 213,750 213,750
Shareholders' Equity
Preferred stock, cumulative, $100 par value - -
Preference stock, cumulative, $1 par value - -
Second preferred stock, cumulative, $1 par value 141,779 149,668
Common stock $0.10 par value 25,071 24,910
Additional paid-in capital 1,732,588 1,707,938
Retained earnings 1,226,445 1,104,986
Cumulative foreign currency translation
adjustment (133,804) (138,704)
Other (225,195) (225,424)
Total 2,766,884 2,623,374
Total Liabilities and Shareholders' Equity $11,123,666 $11,504,315
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
5
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<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
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 $ 173,063 $ 146,229
Depreciation, depletion and amortization 115,048 110,218
Oil and gas exploration expenses 16,050 12,874
Amortization of deferred contract reformation costs 24,368 24,809
Deferred income taxes 46,833 (3,483)
Gain on sale of assets (24,433) (9,245)
Regulatory, litigation and other contingency
adjustments (15,035) (1,227)
Changes in components of working capital (475,970) (241,726)
Deferred contract reformation costs (18,342) (55,051)
Deferred revenues (4,179) 5,336
Net assets from price risk management activities (48,255) (102,485)
Other, net 842 (84,085)
Net Cash Used in Operating Activities (210,010) (197,836)
Cash Flows From Investing Activities
Proceeds from sale of assets and investments 194,776 9,321
Additions to property, plant and equipment (118,657) (116,236)
Other, net (50,742) (141,792)
Net Cash Provided by (Used in) Investing Activities 25,377 (248,707)
Cash Flows From Financing Activities
Issuance of long-term debt 320 23,210
Net increase in short-term borrowings 260,106 670,776
Decrease in long-term debt (30,973) (102,916)
Acquisition of treasury stock (412) (52,271)
Issuance of treasury stock - 4,505
Issuance of common stock 9,677 3,739
Dividends paid (58,597) (47,514)
Decrease in receivable from ESOP - 10,000
Decrease in other long-term obligations - (15,405)
Net Cash Provided by Financing Activities 180,121 494,124
Increase (Decrease) in Cash and Cash Equivalents (4,512) 47,581
Cash and Cash Equivalents, Beginning of Period 140,240 141,689
Cash and Cash Equivalents, End of Period $ 135,728 $ 189,270
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
6
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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. 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 Corp. 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 included in Enron Corp.'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. In material respects, the businesses of Enron
are conducted by Enron Corp.'s subsidiaries and affiliates
whose operations are managed by their respective officers.
2. Supplemental Cash Flow Information
Net cash received for income tax refunds was $6.2 million
for the first quarter of 1994. Cash paid for income taxes,
net of refunds received, for the first quarter of 1993 was
$27.4 million. Cash paid for interest expense for the same
periods, net of amounts capitalized was $50.9 million and
$50.4 million, respectively.
Changes in components of working capital are as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Receivables $(271,426) $(328,847)
Inventories 63,601 103,802
Prepayments (31,548) (8,441)
Payables (212,265) (19,168)
Accrued taxes 61,537 28,202
Accrued interest 6,235 8,306
Other (92,104) (25,580)
Total $(475,970) $(241,726)
</TABLE>
7
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Concluded)
ENRON CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Litigation
As reported in 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
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, trial is set for September 1994.
Although no assurances can be given, Enron Corp. believes
that TransAmerican's claims are without merit and 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 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.
4. EOTT Energy Partners, L.P.
During March 1994, EOTT Energy Corp., a wholly-owned
subsidiary of Enron, sold its crude oil trading and
transportation operations to EOTT Energy Partners, L.P.
(EOTT, L.P.) in exchange for common and subordinated units
in EOTT, L.P. EOTT Energy Corp. sold all of its common
units in EOTT, L.P. in an underwritten public offering. The
sale of common units resulted in net proceeds to Enron of
$180.5 million which were used to reduce debt and for other
general corporate purposes. EOTT Energy Corp. continues to
own 42.4% of EOTT, L.P. through ownership of 7 million
subordinated units and its 2% ownership as general partner.
8
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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
First Quarter 1994
vs. First 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 first quarter 1994 net income increased to
approximately $173 million as compared to approximately $146
million during the first quarter of 1993. The $27 million
increase in consolidated net income primarily reflects
improved income before interest, minority interests and
income taxes for the transportation and operation, gas
services, exploration and production and international
segments. This increase was partially offset by lower
income before interest, minority interests and income taxes
for the gas processing segment combined with higher income
taxes. The first quarter of 1994 includes a $15 million
pretax gain from the sale of a portion of Enron's investment
in EOTT Energy Partners, L.P. Earnings per share rose to
$.70 in the first quarter of 1994 from $.60 in the same
period in 1993, while the average number of primary common
shares increased 2% during the comparable periods.
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>
First Quarter Increase
1994 1993 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $153 $131 $22
Gas Services 62 50 12
Exploration and Production 41 31 10
Gas Processing (13) 16 (29)
International Gas and Power Services 51 34 17
Corporate and Other 42 6 36
Total $336 $268 $68
</TABLE>
9
<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
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, Enron's crude oil marketing and transportation
operations conducted by EOTT Energy Corp. (EOTT) (see Note 4
of the Notes to Consolidated Financial Statements) and
Enron's investment in liquids pipeline operations. The
segment realized a $22 million increase in IBIT for the
first 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 and the
crude oil marketing and transportation operations. 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 $115 million (27%) during the first
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 553
million cubic feet per day (Mmcf/d) to 146 Mmcf/d and total
transport volumes increased from 4,227 Mmcf/d to 4,865 Mmcf/d
when comparing the first quarter of 1993 to the same period in 1994.
COST OF GAS AND OTHER PRODUCTS SOLD
The cost of gas and other products sold by the
transportation and operation segment decreased by $101
million (81%) during the first 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 12% during the first quarter of 1994 as
compared to the same period in 1993. The decline primarily
reflects 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 being primarily transporters of natural gas.
Depreciation expense for the transportation and operation
segment decreased $5 million (17%) during the first quarter
of 1994 as compared to the same period in 1993 primarily as
a result of a the sale of certain assets and full
depreciation of certain offshore pipeline assets.
10
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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
declined by $6 million (57%) during the first quarter of
1994 as compared to the same period in 1993 reflecting
reduced earnings from Northern Border Pipeline Company
(Northern Border) as a result of Enron's contribution of its
investment in Northern Border to Northern Border Partners,
L.P., a master limited partnership (the Partnership), and
Enron's subsequent sale of a portion of its interest in the
Partnership in an underwritten public offering. Other
income, net increased $18 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
Enron's Gas Services segment (EGS) had a $12 million
(24%) increase in IBIT for the first quarter of 1994 as
compared to the same period in 1993. This increase was due
primarily to the continued growth of the physical and
financial risk management services provided to the natural
gas business and increased earnings in natural gas liquids
activities. Offsetting these increases was a decline in
earnings associated with EGS's North American power
ventures. EGS can be categorized into four business lines:
Gas, Power, Finance and Liquids. The following discussion
analyzes the contributions to IBIT for each of these
businesses.
11
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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>
1994 1993
<S> <C> <C>
Physical/Notional Quantities (BBtu/d) (1)
Firm (2) 6,475 3,757
Interruptible (3) 716 643
Transport Volumes 576 441
Financial Settlements (Notional) 14,330 3,158
Total 22,097 7,999
Production Payments and Financings
Arranged (In Millions) $ 12.4 $ 23.8
Fixed Price Contract Originations
(TBtue) (4) 1,400 833
Liquids Marketing (MMgal) (5)
Domestic NGL Marketed 663 661
International NGL Marketed 92 202
MTBE Marketed 65 59
<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) Deliveries of gas on a best-efforts basis.
(4) Trillion British thermal unit equivalent.
(5) Million gallons.
</TABLE>
The Gas operations include price risk management and
origination activities as well as physical natural gas
trading and transportation activities. The earnings from
these activities increased in 1994 primarily as a result of
increases in sales volumes, including greater sales
activities as a result of the April 1993 acquisition of the
operations of Louisiana Resources Company and expansion into
the Canadian market.
Earnings from EGS's Power and Finance sectors declined in
1994 as compared to the first quarter of 1993 due to a
decrease in production payments and financings arranged and
lower Power-related originations during the period. Based
on current transactions being negotiated, both sectors
expect increased originations for total year 1994 as
compared to 1993.
The Liquids business of EGS includes the natural gas
liquids marketing activities and the Clean Fuels business,
which consists of the methanol and methyl tertiary butyl
ether businesses. Earnings increased in 1994 due to
commodity price risk management activities, and the
reflection of Clean Fuels contractual commitments at market
value, partially offset by lower product prices.
12
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PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
ENRON CORP. AND SUBSIDIARIES
EGS's net unallocated 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
and system upgrades.
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT increased
to $41 million in the first quarter of 1994 from $31 million
in the same period of 1993. The following discussion
analyzes the significant changes in the segment's results.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Wellhead Volumes
Natural Gas (MMcf/d) (1)(3) 799 705
Crude Oil and Condensate (MBbl/d) (1) 10.8 9.7
Natural Gas Liquids (MBbl/d) 0.7 0.7
Wellhead Average Prices
Natural Gas ($/Mcf) (2)(4) 1.91 1.76
Crude Oil and Condensate ($/Bbl) (2) 12.83 17.56
Natural Gas Liquids ($/Bbl) 8.37 12.37
Other Natural Gas Marketing
Volumes (MMcf/d) (3) 341 289
Average Gross Revenue ($/Mcf) 2.53 2.52
Associated Costs ($/Mcf) (5) 2.35 2.25
Margin ($/Mcf) 0.18 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
three-month periods ended March 31, 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
$1.61/Mcf and $1.67/Mcf for the three-month periods ended
March 31, 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
increased 11% during the first quarter of 1994 as compared
to the same period in 1993. The increased revenues are
attributable to a 9% increase in average wellhead natural
gas prices combined with a 13% increase in average wellhead
natural gas volumes, partially offset by the effects of 27%
lower average prices for crude oil and condensate.
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
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities increased $4 million (13%) from the
first quarter of 1993 compared to the same period in 1994
due to 4% higher average associated costs per Mcf combined
with an 18% increase in other natural gas marketing volumes.
Operating expenses for the exploration and production
segment increased $7 million (18%) during the first quarter
of 1994 when compared to the same period in 1993 primarily
reflecting increased international operations and overall
higher costs associated with certain employee related
expenses.
Depreciation, depletion and amortization (DD&A) expense
increased $5 million reflecting an increase in production
volumes partially offset by an average DD&A rate decrease
from $0.87 per thousand cubic feet equivalent (Mcfe) in the
first quarter of 1993 to $0.83 per Mcfe in the first quarter
of 1994. The DD&A rate decrease is primarily due to
production from international operations at an average DD&A
rate significantly less than the North American operations
average DD&A rate.
Other income, net increased $6 million due primarily to
gains on sales of oil and gas properties.
GAS PROCESSING
The gas processing segment's IBIT decreased $29 million
primarily due to decreased margins and volumes. The
following discussion analyzes the significant changes in the
segment's results.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Total Production Volumes (MMgal) 271 330
Processing Margin ($/Gal) $0.0480 $0.1200
</TABLE>
The following discussion further analyzes the significant
changes in the segment's results.
MARGINS
Margins of the gas processing segment decreased when
comparing the first quarter of 1994 to the same period last
year. The decline primarily reflects lower product prices
resulting from lower crude oil prices and higher natural gas
feedstock prices. Average West Texas intermediate crude price
declined to $13.16 from $17.64 for the first quarter of 1994
compared to the same period in 1993. Volumes also decreased
due to unfavorable margins.
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
INTERNATIONAL GAS AND POWER SERVICES
The international segment's IBIT increased $17 million.
The following discussion analyzes the significant changes in
the segment's results.
REVENUES
Revenues for the international segment decreased $8
million (4%) primarily due to decreased revenues earned by
the international gas liquids marketing operations as a
result of a 54% decrease in sales volumes reflecting reduced
spot market activity partially offset by revenues of
approximately $31 million from the promotion on the sale of
certain liquids processing facilities at Teesside.
COSTS AND EXPENSES
The cost of gas and other products sold by the
international segment decreased $33 million as a result of
the sales volume decrease discussed above.
Depreciation expense increased $4 million as a result of
increased investment in certain international natural gas
liquids assets.
CORPORATE AND OTHER
The corporate and other segment's IBIT is $42 million in
the first quarter of 1994 as compared to $6 million in the
first quarter of 1993. The 1994 results include a gain
related to the sale of 10 million common units of EOTT
Energy Partners, L.P. and general and administrative expense
reductions, including benefits related to the renegotiation
of certain lease obligations.
INTEREST EXPENSE, NET
Interest and related charges, shown net of capitalized
interest, decreased from approximately $72 million in the
first quarter of 1993 to $70 million in the first quarter of
1994. The decrease in interest is primarily due to lower
total obligations.
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.
15
<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
INCOME TAXES
Income taxes increased during the first quarter of 1994
as compared to the first quarter of 1993 primarily as a
result of increased pretax income, an increase in the
corporate Federal tax rate from 34% to 35% and a decrease in
tight gas sand credits from $14 million to $8 million.
FINANCIAL CONDITION
Cash used in operating activities totaled approximately
$210 million as compared to $198 million during the same
period last year.
Cash used in investing activities totaled $249 million
during the first quarter of 1993 as compared to cash
provided of $25 million during the same period in 1994. The
decrease primarily reflects decreased expenditures in
connection with Enron's investment in Argentina and power
projects.
Cash provided by financing activities totaled $180
million during the first quarter of 1994 as compared to $494
million during the same period in 1993. During the first
quarter of 1994, net issuances of short- and long-term debt
totaled $229 million. Proceeds from these issuances were
used primarily to fund capital and other expenditures and
meet working capital requirements.
At March 31, 1994, Enron had a working capital deficit of
$219 million as compared to a deficit of $657 million at
December 31, 1993. The improvement primarily reflects
decreases in accounts payable and liabilities from price
risk management activities. Enron is able to fund its
working capital deficit through the utilization of credit
facilities and its ability to sell commercial paper and
accounts receivable.
Total capitalization at March 31, 1994 was $6 billion.
Debt as a percentage of total capitalization was 47.7% at
March 31, 1994 as compared to 46.7% at year-end 1993. The
increase primarily reflects the increase in debt levels
occurring during the first quarter of 1994 as discussed
above.
16
<PAGE>
PART II. OTHER INFORMATION
ENRON CORP. AND SUBSIDIARIES
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of Enron Corp. was held
on May 3, 1994. The matters voted upon, other than the
election of directors and procedure items, were as follows:
(a) The stockholders voted 189,027,499 shares in the
affirmative and 9,214,586 shares in the negative, with
11,240,933 shares abstaining, to approve an amendment
to Enron's Restated Certificate of Incorporation to
change to a variable rate the dividend characteristics
of the $10.50 Cumulative Second Preferred Convertible Stock.
(b) The stockholders voted 218,393,680 shares in the
affirmative and 12,093,581 shares in the negative, with
4,308,022 shares abstaining, to approve the Enron Corp.
Performance Unit Plan, the purpose of which is to
advance the interests of Enron and its subsidiaries and
their stockholders by providing long-term incentive
compensation tied to increases in stockholder value to
those key executive employees who are in a position to
make substantial contributions to the long-term
financial success of Enron and its subsidiaries.
(c) The stockholders voted 216,252,280 shares in the
affirmative and 14,422,120 shares in the negative, with
3,760,883 shares abstaining, to approve the Enron Corp.
Annual Incentive Plan, which is designed to recognize,
motivate and reward exceptional accomplishments toward
annual corporation objectives.
(d) The shareholders voted 211,790,139 shares in the
affirmative and 16,670,973 shares in the negative, with
4,483,157 shares abstaining, to approve an amendment to
the Enron Corp. 1991 Stock Plan, which increased the
number of shares authorized for granting awards under
the Plan.
ITEM 5. Other Information
As described above, at the 1994 Annual Meeting of
Stockholders there was submitted for stockholder approval
a resolution that will amend Enron's Restated Certificate of
Incorporation by amending Paragraph (A) and Paragraph (B) of
the resolution of the Board of Directors set forth in the
Certificate of Designation of the $10.50 Cumulative Second
Preferred Convertible Stock (the "Preferred Stock")
(the "Charter Amendment").
17
<PAGE>
PART II. OTHER INFORMATION - (Concluded)
ENRON CORP. AND SUBSIDIARIES
The Charter Amendment will become effective when the
appropriate Certificate of Amendment to Enron's Restated
Certificate of Incorporation is filed with the Secretary of
State of the State of Delaware. Enron intends to file the
amendment during the second quarter of 1994.
The effect of the Charter Amendment will be to change to a
variable rate the dividend characteristics of the Preferred
Stock. The new dividend policy will provide that holders of
the Preferred Stock receive the higher of $10.50 per share
or the equivalent that would be paid if the Preferred Stock
were converted into Common Stock.
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 March 1, 1994
containing Enron Corp.'s Consolidated Financial
Statements for the year ended December 31, 1993.
18
<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: May 13, 1994 By: Jack I. Tompkins
Jack I. Tompkins
Senior Vice President and
Chief Information, Administrative
and Accounting Officer
(Principal Accounting Officer)
19
Exhibit 11
<TABLE>
ENRON CORP. AND SUBSIDIARIES
Calculation of Earnings Per Share
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1994 1993
(in thousands except
per share amounts)
<S> <C> <C>
Primary Earnings Per Share
Earnings on common stock
Net income $173,063 $146,229
Preferred stock dividends (3,722) (4,521)
$169,341 $141,708
Average number of common shares outstanding 242,483 237,530
Primary earnings per share of common stock $ 0.70 $ 0.60
Fully Diluted Earnings Per Share
Adjusted earnings on common stock
Net income $173,063 $146,229
Preferred stock dividends (3,722) (4,521)
Add back:
Dividends on convertible preferred stock 3,722 4,521
$173,063 $146,229
Average number of common shares outstanding
on a fully diluted basis
Average number of common shares outstanding 242,483 237,530
Additional shares issuable upon:
Conversion of preferred stock 19,766 24,135
Exercise of stock options reduced by the number
of shares which could have been purchased with
the proceeds from exercise of such options 4,003 3,879
266,252 265,544
Fully diluted earnings per share of common stock $ 0.65 $ 0.55
</TABLE>
Exhibit 12
<TABLE>
ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(In Thousands)
(Unaudited)
<CAPTION>
Three Months
Ended Year Ended December 31,
3/31/94 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $173,063 $332,522 $328,800 $232,146 $202,180 $226,109
Less:
Undistributed earnings and losses
of less than 50% owned affiliates (4,215) (20,232) (32,526) (8,890) (15,468) 5,809
Capitalized interest of nonregulated
companies (2,867) (25,434) (66,401) (36,537) (8,145) (5,107)
Add:
Fixed charges (1) 117,128 471,278 452,014 454,607 425,177 428,579
Minority interest 6,052 27,605 17,632 7,210 7,129 335
Income tax expense 84,448 148,104 88,630 105,859 62,739 71,850
Total $373,609 $933,843 $788,149 $754,395 $673,612 $727,575
Fixed Charges
Interest expense (1) $108,052 $436,211 $430,406 $425,945 $400,548 $405,013
Rental expense representative of
interest factor 9,076 35,067 21,608 28,662 24,629 23,566
Total $117,128 $471,278 $452,014 $454,607 $425,177 $428,579
Ratio of earnings to fixed charges 3.19 1.98 1.74 1.66 1.58 1.70
<FN>
(1) Amounts exclude costs incurred on sales of accounts receivables.
</TABLE>
