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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JANUARY 14, 1999
(DATE OF EARLIEST EVENT REPORTED: DECEMBER 31, 1998)
TENNESSEE GAS PIPELINE COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-4101 74-1056569
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction Identification No.)
of incorporation)
</TABLE>
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EL PASO ENERGY BUILDING
1001 LOUISIANA STREET
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
(713) 420-2131
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 31, 1998, El Paso Energy Corporation ("EPEC"), the indirect
corporate parent of Tennessee Gas Pipeline Company (the "Company"), initiated
and completed a tax-free internal reorganization of its assets and operations
and those of its subsidiaries (the "Reorganization"), in accordance with a
ruling received from the Internal Revenue Service. In the Reorganization, the
Company transferred a substantial number of its subsidiaries (and their assets,
liabilities, and operations) to EPEC or other entities owned by EPEC. After
giving effect to the Reorganization, the Company's primary asset is an
interstate pipeline system known as the TGP system, which consists of
approximately 14,800 miles of pipeline beginning in the gas producing regions of
Louisiana and Texas (including the Gulf of Mexico) and serving the northeast
section of the United States, including the New York City and Boston
metropolitan areas. In the Reorganization, the Company transferred the following
assets, liabilities, and operations to EPEC or other subsidiaries of EPEC, and
eliminated them from its consolidated financial statements: (i) East Tennessee
Natural Gas Company, the owner and operator of the East Tennessee interstate gas
pipeline system; (ii) Midwestern Gas Transmission Company, the owner and
operator of the Midwestern interstate gas pipeline system; (iii) all
international subsidiaries; (iv) all field services operations; (v) all trading
and marketing operations; and (vi) all corporate and certain discontinued
operations.
The Company accomplished the Reorganization primarily through a series of
intercompany transactions, including a dividend of its interests in those
subsidiaries transferred in the Reorganization to EPEC or other entities owned
by EPEC. The Company will report the effect of the transfers as if it were
discontinued operations as of December 31, 1998, and accordingly will reflect
the Reorganization in all reporting periods required in its Annual Report on
Form 10-K for the year ended December 31, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Pro forma financial information:
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TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements of the Company (the "Pro Forma Financial Statements") illustrate the
effect of the Reorganization, particularly the transfer by the Company to EPEC
or other entities owned by EPEC of the following: (i) East Tennessee Natural Gas
Company; (ii) Midwestern Gas Transmission Company; (iii) all international
subsidiaries; (iv) all field services operations; (v) all trading and marketing
operations; and (vi) all corporate and certain discontinued operations. The
transfer for the majority of subsidiaries was accomplished through dividends by
the Company to EPEC or other entities owned by EPEC with the remaining
subsidiaries transferred by sale to EPEC or other entities owned by EPEC (the
"Subsidiary Transfer Adjustments"). In addition to the Reorganization, the
Company transferred its post-retirement benefit liability for discontinued
operations to El Paso Tennessee Pipeline Co., its parent. The Pro Forma
Financial Statements have been prepared to give effect to the Reorganization as
of and for the nine months ended September 30, 1998, and for each of the three
years ended December 31, 1997, 1996, and 1995. The Pro Forma Financial
Statements are not necessarily indicative of the actual operating results or
financial position had the Reorganization occurred as of such dates, nor do they
purport to indicate operating results or financial position which may be
attained in the future. Historical financial statements for previous periods
include certain reclassifications which were made to conform to the current
presentation. Such reclassifications have no effect on reported net income or
total stockholder's equity.
The Consolidated Company Historical column presented in the Pro Forma
Financial Statements represents the Company's unaudited financial position and
results of operations derived from the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1998 and the audited results of
operations derived from the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. The Subsidiary Transfer Adjustments column includes the
effect of deconsolidating the subsidiaries to be transferred and the
transactions to reflect the transfers in the form of a dividend or sale to EPEC
or other entities owned by EPEC. The Other Adjustments column reflects the
restoration of intercompany accounts previously eliminated in consolidation, as
well as the transfer by the Company of its post-retirement benefit liability for
discontinued operations to its parent.
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TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARY CONSOLIDATED
COMPANY TRANSFER OTHER COMPANY
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and temporary investments............... $ 10 $ (3)(a) $ $ 7
Accounts and notes receivable, net
Customers................................. 591 (409)(a) 182
Affiliated companies...................... 329 (1,152)(a)
(143)(b) 1,787(c) 821
Inventories.................................. 20 (6)(a) 14
Deferred income tax benefit.................. 62 (54)(a) 8
Other........................................ 301 (246)(a) 55
------ ------- ------ ------
Total current assets................. 1,313 (2,013) 1,787 1,087
Property, plant, and equipment, net............ 4,779 (308)(a) 4,471
Investment in consolidated affiliates.......... -- 602(a)
(602)(b) --
Other.......................................... 412 (214)(a) 22(c) 220
------ ------- ------ ------
Total assets......................... $6,504 $(2,535) $1,809 $5,778
====== ======= ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable
Trade and other........................... $ 623 $ (498)(a) $ $ 125
Affiliated companies...................... 92 (791)(a) 1,776(c) 1,077
Affiliated notes payable.................. 125 12(c) 137
Other........................................ 513 (214)(a) (28)(d) 271
------ ------- ------ ------
Total current liabilities............ 1,353 (1,503) 1,760 1,610
------ ------- ------ ------
Long-term debt, less current maturities........ 1,276 (14)(a) 1,262
------ ------- ------ ------
Deferred income taxes.......................... 1,145 (36)(a) 82(d) 1,191
------ ------- ------ ------
Other.......................................... 724 (227)(a) 21(c)
(223)(d) 295
------ ------- ------ ------
Minority interest.............................. 25 (25)(a) --
------ ------- ------ ------
Stockholder's equity
Common stock................................. -- -- --
Additional paid-in capital................... 1,873 (622)(b) 169(d) 1,420
Retained earnings............................ 123 (123)(b) --
Accumulated other comprehensive income....... (15) 15(a) --
------ ------- ------ ------
Total stockholder's equity........... 1,981 (730) 169 1,420
------ ------- ------ ------
Total liabilities and stockholder's
equity............................. $6,504 $(2,535) $1,809 $5,778
====== ======= ====== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet
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TENNESSEE GAS PIPELINE COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SUBSIDIARY TRANSFER ADJUSTMENTS
(a) Deconsolidation of the assets and liabilities of the subsidiaries to be
transferred in the Reorganization and the corresponding establishment of an
investment in consolidated affiliates
(b) Transfer by the Company of its investment in consolidated affiliates,
primarily through a dividend to EPEC or other entities owned by EPEC with
the remaining subsidiaries transferred by sale to EPEC or other entities
owned by EPEC
OTHER ADJUSTMENTS
(c) Reinstatement of affiliated company transactions that were previously
eliminated in consolidation
(d) Transfer of post-retirement benefit liability for discontinued operations
and associated deferred tax amounts to El Paso Tennessee Pipeline Co., the
Company's parent
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TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARY CONSOLIDATED
COMPANY TRANSFER OTHER COMPANY
HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues......................... $4,040 $(3,543) $ 25(b) $522
------ ------- ---- ----
Operating expenses
Cost of gas and other products........... 3,392 (3,417) 25(b) --
Operation and maintenance................ 299 (97) (15)(c) 187
Depreciation, depletion, and
amortization.......................... 117 (15) 102
Taxes, other than income taxes........... 38 (7) 31
------ ------- ---- ----
3,846 (3,536) 10 320
------ ------- ---- ----
Operating income........................... 194 (7) 15 202
------ ------- ---- ----
Other (income) and expense
Interest and debt expense -- third
party................................. 81 (5) 76
Interest and debt expense -- affiliated
companies............................. 13 (8) 48(b) 53
Other -- third party, net................ (74) 52 (22)
Other -- affiliated companies, net....... (6) 49 (48)(b) (5)
------ ------- ---- ----
14 88 102
------ ------- ---- ----
Income before income taxes................. 180 (95) 15 100
Income tax expense......................... 57 (30) 5(c) 32
------ ------- ---- ----
Net income................................. $ 123 $ (65) $ 10 $ 68
====== ======= ==== ====
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income
Statements
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TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARY CONSOLIDATED
COMPANY TRANSFER OTHER COMPANY
HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues............................ $3,602 $(2,905) $ 31(b) $ 728
------ ------- ------ ------
Operating expense
Cost of gas and other products.............. 2,763 (2,794) 31(b) --
Operation and maintenance................... 379 (72) (22)(c) 285
Depreciation, depletion and amortization.... 143 (15) 128
Taxes, other than income taxes.............. 54 (8) 46
------ ------- ------ ------
3,339 (2,889) 9 459
------ ------- ------ ------
Operating income.............................. 263 (16) 22 269
------ ------- ------ ------
Other (income) and expense
Interest and other debt expense -- third
party.................................... 85 (9) 76
Interest and other debt
expense -- affiliated companies.......... 6 -- 72(b) 78
Other -- third party, net................... (37) 22 (15)
Other -- affiliated companies, net.......... (45) 74 (72)(b) (43)
------ ------- ------ ------
9 87 96
------ ------- ------ ------
Income before income taxes.................... 254 (103) 22 173
Income tax expense............................ 88 (33) 8(c) 63
------ ------- ------ ------
Net income.................................... $ 166 $ (70) $ 14 $ 110
====== ======= ====== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income
Statements
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TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARY CONSOLIDATED
COMPANY TRANSFER OTHER COMPANY
HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues............................ $2,708 $(2,053) $148(b) $803
------ ------- ---- ----
Operating expense
Cost of gas and other products.............. 1,745 (1,893) 148(b) --
Operation and maintenance................... 494 (96) (11)(c) 387
Finance charges............................. 62 (62) --
Depreciation, depletion and amortization.... 164 (31) 133
Taxes, other than income taxes.............. 60 (8) 52
------ ------- ---- ----
2,525 (2,090) 137 572
------ ------- ---- ----
Operating income.............................. 183 37 11 231
------ ------- ---- ----
Other (income) and expense
Interest and other debt expense -- third
party.................................... 41 -- 41
Interest and other debt
expense -- affiliated companies.......... -- -- 7(b) 7
Gain on sale of assets, net................. (3) -- (3)
Other -- third party, net................... (78) 12 (66)
Other -- affiliated companies, net.......... -- 7 (7)(b) --
------ ------- ---- ----
(40) 19 (21)
------ ------- ---- ----
Income before income taxes.................... 223 18 11 252
Income tax expense............................ 68 23 4(c) 95
------ ------- ---- ----
Income before extraordinary loss.............. $ 155 $ (5) $ 7 $157
====== ======= ==== ====
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income
Statements
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TENNESSEE GAS PIPELINE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARY CONSOLIDATED
COMPANY TRANSFER OTHER COMPANY
HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenue............................. $1,986 $(1,422) $139(b) $703
------ ------- ---- ----
Operating expense
Cost of gas and other products.............. 1,068 (1,207) 139(b) --
Operation and maintenance................... 481 (123) (11)(c) 347
Finance charges............................. 79 (79) --
Depreciation, depletion and amortization.... 170 (43) 127
Taxes, other than income taxes.............. 63 (10) 53
------ ------- ---- ----
1,861 (1,462) 128 527
------ ------- ---- ----
Operating income.............................. 125 40 11 176
------ ------- ---- ----
Other (income) and expense
Interest and other debt expense -- third
party.................................... 65 65
Interest and other debt
expense -- affiliated parties............ -- 7(b) 7
Gain on sale of assets, net................. (11) (12) (23)
Other, net -- third party................... (105) 44 (61)
Other, net -- affiliated parties............ -- 7 (7)(b) --
------ ------- ---- ----
(51) 39 (12)
------ ------- ---- ----
Income before income taxes.................... 176 1 11 188
Income tax expense............................ 12 68 4(c) 84
------ ------- ---- ----
Net income.................................... $ 164 $ (67) $ 7 $104
====== ======= ==== ====
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income
Statements
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TENNESSEE GAS PIPELINE COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS
SUBSIDIARY TRANSFER ADJUSTMENTS
(a) Income and expenses associated with subsidiaries transferred to EPEC or
other entities owned by EPEC as part of the Reorganization
OTHER ADJUSTMENTS
(b) Reinstatement of affiliated company transactions that were previously
eliminated in consolidation
(c) Reduction of post-retirement benefit expenses of discontinued operations
associated with the post-retirement benefit liability that was transferred
to El Paso Tennessee Pipeline Co.
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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 hereunto duly authorized.
TENNESSEE GAS PIPELINE COMPANY
By: /s/ JEFFREY I. BEASON
----------------------------------
Jeffrey I. Beason
Vice President and Controller
(Chief Accounting Officer)
Date: January 14, 1999
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