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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): April 29, 1997
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TENNECO INC.
(Exact name of registrant specified in its charter)
DELAWARE 1-12387 76-0515284
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1275 KING STREET
GREENWICH, CONNECTICUT 06831
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 863-1000
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ITEM 5. OTHER EVENTS.
On April 29, 1997, Tenneco Inc. (the "Company") announced its earnings
in the quarter ended March 31, 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
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99 NEWS RELEASE issued April 29, 1997 by Tenneco Inc.
regarding earnings of Tenneco Inc. in the quarter
ended March 31, 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: April 29, 1997 By: /s/ Karl A. Stewart
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Karl A. Stewart
Vice President and Secretary
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EXHIBIT INDEX
Exhibit No. Description
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99 News Release issued April 29, 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
[TENNECO LOGO]
NEWS RELEASE
MEDIA CONTACT: Mike Bazinet (203) 863-1073
INVESTOR RELATIONS: Lisa Lobon (203) 863-1186
TENNECO EARNINGS PER SHARE FROM CONTINUING OPERATIONS
ROSE 29 PERCENT IN FIRST QUARTER
GREENWICH, Conn., April 29, 1997 -- Tenneco (NYSE: TEN) today reported
that earnings per share from continuing operations rose 29 percent in the first
quarter, to 44 cents per share from 34 cents a year-ago. Net income from
continuing operations rose 27 percent to $76 million, up from $60 million a
year ago. Tenneco Automotive set first quarter records in revenues and
operating income. Tenneco Packaging reported a decline in operating income due
largely to weaker containerboard prices. This decline was partially offset by
higher earnings from the specialty products business and an operating gain from
the refinancing of two containerboard mill leases.
The lease refinancing resulted in a one-time, pre-tax gain of $38
million. The ongoing operating income benefit from this action is expected to
be approximately $15 million annually. The cash flow improvement is projected
to be more than $120 million over the first two years and approximately $250
million over the next five years, due to lower lease costs and other benefits.
All 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 $159 million, compared with $161 million
last year. Revenues increased 6 percent in the quarter, to $1.6 billion from
$1.5 billion. Income from discontinued operations in the year-ago quarter of
$435 million, or $2.55 per share, included a gain on the sale of the remaining
investment in Case Corporation, as well as net income from Newport News
Shipbuilding and Tenneco Energy.
*PLEASE NOTE: FOR THIS REASON, THE MORE MEANINGFUL COMPARISON FOR
PURPOSES OF ANALYZING QUARTER-TO-QUARTER EARNINGS IS NET INCOME FROM CONTINUING
OPERATIONS. (SEE FOOTNOTE (a) ON PAGE 3.)
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"We are pleased by the record results in our automotive parts business
and the continued solid performance of our specialty packaging operations in
the first quarter," said Dana G. Mead, Tenneco chairman and chief executive
officer. "While the containerboard market remains disappointingly weak, we
continue to make steady progress in offsetting the cyclicality in that business
by growing our highly profitable specialty and protective packaging operations.
At the same time, with our recently announced Automotive reorganization, we are
on target in our program to lower corporate overhead in the range of $100
million by early 1998."
Tenneco Automotive operating income rose 36 percent to $80 million
from $59 million a year ago. Revenues increased 14 percent to $778 million
from $683 million in the first quarter last year, setting a
quarter-over-quarter record for the 14th straight time.
Tenneco Packaging's operating income of $80 million, on sales of $852
million, included the previously described lease refinancing. In the year ago
quarter, operating income of $106 million was reported on sales of $859
million. Specialty packaging operating income was up 11 percent, led by
contributions from the foam products acquisition and stronger volume growth.
"With the acquisition of the protective and flexible packaging
operations of KNP BT that we completed this week, we more than double Tenneco
Packaging's sales in Europe and we establish a significant presence in two
additional growth segments of the packaging business," Mead said. "These
operations, with $540 million in 1996 annual sales, are an excellent strategic
fit and will immediately contribute to net income."
FOR ADDITIONAL DETAIL SEE SEGMENT ANALYSIS FOLLOWING THE FINANCIAL
TABLE.
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
Advantage(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 One Zip(R) and Baggies(R) food storage bags, E-Z
Foil(R) single-use aluminum cookware and Diamond(R) tableware.
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TENNECO CONSOLIDATED EARNINGS RESULTS
Unaudited
FIRST QUARTER
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Net sales and operating
revenues:
Automotive $ 778,000,000 $ 683,000,000
Packaging 852,000,000 859,000,000
Other (1,000,000) (3,000,000)
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$1,629,000,000 $1,539,000,000
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Operating income (loss):
Automotive $ 80,000,000 $ 59,000,000
Packaging 80,000,000 106,000,000
Other (1,000,000) (4,000,000)
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159,000,000 161,000,000
Less:
Interest expense (net of
interest capitalized) 45,000,000 47,000,000
Income tax expense 33,000,000 49,000,000
Minority interest 5,000,000 5,000,000
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Income from continuing
operations 76,000,000 60,000,000
Income from discontinued
operations (a) -- 435,000,000
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Net income 76,000,000 495,000,000
Preferred stock dividends -- 3,000,000
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Net income to common stock $ 76,000,000 $ 492,000,000
=============== ==============
Average common shares 171,300,000 170,400,000
outstanding =============== ==============
Earnings per average common share:
Continuing operations $ .44 $ .34
Discontinued operations (a) -- 2.55
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$ .44 $ 2.89
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</TABLE>
(a) Includes the discontinued operations of the energy business ($77
million or $.45 per share); the shipbuilding business ($19 million or $.11
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 & CORPORATE INITIATIVES
AUTOMOTIVE
Tenneco Automotive reported an all-time record first quarter for both
revenues and operating income. Operating income rose 36 percent to $80 million
from $59 million last year. Revenues increased 14 percent to $778 million from
$683 million in the first quarter last year, setting a quarter-over-quarter
record for the 14th straight time. Overall operating margins improved by 20
percent. Strong new original equipment business in North America and Europe,
higher margins from strategic acquisitions, worldwide aftermarket price
increases and aggressive cost reductions were largely responsible for these
improved results.
Revenues for the North American original equipment business rose 38
percent over the first quarter of 1996, driven by the Clevite acquisition and
brisk sales of popular light trucks and sport-utility vehicles featuring
Tenneco Automotive ride control and exhaust products. Despite a stronger
dollar, the company's original equipment revenues in Europe increased 5 percent
over the same period last year, boosted by new business from recently launched
Mercedes, Porsche and Volkswagen vehicles.
Overall revenues in the North American aftermarket rose 2 percent
compared with the first quarter of last year, while aftermarket revenues were
flat in Europe. Tenneco Automotive's South American operations, both original
equipment and aftermarket, recorded a 111 percent improvement in revenues over
the first quarter of 1996 due to new business from the acquisitions of Fric-Rot
and Minuzzi and an improved sales mix of premium products.
Several new vehicles carrying Tenneco Automotive ride control or
exhaust system components were either launched or reached full production in
the first quarter, including the Ford Expedition, the redesigned Chevrolet
Malibu/Oldsmobile Cutlass, Buick Park Avenue, Mercedes E-Class series and
Porsche 986 Boxster. In Europe, the recently launched Audi A3 and Skoda Octavia
feature both Tenneco Automotive ride control and exhaust products.
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"Automotive earnings, already record setting, should gain additional
momentum as we enter our traditionally strong season and begin to see the added
benefits of newly implemented cost reduction efforts," Mead said.
PACKAGING
Tenneco Packaging reported operating income of $80 million, including
the $38 million gain on lease refinancing, on sales of $852 million in the
first quarter. In the year ago quarter, earnings of $106 million were reported
on sales of $859 million. The earnings decline was partially offset by
improved earnings in the specialty products business and lease refinancing.
In the first quarter, Tenneco Packaging refinanced leases on its
Tomahawk and Valdosta containerboard mills, realizing an operating income
benefit of $38 million in the quarter. Going forward, reduced lease expenses
are projected to improve operating income by approximately $15 million
annually. The cash flow improvement is expected to be more than $120 million
over the first two years and approximately $250 million over the next five
years, due to lower lease costs and other benefits.
In Specialty Packaging, first quarter operating income rose to $48
million compared with $43 million in the year-ago period. Operating earnings
were led by contributions from the Amoco foam acquisition offset partially by
pricing pressures in stretch film. Revenues climbed 22 percent to $483 million
from $398 million in the first quarter of 1996. Consumer sales growth showed
particular strength, rising 9 percent, led by a better than 50 percent volume
increase in Hefty One Zip(R) sales over last year.
Paperboard Packaging operations, which include containerboard mills,
corrugated products and folding carton, continued to experience weak
performance. Operating earnings declined due largely to weaker containerboard
prices, with industry linerboard price declines of 27 percent and medium prices
down 38 percent compared with the same period last year. Linerboard prices are
the lowest since 1993, the last cyclical trough, while medium prices are the
lowest since 1982.
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Operating income for the quarter was $32 million, including the gain on
lease refinancing, down from $63 million in the year-ago period. Revenues were
$369 million compared with $461 million in the first quarter of 1996.
Despite weak containerboard prices, operating income from corrugated
converting operations rose 7 percent over the fourth quarter of 1996, driven by
continued growth in graphics, specialty corrugated products and value-added
services.
Containerboard mill cost reductions and productivity improvements
continue to be a primary focus, with a two-year target of $75 million in cost
reductions. More than half is expected to be realized in 1997. On an annual
basis these improvements will reduce containerboard costs by more than $30 per
ton.
"While we are not satisfied with containerboard results in the quarter,
we have fared better than most of our competitors, and we are well positioned
for any upturn in pricing," Mead said. "At the same time, the outlook for
specialty packaging is highly encouraging. We continue to introduce products
for the faster growing markets, such as convenience food and agricultural
packaging, which should continue to boost sales and improve our operating
margins."
CORPORATE COST-REDUCTION INITIATIVES
Tenneco's new structure has enabled it to launch a broad initiative to
improve customer focus, enhance global competitiveness and reduce overhead
costs. The corporate effort is expected to yield approximately $100 million in
cost reductions by early 1998. As a first step in this initiative, Tenneco
Automotive in March announced a new management structure expected to contribute
at least $30 million in savings. This action is in addition to the European
exhaust system manufacturing restructuring and realignment of the North
American aftermarket ride control product lines announced in the fourth quarter
of 1996, which are projected to save $28 million annually.
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The corporation's continuing program to improve processes in all
business activities, known as Cost of Quality, reduced failure costs by $34
million in the quarter, adding $22 million to operating income. Failure costs
are costs associated with inefficient manufacturing and administrative
processes, malfunctioning equipment, related downtime and other factors.
During 1997, Tenneco plans to further reduce working capital on a
percentage of revenues basis, generating the equivalent of an additional $230
million in cash flow. The company's three-year working capital initiative
begun in early 1996 has already reduced working capital on a
percentage-of-revenues basis by 4.5 percentage points, which is equivalent to a
$280 million increase in cash flow. Operating division Economic Value Added
improved by $33 million over the previous quarter.
OTHER RECENT COMPANY ACTIONS
- - Tenneco this week completed its acquisition of the protective and
flexible packaging operations of NV Koninklijke KNP BT, a Dutch distribution,
paper and packaging firm, for approximately $375 million. Tenneco's new
European protective packaging operations are located in the Netherlands,
Belgium, Germany, France, Great Britian, Italy and Poland. The Astro-Valcour
subsidiary has nine locations in the United States and Canada, while there are
four flexible packaging locations in Germany and one in Egypt. Combined with
Tenneco's highly successful Hexacomb operations, this purchase secures Tenneco
Packaging a leadership position in the higher margin protective packaging
market, a base for additional international growth and the capability to
provide additional packaging solutions for customers.
- - The company also announced in March that the Tenneco Automotive global
alliance with ITT Automotive to develop and produce modular chassis systems is
teaming with Benteler Automotive, one of the world's largest producers of
chassis systems and components, to enhance its relationships with vehicle
manufacturers on a worldwide basis. The alliance will offer automakers
significant added value in shorter development time and optimized performance.
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- - Also in the quarter, Tenneco announced a new stock repurchase program
that will allow the company to buy up to 5 percent or nearly 8.6
million of its outstanding shares. As of March 31, the stock buyback
was approximately 20 percent complete.
FOR MORE INFORMATION ABOUT TENNECO, VISIT THE TENNECO WEBSITE AT
http://www.tenneco.com.
Several statements in this press release are forward looking and are
identified by the use of the following forward-looking words and phrases: "is
expected," "plans to," "earnings should gain...," "on target to," "are designed
to," "going forward," "is projected to," and "are projected." 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.
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