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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 20, 2005
(Date of Earliest Event Reported: January 14, 2005)
EL PASO CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-14365 76-0568816
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
El Paso Building
1001 Louisiana Street
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 420-2600
(Registrant's telephone number, including area code)
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Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS
b. Unaudited Pro Forma Financial Statements
On January 14, 2005, we sold our remaining interests in Enterprise
Products GP, LLC, the general partner of Enterprise Products Partners, L.P., and
Enterprise Products Partners L.P. (Enterprise) to affiliates of EPCO, Inc. for
approximately $425 million. The transaction includes the sale of El Paso's 9.9
percent membership interest in the general partner of Enterprise and
approximately 13.5 million common units in Enterprise.
Previously, on September 30, 2004, we completed the sale of a portion
of our ownership interests in GulfTerra Energy Partners, L.P. ("GulfTerra") and
nine processing plants in South Texas to affiliates of Enterprise. The sales
were completed in connection with the closing of the merger between GulfTerra
and Enterprise. This Current Report on Form 8-K provides the pro forma impacts
of these sales.
These unaudited pro forma financial statements are based on our
historical consolidated financial statements as of and for the nine months ended
September 30, 2004, and for the year ended December 31, 2003, adjusted for the
effects of the sales of our interests in Enterprise and GulfTerra and the
processing plants described above. The unaudited pro forma balance sheet as of
September 30, 2004, assumes that the January 14, 2005 disposition of our
remaining interests in Enterprise occurred on the balance sheet date. The
unaudited pro forma statements of income for the nine months ended September 30,
2004, and for the year ended December 31, 2003, assume all dispositions occurred
on January 1, 2003. The unaudited pro forma financial statements should be read
in conjunction with the historical consolidated financial statements included in
our Quarterly Report on Form 10-Q for the nine months ended September 30, 2004,
and our Annual Report on Form 10-K for the year ended December 31, 2003, and
should not be construed to be indicative of future results or results that
actually would have occurred had the transactions occurred at the dates
presented. In addition, these pro forma financial statements were prepared in
accordance with Article 11 of Regulation S-X. Accordingly, we have not assumed
any cost savings or synergies that might occur related to these transactions.
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EL PASO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2004
(In millions)
EL PASO PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 2,329 $ 425 (a) $ 2,754
Accounts and notes receivable, net 1,634 1,634
Assets held for sale and from discontinued operations 480 480
Other 1,534 1,534
-------- ----- --------
Total current assets 5,977 425 6,402
Property, plant and equipment, net 18,625 18,625
Other assets
Investments in unconsolidated affiliates 3,052 (256)(a) 2,796
Other 4,141 4,141
-------- ----- --------
Total assets $ 31,795 $ 169 $ 31,964
======== ===== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,336 $ 1,336
Short-term financing obligations, including
current maturities 1,554 1,554
Liabilities related to assets held for sale 149 149
Other 1,789 167 (a) 1,955
(1)(a)
-------- ----- --------
Total current liabilities 4,828 166 4,994
-------- ----- --------
Long-term debt 17,673 17,673
-------- ----- --------
Other liabilities
Deferred income taxes 1,598 (102)(a) 1,496
Other 3,298 (15)(a) 3,283
-------- ----- --------
4,896 (117) 4,779
-------- ----- --------
Commitments and contingencies
Securities of subsidiaries 366 366
-------- ----- --------
366 366
-------- ----- --------
Stockholders' equity
Common stock 1,952 1,952
Additional paid-in capital 4,557 4,557
Accumulated deficit (2,189) 120 (a) (2,069)
Other (288) (288)
-------- ----- --------
Total stockholders' equity 4,032 120 4,152
-------- ----- --------
Total liabilities & stockholders' equity $ 31,795 $ 169 $ 31,964
======== ===== ========
See accompanying notes
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EL PASO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(In millions)
EL PASO PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Operating revenues $ 4,510 $ (722)(b) $ 3,788
------- ------ -------
Operating expenses
Cost of products and services 1,215 (528)(b) 687
Operation and maintenance 1,281 (12)(b) 1,269
Depreciation, depletion and amortization 808 (8)(b) 800
Loss on long-lived assets 789 (491)(b) 298
Taxes, other than income taxes 197 (2)(b) 195
------- ------ -------
4,290 (1,041) 3,249
------- ------ -------
Operating income 220 319 539
Earnings from unconsolidated affiliates 815 (607)(b) 208
Other income, net 82 82
Interest and debt expense (1,229) (1,229)
Distributions on preferred interests of consolidated
subsidiaries (18) (18)
------- ------ -------
Loss before income taxes (130) (288) (418)
Income taxes (124) 240 (c) 116
------- ------ -------
Loss from continuing operations $ (254) $ (48) $ (302)
======= ====== =======
Basic and diluted loss per common share
from continuing operations $ (.40) $ (.47)
======= =======
Basic and diluted average common
shares outstanding 639 639
======= =======
See accompanying notes
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EL PASO CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2003
(In millions)
EL PASO PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Operating revenues $ 6,711 $ (782)(b) $ 5,929
------- ------ -------
Operating expenses
Cost of products and services 1,787 (617)(b) 1,170
Operation and maintenance 2,121 (17)(b) 2,104
Depreciation, depletion and amortization 1,207 (12)(b) 1,195
Ceiling test charges 76 76
Loss on long-lived assets 949 (166)(b) 783
Taxes, other than income taxes 296 296
------- ------ -------
6,436 (812) 5,624
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Operating income 275 30 305
Earnings (losses) from unconsolidated affiliates 363 (420)(b) (57)
Other income, net 1 1
Interest and debt expense (1,787) (1,787)
Distributions on preferred interests of consolidated
subsidiaries (52) (52)
------- ------ -------
Loss before income taxes (1,200) (390) (1,590)
Income taxes 584 136 (d) 720
------- ------ -------
Loss from continuing operations $ (616) $ (254) $ (870)
======= ====== =======
Basic and diluted loss per common share
from continuing operations $ (1.03) $ (1.46)
======= =======
Basic and diluted average common
shares outstanding 597 597
======= =======
See accompanying notes
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EL PASO CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
EL PASO HISTORICAL
These amounts represent our condensed historical consolidated balance
sheet and income statement information. Amounts as of and for the nine months
ended September 30, 2004 were derived from our Quarterly Report on Form 10-Q for
the nine months ended September 30, 2004. Amounts for the year ended December
31, 2003 were derived from our 2003 Annual Report on Form 10-K.
PRO FORMA ADJUSTMENTS
These amounts represent the historical results and balances related to
our interests in Enterprise and GulfTerra which were accounted for as equity
investments and the nine processing plants sold to affiliates of EPCO, Inc. as
of and for the periods presented. The pro forma adjusting entries reflect the
following transactions:
o The sale of all of our interest in the general partner of Enterprise
and GulfTerra;
o The redemption of our Series B units of GulfTerra;
o The elimination of all effects of our common units and Series C units
of GulfTerra and Enterprise; and
o The elimination of all non-affiliated effects of the nine processing
plants sold.
PRO FORMA ADJUSTING ENTRIES
(a) To reflect the pro forma effects of the sale of our remaining Enterprise
interests on our condensed consolidated balance sheet. The pro forma
effects include the following:
(1) Receipt of proceeds of $425 million from the sale of our remaining
9.9 percent interest in the general partner of Enterprise and 13.5
million of Enterprise common units.
(2) Elimination of the remaining carrying value of our investment in
Enterprise of $256 million and unamortized current and non-current
deferred gains of $16 million that were previously recorded related
to asset sales to GulfTerra.
(3) Recording current income taxes payable of $167 million, which
includes reclassifying deferred income taxes of $102 million.
(4) Recording a $120 million gain, net of income taxes, associated
with the sale transaction.
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(b) To reflect the pro forma effects of the sale of our Enterprise and
GulfTerra interests and nine processing plants on our condensed
consolidated income statements. The pro forma effects include the
following:
(1) Adjustment for the historical results of operations for our nine
processing plants, including impairment charges recorded
during 2003 and 2004 on these assets;
(2) Reduction of earnings from unconsolidated affiliates for (i) all
of our general partner interest, (ii) all of our Series C units,
(iii) all of our Series B units redeemed by GulfTerra during 2003,
and (iv) all of our common units sold; and
(3) Elimination of gains and losses on long-lived assets during 2003
and 2004 on sales of our Enterprise and GulfTerra interests.
(c) To reflect income taxes related to 2004 income statement adjustments.
Income taxes were computed using a statutory rate of 35 percent except for
taxes on the net gain related to the sale of our interests in GulfTerra
and our nine processing plants. Taxes on the net gain were computed
separately and resulted in significant tax expense of $139 million due to
the non-deductibility of goodwill which was written off as a result of
these transactions. The statutory rate of 35 percent differs from our
effective tax rate.
(d) To reflect income taxes related to 2003 income statement adjustments at a
statutory tax rate of 35 percent. This rate differs from our effective
tax rate.
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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 hereunto duly authorized.
EL PASO CORPORATION
By: /s/ JEFFREY I. BEASON
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Jeffrey I. Beason
Senior Vice President and Controller
(Principal Accounting Officer)
Date: January 20, 2005
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