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 June 30, 1995
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 July 21,
1995
Common Stock, $.10 Par Value 252,006,756 shares
1 of 25
ENRON CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Income - Three
Months Ended June 30, 1995 and 1994 and
Six Months Ended June 30, 1995 and 1994 3
Consolidated Balance Sheet - June 30, 1995
and December 31, 1994 4
Consolidated Statement of Cash Flows - Six
Months Ended June 30, 1995 and 1994 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 23
ITEM 6. Exhibits and Reports on Form 8-K 24
<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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues $2,149,346 $1,910,709 $4,453,295 $4,366,436
Costs and Expenses
Cost of gas and other products 1,550,480 1,371,542 3,169,913 3,153,936
Operating expenses 265,806 249,884 477,494 472,269
Amortization of deferred contract
reformation costs 4,060 20,528 14,830 44,896
Oil and gas exploration expenses 22,850 22,233 42,975 38,283
Depreciation, depletion and
amortization 102,844 109,825 210,240 224,873
Taxes, other than income taxes 26,280 22,834 57,010 54,170
1,972,320 1,796,846 3,972,462 3,988,427
Operating Income 177,026 113,863 480,833 378,009
Other Income and Deductions
Equity in earnings of unconsolidated
subsidiaries 12,527 23,473 27,727 37,678
Interest income 7,567 8,064 14,466 17,492
Other, net 33,327 23,303 78,863 71,591
Income before Interest, Minority
Interests and Income Taxes 230,447 168,703 601,889 504,770
Interest and Related Charges, net 70,919 67,401 137,927 137,090
Dividends on Preferred Stock of
Subsidiaries 7,848 4,275 15,696 8,550
Minority Interests 13,451 6,842 23,282 12,894
Income Taxes 44,184 14,584 135,989 97,572
Net Income 94,045 75,601 288,995 248,664
Preferred Stock Dividends 3,809 3,721 7,628 7,443
Earnings on Common Stock $ 90,236 $ 71,880 $ 281,367 $ 241,221
Earnings Per Share of Common Stock
Primary $ 0.37 $ 0.30 $ 1.16 $ 0.99
Fully diluted $ 0.35 $ 0.28 $ 1.08 $ 0.93
Average Number of Common Shares
Used in Primary Computation 244,018 243,546 243,605 242,986
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 140,516 $ 132,336
Trade receivables 523,888 604,985
Other receivables 250,704 233,213
Transportation and exchange gas receivable 161,912 98,787
Inventories 105,619 138,405
Assets from price risk management activities 498,826 449,588
Other 272,193 251,679
Total Current Assets 1,953,658 1,908,993
Investments and Other Assets
Investments in unconsolidated subsidiaries 1,128,895 1,065,189
Assets from price risk management activities 1,725,361 1,027,945
Other 1,186,462 1,225,224
Total Investments and Other Assets 4,040,718 3,318,358
Property, Plant and Equipment, at cost 11,157,085 10,964,401
Less accumulated depreciation, depletion
and amortization 4,379,466 4,225,741
Net Property, Plant and Equipment 6,777,619 6,738,660
Total Assets $12,771,995 $11,966,011
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
ENRON CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 743,776 $ 924,446
Transportation and exchange gas payable 156,963 114,124
Accrued taxes 91,383 90,906
Accrued interest 52,799 58,569
Liabilities from price risk management
activities 418,528 522,070
Other 340,618 587,271
Total Current Liabilities 1,804,067 2,297,386
Long-Term Debt 3,417,585 2,805,142
Deferred Credits and Other Liabilities
Deferred income taxes 1,929,782 1,893,450
Deferred revenue 219,787 256,298
Liabilities from price risk management
activities 1,099,748 575,377
Other 508,329 591,134
Total 3,757,646 3,316,259
Minority Interests 308,947 290,146
Preferred Stock of Subsidiary Companies 395,750 376,750
Shareholders' Equity
Second preferred stock, cumulative, $1 par
value 139,425 140,498
Common stock, $0.10 par value 25,309 25,308
Additional paid in capital 1,778,778 1,788,044
Retained earnings 1,529,781 1,351,297
Cumulative foreign currency translation
adjustment (154,092) (158,881)
Common stock held in treasury (18,678) (41,090)
Other (including Flexible Equity Trust) (212,523) (224,848)
Total 3,088,000 2,880,328
Total Liabilities and Shareholders' Equity $12,771,995 $11,966,011
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<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>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities
Reconciliation of net income to net cash
provided by (used in) operating activities
Net Income $ 288,995 $ 248,664
Depreciation, depletion and amortization 210,240 224,873
Oil and gas exploration expenses 42,975 38,283
Amortization of deferred contract reformation
costs 14,830 44,896
Deferred income taxes 95,570 50,137
Gain on sale of assets (31,692) (24,615)
Regulatory, litigation and other contingency
adjustments (31,243) (26,275)
Changes in components of working capital (443,060) (433,488)
Deferred contract reformation costs (8,966) (34,502)
Deferred revenues (8,738) (4,249)
Net assets from price risk management
activities (325,824) (229,844)
Other, net 9,635 (9,387)
Net Cash Used in Operating Activities (187,278) (155,507)
Cash Flows From Investing Activities
Proceeds from sale of assets and investments 102,619 219,374
Additions to property, plant and equipment (282,516) (269,710)
Equity investments (63,544) (216,018)
Other, net (48,633) (56,382)
Net Cash Used in Investing Activities (292,074) (322,736)
Cash Flows From Financing Activities
Issuance of long-term debt 434,155 27,278
Net increase in short-term borrowings 424,595 651,620
Decrease in long-term debt (244,779) (134,202)
Acquisition of treasury stock (24,247) (724)
Issuance of treasury stock 25,472 -
Issuance of common stock - 27,776
Dividends paid (127,664) (113,721)
Net Cash Provided by Financing Activities 487,532 458,027
Increase (Decrease) in Cash and Cash Equivalents 8,180 (20,216)
Cash and Cash Equivalents, Beginning of Period 132,336 140,240
Cash and Cash Equivalents, End of Period $ 140,516 $ 120,024
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
<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, 1994 (Form 10-K).
Certain reclassifications have been made in the 1994
amounts to conform with the 1995 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 half of 1995 and
1994 was $6.8 million and $29.5 million, respectively. Cash
paid for interest expense for the same periods, net of
amounts capitalized, was $145.9 million and $135.3 million,
respectively.
Changes in components of working capital are as follows
(in thousands):
<TABLE>
<CAPTION>
First Six Months
1995 1994
<S> <C> <C>
Receivables $ 481 $ 20,783
Inventories 32,786 (7,273)
Prepayments (58,873) 3,516
Payables (137,831) (340,300)
Accrued taxes 477 7,629
Accrued interest (5,770) (2,328)
Other (274,330) (115,515)
$(443,060) $(433,488)
</TABLE>
3. LITIGATION AND CONTINGENCIES
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. believes that TransAmerican's claims are without
merit. Enron 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 had a minority interest and for which an
Enron affiliate has served as operator had filed a petition
against Enron and certain affiliates alleging an unspecified
amount of damages relating to the operation of such pipeline
company. The lawsuit was settled and dismissed in June 1995
pursuant to which settlement Enron's equity interest in such
pipeline company was conveyed to another equity owner. The
terms of the settlement did not have a materially adverse
effect on Enron's financial position or results of
operations.
During October 1994, an explosion occurred at Enron's
methanol plant in Pasadena, Texas. Before the explosion,
the plant was producing approximately 420,000 gallons of
methanol per day, approximately half of which was being used
at Enron's MTBE plant. There were no fatalities or serious
injuries as a result of the explosion. The plant was placed
back into commercial operation in June 1995. Based upon
business interruption and other insurance coverages, Enron
currently anticipates that the explosion will not have a
material adverse effect on its financial position or results
of operations.
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
Second Quarter 1995
vs. Second Quarter 1994
The following review of Enron's results of operations
should be read in conjunction with the Consolidated
Financial Statements.
CONSOLIDATED NET INCOME
Enron's second quarter 1995 net income increased to $94
million as compared to $76 million during the second quarter
of 1994. Net income in the second quarter of 1995 benefited
from strong performances in the international and
exploration and production segments. These increases were
partially offset by higher interest and related charges,
higher dividends on preferred stock of subsidiaries and
increased income tax expense. Earnings per share rose to
$0.37 in the second quarter of 1995 from $0.30 in the same
period in 1994.
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>
Second Quarter Increase
1995 1994 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $ 69 $ 74 $(5)
Domestic Gas and Power Services 47 46 1
International Gas and Power Services 24 13 11
Exploration and Production 84 40 44
Corporate and Other 6 (4) 10
Total $230 $169 $61
</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 conducted by EOTT Energy Partners,
L.P. (EOTT) and liquids pipeline operations. The segment's
IBIT declined $5 million in the second quarter of 1995 as
compared to the same period in 1994. 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 $20 million (10%) during the second
quarter of 1995 as compared to the same period in 1994. The
decrease in revenues primarily reflects reduced sales
revenue at Northern Natural Gas Company (Northern Natural)
as that pipeline is now almost exclusively a transporter of
natural gas.
COSTS AND EXPENSES
Operating expenses in the transportation and operation
segment declined 3% during the second quarter of 1995 as
compared to the same period in 1994. The decline primarily
reflects lower operating expenses of the regulated natural
gas pipelines due to lower transmission, compression and
storage cost of gas purchased for resale as a result of the
previously discussed transition to being almost exclusively
transporters of natural gas.
Amortization of deferred contract reformation costs
decreased 80% in the second quarter of 1995 primarily due to
the completion by Northern Natural of the recovery of
certain transition costs in early 1995.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
decreased $9 million (80%) in the second quarter of 1995 as
compared to the same period in 1994 as a result of lower
earnings realized by EOTT due primarily to weak industry-
wide processing margins on the West Coast combined with
reserves established in connection with the restructuring of
EOTT's West Coast processing arrangement. This decline was
partially offset by increased earnings from Trailblazer
Pipeline due to a settlement with a transportation customer.
Other income, net increased $9 million for the second
quarter of 1995 compared to the same period in 1994. The
increase was primarily due to pre-tax earnings of $10
million related to the disposition of non-strategic
gathering facilities.
DOMESTIC GAS AND POWER SERVICES
Enron's domestic gas and power activities are conducted
by Enron Capital & Trade Resources Corp. (ECT) and can be
categorized into three business lines: Cash and Physical,
Risk Management and Finance. The domestic gas and power
services segment's IBIT for the second quarter of 1995 was
virtually unchanged from the same period in 1994. The
following discussion analyzes the contributions to IBIT for
each of these businesses.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Second Quarter
1995 1994
<S> <C> <C>
Physical/Notional Quantities (BBtue/d) (1)
Firm (2) 5,632 4,398
Interruptible 2,280 1,914
Transport Volumes 353 549
Financial Settlements (Notional) 32,128 10,858
Total 40,393 17,719
Production Payments and Financings
Arranged (In Millions) $45.1 $198.4
Fixed Price Contract Originations
(TBtue) (3) 2,015 1,608
Electricity (Megawatts/hour)
Owned Production 385 351
Transaction Volumes Marketed 734 -
Liquids Marketing (Mmgal) (4)
Domestic NGL Marketed 445 462
MTBE Marketed 149 73
Domestic Gas Processing
Total Production (Mmgal) (4) 291 303
Processing Margin ($/Gal) $0.092 $0.065
<FN>
(1) Billion British thermal units equivalent 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 cash and physical operations include earnings from
physical contracts of one year or less involving marketing
and transportation of physical natural gas, liquids,
electricity and other commodities, earnings from the
management of ECT's contract portfolio and earnings related
to the physical assets of ECT, including domestic gas
processing activity. Also reported in this business are the
effects of actual settlements of ECT's long-term physical
and notional quantity-based contracts. The cash and
physical operations' earnings before overhead expenses were
$27 million in the second quarter of 1995 and $21 million in
the same period in 1994. The earnings from this business
unit increased in the second quarter of 1995 primarily due
to the effects of improved liquidity in the index-based
markets on its portfolio of contracts and activity related
to electricity marketing. This business line accounted for
37% of ECT's earnings before overhead expenses in the second
quarter of 1995 as compared to 30% in the second quarter of
1994.
The risk management operations consist of market
origination activity on new long-term contracts
(transactions greater than one year) and restructuring of
existing long-term contracts. Second quarter earnings
before overhead expenses from this unit decreased slightly
from $51 million in 1994 to $49 million in 1995. In 1995,
earnings were primarily from the utility sector while in
1994 originations were from independent power plants. The
earnings from risk management operations were 67% and 73% of
ECT earnings before overhead expenses in the second quarter
of 1995 and 1994, respectively.
ECT's finance operations provide capital to customers
through various product offerings. The loss before overhead
expenses from this unit increased from $2 million in the
second quarter of 1994 to $3 million in the second quarter
of 1995, primarily due to lower earnings related to
production payments. The finance activities contributed
(4)% of ECT's earnings before overhead expenses in the
second quarter of 1995 and (3)% in the same period in 1994.
ECT's overhead expenses such as rent, systems expenses
and other support group costs were $27 million in the second
quarter of 1995 and $23 million in the same period in 1994.
These costs increased by 19% in the second quarter of 1995
due to continued expansion into new markets coupled with
increased expenses for insurance and employee benefits.
INTERNATIONAL GAS AND POWER SERVICES
The international segment includes earnings from the
development and promotion of natural gas pipeline and power
projects, commercial power generation activities outside of
North America and activities of Enron Global Power &
Pipelines L.L.C. The segment's second quarter IBIT
increased $11 million from 1994 to 1995. The following
discussion analyzes the significant changes in the segment's
results.
NET REVENUES
Net revenues for the international segment increased by
$30 million in the second quarter of 1995 as compared with
1994. This increase is primarily due to revenues of $12
million which were recognized as a result of the expiration
of certain contingent obligations related to the formation
of Enron Global Power & Pipelines L.L.C., improved net
revenues from Enron Americas and growth in the natural gas
marketing operations in Europe.
COSTS AND EXPENSES
Operating expenses increased $4 million during the second
quarter of 1995 as compared to the same period in 1994
primarily as a result of increased international activities.
Depreciation and amortization expense increased $4 million
as a result of increased amortization of project development
costs.
OTHER INCOME AND DEDUCTIONS
Other income, net decreased $13 million primarily due to
foreign currency exchange gains realized by Enron Americas
in the second quarter of 1994.
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT increased
to $84 million in the second quarter of 1995 from $40
million in the same period of 1994. These results include
the impact of hedges placed by Enron on open commodity
positions not hedged by EOG. The following discussion
analyzes the significant changes in the segment's results.
Wellhead volume and price statistics (including
intercompany amounts) are as follows:
<TABLE>
<CAPTION>
Second Quarter
1995 1994
<S> <C> <C>
Natural Gas Volumes (MMcf/d) (1)
North America (2) 548 679
Trinidad 122 81
Total 670 760
Average Natural Gas Prices ($/Mcf)
North America (3) $1.34 $1.73
Trinidad 0.97 0.93
Total Composite 1.27 1.65
Crude/Condensate Volumes (MBbl/d) (1)
North America 10.9 9.1
Trinidad 4.8 3.2
India 1.7 -
Total 17.4 12.3
Average Crude/Condensate Prices ($/Bbl)
North America $17.93 $16.02
Trinidad 17.14 15.20
India 18.13 -
Total Composite 17.73 15.80
<FN>
(1) Million cubic feet per day or thousand barrels per day,
as applicable.
(2) Includes 48 MMcf per day for the three-month periods
ended June 30, 1995 and 1994 delivered under the terms of
volumetric production payment and exchange agreements
effective October 1, 1992, as amended.
(3) Includes an average equivalent wellhead value of
$0.79/Mcf and $1.24/Mcf for the three-month periods ended
June 30, 1995 and 1994, respectively, for the volumes
described in note (2), net of transportation costs.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
increased $22 million (12%) during the second quarter of
1995 as compared to the same period in 1994. The increase
reflects gains on sales of reserves and related assets which
totaled $54 million in the second quarter of 1995 compared
with $13 million in the same period in 1994. Decreased
natural gas sales and other marketing revenues were
partially mitigated by the positive effects of EOG's hedging
strategies which resulted in a gain of $16 million on
natural gas commodity price hedging activities in the second
quarter of 1995 compared to a loss of less than $1 million
during the second quarter of 1994. Gains related to hedges
placed by Enron on open commodity positions not hedged by
EOG increased from $1 million in the second quarter of 1994
to $11 million in the same period in 1995. Increased crude
and condensate sales also contributed to the increase in
revenues.
Because of 23% lower average wellhead natural gas prices,
U.S. wellhead natural gas volumes were voluntarily curtailed
by an average of 120 MMcf/d during the second quarter of
1995 compared to an average of 75 MMcf/d during the same
period in 1994, contributing to a decrease of 12% in volumes
delivered from the second quarter of 1994.
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities decreased $16 million (53%) from the
second quarter of 1994 compared to the same period in 1995
due to lower average associated costs per Mcf combined with
a decrease in other natural gas marketing volumes.
Operating expenses for the exploration and production
segment increased $4 million (15%) during the second quarter
of 1995 as compared to the same period in 1994 primarily due
to expanded international activities and overall higher
costs associated with certain employee related costs.
Depreciation, depletion and amortization (DD&A) expense
decreased $14 million (22%) reflecting the decrease in
production volumes noted earlier and a decrease in the
average DD&A rate from $0.82 per thousand cubic feet
equivalent (Mcfe) in the second quarter of 1994 to $0.69 per
Mcfe in the second quarter of 1995. The decrease in the
DD&A rate is due to an increase in the proportion of North
American production coming from lower cost fields, the
disposition of higher cost properties and increases in
international volumes at lower than average domestic DD&A
rates.
Taxes other than income were $3 million higher in the
second quarter of 1995 compared to the same period in 1994
primarily due to a benefit of $4 million included in 1994
associated with reductions in state franchise taxes.
CORPORATE AND OTHER
The corporate and other segment's IBIT increased to $6
million in the second quarter of 1995 as a result of the
resolution of certain litigation in 1995.
DIVIDENDS ON PREFERRED STOCK OF SUBSIDIARY COMPANIES
The increase in dividends on preferred stock of
subsidiaries reflects the issuance by Enron Capital
Resources, L.P. of 3 million shares of 9% Cumulative
Preferred Securities, Series A ($25 per share liquidation
value) in August 1994 and the issuance in December 1994 of
880 shares of 8.57% Preferred Stock, $0.001 par value
($100,000 per share liquidation value) by Enron Equity Corp.
INCOME TAXES
Income taxes increased during the second quarter of 1995
as compared to the second quarter of 1994 primarily as a
result of increased pretax income and a decrease in tight
gas sand Federal tax credits.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1995
vs. Six Months Ended June 30, 1994
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 first six months of 1995
increased to $289 million as compared to $249 million during
the same period in 1994. The $40 million increase in
consolidated net income reflects improved income before
interest, minority interests and income taxes for all of
Enron's operating segments except corporate and other. This
increase was partially offset by higher dividends on
preferred stock of subsidiaries and increased income tax
expense. Earnings per share rose to $1.16 in the first six
months of 1995 from $0.99 in the same period in 1994.
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>
Six Months Increase
1995 1994 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $250 $227 $ 23
Domestic Gas and Power Services 98 95 3
International Gas and Power Services 75 64 11
Exploration and Production 143 80 63
Corporate and Other 36 39 (3)
Total $602 $505 $ 97
</TABLE>
TRANSPORTATION AND OPERATION
The transportation and operation segment realized a $23
million increase in IBIT for the first half of 1995 as
compared to the same period in 1994. 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 $70 million (14%) during the first half of 1995 as
compared to the same period in 1994. The decrease in
revenues primarily reflects reduced sales revenue at
Northern Natural as that pipeline is now almost exclusively
a transporter of natural gas. Additionally, the decreased
ownership interest in EOTT in March 1994 contributed to the
decline in revenue.
COSTS AND EXPENSES
The cost of gas and other products sold by the
transportation and operation segment decreased by $18
million (50%) during the first half of 1995 compared to the
same period in 1994 primarily as a result of decreased gas
purchases by Northern Natural Gas as that pipeline is now
almost exclusively a transporter of natural gas.
Operating expenses in the transportation and operation
segment declined by $13 million (8%) during the first half
of 1995 as compared to the same period in 1994. The decline
primarily reflects lower operating expenses of the regulated
natural gas pipelines due to 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 EOTT.
Depreciation expense for the transportation and operation
segment decreased $4 million (9%) during the first half of
1995 as compared to the same period in 1994 primarily as a
result of the decreased ownership interest in EOTT.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
decreased by $10 million (59%) during the first half of 1995
as compared to the same period in 1994 reflecting reduced
earnings from EOTT as previously discussed, partially offset
by increased earnings from Trailblazer Partnership and
Citrus Corp.
Other income, net increased $39 million to $58 million,
primarily due to gains related to the disposition of non-
strategic natural gas processing and gathering facilities.
DOMESTIC GAS AND POWER SERVICES
The domestic gas and power segment had a $3 million (3%)
increase in income before interest, minority interest and
income taxes for the six months ended June 30, 1995 as
compared to the same period in 1994. This increase was due
primarily to increased earnings in the risk management and
finance businesses, offset by lower earnings in the cash and
physical business. The following discussion analyzes the
contributions to IBIT for each of these businesses.
Volume and price statistics (including intercompany
amounts) are as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Physical/Notional Quantities (BBtue/d) (1)
Firm (2) 5,499 4,784
Interruptible 2,197 1,857
Transport Volumes 525 566
Financial Settlements (Notional) 32,438 12,666
Total 40,659 19,873
Production Payments and Financings
Arranged (In Millions) $ 103.5 $ 210.8
Fixed Price Contract Originations
(TBtue) (3) 3,513 3,008
Electricity (Megawatts/hour)
Owned Production 381 349
Transaction Volumes Marketed 534 -
Liquids Marketing (Mmgal) (5)
Domestic NGL Marketed 959 1,044
MTBE Marketed 323 138
Domestic Gas Processing
Total Production (Mmgal) (4) 591 574
Processing Margin ($/Gal) $0.076 $0.060
<FN>
(1) Billion British thermal units equivalent 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 cash and physical operations' earnings before
overhead expenses were $50 million and $85 million in the
first six months of 1995 and 1994, respectively. This
decrease was primarily a result of lower margins for
physical natural gas resulting from less volatile market
conditions due to mild weather in the first quarter of 1995,
partially offset by an increase in activity in electricity
marketing. This business line accounted for 33% of ECT's
earnings before overhead expenses in the first six months of
1995 as compared to 61% in the first six months of 1994.
Earnings before overhead expenses for the risk management
business were $84 million in the first six months of 1995
and $56 million in the same period in 1994. This increase
was due primarily to earnings related to long-term gas
supply contracts with independent power plants and the
utility sector (including $19 million associated with the
non-affiliated portion of earnings from a long-term gas
supply contract with a 50% owned independent power plant).
The earnings from risk management operations were 56% and
41% of ECT earnings before overhead expenses in the first
six months of 1995 and 1994, respectively.
ECT's finance operations earnings before overhead
expenses were $17 million in the first six months of 1995
compared with a loss of $3 million for the same period in
1994. This increase was due primarily to its share of
earnings associated with long-term gas supply contracts with
the independent power plant discussed above. The finance
activities contributed 11% of ECT's earnings before overhead
expenses in the first six months of 1995 and (2)% in the
same period in 1994.
ECT's overhead expenses were $52 million in the first
half of 1995 and $43 million in the same period in 1994.
These costs increased by 21% in the first six months of 1995
due to continued expansion into new markets and increased
expenses for insurance and employee benefits.
INTERNATIONAL GAS AND POWER SERVICES
The international segment's IBIT increased $11 million
(19%) in the first six months of 1995 compared to the same
period in 1994. The following discussion analyzes the
significant changes in the segment's results.
NET REVENUES
Net revenues for the international segment increased by
$35 million (51%)in the first half of 1995 as compared with
1994. Included in 1995 were amounts received from the
promotion of a portion of Enron's interest in the Dabhol
power project in India, $24 million from the promotion of a
portion of Enron's interest in its power assets at Teesside
in the United Kingdom and increased net revenues from the
natural gas marketing operations in Europe. In addition,
revenues of $24 million were recognized as a result of the
expiration of certain contingent obligations related to the
formation of Enron Global Power & Pipelines L.L.C. The 1994
results included revenues of approximately $31 million from
the promotion on the sale of certain liquids processing
facilities at Teesside.
COSTS AND EXPENSES
Operating expenses increased $11 million during the first
half of 1995 as compared to the same period in 1994
primarily as a result of increased international activities.
Depreciation and amortization expense increased $5 million
as a result of increased amortization of project development
costs.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased $7 million primarily as a result of increased
earnings from Teesside and improved results from Enron
Americas' Venezuelan manufacturing operations. Other
income, net declined $13 million due primarily to foreign
exchange gains realized by Enron Americas in the first half
of 1994.
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT increased
to $143 million in the first half of 1995 from $80 million
in the same period of 1994. These results include the
impact of hedges placed by Enron on open commodity positions
not hedged by EOG. The following discussion analyzes the
significant changes in the segment's results.
Wellhead volume and price statistics (including
intercompany amounts) are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Natural Gas Volumes (MMcf/d) (1)
North America (2) 584 717
Trinidad 109 62
Total 693 779
Average Natural Gas Prices ($/Mcf)
North America (3) $1.31 $1.86
Trinidad 0.97 0.92
Total Composite 1.25 1.78
Crude/Condensate Volumes (MBbl/d) (1)
North America 11.3 9.0
Trinidad 4.2 2.5
India 2.2 -
Total 17.7 11.5
Average Crude/Condensate Prices ($/Bbl)
North America $17.25 $14.36
Trinidad 16.44 14.60
India 17.20 -
Total Composite 17.06 14.42
<FN>
(1) Million cubic feet per day or thousand barrels per day,
as applicable.
(2) Includes 48 MMcf per day for the six-month periods ended
June 30, 1995 and 1994 delivered under the terms of
volumetric production payment and exchange agreements
effective October 1, 1992, as amended.
(3) Includes an average equivalent wellhead value of
$0.83/Mcf and $1.42/Mcf for the six-month periods ended
June 30, 1995 and 1994, respectively, for the volumes
described in note (2), net of transportation costs.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
increased $29 million (8%) during the first half of 1995 as
compared to the same period in 1994. The increase reflects
gains on sales of reserves and related assets which totaled
$59 million in the first six months of 1995 compared with
$19 million in the same period in 1994. Decreased natural
gas sales and other marketing revenues were partially
mitigated by the positive effects of EOG's hedging
strategies which resulted in a gain of $31 million on
natural gas commodity price hedging activities in the first
half of 1995 compared to a loss of $6 million during the
first half of 1994. Gains related to hedges placed by Enron
on open commodity positions not hedged by EOG increased from
less than $1 million in the second quarter of 1994 to $27
million in the same period in 1995. Increased crude and
condensate sales also contributed to the increase in
revenues.
Because of 30% lower average wellhead natural gas prices,
U.S. wellhead natural gas volumes were voluntarily curtailed
by an average of 105 MMcf/d during the first half of 1995
compared to an average of 50 MMcf/d during the same period
in 1994, contributing to a decrease of 11% in volumes
delivered from the first six months of 1994.
COSTS AND EXPENSES
The cost of gas sold in connection with other natural gas
marketing activities in the first half of 1995 decreased $23
million (37%) compared to the same period in 1994 due to
lower average associated costs per Mcf combined with
decreased other natural gas marketing volumes.
Operating expenses for the exploration and production
segment increased $5 million (9%) during the first half of
1995 as compared to the same period in 1994 primarily
reflecting increased international operations. Oil and gas
exploration expenses increased $5 million (12%) in the first
half of 1995 as compared to the same period in 1994, due to
expanded international drilling operations and increased
impairments of unproved oil and gas properties associated
with certain offshore leases.
DD&A expense decreased $25 million reflecting the
decrease in production volumes noted earlier and a decrease
in the average DD&A rate from $0.82 per Mcfe in the first
half of 1994 to $0.69 per Mcfe in the first half of 1995.
A portion of the DD&A rate decrease is attributable to
increased production from international operations with
lower than average DD&A rates than incurred for North
American operations. The remainder of the decrease is
primarily due to an increase in the proportion of North
American production coming from lower cost fields, the
disposition of higher cost properties and increases in
reserve estimates resulting primarily from evolving
production histories.
Taxes other than income were $3 million higher in the
first half of 1995 compared to the same period in 1994
primarily due to a benefit included in 1994 associated with
reductions in state franchise taxes.
CORPORATE AND OTHER
The corporate and other segment's IBIT decreased $3
million (8%) in the first half of 1995 as compared to the
first half of 1994. The 1994 amount includes a gain related
to the sale of 10 million common units of EOTT and general
and administrative expense reductions realized in 1994. The
1995 results include amounts recognized following the
resolution of certain litigation in 1995.
DIVIDENDS ON PREFERRED STOCK OF SUBSIDIARY COMPANY
The increase in dividends on preferred stock of
subsidiaries reflects the issuance by Enron Capital
Resources, L.P. of 3 million shares of 9% Cumulative
Preferred Securities, Series A ($25 per share liquidation
value) in August 1994 and the issuance in December 1994 of
880 shares of 8.57% Preferred Stock, $0.001 par value
($100,000 per share liquidation value) by Enron Equity Corp.
INCOME TAXES
Income taxes increased during the first six months of
1995 as compared to the first six months of 1994 primarily
as a result of increased pretax income and decreased tight
gas sand Federal tax credits.
FINANCIAL CONDITION
Cash used in operating activities totaled approximately
$187 million during the first half of 1995 as compared to
$156 million during the same period last year. The increase
in cash used in operating activities reflects increased cash
used in price risk management activities.
Cash used in investing activities totaled $292 million
during the first half of 1995 as compared to $323 million
during the same period in 1994. The decrease primarily
reflects reduced equity investments as compared to the first
half of 1994, primarily reflecting investments in Citrus
Corp. during 1994 in connection with the Phase III expansion
project. This decline was partially offset by lower
proceeds from sales of assets and investments. Proceeds
from asset sales during the first half of 1995 primarily
reflect sales of oil and gas properties while proceeds
during the first half of 1994 reflect amounts related to the
formation of EOTT and oil and gas property sales.
Cash provided by financing activities totaled $488
million during the first half of 1995 as compared to $458
million during the same period in 1994. During the first
half of 1995, net issuances of short- and long-term debt
totaled $614 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.
Total capitalization at June 30, 1995 was $7.2 billion.
Debt as a percentage of total capitalization was 47.4% at
June 30, 1995 as compared to 44.2% at year-end 1994. The
increase from year-end primarily reflects the increase in
debt levels as discussed above.
<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 2, 1995 in Houston, Texas, for the purpose of
electing a board of directors, approving the appointment of
auditors, and voting on the proposal described below.
Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities Exchange Act of 1934 and there was
no solicitation in opposition to management's solicitations.
(a) All of management's nominees for directors as listed in
the proxy statement were elected with the following vote:
<TABLE>
<CAPTION>
Nominee Shares FOR Shares WITHHELD
<S> <C> <C>
Robert A. Belfer 232,726,139 2,870,062
Norman P. Blake, Jr. 232,822,376 2,773,825
John H. Duncan 232,789,990 2,806,211
Joe H. Foy 232,791,891 2,804,310
Wendy L. Gramm 232,739,162 2,857,039
Robert K. Jaedicke 232,779,131 2,817,070
Richard D. Kinder 232,783,490 2,812,711
Kenneth L. Lay 232,743,168 2,853,033
Charles A. LeMaistre 232,719,061 2,877,140
John A. Urquhart 231,547,406 4,048,795
John Wakeham 231,450,976 4,145,225
Charls E. Walker 232,732,245 2,863,956
Herbert S. Winokur, Jr. 232,837,667 2,758,534
(b) The appointment of Arthur Andersen LLP as independent
auditor was approved by the following vote:
Shares FOR Shares AGAINST Shares ABSTAINING
231,847,302 2,377,213 1,371,686
(c) The Enron Corp. Amended and Restated Performance Unit
Plan was approved by the following vote:
Shares FOR Shares AGAINST Shares ABSTAINING
220,911,042 9,799,125 4,882,634
The purpose of the Enron Corp. Amended and Restated
Performance Unit Plan 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. The
amendment was required so that certain awards under the plan
will qualify as performance-based compensation under Section
162(m) of the Internal Revenue Code.
<PAGE>
PART II. OTHER INFORMATION - (Concluded)
ENRON CORP. AND SUBSIDIARIES
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
None.
<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: August 1, 1995 By: Jack I. Tompkins
Jack I. Tompkins
Senior Vice President and
Chief Information, Administrative
and Accounting Officer
(Principal Accounting Officer)
</TABLE>
Exhibit 11
<TABLE>
ENRON CORP. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Earnings on common stock
Net income $94,045 $ 75,601 $288,995 $248,664
Preferred stock dividends (3,809) (3,721) (7,628) (7,443)
$90,236 $ 71,880 $281,367 $241,221
Average number of common shares
outstanding 244,018 243,546 243,605 242,986
Primary earnings per share of
common stock $ 0.37 $ 0.30 $ 1.16 $ 0.99
Fully Diluted Earnings Per Share
Adjusted earnings on common stock
Net income $94,045 $ 75,601 $288,995 $248,664
Preferred stock dividends (3,809) (3,721) (7,628) (7,443)
Add back:
Dividends on convertible
preferred stock 3,809 3,721 7,628 7,443
$94,045 $ 75,601 $288,995 $248,664
Average number of common shares
outstanding on a fully diluted basis
Average number of common shares
outstanding 244,018 243,546 243,605 242,986
Additional shares issuable upon:
Conversion of preferred stock 19,060 19,352 19,103 19,589
Exercise of stock options reduced by the
number of shares which could have been
purchased with the proceeds from
exercise of such options 4,890 4,194 4,890 4,194
267,968 267,092 267,598 266,769
Fully diluted earnings per share of
common stock $ 0.35 $ 0.28 $ 1.08 $ 0.93
</TABLE>
Exhibit 12
<TABLE>
ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(In Thousands)
(Unaudited)
<CAPTION>
Six Months
Ended Year Ended December 31,
6/30/95 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $288,995 $ 453,410 $332,522 $328,800 $232,146 $202,180
Less:
Undistributed earnings and losses
of less than 50% owned affiliates (5,902) (9,453) (20,232) (32,526) (8,890) (15,468)
Capitalized interest of
nonregulated companies (4,544) (9,007) (25,434) (66,401) (36,537) (8,145)
Add:
Fixed charges (1) 202,216 467,383 471,278 452,014 454,607 425,177
Minority interest 23,282 31,041 27,605 17,632 7,210 7,129
Income tax expense 146,387 190,081 148,104 88,630 105,859 62,739
Total $650,434 $1,123,455 $933,843 $788,149 $754,395 $673,612
Fixed Charges
Interest expense (1) $177,189 $ 424,893 $436,211 $430,406 $425,945 $400,548
Rental expense representative of
interest factor 25,027 42,490 35,067 21,608 28,662 24,629
Total $202,216 $ 467,383 $471,278 $452,014 $454,607 $425,177
Ratio of earnings to fixed charges 3.22 2.40 1.98 1.74 1.66 1.58
<FN>
(1) Amounts exclude costs incurred on sales of accounts receivables.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 140,516
<SECURITIES> 0
<RECEIVABLES> 774,592
<ALLOWANCES> 0
<INVENTORY> 105,619
<CURRENT-ASSETS> 1,953,658
<PP&E> 11,157,085
<DEPRECIATION> 4,379,466
<TOTAL-ASSETS> 12,771,995
<CURRENT-LIABILITIES> 1,804,067
<BONDS> 3,417,585
<COMMON> 25,309
0
139,425
<OTHER-SE> 2,923,266
<TOTAL-LIABILITY-AND-EQUITY> 12,771,995
<SALES> 2,749,549
<TOTAL-REVENUES> 4,453,295
<CGS> 3,169,913
<TOTAL-COSTS> 3,972,462
<OTHER-EXPENSES> (121,056)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137,927
<INCOME-PRETAX> 424,984
<INCOME-TAX> 135,989
<INCOME-CONTINUING> 288,995
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288,995
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.08
</TABLE>
