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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 21, 1998
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TENNECO INC.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
DELAWARE 1-12387 76-0515284
(State or Other (Commission (IRS Employer
Jurisdiction File Number) Identification
of Incorporation) Number)
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<TABLE>
<S> <C>
1275 KING STREET 06831
GREENWICH, CONNECTICUT (Zip Code)
(Address of Principal Executive
Offices)
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Registrant's telephone number, including area code: (203) 863-1000
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ITEM 5. OTHER EVENTS.
On July 21, 1998, Tenneco Inc. (the "Registrant") announced its earnings in
the quarter ended June 30, 1998 and other matters.
On July 21, 1998, the Registrant also announced strategic actions, as
described in the news release filed herewith as Exhibit 99.2.
Copies of the Registrant's news releases are attached as exhibits to this
report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
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EXHIBIT NO. DESCRIPTION
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99.1 Press Release issued July 21, 1998 by Tenneco Inc. regarding
earnings of Tenneco Inc. for the quarter ended June 30, 1998
and other matters.
99.2 Press release issued July 21, 1998 by Tenneco Inc.
announcing strategic actions.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TENNECO INC.
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Date: August 3, 1998 By: /s/ KARL A. STEWART
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Karl A. Stewart
Vice President and Secretary
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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99.1 Press Release issued July 21, 1998 by Tenneco Inc. regarding
earnings of Tenneco Inc. for the quarter ended June 30, 1998
and other matters.
99.2 Press release issued July 21, 1998 by Tenneco Inc.
announcing strategic actions.
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Exhibit 99.1
NEWS RELEASE
CONTACT: Neil Geary, Media, 203-863-1073, or Barbara Posner, Media,
203-863-1374, or Lisa Lobon, Investor Relations, 203-863-1186, all of Tenneco
Tenneco Second Quarter Earnings Rise 33 Percent - To 81 Cents Per Share -
On Revenue Gains In Automotive Original Equipment and Packaging
GREENWICH, Conn., July 21, 1998 -- Tenneco (NYSE: TEN) today reported
second quarter net income of $137 million, or 81 cents per share, compared to
$104 million, or 61 cents per share in the second quarter of 1997, an increase
of 33 percent.* Tenneco also reported a 5 percent increase in consolidated
revenues to $2.0 billion, compared to the $1.9 billion reported the previous
year.
Tenneco's improved revenue and earnings were driven by strong
performance by Tenneco Automotive's North American and European original
equipment(OE) businesses and growth in the specialty and paperboard packaging
businesses of Tenneco Packaging.
Tenneco Packaging revenue increased from $1.0 billion to $1.1
billion. Tenneco Packaging operating income grew 83 percent from $82 million to
$150 million for the second quarter of 1998, including a pretax $15 million
gain, 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.
Specialty Packaging's revenue increased from $669 million to $731 million and
operating income increased from $90 million to $101 million. Operating income in
Specialty's consumer products group improved as a result of strong consumer
volume and improved consumer waste bag and stretch film margins. Hefty OneZip(R)
bag volume increased 18 percent over the 1997 quarter. The flexible and
protective packaging business of KNP BT, acquired last year, contributed to the
strong sales and profit results.
Paperboard packaging reported a 15 percent revenue increase to $402 million
from $350 million a year ago as operating income rose from a loss of $8 million
the previous year to $49 million, including the $15 million gain from Caraustar.
Revenue and operating income improvements resulted from higher volume and
improved year-over-year linerboard, medium and corrugated box pricing.
Tenneco Automotive's overall revenue and operating income were
essentially equal to last year's record quarterly performance. Tenneco
Automotive reported $130 million in operating income on revenue of $864 million,
compared to $131 million on revenue of $873 million in the year-earlier period.
Original equipment business in North America and Europe recorded revenue
increases of 11 percent and 13 percent to $259 million and $196 million
respectively, helping overcome effects of the General Motors (GM) strike and
currency fluctuation. The economic
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slowdown in Asia and South America had a negligible direct impact on earnings.
North American OE revenue and operating income improved as the business
placed its products in the fast-growing light truck market and successfully
implemented numerous new OE platform launches. Tenneco Automotive European
OE operating income climbed significantly with the successful launch of
new platforms, numerous full-system initiatives and increased content per
launch. Tenneco Automotive's North American aftermarket revenues declined 18
percent to $189 million from $230 million in the year earlier second quarter,
resulting in lower operating income, as Tenneco worked with its customers to
reduce their inventory levels and improve their cash management. The effects of
the inventory adjustment and increased service bay activity are expected to
result in volume and margin improvement going forward. While European
aftermarket sales declined 5 percent from $148 million to $141 million,
operating income increased. In Argentina, where Tenneco has a leading position,
aftermarket sales increased 15 percent.
"Tenneco's second quarter earnings demonstrate that our businesses have the
capacity to report consistent earnings despite uneven market conditions," said
Dana G. Mead, Tenneco chairman and chief executive officer. "Tenneco
Automotive's OE performance largely offset the combined effects of inventory
corrections and weak demand in the North American aftermarket, the strike at GM
and currency fluctuations. Likewise, we produced strong results in Specialty
packaging and Paperboard. We expect Tenneco's top consumer brands and strong
market positions in both major businesses to continue providing top-line growth
and improved returns on a consistent basis."
For additional detail see Segment Analysis following financial tables.
Tenneco is an $8 billion global manufacturing company headquartered
in Greenwich, Conn., with 50,000 employees worldwide. Tenneco Automotive is one
of the world's largest producers and marketers of ride control and exhaust
systems and products, which are sold under the Monroe(R) and Walker(R)global
brand names. Among its products are Sensa-Trac(R) shocks and struts, Rancho(R)
shock absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(TM) performance
exhaust products, and Monroe(R) Clevite(TM) vibration control components.
Tenneco Packaging is among the world's leading and most diversified packaging
companies. Among its products are Hefty(R)trash bags, Hefty OneZip(R) and
Baggies(R) food storage bags, E-Z Foil(R)single-use aluminum cookware and
Hexacomb(R) paper honeycomb products.
For more information about Tenneco, visit the Tenneco website at
http://www.tenneco.com.
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TENNECO CONSOLIDATED EARNINGS RESULTS
Unaudited
THREE MONTHS ENDED JUNE 30,
1998 1997
Net sales and operating
revenues:
Automotive $864,000,000 $873,000,000
Packaging 1,133,000,000 1,019,000,000
Other (1,000,000) --
$1,996,000,000 $1,892,000,000
Operating income (loss):
Automotive $130,000,000 $131,000,000
Packaging 150,000,000(a) 82,000,000
Other (4,000,000) (1,000,000)
276,000,000 212,000,000
Less:
Interest expense (net of
interest capitalized) 61,000,000 53,000,000
Income tax expense 70,000,000 49,000,000
Minority interest 8,000,000 6,000,000
Net income $137,000,000(a) $104,000,000
Average common shares
outstanding:
Basic 169,200,000 169,800,000
Diluted 169,900,000 170,200,000
Earnings per share of
common stock:
Basic $ .81(a) $ .61
Diluted $ .81(a) $ .61
(a) Includes a pretax gain of $15 million on the sale of Tenneco's
remaining interest in the joint venture with Caraustar, $9 million or $.05 per
share on an aftertax basis.
Segment Analysis
Overall Packaging Results
Tenneco Packaging revenues increased 11 percent to $1.1 billion in the second
quarter of 1998 from $1.0 billion in the previous year. Tenneco Packaging
operating income increased 83 percent from $82 million in the 1997 second
quarter to $150 million in the second quarter of 1998, including a one-time gain
from the sale of a joint venture interest.
Specialty Packaging
In Tenneco Packaging's Specialty business, revenues were $731 million in the
second quarter of 1998, compared to $669 million the previous year, and
operating income rose from $90 million to $101 million. In addition to the 18
percent volume increase in sales of the company's Hefty OneZip(R) bags, they
recently were selected for distribution in more than 200 Wal-Mart Sam's stores.
A successful national roll-out of Hefty Easy Flaps(TM) waste bags is nearing
completion. The company is testing a jumbo version (2.5 gallon size)
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of the Hefty OneZip(R) bag in select multi-use markets. And sales of the
McDonald's Big Breakfast Deluxe foam container, which was launched in the first
quarter in Los Angeles, Chicago and Baltimore, have exceeded initial
expectations.
The successful market introduction of the Hefty(R) Slide Rite(TM) bag
closure system continued in the quarter. In addition, Medi-Zip(TM) medical and
laboratory bags using Slide-Rite(TM) bag closure technology were introduced to
the medical field during the second quarter with major shipments scheduled to
begin in August. An improved Hefty OneZip(R) bag also was introduced during the
quarter, featuring easier-moving, easier-gripping sliders, color-coded with red
for refrigerator and blue for freezer use. Improved Hefty Handle Sak(TM) waste
bags were shipped to customers in April. The bags are thicker, stronger and
easier to dispense than before.
Richter Manufacturing, a leading producer of protective packaging for
the western United States, which Tenneco acquired in May 1998, with 1997 sales
of $61 million, is rapidly being integrated with Tenneco Packaging's global
protective packaging operations.
Paperboard Packaging
In the second quarter of 1998, Tenneco Packaging's paperboard business
reported a 15 percent increase in revenue to $402 million, compared with $350
million in 1997. Operating income improved to $34 million, excluding the
Caraustar gain, from a loss of $8 million in the second quarter last year.
Improved volume and linerboard, medium and corrugated box pricing contributed to
revenue and operating income improvements.
Paperboard packaging's initiative to produce more high performance
linerboard, including mottled white containerboard for internal use and clay
coated linerboard for rotogravure applications, is expected to improve operating
income by $10 million annually. Use of such products by Tenneco Packaging's
folding carton and graphics division is expected to further expand the range of
current product offerings.
The Paperboard business continues to focus on productivity and cost
reductions to improve profitability. Containerboard mill operations eliminated
about $18 million in costs in the first half of 1998, more than offsetting
inflation and higher fiber costs. Corrugated converting operations also reduced
conversion costs 3 percent in the first six months of 1998 versus the same
period a year ago.
Automotive
Tenneco Automotive reported operating income of $130 million on revenue of
$864 million in the quarter, compared to record operating income and revenue of
$131 million and $873 million a year earlier.
In North America, Tenneco Automotive's combined OE and aftermarket
revenue was $448 million, essentially even with last year, despite an 18 percent
drop in the aftermarket. North American OE revenue increased 11 percent over the
year earlier quarter.
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Tenneco Automotive's global OE operating income increased 44 percent,
driven by record 1998 product launches and new business. When combined with
benefits from restructuring, the strength of the OE business more than offset
soft aftermarkets, currency effects in Europe and Asia and the GM strike
combined.
Tenneco Automotive's North American OE revenues and operating income grew as
a result of the company's ability to target and obtain contracts to supply
vehicles in the growing light truck and sport utility vehicle segment. In
addition, an array of cost management, efficiency and productivity gains helped
improve results. In the quarter, the company launched new business with Ford,
Chrysler and GM. For the first time the company began supplying catalytic
converter assemblies to Ford for the Mustang. Ford also awarded Tenneco
Automotive the contract to supply exhaust products for the high profile Nastruck
and Sport Truck. And the Ford F-Series truck was launched with Tenneco supplying
exhaust components from the Queretaro, Mexico, facility.
Tenneco Automotive is conducting a major launch of GM's redesigned GMT800,
supplying muffler and pipe assemblies, bushings and the new monotube shock
absorbers, although production is temporarily halted during the strike.
Production is expected to reach one million vehicles annually, providing Tenneco
Automotive annual revenue of approximately $60 million. During the second
quarter, Tenneco Automotive also ramped up production of shock absorbers for JX
vehicles in Mexico.
The North American OE group received the largest-ever single order in
Tenneco Automotive's history with the award of the exhaust systems business for
GM's new mid-sized Epsilon platform. The project, which starts in year 2000,
will encompass four continents (North America, South America, Europe and
Australia). Tenneco Automotive also expects to announce several significant
global OE business awards in the near future.
Tenneco Automotive's aftermarket business continues to operate in a
generally weak global environment where sales industry-wide are down an
estimated 8 to 10 percent. Second quarter revenue also was affected
substantially by an effort to help customers better balance their inventory
levels and stabilize their cash management positions. These actions are expected
to help improve margins and sales in the second half of the year.
The company is taking additional steps to counter aftermarket weakness.
The recent launches of the new Walker(R) Quiet-Flow(TM) premium muffler and the
Safetech(TM) update of the Monroe(R) Sensa-Trac(R) premium shock and strut line
progressed well, supported by extensive advertising and marketing programs.
Quarterly revenues from Tenneco Automotive's combined European
operations increased 5 percent. An increase of 13 percent in European OE
revenues to $196 million and significant operating income improvement reflected
expanded business with Mercedes, Nissan, VW, Rover, Ford, Volvo, Toyota,
GM/Opel, BMW, and Porsche, as well as aggressive restructuring efforts in
Germany, the United Kingdom and
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France. European aftermarket operating income increased 4 percent due to
restructuring and inventory management, although aftermarket revenues reflected
an exchange rate impact and declined 5 percent in the quarter to $141 million.
Tenneco Automotive's operating income in South America increased
slightly versus the same quarter last year, even though Tenneco Automotive South
American revenues declined 9 percent to $42 million in an overall market that
fell 16 percent. New OE and aftermarket business, especially in Argentina,
offset effects of the region's economic slowdown.
Outlook
"The combined operating performance of Tenneco Automotive and Tenneco
Packaging in the first half of 1998 and the most recent quarter are the result
of efforts to improve operations, reach customers with new products and build on
two excellent manufacturing businesses worldwide," Mead said.
"The outlook for Tenneco Automotive is good. Its OE business is growing
and our potential to provide systems integration and grow globally is great."
General industry forecasts call for stable production through the rest of 1998,
although they do not include the effects of the GM strike.
"Ford, Chrysler and GM are expected to continue driving the light truck
segment while other producers gain ground in the passenger vehicle segment,"
Mead said. "Improving economic conditions in Mexico and Canada should further
increase North American vehicle demand. In the aftermarket, inventory reductions
and increased service bay activity are expected to improve results.
"In Europe, Tenneco Automotive is identifying new business, such as the
growing small car segment in Eastern Europe. In South America, recent
investments are expected to drive growth. And while the outlook for Asia and the
Pacific Rim remains soft due to the regional economic crisis, Tenneco Automotive
continues to adopt aggressive cost management practices, maintain customer
relationships and identify future opportunities.
"The outlook for Specialty packaging is strong as new volume and new,
higher-value-added consumer and industrial products add income growth," said
Mead. Successful integration of acquisitions continues to yield cost advantages.
Growth of 5 to 6 percent is expected in Specialty market segments throughout the
year as the group strengthens its product positions among leading distributors
and retailers.
"In Paperboard, inventories have not declined as quickly as forecast,
exacerbated by a steep decline in exports," Mead said. But a number of producers
have announced downtime in July, with some downtime characterized as indefinite.
"Longer term, most analysts predict improved supply and demand balance, with no
new major capacity projected. If their predictions materialize, that would be
very positive for our paperboard business."
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Several statements in this press release are forward looking and are
identified by the use of forward looking words and phrases, such as "continues,"
"continue," "scheduled to begin," "rapidly being integrated," "expect,"
"expects," "expected," "capacity to," "steps to counter," "will encompass,"
"outlook," "is growing," "forecasts call," "should further increase," "is
building on," "will contribute," "potential is great," "analysts predict," and
"if their predictions materialize." These forward looking statements are based
on the Company's current expectations. Because forward looking statements
involve risks and uncertainties, the Company'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
political, economic and competitive conditions in markets and countries where
the Company and its subsidiaries operate, including currency fluctuations and
other risks associated with operating in foreign countries; (ii) governmental
actions, including the ability to receive regulatory approvals and the timing of
such approvals; (iii) changes in capital availability or costs; (iv) changes in
consumer demand and prices, including decreases in demand for Company products
and the resulting negative impact on the Company's revenues and margins from
such products (v); the cost of compliance with changes in regulations, including
environmental regulations; (vi) workforce factors such as strikes or labor
interruptions; (vii) material substitutions and increases in the costs of the
Company's raw materials; (viii) the Company's ability to integrate operations of
acquired businesses quickly and in a cost-effective manner; and (ix) the timing
and occurrence (or non-occurrence) of transactions and events which may be
subject to circumstances beyond the Company's control.
*All earnings per share in this release are reported on a diluted basis.
SOURCE Tenneco
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Exhibit 99.2
NEWS RELEASE
Contact: Neil Geary (203) 863-1073
Barb Posner (203) 863-1374
Tenneco Announces Major Strategic Actions to Enhance Value
GREENWICH, Conn., July 21, 1998 -- Tenneco today announced three major
strategic actions designed to enhance shareowner value. First, the company
stated that its Board of Directors has authorized management to develop a broad
range of strategic alternatives to unlock the value of its businesses and to
include among the options the separation of its automotive and packaging
businesses into stand-alone entities.
Second, the company underscored its determination to accelerate
the separation of its containerboard packaging business from its
specialty packaging business. The options for separation might include a sale,
merger, spin off, initial public offering or strategic alliance, among others.
Finally, the company outlined a broad program focused on reducing structural
costs, which is expected to realize approximately $100 million in annualized
savings by reducing overhead and operating expenses.
Note: Tenneco also released second quarter earnings today. See related
news release.
"These announcements are the latest steps in Tenneco's five-year
transformation," said Dana G. Mead, Tenneco chairman and chief executive
officer. "Over that time, Tenneco has carefully streamlined itself, capturing
value for shareholders in the divestiture of several strong businesses. That
process included realizing over $13 billion of cash proceeds, which enabled us
to pay down over $9 billion in debt, spin off $1.5 billion of subsidiary shares
to our shareholders, repurchase over $1.0 billion in stock, and build our
automotive parts and packaging businesses with $3.0 billion in strategic
acquisitions.
"We are now at a point in our evolution where we must again ensure that
the company is structured to provide the greatest value to our shareowners. We
will study carefully the full range of structural alternatives available to us
and do so as expeditiously as possible. We intend to make our recommendations to
the Board this fall.
"Last year, we said that we would exit the containerboard business when
market conditions were optimal. Today, because of aggressive cost reduction
programs at our mills and box plants, Tenneco is one of the most efficient
producers in this industry. We believe the timing is now right to capture the
value of this business, especially in light of industry consolidation and the
anticipated improvement in longer term market conditions," said Mead.
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With annual sales of $1.5 billion, Tenneco Packaging's containerboard
business includes four containerboard mills, over 70 corrugated facilities and
nearly one million acres of owned or controlled timberland throughout the U.S.
The cost reduction program that Tenneco announced today is intended to
reduce structural costs, both administrative and operational. This new
initiative is expected to result in approximately $100 million in incremental
annualized savings not conditional on any strategic actions. Even greater
savings could result, depending on the outcome of the strategic study announced
today. Over the last three years, Tenneco has realized approximately $1 billion
in cost reductions, approximately $375 million of which has been translated into
net operating income. Additionally, as previously reported, Tenneco Automotive's
1997 global restructuring will provide over $80 million in cost savings by the
end of 1998. Containerboard packaging's two-year mill cost reduction program
should total $85 million by year-end.
Mead said, "Two years ago when Tenneco emerged in its current
configuration and committed to a strategy of building shareowner value in our
two major companies - automotive and packaging, I promised that we would not
only continue to build value within the current structure, but would also remain
open to alternatives for ultimate separation of the businesses, or other options
that would unlock yet additional value. In my view, and in that of our Board of
Directors, the time is now right to fully and actively explore those other
actions. That is the essence of the announcements we have made today."
Tenneco is an $8 billion global manufacturing company headquartered in
Greenwich, Conn., with 50,000 employees worldwide. The company is one of the
world's largest producers and marketers of ride control and exhaust systems and
products, which are sold under the Monroe(R) and Walker(R) global brand names.
Among its products are Sensa-Trac(R) shocks and struts, Rancho(R)shock
absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(TM)performance exhaust
products, and Monroe(R) Clevite(TM) vibration control components. Tenneco
Packaging is among the world's leading and most diversified packaging companies.
Among its products are Hefty(R) trash bags, Hefty OneZip(R) and Baggies(R) food
storage bags, E-Z Foil(R) single-use aluminum cookware and Hexacomb(R) paper
honeycomb products.
Several statements in this press release are forward-looking and are
identified by the use of forward-looking words and phrases, such as "to
develop," "to accelerate," "is expected," "intend," "intended," "timing is now
right," "time is now right," "could result," "will provide," "should," and
"explore." These forward-looking statements are based on the Company's current
expectations. Because forward-looking statements involve risks and
uncertainties, the Company'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 political,
economic and competitive conditions in markets and countries where the Company
and its subsidiaries operate, including currency fluctuations and other risks
associated with operating in foreign countries; (ii) governmental actions,
including the ability to receive regulatory approvals and the timing of such
approvals; (iii) changes in capital
<PAGE> 3
availability or costs; (iv) changes in consumer demand and prices, including
decreases in demand for Company products and the resulting negative impact on
the Company's revenues and margins from such products (v); the cost of
compliance with changes in regulations,including environmental regulations; (vi)
workforce factors such as strikes or labor interruptions; (vii) material
substitutions and increases in the costs of the Company's raw materials; (viii)
the Company's ability to integrate operations of acquired businesses quickly and
in a cost-effective manner; and (ix) the timing and occurrence (or
non-occurrence) of transactions and events which may be subject to circumstances
beyond the Company's control.
