<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-15095
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TENNECO CREDIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0010368
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
TENNECO BUILDING, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 757-2131
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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.
Common Stock, par value $5 per share: 200 shares as of March 31, 1994
TENNECO CREDIT CORPORATION MEETS THE CONDITIONS OF GENERAL INSTRUCTION
H(1)(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED
DISCLOSURE FORMAT AS PERMITTED BY SUCH INSTRUCTION.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I--Financial Information
Tenneco Credit Corporation and Consolidated Subsidiaries--
Statement of Income................................................... 2
Statement of Cash Flows............................................... 3
Balance Sheet......................................................... 4
Statement of Changes in Stockholder's Equity.......................... 6
Notes to Financial Statements......................................... 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 8
Part II--Other Information
Item 1. Legal Proceedings............................................... *
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. *
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 10
</TABLE>
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* No such response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
1
<PAGE>
PART I--FINANCIAL INFORMATION
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
---------------
1994 1993
------- -------
<S> <C> <C>
REVENUE:
Earned finance charges and interest--
Affiliated companies........................................ $18,137 $19,225
Other....................................................... 21,489 43,723
Rental income from affiliated company........................ 1,432 1,432
------- -------
Total revenues............................................... 41,058 64,380
------- -------
EXPENSES:
Interest--
Commercial paper............................................ 1,005 1,090
Senior notes................................................ 30,758 37,029
Subordinated notes.......................................... 2,256 2,230
Commitment fees and other................................... 1,807 1,700
------- -------
35,826 42,049
Depreciation and amortization................................ 497 497
Operating and administrative................................. 751 807
------- -------
Total expenses............................................... 37,074 43,353
------- -------
OTHER INCOME--Gain on sale of receivables...................... 26,085 1,867
------- -------
INCOME BEFORE INCOME TAXES..................................... 30,069 22,894
INCOME TAXES................................................... 12,146 8,697
------- -------
NET INCOME..................................................... $17,923 $14,197
======= =======
</TABLE>
(The accompanying notes to financial statements are an
integral part of this statement of income.)
2
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
1994 1993
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................. $ 17,923 $ 14,197
Adjustments to reconcile to cash provided from operating
activities:
Depreciation and amortization......................... 497 497
Deferred income taxes................................. 10,945 7,318
Decrease in notes and accounts receivable purchased
from affiliates, net................................. 462,714 16,726
Change in accounts payable to and receivable from
affiliates........................................... 3,473 (26,309)
Decrease in accrued interest.......................... (21,294) (19,889)
Increase (decrease) in dealers' reserves.............. (1,963) 5,201
Change in other assets and other, net................. 2,220 11,481
--------- --------
CASH PROVIDED FROM OPERATING ACTIVITIES................... 474,515 9,222
--------- --------
INVESTING ACTIVITIES:
Collections on long-term notes receivable............... 17,573 8,678
Purchase of long-term notes receivable.................. (30,916) --
--------- --------
CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES......... (13,343) 8,678
--------- --------
FINANCING ACTIVITIES:
Increase (decrease) in commercial paper................. (210,976) 21,542
Retirement of senior notes.............................. (250,200) (39,450)
--------- --------
CASH USED IN FINANCING ACTIVITIES......................... (461,176) (17,908)
--------- --------
DECREASE IN CASH.......................................... (4) (8)
BEGINNING CASH BALANCE.................................... 4 13
--------- --------
ENDING CASH BALANCE....................................... $ -- $ 5
========= ========
CASH PAID DURING THE PERIOD FOR:
Interest................................................ $ 56,283 $ 65,401
Income Taxes............................................ $ 1,201 $ 1,379
</TABLE>
(The accompanying notes to financial statements are an
integral part of this statement of cash flows.)
3
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
(THOUSANDS)
MARCH 31, DECEMBER 31, MARCH 31,
1994 1993 1993
---------- ------------ ----------
<S> <C> <C> <C>
Notes and accounts receivable purchased from
affiliates:
Customers.................................. $1,536,632 $2,024,575 $2,479,437
Affiliated companies....................... 61,854 94,968 92,546
---------- ---------- ----------
1,598,486 2,119,543 2,571,983
Less--Unearned finance charges.............. 164,469 224,518 343,642
Allowance for doubtful receivables....... 10,669 34,863 39,623
---------- ---------- ----------
1,423,348 1,860,162 2,188,718
---------- ---------- ----------
Notes receivable:
Non-affiliated companies, including $9,164,
$8,067 and $11,117 due within one year at
the respective dates...................... 102,945 105,829 144,946
Affiliated companies....................... 109,596 110,085 68,706
---------- ---------- ----------
212,541 215,914 213,652
---------- ---------- ----------
Equipment under operating leases (at cost),
less accumulated depreciation of $16,754,
$16,257 and $14,766 at the respective
dates...................................... 52,852 53,349 54,839
---------- ---------- ----------
Other assets:
Cash ...................................... -- 4 5
Accounts receivable from affiliates........ 3,182 1,730 12,292
Interest receivable and other.............. 104,938 106,667 36,050
---------- ---------- ----------
108,120 108,401 48,347
---------- ---------- ----------
$1,796,861 $2,237,826 $2,505,556
========== ========== ==========
</TABLE>
(The accompanying notes to financial statements are an
integral part of this balance sheet.)
4
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(UNAUDITED)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
(THOUSANDS EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, MARCH 31,
1994 1993 1993
---------- ------------ ----------
<S> <C> <C> <C>
Commercial paper............................ $ 29,962 $ 240,938 $ 151,306
Senior notes, including $287,172, $253,322
and $376,338 due within one year at the
respective dates........................... 1,103,884 1,353,593 1,768,373
Subordinated notes.......................... 92,100 92,100 92,100
Accounts payable to affiliates.............. 9,493 4,449 3,715
Dealers' reserves........................... 16,185 18,148 14,874
Accrued interest............................ 22,331 43,625 31,668
Deferred income taxes....................... 21,181 1,171 15,113
---------- ---------- ----------
1,295,136 1,754,024 2,077,149
---------- ---------- ----------
Stockholder's equity:
Common stock, par value $5 per share, au-
thorized, issued and outstanding 200
shares.................................... 1 1 1
Capital surplus............................ 185,228 185,228 185,228
Retained earnings.......................... 316,496 298,573 243,178
---------- ---------- ----------
501,725 483,802 428,407
---------- ---------- ----------
$1,796,861 $2,237,826 $2,505,556
========== ========== ==========
</TABLE>
(The accompanying notes to financial statements are an
integral part of this balance sheet.)
5
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
-----------------
1994 1993
-------- --------
<S> <C> <C>
COMMON STOCK:
Balance beginning and end of period........................ $ 1 $ 1
-------- --------
CAPITAL SURPLUS:
Balance beginning and end of period........................ 185,228 185,228
-------- --------
RETAINED EARNINGS:
Balance beginning of period................................ 298,573 228,981
Net income................................................ 17,923 14,197
-------- --------
Balance end of period...................................... 316,496 243,178
-------- --------
Total..................................................... $501,725 $428,407
======== ========
</TABLE>
(The accompanying notes to financial statements are an
integral part of this statement of changes in stockholder's equity.)
6
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) In the opinion of Tenneco Credit Corporation, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of March 31, 1994, and the results of operations; changes in stockholder's
equity; and cash flows for the periods indicated.
(2) Certain reclassifications have been made to prior period amounts to conform
with the current period presentation.
(3) On April 26, 1994, it was announced that Tenneco Inc. and its subsidiaries
("Tenneco") intend to offer 35% of the common stock of a newly created
corporation which will own its farm and construction equipment segment
through an initial public offering. After the offering, Tenneco would
retain 65% of the new corporation, which would operate under the name of
Case Corporation (the "new Case Corporation"). Additionally, after the
offering Tenneco Credit Corporation ("Tenneco Credit") will no longer
purchase Case Corporation retail receivables. Existing U.S. retail
receivables of approximately $1.1 billion at the time of the offering will
be collected over their remaining terms. The new Case Corporation will
service the retail receivables retained by Tenneco Credit, for which
Tenneco Credit will pay a servicing fee equal to two percent per annum of
the average amount outstanding during each month. It is estimated that by
1997 substantially all of the receivables retained by Tenneco Credit will
be liquidated. As a result of transactions described above, the future
activities and income of Tenneco Credit will be substantially reduced.
(The above notes are an integral part of the foregoing financial statements.)
7
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FIRST QUARTER RESULTS
SIGNIFICANT EVENT
On April 26, 1994, it was announced that Tenneco Inc. and its subsidiaries
("Tenneco") intend to offer 35% of the common stock of a newly created
corporation which will own its farm and construction equipment segment through
an initial public offering. After the offering, Tenneco would retain 65% of the
new corporation, which would operate under the name of Case Corporation (the
"new Case Corporation"). Additionally, after the offering Tenneco Credit will
no longer purchase Case Corporation retail receivables. Existing U.S. retail
receivables of approximately $1.1 billion at the time of the offering will be
collected over their remaining terms. The new Case Corporation will service the
retail receivables retained by Tenneco Credit, for which Tenneco Credit will
pay a servicing fee equal to two percent per annum of the average amount
outstanding during each month. It is estimated that by 1997 substantially all
of the receivables retained by Tenneco Credit will be liquidated. As a result
of transactions described above, the future activities and income of Tenneco
Credit will be substantially reduced.
REVENUE
Tenneco Credit Corporation and its consolidated subsidiaries (the "Company")
reported total revenues of $41.1 million for the first quarter of 1994, down
$23.3 million from the first quarter of 1993. This decrease is attributable to
a decrease in Case Corporation ("Case") retail notes receivable due to the sale
of $395 million, $439 million and $530 million net book value of certain retail
farm and construction equipment receivables to limited purpose business trusts,
which utilized the receivables as collateral for the issuance of asset-backed
securities to the public in May 1993, November 1993 and February 1994,
respectively. See "Other Income" for additional information. The following sets
forth the percentage of revenues from the various sources:
<TABLE>
<CAPTION>
REVENUE
---------------------
THREE MONTHS ENDED
MARCH 31,
------------------
1994 1993
--------- ---------
<S> <C> <C>
Case.............................................. 75% 85%
Pipeline.......................................... 10 6
Other............................................. 8 3
--------- ---------
Total from accounts receivable.................. 93 94
Rental............................................ 4 2
Notes receivable.................................. 3 4
--------- ---------
100% 100%
</TABLE>
The average yield on Case retail receivables for the first quarter of 1994
was 9.7% compared with 11.7% for the first quarter of 1993. The discount rate
charged on pipeline and other short-term receivables was 5.75% during the first
quarter of 1994 versus 6.5% during the first quarter of 1993.
The Company's only leasing activity is the multifuel boiler facility lease to
Packaging Corporation of America ("Packaging"), an affiliate of the Company.
Leasing activities provided $1.4 million of revenues in the three months ended
March 31, 1994 and 1993.
Under an Investment Agreement dated June 15, 1988, between the Company and
Tenneco Inc. (the "Investment Agreement"), the Company is to receive a service
charge from Tenneco Inc. for each month equal to the amount, if any, by which
the cumulative earnings of the Company for the period from the beginning of the
calendar year to the end of such month, before deduction of fixed charges and
federal income taxes, are less than 125% of the Company's fixed charges. A
service charge of $234,000 was paid by Tenneco Inc. for the month of January
1994. No service charge was required for the months prior to January 1994 nor
for February or March 1994.
8
<PAGE>
EXPENSES
Interest expense totaled $35.8 million for the first quarter of 1994, a
decrease of $6.2 million or 15% over 1993. This decrease resulted from lower
levels of long-term and short-term debt. The average interest rate for the
first quarter of 1994 was 10.1% compared to 8.4% for the first quarter of 1993.
The higher average interest rates were due to the maturity of low interest
long-term debt.
OTHER INCOME
In February 1994, the Company received proceeds of $557 million from the sale
of certain farm and construction equipment receivables to a limited purpose
business trust, which utilized the receivables as collateral for the issuance
of asset-backed securities to the public. The net book value of the receivables
sold was $530 million and accordingly, the Company recognized a pre-tax gain of
$25.4 million in February 1994 due to the sale. In addition, the Company
recognized a gain of $0.7 million from the sale of trade receivables to Asset
Securitization Cooperative Corporation. These receivables originated with
Tenneco Inc.'s packaging, automotive and natural gas pipeline subsidiaries.
NET INCOME
Net income for the first quarter of 1994 was $17.9 million, an increase of
$3.7 million or 26% compared with the first quarter of 1993. The increase is
primarily attributable to the sale of certain farm and construction equipment
receivables as discussed under "Other Income" partially offset by lower yields
and reduced levels of receivables associated with the Case retail portfolio.
ASSETS
The Company had total assets of $1,796.9 million at March 31, 1994, as
compared to $2,237.8 million at December 31, 1993, and $2,505.6 million at
March 31, 1993. The 28% reduction of total assets at March 31, 1994, versus
March 31, 1993, was due primarily to the sale of $1,364 million net book value
of certain Case retail receivables. This decrease was partially offset by
additional acquisitions of Case retail notes receivable, and pipeline and other
accounts receivable.
As of March 31, 1994, the Company held net trade notes and accounts
receivable totaling $1,423.3 million, which accounted for 79% of the Company's
total assets. This compares to $1,860.2 million and $2,188.7 million or 83% and
87% of total assets as of December 31, 1993 and March 31, 1993, respectively.
Details of these receivables are shown as follows:
<TABLE>
<CAPTION>
NET TRADE NOTES AND ACCOUNTS
RECEIVABLE
--------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1994 1993 1993
--------- ------------ ---------
<S> <C> <C> <C>
Case..................................... 80% 81% 88%
Pipeline................................. 9 13 8
Other.................................... 11 6 4
--- --- ---
100% 100% 100%
</TABLE>
Case net trade notes and accounts receivable are $380.3 million and $805.8
million lower at March 31, 1994, compared to December 31, 1993 and March 31,
1993, respectively, due to the sale of certain retail farm and construction
equipment receivables to limited purpose business trusts.
The Company held $102.9 million of notes receivable from non-affiliated
companies at March 31, 1994, down from the $105.8 million and $144.9 million
held at December 31, 1993 and March 31, 1993, respectively. Long-term
receivables from non-affiliated companies represented 6% of the Company's total
assets at March 31, 1994.
9
<PAGE>
As of March 31, 1994, the Company had $52.9 million invested in a multifuel
boiler leased to Packaging. The leased facility represented 3% of the Company's
total assets at March 31, 1994.
CAPITALIZATION AND CAPITAL RESOURCES
Pursuant to the Investment Agreement, Tenneco Inc. is required to maintain an
investment in the Company as necessary to assure that at all times the sum of
the Company's subordinated debt plus stockholder's equity will be at least
equal to 20% of the Company's total debt plus stockholder's equity.
The Company's capital requirements have been financed through the issuance of
commercial paper, publicly and privately placed medium-term notes, senior
public debt and bank loans, subordinated debt, and advances and equity capital
from Tenneco Inc., plus earnings retained in the business.
The Company's total capitalization was $1,727.7 million, $2,170.4 million and
$2,440.2 million at March 31, 1994, December 31, 1993 and March 31, 1993,
respectively. The components of capitalization at such dates are set forth in
the following table:
<TABLE>
<CAPTION>
CAPITALIZATION
--------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1994 1993 1993
--------- ------------ ---------
<S> <C> <C> <C>
Commercial paper......................... 2% 11% 6%
Medium-term senior debt.................. 4 4 4
Long-term senior debt.................... 60 59 68
Subordinated debt........................ 5 4 4
Stockholder's equity..................... 29 22 18
--- --- ---
100% 100% 100%
</TABLE>
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
12--Computation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K. Tenneco Credit Corporation did not file any reports
on Form 8-K during the quarter ended March 31, 1994.
10
<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.
TENNECO CREDIT CORPORATION
Robert T. Blakely
Date: May 16, 1994 By __________________________________
Robert T. Blakely
President
E. J. Milan
Date: May 16, 1994 By __________________________________
E. J. Milan
Principal Financial and Accounting
Officer
11
<PAGE>
EXHIBIT 12
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS
ENDED
MARCH 31,
----------------
1994 1993
------- --------
<S> <C> <C>
Net income.................................................... $17,923 $ 14,197
Add:
Interest expense............................................. 35,826 42,049
Income taxes................................................. 12,146 8,697
------- --------
Earnings as defined........................................ $65,895 $ 64,943
======= ========
Fixed charges--interest expense............................... $35,826 $ 42,049
======= ========
Ratio of earnings to fixed charges............................ 1.84 1.54
======= ========
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGES
------- ---------------------- ------------
<C> <S> <C>
12 --Computation of Ratio of Earnings to Fixed Charges.
</TABLE>
<PAGE>
EXHIBIT 12
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS
ENDED
MARCH 31,
----------------
1994 1993
------- --------
<S> <C> <C>
Net income.................................................... $17,923 $ 14,197
Add:
Interest expense............................................. 35,826 42,049
Income taxes................................................. 12,146 8,697
------- --------
Earnings as defined........................................ $65,895 $ 64,943
======= ========
Fixed charges--interest expense............................... $35,826 $ 42,049
======= ========
Ratio of earnings to fixed charges............................ 1.84 1.54
======= ========
</TABLE>
