-----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, CzSKCFgJnagH0kUdI3dWsGZ4lkZDx4hZc2Y42eJp5zP6Bf0lBzJopUw96DlMXVGA c50VHn88bal9ZL6JX0abjg== 0000950137-98-003237.txt : 19980817 0000950137-98-003237.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950137-98-003237 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: CSX SROS: NYSE SROS: PCX 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: 98689614 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 QUARTERLY REPORT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 JUNE 30, 1998 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 offices) (Zip Code)
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: 168,198,208 shares as of June 30, 1998. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................... * 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 Vote of Security Holders............................................... 15 Item 5. Other Information.............................. 15 Item 6. Exhibits and Reports on Form 8-K............... 15
- ------------ * No response to this item is included herein for the reason that it is inapplicable or the answer to such item is negative. CAUTIONARY STATEMENT AND "SAFE HARBOR" OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-Q contains forward-looking statements regarding: (i) the development of strategic alternatives to include among the options the separation of the automotive and packaging businesses into stand-alone entities and the separation of the containerboard packaging business from the specialty packaging business; (ii) a cost reduction program and the expected savings therefrom; (iii) the Year 2000 issue (relating to potential equipment and computer failures by or at the change in the century); and (iv) capital resources. See "Recent Developments," "Liquidity and Capital Resources - -- Capitalization" and "Year 2000" under "Management's Discussion and Analysis of Financial Condition and Results of Operations." These forward-looking statements are based on the current expectations of Tenneco (as defined below). Because forward-looking statements involve risks and uncertainties, Tenneco's plans, actions and actual results could differ materially. Among the factors that could cause plans, actions and results to differ materially from current expectations are: (i) the general economic, political and competitive conditions in markets and countries where Tenneco operates, including currency fluctuations and other risks associated with operating in foreign countries and changes in distribution channels; (ii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (iii) changes in capital availability or costs; (iv) results of analysis regarding strategic alternatives; (v) changes in consumer demand and prices, including decreases in demand for Tenneco products and the resulting negative impact on Tenneco's revenues and margins from such products; (vi) the cost of compliance with changes in regulations, including environmental regulations; (vii) workforce factors such as strikes or labor interruptions; (viii) material substitutions or increases in the costs of Tenneco's raw materials; (ix) Tenneco's ability to integrate operations of acquired businesses quickly and in a cost-effective manner; (x) new technologies; (xi) the ability of Tenneco and those with which it conducts business to timely resolve the Year 2000 issue, unanticipated costs of, problems with or delays in resolving the Year 2000 issue, and the costs and impacts if the Year 2000 issue is not timely resolved; (xii) changes by the Financial Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or policies; and (xiii) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond Tenneco's control. 1 3 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- (MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) REVENUES Net sales and operating revenues-- Automotive....................... $ 864 $ 873 $ 1,664 $ 1,651 Packaging........................ 1,133 1,019 2,142 1,871 Intergroup sales and other....... (1) -- (1) (1) ----------- ----------- ----------- ----------- 1,996 1,892 3,805 3,521 Other income, net..................... 32 1 48 41 ----------- ----------- ----------- ----------- 2,028 1,893 3,853 3,562 ----------- ----------- ----------- ----------- COSTS AND EXPENSES Cost of sales (exclusive of depreciation shown below)........... 1,380 1,338 2,648 2,529 Engineering, research, and development......................... 11 18 30 34 Selling, general, and administrative...................... 251 234 493 445 Depreciation, depletion, and amortization........................ 110 91 220 183 ----------- ----------- ----------- ----------- 1,752 1,681 3,391 3,191 ----------- ----------- ----------- ----------- INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY INTEREST............. 276 212 462 371 Interest expense (net of interest capitalized)........................ 61 53 117 98 Income tax expense.................... 70 49 117 82 Minority interest..................... 8 6 16 11 ----------- ----------- ----------- ----------- NET INCOME................................. $ 137 $ 104 $ 212 $ 180 =========== =========== =========== =========== PER SHARE Average shares of common stock outstanding-- Basic............................ 169,174,444 169,779,760 169,341,555 170,590,721 Diluted.......................... 169,869,703 170,170,076 169,936,676 170,908,529 Earnings per average share of common stock-- Basic............................ $ .81 $ .61 $ 1.25 $ 1.05 =========== =========== =========== =========== Diluted.......................... $ .81 $ .61 $ 1.25 $ 1.05 =========== =========== =========== =========== Cash dividends per share of common stock............................... $ .30 $ .30 $ .60 $ .60 =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements of income. 2 4 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------- 1998 1997 ----- ----- (MILLIONS) OPERATING ACTIVITIES Net income.................................................. $ 212 $ 180 Adjustments to reconcile net income to net cash provided (used) by operating activities-- Depreciation, depletion, and amortization.............. 220 183 Deferred income taxes.................................. 88 71 (Gain)/loss on sale of businesses and assets, net...... (6) 10 Changes in components of working capital-- (Increase) decrease in receivables................ (182) (126) (Increase) decrease in inventories................ (21) (20) (Increase) decrease in prepayments and other current assets................................... (8) (54) Increase (decrease) in payables................... (2) (88) Increase (decrease) in taxes accrued.............. 22 (20) Increase (decrease) in interest accrued........... -- 28 Increase (decrease) in other current liabilities...................................... (51) (90) Other.................................................. (94) (60) ----- ----- Net cash provided (used) by operating activities............ 178 14 ----- ----- INVESTING ACTIVITIES Net proceeds from sale of businesses and assets............. 17 7 Expenditures for plant, property, and equipment............. (232) (202) Acquisition of businesses................................... (58) (289) Investments and other....................................... (41) (52) ----- ----- Net cash provided (used) by investing activities............ (314) (536) ----- ----- FINANCING ACTIVITIES Issuance of common and treasury shares...................... 27 20 Purchase of common stock.................................... (82) (90) Issuance of long-term debt.................................. 3 593 Retirement of long-term debt................................ (15) (5) Net increase (decrease) in short-term debt excluding current maturities on long-term debt.............................. 294 126 Dividends on common stock................................... (102) (102) ----- ----- Net cash provided (used) by financing activities............ 125 542 ----- ----- Effect of foreign exchange rate changes on cash and temporary cash investments................................ -- (1) ----- ----- Increase (decrease) in cash and temporary cash investments............................................... (11) 19 Cash and temporary cash investments, January 1.............. 41 62 ----- ----- Cash and temporary cash investments, June 30 (Note)......... $ 30 $ 81 ===== ===== Cash paid during the period for interest.................... $ 127 $ 80 Cash paid during the period for income taxes (net of refunds).................................................. $ (5) $ 42
- ------------ 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 5 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30, -------- ------------ -------- 1998 1997 1997 -------- ------------ -------- (MILLIONS) ASSETS Current assets: Cash and temporary cash investments..................... $ 30 $ 41 $ 81 Receivables-- Customer notes and accounts, net................... 888 729 808 Income taxes....................................... 22 63 -- Other.............................................. 58 17 35 Inventories-- Finished goods..................................... 480 467 500 Work in process.................................... 120 100 95 Raw materials...................................... 238 265 227 Materials and supplies............................. 135 118 114 Deferred income taxes................................... 78 63 86 Prepayments and other................................... 283 252 201 ------ ------ ------ 2,332 2,115 2,147 ------ ------ ------ Other assets: Long-term notes receivable, net......................... 47 49 41 Goodwill and intangibles, net........................... 1,607 1,577 1,578 Deferred income taxes................................... 54 55 113 Pension assets.......................................... 796 747 681 Other................................................... 339 334 415 ------ ------ ------ 2,843 2,762 2,828 ------ ------ ------ Plant, property, and equipment, at cost..................... 5,501 5,284 5,029 Less--Reserves for depreciation, depletion, and amortization.......................................... 1,968 1,829 1,747 ------ ------ ------ 3,533 3,455 3,282 ------ ------ ------ $8,708 $8,332 $8,257 ====== ====== ====== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt (including current maturities on long-term debt)....................................... $ 591 $ 278 $ 437 Trade payables.......................................... 716 687 603 Taxes accrued........................................... 77 96 72 Accrued liabilities..................................... 315 344 282 Other................................................... 235 256 293 ------ ------ ------ 1,934 1,661 1,687 ------ ------ ------ Long-term debt.............................................. 2,626 2,633 2,663 ------ ------ ------ Deferred income taxes....................................... 714 614 519 ------ ------ ------ Postretirement benefits..................................... 238 228 211 ------ ------ ------ Deferred credits and other liabilities...................... 215 244 326 ------ ------ ------ Commitments and contingencies Minority interest........................................... 422 424 313 ------ ------ ------ Shareowners' equity: Common stock............................................ 2 2 2 Premium on common stock and other capital surplus....... 2,699 2,679 2,659 Cumulative translation adjustments...................... (142) (122) (91) Retained earnings....................................... 199 89 56 ------ ------ ------ 2,758 2,648 2,626 Less--Common stock held as treasury stock, at cost...... 199 120 88 ------ ------ ------ 2,559 2,528 2,538 ------ ------ ------ $8,708 $8,332 $8,257 ====== ====== ======
The accompanying notes to financial statements are an integral part of these balance sheets. 4 6 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------------------------------- 1998 1997 -------------------- -------------------- SHARES AMOUNT SHARES AMOUNT ----------- ------ ----------- ------ (MILLIONS EXCEPT SHARE AMOUNTS) COMMON STOCK Balance January 1.................................. 172,569,889 $ 2 171,567,658 $ 2 Issued pursuant to benefit plans.............. 539,220 -- 534,867 -- ----------- ------ ----------- ------ Balance June 30.................................... 173,109,109 2 172,102,525 2 =========== ------ =========== ------ PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS Balance January 1.................................. 2,679 2,642 Premium on common stock issued pursuant to benefit plans............................... 20 17 ------ ------ Balance June 30.................................... 2,699 2,659 ------ ------ CUMULATIVE TRANSLATION ADJUSTMENTS Balance January 1.................................. (122) 23 Translation of foreign currency statements.... (20) (127) Hedges of net investment in foreign subsidiaries (net of income taxes).......... -- 13 ------ ------ Balance June 30.................................... (142) (91) ------ ------ RETAINED EARNINGS (ACCUMULATED DEFICIT) Balance January 1.................................. 89 (21) Net income.................................... 212 180 Dividends on common stock..................... (102) (103) ------ ------ Balance June 30.................................... 199 56 ------ ------ LESS -- COMMON STOCK HELD AS TREASURY STOCK, AT COST Balance January 1.................................. 2,928,189 120 -- -- Shares acquired............................... 2,202,423 88 2,288,200 90 Shares issued pursuant to benefit and dividend reinvestment plans.......................... (219,711) (9) (65,020) (2) ----------- ------ ----------- ------ Balance June 30.................................... 4,910,901 199 2,223,180 88 =========== ------ =========== ------ Total......................................... $2,559 $2,538 ====== ======
The accompanying notes to financial statements are an integral part of these statements of changes in shareowners' equity. 5 7 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. Prior year's financial statements have been reclassified where appropriate to conform to 1998 presentations. (2) On July 21, 1998, Tenneco announced that its Board of Directors had authorized management to develop a broad range of strategic alternatives designed to better realize the long-term value of its businesses for shareowners to include among the options the separation of the automotive and packaging businesses into stand-alone entities and the separation of its containerboard packaging business from its specialty packaging business. Among the options for separation of the containerboard business are a sale, merger, spin-off, initial public offering or strategic alliance. Finally, Tenneco announced a cost reduction program expected to realize approximately $100 million in annual savings. (3) 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. (4) 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 position or results of operations. (5) In March 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which establishes new accounting and reporting standards for the costs of computer software developed or obtained for internal use. This statement will be applied prospectively and is effective for fiscal years beginning after December 15, 1998. The impact of this new standard is not expected to have a significant effect on Tenneco's financial position or results of operations. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs of start-up activities to be expensed as incurred. This statement is effective for fiscal years beginning after December 15, 1998. The statement requires capitalized costs related to start-up activities to be expensed as a cumulative effect of a change in accounting principle when the statement is adopted. Tenneco capitalizes certain costs related to start-up activities and is currently evaluating the new standard but has not yet determined the impact it will have on its financial position or results of operations. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes new accounting and reporting standards requiring that every derivative instrument 6 8 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This statement will be applied prospectively and is effective for all fiscal years beginning after June 15, 1999. Tenneco is currently evaluating the new standard but has not yet determined the impact it will have on its financial position or results of operations. (6) Earnings per share of common stock outstanding were computed as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------- -------------------------- 1998 1997 1998 1997 ------------ ------------ ----------- ----------- (MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) Basic Earnings Per Share-- Net income........................... $ 137 $ 104 $ 212 $ 180 ----------- ----------- ----------- ----------- Average shares of common stock outstanding........................ 169,174,444 169,779,760 169,341,555 170,590,721 =========== =========== =========== =========== Earnings per average share of common stock.............................. $ .81 $ .61 $ 1.25 $ 1.05 =========== =========== =========== =========== Diluted Earnings Per Share-- Net income........................... $ 137 $ 104 $ 212 $ 180 ----------- ----------- ----------- ----------- Average shares of common stock outstanding........................ 169,174,444 169,779,760 169,341,555 170,590,721 Effect of dilutive securities: Restricted stock................ 52,224 -- 39,512 -- Stock options................... 364,170 306,630 296,498 234,122 Performance shares.............. 278,865 83,686 259,111 83,686 ----------- ----------- ----------- ----------- Average shares of common stock outstanding including dilutive securities......................... 169,869,703 170,170,076 169,936,676 170,908,529 =========== =========== =========== =========== Earnings per average share of common stock.............................. $ .81 $ .61 $ 1.25 $ 1.05 =========== =========== =========== ===========
(7) Tenneco adopted FAS No. 130, "Reporting Comprehensive Income," in the first quarter of 1998. FAS No. 130 establishes new accounting standards for reporting and display of comprehensive income and its components. Comprehensive income is the total of net income and all other non-owner changes in equity in a given period. For the three months ended June 30, 1998 and 1997, Tenneco's comprehensive income is $140 million and $48 million, respectively. For the six months ended June 30, 1998 and 1997, Tenneco's comprehensive income is $192 million and $66 million, respectively. The above notes are an integral part of the foregoing financial statements. 7 9 ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RECENT DEVELOPMENTS On July 21, 1998 Tenneco Inc. announced that its Board of Directors had authorized management to develop a broad range of strategic alternatives designed to better realize the long-term value of its businesses for shareowners to include among the options the separation of the automotive and packaging businesses into stand-alone entities and the separation of its containerboard packaging business from its specialty packaging business. Among the options for separation of the containerboard business are a sale, merger, spin-off, initial public offering or strategic alliance. Finally, Tenneco Inc. announced a cost reduction program expected to realize approximately $100 million in annual savings. RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1998 AND 1997 Tenneco Inc. and its consolidated subsidiaries ("Tenneco") reported net income of $137 million, or 81 cents per share on a diluted basis, for the quarter ended June 30, 1998. (All references to earnings per share in this Management's Discussion and Analysis are on a diluted basis unless otherwise noted.) Net income for the second quarter of 1997 was $104 million, or 61 cents per share. The earnings improvement resulted from strong performance by Tenneco Automotive's North American and European original equipment ("OE") business and growth in the specialty and paperboard packaging businesses of Tenneco Packaging. The results for the second quarter of 1998 also included a pretax gain of $15 million, or 5 cents per share, on the sale of Tenneco Packaging's remaining 20 percent interest in a recycled paperboard joint venture with Caraustar Industries. The improved performance at the operating divisions for the second quarter of 1998 compared to the same period in 1997 was partially offset by a higher effective tax rate and an increased level of interest expense. Revenues
SECOND QUARTER ------------------------------ 1998 1997 % CHANGE ------ ------ -------- (MILLIONS) Tenneco Automotive................................. $ 864 $ 873 (1%) Tenneco Packaging.................................. 1,133 1,019 11% Intergroup sales and other......................... (1) -- -- ------ ------ $1,996 $1,892 5% ====== ======
Tenneco Automotive's slightly lower second quarter 1998 revenues resulted primarily from strong OE sales offset by lower aftermarket sales. Tenneco Automotive's original equipment business in North America and Europe continued its strong growth resulting from placement of ride control and exhaust parts on more new vehicle platforms and greater part content per vehicle. While overall OE volumes were up, a General Motors strike, which began in June, had a slight negative impact on second quarter 1998 OE revenues as Tenneco Automotive decreased its shipments to GM. Overall, higher OE volumes added $42 million to revenues in 1998's second quarter compared to the second quarter of 1997. Lower volumes in the aftermarket, where Tenneco Automotive continues to operate in a generally weak global environment, offset this positive trend. Second quarter volumes were also affected substantially by Tenneco Automotive's effort during the second quarter to work with its customers to reduce their inventory levels and improve their cash management. Overall, lower volumes in the aftermarket decreased revenues in the second quarter of 1998 by $45 million compared to the same period last year. Other Tenneco Automotive revenue increases during the second quarter of 1998 compared to 1997 were revenues of $16 million earned by companies acquired since the second quarter of 1997 and the net positive change due to pricing improvements and product mix of $5 million. The effects of the strong U.S. dollar on revenues earned in overseas markets reduced second quarter 1998 revenues by $27 million compared to the same period in 1997. 8 10 Tenneco Packaging's revenue increase occurred in both its paperboard and specialty packaging businesses. Specialty packaging's revenue increased to $731 million in the second quarter of 1998 from $669 million in the same period of 1997. Businesses acquired since the second quarter of 1997, primarily Richter Manufacturing, a leading producer of protective packaging for the western United States which was acquired in May 1998, contributed $11 million of this increase. In addition, the protective and flexible packaging businesses of NV Koninklijke KNP BT ("KNP BT") acquired in April 1997, performed strongly, contributing $36 million to the revenue increase. Volume increases in specialty packaging's consumer business accounted for the majority of the remaining revenue improvement. Tenneco Packaging Hefty OneZip(R) bags and consumer tableware both experienced an increase in unit volume sales. Revenues in the paperboard packaging business climbed to $402 million in the second quarter of 1998 from $350 million in the second quarter of 1997. This increase was due in large part to pricing improvements in linerboard, medium and corrugated boxes. Industry average prices as reported in Pulp and Paper Weekly were up $85 per ton for linerboard and $102 per ton for medium for the second quarter of 1998 compared to the same period of 1997. In addition to the pricing improvements, volume shipments were up slightly in the second quarter of 1998 compared to the same period in 1997. Operating Income
SECOND QUARTER ------------------------- 1998 1997 % CHANGE ---- ---- -------- (MILLIONS) Tenneco Automotive.................................... $130 $131 (1%) Tenneco Packaging..................................... 150 82 83% Other................................................. (4) (1) NM ---- ---- $276 $212 30% ==== ====
Tenneco Automotive's second quarter 1998 operating income was essentially equal with the second quarter of 1997's record performance. While the net revenue impact of higher OE volumes and lower aftermarket volumes was small, the shift in volumes from the higher margin aftermarket business to the lower margin OE business had a negative impact on operating income. This volume shift combined with the lower volumes shipped to GM during the strike reduced operating income in the second quarter of 1998 by $17 million compared to the same period in 1997. The strong U.S. dollar also reduced operating income by $4 million. Tenneco Automotive was largely able to offset those operating income declines, however, through the positive impacts of its cost reduction program and the net benefits from the pricing and product mix changes discussed under Revenues above. Both Tenneco Packaging's specialty and paperboard businesses reported higher operating income in the second quarter of 1998. Operating income in the specialty packaging business increased to $101 million from $90 million in the second quarter of 1997. The primary contributor to this improvement was the volume increases discussed previously that contributed $6 million to the second quarter 1998 higher operating income. The protective and flexible packaging businesses acquired from KNP BT in April 1997 contributed increased operating income of $5 million in the second quarter of 1998 compared to 1997. Acquisitions made since the second quarter of 1997, including Richter Manufacturing, contributed an additional $2 million in operating income. Partially offsetting these operating income increases were small pricing decreases in some of specialty packaging's products and higher promotional expenses. Lower variable cost of $12 million due to favorable raw material pricing was offset by increased fixed costs, including depreciation and warehousing costs. Excluding the $15 million pretax gain on the sale of paperboard's remaining 20 percent interest in a recycled paperboard joint venture with Caraustar Industries, the paperboard business operating income improved to $34 million in the second quarter of 1998 from a loss of $8 million in the second quarter of last year. This improvement is due largely to the improved pricing environment for linerboard, medium and corrugated boxes discussed previously. In addition, the volume increase, which occurred primarily in corrugated shipments, contributed to the operating income improvement. 9 11 Interest Expense (net of interest capitalized) Interest expense increased $8 million during the second quarter of 1998 over the same period last year. This increase is primarily attributable to debt issued to finance Tenneco's capital needs, including acquisitions and its share repurchase activity. Income Taxes Tenneco's effective tax rate for the second quarter of 1998 was 33 percent compared to 31 percent for the second quarter of 1997. The 1997 second quarter rate was lower than the statutory rate as a result of non-recurring foreign tax benefits recognized in that quarter. The second quarter 1998 effective tax rate was lower than the statutory rate as a result of certain non-recurring state tax benefits. Minority Interest Minority interest primarily represents dividends on the preferred stock of a subsidiary. The increase of $2 million in the second quarter of 1998 resulted from the dividends paid on additional subsidiary preferred stock which was issued in December 1997. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 Revenues
SIX MONTHS ENDED JUNE 30, ------------------------------ 1998 1997 % CHANGE ------ ------ -------- (MILLIONS) Tenneco Automotive................................. $1,664 $1,651 1% Tenneco Packaging.................................. 2,142 1,871 14% Intergroup sales and other......................... (1) (1) -- ------ ------ $3,805 $3,521 8% ====== ======
Tenneco Automotive's revenue increase for the first half of 1998 was due to volume gains, acquisition performance and favorable net pricing gains, partially offset by the negative impact of the strong U.S. dollar on revenues earned in overseas markets. Similar to the second quarter discussion above, volumes were up in Tenneco Automotive's North American and European OE business due to new platform launches and greater parts content per vehicle. The OE volume growth added $107 million to the six month 1998 revenue increase. Aftermarket volumes were down due to a soft aftermarket and the second quarter 1998 customer inventory adjustment effort, reducing revenues by $70 million for the first half of 1998 compared to the same period in 1997. On a year to date basis, acquisitions have added $30 million to Tenneco Automotive revenues. The remaining revenue change for the first half of 1998 compared to the 1997 period, a decrease of $54 million, was primarily due to the impact of the strong U.S. dollar on revenues earned in overseas markets. Tenneco Packaging's specialty and paperboard packaging businesses both contributed revenue increases in the six month period ended June 30, 1998. Specialty packaging's revenue increased to $1,361 million in 1998 from $1,173 million in 1997. The flexible and protective packaging businesses acquired from KNP BT in April 1997 contributed $157 million of this increase while other acquisitions contributed $11 million. Favorable pricing in the first quarter of 1998, particularly in consumer waste bags, aluminum and stretch film, combined with volume growth in the second quarter as discussed previously, provided the balance of the revenue increase for the first half of 1998 compared to the first half of 1997. Paperboard packaging's revenues climbed to $781 million for the first half of 1998 from $698 million for the same period in 1997. This gain was primarily due to pricing improvements as linerboard, medium and corrugated box pricing continued to recover from the depressed prices in early 1997. Additionally, the volume increase in corrugated box shipments previously discussed contributed to higher revenues. 10 12 Operating Income
SIX MONTHS ENDED JUNE 30, -------------------------- 1998 1997 % CHANGE ---- ---- -------- (MILLIONS) Tenneco Automotive.................................... $219 $211 4% Tenneco Packaging..................................... 258 162 59% Other................................................. (15) (2) NM ---- ---- $462 $371 25% ==== ====
Tenneco Automotive's year to date operating income improvement resulted from its cost reduction program and the net change in pricing and product mix for the first half of 1998, partially offset by the volume changes discussed above and the strong U.S. dollar. While the revenue increases from the higher OE volumes more than offset the lower aftermarket volumes, the shift from higher margin sales in the aftermarket to lower margin OE sales combined with the effects of the GM strike had a net negative impact on operating income of $21 million for the first six months of 1998. Additionally, the strong U.S. dollar reduced operating income $8 million for the first half of 1998 compared to the same 1997 period. However, Tenneco Automotive's cost reduction efforts and the positive operating income impact of the pricing and mix changes previously discussed more than offset the volume and currency impacts. Tenneco Packaging again had improvements in the operating income of both the specialty and the paperboard businesses. Operating income for the specialty packaging business increased from $139 million in the first six months of 1997 to $175 million in the same period of 1998. The protective and flexible packaging businesses acquired from KNP BT in April 1997 contributed $17 million of this increase while other acquisitions contributed $2 million. Cost reduction initiatives and lower raw material prices contributed $18 million in improved operating income for the first six months of 1998 over the same period in 1997. Improved pricing through the first six months of 1998 combined with volume increases were offset by increased fixed costs, including depreciation and warehousing costs. The paperboard packaging business reported operating income of $83 million for the first six months of 1998 compared to $23 million in the comparable 1997 period. The results for 1998 included the $15 million pretax gain on the sale of the remaining interest in a joint venture as discussed previously, while the 1997 period included a $38 million gain on a mill lease refinancing transaction. Absent these one-time items, operating income would have been $68 million in the 1998 period compared to a $15 million loss in the 1997 period. Similar to the second quarter results discussed previously, improved pricing and a volume increase drove the improvement. Interest Expense (net of interest capitalized) Interest expense for the first six months of 1998 increased $19 million over the same period in 1997 due to higher debt levels to finance Tenneco's capital needs, including acquisitions and its share repurchase program. Income Taxes Tenneco's effective tax rate for the first six months of 1998 was 34 percent compared to 30 percent in the comparable 1997 period. The 1997 rate was lower than the statutory rate as a result of non-recurring foreign tax benefits recognized in that period. The 1998 effective tax rate was lower than the statutory rate as a result of certain non-recurring tax benefits derived from state tax planning opportunities. Minority Interest Minority interest primarily represents dividends on the preferred stock of a subsidiary. The increase of $5 million in the first six months of 1998 resulted from the dividends paid on additional subsidiary preferred stock which was issued in December 1997. 11 13 LIQUIDITY AND CAPITAL RESOURCES Cash Flow
SIX MONTHS ENDED JUNE 30, ----------------- 1998 1997 ----- ----- (MILLIONS) Cash provided (used) by: Operating activities...................................... $ 178 $ 14 Investing activities...................................... (314) (536) Financing activities...................................... 125 542
Cash flow from operating activities improved by $164 million for the first six months of 1998 compared to the same period in 1997. Income before non-cash depreciation and deferred income taxes charges and gains or losses on the sale of businesses and assets increased by $70 million in the first six months of 1998 over the 1997 period. Cash used in the components of working capital also declined during the first half of 1998 compared to the same period in 1997, contributing $128 million to the operating cash flow improvement. This improvement was driven by a lower use of cash in the 1998 period for prepayments and other current assets, payment of accounts payable and accrued taxes, and payment of other current liabilities. Cash used in investing activities declined by $222 million for the first half of 1998 compared to 1997. The largest contributor to this decrease is the lower level of cash spent for acquisitions of businesses in 1998. Acquisitions of $58 million in 1998 have included Richter Manufacturing, which was purchased in May 1998, while acquisitions of $289 million for the first six months of 1997 primarily related to the flexible and protective packaging businesses of KNP BT acquired in April 1997. Capital expenditures during the first six months of 1998 were $80 million at Automotive, $144 million at Packaging and $8 million primarily related to the consolidated data center. This compares to capital expenditures for the first six months of 1997 of $86 million at Automotive and $117 million at Packaging. Cash provided by financing activities was down by $417 million for the first half of 1998 compared to the same period in 1997. This primarily reflects lower incremental borrowings during 1998 to fund acquisitions. Tenneco issued a net $714 million of combined long-term and short-term debt during the first half of 1997, which was $432 million greater than Tenneco issued during the first half of 1998. Other 1998 financing activities included the sale of common and treasury shares, primarily related to employee benefit plans, of $27 million and the repurchase of $82 million of common stock pursuant to its share repurchase program. Comparable 1997 activity was the sale of $20 million in common stock primarily related to employee benefit plans and the repurchase of $90 million in common stock under the share repurchase program. Tenneco paid dividends on its common stock of $102 million in each of the 1998 and 1997 six month periods. Capitalization
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- (MILLIONS) Short-term debt................................... $ 591 $ 278 Long-term debt.................................... 2,626 2,633 Minority interest................................. 422 424 Shareowners' equity............................... 2,559 2,528 ------ ------ $6,198 $5,863 ====== ======
The increase in debt for the first six months of 1998 represents the use of cash for acquisitions, share repurchases and other activity as described under Cash Flow above. Shareowners' equity increased during the first half of 1998 as net income and the sale of shares for employee benefit plan purposes exceeded dividends, share repurchases and the negative impact of cumulative translation adjustments resulting from the strong U.S. dollar. As a result of these debt and equity changes, Tenneco's debt to capitalization ratio at June 30, 1998 was 51.9 percent compared to 49.7 percent at December 31, 1997. 12 14 Tenneco believes it has adequate capital resources available to meet its future capital needs, including strategic acquisitions and announced share repurchases. CHANGES IN ACCOUNTING PRINCIPLES In March 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which establishes new accounting and reporting standards for the costs of computer software developed or obtained for internal use. This statement will be applied prospectively and is effective for fiscal years beginning after December 15, 1998. The impact of this new standard is not expected to have a significant effect on Tenneco's financial position or results of operations. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs of start-up activities to be expensed as incurred. This statement is effective for fiscal years beginning after December 15, 1998. The statement requires capitalized costs related to start-up activities to be expensed as a cumulative effect of a change in accounting principle when the statement is adopted. Tenneco capitalizes certain costs related to start-up activities and is currently evaluating the new standard but has not yet determined the impact on its financial position or results of operations. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes new accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This statement will be applied prospectively and is effective for all fiscal years beginning after June 15, 1999. Tenneco is currently evaluating the new standard but has not yet determined the impact it will have on its financial position or results of operations. YEAR 2000 Many computer software systems, as well as certain hardware and equipment utilizing date-sensitive data, were structured to use a two-digit date field meaning that they will not be able to properly recognize dates in the Year 2000. Tenneco's significant technology transformation projects are addressing the Year 2000 issue in those areas where replacement systems are being installed for other business reasons. Where existing systems and equipment are expected to remain in place beyond 1999, Tenneco has a detailed process in place to identify and assess Year 2000 issues and to remediate, replace or establish alternative procedures addressing non-Year 2000 compliant systems, hardware and equipment. Tenneco continues to inventory its systems and equipment including computer systems and business applications as well as date-sensitive technology embedded in its equipment and facilities; plan for and undertake remediation, replacement or alternative procedures for non-compliant Year 2000 systems and equipment; and test remediated, replaced or alternative procedures for systems and equipment. It expects to substantially complete the inventory by September 30, 1998. Tenneco is in the process of confirming that none of its products are date-sensitive. Remediation, replacement or alternative procedures for systems and equipment are being undertaken on a business priority basis. This is ongoing and has been completed at some plants. The process will continue and, depending upon the business unit, is targeted to be completed, in most cases, sometime during the fourth quarter of 1998 and the first through the third quarters of 1999 with testing to occur in the same time frame. Also, Tenneco is contacting its major customers, suppliers, financial institutions and others with whom it conducts business to determine whether they will be able to resolve in a timely manner Year 2000 problems affecting Tenneco. As part of its planning and readiness activities in the remainder of 1998 and 1999, Tenneco intends to address and develop Year 2000 contingency plans for critical business processes. 13 15 Based upon current estimates, Tenneco believes it will incur costs which may range from approximately $50 to $60 million during 1998 and 1999 to address Year 2000 issues and implement the necessary changes to its existing systems and equipment. As of June 30, 1998, approximately $5 million of the costs have already been incurred. These costs are being expensed as they are incurred, except that in certain instances Tenneco may determine that replacing existing computer systems or equipment may be more effective and efficient, particularly where additional functionality is available. These replacements would be capitalized and would reduce the estimated 1998 and 1999 expense associated with Year 2000 issues. In the event Tenneco is unable to complete the remediation, replacement or alternative procedures for critical systems and equipment in a timely manner or if those with whom Tenneco conducts business are unsuccessful in implementing timely solutions, Year 2000 issues could have a material adverse effect on Tenneco's results of operations. At this time, the potential effect in the event Tenneco and/or third parties are unable to timely resolve Year 2000 problems is not determinable, however, Tenneco believes it will be able to resolve its own Year 2000 issues. 14 16 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS The Annual Meeting of Shareowners of the Company was held on May 12, 1998. The following matters were voted upon at the meeting and the votes cast for, against, or withheld, as well as the number of abstentions and broker non-votes, as to each such matter is also included: (a) Elections of directors for a term to expire at the year 2001 Annual Meeting of Shareowners:
FOR WITHHELD ----------- --------- Larry D. Brady........................................ 140,698,250 9,933,054 M. Kathryn Eickhoff................................... 140,725,355 9,905,949 Dana G. Mead.......................................... 140,684,718 9,946,586 Roger G. Porter....................................... 140,688,429 9,942,875
(b) To approve the appointment of Arthur Andersen LLP as independent public accountants for Tenneco Inc. for the year 1998:
FOR AGAINST ABSTAINED BROKER NON-VOTE - ----------- ------- --------- --------------- 149,589,313 612,448 429,543 -0-
(c) To approve of a stockholder proposal concerning voting of proxies:
FOR AGAINST ABSTAINED BROKER NON-VOTE - ---------- ----------- --------- --------------- 14,817,119 120,298,503 4,140,369 11,375,313
ITEM 5. OTHER INFORMATION New SEC Rule 14a-4(c) -- On May 21, 1998 the Securities and Exchange Commission ("SEC") adopted amendments to Rule 14a-4(c) under the Securities Exchange Act of 1934. Generally, under new Rule 14a-4(c), a proxy may confer discretionary authority to vote on any matter in the event that, among other situations, the Company did not have notice of the matter at least 45 days before the month and day on which the Company's proxy materials were mailed for the prior year's annual meeting. For the 1999 Annual Meeting of Shareowners, this date would be February 15, 1999 (45 days before April 1 -- the date of mailing of the 1998 proxy materials). This is in addition to the date for submission of business at the Annual Meeting of Shareowners under the Company's By-laws which require, among other things, that notice of any matter be received by the Company at its principal executive offices not less than 50 nor more than 75 days prior to the date of the meeting, except that if less than 65 days' notice or prior public disclosure of the meeting date is given or made to shareowners, notice of the matter must be received not later than the close of business on the 15th day following the date of notice or public disclosure of the meeting date, whichever occurs first. The requirement under the new SEC Rule is also in addition to the deadline under SEC Rule 14a-8(e) for submission of matters to be considered for inclusion in the Company's proxy statement (December 2, 1998 for the 1999 Annual Meeting of Shareowners). 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 June 30, 1998. 15 17 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: August 14, 1998 16 18 EXHIBITS The following exhibits are filed with Tenneco Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, or incorporated therein 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(a) -- Restated Certificate of Incorporation of Tenneco Inc. dated December 11, 1996 (incorporated herein by reference from Exhibit 3.1(a) of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 3.1(b) -- Certificate of Designation, Preferences and Rights of Series A Participating Junior Preferred Stock, dated December 11, 1996 (incorporated herein by reference from Exhibit 3.1(b) of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 3.1(c) -- Certificate of Amendment, dated December 11, 1996 (incorporated herein by reference from Exhibit 3.1(c) of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 3.1(d) -- Certificate of Ownership and Merger, dated July 8, 1997 (incorporated herein by reference from Exhibit 3.1(d) of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 3.2 -- Amended and Restated By-laws of Tenneco Inc. (incorporated herein by reference from Exhibit 3.2 of Tenneco Inc.'s Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
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EXHIBIT NUMBER DESCRIPTION - --------- ----------- 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 4.3(i) -- 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 Current Report on Form 8-K dated April 23, 1997, File No. 1-12387). 4.3(j) -- 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 Current Report on Form 8-K dated April 23, 1997, File No. 1-12387). 4.3(k) -- Tenth Supplemental Indenture, dated as of July 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 Current Report on Form 8-K dated June 11, 1997, File No. 1-12387). 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387).
18 20
EXHIBIT NUMBER DESCRIPTION - --------- ----------- 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the 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 Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.11 -- 1997 Tenneco Inc. Board of Directors Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.11 of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 10.12 -- Executive Incentive Compensation Plan (incorporated herein by reference from Exhibit 10.12 of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 10.13 -- Tenneco Inc. Deferred Compensation Plan (incorporated herein by reference from Exhibit 10.13 of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 10.14 -- Amended and Restated Tenneco Inc. Supplemental Executive Retirement Plan (incorporated herein by reference from Exhibit 10.12 of Tenneco's Form 10, File No. 1-12387). 10.15 -- Amended and Restated Tenneco Inc. Benefit Equalization Plan (incorporated herein by reference from Exhibit 10.13 of Tenneco's Form 10, File No. 1-12387). 10.16 -- 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's Form 10, File No. 1-12387). 10.17 -- Amended and Restated Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives (incorporated herein by reference from Exhibit 10.16 of Tenneco's Form 10, File No. 1-12387). 10.18 -- Amended and Restated Tenneco Benefits Protection Trust (incorporated herein by reference from Exhibit 10.18 of Tenneco's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998). 10.19 -- Employment Agreement, dated March 12, 1992 between Dana G. Mead and Tenneco Inc. (incorporated herein by reference from Exhibit 10.19 of Tenneco's Form 10, File No. 1-12387). 10.20 -- Employment Agreement, dated December 3, 1993 between Paul T. Stecko and Tenneco Packaging Inc. (incorporated herein by reference from Exhibit 10.20 of Tenneco's Form 10, File No. 1-12387).
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EXHIBIT NUMBER DESCRIPTION - --------- ----------- 10.21 -- Agreement, dated September 9, 1992 between Theodore R. Tetzlaff and Tenneco Inc. (incorporated herein by reference from Exhibit 10.21 of Tenneco's Form 10, File No. 1-12387). *10.22 -- Release Agreement dated July 6, 1998 between Stacy S. Dick, Pamela Dick and Tenneco Management Company 10.23 -- 1996 Tenneco Inc. Stock Ownership Plan, as amended (incorporated herein by reference from Exhibit 10.23 of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 10.24 -- 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 year ended December 31, 1996, File No. 1-12387). 10.25 -- 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 Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12387). 10.26 -- Timberland Lease, dated January 31, 1991, by and between Four States Timber Venture and Packaging Corporation of America, as amended (incorporated herein by reference from Exhibit 10.26 of Tenneco Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997). 10.27 -- Professional Services Agreement, dated August 22, 1996, by and between Tenneco Business Services Inc. and Newport News Shipbuilding and Dry Dock Company (incorporated herein by reference from Exhibit 10.28 of Tenneco Inc.'s Form 10, File No. 1-12387). 10.28 -- Termination Agreement, dated April 23, 1998, by and between Tenneco Business Services Inc. and Newport News Shipbuilding and Dry Dock Company, a wholly-owned subsidiary of Newport News Shipbuilding Inc., relating to Professional Services Agreement, dated August 22, 1996 (incorporated herein by reference from Exhibit 10.28 of Tenneco's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998). 11 -- None. *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 this Report; all others are incorporated by reference. 20 22 Tenneco Logo EX-10.22 2 EXHIBIT-10.22 1 EXHIBIT 10.22 [ LETTERHEAD OF TENNECO ] July 6, 1998 Mr. Stacy S. Dick 187 West Old Mill Road Greenwich, Connecticut 06831 Re: Release Agreement Dear Stacy: This Release Agreement ("Agreement") entered into as of the date at the end hereof is by and between Stacy S. Dick ("Employee"),Pamela Dick ("Employee's Spouse"), and the employer, Tenneco Management Company, ("Employer") (collectively, "the Parties"). The Parties named above agree as follows: 1. Employee's employment with Employer will terminate on July 31, 1998 (the "Termination Date"). 2. Employer shall provide the following to Employee, subject to applicable tax withholdings and any amounts due the Employer, conditioned upon final execution of this Agreement and after the additional seven-day period referred to in paragraph 26: - Payment - Upon receipt of signed agreement, Employee will receive a lump sum payment of $848,000, as soon as administratively feasible after July 31, 1998. This payment shall be in lieu of any other payments, wages, cost of living adjustments, and benefits. If either the Employee or Employee's Spouse fail to execute this Agreement by July 28, 1998, or revoke or cancel this Agreement during the seven-day period referred to in Paragraph 26, Employer shall not be obligated to make lump sum payment to 2 Stacy S. Dick Page 2 Employee. If Employee revokes or cancels the Agreement after Employer has made the lump sum payment, Employee shall be obligated to return to Employer all benefits and payments provided to him under this Agreement, including but not limited to the lump sum payment. - Business Expenses - Reimbursement for any business expenses incurred by Employee on behalf of the Employer that have been submitted for reimbursement in accordance with the Employer's normal expense account procedures. - Retirement Plan Vesting - Since Employee is a participant in the Tenneco Inc. Retirement Plan and has completed five years of service on the Termination Date, he is 100% vested in his accrued benefit under the Tenneco Inc. Retirement Plan. For information regarding Retirement Benefits, the Employee should call the Benefits Center at 1-800-444-5578. Employee is also a participant in the Tenneco Inc. Supplemental Executive Retirement Plan (the "SERP"), and pursuant to a special agreement covering him, which has been merged into the SERP, he has been credited with five additional years of participation. Employee is 100% vested in his accrued benefit under the SERP. Employee is entitled to receive the benefit of recently adopted amendments to the SERP which count certain bonuses for purposes of computing SERP benefits, which feature was also included in his special agreement, and which permit lump sum distributions. - Executive Incentive Compensation Plan - Should the Company achieve the performance goals for Incentive Award payout, the Employee will receive a pro-rata adjusted target 1998 award, payable in 1999. No future awards will be made under this Plan. 3 Stacy S. Dick Page 3 - 1996 Tenneco Inc. Stock Ownership Plan - Employee has 210,822 options to purchase shares of Tenneco common stock. All such options shall be deemed exercisable as of August 1, 1998, and shall remain exercisable until July 31, 2003, provided that, except to the extent specifically modified herein, all terms and conditions of the 1996 Tenneco Inc. Stock Ownership Plan {"SOP"), as it may be amended from time to time, and the Award Agreements covering such options, as they may be amended from time to time, shall remain applicable to such options, including without limitation, the provisions governing the adjustment and amendment of outstanding options, and, provided further, that, notwithstanding the terms of the Award Agreement, Employee shall not be awarded any Reload Stock Options, as that term is defined in the SOP, upon the exercise of any such options. No future awards of options will be made under this Plan. - Performance Shares - The Employee has been granted 28,000 Performance Shares under the SOP. Employee will not forfeit such Performance Shares on account of his separation from service with Employer, and such Performance Shares shall remain outstanding, and, except as specifically provided herein, shall continue to be subject to the rules of the SOP and the Performance Share Award Agreement covering them. Performance Shares will be distributed to Employee as soon as administratively feasible based on the number of shares earned at the end of each applicable four year performance period. No future awards of Performance Shares will be made under this Plan. - Tenneco Inc. Restricted Shares - Employee's 5,530 restricted shares will vest on the Termination Date. A Stock Certificate for the appropriate number of shares will be delivered to the employee as soon as administrative feasible. - Deferred Compensation - Employee may elect at any time prior to the Termination Date, the payment of the balance in his Deferred Compensation Account under the Tenneco Inc. Deferred Compensation Plan (the "DCP") in either a 4 Stacy S. Dick Page 4 single lump sum distribution payable as soon as administratively feasible after the Termination Date or in five (5) annual installments commencing in 1998. If he elects installments, the rules of the DCP shall continue to apply to the remaining balance until paid. - Thrift Plan - Employee is a participant in the Tenneco Inc. Thrift Plan and contributions to the Tenneco Inc. Thrift Plan cease upon the termination of Employee's employment. Employee may then elect to receive a final settlement of his account balance, usually within four to six weeks following the receipt of his properly completed election forms. Employee is 100% vested in his account. Apart from an excise tax applicable to certain large distributions, taxable funds will be subject to ordinary income taxes and a 10% excise tax if Employee is under age 59 1/2 at the time of distribution unless the taxable funds are rolled over to an IRA within sixty (60) days from the date of distribution. Due to the tax changes passed effective January 1, 1993, there have been changes regarding IRA-rollover and federal income tax withholding provisions. Employee should contact the Benefits Center for information about his Thrift Plan account, including any outstanding Thrift Plan loans, and the tax consequences of his distribution. - Medical Coverage Continuation - If enrolled in the Tenneco medical plan at the Termination Date, continued coverage under the Tenneco medical plan as it may be amended from time to time will be offered to Employee and Employee's eligible dependents on an optional basis with your sharing the cost (after-tax basis) for up to twelve (12) months from the Termination Date (the "continuation period"). Employee will remain responsible for any employee contribution required by his medical coverage choice. In the event Employee enrolls in a group medical plan of a new employer before the end of his continuation period, his new coverage will be primary and Tenneco medical coverage will be secondary as provided in the medical plan. 5 Stacy S. Dick Page 5 Unless Employee is covered by another group medical plan at the expiration of the continuation period, he may be able to continue, completely at his own expense, Tenneco medical coverage for up to an additional eighteen (18) months under COBRA. Following termination of Tenneco medical coverage, an individual medical benefits conversion policy may be available. - Dental Coverage Continuation - If enrolled in the Tenneco dental plan at the Termination Date, coverage under the Tenneco dental plan as it may be amended from time to time, (or the DMO option you have elected) will be offered to Employee and Employee's eligible dependents on an optional basis with your sharing the cost (after-tax basis) for up to twelve (12) months from the Termination Date. Employee remain responsible for any employee contribution required by your dental coverage choice. In the event Employee enroll in a group dental plan of a new employer before the end of his continuation period, Employee's new coverage will be primary and Tenneco dental coverage will be secondary as provided in the dental plan. Unless Employee is covered by another group dental plan at the expiration of the continuation period, he may be able to continue, completely at his own expense, Tenneco dental coverage for up to an additional eighteen (18) months under COBRA. - Life Insurance Continuation - Under the Tenneco basic group life insurance plan as it may be amended from time to time, Employee's basic life and accidental death and dismemberment (AD&D) coverage will continue at Company expense for twelve (12) months from the Termination Date. An individual life insurance conversion policy may be available following termination of Tenneco life insurance coverage. Employee may not continue your supplemental or dependent coverages past the Termination Date. 6 Stacy S. Dick Page 6 - Disability and Accident Insurance - Employee's participation in the Tenneco Inc. Long Term Disability and Travel Accident Insurance Plans ceases upon his termination of employment. - Other Benefit Plans - Except as set out in this Agreement, the provisions of the policies or plan documents will control. - Relocation Loan Modification - The Employer, and the Employee and Employee's Spouse are parties to a May 1, 1996 Balloon Note (Fixed Rate)(the "Note") in the principal amount of $400,000, which Note has a current outstanding principal balance of $400,000. The Employer hereby forgives $200,000 of the principal of the Note, leaving a principal balance of the Note of $200,000. Pursuant to Paragraph 11 of the Note, the Note Holder, at its sole option, may send notice requiring payment within 90 days after the Termination Date (as defined therein) in the event Employee's employment with Tenneco Management Company or its affiliates is terminated for any reason. Employee and Employee's Spouse hereby agree that upon the execution of this Agreement such notice shall be deemed given hereby by the Employer with respect to the $200,000 balance of the principal plus accrued interest on the Note, after the forgiveness above. Notwithstanding the foregoing, the parties hereby further agree that the "maturity date" of the Note shall be amended to be the earlier of August 1, 2000, or such time as the Employee and Employee's Spouse divest any of their interests in the property generally described as 187 West Old Mill Road, Greenwich, Connecticut, by sale, gift, transfer or otherwise, to any other person or entity. Notwithstanding anything in the note to the contrary, Tenneco hereby agrees under Section 3 (c) of the Note that no interest shall be charged under the Note, except upon a default described in Section 6(B) of the Note after which interest shall be charged at the default rate set forth in Section 2 of the Note and be payable on demand. The parties hereby agree to execute within five (5) days of the expiration of the seven day revocation period set forth in paragraph 26 7 Stacy S. Dick Page 7 of this Agreement, a Loan Modification Agreement and Allonge to Note containing the provisions set forth in this paragraph, which Loan Modification Agreement and Allonge to Note shall be recorded with the Recorders Office in Fairfield County, Connecticut. Copies of such Loan Modification Agreement and the Allonge to Note are attached hereto as Attachment 1. All other rights and remedies of Tenneco and its affiliates under the Note or under the Mortgage serving this Note shall be preserved and are unaffected by this Agreement. Notwithstanding the foregoing, Employer agrees that if more than 90 percent of the Balloon Notes issued by the Employer to various employees in connection with the relocation of the Tenneco's Headquarters operations from Houston, Texas to Greenwich, Connecticut that remain outstanding as of August 1, 1998, are forgiven in whole and canceled by the Employer on or before August 1, 1999, the Employer shall forgive in whole and cancel the Note (as defined and modified hereunder) by the Loan Modification Agreement and Allonge to Note described above and attached hereto as Attachment 1. 3. Employee acknowledges that his employment shall terminate with Employer, its direct or indirect subsidiaries, affiliates, parents, and related companies or entities, regardless of its or their form of business organization, including without limitation the plans described in paragraph 6 (all collectively the "Employer Entities"), on or before July 31, 1998. 4. In exchange for the compensation and benefits described in paragraph 2, Employee and Employee's Spouse release and discharge any and all Employer Entities as defined in paragraph 3, and any and all of their past and present subsidiaries, affiliates, parents, related companies, persons and entities, directors, employees, officers, agents, partners, insurers, attorneys, trustees, administrators and fiduciaries (all collectively the "Released Parties") from any and all claims, demands, and causes of action, whether arising in contract, tort or any other theory of action, whether arising in law or equity, whether known or unknown, accrued or unaccrued, asserted or unasserted, from the beginning of time up to the effective date of this Agreement, except for those obligations 8 Stacy S. Dick Page 8 created by or arising out of this Agreement. Nothing contained herein shall release the Employer Entities from any indemnity obligations it may have under Delaware law to Employee with respect to his service as an officer or director of any Employer Entity. Employee and Employee's Spouse expressly waive the benefit of any statute or rule of law which, if applied to this Agreement, would otherwise exclude from its binding effect any claim against any Released Party not now known by Employee or Employee's Spouse to exist. Except as necessary for Employee and Employee's Spouse to enforce this Agreement, this Agreement is intended to be a general release and a covenant not to sue that extinguishes all claims and precludes any attempt by Employee or Employee's Spouse to initiate any litigation against any Employer Entity. Without limiting the generality of this paragraph, if Employee or Employee's Spouse commence or continue any claim in violation of this Agreement, the Released Party shall be entitled to assert this Agreement as a bar to such action or proceeding and shall be entitled to recover its attorneys' fees and costs of litigation from the party commencing or continuing the claim, including reasonable compensation for the services of the internal personnel of the Released Party. 5. Without in any way limiting the generality of the foregoing, this Agreement is an individually tailored separation agreement and constitutes a full release and disclaimer of any and all claims arising out or accruing up to the effective date of this Agreement, including but not limited to any claims arising out of or in any way connected with or relating to the termination of Employee's employment and any claims arising out of or in any way connected with or related to Employee's employment with Employer or any other Employer Entity up to the effective date of this Agreement. The scope of this waiver includes but is not limited to claims arising under 29 U.S.C. Section 1981, the Age Discrimination in Employment Act of 1967 as amended (29 U.S.C. Section 621), Title VII of the Civil Rights Act of 1964 as amended, (42 U.S.C. Section 2000e), the Americans With Disabilities Act (42 U.S.C. Section 12101), the Worker Adjustment Retraining and Notification Act (29 U.S.C. Section 2101), the Family and Medical Leave Act of 1993 (29 U.S.C. Section 2601), the Connecticut Human Rights and Opportunities Act, the Connecticut Family and Medical Leave laws (Conn. Gen. Stat. 31-51cc to 31-51gg and Ct. Legis, 96-140, effective January 1, 1997), the Texas Human Rights Act, (Tex Rev. Civ. Stat. Art. 5221k), the National Labor 9 Stacy S. Dick Page 9 Relations Act, any claims for breach of contract, wrongful or retaliatory discharge, tortious action, inaction or interference of any sort, and any claim under any other state, local or federal statute, regulation or ordinance, or common law cause of action. 6. It is expressly agreed that the payments described in paragraph 2 of this Agreement are in full and complete satisfaction of any and all liabilities or obligations which any Employer Entity, including any plan, fund or program sponsored, maintained or contributed to by any Employer Entity, has or may have to Employee and Employee's Spouse under or with respect to any employee benefit plan described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any payment or other item excluded from the definition of "employee welfare benefit plan", "employee pension benefit plan" or "employee benefit plan" under the rules of 29 C.F.R. Section 2510.3-1, 2510.3-2 or 2510.3-3, as the case may be, and any employee benefit plan described in Section 4 of ERISA. It is further agreed that the payments described in this Agreement exceed in value anything to which Employee and Employee's Spouse may be already entitled. 7. Employee and Employee's Spouse represent that neither of them has assigned or transferred, or purported to assign or transfer, to any person or entity, any claim or any portion thereof or interest therein against a Released Party. 8. Employee represents that he has turned over to Employer all originals and copies of expense reports, notes, memoranda, records, documents, Employer manuals, credit cards, pass keys, computers, computer diskettes, office equipment, sales records and data, and all other information or property, no matter how produced, reproduced or maintained, which Employee has in his possession and pertain to the business of any Employer Entity, including but not limited to lists of customers, prices, marketing plans, strategies, documents relating to the legal rights and obligations of any Employer Entity, the work product of any attorney employed or retained by any Employer Entity, and other confidential materials or information obtained by Employee in the course of his employment. 10 Stacy S. Dick Page 10 9. Employee acknowledges that the business and services of all Employer Entities are highly specialized and that the following information is Confidential Information: proprietary technical and business information relating to any Employer Entity's plans, analysis or strategies concerning international or domestic acquisitions, possible acquisitions or new ventures; development plans or introduction plans for products or services; unannounced products or services; operation costs; pricing of products or services; research and development; personnel information; manufacturing processes; installation, service and distribution procedures and processes; customer lists; any know-how relating to the design, manufacture, and marketing of any Employer Entity's services and products, including components and parts thereof; non-public information acquired by Employee concerning the requirements and specifications of any Employer Entity's agents, vendors, contractors, customers and potential customers; non-public financial information, business and marketing plans, pricing and price lists; non-public matters relating to employee benefit plans; quotations or proposals given to agents or customers or received from suppliers; documents relating to any Employer Entity's legal rights and obligations; the work product of any attorney employed by or retained by any Employer Entity; and any other information which is sufficiently secret to derive economic value from not being generally known. No information shall be Confidential Information that is, or becomes, generally available to the public other than as a result of Employee's disclosure or that becomes available to Employee on a nonconfidential basis from a source other than the Employee. 10. Employee shall maintain in the strictest confidence and will not, directly or indirectly, use, intentionally or inadvertently, publish or otherwise disclose to any person or entity whatever, any trade secrets, or any confidential, proprietary or other non-public information of or belonging to any Employer Entity or any agent, joint venturer, contractor, customer, vendor or supplier of any Employer Entity (collectively, the "Confidential Information"), regardless of its form without the prior written explicit consent of Employer. Employee shall take reasonable precautions to protect the inadvertent disclosure of Confidential Information. Employee's obligations under this Agreement with respect to Confidential Information shall extend for the period that such information is not generally known outside of the relevant Employer Entity for reasons other than disclosure or disclosures made by or on 11 Stacy S. Dick Page 11 behalf of Employee. All duties and obligations set forth in this Agreement shall be in addition to those which exist under statute and at common law and shall not negate but shall be in addition to or coextensive with those obligations arising under any agreements or documents executed by Employee during his employment with Employer. Should Employee be served with legal process seeking to compel disclosure of any such information, Employee shall notify the General Counsel of Employer immediately. 11. Paragraphs 9 and 10 hereof shall be deemed to consist of a series of separate covenants. Should a determination be made by a court of competent jurisdiction that the character, duration, or geographical scope of those provisions are unreasonable in light of the circumstances as they then exist, then it is the intention and the agreement of Employer and Employee that these shall be construed by the court in such a manner as to impose only those restrictions on Employee's conduct which are reasonable in light of the circumstances as they then exist and as are necessary to assure the relevant Employer Entity of their intended benefit. If, in any judicial proceeding, a court shall refuse to enforce all of the separate covenants because, taken together, they are more extensive than necessary to assure the relevant Employer Entity of the intended benefit, then it is expressly understood and agreed that those of such covenants which, if modified or eliminated, would permit the remaining separate covenants to be enforced in such proceeding, shall, for the purpose of such proceeding, be deemed modified or eliminated in order to enforce the remaining provisions. 12. Nothing in this Agreement shall be construed as an admission of any wrongdoing by any person or entity. 13. The Parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the terms and intent of this Agreement that are not inconsistent with its terms. 14. Employee shall provide thorough and accurate information and testimony voluntarily to or on behalf of any Employer Entity, regarding any investigation or court case initiated by or against any Employer Entity or by any government agency, but he agrees not to disclose or to discuss with anyone who is not directing or assisting in any Employer 12 Stacy S. Dick Page 12 Entity investigation or case, other than his attorney, the fact of or the subject matter of any investigation, except as required by law. Employee will cooperate with the Employer Entity and promptly provide such information. If the Employer Entity requests information, it will attempt to work with Employee to arrange times that reasonably accommodate him, and will reimburse Employee for commuting, parking or other similar expenses and, to the extent permitted by law, will reasonably compensate Employee for any significant imposition on his time by the request. 15. Employee acknowledges that any employment or contractual relationship between Employee and any and all Employer Entities, including but not limited to the Employer, will terminate by virtue of this Agreement on or before July 31, 1998. In consideration of this Agreement, Employee waives any and all employment rights that Employee now has with any Employer Entity, except as otherwise expressly provided in this Agreement. Employee agrees not to seek reinstatement, reemployment, or future employment as a new employee, and no Employer Entity has an obligation, contractual or otherwise, to employ or reemploy, hire or rehire, or recall or reinstate Employee in the future. 16. Employee and Employee's Spouse agree to keep confidential the terms, conditions, and amounts set forth in this Agreement, except to their attorneys, accountants, and tax advisors, and not to disclose any information relating to this Agreement to any employee or former employee of any Employer Entity except as required by law or a court of competent jurisdiction. The Employer and all Employer Entities hereby agree to keep confidential the terms, conditions, and amounts set forth in this Agreement, except as required by law or a court of competent jurisdiction. 17. It is further agreed that if any provision of this Agreement contravenes the law of any state or jurisdiction where this Agreement is to be performed or enforced, such provision shall be deemed not to be a part of this Agreement, and the other provisions of this Agreement, shall remain in full force and effect. 13 Stacy S. Dick Page 13 18. The failure of the Employer to exercise any rights under this Agreement upon any breach or threatened breach by Employee or Employee's Spouse shall not constitute a waiver of any rights arising by reason of other or similar breaches. 19. Employee and Employee's Spouse shall have no right of assignment or transfer of any rights herein or any sums that may accrue to them hereunder, nor shall any creditor or other claimant have any right to assert any interest in or right to receive such sums either by voluntary or involuntary act on their part, by any writ or garnishment or attachment or otherwise. 20. This Agreement shall be deemed to have been executed and delivered within the State of Connecticut and the rights and obligations of the Parties shall be construed and enforced in accordance with, and governed by, the laws of the State of Connecticut without regard to that state's rules regarding conflict of laws. The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any of the Parties. 21. Employer and all Employer entities waive any claims now known to them that might be asserted by them against Employee or Employee's Spouse arising out of the employment relationship. 22. Employee and Employee's Spouse acknowledge and warrant that they are unaware of any claim which may be asserted by themselves or any other person in connection with Employee's employment with the Employer or the termination thereof. This Agreement shall be binding upon and inure to the benefit of the respective successors, heirs, assigns, administrators, executors and legal representatives of the Parties and other entities described in this Agreement. 23. Employee and Employee's Spouse warrant that no promise or inducement to enter into this Agreement has been offered or made except as set forth in this Agreement, that each is entering into this Agreement without any threat or coercion and without reliance on any statement or representation made on behalf of any Employer Entity or by any person employed by or representing any Employer Entity, except for the written provisions and promises contained in this Agreement. 14 Stacy S. Dick Page 14 24. This Agreement constitutes the entire agreement and understanding between the Parties with regard to all matters, including but not limited to Employee's employment, the cessation of his employment from Employer, payments owed to him and his spouse as a result thereof, and the other subject matters addressed in this Agreement. This Agreement supersedes and replaces all prior commitments, negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters contained in this Agreement. This Agreement is an integrated document and the consideration stated herein is the sole consideration for this Agreement. 25. This Agreement is being delivered to Employee and Employee's Spouse on July 6,1998. Employee and Employee's Spouse shall have until July 28, 1998, to decide whether to sign the Agreement and be bound by its terms. 26. In addition, the Parties agree that even after signing the Agreement, Employee and Employee's Spouse shall have the right to revoke or cancel it only within seven days after signing it. This cancellation or revocation can be accomplished by delivery of a written notification if Employee or Employee's Spouse wishes to revoke the Agreement to the Vice President of Human Resources. In the event that this Agreement is canceled or revoked by Employee or Employee's Spouse, Employer shall have no obligation to meet the commitments described in this Agreement. 27. Employee and Employee's Spouse acknowledge that they each have been advised and encouraged by Employer to consult their own attorney prior to signing this Agreement, and that the Employee and Employee's Spouse execute this Agreement voluntarily. 15 Stacy S. Dick Page 15 28. Employee and Employee's Spouse acknowledge that they each have read this Agreement and that the Employee and Employee's Spouse understand that the Agreement will have the effect of waiving any action or recovery they might pursue, including breach of contract, personal injury, discrimination on the basis of race, age, sex, national origin, citizenship, religion, veteran status, handicap, or disability and any other claims arising prior to the date of the Agreement, Sincerely, /s/ Stephen J. Smith Stephen J. Smith Vice President, Human Resources APPROVED BY: /s/ Dana G. Mead -------------------------------- Dana G. Mead Chief Executive Officer Date: AGREED AND ACCEPTED: /s/ Stacy S. Dick Date: 7/21/98 - -------------------------- ---------------- Stacy S. Dick /s/ Pamela Dick Date: 7/21/98 - -------------------------- ---------------- Pamela Dick Attachment EX-12 3 COMPUTATION OF RATIO OF EARNINGS 1 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)
SIX MONTHS ENDED JUNE 30, -------------- 1998 1997 ----- ----- Net income.................................................. $ 212 $ 180 Add: Interest............................................... 117 98 Portion of rentals representative of interest factor... 29 26 Preferred stock dividend requirements of majority-owned subsidiaries.......................................... 14 10 Income tax expense and other taxes on income........... 118 82 Amortization of interest capitalized................... -- 1 Undistributed (earnings) losses of affiliated companies in which less than a 50% voting interest is owned..... (3) (1) ----- ----- Earnings as defined............................... $ 487 $ 396 ===== ===== Interest.................................................... $ 117 $ 98 Interest capitalized........................................ -- 1 Portion of rentals representative of interest factor........ 29 26 Preferred stock dividend requirements of majority-owned subsidiaries on a pre-tax basis........................... 22 16 ----- ----- Fixed charges as defined.......................... $ 168 $ 141 ===== ===== Ratio of earnings to fixed charges.......................... 2.90 2.81 ===== =====
EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Tenneco Inc. and Consolidated Subsidiaries Financial Statements and is qualified in its entirety by reference to such Financial Statements. 1,000,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 30 0 888 0 973 2,332 5,501 1,968 8,708 1,934 2,626 0 0 2 2,557 8,708 3,805 3,805 2,678 2,678 713 0 117 345 117 212 0 0 0 212 1.25 1.25
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