<PAGE> 1
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K/A
Amendment No. 1
to
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 22, 1997 (Date of Earliest
Event Reported: December 11, 1996)
TENNESSEE GAS PIPELINE COMPANY
(Exact Name of Registrant as Specified in the Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-4101 74-1056569
(Commission File Number) (I.R.S. Employer Identification No.)
El Paso Energy Building
1001 Louisiana 77002
Houston, Texas (Zip Code)
(Address of Principal Executive Offices)
(713) 757-2131
(Registrant's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
<PAGE> 2
Items 1 and 2. Changes in Control of Registrant; Acquisition or Disposition
of Assets.
On December 12, 1996, Tennessee Gas Pipeline Company ("TGP"), a wholly
owned subsidiary of Tenneco Inc. ("Parent Company"), became an indirect
subsidiary of El Paso Natural Gas Company ("El Paso") as a result of the Merger
described below involving Parent Company and an indirect subsidiary of El Paso.
References herein to "Old Tenneco" refer to Parent Company prior to the
Distributions and Merger described below and references to "El Paso Tennessee"
refer to Parent Company following the Distributions and Merger. In the Merger,
Old Tenneco (i.e., Tenneco Inc.) changed its name to "El Paso Tennessee Pipeline
Co." TGP remains a wholly owned subsidiary of El Paso Tennessee and, as a result
of the Merger, became an indirect subsidiary of El Paso.
On December 12, 1996, El Paso Merger Company, an indirect subsidiary of
El Paso ("El Paso Merger Sub"), merged with and into Old Tenneco (the "Merger"),
which became an indirect subsidiary of El Paso. The Merger was effected in
accordance with the Amended and Restated Agreement and Plan of Merger, dated as
of June 19, 1996 (the "Merger Agreement"), among El Paso Merger Sub, El Paso and
Old Tenneco, which Merger Agreement is filed as an exhibit to this Current
Report on Form 8-K and incorporated herein by reference. In addition, El Paso
and New Tenneco Inc. ("New Tenneco") entered into a Letter Agreement, dated
December 11, 1996, relating to the Merger, which Letter Agreement is filed as an
exhibit to this Current Report on Form 8-K and incorporated herein by reference.
The consideration paid by El Paso in the Merger consisted of:
o the retention after the Merger of approximately $2.6 billion of
debt and preferred stock obligations of Old Tenneco, subject to
certain adjustments (which obligations consisted, in part, of
(1) approximately $200 million of public debt of Old Tenneco
outstanding at the effective time of the Merger, (2) $2.1
billion of debt of Old Tenneco outstanding at the effective
time of the Merger under a $3 billion Revolving Credit and
Competitive Advance Facility Agreement, dated as of
November 4, 1996 (the "Credit Agreement"), among Old Tenneco,
the banks and other financial institutions party thereto and The
Chase Manhattan Bank, as agent, and (3) $300 million of Old
Tenneco preferred stock);
o the issuance of approximately 18.8 million shares of common
stock of El Paso valued at approximately $914 million, based on
a closing price per share of common stock on the New York Stock
Exchange of $48.625 on December 9, 1996, to the holders of Old
Tenneco's common stock and two series of its preferred stock;
and
o the retention of liabilities related to certain discontinued
businesses of Old Tenneco which El Paso estimated to be
approximately $600 million.
The number of shares of El Paso's common stock issued in the Merger to
stockholders of Old Tenneco was determined pursuant to formulas set forth in
the Merger Agreement. In the Merger, (i) a holder of Old Tenneco's common stock
received .093 of a share of El Paso's common stock for each share of Old Tenneco
common stock, (ii) a holder of Old Tenneco's $7.40 Cumulative Preferred Stock
received 2.365 shares of El Paso's common stock for each such share of $7.40
Cumulative Preferred Stock, and (iii) a holder of Old Tenneco's $4.50 Cumulative
Preferred Stock received 2.365 shares of El Paso's common stock for each such
share of $4.50 Cumulative Preferred Stock.
-1-
<PAGE> 3
As a result of the Merger, El Paso indirectly owns 100% of the common
equity and approximately 75% of the combined equity value of El Paso Tennessee.
Currently, approximately $300 million of preferred stock issued in a public
offering by Old Tenneco on November 18, 1996 remains outstanding. The holders
of such preferred stock have the right to elect one-sixth of the board of
directors of El Paso Tennessee.
El Paso currently is engaged in a comprehensive review of the business
and operations of El Paso Tennessee and its subsidiaries (collectively, "Tenneco
Energy"). Following the completion of such review, El Paso intends to integrate,
for the most part, the operations of Tenneco Energy with those of El Paso to
increase operating and administrative efficiency through consolidation and
reengineering of facilities, workforce reductions and coordination of
purchasing, sales and marketing activities. El Paso anticipates that the
complementary interstate and intrastate pipeline operations and gas marketing
activities of El Paso and Tenneco Energy should provide the combined company
with increased operating flexibility and access to additional customers and
markets. As previously disclosed, El Paso is in the process of monetizing
certain assets of Tenneco Energy through asset sales and non-recourse project
financings. In December 1996 El Paso received approximately $400 million in
proceeds from the sale of a 70% interest in Tenneco Energy's two Australian
pipelines and a related debt financing. It also has completed the sale of its
oil and gas exploration, production and financing unit, formerly known as
Tenneco Ventures, in a $105 million transaction. The net proceeds from these
monetization transactions were used to repay outstanding borrowings under the
Credit Agreement. El Paso is also pursuing the monetization of other assets.
Prior to the Merger, Old Tenneco and its subsidiaries (including TGP)
effected various intercompany transfers and distributions which restructured,
divided and separated their businesses, assets and liabilities so that all the
assets, liabilities and operations related to their automotive parts, packaging
and administrative services businesses (collectively, the "Industrial Business")
and their shipbuilding business (the "Shipbuilding Business") were spun-off to
Old Tenneco's then existing common stockholders (the "Distributions"). The
Distributions were effected on December 11, 1996 pursuant to the Distribution
Agreement dated as of November 1, 1996 (as amended, the "Distribution
Agreement"), among Old Tenneco, New Tenneco and Newport News Shipbuilding Inc.
("Newport News"), which Distribution Agreement is filed as an exhibit to this
Current Report on Form 8-K and incorporated herein by reference. Following the
Distributions, the remaining operations of Old Tenneco consisted primarily of
those operations related to the transmission and marketing of natural gas. In
connection with the Distributions, certain assets of TGP relating to the
Industrial Business were transferred from TGP to New Tenneco.
In anticipation of the Distributions, TGP's Board of Directors declared
a special distribution to Old Tenneco consisting of all of the capital stock of
(i) New Tenneco (now known as Tenneco Inc.), a newly formed, wholly owned
subsidiary of Old Tenneco which held the Industrial Business, and (ii) Newport
News, a newly formed, wholly owned subsidiary of Old Tenneco which held the
Shipbuilding Business. These assets constituted a substantial portion of the
assets of TGP.
In connection with the Distributions, Old Tenneco's Board of Directors
declared a special distribution to its common stockholders of all of the
capital stock of New Tenneco and Newport News. The shares of common stock of
New Tenneco and Newport News were distributed to holders of record of Old
Tenneco's common stock on the distribution record date, December 11, 1996,
without any consideration being paid by such holders, on the basis of (i) one
share of common stock of New Tenneco for every share of common stock of Old
Tenneco and (ii) one share of common stock of Newport News for every five shares
of common stock of Old Tenneco. No certificates or scrip representing fractional
shares of Newport News common stock were issued in the Distributions. Holders of
Old Tenneco common stock who would be entitled to receive fractional shares of
common stock of Newport News received cash in the Distributions, in lieu of such
fractional shares, derived from the sale of such fractional shares on the open
market.
-2-
<PAGE> 4
The reorganization of Old Tenneco, including the Merger and the
Distributions, was approved by the stockholders of Old Tenneco at a special
meeting of stockholders on December 10, 1996. The issuance of common stock of
El Paso in the Merger was approved by the stockholders of El Paso at a special
meeting of stockholders on December 9, 1996.
The directors and executive officers of TGP prior to the Merger
resigned as of the effective time of the Merger. The following persons
are presently serving as directors and executive officers of TGP in the
capacities indicated:
NAME POSITION
---- --------
William A. Wise . . . . . . . Chairman of the Board and Director
John W. Somerhalder II . . . . President and Director
Gilmer R. Abel . . . . . . . . Senior Vice President
H. Brent Austin . . . . . . . Senior Vice President and Director
E. Jay Holm . . . . . . . . . Senior Vice President
Wayne B. Allred . . . . . . . Vice President and Treasurer
Steve C. Beasley . . . . . . . Vice President
Jeffrey I. Beason . . . . . . Vice President and Controller
John M. Green, Jr. . . . . . . Vice President
Daniel B. Martin . . . . . . . Vice President
C. Dana Rice . . . . . . . . . Vice President
V. Larry Smith . . . . . . . . Vice President
Stacy J. James . . . . . . . . Secretary
As described above, Old Tenneco entered into the Credit Agreement under
which a syndicate of banks and other financial institutions (the "Lenders")
committed to provide up to $3 billion of financing to Old Tenneco on an
unsecured basis. Chase Securities Inc. arranged the Credit Agreement and The
Chase Manhattan Bank is acting as agent for the Lenders. A list of the Lenders
is set forth on Exhibit 99.1 which is incorporated herein by reference. The
Credit Agreement consists of a 364-day revolving credit facility, with a
two-year term thereafter, the proceeds of which were used to effect the Debt
Realignment (as defined and as described in the Merger Agreement) and for other
general corporate purposes, and is guaranteed by El Paso. The borrowings under
the Credit Agreement will mature in November 1999. Borrowings under the Credit
Agreement bear interest at a rate per annum equal to, at the borrowers' option,
either
(a) the highest of (i) the rate from time to time publicly
announced by The Chase Manhattan Bank in New York City as its prime
rate, and (ii) the federal funds effective rate from time to time plus
1/2 of 1%, or
(b) the average of the rates at which eurodollar deposits for
one, two, three or six months or, subject to availability to each
lender, nine or 12 months (as selected by the borrowers) are offered in
the interbank eurodollar market in the approximate amount of the
relevant loan, plus the Applicable Margin.
-3-
<PAGE> 5
The "Applicable Margin" will be based on El Paso's senior long-term debt
rating, as determined from time to time, or if El Paso's debt is not rated,
each rating agency will be assumed to have assigned its lowest rating. At
December 26, 1996, the outstanding loans under the Credit Agreement bore a
weighted average interest rate of 5.94% per annum.
The Credit Agreement requires that El Paso's ratio of total
indebtedness to total indebtedness plus net worth not exceed 70%. Failure to
satisfy the foregoing minimum requirement will be a default under the Credit
Agreement that will enable the Lenders to refuse to loan funds to El Paso
Tennessee and to accelerate the indebtedness thereunder. The Credit Agreement
also imposes prohibitions or limitations on liens (other than agreed permitted
liens), subsidiary indebtedness and guarantee obligations, and asset
dispositions (with certain permitted exceptions), among others. The Credit
Agreement contains certain default provisions, including, among other things,
(i) nonpayment of any amount due to the lenders under the Credit Agreement,
(ii) material breach of representations and warranties, (iii) default in the
performance of covenants, (iv) bankruptcy or insolvency, (v) cross-default with
respect to indebtedness for borrowed money and related guaranty obligations
in excess of $100 million, and (vi) a judgment suffered by El Paso in excess of
$50 million not covered by insurance and which judgment shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days.
Although the separation of the Industrial Business from the remainder of
the businesses, operations and companies constituting the Tenneco Group prior to
the Merger has been structured as a "spin-off" of New Tenneco and Newport News
for legal, tax and other reasons, New Tenneco will succeed to certain important
aspects of the Old Tenneco business, organization and affairs, namely: (i) New
Tenneco has been renamed "Tenneco Inc." subsequent to the consummation of the
Merger; (ii) New Tenneco is headquartered at Old Tenneco's former headquarters
in Greenwich, Connecticut; (iii) New Tenneco's Board of Directors consists of
those persons previously constituting Old Tenneco's Board of Directors prior to
the Merger; (iv) New Tenneco's executive management consists substantially of
Old Tenneco's executive management; and (v) the Industrial Business conducted
by New Tenneco consists largely of Tenneco Automotive and Tenneco Packaging,
which combined represent over half of the assets, revenues and operating income
of the businesses, operations and companies that constituted the Tenneco Group.
Consequently, New Tenneco will reflect the Newport News business and the energy
businesses which were acquired by El Paso as discontinued operations in its
financial statements. Additionally, TGP will reflect the financial position and
results of operations of the acquired energy businesses on a separate and stand
alone basis in its historical financial statements.
-4-
<PAGE> 6
Item 5. Other Events.
El Paso announced on December 23, 1996 that it reached a settlement that
resolves its gas purchase contract disputes with KCS Energy, Inc. Attached as
Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference
herein is a press release related to such settlement.
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information:
-5-
<PAGE> 7
TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following Unaudited Pro Forma Financial Statements of TGP (the "Pro
Forma Financial Statements") illustrate the effect of: the Corporate
Restructuring Transactions, the Cash Realignment, the Debt Realignment and the
Merger and Refinancing Transactions (see below). The Unaudited Pro Forma Balance
Sheet has been prepared as if such transactions occurred on September 30, 1996;
the Unaudited Pro Forma Statements of Income have been prepared as if such
transactions occurred as of January 1, 1995. Capitalized terms used herein shall
have the respective meanings set forth in the Merger Agreement or the
Distribution Agreement unless otherwise defined herein.
The Corporate Restructuring Transactions represent a reorganization of
companies, assets and liabilities under common control and, accordingly, the
transfers of assets and liabilities pursuant to the Corporate Restructuring
Transactions have been accounted for at historical cost.
El Paso's acquisition of Old Tenneco, and its indirect acquisition of
TGP, will be accounted for under the purchase method and the purchase price
adjustments will be reflected in the separate consolidated financial statements
of TGP. The Merger adjustments in the Pro Forma Financial Statements also
reflect the "push down" of $800 million of debt borrowed by El Paso Tennessee
at the time of the Merger which management intends to refinance with public
debt to be issued by TGP. A final determination of required purchase
accounting adjustments, including the allocation of the purchase price to the
assets acquired and liabilities assumed based on their respective fair values,
has not yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the Pro Forma Financial Statements are
preliminary and have been made solely for purposes of developing the pro forma
financial information. However, El Paso's management believes that the pro
forma adjustments and the underlying assumptions reasonably present the
significant effects of the Merger and the Refinancing Transactions (as
defined). In addition, El Paso will undertake a study to determine the fair
value of TGP's assets and liabilities and will revise purchase accounting
adjustments upon completion of that study. The actual financial position and
results of operations of TGP will differ, perhaps significantly, from the pro
forma amounts reflected herein because of a variety of factors, including
access to additional information, changes in value and changes in operating
results between the dates of the pro forma financial information and the date
on which purchase accounting adjustments are finalized.
As used herein, "Refinancing Transactions" means certain transactions
with respect to TGP in order to reduce the amount of El Paso Tennessee debt
including the monetization of certain assets of Tenneco, TGP or its
subsidiaries for anticipated net proceeds of approximately $500 million, which
have been funded as an affiliated loan to El Paso Tennessee in the Pro Forma
Financial Statements. As the primary operations of El Paso Tennessee consists
of the operations of TGP, management anticipates that the funds necessary to
service the debt and other securities of El Paso Tennessee will be provided by
El Paso or the operations of the Company. Consequently, the Company may provide
funds from operating activities, as well as proceeds from additional asset
sales or various financings, to El Paso Tennessee to fund its debt and
preferred stock servicing requirements.
The Pro Forma Financial Statements are not necessarily indicative of
actual operating results or financial position had the transactions reflected
therein occurred as of the dates indicated above, nor do they purport to
indicate operating results or financial position which may be attained in the
future.
-6-
<PAGE> 8
TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
(MILLIONS)
<TABLE>
<CAPTION>
PRE-MERGER PRO FORMA PRO FORMA MERGER
------------------------------------------------- ------------------------------
COMBINED RESTRUCTURING TGP MERGER AND
TGP AND AS REFINANCING TGP
HISTORICAL REALIGNMENT ADJUSTED TRANSACTIONS PRO FORMA
----------- ------------ -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments. $ 35 $ (2)(c) $ 33 $ -- $ 33
Receivables
Affiliated companies.............. 90 (17)(a) 73 73
Other............................. 912 (303)(b) 662 662
53 (c)
Other current assets................ 157 (10)(c) 147 147
------ ------- ------ ----- ------
Total current assets............. 1,194 (279) 915 -- 915
------ ------- ------ ------ ------
Affiliated note receivable............. 500 (h) 500
Net property, plant and equipment...... 2,972 (39)(c) 2,933 1,720 (f) 4,073
(580)(h)
Other assets and deferred charges...... 1,067 (130)(b) 932 (590)(e) 422
(5)(c) 80 (h)
------ ------- ------ ------ ------
Total assets..................... $5,233 $ (453) $4,780 $1,130 $5,910
====== ======= ====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Short-term debt.................... $ 324 $ (272)(d) $ 52 $ $ 52
Payables
Affiliated companies............. 74 (68)(a) 6 6
Other............................ 343 (2)(b) 341 341
Other current liabilities.......... 481 (3)(b) 451 451
(27)(d)
------ ------- ------ ------ ------
Total current liabilities....... 1,222 (372) 850 850
------ ------- ------ ------ ------
Long-term debt........................ 584 (502)(d) 82 800 (i) 882
Other liabilities and deferred
credits............................ 545 (14)(c) 529 151 (e) 680
(2)(c)
Deferred income taxes................. 442 (14)(b) 428 382 (g) 810
------ ------- ------ ------ ------
2,793 (904) 1,889 1,333 3,222
------ ------- ------ ------ ------
Stockholder's equity
Common Stock and paid-in capital ..... -- -- 1,720 (f) 2,688
(741)(e)
(382)(g)
(800)(i)
2,891 (j)
Retained Earnings
TGP combined equity................... 2,440 51 (a) 2,891 (2,891)(j) --
(414)(b)
13 (c)
801 (d)
------ ------- ------ ------ ------
Total stockholder's equity ..... 2,440 451 2,891 (203) 2,688
------ ------- ------ ------ ------
Total liabilities and
stockholder's equity......... $5,233 $ (453) $4,780 $1,130 $5,910
====== ======= ====== ====== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Balance Sheet.
-7-
<PAGE> 9
TENNESSEE GAS PIPELINE COMPANY
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
RESTRUCTURING AND REALIGNMENT:
(a) To reflect the settlement of certain intercompany trade accounts
receivable and intercompany trade accounts payable with TGP affiliates.
(b) To reflect the distribution to New Tenneco of receivables previously sold
to Tenneco Credit Corporation, a TGP combined subsidiary.
(c) To reflect the transfer between TGP and New Tenneco of certain assets and
liabilities as part of the Corporate Restructuring Transactions.
(d) To reflect the restructuring and realignment of the TGP debt pursuant to
the Debt Realignment and the applicable provisions of the Merger
Agreement, and the assumed payment of accrued interest on the TGP debt
defeased, redeemed or tendered as part of the Debt Realignment. TGP
recognized an after tax extraordinary charge of approximately $100 million
related to the Debt Realignment transactions.
MERGER AND REFINANCING TRANSACTIONS:
(e) To reflect the preliminary estimated acquisition adjustments under the
purchase method of accounting, which will be reflected in the separate
financial statements of TGP to record assets acquired and liabilities
assumed at estimated fair value for: (i) reduction of certain other assets,
deferred charges and regulatory assets; (ii) the revision of benefit plan
assumptions relating to the retiree medical plan obligation; and (iii)
adjustments related to other employee benefit costs and environmental
costs. The following adjustments reflect El Paso management's intended
business strategies which may differ from the business strategies employed
by Old Tenneco management prior to the Merger (in millions):
<TABLE>
<S> <C>
Other assets and deferred charges.................... $590
Other liabilities and deferred credits............... 151
----
$741
====
</TABLE>
(f) To reflect the allocation to property, plant and equipment of the $1,720
million excess purchase price from the Merger, which will be reflected in
the separate financial statements of TGP. The allocation of excess
purchase price reflects El Paso's internal evaluation and is subject to
the completion of an independent appraisal of the fair value of the
property acquired. It is not expected that any excess purchase price
allocated to property, plant and equipment will be allowed for regulatory
purposes or recovery through rates. Should the independent appraisal not
support such allocation to property, plant and equipment, the excess of
total purchase price over the fair value of the net assets acquired will
be reflected as goodwill.
(g) To reflect the increase in deferred income taxes of $382 million which have
been provided for temporary differences after the allocation of the pro
forma purchase price and acquisition adjustments. The following pro forma
adjustments were required for estimated book and tax basis differences
resulting from the allocation of the pro forma purchase price in the TGP
financial statements, at an assumed statutory tax rate of 39% (in
millions):
<TABLE>
<S> <C>
Property, plant and equipment........................ $ 671
Other assets......................................... (230)
Other liabilities.................................... (59)
----
$ 382
====
</TABLE>
(h) To reflect the assumed monetization of $500 million of assets through sales
or project financings, at net book value, and to reflect TGP's remaining
$80 million investment in certain Australian projects using the equity
method. The proceeds from these transactions are assumed to be loaned to
El Paso Tennessee.
(i) To reflect the allocation of debt to the TGP separate financial statements
for the portion of the long-term debt assumed by El Paso Tennessee in the
Merger which is expected to be refinanced with public debt of TGP.
(j) To reflect the capitalization of the pre-merger "TGP as adjusted" combined
equity.
-8-
<PAGE> 10
TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(MILLIONS)
<TABLE>
<CAPTION>
PRE-MERGER PRO FORMA PRO FORMA MERGER
------------------------------------------ ------------------------------
COMBINED RESTRUCTURING TGP MERGER AND
TGP AND AS REFINANCING TGP
HISTORICAL REALIGNMENT ADJUSTED TRANSACTIONS PRO FORMA
----------- ------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 1,997 $ $ 1,997 $ (36)(f) $ 1,961
Operating costs and expenses..................... 1,864 (51)(b) 1,813 32 (d) 1,820
6 (e)
(31)(f)
--------- ---------- -------- --------- ---------
Operating Income............................... 133 51 184 (43) 141
Other (income) expense, net ..................... (100) 49 (b) (51) (51)
Interest expense (income): ......................
Other ......................................... 33 (17)(a) 16 (3)(f) 58
45 (c)
Affiliated .................................... (23)(h) (23)
--------- ---------- -------- ----------- ---------
Income before income taxes .................... 200 19 219 (62) 157
Provision for income taxes....................... 82 6 (a) 89 (1)(f) 65
1 (b) (23)(g)
--------- ---------- -------- ----------- ---------
Net income before extraordinary loss........... $ 118 $ 12 $ 130 $ (38) $ 92
========= ========== ======== =========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Income Statements.
-9-
<PAGE> 11
TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(MILLIONS)
<TABLE>
<CAPTION>
PRE-MERGER PRO FORMA PRO FORMA MERGER
--------------------------------------------------- -------------------------------------
COMBINED RESTRUCTURING TGP MERGER AND
TGP AND AS REFINANCING TGP
HISTORICAL REALIGNMENT ADJUSTED TRANSACTIONS PRO FORMA
------------ ------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . $1,921 $ $1,921 $(47)(f) $1,874
Operating costs and expenses . 1,842 (93)(b) 1,749 43 (d) 1,759
8 (e)
(41)(f)
------ ------- ------ ---- ------
Operating Income . . . . . . 79 93 172 (57) 115
Other (income) expense, net. . (181) 84 (b) (97) (97)
Interest expense (income):
Other . . . . . . . . . . . . 65 (37)(a) 28 4 (f) 92
60 (c)
Affiliated . . . . . . . . . (30)(h) (30)
------ ------- ------ ---- -----
Income before income taxes . 195 46 241 (91) 150
Provision for income taxes . . 31 14 (a) 49 (3)(f) 14
4 (b) (32)(g)
------ ------- ------ ---- -----
Net income before
extraordinary loss . . . . . $ 164 $ 28 $ 192 $ (56) $ 136
====== ======= ====== ==== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Income Statements.
-10-
<PAGE> 12
TENNESSEE GAS PIPELINE COMPANY
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENTS
RESTRUCTURING AND REALIGNMENT:
(a) To reflect the effect on interest expense for the restructuring and
realignment of TGP debt pursuant to the Debt Realignment and the
applicable provisions of the Merger Agreement, and the related effect on
the provision for income taxes at an assumed effective tax rate of 39%.
(b) To reflect the earnings impact of the distribution to New Tenneco, or
the sale, of receivables previously sold to Tenneco Credit Corporation,
a TGP combined subsidiary.
MERGER AND REFINANCING TRANSACTIONS:
(c) To reflect the effect on interest expense for the allocation to the TGP
separate financial statement of debt assumed by El Paso Tennessee in the
Merger at an assumed weighted average interest rate of 7.5%. Such debt
is expected to be refinanced with TGP public debt. A 1/8% change in
assumed interest rates would change pro forma interest expense by $0.9
million for the nine months ended September 30, 1996 and $1.2 million
for the year ended December 31, 1995.
(d) To reflect depreciation expense related to the increase in estimated
fair value of property, plant and equipment, depreciated over a 40-year
period which approximates the FERC approved depreciation rate for the
regulated property, plant and equipment of TGP prospectively.
(e) To reflect the assumed pro forma postretirement benefit cost for
TGP employees.
(f) To remove the historical operating results of TGP's exploration and
production business which is assumed to be disposed of at book value.
(g) To reflect the income tax expense effects of pro forma adjustments at an
assumed effective tax rate of 39%.
(h) To reflect interest income on the $500 million of proceeds from the
assumed monetization of certain assets which were loaned to El Paso
Tennessee at an assumed interest rate of 6%.
-11-
<PAGE> 13
(c) Exhibits:
The following exhibits are incorporated herein by reference to a prior
filing as indicated.
2.1 Amended and Restated Agreement and Plan of Merger, dated as of June 19,
1996, among El Paso, El Paso Merger Company and Old Tenneco (Exhibit 2.1
to El Paso Natural Gas Company's Form 8-K dated December 26, 1996,
File No. 1-2700).
2.2 Distribution Agreement, dated as of November 1, 1996, among Old
Tenneco, New Tenneco Inc. and Newport News Shipbuilding Inc. (Exhibit
2.2 to El Paso Natural Gas Company's Form 8-K dated December 26, 1996,
File No. 1-2700).
2.3 Amendment No. 1 to Distribution Agreement, entered into as of December
11, 1996, among Old Tenneco, New Tenneco and Newport News (Exhibit 2.3
to El Paso Natural Gas Company's Form 8-K/A dated January 21, 1997,
File No. 1-2700).
2.4 Letter Agreement, dated December 11, 1996, between El Paso and New
Tenneco Inc. (Exhibit 2.4 to El Paso Natural Gas Company's Form 8-K/A
dated January 21, 1997, File No. 1-2700).
99.1 List of Lenders under the Credit Agreement (Exhibit 99.1 to El Paso
Natural Gas Company's Form 8-K dated December 26, 1996, File
No. 1-2700).
99.2 Press Release, dated December 23, 1996 (Exhibit 99.2 to El Paso
Natural Gas Company's Form 8-K dated December 26, 1996,
File No. 1-2700).
-12-
<PAGE> 14
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.
TENNESSEE GAS PIPELINE COMPANY
By /s/ H. BRENT AUSTIN
------------------------------
H. Brent Austin
Senior Vice President
Date: January 22, 1997
-13-
