-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UpWeaI7YTstcbNqk2Mj6b+ZbSsGecfgp6sfR9vT9BTbXmtw9AxT2gJ4hWOy4uBsB az/QsviAAbSZJTenxJOUsg== 0000899243-97-002227.txt : 19971117 0000899243-97-002227.hdr.sgml : 19971117 ACCESSION NUMBER: 0000899243-97-002227 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENNECO INC /DE CENTRAL INDEX KEY: 0001024725 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 760515284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12387 FILM NUMBER: 97719170 BUSINESS ADDRESS: STREET 1: 1275 KING STREET CITY: GREENWICH STATE: CT ZIP: 06831 BUSINESS PHONE: 2038631000 MAIL ADDRESS: STREET 1: 1010 MILAM STREET STREET 2: ROOM T 2560B CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: NEW TENNECO INC DATE OF NAME CHANGE: 19961011 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-Q (mark one) [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-12387 ---------------- TENNECO INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 76-0515284 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1275 KING STREET, GREENWICH, CT 06831 (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000 ---------------- 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 $.01 PER SHARE: 170,243,976 SHARES AS OF SEPTEMBER 30, 1997. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I--FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Tenneco Inc. and Consolidated Subsidiaries-- Statements of Income.................................................. 2 Statements of Cash Flows.............................................. 3 Balance Sheets........................................................ 4 Statements of Changes in Shareowners' Equity.......................... 5 Notes to Financial Statements......................................... 6 Item 2. 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................................ 13
- -------- * No response to this item is included herein for the reason that it is inapplicable or the answer to such item is negative. GENERAL INFORMATION This Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, represents Tenneco Inc.'s third quarterly report following the completion of a series of restructuring transactions completed in December 1996. As a result of those transactions, Tenneco Inc. now consists of a global manufacturing company with interests in the automotive parts ("Tenneco Automotive") and packaging ("Tenneco Packaging") industries and an administrative services business ("Tenneco Business Services"). Note 1 to the financial statements contains a description of the transaction, and Management's Discussion and Analysis which follows the financial statements and footnotes, contains a description of the transaction as well as a discussion of the results of operations for the quarter and year to date. CAUTIONARY STATEMENT AND "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-Q contains forward-looking statements regarding (i) the implementation of price increases for Tenneco's paperboard packaging products and (ii) the recovery of increases in resin costs. See "Revenues" and "Income Before Interest Expense, Income Taxes and Minority Interest ("Operating Income")" under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Continuing Operations for the Quarter Ended September 30, 1997" and "Revenues" and "Operating Income" under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Continuing Operations for the Nine Months Ended September 30, 1997." These forward-looking statements are made in good faith, and on a basis and with assumptions which Tenneco believes are reasonable; however, assumed facts or basis may vary from actual results and the differences between assumed facts or basis and actual results can be material, depending upon the circumstances. There can be no assurance that the expectations set forth in the forward-looking statements will be achieved or accomplished. Actual results could differ from those in the forward-looking statements as a result of various factors, including market conditions placing downward pressure on industry prices for linerboard and medium and other packaging products and, as described below, the possible disposition of some or all of Tenneco's containerboard mills, timberlands and other related operations. In addition to the foregoing, Tenneco's future results may be adversely impacted by a number of other matters and uncertainties, including: (i) changes in consumer demand and prices; (ii) potential legislation or regulatory changes; (iii) material substitution and changes in the prices of raw materials; (iv) possible labor interruptions; (v) certain risks associated with operating in foreign countries, such as devaluations and fluctuations in currency exchange rates; (vi) new technologies; (vii) changes in distribution channels or competitive conditions in the markets and countries where Tenneco operates; (viii) increases in the cost of compliance with regulations, including environmental regulations, and environmental liabilities in excess of the amount reserved; (ix) changes in capital availability or costs, such as changes in interest rates or ratings of securities; and (x) changes by the Financial Accounting Standards Board or the Securities and Exchange Commission to authoritative generally accepted accounting principles or policies. 1 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (MILLIONS EXCEPT SHARE AMOUNTS) REVENUES Net sales and operating revenues-- Automotive............... $ 785 $ 760 $ 2,436 $ 2,223 Packaging................ 1,045 896 2,916 2,671 Intergroup sales and other................... 1 (3) -- (8) ----------- ----------- ----------- ----------- 1,831 1,653 5,352 4,886 Other income, net.......... 24 40 65 111 ----------- ----------- ----------- ----------- 1,855 1,693 5,417 4,997 ----------- ----------- ----------- ----------- COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below). 1,311 1,211 3,840 3,514 Engineering, research and development............... 20 22 54 66 Selling, general and administrative............ 208 207 653 603 Depreciation, depletion and amortization.............. 90 82 273 229 ----------- ----------- ----------- ----------- 1,629 1,522 4,820 4,412 ----------- ----------- ----------- ----------- INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST........... 226 171 597 585 Interest expense (net of interest capitalized)..... 59 45 157 145 Income tax expense......... 56 45 138 171 Minority interest.......... 6 5 17 15 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS.................. 105 76 285 254 Income from discontinued operations, net of income tax......................... -- 40 -- 518 Extraordinary loss, net of income tax.................. -- (1) -- (1) ----------- ----------- ----------- ----------- NET INCOME................... 105 115 285 771 Preferred stock dividends.... -- 2 -- 7 ----------- ----------- ----------- ----------- NET INCOME TO COMMON STOCK... $ 105 $ 113 $ 285 $ 764 =========== =========== =========== =========== PER SHARE Average number of shares of common stock outstanding.... 170,081,544 170,365,089 170,516,035 170,418,046 Earnings per average share of common stock-- Continuing operations...... $ .62 $ .45 $ 1.67 $ 1.49 Discontinued operations.... -- .22 -- 3.00 Extraordinary loss......... -- (.01) -- (.01) ----------- ----------- ----------- ----------- $ .62 $ .66 $ 1.67 $ 4.48 =========== =========== =========== =========== Cash dividends per share of common stock................ $ .30 $ .45 $ .90 $ 1.35 =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements of income. 2 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------- 1997 1996 ------ ------ (MILLIONS) OPERATING ACTIVITIES Income from continuing operations.......................... $ 285 $ 254 Adjustments to reconcile income from continuing operations to cash provided (used) by continuing operations-- Depreciation, depletion and amortization................. 273 229 Deferred income taxes.................................... 148 32 (Gain) loss on sale of businesses and assets, net........ 14 (58) Changes in components of working capital-- (Increase) decrease in receivables..................... (114) (112) (Increase) decrease in inventories..................... (40) 12 (Increase) decrease in prepayments and other current assets................................................ (63) (4) Increase (decrease) in payables........................ (71) (10) Increase (decrease) in taxes accrued................... (48) 59 Increase (decrease) in interest accrued................ 58 -- Increase (decrease) in other current liabilities....... (113) (63) Other.................................................... (108) (43) ------ ------ Cash provided (used) by continuing operations.............. 221 296 Cash provided (used) by discontinued operations............ -- (453) ------ ------ Net cash provided (used) by operating activities........... 221 (157) ------ ------ INVESTING ACTIVITIES Net proceeds from sale of businesses and assets............ 17 136 Expenditures for plant, property and equipment............. (324) (400) Acquisitions of businesses................................. (308) (677) Net proceeds related to the sale of discontinued operations................................................ -- 1,049 Expenditures for plant, property and equipment, and business acquisitions--discontinued operations............ -- (351) Investments and other...................................... (61) (94) ------ ------ Net cash provided (used) by investing activities........... (676) (337) ------ ------ FINANCING ACTIVITIES Issuance of common, treasury and SECT shares............... 35 105 Purchase of common shares.................................. (90) (149) Redemption of preferred stock.............................. -- (20) Issuance of long-term debt................................. 596 5 Retirement of long-term debt............................... (9) (379) Net increase (decrease) in short-term debt excluding current maturities on long-term debt...................... 55 980 Dividends (common and preferred)........................... (154) (236) ------ ------ Net cash provided (used) by financing activities........... 433 306 ------ ------ Effect of foreign exchange rate changes on cash and temporary cash investments................................ -- (1) ------ ------ Increase (decrease) in cash and temporary cash investments. (22) (189) Cash and temporary cash investments, January 1............. 62 354 ------ ------ Cash and temporary cash investments, September 30 (Note)... $ 40 $ 165 ====== ====== Cash paid during the period for interest................... $ 113 $ 316 Cash paid during the period for income taxes (net of refunds).................................................. $ 61 $ 657
- -------- Note: Cash and temporary cash investments include highly liquid investments with a maturity of three months or less at the date of purchase. The accompanying notes to financial statements are an integral part of these statements of cash flows. 3 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, ------------- ------------ ------------- ASSETS 1997 1996 1996 ------ ------------- ------------ ------------- (MILLIONS) Current assets: Cash and temporary cash investments. $ 40 $ 62 $ 165 Receivables-- Customer notes and accounts, net.. 795 561 529 Affiliated companies.............. -- -- 130 Income taxes...................... 67 -- 65 Other............................. 29 138 73 Inventories-- Finished goods.................... 495 408 403 Work in process................... 95 118 118 Raw materials..................... 247 245 269 Materials and supplies............ 117 107 92 Deferred income taxes............... 99 95 23 Prepayments and other............... 206 189 181 ------ ------ ------ 2,190 1,923 2,048 ------ ------ ------ Other assets: Long-term notes receivable.......... 43 20 15 Goodwill and intangibles, net....... 1,628 1,341 1,334 Deferred income taxes............... 56 60 61 Pension assets...................... 707 547 476 Other............................... 418 444 341 ------ ------ ------ 2,852 2,412 2,227 ------ ------ ------ Plant, property and equipment, at cost................................. 5,141 4,870 4,685 Less--Reserves for depreciation, depletion and amortization......... 1,795 1,618 1,586 ------ ------ ------ 3,346 3,252 3,099 ------ ------ ------ Net assets of discontinued operations. -- -- 1,161 ------ ------ ------ $8,388 $7,587 $8,535 ====== ====== ====== LIABILITIES AND SHAREOWNERS' EQUITY ----------------------------------- Current liabilities: Short-term debt (including current maturities on long-term debt)...... $ 370 $ 236 $ 916 Payables-- Trade............................. 608 651 611 Affiliated companies.............. -- -- 50 Taxes accrued....................... 110 91 120 Accrued liabilities................. 295 308 208 Other............................... 316 335 285 ------ ------ ------ 1,699 1,621 2,190 ------ ------ ------ Long-term debt........................ 2,638 2,067 1,531 ------ ------ ------ Deferred income taxes................. 619 476 450 ------ ------ ------ Postretirement benefits............... 211 168 198 ------ ------ ------ Deferred credits and other liabilities.......................... 310 305 204 ------ ------ ------ Commitments and contingencies Minority interest..................... 313 304 300 ------ ------ ------ Shareowners' equity: Common stock........................ 2 2 957 Stock Employee Compensation Trust (common stock held in trust)....... -- -- -- Premium on common stock and other capital surplus.................... 2,670 2,642 3,605 Cumulative translation adjustments.. (101) 23 9 Retained earnings (accumulated deficit)........................... 111 (21) 62 ------ ------ ------ 2,682 2,646 4,633 Less--Shares held as treasury stock, at cost............................ 84 -- 971 ------ ------ ------ 2,598 2,646 3,662 ------ ------ ------ $8,388 $7,587 $8,535 ====== ====== ======
The accompanying notes to financial statements are an integral part of these balance sheets. 4 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------------- 1997 1996 ------------------- ------------------- SHARES AMOUNT SHARES AMOUNT ----------- ------ ----------- ------ (MILLIONS EXCEPT SHARE AMOUNTS) COMMON STOCK Balance January 1.................... 171,567,658 $ 2 191,351,615 $ 957 Issued pursuant to benefit plans.... 795,108 -- 4,004 -- ----------- ------ ----------- ------ Balance September 30................. 172,362,766 2 191,355,619 957 =========== ------ =========== ------ STOCK EMPLOYEE COMPENSATION TRUST (SECT) Balance January 1.................... -- (215) Shares issued....................... -- 216 Adjustment to market value.......... -- (1) ------ ------ Balance September 30................. -- -- ------ ------ PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS Balance January 1.................... 2,642 3,602 Premium on common stock issued pursuant to benefit plans.......... 28 -- Dividends on shares held by SECT.... -- 3 Adjustment of SECT to market value.. -- 1 Other............................... -- (1) ------ ------ Balance September 30................. 2,670 3,605 ------ ------ CUMULATIVE TRANSLATION ADJUSTMENTS Balance January 1.................... 23 26 Translation of foreign currency statements......................... (139) (13) Hedges of net investment in foreign subsidiaries (net of income taxes)............................. 15 (4) ------ ------ Balance September 30................. (101) 9 ------ ------ RETAINED EARNINGS (ACCUMULATED DEFICIT) Balance January 1.................... (21) (469) Net income.......................... 285 771 Dividends-- Preferred stock................... -- (4) Common stock...................... (153) (233) Accretion of excess of redemption value of preferred stock over fair value at date of issue............. -- (3) ------ ------ Balance September 30................. 111 62 ------ ------ LESS--COMMON STOCK HELD AS TREASURY STOCK, AT COST Balance January 1.................... -- -- 16,422,619 753 Shares acquired..................... 2,288,200 90 4,657,165 241 Shares issued pursuant to benefit and dividend reinvestment plans.... (169,410) (6) (479,741) (23) ----------- ------ ----------- ------ Balance September 30................. 2,118,790 84 20,600,043 971 =========== ------ =========== ------ Total............................... $2,598 $3,662 ====== ======
The accompanying notes to financial statements are an integral part of these statements of changes in shareowners' equity. 5 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) In the opinion of Tenneco Inc. (the "Company"), the accompanying unaudited consolidated financial statements of Tenneco Inc. and its consolidated subsidiaries ("Tenneco") contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in shareowners' equity, and cash flows for the periods indicated. The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. The consolidated financial statements of Tenneco include all majority-owned subsidiaries of the Company. Investments in 20% to 50% owned companies where the Company has the ability to exert significant influence over operating and financial policies are carried at cost plus equity in undistributed earnings and cumulative translation adjustments since date of acquisition. The Company was spun-off from the company previously known as Tenneco Inc. ("Old Tenneco") on December 11, 1996, following a series of transactions undertaken to realign the assets, liabilities and operations of Old Tenneco such that the automotive parts ("Tenneco Automotive"), packaging ("Tenneco Packaging") and the administrative services ("Tenneco Business Services") businesses were owned by the Company and the shipbuilding business was owned by Newport News Shipbuilding Inc. ("Newport News"). Old Tenneco distributed the shares of the Company and Newport News to its shareowners on December 11, 1996. On December 12, 1996, Old Tenneco, which then consisted primarily of the energy business and certain previously discontinued operations of Old Tenneco, merged with a subsidiary of El Paso Natural Gas Company. Although the separation of Tenneco from Old Tenneco was structured as a spin-off for legal, tax and other reasons, Tenneco kept certain important aspects of Old Tenneco, including its executive management, Board of Directors and headquarters. Most importantly, the combined assets, revenues, and operating income of Tenneco Automotive and Tenneco Packaging represented more than half the assets, revenues and operating income of Old Tenneco prior to the spin-offs and merger. Consequently, Tenneco's financial statements for periods prior to the spin-offs and merger present the net assets and results of operations of Old Tenneco's shipbuilding and energy businesses, as well as its farm and construction equipment business which was disposed of prior to the spin-offs and merger, as discontinued operations. Prior year's financial statements have been reclassified where appropriate to conform to 1997 presentations. (2) Tenneco is a party to various legal proceedings arising from its operations. Tenneco believes that the outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on its financial position or results of operations. (3) Tenneco is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which it operates. Tenneco has provided reserves for compliance with these laws and regulations where it is probable that a liability exists and where Tenneco can make a reasonable estimate of the liability. The estimated liabilities recorded are subject to change as more information becomes available regarding the magnitude of possible cleanup costs and the timing, varying costs, and effectiveness of alternative cleanup technologies. However, Tenneco believes that any additional costs which may arise as more information becomes available will not have a material adverse effect on its financial condition or results of operations. 6 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) (4) In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("FAS") No. 128, Earnings Per Share, which establishes new standards for computing and presenting earnings per share. The provisions of the statement are effective for fiscal years ending after December 15, 1997. If the provisions of FAS No. 128 had been adopted in the third quarter of 1997 and 1996, basic and diluted earnings per share would not have been materially different from primary and fully diluted earnings per share, respectively, as calculated in accordance with Accounting Principles Board Opinion No. 15. (5) Tenneco uses derivative financial instruments, principally foreign currency forward purchase and sale contracts with terms of less than one year, to hedge its exposure to changes in foreign currency exchange rates. Tenneco's primary exposure to changes in foreign currency rates results from intercompany loans made between Tenneco affiliates to minimize the need for borrowings from third parties. Net gains or losses on these foreign currency exchange contracts which are designated as hedges are recognized in the income statement to offset the foreign currency gain or loss on the underlying transaction. Additionally, Tenneco enters into foreign currency forward purchase and sale contracts to mitigate its exposure to changes in exchange rates on intercompany and third party trade receivables and payables. Since these anticipated transactions are not firm commitments, Tenneco marks these forward contracts to market each period and records any gain or loss in the income statement. Tenneco has from time to time also entered into forward contracts to hedge its net investment in foreign subsidiaries. The after-tax net gains or losses on these contracts are recognized on the accrual basis in the balance sheet caption "Cumulative translation adjustments." In the statement of cash flows, cash receipts or payments related to these exchange contracts are classified consistent with the cash flows from the transaction being hedged. Tenneco does not currently enter into derivative financial instruments for speculative purposes. (6) Tenneco management currently is studying various strategic alternatives (including divestitures, spin-offs and joint venture arrangements) concerning some or all of the Company's containerboard mills, timberlands and other related operations. In the event a strategic alternative on acceptable terms is identified, management believes that, depending on market conditions and other factors, the strategic alternative could be completed by the end of 1998. The above notes are an integral part of the foregoing financial statements. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996 Tenneco Inc. and its consolidated subsidiaries ("Tenneco") reported income from continuing operations of $105 million, or 62 cents per share, for the third quarter of 1997 compared to $76 million, or 45 cents per share, for the same period in 1996. The improvement resulted from higher income at both Tenneco Automotive and Tenneco Packaging and a lower overall effective tax rate in 1997. The Company was spun-off from the company previously known as Tenneco Inc. ("Old Tenneco") on December 11, 1996, following a series of transactions undertaken to realign the assets, liabilities and operations of Old Tenneco such that the automotive parts ("Tenneco Automotive"), packaging ("Tenneco Packaging") and the administrative services ("Tenneco Business Services") businesses were owned by the Company and the shipbuilding business was owned by Newport News Shipbuilding Inc. ("Newport News"). Old Tenneco distributed the shares of the Company and Newport News to its shareowners on December 11, 1996. On December 12, 1996, Old Tenneco, which then consisted primarily of the energy business ("Energy") and certain previously discontinued operations of Old Tenneco, merged with a subsidiary of El Paso Natural Gas Company. Although the separation of Tenneco from Old Tenneco was structured as a spin-off for legal, tax and other reasons, Tenneco kept certain important aspects of Old Tenneco, including its executive management, Board of Directors and headquarters. Most importantly, the combined assets, revenues, and operating income of Tenneco Automotive and Tenneco Packaging represented more than half the assets, revenues and operating income of Old Tenneco prior to the spin-offs and merger. Consequently, this Management's Discussion and Analysis of Financial Condition and Results of Operations and Tenneco's financial statements for periods prior to the spin-offs and merger present the net assets and results of operations of Old Tenneco's shipbuilding and energy businesses, as well as its farm and construction equipment business which was disposed of prior to the spin-offs and merger, as discontinued operations. Revenues
THIRD QUARTER ------------- 1997 1996 ------ ------ (MILLIONS) Tenneco Automotive......................................... $ 785 $ 760 Tenneco Packaging.......................................... 1,045 896 Intergroup sales and other................................. 1 (3) ------ ------ $1,831 $1,653 ====== ======
Tenneco Automotive earned record third quarter revenues, its sixteenth consecutive quarter of quarter-over-quarter improvement. The revenue increase was achieved despite the strength of the U.S. dollar in overseas markets, which reduced revenues by $42 million. Revenues of $32 million earned from acquisitions made since the third quarter of 1996, higher sales to existing and new customers of $23 million and improved pricing and product mix more than offset the effects of the strong U.S. dollar. Tenneco Packaging's revenue improvement of 17 percent was due to revenue growth of $170 million, from $509 million to $679 million, in the specialty packaging business, partially offset by a revenue decrease in the paperboard packaging business of $21 million. Acquisitions made in the specialty packaging business since the beginning of the third quarter of 1996 contributed $152 million in revenue growth to the third quarter of 1997. The remainder of specialty packaging's revenue increase resulted primarily from unit sales volume growth. Unit sales of Hefty OneZip(R) storage and freezer bags increased by 50 percent compared to last year's third quarter and sales of clear plastic and foam containers to supermarkets and the food service industry were up 7 percent over the year ago period. The revenue decrease in the paperboard packaging business from $387 million in the 1996 third quarter to $366 million in the 1997 third quarter resulted primarily from lower average prices in the third quarter of 1997 8 compared to the third quarter of 1996. Industry linerboard prices, as reported in the trade press, were 4 percent lower and medium prices were 3 percent lower than the third quarter of 1996. Third quarter 1997 average industry prices rebounded from 1997's second quarter, however, rising 11 percent for linerboard and 20 percent for medium. Tenneco Packaging has announced an additional 12 percent box price increase effective in November. Income Before Interest Expense, Income Taxes and Minority Interest ("Operating Income")
THIRD QUARTER ----------- 1997 1996 ----- ----- (MILLIONS) Tenneco Automotive............................................ $ 119 $ 82 Tenneco Packaging............................................. 107 85 Other......................................................... -- 4 ----- ----- $ 226 $ 171 ===== =====
Tenneco Automotive's operating income increased by $37 million in the third quarter of 1997 compared to the same period in 1996 despite the fact that operating income was reduced by $7.4 million due to the strong U.S. dollar. The effects of currency exchange rates were more than offset by earnings of $5 million from acquisitions made since the third quarter of 1996, favorable resolution of a legal action which contributed $9.7 million to the quarter and improved pricing and product mix. Tenneco Automotive's operating income for the third quarter of 1997 was also higher due to a net reduction of $4 million in certain reserves, primarily related to ongoing reorganization initiatives which have proceeded more rapidly and efficiently than planned, allowing Tenneco Automotive to adjust its cost estimates for completing these initiatives. Administrative and operational cost savings resulting from these initiatives accounted for the balance of the operating income increase. Tenneco Packaging's operating income growth of 26 percent occurred in both the specialty and paperboard packaging businesses, which were up $17 million and $5 million, respectively. Specialty packaging's operating income increased to $84 million for the third quarter of 1997 from $67 million for the same period in 1996. This increase was primarily a result of operating income growth of $23 million from businesses acquired since the beginning of the third quarter of 1996, including the foam, protective and flexible packaging businesses. Lower margins in specialty packaging's molded fibre operations partially offset the operating income increases earned from acquisitions. Paperboard packaging's operating income improvement to $23 million over third quarter 1996 operating income of $18 million was achieved despite lower pricing. Cost reduction initiatives and a $4.5 million benefit from a timberland management transaction more than offset the operating income effect of the lower pricing. Compared to the second quarter of 1997, the paperboard packaging business improved its operating income in the third quarter of 1997 by $31 million. Price increases in linerboard and medium contributed $13 million to this earnings recovery, while cost reduction, product mix and other improvements added $10 million and the timberland management transaction contributed $4.5 million. Tenneco management currently is studying various strategic alternatives (including divestitures, spin-offs and joint venture arrangements) concerning some or all of the Company's containerboard mills, timberlands and other related operations. In the event a strategic alternative on acceptable terms is identified, management presently believes that, depending on market conditions and other factors, the strategic alternative could be completed by the end of 1998. 9 RESULTS OF CONTINUING OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 Revenues
NINE MONTHS ------------- 1997 1996 ------ ------ (MILLIONS) Tenneco Automotive......................................... $2,436 $2,223 Tenneco Packaging.......................................... 2,916 2,671 Intergroup sales and other................................. -- (8) ------ ------ $5,352 $4,886 ====== ======
Tenneco Automotive's year to date revenue improvement of 10 percent is attributable to acquisitions, volume growth, and pricing and product mix improvements, partially offset by $100 million in lower revenues due to the effects of the strong U.S. dollar. Acquisitions added $208 million to 1997 year to date revenues. Volume growth with existing and new customers contributed $83 million in revenues, while pricing and product mix improvements accounted for the remainder of the increase. Tenneco Packaging's year to date revenues grew by 9 percent compared to 1996. Specialty packaging's revenue increase of $429 million was driven primarily by $372 million in revenue growth from acquisitions made since the beginning of the third quarter of 1996 and by unit sales volume growth. Revenues for the paperboard packaging business declined by $184 million, primarily due to lower pricing for linerboard and medium. Operating Income
NINE MONTHS -------------- 1997 1996 ------ ------ (MILLIONS) Tenneco Automotive....................................... $ 330 $ 245 Tenneco Packaging........................................ 269 341 Other.................................................... (2) (1) ------ ------ $ 597 $ 585 ====== ======
Tenneco Automotive generated a 35 percent improvement in year to date operating income. Acquisitions contributed $33 million of this improvement. In addition, the favorable legal action resolution and reserve adjustments, described above in the discussion of third quarter results, contributed to operating income. These improvements were partially offset by the impact of the strong U.S. dollar, which for the year to date has reduced operating income by $15 million. The remainder of the operating income increase is primarily attributable to administrative and operational cost savings resulting from the restructuring efforts and improved pricing and product mix. Tenneco Packaging's year to date operating income decreased 21 percent compared to 1996. The specialty packaging business showed an operating income increase of $43 million for the first three quarters of 1997, while operating income for the paperboard packaging business was $115 million lower than the first three quarters of 1996. The increase in operating income for the specialty packaging business was due primarily to $61 million of operating income growth from acquisitions made since the beginning of the third quarter of 1996. Partially offsetting this increase were resin cost increases and weak stretch film margins during the first six months of 1997 and lower margins in specialty packaging's molded fibre business. The resin cost increases are expected to be recovered through price increases announced in the third quarter and stretch film margins benefited from better pricing and lower material costs in the third quarter compared with the first half of the year. The year to date results for the paperboard packaging business included a one time $38 million pre tax gain from the first quarter refinancing of two containerboard mill leases. The results for 1996 included a second quarter $50 million gain on the sale of certain recycled paperboard assets to a joint venture with Caraustar Industries. Excluding these two transactions, the operating income of the paperboard packaging business was 10 down $104 million for the first three quarters of 1997 compared to the same period in 1996. Lower pricing accounted for this decrease, partially offset by cost reduction initiatives and the timberland management transaction described above in the discussion of third quarter results. INTEREST EXPENSE Interest expense increased $14 million for the third quarter of 1997 compared to the third quarter of 1996. This increase resulted from higher average debt levels during the third quarter of 1997, reflecting primarily acquisitions made since the beginning of the third quarter of 1996 and share repurchase programs. Interest expense is up by $12 million for the year to date period for the same reason. INCOME TAXES Tenneco's effective tax rate for the third quarter of 1997 was 34 percent compared to 36 percent in the third quarter of 1996. The effective tax rate for the 1997 year to date period was 31 percent compared to 39 percent for the same period in 1996. The lower overall effective tax rate primarily reflects certain non-recurring foreign tax benefits recognized during 1997. RESULTS OF DISCONTINUED OPERATIONS The 1996 after-tax income from discontinued operations resulted from Tenneco's disposition of its remaining interest in its former farm and construction equipment subsidiary, Case Corporation, in March 1996, and the operations of the energy and shipbuilding businesses prior to the spin-off and merger transactions in December 1996.
THIRD NINE QUARTER MONTHS 1996 1996 ------- ------ (MILLIONS) Case Corporation Gain on disposition....................................... $ -- $340 Loss from operations...................................... -- (1) Shipbuilding Income from operations.................................... 15 52 Energy Income from operations.................................... 25 127 ----- ---- $40 $518 ===== ==== LIQUIDITY AND CAPITAL RESOURCES Cash Flow NINE MONTHS -------------- 1997 1996 ------- ------ (MILLIONS) Cash provided (used) by: Operating activities-continuing operations............... $ 221 $296 Investing activities..................................... (676) (337) Financing activities..................................... 433 306
Cash provided by continuing operating activities declined by $75 million for the first three quarters of 1997 compared to the same period of 1996. Higher levels of income before non-cash items were more than offset by changes in the components of working capital. Higher levels of activity in receivables and inventory, reflecting 11 acquisitions in both Tenneco Automotive and Tenneco Packaging, increased the balances in those accounts for the first three quarters of 1997. Additionally, liquidation of payables, including those incurred in connection with the December 1996 merger and spin-off transactions, contributed to the lower levels of cash flow from continuing operating activities. While cash flow from operating activities for the year to date period was lower than the 1996 year to date period, the third quarter of 1997 showed a $47 million improvement over the same period in 1996. Tenneco's discontinued operations used $453 million in operating cash flow for the nine months ended September 30, 1996. Cash flow used by investing activities for the first three quarters of 1997 included $308 million for businesses acquired, the most significant of which was the protective and flexible packaging businesses of NV Koninklijke KNP BT in the second quarter. Acquisitions of businesses in the first three quarters of 1996 used cash of $677 million, including the acquisitions of The Pullman Company and its Clevite Products division for approximately $330 million and Amoco Foam Products for approximately $310 million. Capital expenditures were $76 million lower in the 1997 year to date period compared to 1996, reflecting Tenneco's focused capital expenditure program. Year to date 1996 investing activities included $1,049 million in proceeds from sales of business operations that have been discontinued, primarily the remaining Case investment and Tenneco's 50 percent investment in a pipeline partnership. Tenneco's discontinued operations used $351 million in the 1996 year to date period for capital expenditures and acquisitions of businesses. Cash provided by financing activities for the first nine months of 1997 was $433 million. This included two long-term debt financings completed in the second quarter, which provided net proceeds of $593 million and a net increase in short-term debt of $55 million. The debt increase primarily reflects cash used for acquisitions and the financing on a long-term basis of short-term debt that Tenneco retained following the spin-off and merger transactions. Also during the first three quarters of 1997, Tenneco paid $154 million in dividends on its common stock and repurchased $90 million of its common shares outstanding. This compares to dividends on common and preferred stock of $236 million and share repurchases of $149 million during the same period in 1996.- Capitalization
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (MILLIONS) Short-term debt................................ $ 370 $ 236 Long-term debt................................. 2,638 2,067 Minority interest.............................. 313 304 Shareowners' equity............................ 2,598 2,646 ------ ------ $5,919 $5,253 ====== ======
Tenneco's debt to capitalization ratio at September 30, 1997 was 50.8 percent compared to 43.8 percent at December 31, 1996. The increase in the ratio is attributable to the additional debt issued as described under Cash Flow above as well as a decline in equity resulting from net income for the first nine months being more than offset by dividends, share repurchases and cumulative translation adjustments resulting from the strong US dollar. Tenneco believes it has adequate capital resources available to it to meet its future capital needs, including strategic acquisitions and announced share repurchases. 12 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The exhibits filed herewith are listed in the exhibit index which follows the signature page and immediately precedes the exhibits filed. (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended September 30, 1997. 13 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. TENNECO INC. By /s/ Robert T. Blakely ___________________________________ Robert T. Blakely Executive Vice President and Chief Financial Officer Date: November 14, 1997 14 EXHIBITS The following exhibits are filed with Tenneco Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, or incorporated herein by reference (exhibits designated by an asterisk are filed with the Report; all other exhibits are incorporated by reference):
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2 --None. 3.1 --Restated Certificate of Incorporation of Tenneco Inc. (incorporated herein by reference from Exhibit 3.1 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 3.2 --Amended and Restated By-laws of Tenneco Inc. (incorporated herein by reference from Exhibit 3.2 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.1 --Form of Specimen Stock Certificate of Tenneco Inc. Common Stock (incorporated herein by reference from Exhibit 4.1 of Tenneco Inc.'s Form 10, File No. 1-12387). 4.2 --Rights Agreement, dated as of December 11, 1996, by and between Tenneco Inc. (formerly New Tenneco Inc.) and First Chicago Trust Company of New York, as Rights Agent (incorporated herein by reference from Exhibit 4.2 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(a) --Indenture, dated as of November 1, 1996, between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.1 of Tenneco Inc.'s Form S-4, Registration No. 333-14003). 4.3(b) --First Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(b) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(c) --Second Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(c) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(d) --Third Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(d) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(e) --Fourth Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(e) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(f) --Fifth Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(f) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(g) --Sixth Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(g) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 4.3(h) --Seventh Supplemental Indenture dated as of December 11, 1996 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.3(h) of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387).
15
EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.3(i) --Form of Eighth Supplemental Indenture dated as of April 28, 1997 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.1 of Tenneco Inc.'s Form 8-K filed on April 25, 1997, File No. 1-12387). 4.3(j) --Form of Ninth Supplemental Indenture dated as of April 28, 1997 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.2 of Tenneco Inc.'s Form 8-K filed on April 25, 1997, File No. 1-12387). 4.3(k) --Form of 7 1/2% Note due 2027 (contained in the Form of Eighth Supplemental Indenture filed as Exhibit 4.1 to Tenneco Inc.'s Form 8- K filed on June 13, 1997, File No. 1-12387 and incorporated herein by reference). 4.3(l) --Form of 7 7/8% Debenture due 2027 (contained in the Form of Ninth Supplemental Indenture filed as Exhibit 4.2 to Tenneco Inc.'s Form 8- K filed on June 13, 1997, File No. 1-12387 and incorporated herein by reference). 4.3(m) --Form of Tenth Supplemental Indenture dated as of June 16, 1997 to Indenture dated as of November 1, 1996 between Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as Trustee (incorporated herein by reference from Exhibit 4.1 of Tenneco Inc.'s Form 8-K filed on June 13, 1997, File No. 1-12387). 4.3(n) --Form of 7 5/8% Debenture due June 15, 2017 (contained in the Form of Tenth Supplemental Indenture filed as Exhibit 4.1 to Tenneco Inc.'s Form 8-K filed on June 13, 1997, File No. 1-12387 and incorporated herein by reference). 10.1 --Distribution Agreement, dated November 1, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 2 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.2 --Amendment No. 1 to Distribution Agreement, dated as of December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.2 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 10.3 --Debt and Cash Allocation Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.3 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1- 12387). 10.4 --Benefits Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.4 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1- 12387). 10.5 --Insurance Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.5 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1- 12387). 10.6 --Tax Sharing Agreement, dated December 11, 1996, by and among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Newport News Shipbuilding Inc., Tenneco Inc. (formerly New Tenneco Inc.), and El Paso Natural Gas Company (incorporated herein by reference from Exhibit 10.6 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 10.7 --First Amendment to Tax Sharing Agreement, dated as of December 11, 1996 among El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.7 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387).
16
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.8 --Transition Services Agreement, dated June 19, 1996, by and among, Tenneco Business Services, Inc., El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), and El Paso Natural Gas Company (incorporated herein by reference from Exhibit 10.8 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1- 12387). 10.9 --Trademark Transition License Agreement, dated December 11, 1996, by and between Newport News Shipbuilding Inc. and Tenneco Inc. (formerly New Tenneco Inc.) (incorporated herein by reference from Exhibit 10.9 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 10.10 --Trademark Transition License Agreement, dated December 11, 1996, by and between Tenneco Inc. (formerly New Tenneco Inc.) and El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.) (incorporated herein by reference from Exhibit 10.10 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 10.11 --Amended and Restated Tenneco Inc. Board of Directors Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.8 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.12 --Amended and Restated Tenneco Inc. Executive Incentive Compensation Plan (incorporated herein by reference from Exhibit 10.9 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.13 --Tenneco Inc. Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.10 of Tenneco Inc.'s Form 10, File No. 1- 12387). 10.14 --Tenneco Inc. 1996 Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.11 of Tenneco Inc.'s Form 10, File No. 1- 12387). 10.15 --Amended and Restated Tenneco Inc. Supplemental Executive Retirement Plan (incorporated herein by reference from Exhibit 10.12 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.16 --Amended and Restated Tenneco Inc. Benefit Equalization Plan (incorporated herein by reference from Exhibit 10.13 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.17 --Amended and Restated Tenneco Inc. Outside Directors Retirement Plan (incorporated herein by reference from Exhibit 10.14 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.18 --Amended and Restated Supplemental Pension Agreement, dated September 12, 1995 between Dana G. Mead and Tenneco Inc. (incorporated herein by reference from Exhibit 10.15 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.19 --Amended and Restated Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives (incorporated herein by reference from Exhibit 10.16 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.20 --Amended and Restated Tenneco Benefits Protection Trust (incorporated herein by reference from Exhibit 10.17 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.21 --Employment Agreement, dated June 29, 1992 between Stacy S. Dick and Tenneco Inc. (incorporated herein by reference from Exhibit 10.18 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.22 --Employment Agreement, dated March 12, 1992 between Dana G. Mead and Tenneco Inc. (incorporated herein by reference from Exhibit 10.19 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.23 --Employment Agreement, dated December 3, 1993 between Paul T. Stecko and Tenneco Packaging Inc. (incorporated herein by reference from Exhibit 10.20 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.24 --Agreement, dated September 9, 1992 between Theodore R. Tetzlaff and Tenneco Inc. (incorporated herein by reference from Exhibit 10.21 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.25 --Tenneco Inc. Directors Restricted Stock Program (incorporated herein by reference from Exhibit 10.22 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.26 --Tenneco Inc. Directors Restricted Stock and Restricted Unit Program (incorporated herein by reference from Exhibit 10.23 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.27 --1996 Tenneco Inc. Stock Ownership Plan (incorporated herein by reference from Exhibit 10.24 of Tenneco Inc.'s Form 10, File No. 1- 12387).
17
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.28 --Amended and Restated Mill I Lease, dated as of November 4, 1996, between Credit Suisse Leasing 92A, L.P., and Tenneco Packaging Inc. (incorporated herein by reference from Exhibit 10.28 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 10.29 --Amended and Restated Mill II Lease, dated as of November 4, 1996, between Credit Suisse Leasing 92A, L.P., and Tenneco Packaging Inc. (incorporated herein by reference from Exhibit 10.29 of Tenneco Inc.'s Form 10-K for the fiscal year ended December 31, 1996, File No. 1-12387). 10.30 --Timberland Lease, dated January 31, 1991, by and between Four States Timber Venture and Packaging Corporation of America (incorporated herein by reference from Exhibit 10.27 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.31 --Professional Services Agreement, dated August 22, 1996, by and between Tenneco Business Services Inc. and Newport News Shipbuilding Inc. (incorporated herein by reference from Exhibit 10.28 of Tenneco Inc.'s Form 10, File No. 1-12387). *11 --Computation of Earnings (Loss) Per Share of Common Stock. *12 --Computation of Ratio of Earnings to Fixed Charges. 15 --None. 18 --None. 19 --None. 22 --None. 24 --None. *27.1 --Financial Data Schedule. 28 --None. 99 --None.
- -------- *Note: Exhibits designated by an asterisk are filed with the Report; all others are incorporated by reference. (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended September 30, 1997. 18 [LOGO OF TENNECO APPEARS HERE] EX-11 2 COMPUTATION OF EARNINGS EXHIBIT 11 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK (UNAUDITED)
NINE THREE MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (MILLIONS EXCEPT SHARE AMOUNTS) COMPUTATION FOR STATEMENTS OF INCOME Earnings Per Share (average shares outstanding): Income from continuing operations.............. $ 105 $ 76 $ 285 $ 254 Income from discontinued operations, net of income tax.............. -- 40 -- 518 Extraordinary loss, net of income tax........... -- (1) -- (1) ----------- ----------- ----------- ----------- Net income............... 105 115 285 771 Preferred stock dividends............... -- 2 -- 7 ----------- ----------- ----------- ----------- Net income to common stock................... $ 105 $ 113 $ 285 $ 764 =========== =========== =========== =========== Average shares of common stock outstanding(a).... 170,081,544 170,365,089 170,516,035 170,418,046 =========== =========== =========== =========== Earnings per average share of common stock: Continuing operations.. $ .62 $ .45 $ 1.67 $ 1.49 Discontinued operations............ -- .22 -- 3.00 Extraordinary loss..... -- (.01) -- (.01) ----------- ----------- ----------- ----------- $ .62 $ .66 $ 1.67 $ 4.48 =========== =========== =========== =========== ADDITIONAL COMPUTATIONS(B) Net income to common stock, per above................. $ 105 $ 113 $ 285 $ 764 =========== =========== =========== =========== Primary Earnings Per Share (including common stock equivalents): Average shares of common stock outstanding(a).... 170,081,544 170,365,089 170,516,035 170,418,046 Incremental common shares applicable to common stock options based on the common stock daily average market price during the period....... 883,202 210,701 450,480 462,904 Incremental common shares applicable to performance units based upon the attainment of specified goals......... 82,398 88,125 82,398 88,125 ----------- ----------- ----------- ----------- Average common shares, as adjusted................ 171,047,144 170,663,915 171,048,913 170,969,075 =========== =========== =========== =========== Earnings per average share of common stock (including common stock equivalents): Continuing operations.. $ .62 $ .45 $ 1.67 $ 1.48 Discontinued operations............ -- .22 -- 2.99 Extraordinary loss..... -- (.01) -- (.01) ----------- ----------- ----------- ----------- $ .62 $ .66 $ 1.67 $ 4.46 =========== =========== =========== =========== Fully Diluted Earnings Per Share: Average shares of common stock outstanding(a).... 170,081,544 170,365,089 170,516,035 170,418,046 Incremental common shares applicable to common stock options based on the more dilutive of the common stock ending or average market price during the period....... 1,057,932 233,326 1,057,932 550,364 Incremental common shares applicable to performance units based upon the attainment of specified goals......... 82,398 88,125 82,398 88,125 ----------- ----------- ----------- ----------- Average common shares assuming full dilution.. 171,221,874 170,686,540 171,656,365 171,056,535 =========== =========== =========== =========== Fully diluted earnings per average share, assuming conversion of all applicable securities: Continuing operations.. $ .62 $ .45 $ 1.66 $ 1.48 Discontinued operations............ -- .22 -- 2.99 Extraordinary loss..... -- (.01) -- (.01) ----------- ----------- ----------- ----------- $ .62 $ .66 $ 1.66 $ 4.46 =========== =========== =========== ===========
- ------- NOTES: (a) In 1992, 12,000,000 shares of common stock were issued to the Tenneco Inc. Stock Employee Compensation Trust ("SECT"). Shares of common stock issued to a related trust are not considered to be outstanding in the computation of average shares of common stock until the shares are utilized to fund the obligations for which the trust was established. For the three months and nine months ended September 30, 1996, the SECT utilized 1,123,648 and 4,358,084 shares, respectively. At December 31, 1996, all shares had been utilized. (b) These calculations are submitted in accordance with Securities and Exchange Commission requirements although not required by Accounting Principles Board Opinion No. 15 because they result in dilution of less than 3%. EX-12 3 RATIO OF EARNINGS EXHIBIT 12 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN MILLIONS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------- 1997 1996 ------ ------ Income from continuing operations............................... $ 285 $ 254 Add: Interest...................................................... 157 145 Portion of rentals representative of interest factor.......... 40 43 Preferred stock dividend requirements of majority-owned subsidiaries................................................. 16 15 Income tax expense and other taxes on income.................. 138 171 Amortization of interest capitalized.......................... 1 1 Undistributed (earnings) losses of affiliated companies in which less than a 50% voting interest is owned............... (1) -- ------ ------ Earnings as defined......................................... 636 629 ====== ====== Interest........................................................ 157 145 Interest capitalized............................................ 1 5 Portion of rentals representative of interest factor............ 40 43 Preferred stock dividend requirements of majority-owned subsidiaries on a pre-tax basis................................ 24 24 ------ ------ Fixed charges as defined.................................... 222 217 ====== ====== Ratio of earnings to fixed charges.............................. 2.86 2.90 ====== ======
EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 40 0 795 0 954 2,190 5,141 1,795 8,388 1,699 2,638 0 0 2 2,596 8,388 5,352 5,352 3,894 3,894 926 0 157 440 138 285 0 0 0 285 1.67 1.66
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