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, 1996
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, 1996
Common Stock, $.10 Par Value 252,072,047 shares
1 of 19
<PAGE>
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, 1996 and 1995 3
Consolidated Balance Sheet - March 31, 1996
and December 31, 1995 4
Consolidated Statement of Cash Flows - Three
Months Ended March 31, 1996 and 1995 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 18
ITEM 6. Exhibits and Reports on Form 8-K 18
<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,
1996 1995
<S> <C> <C>
Revenues $3,053,996 $2,303,949
Costs and Expenses
Cost of gas and other products 2,341,428 1,619,433
Operating expenses 296,782 222,458
Oil and gas exploration expenses 19,292 20,125
Depreciation, depletion and amortization 119,429 107,396
Taxes, other than income taxes 37,419 30,730
2,814,350 2,000,142
Operating Income 239,646 303,807
Other Income and Deductions
Equity in earnings of unconsolidated
subsidiaries 30,939 15,200
Interest income 12,077 6,899
Other, net 132,589 45,536
Income before Interest, Minority Interests
and Income Taxes 415,251 371,442
Interest and Related Charges, net 69,668 67,008
Dividends on Preferred Stock of Subsidiaries 7,848 7,848
Minority Interests 15,138 9,831
Income Taxes 109,812 91,805
Net Income 212,785 194,950
Preferred Stock Dividends 3,986 3,819
Earnings on Common Stock $ 208,799 $ 191,131
Earnings per Share of Common Stock
Primary $ 0.86 $ 0.79
Fully diluted $ 0.80 $ 0.73
Average Number of Common Shares Used in
Primary Computation 244,151 243,217
<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>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 199,156 $ 114,917
Trade receivables 1,109,921 1,115,709
Other receivables 313,634 310,790
Transportation and exchange gas receivable 191,606 149,659
Inventories 72,748 111,463
Assets from price risk management activities 449,986 579,749
Other 240,102 344,620
Total Current Assets 2,577,153 2,726,907
Investments and Other Assets
Investments in unconsolidated subsidiaries 1,340,626 1,216,474
Assets from price risk management
activities 1,031,159 1,197,029
Other 1,316,175 1,230,090
Total Investments and Other Assets 3,687,960 3,643,593
Property, Plant and Equipment, at cost 10,900,976 11,107,181
Less accumulated depreciation, depletion
and amortization 4,114,964 4,238,746
Net Property, Plant and Equipment 6,786,012 6,868,435
Total Assets $13,051,125 $13,238,935
<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>
March 31, December 31,
1996 1995
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,059,433 $ 1,020,599
Transportation and exchange gas payable 214,885 144,141
Accrued taxes 95,969 121,192
Accrued interest 59,379 51,692
Liabilities from price risk management
activities 362,526 708,353
Other 323,107 386,015
Total Current Liabilities 2,115,299 2,431,992
Long-Term Debt 3,126,602 3,064,839
Deferred Credits and Other Liabilities
Deferred income taxes 2,128,538 2,185,748
Deferred revenue 198,128 202,217
Liabilities from price risk management
activities 496,180 590,302
Other 680,562 673,223
Total 3,503,408 3,651,490
Minority Interests 569,095 548,648
Preferred Stock of Subsidiary Companies 376,750 376,750
Shareholders' Equity
Second preferred stock, cumulative, $1 par
value 137,410 137,550
Common stock, $0.10 par value 25,503 25,386
Additional paid in capital 1,854,932 1,791,151
Retained earnings 1,799,881 1,650,949
Cumulative foreign currency translation
adjustment (162,896) (153,563)
Common stock held in treasury (114,448) (92,642)
Other (including Flexible Equity Trust) (180,411) (193,615)
Total 3,359,971 3,165,216
Total Liabilities and Shareholders' Equity $13,051,125 $13,238,935
<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>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities
Reconciliation of net income to net cash
provided by (used in) operating activities
Net Income $ 212,785 $ 194,950
Depreciation, depletion and amortization 119,429 107,396
Oil and gas exploration expenses 19,292 20,125
Amortization of deferred contract reformation
costs 3,956 10,770
Deferred income taxes 79,827 64,559
Gain on sale of assets (110,719) (29,035)
Changes in components of working capital 136,847 (309,601)
Deferred contract reformation costs (3,827) 1,127
Amortization of production payments (10,807) (10,687)
Deferred revenues - (7,879)
Net assets from price risk management
activities (144,316) (72,217)
Other, net (15,685) (107,451)
Net Cash Provided by (Used in) Operating
Activities 286,782 (137,943)
Cash Flows From Investing Activities
Proceeds from sale of assets and investments 57,743 31,726
Additions to property, plant and equipment (118,909) (116,241)
Equity investments (161,681) (28,657)
Other, net (12,568) (9,507)
Net Cash Used in Investing Activities (235,415) (122,679)
Cash Flows From Financing Activities
Issuance of long-term debt 138,868 211,406
Net increase in short-term borrowings 32,022 126,698
Decrease in long-term debt (109,931) (44,060)
Acquisition of treasury stock (35,321) (17,087)
Issuance of treasury stock 15,000 9,130
Issuance of common stock 50,253 -
Dividends paid (66,550) (64,770)
Other, net 8,531 -
Net Cash Provided by Financing Activities 32,872 221,317
Increase (Decrease) in Cash and Cash Equivalents 84,239 (39,305)
Cash and Cash Equivalents, Beginning of Period 114,917 132,336
Cash and Cash Equivalents, End of Period $ 199,156 $ 93,031
<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. 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, 1995 (Form 10-K).
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Certain reclassifications have been made in the 1995
amounts to conform with the 1996 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 paid for income taxes was $43.9 million for the
first quarter of 1996, compared with $0.4 million received
for income tax refunds for the first quarter of 1995. Cash
paid for interest expense for the same periods, net of
amounts capitalized, was $66.0 million and $68.2 million,
respectively.
Changes in components of working capital are as follows
(in thousands):
<TABLE>
<CAPTION>
First Quarter
1996 1995
<S> <C> <C>
Receivables $(39,003) $ 108,417
Inventories 38,715 31,669
Payables 109,578 (201,650)
Accrued taxes (25,223) 4,224
Accrued interest 7,687 (257)
Other 45,093 (252,004)
Total $136,847 $(309,601)
</TABLE>
3. Litigation and Contingencies
As reported in the Form 10-K, in 1995, several parties
(the Plaintiffs) filed suit in Harris County District Court
in Houston, Texas against Intratex Gas Company (Intratex),
Houston Pipe Line Company and Panhandle Gas Company
(collectively, the Enron Defendants), each of which is a
wholly-owned subsidiary of Enron. The Plaintiffs were
either sellers or royalty owners under numerous gas purchase
contracts with Intratex, many of which have terminated.
Early in 1996, the case was severed by the Court into two
matters that will be tried (or otherwise resolved)
separately. In the first matter, the Plaintiffs allege that
the Enron Defendants committed fraud and negligent
misrepresentation in connection with the "Panhandle
program," a special marketing program established in the
early 1980s. In the second matter, the Plaintiffs allege
that Intratex violated state regulatory requirements and
certain gas purchase contracts by failing to take the
Plaintiffs' gas ratably with other producers' gas at certain
times between 1978 and 1988. The Enron Defendants deny the
Plaintiffs' claims and have asserted various affirmative
defenses, including the statute of limitations. The Enron
Defendants believe they have strong legal and factual
defenses, and intend to vigorously contest the claims
brought in each matter. Although no assurances can be
given, Enron believes that the ultimate resolution of these
matters will not have a materially adverse effect on its
financial position or results of operations.
In 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. Taking into
account business interruption and other insurance coverages,
Enron currently anticipates that the explosion did not and
will not have a materially adverse effect on its financial
position or results of operations.
In connection with a Power Purchase Agreement between
Dabhol Power Company, Enron's 80%-owned subsidiary, and the
Maharashtra State Electricity Board, Dabhol Power Company
has been developing Phase I of an electricity generating
power plant south of Bombay, State of Maharashtra, India
(the Project). On August 3, 1995, after construction had
begun, a new coalition government in the State of
Maharashtra announced the State government's intention to
terminate the Project, and construction ceased on August 8,
1995. Enron believes that such actions were in clear
violation of the contract and in response to these actions,
Dabhol Power Company commenced arbitration proceedings in
London against the State government for the actions it has
taken to terminate the Project. Dabhol Power Company seeks
to recover all of its construction and other expenses, in
addition to lost profits. In addition, Dabhol Power Company
has both orally and in writing communicated to the
Maharashtra State government its desire to go forward with
construction of the Project and its willingness to resolve
any outstanding issues. In January 1996, the Maharashtra
State government notified Dabhol Power Company in writing
that it had approved a restructured transaction (that
includes both Phase I and Phase II and that increases the
planned capacity of the facility by 435 megawatts to 2,450
megawatts) on terms that are acceptable to Enron. While the
parties are working together in good faith and Enron
anticipates construction to resume in the near future,
various approvals remain outstanding from government
agencies and lenders. Although the outcomes of the
arbitration and the renegotiation processes cannot be
predicted with certainty, based on currently available
information, Enron believes that the ultimate outcome of the
Project will not have a materially adverse effect on its
financial position.
On March 29, 1996, Enron and two of its wholly-owned
subsidiaries filed suit in the state district court of
Harris County, Texas seeking a ruling that the Capacity
Reservation and Transportation Agreement (CRTA) dated
September 10, 1990 between Teesside Gas Transportation
Limited (TGTL), an Enron subsidiary, and the "CATS" parties
has terminated due to consistent material breaches of that
agreement by the CATS parties. The suit has been removed to
the federal district court in Houston, Texas. In April
1996, TGTL, reserving its position under the lawsuit that
the contract had been terminated, notified the CATS parties
in accordance with the provisions of the CRTA that as a
result of their failure to provide the Transportation
Service (as defined in the contract) by April 1, 1996, the
CRTA had terminated. The CATS parties were to have provided
transportation under the CRTA to ship J-Block gas through
the Central Area Transmission System (CATS) pipeline, owned
by the CATS parties. Termination of the CRTA leads to
termination of the "J-Block Contracts". The "J-Block
Contracts" are long-term gas contracts that Enron entered
into in March 1993 with Phillips Petroleum Company United
Kingdom Limited, British Gas Exploration and Production
Limited and Agip (U.K.) Limited to purchase future gas
production from the J-Block field which is located in the
North Sea offshore the United Kingdom. Such agreements
provided for Enron to take or pay for the gas at a fixed
price (with possible escalations throughout the contract
period). The agreements provided that gas paid for, but not
taken, could be recovered in later contract years. In
September 1995, Enron announced that, in accordance with its
contractual rights, it had notified the J-Block sellers that
Enron's nominations for gas from the J-Block fields were
estimated to be zero from the first delivery date through
September 30, 1997. In addition, in accordance with its
contractual rights, Enron made no estimated nominations for
J-Block gas under the J-Block Contracts for the contract
year ending September 30, 1998. Enron continues to believe
that there are many reasons for the parties to resolve any
contract issues commercially, but efforts have not been
successful to date. Proceedings in the Houston lawsuit have
been enjoined by an English court; a hearing on that
injunction has been set for June 1996. In the Houston court
case, Enron has also requested that the court enjoin the J-
Block sellers from reinjecting gas or pursuing unitization
with adjacent Block 30/6 to prevent any diminution in the
value of the asset. Although no assurances can be given,
based upon the foregoing and other information currently
available, Enron does not anticipate that the ultimate
outcome of the J-Block matter will have a materially adverse
effect on its financial position.
4. Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS)
No. 121 - "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," which
requires, among other things, that long-lived assets and
certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an
asset may not be recoverable. Enron's adoption of SFAS No.
121 in the first quarter of 1996 did not have a material
impact on its financial position or results of operations.
<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
First Quarter 1996
vs. First Quarter 1995
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 1996 net income increased to $213
million as compared to $195 million during the first quarter
of 1995. The $18 million increase in consolidated net
income primarily reflects improved income before interest,
minority interests and income taxes for the transportation
and operation and domestic gas and power services segments.
This increase was partially offset by lower income before
interest, minority interests and income taxes for the
international gas and power services, exploration and
production and corporate and other segments combined with
higher minority interests and income taxes. Earnings per
share rose to $0.86 in the first quarter of 1996 from $0.79
in the same period in 1995.
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
1996 1995 (Decrease)
<S> <C> <C> <C>
Transportation and Operation $233 $181 $52
Domestic Gas and Power Services 98 51 47
International Gas and Power Services 40 51 (11)
Exploration and Production 30 58 (28)
Corporate and Other 14 30 (16)
Total $415 $371 $44
</TABLE>
TRANSPORTATION AND OPERATION
The transportation and operation segment includes Enron's
interstate natural gas pipelines, construction of power,
pipeline and liquids projects, management and operation of
pipelines and clean fuels plants and Enron's investments in
crude oil marketing and transportation operations conducted
by EOTT Energy Partners, L.P. (EOTT) and liquids pipeline
operations. The segment realized a $52 million increase in
IBIT for the first quarter of 1996 as compared to the
comparable period in 1995. 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 $8 million (3%) during the first
quarter of 1996 as compared to the same period in 1995. 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, combined with completion of the recovery of
certain transition costs for Northern Natural. These
declines were partially offset by revenues associated with
clean fuels plant operations transferred from the domestic
gas and power services segment in the first quarter of 1996.
COSTS AND EXPENSES
Operating expenses in the transportation and operation
segment increased $4 million (4%) during the first quarter
of 1996 as compared to the comparable period in 1995. The
increase primarily reflects costs associated with the clean
fuels plant operations referred to above, partially offset
by a decrease of $7 million (63%) in amortization of
deferred contract reformation costs which was primarily due
to the completion by Northern Natural of the recovery of
certain transition costs.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
increased from $4 million in the first quarter of 1995 to $8
million in the same period in 1996. The first quarter 1996
reflects improved results from EOTT as well as an increase
in Enron's ownership in EOTT from 42% to 50%.
Other income, net increased $61 million, from $49 million
in the first quarter of 1995 to $110 million in the same
period in 1996, primarily due to gains on the sale of non-
strategic natural gas processing and gathering facilities,
which totaled $90 million in the first quarter of 1996 as
compared to $29 million in the same period in 1995.
DOMESTIC GAS AND POWER SERVICES
Enron Capital & Trade Resources Corp. (ECT) conducts
Enron's energy commodity marketing, purchasing and financing
activities and the management of the portfolio of
commitments arising from these activities. ECT's activities
can be categorized into three business lines: cash and
physical, risk management and finance. ECT had a $47
million increase in income before interest, minority
interest and income taxes in the first quarter of 1996 as
compared to the same period in 1995. This increase was
primarily due to increased earnings in the cash and physical
and risk management operations, partially offset by lower
earnings in finance. The following discussion analyzes the
contributions from each of these business lines.
Statistics for ECT (including intercompany amounts) are
as follows:
<TABLE>
<CAPTION>
First Quarter
1996 1995
<S> <C> <C>
Natural Gas and Crude Oil
Physical/Notional Quantities (BBtue/d) (1)
Firm (2) 6,350 5,366
Interruptible 1,780 2,117
Transport Volumes 413 699
Subtotal 8,543 8,182
Financial Settlements (Notional) 35,682 32,752
Total 44,225 40,934
Production Payments and Financings
Arranged (In Millions) $237.2 $ 55.9
Fixed Price Contract Originations
(TBtue) (3) 471 1,498
Electricity (Thousand Megawatt hours)
Owned Production 804 812
Transaction Volumes Marketed 9,868 718
<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.
</TABLE>
The cash and physical operations include earnings from
physical contracts of one year or less involving marketing
and transportation of 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. 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 unallocated overhead
expenses for the first quarter were $91 million in 1996 and
$22 million in 1995. This increase primarily resulted from
increased earnings from electricity marketing and higher
margins for natural gas. Demand for ECT's products and
services was significantly greater in the first quarter of
1996 as compared to the same period in 1995 due to price
volatility in the natural gas market and the growth from
electricity marketing. Earnings from the management of
ECT's contract portfolio also increased in 1996. The cash
and physical business line accounted for 73% of ECT's
earnings before overhead expenses in the first quarter of
1996.
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. In the first quarter of 1996,
earnings before unallocated expenses from the risk
management operations were $38 million as compared to $34
million for the same period in 1995. Earnings from this
unit increased slightly due primarily to increased
originations for electricity and originations in the
European market, which were partially offset by lower
originations from long-term contracts with independent power
plants. In the first quarter of 1996, earnings from risk
management originations were 30% of ECT earnings before
overhead expenses.
ECT's finance operations provide capital to customers
through various product offerings. The finance sector had a
$4 million loss in 1996 as compared to income of $20 million
in 1995. The 1995 earnings were primarily related to the
restructuring of long-term gas supply contracts with an
independent power plant. The increase in production
payments and financings arranged in the first quarter of
1996 as compared to the same period in 1995 reflects an
increase in equity fundings which does not result in current
period income recognition.
ECT's overhead expenses such as rent, systems expenses
and other support group costs were $27 million in the first
quarter of 1996 as compared to $25 million for the same
period in 1995. This increase is attributable to expansion
into new markets.
INTERNATIONAL GAS AND POWER SERVICES
The international segment's IBIT decreased $11 million in
the first quarter of 1996 as compared to the same period in
1995. The following discussion analyzes significant items
in the segment's results.
NET REVENUES
Revenues net of cost of sales for the international gas
and power services segment decreased by $29 million (50%) in
the first quarter of 1996 as compared with the 1995 period.
Included in 1995 was $24 million from the promotion of a
portion of Enron's interest in its power assets at Teesside
in the United Kingdom. In addition, revenues of $12 million
were recognized in the first quarter of 1995 as a result of
the satisfaction of Enron's support obligations related to
the formation of Enron Global Power & Pipelines L.L.C.
OPERATING EXPENSES
Operating expenses decreased by $4 million (26%) as a
result of lower general and administrative costs in the
first quarter of 1996 as compared to the 1995 period.
OTHER INCOME AND DEDUCTIONS
Equity in earnings of unconsolidated subsidiaries
improved from $12 million in the first quarter of 1995 to
$18 million in the same period in 1996 due primarily to
increased earnings from Enron's interests in international
power and pipeline projects.
EXPLORATION AND PRODUCTION
The exploration and production segment's IBIT decreased
to $30 million in the first quarter of 1996 from $58 million
in the same period of 1995. Enron's exploration and
production activities are conducted by Enron Oil & Gas
Company (EOG). The following discussion analyzes the
significant changes in the segment's results.
Wellhead volume and price statistics (including
intercompany amounts) are as follows:
<TABLE>
<CAPTION>
First Quarter
1996 1995
<S> <C> <C>
Natural Gas Volumes (Mmcf/d) (1)
North America (2) 715 621
Trinidad 133 95
Total 848 716
Average Natural Gas Prices ($/Mcf)
North America (3) $ 1.74 $ 1.28
Trinidad 1.00 0.96
Total Composite 1.62 1.24
Crude/Condensate Volumes (Mbbl/d) (1)
North America 11.3 11.7
Trinidad 7.1 3.6
India 3.0 2.8
Total 21.4 18.1
Average Crude/Condensate Prices ($/Bbl)
North America $18.41 $16.62
Trinidad 17.96 15.48
India 17.36 16.65
Total Composite 18.11 16.40
<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 March 31, 1996 and 1995 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
$0.91/Mcf and $0.87/Mcf for the three-month periods ended
March 31, 1996 and 1995, respectively, for the volumes
described in note (2), net of transportation costs.
</TABLE>
REVENUES
The exploration and production segment's gross revenues
decreased by $22 million (11%) during the first quarter of
1996 as compared to the same period in 1995. Although
wellhead natural gas prices and production volumes increased
in the first quarter of 1996 as compared to the previous
year period, this increase was more than offset by lower
results from commodity price swap transactions. First
quarter average wellhead natural gas prices were up 31% from
the comparable period in 1995, and wellhead natural gas
volumes increased 18%. The increase in North America
wellhead natural gas volumes was primarily the result of net
acquisitions made during 1995 and eliminating voluntary
curtailments in the first quarter of 1996 due to the
significant increases in wellhead natural gas prices.
Offshore Trinidad natural gas volumes were 40% higher
primarily as a result of increased daily takes under the
existing contract. First quarter 1996 wellhead crude oil
and condensate average prices were up 10%, and wellhead
crude oil and condensate volumes increased 18% from the same
period a year ago. The increased volumes primarily reflect
the impact on condensate volumes of the higher natural gas
takes in Trinidad noted above and successful well
completions in the latter half of 1995.
During December 1995 and the first quarter of 1996, EOG
and Enron closed out their NYMEX-related hedges on EOG's
1996 production. EOG recognized losses of $16 million in
the first quarter of 1996 relating to commodity price swap
transactions, including these hedges, compared with gains of
$26 million in the first quarter of 1995. Similarly, Enron
recognized losses of $2 million on commodity positions not
hedged by EOG in the first quarter of 1996 compared with
gains of $16 million in the same period in 1995. Although
losses were recognized for the first quarter of 1996, EOG
and Enron locked in gains of $17 million and $2 million,
respectively, on their hedges for the remaining quarters of
1996. This gain, in addition to the ability to benefit from
increasing natural gas prices, is expected to more than
offset the losses recognized in the first quarter.
COSTS AND EXPENSES
The cost of natural gas sold in connection with other
natural gas marketing activities decreased $8 million (30%)
from the first quarter of 1995 compared to the same period
in 1996 due to a reduction in volumes purchased, partially
offset by higher product prices.
Operating expenses for the exploration and production
segment increased $3 million (12%) during the first quarter
of 1996 when compared to the same period in 1995 primarily
reflecting continually expanding operations.
Depreciation, depletion and amortization (DD&A) expense
increased $10 million to $63 million, reflecting an increase
in production volumes. The average DD&A rate was $0.70 per
thousand cubic feet equivalent (Mcfe) in the first quarter
of 1996 and 1995.
CORPORATE AND OTHER
The corporate and other segment's IBIT was $14 million in
the first quarter of 1996 as compared to $30 million in the
first quarter of 1995. The 1995 results include amounts
recognized following the further resolution of certain
litigation.
MINORITY INTERESTS
Minority interests increased to $15 million in the first
quarter of 1996 from $10 million in the comparable prior
period, primarily due to the sale in late 1995 of 31 million
shares of EOG common stock held by Enron, which resulted in
a reduction of Enron's ownership interest in EOG.
INCOME TAXES
Income taxes increased during the first quarter of 1996
as compared to the first quarter of 1995 primarily as a
result of increased pretax income.
FINANCIAL CONDITION
Cash provided by operating activities totaled
approximately $287 million as compared to $138 million used
in operating activities during the same period last year.
The improvement primarily reflects reduced working capital
requirements.
Cash used in investing activities totaled $235 million
during the first quarter of 1996 as compared to $123 million
during the same period in 1995. This change primarily
resulted from equity investments in Joint Energy Development
Investments and EOTT, combined with investments in the
Colombia pipeline project.
Cash provided by financing activities totaled $33 million
during the first quarter of 1996 as compared to $221 million
during the same period in 1995. During the first quarter of
1996, net issuances of short- and long-term debt totaled $61
million. Proceeds from these issuances were used primarily
to fund capital and other expenditures and meet working
capital requirements.
At March 31, 1996, Enron had working capital of $462
million as compared to $295 million at December 31, 1995.
Should a working capital deficit occur, Enron would be able
to fund such a deficit through the utilization of credit
facilities and its ability to sell commercial paper and
accounts receivable.
Total capitalization at March 31, 1996 was $7.4 billion.
Debt as a percentage of total capitalization was 42.1% at
March 31, 1996 as compared to 42.8% at year-end 1995 and
45.4% at March 31, 1995. The decrease from December 31,
1995 primarily reflects the increase in equity due to first
quarter 1996 earnings.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward
looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although Enron believes that its
expectations are based on reasonable assumptions, it can
give no assurance that its goals will be achieved. Important
factors that could cause actual results to differ materially
from those in the forward looking statements herein include
political developments in foreign countries, the pace of
deregulation of retail natural gas and electricity markets
in the United States, the timing and extent of changes in
commodity prices for crude oil, natural gas, electricity and
interest rates, the extent of EOG's success in acquiring oil
and gas properties and in discovering, developing and
producing reserves, the timing and success of Enron's
efforts to develop international power, pipeline and other
infrastructure projects and conditions of the capital
markets and equity markets during the periods covered by the
forward looking statements.
<PAGE>
PART II. OTHER INFORMATION
ENRON CORP. AND SUBSIDIARIES
ITEM 1. Legal Proceedings
See Part I. Item 1, Note 3 to Consolidated Financial
Statements entitled "Litigation and Contingencies," which is
incorporated herein by reference.
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 filed March 8, 1996,
containing Enron Corp. Consolidated Financial
Statements for the year ended December 31, 1995.
<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, 1996 By: Jack I. Tompkins
Jack I. Tompkins
Senior Vice President and
Chief Information, Administrative
and Accounting Officer
(Principal Accounting Officer)
Exhibit 11
<TABLE>
ENRON CORP. AND SUBSIDIARIES
Calculation of Earnings Per Share
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1996 1995
(in thousands except
per share amounts)
<S> <C> <C>
Primary Earnings Per Share
Earnings on common stock
Net income $212,785 $194,950
Preferred stock dividends (3,986) (3,819)
$208,799 $191,131
Average number of common shares outstanding 244,151 243,217
Primary earnings per share of common stock $ 0.86 $ 0.79
Fully Diluted Earnings Per Share
Adjusted earnings on common stock
Net income $212,785 $194,950
Preferred stock dividends (3,986) (3,819)
Add back:
Dividends on convertible preferred stock 3,986 3,819
$212,785 $194,950
Average number of common shares outstanding
on a fully diluted basis
Average number of common shares outstanding 244,151 243,217
Additional shares issuable upon:
Conversion of preferred stock 18,774 19,143
Exercise of stock options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such options 4,326 4,084
267,251 266,444
Fully diluted earnings per share of common stock $ 0.80 $ 0.73
</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,
3/31/96 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $212,785 $ 519,694 $ 453,410 $332,522 $328,800 $232,146
Less:
Undistributed earnings and
losses of less than 50% owned
affiliates (1,084) (13,505) (9,453) (20,232) (32,526) (8,890)
Capitalized interest of
nonregulated companies (2,299) (8,315) (9,007) (25,434) (66,401) (36,537)
Add:
Fixed charges (1) 110,562 435,681 487,258 471,278 452,014 454,607
Minority interest 10,321 27,260 29,600 27,605 17,632 7,210
Income tax expense 115,284 310,264 190,081 148,104 88,630 105,859
Total $445,569 $1,271,079 $1,141,889 $933,843 $788,149 $754,395
Fixed Charges
Interest expense (1) $ 98,161 $ 385,995 $ 444,768 $436,211 $430,406 $425,945
Rental expense representative of
interest factor 12,401 49,686 42,490 35,067 21,608 28,662
Total $110,562 $ 435,681 $ 487,258 $471,278 $452,014 $454,607
Ratio of earnings to fixed charges 4.03 2.92 2.34 1.98 1.74 1.66
<FN>
(1) Amounts exclude costs incurred on sales of accounts receivables.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 199,156
<SECURITIES> 0
<RECEIVABLES> 1,423,555
<ALLOWANCES> 0
<INVENTORY> 72,748
<CURRENT-ASSETS> 2,577,153
<PP&E> 10,900,976
<DEPRECIATION> 4,114,964
<TOTAL-ASSETS> 13,051,125
<CURRENT-LIABILITIES> 2,115,299
<BONDS> 3,126,602
0
137,410
<COMMON> 25,503
<OTHER-SE> 3,197,058
<TOTAL-LIABILITY-AND-EQUITY> 13,051,125
<SALES> 2,236,961
<TOTAL-REVENUES> 3,053,996
<CGS> 2,341,428
<TOTAL-COSTS> 2,814,350
<OTHER-EXPENSES> (175,605)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,668
<INCOME-PRETAX> 322,597
<INCOME-TAX> 109,812
<INCOME-CONTINUING> 212,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212,785
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.80
</TABLE>
