0000899243-95-000511.txt : 19950815 0000899243-95-000511.hdr.sgml : 19950815 ACCESSION NUMBER: 0000899243-95-000511 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENNECO CREDIT CORP CENTRAL INDEX KEY: 0000805019 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 760010368 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09412 FILM NUMBER: 95562135 BUSINESS ADDRESS: STREET 1: TENNECO BLDG STREET 2: 1010 MILAM STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7137572131 MAIL ADDRESS: STREET 1: TENNECO BLDG STREET 2: 1010 MILAM STREET CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 FORM 10-Q -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 0-15095 ---------------- TENNECO CREDIT CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 76-0010368 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) TENNECO BUILDING, HOUSTON, TEXAS 77002 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 757-2131 ---------------- INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK AS OF THE LATEST PRACTICABLE DATE. Common Stock, par value $5 per share: 200 shares as of July 31, 1995 TENNECO CREDIT CORPORATION MEETS THE CONDITIONS OF GENERAL INSTRUCTION H(1)(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED BY SUCH INSTRUCTION. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- Part I--Financial Information Tenneco Credit Corporation and Consolidated Subsidiaries-- Statements of Income.................................................. 2 Statements of Cash Flows.............................................. 3 Balance Sheets........................................................ 4 Statements of Changes in Stockholder's Equity......................... 6 Notes to Financial Statements......................................... 7 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 8 Part II--Other Information Item 1. Legal Proceedings............................................... * Item 2. Changes in Securities........................................... * Item 3. Defaults Upon Senior Securities................................. * Item 4. Submission of Matters to a Vote of Security Holders............. * Item 5. Other Information............................................... * Item 6. Exhibits and Reports on Form 8-K................................ 11
-------- * No such response to this item is included herein for the reason that it is inapplicable or the answer to such item is negative. 1 PART I--FINANCIAL INFORMATION TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME (UNAUDITED)
(THOUSANDS) (THOUSANDS) THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, --------------- --------------- 1995 1994 1995 1994 ------- ------- ------- ------- REVENUES: Earned finance charges and interest........ $33,443 $43,502 $67,335 $83,128 Rental income from affiliated company...... 1,432 1,432 2,864 2,864 ------- ------- ------- ------- Total revenues........................... 34,875 44,934 70,199 85,992 ------- ------- ------- ------- EXPENSES: Interest-- Commercial paper.......................... -- 1,345 -- 2,350 Senior notes.............................. 19,814 26,601 39,736 57,359 Subordinated notes........................ 2,287 2,281 4,567 4,537 Commitment fees and other................. 446 1,335 778 3,142 ------- ------- ------- ------- 22,547 31,562 45,081 67,388 Depreciation and amortization.............. 497 497 994 994 Operating and administrative............... 3,240 (1,592) 6,945 (841) ------- ------- ------- ------- Total expenses........................... 26,284 30,467 53,020 67,541 ------- ------- ------- ------- OTHER INCOME--Gain (loss) on sale of receivables................................. -- (571) -- 25,514 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES................... 8,591 13,896 17,179 43,965 INCOME TAXES................................. 3,357 5,641 6,716 17,787 ------- ------- ------- ------- NET INCOME................................... $ 5,234 $ 8,255 $10,463 $26,178 ======= ======= ======= =======
(The accompanying notes to financial statements are an integral part of these statements of income.) 2 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED)
(THOUSANDS) SIX MONTHS ENDED JUNE 30, ------------------- 1995 1994 --------- -------- OPERATING ACTIVITIES: Net income.............................................. $ 10,463 $ 26,178 Adjustments to reconcile to net cash provided from operating activities: Depreciation and amortization......................... 994 994 Deferred income taxes................................. (91) 2,109 (Increase) decrease in notes and accounts receivable purchased from affiliates, net....................... 301,599 259,636 Change in accounts payable to and receivable from affiliates........................................... (4,506) 16,133 Increase (decrease) in accrued interest............... (815) (8,809) Increase (decrease) in dealers' reserves.............. -- (3,415) (Increase) decrease in notes receivable from affiliated companies................................. (25,000) 89,031 Change in other assets and other, net................. 8,635 103,582 --------- -------- NET CASH PROVIDED FROM OPERATING ACTIVITIES............... 291,279 485,439 --------- -------- INVESTING ACTIVITIES: Collections on long-term notes receivable............... 43,989 7,226 Purchase of long-term notes receivable.................. -- (146) --------- -------- NET CASH PROVIDED FROM INVESTING ACTIVITIES............... 43,989 7,080 --------- -------- FINANCING ACTIVITIES: Increase (decrease) in commercial paper................. -- (240,938) Retirement of senior notes.............................. (35,600) (251,567) Dividends paid.......................................... (300,000) -- --------- -------- NET CASH USED IN FINANCING ACTIVITIES..................... (335,600) (492,505) --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... (332) 14 BEGINNING CASH AND CASH EQUIVALENTS BALANCE............... 332 4 --------- -------- ENDING CASH AND CASH EQUIVALENTS BALANCE.................. $ -- $ 18 ========= ======== CASH PAID DURING THE PERIOD FOR: Interest................................................ $ 45,896 $ 75,360 Income Taxes............................................ $ 6,742 $ 15,678
(The accompanying notes to financial statements are an integral part of these statements of cash flows.) 3 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (UNAUDITED) ASSETS
(THOUSANDS) JUNE 30, DECEMBER 31, JUNE 30, 1995 1994 1994 ---------- ------------ ---------- Notes and accounts receivable purchased from affiliates: Customers.................................. $1,175,088 $1,522,862 $1,832,828 Affiliated companies....................... 3,780 3,741 4,236 ---------- ---------- ---------- 1,178,868 1,526,603 1,837,064 Less--Unearned finance charges.............. 92,049 137,500 199,895 Allowance for doubtful receivables....... 8,869 9,554 10,743 ---------- ---------- ---------- 1,077,950 1,379,549 1,626,426 ---------- ---------- ---------- Notes receivable: Non-affiliated companies, including $4,917, $4,917 and $4,917 due within one year at the respective dates...................... 23,167 67,156 71,085 Affiliated companies....................... 25,000 -- -- ---------- ---------- ---------- 48,167 67,156 71,085 ---------- ---------- ---------- Equipment under operating leases (at cost), less accumulated depreciation of $19,240, $18,246 and $17,251 at the respective dates...................................... 50,366 51,360 52,355 ---------- ---------- ---------- Other assets: Cash and cash equivalents ................. -- 332 18 Accounts receivable from affiliates........ 5,900 1,193 43,180 Interest receivable and other.............. 9,945 16,466 3,873 ---------- ---------- ---------- 15,845 17,991 47,071 ---------- ---------- ---------- $1,192,328 $1,516,056 $1,796,937 ========== ========== ==========
(The accompanying notes to financial statements are an integral part of these balance sheets.) 4 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (UNAUDITED) LIABILITIES AND STOCKHOLDER'S EQUITY
(THOUSANDS EXCEPT SHARE AMOUNTS) JUNE 30, DECEMBER 31, JUNE 30, 1995 1994 1994 ---------- ------------ ---------- Senior notes, including $204,205, $238,576 and $287,355 due within one year at the respective dates........................... $ 817,289 $ 852,008 $1,102,925 Subordinated notes.......................... 92,100 92,100 92,100 Accounts payable to affiliates.............. 8,035 7,834 30,038 Dealers' reserves........................... -- -- 14,733 Accrued interest............................ 25,031 24,613 34,816 Deferred income taxes....................... 14,213 14,304 12,345 ---------- ---------- ---------- 956,668 990,859 1,286,957 ---------- ---------- ---------- Stockholder's equity: Common stock, par value $5 per share, au- thorized, issued and outstanding 200 shares.................................... 1 1 1 Capital surplus............................ 185,228 185,228 185,228 Retained earnings.......................... 50,431 339,968 324,751 ---------- ---------- ---------- 235,660 525,197 509,980 ---------- ---------- ---------- $1,192,328 $1,516,056 $1,796,937 ========== ========== ==========
(The accompanying notes to financial statements are an integral part of these balance sheets.) 5 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
(THOUSANDS) SIX MONTHS ENDED JUNE 30, ------------------ 1995 1994 -------- -------- COMMON STOCK: Balance beginning and end of period....................... $ 1 $ 1 -------- -------- CAPITAL SURPLUS: Balance beginning and end of period....................... 185,228 185,228 -------- -------- RETAINED EARNINGS: Balance beginning of period............................... 339,968 298,573 Net income............................................... 10,463 26,178 Dividends................................................ (300,000) -- -------- -------- Balance end of period..................................... 50,431 324,751 -------- -------- Total.................................................... $235,660 $509,980 ======== ========
(The accompanying notes to financial statements are an integral part of these statements of changes in stockholder's equity.) 6 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) In the opinion of Tenneco Credit Corporation, the accompanying unaudited financial statements of Tenneco Credit Corporation and its consolidated subsidiaries (the "Company") contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1995, and the results of operations; changes in stockholder's equity; and cash flows for the periods indicated. (2) Certain reclassifications have been made to prior period amounts, where appropriate, to conform with the current period presentation. (3) In June 1994, Tenneco Inc. and its consolidated subsidiaries ("Tenneco") completed an initial public offering of approximately 29% of the common stock of Case Corporation ("Case"), the holder of Tenneco's farm and construction equipment segment (the "Case Business"). In November 1994, a secondary offering of Case's common stock reduced Tenneco's ownership to approximately 44%. On August 9, 1995, Tenneco sold in a secondary public offering 16.1 million shares of common stock of Case, further reducing Tenneco's ownership interest in Case to approximately 21%. In connection with the initial public offering, Tenneco transferred all of its Case Business assets to Case, except for $1.2 billion of existing United States retail receivables, which were retained by the Company. Case will service the retail receivables retained by the Company for which the Company will pay a servicing fee equal to two percent per annum of the average amount outstanding during each month. It is estimated that by 1999 substantially all of the farm and construction equipment receivables retained by the Company will be liquidated. As a result of transactions described above, the future activities and income of the Company will be substantially reduced. (4) Tenneco International Holding Corp. ("TIHC"), a wholly-owned subsidiary of Tenneco International Inc., has arranged a $50 million committed line of credit with the Company to provide short-term financing which provides for borrowings at various rates. At June 30, 1995, the Company had made loans of $25 million to TIHC related to this line of credit. (The above notes are an integral part of the foregoing financial statements.) 7 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER RESULTS REVENUES The Company reported total revenues of $34.9 million for the second quarter of 1995, down $10.0 million from the second quarter of 1994. The following sets forth the percentage of revenues from the various sources:
REVENUES --------------------- THREE MONTHS ENDED JUNE 30, --------------------- 1995 1994 --------- --------- Case.............................................. 44% 69% Pipeline.......................................... 14 9 Packaging......................................... 15 6 Automotive........................................ 13 5 Other............................................. 8 2 --------- --------- Total from accounts receivable.................. 94 91 Rental............................................ 4 3 Notes receivable.................................. 2 6 --------- --------- 100% 100%
The average yield on Case retail receivables for the second quarter of 1995 was 10.7% compared with 10.5% for the second quarter of 1994. The discount rate charged on pipeline and other short-term receivables was 9.25% during the second quarter of 1995 versus a range of 6.50% to 7.50% during the second quarter of 1994. The Company's only leasing activity is the multifuel boiler facility leased to Packaging Corporation of America ("Packaging"), an affiliate of the Company. Leasing activities provided $1.4 million of revenues in the three months ended June 30, 1995 and 1994. Under an Investment Agreement dated June 15, 1988, between the Company and Tenneco Inc. (the "Investment Agreement"), the Company is to receive a service charge from Tenneco Inc. for each month equal to the amount, if any, by which the cumulative earnings of the Company for the period from the beginning of the calendar year to the end of such month, before deduction of fixed charges and federal income taxes, are less than 125% of the Company's fixed charges. A service charge of $234,000 was paid by Tenneco Inc. for the month of January 1994. No service charge was required for the months prior or subsequent to January 1994. Subsequent to the Case reorganization and initial public offering (See Note 3 to financial statements for additional information), the Case retail financing activities have been conducted by Case's newly formed United States finance subsidiary. As the Company no longer purchases Case retail receivables, future revenues and income will continue to decline as the remaining Case retail receivables are collected. EXPENSES Interest expense totaled $22.5 million for the second quarter of 1995, a decrease of $9.0 million or 29% over the second quarter of 1994. This decrease resulted from lower levels of long-term and short-term debt. The average interest rate for the second quarter of 1995 was 9.9% compared to 10.0% for the second quarter of 1994. Operating and administrative expenses increased $4.8 million primarily due to fees paid to Case to service Case U.S. retail notes receivable retained by the Company in the Case reorganization (See Note 3 to financial statements for additional information) and the June 1994 reversal of the allowance for bad debt related to Case store receivables. 8 NET INCOME Net income for the second quarter of 1995 was $5.2 million, a decrease of $3.1 million or 37% compared with the second quarter of 1994. The decrease is attributable to lower revenues and increased operating and maintenance expenses partially offset by lower interest expense and income taxes. ASSETS The Company had total assets of $1,192.3 million at June 30, 1995, as compared to $1,516.1 million at December 31, 1994, and $1,796.9 million at June 30, 1994. The 34% reduction of total assets at June 30, 1995 versus June 30, 1994, was primarily due to the continuing liquidation of the Case retail notes receivable (See Note 3 to financial statements for additional information). As of June 30, 1995, the Company held net trade notes and accounts receivable totaling $1,078.0 million, which accounted for 90% of the Company's total assets. This compares to $1,379.5 million and $1,626.4 million or 91% of the total assets as of December 31, 1994 and June 30, 1994. Details of these receivables are shown as follows:
NET TRADE NOTES AND ACCOUNTS RECEIVABLE ------------------------------ JUNE 30, DECEMBER 31, JUNE 30, 1995 1994 1994 -------- ------------ -------- Case....................................... 52% 53% 62% Pipeline................................... 20 19 15 Packaging.................................. 10 15 11 Automotive................................. 18 13 12 --- --- --- 100% 100% 100%
Case net trade notes and accounts receivable are $179.8 million and $443.1 million lower at June 30, 1995, compared to December 31, 1994 and June 30, 1994, respectively, due to the continuing liquidation of the Case retail notes receivables. The Company held $23.2 million of notes receivable from non-affiliated companies at June 30, 1995, down from the $67.2 million and $71.1 million held at December 31, 1994 and June 30, 1994, respectively. The decrease from December 31, 1994, was due to the pre-payment of a long-term note from a third party. Long-term receivables from non-affiliated companies represented 2% of the Company's total assets at June 30, 1995. As of June 30, 1995, the Company had a net recorded investment of $50.4 million in a multifuel boiler leased to Packaging. The leased facility represented 4% of the Company's total assets at June 30, 1995. CAPITALIZATION AND CAPITAL RESOURCES Pursuant to the Investment Agreement, Tenneco Inc. is required to maintain an investment in the Company as necessary to assure that at all times the sum of the Company's subordinated debt plus stockholder's equity will be at least equal to 20% of the Company's total debt plus stockholder's equity. The Company's capital requirements have been financed through the issuance of commercial paper, publicly and privately placed medium-term notes, senior public debt and bank loans, subordinated debt, and advances and equity capital from Tenneco Inc., plus earnings retained in the business. 9 The Company's total capitalization was $1,145.0 million, $1,469.3 million and $1,705.0 million at June 30, 1995, December 31, 1994 and June 30, 1994, respectively. The components of capitalization at such dates are set forth in the following table:
CAPITALIZATION ------------------------------ JUNE 30, DECEMBER 31, JUNE 30, 1995 1994 1994 -------- ------------ -------- Medium-term senior debt.................... 3% 5% 4% Long-term senior debt...................... 68 53 60 Subordinated debt.......................... 8 6 6 Stockholder's equity....................... 21 36 30 --- --- --- 100% 100% 100%
SIX MONTH RESULTS REVENUES For the six months of 1995, revenue totaled $70.2 million, down 18% from the $86.0 million reported for the same period in 1994. This reduction is attributable to lower average Case receivable balances. On a percentage basis, revenues for the indicated six-month periods were generated from the following:
REVENUES ------------------- SIX MONTHS ENDED JUNE 30, ------------------- 1995 1994 -------- -------- Case................................................ 47% 72% Pipeline............................................ 14 10 Packaging........................................... 14 5 Automotive.......................................... 11 4 Other............................................... 8 2 -------- -------- Total from accounts receivable.................... 94 93 Rental.............................................. 4 3 Notes receivable.................................... 2 4 -------- -------- 100% 100%
Discount rates on short-term accounts receivable during the first six months of 1995 ranged from 8.75% to 9.25% as compared to a range of 5.75% to 7.5% for the first six months of 1994. The average yield on Case retail receivables for the six month period increased to 10.5% in 1995 from 9.8% in 1994. EXPENSES Interest expense for the six months ended June 30, 1995, was $45.1 million versus $67.4 million for the same period in 1994. The $22.3 million decrease was due to lower levels of long-term and short-term debt for the first six months of 1995. Operating and administrative expense increased $7.8 million as discussed in "Second Quarter Results--Expenses." OTHER INCOME Other income for the six months ended June 30, 1995, was down $25.5 million from the same period in 1994. Other income for 1994 was primarily attributable to the pre-tax gain on the sale of certain farm and construction equipment receivables to limited purpose business trusts in February 1994. 10 NET INCOME Net income for the first six months of 1995 was $10.5 million, a decrease of $15.7 million from net income of $26.2 million for the 1994 period. See discussion in "Net Income" under Second Quarter Results. PART II--OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 12--Computation of Ratio of Earnings to Fixed Charges. 27--Financial Data Schedule. (b) Reports on Form 8-K. Tenneco Credit Corporation did not file any reports on Form 8-K during the quarter ended June 30, 1995. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TENNECO CREDIT CORPORATION Robert T. Blakely Date: August 11, 1995 By __________________________________ Robert T. Blakely President Mark A. McCollum Date: August 11, 1995 By __________________________________ Mark A. McCollum Principal Financial and Accounting Officer 12 EXHIBIT 12 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
(THOUSANDS) SIX MONTHS ENDED JUNE 30, ---------------- 1995 1994 ------- -------- Net income.................................................... $10,463 $ 26,178 Add: Interest expense............................................. 45,081 67,388 Income taxes................................................. 6,716 17,787 ------- -------- Earnings as defined........................................ $62,260 $111,353 ======= ======== Fixed charges--interest expense............................... $45,081 $ 67,388 ======= ======== Ratio of earnings to fixed charges............................ 1.38 1.65 ======= ========
EX-12 2 EXHIBIT 12 EXHIBIT 12 TENNECO CREDIT CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
(THOUSANDS) SIX MONTHS ENDED JUNE 30, ---------------- 1995 1994 ------- -------- Net income.................................................... $10,463 $ 26,178 Add: Interest expense............................................. 45,081 67,388 Income taxes................................................. 6,716 17,787 ------- -------- Earnings as defined........................................ $62,260 $111,353 ======= ======== Fixed charges--interest expense............................... $45,081 $ 67,388 ======= ======== Ratio of earnings to fixed charges............................ 1.38 1.65 ======= ========
EX-27 3 EXHIBIT 27
5 This schedule contains summary financial information extracted from Tenneco Credit Corporation and Consolidated Subsidiaries Financial Statements and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 0 0 1,083,039 (8,869) 0 0 69,606 (19,240) 1,192,328 0 909,389 1 0 0 235,659 1,192,328 0 70,199 0 0 7,939 0 45,081 17,179 6,716 10,463 0 0 0 10,463 0 0