1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- 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) DELAWARE 1-4101 74-1056569 (State or other (Commission File No.) (I.R.S. Employer jurisdiction Identification No.) of incorporation) --------------------- 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) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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: 2 3 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. 3 4 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1998 (IN MILLIONS) CONSOLIDATED SUBSIDIARY CONSOLIDATED COMPANY TRANSFER OTHER COMPANY HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA ------------ ----------- ----------- ------------ 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 ====== ======= ====== ====== See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet 4 5 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 5 6 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN MILLIONS) CONSOLIDATED SUBSIDIARY CONSOLIDATED COMPANY TRANSFER OTHER COMPANY HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA ------------ -------------- ----------- ------------ 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 ====== ======= ==== ==== See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income Statements 6 7 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1997 (IN MILLIONS) CONSOLIDATED SUBSIDIARY CONSOLIDATED COMPANY TRANSFER OTHER COMPANY HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA ------------ -------------- ----------- ------------ 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 ====== ======= ====== ====== See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income Statements 7 8 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1996 (IN MILLIONS) CONSOLIDATED SUBSIDIARY CONSOLIDATED COMPANY TRANSFER OTHER COMPANY HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA ------------ -------------- ----------- ------------ 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 ====== ======= ==== ==== See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income Statements 8 9 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995 (IN MILLIONS) CONSOLIDATED SUBSIDIARY CONSOLIDATED COMPANY TRANSFER OTHER COMPANY HISTORICAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA ------------ -------------- ----------- ------------ 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 ====== ======= ==== ==== See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Income Statements 9 10 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. 10 11 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 11