<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 JUNE 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: 170,968,183 shares as of June 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................................................ 15
Part II--Other Information
Item 1. Legal Proceedings............................................... 21
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. 22
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 22
</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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
- -------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE
AMOUNTS) 1994 1993 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues--
Natural gas pipelines.. $ 605 $ 665 $ 1,298 $ 1,483
Farm and construction
equipment............. 1,118 1,075 2,118 1,889
Automotive parts....... 545 506 1,010 937
Shipbuilding........... 464 463 867 915
Packaging.............. 527 514 1,018 1,018
Chemicals.............. 251 242 472 462
Other.................. (1) 1 (4) (3)
----------- ----------- ----------- -----------
3,509 3,466 6,779 6,701
Other income--
Interest income........ 40 74 87 148
Equity in net income--
Tenneco Finance....... -- -- -- --
Other income, net...... 15 21 32 37
----------- ----------- ----------- -----------
3,564 3,561 6,898 6,886
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales (exclusive
of depreciation shown
below)................. 2,225 2,210 4,238 4,143
Operating expenses...... 511 553 1,042 1,177
Selling, general and ad-
ministrative........... 308 309 612 602
Finance charges--Tenneco
Finance................ 44 64 95 137
Depreciation, depletion
and amortization....... 96 127 228 258
Restructuring costs..... (16) -- (16) --
----------- ----------- ----------- -----------
3,168 3,263 6,199 6,317
----------- ----------- ----------- -----------
Income Before Interest Ex-
pense and Income Taxes... 396 298 699 569
Interest Expense (net of
interest capitalized).... 105 118 207 244
----------- ----------- ----------- -----------
Income Before Income Tax-
es....................... 291 180 492 325
Income Tax Expense ....... 120 74 197 145
----------- ----------- ----------- -----------
Income From Continuing Op-
erations................. 171 106 295 180
Income (Loss) From Discon-
tinued Operations, Net of
Income Tax............... (24) 2 (26) (1)
----------- ----------- ----------- -----------
Income Before Extraordi-
nary Loss................ 147 108 269 179
Extraordinary Loss, Net of
Income Tax............... (5) (23) (5) (23)
----------- ----------- ----------- -----------
Income Before Cumulative
Effect of Change in Ac-
counting Principle....... 142 85 264 156
Cumulative Effect of
Change in Accounting
Principle, Net of Income
Tax...................... -- -- (39) --
----------- ----------- ----------- -----------
Net Income................ 142 85 225 156
Preferred Stock Dividends. 4 4 7 8
----------- ----------- ----------- -----------
Net Income to Common
Stock.................... $ 138 $ 81 $ 218 $ 148
=========== =========== =========== ===========
Average Number of Shares
of Common Stock Outstand-
ing...................... 179,850,934 168,965,649 179,287,726 160,167,889
=========== =========== =========== ===========
Earnings (Loss) Per Aver-
age Share of Common
Stock:
Continuing operations... $ .93 $ .60 $ 1.61 $ 1.08
Discontinued operations. (.13) .01 (.14) (.02)
Extraordinary loss...... (.03) (.13) (.03) (.14)
Cumulative effect of
change in accounting
principle.............. -- -- (.22) --
----------- ----------- ----------- -----------
$ .77 $ .48 $ 1.22 $ .92
=========== =========== =========== ===========
Cash Dividends Per Share
of Common Stock.......... $ .40 $ .40 $ .80 $ .80
=========== =========== =========== ===========
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of income.)
2
<PAGE>
<TABLE>
<CAPTION>
TENNECO INDUSTRIAL
--------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------
1994 1993 1994 1993
----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues--
Natural gas pipelines.. $ 605 $ 665 $ 1,298 $ 1,483
Farm and construction
equipment............. 1,118 1,075 2,118 1,889
Automotive parts....... 545 506 1,010 937
Shipbuilding........... 464 463 867 915
Packaging.............. 527 514 1,018 1,018
Chemicals.............. 251 242 472 462
Other.................. (1) 1 (4) (3)
----------- ----------- ----------- -----------
3,509 3,466 6,779 6,701
Other income--
Interest income........ 14 11 22 21
Equity in net income--
Tenneco Finance....... 22 30 63 53
Other income, net...... 17 25 33 44
----------- ----------- ----------- -----------
3,562 3,532 6,897 6,819
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales (exclusive
of depreciation shown
below)................. 2,225 2,212 4,240 4,146
Operating expenses...... 514 550 1,054 1,171
Selling, general and ad-
ministrative........... 350 353 706 679
Finance charges--Tenneco
Finance................ -- -- -- --
Depreciation, depletion
and amortization....... 95 127 227 257
Restructuring costs..... (16) -- (16) --
----------- ----------- ----------- -----------
3,168 3,242 6,211 6,253
----------- ----------- ----------- -----------
Income Before Interest Ex-
pense and Income Taxes... 394 290 686 566
Interest Expense (net of
interest capitalized).... 118 133 231 279
----------- ----------- ----------- -----------
Income Before Income Tax-
es....................... 276 157 455 287
Income Tax Expense ....... 105 51 160 107
----------- ----------- ----------- -----------
Income From Continuing Op-
erations................. 171 106 295 180
Income (Loss) From Discon-
tinued Operations, Net of
Income Tax............... (24) 2 (26) (1)
----------- ----------- ----------- -----------
Income Before Extraordi-
nary Loss................ 147 108 269 179
Extraordinary Loss, Net of
Income Tax............... (5) (23) (5) (23)
----------- ----------- ----------- -----------
Income Before Cumulative
Effect of Change in Ac-
counting Principle....... 142 85 264 156
Cumulative Effect of
Change in Accounting
Principle, Net of Income
Tax...................... -- -- (39) --
----------- ----------- ----------- -----------
Net Income................ 142 85 225 156
Preferred Stock Dividends. 4 4 7 8
----------- ----------- ----------- -----------
Net Income to Common
Stock.................... $ 138 $ 81 $ 218 $ 148
=========== =========== =========== ===========
TENNECO FINANCE
--------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------
1994 1993 1994 1993
----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues--
Natural gas pipelines.. $ -- $ -- $ -- $ --
Farm and construction
equipment............. -- -- -- --
Automotive parts....... -- -- -- --
Shipbuilding........... -- -- -- --
Packaging.............. -- -- -- --
Chemicals.............. -- -- -- --
Other.................. -- -- -- --
----------- ----------- ----------- -----------
-- -- -- --
Other income--
Interest income........ 87 138 197 269
Equity in net income--
Tenneco Finance....... -- -- -- --
Other income, net...... 1 2 2 3
----------- ----------- ----------- -----------
88 140 199 272
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales (exclusive
of depreciation shown
below)................. -- -- -- --
Operating expenses...... (2) 5 (9) 9
Selling, general and ad-
ministrative........... (1) 4 1 6
Finance charges--Tenneco
Finance................ 49 72 98 150
Depreciation, depletion
and amortization....... 1 -- 1 1
Restructuring costs..... -- -- -- --
----------- ----------- ----------- -----------
47 81 91 166
----------- ----------- ----------- -----------
Income Before Interest Ex-
pense and Income Taxes... 41 59 108 106
Interest Expense (net of
interest capitalized).... 4 6 8 15
----------- ----------- ----------- -----------
Income Before Income Tax-
es....................... 37 53 100 91
Income Tax Expense ....... 15 23 37 38
----------- ----------- ----------- -----------
Income From Continuing Op-
erations................. 22 30 63 53
Income (Loss) From Discon-
tinued Operations, Net of
Income Tax............... -- -- -- --
----------- ----------- ----------- -----------
Income Before Extraordi-
nary Loss................ 22 30 63 53
Extraordinary Loss, Net of
Income Tax............... (4) (1) (4) (1)
----------- ----------- ----------- -----------
Income Before Cumulative
Effect of Change in Ac-
counting Principle....... 18 29 59 52
Cumulative Effect of
Change in Accounting
Principle, Net of Income
Tax...................... -- -- -- --
----------- ----------- ----------- -----------
Net Income................ 18 29 59 52
Preferred Stock Dividends. -- -- -- --
----------- ----------- ----------- -----------
Net Income to Common
Stock.................... $ 18 $ 29 $ 59 $ 52
=========== =========== =========== ===========
</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
------------------ ------------------- -------------------
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 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............ $ 295 $ 180 $ 295 $ 180 $ 63 $ 53
Adjustments to
reconcile income from
continuing operations
to cash provided
(used) by continuing
operations--
Depreciation, depletion
and amortization...... 228 258 227 257 1 1
Deferred income taxes.. (35) (39) (42) (39) 7 --
Changes in components
of working capital--
(Increase) decrease in
receivables.......... (532) 228 (1,704) 10 708 547
(Increase) decrease in
inventories.......... (146) (42) (146) (42) -- --
(Increase) decrease in
prepayments and other
current assets....... 66 (18) 75 (30) (2) 12
Increase (decrease) in
payables............. 197 (96) (18) (207) 53 (4)
Increase (decrease) in
taxes accrued........ 149 (101) 161 (89) (12) (12)
Increase (decrease) in
interest accrued..... (32) (34) (14) (21) (18) (13)
Increase (decrease) in
restructuring liabil-
ity.................. (52) (20) (52) (20) -- --
Increase (decrease) in
natural gas pipeline
revenue reservation.. (157) 75 (157) 75 -- --
Increase (decrease) in
other current liabil-
ities................ 96 41 114 47 (18) (6)
(Increase) decrease in
long-term notes and
receivables........... 275 152 70 -- 189 135
Take-or-pay (refunds to
customers) recoup-
ments, net............ 4 (30) 4 (30) -- --
Other.................. (82) (12) (87) (17) 5 (33)
-------- -------- -------- --------- --------- -------
Cash provided (used)
by continuing opera-
tions................ 274 542 (1,274) 74 976 680
Cash provided (used)
by discontinued oper-
ations............... (5) (7) (5) (7) -- --
-------- -------- -------- --------- --------- -------
Net Cash Provided (Used)
by Operating Activi-
ties................... 269 535 (1,279) 67 976 680
-------- -------- -------- --------- --------- -------
Cash Flows from Invest-
ing Activities:
Net proceeds
(expenditures) related
to the sale of
discontinued
operations............ (5) (34) (5) (34) -- --
Proceeds from sale of
businesses and assets. 522 65 522 65 -- --
Expenditures for plant,
property and equip-
ment--
Continuing operations.. (240) (176) (240) (176) -- --
Discontinued opera-
tions................. -- (1) -- (1) -- --
Acquisition of busi-
ness.................. -- (2) -- (2) -- --
Investments and other.. 9 56 (198) 28 (10) 27
-------- -------- -------- --------- --------- -------
Net Cash Provided (Used)
by Investing Activi-
ties................... 286 (92) 79 (120) (10) 27
-------- -------- -------- --------- --------- -------
Cash Flows from Financ-
ing Activities:
Issuance of common,
treasury and SECT
shares................ 108 1,125 108 1,125 185 --
Purchase of common
stock................. (6) (2) (6) (2) -- --
Redemption of preferred
stock................. (20) (30) (20) (30) -- --
Issuance of long-term
debt.................. 979 2 992 6 12 --
Retirement of long-term
debt.................. (1,060) (1,516) (66) (1,060) (1,018) (457)
Net increase (decrease)
in short-term debt ex-
cluding current
maturities on long-
term debt............. (54) 114 455 154 112 (254)
Dividends (common and
preferred)............ (161) (151) (161) (151) (18) --
-------- -------- -------- --------- --------- -------
Net Cash Provided (Used)
by Financing Activi-
ties................... (214) (458) 1,302 42 (727) (711)
-------- -------- -------- --------- --------- -------
Effect of Foreign
Exchange Rate Changes
on Cash and Temporary
Cash Investments....... 3 2 3 (1) -- 3
-------- -------- -------- --------- --------- -------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ 344 (13) 105 (12) 239 (1)
Cash and Temporary Cash
Investments, January 1. 218 111 213 102 5 9
-------- -------- -------- --------- --------- -------
Cash and Temporary Cash
Investments, June 30
(Note)................. $ 562 $ 98 $ 318 $ 90 $ 244 $ 8
======== ======== ======== ========= ========= =======
Cash Paid During the Pe-
riod for:
Interest............... $ 338 $ 417 $ 258 $ 327 $ 130 $ 177
Income taxes (net of
refunds).............. $ (62) $ 267 $ (78) $ 204 $ 16 $ 63
</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
-------------------------------
JUNE 30, DECEMBER 31, JUNE 30,
(MILLIONS) 1994 1993 1993
- ---------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and temporary cash investments............ $ 562 $ 218 $ 98
Receivables--
Customer notes and accounts (net)............ 3,398 2,669 3,101
Affiliated companies......................... -- -- --
Gas transportation and exchange.............. 295 228 241
Other........................................ 235 274 165
Inventories.................................... 1,754 1,581 1,759
Deferred income taxes.......................... 104 61 219
Prepayments and other.......................... 330 386 390
------- ------- -------
6,678 5,417 5,973
------- ------- -------
Investments and Other Assets:
Investment in affiliated companies............. 472 470 584
Other investments, at cost..................... 54 58 77
Long-term notes and other receivables (net).... 1,587 1,961 2,179
Investment in subsidiaries in excess of net
assets at date of acquisition, less amortiza-
tion.......................................... 410 422 427
Deferred income taxes.......................... 41 38 --
Other.......................................... 1,218 1,327 1,230
------- ------- -------
3,782 4,276 4,497
------- ------- -------
Plant, Property and Equipment, at cost.......... 12,287 12,115 12,037
Less--Reserves for depreciation, depletion and
amortization.................................. 6,591 6,435 6,451
------- ------- -------
5,696 5,680 5,586
------- ------- -------
$16,156 $15,373 $16,056
======= ======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Short-term debt (including current maturities
on long-term debt)............................ $ 1,133 $ 1,274 $ 1,263
Payables--
Trade........................................ 1,496 1,337 1,353
Affiliated companies......................... -- -- --
Gas transportation and exchange.............. 208 136 180
Taxes accrued.................................. 309 158 130
Interest accrued............................... 138 154 168
Restructuring liability........................ 171 213 254
Natural gas pipeline revenue reservation....... 118 291 231
Other.......................................... 1,463 1,347 1,377
------- ------- -------
5,036 4,910 4,956
------- ------- -------
Long-term Debt.................................. 4,848 4,799 5,448
------- ------- -------
Deferred Income Taxes........................... 1,178 1,225 1,184
------- ------- -------
Deferred Credits and Other Liabilities.......... 1,537 1,522 1,725
------- ------- -------
Commitments and Contingencies
Minority Interest............................... 573 153 157
------- ------- -------
Preferred Stock with Mandatory Redemption Provi-
sions.......................................... 145 163 162
------- ------- -------
Stockholders' Equity:
Series A preferred stock....................... 9 9 9
Common stock................................... 870 870 869
Stock Employee Compensation Trust (common
stock held in trust).......................... (386) (499) (541)
Premium on common stock and other capital sur-
plus.......................................... 3,664 3,714 3,687
Cumulative translation adjustments............. (243) (303) (275)
Retained earnings (accumulated deficit)........ (923) (980) (1,084)
------- ------- -------
2,991 2,811 2,665
Less--Shares held as treasury stock, at cost... 152 210 241
------- ------- -------
2,839 2,601 2,424
------- ------- -------
$16,156 $15,373 $16,056
======= ======= =======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
balance sheets.)
6
<PAGE>
<TABLE>
<CAPTION>
TENNECO INDUSTRIAL
-------------------------------------
JUNE 30, DECEMBER 31, JUNE 30,
1994 1993 1993
----------------------------------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and temporary cash investments............ $ 318 $ 213 $ 90
Receivables--
Customer notes and accounts (net)............ 2,343 561 772
Affiliated companies......................... 62 57 71
Gas transportation and exchange.............. 295 228 241
Other........................................ 222 259 132
Inventories.................................... 1,754 1,581 1,759
Deferred income taxes.......................... 101 40 197
Prepayments and other.......................... 325 393 401
------- ------- -------
5,420 3,332 3,663
------- ------- -------
Investments and Other Assets:
Investment in affiliated companies............. 1,352 1,526 1,596
Other investments, at cost..................... 49 53 72
Long-term notes and other receivables (net).... 664 243 217
Investment in subsidiaries in excess of net
assets at date of acquisition, less amortiza-
tion.......................................... 410 422 427
Deferred income taxes.......................... 41 38 --
Other.......................................... 1,250 1,372 1,215
------- ------- -------
3,766 3,654 3,527
------- ------- -------
Plant, Property and Equipment, at cost.......... 12,217 12,046 11,967
Less--Reserves for depreciation, depletion and
amortization.................................. 6,573 6,419 6,436
------- ------- -------
5,644 5,627 5,531
------- ------- -------
$14,830 $12,613 $12,721
======= ======= =======
<CAPTION> <CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Short-term debt (including current maturities
on long-term debt)............................ $ 809 $ 179 $ 184
Payables--
Trade........................................ 1,481 1,334 1,352
Affiliated companies......................... 47 129 159
Gas transportation and exchange.............. 208 136 180
Taxes accrued.................................. 301 132 109
Interest accrued............................... 103 102 110
Restructuring liability........................ 171 213 254
Natural gas pipeline revenue reservation....... 118 291 231
Other.......................................... 1,427 1,286 1,306
------- ------- -------
4,665 3,802 3,885
------- ------- -------
Long-term Debt.................................. 3,940 3,143 3,190
------- ------- -------
Deferred Income Taxes........................... 1,171 1,227 1,178
------- ------- -------
Deferred Credits and Other Liabilities.......... 1,549 1,524 1,725
------- ------- -------
Commitments and Contingencies
Minority Interest............................... 521 153 157
------- ------- -------
Preferred Stock with Mandatory Redemption Provi-
sions.......................................... 145 163 162
------- ------- -------
Stockholders' Equity:
Series A preferred stock....................... 9 9 9
Common stock................................... 870 870 869
Stock Employee Compensation Trust (common
stock held in trust).......................... (386) (499) (541)
Premium on common stock and other capital sur-
plus.......................................... 3,664 3,714 3,687
Cumulative translation adjustments............. (243) (303) (275)
Retained earnings (accumulated deficit)........ (923) (980) (1,084)
------- ------- -------
2,991 2,811 2,665
Less--Shares held as treasury stock, at cost... 152 210 241
------- ------- -------
2,839 2,601 2,424
------- ------- -------
$14,830 $12,613 $12,721
======= ======= =======
TENNECO FINANCE
----------------------------------------
JUNE 30, DECEMBER 31, JUNE 30,
1994 1993 1993
-------------------------------------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and temporary cash investments............ $ 244 $ 5 $ 8
Receivables--
Customer notes and accounts (net)............ 1,049 2,098 2,314
Affiliated companies......................... 564 371 260
Gas transportation and exchange.............. -- -- --
Other........................................ 13 15 33
Inventories.................................... -- -- --
Deferred income taxes.......................... 3 21 22
Prepayments and other.......................... 7 3 4
------ ------ ------
1,880 2,513 2,641
------ ------ ------
Investments and Other Assets:
Investment in affiliated companies............. -- -- --
Other investments, at cost..................... 5 5 5
Long-term notes and other receivables (net).... 945 1,722 1,941
Investment in subsidiaries in excess of net
assets at date of acquisition, less amortiza-
tion.......................................... -- -- --
Deferred income taxes.......................... -- -- --
Other.......................................... 5 7 85
------ ------ ------
955 1,734 2,031
------ ------ ------
Plant, Property and Equipment, at cost.......... 70 69 70
Less--Reserves for depreciation, depletion and
amortization.................................. 18 16 15
------ ------ ------
52 53 55
------ ------ ------
$2,887 $4,300 $4,727
====== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Short-term debt (including current maturities
on long-term debt)............................ $ 897 $1,382 $1,230
Payables--
Trade........................................ 15 3 1
Affiliated companies......................... 36 11 20
Gas transportation and exchange.............. -- -- --
Taxes accrued.................................. 8 26 21
Interest accrued............................... 35 52 58
Restructuring liability........................ -- -- --
Natural gas pipeline revenue reservation....... -- -- --
Other.......................................... 36 61 71
------ ------ ------
1,027 1,535 1,401
------ ------ ------
Long-term Debt.................................. 919 1,710 2,307
------ ------ ------
Deferred Income Taxes........................... 7 (2) 6
------ ------ ------
Deferred Credits and Other Liabilities.......... 2 1 1
------ ------ ------
Commitments and Contingencies
Minority Interest............................... 52 -- --
------ ------ ------
Preferred Stock with Mandatory Redemption Provi-
sions.......................................... -- -- --
------ ------ ------
Stockholders' Equity:
Series A preferred stock....................... -- -- --
Common stock................................... 71 317 314
Stock Employee Compensation Trust (common
stock held in trust).......................... -- -- --
Premium on common stock and other capital sur-
plus.......................................... 403 268 267
Cumulative translation adjustments............. (5) (8) (6)
Retained earnings (accumulated deficit)........ 411 479 437
------ ------ ------
880 1,056 1,012
Less--Shares held as treasury stock, at cost... -- -- --
------ ------ ------
880 1,056 1,012
------ ------ ------
$2,887 $4,300 $4,727
====== ====== ======
</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
----------------------------------------
SIX MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE AMOUNTS) 1994 1993
- --------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Series A Preferred Stock:
Balance January 1 and June 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........ 37,946 -- 84,773 --
Other................................... -- -- 152 --
----------- ------ ----------- ------
Balance June 30........................... 173,990,958 870 173,885,149 869
=========== ------ =========== ------
Stock Employee Compensation Trust (SECT):
Balance January 1......................... (499) (488)
Shares issued........................... 63 65
Adjustment to market value.............. 50 (118)
------ ------
Balance June 30........................... (386) (541)
------ ------
Premium on Common Stock and Other Capital
Surplus:
Balance January 1......................... 3,714 2,637
Premium on common stock issued to retire
debt................................... -- 936
Premium on common stock issued pursuant
to benefit plans....................... 2 3
Loss on issuance of treasury stock...... -- (3)
Loss on shares issued by SECT........... (4) (2)
Dividends on shares held by SECT........ 7 9
Adjustment of SECT to market value...... (50) 118
Deferred compensation related to the
stock plans (net of amortization)...... (5) (11)
------ ------
Balance June 30........................... 3,664 3,687
------ ------
Cumulative Translation Adjustments:
Balance January 1......................... (303) (230)
Translation of foreign currency state-
ments.................................. 63 (51)
Hedges of net investment in foreign sub-
sidiaries (net of income taxes)........ (3) 6
------ ------
Balance June 30........................... (243) (275)
------ ------
Retained Earnings (Accumulated Deficit):
Balance January 1......................... (980) (1,082)
Net income.............................. 225 156
Dividends--
Preferred stock....................... (5) (7)
Series A preferred stock.............. (25) (25)
Common stock.......................... (136) (125)
Accretion of excess of redemption value
of preferred stock over fair value at
date of issue.......................... (2) (1)
------ ------
Balance June 30........................... (923) (1,084)
------ ------
Less--Common Stock Held as Treasury Stock,
at Cost:
Balance January 1......................... 4,166,835 210 5,323,912 268
Shares acquired......................... 190,458 10 60,529 3
Shares issued pursuant to benefit and
dividend reinvestment plans............ (1,334,518) (68) (588,303) (30)
----------- ------ ----------- ------
Balance June 30........................... 3,022,775 152 4,796,138 241
=========== ------ =========== ------
Total............................... $2,839 $2,424
====== ======
</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
-----------------------------------
SIX MONTHS ENDED JUNE 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...... -- 2 -- 1
--------- ---- --------- -----
Balance June 30.......................... 1,586,764 $145 1,782,525 $ 162
========= ==== ========= =====
</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 June 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 (see Note 6 below), 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 $10 million, $18 million, $22 million and $40 million for the
three months and six months ended June 30, 1994, and 1993, respectively, with
no effect on consolidated net income. At December 31, 1993, and June 30, 1993,
this change would have increased receivables and debt of Tenneco Industrial by
$1.5 billion and $1.8 billion, respectively, with no effect in 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) On April 5, 1994, the Federal Energy Regulatory Commission ("FERC")
issued a final order approving Tennessee Gas Pipeline Company's ("Tennessee")
Stipulation and Agreement that resolved many significant issues in Docket No.
RP91-203 (Tennessee's current rate case, which was filed in 1991) and
established procedures for resolving the remaining issues, including the
recovery of certain environmental expenditures discussed in Note (4) below.
Tennessee is currently collecting the environmental costs in its 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 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 now included 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 global
10
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
settlement will depend upon the results of Tennessee's negotiations with its
customers and will be subject to FERC approval. Given the current uncertainty
of a possible settlement, the Company is unable to predict its timing or its
impact on Tenneco's consolidated financial position or results of operations.
Pursuant to the final FERC order, on June 3, 1994, Tennessee paid refunds for
the period February 1, 1992, through August 31, 1993. 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.
On April 8, 1992, the FERC issued Order No. 636 which, together with
subsequently issued clarifying Order Nos. 636-A and 636-B (the "FERC
Restructuring Orders"), restructured the interstate gas pipeline industry. The
FERC Restructuring Orders required pipelines to: 1) "unbundle" their
transportation and storage services from their sales services, 2) increase
pipeline customers' flexibility to change receipt and delivery points under
transportation contracts and to allow release of capacity under those contracts
for use by others and 3) separate interstate pipeline gas sales organizations
from interstate pipeline transportation and storage business units. Under the
FERC Restructuring Orders, rates for pipeline transportation and storage
generally remain subject to traditional cost-of-service regulation but under a
rate design which is relatively insensitive to throughput and hence less
sensitive to seasonal variation. Sales of natural gas by interstate pipelines
occur pursuant to a blanket sales certificate under which price and other terms
of sale are set by market forces.
Commencing on September 1, 1993, Tennessee implemented its Order No. 636
tariff and the restructuring of its transportation, storage and sales services
and the implementation of various recovery mechanisms to begin recovery of
certain transition costs already paid or obligated to be paid in connection
with the FERC Restructuring Orders.
Tennessee's Order No. 636 compliance filings request authority to: 1)
recover, through a monthly surcharge, one-time gas supply realignment costs and
certain related costs incurred to date over a period of up to thirty-six
months, 2) direct-bill customers for unrecovered purchased gas costs over a
twelve-month period and 3) track and recover from customers, through an annual
surcharge, upstream transportation costs which Tennessee is obligated to pay
under existing contracts. The filings were accepted effective September 1,
1993, and made subject to refund pending review. Hearings have been instituted
to review the recovery of the gas supply realignment costs and the direct
billing of unrecovered purchased gas costs.
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 the ability of
Tennessee to file for the recovery of losses upon disposition of these assets.
Tennessee will seek appellate review of the FERC actions. Tennessee is
confident that the Bastian Bay costs will ultimately be recovered either as
transition costs directly related to Order No. 636 or through traditional rate
recovery methods, and no FERC order has questioned the ultimate recoverability
of these costs.
The total amount of transition costs that will be incurred by Tennessee will
depend upon: 1) developments in restructuring proceedings involving Tennessee,
its customers and other affected parties, 2) the resolution of pending
litigation and 3) the terms of multiple negotiations with individual suppliers.
Until these issues are resolved, Tennessee cannot finally determine the
ultimate amount of one-time transition costs or other annual costs it will
incur, nor the amounts which will be recovered from customers. Tennessee
believes that one-time transition costs will not exceed $700 million. As of
June 30, 1994, Tennessee has
11
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
deferred transition costs net of recoveries of approximately $135 million,
which will be recovered from its customers. Tennessee believes that other
annual transition costs, including upstream transportation costs, will not
exceed $100 million in 1994, decreasing thereafter over the length of the
contracts involved.
In July 1994, Tennessee filed with the FERC a Stipulation and Agreement (the
"PGA Stipulation"), which will resolve, if approved, the recovery of
unrecovered purchased gas costs 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
unrecovered purchased gas costs, but establishes a cap on the charges that may
be imposed upon former sales customers.
The FERC Restructuring Orders will undergo judicial review, clarification and
formulation of cost recovery details as the restructuring process proceeds.
However, Tennessee believes that it is entitled to full recovery of all
transition costs it will incur. Inasmuch as the FERC Restructuring Orders
contemplate complete recovery by pipelines of qualified transition costs, the
Company believes that Tennessee's Order No. 636 restructuring (together with
the Order No. 636 restructuring of Tenneco's other interstate pipelines) will
not have a material effect on Tenneco's consolidated financial position or
results of operations. The Company further believes that the PGA Stipulation
will not have a material effect on Tenneco's consolidated financial position or
results of operations.
(3) The Company and its subsidiaries are parties to numerous legal
proceedings arising from their operations. The Company believes that the
outcome of these 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"). 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 June 30, 1994, Tenneco has charged $70 million against this
environmental reserve. Of the remaining reserve, $41 million has been recorded
on the balance sheet under "Payables--Trade" and $149 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
12
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 through rates
charged to 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"). The 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 June 30, 1994, the asset balance is $151 million ($37 million in "Current
Assets" and $114 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 five of the defendant carriers and
believes that the likelihood of recovery against the remaining defendant
carriers is reasonably possible.
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
13
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
sells a broad line of brake components and accessories. The transaction is
expected to close in the third 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) In June 1994, the Company completed an IPO of approximately 29 percent of
the common stock of Case Corporation, the holder of Tenneco's Farm and
construction equipment segment, resulting in proceeds of $382 million. The
proceeds will be used to reduce borrowings and to take advantage of growth
opportunities in its other businesses. The gain from the IPO was $1 million,
net of $8 million of income taxes.
(7) An extraordinary loss of $5 million was recorded in the second quarter,
net of $2 million income tax benefit, for the redemption premium resulting from
the prepayment of debt.
(8) 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.
(9) 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 June 30, 1994, approximately $147
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 $737 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.
(The above notes are an integral part of the foregoing financial statements.)
14
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT EVENT
On April 26, 1994, Case Equipment Corporation, a newly organized corporation
formed to acquire the Farm and Construction Equipment segment ("Case") of
Tenneco Inc. and its consolidated subsidiaries ("Tenneco"), filed a
registration statement with the Securities and Exchange Commission to sell to
the public shares of its common stock through an initial public offering. On
June 24, 1994, Case Equipment Corporation was listed on the New York Stock
Exchange following an initial public offering of 20.1 million shares of common
stock, or approximately 29 percent of Case Corporation's 70 million outstanding
common shares. On July 1, 1994, Case Equipment Corporation changed its name to
"Case Corporation." Thereafter, on August 2, 1994, Case Corporation was listed
on the Chicago Stock Exchange.
In connection with the offering, Tenneco transferred all of its Case assets
to Case Equipment Corporation, except for $1.2 billion of existing United
States retail receivables, which were retained by Tenneco Credit Corporation.
Finance subsidiaries of Case Equipment Corporation (now Case Corporation) will
finance retail receivables in the future.
Wholesale receivables from dealers of $1.6 billion and the corresponding debt
were included on Tenneco's industrial balance sheet at June 30, 1994. In the
past, Tenneco reported these wholesale receivables and corresponding debt as a
part of Tenneco Finance. As of June 30, 1994, Case Corporation was financed
independently of Tenneco with $2.3 billion of five year syndicated bank
facilities and $600 million of three year other credit facilities. Borrowings
under these facilities were $1.5 billion at June 30, 1994. The proceeds from
these borrowings were used to repay debt, to capitalize Case's finance
subsidiaries and other general corporate purposes.
The gross proceeds from the sale were $382 million and will be used by
Tenneco to repay debt and to take advantage of growth opportunities in its
other businesses. Longer term, Tenneco intends to reinvest the proceeds in a
manner consistent with the Company's strategic plans; under current planning
assumptions, the expected returns from these investments would replace the
earnings contribution lost as a result of the offering. Tenneco recorded a gain
of $1 million (net of income tax expense of $8 million) on the sale in the
second quarter of 1994. Reference is made to Note (1) and Note (6) to the Notes
to Financial Statements for additional information regarding this transaction.
THREE MONTH RESULTS
RESTRUCTURING PROGRAMS--CASE OPERATIONS
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 June 30, 1994, approximately $147
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 $737 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.
In the second 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. As
part of
15
<PAGE>
this program, Case announced in March 1994 several proposed restructuring steps
in Europe. These steps will rationalize agricultural tractor and transmission
production in Europe, as well as consolidate engineering, manufacturing and
product support for construction equipment. In May, Case announced that it had
reached an agreement in principle to sell its foundry in St. Dizier, France.
In the second quarter, financial statements have been restated to reflect
certain minor interperiod adjustments related to Case in connection with the
Case Corporation 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.
REVENUES
Revenues for the second quarter of 1994 were $3.51 billion, up slightly from
$3.47 billion in the second quarter of 1993. Each division reported improved
revenues for the quarter with the exception of natural gas pipelines where
revenues decreased $60 million or 9 percent. Higher revenues were reported for
farm and construction equipment (up $43 million or 4 percent), automotive parts
(up $39 million or 8 percent), shipbuilding (up $1 million), packaging (up $13
million or 3%) and chemicals (up $9 million or 4%).
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES ("OPERATING INCOME")
Operating income for the second quarter of 1994 was $396 million, up $98
million or 33 percent, compared with $298 million for the second quarter of
1993.
Natural gas pipelines reported operating income for the second quarter of
1994 of $89 million compared with $76 million in the 1993 second quarter.
Revenues for the second quarter of 1994 decreased to $605 million compared with
$665 million in the second 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 will 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. Operating
income increased primarily due to the shift to the new non-seasonal rate
structure.
Farm and construction equipment posted operating income for the second
quarter of 1994 of $111 million, an improvement of $57 million over its
operating income of $54 million in the second quarter last year. Second quarter
revenues of $1.12 billion were up from $1.08 billion reported in the 1993
second quarter, due to stronger dealer and retail demand for agricultural and
construction equipment in the North American segment and the international
business group. Farm and construction equipment operating income improved
compared to the second quarter of 1993 primarily as a result of increased
dealer demand which resulted in higher production volumes, lower discounts and
improved pricing, and the restructuring charge reversal discussed under
"Restructuring Programs--Case Operations" above. During the second quarter,
worldwide farm and construction equipment production increased by 5 percent
compared with the same period last year in response to improving market
conditions.
Automotive parts reported second quarter 1994 operating income of $77 million
compared with $74 million recorded in the same quarter a year ago. During the
1994 quarter, automotive recorded a $5 million charge to reduce excess
capacity. Revenues for the second quarter of 1994 totaled $545 million compared
with $506 million in last year's second quarter, primarily due to higher North
American original equipment sales (up 25 percent) in the Walker exhaust
segment, reflecting higher new car and truck production. Aftermarket sales of
ride control products in North America increased 8 percent as a result of the
continuing success of Monroe's new Sensa-Trac shocks and struts. Improving
economic conditions in Europe led to a 14 percent increase in overall European
revenues. Operating income increased as a result of the higher revenues and the
benefit of quality program initiatives.
Shipbuilding reported second quarter operating income of $53 million, which
was the same as in the 1993 second quarter. Revenues increased slightly to $464
million in the second quarter of 1994 compared with $463 million in the same
period a year ago. Revenue increases from higher volumes on the SEALIFT
16
<PAGE>
activity and carrier construction were offset by 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 second quarter of 1994 stood at $3.1 billion and
included construction contracts for five LOS ANGELES class submarines, two
NIMITZ class aircraft carriers, the refueling and overhaul contract on the
carrier USS ENTERPRISE and a conversion contract for two fast SEALIFT ships.
Second quarter 1994 operating income for packaging was $44 million, up from
$30 million generated in the 1993 second quarter. Revenues for the second
quarter of 1994 were $527 million compared with $514 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.
Chemicals reported second quarter 1994 operating income of $21 million up
slightly from $20 million in the same period last year. Revenues increased 4
percent to $251 million in the 1994 second quarter compared with $242 million
in the 1993 period. The improvements in revenues and operating income were led
by higher volumes in the United Kingdom phosphates group. Phosphate products
are used as additives in industrial cleansers, carbonated beverages and
detergent builders.
INTEREST EXPENSE
Interest expense decreased from $119 million in the 1993 second quarter to
$106 million in the second quarter of 1994. The decline was primarily
attributable to lower debt levels that resulted from the $1.1 billion equity
offering completed in April 1993 and scheduled long-term debt retirements.
Interest capitalized was unchanged at $1 million for the second quarter of 1993
and 1994.
INCOME TAXES
Income tax expense for the second quarter of 1994 was $120 million compared
with $74 million reported for the second quarter of 1993. This increase was
primarily due to higher pre-tax income in 1994, partially offset by lower
levels of unbenefitted foreign losses.
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 third quarter of 1994.
The loss from discontinued operations in the second quarter of 1994 of $24
million included a $21 million loss (net of income tax benefit of $15 million)
on the sale of automotive's brakes business and a loss of $3 million (net of
income tax benefit of $4 million) from operations. This compares with income of
$2 million (net of income tax benefit of $2 million) in the 1993 second quarter
from the brakes operations.
EXTRAORDINARY LOSS
The extraordinary loss of $5 million for the second quarter of 1994 and $23
million for the second quarter of 1993 resulted from the redemption premium
associated with the prepayment of long-term debt. The second quarter 1993
extraordinary loss was attributable to the early redemption premium on long-
term debt retired with the net proceeds from the April 1993 underwritten public
offering of 23.5 million shares of the Company's common stock.
EARNINGS (LOSS) PER AVERAGE COMMON SHARE
Income from continuing operations for the second quarter of 1994 was $171
million, or 93 cents per average common share after preferred stock dividends,
compared with income from continuing operations of $106 million, or 60 cents
per average common share after preferred stock dividends, in the 1993 second
quarter. Preferred stock dividends were $4 million in each of the two periods.
The 1993 second quarter income from continuing operations was restated to 60
cents per share from 63 cents per share to reflect the brake division as a
discontinued operation and certain interperiod adjustments referred to in
"Restructuring Programs--Case Operations."
17
<PAGE>
Loss from discontinued operations for the second quarter of 1994 was $24
million, or 13 cents per average common share, versus income from discontinued
operations of $2 million, or 1 cent per average common share in the 1993
quarter. Extraordinary loss for the 1994 quarter was $5 million, or 3 cents per
average common share, compared with $23 million or 13 cents per average common
share in the 1993 quarter. Net income to common stock for the second quarter of
1994 was $138 million, or 77 cents per average common share, compared to net
income to common stock of $81 million, or 48 cents per average common share,
for the 1993 quarter.
Average shares outstanding used for the calculation of earnings per average
common share for the second quarter of 1994 were 179.9 million compared to
169.0 million in the 1993 quarter. The increase was primarily the result of the
23.5 million shares issued in the April 1993 underwritten public offering and
the issuance of treasury shares and shares from the stock employee compensation
trust ("SECT").
SIX MONTH RESULTS
REVENUES
Net sales and operating revenues for the first six months of 1994 were $6.78
billion, up from $6.70 billion reported in 1993. Higher revenues for farm and
construction equipment (up $229 million or 12 percent), automotive parts (up
$73 million or 8 percent) and chemicals (up $10 million or 2 percent) were
offset by lower revenues for natural gas pipelines (down $185 million or 12
percent), and shipbuilding (down $48 million or 5 percent). Revenues for
packaging were unchanged.
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES ("OPERATING INCOME")
Operating income for the first six months of 1994 was $699 million compared
with $569 million reported for the same period of 1993.
Natural gas pipelines reported operating income of $194 million for the first
half of 1994 compared with $197 million in the same period of 1993. Revenues
decreased to $1.30 billion compared to $1.48 billion in the first six months of
1993. Farm and construction equipment reported year-to-date 1994 operating
income of $192 million, up $160 million from $32 million reported for the first
half of 1993. Year-to-date revenues were $2.12 billion, up from $1.89 billion
reported in the first half 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 first half 1994 operating income of $131 million
compared with $127 million recorded in the same period a year ago. Year-to-date
revenues for 1994 totaled $1.01 billion as compared with last year's reported
amount of $937 million. Higher revenues were reported for both exhaust and ride
control products in North American original equipment markets, buoyed by
increased new car and light truck production. Overall revenues were also up in
Europe due to the improving market conditions which contributed to higher
operating income. The improvement in first half 1994 operating income also
resulted from the higher original equipment market revenues, 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 first half 1994 operating income of $101 million
compared with $108 million in the same period in 1993. Revenues were $867
million for the first six months of 1994 compared with $915 million in the
first half of 1993. Revenue 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 $64 million in the first six months of 1994
versus $67 million in the same period of the prior year. Revenues were $1.02
billion in both periods. Higher revenues and operating
18
<PAGE>
income due to strengthening containerboard pricing in the second quarter of
1994 were 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.
First half 1994 operating income for chemicals was $30 million, down from $35
million in the same period in 1993. Revenues in the first six months of 1994
were $472 million versus $462 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.
INTEREST EXPENSE
Interest expense decreased from $246 million in the first half of 1993 to
$210 million in the first half of 1994 while interest capitalized increased
from $2 million to $3 million in the same periods. The year-to-year change in
these items was due to the same reasons discussed under "Three Month Results"
above.
INCOME TAXES
Income tax expense for the first half of 1994 was $197 million versus $145
million in the same period of 1993. Income tax expense increased in 1994 due to
higher pre-tax income in 1994 partially offset by lower levels of unbenefitted
foreign losses.
DISCONTINUED OPERATIONS
Loss from discontinued operations for the first half 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 $1 million (net of income tax benefit of $3 million)
for the first six months of 1993 reflects the loss from the brakes operations.
EXTRAORDINARY LOSS
The extraordinary loss for the first half of 1994 of $5 million and $23
million for the first half of 1993 was attributable to the second quarter early
redemption premiums on long-term debt as discussed under "Three Month Results"
above.
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 first half 1994 Statement of Income 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 half of 1994 was $295
million, or $1.61 per average common share after preferred stock dividends,
compared with income from continuing operations of $180 million, or $1.08 per
average common share after preferred stock dividends, in the 1993 first half.
Preferred stock dividends were $7 million in the first half of 1994 and $8
million in the 1993 first half.
19
<PAGE>
Loss from discontinued operations for the first half of 1994 was $26 million,
or 14 cents per average common share versus a loss of $1 million, or 2 cents
per average common share, from discontinued operations in the first half of
1993. Also included in 1994 was the 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 six months of 1994 was
$5 million, or 3 cents per average common share versus $23 million, or 14 cents
per average common share in the 1993 first half. Net income to common stock for
the first six months of 1994 was $218 million, or $1.22 per average common
share, compared to net income to common stock of $148 million, or 92 cents per
average common share, for the first half of 1993.
Average shares outstanding used for the calculation of earnings per average
common share for the first half of 1994 were 179.3 million compared to 160.2
million in the first half 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
during the second half of 1993 and the first half of 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $269 million for the first six
months of 1994 compared to cash provided of $535 million for the same period in
1993, a decrease of $266 million including net cash used by discontinued
operations. Excluding the discontinued operations, there was a decrease of $268
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. 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 half of 1994 was $286
million compared to $92 million used in the first half of 1993. Proceeds from
the sale of businesses and assets were higher ($457 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 of $64 million.
Expenditures for plant, property, and equipment for the first six months of
1994 were $240 million compared to $176 million for the first six months of
1993. Packaging increased $25 million (due to higher spending on expansion and
enhancement projects), and increased expenditures for natural gas pipelines
($21 million), farm and construction equipment ($18 million) and chemicals ($10
million), more than offset the decrease of $5 million for both shipbuilding and
automotive parts.
Capitalization totalled $9.54 billion at June 30, 1994, an increase of $548
million from December 31, 1993. The resulting ratio of total debt to
capitalization decreased from 67.6 percent to 62.7 percent. The total debt to
capitalization ratio was 60.3 percent including the market value of the SECT
shares at June 30, 1994, compared to 64.0 percent at December 31, 1993. The
major changes in capitalization were: total debt down $92 million,
stockholders' equity up $238 million, minority interest up $420 million as a
result of the Case initial stock offering and preferred stock down $18 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.
20
<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 will pay $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) Potential Superfund Liability.
At June 30, 1994, Tenneco has been designated as a potentially responsible
party in 74 "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 $73 million or 0.4% to 2.3% of the total
remediation costs for those sites and has provided reserves that it believes
are adequate for such costs. Because the clean-up 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.
21
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the shareholders of the Company was held on May 10,
1994. The following matters were voted upon at the meeting and the votes cast
for, against, or withheld, as well as the number of abstentions and broker non-
votes, as to each such matter is also listed:
(a) Election of Directors for a term to expire at the 1997 Annual Meeting
of Stockholders:
<TABLE>
<CAPTION>
FOR AGAINST
----------- ---------
<S> <C> <C>
Mark Andrews....................................... 144,159,866 2,090,775
W. Michael Blumenthal.............................. 144,127,831 2,122,810
Belton K. Johnson.................................. 144,262,869 1,987,772
William L. Weiss................................... 144,095,219 2,155,422
</TABLE>
(b) Other Matters:
(1) To approve the 1994 Tenneco Inc. Stock Ownership Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
129,679,452 12,873,675 3,697,514 -0-
</TABLE>
(2) To approve the appointment of Arthur Andersen & Co. as independent
public accountants for Tenneco Inc. for the year 1994:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
144,998,322 701,304 551,015 -0-
</TABLE>
(3) In connection with stockholder proposal concerning endorsement of
the CERES Principles:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
10,720,440 113,055,562 10,661,143 11,813,496
</TABLE>
(4) In connection with stockholder proposal concerning modification of
the Compensation Committee:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTE
--- ------- ------- ---------------
<S> <C> <C> <C>
32,095,573 95,467,126 6,874,440 11,813,502
</TABLE>
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
(b) Reports on Form 8-K. Tenneco Inc. filed a Current Report on Form 8-K on
April 26, 1994, regarding the issuance of two press releases announcing its
first quarter results and the filing of a registration statement to offer, in
an initial public offering, thirty-five percent of the common shares of a
newly-organized corporation that would own the operating assets of Tenneco
Inc.'s farm and construction equipment division.
22
<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: August 12, 1994 By __________________________________
Robert T. Blakely
Senior Vice President and
Chief Financial Officer
23
<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 SIX MONTHS ENDED
JUNE 30, JUNE 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...... $ 171 $ 106 $ 295 $ 180
Income (loss) from
discontinued opera-
tions, net of income
tax................. (24) 2 (26) (1)
------------ ------------- ------------ -------------
Income before ex-
traordinary loss.... 147 108 269 179
Extraordinary loss,
net of income tax... (5) (23) (5) (23)
------------ ------------- ------------ -------------
Income before cumula-
tive effect of
change in accounting
principle........... 142 85 264 156
Cumulative effect of
change in accounting
principle, net of
income tax.......... -- -- (39) --
------------ ------------- ------------ -------------
Net income........... 142 85 225 156
Preferred stock divi-
dends............... 4 4 7 8
------------ ------------- ------------ -------------
Net income to common
stock............... $ 138 $ 81 $ 218 $ 148
============ ============= ============ =============
Average shares of
common stock
outstanding(a),(b).. 179,850,934 168,965,649 179,287,726 160,167,889
============ ============= ============ =============
Earnings (loss) per
average share of
common stock:
Continuing opera-
tions............. $ .93 $ .60 $ 1.61 $ 1.08
Discontinued opera-
tions............. (.13) .01 (.14) (.02)
Extraordinary loss. (.03) (.13) (.03) (.14)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .77 $ .48 $ 1.22 $ .92
============ ============= ============ =============
ADDITIONAL COMPUTATIONS
(C)
Net income to common
stock, per above...... $ 138 $ 81 $ 218 $ 148
============ ============= ============ =============
Primary Earnings Per
Share (including com-
mon stock equiva-
lents):
Average shares of
common stock
outstanding(a),(b).. 179,850,934 168,965,649 179,287,726 160,167,889
Incremental common
shares applicable to
common stock options
based on the common
stock daily average
market price during
the period.......... 79,004 22,138 99,042 16,948
------------ ------------- ------------ -------------
Average common
shares, as adjusted. 179,929,938 168,987,787 179,386,768 160,184,837
============ ============= ============ =============
Earnings (loss) per
average share of
common stock (in-
cluding common stock
equivalents):
Continuing opera-
tions............. $ .93 $ .60 $ 1.61 $ 1.08
Discontinued opera-
tions............. (.13) .01 (.14) (.02)
Extraordinary loss. (.03) (.13) (.03) (.14)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .77 $ .48 $ 1.22 $ .92
============ ============= ============ =============
Fully Diluted Earnings
Per Share:
Average shares of
common stock
outstanding(a), (b). 179,850,934 168,965,649 179,287,726 160,167,889
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... 79,004 30,164 99,042 24,169
Average common shares
issuable assuming
conversion of
Tenneco Inc. 10%
loan stock.......... 41,903 42,861 41,903 42,904
------------ ------------- ------------ -------------
Average common shares
assuming full dilu-
tion................ 179,971,841 169,038,674 179,428,671 160,234,962
============ ============= ============ =============
Fully diluted earn-
ings (loss) per av-
erage share, assum-
ing conversion of
all applicable secu-
rities:
Continuing opera-
tions............. $ .93 $ .60 $ 1.61 $ 1.08
Discontinued opera-
tions............. (.13) .01 (.14) (.02)
Extraordinary loss. (.03) (.13) (.03) (.14)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .77 $ .48 $ 1.22 $ .92
============ ============= ============ =============
</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 June 30, 1994, the SECT had utilized 3,668,391 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)
SIX MONTHS
ENDED
JUNE 30,
------------
1994 1993
----- -----
<S> <C> <C>
Income from continuing operations................................ $295 $180
Add:
Interest....................................................... 321 400
Portion of rentals representative of interest factor........... 34 35
Income tax expense and other taxes on income................... 197 147
Amortization of interest capitalized applicable to nonutility
companies..................................................... 4 4
Undistributed earnings of affiliated companies in which less
than a 50% voting interest is owned........................... (5) (1)
----- -----
Earnings as defined.......................................... $ 846 $765
===== =====
Interest......................................................... $ 321 $400
Interest capitalized............................................. 3 1
Portion of rentals representative of interest factor............. 34 35
----- -----
Fixed charges as defined..................................... $ 358 $436
===== =====
Ratio of earnings to fixed charges............................... 2.36 1.75
===== =====
</TABLE>
<PAGE>
[LOGO OF TENNECO APPEARS HERE]
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
11 --Computation of Earnings (Loss) Per Share of Common Stock
12 --Computation of Ratio of Earnings to Fixed Charges
</TABLE>
<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 SIX MONTHS ENDED
JUNE 30, JUNE 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...... $ 171 $ 106 $ 295 $ 180
Income (loss) from
discontinued opera-
tions, net of income
tax................. (24) 2 (26) (1)
------------ ------------- ------------ -------------
Income before ex-
traordinary loss.... 147 108 269 179
Extraordinary loss,
net of income tax... (5) (23) (5) (23)
------------ ------------- ------------ -------------
Income before cumula-
tive effect of
change in accounting
principle........... 142 85 264 156
Cumulative effect of
change in accounting
principle, net of
income tax.......... -- -- (39) --
------------ ------------- ------------ -------------
Net income........... 142 85 225 156
Preferred stock divi-
dends............... 4 4 7 8
------------ ------------- ------------ -------------
Net income to common
stock............... $ 138 $ 81 $ 218 $ 148
============ ============= ============ =============
Average shares of
common stock
outstanding(a),(b).. 179,850,934 168,965,649 179,287,726 160,167,889
============ ============= ============ =============
Earnings (loss) per
average share of
common stock:
Continuing opera-
tions............. $ .93 $ .60 $ 1.61 $ 1.08
Discontinued opera-
tions............. (.13) .01 (.14) (.02)
Extraordinary loss. (.03) (.13) (.03) (.14)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .77 $ .48 $ 1.22 $ .92
============ ============= ============ =============
ADDITIONAL COMPUTATIONS
(C)
Net income to common
stock, per above...... $ 138 $ 81 $ 218 $ 148
============ ============= ============ =============
Primary Earnings Per
Share (including com-
mon stock equiva-
lents):
Average shares of
common stock
outstanding(a),(b).. 179,850,934 168,965,649 179,287,726 160,167,889
Incremental common
shares applicable to
common stock options
based on the common
stock daily average
market price during
the period.......... 79,004 22,138 99,042 16,948
------------ ------------- ------------ -------------
Average common
shares, as adjusted. 179,929,938 168,987,787 179,386,768 160,184,837
============ ============= ============ =============
Earnings (loss) per
average share of
common stock (in-
cluding common stock
equivalents):
Continuing opera-
tions............. $ .93 $ .60 $ 1.61 $ 1.08
Discontinued opera-
tions............. (.13) .01 (.14) (.02)
Extraordinary loss. (.03) (.13) (.03) (.14)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .77 $ .48 $ 1.22 $ .92
============ ============= ============ =============
Fully Diluted Earnings
Per Share:
Average shares of
common stock
outstanding(a), (b). 179,850,934 168,965,649 179,287,726 160,167,889
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... 79,004 30,164 99,042 24,169
Average common shares
issuable assuming
conversion of
Tenneco Inc. 10%
loan stock.......... 41,903 42,861 41,903 42,904
------------ ------------- ------------ -------------
Average common shares
assuming full dilu-
tion................ 179,971,841 169,038,674 179,428,671 160,234,962
============ ============= ============ =============
Fully diluted earn-
ings (loss) per av-
erage share, assum-
ing conversion of
all applicable secu-
rities:
Continuing opera-
tions............. $ .93 $ .60 $ 1.61 $ 1.08
Discontinued opera-
tions............. (.13) .01 (.14) (.02)
Extraordinary loss. (.03) (.13) (.03) (.14)
Cumulative effect
of change in ac-
counting princi-
ple............... -- -- (.22) --
------------ ------------- ------------ -------------
$ .77 $ .48 $ 1.22 $ .92
============ ============= ============ =============
</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 June 30, 1994, the SECT had utilized 3,668,391 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)
SIX MONTHS
ENDED
JUNE 30,
------------
1994 1993
----- -----
<S> <C> <C>
Income from continuing operations................................ $295 $180
Add:
Interest....................................................... 321 400
Portion of rentals representative of interest factor........... 34 35
Income tax expense and other taxes on income................... 197 147
Amortization of interest capitalized applicable to nonutility
companies..................................................... 4 4
Undistributed earnings of affiliated companies in which less
than a 50% voting interest is owned........................... (5) (1)
----- -----
Earnings as defined.......................................... $ 846 $765
===== =====
Interest......................................................... $ 321 $400
Interest capitalized............................................. 3 1
Portion of rentals representative of interest factor............. 34 35
----- -----
Fixed charges as defined..................................... $ 358 $436
===== =====
Ratio of earnings to fixed charges............................... 2.36 1.75
===== =====
</TABLE>
