<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-12387
---------------------------
TENNECO INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0515284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1275 KING STREET, GREENWICH, CT 06831
(Address of principal executive
offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, par value $.01 per share: 168,198,208 shares as of June 30,
1998.
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<PAGE> 2
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
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................... *
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.............................. *
Item 2. Changes in Securities.......................... *
Item 3. Defaults Upon Senior Securities................ *
Item 4. Submission of Matters to Vote of Security
Holders............................................... 15
Item 5. Other Information.............................. 15
Item 6. Exhibits and Reports on Form 8-K............... 15
</TABLE>
- ------------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
CAUTIONARY STATEMENT AND "SAFE HARBOR" OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q contains forward-looking statements
regarding: (i) the development of strategic alternatives to include among the
options the separation of the automotive and packaging businesses into
stand-alone entities and the separation of the containerboard packaging business
from the specialty packaging business; (ii) a cost reduction program and the
expected savings therefrom; (iii) the Year 2000 issue (relating to potential
equipment and computer failures by or at the change in the century); and (iv)
capital resources. See "Recent Developments," "Liquidity and Capital Resources
- -- Capitalization" and "Year 2000" under "Management's Discussion and Analysis
of Financial Condition and Results of Operations." These forward-looking
statements are based on the current expectations of Tenneco (as defined below).
Because forward-looking statements involve risks and uncertainties, Tenneco's
plans, actions and actual results could differ materially. Among the factors
that could cause plans, actions and results to differ materially from current
expectations are: (i) the general economic, political and competitive conditions
in markets and countries where Tenneco operates, including currency fluctuations
and other risks associated with operating in foreign countries and changes in
distribution channels; (ii) governmental actions, including the ability to
receive regulatory approvals and the timing of such approvals; (iii) changes in
capital availability or costs; (iv) results of analysis regarding strategic
alternatives; (v) changes in consumer demand and prices, including decreases in
demand for Tenneco products and the resulting negative impact on Tenneco's
revenues and margins from such products; (vi) the cost of compliance with
changes in regulations, including environmental regulations; (vii) workforce
factors such as strikes or labor interruptions; (viii) material substitutions or
increases in the costs of Tenneco's raw materials; (ix) Tenneco's ability to
integrate operations of acquired businesses quickly and in a cost-effective
manner; (x) new technologies; (xi) the ability of Tenneco and those with which
it conducts business to timely resolve the Year 2000 issue, unanticipated costs
of, problems with or delays in resolving the Year 2000 issue, and the costs and
impacts if the Year 2000 issue is not timely resolved; (xii) changes by the
Financial Accounting Standards Board or other accounting regulatory bodies of
authoritative generally accepted accounting principles or policies; and (xiii)
the timing and occurrence (or non-occurrence) of transactions and events which
may be subject to circumstances beyond Tenneco's control.
1
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues--
Automotive....................... $ 864 $ 873 $ 1,664 $ 1,651
Packaging........................ 1,133 1,019 2,142 1,871
Intergroup sales and other....... (1) -- (1) (1)
----------- ----------- ----------- -----------
1,996 1,892 3,805 3,521
Other income, net..................... 32 1 48 41
----------- ----------- ----------- -----------
2,028 1,893 3,853 3,562
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)........... 1,380 1,338 2,648 2,529
Engineering, research, and
development......................... 11 18 30 34
Selling, general, and
administrative...................... 251 234 493 445
Depreciation, depletion, and
amortization........................ 110 91 220 183
----------- ----------- ----------- -----------
1,752 1,681 3,391 3,191
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE, INCOME
TAXES, AND MINORITY INTEREST............. 276 212 462 371
Interest expense (net of interest
capitalized)........................ 61 53 117 98
Income tax expense.................... 70 49 117 82
Minority interest..................... 8 6 16 11
----------- ----------- ----------- -----------
NET INCOME................................. $ 137 $ 104 $ 212 $ 180
=========== =========== =========== ===========
PER SHARE
Average shares of common stock
outstanding--
Basic............................ 169,174,444 169,779,760 169,341,555 170,590,721
Diluted.......................... 169,869,703 170,170,076 169,936,676 170,908,529
Earnings per average share of common
stock--
Basic............................ $ .81 $ .61 $ 1.25 $ 1.05
=========== =========== =========== ===========
Diluted.......................... $ .81 $ .61 $ 1.25 $ 1.05
=========== =========== =========== ===========
Cash dividends per share of common
stock............................... $ .30 $ .30 $ .60 $ .60
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of income.
2
<PAGE> 4
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
-------------
1998 1997
----- -----
(MILLIONS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 212 $ 180
Adjustments to reconcile net income to net cash provided
(used) by operating activities--
Depreciation, depletion, and amortization.............. 220 183
Deferred income taxes.................................. 88 71
(Gain)/loss on sale of businesses and assets, net...... (6) 10
Changes in components of working capital--
(Increase) decrease in receivables................ (182) (126)
(Increase) decrease in inventories................ (21) (20)
(Increase) decrease in prepayments and other
current assets................................... (8) (54)
Increase (decrease) in payables................... (2) (88)
Increase (decrease) in taxes accrued.............. 22 (20)
Increase (decrease) in interest accrued........... -- 28
Increase (decrease) in other current
liabilities...................................... (51) (90)
Other.................................................. (94) (60)
----- -----
Net cash provided (used) by operating activities............ 178 14
----- -----
INVESTING ACTIVITIES
Net proceeds from sale of businesses and assets............. 17 7
Expenditures for plant, property, and equipment............. (232) (202)
Acquisition of businesses................................... (58) (289)
Investments and other....................................... (41) (52)
----- -----
Net cash provided (used) by investing activities............ (314) (536)
----- -----
FINANCING ACTIVITIES
Issuance of common and treasury shares...................... 27 20
Purchase of common stock.................................... (82) (90)
Issuance of long-term debt.................................. 3 593
Retirement of long-term debt................................ (15) (5)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.............................. 294 126
Dividends on common stock................................... (102) (102)
----- -----
Net cash provided (used) by financing activities............ 125 542
----- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ -- (1)
----- -----
Increase (decrease) in cash and temporary cash
investments............................................... (11) 19
Cash and temporary cash investments, January 1.............. 41 62
----- -----
Cash and temporary cash investments, June 30 (Note)......... $ 30 $ 81
===== =====
Cash paid during the period for interest.................... $ 127 $ 80
Cash paid during the period for income taxes (net of
refunds).................................................. $ (5) $ 42
</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> 5
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
-------- ------------ --------
1998 1997 1997
-------- ------------ --------
(MILLIONS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments..................... $ 30 $ 41 $ 81
Receivables--
Customer notes and accounts, net................... 888 729 808
Income taxes....................................... 22 63 --
Other.............................................. 58 17 35
Inventories--
Finished goods..................................... 480 467 500
Work in process.................................... 120 100 95
Raw materials...................................... 238 265 227
Materials and supplies............................. 135 118 114
Deferred income taxes................................... 78 63 86
Prepayments and other................................... 283 252 201
------ ------ ------
2,332 2,115 2,147
------ ------ ------
Other assets:
Long-term notes receivable, net......................... 47 49 41
Goodwill and intangibles, net........................... 1,607 1,577 1,578
Deferred income taxes................................... 54 55 113
Pension assets.......................................... 796 747 681
Other................................................... 339 334 415
------ ------ ------
2,843 2,762 2,828
------ ------ ------
Plant, property, and equipment, at cost..................... 5,501 5,284 5,029
Less--Reserves for depreciation, depletion, and
amortization.......................................... 1,968 1,829 1,747
------ ------ ------
3,533 3,455 3,282
------ ------ ------
$8,708 $8,332 $8,257
====== ====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on
long-term debt)....................................... $ 591 $ 278 $ 437
Trade payables.......................................... 716 687 603
Taxes accrued........................................... 77 96 72
Accrued liabilities..................................... 315 344 282
Other................................................... 235 256 293
------ ------ ------
1,934 1,661 1,687
------ ------ ------
Long-term debt.............................................. 2,626 2,633 2,663
------ ------ ------
Deferred income taxes....................................... 714 614 519
------ ------ ------
Postretirement benefits..................................... 238 228 211
------ ------ ------
Deferred credits and other liabilities...................... 215 244 326
------ ------ ------
Commitments and contingencies
Minority interest........................................... 422 424 313
------ ------ ------
Shareowners' equity:
Common stock............................................ 2 2 2
Premium on common stock and other capital surplus....... 2,699 2,679 2,659
Cumulative translation adjustments...................... (142) (122) (91)
Retained earnings....................................... 199 89 56
------ ------ ------
2,758 2,648 2,626
Less--Common stock held as treasury stock, at cost...... 199 120 88
------ ------ ------
2,559 2,528 2,538
------ ------ ------
$8,708 $8,332 $8,257
====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
4
<PAGE> 6
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------
1998 1997
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------ ----------- ------
(MILLIONS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
COMMON STOCK
Balance January 1.................................. 172,569,889 $ 2 171,567,658 $ 2
Issued pursuant to benefit plans.............. 539,220 -- 534,867 --
----------- ------ ----------- ------
Balance June 30.................................... 173,109,109 2 172,102,525 2
=========== ------ =========== ------
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1.................................. 2,679 2,642
Premium on common stock issued pursuant to
benefit plans............................... 20 17
------ ------
Balance June 30.................................... 2,699 2,659
------ ------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance January 1.................................. (122) 23
Translation of foreign currency statements.... (20) (127)
Hedges of net investment in foreign
subsidiaries (net of income taxes).......... -- 13
------ ------
Balance June 30.................................... (142) (91)
------ ------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1.................................. 89 (21)
Net income.................................... 212 180
Dividends on common stock..................... (102) (103)
------ ------
Balance June 30.................................... 199 56
------ ------
LESS -- COMMON STOCK HELD AS TREASURY STOCK, AT
COST
Balance January 1.................................. 2,928,189 120 -- --
Shares acquired............................... 2,202,423 88 2,288,200 90
Shares issued pursuant to benefit and dividend
reinvestment plans.......................... (219,711) (9) (65,020) (2)
----------- ------ ----------- ------
Balance June 30.................................... 4,910,901 199 2,223,180 88
=========== ------ =========== ------
Total......................................... $2,559 $2,538
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of changes in shareowners' equity.
5
<PAGE> 7
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) In the opinion of Tenneco Inc. (the "Company"), the accompanying
unaudited consolidated financial statements of Tenneco Inc. and its consolidated
subsidiaries ("Tenneco") contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, changes in shareowners' equity, and cash flows for the periods
indicated. The unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles. The consolidated
financial statements of Tenneco include all majority-owned subsidiaries of the
Company. Investments in 20% to 50% owned companies where the Company has the
ability to exert significant influence over operating and financial policies are
carried at cost plus equity in undistributed earnings and cumulative translation
adjustments since date of acquisition.
Prior year's financial statements have been reclassified where appropriate
to conform to 1998 presentations.
(2) On July 21, 1998, Tenneco announced that its Board of Directors had
authorized management to develop a broad range of strategic alternatives
designed to better realize the long-term value of its businesses for shareowners
to include among the options the separation of the automotive and packaging
businesses into stand-alone entities and the separation of its containerboard
packaging business from its specialty packaging business. Among the options for
separation of the containerboard business are a sale, merger, spin-off, initial
public offering or strategic alliance. Finally, Tenneco announced a cost
reduction program expected to realize approximately $100 million in annual
savings.
(3) Tenneco is a party to various legal proceedings arising from its
operations. Tenneco believes that the outcome of these proceedings, individually
and in the aggregate, will not have a material adverse effect on its financial
position or results of operations.
(4) Tenneco is subject to a variety of environmental and pollution control
laws and regulations in all jurisdictions in which it operates. Tenneco has
provided reserves for compliance with these laws and regulations where it is
probable that a liability exists and where Tenneco can make a reasonable
estimate of the liability. The estimated liabilities recorded are subject to
change as more information becomes available regarding the magnitude of possible
cleanup costs and the timing, varying costs, and effectiveness of alternative
cleanup technologies. However, Tenneco believes that any additional costs which
may arise as more information becomes available will not have a material adverse
effect on its financial position or results of operations.
(5) In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement will be applied
prospectively and is effective for fiscal years beginning after December 15,
1998. The impact of this new standard is not expected to have a significant
effect on Tenneco's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires capitalized costs related to start-up
activities to be expensed as a cumulative effect of a change in accounting
principle when the statement is adopted. Tenneco capitalizes certain costs
related to start-up activities and is currently evaluating the new standard but
has not yet determined the impact it will have on its financial position or
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new accounting
and reporting standards requiring that every derivative instrument
6
<PAGE> 8
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. This statement will
be applied prospectively and is effective for all fiscal years beginning after
June 15, 1999. Tenneco is currently evaluating the new standard but has not yet
determined the impact it will have on its financial position or results of
operations.
(6) Earnings per share of common stock outstanding were computed as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Basic Earnings Per Share--
Net income........................... $ 137 $ 104 $ 212 $ 180
----------- ----------- ----------- -----------
Average shares of common stock
outstanding........................ 169,174,444 169,779,760 169,341,555 170,590,721
=========== =========== =========== ===========
Earnings per average share of common
stock.............................. $ .81 $ .61 $ 1.25 $ 1.05
=========== =========== =========== ===========
Diluted Earnings Per Share--
Net income........................... $ 137 $ 104 $ 212 $ 180
----------- ----------- ----------- -----------
Average shares of common stock
outstanding........................ 169,174,444 169,779,760 169,341,555 170,590,721
Effect of dilutive securities:
Restricted stock................ 52,224 -- 39,512 --
Stock options................... 364,170 306,630 296,498 234,122
Performance shares.............. 278,865 83,686 259,111 83,686
----------- ----------- ----------- -----------
Average shares of common stock
outstanding including dilutive
securities......................... 169,869,703 170,170,076 169,936,676 170,908,529
=========== =========== =========== ===========
Earnings per average share of common
stock.............................. $ .81 $ .61 $ 1.25 $ 1.05
=========== =========== =========== ===========
</TABLE>
(7) Tenneco adopted FAS No. 130, "Reporting Comprehensive Income," in the
first quarter of 1998. FAS No. 130 establishes new accounting standards for
reporting and display of comprehensive income and its components. Comprehensive
income is the total of net income and all other non-owner changes in equity in a
given period. For the three months ended June 30, 1998 and 1997, Tenneco's
comprehensive income is $140 million and $48 million, respectively. For the six
months ended June 30, 1998 and 1997, Tenneco's comprehensive income is $192
million and $66 million, respectively.
The above notes are an integral part of the foregoing financial statements.
7
<PAGE> 9
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS
On July 21, 1998 Tenneco Inc. announced that its Board of Directors had
authorized management to develop a broad range of strategic alternatives
designed to better realize the long-term value of its businesses for shareowners
to include among the options the separation of the automotive and packaging
businesses into stand-alone entities and the separation of its containerboard
packaging business from its specialty packaging business. Among the options for
separation of the containerboard business are a sale, merger, spin-off, initial
public offering or strategic alliance. Finally, Tenneco Inc. announced a cost
reduction program expected to realize approximately $100 million in annual
savings.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1998 AND 1997
Tenneco Inc. and its consolidated subsidiaries ("Tenneco") reported net
income of $137 million, or 81 cents per share on a diluted basis, for the
quarter ended June 30, 1998. (All references to earnings per share in this
Management's Discussion and Analysis are on a diluted basis unless otherwise
noted.) Net income for the second quarter of 1997 was $104 million, or 61 cents
per share. The earnings improvement resulted from strong performance by Tenneco
Automotive's North American and European original equipment ("OE") business and
growth in the specialty and paperboard packaging businesses of Tenneco
Packaging. The results for the second quarter of 1998 also included a pretax
gain of $15 million, or 5 cents per share, on the sale of Tenneco Packaging's
remaining 20 percent interest in a recycled paperboard joint venture with
Caraustar Industries. The improved performance at the operating divisions for
the second quarter of 1998 compared to the same period in 1997 was partially
offset by a higher effective tax rate and an increased level of interest
expense.
Revenues
<TABLE>
<CAPTION>
SECOND QUARTER
------------------------------
1998 1997 % CHANGE
------ ------ --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive................................. $ 864 $ 873 (1%)
Tenneco Packaging.................................. 1,133 1,019 11%
Intergroup sales and other......................... (1) -- --
------ ------
$1,996 $1,892 5%
====== ======
</TABLE>
Tenneco Automotive's slightly lower second quarter 1998 revenues resulted
primarily from strong OE sales offset by lower aftermarket sales. Tenneco
Automotive's original equipment business in North America and Europe continued
its strong growth resulting from placement of ride control and exhaust parts on
more new vehicle platforms and greater part content per vehicle. While overall
OE volumes were up, a General Motors strike, which began in June, had a slight
negative impact on second quarter 1998 OE revenues as Tenneco Automotive
decreased its shipments to GM. Overall, higher OE volumes added $42 million to
revenues in 1998's second quarter compared to the second quarter of 1997. Lower
volumes in the aftermarket, where Tenneco Automotive continues to operate in a
generally weak global environment, offset this positive trend. Second quarter
volumes were also affected substantially by Tenneco Automotive's effort during
the second quarter to work with its customers to reduce their inventory levels
and improve their cash management. Overall, lower volumes in the aftermarket
decreased revenues in the second quarter of 1998 by $45 million compared to the
same period last year.
Other Tenneco Automotive revenue increases during the second quarter of
1998 compared to 1997 were revenues of $16 million earned by companies acquired
since the second quarter of 1997 and the net positive change due to pricing
improvements and product mix of $5 million. The effects of the strong U.S.
dollar on revenues earned in overseas markets reduced second quarter 1998
revenues by $27 million compared to the same period in 1997.
8
<PAGE> 10
Tenneco Packaging's revenue increase occurred in both its paperboard and
specialty packaging businesses. Specialty packaging's revenue increased to $731
million in the second quarter of 1998 from $669 million in the same period of
1997. Businesses acquired since the second quarter of 1997, primarily Richter
Manufacturing, a leading producer of protective packaging for the western United
States which was acquired in May 1998, contributed $11 million of this increase.
In addition, the protective and flexible packaging businesses of NV Koninklijke
KNP BT ("KNP BT") acquired in April 1997, performed strongly, contributing $36
million to the revenue increase. Volume increases in specialty packaging's
consumer business accounted for the majority of the remaining revenue
improvement. Tenneco Packaging Hefty OneZip(R) bags and consumer tableware both
experienced an increase in unit volume sales.
Revenues in the paperboard packaging business climbed to $402 million in
the second quarter of 1998 from $350 million in the second quarter of 1997. This
increase was due in large part to pricing improvements in linerboard, medium and
corrugated boxes. Industry average prices as reported in Pulp and Paper Weekly
were up $85 per ton for linerboard and $102 per ton for medium for the second
quarter of 1998 compared to the same period of 1997. In addition to the pricing
improvements, volume shipments were up slightly in the second quarter of 1998
compared to the same period in 1997.
Operating Income
<TABLE>
<CAPTION>
SECOND QUARTER
-------------------------
1998 1997 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive.................................... $130 $131 (1%)
Tenneco Packaging..................................... 150 82 83%
Other................................................. (4) (1) NM
---- ----
$276 $212 30%
==== ====
</TABLE>
Tenneco Automotive's second quarter 1998 operating income was essentially
equal with the second quarter of 1997's record performance. While the net
revenue impact of higher OE volumes and lower aftermarket volumes was small, the
shift in volumes from the higher margin aftermarket business to the lower margin
OE business had a negative impact on operating income. This volume shift
combined with the lower volumes shipped to GM during the strike reduced
operating income in the second quarter of 1998 by $17 million compared to the
same period in 1997. The strong U.S. dollar also reduced operating income by $4
million. Tenneco Automotive was largely able to offset those operating income
declines, however, through the positive impacts of its cost reduction program
and the net benefits from the pricing and product mix changes discussed under
Revenues above.
Both Tenneco Packaging's specialty and paperboard businesses reported
higher operating income in the second quarter of 1998. Operating income in the
specialty packaging business increased to $101 million from $90 million in the
second quarter of 1997. The primary contributor to this improvement was the
volume increases discussed previously that contributed $6 million to the second
quarter 1998 higher operating income. The protective and flexible packaging
businesses acquired from KNP BT in April 1997 contributed increased operating
income of $5 million in the second quarter of 1998 compared to 1997.
Acquisitions made since the second quarter of 1997, including Richter
Manufacturing, contributed an additional $2 million in operating income.
Partially offsetting these operating income increases were small pricing
decreases in some of specialty packaging's products and higher promotional
expenses. Lower variable cost of $12 million due to favorable raw material
pricing was offset by increased fixed costs, including depreciation and
warehousing costs.
Excluding the $15 million pretax gain on the sale of paperboard's remaining
20 percent interest in a recycled paperboard joint venture with Caraustar
Industries, the paperboard business operating income improved to $34 million in
the second quarter of 1998 from a loss of $8 million in the second quarter of
last year. This improvement is due largely to the improved pricing environment
for linerboard, medium and corrugated boxes discussed previously. In addition,
the volume increase, which occurred primarily in corrugated shipments,
contributed to the operating income improvement.
9
<PAGE> 11
Interest Expense (net of interest capitalized)
Interest expense increased $8 million during the second quarter of 1998
over the same period last year. This increase is primarily attributable to debt
issued to finance Tenneco's capital needs, including acquisitions and its share
repurchase activity.
Income Taxes
Tenneco's effective tax rate for the second quarter of 1998 was 33 percent
compared to 31 percent for the second quarter of 1997. The 1997 second quarter
rate was lower than the statutory rate as a result of non-recurring foreign tax
benefits recognized in that quarter. The second quarter 1998 effective tax rate
was lower than the statutory rate as a result of certain non-recurring state tax
benefits.
Minority Interest
Minority interest primarily represents dividends on the preferred stock of
a subsidiary. The increase of $2 million in the second quarter of 1998 resulted
from the dividends paid on additional subsidiary preferred stock which was
issued in December 1997.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Revenues
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1998 1997 % CHANGE
------ ------ --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive................................. $1,664 $1,651 1%
Tenneco Packaging.................................. 2,142 1,871 14%
Intergroup sales and other......................... (1) (1) --
------ ------
$3,805 $3,521 8%
====== ======
</TABLE>
Tenneco Automotive's revenue increase for the first half of 1998 was due to
volume gains, acquisition performance and favorable net pricing gains, partially
offset by the negative impact of the strong U.S. dollar on revenues earned in
overseas markets. Similar to the second quarter discussion above, volumes were
up in Tenneco Automotive's North American and European OE business due to new
platform launches and greater parts content per vehicle. The OE volume growth
added $107 million to the six month 1998 revenue increase. Aftermarket volumes
were down due to a soft aftermarket and the second quarter 1998 customer
inventory adjustment effort, reducing revenues by $70 million for the first half
of 1998 compared to the same period in 1997.
On a year to date basis, acquisitions have added $30 million to Tenneco
Automotive revenues. The remaining revenue change for the first half of 1998
compared to the 1997 period, a decrease of $54 million, was primarily due to the
impact of the strong U.S. dollar on revenues earned in overseas markets.
Tenneco Packaging's specialty and paperboard packaging businesses both
contributed revenue increases in the six month period ended June 30, 1998.
Specialty packaging's revenue increased to $1,361 million in 1998 from $1,173
million in 1997. The flexible and protective packaging businesses acquired from
KNP BT in April 1997 contributed $157 million of this increase while other
acquisitions contributed $11 million. Favorable pricing in the first quarter of
1998, particularly in consumer waste bags, aluminum and stretch film, combined
with volume growth in the second quarter as discussed previously, provided the
balance of the revenue increase for the first half of 1998 compared to the first
half of 1997.
Paperboard packaging's revenues climbed to $781 million for the first half
of 1998 from $698 million for the same period in 1997. This gain was primarily
due to pricing improvements as linerboard, medium and corrugated box pricing
continued to recover from the depressed prices in early 1997. Additionally, the
volume increase in corrugated box shipments previously discussed contributed to
higher revenues.
10
<PAGE> 12
Operating Income
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998 1997 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Tenneco Automotive.................................... $219 $211 4%
Tenneco Packaging..................................... 258 162 59%
Other................................................. (15) (2) NM
---- ----
$462 $371 25%
==== ====
</TABLE>
Tenneco Automotive's year to date operating income improvement resulted
from its cost reduction program and the net change in pricing and product mix
for the first half of 1998, partially offset by the volume changes discussed
above and the strong U.S. dollar. While the revenue increases from the higher OE
volumes more than offset the lower aftermarket volumes, the shift from higher
margin sales in the aftermarket to lower margin OE sales combined with the
effects of the GM strike had a net negative impact on operating income of $21
million for the first six months of 1998. Additionally, the strong U.S. dollar
reduced operating income $8 million for the first half of 1998 compared to the
same 1997 period. However, Tenneco Automotive's cost reduction efforts and the
positive operating income impact of the pricing and mix changes previously
discussed more than offset the volume and currency impacts.
Tenneco Packaging again had improvements in the operating income of both
the specialty and the paperboard businesses. Operating income for the specialty
packaging business increased from $139 million in the first six months of 1997
to $175 million in the same period of 1998. The protective and flexible
packaging businesses acquired from KNP BT in April 1997 contributed $17 million
of this increase while other acquisitions contributed $2 million. Cost reduction
initiatives and lower raw material prices contributed $18 million in improved
operating income for the first six months of 1998 over the same period in 1997.
Improved pricing through the first six months of 1998 combined with volume
increases were offset by increased fixed costs, including depreciation and
warehousing costs.
The paperboard packaging business reported operating income of $83 million
for the first six months of 1998 compared to $23 million in the comparable 1997
period. The results for 1998 included the $15 million pretax gain on the sale of
the remaining interest in a joint venture as discussed previously, while the
1997 period included a $38 million gain on a mill lease refinancing transaction.
Absent these one-time items, operating income would have been $68 million in the
1998 period compared to a $15 million loss in the 1997 period. Similar to the
second quarter results discussed previously, improved pricing and a volume
increase drove the improvement.
Interest Expense (net of interest capitalized)
Interest expense for the first six months of 1998 increased $19 million
over the same period in 1997 due to higher debt levels to finance Tenneco's
capital needs, including acquisitions and its share repurchase program.
Income Taxes
Tenneco's effective tax rate for the first six months of 1998 was 34
percent compared to 30 percent in the comparable 1997 period. The 1997 rate was
lower than the statutory rate as a result of non-recurring foreign tax benefits
recognized in that period. The 1998 effective tax rate was lower than the
statutory rate as a result of certain non-recurring tax benefits derived from
state tax planning opportunities.
Minority Interest
Minority interest primarily represents dividends on the preferred stock of
a subsidiary. The increase of $5 million in the first six months of 1998
resulted from the dividends paid on additional subsidiary preferred stock which
was issued in December 1997.
11
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
----- -----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ 178 $ 14
Investing activities...................................... (314) (536)
Financing activities...................................... 125 542
</TABLE>
Cash flow from operating activities improved by $164 million for the first
six months of 1998 compared to the same period in 1997. Income before non-cash
depreciation and deferred income taxes charges and gains or losses on the sale
of businesses and assets increased by $70 million in the first six months of
1998 over the 1997 period. Cash used in the components of working capital also
declined during the first half of 1998 compared to the same period in 1997,
contributing $128 million to the operating cash flow improvement. This
improvement was driven by a lower use of cash in the 1998 period for prepayments
and other current assets, payment of accounts payable and accrued taxes, and
payment of other current liabilities.
Cash used in investing activities declined by $222 million for the first
half of 1998 compared to 1997. The largest contributor to this decrease is the
lower level of cash spent for acquisitions of businesses in 1998. Acquisitions
of $58 million in 1998 have included Richter Manufacturing, which was purchased
in May 1998, while acquisitions of $289 million for the first six months of 1997
primarily related to the flexible and protective packaging businesses of KNP BT
acquired in April 1997. Capital expenditures during the first six months of 1998
were $80 million at Automotive, $144 million at Packaging and $8 million
primarily related to the consolidated data center. This compares to capital
expenditures for the first six months of 1997 of $86 million at Automotive and
$117 million at Packaging.
Cash provided by financing activities was down by $417 million for the
first half of 1998 compared to the same period in 1997. This primarily reflects
lower incremental borrowings during 1998 to fund acquisitions. Tenneco issued a
net $714 million of combined long-term and short-term debt during the first half
of 1997, which was $432 million greater than Tenneco issued during the first
half of 1998. Other 1998 financing activities included the sale of common and
treasury shares, primarily related to employee benefit plans, of $27 million and
the repurchase of $82 million of common stock pursuant to its share repurchase
program. Comparable 1997 activity was the sale of $20 million in common stock
primarily related to employee benefit plans and the repurchase of $90 million in
common stock under the share repurchase program. Tenneco paid dividends on its
common stock of $102 million in each of the 1998 and 1997 six month periods.
Capitalization
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
(MILLIONS)
<S> <C> <C>
Short-term debt................................... $ 591 $ 278
Long-term debt.................................... 2,626 2,633
Minority interest................................. 422 424
Shareowners' equity............................... 2,559 2,528
------ ------
$6,198 $5,863
====== ======
</TABLE>
The increase in debt for the first six months of 1998 represents the use of
cash for acquisitions, share repurchases and other activity as described under
Cash Flow above. Shareowners' equity increased during the first half of 1998 as
net income and the sale of shares for employee benefit plan purposes exceeded
dividends, share repurchases and the negative impact of cumulative translation
adjustments resulting from the strong U.S. dollar. As a result of these debt and
equity changes, Tenneco's debt to capitalization ratio at June 30, 1998 was 51.9
percent compared to 49.7 percent at December 31, 1997.
12
<PAGE> 14
Tenneco believes it has adequate capital resources available to meet its
future capital needs, including strategic acquisitions and announced share
repurchases.
CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement will be applied
prospectively and is effective for fiscal years beginning after December 15,
1998. The impact of this new standard is not expected to have a significant
effect on Tenneco's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires capitalized costs related to start-up
activities to be expensed as a cumulative effect of a change in accounting
principle when the statement is adopted. Tenneco capitalizes certain costs
related to start-up activities and is currently evaluating the new standard but
has not yet determined the impact on its financial position or results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes new accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. This statement will be applied prospectively and
is effective for all fiscal years beginning after June 15, 1999. Tenneco is
currently evaluating the new standard but has not yet determined the impact it
will have on its financial position or results of operations.
YEAR 2000
Many computer software systems, as well as certain hardware and equipment
utilizing date-sensitive data, were structured to use a two-digit date field
meaning that they will not be able to properly recognize dates in the Year 2000.
Tenneco's significant technology transformation projects are addressing the Year
2000 issue in those areas where replacement systems are being installed for
other business reasons. Where existing systems and equipment are expected to
remain in place beyond 1999, Tenneco has a detailed process in place to identify
and assess Year 2000 issues and to remediate, replace or establish alternative
procedures addressing non-Year 2000 compliant systems, hardware and equipment.
Tenneco continues to inventory its systems and equipment including computer
systems and business applications as well as date-sensitive technology embedded
in its equipment and facilities; plan for and undertake remediation, replacement
or alternative procedures for non-compliant Year 2000 systems and equipment; and
test remediated, replaced or alternative procedures for systems and equipment.
It expects to substantially complete the inventory by September 30, 1998.
Tenneco is in the process of confirming that none of its products are
date-sensitive. Remediation, replacement or alternative procedures for systems
and equipment are being undertaken on a business priority basis. This is ongoing
and has been completed at some plants. The process will continue and, depending
upon the business unit, is targeted to be completed, in most cases, sometime
during the fourth quarter of 1998 and the first through the third quarters of
1999 with testing to occur in the same time frame. Also, Tenneco is contacting
its major customers, suppliers, financial institutions and others with whom it
conducts business to determine whether they will be able to resolve in a timely
manner Year 2000 problems affecting Tenneco. As part of its planning and
readiness activities in the remainder of 1998 and 1999, Tenneco intends to
address and develop Year 2000 contingency plans for critical business processes.
13
<PAGE> 15
Based upon current estimates, Tenneco believes it will incur costs which
may range from approximately $50 to $60 million during 1998 and 1999 to address
Year 2000 issues and implement the necessary changes to its existing systems and
equipment. As of June 30, 1998, approximately $5 million of the costs have
already been incurred. These costs are being expensed as they are incurred,
except that in certain instances Tenneco may determine that replacing existing
computer systems or equipment may be more effective and efficient, particularly
where additional functionality is available. These replacements would be
capitalized and would reduce the estimated 1998 and 1999 expense associated with
Year 2000 issues.
In the event Tenneco is unable to complete the remediation, replacement or
alternative procedures for critical systems and equipment in a timely manner or
if those with whom Tenneco conducts business are unsuccessful in implementing
timely solutions, Year 2000 issues could have a material adverse effect on
Tenneco's results of operations. At this time, the potential effect in the event
Tenneco and/or third parties are unable to timely resolve Year 2000 problems is
not determinable, however, Tenneco believes it will be able to resolve its own
Year 2000 issues.
14
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareowners of the Company was held on May 12, 1998.
The following matters were voted upon at the meeting and the votes cast for,
against, or withheld, as well as the number of abstentions and broker non-votes,
as to each such matter is also included:
(a) Elections of directors for a term to expire at the year 2001
Annual Meeting of Shareowners:
<TABLE>
<CAPTION>
FOR WITHHELD
----------- ---------
<S> <C> <C>
Larry D. Brady........................................ 140,698,250 9,933,054
M. Kathryn Eickhoff................................... 140,725,355 9,905,949
Dana G. Mead.......................................... 140,684,718 9,946,586
Roger G. Porter....................................... 140,688,429 9,942,875
</TABLE>
(b) To approve the appointment of Arthur Andersen LLP as independent
public accountants for Tenneco Inc. for the year 1998:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED BROKER NON-VOTE
- ----------- ------- --------- ---------------
<S> <C> <C> <C>
149,589,313 612,448 429,543 -0-
</TABLE>
(c) To approve of a stockholder proposal concerning voting of proxies:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED BROKER NON-VOTE
- ---------- ----------- --------- ---------------
<S> <C> <C> <C>
14,817,119 120,298,503 4,140,369 11,375,313
</TABLE>
ITEM 5. OTHER INFORMATION
New SEC Rule 14a-4(c) -- On May 21, 1998 the Securities and Exchange
Commission ("SEC") adopted amendments to Rule 14a-4(c) under the Securities
Exchange Act of 1934. Generally, under new Rule 14a-4(c), a proxy may confer
discretionary authority to vote on any matter in the event that, among other
situations, the Company did not have notice of the matter at least 45 days
before the month and day on which the Company's proxy materials were mailed for
the prior year's annual meeting. For the 1999 Annual Meeting of Shareowners,
this date would be February 15, 1999 (45 days before April 1 -- the date of
mailing of the 1998 proxy materials). This is in addition to the date for
submission of business at the Annual Meeting of Shareowners under the Company's
By-laws which require, among other things, that notice of any matter be received
by the Company at its principal executive offices not less than 50 nor more than
75 days prior to the date of the meeting, except that if less than 65 days'
notice or prior public disclosure of the meeting date is given or made to
shareowners, notice of the matter must be received not later than the close of
business on the 15th day following the date of notice or public disclosure of
the meeting date, whichever occurs first. The requirement under the new SEC Rule
is also in addition to the deadline under SEC Rule 14a-8(e) for submission of
matters to be considered for inclusion in the Company's proxy statement
(December 2, 1998 for the 1999 Annual Meeting of Shareowners).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The exhibits filed herewith are listed in the exhibit index which
follows the signature page and immediately precedes the exhibits filed.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1998.
15
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TENNECO INC.
By: /s/ ROBERT T. BLAKELY
------------------------------------
Robert T. Blakely
Executive Vice President and
Chief Financial Officer
Date: August 14, 1998
16
<PAGE> 18
EXHIBITS
The following exhibits are filed with Tenneco Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, or incorporated therein by
reference (exhibits designated by an asterisk are filed with the Report; all
other exhibits are incorporated by reference):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C>
2 -- None.
3.1(a) -- Restated Certificate of Incorporation of Tenneco Inc. dated
December 11, 1996 (incorporated herein by reference from
Exhibit 3.1(a) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997).
3.1(b) -- Certificate of Designation, Preferences and Rights of Series
A Participating Junior Preferred Stock, dated December 11,
1996 (incorporated herein by reference from Exhibit 3.1(b)
of Tenneco Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1997).
3.1(c) -- Certificate of Amendment, dated December 11, 1996
(incorporated herein by reference from Exhibit 3.1(c) of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
3.1(d) -- Certificate of Ownership and Merger, dated July 8, 1997
(incorporated herein by reference from Exhibit 3.1(d) of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
3.2 -- Amended and Restated By-laws of Tenneco Inc. (incorporated
herein by reference from Exhibit 3.2 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
4.1 -- Form of Specimen Stock Certificate of Tenneco Inc. Common
Stock (incorporated herein by reference from Exhibit 4.1 of
Tenneco Inc.'s Form 10, File No. 1-12387).
4.2 -- Rights Agreement, dated as of December 11, 1996, by and
between Tenneco Inc. (formerly New Tenneco Inc.) and First
Chicago Trust Company of New York, as Rights Agent
(incorporated herein by reference from Exhibit 4.2 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
4.3(a) -- Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.1 of Tenneco Inc.'s Form S-4, Registration No.
333-14003).
4.3(b) -- First Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(b) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(c) -- Second Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(c) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(d) -- Third Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(d) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(e) -- Fourth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(e) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C>
4.3(f) -- Fifth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(f) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(g) -- Sixth Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(g) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(h) -- Seventh Supplemental Indenture dated as of December 11, 1996
to Indenture dated as of November 1, 1996 between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.3(h) of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
4.3(i) -- Eighth Supplemental Indenture, dated as of April 28, 1997,
to Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.1 of Tenneco Inc.'s Current Report on Form 8-K
dated April 23, 1997, File No. 1-12387).
4.3(j) -- Ninth Supplemental Indenture, dated as of April 28, 1997, to
Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.2 of Tenneco Inc.'s Current Report on Form 8-K
dated April 23, 1997, File No. 1-12387).
4.3(k) -- Tenth Supplemental Indenture, dated as of July 16, 1997, to
Indenture, dated as of November 1, 1996, between Tenneco
Inc. (formerly New Tenneco Inc.) and The Chase Manhattan
Bank, as Trustee (incorporated herein by reference from
Exhibit 4.1 of Tenneco Inc.'s Current Report on Form 8-K
dated June 11, 1997, File No. 1-12387).
10.1 -- Distribution Agreement, dated November 1, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Tenneco Inc. (formerly New Tenneco Inc.), and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 2 of Tenneco Inc.'s Form 10, File No. 1-12387).
10.2 -- Amendment No. 1 to Distribution Agreement, dated as of
December 11, 1996, by and among El Paso Tennessee Pipeline
Co. (formerly Tenneco Inc.), Tenneco Inc. (formerly New
Tenneco Inc.), and Newport News Shipbuilding Inc.
(incorporated herein by reference from Exhibit 10.2 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
10.3 -- Debt and Cash Allocation Agreement, dated December 11, 1996,
by and among El Paso Tennessee Pipeline Co. (formerly
Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.), and
Newport News Shipbuilding Inc. (incorporated herein by
reference from Exhibit 10.3 of Tenneco Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1996, File No.
1-12387).
10.4 -- Benefits Agreement, dated December 11, 1996, by and among El
Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco
Inc. (formerly New Tenneco Inc.), and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.4 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.5 -- Insurance Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Tenneco Inc. (formerly New Tenneco Inc.), and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.5 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C>
10.6 -- Tax Sharing Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Newport News Shipbuilding Inc., Tenneco Inc. (formerly New
Tenneco Inc.), and El Paso Natural Gas Company (incorporated
herein by reference from Exhibit 10.6 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.7 -- First Amendment to Tax Sharing Agreement, dated as of
December 11, 1996 among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco
Inc.) and Newport News Shipbuilding Inc. (incorporated
herein by reference from Exhibit 10.7 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.8 -- Transition Services Agreement, dated June 19, 1996, by and
among, Tenneco Business Services, Inc., El Paso Tennessee
Pipeline Co. (formerly Tenneco Inc.) and El Paso Natural Gas
Company (incorporated herein by reference from Exhibit 10.8
of Tenneco Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.9 -- Trademark Transition License Agreement, dated December 11,
1996, by and between Newport News Shipbuilding Inc. and
Tenneco Inc. (formerly New Tenneco Inc.) (incorporated
herein by reference from Exhibit 10.9 of Tenneco Inc.'s
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 1-12387).
10.10 -- Trademark Transition License Agreement, dated December 11,
1996, by and between Tenneco Inc. (formerly New Tenneco
Inc.) and El Paso Tennessee Pipeline Co. (formerly Tenneco
Inc.) (incorporated herein by reference from Exhibit 10.10
of Tenneco Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.11 -- 1997 Tenneco Inc. Board of Directors Deferred Compensation
Plan (incorporated herein by reference from Exhibit 10.11 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
10.12 -- Executive Incentive Compensation Plan (incorporated herein
by reference from Exhibit 10.12 of Tenneco Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997).
10.13 -- Tenneco Inc. Deferred Compensation Plan (incorporated herein
by reference from Exhibit 10.13 of Tenneco Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997).
10.14 -- Amended and Restated Tenneco Inc. Supplemental Executive
Retirement Plan (incorporated herein by reference from
Exhibit 10.12 of Tenneco's Form 10, File No. 1-12387).
10.15 -- Amended and Restated Tenneco Inc. Benefit Equalization Plan
(incorporated herein by reference from Exhibit 10.13 of
Tenneco's Form 10, File No. 1-12387).
10.16 -- Amended and Restated Supplemental Pension Agreement, dated
September 12, 1995 between Dana G. Mead and Tenneco Inc.
(incorporated herein by reference from Exhibit 10.15 of
Tenneco's Form 10, File No. 1-12387).
10.17 -- Amended and Restated Tenneco Inc. Change in Control
Severance Benefit Plan for Key Executives (incorporated
herein by reference from Exhibit 10.16 of Tenneco's Form 10,
File No. 1-12387).
10.18 -- Amended and Restated Tenneco Benefits Protection Trust
(incorporated herein by reference from Exhibit 10.18 of
Tenneco's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
10.19 -- Employment Agreement, dated March 12, 1992 between Dana G.
Mead and Tenneco Inc. (incorporated herein by reference from
Exhibit 10.19 of Tenneco's Form 10, File No. 1-12387).
10.20 -- Employment Agreement, dated December 3, 1993 between Paul T.
Stecko and Tenneco Packaging Inc. (incorporated herein by
reference from Exhibit 10.20 of Tenneco's Form 10, File No.
1-12387).
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<C> <C> <S>
10.21 -- Agreement, dated September 9, 1992 between Theodore R.
Tetzlaff and Tenneco Inc. (incorporated herein by reference
from Exhibit 10.21 of Tenneco's Form 10, File No. 1-12387).
*10.22 -- Release Agreement dated July 6, 1998 between Stacy S. Dick,
Pamela Dick and Tenneco Management Company
10.23 -- 1996 Tenneco Inc. Stock Ownership Plan, as amended
(incorporated herein by reference from Exhibit 10.23 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997).
10.24 -- Amended and Restated Mill I Lease, dated as of November 4,
1996, between Credit Suisse Leasing 92A, L.P. and Tenneco
Packaging Inc. (incorporated herein by reference from
Exhibit 10.28 of Tenneco Inc.'s Form 10-K for the year ended
December 31, 1996, File No. 1-12387).
10.25 -- Amended and Restated Mill II Lease, dated as of November 4,
1996, between Credit Suisse Leasing 92A, L.P. and Tenneco
Packaging Inc. (incorporated herein by reference from
Exhibit 10.29 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, File No. 1-12387).
10.26 -- Timberland Lease, dated January 31, 1991, by and between
Four States Timber Venture and Packaging Corporation of
America, as amended (incorporated herein by reference from
Exhibit 10.26 of Tenneco Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1997).
10.27 -- Professional Services Agreement, dated August 22, 1996, by
and between Tenneco Business Services Inc. and Newport News
Shipbuilding and Dry Dock Company (incorporated herein by
reference from Exhibit 10.28 of Tenneco Inc.'s Form 10, File
No. 1-12387).
10.28 -- Termination Agreement, dated April 23, 1998, by and between
Tenneco Business Services Inc. and Newport News Shipbuilding
and Dry Dock Company, a wholly-owned subsidiary of Newport
News Shipbuilding Inc., relating to Professional Services
Agreement, dated August 22, 1996 (incorporated herein by
reference from Exhibit 10.28 of Tenneco's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998).
11 -- None.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
15 -- None.
18 -- None.
19 -- None.
22 -- None.
24 -- None.
*27.1 -- Financial Data Schedule.
28 -- None.
99 -- None.
</TABLE>
- -------------------------
Note: Exhibits designated by an asterisk are filed with this Report; all others
are incorporated by reference.
20
<PAGE> 22
Tenneco Logo
<PAGE> 1
EXHIBIT 10.22
[ LETTERHEAD OF TENNECO ]
July 6, 1998
Mr. Stacy S. Dick
187 West Old Mill Road
Greenwich, Connecticut 06831
Re: Release Agreement
Dear Stacy:
This Release Agreement ("Agreement") entered into as of the date at the end
hereof is by and between Stacy S. Dick ("Employee"),Pamela Dick ("Employee's
Spouse"), and the employer, Tenneco Management Company, ("Employer")
(collectively, "the Parties").
The Parties named above agree as follows:
1. Employee's employment with Employer will terminate on July 31, 1998
(the "Termination Date").
2. Employer shall provide the following to Employee, subject to
applicable tax withholdings and any amounts due the Employer,
conditioned upon final execution of this Agreement and after the
additional seven-day period referred to in paragraph 26:
- Payment - Upon receipt of signed agreement, Employee will
receive a lump sum payment of $848,000, as soon as
administratively feasible after July 31, 1998. This payment
shall be in lieu of any other payments, wages, cost of living
adjustments, and benefits. If either the Employee or
Employee's Spouse fail to execute this Agreement by July 28,
1998, or revoke or cancel this Agreement during the seven-day
period referred to in Paragraph 26, Employer shall not be
obligated to make lump sum payment to
<PAGE> 2
Stacy S. Dick
Page 2
Employee. If Employee revokes or cancels the Agreement after
Employer has made the lump sum payment, Employee shall be
obligated to return to Employer all benefits and payments
provided to him under this Agreement, including but not
limited to the lump sum payment.
- Business Expenses - Reimbursement for any business expenses
incurred by Employee on behalf of the Employer that have been
submitted for reimbursement in accordance with the Employer's
normal expense account procedures.
- Retirement Plan Vesting - Since Employee is a participant in
the Tenneco Inc. Retirement Plan and has completed five years
of service on the Termination Date, he is 100% vested in his
accrued benefit under the Tenneco Inc. Retirement Plan. For
information regarding Retirement Benefits, the Employee should
call the Benefits Center at 1-800-444-5578.
Employee is also a participant in the Tenneco Inc.
Supplemental Executive Retirement Plan (the "SERP"), and
pursuant to a special agreement covering him, which has been
merged into the SERP, he has been credited with five
additional years of participation. Employee is 100% vested in
his accrued benefit under the SERP. Employee is entitled to
receive the benefit of recently adopted amendments to the SERP
which count certain bonuses for purposes of computing SERP
benefits, which feature was also included in his special
agreement, and which permit lump sum distributions.
- Executive Incentive Compensation Plan - Should the Company
achieve the performance goals for Incentive Award payout, the
Employee will receive a pro-rata adjusted target 1998 award,
payable in 1999. No future awards will be made under this
Plan.
<PAGE> 3
Stacy S. Dick
Page 3
- 1996 Tenneco Inc. Stock Ownership Plan - Employee has 210,822
options to purchase shares of Tenneco common stock. All such
options shall be deemed exercisable as of August 1, 1998, and
shall remain exercisable until July 31, 2003, provided that,
except to the extent specifically modified herein, all terms
and conditions of the 1996 Tenneco Inc. Stock Ownership Plan
{"SOP"), as it may be amended from time to time, and the Award
Agreements covering such options, as they may be amended from
time to time, shall remain applicable to such options,
including without limitation, the provisions governing the
adjustment and amendment of outstanding options, and, provided
further, that, notwithstanding the terms of the Award
Agreement, Employee shall not be awarded any Reload Stock
Options, as that term is defined in the SOP, upon the exercise
of any such options. No future awards of options will be made
under this Plan.
- Performance Shares - The Employee has been granted 28,000
Performance Shares under the SOP. Employee will not forfeit
such Performance Shares on account of his separation from
service with Employer, and such Performance Shares shall
remain outstanding, and, except as specifically provided
herein, shall continue to be subject to the rules of the SOP
and the Performance Share Award Agreement covering them.
Performance Shares will be distributed to Employee as soon as
administratively feasible based on the number of shares earned
at the end of each applicable four year performance period. No
future awards of Performance Shares will be made under this
Plan.
- Tenneco Inc. Restricted Shares - Employee's 5,530 restricted
shares will vest on the Termination Date. A Stock Certificate
for the appropriate number of shares will be delivered to the
employee as soon as administrative feasible.
- Deferred Compensation - Employee may elect at any time prior
to the Termination Date, the payment of the balance in his
Deferred Compensation Account under the Tenneco Inc. Deferred
Compensation Plan (the "DCP") in either a
<PAGE> 4
Stacy S. Dick
Page 4
single lump sum distribution payable as soon as
administratively feasible after the Termination Date or in
five (5) annual installments commencing in 1998. If he elects
installments, the rules of the DCP shall continue to apply to
the remaining balance until paid.
- Thrift Plan - Employee is a participant in the Tenneco Inc.
Thrift Plan and contributions to the Tenneco Inc. Thrift Plan
cease upon the termination of Employee's employment. Employee
may then elect to receive a final settlement of his account
balance, usually within four to six weeks following the
receipt of his properly completed election forms. Employee is
100% vested in his account. Apart from an excise tax
applicable to certain large distributions, taxable funds will
be subject to ordinary income taxes and a 10% excise tax if
Employee is under age 59 1/2 at the time of distribution
unless the taxable funds are rolled over to an IRA within
sixty (60) days from the date of distribution. Due to the tax
changes passed effective January 1, 1993, there have been
changes regarding IRA-rollover and federal income tax
withholding provisions. Employee should contact the Benefits
Center for information about his Thrift Plan account,
including any outstanding Thrift Plan loans, and the tax
consequences of his distribution.
- Medical Coverage Continuation - If enrolled in the Tenneco
medical plan at the Termination Date, continued coverage under
the Tenneco medical plan as it may be amended from time to
time will be offered to Employee and Employee's eligible
dependents on an optional basis with your sharing the cost
(after-tax basis) for up to twelve (12) months from the
Termination Date (the "continuation period"). Employee will
remain responsible for any employee contribution required by
his medical coverage choice. In the event Employee enrolls in
a group medical plan of a new employer before the end of his
continuation period, his new coverage will be primary and
Tenneco medical coverage will be secondary as provided in the
medical plan.
<PAGE> 5
Stacy S. Dick
Page 5
Unless Employee is covered by another group medical plan at
the expiration of the continuation period, he may be able to
continue, completely at his own expense, Tenneco medical
coverage for up to an additional eighteen (18) months under
COBRA. Following termination of Tenneco medical coverage, an
individual medical benefits conversion policy may be
available.
- Dental Coverage Continuation - If enrolled in the Tenneco
dental plan at the Termination Date, coverage under the
Tenneco dental plan as it may be amended from time to time,
(or the DMO option you have elected) will be offered to
Employee and Employee's eligible dependents on an optional
basis with your sharing the cost (after-tax basis) for up to
twelve (12) months from the Termination Date. Employee remain
responsible for any employee contribution required by your
dental coverage choice. In the event Employee enroll in a
group dental plan of a new employer before the end of his
continuation period, Employee's new coverage will be primary
and Tenneco dental coverage will be secondary as provided in
the dental plan.
Unless Employee is covered by another group dental plan at the
expiration of the continuation period, he may be able to
continue, completely at his own expense, Tenneco dental
coverage for up to an additional eighteen (18) months under
COBRA.
- Life Insurance Continuation - Under the Tenneco basic group
life insurance plan as it may be amended from time to time,
Employee's basic life and accidental death and dismemberment
(AD&D) coverage will continue at Company expense for twelve
(12) months from the Termination Date. An individual life
insurance conversion policy may be available following
termination of Tenneco life insurance coverage. Employee may
not continue your supplemental or dependent coverages past the
Termination Date.
<PAGE> 6
Stacy S. Dick
Page 6
- Disability and Accident Insurance - Employee's participation
in the Tenneco Inc. Long Term Disability and Travel Accident
Insurance Plans ceases upon his termination of employment.
- Other Benefit Plans - Except as set out in this Agreement, the
provisions of the policies or plan documents will control.
- Relocation Loan Modification - The Employer, and the Employee
and Employee's Spouse are parties to a May 1, 1996 Balloon
Note (Fixed Rate)(the "Note") in the principal amount of
$400,000, which Note has a current outstanding principal
balance of $400,000. The Employer hereby forgives $200,000 of
the principal of the Note, leaving a principal balance of the
Note of $200,000. Pursuant to Paragraph 11 of the Note, the
Note Holder, at its sole option, may send notice requiring
payment within 90 days after the Termination Date (as defined
therein) in the event Employee's employment with Tenneco
Management Company or its affiliates is terminated for any
reason. Employee and Employee's Spouse hereby agree that upon
the execution of this Agreement such notice shall be deemed
given hereby by the Employer with respect to the $200,000
balance of the principal plus accrued interest on the Note,
after the forgiveness above. Notwithstanding the foregoing,
the parties hereby further agree that the "maturity date" of
the Note shall be amended to be the earlier of August 1, 2000,
or such time as the Employee and Employee's Spouse divest any
of their interests in the property generally described as 187
West Old Mill Road, Greenwich, Connecticut, by sale, gift,
transfer or otherwise, to any other person or entity.
Notwithstanding anything in the note to the contrary, Tenneco
hereby agrees under Section 3 (c) of the Note that no interest
shall be charged under the Note, except upon a default
described in Section 6(B) of the Note after which interest
shall be charged at the default rate set forth in Section 2 of
the Note and be payable on demand. The parties hereby agree to
execute within five (5) days of the expiration of the seven
day revocation period set forth in paragraph 26
<PAGE> 7
Stacy S. Dick
Page 7
of this Agreement, a Loan Modification Agreement and Allonge
to Note containing the provisions set forth in this paragraph,
which Loan Modification Agreement and Allonge to Note shall be
recorded with the Recorders Office in Fairfield County,
Connecticut. Copies of such Loan Modification Agreement and
the Allonge to Note are attached hereto as Attachment 1. All
other rights and remedies of Tenneco and its affiliates under
the Note or under the Mortgage serving this Note shall be
preserved and are unaffected by this Agreement.
Notwithstanding the foregoing, Employer agrees that if more
than 90 percent of the Balloon Notes issued by the Employer to
various employees in connection with the relocation of the
Tenneco's Headquarters operations from Houston, Texas to
Greenwich, Connecticut that remain outstanding as of August 1,
1998, are forgiven in whole and canceled by the Employer on or
before August 1, 1999, the Employer shall forgive in whole and
cancel the Note (as defined and modified hereunder) by the
Loan Modification Agreement and Allonge to Note described
above and attached hereto as Attachment 1.
3. Employee acknowledges that his employment shall terminate with
Employer, its direct or indirect subsidiaries, affiliates, parents, and
related companies or entities, regardless of its or their form of
business organization, including without limitation the plans described
in paragraph 6 (all collectively the "Employer Entities"), on or before
July 31, 1998.
4. In exchange for the compensation and benefits described in paragraph 2,
Employee and Employee's Spouse release and discharge any and all
Employer Entities as defined in paragraph 3, and any and all of their
past and present subsidiaries, affiliates, parents, related companies,
persons and entities, directors, employees, officers, agents, partners,
insurers, attorneys, trustees, administrators and fiduciaries (all
collectively the "Released Parties") from any and all claims, demands,
and causes of action, whether arising in contract, tort or any other
theory of action, whether arising in law or equity, whether known or
unknown, accrued or unaccrued, asserted or unasserted, from the
beginning of time up to the effective date of this Agreement, except
for those obligations
<PAGE> 8
Stacy S. Dick
Page 8
created by or arising out of this Agreement. Nothing contained herein
shall release the Employer Entities from any indemnity obligations it
may have under Delaware law to Employee with respect to his service as
an officer or director of any Employer Entity. Employee and Employee's
Spouse expressly waive the benefit of any statute or rule of law which,
if applied to this Agreement, would otherwise exclude from its binding
effect any claim against any Released Party not now known by Employee
or Employee's Spouse to exist. Except as necessary for Employee and
Employee's Spouse to enforce this Agreement, this Agreement is intended
to be a general release and a covenant not to sue that extinguishes all
claims and precludes any attempt by Employee or Employee's Spouse to
initiate any litigation against any Employer Entity. Without limiting
the generality of this paragraph, if Employee or Employee's Spouse
commence or continue any claim in violation of this Agreement, the
Released Party shall be entitled to assert this Agreement as a bar to
such action or proceeding and shall be entitled to recover its
attorneys' fees and costs of litigation from the party commencing or
continuing the claim, including reasonable compensation for the
services of the internal personnel of the Released Party.
5. Without in any way limiting the generality of the foregoing, this
Agreement is an individually tailored separation agreement and
constitutes a full release and disclaimer of any and all claims arising
out or accruing up to the effective date of this Agreement, including
but not limited to any claims arising out of or in any way connected
with or relating to the termination of Employee's employment and any
claims arising out of or in any way connected with or related to
Employee's employment with Employer or any other Employer Entity up to
the effective date of this Agreement. The scope of this waiver includes
but is not limited to claims arising under 29 U.S.C. Section 1981, the
Age Discrimination in Employment Act of 1967 as amended (29 U.S.C.
Section 621), Title VII of the Civil Rights Act of 1964 as amended, (42
U.S.C. Section 2000e), the Americans With Disabilities Act (42 U.S.C.
Section 12101), the Worker Adjustment Retraining and Notification Act
(29 U.S.C. Section 2101), the Family and Medical Leave Act of 1993 (29
U.S.C. Section 2601), the Connecticut Human Rights and Opportunities
Act, the Connecticut Family and Medical Leave laws (Conn. Gen. Stat.
31-51cc to 31-51gg and Ct. Legis, 96-140, effective January 1, 1997),
the Texas Human Rights Act, (Tex Rev. Civ. Stat. Art. 5221k), the
National Labor
<PAGE> 9
Stacy S. Dick
Page 9
Relations Act, any claims for breach of contract, wrongful or
retaliatory discharge, tortious action, inaction or interference of any
sort, and any claim under any other state, local or federal statute,
regulation or ordinance, or common law cause of action.
6. It is expressly agreed that the payments described in paragraph 2 of
this Agreement are in full and complete satisfaction of any and all
liabilities or obligations which any Employer Entity, including any
plan, fund or program sponsored, maintained or contributed to by any
Employer Entity, has or may have to Employee and Employee's Spouse
under or with respect to any employee benefit plan described in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any payment or other item excluded from the definition of
"employee welfare benefit plan", "employee pension benefit plan" or
"employee benefit plan" under the rules of 29 C.F.R. Section 2510.3-1,
2510.3-2 or 2510.3-3, as the case may be, and any employee benefit plan
described in Section 4 of ERISA. It is further agreed that the payments
described in this Agreement exceed in value anything to which Employee
and Employee's Spouse may be already entitled.
7. Employee and Employee's Spouse represent that neither of them has
assigned or transferred, or purported to assign or transfer, to any
person or entity, any claim or any portion thereof or interest therein
against a Released Party.
8. Employee represents that he has turned over to Employer all originals
and copies of expense reports, notes, memoranda, records, documents,
Employer manuals, credit cards, pass keys, computers, computer
diskettes, office equipment, sales records and data, and all other
information or property, no matter how produced, reproduced or
maintained, which Employee has in his possession and pertain to the
business of any Employer Entity, including but not limited to lists of
customers, prices, marketing plans, strategies, documents relating to
the legal rights and obligations of any Employer Entity, the work
product of any attorney employed or retained by any Employer Entity,
and other confidential materials or information obtained by Employee in
the course of his employment.
<PAGE> 10
Stacy S. Dick
Page 10
9. Employee acknowledges that the business and services of all Employer
Entities are highly specialized and that the following information is
Confidential Information: proprietary technical and business
information relating to any Employer Entity's plans, analysis or
strategies concerning international or domestic acquisitions, possible
acquisitions or new ventures; development plans or introduction plans
for products or services; unannounced products or services; operation
costs; pricing of products or services; research and development;
personnel information; manufacturing processes; installation, service
and distribution procedures and processes; customer lists; any
know-how relating to the design, manufacture, and marketing of any
Employer Entity's services and products, including components and
parts thereof; non-public information acquired by Employee concerning
the requirements and specifications of any Employer Entity's agents,
vendors, contractors, customers and potential customers; non-public
financial information, business and marketing plans, pricing and price
lists; non-public matters relating to employee benefit plans;
quotations or proposals given to agents or customers or received from
suppliers; documents relating to any Employer Entity's legal rights
and obligations; the work product of any attorney employed by or
retained by any Employer Entity; and any other information which is
sufficiently secret to derive economic value from not being generally
known. No information shall be Confidential Information that is, or
becomes, generally available to the public other than as a result of
Employee's disclosure or that becomes available to Employee on a
nonconfidential basis from a source other than the Employee.
10. Employee shall maintain in the strictest confidence and will not,
directly or indirectly, use, intentionally or inadvertently, publish
or otherwise disclose to any person or entity whatever, any trade
secrets, or any confidential, proprietary or other non-public
information of or belonging to any Employer Entity or any agent, joint
venturer, contractor, customer, vendor or supplier of any Employer
Entity (collectively, the "Confidential Information"), regardless of
its form without the prior written explicit consent of Employer.
Employee shall take reasonable precautions to protect the inadvertent
disclosure of Confidential Information. Employee's obligations under
this Agreement with respect to Confidential Information shall extend
for the period that such information is not generally known outside of
the relevant Employer Entity for reasons other than disclosure or
disclosures made by or on
<PAGE> 11
Stacy S. Dick
Page 11
behalf of Employee. All duties and obligations set forth in this
Agreement shall be in addition to those which exist under statute and
at common law and shall not negate but shall be in addition to or
coextensive with those obligations arising under any agreements or
documents executed by Employee during his employment with Employer.
Should Employee be served with legal process seeking to compel
disclosure of any such information, Employee shall notify the General
Counsel of Employer immediately.
11. Paragraphs 9 and 10 hereof shall be deemed to consist of a series of
separate covenants. Should a determination be made by a court of
competent jurisdiction that the character, duration, or geographical
scope of those provisions are unreasonable in light of the
circumstances as they then exist, then it is the intention and the
agreement of Employer and Employee that these shall be construed by
the court in such a manner as to impose only those restrictions on
Employee's conduct which are reasonable in light of the circumstances
as they then exist and as are necessary to assure the relevant
Employer Entity of their intended benefit. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate
covenants because, taken together, they are more extensive than
necessary to assure the relevant Employer Entity of the intended
benefit, then it is expressly understood and agreed that those of such
covenants which, if modified or eliminated, would permit the remaining
separate covenants to be enforced in such proceeding, shall, for the
purpose of such proceeding, be deemed modified or eliminated in order
to enforce the remaining provisions.
12. Nothing in this Agreement shall be construed as an admission of any
wrongdoing by any person or entity.
13. The Parties agree to cooperate fully and to execute any and all
supplementary documents and to take all additional actions that may be
necessary or appropriate to give full force to the terms and intent of
this Agreement that are not inconsistent with its terms.
14. Employee shall provide thorough and accurate information and testimony
voluntarily to or on behalf of any Employer Entity, regarding any
investigation or court case initiated by or against any Employer
Entity or by any government agency, but he agrees not to disclose or
to discuss with anyone who is not directing or assisting in any
Employer
<PAGE> 12
Stacy S. Dick
Page 12
Entity investigation or case, other than his attorney, the fact of or
the subject matter of any investigation, except as required by law.
Employee will cooperate with the Employer Entity and promptly provide
such information. If the Employer Entity requests information, it will
attempt to work with Employee to arrange times that reasonably
accommodate him, and will reimburse Employee for commuting, parking or
other similar expenses and, to the extent permitted by law, will
reasonably compensate Employee for any significant imposition on his
time by the request.
15. Employee acknowledges that any employment or contractual relationship
between Employee and any and all Employer Entities, including but not
limited to the Employer, will terminate by virtue of this Agreement on
or before July 31, 1998. In consideration of this Agreement, Employee
waives any and all employment rights that Employee now has with any
Employer Entity, except as otherwise expressly provided in this
Agreement. Employee agrees not to seek reinstatement, reemployment, or
future employment as a new employee, and no Employer Entity has an
obligation, contractual or otherwise, to employ or reemploy, hire or
rehire, or recall or reinstate Employee in the future.
16. Employee and Employee's Spouse agree to keep confidential the terms,
conditions, and amounts set forth in this Agreement, except to their
attorneys, accountants, and tax advisors, and not to disclose any
information relating to this Agreement to any employee or former
employee of any Employer Entity except as required by law or a court
of competent jurisdiction. The Employer and all Employer Entities
hereby agree to keep confidential the terms, conditions, and amounts
set forth in this Agreement, except as required by law or a court of
competent jurisdiction.
17. It is further agreed that if any provision of this Agreement
contravenes the law of any state or jurisdiction where this Agreement
is to be performed or enforced, such provision shall be deemed not to
be a part of this Agreement, and the other provisions of this
Agreement, shall remain in full force and effect.
<PAGE> 13
Stacy S. Dick
Page 13
18. The failure of the Employer to exercise any rights under this
Agreement upon any breach or threatened breach by Employee or
Employee's Spouse shall not constitute a waiver of any rights arising
by reason of other or similar breaches.
19. Employee and Employee's Spouse shall have no right of assignment or
transfer of any rights herein or any sums that may accrue to them
hereunder, nor shall any creditor or other claimant have any right to
assert any interest in or right to receive such sums either by
voluntary or involuntary act on their part, by any writ or garnishment
or attachment or otherwise.
20. This Agreement shall be deemed to have been executed and delivered
within the State of Connecticut and the rights and obligations of the
Parties shall be construed and enforced in accordance with, and
governed by, the laws of the State of Connecticut without regard to
that state's rules regarding conflict of laws. The language of all
parts of this Agreement shall in all cases be construed as a whole,
according to its fair meaning and not strictly for or against any of
the Parties.
21. Employer and all Employer entities waive any claims now known to them
that might be asserted by them against Employee or Employee's Spouse
arising out of the employment relationship.
22. Employee and Employee's Spouse acknowledge and warrant that they are
unaware of any claim which may be asserted by themselves or any other
person in connection with Employee's employment with the Employer or
the termination thereof. This Agreement shall be binding upon and
inure to the benefit of the respective successors, heirs, assigns,
administrators, executors and legal representatives of the Parties and
other entities described in this Agreement.
23. Employee and Employee's Spouse warrant that no promise or inducement
to enter into this Agreement has been offered or made except as set
forth in this Agreement, that each is entering into this Agreement
without any threat or coercion and without reliance on any statement
or representation made on behalf of any Employer Entity or by any
person employed by or representing any Employer Entity, except for the
written provisions and promises contained in this Agreement.
<PAGE> 14
Stacy S. Dick
Page 14
24. This Agreement constitutes the entire agreement and understanding
between the Parties with regard to all matters, including but not
limited to Employee's employment, the cessation of his employment from
Employer, payments owed to him and his spouse as a result thereof, and
the other subject matters addressed in this Agreement. This Agreement
supersedes and replaces all prior commitments, negotiations and all
agreements proposed or otherwise, whether written or oral, concerning
the subject matters contained in this Agreement. This Agreement is an
integrated document and the consideration stated herein is the sole
consideration for this Agreement.
25. This Agreement is being delivered to Employee and Employee's Spouse on
July 6,1998. Employee and Employee's Spouse shall have until July 28,
1998, to decide whether to sign the Agreement and be bound by its
terms.
26. In addition, the Parties agree that even after signing the Agreement,
Employee and Employee's Spouse shall have the right to revoke or
cancel it only within seven days after signing it. This cancellation
or revocation can be accomplished by delivery of a written
notification if Employee or Employee's Spouse wishes to revoke the
Agreement to the Vice President of Human Resources. In the event that
this Agreement is canceled or revoked by Employee or Employee's
Spouse, Employer shall have no obligation to meet the commitments
described in this Agreement.
27. Employee and Employee's Spouse acknowledge that they each have been
advised and encouraged by Employer to consult their own attorney prior
to signing this Agreement, and that the Employee and Employee's Spouse
execute this Agreement voluntarily.
<PAGE> 15
Stacy S. Dick
Page 15
28. Employee and Employee's Spouse acknowledge that they each have read
this Agreement and that the Employee and Employee's Spouse understand
that the Agreement will have the effect of waiving any action or
recovery they might pursue, including breach of contract, personal
injury, discrimination on the basis of race, age, sex, national
origin, citizenship, religion, veteran status, handicap, or disability
and any other claims arising prior to the date of the Agreement,
Sincerely,
/s/ Stephen J. Smith
Stephen J. Smith
Vice President, Human Resources
APPROVED BY:
/s/ Dana G. Mead
--------------------------------
Dana G. Mead
Chief Executive Officer
Date:
AGREED AND ACCEPTED:
/s/ Stacy S. Dick Date: 7/21/98
- -------------------------- ----------------
Stacy S. Dick
/s/ Pamela Dick Date: 7/21/98
- -------------------------- ----------------
Pamela Dick
Attachment
<PAGE> 1
EXHIBIT 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
--------------
1998 1997
----- -----
<S> <C> <C>
Net income.................................................. $ 212 $ 180
Add:
Interest............................................... 117 98
Portion of rentals representative of interest factor... 29 26
Preferred stock dividend requirements of majority-owned
subsidiaries.......................................... 14 10
Income tax expense and other taxes on income........... 118 82
Amortization of interest capitalized................... -- 1
Undistributed (earnings) losses of affiliated companies
in which less than a 50% voting interest is owned..... (3) (1)
----- -----
Earnings as defined............................... $ 487 $ 396
===== =====
Interest.................................................... $ 117 $ 98
Interest capitalized........................................ -- 1
Portion of rentals representative of interest factor........ 29 26
Preferred stock dividend requirements of majority-owned
subsidiaries on a pre-tax basis........................... 22 16
----- -----
Fixed charges as defined.......................... $ 168 $ 141
===== =====
Ratio of earnings to fixed charges.......................... 2.90 2.81
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Tenneco Inc.
and Consolidated Subsidiaries Financial Statements and is qualified in its
entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 888
<ALLOWANCES> 0
<INVENTORY> 973
<CURRENT-ASSETS> 2,332
<PP&E> 5,501
<DEPRECIATION> 1,968
<TOTAL-ASSETS> 8,708
<CURRENT-LIABILITIES> 1,934
<BONDS> 2,626
0
0
<COMMON> 2
<OTHER-SE> 2,557
<TOTAL-LIABILITY-AND-EQUITY> 8,708
<SALES> 3,805
<TOTAL-REVENUES> 3,805
<CGS> 2,678
<TOTAL-COSTS> 2,678
<OTHER-EXPENSES> 713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117
<INCOME-PRETAX> 345
<INCOME-TAX> 117
<INCOME-CONTINUING> 212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
