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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 21, 1997
TENNECO INC.
(EXACT NAME OF REGISTRANT SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-12387 76-0515284
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
1275 KING STREET 06831
GREENWICH, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000
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ITEM 5. OTHER EVENTS
ON OCTOBER 21, 1997, TENNECO INC. (THE "COMPANY") ANNOUNCED ITS EARNINGS IN THE
QUARTER ENDED SEPTEMBER 30, 1997 AND OTHER MATTERS. A COPY OF THE COMPANY'S
NEWS RELEASE IS ATTACHED AS AN EXHIBIT TO THIS REPORT.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(C) EXHIBITS.
EXHIBIT NO. DESCRIPTION
99 NEWS RELEASE ISSUED OCTOBER 21, 1997 BY TENNECO INC.
REGARDING EARNINGS OF TENNECO INC. IN THE QUARTER ENDED
SEPTEMBER 30, 1997 AND OTHER MATTERS.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TENNECO INC.
Date: October 23, 1997 By: /s/ Karl A. Stewart
------------------------------------
Karl A. Stewart
Vice President and Secretary
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99 NEWS RELEASE ISSUED OCTOBER 21, 1997 BY TENNECO INC.
REGARDING EARNINGS OF TENNECO INC. IN THE QUARTER ENDED
MARCH 31, 1997 AND OTHER MATTERS.
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EXHIBIT 99
NEWS RELEASE
[TENNECO LOGO]
MEDIA CONTACT: Mike Bazinet (203) 863-1073
INVESTOR RELATIONS: Lisa Lobon (203) 863-1186
TENNECO ANNOUNCES STRONG THIRD QUARTER EARNINGS,
AS AUTOMOTIVE AND SPECIALTY PACKAGING SET RECORDS
- EARNINGS PER SHARE FROM CONTINUING OPERATIONS ROSE 38 PERCENT TO 62
CENTS FROM 45 CENTS A YEAR EARLIER.
- REVENUES INCREASED 11 PERCENT TO $1.83 BILLION FROM $1.65 BILLION.
- AUTOMOTIVE OPERATING INCOME INCREASED 46 PERCENT ON RECORD THIRD
QUARTER REVENUES.
- PACKAGING OPERATING INCOME ROSE 26 PERCENT, WHILE REVENUES ROSE 17
PERCENT.
GREENWICH, Conn., Oct. 21, 1997 -- Tenneco (NYSE: TEN) today reported
that earnings per share from continuing operations rose 38 percent in the third
quarter, to 62 cents per share from 45 cents a year ago.
Net income from continuing operations rose 38 percent to $105 million,
from $76 million a year ago. Automotive once again set quarterly records in
operating income and revenue. These results came from new business growth,
aggressive global market expansion and successful acquisition integration.
Specialty packaging also reported record third quarter operating income and
revenues led by strong contributions from the foam products business that was
acquired in 1996 and the more recently acquired protective and flexible
packaging operations. Paperboard packaging accomplished the turnaround that had
been projected, due to improved industry fundamentals, aggressive cost control
and higher-margin products.
Last year's results are restated to reflect a restructured Tenneco
formed in December 1996 following the spin-off of Newport News Shipbuilding and
the merger of Tenneco Energy with El Paso Energy.*
Quarterly operating income was $226 million, compared with $171 million
last year. Revenues increased 11 percent in the quarter, to $1.83 billion from
$1.65 billion.
*PLEASE NOTE: FOR THIS REASON, THE MORE MEANINGFUL COMPARISON FROM PURPOSES OF
ANALYZING QUARTER-TO-QUARTER EARNINGS IS NET INCOME FROM CONTINUING OPERATIONS.
(SEE FOOTNOTE (a) ON PAGE 3.)
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Tenneco Automotive operating income rose 46 percent to a third quarter
record of $119 million from $82 million a year ago. Revenues increased 3
percent to $785 million from $760 million, setting a quarter-over-quarter
record for the 16th straight time. Overall the operating margin increased by
more than 4 percentage points.
Tenneco Packaging operating income increased 26 percent to $107 million
from $85 million a year ago on sales of $1.05 billion. Revenues increased 17
percent in the quarter, exceeding the $1 billion mark for the second time.
Specialty packaging operating income was up 26 percent and revenues grew 33
percent.
"Our continuing objective is to build a track record of consistent income
and revenue growth through operating performance, cost control, strategic
acquisitions and global expansion," said Dana G. Mead, Tenneco chairman and
chief executive officer. "Our record third quarter earnings were the result of
achieving our goals in each of these areas."
FOR ADDITIONAL DETAIL SEE SEGMENT ANALYSIS FOLLOWING THE FINANCIAL TABLES.
Tenneco is a $7 billion global manufacturing company headquartered in
Greenwich, Conn., with 50,000 employees worldwide. Tenneco Automotive is one of
the world's largest producers and marketers of ride control products and
exhaust systems, which are sold under the Monroe(R) and Walker(R) brand names.
Among its products are Sensa-Trac(R) and Rancho(R) shock absorbers, Walker
Quiet-Flow(R) mufflers and DynoMax(R) performance mufflers, and Monroe
Clevite(TM) vibration control components. Tenneco Packaging is among the
world's leading and most diversified packaging companies. Among its products
are Hefty(R) trash bags, Hefty OneZip(R) and Baggies(R) food storage bags and
E-Z Foil(R) single-use aluminum cookware.
FOR MORE INFORMATION ABOUT TENNECO, VISIT THE TENNECO WEBSITE AT
HTTP://WWW.TENNECO.COM.
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TENNECO CONSOLIDATED EARNINGS RESULTS
Unaudited
THREE MONTHS ENDED SEPTEMBER 30
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<CAPTION>
1997 1996
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Net sales and operating
revenues:
Automotive $ 785,000,000 $ 760,000,000
Packaging 1,045,000,000 896,000,000
Other 1,000,000 (3,000,000)
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$1,831,000,000 $1,653,000,000
============== ==============
Operating income (loss):
Automotive $ 119,000,000 $ 82,000,000
Packaging 107,000,000 85,000,000
Other - 4,000,000
-------------- --------------
226,000,000 171,000,000
Less:
Interest expense (net of
interest capitalized) 59,000,000 45,000,000
Income tax expense 56,000,000 45,000,000
Minority interest 6,000,000 5,000,000
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Income from continuing
operations 105,000,000 76,000,000
Income from discontinued
operations - 40,000,000(a)
Extraordinary loss, net
of income tax - (1,000,000)
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Net income 105,000,000 115,000,000
Preferred stock dividends - 2,000,000
-------------- --------------
Net income to
common stock $ 105,000,000 $ 113,000,000
============== ==============
Average common shares
outstanding 170,100,000 170,400,000
============== ==============
Earnings (loss) per average
common share:
Continuing operations $ .62 $ .45
Discontinued operations - .22 (a)
Extraordinary loss - (.01)
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$ .62 $ .66
============== ==============
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(a) Includes the discontinued operations of the energy business ($25 million or
$.13 per share) and the shipbuilding business ($15 million or $.09 per share).
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TENNECO CONSOLIDATED EARNINGS RESULTS
Unaudited
NINE MONTHS ENDED SEPTEMBER 30
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<CAPTION>
1997 1996
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<S> <C> <C>
Net sales and operating revenues:
Automotive $2,436,000,000 $2,223,000,000
Packaging 2,916,000,000 2,671,000,000
Other - (8,000,000)
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$5,352,000,000 $4,886,000,000
============== ==============
Operating income (loss):
Automotive $ 330,000,000 $ 245,000,000
Packaging 269,000,000 (a) 341,000,000 (b)
Other (2,000,000) (1,000,000)
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597,000,000 585,000,000
Less:
Interest expense (net of
interest capitalized) 157,000,000 145,000,000
Income tax expense 138,000,000 171,000,000
Minority interest 17,000,000 15,000,000
-------------- --------------
Income from continuing operations 285,000,000 (a) 254,000,000 (b)
Income from discontinued operations - 518,000,000 (c)
Extraordinary loss, net of
income tax - (1,000,000)
-------------- --------------
Net income 285,000,000 771,000,000
Preferred stock dividends - 7,000,000
-------------- --------------
Net income to common stock $ 285,000,000 $ 764,000,000
============== ==============
Average common shares outstanding 170,500,000 170,400,000
============== ==============
Earnings (loss) per average
common share:
Before gains on sale and
refinancing $ 1.54 $ 1.31
Gain on mill lease and
refinancing .13 -
Gain on sale to joint venture - .18
-------------- --------------
Continuing operations 1.67 (a) 1.49 (b)
Discontinued operations - 3.00 (c)
Extraordinary loss - (.01)
-------------- --------------
$ 1.67 $ 4.48
============== ==============
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(a) Includes pretax gain on refinancing of two containerboard mill leases of
$38 million, $23 million or $.13 per share on an aftertax basis.
(b) Includes the 1996 pretax gain of $50 million on the sale of assets to the
joint venture with Caraustar, $30 million or $.18 per share on an aftertax
basis.
(c) Includes the discontinued operations of the energy business ($127 million
or $.70 per share); the shipbuilding business ($52 million or $.31 per
share) and the gain from the sale of the remaining stock of Case
Corporation, along with equity in Case's loss through the sale date ($339
million or $1.99 per share).
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SEGMENT ANALYSIS
AUTOMOTIVE
Tenneco Automotive reported a record quarter for operating income, up
46 percent to $119 million from $82 million last year. Revenues increased 3
percent to $785 million from $760 million in the third quarter last year,
setting a quarter-over-quarter record for the 16th consecutive time. Overall
operating margins improved by more than four percentage points to 15.2 percent,
despite the continued unfavorable impact of the strong dollar in Europe and
softness in the North American aftermarket. The impact of the strong dollar
reduced operating income by $7.4 million in the third quarter. However, this
was offset by favorable resolution of a legal action that increased income by
$9.7 million. Lower than anticipated costs for Automotive's reorganization,
which has proceeded more rapidly and efficiently than planned, resulted in a $4
million benefit.
Revenues for the North American original equipment business rose 4
percent over the third quarter of 1996, driven by the company's strong position
in the popular light truck segment.
North American aftermarket revenue rose 7 percent compared with the
third quarter of last year, due to new business, acquisitions, pricing, and
strong marketing programs in an industry market that was down more than 8
percent. Aftermarket revenues decreased 9 percent in Europe, solely due to
exchange rates. Tenneco Automotive's South American revenues, original
equipment and aftermarket combined, nearly tripled over the third quarter of
1996 due to a combination of internal growth and acquisitions of ride control
and exhaust system businesses.
"The outlook for our automotive businesses in North America remains
positive for the remainder of the year and into 1998," Mead said. "Sales of
light trucks and sport utility vehicles are especially strong. These vehicles
represent more than 60 percent of Tenneco Automotive's North American original
equipment sales. In fact, Tenneco products are on all of the top 10 selling
light trucks."
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New original equipment exhaust systems business coming on line for the
remainder of 1997 includes the Dodge Durango and Nissan Frontier trucks as well
as the Volkswagen Golf and Toyota Sienna. New ride control original equipment
business includes the Isuzu Rodeo and Nissan Altima.
OVERALL PACKAGING RESULTS
Tenneco Packaging reported operating income of $107 million as revenues
climbed 17 percent to $1.05 billion in the third quarter. This marks the
second consecutive quarter that revenues have passed the billion dollar level.
In the year ago quarter, earnings of $85 million were reported on sales of $896
million.
SPECIALITY PACKAGING
In Specialty packaging, operating income rose 26 percent to a third
quarter record of $84 million compared with $67 million in the year-ago period.
The increase in operating earnings was led by strong performance from foam
products; the recently acquired protective and flexible packaging operations;
significant unit volume growth in consumer, foam and clear plastic products;
and successful new product introductions. Stretch film margins, which have
been depressed, benefited from better pricing and lower material costs,
compared with the first half of the year. Revenues climbed to $679 million
from $509 million in the third quarter of 1996, a 33 percent increase.
Consumer products showed particular strength, up 11 percent in volume
over last year, led by a 50 percent increase in Hefty OneZip(R) food storage
bag sales over the same period last year. Sales of clear plastic and foam
containers to supermarkets and the foodservice industry were up 7 percent over
the year-ago period. The new MealMaster(TM) rigid container line has found
wide acceptance in the supermarket and foodservice channels, while the
extremely strong reception for the new FastPak(TM) supermarket deli bags using
the OneZip(R) closure is resulting in the addition of capacity.
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"The integration into Tenneco Packaging of the protective and flexible
packaging operations of KNP is ahead of plan," Mead said. "The combination of
our Hexacomb business and KNP's protective division, Astro-Valcour, has given
us an excellent platform for further expansion in protective packaging. Our
European flexible business also is reaping the benefits of this integration.
We have identified synergies in purchasing, manufacturing processes and
technology, all of which should translate into higher earnings growth going
forward."
PAPERBOARD PACKAGING
Paperboard packaging operations, which include containerboard mills,
corrugated products and folding carton, recorded operating income of $23
million, up 24 percent from the year-ago period. These results represent a $31
million improvement from a second quarter 1997 loss of $8 million.
This business demonstrated strong improvement over the second quarter.
Price increases in linerboard and medium contributed $13 million to the
earnings recovery; while the company's aggressive cost reduction and product mix
improvements added $10 million. A timberland management transaction
contributed another $4.5 million.
Average industry prices for linerboard and medium increased over the
second quarter by $32 per ton and $43 per ton, respectively. The industry-wide
box price increases of 10 to 12 percent announced by a number of producers in
August are being implemented. Tenneco Packaging has announced an additional 12
percent increase effective in November.
Operational improvements continued in the company's four
containerboard mills. By the end of the year, more than $46 million of a
two-year $75 million cost reduction effort should be achieved. Shifting
existing production capacity to higher value board grades should generate
another $15 million in earnings improvements in 1998. Earnings from corrugated
converting operations rose 7 percent over the second quarter, driven by growth
in higher priced, value added products.
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Containerboard industry fundamentals continue to improve. Inventories
at box plants and mills dropped to 4.1 weeks supply at the end of September,
the lowest level since January 1995, while average week box shipments through
the end of that month were up 2.9 percent. October medium and linerboard price
increases have been announced by most suppliers.
CONTINUING COST-REDUCTION INITIATIVES
Tenneco's commitment to improving customer focus, enhancing global
competitiveness and reducing overhead costs made significant progress in the
third quarter. Tenneco Automotive continued to transform its worldwide
organization from product-based to customer-focused. The restructuring of the
North American aftermarket business unit was completed in the quarter while the
restructuring of European operations was accelerated. More than $80 million in
annual savings is expected from the Automotive reorganization and
rationalization.
The corporation's continuing program to improve processes in all
business activities, known as Cost of Quality, reduced failure costs by $82
million in the third quarter, adding $47 million to operating income. Failure
costs are costs associated with inefficient manufacturing and administrative
processes, malfunctioning equipment, related downtime and other factors.
Tenneco has expanded its Economic Value Added (EVA*) program to a
Managing for Value strategy to ensure that management processes and incentive
structures are aligned with increasing total shareowner returns. The Managing
for Value strategy establishes targets for annual increases in EVA that will
create consistently superior shareowner returns. Earlier this year, Tenneco
implemented a long-term performance plan that linked executive compensation to
targeted increases in EVA from 1997 to 2000.
*EVA IS A REGISTERED TRADEMARK OF STERN STEWART & CO.
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RECENT COMPANY NEWS
In August, Tenneco Automotive announced the purchase of Autocan, a
Mexican catalytic converter and exhaust pipe assembly manufacturer. Located in
Puebla, Mexico, Autocan currently supplies Volkswagen, the largest passenger car
producer in that country, as well as for Chrysler and BMW. With 250 employees
and 1996 sales of $25 million, Autocan operates a 60,000-square foot facility
that opened in 1993. Autocan is the most recent of 18 acquisitions and joint
ventures Tenneco Automotive has completed in the last three years.
In September, Tenneco Automotive introduced the all-new Quiet-Flow(TM)
premium muffler line, which is the first of a generation of Walker replacement
mufflers that deliver improved sound quality and, on average, 35 percent less
exhaust backpressure resulting in better vehicle performance. The Walker
Quiet-Flow(TM) muffler will be available to the public in the first quarter of
1998.
On Oct. 16, IndustryWeek announced the selection of Tenneco
Automotive's plant in Paragould, Ark., as one of the Ten Best Plants in the
United States. The Paragould facility manufactures Monroe(R) shock absorbers
and struts mainly for the aftermarket. This is the second "Best Plants" award
for Tenneco. Tenneco Packaging's Counce, Tenn., containerboard mill achieved
this distinction in 1996. During the third quarter, IndustryWeek magazine had
named Tenneco one of the World's 100 Best-Managed Companies. This is the second
year the magazine has conducted this competition and the second year Tenneco has
been so honored. Companies were evaluated based on their achievements in 12
areas including financial performance, global strategy, human resources and
corporate citizenship.
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Several statements in this press release are forward looking and are identified
by the use of the following forward-looking words and phrases, such as:
"outlook... remains positive," "coming on line," "should translate," "should
be achieved," "should generate," "continue to improve," "is expected," and
"will be available." These forward-looking statements are based on the
company's current expectations. Because forward-looking statements involve
risks and uncertainties, the company's actual results could differ materially.
Among the factors that could cause results to differ materially from current
expectations are: (i) the general political, economic and competitive
conditions in markets and countries where the company and its subsidiaries
operate; (ii) changes in capital availability or costs; (iii) decreases in
demand for company products and the resulting negative impact on the company's
revenues and margins from such products; (iv) the cost of compliance with
changes in regulations, including environmental regulations; (v) employee
workforce factors; (vi) increases in the costs of the company's raw materials;
(vii) the company's ability to integrate the operations of acquired businesses
quickly and in a cost-effective manner; and (viii) the timing and occurrence
(or non-occurrence) of transactions and events, which may be subject to
circumstances beyond the company's control.
