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