<PAGE>
- -------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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, 1996
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.)
1275 KING STREET, GREENWICH, CONNECTICUT 06831
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000
----------------
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 April 30, 1996
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................................ 11
</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,
---------------
1996 1995
------- -------
<S> <C> <C>
REVENUES:
Earned finance charges and interest.......................... $25,837 $33,892
Rental income from affiliated company........................ 1,432 1,432
------- -------
Total revenues............................................. 27,269 35,324
------- -------
EXPENSES:
Interest--
Senior notes................................................ 15,051 19,922
Subordinated notes.......................................... 2,280 2,280
Commitment fees and other................................... 220 332
Affiliated companies........................................ 87 --
------- -------
17,638 22,534
Depreciation and amortization................................ 497 497
Operating and administrative................................. 2,523 3,705
------- -------
Total expenses............................................. 20,658 26,736
------- -------
OTHER INCOME--Gain on sale of receivables...................... 877 --
------- -------
INCOME BEFORE INCOME TAXES..................................... 7,488 8,588
INCOME TAXES................................................... 2,889 3,359
------- -------
NET INCOME..................................................... $ 4,599 $ 5,229
======= =======
</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,
-------------------
1996 1995
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................. $ 4,599 $ 5,229
Adjustments to reconcile to net cash provided from (used
in) operating activities:
Depreciation and amortization......................... 497 497
Deferred income taxes................................. (129) (50)
(Increase) decrease in notes and accounts receivable
purchased from affiliates, net....................... (387,570) 145,702
Change in notes and accounts payable to and receivable
from affiliates...................................... 168,140 28,186
Increase (decrease) in accrued interest............... (1,315) (6,661)
(Increase) decrease in notes receivable from
affiliated companies................................. -- (25,000)
Change in other assets and other, net................. 4,250 4,715
--------- --------
NET CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES..... (211,528) 152,618
--------- --------
NET CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES..... -- --
--------- --------
FINANCING ACTIVITIES:
Retirement of senior notes.............................. -- (34,050)
--------- --------
NET CASH USED IN FINANCING ACTIVITIES..................... -- (34,050)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... (211,528) 118,568
BEGINNING CASH AND CASH EQUIVALENTS BALANCE............... 211,610 332
--------- --------
ENDING CASH AND CASH EQUIVALENTS BALANCE.................. $ 82 $118,900
========= ========
CASH PAID DURING THE PERIOD FOR:
Interest................................................ $ 18,866 $ 29,195
Income taxes............................................ $ 3,946 $ 363
</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,
1996 1995 1995
---------- ------------ ----------
<S> <C> <C> <C>
Notes and accounts receivable purchased from
affiliates:
Customers.................................. $1,145,333 $ 775,199 $1,353,164
Affiliated companies....................... -- -- 3,773
---------- ---------- ----------
1,145,333 775,199 1,356,937
Less--Unearned finance charges.............. 47,073 64,405 113,865
Allowance for doubtful receivables....... 7,887 7,991 9,225
---------- ---------- ----------
1,090,373 702,803 1,233,847
---------- ---------- ----------
Notes receivable:
Non-affiliated companies, including $0, $0
and $4,917 due within one year at the re-
spective dates............................ 1,267 1,267 67,156
Affiliated companies....................... 25,000 25,000 25,000
---------- ---------- ----------
26,267 26,267 92,156
Less--Allowance for doubtful note
receivable................................ 1,267 1,267 --
---------- ---------- ----------
25,000 25,000 92,156
---------- ---------- ----------
Equipment under operating leases (at cost),
less accumulated depreciation of $20,731,
$20,234 and $18,743 at the respective
dates...................................... 48,875 49,372 50,863
---------- ---------- ----------
Other assets:
Cash and cash equivalents ................. 82 211,610 118,900
Accounts receivable from affiliates........ 4,028 2,716 4,653
Interest receivable and other.............. 5,024 8,840 12,183
---------- ---------- ----------
9,134 223,166 135,736
---------- ---------- ----------
$1,173,382 $1,000,341 $1,512,602
========== ========== ==========
</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,
1996 1995 1995
---------- ------------ ----------
<S> <C> <C> <C>
Senior notes, including $180,226, $157,626
and $204,526 due within one year at the
respective dates........................... $ 615,590 $ 615,156 $ 818,390
Subordinated notes.......................... 92,100 92,100 92,100
Notes and accounts payable to affiliates.... 181,412 11,960 39,480
Accrued interest............................ 15,397 16,712 17,952
Deferred income taxes....................... 14,714 14,843 14,254
---------- ---------- ----------
919,213 750,771 982,176
---------- ---------- ----------
Stockholder's equity:
Common stock, par value $5 per share, au-
thorized, issued and outstanding 200
shares.................................... 1 1 1
Capital surplus............................ 188,128 188,128 185,228
Retained earnings.......................... 66,040 61,441 345,197
---------- ---------- ----------
254,169 249,570 530,426
---------- ---------- ----------
$1,173,382 $1,000,341 $1,512,602
========== ========== ==========
</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,
-----------------
1996 1995
-------- --------
<S> <C> <C>
COMMON STOCK:
Balance beginning and end of period........................ $ 1 $ 1
-------- --------
CAPITAL SURPLUS:
Balance beginning and end of period........................ 188,128 185,228
-------- --------
RETAINED EARNINGS:
Balance beginning of period................................ 61,441 339,968
Net income................................................ 4,599 5,229
-------- --------
Balance end of period...................................... 66,040 345,197
-------- --------
Total..................................................... $254,169 $530,426
======== ========
</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, 1996, and the results of
operations; changes in stockholders'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 March 1996, Tenneco Inc. and its consolidated subsidiaries sold all
their remaining Case Corporation ("Case") shares. At March 31, 1996, $426
million of the initial $1.2 billion Case retail receivables retained by
the Company remained outstanding.
(4) On March 21, 1996, Tenneco Inc. announced that it intends to spin off
Newport News Shipbuilding and Dry Dock Company to its shareholders in a
tax-free transaction, and is developing strategic options to separate
Tenneco Energy from its packaging and automotive parts divisions and to
maximize shareowner value through a tax-free spinoff, a sale, strategic
alliance or other action. The development of these options related to
Tenneco Energy is expected to be completed during the second quarter of
1996. The spinoff of Newport News Shipbuilding and Dry Dock Company is
targeted to be completed late in 1996, but remains subject to a number of
conditions including the receipt of a favorable ruling from the Internal
Revenue Service on the tax-free nature of the proposed transaction and
authorization by Tenneco's board of directors.
As a result of these actions, the level of receivables purchased by the
Company could be reduced and certain receivables currently owned by the
Company may be sold. Also, Tenneco may seek to retire or otherwise realign
the Company's debt.
(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
$27.3 million for the first quarter of 1996, down $8.0 million or 23% from the
first quarter of 1995. The decrease is primarily attributable to the declining
retail receivables related to Case. Presented below are the percentages of
revenues from the various sources:
<TABLE>
<CAPTION>
REVENUES
----------
THREE
MONTHS
ENDED
MARCH 31,
----------
1996 1995
---- ----
<S> <C> <C>
Case.......................................................... 49% 50%
Energy........................................................ 13 15
Packaging..................................................... 13 12
Automotive.................................................... 10 10
Other......................................................... 10 7
--- ---
Total from accounts receivable.............................. 95 94
Rental........................................................ 5 4
Notes receivable.............................................. 0 2
--- ---
100% 100%
=== ===
</TABLE>
The average yield on Case retail receivables for the first quarter of 1996
was 10.2% compared to 10.5% for the first quarter of 1995. The discount rate
charged on short-term receivables purchased from subsidiaries of Tenneco Inc.
ranged from 8.50% to 9.00% during the first quarter of 1996 compared to ranges
of 8.75% to 9.25% for the same period in 1995.
The Company's only leasing activity is the multifuel boiler facility leased
to Tenneco Packaging, Inc., an affiliate of the Company. Leasing activities
provided $1.4 million of revenues in the three months ended March 31, 1996 and
1995.
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.
No service charge was required for the three months ended March 31, 1996 and
1995.
Subsequent to the Case reorganization in June 1994, the Case retail
financing activities have been conducted by Case's United States finance
subsidiary. As the Company no longer purchases Case retail receivables, future
revenues and income will continue to decline as the remaining retail
receivables balance is collected.
EXPENSES
Interest expense of $17.6 million for the first quarter of 1996 represented
a decrease of 22% or $4.9 million over the first quarter of 1995. This
decrease resulted from lower levels of long-term debt. The average interest
rate for the first quarter of 1996 and 1995 was 10.0% and 9.8%, respectively.
Operating and administrative expenses decreased $1.2 million primarily due to
lower fees paid to Case to service Case U.S. retail notes receivable retained
by the Company. These fees will continue to decrease as the remaining retail
notes receivables are collected.
8
<PAGE>
OTHER INCOME
The Company recognized a $.9 million gain on the sale of trade receivables
to Asset Securitization Cooperative Corporation in the first quarter of 1996.
These trade receivables originated from Tenneco's packaging, automotive and
energy subsidiaries.
NET INCOME
Net income for the first quarter of 1996 was $4.6 million, a decrease of $.6
million or 12% compared with the first quarter of 1995. The decrease is
primarily attributable to lower revenues offset by decreased interest expense
and income taxes.
ASSETS
The Company had total assets of $1,173.4 million at March 31, 1996, as
compared to $1,000.3 million and $1,512.6 million at December 31, 1995 and
March 31, 1995, respectively. The 17% increase in total assets at March 31,
1996 versus December 31, 1995 was primarily due to the increase in trade
receivable purchases from Tenneco's packaging, automotive and energy
subsidiaries offset by the continuing liquidation of the Case retail
receivables.
As of March 31, 1996, the Company held net trade notes and accounts
receivable totaling $1,090.4 million, which accounted for 93% of the Company's
total assets. This compares to $702.8 million and $1,233.8 million or 70% and
82% of the total assets at December 31, 1995 and March 31, 1995, respectively.
Details of these receivables are shown as follows:
<TABLE>
<CAPTION>
NET TRADE NOTES AND
ACCOUNTS RECEIVABLE
--------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
--------- ------------ ---------
<S> <C> <C> <C>
Case..................................... 34% 62% 51%
Energy................................... 22 17 17
Packaging................................ 27 10 18
Automotive............................... 17 11 14
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
Case net trade notes and accounts receivable are $64.3 million and $259.3
million lower at March 31, 1996, compared to December 31, 1995 and March 31,
1995, respectively, due to the continuing liquidation of the Case retail
receivables.
Net notes receivable from non-affiliated companies was zero at March 31,
1996, unchanged from December 31, 1995 and down $67.2 million from March 31,
1995. The decrease from March 31, 1995 was primarily due to the pre-payment of
a long-term note from a third party.
As of March 31, 1996, the Company had a net recorded investment of $48.9
million in a multifuel boiler leased to Tenneco Packaging, Inc., an indirect,
wholly-owned subsidiary of Tenneco Inc. The leased facility represented 4% of
the Company's total assets at March 31, 1996.
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 advances and
equity capital from Tenneco Inc. plus earnings retained in the business.
9
<PAGE>
The Company's total capitalization was $961.9 million at March 31, 1996, and
$956.8 million and $1,440.9 million at December 31, 1995 and March 31, 1995,
respectively. The components of capitalization at such dates are set forth in
the following table:
<TABLE>
<CAPTION>
CAPITALIZATION
--------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
--------- ------------ ---------
<S> <C> <C> <C>
Medium-term senior debt.................. 4% 4% 3%
Long-term senior debt.................... 60 60 54
Subordinated debt........................ 10 10 6
Stockholder's equity..................... 26 26 37
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
OUTLOOK
Pursuant to the Investment Agreement, Tenneco Inc. is required to cause the
Company's consolidated assets to be at least equal to 125% of all its
consolidated Senior Debt outstanding. Further, Tenneco Inc. is required to pay
the Company a monthly service charge equal to the amount by which pre-
interest, pre-tax earnings are less than 125% of fixed charges, as defined.
Because a significant amount of the long-term debt owed by the Company will
mature after the maturity of a significant amount of the long-term trade
receivables held by the Company, the Company believes that it will be
necessary for Tenneco Inc. to provide financial support, under the provisions
of this contractual agreement, in future periods. The Company also is
contractually restricted from declaring or paying dividends or making any
other capital distributions if such action would render the Company unable to
meet its debt service obligations on unaffiliated debt. As a result, the
Company believes that the continuing liquidation of the Case retail receivable
portfolio will not impact the Company's ability to meet the maturities of its
debt portfolio which are due after these receivables are substantially
liquidated.
On an ongoing basis, the Company expects that the scope if its operations
will be substantially reduced as the Case retail receivables are liquidated.
As a result, earnings, assets and total capitalization are expected to
continue to decrease throughout the foreseeable future.
10
<PAGE>
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, 1996.
11
<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, 1996 By __________________________________
Robert T. Blakely
President
Mark A. McCollum
Date: May 15, 1996 By __________________________________
Mark A. McCollum
Vice President and Controller
12
<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,
---------------
1996 1995
------- -------
<S> <C> <C>
Net income..................................................... $ 4,599 $ 5,229
Add:
Interest expense.............................................. 17,638 22,534
Income taxes.................................................. 2,889 3,359
------- -------
Earnings as defined......................................... $25,126 $31,122
======= =======
Fixed charges--interest expense................................ $17,638 $22,534
======= =======
Ratio of earnings to fixed charges............................. 1.42 1.38
======= =======
</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,
---------------
1996 1995
------- -------
<S> <C> <C>
Net income..................................................... $ 4,599 $ 5,229
Add:
Interest expense.............................................. 17,638 22,534
Income taxes.................................................. 2,889 3,359
------- -------
Earnings as defined......................................... $25,126 $31,122
======= =======
Fixed charges--interest expense................................ $17,638 $22,534
======= =======
Ratio of earnings to fixed charges............................. 1.42 1.38
======= =======
</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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 82
<SECURITIES> 0
<RECEIVABLES> 1,098,260
<ALLOWANCES> (7,887)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 69,606
<DEPRECIATION> (20,731)
<TOTAL-ASSETS> 1,173,382
<CURRENT-LIABILITIES> 0
<BONDS> 707,690
0
0
<COMMON> 1
<OTHER-SE> 254,168
<TOTAL-LIABILITY-AND-EQUITY> 1,173,382
<SALES> 0
<TOTAL-REVENUES> 27,269
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,638
<INCOME-PRETAX> 7,488
<INCOME-TAX> 2,889
<INCOME-CONTINUING> 4,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,599
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
