<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)........ April 26, 1994
TENNECO INC.
................................................................................
(Exact name of registrant as specified in its charter)
Delaware 1-9864 76-0233548
................................................................................
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number Identification No.)
Tenneco Building, Houston, Texas 77002
................................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 757-2131
<PAGE>
Item 5. Other Events
On April 26, 1994, Tenneco Inc. issued two press releases regarding its first
quarter earnings 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 will own the operating assets of the Case farm
and construction equipment division.
Item 7. Financial Statements and Exhibits.
99(a) --Press Release issued April 26, 1994 regarding its first quarter
earnings 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 will own the
operating assets of the Case farm and construction equipment
division.
99(b) --Press Release issued April 26, 1994 regarding 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 will own the operating assets of the Case farm and
construction equipment division.
<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 hereunto duly authorized.
TENNECO INC.
Registrant
By /s/ M.W. MEYER
------------------------------
M.W. Meyer, Vice President and
Deputy General Counsel
DATE: April 26, 1994
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
EXHIBITS
to
FORM 8-K
CURRENT REPORT
Under
THE SECURITIES EXCHANGE ACT OF 1934
for
TENNECO INC.
Date of Report - April 26, 1994
Commission File No.: 1-9864
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description of Exhibits Page
- ------- ----------------------- ------------
99(a) --Press Release issued April 26, 1994 regarding its first
quarter earnings 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 will own the operating
assets of the Case farm and construction equipment
division.
99(b) --Press Release issued April 26, 1994 regarding 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 will own the operating
assets of the Case farm and construction equipment
division.
<PAGE>
Exhibit 99(a)
<PAGE>
News [LOGO OF TENNECO INC APPEARS HERE] Tenneco Inc.
Release
Tenneco Building
P.O. Box 2511
Houston, Texas 77252
TWX 910-881-2565
- -------------------------------------------------------------------------------
MEDIA CONTACT: Christine LeLaurin (713) 757-2761
- ------------------------------------------------
TENNECO EPS FROM OPERATIONS RISES 46 PERCENT;
CASE INCOME UP SHARPLY, NEW Ql RECORDS FOR TENNECO AUTOMOTIVE;
* * *
TENNECO FILES FOR INITIAL PUBLIC OFFERING OF 35 PERCENT OF CASE
FARM AND CONSTRUCTION EQUIPMENT DIVISION
. Earnings per share from operations in the first quarter increased to 67
cents, from 46 cents.
. Operating income rose to $301 million, from $274 million.
. Case earned $81 million in operating income, a positive swing of $98
million.
. Tenneco Automotive earned $52 million in operating income, highest ever for
first quarter.
. Under Case I.P.O filing, Tenneco would offer to sell 35 percent of a new
corporation holding assets of Case farm and construction equipment division.
HOUSTON, April 26, 1994 -- Tenneco Inc. today reported that earnings per
share from operations rose 46 percent to 67 cents in the first quarter, compared
with 46 cents in the period a year ago.
This marks the eighth consecutive quarter in which that profit measure has
increased by at least 46 percent, excluding restructuring charges, in quarter-
over-quarter comparisons.
"Our goal is to accelerate the transformation of Tenneco into a world-class
industrial growth company," said Dana G. Mead, Tenneco president and chief
executive officer. "Our commitment to intensive management and operating cost
leadership continues to produce solid earnings momentum."
"A world-class company is one that continues to grow earnings at any point
in the business cycle," Mead said. "And we're doing it."
-more-
<PAGE>
2
Here are some of the specifics of the offering:
Tenneco would transfer all of Case's assets to the new Case Corporation,
except for existing U.S. retail receivables, which will be retained by
Tenneco Credit Corporation.
Separate Case finance companies would finance retail receivables going
forward.
Wholesale receivables would now be on the Case balance sheet.
Case would be financed independently of Tenneco with $2.9 billion of credit
lines to be syndicated by Chemical Bank.
Tenneco will maintain a significant ownership position in Case.
The offering will be led by CS First Boston and Lazard Freres & Co., with
Morgan Stanley & Co. Incorporated, J.P. Morgan Securities and Smith Barney
Shearson as co-managers.
No offering price range was included in the filing.
Tenneco Seeks Higher Returns, Faster Growth in Core Businesses
- --------------------------------------------------------------
Mead said that Tenneco's broader goal with the initial public offering is to
redeploy the company's assets into other less cyclical, higher growth business
opportunities for Tenneco with the potential for higher returns on investment.
These investments include projects in existing markets as well as international
expansion opportunities.
"We have had many opportunities to apply capital in projects that were a
close fit with our current businesses, product lines and management strengths,
but we haven't had the strategic flexibility to move as quickly as we would have
liked," Mead said. "The opportunities fall into three categories: core business
expansion, extension into new markets, and acquisitions."
-more-
<PAGE>
3
Operating income at the division rose to $81 million, or nearly as much as
the $82 million Case earned in all of 1993. This was a $98-million improvement
compared with the loss of $17 million in the period a year ago.
Revenues rose 23 percent to $1.0 billion compared with $814 million in the
period a year ago. Sales in the quarter of several new products, including the
7200 series Magnum tractor, exceeded expectations.
Mead said extensive steps taken to restructure Case also contributed to the
strong first-quarter performance. Case, based in Racine, Wis., is in the second
year of a major restructuring program announced in March 1993.
The restructuring program is expected to enhance operating income and pretax
cash flow through a reduction in costs of approximately $200 million annually
over 1992 cost levels by 1997.
Mead said the restructuring remains on plan and on budget. Projects have
included sales or closures of foundries and plants, a more focused product line
and work force reductions worldwide.
"All of the programs are part of a fundamental new business strategy
designed to strengthen Case's competitive position in the global marketplace and
allow it to be consistently profitable with positive operating cash flow at
current market volumes and prices," Mead said.
"Case should be able to enjoy greater profitability and operating cash flow
as volumes or prices increase," he said.
FIRST QUARTER RECORDS FOR TENNECO AUTOMOTIVE
- --------------------------------------------
Tenneco's auto parts division, Tenneco Automotive, achieved record first-
quarter levels for both operating income and revenues. The division earned $52
million in the quarter, compared with $5l million in the period a year ago.
Revenues rose to $481 million, compared with $443 million.
-more-
<PAGE>
4
"This was one of the best quarters in Tenneco Automotive's history, and it
occurred under the most difficult weather and market conditions in the first two
months," Mead said. "The successful quarter is a harbinger of very good future
performance for the division."
The division continued to benefit from strong new car and truck production
in North America, where sales of Walker and Monroe equipment to auto
manufacturers rose 15 percent. Aftermarket sales in North America also
rebounded, as both Walker and Monroe recorded growing shipments to their
distributors. Walker aftermarket shipments were up 10 percent in the quarter.
COST OF QUALITY PROGRAMS REMOVE $94 MILLION IN FAILURE COSTS
- ------------------------------------------------------------
Mead said Tenneco's highly-successful "Cost of Quality" programs continued
to add to earnings across all of the company's divisions by improving product
quality while eliminating or lowering unnecessary costs. These Cost of Quality
programs are part of the company's strategy to have its divisions rank among the
operating cost leaders in their respective industries in the world.
The operating cost leadership programs reduced or eliminated $94 million in
failure costs in the quarter and, in turn, added $36 million to operating
income. By the end of this year, Tenneco expects to have reduced failure costs
by $1.5 billion since the start of 1992, actions that will have contributed a
projected $680 million in operating income over these three years.
During the quarter, Tenneco adopted FAS 112, an accounting rule issued by
the Financial Accounting Standards Board requiring the accrual of postemployment
benefits. As previously announced, this resulted in a one-time charge after
taxes of $39 million, or 22 cents per share.
-more-
<PAGE>
5
Reflecting the one-time charge for FAS 112, net income in the quarter was
$83 million, a gain of 12 percent compared with $74 million in the first quarter
of 1993. Earnings per share were 45 cents, compared with 46 cents in the year-
ago period. The number of common shares outstanding was 179 million at the end
of the first quarter, compared with 151 million a year ago.
TENNECO ANNOUNCES PROPOSED OFFER OF 35 PERCENT OF CASE
- ------------------------------------------------------
Tenneco also announced today that it filed a registration statement with the
Securities and Exchange Commission to offer 35 percent of Case in an initial
public offering. Additional details of that announcement are contained in a
separate news release.
In the transaction, Tenneco is offering 35 percent of the common shares of a
newly organized, independent corporation that will own the operating assets of
the Case farm and construction equipment division. After the offering, Tenneco
would retain 65 percent of the new corporation, which would operate under the
name of Case Corporation.
Tenneco would transfer all of Case's assets to the new Case Corporation
except for existing U.S. retail receivables. Separate Case finance companies
would finance retail receivables going forward. Case would be financed
independently of Tenneco with $2.9 billion of credit syndicated by Chemical
Bank. The stock offering will be co-led by CS First Boston and Lazard Freres &
Co., with Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and
Smith Barney Shearson Inc. as co-managers.
"Our goal from the outset was to return Case to consistent profitability,"
Mead said. "We knew that was the best way we could create shareholder value. We
think the results we are announcing today provide evidence that we have
successfully created that value. A public offering is the next logical step to
begin unlocking it for our shareholders."
-more-
<PAGE>
6
He said that the proceeds from the proposed offering would be used by
Tenneco to repay short-term debt, to pay taxes arising from the transaction and
for general corporate purposes. Total proceeds from the initial public offering
are dependent upon the offering price per share to be determined later.
Longer term, the company intends to reinvest the proceeds in a manner
consistent with the company's strategy. Under current planning assumptions, the
expected returns from these investments would replace the earnings contribution
lost as a result of the proposed offering.
It is expected that this would not have a material effect on Tenneco
earnings in 1994.
Mead said that Tenneco's broader goal with the initial public offering is to
redeploy the company's assets into other less cyclical, higher growth business
opportunities for Tenneco with the potential for higher returns on investment.
These investments include projects in existing markets as well as international
expansion opportunities.
"We have had many opportunities to apply capital in projects that were a
close fit with our current businesses, product lines and management strengths,
but we haven't had the strategic flexibility to move as quickly as we would have
liked," Mead said. "The opportunities fall into three categories: core business
expansion, extension into new markets, and acquisitions."
"This transaction, along with the improved earnings from operations and an
already strengthened balance sheet, should enable us to enter a new period of
consistent growth from a less cyclical base of operations," he said.
"The transition to public ownership of Case is an opportunity for both
Tenneco and Case investors to share in Case's improved prospects in the farm and
construction equipment industry and to realize the value that has been created
at Case by virtue of its stronger performance," he said.
-more-
<PAGE>
7
"Tenneco would further benefit from the redeployment of the proceeds into
some of its higher return, faster growing businesses."
DIVISIONAL ANALYSIS
- -------------------
NATURAL GAS OPERATIONS
Tenneco Gas earned $105 million in operating income during the first
quarter, down from $121 million in the same period a year ago. Revenues were
$693 million, compared with $818 million.
The declines in both operating income and revenues were related to the shift
to a new, non-seasonal rate structure at the division's interstate pipelines.
Under new rates required by Order 636 of the Federal Energy Regulatory
Commission, higher revenues and income applied to the summer months offset lower
revenues and income during the winter.
Demand for natural gas was strong in one of the harshest winters on record
and the first under Order 636. Tenneco Gas performed well, meeting 100 percent
of its firm commitments for transportation in the Northeast.
One of the major strategic thrusts in this business is redeploying capital
into higher return, non-regulated businesses. In that regard, the gas division
completed several strategic actions in the quarter.
It signed an agreement last week to oversee the design, construction and
operation of a 750-mile pipeline from Argentina to Chile. Upon completion, it
will have a 25 percent equity interest in the $600 million pipeline project, and
will be the pipeline's technical operator.
It agreed to acquire a 50-percent interest in a new gas gathering system to
be built in the promising Mobile Bay production area along the Gulf Coast. That
system will complement the Viosca Knoll project, a gas gathering system that
Tenneco Gas agreed late last year to build and own with other partners.
-more-
<PAGE>
8
Its Tenneco Energy Resources Corporation, which directs gas marketing and
related activities, signed an agreement with Germany's largest gas
transportation company, Ruhrgas, to evaluate and pursue projects together in
Europe. Ruhrgas also agreed to acquire a 20-percent ownership in Tenneco Energy
Resources.
Earlier this month, Tenneco Gas took steps to increase the financial
flexibility and encourage expansion-related capital investments for two
subsidiaries on its l9,000-mile pipeline system. It filed for FERC approval to
change the business structures of its East Tennessee Natural Gas and Midwestern
Gas Transmission subsidiaries to limited partnerships.
FARM AND CONSTRUCTION EQUIPMENT
Case outpaced industry growth rates in several markets in the quarter. North
American sales of Case's tractor models with 100 horsepower or more and combines
were especially strong, climbing 87 percent compared with an industry increase
of 18 percent. In construction machinery, sales in North America rose 54
percent, compared with 40 percent for the industry. Loader/backhoes, excavators
and skid steer loaders were the products that led the sales increase for Case.
Worldwide production at Case rose 27 percent in the quarter, compared with
the year-ago quarter, with North American production rising 45 percent.
Inventories were about $1.6 billion less than they were at the beginning of
1991, and should decline further by the end of this year.
The favorable market conditions that prevailed in North America in late 1993
continued to strengthen demand for both farm and construction equipment in the
first quarter of 1994.
Net cash income for farms was at the highest level in more than a decade,
and low inventories of corn and soybeans are expected to result in the planting
of substantial acreage this year.
-more-
<PAGE>
9
Industry sales in North America for farm equipment grew by 16 percent in the
first quarter, compared with the first quarter of 1993, and industry sales of
construction equipment increased by 40 percent.
In Europe, the economic conditions remain difficult, and reforms in European
Community agricultural policy are likely to result in increased farm
consolidations. These trends will restrict the growth in European demand for
farm and construction equipment in 1994.
AUTOMOTIVE PARTS
Tenneco Automotive posted first-quarter record operating income and
revenues. Operating income was $52 million, compared with $51 million in the
first quarter of 1993. Revenues were $481 million, compared with $443 million in
the year-ago quarter.
Sales of original equipment, particularly Walker exhaust systems, were aided
by strong new car and truck production in North America. Sales of Walker and
Monroe equipment to auto manufacturers rose 15 percent.
Sales of replacement parts also were strong in both the exhaust business and
in the ride-control segment including Monroe struts and shock absorbers.
Walker recorded a 10-percent increase in shipments to North American
distributors in the quarter. These distributors anticipated that consumer demand
for mufflers and other exhaust products would rise this spring after the harsh
winter weather.
Monroe's sales of Sensa-Trac struts and shock absorbers grew, supported by
the advertising campaign that was accelerated by widely-viewed broadcasts of the
Winter Olympic Games.
In Europe, consumers began to make long-delayed car repairs, which led to
increased sales of exhaust products through retail distributors.
-more-
<PAGE>
10
Walker and Monroe expect increased orders from Japanese carmakers. The
Japanese companies recently pledged to increase their purchases from suppliers
of auto parts in the United States.
NEWPORT NEWS SHIPBUILDING
Operating income was $48 million, compared with $55 million in the first
quarter of 1993. Revenues were $403 million, compared with $452 million.
The sale in November last year of Sperry Marine and lower volume on aircraft
carrier and submarine construction contracts accounted for most of the
difference in revenues and operating income.
The order backlog amounted to $3.5 billion at the end of the quarter. The
shipyard has received or is pursuing several Navy contracts. A defueling project
for the nuclear cruiser Long Beach is set to begin in July. Planning contracts
have been received for the overhaul of the carriers Eisenhower and Roosevelt and
negotiations for contracts to perform the work are underway.
Efforts to capture more contracts in the commercial design and construction
markets moved forward as negotiations with prospective customers advanced.
Newport News generated considerable industry attention with its design for a new
double-hulled tanker, a ship priced between $40 million and $50 million. The
shipyard also is bidding to convert several tankers to double hull from single
hull. The commercial ship repair business added 10 new contracts.
As the backlog declines and securing non-Navy commercial work grows more
important, Newport News is focusing on lowering its costs. In early April, the
shipyard announced plans to reduce its work force to 14,000 in the next two
years, a decline of 7,000 jobs from the current level. This will be accomplished
gradually, through attrition and other steps.
-more-
<PAGE>
11
PACKAGING
Operating income was $20 million, compared with $37 million in the first
quarter of 1993. Revenues were $491 million, compared with $504 million.
Severe winter weather in the Midwest and Northeast, as well as the
California earthquake, unexpectedly marred results in the quarter, reducing
earnings by $11 million compared with the same period last year.
The weather curtailed operations, delayed shipments to customers, increased
energy and wood costs and significantly lowered demand for packaged goods bought
by consumers.
Lower linerboard prices reduced earnings by $5 million, compared with the
quarter a year ago, and a new federal labeling law caused a delay by customers
in orders for paperboard containers. Final versions of the new regulations will
be completed in May.
The combination of stronger pricing and higher sales volumes across all of
its businesses in the second quarter should enable PCA to post higher operating
income compared with the second quarter in 1993. The long-awaited upturn in the
commodity business is underway.
In the containerboard business, a portion of the price increase announced in
the fall of 1993 has been realized at PCA's box plants. Price increases for
highly-integrated producers like PCA do not affect profits until the increases
are passed all the way through to boxes.
Price increases also have been implemented or announced by manufacturers in
three segments of specialty packaging since March: in egg containers, aluminum
packaging and plastic containers.
-more-
<PAGE>
12
CHEMICALS
Operating income at the Albright & Wilson division was $16 million before a
restructuring charge, compared with $15 million in the first quarter last year.
Revenues rose slightly to $221 million.
With the exception of the surfactants business, each of the chemicals
business groups posted improvements in operating income. Demand for phosphate
products remained good, particularly in Asia, where sales exceeded expectations.
The division has manufacturing plants in Singapore, Indonesia, the Philippines
and Thailand, as well as several sales offices in the region.
The specialties group recorded a gain of six percent in operating income on
the strength of new and innovative product introductions and geographic
expansion.
The recession in Europe affected Albright & Wilson, which is based in the
United Kingdom, more than Tenneco's other divisions. About 60 percent of
Albright & Wilson's sales are in Europe.
In the quarter, the division took a $7 million restructuring charge to
reduce costs and improve efficiency in its surfactants business. The payback
from the program is expected to be less than two years.
Tenneco Inc. (NYSE:TGT) is the nation's 34th-largest industrial company,
with 1993 sales of $13.3 billion.
The Houston-based company has major business interests in natural gas
transportation and marketing (Tenneco Gas), farm and construction equipment
(Case), automotive parts (Tenneco Automotive), ship design, construction and
repair (Newport News Shipbuilding), packaging (Packaging Corporation of America)
and chemicals (Albright & Wilson).
# # #
<PAGE>
13
TENNECO DIVISION EARNINGS RESULTS (MILLIONS)
<TABLE>
<CAPTION>
Unaudited
---------
THREE MONTHS ENDED MARCH 31,
1994 1993
------ ------
<S> <C> <C>
Net Sales and Operating
Revenues:
Natural Gas Pipelines $ 693 $ 818
Farm & Construction Equipment 1,000 814
Automotive Parts 481 443
Shipbuilding 403 452
Packaging 491 504
Chemicals 221 220
Other (3) (4)
------ ------
$3,286 $3,247
====== ======
Operating Income (Loss):
Natural Gas Pipelines $ 105 $ 121
Farm & Construction Equipment 81 (17)
Automotive Parts 52 51
Shipbuilding 48 55
Packaging 20 37
Chemicals 16 15
Other (14) 12
Restructuring (a) (7) --
------ ------
$ 301 $ 274
====== ======
</TABLE>
(a) Reflects a $7 million restructuring charge at Chemicals.
<PAGE>
14
TENNECO CONSOLIDATED EARNINGS RESULTS
<TABLE>
<CAPTION>
Unaudited
---------
THREE MONTHS ENDED MARCH 31,
1994 1993
---------- ----------
<S> <C> <C>
Net sales and operating revenues $3,286,000,000 $3,247,000,000
============== ==============
Operating income (before interest
and taxes) $ 301,000,000 $ 274,000,000
============== ==============
Income from operations before
cumulative effect of change in
accounting principle $ 122,000,000 $ 74,000,000
Cumulative effect of change
in accounting principle (a) (39,000,000) --
-------------- --------------
Net income 83,000,000 74,000,000
Preferred stock dividends (3,000,000) (4,000,000)
-------------- --------------
Net income to common stock $ 80,000,000 $ 70,000,000
============== ==============
Average common shares outstanding 178,700,000 151,300,000
============== ==============
Earnings (loss) per
average share:
From operations
before cumulative
effect of change in
accounting principle $ 0.67 $ 0.46
Cumulative effect of
change in accounting
principle (a) (0.22) --
-------------- --------------
$ 0.45 $ 0.46
============== ==============
</TABLE>
(a) Reflects a charge of $39 million or $.22 per share for Postemployment
Benefits.
<PAGE>
Exhibit 99(b)
<PAGE>
News [LOGO OF TENNECO INC APPEARS HERE] Tenneco Inc.
Release
Tenneco Building
P.O. Box 2511
Houston, Texas 77252
TWX 910-881-2565
- -----------------------------------------------------------------------------
MEDIA CONTACTS:
Christine LeLaurin at Tenneco-Houston (713) 757-2761
Bill Masterson, Sandy Lasch at Case-Racine (414) 636-5708
Kate Philipps at Case Europe-Paris 011-331-46-40-82-08
TENNECO FILES FOR INITIAL PUBLIC OFFERING OF 35 PERCENT OF ITS
CASE FARM AND CONSTRUCTION EQUIPMENT DIVISION
HOUSTON, April 26, 1994 -- Tenneco Inc. announced today that it intends to
offer 35 percent of its Case farm and construction equipment division through an
initial public offering.
A registration statement was filed this morning with the Securities and
Exchange Commission in Washington describing the transaction. After the
offering, Tenneco would retain 65 percent of the new corporation, which would
operate under the name of Case Corporation.
Dana G. Mead, Tenneco president and chief executive and chairman of Case,
said that the proceeds from the proposed offering would be used by Tenneco to
repay short-term debt, to pay taxes related to the transaction and for general
corporate purposes. Proceeds from the initial public offering are dependent upon
the offering price per share to be determined later.
Longer term, the company intends to reinvest the proceeds in a manner
consistent with the company's strategy. Under current planning assumptions, the
expected returns from these investments would replace the earnings contribution
lost as a result of the proposed offering.
It is expected that the proposed offering would not have a material effect
on Tenneco earnings in 1994.
-more-
<PAGE>
2
Overall gross margins were up as operating income rose by 10 percent in the
first quarter, to $301 million, from $274 million. Revenues rose by 1 percent to
$3.3 billion.
Mead said that further improvement from operating efficiencies in each of
Tenneco's six business divisions as well as improved pricing for many products
should contribute to continued strong earnings growth at Tenneco this year.
The expanding economy in the United States is providing strength to several
Tenneco markets in addition to auto parts, which had a record first quarter,
Mead said. Prices and demand for containerboard, plastics and aluminum specialty
packaging are rising, and all areas of the natural gas operations are
strengthening.
Business conditions for most industry sectors in Europe remain weak, but are
beginning to improve. Sales of specialty chemicals are above year-ago levels. In
Asia, where Tenneco's chemical operations are expanding, phosphate sales
exceeded expectations.
"This is the first time in two-and-a-half years that we have had improving
market conditions in nearly every sector," Mead said. "We are continuing to see
the improvements in our cost position help us achieve even greater improved
earnings."
CONTINUED IMPROVEMENT, STRONG RESULTS AT CASE
- ---------------------------------------------
The strong performance in the first quarter by the Case farm and
construction equipment division was responsible for most of the gain in
Tenneco's operating income.
Case has now recorded four consecutive profitable quarters and nine
consecutive quarters of improved operating income in quarter over quarter
comparisons that represents an overall increment of about $800 million since the
fourth quarter of l991, excluding restructuring charges.
-more-
<PAGE>
3
"This transaction, along with the improved earnings from operations and an
already strengthened balance sheet, should enable us to enter a new period of
consistent growth from a less cyclical base of operations," he said.
"The transition to public ownership of Case creates opportunities for both
Tenneco and Case investors to share in Case's improved prospects in the farm and
construction equipment industry and to realize the value that has been created
at Case by virtue of its stronger performance. Tenneco would further benefit
from the redeployment of the proceeds into some of its higher-return, faster-
growing core businesses."
A CORE OF STRONG BUSINESSES WITH GOOD GROWTH PROSPECTS
- ------------------------------------------------------
Mead said that each Tenneco division has opportunities to build on its
existing core businesses, including through international expansion.
He underscored the growth opportunities at three of the divisions. Tenneco
Gas, the company's natural gas business based in Houston, has attractive
prospects in the higher-return, non-regulated side of that business.
It signed an agreement last week to oversee the design, construction and
operation of a 750-mile pipeline from Argentina to Chile. Upon completion, it
will have a 25 percent equity interest in the $600 million pipeline project, and
will be the pipeline's technical operator.
The division is seeking additional projects in Europe, South America and
Asia. Meanwhile, its regulated pipeline business in the United States has
consistently ranked among the top competitors in return on net assets, and led
the industry in 1993.
-more-
<PAGE>
4
Tenneco Automotive, the global automotive parts business based near Chicago
in Lincolnshire, Ill., has leading market positions in the North America retail
business through its Walker and Monroe brands. Its advanced technology has made
it a leader in new products to reduce vehicle exhaust emissions as well as noise
generated by industrial sources and by vehicles.
As a high-quality, low-cost manufacturer, Tenneco Automotive is ideally
situated for growth as automakers reduce their number of suppliers and shift
more value-added manufacturing and assembly work to outside sources. It is
cultivating worldwide relationships with major car manufacturers to become the
supplier of choice wherever their cars are built.
Packaging Corporation of America, with headquarters in Evanston, Ill., has
as great a breadth of products as any business in its industry and is among the
lowest-cost producers. It is the world leader in production of molded fiber
products and is the U.S. market leader in aluminum containers and clear plastic
packaging for the food service industry. It is well positioned to benefit from
future packaging trends and to build its specialty packaging segment both
through internal growth and incremental acquisitions.
Mead added that the other two divisions, shipbuilding and chemicals, have
investment opportunities promising higher returns, albeit on a smaller scale.
Tenneco's redeployment strategy is also expected to be a major factor in the
improvement in its financial strength going forward. The company's industrial
ratio of debt to total capitalization improved to 48.9 percent at the end of the
first quarter, the lowest in 10 years and a decline of 18 percentage points from
the comparable quarter a year ago.
-more-
<PAGE>
5
CASE: STRONG EARNINGS AND A STRATEGY FOR CONSISTENT PROFITS
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Tenneco reported today that Case earned $81 million in operating income in
the first quarter of 1994, or nearly as much as the $82 million in operating
income the division posted for all of 1993. Revenues in the first quarter this
year rose 23 percent to $1.0 billion, from $814 million in the period a year
ago.
"We have said for more than two years that one of our prime objectives at
Tenneco was to return Case to sustained profitability," Mead said. He added that
the division's performance "has exceeded our expectations."
By retaining a significant ownership position in the new corporation,
Tenneco can continue to benefit from improved demand, pricing and international
growth opportunities in the farm and construction equipment industry, Mead said.
Tenneco ranked No. 34 among the nation's largest industrial companies last
year, with revenues of $13.3 billion. Case contributed $3.7 billion of that
total, the most of any Tenneco division.
Mead said that "the sale of any stake in Case would go a long way toward
unlocking the substantial values we have created in our biggest division during
the past two years," he said.
"As a result, Tenneco will have improved its prospects for steady, year-
over-year growth and reduced exposure to industry cycles," he said. "We will
become a more focused industrial company, with a faster pace of expansion in
international markets."
After nearly $1.4 billion in restructuring charges and operating losses of
$878 million in the combined years of 1991 and 1992, Case has been profitable in
each of the last four quarters.
Operating income has improved for nine consecutive quarters, in quarter-
over-quarter comparisons, by a total in that period of $800 million. The total
excludes restructuring charges.
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Case outpaced industry growth rates in several markets in the quarter. North
American sales of Case's tractor models with 100 horsepower or more were
especially strong, climbing 87 percent compared with an industry increase of 18
percent. Sales in Case construction equipment in North America rose 54 percent
in the quarter, compared with 40 percent in the industry.
MAJOR RESTRUCTURING PROGRAM UNDERWAY
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Case currently is executing a restructuring program initiated in March 1993
that is among the most complex in American industry.
The restructuring was designed in part to reduce excess capacity in Case's
worldwide operations, particularly in component manufacturing and final
assembly. In addition, component production was overly integrated, many product
lines had uneconomic market positions and too many company-owned stores made the
worldwide distribution system inefficient.
The division has successfully reengineered processes to accelerate response
time for customer orders and to shorten periods for the design and manufacture
of new products.
Other important programs included the introduction of new products, more
efficient manufacturing processes, improved marketing and distribution systems,
better pricing strategies, and an emphasis on quality and low operating costs.
Last month, Case announced a series of steps intended to improve operating
efficiencies in Europe. The actions were designed to rationalize agricultural
tractor and transmission production and to consolidate engineering,
manufacturing and product support for construction equipment.
The restructuring program is expected to enhance operating income and pretax
cash flow through a reduction in costs of approximately $200 million annually
over 1992 cost levels by 1997.
Inventories at the end of the first quarter were about $1.6 billion less
than they were at the beginning of 1991 and should decline further by the end of
this year.
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"Today, more than ever, Case is well positioned to achieve its goals," said
Jean-Pierre Rosso, president and chief executive officer of Case. "Our future is
bright."
Rosso was appointed president and chief executive officer at Case by Tenneco
last month. He had been president of the worldwide home and building control
business group of Honeywell Inc.
Mead will continue as chairman at Case in addition to his positions at
Tenneco. He was named chairman and chief executive officer at Case in August
1992.
"Our goal from the outset was to return Case to consistent profitability,"
Mead said. "We knew that this was the best way that we could create shareholder
value."
"We think that the earnings that we are announcing today provide evidence
that we have successfully created that value," he said. "A public offering is
the next logical step to unlock it for our shareholders."
Case stock has not been publicly traded since Tenneco acquired full
ownership in 1970. The division, based in Racine, Wis., was founded in 1842 by
Jerome Increase Case.
The Tenneco unit is the second-largest maker of farm equipment in North
America and the largest manufacturer and distributor of light and medium-sized
construction equipment in the world. With $3.7 billion in sales, it would have
ranked No. 137 last year among the nation's largest, publicly traded industrial
companies.
Approximately 68 percent of its 1993 sales were in North America, and
another 26 percent were in Europe. Sales of farm and construction equipment last
year contributed approximately 71 percent of Case's total revenues, with
replacement parts contributing 23 percent, and financing operations 6 percent.
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Tenneco Inc. (NYSE: TGT) is the nation's 34th-largest industrial company,
with 1993 sales of $13.3 billion.
Based in Houston, Tenneco has major business interests in natural gas
transportation and marketing (Tenneco Gas), farm and construction equipment
(Case), automotive parts (Tenneco Automotive), ship design, construction and
repair (Newport News Shipbuilding), packaging (Packaging Corporation of America)
and chemicals (Albright & Wilson).
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TENNECO HISTORICAL REVIEW
1943 Tennessee Gas and Transmission Company received a certificate authorizing
construction of a natural gas pipeline from South Texas to West Virginia.
1945 Became an independent, publicly owned firm after The Chicago Corporation
sold its interest to an investment syndicate which, in turn, resold the
stock to the public.
1946 Diversified into oil and gas production.
1947 Changed name to Tennessee Gas Transmission Company.
1955 Gained 50 percent ownership of Petro-Tex Chemical Corporation.
1961 Formed Tenneco Oil Company as a wholly owned subsidiary.
1965 Acquired Packaging Corporation of America.
1966 Adopted Tenneco Inc. as the name of the parent company. Tennessee Gas
Transmission Company became the name of the subsidiary that provided
overall administrative and staff services for Tenneco's pipeline
operations.
1967 Acquired Kern County Land Company. Included in the transaction were Walker
Manufacturing Company and a majority interest in J I Case Company.
1968 Acquired Newport News Shipbuilding.
1970 Acquired the remaining interest in J I Case.
1977 Acquired Monroe Auto Equipment Company and formed Tenneco Automotive.
Acquired 40 percent of the France-based construction equipment firm,
Poclain SA.
1978 Acquired full ownership of Albright & Wilson (Tenneco's chemicals
division).
1984 Agreed to a 1985 purchase of selected agricultural equipment assets from
International Harvester, which were merged into J I Case.
1988 Sold Tenneco Oil Company for $7.63 billion.
1991 Announced a $504 million restructuring, $461 million earmarked for J I
Case.
1993 Completed an equity offering that raised $1.09 billion. Tenneco announced a
$920 million restructuring charge against 1992 earnings to address a second
J I Case restructuring.
1994 Announced offer of 35 percent of Case through initial public offering.
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CASE HISTORICAL REVIEW
1842 Jerome Increase Case founded the company by improving and selling a crude
"ground hog" thresher in Rochester, Wis. Two years later, Case moved his
business to Racine, Wis.
1863 The company was formed officially as J I Case and Company, with later name
changes to J I Case Threshing Machine Company in 1880 and to J I Case
Company in 1928. (After the proposed IPO is completed, the official name
will become Case corporation.)
1878 First Case thresher shipped overseas, to France.
1912 Production of road-building equipment such as steam rollers and road
graders begins.
1957 Acquired American Tractor Corporation, establishing a leadership position
in the construction equipment market.
1964 Kern County Land Company acquired controlling interest in Case.
1967 Tenneco Inc. acquired Kern County Land Company and its majority ownership
of Case.
1970 J I Case became a wholly owned subsidiary of Tenneco Inc.
1985 Tenneco acquired selected agricultural assets from International Harvester.
Enabled regain Case to regain status as a full-line manufacturer of
combines, implements and tractors.
1991 Announced $461 million restructuring aimed at reducing costs
1993 Restructuring program announced to strategically reposition Case. Tenneco
takes $920 million writedown to cover anticipated costs of the program, one
of the most complex restructurings in American industry.
1993 Case earned $82 million for the full year, completing eight consecutive
quarters of improving operations, excluding restructuring charges. Division
is profitable in each of last three quarters of the year. Inventories
reduced by $1.9 billion at year-end from the beginning of 1991.
1994 Earnings in first quarter were $81 million, a positive swing of $98 million
compared with a loss of $17 million in the year-ago quarter. Tenneco Inc.
announces plan to offer 35 percent of Case in a newly organized independent
corporation.
