<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, 1995
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
----------------
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
----------------
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, 1995
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--
Statements of Income.................................................. 2
Statements of Cash Flows.............................................. 3
Balance Sheets........................................................ 4
Statements 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>
- --------
* 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
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
---------------
1995 1994
------- -------
<S> <C> <C>
REVENUES:
Earned finance charges and interest.......................... $33,892 $39,626
Rental income from affiliated company........................ 1,432 1,432
------- -------
Total revenues............................................. 35,324 41,058
------- -------
EXPENSES:
Interest--
Commercial paper............................................ -- 1,005
Senior notes................................................ 19,922 30,758
Subordinated notes.......................................... 2,280 2,256
Commitment fees and other................................... 332 1,807
------- -------
22,534 35,826
Depreciation and amortization................................ 497 497
Operating and administrative................................. 3,705 751
------- -------
Total expenses............................................. 26,736 37,074
------- -------
OTHER INCOME--Gain on sale of receivables...................... -- 26,085
------- -------
INCOME BEFORE INCOME TAXES..................................... 8,588 30,069
INCOME TAXES................................................... 3,359 12,146
------- -------
NET INCOME..................................................... $ 5,229 $17,923
======= =======
</TABLE>
(The accompanying notes to financial statements are an
integral part of these statements of income.)
2
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................. $ 5,229 $ 17,923
Adjustments to reconcile to net cash provided from
operating activities:
Depreciation and amortization......................... 497 497
Deferred income taxes................................. (50) 10,945
(Increase) decrease in notes and accounts receivable
purchased from affiliates, net....................... 145,702 462,714
Change in accounts payable to and receivable from
affiliates........................................... 28,186 3,473
Increase (decrease) in accrued interest............... (6,661) (21,294)
Increase (decrease) in dealers' reserves.............. -- (1,963)
(Increase) decrease in notes receivable from
affiliated companies................................. (25,000) (16,347)
Change in other assets and other, net................. 4,715 2,220
-------- ---------
NET CASH PROVIDED FROM OPERATING ACTIVITIES............... 152,618 458,168
-------- ---------
INVESTING ACTIVITIES:
Collections on long-term notes receivable............... -- 3,004
-------- ---------
NET CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES..... -- 3,004
-------- ---------
FINANCING ACTIVITIES:
Increase (decrease) in commercial paper................. -- (210,976)
Retirement of senior notes.............................. (34,050) (250,200)
-------- ---------
NET CASH USED IN FINANCING ACTIVITIES..................... (34,050) (461,176)
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 118,568 (4)
BEGINNING CASH AND CASH EQUIVALENTS BALANCE............... 332 4
-------- ---------
ENDING CASH AND CASH EQUIVALENTS BALANCE.................. $118,900 $ --
======== =========
CASH PAID DURING THE PERIOD FOR:
Interest................................................ $ 29,195 $ 56,283
Income taxes............................................ $ 363 $ 1,201
</TABLE>
(The accompanying notes to financial statements are an
integral part of these statements of cash flows.)
3
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
(THOUSANDS)
MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
---------- ------------ ----------
<S> <C> <C> <C>
Notes and accounts receivable purchased from
affiliates:
Customers.................................. $1,353,164 $1,522,862 $1,536,632
Affiliated companies....................... 3,773 3,741 61,854
---------- ---------- ----------
1,356,937 1,526,603 1,598,486
Less--Unearned finance charges.............. 113,865 137,500 164,469
Allowance for doubtful receivables....... 9,225 9,554 10,669
---------- ---------- ----------
1,233,847 1,379,549 1,423,348
---------- ---------- ----------
Notes receivable:
Non-affiliated companies, including $4,917,
$4,917 and $9,164 due within one year at
the respective dates...................... 67,156 67,156 102,945
Affiliated companies....................... 25,000 -- 109,596
---------- ---------- ----------
92,156 67,156 212,541
---------- ---------- ----------
Equipment under operating leases (at cost),
less accumulated depreciation of $18,743,
$18,246 and $16,754 at the respective
dates...................................... 50,863 51,360 52,852
---------- ---------- ----------
Other assets:
Cash and cash equivalents ................. 118,900 332 --
Accounts receivable from affiliates........ 4,653 1,193 3,182
Interest receivable and other.............. 12,183 16,466 104,938
---------- ---------- ----------
135,736 17,991 108,120
---------- ---------- ----------
$1,512,602 $1,516,056 $1,796,861
========== ========== ==========
</TABLE>
(The accompanying notes to financial statements are an
integral part of these balance sheets.)
4
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
(THOUSANDS EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
---------- ------------ ----------
<S> <C> <C> <C>
Commercial paper............................ $ -- $ -- $ 29,962
Senior notes, including $204,526, $238,576
and $287,172 due within one year at the
respective dates........................... 818,390 852,008 1,103,884
Subordinated notes.......................... 92,100 92,100 92,100
Accounts payable to affiliates.............. 39,480 7,834 9,493
Dealers' reserves........................... -- -- 16,185
Accrued interest............................ 17,952 24,613 22,331
Deferred income taxes....................... 14,254 14,304 21,181
---------- ---------- ----------
982,176 990,859 1,295,136
---------- ---------- ----------
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.......................... 345,197 339,968 316,496
---------- ---------- ----------
530,426 525,197 501,725
---------- ---------- ----------
$1,512,602 $1,516,056 $1,796,861
========== ========== ==========
</TABLE>
(The accompanying notes to financial statements are an
integral part of these balance sheets.)
5
<PAGE>
TENNECO CREDIT CORPORATION
AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS)
THREE MONTHS
ENDED MARCH 31,
-----------------
1995 1994
-------- --------
<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................................ 339,968 298,573
Net income................................................ 5,229 17,923
-------- --------
Balance end of period...................................... 345,197 316,496
-------- --------
Total..................................................... $530,426 $501,725
======== ========
</TABLE>
(The accompanying notes to financial statements are an
integral part of these statements 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 "Company"), 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, 1995, 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, where
appropriate, to conform with the current period presentation.
(3) In June 1994, Tenneco Inc. and its consolidated subsidiaries ("Tenneco")
completed an initial public offering of approximately 29% of the common
stock of Case Corporation ("Case"), the holder of Tenneco's farm and
construction equipment segment (the "Case Business"). In November 1994, a
secondary offering of Case's common stock reduced Tenneco's ownership to
approximately 44%.
In connection with the initial public offering, Tenneco transferred all of
its Case Business assets to Case, except for $1.2 billion of existing
United States retail receivables, which were retained by the Company. Case
will service the retail receivables retained by the Company for which the
Company will pay a servicing fee equal to two percent per annum of the
average amount outstanding during each month. It is estimated that by 1999
substantially all of the farm and construction equipment receivables
retained by the Company will be liquidated. As a result of transactions
described above, the future activities and income of the Company will be
substantially reduced.
(4) Tenneco International Holding Corp. ("TIHC"), a wholly-owned subsidiary of
Tenneco International Inc., has arranged a $50 million committed line of
credit with the Company to provide short-term financing which provides for
borrowings at various rates. At March 31, 1995, the Company had made loans
of $25 million to TIHC related to this line of credit.
(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
REVENUES
The Company and its consolidated subsidiaries reported total revenues of
$35.3 million for the first quarter of 1995, down $5.7 million from the first
quarter of 1994. This reduction is attributable to a decrease in Case retail
notes receivable due to the sale of $530 million net book value of certain
retail farm and construction equipment receivables in the first quarter of 1994
to limited purpose business trusts, which utilized the receivables as
collateral for the issuance of asset-backed securities to the public in
February 1994. The following sets forth the percentage of revenues from the
various sources:
<TABLE>
<CAPTION>
REVENUES
---------------------
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
--------- ---------
<S> <C> <C>
Case.............................................. 50% 75%
Pipeline.......................................... 15 10
Packaging......................................... 12 4
Automotive........................................ 10 2
Other............................................. 7 2
--------- ---------
Total from accounts receivable.................. 94 93
Rental............................................ 4 4
Notes receivable.................................. 2 3
--------- ---------
100% 100%
</TABLE>
The average yield on Case retail receivables for the first quarter of 1995
was 10.5% compared with 9.7% for the first quarter of 1994. The discount rate
charged on pipeline and other short-term receivables ranged from 8.75% to 9.25%
during the first quarter of 1995 versus 5.75% during the first quarter of 1994.
The Company's only leasing activity is the multifuel boiler facility leased
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, 1995 and 1994.
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 or subsequent to
January 1994.
Subsequent to the Case reorganization and initial public offering (See Note 3
to financial statements for additional information), the Case retail financing
activities have been conducted by Case's newly formed United States finance
subsidiary. As the Company no longer purchases Case retail receivables future
revenues and income will continue to decline as the remaining Case retail
receivables are collected.
EXPENSES
Interest expense totaled $22.5 million for the first quarter of 1995, a
decrease of $13.3 million or 37% over the first quarter of 1994. This decrease
resulted from lower levels of long-term and short-term debt. The average
interest rate for the first quarter of 1995 was 9.8% compared to 10.1% for the
first quarter of 1994.
8
<PAGE>
Operating and administrative expenses increased from $0.8 million in the first
quarter of 1994 to $3.7 million in the first quarter of 1995 primarily due to
fees paid to Case to service Case U.S. retail notes receivable retained by the
Company.
OTHER INCOME
Other income for the first quarter of 1995 was down $26.1 million from the
first quarter of 1994. In February 1994, the Company received net proceeds of
$555 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 million in February 1994 due to the
sale.
NET INCOME
Net income for the first quarter of 1995 was $5.2 million, a decrease of
$12.7 million or 71% compared with the first quarter of 1994. The decrease is
primarily attributable to lower other income as discussed under "Other Income",
partially offset by lower federal income taxes.
ASSETS
The Company had total assets of $1,512.6 million at March 31, 1995, as
compared to $1,516.1 million at December 31, 1994, and $1,796.9 million at
March 31, 1994. The 16% reduction of total assets at March 31, 1995, versus
March 31, 1994, was due primarily to the decrease in Case net receivables and
notes receivable from non-affiliated companies. This decrease was partially
offset by an increase in temporary cash investments.
As of March 31, 1995, the Company held net trade notes and accounts
receivable totaling $1,233.8 million, which accounted for 82% of the Company's
total assets. This compares to $1,379.5 million and $1,423.3 million or 91% and
79% of total assets as of December 31, 1994 and March 31, 1994, respectively.
Details of these receivables are shown as follows:
<TABLE>
<CAPTION>
NET TRADE NOTES AND ACCOUNTS
RECEIVABLE
--------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
--------- ------------ ---------
<S> <C> <C> <C>
Case..................................... 51% 53% 80%
Pipeline................................. 17 19 9
Packaging................................ 18 15 7
Automotive............................... 14 13 4
--- --- ---
100% 100% 100%
</TABLE>
Case net trade notes and accounts receivable are $105.0 million and $497.8
million lower at March 31, 1995, compared to December 31, 1994 and March 31,
1994, respectively, primarily due to the termination of purchases of Case
receivables in June 1994.
The Company held $67.2 million of notes receivable from non-affiliated
companies at March 31, 1995, unchanged from December 31, 1994 and down $35.8
million from March 31, 1994. Long-term receivables from non-affiliated
companies represented 4% of the Company's total assets at March 31, 1995.
As of March 31, 1995, the Company had a net recorded investment of $50.9
million in a multifuel boiler leased to Packaging. The leased facility
represented 3% of the Company's total assets at March 31, 1995.
9
<PAGE>
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 $1,440.9 million, $1,469.3 million and
$1,727.7 million at March 31, 1995, December 31, 1994 and March 31, 1994,
respectively. The components of capitalization at such dates are set forth in
the following table:
<TABLE>
<CAPTION>
CAPITALIZATION
--------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
--------- ------------ ---------
<S> <C> <C> <C>
Commercial paper......................... --% --% 2%
Medium-term senior debt.................. 3 5 4
Long-term senior debt.................... 54 53 60
Subordinated debt........................ 6 6 5
Stockholder's equity..................... 37 36 29
--- --- ---
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.
27--Financial Data Schedule.
(b) Reports on Form 8-K. Tenneco Credit Corporation did not file any reports
on Form 8-K during the quarter ended March 31, 1995.
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 15, 1995 By __________________________________
Robert T. Blakely
President
Mark A. McCollum
Date: May 15, 1995 By __________________________________
Mark A. McCollum
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,
---------------
1995 1994
------- -------
<S> <C> <C>
Net income..................................................... $ 5,229 $17,923
Add:
Interest expense.............................................. 22,534 35,826
Income taxes.................................................. 3,359 12,146
------- -------
Earnings as defined......................................... $31,122 $65,895
======= =======
Fixed charges--interest expense................................ $22,534 $35,826
======= =======
Ratio of earnings to fixed charges............................. 1.38 1.84
======= =======
</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,
---------------
1995 1994
------- -------
<S> <C> <C>
Net income..................................................... $ 5,229 $17,923
Add:
Interest expense.............................................. 22,534 35,826
Income taxes.................................................. 3,359 12,146
------- -------
Earnings as defined......................................... $31,122 $65,895
======= =======
Fixed charges--interest expense................................ $22,534 $35,826
======= =======
Ratio of earnings to fixed charges............................. 1.38 1.84
======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TENNECO
CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 118,900
<SECURITIES> 0
<RECEIVABLES> 1,239,300
<ALLOWANCES> (9,225)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 69,606
<DEPRECIATION> (18,743)
<TOTAL-ASSETS> 1,512,602
<CURRENT-LIABILITIES> 0
<BONDS> 910,490
<COMMON> 1
0
0
<OTHER-SE> 530,425
<TOTAL-LIABILITY-AND-EQUITY> 1,512,602
<SALES> 0
<TOTAL-REVENUES> 35,324
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,534
<INCOME-PRETAX> 8,588
<INCOME-TAX> 3,359
<INCOME-CONTINUING> 5,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,229
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
