<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO __________
COMMISSION FILE NUMBER 1-9864
----------------
TENNECO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0233548
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
TENNECO BUILDING, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 757-2131
----------------
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 $5 per share: 171,375,645 shares as of September 30,
1994.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I--Financial Information
Tenneco Inc. and Consolidated Subsidiaries--
Statements of Income.................................................. 2
Statements of Cash Flows.............................................. 5
Balance Sheets........................................................ 6
Statements of Changes in Stockholders' Equity......................... 8
Statements of Changes in Preferred Stock With Mandatory Redemption
Provisions........................................................... 9
Notes to Financial Statements......................................... 10
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 16
Part II--Other Information
Item 1. Legal Proceedings............................................... 23
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. *
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 24
</TABLE>
- --------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
1
<PAGE>
PART I
FINANCIAL INFORMATION
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- -------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE
AMOUNTS) 1994 1993 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues--
Natural gas pipelines.. $ 549 $ 690 $ 1,847 $ 2,173
Farm and construction
equipment............. 1,008 841 3,126 2,730
Automotive parts....... 511 437 1,521 1,374
Shipbuilding........... 424 436 1,291 1,351
Packaging.............. 562 513 1,580 1,531
Chemicals.............. 243 223 715 685
Other.................. (5) (4) (9) (7)
----------- ----------- ----------- -----------
3,292 3,136 10,071 9,837
Other income--
Interest income........ 52 64 139 212
Equity in net income--
Tenneco Finance....... -- -- -- --
Other income (loss),
net................... (9) 71 23 108
----------- ----------- ----------- -----------
3,335 3,271 10,233 10,157
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales (exclusive
of depreciation shown
below)................. 2,108 1,944 6,346 6,087
Operating expenses...... 429 571 1,471 1,748
Selling, general and ad-
ministrative........... 304 297 916 899
Finance charges--Tenneco
Finance................ 30 61 125 198
Depreciation, depletion
and amortization....... 101 125 329 383
Restructuring costs..... -- -- (16) --
----------- ----------- ----------- -----------
2,972 2,998 9,171 9,315
----------- ----------- ----------- -----------
Income Before Interest Ex-
pense, Income Taxes and
Minority Interest........ 363 273 1,062 842
Interest Expense (net of
interest capitalized).... 121 108 328 352
----------- ----------- ----------- -----------
Income Before Income Taxes
and Minority Interest.... 242 165 734 490
Income Tax Expense ....... 79 48 276 193
----------- ----------- ----------- -----------
Income Before Minority In-
terest................... 163 117 458 297
Minority Interest......... 12 -- 12 --
----------- ----------- ----------- -----------
Income From Continuing Op-
erations................. 151 117 446 297
Loss From Discontinued Op-
erations, Net of Income
Tax...................... -- (4) (26) (5)
----------- ----------- ----------- -----------
Income Before Extraordi-
nary Loss................ 151 113 420 292
Extraordinary Loss, Net of
Income Tax............... -- (2) (5) (25)
----------- ----------- ----------- -----------
Income Before Cumulative
Effect of Change in Ac-
counting Principle....... 151 111 415 267
Cumulative Effect of
Change in Accounting
Principle, Net of Income
Tax...................... -- -- (39) --
----------- ----------- ----------- -----------
Net Income................ 151 111 376 267
Preferred Stock Dividends. 2 3 9 11
----------- ----------- ----------- -----------
Net Income to Common
Stock.................... $ 149 $ 108 $ 367 $ 256
=========== =========== =========== ===========
Average Number of Shares
of Common Stock Outstand-
ing...................... 180,902,646 176,854,553 179,811,774 165,784,941
=========== =========== =========== ===========
Earnings (Loss) Per Aver-
age Share of Common
Stock:
Continuing operations... $ .82 $ .64 $ 2.43 $ 1.73
Discontinued operations. -- (.02) (.14) (.03)
Extraordinary loss...... -- (.01) (.03) (.15)
Cumulative effect of
change in accounting
principle.............. -- -- (.22) --
----------- ----------- ----------- -----------
$ .82 $ .61 $ 2.04 $ 1.55
=========== =========== =========== ===========
Cash Dividends Per Share
of Common Stock.......... $ .40 $ .40 $ 1.20 $ 1.20
=========== =========== =========== ===========
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of income.)
2
<PAGE>
<TABLE>
<CAPTION>
TENNECO INDUSTRIAL TENNECO FINANCE
-------------------------------------------------- ---------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------------------------------
1994 1993 1994 1993 1994 1993 1994 1993
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues--
Natural gas pipelines.. $ 549 $ 690 $ 1,847 $ 2,173 $ -- $ -- $ -- $ --
Farm and construction
equipment............. 1,008 841 3,126 2,730 -- -- -- --
Automotive parts....... 511 437 1,521 1,374 -- -- -- --
Shipbuilding........... 424 436 1,291 1,351 -- -- -- --
Packaging.............. 562 513 1,580 1,531 -- -- -- --
Chemicals.............. 243 223 715 685 -- -- -- --
Other.................. (5) (4) (9) (7) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
3,292 3,136 10,071 9,837 -- -- -- --
Other income--
Interest income........ 20 10 42 31 58 118 255 387
Equity in net income--
Tenneco Finance....... 13 24 76 77 -- -- -- --
Other income (loss),
net................... (8) 74 25 118 2 1 4 4
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
3,317 3,244 10,214 10,063 60 119 259 391
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales (exclusive
of depreciation shown
below)................. 2,110 1,945 6,350 6,091 -- -- -- --
Operating expenses...... 438 568 1,492 1,739 (9) 4 (18) 13
Selling, general and ad-
ministrative........... 310 335 1,016 1,014 7 2 8 8
Finance charges--Tenneco
Finance................ -- -- -- -- 31 67 129 217
Depreciation, depletion
and amortization....... 101 125 328 382 -- -- 1 1
Restructuring costs..... -- -- (16) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2,959 2,973 9,170 9,226 29 73 120 239
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Interest Ex-
pense, Income Taxes and
Minority Interest........ 358 271 1,044 837 31 46 139 152
Interest Expense (net of
interest capitalized).... 127 124 358 403 7 4 15 19
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Income Taxes
and Minority Interest.... 231 147 686 434 24 42 124 133
Income Tax Expense ....... 70 30 230 137 9 18 46 56
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Minority In-
terest................... 161 117 456 297 15 24 78 77
Minority Interest......... 10 -- 10 -- 2 -- 2 --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From Continuing Op-
erations................. 151 117 446 297 13 24 76 77
Loss From Discontinued Op-
erations, Net of Income
Tax...................... -- (4) (26) (5) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Extraordi-
nary Loss................ 151 113 420 292 13 24 76 77
Extraordinary Loss, Net of
Income Tax............... -- (2) (5) (25) -- -- (4) (1)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Cumulative
Effect of Change in Ac-
counting Principle....... 151 111 415 267 13 24 72 76
Cumulative Effect of
Change in Accounting
Principle, Net of Income
Tax...................... -- -- (39) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income................ 151 111 376 267 13 24 72 76
Preferred Stock Dividends. 2 3 9 11 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income to Common
Stock.................... $ 149 $ 108 $ 367 $ 256 $ 13 $ 24 $ 72 $ 76
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
(Reference is made to Note 1 for definitions of "Tenneco Industrial" and
"Tenneco Finance.")
3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
TENNECO INC. AND
CONSOLIDATED
SUBSIDIARIES TENNECO INDUSTRIAL TENNECO FINANCE
------------------ ------------------- -------------------
NINE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
- --------------------------------------------------------------------------------------
(MILLIONS) 1994 1993 1994 1993 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operat-
ing Activities:
Income from continuing
operations............ $ 446 $ 297 $ 446 $ 297 $ 76 $ 77
Adjustments to
reconcile income from
continuing operations
to cash provided
(used) by continuing
operations--
Depreciation, depletion
and amortization...... 329 383 328 382 1 1
Deferred income taxes.. (87) (45) (96) (55) 9 10
Changes in components
of working capital--
(Increase) decrease in
receivables.......... (440) 244 (1,606) 38 809 452
(Increase) decrease in
inventories.......... (95) 14 (95) 14 -- --
(Increase) decrease in
prepayments and other
current assets....... 25 (32) 40 (42) (8) 13
Increase (decrease) in
payables............. 13 (161) (180) (300) 43 (7)
Increase (decrease) in
taxes accrued........ 143 (70) 159 (61) (16) (9)
Increase (decrease) in
interest accrued..... 2 (5) 36 16 (34) (21)
Increase (decrease) in
restructuring liabil-
ity.................. (64) (32) (64) (32) -- --
Increase (decrease) in
natural gas pipeline
revenue reservation.. (96) 97 (96) 97 -- --
Increase (decrease) in
other current liabil-
ities................ 115 22 130 34 (15) (12)
(Increase) decrease in
long-term notes and
receivables........... 142 366 36 -- 99 341
Take-or-pay (refunds to
customers) recoup-
ments, net............ 15 (43) 15 (43) -- --
Other.................. (9) (130) (36) (152) 4 (32)
-------- -------- -------- --------- --------- -------
Cash provided (used)
by continuing opera-
tions................ 439 905 (983) 193 968 813
Cash provided (used)
by discontinued oper-
ations............... (6) (13) (6) (13) -- --
-------- -------- -------- --------- --------- -------
Net Cash Provided (Used)
by Operating Activi-
ties................... 433 892 (989) 180 968 813
-------- -------- -------- --------- --------- -------
Cash Flows from Invest-
ing Activities:
Net proceeds
(expenditures) related
to the sale of
discontinued
operations............ (15) (40) (15) (40) -- --
Proceeds from sale of
businesses and assets. 539 114 539 114 -- --
Expenditures for plant,
property and equip-
ment--
Continuing operations.. (438) (333) (438) (333) -- --
Discontinued opera-
tions................. (1) (2) (1) (2) -- --
Acquisitions of busi-
nesses................ (4) (2) (4) (2) -- --
Investments and other.. (29) 51 (276) 20 64 43
-------- -------- -------- --------- --------- -------
Net Cash Provided (Used)
by Investing Activi-
ties................... 52 (212) (195) (243) 64 43
-------- -------- -------- --------- --------- -------
Cash Flows from Financ-
ing Activities:
Issuance of common,
treasury and SECT
shares................ 152 1,170 152 1,170 185 --
Purchase of common
stock................. (6) (2) (6) (2) -- --
Redemption of preferred
stock................. (20) (30) (20) (30) -- --
Issuance of long-term
debt.................. 982 3 1,007 7 12 11
Retirement of long-term
debt.................. (1,316) (1,712) (109) (1,099) (1,273) (639)
Net increase (decrease)
in short-term debt ex-
cluding current
maturities on long-
term debt............. 221 80 335 194 385 (216)
Dividends (common and
preferred)............ (240) (229) (240) (229) (18) --
-------- -------- -------- --------- --------- -------
Net Cash Provided (Used)
by Financing Activi-
ties................... (227) (720) 1,119 11 (709) (844)
-------- -------- -------- --------- --------- -------
Effect of Foreign
Exchange Rate Changes
on Cash and Temporary
Cash Investments....... 16 3 6 -- 10 3
-------- -------- -------- --------- --------- -------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ 274 (37) (59) (52) 333 15
Cash and Temporary Cash
Investments, January 1. 218 111 213 102 5 9
-------- -------- -------- --------- --------- -------
Cash and Temporary Cash
Investments, September
30 (Note).............. $ 492 $ 74 $ 154 $ 50 $ 338 $ 24
======== ======== ======== ========= ========= =======
Cash Paid During the Pe-
riod for:
Interest............... $ 454 $ 558 $ 343 $ 425 $ 183 $ 257
Income taxes (net of
refunds).............. $ 93 $ 306 $ 42 $ 235 $ 51 $ 71
</TABLE>
- --------
NOTE: Cash and temporary cash investments include highly liquid investments
with a maturity of three months or less at date of purchase.
(The accompanying notes to financial statements are an integral part of these
statements of cash flows.)
(Reference is made to Note 1 for definitions of "Tenneco Industrial" and
"Tenneco Finance.")
5
<PAGE>
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
TENNECO INC. AND
CONSOLIDATED SUBSIDIARIES
----------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
(MILLIONS) 1994 1993 1993
- --------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and temporary cash investments.. $ 492 $ 218 $ 74
Receivables--
Customer notes and accounts (net).. 3,255 2,669 3,087
Affiliated companies............... -- -- --
Gas transportation and exchange.... 330 228 232
Other.............................. 228 274 150
Inventories.......................... 1,720 1,581 1,711
Deferred income taxes................ 150 61 185
Prepayments and other................ 350 386 420
------- ------- -------
6,525 5,417 5,859
------- ------- -------
Investments and Other Assets:
Investment in affiliated companies... 499 470 580
Other investments, at cost........... 52 58 45
Long-term notes and other receiv-
ables (net)......................... 1,746 1,961 2,021
Investment in subsidiaries in excess
of net assets at date of acquisi-
tion, less amortization............. 403 422 421
Deferred income taxes................ 54 38 37
Other................................ 1,124 1,327 1,244
------- ------- -------
3,878 4,276 4,348
------- ------- -------
Plant, Property and Equipment, at
cost................................. 12,579 12,115 12,129
Less--Reserves for depreciation, de-
pletion and amortization............ 6,672 6,435 6,525
------- ------- -------
5,907 5,680 5,604
------- ------- -------
$16,310 $15,373 $15,811
======= ======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Short-term debt (including current
maturities on long-term debt)....... $ 1,408 $ 1,274 $ 1,554
Payables--
Trade.............................. 1,341 1,337 1,287
Affiliated companies............... -- -- --
Gas transportation and exchange.... 218 136 180
Taxes accrued........................ 307 158 163
Interest accrued..................... 170 154 197
Restructuring liability.............. 151 213 238
Natural gas pipeline revenue reser-
vation.............................. 182 291 253
Other................................ 1,441 1,347 1,334
------- ------- -------
5,218 4,910 5,206
------- ------- -------
Long-term Debt........................ 4,616 4,799 4,938
------- ------- -------
Deferred Income Taxes................. 1,176 1,225 1,129
------- ------- -------
Deferred Credits and Other
Liabilities.......................... 1,585 1,522 1,746
------- ------- -------
Commitments and Contingencies
Minority Interest..................... 586 153 159
------- ------- -------
Preferred Stock with Mandatory Redemp-
tion Provisions...................... 146 163 163
------- ------- -------
Stockholders' Equity:
Series A preferred stock............. 9 9 9
Common stock......................... 870 870 870
Stock Employee Compensation Trust
(common stock held in trust)........ (348) (499) (529)
Premium on common stock and other
capital surplus..................... 3,653 3,714 3,711
Cumulative translation adjustments... (214) (303) (309)
Retained earnings (accumulated defi-
cit)................................ (855) (980) (1,056)
------- ------- -------
3,115 2,811 2,696
Less--Shares held as treasury stock,
at cost............................. 132 210 226
------- ------- -------
2,983 2,601 2,470
------- ------- -------
$16,310 $15,373 $15,811
======= ======= =======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
balance sheets.)
6
<PAGE>
<TABLE>
<CAPTION>
TENNECO INDUSTRIAL TENNECO FINANCE
---------------------------------------- ----------------------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1994 1993 1993 1994 1993 1993
---------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and temporary cash investments.. $ 154 $ 213 $ 50 $ 338 $ 5 $ 24
Receivables--
Customer notes and accounts (net).. 2,207 561 767 1,044 2,098 2,307
Affiliated companies............... 192 57 19 412 371 336
Gas transportation and exchange.... 330 228 232 -- -- --
Other.............................. 216 259 136 12 15 14
Inventories.......................... 1,720 1,581 1,711 -- -- --
Deferred income taxes................ 147 40 162 3 21 23
Prepayments and other................ 338 393 426 14 3 4
------- ------- ------- ------ ------ ------
5,304 3,332 3,503 1,823 2,513 2,708
------- ------- ------- ------ ------ ------
Investments and Other Assets:
Investment in affiliated companies... 1,397 1,526 1,605 -- -- --
Other investments, at cost........... 47 53 40 5 5 5
Long-term notes and other receiv-
ables (net)......................... 699 243 211 1,017 1,722 1,801
Investment in subsidiaries in excess
of net assets at date of acquisi-
tion, less amortization............. 403 422 421 -- -- --
Deferred income taxes................ 54 38 37 -- -- --
Other................................ 1,163 1,372 1,300 10 7 8
------- ------- ------- ------ ------ ------
3,763 3,654 3,614 1,032 1,734 1,814
------- ------- ------- ------ ------ ------
Plant, Property and Equipment, at
cost................................. 12,510 12,046 12,060 69 69 69
Less--Reserves for depreciation, de-
pletion and amortization............ 6,654 6,419 6,509 18 16 16
------- ------- ------- ------ ------ ------
5,856 5,627 5,551 51 53 53
------- ------- ------- ------ ------ ------
$14,923 $12,613 $12,668 $2,906 $4,300 $4,575
======= ======= ======= ====== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Short-term debt (including current
maturities on long-term debt)....... $ 857 $ 179 $ 261 $1,135 $1,382 $1,494
Payables--
Trade.............................. 1,331 1,334 1,287 10 3 --
Affiliated companies............... 10 129 131 16 11 19
Gas transportation and exchange.... 218 136 180 -- -- --
Taxes accrued........................ 303 132 137 4 26 26
Interest accrued..................... 151 102 148 19 52 49
Restructuring liability.............. 151 213 238 -- -- --
Natural gas pipeline revenue reser-
vation.............................. 182 291 253 -- -- --
Other................................ 1,405 1,286 1,274 40 61 60
------- ------- ------- ------ ------ ------
4,608 3,802 3,909 1,224 1,535 1,648
------- ------- ------- ------ ------ ------
Long-term Debt........................ 3,908 3,143 3,103 715 1,710 1,888
------- ------- ------- ------ ------ ------
Deferred Income Taxes................. 1,165 1,227 1,117 11 (2) 12
------- ------- ------- ------ ------ ------
Deferred Credits and Other
Liabilities.......................... 1,584 1,524 1,747 1 1 2
------- ------- ------- ------ ------ ------
Commitments and Contingencies
Minority Interest..................... 529 153 159 57 -- --
------- ------- ------- ------ ------ ------
Preferred Stock with Mandatory Redemp-
tion Provisions...................... 146 163 163 -- -- --
------- ------- ------- ------ ------ ------
Stockholders' Equity:
Series A preferred stock............. 9 9 9 -- -- --
Common stock......................... 870 870 870 71 317 309
Stock Employee Compensation Trust
(common stock held in trust)........ (348) (499) (529) -- -- --
Premium on common stock and other
capital surplus..................... 3,653 3,714 3,711 401 268 268
Cumulative translation adjustments... (214) (303) (309) 2 (8) (10)
Retained earnings (accumulated defi-
cit)................................ (855) (980) (1,056) 424 479 458
------- ------- ------- ------ ------ ------
3,115 2,811 2,696 898 1,056 1,025
Less--Shares held as treasury stock,
at cost............................. 132 210 226 -- -- --
------- ------- ------- ------ ------ ------
2,983 2,601 2,470 898 1,056 1,025
------- ------- ------- ------ ------ ------
$14,923 $12,613 $12,668 $2,906 $4,300 $4,575
======= ======= ======= ====== ====== ======
</TABLE>
(Reference is made to Note 1 for definitions of "Tenneco Industrial" and
"Tenneco Finance.")
7
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
TENNECO INC. AND CONSOLIDATED
SUBSIDIARIES
----------------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE AMOUNTS) 1994 1993
- --------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Series A Preferred Stock:
Balance January 1 and September 30........ 8,935,175 $ 9 8,935,175 $ 9
=========== ------ =========== ------
Common Stock:
Balance January 1......................... 173,953,012 870 150,300,224 752
Issued to retire debt................... -- -- 23,500,000 117
Issued pursuant to benefit plans........ 37,996 -- 125,231 1
Other................................... 1,422 -- 152 --
----------- ------ ----------- ------
Balance September 30...................... 173,992,430 870 173,925,607 870
=========== ------ =========== ------
Stock Employee Compensation Trust (SECT):
Balance January 1......................... (499) (488)
Shares issued........................... 86 93
Adjustment to market value.............. 65 (134)
------ ------
Balance September 30...................... (348) (529)
------ ------
Premium on Common Stock and Other Capital
Surplus:
Balance January 1......................... 3,714 2,637
Premium on common stock issued to retire
debt................................... -- 935
Premium on common stock issued pursuant
to benefit plans....................... 2 5
Loss on issuance of treasury stock...... (2) (2)
Loss on shares issued by SECT........... (5) (4)
Dividends on shares held by SECT........ 10 13
Adjustment of SECT to market value...... (65) 134
Deferred compensation related to the
stock plans (net of amortization)...... (1) (7)
------ ------
Balance September 30...................... 3,653 3,711
------ ------
Cumulative Translation Adjustments:
Balance January 1......................... (303) (230)
Translation of foreign currency state-
ments.................................. 93 (82)
Hedges of net investment in foreign sub-
sidiaries (net of income taxes)........ (4) 3
------ ------
Balance September 30...................... (214) (309)
------ ------
Retained Earnings (Accumulated Deficit):
Balance January 1......................... (980) (1,082)
Net income.............................. 376 267
Dividends--
Preferred stock....................... (6) (9)
Series A preferred stock.............. (37) (37)
Common stock.......................... (205) (193)
Accretion of excess of redemption value
of preferred stock over fair value at
date of issue.......................... (3) (2)
------ ------
Balance September 30...................... (855) (1,056)
------ ------
Less--Common Stock Held as Treasury Stock,
at Cost:
Balance January 1......................... 4,166,835 210 5,323,912 268
Shares acquired......................... 213,454 11 114,398 6
Shares issued pursuant to benefit and
dividend reinvestment plans............ (1,763,504) (89) (955,000) (48)
----------- ------ ----------- ------
Balance September 30...................... 2,616,785 132 4,483,310 226
=========== ------ =========== ------
Total............................... $2,983 $2,470
====== ======
</TABLE>
(The accompanying notes to financial statements are an integral part
of these statements of changes in stockholders' equity.)
8
<PAGE>
STATEMENTS OF CHANGES IN PREFERRED STOCK
WITH MANDATORY REDEMPTION PROVISIONS
(UNAUDITED)
<TABLE>
<CAPTION>
TENNECO INC. AND CONSOLIDATED
SUBSIDIARIES
-----------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
- -------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE AMOUNTS) 1994 1993
- -------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Preferred Stock:
Balance January 1........................ 1,782,508 $163 2,084,796 $ 191
Shares redeemed........................ (195,744) (20) (302,271) (30)
Accretion of excess of redemption value
over fair value at date of issue...... -- 3 -- 2
--------- ---- --------- -----
Balance September 30..................... 1,586,764 $146 1,782,525 $ 163
========= ==== ========= =====
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of changes in preferred stock with mandatory redemption provisions.)
9
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) In the opinion of Tenneco Inc. (hereinafter referred to as the
"Company"), the accompanying unaudited financial statements of Tenneco Inc. and
Consolidated Subsidiaries (hereinafter referred to as "Tenneco") contain all
adjustments necessary to present fairly the financial position as of September
30, 1994, and the results of operations; changes in stockholders' equity;
changes in preferred stock with mandatory redemption provisions; and cash flows
for the periods indicated.
The accompanying financial statements also include, on a separate and
supplemental basis, the combination of Tenneco's industrial companies and
finance companies as follows:
<TABLE>
<C> <S>
Tenneco Industrial -- The financial information captioned "Tenneco
Industrial" reflects the consolidation of all
majority-owned subsidiaries except for the finance
subsidiaries. The finance subsidiaries have been
included using the equity method of accounting
whereby the net income and net assets of these
companies are reflected, respectively, in the
income statement caption, "Equity in net income--
Tenneco Finance," and in the balance sheet
caption, "Investment in affiliated companies."
Tenneco Finance -- The financial information captioned "Tenneco
Finance" reflects the combination of Tenneco's
majority-owned finance subsidiaries and
adjustments for minority interest.
</TABLE>
Prior to the initial public offering ("IPO") of approximately 29 percent of
the common stock of Case Corporation ("Case"), the wholesale (dealer) credit
and retail credit operations of the Farm and construction equipment segment
were financed by wholly-owned finance subsidiaries. Subsequent to the IPO, the
wholesale (dealer) credit operations are being financed by industrial
subsidiaries. As a result of this change, interest expense related to the
wholesale (dealer) credit operations will be reported as "Interest Expense"
rather than "Finance charges--Tenneco Finance" as in prior periods. If prior
periods were reclassified to reflect this prospective presentation of interest
expense related to wholesale (dealer) credit operations, consolidated "Finance
charges--Tenneco Finance" would have been reduced and "Interest Expense" would
have increased by $16 million, $22 million and $56 million for the three months
ended September 30, 1993, and nine months ended September 30, 1994, and 1993,
respectively, with no effect on consolidated net income. At December 31, 1993,
and September 30, 1993, this change would have increased receivables and debt
of Tenneco Industrial by $1.5 billion and $1.7 billion, respectively, with no
effect on the consolidated balance sheet.
All significant intercompany transactions, including activity within and
between the "Tenneco Industrial" and "Tenneco Finance" business units, have
been eliminated.
(2) Pursuant to Order 636 issued by the Federal Energy Regulatory Commission
("FERC") on April 8, 1992, Tennessee Gas Pipeline Company ("Tennessee")
implemented revisions to its tariff which put into effect on September 1, 1993,
the restructuring of its transportation, storage and sales services. Pursuant
to the provisions of Order 636 allowing for the recovery of transition costs
related to the restructuring, Tennessee has made filings to recover gas
production costs related to its Bastian Bay facilities, the remaining balance
of purchased gas ("PGA") costs, stranded transportation ("TBO") costs, and gas
supply realignment ("GSR") costs resulting from remaining gas purchase
obligations.
Tennessee's filings to recover production costs related to its Bastian Bay
facilities have been rejected by the FERC based on the continued use of the gas
production from the field; however, the FERC recognized
10
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the ability of Tennessee to file for the recovery of losses upon disposition of
these assets. Tennessee has filed for appellate review of the FERC actions and
is confident that the Bastian Bay costs will ultimately be recovered as
transition costs directly related to Order 636, and no FERC order has
questioned the ultimate recoverability of these costs.
The filings implementing Tennessee's recovery mechanisms for the following
transition costs were accepted effective September 1, 1993, and made subject to
refund pending FERC review: 1) direct-billing of unrecovered PGA costs to its
former sales customers over a twelve-month period; 2) recovery of TBO costs,
which Tennessee is obligated to pay under existing contracts, through a
surcharge from firm transportation customers, adjusted annually; and 3) GSR
cost recovery of 90% of such costs over a period of up to 36 months from firm
transportation customers and recovery of 10% of such costs from interruptible
transportation customers.
Following negotiations with its customers, Tennessee filed in July 1994 with
the FERC a Stipulation and Agreement (the "PGA Stipulation"), which will
resolve, if approved, the recovery of PGA costs of approximately $100 million
and the recovery of costs associated with the transfer of storage gas inventory
to new storage customers in Tennessee's restructuring proceeding. The PGA
Stipulation eliminates all challenges to the PGA costs, but establishes a cap
on the charges that may be imposed upon former sales customers. Tennessee
believes that the PGA Stipulation will not have a material adverse effect on
Tenneco's consolidated financial position or results of operations.
Tennessee is recovering TBO costs formerly incurred to perform its sales
functions, subject to refund, pending review of data submitted by Tennessee
through technical conference proceedings. Tennessee believes that annual TBO
costs will not exceed $35 million in 1994, decreasing each year thereafter over
the term of the contracts involved.
In connection with Tennessee's GSR cost recovery discussed below, Tennessee
along with three other pipelines, executed four separate settlement agreements
with Dakota Gasification Company and the U.S. Department of Energy and
initiated four separate proceedings at the FERC seeking approval to implement
the settlement agreements. The settlement resolved litigation concerning
purchases made by Tennessee of synthetic gas from the Great Plains Coal
Gasification plant ("Great Plains"). On October 18, 1994, the FERC consolidated
the four proceedings and set them for hearing before an administrative law
judge who is to issue his initial decision by December 31, 1995. The FERC order
clearly stated that the costs related to the Great Plains project are eligible
for recovery through GSR and other special recovery mechanisms and that the
costs are eligible for recovery for the duration of the term of the original
gas purchase agreements. The hearing will be limited to the issue of whether
the settlement agreements are prudent.
Also in connection with Tennessee's GSR cost recovery discussed below, on
October 14, 1993, Tennessee was sued in the State District Court of Ector
County, Texas by ICA Energy, Inc. ("ICA") and TransTexas Gas Corporation
("TransTexas"). In that suit, ICA and TransTexas contended that Tennessee had
an obligation to purchase gas production which TransTexas thereafter attempted
to add unilaterally to the reserves originally dedicated to a 1979 gas
contract. On two subsequent occasions, TransTexas gave Tennessee notice that it
was adding new production and/or acreage "to the contract." A recent amendment
to the pleadings seeks $1.5 billion from Tennessee for alleged damages caused
by Tennessee's refusal to purchase gas produced from the TransTexas bases
covering the new production and lands. Neither ICA nor TransTexas were parties
to that contract. However, they contend that any stranger acquiring a
fractional interest in the original committed reserves, thereby obtains a right
to add to the contract unlimited volumes of gas production from unspecified
locations in South Texas. Tennessee believes it has meritorious defenses to the
claims of ICA and TransTexas, which defenses it will vigorously assert.
11
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As of September 30, 1994, Tennessee deferred GSR costs yet to be recovered
from its customers of approximately $179 million, net of $141 million
previously collected from its customers, subject to refund. Proceedings have
commenced to review the recovery of these GSR costs; however, FERC has also
generally encouraged pipelines to settle such issues through negotiations with
customers.
Although Order 636 contemplates the complete recovery by pipelines of
qualified transition costs, Tennessee has initiated settlement discussions with
its customers concerning the amount of recoverable GSR costs in response to
recent FERC and customer statements acknowledging the desirability of such
settlements. Tennessee is also engaged in separate settlement and contract
reformation discussions with holders of certain gas purchase contracts who have
sued Tennessee, although Tennessee believes that its defenses in the underlying
gas purchase contract actions are meritorious.
On April 5, 1994, the FERC issued a final order approving Tennessee's
Stipulation and Agreement partially resolving its current rate case. Pursuant
to this final FERC order, rates for the period February 1, 1992, through August
31, 1993, were approved, and Tennessee paid refunds for this period on June 3,
1994. The refunds had no material effect on reported net income. Also pursuant
to Tennessee's Stipulation and Agreement, refunds for the period after
September 1, 1993, will be paid by Tennessee within 60 days of receipt of a
final FERC order resolving issues related to this period. Tennessee has
recorded a liability which is adequate to cover these estimated refunds. The
Stipulation and Agreement obligates Tennessee to file another rate case by the
end of 1994.
In addition, the Stipulation and Agreement established procedures for
resolving the recovery of certain environmental expenditures. These
environmental costs are currently being collected in Tennessee's rates subject
to further review in the rate case and possible refund. A hearing concerning
these costs is scheduled to commence no later than January 31, 1995. Tennessee
intends to pursue full recovery of the costs at issue in this hearing.
Tennessee is also currently pursuing the possibility of a global settlement
with its customers that would not only address recovery of the environmental
costs currently being recovered in its rates, but would also establish a
mechanism for recovering a substantial portion of the environmental costs
discussed in Note (4) that will be expended in the future. The total amount of
and timing for any recovery pursuant to such a global settlement will depend
upon the results of Tennessee's negotiations with its customers and will be
subject to FERC approval.
Given the current uncertainty over the results of ongoing discussions between
Tennessee and its customers over the recovery of the GSR and environmental
costs referenced in this Note (2) and settlement and contract reformation
discussions with holders of gas purchase contracts, the Company is unable to
predict the timing or the ultimate impact on Tenneco's consolidated financial
position or results of operations of any such settlements.
(3) The Company and its subsidiaries are parties to numerous other legal
proceedings arising from their operations. The Company believes that the
outcome of these other proceedings, individually and in the aggregate, will
have no material effect on the financial position or results of operations of
Tenneco Inc. and its consolidated subsidiaries.
(4) In 1988, Tennessee initiated an internal project to identify and deal
with the presence of polychlorinated biphenyls ("PCBs") at compressor stations
operated by both its interstate and intrastate natural gas pipeline systems.
This situation arose as a result of the use of a PCB-containing lubricant,
purchased between 1953 and the early 1970's, in air compressors which are used
to start the main gas compressor engines (lubricants containing PCBs were not
used in the main gas compressor engines themselves). The project was
subsequently expanded to include a screening for the presence of any substances
included on the U.S. Environmental Protection Agency ("EPA") List of Hazardous
Substances ("HS List").
12
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Tennessee conducted the project with frequent contact with federal and state
regulatory agencies, both through informal negotiation and formal entry of
consent orders, in order to assure that site characterization efforts met
regulatory requirements.
In 1991, upon the conclusion of a comprehensive study to estimate remediation
costs for its compressor sites and all other sites on Tennessee's interstate
and intrastate pipeline systems at which listed substances had then been
identified, Tenneco recorded a reserve of $260 million for estimated future
environmental expenses including: 1) expected remediation expense and
associated onsite, offsite and groundwater technical studies; 2) legal fees;
and 3) settlement of third party and governmental litigation, including civil
penalties. Through September 30, 1994, Tenneco has charged $80 million against
this environmental reserve. Of the remaining reserve, $30 million has been
recorded on the balance sheet under "Payables--Trade" and $150 million under
"Deferred Credits and Other Liabilities."
As a result of its recent negotiations with federal and state regulatory
agencies, including the recently-executed remediation agreement with the EPA
discussed in Item 1, Legal Proceedings, Tennessee anticipates that it will
perform further testing for and characterization of substances on the HS List,
and other substances of concern to it and those agencies, at its compressor
sites and other sites on its interstate pipeline systems. Due to the current
uncertainty regarding the regulatory requirements for site characterization,
the actual presence of such substances at the sites, and the final, site-
specific clean-up decisions to be made with respect to clean-up levels and
remediation technologies, Tennessee cannot at this time project what additional
costs may result. While there are still many uncertainties relating to the
ultimate costs which may be incurred, based upon Tennessee's continuing
evaluation and experience to date, Tenneco continues to believe that the amount
of the reserve is appropriate.
Tenneco believes that a substantial portion of these costs, which will be
expended over the next five to ten years, will be recovered from customers of
its natural gas pipelines. The estimated costs expected to be recovered,
amounting to $230 million, were recorded in 1991 as an asset ($30 million in
"Current Assets" and $200 million in "Investments and Other Assets"). An
estimated unrecoverable portion, amounting to $30 million, was charged against
income in 1991. Tennessee is currently recovering environmental expenses
annually in its rates. For more information regarding recovery of environmental
costs, see Note (2) above. A significant portion of these expenses remains
subject to review and refund in Tennessee's pending rate case. As of September
30, 1994, the asset balance is $142 million ($34 million in "Current Assets"
and $108 million in "Investments and Other Assets").
Tenneco believes that its liability insurance policies in effect during the
period in which the environmental issues occurred provide coverage for
remediation costs and related claims. In 1991, the Company commenced litigation
in a Louisiana state court against 26 of its insurance carriers during this
period, seeking recovery of losses which the Company incurred. The issues in
dispute involve determining: 1) whether the presence of PCBs and other
substances at each compressor station constituted a separate occurrence for
purposes of the per-occurrence limits of the policies; 2) the applicability of
the pollution exclusions in certain policies issued after 1971; 3) the
applicability of provisions which exclude the environmental impacts located
solely on the insured's property; 4) whether the term "property damage" in the
policies will cover the cost of compliance with governmental clean-up
directives; 5) the allocation of costs to the various policies in effect during
the period the environmental impact occurred; 6) the applicability of
provisions excluding pollution that is "expected or intended"; and 7) the
adequacy of notice of claims to insurance carriers. This environmental
insurance coverage litigation remains pending. Tenneco has completed
settlements with and received payment from six of the defendant carriers and
believes that the likelihood of recovery against the remaining defendant
carriers is reasonably possible.
13
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In July 1994, Tennessee commenced litigation in a Kentucky state court
against the manufacturer of the PCB-containing lubricant used by Tennessee,
seeking reimbursement of sums Tennessee has and will incur in the defense and
settlement of PCB-related claims brought by state and federal agencies, private
individuals, and others. Tennessee anticipates that the defendant will raise a
variety of issues in dispute of Tennessee's claims.
While Tenneco believes its legal position to be meritorious, Tenneco has not
adjusted its environmental reserve to reflect any anticipated insurance
recoveries or recoveries from the manufacturer of the PCB-containing lubricant.
The Company and its subsidiaries have identified other sites in their various
operating divisions where environmental remediation expense may be required
should there be a change in ownership, operations or applicable regulations.
These possibilities cannot be predicted or quantified at this time and
accordingly, no provision has been recorded. However, provisions have been made
for all instances where it has been determined that the incurrence of any
material remedial expense is reasonably possible.
(5) In June 1994, the Company announced that its Tenneco Automotive
subsidiary entered into an agreement in principle to sell its brakes division
to an individual for approximately $39 million. The brakes division
manufactures asbestos-free brake friction products for the automotive and heavy
duty markets and sells a broad line of brake components and accessories. The
transaction is expected to close in the fourth quarter of 1994. The Company has
recorded as part of discontinued operations an after-tax loss estimated at $21
million, net of $15 million of income tax benefits, on the sale of this
business.
(6) Financial statements for 1993 have been restated to reflect certain minor
interperiod adjustments related to the Farm and construction equipment segment
made in connection with the Case IPO. These adjustments changed income before
interest and taxes and net income for each of the 1993 quarters but had no
effect on the full year.
(7) In March 1993, a restructuring program was announced by the Company's
Farm and construction equipment segment and a pre-tax charge of $920 million
was recorded against 1992 earnings. Through September 30, 1994, approximately
$213 million of charges have been taken against the 1992 restructuring reserve.
Also, as a result of restructuring actions taken to date and various changes in
estimates for planned actions, it was determined that there were excess
reserves. Therefore, $20 million of the restructuring reserve was reversed to
income in 1993 and $16 million was reversed to income in the second quarter of
1994, leaving approximately $671 million of reserves available for the next
three years.
The specific restructuring measures and associated estimated costs were based
on management's best business judgment under prevailing circumstances and on
assumptions which have been and may continue to be revised over time and as
circumstances change.
(8) On October 6, 1994, the Company announced that Tenneco Power Generation
Company, a division of Tenneco Gas, signed a letter of intent to complete the
acquisition of ARK Energy, Inc., for $60 million in Tenneco Inc. common stock
and other considerations by year-end. ARK Energy, Inc. is a privately-owned
power generation company.
(9) On October 26, 1994, the Company announced that its Tenneco Automotive
subsidiary reached an agreement to acquire Heinrich Gillet GmbH & Company in a
transaction valued at $113 million in cash and assumed debt. Heinrich Gillet
GmbH & Company has been the leading manufacturer of original equipment exhaust
systems and components for European auto makers.
14
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(10) On October 28, 1994, the Company announced a secondary public offering
of 15.6 million shares of the common stock of Case Corporation, the holder of
Tenneco's Farm and construction equipment segment. The Company expects the
offering to reduce its holdings in the Farm and construction equipment segment
from approximately 71 percent to approximately 49 percent. It is expected that
the proposed offering would not have a material effect on Tenneco's earnings in
1994.
(11) On November 3, 1994, the Company announced that it will convert all of
its $2.80 depositary shares (designated as "Series A preferred stock" on the
September 30, 1994, Tenneco balance sheet) on December 16, 1994. For each
depositary share held on December 16, 1994, the holder will receive 0.970488
shares of the Company's common stock, or approximately 17.3 million shares in
total. The number of shares of common stock delivered for each depositary share
converted is equal to $42.75 (one-half of the current call price of the PERCS)
divided by the current market price of $44.05.
Holders of record on November 25, 1994, will receive $0.591111 per share in
cash equal to the accrued and unpaid dividends from October 1, 1994, through
December 16, 1994. Holders of depositary shares purchased on or after the ex-
dividend date will receive 0.970488 shares of the Company's common stock for
each depositary share held on December 16, 1994, but will not receive dividends
on the depositary shares.
Since being issued, the depositary shares have been included in the number of
average common shares outstanding as common stock equivalents for purposes of
the earnings per share calculation. As a result, the conversion of the
depositary shares into common stock of the Company will not cause a significant
change in the number of average common shares outstanding.
(The above notes are an integral part of the foregoing financial statements.)
15
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTH RESULTS
RESTRUCTURING PROGRAMS--CASE OPERATIONS
In the third quarter, Case continued to focus on successfully executing its
restructuring program. This program, which was announced in March 1993, is
designed to address problems of excess capacity, over-integration of component
production, highly proliferated product lines and inefficient distribution. In
October 1994, a letter of intent was signed to sell the company's cab and
component manufacturing facility in Croix, France. In addition, agreements were
reached with works councils to close both the Vierzon, France, plant in June
1995 and to reduce the workforce at the Doncaster, United Kingdom, plant during
1996 and 1997. As previously announced, a non-binding letter of intent was
signed to sell Case's foundry in St. Dizier, France.
As part of the ongoing program to divest company owned outlets worldwide,
Case sold eight retail stores in the third quarter, and signed letters of
intent to sell four additional stores. Company-owned stores declined from
approximately 250 on December 31, 1990 to 125 at September 30, 1994 primarily
as a result of these stores being converted into independent dealerships.
REVENUES
Revenues for the third quarter of 1994 were $3.29 billion, up slightly from
$3.14 billion in the third quarter of 1993. Each division reported improved
revenues for the quarter with the exception of natural gas pipelines where
revenues decreased $141 million or 20 percent and shipbuilding where revenues
decreased $12 million or 3 percent. Higher revenues were reported for farm and
construction equipment (up $167 million or 20 percent), automotive parts (up
$74 million or 17 percent), packaging (up $49 million or 10 percent) and
chemicals (up $20 million or 9 percent).
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST ("OPERATING
INCOME")
Operating income for the third quarter of 1994 was $363 million, up $90
million or 33 percent, compared with $273 million for the third quarter of
1993.
Natural gas pipelines reported operating income for the third quarter of 1994
of $97 million compared with $94 million in the 1993 third quarter. Revenues
for the third quarter of 1994 decreased to $549 million compared with $690
million in the third quarter of 1993, mainly due to changes in operations under
the Federal Energy Regulatory Commission ("FERC") Order No. 636 which commenced
September 1, 1993. Under FERC Order No. 636, regulated pipeline revenues no
longer include gas sales since this business includes primarily transportation
revenues, and will reflect a smoother quarterly earnings stream with the switch
to a non-seasonal rate structure. Third quarter 1994 operating income included
a $16 million benefit resulting from the early settlement of a firm
transportation contract running through the year 1999. Operating income also
increased due to improved non-regulated earnings and from lower operating
expenses, primarily the result of continuing efforts to control costs. The
third quarter 1993 operating income included $34 million resulting from a
favorable rate decision that allowed collection from customers of the
transition obligation that was established at the time of adoption of FAS 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" for
domestic operations. This benefit was partially offset by a $10 million reserve
established for costs which may be absorbed by the Company to resolve the pass
through of the costs of implementing Order 636. Reference is made to Note 2 in
the "Notes to Financial Statements" for additional information on FERC matters.
16
<PAGE>
Farm and construction equipment posted operating income for the third quarter
of 1994 of $73 million, an improvement of $68 million over its operating income
of $5 million in the third quarter last year. Third quarter revenues of $1.01
billion were up from $841 million reported in the 1993 third quarter, due to
stronger dealer and retail demand worldwide for agricultural and construction
equipment. Farm and construction equipment operating income improved compared
to the third quarter of 1993 primarily as a result of higher sales volumes,
improved pricing and more efficient operations resulting from restructuring
actions. Partially offsetting the increase to operating income were $15 million
of retooling expenses at the Burlington, Iowa construction equipment
manufacturing facility along with more than $8 million of higher engineering
expenses for the acceleration of new product development. During the third
quarter, worldwide farm and construction equipment production increased by 22
percent compared with the same period last year in response to improving market
conditions.
Automotive parts reported third quarter 1994 operating income of $70 million
compared with $63 million recorded in the same quarter a year ago. Revenues for
the third quarter of 1994 totaled $511 million compared with $437 million in
last year's third quarter, primarily due to higher North American original
equipment sales (up 37 percent) in the Walker exhaust segment, reflecting
stronger new car and truck production. Aftermarket sales of ride control
products in North America increased 24 percent as a result of the continuing
success of Monroe's new Sensa-Trac ride-control product. Improving economic
conditions in Europe led to a 23 percent increase in overall European revenues.
Operating income increased primarily as a result of higher aftermarket sales
and margins in the ride control segment and the benefit of quality program
initiatives.
Shipbuilding reported third quarter operating income of $52 million, up
slightly from $51 million in the 1993 third quarter. Revenues decreased to $424
million in the third quarter of 1994 compared with $436 million in the same
period a year ago primarily due to lower volumes on submarine construction
contracts and the loss of revenues from the Sperry Marine business. The Sperry
Marine business was sold in the fourth quarter of 1993. The backlog at the end
of the third quarter of 1994 stood at just under $3 billion and included
construction contracts for four LOS ANGELES class submarines, two NIMITZ class
aircraft carriers, the recently awarded contract to defuel and deactivate the
nuclear cruiser LONG BEACH and the conversion contract for two fast SEALIFT
ships.
Third quarter 1994 operating income for packaging was $63 million, up from
$51 million generated in the 1993 third quarter. Excluding $24 million in non-
recurring gains on asset sales in the year-ago quarter, operating income more
than doubled. Revenues for the third quarter of 1994 were $562 million compared
with $513 million in the same period last year. The higher revenues and
operating income were primarily the result of strengthening containerboard
pricing due to stronger demand and productivity gains at packaging's paper
mills. Operating income from the containerboard segment was $41 million in the
third quarter of 1994 compared to $2 million in the third quarter of 1993 due
to the sharp increase in containerboard prices. Partially offsetting this
increase was lower operating income in the specialty segment due to higher raw
material costs, particularly for aluminum and recycled paper and competitive
pricing pressures on molded fibre, recycled paperboard and aluminum products.
Chemicals reported third quarter 1994 operating income of $16 million down
from $20 million in the same period last year. Operating income decreased due
to lower sales margins and a one-time provision of $4 million to cover audit
adjustments in Germany and Belgium partially offset by higher income from
increased sales volumes. Revenues increased 9 percent to $243 million in the
1994 third quarter compared with $223 million in the 1993 period. The
improvement in revenues resulted from higher sales volumes and the favorable
impact of a weakening U.S. dollar on currency transactions.
INTEREST EXPENSE
Interest expense increased from $109 million in the 1993 third quarter to
$123 million in the third quarter of 1994. The increase in interest expense was
primarily due to the change in the reporting of financing
17
<PAGE>
costs on Case's wholesale receivables as interest expense. Prior to the Case
Initial Public Offering in June 1994, the Case wholesale financing costs were
reported as "Finance Charges--Tenneco Finance". Interest capitalized was $2
million for the third quarter of 1994 compared with $1 million for the third
quarter of 1993.
Reference is made to Note 1 in the "Notes to Financial Statements" for
additional information on this reporting change.
INCOME TAXES
Income tax expense for the third quarter of 1994 was $79 million compared
with $48 million reported for the third quarter of 1993. This increase was
primarily due to higher pre-tax income in 1994, partially offset by lower
levels of unbenefitted foreign losses and a benefit from the reduction of a
Case tax valuation reserve of $8 million. The 1993 period benefitted from a $44
million tax benefit attributable to a tax realignment of Tenneco's operations
in Germany and included tax expense of $13 million attributable to asset sales.
DISCONTINUED OPERATIONS
In June 1994, Tenneco announced that its Tenneco Automotive subsidiary
entered into an agreement in principle to sell its brakes division for
approximately $39 million. The brakes division manufactures asbestos-free brake
friction products for the automotive and heavy duty markets and sells a broad
line of brake components and accessories. The transaction is expected to close
in the fourth quarter of 1994.
The third quarter 1993 Statement of Income reflects the loss from the
discontinued brakes operations of $4 million.
EXTRAORDINARY LOSS
The extraordinary loss of $2 million (net of $1 million tax benefit) for the
third quarter of 1993 resulted from the redemption premium associated with the
prepayment of long-term debt.
EARNINGS (LOSS) PER AVERAGE COMMON SHARE
Income from continuing operations for the third quarter of 1994 was $151
million, or 82 cents per average common share after preferred stock dividends,
compared with income from continuing operations of $117 million, or 64 cents
per average common share after preferred stock dividends, in the 1993 third
quarter. Preferred stock dividends were $2 million in the third quarter of 1994
and $3 million in the 1993 third quarter.
Loss from discontinued operations for the third quarter of 1993 was $4
million, or 2 cents per average common share. Extraordinary loss for the third
quarter of 1993 was $2 million, or 1 cent per average common share. Net income
to common stock for the third quarter of 1994 was $149 million, or 82 cents per
average common share, compared to net income to common stock of $108 million,
or 61 cents per average common share, for the 1993 third quarter.
Average shares outstanding used for the calculation of earnings per average
common share for the third quarter of 1994 were 180.9 million compared to 176.9
million in the 1993 quarter. The increase was primarily the result of the
issuance of treasury shares and shares from the stock employee compensation
trust ("SECT") to employee benefit plans and Tenneco's dividend reinvestment
plans.
18
<PAGE>
NINE MONTH RESULTS
REVENUES
Revenues for the first nine months of 1994 were $10.07 billion, up from $9.84
billion reported in the first nine months of 1993. Higher revenues for farm and
construction equipment (up $396 million or 15 percent), automotive parts (up
$147 million or 11 percent), packaging (up $49 million or 3 percent) and
chemicals (up $30 million or 4 percent) were offset by lower revenues for
natural gas pipelines (down $326 million or 15 percent), and shipbuilding (down
$60 million or 4 percent).
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST ("OPERATING
INCOME")
Operating income for the first nine months of 1994 was $1.06 billion compared
with $842 million reported for the same period of 1993.
Natural gas pipelines reported operating income of $291 million for the first
nine months of 1994, no change from the same period of 1993. Revenues decreased
to $1.85 billion compared to $2.17 billion in the first nine months of 1993.
Farm and construction equipment reported year-to-date 1994 operating income of
$265 million, up $228 million from $37 million reported for the first nine
months of 1993. Year-to-date revenues were $3.13 billion, up from $2.73 billion
reported in the first nine months of 1993. These changes in the above
divisions' revenues and operating income were due principally to the factors
discussed under "Three Month Results" above.
Automotive parts reported operating income of $201 million for the first nine
months of 1994 compared with $190 million recorded in the same period a year
ago. Year-to-date revenues for 1994 totaled $1.52 billion as compared with last
year's $1.37 billion. Higher revenues were reported for exhaust products in
North American original equipment markets, buoyed by increased new car and
light truck production and for ride control products in North America. Overall
revenues were also up in Europe due to the improving market conditions which
also contributed to higher operating income. The improvement in the first nine
months of 1994 operating income also resulted from higher aftermarket revenues
for ride control products in North America, combined with aggressive cost
management and quality program initiatives. These improvements more than offset
the effects of the weaker North American exhaust aftermarket conditions.
Shipbuilding reported operating income of $153 million for the first nine
months of 1994 compared with $159 million in the same period in 1993. Revenues
were $1.29 billion for the first nine months of 1994 compared with $1.35
billion in the comparable 1993 period. Revenues and operating income decreases
resulted from lower volumes on submarine construction contracts and the loss of
revenues from the Sperry Marine business. The Sperry Marine business was sold
in the fourth quarter of 1993. These decreases were partially offset by
increased SEALIFT volumes.
Packaging had operating income of $127 million in the first nine months of
1994 versus $118 million in the same period of the prior year. Revenues in the
first nine months of 1994 were $1.58 billion compared with $1.53 billion in the
same 1993 period. Higher revenues and operating income due to strengthening
containerboard pricing in the second and third quarters of 1994 were partially
offset by lower first quarter revenues and operating income. The lower
operating income in the first quarter of 1994 was primarily the result of
severe winter weather and the California earthquake which curtailed plant
operations and delayed customer shipments.
Chemicals reported year-to-date 1994 operating income of $46 million, down
from $55 million in the same period in 1993. Revenues in the first nine months
of 1994 were $715 million compared to $685 million in the same period of the
prior year. The lower operating income was primarily the result of a $7 million
charge to increase the efficiency of the surfactants operation and to reduce
costs at the Whitehaven, United Kingdom site recorded in the first quarter of
1994 and a third quarter provision of $4 million for audit adjustments in
Germany and Belgium.
19
<PAGE>
INTEREST EXPENSE
Interest expense decreased from $355 million in the first nine months of 1993
to $333 million in the first nine months of 1994 while interest capitalized
increased from $3 million to $5 million in the same periods. The year-to-year
decrease in interest expense was due to lower debt levels partially offset by
higher interest expense due to the change in the reporting of finance costs on
Case's wholesale receivables discussed under "Three Month Results" above.
INCOME TAXES
Income tax expense for the first nine months of 1994 was $276 million versus
$193 million in the same period of 1993. Income tax expense increased in 1994
primarily due to higher pre-tax income in 1994 partially offset by lower levels
of unbenefitted foreign losses and a benefit from the reduction of a Case tax
valuation reserve of $8 million. The 1993 tax expense included a benefit of $44
million resulting from a tax realignment of Tenneco's German operations.
DISCONTINUED OPERATIONS
Loss from discontinued operations for the first nine months of 1994 of $26
million included a $21 million loss (net of income tax benefit of $15 million)
on the pending sale of Tenneco's brakes business and a loss of $5 million (net
of income tax benefit of $5 million) from the brakes operations. Loss from
discontinued operations of $5 million (net of income tax benefit of $3 million)
for the first nine months of 1993 reflects the loss from the brakes operations.
The sale is expected to close in the fourth quarter of 1994.
EXTRAORDINARY LOSS
The extraordinary loss for the first nine months of 1994 of $5 million and
$25 million for the first nine months of 1993 was attributable to the early
redemption premiums on long-term debt.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, Tenneco adopted Statement of Financial Accounting
Standards ("FAS") No. 112, Employers' Accounting for Postemployment Benefits.
This new standard was adopted using the cumulative catch-up method and requires
employers to account for postemployment benefits for former or inactive
employees after employment but before retirement on the accrual basis rather
than the "pay-as-you-go" basis. As a result of the adoption of this statement,
the Statement of Income for the nine months ending September 30, 1994, includes
an after-tax charge of $39 million, or 22 cents per average common share, for
the cumulative effect of the accounting change.
EARNINGS (LOSS) PER AVERAGE COMMON SHARE
Income from continuing operations for the first nine months of 1994 was $446
million, or $2.43 per average common share after preferred stock dividends,
compared with income from continuing operations of $297 million, or $1.73 per
average common share after preferred stock dividends, in the comparable 1993
period. Preferred stock dividends were $9 million in the first nine months of
1994 and $11 million in the comparable 1993 period.
Loss from discontinued operations for the first nine months of 1994 was $26
million, or 14 cents per average common share versus a loss of $5 million, or 3
cents per average common share, from discontinued operations in the first nine
months of 1993. Also included in 1994 was the after-tax charge of $39 million,
or 22 cents per average common share, relating to the cumulative effect of a
change in accounting principle. Extraordinary loss for the first nine months of
1994 was $5 million, or 3 cents per average common share versus $25 million, or
15 cents per average common share in the 1993 period. Net income to common
stock
20
<PAGE>
for the first nine months of 1994 was $367 million, or $2.04 per average common
share, compared to net income to common stock of $256 million, or $1.55 per
average common share, for the first nine months of 1993.
Average shares outstanding used for the calculation of earnings per average
common share for the first nine months of 1994 were 179.8 million compared to
165.8 million in the first nine months of 1993. The increase was due primarily
to the issuance of 23.5 million shares in the April 1993 underwritten public
offering and the issuance of treasury shares and SECT shares to employee
benefit plans and Tenneco's dividend reinvestment plans during the second half
of 1993 and the first nine months of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $433 million for the first nine
months of 1994 compared to cash provided by operating activities of $892
million for the same period in 1993, a decrease of $459 million including net
cash used by discontinued operations. Excluding the discontinued operations,
there was a decrease of $466 million. This decrease was due primarily to the
increase in wholesale receivables at Case to replenish low dealer inventory
levels associated with stronger retail demand and the pipeline rate refund
payment. Partially offsetting these declines were higher income from continuing
operations, lower tax payments and higher payables at Case due to increased
production.
Net cash provided by investing activities in the first nine months of 1994
was $52 million compared to $212 million used by investing activities in the
first nine months of 1993. Proceeds from the sale of businesses and assets were
higher by $425 million, primarily due to the sale of approximately 29 percent
of the common stock of Case in June 1994, partially offset by higher capital
expenditures from continuing operations of $105 million.
Expenditures for plant, property, and equipment from continuing operations
for the first nine months of 1994 were $438 million compared to $333 million
for the first nine months of 1993. Natural gas pipelines' capital expenditures
increased $50 million due to higher spending on expansion and enhancement
projects. Increased expenditures for packaging ($23 million), farm and
construction equipment ($22 million), chemicals ($11 million) and automotive
parts ($9 million) more than offset the decrease of $10 million for
shipbuilding.
Capitalization totalled $9.74 billion at September 30, 1994, an increase of
$749 million from December 31, 1993. The resulting ratio of total debt to
capitalization decreased from 67.6 percent to 61.9 percent. The total debt to
capitalization ratio was 59.7 percent including the market value of the SECT
shares at September 30, 1994, compared to 64.0 percent at December 31, 1993.
The major changes in capitalization were: total debt down $49 million,
stockholders' equity up $382 million, minority interest up $433 million as a
result of the Case initial stock offering and preferred stock down $17 million
primarily due to mandatory redemptions.
Based upon Tenneco's estimates of anticipated needs and circumstances of
business operations, together with anticipated market conditions, Tenneco
expects adequate sources of funds to be available to finance its future
operations through internally generated funds, the sale of assets, the use of
credit facilities and other long-term securities. Over the past several years,
Tenneco has relied on externally generated funds to meet substantial portions
of its cash requirements.
OTHER MATTERS
On October 28, 1994, Tenneco Inc. announced a secondary public offering of
15.6 million shares of the common stock of Case Corporation, the holder of
Tenneco's farm and construction equipment segment. The Company expects the
offering to reduce its holdings in the farm and construction segment from
approximately 71 percent to approximately 49 percent. It is expected that the
proposed offering would not have a material effect on Tenneco's earnings in
1994.
21
<PAGE>
On October 26, 1994, Tenneco Inc. announced that it reached an agreement to
acquire Heinrich Gillet GmbH & Company, a family-owned German firm that has
been the leading manufacturer of original equipment exhaust systems and
components for European auto makers. The acquisition is valued at $113 million
in cash and assumed debt and is expected to be completed by year-end.
Tenneco Gas has entered into an agreement to acquire ARK Energy, Inc., an
established company in the power cogeneration operation and development
business. The acquisition is valued at $60 million in stock and cash and is
also expected to be completed by year-end.
On November 3, 1994, the Company announced that it will convert all of its
$2.80 depositary shares (designated as "Series A preferred stock" on the
September 30, 1994, Tenneco balance sheet) on December 16, 1994. For each
depositary share held on December 16, 1994, the holder will receive 0.970488
shares of the Company's common stock, or approximately 17.3 million shares in
total. The number of shares of common stock delivered for each depositary share
converted is equal to $42.75 (one-half of the current call price of the PERCS)
divided by the current market price of $44.05.
Holders of record on November 25, 1994, will receive $0.591111 per share in
cash equal to the accrued and unpaid dividends from October 1, 1994, through
December 16, 1994. Holders of depositary shares purchased on or after the ex-
dividend date will receive 0.970488 shares of the Company's common stock for
each depositary share held on December 16, 1994, but will not receive dividends
on the depositary shares.
Since being issued, the depositary shares have been included in the number of
average common shares outstanding as common stock equivalents for purposes of
the earnings per share calculation. As a result, the conversion of the
depositary shares into common stock of the Company will not cause a significant
change in the number of average common shares outstanding.
22
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
(1) Environmental Proceedings.
Tennessee is a party in proceedings involving federal and state authorities
regarding the past use by Tennessee of a lubricant containing polychlorinated
biphenyls ("PCBs") in its starting air systems.
On January 13, 1992, the United States Environmental Protection Agency
("EPA") filed an administrative complaint alleging that Tennessee violated the
Toxic Substances Control Act between 1980 and 1990 by engaging in the
unauthorized use and disposal of materials containing PCBs. The complaint
addresses PCB-related activity at 26 compressor stations in five states
(Alabama, Mississippi, Kentucky, Tennessee and Ohio). A civil penalty of
$15,678,000 was sought. Tennessee and the EPA have executed a final settlement
agreement under which Tennessee paid $6.4 million to resolve all alleged civil
penalties under the Toxic Substances Control Act arising from Tennessee's prior
use of PCBs at compressor stations throughout its system. This agreement covers
42 Tennessee compressor stations in nine states and five EPA regions.
Tennessee's separate negotiations with EPA on the remediation of its compressor
stations in Regions IV, V, and VI are also complete and the parties have
executed a consent order governing this remediation. With respect to the nine
stations in Regions II and III, EPA has advised Tennessee that it is deferring
to the Pennsylvania and New York environmental agencies to specify the
remediation requirements applicable to Tennessee. Tennessee anticipates that it
will soon reach an agreement with the Pennsylvania Department of Environmental
Resources ("PaDER") and will enter into a consent order on remediation at the
Pennsylvania stations (under which Tennessee also agrees to pay a civil penalty
and to make a contribution for environmental projects); meanwhile, Tennessee
will continue its negotiations with the New York Department of Environmental
Conservation on remediation at the New York stations. Tenneco believes that the
ultimate resolution of this matter will not have a material adverse effect on
the financial condition or results of operations of Tenneco Inc. and its
consolidated subsidiaries.
(2) Other Proceedings.
On October 14, 1993, Tennessee was sued in the State District Court of Ector
County, Texas by ICA Energy, Inc. ("ICA") and TransTexas Gas Corporation
("TransTexas"). In that suit, ICA and TransTexas contended that Tennessee had
an obligation to purchase gas production which TransTexas thereafter attempted
to add unilaterally to the reserves originally dedicated to a 1979 gas
contract. On two subsequent occasions, TransTexas gave Tennessee notice that it
was adding new production and/or acreage "to the contract". A recent amendment
to the pleadings seeks $1.5 billion from Tennessee for alleged damages caused
by Tennessee's refusal to purchase gas produced from the TransTexas bases
covering the new production and lands. Neither ICA nor TransTexas were parties
to that contract. However, they contend that any stranger acquiring a
fractional interest in the original committed reserves, thereby obtains a right
to add to the contract unlimited volumes of gas production from unspecified
locations in South Texas. Tennessee believes it has meritorious defenses to the
claims of ICA and TransTexas, which defenses it will vigorously assert.
(3) Potential Superfund Liability.
At June 30, 1994, Tenneco was designated as a potentially responsible party
in 70 "Superfund" sites. With respect to its pro rata share of the remediation
costs of certain sites, Tenneco is fully indemnified by third parties. With
respect to certain other sites, Tenneco has sought to resolve its liability
through payments to the other potentially responsible parties. For the
remaining sites, Tenneco has estimated its share of the remediation costs to be
between $13 million and $72 million or 0.4% to 2.2% of the total remediation
costs for those sites and has provided reserves that it believes are adequate
for such costs. Because the clean-up
23
<PAGE>
costs are estimates and are subject to revision as more information becomes
available about the extent of remediation required, Tenneco's estimate of its
share of remediation costs could change. Moreover, liability under the
Comprehensive Environmental Response, Compensation and Liability Act is joint
and several, meaning that Tenneco could be required to pay in excess of its pro
rata share of remediation costs. Tenneco's understanding of the financial
strength of other potentially responsible parties has been considered, where
appropriate, in Tenneco's determination of its estimated liability. Tenneco
does not believe that the costs associated with its current status as a
potentially responsible party in the Superfund sites described above will be
material to its financial position or results of operations.
For additional information concerning environmental matters, see Note 4 in
the "Notes to Financial Statements" of Tenneco Inc. and Consolidated
Subsidiaries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
11--Computation of Earnings (Loss) Per Share of Common Stock
12--Computation of Ratio of Earnings to Fixed Charges
27--Financial Data Schedule
(b) Reports on Form 8-K. Tenneco Inc. did not file any Current Reports on
Form 8-K during the quarter ended September 30, 1994.
24
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TENNECO INC.
Robert T. Blakely
Date: November 10, 1994 By __________________________________
Robert T. Blakely
Senior Vice President and
Chief Financial Officer
25
<PAGE>
EXHIBIT 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE AMOUNTS)
-------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1994 1993 1994 1993
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
COMPUTATION FOR STATE-
MENTS OF INCOME
Primary Earnings Per
Share (average shares
outstanding):
Income from continu-
ing operations...... $ 151 $ 117 $ 446 $ 297
Loss from discontin-
ued operations, net
of income tax....... -- (4) (26) (5)
------------ ------------- ------------ -------------
Income before ex-
traordinary loss.... 151 113 420 292
Extraordinary loss,
net of income tax... -- (2) (5) (25)
------------ ------------- ------------ -------------
Income before cumula-
tive effect of
change in accounting
principle........... 151 111 415 267
Cumulative effect of
change in accounting
principle, net of
income tax.......... -- -- (39) --
------------ ------------- ------------ -------------
Net income........... 151 111 376 267
Preferred stock divi-
dends............... 2 3 9 11
------------ ------------- ------------ -------------
Net income to common
stock............... $ 149 $ 108 $ 367 $ 256
============ ============= ============ =============
Average shares of
common stock
outstanding(a),(b).. 180,902,646 176,854,553 179,811,774 165,784,941
============ ============= ============ =============
Earnings (loss) per
average share of
common stock:
Continuing opera-
tions............. $ .82 $ .64 $ 2.43 $ 1.73
Discontinued opera-
tions............. -- (.02) (.14) (.03)
Extraordinary loss. -- (.01) (.03) (.15)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .82 $ .61 $ 2.04 $ 1.55
============ ============= ============ =============
ADDITIONAL COMPUTATIONS
(C)
Net income to common
stock, per above...... $ 149 $ 108 $ 367 $ 256
============ ============= ============ =============
Primary Earnings Per
Share (including com-
mon stock equiva-
lents):
Average shares of
common stock
outstanding(a),(b).. 180,902,646 176,854,553 179,811,774 165,784,941
Incremental common
shares applicable to
common stock options
based on the common
stock daily average
market price during
the period.......... 63,993 24,826 87,359 19,574
------------ ------------- ------------ -------------
Average common
shares, as adjusted. 180,966,639 176,879,379 179,899,133 165,804,515
============ ============= ============ =============
Earnings (loss) per
average share of
common stock (in-
cluding common stock
equivalents):
Continuing opera-
tions............. $ .82 $ .64 $ 2.43 $ 1.73
Discontinued opera-
tions............. -- (.02) (.14) (.03)
Extraordinary loss. -- (.01) (.03) (.15)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .82 $ .61 $ 2.04 $ 1.55
============ ============= ============ =============
Fully Diluted Earnings
Per Share:
Average shares of
common stock
outstanding(a), (b). 180,902,646 176,854,553 179,811,774 165,784,941
Incremental common
shares applicable to
common stock options
based on the more
dilutive of the com-
mon stock ending or
average market price
during the period... 63,993 27,683 87,359 27,683
Average common shares
issuable assuming
conversion of
Tenneco Inc. 10%
loan stock.......... 41,192 42,861 41,619 42,891
------------ ------------- ------------ -------------
Average common shares
assuming full dilu-
tion................ 181,007,831 176,925,097 179,940,752 165,855,515
============ ============= ============ =============
Fully diluted earn-
ings (loss) per av-
erage share, assum-
ing conversion of
all applicable secu-
rities:
Continuing opera-
tions............. $ .82 $ .64 $ 2.43 $ 1.73
Discontinued opera-
tions............. -- (.02) (.14) (.03)
Extraordinary loss. -- (.01) (.03) (.15)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .82 $ .61 $ 2.04 $ 1.55
============ ============= ============ =============
</TABLE>
- -------
NOTES: (a) In 1992, 12,000,000 shares of common stock were issued to the Stock
Employee Compensation Trust ("SECT"). Shares of common stock issued
to a related trust are not considered to be outstanding in the
computation of average shares of common stock until the shares are
utilized to fund the obligations for which the trust was
established. At September 30, 1994, the SECT had utilized 4,154,538
of these shares.
(b) Series A preferred stock is converted into common stock under the
Contingent Share method. The above computation includes 8,935,175
shares of Series A preferred stock which were converted into
17,870,350 shares of common stock.
(c) These calculations are submitted in accordance with Securities and
Exchange Commission requirements although not required by
Accounting Principles Board Opinion No. 15 because they result in
dilution of less than 3%.
<PAGE>
EXHIBIT 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS)
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1994 1993
------ ------
<S> <C> <C>
Income from continuing operations............................... $446 $297
Add:
Interest...................................................... 480 578
Portion of rentals representative of interest factor.......... 52 52
Income tax expense............................................ 277 194
Amortization of interest capitalized applicable to nonutility
companies.................................................... 5 5
Interest capitalized applicable to utility companies.......... 1 1
Undistributed earnings of affiliated companies in which less
than a 50% voting interest is owned.......................... (5) 1
------ ------
Earnings as defined......................................... $1,256 $1,128
====== ======
Interest........................................................ $ 480 $ 578
Interest capitalized............................................ 5 3
Portion of rentals representative of interest factor............ 52 52
------ ------
Fixed charges as defined.................................... $ 537 $ 633
====== ======
Ratio of earnings to fixed charges.............................. 2.34 1.78
====== ======
</TABLE>
<PAGE>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE TENNECO INC. AND CONSOLIDATED
SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
FINANCIAL DATA SCHEDULE
<TABLE>
<CAPTION>
(MILLIONS
EXCEPT PER
SHARE DATA)
-------------
AS OF
SEPTEMBER 30,
1994 AND FOR
THE NINE
MONTHS THEN
ENDED
-------------
<S> <C>
Cash and cash items $ 492
Marketable securities 0
Notes and accounts receivable--trade 3,255
Allowances for doubtful accounts 0
Inventory 1,720
Total current assets 6,525
Property, plant and equipment 12,579
Accumulated depreciation 6,672
Total assets 16,310
Total current liabilities 5,218
Bonds, mortgages and similar debt 4,616
Preferred stock--mandatory redemption 146
Preferred stock--no mandatory redemption 9
Common stock 870
Other stockholders' equity 2,104
Total liabilities and stockholders' equity 16,310
Net sales of tangible products 10,071
Total revenues 10,071
Cost of tangible goods sold 7,817
Total costs and expenses applicable to sales and revenues 7,817
Other costs and expenses 1,354
Provision for doubtful accounts and notes 0
Interest and amortization of debt discount 328
Income before taxes and other items 734
Income tax expense 276
Income/loss continuing operations 446
Discontinued operations (26)
Extraordinary items (5)
Cumulative effect--changes in accounting principles (39)
Net income or loss $ 376
Earnings per share--primary $2.04
Earnings per share--fully diluted $2.04
</TABLE>
<PAGE>
LOGO
<PAGE>
EXHIBIT 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE AMOUNTS)
-------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1994 1993 1994 1993
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
COMPUTATION FOR STATE-
MENTS OF INCOME
Primary Earnings Per
Share (average shares
outstanding):
Income from continu-
ing operations...... $ 151 $ 117 $ 446 $ 297
Loss from discontin-
ued operations, net
of income tax....... -- (4) (26) (5)
------------ ------------- ------------ -------------
Income before ex-
traordinary loss.... 151 113 420 292
Extraordinary loss,
net of income tax... -- (2) (5) (25)
------------ ------------- ------------ -------------
Income before cumula-
tive effect of
change in accounting
principle........... 151 111 415 267
Cumulative effect of
change in accounting
principle, net of
income tax.......... -- -- (39) --
------------ ------------- ------------ -------------
Net income........... 151 111 376 267
Preferred stock divi-
dends............... 2 3 9 11
------------ ------------- ------------ -------------
Net income to common
stock............... $ 149 $ 108 $ 367 $ 256
============ ============= ============ =============
Average shares of
common stock
outstanding(a),(b).. 180,902,646 176,854,553 179,811,774 165,784,941
============ ============= ============ =============
Earnings (loss) per
average share of
common stock:
Continuing opera-
tions............. $ .82 $ .64 $ 2.43 $ 1.73
Discontinued opera-
tions............. -- (.02) (.14) (.03)
Extraordinary loss. -- (.01) (.03) (.15)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .82 $ .61 $ 2.04 $ 1.55
============ ============= ============ =============
ADDITIONAL COMPUTATIONS
(C)
Net income to common
stock, per above...... $ 149 $ 108 $ 367 $ 256
============ ============= ============ =============
Primary Earnings Per
Share (including com-
mon stock equiva-
lents):
Average shares of
common stock
outstanding(a),(b).. 180,902,646 176,854,553 179,811,774 165,784,941
Incremental common
shares applicable to
common stock options
based on the common
stock daily average
market price during
the period.......... 63,993 24,826 87,359 19,574
------------ ------------- ------------ -------------
Average common
shares, as adjusted. 180,966,639 176,879,379 179,899,133 165,804,515
============ ============= ============ =============
Earnings (loss) per
average share of
common stock (in-
cluding common stock
equivalents):
Continuing opera-
tions............. $ .82 $ .64 $ 2.43 $ 1.73
Discontinued opera-
tions............. -- (.02) (.14) (.03)
Extraordinary loss. -- (.01) (.03) (.15)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .82 $ .61 $ 2.04 $ 1.55
============ ============= ============ =============
Fully Diluted Earnings
Per Share:
Average shares of
common stock
outstanding(a), (b). 180,902,646 176,854,553 179,811,774 165,784,941
Incremental common
shares applicable to
common stock options
based on the more
dilutive of the com-
mon stock ending or
average market price
during the period... 63,993 27,683 87,359 27,683
Average common shares
issuable assuming
conversion of
Tenneco Inc. 10%
loan stock.......... 41,192 42,861 41,619 42,891
------------ ------------- ------------ -------------
Average common shares
assuming full dilu-
tion................ 181,007,831 176,925,097 179,940,752 165,855,515
============ ============= ============ =============
Fully diluted earn-
ings (loss) per av-
erage share, assum-
ing conversion of
all applicable secu-
rities:
Continuing opera-
tions............. $ .82 $ .64 $ 2.43 $ 1.73
Discontinued opera-
tions............. -- (.02) (.14) (.03)
Extraordinary loss. -- (.01) (.03) (.15)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .82 $ .61 $ 2.04 $ 1.55
============ ============= ============ =============
</TABLE>
- -------
NOTES: (a) In 1992, 12,000,000 shares of common stock were issued to the Stock
Employee Compensation Trust ("SECT"). Shares of common stock issued
to a related trust are not considered to be outstanding in the
computation of average shares of common stock until the shares are
utilized to fund the obligations for which the trust was
established. At September 30, 1994, the SECT had utilized 4,154,538
of these shares.
(b) Series A preferred stock is converted into common stock under the
Contingent Share method. The above computation includes 8,935,175
shares of Series A preferred stock which were converted into
17,870,350 shares of common stock.
(c) These calculations are submitted in accordance with Securities and
Exchange Commission requirements although not required by
Accounting Principles Board Opinion No. 15 because they result in
dilution of less than 3%.
<PAGE>
EXHIBIT 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS)
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1994 1993
------ ------
<S> <C> <C>
Income from continuing operations............................... $446 $297
Add:
Interest...................................................... 480 578
Portion of rentals representative of interest factor.......... 52 52
Income tax expense............................................ 277 194
Amortization of interest capitalized applicable to nonutility
companies.................................................... 5 5
Interest capitalized applicable to utility companies.......... 1 1
Undistributed earnings of affiliated companies in which less
than a 50% voting interest is owned.......................... (5) 1
------ ------
Earnings as defined......................................... $1,256 $1,128
====== ======
Interest........................................................ $ 480 $ 578
Interest capitalized............................................ 5 3
Portion of rentals representative of interest factor............ 52 52
------ ------
Fixed charges as defined.................................... $ 537 $ 633
====== ======
Ratio of earnings to fixed charges.............................. 2.34 1.78
====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Tenneco Inc. and consolidated subsidiaries financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 492
<SECURITIES> 0
<RECEIVABLES> 3,255
<ALLOWANCES> 0
<INVENTORY> 1,720
<CURRENT-ASSETS> 6,525
<PP&E> 12,579
<DEPRECIATION> 6,672
<TOTAL-ASSETS> 16,310
<CURRENT-LIABILITIES> 5,218
<BONDS> 4,616
<COMMON> 870
146
9
<OTHER-SE> 2,104
<TOTAL-LIABILITY-AND-EQUITY> 16,310
<SALES> 10,071
<TOTAL-REVENUES> 10,071
<CGS> 7,817
<TOTAL-COSTS> 7,817
<OTHER-EXPENSES> 1,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 328
<INCOME-PRETAX> 734
<INCOME-TAX> 276
<INCOME-CONTINUING> 446
<DISCONTINUED> (26)
<EXTRAORDINARY> (5)
<CHANGES> (39)
<NET-INCOME> 376
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 2.04
</TABLE>
