<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 JUNE 30, 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 1-4101
----------------
TENNESSEE GAS PIPELINE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-1056569
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
TENNECO BUILDING, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
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 June 30, 1995.
TENNESSEE GAS PIPELINE COMPANY 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
Tennessee Gas Pipeline Company and Consolidated Subsidiaries--
Statements of Income.................................................. 2
Statements of Cash Flows.............................................. 3
Balance Sheets........................................................ 4
Statements of Changes in Shareowner's Equity.......................... 6
Notes to Financial Statements......................................... 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 12
Part II--Other Information
Item 1. Legal Proceedings............................................... 17
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................................ 18
</TABLE>
--------
* No 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
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS)
THREE MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE
30, 30,
-------------- --------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating revenues--
Natural gas pipelines...................... $ 432 $ 605 $ 937 $1,298
Automotive parts........................... 648 507 1,237 938
Packaging.................................. 682 527 1,318 1,018
Shipbuilding............................... 424 464 845 867
Farm and construction equipment............ -- 277 -- 518
Other...................................... (3) (2) (4) (4)
------ ------ ------ ------
2,183 2,378 4,333 4,635
Other income--
Interest income--
Affiliated companies..................... 96 47 180 96
Other.................................... 19 10 27 16
Gain (loss) on sale of businesses and
assets, net............................... (7) (22) 7 (20)
Other income, net.......................... 39 4 64 16
------ ------ ------ ------
2,330 2,417 4,611 4,743
------ ------ ------ ------
Costs and Expenses:
Cost of sales (exclusive of depreciation
shown below)................................ 1,285 1,395 2,527 2,642
Operating expenses........................... 315 514 686 1,054
Selling, general and administrative.......... 181 172 356 343
Finance charges of Tennessee's finance
subsidiaries................................ -- 4 -- 8
Depreciation, depletion and amortization..... 107 57 209 156
------ ------ ------ ------
1,888 2,142 3,778 4,203
------ ------ ------ ------
Income Before Interest Expense, Income Taxes
and Minority Interest......................... 442 275 833 540
------ ------ ------ ------
Interest Expense (net of interest capitalized):
Affiliated companies......................... 43 23 71 45
Other........................................ 36 44 73 88
------ ------ ------ ------
79 67 144 133
------ ------ ------ ------
Income Before Income Taxes and Minority
Interest...................................... 363 208 689 407
Income Tax Expense............................. 147 111 280 188
------ ------ ------ ------
Income Before Minority Interest................ 216 97 409 219
Minority Interest.............................. 10 -- 18 --
------ ------ ------ ------
Income From Continuing Operations.............. 206 97 391 219
Loss From Discontinued Operations, Net of
Income Tax.................................... -- (8) -- (2)
------ ------ ------ ------
Income Before Cumulative Effect of Change in
Accounting Principle.......................... 206 89 391 217
Cumulative Effect of Change in Accounting
Principle, Net of Income Tax.................. -- -- -- (13)
------ ------ ------ ------
Net Income..................................... $ 206 $ 89 $ 391 $ 204
====== ====== ====== ======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of income.)
2
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS)
SIX MONTHS
ENDED
JUNE 30,
----------------
1995 1994
------- -------
<S> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations.......................... $ 391 $ 219
Adjustments to reconcile income from continuing operations
to cash provided (used) by continuing operations--
Depreciation, depletion and amortization................. 209 156
Deferred income taxes.................................... 13 (13)
(Gain) loss on sale of businesses and assets, net........ (7) 20
Changes in components of working capital--
(Increase) decrease in receivables..................... (149) 228
(Increase) decrease in inventories..................... (182) (91)
(Increase) decrease in prepayments and other current
assets................................................ (6) 37
Increase (decrease) in payables........................ (15) 92
Increase (decrease) in taxes accrued................... (51) 3
Increase (decrease) in interest accrued................ (19) (19)
Increase (decrease) in restructuring liability......... -- (5)
Increase (decrease) in natural gas pipeline revenue
reservation........................................... (179) (157)
Increase (decrease) in other current liabilities....... (3) 112
(Increase) decrease in long-term notes and receivables... -- 4
Take-or-pay (refunds to customers) recoupments, net...... 25 4
Other.................................................... 105 (67)
------- -------
Cash provided (used) by continuing operations.......... 132 523
Cash provided (used) by discontinued operations........ 13 (5)
------- -------
Net Cash Provided (Used) by Operating Activities............. 145 518
------- -------
Cash Flows from Investing Activities:
Net proceeds (expenditures) related to the sale of
discontinued operations................................... 697 (5)
Net proceeds from sale of businesses and assets............ 46 199
Expenditures for plant, property and equipment--
Continuing operations.................................... (321) (176)
Discontinued operations.................................. (4) (32)
Acquisitions of businesses................................. (271) --
(Increase) decrease in Tenneco Inc. receivables............ (156) (2,109)
(Increase) decrease in notes receivable from other
affiliates................................................ (271) 1,755
Investments and other...................................... 6 (9)
------- -------
Net Cash Provided (Used) by Investing Activities............. (274) (377)
------- -------
Cash Flows from Financing Activities:
Capital distribution to affiliate.......................... (28) --
Issuance of long-term debt................................. -- 2
Retirement of long-term debt............................... (152) (134)
Net increase (decrease) in short-term debt excluding
current maturities on long-term debt...................... 10 233
------- -------
Net Cash Provided (Used) by Financing Activities............. (170) 101
------- -------
Effect of Foreign Exchange Rate Changes on Cash and Temporary
Cash Investments............................................ 5 2
------- -------
Increase (Decrease) in Cash and Temporary Cash Investments... (294) 244
Cash and Temporary Cash Investments, January 1............... 459 220
------- -------
Cash and Temporary Cash Investments, June 30 (Note).......... $ 165 $ 464
======= =======
Cash Paid During the Period for Interest..................... $ 158 $ 160
Cash Paid During the Period for Income Taxes (net of
refunds).................................................... $ 357 $ 201
</TABLE>
--------
NOTE: Cash and temporary cash investments include highly liquid investments
with a maturity of three months or less at date of purchase.
(The accompanying notes to financial statements are an integral part of these
statements of cash flows.)
3
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS)
JUNE 30, DECEMBER 31, JUNE 30,
ASSETS 1995 1994 1994
------ -------- ------------ --------
<S> <C> <C> <C>
Current Assets:
Cash and temporary cash investments........... $ 165 $ 459 $ 464
Receivables--
Customer notes and accounts (net)........... 456 644 694
Affiliated companies........................ 407 297 271
Gas transportation and exchange............. 198 214 295
Other....................................... 272 164 174
Notes receivable from Tenneco Inc. ........... 3,357 3,201 2,854
Inventories--
Finished goods.............................. 312 355 302
Work in process............................. 90 82 68
Long-term contracts in progress, less
progress billings.......................... 212 138 113
Raw materials............................... 206 178 184
Materials and supplies...................... 152 156 152
Deferred income taxes......................... 69 43 43
Prepayments and other......................... 240 301 274
------- ------- -------
6,136 6,232 5,888
------- ------- -------
Investments and Other Assets:
Investment in affiliated companies............ 424 523 555
Other investments, at cost.................... 45 49 56
Long-term receivables--
Notes and other............................. 176 157 163
Affiliated companies........................ 279 -- 15
Investment in subsidiaries in excess of fair
value of net assets at date of acquisition,
less amortization............................ 305 329 280
Deferred income taxes......................... 60 49 41
Other......................................... 1,252 733 778
------- ------- -------
2,541 1,840 1,888
------- ------- -------
Plant, Property and Equipment, at cost.......... 10,661 11,009 10,212
Less--Reserves for depreciation, depletion and
amortization................................. 5,517 5,851 5,554
------- ------- -------
5,144 5,158 4,658
------- ------- -------
$13,821 $13,230 $12,434
======= ======= =======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
balance sheets.)
4
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS)
JUNE 30, DECEMBER 31, JUNE 30,
LIABILITIES AND SHAREOWNER'S EQUITY 1995 1994 1994
----------------------------------- -------- ------------ --------
<S> <C> <C> <C>
Current Liabilities:
Short-term debt (including current maturities on
long-term debt).................................. $ 426 $ 298 $ 229
Payables--
Trade........................................... 800 1,029 980
Affiliated companies............................ 367 244 247
Gas transportation and exchange................. 129 159 208
Taxes accrued..................................... 88 49 194
Interest accrued.................................. 41 37 40
Restructuring liability........................... -- -- 13
Natural gas pipeline revenue reservation.......... 3 190 118
Other............................................. 1,015 787 829
------- ------- -------
2,869 2,793 2,858
------- ------- -------
Long-term Debt...................................... 536 793 857
------- ------- -------
Deferred Income Taxes............................... 1,239 1,408 1,233
------- ------- -------
Postretirement Benefits............................. 600 380 363
------- ------- -------
Deferred Credits and Other Liabilities.............. 601 422 413
------- ------- -------
Commitments and Contingencies
Minority Interest................................... 483 475 18
------- ------- -------
Shareowner's Equity:
Common stock, par value $5 per share, authorized,
issued and outstanding 200 shares................ -- -- --
Premium on common stock and other capital surplus. 3,466 3,494 3,494
Cumulative translation adjustments................ (3) (174) (155)
Retained earnings................................. 4,030 3,639 3,353
------- ------- -------
7,493 6,959 6,692
------- ------- -------
$13,821 $13,230 $12,434
======= ======= =======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
balance sheets.)
5
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREOWNER'S EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE
AMOUNTS)
SIX MONTHS ENDED JUNE 30,
----------------------------
1995 1994
------------- -------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Common Stock:
Balance January 1 and June 30.................. 200 $ -- 200 $ --
=== ------ === ------
Premium on Common Stock and Other Capital
Surplus:
Balance January 1.............................. 3,494 3,494
Capital distribution to affiliate............ (28) --
------ ------
Balance June 30................................ 3,466 3,494
------ ------
Cumulative Translation Adjustments:
Balance January 1.............................. (174) (297)
Translation of foreign currency statements... 44 143
Sale of investment in foreign subsidiaries... 127 --
Hedges of net investment in foreign
subsidiaries (net of income taxes).......... -- (1)
------ ------
Balance June 30................................ (3) (155)
------ ------
Retained Earnings:
Balance January 1.............................. 3,639 3,149
Net income................................... 391 204
------ ------
Balance June 30................................ 4,030 3,353
------ ------
Total...................................... $7,493 $6,692
====== ======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of changes in shareowner's equity.)
6
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) In the opinion of Tennessee Gas Pipeline Company (the "Company"), the
accompanying unaudited financial statements of Tennessee Gas Pipeline Company
and Consolidated Subsidiaries ("Tennessee") contain all adjustments necessary
to present fairly the financial position as of June 30, 1995, and the results
of operations; changes in shareowner's equity; and cash flows for the periods
indicated.
In June 1994, Tenneco Inc. and its subsidiaries ("Tenneco") completed an
initial public offering ("IPO") of approximately 29% of the common stock of
Case Corporation ("Case"), the holder of Tenneco's Farm and construction
equipment segment. In November 1994, a secondary offering of Case's common
stock reduced Tenneco's ownership to approximately 44%. Prior to the IPO,
Tenneco reorganized this segment resulting in Tennessee selling all of its Farm
and construction equipment net assets to Case Corporation for consideration of
Case Corporation common stock and cash. From January through June 1994,
Tennessee's Farm and construction equipment segment was fully consolidated;
subsequent to June 1994, it was reflected in Tennessee's financial statements
using the cost method of accounting. Tennessee's remaining investment in Case
is not significant to its consolidated financial position. See Note 5 for
additional information regarding Tennessee's investment in Case.
Prior year's financial statements have been reclassified where appropriate to
conform to 1995 presentations.
(2) Pursuant to Order 636 issued by the Federal Energy Regulatory Commission
("FERC") on April 8, 1992, the Company implemented revisions to its tariff
which put into effect on September 1, 1993, the restructuring of its
transportation, storage and sales services. Pursuant to the provisions of Order
636 allowing for the recovery of transition costs related to the restructuring,
the Company has made filings to recover gas production costs related to its
Bastian Bay facilities, the remaining balance of purchased gas ("PGA") costs,
stranded transportation ("TBO") costs and gas supply realignment ("GSR") costs
resulting from remaining gas purchase obligations.
The Company's filings to recover production costs related to its Bastian Bay
facilities have been rejected by the FERC based on the continued use of the gas
production from the field; however, the FERC recognized the ability of the
Company to file for the recovery of losses upon disposition of these assets.
The Company has filed for appellate review of the FERC actions and is confident
that the Bastian Bay costs will ultimately be recovered as transition costs
directly related to Order 636, and no FERC order has questioned the ultimate
recoverability of these costs.
The filings implementing the Company's recovery mechanisms for the following
transition costs were accepted effective September 1, 1993, and made subject to
refund pending FERC review: 1) direct-billing of unrecovered PGA costs to its
former sales customers over a twelve-month period, 2) recovery of TBO costs,
which the Company is obligated to pay under existing contracts, through a
surcharge from firm transportation customers, adjusted annually, and 3) GSR
cost recovery of 90% of such costs over a period of up to thirty-six months
from firm transportation customers and recovery of 10% of such costs from
interruptible transportation customers.
Following negotiations with its customers, the Company filed in July 1994
with the FERC a Stipulation and Agreement (the "PGA Stipulation"), which
provides for the recovery of PGA costs of approximately $100 million and the
recovery of costs associated with the transfer of storage gas inventory to new
storage customers in the Company's restructuring proceeding. The PGA
Stipulation eliminates all challenges to the PGA costs, but establishes a cap
on the charges that may be imposed upon former sales customers. On November 15,
1994, the FERC issued an order approving the PGA Stipulation and resolving all
outstanding issues. On April 5, 1995, the FERC issued its order on rehearing
affirming its initial approval of the PGA Stipulation. The Company implemented
the terms of the PGA Stipulation and made refunds in May 1995. The orders
approving the PGA Stipulation have been appealed to the D.C. Circuit Court of
Appeals by certain customers. The Company believes the PGA Stipulation will be
upheld on appeal.
7
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is recovering TBO costs formerly incurred to perform its sales
functions, subject to refund, pending review of data submitted by the Company.
On November 18, 1994, the FERC issued an order on the Company's initial TBO
surcharge filing to recover TBO costs for the twelve-month period beginning
September 1, 1993. The order required the Company to remove certain costs from
this surcharge. The Company has appealed this decision to the D.C. Circuit
Court of Appeals. On November 30, 1994, the Company filed with the FERC to
collect through a surcharge approximately $25 million annually of TBO costs in
compliance with the FERC's November 18, 1994 order, and in a separate filing,
the Company filed to recover its projected annual TBO costs of approximately
$21 million for the twelve-month period beginning January 1, 1995. The FERC
accepted the Company's filing to recover its projected TBO costs, subject to
refund.
With regard to the Company's GSR costs, the Company, along with three other
pipelines, executed four separate settlement agreements with Dakota
Gasification Company and the U.S. Department of Energy and initiated four
separate proceedings at the FERC seeking approval to implement the settlement
agreements. The settlement resolved litigation concerning purchases made by the
Company of synthetic gas produced from the Great Plains Coal Gasification plant
("Great Plains"). On October 18, 1994, the FERC consolidated the four
proceedings and set them for hearing before an administrative law judge
("ALJ"). The hearing, which concluded in July 1995, was limited to the issue of
whether the settlement agreements are prudent. The ALJ is required to issue his
initial decision by December 31, 1995. The FERC has committed to issuing a
final order by December 31, 1996. The FERC order stated that the costs related
to the Great Plains project are eligible for recovery through GSR and other
special recovery mechanisms and that the costs are eligible for recovery for
the duration of the term of the original gas purchase agreements.
Also related to the Company's GSR costs, on October 14, 1993, the Company
was sued in the State District Court of Ector County, Texas, by ICA Energy,
Inc. ("ICA") and TransTexas Gas Corporation ("TransTexas"). In that suit, ICA
and TransTexas contended that the Company had an obligation to purchase gas
production which TransTexas thereafter attempted to add unilaterally to the
reserves originally dedicated to a 1979 gas contract. On two subsequent
occasions, TransTexas gave the Company notice that it was adding new production
and/or acreage "to the contract." An amendment to the pleadings seeks $1.5
billion from the Company for alleged damages caused by the Company's refusal to
purchase gas produced from the TransTexas leases covering the new production
and lands. Neither ICA nor TransTexas were original parties to that contract.
However, they contend that any stranger acquiring a fractional interest in the
original committed reserves thereby obtains a right to add to the contract
unlimited volumes of gas production from locations in South Texas. The Company
filed a motion for summary judgment, asserting that the Texas statutes of
frauds precluded the plaintiffs from adding new production or acreage to the
contract. On May 4, 1995, the trial court granted the Company's motion for
summary judgment. The plaintiffs have filed a notice of appeal.
The Company has been engaged in separate settlement and contract reformation
discussions with holders of certain gas purchase contracts who have sued the
Company. Although the Company believes that its defenses in the underlying gas
purchase contract actions are meritorious, the Company recorded liabilities in
the first quarter of 1995 which it believes are adequate to cover the
resolution of these matters. On August 1, 1995, the Texas Supreme Court
affirmed a ruling favorable to the Company of the Court of Appeals in one of
these matters and indicated that it would remand the case to the trial court.
As of August 11, 1995, the mandate had not yet been issued on this ruling. The
Company is reassessing these liabilities in light of this favorable Texas
Supreme Court ruling.
As of June 30, 1995, the Company has deferred GSR costs yet to be recovered
from its customers of approximately $493 million, net of $270 million
previously recovered from its customers, subject to refund. Proceedings have
commenced to review the recovery of these GSR costs; however, the FERC has
generally encouraged pipelines to settle such issues through negotiations with
customers. Although Order 636
8
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
contemplates complete recovery by pipelines of qualified transition costs, the
Company is engaged in settlement discussions with its customers concerning the
amount of recoverable GSR costs in response to the FERC and customer statements
acknowledging the desirability of such settlements.
Given the uncertainty over the results of ongoing discussions between the
Company and its customers related to the recovery of GSR costs and the
uncertainty related to predicting the outcome of its gas purchase contract
reformation efforts and the associated litigation, Tennessee is unable to
predict the timing or the ultimate impact the resolution of these issues will
have on its consolidated financial position or results of operations.
On December 30, 1994, the Company filed a general rate increase in Docket No.
RP95-112 (the "1995 Rate Case") which reflected an increase in the Company's
revenue requirement of $118 million, including recovery of certain
environmental costs as discussed in Note 4. On January 25, 1995, the FERC
accepted the filing, suspended its effectiveness for the maximum period of five
months pursuant to normal regulatory process, and set the matter for hearing.
With modifications, the proposed rates in the 1995 Rate Case became effective
on July 1, 1995, subject to refund. Settlement discussions with the FERC staff
and customers are ongoing and the Company will reserve revenues it believes
adequate to cover any refunds which may be required upon final settlement of
this proceeding.
Also on January 25, 1995, the FERC issued an order requiring the convening of
a technical conference to discuss certain issues in the 1995 Rate Case and
concerns expressed in response to operational issues in a 1995 tariff filing.
The concerns include the Company's ability to provide its shippers with timely
and accurate operating and billing information and the associated systems
costs. Several technical conferences were held during the second quarter of
1995 resulting in modifications to the 1995 tariff filing and the assignment of
certain issues to the 1995 Rate Case for final resolution. The ultimate
resolution of these issues may result in adjustments to customer billings.
(3) Reference is made to Note 2 for information concerning gas supply
litigation. Tennessee Gas Pipeline Company and its subsidiaries are parties to
numerous other legal proceedings arising from their operations. Tennessee Gas
Pipeline Company believes that the outcome of these proceedings, individually
and in the aggregate, will have no material effect on the financial position or
results of operations of Tennessee Gas Pipeline Company and its consolidated
subsidiaries.
(4) Since 1988, the Company has been engaged in an internal project to
identify and deal with the presence of polychlorinated biphenyls ("PCBs") and
other substances of concern, including substances on the U.S. Environmental
Protection Agency ("EPA") List of Hazardous Substances ("HS List") at
compressor stations and other facilities operated by both its interstate and
intrastate natural gas pipeline systems. While conducting this project, the
Company has been in frequent contact with federal and state regulatory
agencies, both through informal negotiation and formal entry of consent orders,
in order to assure that its efforts meet regulatory requirements.
Tennessee has established a reserve for the Company's environmental expenses,
which includes: 1) expected remediation expense and associated onsite, offsite
and groundwater technical studies, 2) legal fees and 3) settlement of third
party and governmental litigation, including civil penalties. Through June 30,
1995, Tennessee has charged approximately $107 million against the
environmental reserve. Of the remaining reserve, $30 million has been recorded
on the balance sheet under "Payables-Trade" and $126 million under "Deferred
Credits and Other Liabilities."
Due to the current uncertainty regarding the estimated costs of the further
activity necessary for the Company to address the presence of the PCBs, the
substances on the HS List and other substances of concern
9
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
on its sites, including the requirements for additional site characterization,
the actual amount of such substances at the sites, and the final, site-specific
cleanup decisions to be made with respect to cleanup levels and remediation
technologies, the Company cannot at this time accurately project what
additional costs, if any, may arise from future characterization and
remediation activities. While there are still many uncertainties relating to
the ultimate costs which may be incurred, based upon the Company's evaluation
and experience to date, Tennessee continues to believe that the amount of the
reserve is adequate.
Tennessee believes that a substantial portion of these costs, which will be
expended over the next five to ten years, will be recovered from customers of
its natural gas pipelines. The Stipulation and Agreement approved by the FERC
in the Company's 1991 rate case established procedures for resolving the
recovery of certain environmental expenditures. These environmental costs are
currently being collected in the Company's rates subject to further review and
possible refund. Following negotiations with its customers, the Company in May
1995 filed with the FERC a separate Stipulation and Agreement (the
"Environmental Stipulation") that addresses the recovery of environmental costs
currently being recovered in its rates and also establishes a mechanism for
recovering a substantial portion of the environmental costs that will be
expended in the future. Upon FERC approval, the Environmental Stipulation will
become effective as of July 1, 1995, and will have no material effect on
Tennessee's financial position or results of operations. As of June 30, 1995,
the balance of the regulatory asset is $113 million.
Tennessee believes that its liability insurance policies in effect during the
period in which the environmental issues occurred provide coverage for
remediation costs and related claims. The Company has pending litigation in a
Louisiana state court against its insurance carriers during this period,
seeking recovery of costs which the Company incurred. The issues in dispute
involve determining: 1) whether the presence of PCBs and other substances at
each compressor station constituted a separate occurrence for purposes of the
per-occurrence limits of the policies; 2) the applicability of the pollution
exclusions in certain policies issued after 1971; 3) the applicability of
provisions which exclude the environmental impacts located solely on the
insured's property; 4) whether the term "property damage" in the policies will
cover the cost of compliance with governmental cleanup directives; 5) the
allocation of costs to the various policies in effect during the period the
environmental impact occurred; 6) the applicability of provisions excluding
pollution that is "expected or intended" and 7) the adequacy of notice of
claims to insurance carriers. Tennessee has completed settlements with and is
receiving payments from the majority of the defendant carriers and believes
that the likelihood of recovery of a portion of its remediation costs and
claims against the remaining defendant carriers is reasonably possible.
In July 1994, the Company commenced litigation in a Kentucky state court
against the manufacturer of the PCB-containing lubricant used by the Company,
seeking reimbursement of sums the Company has and will incur in the defense and
settlement of PCB-related claims brought by state and federal agencies, private
individuals and others. The Company anticipates that the defendant will raise a
variety of issues in dispute of the Company's claims.
While Tennessee believes its legal position to be meritorious, Tennessee has
not adjusted its environmental reserve to reflect any anticipated insurance
recoveries or recoveries from the manufacturer of the PCB-containing lubricant.
Recoveries could reduce the amount ultimately recoverable from customers.
Tennessee has identified other sites in its various operating divisions where
environmental remediation expenses may be required should there be a change in
ownership, operations or applicable regulations. These possibilities cannot be
predicted or quantified at this time and accordingly, no provision has been
recorded. However, provisions have been made for all instances where it has
been determined that the incurrence of any material remedial expense is
probable.
10
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) On August 9, 1995, Tenneco sold in a public offering 16.1 million shares
of common stock of Case Corporation at $35 per share. Net proceeds of
approximately $540 million will be used for ongoing investment programs and
Tenneco stock repurchases. The offering reduced Tenneco's ownership in Case
from 44% to 21%. Of the 16.1 million shares sold, approximately 646,000 shares
were owned by Tennessee.
(6) In June 1995, Tennessee acquired the natural gas pipeline assets of the
Pipeline Authority of South Australia ("PASA"), which includes a 488-mile
pipeline, for approximately $225 million. The purchase was made possible by the
privatization of Australia's natural gas industry. Tennessee is already
developing a 470-mile pipeline in southwest Queensland, Australia. Over the
longer term, as the pipeline in Queensland is developed, Tennessee should
realize significant economies of scale, operating both systems from an
existing, centralized gas control center with a single engineering and
technical staff. Pipe for the Queensland transmission system was ordered in the
second quarter of 1995, with construction expected to begin in late 1995. The
pipeline is expected to enter service by January 1997. In the second quarter of
1995, Tennessee completed four acquisitions of packaging plants and companies
for a total of approximately $50 million. Tennessee has accounted for all of
these acquisitions by the "purchase" method of accounting. If these assets had
been acquired January 1, 1995, there would not have been a significant effect
on net income.
(7) In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 which establishes new accounting
standards for the impairment of long-lived assets and for long-lived assets to
be disposed of. Tennessee will adopt the new standard in the first quarter of
1996 but does not expect that the adoption will have a material effect on
Tennessee's consolidated financial position or results of operations.
(The above notes are an integral part of the foregoing financial statements.)
11
<PAGE>
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS RESULTS
REVENUES
Net sales and operating revenues for the second quarter of 1995 were $2.18
billion, down from $2.38 billion in the second quarter of 1994 primarily due to
the exclusion of farm and construction equipment revenues from subsidiaries of
Case Corporation ("Case"). Tennessee's second quarter 1995 revenues excluded
revenues from Case, its farm and construction equipment segment, due to the
change to the cost method of accounting for Case in July 1994. (See Note 1 in
the "Notes to Financial Statements" for additional information.)
Natural gas pipelines revenues were down $173 million or 29 percent primarily
due to decreased volumes and lower gas spot prices in the nonregulated sector,
and the phase-out of gas sales in the regulated sector as a result of operating
under Order 636 of the Federal Energy Regulatory Commission ("FERC").
Automotive parts revenues increased $141 million or 28 percent, of which $87
million resulted from the Heinrich Gillet GmbH & Company ("Gillet") acquisition
in November 1994. Packaging revenues increased $155 million or 29 percent from
improved price realizations in the paperboard packaging business, which
includes containerboard and folding boxboard operations. Shipbuilding revenues
decreased $40 million or nine percent as a result of lower volume on carrier
and submarine work.
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST ("OPERATING
INCOME")
Operating income for the second quarter of 1995 was $442 million, up $167
million compared with $275 million for the second quarter of 1994. The 1994
second quarter includes a loss of $41 million, including $19 million of income
tax expense on the Case reorganization and IPO. This improvement was due
principally to higher prices and improved productivity in packaging's
paperboard business, which reflected strong demand from favorable economic
conditions in the United States and Europe.
NATURAL GAS PIPELINES
Natural gas pipelines reported operating income of $68 million in the 1995
second quarter compared with $89 million in the 1994 second quarter. Revenues
for the second quarter of 1995 decreased to $432 million compared with $605
million in the second quarter of 1994 primarily due to the decline in gas spot
prices and lower volumes in the nonregulated segment and the phase-out of gas
sales by the regulated pipelines. The entire decrease in operating income was
in the regulated business which resulted from competitive pressures in some
markets related to operating under FERC Order 636. The natural gas pipeline
industry is experiencing increasing competition, which is the result of actions
by the FERC to strengthen market forces throughout the industry. In a number of
key markets, Tennessee's interstate pipelines face competitive pressure from
other major pipeline systems, enabling local distribution companies and end
users to choose a supplier or switch suppliers based on the short-term price of
the gas and the cost of transportation. Tennessee's pipelines have been
required to discount their transportation rates to maintain market share.
Additionally, the majority of Tennessee's transportation contracts will be
expiring over the next five years. The renegotiation of these contracts may be
impacted by such competitive factors. (See Note 2 in the "Notes to Financial
Statements" for additional information.)
In April 1995, Tennessee announced its intent to sell its 50% interest in
Kern River Gas Transmission Company ("Kern River") provided an agreement can be
reached with a buyer on terms acceptable to Tennessee. Kern River owns a 904-
mile natural gas pipeline system extending from southwestern Wyoming to
Bakersfield, California.
12
<PAGE>
In June 1995, Tennessee acquired the natural gas pipeline assets of the
Pipeline Authority of South Australia ("PASA"), which includes a 488-mile
pipeline, for approximately $225 million. The purchase was made possible by the
privatization of Australia's natural gas industry. Tennessee is already
developing a 470-mile pipeline in southwest Queensland, Australia. Over the
longer term, as the pipeline in Queensland is developed, Tennessee should
realize significant economies of scale, operating both systems from an
existing, centralized gas control center with a single engineering and
technical staff. Pipe for the Queensland transmission system was ordered in the
second quarter of 1995, with construction expected to begin in late 1995. The
pipeline is expected to enter service by January 1997.
AUTOMOTIVE PARTS
Automotive parts reported second quarter 1995 operating income of $77 million
compared with $72 million in the second quarter of 1994. Second quarter 1994
operating income included a $5 million charge to reduce excess capacity.
Revenues for the second quarter of 1995 increased to $648 million compared with
$507 million in last year's second quarter, primarily as a result of the
acquisition of Gillet, which added $87 million in revenues. Profit margins
declined in the second quarter of 1995 due to the integration of Walker Europe
with Gillet, the largest supplier of exhaust systems for auto manufacturers in
Europe, and competitive pressure in the exhaust and ride control aftermarket.
Aftermarket sales rose worldwide, primarily in Europe where aftermarket sales
increased from the same quarter a year ago. Original equipment sales grew
worldwide with much of this increase supplied by the Gillet acquisition and the
improving European economy. Tennessee expects new vehicle sales in Europe to
rise by two to two and one-half percent in 1995 and new car and truck
production in North America to equal last year.
PACKAGING
Second quarter 1995 operating income for packaging was $141 million, up $97
million compared with $44 million generated in the 1994 second quarter.
Revenues for the 1995 second quarter were $682 million compared with $527
million in the same period last year, up 29 percent primarily due to improved
price realizations in the paperboard packaging business.
The paperboard packaging business, which includes containerboard and folding
boxboard operations, reported operating income of $125 million in the second
quarter, compared with $24 million in the year ago quarter, up $88 million. The
improvement in operating income was primarily due to continued strong market
conditions and limited capacity increases resulting in improved pricing, offset
somewhat by higher costs for recycled fiber. Improved productivity and
operating efficiencies also contributed to the higher operating income. Market
prices for old corrugated containers, a major component of recycled fiber,
escalated to approximately $170 per ton for the second quarter, up from $77 per
ton for the 1994 second quarter.
The outlook for containerboard remains positive, with industry containerboard
production rising six percent through May 1995 and operating rates at 100
percent as compared with 98 percent for the same period last year. Industry
inventory levels, at 5.5 weeks of supply, are still below the normal six-weeks
level.
Productivity of containerboard mills rose nearly three percent over the year-
ago period with all-time production records at the Valdosta and Tomahawk mills.
Reduced downtime and rejects, combined with increased machine speed,
contributed to these productivity gains.
Specialty packaging reported operating income of $16 million in the second
quarter of 1995, compared with $20 million for the same period last year.
Operating income continued to be adversely affected by increases in raw
material costs. The costs of polystyrene and aluminum reroll were up more than
35 percent from the second quarter of 1994, and the cost of old newspapers, the
primary raw material for molded fiber products, remained at record high levels.
Looking forward, it appears that polystyrene costs are stabilizing and aluminum
costs are trending down.
13
<PAGE>
In the 1995 second quarter, packaging completed four acquisitions for
approximately $50 million, the largest of which was Lux Packaging, Ltd.
("Lux"). Lux is a Texas-based leader in gravure preprinting for corrugated
packaging. Annual sales of these acquisitions are estimated to be approximately
$65 million.
SHIPBUILDING
Shipbuilding reported second quarter operating income of $46 million compared
with $53 million in the 1994 second quarter. Revenues decreased $40 million to
$424 million in the second quarter of 1995 compared with $464 million in the
same period last year as a result of lower volume on carrier and submarine work
largely due to the redelivery of the aircraft carrier USS ENTERPRISE in
September 1994 and deliveries of the submarines CHARLOTTE and TOLEDO in August
1994 and January 1995, respectively. Operating income declined due to revised
profit margins on SEALIFT work and lower volume on carrier and submarine work.
The backlog at the end of the second quarter of 1995 was $4.9 billion and
included construction contracts for three LOS ANGELES class submarines and
three NIMITZ class aircraft carriers, a conversion contract for two fast
SEALIFT ships and four "Double Eagle" product tankers. In all, Newport News has
contracts or letters of intent for up to 14 of the double-hulled tankers
introduced only a year ago. The backlog grew an additional $400 million in July
1995 with a new contract to overhaul the aircraft carrier USS EISENHOWER.
OTHER
Tennessee's other operations reported operating income of $110 million in the
second quarter of 1995 compared with $17 million for the second quarter of
1994. Operating income improved in the second quarter of 1995 primarily due to
higher interest income from affiliated companies and other investments.
INTEREST EXPENSE (NET OF INTEREST CAPITALIZED)
Interest expense increased from $67 million in the 1994 second quarter to $79
million in the second quarter of 1995. The increase was primarily attributable
to higher levels of affiliated debt partially offset by scheduled long-term
debt retirements.
INCOME TAXES
Income tax expense for the second quarter of 1995 was $147 million versus
$111 million reported for the 1994 second quarter. This increase was primarily
due to higher pre-tax income in 1995 partially offset by higher taxes on asset
sales in the second quarter of 1994.
DISCONTINUED OPERATIONS
Loss from discontinued operations in the second quarter of 1994 of $8 million
(net of an income tax benefit of $12 million) resulted from the sale of
Tennessee's chemicals and brakes businesses. The loss included a $21 million
loss (net of income tax benefit of $15 million) on the sale of automotive's
brakes business. Also included in the 1994 second quarter is net loss from the
brakes operations of $1 million, net of income tax benefit of $4 million. Net
income from the chemicals operations in the second quarter of 1994 was $14
million, net of income tax expense of $7 million.
14
<PAGE>
NET INCOME
Net income for the second quarter of 1995 was $206 million compared with net
income of $89 million, in the 1994 second quarter.
Included in the second quarter 1994 net income of $89 million was income from
continuing operations of $97 million and loss from discontinued operations of
$8 million.
SIX MONTHS RESULTS
REVENUES
Net sales and operating revenues for the first six months of 1995 were $4.33
billion, down from $4.64 billion reported in 1994 primarily due to the
exclusion of farm and construction equipment revenues as a result of the change
to the cost method of accounting for Case in July 1994. Excluding Case revenues
for the first half of 1994, revenues increased $216 million compared with the
first six months of 1994. Higher revenues for packaging (up $300 million or 29
percent) and automotive parts (up $299 million or 32 percent) were partially
offset by lower revenues for natural gas pipelines (down $361 million or 28
percent), and shipbuilding (down $22 million or three percent).
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST ("OPERATING
INCOME")
Operating income for the first six months of 1995 was $833 million compared
with $540 million reported for the same period of 1994.
Natural gas pipelines reported operating income of $148 million for the first
half of 1995 compared with $194 million in the same period of 1994. Revenues
decreased to $937 million compared to $1.30 billion in the first six months of
1994 primarily due to the decline in gas spot prices and lower volumes in the
nonregulated segment and the phase-out of gas sales by the regulated pipelines.
Operating income declined in the first half of 1995 mainly due to competitive
pressures related to operating under FERC Order 636. Operating income also
decreased as a result of depressed natural gas demand and prices in the
nonregulated business in the first quarter of 1995.
Automotive parts reported first half 1995 operating income of $130 million
compared with $123 million recorded in the same period a year ago. Year-to-date
revenues for 1995 totaled $1.24 billion as compared with last year's reported
amount of $938 million. Revenues increased primarily as a result of the
acquisition of Gillet, which added $173 million in revenues, and increased
European aftermarket revenues. Profit margins declined in the first half of
1995 due to the integration of Walker Europe with Gillet and competitive
pressure in the exhaust aftermarket.
Shipbuilding reported first half 1995 operating income of $90 million
compared with $101 million in the same period in 1994. Revenues were $845
million for the first six months of 1995 compared with $867 million in the
first half of 1994. Revenue and operating income decreases resulted from lower
volumes on carrier and submarine construction contracts. Operating income
declined primarily as a result of revised profit margins on SEALIFT work.
Packaging had operating income of $257 million in the first six months of
1995 versus $64 million in the prior year period. Revenues were $1.32 billion
in the first half of 1995 compared with $1.02 billion
in the first half of 1994. Higher revenues and operating income were primarily
due to strengthening containerboard pricing. In addition, the 1995 first
quarter operating income included a $14 million gain on the sale of a mill in
Sylva, North Carolina.
Tennessee's other operations reported operating income of $208 million in the
first half of 1995 compared with $58 million for the first half of 1994.
Operating income improved in the first half of 1995 primarily due to higher
interest income from affiliated companies and other investments.
15
<PAGE>
INTEREST EXPENSE
Interest expense increased from $133 million in the first half of 1994 to
$144 million in the first half of 1995 while interest capitalized was $3
million in the first half of 1995 versus $1 million in the same period of 1994.
The year-to-year change in these items was due to the same reasons discussed
under "Three Months Results" above.
INCOME TAXES
Income tax expense for the first half of 1995 was $280 million versus $188
million in the same period of 1994. Income tax expense increased in 1995
primarily due to higher pre-tax income. The 1994 period also included higher
taxes on asset sales and higher levels of unbenefitted European losses.
DISCONTINUED OPERATIONS
Loss from discontinued operations for the first half of 1994 of $2 million
(net of an income tax benefit of $11 million) included a $21 million loss (net
of income tax benefit of $15 million) on the sale of Tennessee's brakes
business and a loss of $3 million (net of income tax benefit of $4 million)
from the brakes operations. Net income from the chemicals operations for the
first half of 1994 was $22 million, net of income tax expense of $8 million.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, Tennessee adopted Statement of Financial
Accounting Standards ("FAS") No. 112, Employers' Accounting for Postemployment
Benefits. This new standard was adopted using the cumulative catch-up method
and requires employers to account for postemployment benefits for former or
inactive employees after employment but before retirement on the accrual basis
rather than the "pay-as-you-go" basis. As a result of the adoption of this
statement, the first half 1994 Statement of Income includes an after-tax charge
of $13 million for the cumulative effect of the accounting change.
NET INCOME
Net income for the first half of 1995 was $391 million compared with net
income of $204 million in the 1994 first half. The 1994 first half net income
includes income from continuing operations of $219 million, loss from
discontinued operations of $2 million and the charge of $13 million (net of
income tax) relating to the cumulative effect of the change in accounting
principle.
CAPITAL EXPENDITURES
Expenditures for plant, property and equipment from continuing operations for
the first six months of 1995 were $321 million compared with $176 million for
the first six months of 1994. Increased expenditures for natural gas pipelines
($53 million), automotive parts ($50 million), shipbuilding ($20 million) and
packaging ($25 million) were partially offset by the decline for farm and
construction equipment ($3 million).
OTHER MATTERS
In March 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 121 which establishes new accounting standards for the
impairment of long-lived assets and for long-lived assets to be disposed of.
Tennessee will adopt the new standard in the first quarter of 1996 but does not
expect that the adoption will have a material effect on Tennessee's
consolidated financial position or results of operations.
On August 9, 1995, Tenneco sold in a public offering 16.1 million shares of
common stock of Case Corporation at $35 per share. Net proceeds of
approximately $540 million will be used for ongoing investment programs and
Tenneco stock repurchases. The offering reduced Tenneco's ownership in Case
from 44% to 21%. Of the 16.1 million shares sold, approximately 646,000 shares
were owned by Tennessee.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
(1) Environmental Proceedings.
The Company is a party in proceedings involving federal and state
authorities regarding the past use by the Company of a lubricant containing
polychlorinated biphenyls ("PCBs") in its starting air systems.
The Company has executed a consent order with the United States
Environmental Protection Agency ("EPA") governing the remediation of its
compressor stations in Regions IV, V and VI. With respect to the stations in
Regions II and III, EPA has advised the Company that it is deferring to the
Pennsylvania and New York environmental agencies to specify the remediation
requirements applicable to the Company. The Company has executed a consent
order with the Pennsylvania Department of Environmental Resources dated August
1, 1995, governing remediation at the Pennsylvania stations; this consent
order also obligates the Company to pay a civil penalty of $500,000. In
addition, the Company has agreed to fund environmentally beneficial projects
within the State of Pennsylvania over the next three years; those projects are
expected to have a total cost to the Company of approximately $490,000. The
Company will continue its negotiations with the New York Department of
Environmental Conservation on remediation at the New York stations. The
Company believes that the ultimate resolution of this matter will not have a
material adverse effect on the financial condition or results of operations of
the Company and its consolidated subsidiaries.
(2) Other Proceedings.
On October 14, 1993, the Company was sued in the State District Court of
Ector County, Texas, by ICA Energy, Inc. ("ICA") and TransTexas Gas
Corporation ("TransTexas"). In that suit, ICA and TransTexas contended that
the Company had an obligation to purchase gas production which TransTexas
thereafter attempted to add unilaterally to the reserves originally dedicated
to a 1979 gas contract. On two subsequent occasions, TransTexas gave the
Company notice that it was adding new production and/or acreage "to the
contract." An amendment to the pleadings seeks $1.5 billion from the Company
for alleged damages caused by the Company's refusal to purchase gas produced
from the TransTexas leases covering the new production and lands. Neither ICA
nor TransTexas were original parties to that contract. However, they contend
that any stranger acquiring a fractional interest in the original committed
reserves thereby obtains a right to add to the contract unlimited volumes of
gas production from locations in South Texas. The Company filed a motion for
summary judgment, asserting that the Texas statutes of frauds precluded the
plaintiffs from adding new production or acreage to the contract. On May 4,
1995, the trial court granted the Company's motion for summary judgment. The
plaintiffs have filed a notice of appeal.
(3) Potential Superfund Liability.
At June 30, 1995, the Company has been designated as a potentially
responsible party in 56 "Superfund" sites. With respect to its pro rata share
of the remediation costs of certain sites, the Company is fully indemnified by
third parties. With respect to certain other sites, the Company has sought to
resolve its liability through payments to the other potentially responsible
parties. For the remaining sites, the Company has estimated its share of the
remediation costs to be between $10 million and $69 million or 0.4% to 2.5% of
the total remediation costs for those sites and has provided reserves that it
believes are adequate for such costs. Because the clean-up costs are estimates
and are subject to revision as more information becomes available about the
extent of remediation required, the Company's estimate of its share of
remediation costs could change. Moreover, liability under the Comprehensive
Environmental Response, Compensation and Liability Act is joint and several,
meaning that the Company could be required to pay in excess of its pro rata
share of remediation costs. The Company's understanding of the financial
strength of other potentially responsible parties has been considered, where
appropriate, in the Company's determination of its estimated liability.
17
<PAGE>
The Company does not believe that the costs associated with its current status
as a potentially responsible party in the Superfund sites described above will
be material to its consolidated financial position or results of operations.
For additional information concerning environmental matters, see Note 4 in
the "Notes to Financial Statements" of Tennessee Gas Pipeline Company and
Consolidated Subsidiaries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27--Financial Data Schedule
(b) Reports on Form 8-K. Tennessee Gas Pipeline Company did not file any
Current Reports on Form 8-K during the quarter ended June 30, 1995.
18
<PAGE>
SIGNATURE
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.
TENNESSEE GAS PIPELINE COMPANY
Robert T. Blakely
By __________________________________
Robert T. Blakely
Senior Vice President--Principal
Financial
and Accounting Officer
Date: August 11, 1995
19
<TABLE> <S> <C>
<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TENNESSEE GAS PIPELINE COMPANY AND CONSOLIDATED SUBSIDIARIES FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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