<PAGE>
____________________________________________________________________
____________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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: 177,324,860 shares as of
September 30, 1995.
____________________________________________________________________
____________________________________________________________________<PAGE>
<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 Shareowners' 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.................... 18
Part II--Other Information
Item 1. Legal Proceedings.................................... 27
Item 2. Changes in Securities................................ *
Item 3. Defaults Upon Senior Securities...................... *
Item 4. Submission of Matters to a Vote of Security Holders.. *
Item 5. Other Information.................................... *
Item 6. Exhibits and Reports on Form 8-K..................... 28
</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>
<PAGE>
PART I
FINANCIAL INFORMATION
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Tenneco Inc. and Consolidated Subsidiaries
Three Months Ended Nine Months Ended
September 30, September 30,
(Millions Except Share Amounts) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Net sales and operating revenues--
Natural gas pipelines....................................... $ 427 $ 549 $ 1,364 $ 1,847
Automotive parts............................................ 600 511 1,863 1,521
Packaging................................................... 665 562 1,983 1,580
Shipbuilding................................................ 445 424 1,290 1,291
Farm and construction equipment............................. - 1,008 - 3,126
Other....................................................... (1) (5) (3) (9)
2,136 3,049 6,497 9,356
Other income--
Interest income............................................. 28 52 96 139
Equity in net income of affiliated companies................ 34 8 146 39
Gain (loss) on sale of businesses and assets, net........... 100 (2) 107 10
Other income, net........................................... (15) (20) 4 (41)
2,283 3,087 6,850 9,503
Costs and Expenses:
Cost of sales (exclusive of depreciation shown below)......... 1,302 1,911 3,846 5,760
Operating expenses............................................ 281 429 973 1,471
Selling, general and administrative........................... 188 279 570 847
Finance charges--Tenneco Finance.............................. 22 30 68 125
Depreciation, depletion and amortization...................... 113 91 323 300
Restructuring costs........................................... - - - (16)
1,906 2,740 5,780 8,487
Income Before Interest Expense, Income Taxes and Minority
Interest....................................................... 377 347 1,070 1,016
Interest Expense (net of interest capitalized).................. 78 113 249 306
Income Before Income Taxes and Minority Interest................ 299 234 821 710
Income Tax Expense.............................................. 79 72 252 266
Income Before Minority Interest................................. 220 162 569 444
Minority Interest............................................... 6 12 17 12
Income From Continuing Operations............................... 214 150 552 432
Income (Loss) From Discontinued Operations, Net of Income Tax... - 1 - (12)
Income Before Extraordinary Loss................................ 214 151 552 420
Extraordinary Loss, Net of Income Tax........................... - - - (5)
Income Before Cumulative Effect of Change in Accounting
Principle...................................................... 214 151 552 415
Cumulative Effect of Change in Accounting Principle, Net of
Income Tax.................................................... - - - (39)
Net Income...................................................... 214 151 552 376
Preferred Stock Dividends....................................... 2 2 8 9
Net Income to Common Stock...................................... $ 212 $ 149 $ 544 $ 367
Average Number of Shares of Common Stock Outstanding............ 172,429,542 180,902,646 174,804,413 179,811,774
Earnings (Loss) Per Average Share of Common Stock:<PAGE>
Continuing operations......................................... $ 1.23 $ 0.81 $ 3.11 $ 2.35
Discontinued operations....................................... - 0.01 - (0.06)
Extraordinary loss............................................ - - - (0.03)
Cumulative effect of change in accounting principle........... - - - (0.22)
$ 1.23 $ 0.82 $ 3.11 $ 2.04
Cash Dividends Per Share of Common Stock........................ $ .40 $ .40 $ 1.20 $ 1.20
</TABLE>
(The accompanying notes to financial statements are
an integral part of these statements of income.)
2<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Tenneco Industrial Tenneco Finance
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
(Millions Except Share Amounts) 1995 1994 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales and operating
revenues--
Natural gas pipelines...... $ 427 $ 549 $ 1,364 $ 1,847 $ - $ - $ - $ -
Automotive parts........... 600 511 1,863 1,521 - - - -
Packaging.................. 665 562 1,983 1,580 - - - -
Shipbuilding............... 445 424 1,290 1,291 - - - -
Farm and construction
equipment................. - 1,008 - 3,126 - - - -
Other...................... (1) (5) (3) (9) - - - -
2,136 3,049 6,497 9,356 - - - -
Other income--
Interest income............ 12 20 48 42 32 58 100 255
Equity in net income of
affiliated companies...... 38 21 161 115 - - - -
Gain (loss) on sale of bus-
inesses and assets, net... 100 (2) 107 10 - - - -
Other income, net.......... (15) (19) 4 (39) 1 2 4 4
2,271 3,069 6,817 9,484 33 60 104 259
Costs and Expenses:
Cost of sales (exclusive of
depreciation shown below).... 1,303 1,913 3,850 5,764 - - - -
Operating expenses............ 277 438 963 1,492 4 (9) 10 (18)
Selling, general and
administrative............... 191 285 579 947 1 7 1 8
Finance charges--Tenneco
Finance...................... - - - - 22 31 68 129
Depreciation, depletion and
amortization................. 113 91 322 299 - - 1 1
Restructuring costs........... - - - (16) - - - -
1,884 2,727 5,714 8,486 27 29 80 120
Income Before Interest Expense,
Income Taxes and Minority
Interest....................... 387 342 1,103 998 6 31 24 139
Interest Expense (net of
interest capitalized).......... 90 119 291 336 - 7 - 15
Income Before Income Taxes and
Minority Interest.............. 297 223 812 662 6 24 24 124
Income Tax Expense.............. 77 63 243 220 2 9 9 46
Income Before Minority Interest. 220 160 569 442 4 15 15 78
Minority Interest............... 6 10 17 10 - 2 - 2
Income From Continuing
Operations..................... 214 150 552 432 4 13 15 76
Income (Loss) From Discontinued
Operations, Net of Income Tax.. - 1 - (12) - - - - <PAGE>
Income Before Extraordinary
Loss........................... 214 151 552 420 4 13 15 76
Extraordinary Loss, Net of
Income Tax..................... - - - (5) - - - (4)
Income Before Cumulative Effect
of Change in Accounting
Principle...................... 214 151 552 415 4 13 15 72
Cumulative Effect of Change in
Accounting Principle, Net of
Income Tax..................... - - - (39) - - - -
Net Income...................... 214 151 552 376 4 13 15 72
Preferred Stock Dividends....... 2 2 8 9 - - - -
Net Income to Common Stock...... $ 212 $ 149 $ 544 $ 367 $ 4 $ 13 $ 15 $ 72
</TABLE>
(Reference is made to Note 1 for definitions of
"Tenneco Industrial" and "Tenneco Finance.")
3<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]<PAGE>
4<PAGE>
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Tenneco Inc. and
Consolidated
Subsidiaries Tenneco Industrial Tenneco Finance
Nine Months Ended Nine Months Ended Nine Months Ended
September 30, September 30, September 30,
(Million) 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations............................. $ 552 $ 432 $ 552 $ 432 $ 15 $ 76
Adjustments to reconcile income from continuing operations to
cash provided (used) by continuing operations--
Depreciation, depletion and amortization.................... 323 300 322 299 1 1
Equity in net (income) loss of affiliated companies, net of
dividends.................................................. (95) 3 190 (50) - -
Deferred income taxes....................................... 4 (97) 2 (106) 2 9
Gain on sale of businesses and assets, net.................. (107) (10) (107) (10) - -
Changes in components of working capital--
(Increase) decrease in receivables........................ 319 (420) 37 (1,586) 268 809
(Increase) decrease in inventories........................ (207) (93) (207) (93) - -
(Increase) decrease in prepayments and other current
assets.................................................. (21) 21 (23) 36 - (8)
Increase (decrease) in payables........................... (130) 20 (131) (173) (5) 43
Increase (decrease) in taxes accrued...................... 78 146 78 162 - (16)
Increase (decrease) in interest accrued................... (23) 2 (13) 36 (10) (34)
Increase (decrease) in restructuring liability............ - (60) - (60) - -
Increase (decrease) in natural gas pipeline revenue
reservation.............................................. (169) (96) (169) (96) - -
Increase (decrease) in other current liabilities.......... (84) 119 (83) 134 (1) (15)
(Increase) decrease in long-term notes and receivables...... 260 142 8 36 245 99
Take-or-pay (refunds to customers) recoupments, net......... 35 15 35 15 - -
Other....................................................... (31) (6) (28) 20 (2) 4
Cash provided (used) by continuing operations............. 704 418 463 (1,004) 513 968
Cash provided (used) by discontinued operations........... (11) 15 (11) 15 - -
Net Cash Provided (Used) by Operating Activities................ 693 433 452 (989) 513 968
Cash Flows from Investing Activities:
Net proceeds (expenditures) related to the sale of
discontinued operations...................................... 683 (15) 683 (15) - -
Net proceeds from sale of businesses and assets............... 591 539 591 539 - -
Expenditures for plant, property and equipment--
Continuing operations....................................... (566) (392) (566) (392) - -
Discontinued operations..................................... (4) (47) (4) (47) - -
Acquisitions of businesses.................................... (323) (4) (323) (4) - -
Investments and other......................................... 20 (29) 526 (276) (500) 64
Net Cash Provided (Used) by Investing Activities................ 401 52 907 (195) (500) 64
Cash Flows from Financing Activities:
Issuance of common, treasury and SECT shares.................. 74 152 74 152 - 185
Purchase of common stock...................................... (496) (6) (496) (6) - -
Redemption of preferred stock................................. (20) (20) (20) (20) - -
Issuance of long-term debt.................................... - 982 - 1,007 - 12
Retirement of long-term debt.................................. (393) (1,316) (158) (109) (235) (1,273)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt................................ 258 221 (9) 335 289 385
Dividends (common and preferred).............................. (216) (240) (216) (240) (300) (18)<PAGE>
Net Cash Provided (Used) by Financing Activities................ (793) (227) (825) 1,119 (246) (709)
Effect of Foreign Exchange Rate Changes on Cash and Temporary
Cash Investments.............................................. 6 16 6 6 - 10
Increase (Decrease) in Cash and Temporary Cash Investments...... 307 274 540 (59) (233) 333
Cash and Temporary Cash Investments, January 1.................. 405 218 172 213 233 5
Cash and Temporary Cash Investments, September 30 (Note)........ $ 712 $ 492 $ 712 $ 154 $ - $ 338
Cash Paid During the Period for:
Interest...................................................... $ 331 $ 454 $ 297 $ 343 $ 77 $ 183
Income taxes (net of refunds)................................. $ 251 $ 93 $ 244 $ 42 $ 7 $ 51
</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>
<PAGE>
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Tenneco Inc. and
Consolidated Subsidiaries
September 30, December 31, September 30,
(Millions) 1995 1994 1994
<S> <C> <C> <C>
Assets
Current Assets:
Cash and temporary cash investments.............................. $ 712 $ 405 $ 492
Receivables--
Customer notes and accounts (net)............................. 1,026 1,535 3,254
Affiliated companies.......................................... 58 67 1
Gas transportation and exchange............................... 145 214 330
Income taxes.................................................. 104 234 -
Other......................................................... 299 192 228
Inventories--
Finished goods................................................ 312 355 947
Work in process............................................... 96 83 193
Long-term contracts in progress, less progress billings....... 227 138 100
Raw materials................................................. 215 178 322
Materials and supplies........................................ 152 156 158
Deferred income taxes............................................ 56 23 150
Prepayments and other............................................ 263 315 350
3,665 3,895 6,525
Investments and Other Assets:
Investment in affiliated companies............................... 696 997 499
Other investments, at cost....................................... 60 47 52
Long-term receivables--
Notes and other (net)......................................... 518 805 1,746
Affiliated companies.......................................... 285 264 -
Investment in subsidiaries in excess of fair value of net assets
at date of acquisition, less amortization...................... 327 331 403
Deferred income taxes............................................ 53 49 54
Other............................................................ 1,408 927 1,124
3,347 3,420 3,878
Plant, Property and Equipment, at cost............................. 11,000 11,108 12,579
Less--Reserves for depreciation, depletion and amortization...... 5,629 5,881 6,672
5,371 5,227 5,907
$ 12,383 $ 12,542 $ 16,310
Liabilities and Shareowners' Equity
Current Liabilities:
Short-term debt (including current maturities on long-term debt). $ 666 $ 545 $ 1,408
Payables--
Trade......................................................... 846 1,053 1,323
Affiliated companies.......................................... 1 35 18
Gas transportation and exchange............................... 117 159 218
Taxes accrued.................................................... 99 86 307
Interest accrued................................................. 142 127 170
Restructuring liability.......................................... - - 151
Natural gas pipeline revenue reservation......................... 13 190 182
Other............................................................ 991 859 1,441
2,875 3,054 5,218
Long-term Debt..................................................... 3,310 3,570 4,616
Deferred Income Taxes.............................................. 1,333 1,459 1,176
Postretirement Benefits............................................ 603 603 795
Deferred Credits and Other Liabilities............................. 689 489 790 <PAGE>
Commitments and Contingencies
Minority Interest.................................................. 315 320 586
Preferred Stock with Mandatory Redemption Provisions............... 129 147 146
Shareowners' Equity:
Series A preferred stock......................................... - - 9
Common stock..................................................... 957 957 870
Stock Employee Compensation Trust (common stock held in trust)... (232) (298) (348)
Premium on common stock and other capital surplus................ 3,588 3,553 3,653
Cumulative translation adjustments............................... 36 (237) (214)
Retained earnings (accumulated deficit).......................... (578) (905) (855)
3,771 3,070 3,115
Less--Shares held as treasury stock, at cost..................... 642 170 132
3,129 2,900 2,983
$ 12,383 $ 12,542 $ 16,310
</TABLE>
(The accompanying notes to financial statements are
an integral part of these balance sheets.)
6<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Tenneco Industrial Tenneco Finance
September 30, December 31, September 30, September 30, December 31, September 30,
(Millions) 1995 1994 1994 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and temporary cash investments.. $ 712 $ 172 $ 154 $ - $ 233 $ 338
Receivables--
Customer notes and accounts (net). 479 650 2,207 544 882 1,044
Affiliated companies.............. 60 65 192 36 186 412
Gas transportation and exchange... 145 214 330 - - -
Income taxes...................... 104 234 - - - -
Other............................. 293 187 216 6 5 12
Inventories--
Finished goods.................... 312 355 947 - - -
Work in process................... 96 83 193 - - -
Long-term contracts in progress,
less progress billings........... 227 138 100 - - -
Raw materials..................... 215 178 322 - - -
Materials and supplies............ 152 156 158 - - -
Deferred income taxes................ 56 23 147 - - 3
Prepayments and other................ 266 315 338 - 2 14
3,117 2,770 5,304 586 1,308 1,823
Investments and Other Assets:
Investment in affiliated companies... 905 1,762 1,397 - - -
Other investments, at cost........... 60 42 47 - 5 5
Long-term receivables--
Notes and other (net)............. 175 214 699 328 566 1,017
Affiliated companies.............. - 264 - 285 - -
Investment in subsidiaries in
excess of fair value of net assets
at date of acquisition, less
amortization........................ 327 331 403 - - -
Deferred income taxes................ 53 49 54 - - -
Other................................ 1,421 951 1,163 3 3 10
2,941 3,613 3,763 616 574 1,032
Plant, Property and Equipment, at
cost.................................. 10,930 11,038 12,510 70 70 69
Less--Reserves for depreciation,
depletion and amortization.......... 5,609 5,863 6,654 20 18 18
5,321 5,175 5,856 50 52 51
$ 11,379 $ 11,558 $ 14,923 $ 1,252 $ 1,934 $ 2,906
Liabilities and Shareowners' Equity
Current Liabilities:
Short-term debt (including current
maturities on long-term debt)....... $ 405 $ 310 $ 857 $ 293 $ 410 $ 1,135
Payables--
Trade............................. 845 1,053 1,313 1 - 10
Affiliated companies.............. 7 36 28 - 7 16
Gas transportation and exchange... 117 159 218 - - -
Taxes accrued........................ 97 86 303 2 - 4
Interest accrued..................... 126 102 151 16 25 19
Restructuring liability.............. - - 151 - - -
Natural gas pipeline revenue
reservation......................... 13 190 182 - - -
Other................................ 982 853 1,405 9 7 40 <PAGE>
2,592 2,789 4,608 321 449 1,224
Long-term Debt......................... 2,604 2,865 3,908 706 705 715
Deferred Income Taxes.................. 1,318 1,446 1,165 15 13 11
Postretirement Benefits................ 603 603 795 - - -
Deferred Credits and Other
Liabilities........................... 689 488 789 1 2 1
Commitment and Contingencies
Minority Interest...................... 315 320 529 - - 57
Preferred Stock with Mandatory
Redemption Provisions................. 129 147 146 - - -
Shareowners' Equity:
Series A preferred stock............. - - 9 - - -
Common stock......................... 957 957 870 - 71 71
Stock Employee Compensation Trust
(common stock held in trust)........ (232) (298) (348) - - -
Premium on common stock and other
capital surplus..................... 3,588 3,553 3,653 154 264 401
Cumulative translation adjustments... 36 (237) (214) - 2 2
Retained earnings (accumulated
deficit)............................ (578) (905) (855) 55 428 424
3,771 3,070 3,115 209 765 898
Less--Shares held as treasury
stock, at cost...................... 642 170 132 - - -
3,129 2,900 2,983 209 765 898
$ 11,379 $ 11,558 $ 14,923 $ 1,252 $ 1,934 $ 2,906
</TABLE>
(Reference is made to Note 1 for definitions of
"Tenneco Industrial" and "Tenneco Finance.")
7<PAGE>
<PAGE>
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Tenneco Inc. and Consolidated Subsidiaries
Nine Months Ended September 30,
(Millions Except Share Amounts) 1995 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Series A Preferred Stock:
Balance January 1 and September 30.................. - $ - 8,935,175 $ 9
Common Stock:
Balance January 1................................... 191,335,193 957 173,953,012 870
Issued pursuant to benefit plans................. 2,900 - 37,996 -
Other............................................ 4,390 - 1,422 -
Balance September 30................................ 191,342,483 957 173,992,430 870
Stock Employee Compensation Trust (SECT):
Balance January 1................................... (298) (499)
Shares issued.................................... 87 81
Adjustment to market value....................... (21) 70
Balance September 30................................ (232) (348)
Premium on Common Stock and Other Capital Surplus:
Balance January 1................................... 3,553 3,714
Premium on common stock issued pursuant to
benefit plans.................................. - 2
Loss on issuance of treasury stock............... - (2)
Dividends on shares held by SECT................. 7 10
Adjustment of SECT to market value............... 21 (70)
Other............................................ 7 (1)
Balance September 30................................ 3,588 3,653
Cumulative Translation Adjustments:
Balance January 1................................... (237) (303)
Translation of foreign currency statements....... 40 93
Sale of investment in foreign subsidiaries....... 235 -
Hedges of net investment in foreign subsidiaries
(net of income taxes).......................... (2) (4)
Balance September 30................................ 36 (214)
Retained Earnings (Accumulated Deficit):
Balance January 1................................... (905) (980)
Net income....................................... 552 376
Dividends--
Preferred stock............................... (6) (6)
Series A preferred stock...................... - (37)
Common stock.................................. (217) (205)
Accretion of excess of redemption value of pre-
ferred stock over fair value at date of issue.. (2) (3)
Balance September 30................................ (578) (855)
Less--Common Stock Held as Treasury Stock, at Cost:
Balance January 1................................... 3,617,510 170 4,166,835 210
Shares acquired.................................. 10,411,799 472 213,454 11
Shares issued pursuant to benefit and dividend
reinvestment plans............................. (11,686) - (1,763,504) (89)
Balance September 30................................ 14,017,623 642 2,616,785 132 <PAGE>
Total....................................... $ 3,129 $ 2,983
</TABLE>
(The accompanying notes to financial statements are an
integral part of these statements of changes in
shareowners' equity.)
8<PAGE>
<PAGE>
STATEMENTS OF CHANGES IN PREFERRED STOCK
WITH MANDATORY REDEMPTION PROVISIONS
(Unaudited)
<TABLE>
<CAPTION>
Tenneco Inc. and Consolidated Subsidiaries
Nine Months Ended September 30,
(Millions Except Share Amounts) 1995 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Preferred Stock:
Balance January 1....................................... 1,586,764 $ 147 1,782,508 $ 163
Shares redeemed...................................... (195,771) (20) (195,744) (20)
Accretion of excess of redemption value over fair
value at date of issue............................. - 2 - 3
Balance September 30.................................... 1,390,993 $ 129 1,586,764 $ 146
</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>
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) In the opinion of Tenneco Inc. (hereinafter referred to as the
"Company"), the accompanying unaudited financial statements of Tenneco
Inc. and consolidated subsidiaries (hereinafter referred to as "Tenneco")
contain all adjustments necessary to present fairly the financial position
as of September 30, 1995, and the results of operations; changes in
shareowners' equity; changes in preferred stock with mandatory redemption
provisions; and cash flows for the periods indicated. The financial
statements of Tenneco include all majority-owned subsidiaries including
wholly-owned finance subsidiaries. Companies in which at least a 20% to a
50% voting interest is owned are carried at cost plus equity in
undistributed earnings since date of acquisition (except for Tenneco's
Farm and construction equipment segment as noted below) and cumulative
translation adjustments.
In June 1994, Tenneco completed an initial public offering ("IPO") of
approximately 29% of the common stock of Case Corporation ("Case"), the
holder of Tenneco's Farm and construction equipment segment. In November
1994, a secondary offering of Case's common stock reduced Tenneco's
ownership to approximately 44%. A third public offering in August 1995
reduced Tenneco's ownership further to approximately 21%. From January
through November 1994, Case's financial statements were fully consolidated
with Tenneco's. From July through November 1994, Tenneco's financial
statements reflected the 29% minority shareowners' interest in Case.
Subsequent to November 1994, Case was reflected in Tenneco's financial
statements using the equity method of accounting. See Note 5 for
additional information regarding Tenneco's investment in Case.
The accompanying financial statements also include, on a separate and
supplemental basis, the combination of Tenneco's industrial companies and
finance companies as follows:
Tenneco Industrial -- The financial information captioned "Tenneco
Industrial" reflects the consolidation of all
majority-owned subsidiaries except for the finance
subsidiaries. The finance operations 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 of
affiliated companies," and in the balance sheet
caption, "Investment in affiliated companies."
Tenneco Finance -- The financial information captioned "Tenneco
Finance" reflects the combination of Tenneco's
wholly-owned finance subsidiaries.
10<PAGE>
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Prior to the Case IPO, the wholesale (dealer) credit and retail credit
operations of Case were financed by wholly-owned finance subsidiaries.
Subsequent to the IPO, the wholesale (dealer) credit operations are being
financed by Case industrial subsidiaries. As a result of this change,
interest expense related to the wholesale (dealer) credit operations has
been reported as "Interest Expense" from July through November 1994,
rather than "Finance charges-Tenneco Finance" as in prior periods. If the
first six months of 1994 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 been increased by $18 million
for the nine months ended September 30, 1994, with no effect on the 1994
third quarter or on consolidated net income.
All significant intercompany transactions, including activity within
and between the "Tenneco Industrial" and "Tenneco Finance" business units,
have been eliminated.
The inclusion of Series A preferred stock in the computation of
earnings per share was antidilutive for the nine months ended September
30, 1994. In December 1994, all Series A preferred stock was converted
into common stock.
Prior years' financial statements have been reclassified where
appropriate to conform to 1995 presentations.
(2) Pursuant to Order 636 issued by the Federal Energy Regulatory
Commission ("FERC") on April 8, 1992, Tennessee Gas Pipeline Company
("Tennessee") implemented revisions to its tariff which put into effect on
September 1, 1993, the restructuring of its transportation, storage and
sales services. Pursuant to the provisions of Order 636 allowing for the
recovery of transition costs related to the restructuring, Tennessee has
made filings to recover gas production costs related to its Bastian Bay
facilities, the remaining balance of purchased gas ("PGA") costs, stranded
transportation ("TBO") costs and gas supply realignment ("GSR") costs
resulting from remaining gas purchase obligations.
Tennessee's filings to recover production costs related to its Bastian
Bay facilities have been rejected by the FERC based on the continued use
of the gas production from the field; however, the FERC recognized the
ability of Tennessee to file for the recovery of losses upon disposition
of these assets. Tennessee has filed for appellate review of the FERC
actions and is confident that the Bastian Bay costs will ultimately be
recovered as transition costs directly related to Order 636, and no FERC
order has questioned the ultimate recoverability of these costs.
11<PAGE>
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
The filings implementing Tennessee's recovery mechanisms for the
following transition costs were accepted effective September 1, 1993, and
made subject to refund pending FERC review: 1) direct-billing of
unrecovered PGA costs to its former sales customers over a twelve-month
period, 2) recovery of TBO costs, which Tennessee is obligated to pay
under existing contracts, through a surcharge from firm transportation
customers, adjusted annually, and 3) GSR cost recovery of 90% of such
costs over a period of up to thirty-six months from firm transportation
customers and recovery of 10% of such costs from interruptible
transportation customers.
Following negotiations with its customers, Tennessee filed in July 1994
with the FERC a Stipulation and Agreement (the "PGA Stipulation"), which
provides for the recovery of PGA costs of approximately $100 million and
the recovery of costs associated with the transfer of storage gas
inventory to new storage customers in Tennessee's restructuring
proceeding. The PGA Stipulation eliminates all challenges to the PGA
costs, but establishes a cap on the charges that may be imposed upon
former sales customers. On November 15, 1994, the FERC issued an order
approving the PGA Stipulation and resolving all outstanding issues. On
April 5, 1995, the FERC issued its order on rehearing affirming its
initial approval of the PGA Stipulation. Tennessee implemented the terms
of the PGA Stipulation and made refunds in May 1995. The orders approving
the PGA Stipulation have been appealed to the D.C. Circuit Court of
Appeals by certain customers. Tennessee believes the PGA Stipulation will
be upheld on appeal.
Tennessee is recovering TBO costs formerly incurred to perform its
sales functions, subject to refund, pending review of data submitted by
Tennessee. On November 18, 1994, the FERC issued an order on Tennessee's
initial TBO surcharge filing to recover TBO costs for the twelve-month
period beginning September 1, 1993. The order required Tennessee to remove
certain costs from this surcharge. Tennessee has appealed this decision to
the D.C. Circuit Court of Appeals. On November 30, 1994, Tennessee filed
with the FERC to collect through a surcharge approximately $25 million
annually of TBO costs in compliance with the FERC's November 18, 1994
order, and in a separate filing, Tennessee filed to recover its projected
annual TBO costs of approximately $21 million for the twelve-month period
beginning January 1, 1995. The FERC accepted Tennessee's filing to recover
its projected TBO costs, subject to refund.
With regard to Tennessee's GSR costs, Tennessee, along with three other
pipelines, executed four separate settlement agreements with Dakota
Gasification Company and the U.S. Department of Energy and initiated four
separate proceedings at the FERC seeking approval to implement the
settlement agreements. The settlement resolved litigation concerning
purchases made by Tennessee of synthetic gas produced from the Great
Plains Coal Gasification plant ("Great Plains"). On October 18, 1994, the
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
FERC consolidated the four proceedings and set them for hearing before an
administrative law judge ("ALJ"). The hearing, which concluded in July
1995, was limited to the issue of whether the settlement agreements are
prudent. The ALJ is required to issue his initial decision by December 31,
1995. The FERC has committed to issuing a final order by December 31,
1996. Previously, the FERC has ruled that the costs related to the Great
Plains project are eligible for recovery through GSR and other special
recovery mechanisms and that the costs are eligible for recovery for the
duration of the term of the original gas purchase agreements.
Also related to Tennessee's GSR costs, on October 14, 1993, Tennessee
was sued in the State District Court of Ector County, Texas, by ICA
Energy, Inc. ("ICA") and TransTexas Gas Corporation ("TransTexas"). In
that suit, ICA and TransTexas contended that Tennessee had an obligation
to purchase gas production which TransTexas thereafter attempted to add
unilaterally to the reserves originally dedicated to a 1979 gas contract.
On two subsequent occasions, TransTexas gave Tennessee notice that it was
adding new production and/or acreage "to the contract." An amendment to
the pleadings seeks $1.5 billion from Tennessee for alleged damages caused
by Tennessee's refusal to purchase gas produced from the TransTexas leases
covering the new production and lands. Neither ICA nor TransTexas were
original parties to that contract. However, they contend that any stranger
acquiring a fractional interest in the original committed reserves thereby
obtains a right to add to the contract unlimited volumes of gas production
from locations in South Texas. Tennessee filed a motion for summary
judgment, asserting that the Texas statutes of frauds precluded the
plaintiffs from adding new production or acreage to the contract. On May
4, 1995, the trial court granted Tennessee's motion for summary judgment;
the plaintiffs have filed a notice of appeal. Thereafter, ICA and
TransTexas filed a motion for summary judgment on a separate issue
involving the term "committed reserves" and whether Tennessee has a
contractual obligation to purchase gas produced from a lease not described
in the gas contract. On November 8, 1995, the trial court granted ICA's
and TransTexas' motion in part. That order, which is not final, also held
that ICA's and TransTexas' rights are subject to certain limitations of
the Texas Business and Commerce Code. In addition to these defenses,
which must be resolved at trial, Tennessee has other defenses which it has
asserted and intends to pursue. The November 8, 1995 ruling does not
affect the trial court's previous May 4, 1995 order granting summary
judgment to Tennessee.
Tennessee has been engaged in separate settlement and contract
reformation discussions with holders of certain gas purchase contracts who
have sued Tennessee. Although Tennessee believes that its defenses in the
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
underlying gas purchase contract actions are meritorious, Tennessee
recorded liabilities in the first quarter of 1995 which it believes are
adequate to cover the resolution of these matters. On August 1, 1995, the
Texas Supreme Court affirmed a ruling favorable to Tennessee of the Court
of Appeals in one of these matters and indicated that it would remand the
case to the trial court. Motions for rehearing have been filed by the
producers. As of the date hereof, the court had not ruled on those
motions and mandate had not been issued.
As of September 30, 1995, Tennessee has deferred GSR costs yet to be
recovered from its customers of approximately $487 million, net of $290
million previously recovered from its customers, subject to refund.
Proceedings have commenced to review the recovery of these GSR costs;
however, the FERC has generally encouraged pipelines to settle such issues
through negotiations with customers. Although Order 636 contemplates
complete recovery by pipelines of qualified transition costs, Tennessee is
engaged in settlement discussions with its customers concerning the amount
of recoverable GSR costs in response to the FERC and customer statements
acknowledging the desirability of such settlements.
Given the uncertainty over the results of ongoing discussions between
Tennessee and its customers related to the recovery of GSR costs and the
uncertainty related to predicting the outcome of its gas purchase contract
reformation efforts and the associated litigation, Tenneco is unable to
predict the timing or the ultimate impact the resolution of these issues
will have on its consolidated financial position or results of operations.
On December 30, 1994, Tennessee filed a general rate increase in Docket
No. RP95-112 (the "1995 Rate Case"). On January 25, 1995, the FERC
accepted the filing, suspended its effectiveness for the maximum period of
five months pursuant to normal regulatory process, and set the matter for
hearing. On July 1, 1995, Tennessee began collecting rates, subject to
refund, reflecting an $87 million increase in Tennessee's revenue
requirement. Settlement discussions with the FERC staff and customers are
ongoing and Tennessee is reserving revenues it believes adequate to cover
any refunds which may be required upon final settlement of this
proceeding.
Also on January 25, 1995, the FERC issued an order requiring the
convening of a technical conference to discuss certain issues in the 1995
Rate Case and concerns expressed in response to operational issues in a
1995 tariff filing. The concerns include Tennessee's ability to provide
its shippers with timely and accurate operating and billing information
and the associated systems costs. Several technical conferences were held
during the first half of 1995 resulting in modifications to the 1995
tariff filing, the assignment of certain issues to the 1995 Rate Case for
final resolution, and the negotiation of a settlement with Tennessee's
customers as to certain operational tariff issues. On November 1, 1995,
the FERC approved the settlement of the 1995 tariff issues noting the
efforts Tennessee has made with its customers. The ultimate resolution of
these issues may result in adjustments to customer billings.
14<PAGE>
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
(3) Reference is made to Note 2 for information concerning gas supply
litigation. Tenneco Inc. and its subsidiaries are parties to numerous
other legal proceedings arising from their operations. Tenneco Inc.
believes that the outcome of these other proceedings, individually and in
the aggregate, will have no material effect on the financial position or
results of operations of Tenneco Inc. and its consolidated subsidiaries.
(4) Since 1988, Tennessee has been engaged in an internal project to
identify and deal with the presence of polychlorinated biphenyls ("PCBs")
and other substances of concern, including substances on the U.S.
Environmental Protection Agency ("EPA") List of Hazardous Substances ("HS
List") at compressor stations and other facilities operated by both its
interstate and intrastate natural gas pipeline systems. While conducting
this project, Tennessee has been in frequent contact with federal and
state regulatory agencies, both through informal negotiation and formal
entry of consent orders, in order to assure that its efforts meet
regulatory requirements.
Tenneco has established a reserve for Tennessee's environmental
expenses, which includes: 1) expected remediation expense and associated
onsite, offsite and groundwater technical studies, 2) legal fees and 3)
settlement of third party and governmental litigation, including civil
penalties. Through September 30, 1995, Tenneco has charged approximately
$121 million against the environmental reserve. Of the remaining reserve,
$38 million has been recorded on the balance sheet under "Payables-Trade"
and $104 million under "Deferred Credits and Other Liabilities."
Due to the current uncertainty regarding the estimated costs of the
further activity necessary for Tennessee to address the presence of the
PCBs, the substances on the HS List and other substances of concern on its
sites, including the requirements for additional site characterization,
the actual amount of such substances at the sites, and the final,
site-specific cleanup decisions to be made with respect to cleanup levels
and remediation technologies, Tennessee cannot at this time accurately
project what additional costs, if any, may arise from future
characterization and remediation activities. While there are still many
uncertainties relating to the ultimate costs which may be incurred, based
upon Tennessee's evaluation and experience to date, Tenneco continues to
believe that the amount of the reserve is adequate.
Tenneco believes that a substantial portion of these costs, which will
be expended over the next five to ten years, will be recovered from
customers of its natural gas pipelines. The Stipulation and Agreement
approved by the FERC in Tennessee's 1991 rate case established procedures
for resolving the recovery of certain environmental expenditures. These
environmental costs are currently being collected in Tennessee's rates
15<PAGE>
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
subject to further review and possible refund. Following negotiations with
its customers, Tennessee in May 1995 filed with the FERC a separate
Stipulation and Agreement (the "Environmental Stipulation") that addresses
the recovery of environmental costs currently being recovered in its rates
and also establishes a mechanism for recovering a substantial portion of
the environmental costs that will be expended in the future. Upon FERC
approval, the Environmental Stipulation will become effective as of
July 1, 1995, and will have no material effect on Tenneco's financial
position or results of operations. As of September 30, 1995, the balance
of the regulatory asset is $109 million.
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. Tennessee has pending litigation in
a Louisiana state court against its insurance carriers during this period,
seeking recovery of costs which Tennessee 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 cleanup 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.
Tenneco has completed settlements with and has received payments from the
majority of the defendant carriers and believes that the likelihood of
recovery of a portion of its remediation costs and claims 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. Recoveries could reduce the amount ultimately
recoverable from customers.
16<PAGE>
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Tenneco has identified other sites in its various operating divisions
where environmental remediation expenses may be required should there be a
change in ownership, operations or applicable regulation. 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 probable.
(5) On August 9, 1995, Tenneco sold in a public offering 16.1 million
shares of common stock of Case Corporation at $35 per share. Net proceeds
of approximately $540 million were received, resulting in a gain of $101
million. No taxes were payable due to the utilization of previously
unbenefitted capital loss carryforwards to offset the tax liability
associated with the transaction. The offering reduced Tenneco's ownership
in Case from 44% to 21%.
(6) In September, 1995, Tenneco announced that it had entered into an
agreement to sell Kern River Corporation which holds a 50% interest in
Kern River Gas Transmission Company ("Kern River") for approximately $225
million. The transaction is expected to be finalized in 1995. Kern River
owns a 904-mile natural gas pipeline system extending from southwestern
Wyoming to Bakersfield, California.
(7) On October 2, 1995, Tenneco announced that it had signed a
definitive agreement to acquire the Mobil Plastics business from Mobil
Corporation for $1.27 billion. The acquired operations will become part
of Tenneco's packaging division. Mobil Plastics is the largest North
American producer of polyethylene and polystyrene packaging. Mobil
Plastics' consumer products are sold under the Hefty, Kordite and Baggies
brand names. For food service and industrial consumers, Mobil Plastics is
a leader in polystyrene foam packaging, thermoformed polystyrene packaging
and polyethylene film products. The acquisition is scheduled to be
completed in mid-November.
(8) In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 which establishes new
accounting standards for the impairment of long-lived assets and for
long-lived assets to be disposed of. Tenneco will adopt the new standard
in the first quarter of 1996 but does not expect that the adoption will
have a material effect on Tenneco's consolidated financial position or
results of operations.
(The above notes are an integral part of the foregoing
financial statements.)
17<PAGE>
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS RESULTS
Revenues
Net sales and operating revenues for the third quarter of 1995 were
$2.1 billion, down from $3.0 billion in the third quarter of 1994
primarily due to the exclusion of revenues from Case Corporation and its
subsidiaries ("Case") as a result of the change to the equity method of
accounting for Case in December 1994. (See Note 1 in the "Notes to
Financial Statements" for additional information.) Excluding Case,
revenues increased five percent in the 1995 third quarter compared with
the third quarter of 1994.
Natural gas pipelines revenues were down $122 million or 22 percent
primarily due to the nonregulated sector where both spot prices and
volumes decreased as a result of increased supply availability and the
effect of storage reserves on prices. In the regulated sector, revenues
declined $25 million due to the continued phase-out of merchant gas sales
as a result of operating under Order 636 of the Federal Energy Regulatory
Commission ("FERC"). Automotive parts revenues increased $89 million or
17 percent, including revenues of $76 million resulting from the November
1994 acquisition of Heinrich Gillet GmbH & Company ("Gillet"). Packaging
revenues increased $103 million or 18 percent from strong market
conditions in the paperboard packaging sector and increased pricing in the
specialty segment. Shipbuilding revenues increased $21 million or 5
percent primarily as a result of higher volume on the aircraft carrier
RONALD REAGAN.
Income Before Interest Expense, Income Taxes and Minority Interest
("Operating Income")
Operating income for the third quarter of 1995 was $377 million, up
$30 million or 9 percent, compared with $347 million for the 1994 third
quarter. This improvement was due principally to continuing strong
performance in packaging's paperboard business and a gain of $101 million
on the sale of Case stock, partially offset by a $25 million reserve for
the liquidation of surplus real estate holdings and notes. The third
quarter 1994 included a $16 million benefit from a contract settlement
with Columbia Gas.
On August 9, 1995, Tenneco sold in a public offering 16.1 million
shares of common stock of Case Corporation at $35 per share. Net proceeds
of approximately $540 million were received, resulting in a gain of $101
million. No taxes were payable due to the utilization of previously
unbenefitted capital loss carryforwards to offset the tax liability
associated with the transaction. The offering reduced Tenneco's ownership
in Case from 44 percent to 21 percent. The sale resulted in an increase
to net income of $101 million, or 58 cents per average common share.
18<PAGE>
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Natural Gas Pipelines
Natural gas pipelines reported operating income of $81 million in the
1995 third quarter compared with $97 million in the 1994 third quarter.
Revenues for the third quarter of 1995 decreased to $427 million compared
with $549 million in the third quarter of 1994. Third quarter 1995
operating income slightly improved compared with the 1994 third quarter
after excluding a $2 million lawsuit settlement related to an interstate
pipeline issue in the 1995 third quarter and a $16 million benefit from a
contract settlement from Columbia Gas received in the 1994 third quarter.
Excluding the above special items, operating income in the regulated
segment was flat compared with the 1994 third quarter. Higher operating
income related to the implementation of a new rate structure was offset by
lower operating income from expiring gas transportation contracts and
higher administrative expenses. Operating income in the nonregulated
segment improved compared with the 1994 third quarter primarily due to the
acquisition of natural gas pipeline assets from the Pipeline Authority of
South Australia (PASA), partially offset by decreases in operating income
as a result of lower natural gas volumes and prices.
The natural gas pipeline industry is experiencing increasing
competition, which is the result of actions by the FERC to strengthen
market forces throughout the industry. In a number of key markets,
Tenneco's interstate pipelines face competitive pressure from other major
pipeline systems, enabling local distribution companies and end users to
choose a supplier or switch suppliers based on the short-term price of the
gas and the cost of transportation. Tenneco's pipelines have been
required to discount their transportation rates to maintain market share.
Additionally, the majority of Tenneco's transportation contracts will be
expiring over the next five years. The renegotiation of these contracts
may be impacted by such competitive factors. (See Note 2 in the "Notes to
Financial Statements" for additional information.)
In September, 1995, Tenneco announced that it had entered into an
agreement to sell Kern River Corporation which holds a 50 percent interest
in Kern River Gas Transmission Company ("Kern River") for approximately
$225 million. The transaction is expected to be finalized in 1995. Kern
River owns a 904-mile natural gas pipeline system extending from
southwestern Wyoming to Bakersfield, California.
Automotive Parts
Automotive parts reported third quarter 1995 operating income of $61
million compared with $70 million in the 1994 third quarter. Operating
income declined in the third quarter of 1995 due primarily to higher
start-up costs largely related to a new process, hydroforming, which is a
liquid, high-pressure metal forming application used in the manufacture of
a new exhaust system for the Ford Taurus. Revenues for the third quarter
of 1995 increased to $600 million compared with $511 million in last
year's third quarter, primarily as a result of the acquisition of Gillet,
which added $76 million in revenues. Revenues in the North American
aftermarket were down 13 percent due to market weakness. In the North
American original equipment market, volumes were up 9 percent from last
year's quarter. Aftermarket sales were flat worldwide as aftermarket
19<PAGE>
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sales in Europe increased 18 percent from the same quarter a year ago.
Original equipment sales grew 54 percent worldwide with much of this
increase supplied by the Gillet acquisition and the improving European
economy.
Tenneco expects new vehicle sales in Europe to continue to improve the
rest of 1995 and next year and new car and truck production in North
America to continue at its strong, near record levels throughout 1995.
The North American aftermarket, however, is expected to remain sluggish
through 1995 with a recovery beginning next year.
Packaging
Third quarter 1995 operating income for packaging was $111 million, up
$48 million, compared with $63 million generated in the 1994 third
quarter. Revenues for the 1995 third quarter were $665 million compared
with $562 million in the same period last year. This increase of 18
percent was due to continuing strong market conditions in the paperboard
packaging business and increased pricing in the specialty segment.
The paperboard packaging business reported operating income of $102
million in the third quarter of 1995, compared with $42 million in the
year ago quarter, up more than 140 percent. The improvement in operating
income was primarily due to continued strong market conditions, higher
mill productivity and lower costs for recycled fiber.
The outlook for containerboard remains reasonably positive, with
domestic industry containerboard production for year-to-date September
1995 up four percent over the same period last year. September industry
inventory levels, at 5.5 weeks of supply, are in line with historical
levels and are expected to decline for the remainder of the year.
Specialty packaging reported operating income of $9 million in the
third quarter of 1995, compared with $21 million for the same period last
year. Operating income continued to be adversely affected by increased
raw material costs. The costs of polystyrene and aluminum reroll were up
19 percent from the third quarter of 1994. Raw material costs have
moderated since the second quarter, however, and fourth quarter unit
margins should improve.
On October 2, 1995, Tenneco announced that it had signed a definitive
agreement to acquire the Mobil Plastics business from Mobil Corporation
for $1.27 billion. The acquired operations will become part of Tenneco's
packaging division. Mobil Plastics is the largest North American producer
of polyethylene and polystyrene packaging. Mobil Plastics' consumer
products are sold under the Hefty, Kordite and Baggies brand names. For
food service and industrial consumers, Mobil Plastics is a leader in
polystyrene foam packaging, thermoformed polystyrene packaging and
polyethylene film products. The acquisition is scheduled to be completed
in mid-November.
Shipbuilding
Shipbuilding reported third quarter 1995 operating income of $35
million compared with $52 million in the 1994 third quarter. The $17
million decline resulted primarily from a $6 million charge for headcount
20<PAGE>
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reductions and a $14 million charge for incremental costs for the
shipyard's entry into highly competitive commercial markets. Productivity
improvements partially offset the decline. Revenues increased $21 million
to $445 million in the third quarter of 1995 compared with $424 million in
the same period last year.
The backlog at the end of the third quarter of 1995 was $4.9 billion
and included construction contracts for two LOS ANGELES CLASS submarines,
three NIMITZ class aircraft carriers, four "Double Eagle" product tankers,
a conversion contract for two fast SEALIFT ships and the overhaul contract
for the aircraft carrier USS EISENHOWER.
Other
Tenneco recorded $20 million in operating income which represents our
equity ownership in Case for the third quarter of 1995 compared with $73
million recorded in the third quarter of 1994. In August 1995, Tenneco
sold 16.1 million shares of Case common stock reducing its ownership from
44 percent to 21 percent and recorded a gain of $101 million on the sale.
No taxes were payable due to the utilization of previously unbenefitted
capital loss carryforwards. Tenneco's ownership of Case was approximately
71 percent in the 1994 third quarter. Other operating income for the 1995
third quarter also included a $25 million reserve for the liquidation of
surplus real estate holdings and notes.
Interest Expense (net of interest capitalized)
Net interest expense for the third quarter of 1995 was $78 million
compared with $113 million reported for the 1994 third quarter. This
decrease was a result of lower debt stemming from reducing Tenneco's Case
ownership in late 1994. Excluding Case's interest expense in the third
quarter of 1994, interest expense for the third quarter of 1995 would have
decreased $8 million compared with the third quarter of 1994. Interest
capitalized was $2 million for the third quarter of 1995 compared with $1
million for the 1994 period.
Income Taxes
Income tax expense for the third quarter of 1995 was $79 million
compared with $72 million reported for the 1994 third quarter. This
increase was primarily due to higher 1995 pre-tax income excluding the
$101 million gain on the sale of Case stock. No taxes were payable on the
sale of Case stock due to the utilization of previously unbenefitted
capital loss carryforwards to offset the tax liability related to the
transaction.
Discontinued Operations
Income from discontinued operations in the third quarter of 1994 of $1
million represented the net income of Tenneco's chemicals division which
was sold in the fourth quarter of 1994.
21<PAGE>
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Earnings Per Average Common Share
Net income for the third quarter of 1995 was $214 million, or $1.23 per
average common share after preferred stock dividends, compared with net
income of $151 million, or 82 cents per average common share after
preferred stock dividends in the 1994 third quarter. Net income for the
1994 period included $1 million of income from discontinued operations
(net of income tax). Preferred stock dividends were $2 million for both
quarters.
Average shares outstanding used for the calculation of earnings per
average common share for the third quarter of 1995 were 172.4 million
compared with 180.9 million in the 1994 third quarter. The decrease was
primarily the result of the common stock repurchase program partially
offset by the issuance of shares from the stock employee compensation
trust ("SECT") to employee benefit plans.
NINE MONTHS RESULTS
Revenues
Net sales and operating revenues for the first nine months of 1995 were
$6.5 billion, down from $9.4 billion reported in 1994 primarily due to the
exclusion of farm and construction equipment revenues as a result of the
change to the equity method of accounting for Case in December 1994.
Excluding farm and construction equipment revenues for the first nine
months of 1994, revenues increased four percent compared with the first
nine months of 1994. Higher revenues for packaging (up $403 million or 26
percent) and automotive parts (up $342 million or 22 percent) were
partially offset by lower revenues for natural gas pipelines (down $483
million or 26 percent).
Income Before Interest Expense, Income Taxes and Minority Interest
("Operating Income")
Operating income for the first nine months of 1995 was $1,070 million
compared with $1,016 million reported for the same period of 1994, an
improvement of five percent.
Natural gas pipelines reported operating income of $229 million for the
first nine months of 1995 compared with $291 million in the same period of
1994. Revenues decreased to $1.36 billion compared with $1.85 billion in
the first nine months of 1994 primarily due to the decline in gas spot
prices and lower volumes in the nonregulated segment and the phase-out of
merchant gas sales by the regulated pipelines. Operating income declined
in the first nine months of 1995 compared with 1994 mainly due to
competitive pressures related to operating under FERC Order 636 and the
$16 million benefit from a contract settlement with Columbia Gas in the
third quarter of 1994. Operating income also decreased as a result of
depressed natural gas volumes and prices in the nonregulated business.
Automotive parts reported operating income of $195 million for the
first nine months of 1995 compared with $201 million recorded in the same
period a year ago. Year-to-date revenues for 1995 totaled $1.86 billion
as compared with last year's amount of $1.52 billion. Revenues increased
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primarily as a result of the acquisition of Gillet, which added $249
million in revenues, and increased European aftermarket revenues. Profit
margins declined in the first nine months of 1995 due to higher start-up
costs associated with a new process discussed in the "Three Months
Results" and competitive pressures in the North American original
equipment and aftermarket.
Shipbuilding reported operating income of $125 million for the nine
months ended September 1995 compared with $153 million in the year ago
period. Revenues were $1.29 billion for the first nine months of both
1995 and 1994. Operating income declined primarily as a result of lower
profit margins on SEALIFT work, incremental costs for shipbuilding's entry
into highly competitive commercial markets and a charge related to
personnel reductions.
Packaging reported operating income of $355 million in the first nine
months of 1995 compared with $127 million in the prior year period.
Revenues were $1.98 billion in the first nine months of 1995 compared with
$1.58 billion in the first nine months of 1994. Higher revenues and
operating income were primarily due to strengthening containerboard
pricing partially offset by lower operating income in specialty packaging
associated with higher raw material costs. In addition, the 1995 first
quarter operating income included a $14 million gain on the sale of a mill
in Sylva, North Carolina.
Tenneco's other operating income included $94 million for its equity
ownership in Case's earnings for the first nine months of 1995 compared
with Case's operating income of $265 million in the first nine months of
1994. Also, included in other operating income is the gain on the sale of
Case stock of $101 million along with a $25 million reserve for the
liquidation of surplus real estate holdings and notes recorded in the
third quarter of 1995.
Interest Expense (net of interest capitalized)
Net interest expense decreased from $306 million in the first nine
months of 1994 to $249 million in the 1995 period, while interest
capitalized was $5 million for the nine months ended September 1995
compared with $4 million for the year ago period. The year-to-year
comparison of this item is due to the same reason discussed under "Three
Months Results" above.
Income Taxes
Income tax expense for the first nine months of 1995 was $252 million
compared with $266 million in the 1994 period. Income tax expense
decreased in the first nine months of 1995 primarily due to lower pre-tax
income excluding the gain on the Case sale and Case equity income. No
taxes were payable on the sale of Case stock due to the utilization of
previously unbenefitted capital loss carryforwards to offset the tax
liability related to the transaction.
23<PAGE>
<PAGE>
Discontinued Operations and Extraordinary Loss
Loss from discontinued operations for the first nine months of 1994 of
$12 million (net of an income tax benefit of $10 million) included a $21
million loss (net of income tax benefit of $15 million) on the sale of
Tenneco's brakes business and a loss of $5 million (net of income tax
benefit of $5 million) from the brakes operations. Net income from the
chemicals operations for the first nine months of 1994 was $14 million,
net of income tax expense of $10 million.
The extraordinary loss for the first nine months of 1994 of $5 million
was attributable to the second quarter early redemption premiums on long-
term debt.
Cumulative Effect of a Change in Accounting Principle
Effective January 1, 1994, Tenneco adopted Statement of Financial
Accounting Standards ("FAS") No. 112, Employers' Accounting for
Postemployment Benefits. This new standard was adopted using the
cumulative catch-up method and requires employers to account for
postemployment benefits for former or inactive employees after employment
but before retirement on the accrual basis rather than the "pay-as-you-go"
basis. As a result of the adoption of this statement, the 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 nine months of 1995 was
$552 million, or $3.11 per average common share after preferred stock
dividends, compared with income from continuing operations of $432
million, or $2.35 per average common share after preferred stock
dividends, in the 1994 first nine months. Preferred stock dividends were
$8 million in the first nine months of 1995 and $9 million in the 1994
period.
Loss from discontinued operations for the first nine months of 1994 was
$12 million, or six cents per average common share. Also included in 1994
was the charge of $39 million, or 22 cents per average common share,
related to the cumulative effect of a change in accounting principle. The
extraordinary loss for the first nine months of 1994 was $5 million, or
three cents per average common share. Net income to common stock for the
first nine months of 1995 was $544 million, or $3.11 per average common
share, compared to net income to common stock of $367 million, or $2.04
per average common share, for the first nine months of 1994.
Average shares outstanding used for the calculation of earnings per
average common share for the first nine months of 1995 were 174.8 million
compared to 179.8 million in the first nine months of 1994. The decrease
was primarily the result of the common stock repurchase program partially
offset by the issuance of SECT shares to employee benefit plans.
24<PAGE>
<PAGE>
Cash Flow
Net cash provided by operating activities was $693 million for the
first nine months of 1995 compared with $433 million for the same period
in 1994, an increase of $260 million. This increase was due primarily to
an increase in trade receivables sold to Asset Securitization Cooperative
Corporation partially offset by higher inventories and income tax
payments. Inventories increased in the first nine months of 1995 due
primarily to government conversion and repair work, higher anticipated
sales and increased raw material costs.
Net cash provided by investing activities in the first nine months of
1995 was $401 million compared with net cash provided of $52 million in
the first nine months of 1994. Proceeds from the sale of discontinued
operations and assets were higher in the first nine months of 1995 due to
the completion of an IPO of the Albright & Wilson resulting in net
proceeds of approximately $700 million and the sale of Case stock for net
proceeds of approximately $540 million. The 1994 period includes the
proceeds from the sale of 29 percent of the common stock of Case in June
1994. Higher proceeds from the sale of discontinued operations and assets
in the first nine months of 1995 were partially offset by higher capital
spending and the acquisition of businesses.
Expenditures for plant, property and equipment from continuing
operations for the first nine months of 1995 were $566 million compared
with $392 million for the 1994 period. Increased expenditures for natural
gas pipelines ($74 million), automotive parts ($71 million), shipbuilding
($30 million) and packaging ($61 million) were partially offset by the
decline for farm and construction equipment ($62 million).
Cash used for financing activities for the first nine months of 1995
was $793 million compared with $227 million for the first nine months of
1994. In the first nine months of 1995, Tenneco purchased approximately
$500 million of its common stock as a part of its common stock repurchase
programs. Since the repurchase programs began in December 1994, 11.4
million shares have been acquired at a cost of $513 million.
Liquidity and Capital Resources
Capitalization totaled $7.55 billion at September 30, 1995, an increase
of $67 million from December 31, 1994. The resulting ratio of total debt
to capitalization decreased from 55.0 percent at December 31, 1994, to
52.7 percent at September 30, 1995. Tenneco's total debt to
capitalization ratio was 51.1 percent at September 30, 1995, including the
market value of the SECT shares compared to 52.9 percent at December 31,
1994. The major changes in capitalization were: total debt decreased $139
million, shareowners' equity increased $229 million, minority interest
decreased $5 million and preferred stock decreased $18 million due to a
mandatory redemption.
25<PAGE>
<PAGE>
Based upon Tenneco's estimates of anticipated needs and circumstances
of business operations, together with anticipated market conditions and
including any payments associated with the settlement of the GSR issues,
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 the issuance of other long-term
securities.
Other Matters
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 which establishes new
accounting standards for the impairment of long-lived assets and for long-
lived assets to be disposed of. Tenneco will adopt the new standard in
the first quarter of 1996 but does not expect that the adoption will have
a material effect on Tenneco's consolidated financial position or results
of operations.
26<PAGE>
<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.
Tennessee has executed a consent order with the United States
Environmental Protection Agency ("EPA") governing the remediation of its
compressor stations in Regions IV, V and VI. With respect to the 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 has executed a
consent order with the Pennsylvania Department of Environmental Resources
dated August 1, 1995, governing remediation at the Pennsylvania stations;
this consent order also obligates Tennessee to pay a civil penalty of
$500,000. In addition, Tennessee has agreed to fund environmentally
beneficial projects within the State of Pennsylvania over the next three
years; those projects are expected to have a total cost to Tennessee of
approximately $490,000. Tennessee will continue its negotiations with the
New York Department of Environmental Conservation on remediation at the
New York stations. Tenneco believes that the ultimate resolution of this
matter will not have a material adverse effect on the financial condition
or results of operations of Tenneco Inc. and its consolidated
subsidiaries.
(2) Other Proceedings.
On October 14, 1993, Tennessee was sued in the State District Court
of Ector County, Texas, by ICA Energy, Inc. ("ICA") and TransTexas Gas
Corporation ("TransTexas"). In that suit, ICA and TransTexas contended
that Tennessee had an obligation to purchase gas production which
TransTexas thereafter attempted to add unilaterally to the reserves
originally dedicated to a 1979 gas contract. On two subsequent occasions,
TransTexas gave Tennessee notice that it was adding new production and/or
acreage "to the contract." An amendment to the pleadings seeks $1.5
billion from Tennessee for alleged damages caused by Tennessee's refusal
to purchase gas produced from the TransTexas leases covering the new
production and lands. Neither ICA nor TransTexas were original parties to
that contract. However, they contend that any stranger acquiring a
fractional interest in the original committed reserves thereby obtains a
right to add to the contract unlimited volumes of gas production from
locations in South Texas. Tennessee filed a motion for summary judgment,
asserting that the Texas statutes of frauds precluded the plaintiffs from
adding new production or acreage to the contract. On May 4, 1995, the
trial court granted Tennessee's motion for summary judgment; the
plaintiffs have filed a notice of appeal. Thereafter, ICA and TransTexas
filed a motion for summary judgment on a separate issue involving the term
"committed reserves" and whether Tennessee has a contractual obligation to
27<PAGE>
<PAGE>
purchase gas produced from a lease not described in the gas contract. On
November 8, 1995, the trial court granted ICA's and TransTexas' motion in
part. That order, which is not final, also held that ICA's and
TransTexas' rights are subject to certain limitations of the Texas
Business and Commerce Code. In addition to these defenses, which must be
resolved at trial, Tennessee has other defenses which it has asserted and
intends to pursue. The November 8, 1995 ruling does not affect the trial
court's previous May 4, 1995 order granting summary judgment to Tennessee.
(3) Potential Superfund Liability.
At September 30, 1995, Tenneco has been designated as a potentially
responsible party in 54 "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 $12 million and
$69 million or 0.4 percent to 2.5 percent 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 consolidated financial position or results of
operations.
For additional information concerning environmental matters, see
Note 4 in the "Notes to Financial Statements" of Tenneco Inc. and
Consolidated Subsidiaries.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10--Supplemental Pension Agreement, dated September 12, 1995,
between Dana G. Mead and Tenneco Inc.
11--Computation of Earnings (Loss) Per Share of Common Stock
12--Computation of Ratio of Earnings to Fixed Charges
27--Financial Data Schedule
(b) Reports on Form 8-K. Tenneco Inc. did not file any Current Reports
on Form 8-K during the quarter ended September 30, 1995.
28<PAGE>
<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.
Date: November 14, 1995 By ROBERT T. BLAKELY
Robert T. Blakely
Senior Vice President and
Chief Financial Officer
29<PAGE>
<PAGE>
Exhibit 10
SUPPLEMENTAL PENSION AGREEMENT
BETWEEN
DANA G. MEAD
AND
TENNECO INC.
In consideration of his services to Tenneco Inc. and Tenneco
Management Company (collectively, the "Company") and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby establishes the supplemental pension plan
(the "Plan") described herein for the benefit of Dana G. Mead ("Mead") and
his Beneficiaries, as that term is defined herein, and the parties hereto
agree as follows, effective September 12, 1995:
1. Mead shall be entitled to monthly pension benefits from the
Company in the amount determined under Section 2 hereof commencing on the
first day of the calendar month immediately following the termination of
his employment with the Company.
2. The monthly pension benefits to which Mead shall be entitled
shall be equal to the greater of (a) or (b), where
(a) equals the benefits to which Mead would be entitled under the
Tenneco Inc. Retirement Plan (the "TRP"), Tenneco Inc. Benefit
Equalization Plan and Tenneco Inc. Supplemental Executive
Retirement Plan, computed using Final Average Earnings, as
defined in Section 3 hereof, and Years of Credited Service, as
defined in Section 4 hereof, and substituting the rules of
Sections 1, 5 and 6 hereof for the generally applicable rules
of such plans; and
(b) equals 2.48% of Mead's Final Average Earnings, as defined in
Section 3 hereof, times his Years of Credited Services, as
defined in Section 4 hereof, but not exceeding 20 Years of
Credited Service.
3. "Final Average Earnings" means the quotient of (i) Mead's
Earnings, as defined below, for the 3 calendar years in which his Earnings
were the highest in the 5 consecutive calendar year period ending prior to
his termination of employment, divided by (ii) 36. "Earnings" means
regular base salary plus Executive Incentive Compensation Plan bonus
earned (regardless of when paid) with respect to that period.
4. "Years of Credited Service" means the total of (i) 14 2/3 plus
(ii) Mead's Actual Tenneco Service, as defined below. "Actual Tenneco
Service" means the period, in whole years and fractions thereof with each
month or portion thereof counting as one-twelfth of one year, from April
1, 1992 through the date of Mead's termination of employment with the
Company.
5. The benefits provided hereunder shall be paid in the joint and
50% survivor form of annuity if Mead is married at the time benefits are
to commence -- i.e., to Mead for life and, after his death, 50% of the
monthly amount payable during Mead's life continuing to the spouse, if <PAGE>
<PAGE>
any, to whom he was legally married at the date of the commencement of
payment of benefits hereunder and to whom he was so married on the date of
his death. There shall be no reduction in the amount of the benefits
payable during Mead's life on account of payment in the joint and 50%
survivor form. The benefits provided hereunder shall be paid in the life
only form of annuity if Mead is not married at the time that benefit
payments are to commence. Subject to the rules stated in the immediately
following paragraph, Mead may elect to receive such benefits in another
form which is the actuarial equivalent of the normal form of benefit
specified above for his marital status at the time in question. At Mead's
election, the Company will purchase and distribute to him an annuity
contract issued by an insurance company acceptable to Mead to provide such
benefits.
If his termination of employment is effective after he attains age
62 or earlier with the consent of the Company, Mead may elect to receive
such benefits in the form of a lump sum distribution. If a lump sum
distribution is elected, it shall be computed under the assumptions then
in use with respect to the Tenneco Inc. Retirement Plan, or its successor;
provided, that in no event shall the interest assumption be greater than
the Pension Benefit Guaranty Corporation immediate annuity interest rate
in effect as of January 1 of the year in which the payment is to be made,
and provided further that the mortality table shall be no less favorable
to Mead or his Beneficiary than the 1983 group annuity table, 50% male,
50% female mix.
Mead may elect that the lump sum benefit be paid at some date
certain which is later than the date specified for benefit commencement in
Section 1 hereof. Any such election shall be irrevocable and must be
filed no later than 90 days prior to the date benefits would otherwise
commence hereunder. If he makes such an election, the lump sum amount
computed above shall be credited with interest at the prime rate
prevailing from time to time from the date specified in Section 1 above
until the date of actual payment.
6. If Mead dies before commencing to receive the benefits
described hereunder, his Beneficiary will receive a death benefit in a
lump sum distribution which is the present value of the benefits which he
has accrued hereunder as of the date of his death computed in accordance
with the rules set forth herein, including the interest assumption
specified in Section 5 hereof. Without limiting the generality of the
foregoing, it is specifically provided that the special alternative death
benefit called for by the TRP as in effect on December 31, 1994, shall
apply if that produces a higher benefit. Mead's Beneficiary shall be the
person or entity which he has designated on a form filed with the Company
prior to his death. If, at the time of his death, no valid beneficiary
designation is on file, his Beneficiary shall be his spouse, or, if his
spouse does not survive him, his estate.
7. The benefits provided hereunder are in lieu of any benefits to
which Mead might otherwise be entitled under the Tenneco Inc. Retirement
Plan, Tenneco Inc. Benefit Equalization Plan or Tenneco Inc. Supplemental
Executive Retirement Plan, but shall not adversely affect his entitlement
to benefits under any other plan, fund or program maintained by the <PAGE>
<PAGE>
Company, nor shall benefits provided under any other such plan fund or
program be offset against or otherwise reduce the benefits provided for
hereunder.
8. This Plan shall be administered by the Company, and the Company
shall bear all costs of administration.
9. This Plan contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and supersedes all prior
agreements, arrangements and communications between the parties dealing
with such subject matter, whether oral or written, including, without
limitation, Section 9 of that certain agreement among the parties dated
March 12, 1992.
10. Benefits provided for hereunder may not be assigned or
hypothecated, and to the extent permitted by law, no such benefits shall
be subject to legal process or attachment for the payment of any claims
against any person entitled to receive the same.
11. If it shall be found that any person to whom a payment is due
hereunder is unable to care for his affairs because of physical or mental
disability, as determined by a licensed physician, the Company shall have
the authority to cause the payments becoming due such person to be made to
the legally appointed guardian of any such person or the spouse, brother,
sister, or other person as it shall determine. Payments made pursuant to
such power shall operate as a complete discharge of the Company.
12. The Plan shall be construed, regulated and administered
according to the laws of the State of Texas.
13. This Plan shall be binding upon any successor (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company in the same
manner and to the same extent that the Company would be bound to perform
if no such succession had taken place.
14. This Plan may be amended or terminated only by written
agreement between and among the parties hereto.
DANA G. MEAD
Dana G. Mead
TENNECO MANAGEMENT COMPANY
By ROBERT T. BLAKELY
Its Senior Vice President and Chief
Financial Officer
TENNECO INC.
By KARL A. STEWART
Its Vice President & Secretary <PAGE>
<PAGE> Exhibit 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
OF COMMON STOCK
(Unaudited)
<TABLE>
<CAPTION>
(Millions Except Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Computation for Statements of Income
Primary Earnings Per Share (average shares outstanding):
Income from continuing operations.......................... $ 214 $ 150 $ 552 $ 432
Income (loss) from discontinued operations, net of
income tax................................................ - 1 - (12)
Income before extraordinary loss........................... 214 151 552 420
Extraordinary loss, net of income tax...................... - - - (5)
Income before cumulative effect of change in accounting
principle................................................. 214 151 552 415
Cumulative effect of change in accounting principle, net
of income tax............................................. - - - (39)
Net income................................................. 214 151 552 376
Preferred stock dividends.................................. 2 2 8 9
Net income to common stock................................. $ 212 $ 149 $ 544 $ 367
Average shares of common stock outstanding (a),(b)......... 172,429,542 180,902,646 174,804,413 179,811,774
Earnings (loss) per average share of common stock:
Continuing operations.................................... $ 1.23 $ .81 $ 3.11 $ 2.35
Discontinued operations.................................. - .01 - (.06)
Extraordinary loss....................................... - - - (.03)
Cumulative effect of change in accounting principle...... - - - (.22)
$ 1.23 $ .82 $ 3.11 $ 2.04
Additional Computations (c)
Net income to common stock, per above........................ $ 212 $ 149 $ 544 $ 367
Primary Earnings Per Share (including common stock
equivalents):
Average shares of common stock outstanding (a),(b)......... 172,429,542 180,902,646 174,804,413 179,811,774
Incremental common shares applicable to common stock
options based on the common stock daily average market
price during the period................................... 93,096 63,993 67,648 87,359
Incremental common shares applicable to performance units
based upon the attainment of specified goals.............. 27,625 - 27,625 -
Average common shares, as adjusted......................... 172,550,263 180,966,639 174,899,686 179,899,133
Earnings (loss) per average share of common stock
(including common stock equivalents):
Continuing operations.................................... $ 1.23 $ .81 $ 3.11 $ 2.35
Discontinued operations.................................. - .01 - (.06)
Extraordinary loss....................................... - - - (.03)
Cumulative effect of change in accounting principle...... - - - (.22)
$ 1.23 $ .82 $ 3.11 $ 2.04
Fully Diluted Earnings Per Share:
Average shares of common stock outstanding (a),(b)......... 172,429,542 180,902,646 174,804,413 179,811,774
Incremental common shares applicable to common stock
options based on the more dilutive of the common stock
ending or average market price during the period.......... 93,096 63,993 72,492 87,359
Average common shares issuable assuming conversion of
Tenneco Inc. 10% loan stock............................... 36,805 41,192 38,242 41,619
Incremental common shares applicable to performance units <PAGE>
based upon the attainment of specified goals............. 27,625 - 27,625 -
Average common shares assuming full dilution............... 172,587,068 181,007,831 174,942,772 179,940,752
Fully diluted earnings (loss) per average share, assuming
conversion of all applicable securities:
Continuing operations.................................... $ 1.23 $ .81 $ 3.11 $ 2.35
Discontinued operations.................................. - .01 - (.06)
Extraordinary loss....................................... - - - (.03)
Cumulative effect of change in accounting principle...... - - - (.22)
$ 1.23 $ .82 $ 3.11 $ 2.04
</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 out
standing in the computation of average shares of common stock
until the shares are utilized to fund the obligations for which
the trust was established. At September 30, 1995, the SECT had
utilized 6,933,798 of these shares.
(b) Prior to conversion in December 1994, Series A preferred stock
was 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 17,342,763
shares of common stock.
In December 1994, all of the outstanding shares of Series A
preferred stock were converted into Tenneco Inc. common
stock. The inclusion of Series A preferred stock in the
computation of earnings per share was antidilutive for the nine
months ended September 30, 1994.
(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>
<PAGE> Exhibit 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Income from continuing operations............................................ $ 552 $ 432
Add:
Interest................................................................. 345 457
Portion of rentals representative of interest factor..................... 44 50
Preferred stock dividend requirements of majority-owned subsidiaries..... 17 -
Income tax expense and other taxes on income............................. 253 267
Amortization of interest capitalized applicable to nonutility companies.. 3 4
Interest capitalized applicable to utility companies..................... 1 1
Undistributed earnings of affiliated companies in which less than
a 50% voting interest is owned......................................... (98) (4)
Earnings as defined.................................................. $ 1,117 $ 1,207
Interest..................................................................... $ 345 $ 457
Interest capitalized......................................................... 5 4
Portion of rentals representative of interest factor......................... 44 50
Preferred stock dividend requirements of majority-owned
subsidiaries on a pretax basis.............................................. 29 -
Fixed charges as defined............................................. $ 423 $ 511
Ratio of earnings to fixed charges........................................... 2.64 2.36
/TABLE
<PAGE>
<PAGE>
Exhibit 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE TENNECO INC. AND CONSOLIDATED
SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
FINANCIAL DATA SCHEDULE
<TABLE>
<CAPTION>
(Millions Except
Per Share Data)
As of
September 30, 1995
and for the Nine
Months Then Ended
<S> <C>
Cash and cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 712
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Notes and accounts receivable--trade . . . . . . . . . . . . . . . . . . . . . 1,026
Allowances for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . 0
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,665
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 11,000
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,629
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,383
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,875
Bonds, mortgages and similar debt . . . . . . . . . . . . . . . . . . . . . . . 3,310
Preferred stock--mandatory redemption . . . . . . . . . . . . . . . . . . . . . 129
Preferred stock--no mandatory redemption . . . . . . . . . . . . . . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957
Other stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . 2,172
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . 12,383
Net sales of tangible products . . . . . . . . . . . . . . . . . . . . . . . . 6,497
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,497
Cost of tangible goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . 4,819
Total costs and expenses applicable to sales and revenues . . . . . . . . . . . 4,819
Other costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 961
Provision for doubtful accounts and notes . . . . . . . . . . . . . . . . . . . 0
Interest and amortization of debt discount . . . . . . . . . . . . . . . . . . 249
Income before taxes and other items . . . . . . . . . . . . . . . . . . . . . . 821
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
Income/loss continuing operations . . . . . . . . . . . . . . . . . . . . . . . 552
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Cumulative effect--changes in accounting principles . . . . . . . . . . . . . . 0
Net income or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 552
Earnings per share--primary . . . . . . . . . . . . . . . . . . . . . . . . . . $3.11
Earnings per share--fully diluted . . . . . . . . . . . . . . . . . . . . . . . $3.11
/TABLE
<PAGE>
<PAGE> Exhibit 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
OF COMMON STOCK
(Unaudited)
<TABLE>
<CAPTION>
(Millions Except Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Computation for Statements of Income
Primary Earnings Per Share (average shares outstanding):
Income from continuing operations.......................... $ 214 $ 150 $ 552 $ 432
Income (loss) from discontinued operations, net of
income tax................................................ - 1 - (12)
Income before extraordinary loss........................... 214 151 552 420
Extraordinary loss, net of income tax...................... - - - (5)
Income before cumulative effect of change in accounting
principle................................................. 214 151 552 415
Cumulative effect of change in accounting principle, net
of income tax............................................. - - - (39)
Net income................................................. 214 151 552 376
Preferred stock dividends.................................. 2 2 8 9
Net income to common stock................................. $ 212 $ 149 $ 544 $ 367
Average shares of common stock outstanding (a),(b)......... 172,429,542 180,902,646 174,804,413 179,811,774
Earnings (loss) per average share of common stock:
Continuing operations.................................... $ 1.23 $ .81 $ 3.11 $ 2.35
Discontinued operations.................................. - .01 - (.06)
Extraordinary loss....................................... - - - (.03)
Cumulative effect of change in accounting principle...... - - - (.22)
$ 1.23 $ .82 $ 3.11 $ 2.04
Additional Computations (c)
Net income to common stock, per above........................ $ 212 $ 149 $ 544 $ 367
Primary Earnings Per Share (including common stock
equivalents):
Average shares of common stock outstanding (a),(b)......... 172,429,542 180,902,646 174,804,413 179,811,774
Incremental common shares applicable to common stock
options based on the common stock daily average market
price during the period................................... 93,096 63,993 67,648 87,359
Incremental common shares applicable to performance units
based upon the attainment of specified goals.............. 27,625 - 27,625 -
Average common shares, as adjusted......................... 172,550,263 180,966,639 174,899,686 179,899,133
Earnings (loss) per average share of common stock
(including common stock equivalents):
Continuing operations.................................... $ 1.23 $ .81 $ 3.11 $ 2.35
Discontinued operations.................................. - .01 - (.06)
Extraordinary loss....................................... - - - (.03)
Cumulative effect of change in accounting principle...... - - - (.22)
$ 1.23 $ .82 $ 3.11 $ 2.04
Fully Diluted Earnings Per Share:
Average shares of common stock outstanding (a),(b)......... 172,429,542 180,902,646 174,804,413 179,811,774
Incremental common shares applicable to common stock
options based on the more dilutive of the common stock
ending or average market price during the period.......... 93,096 63,993 72,492 87,359
Average common shares issuable assuming conversion of
Tenneco Inc. 10% loan stock............................... 36,805 41,192 38,242 41,619
Incremental common shares applicable to performance units
based upon the attainment of specified goals............. 27,625 - 27,625 -
Average common shares assuming full dilution............... 172,587,068 181,007,831 174,942,772 179,940,752
Fully diluted earnings (loss) per average share, assuming
conversion of all applicable securities:
Continuing operations.................................... $ 1.23 $ .81 $ 3.11 $ 2.35
Discontinued operations.................................. - .01 - (.06)
Extraordinary loss....................................... - - - (.03)
Cumulative effect of change in accounting principle...... - - - (.22)
$ 1.23 $ .82 $ 3.11 $ 2.04
</TABLE>
NOTES: (a) In 1992, 12,000,000 shares of common stock were issued to the
Stock Employee Compensation Trust ("SECT"). Shares of common
stock issued to a related trust are not considered to be
outstanding in the computation of average shares of common stock
until the shares are utilized to fund the obligations for which
the trust was established. At September 30, 1995, the SECT had
utilized 6,933,798 of these shares.
(b) Prior to conversion in December 1994, Series A preferred stock was
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 17,342,763 shares of
common stock. In December 1994, all of the outstanding shares of
Series A preferred stock were converted into Tenneco Inc. common
stock. The inclusion of Series A preferred stock in the
computation of earnings per share was antidilutive for the nine
months ended September 30, 1994.
(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
(Dollars in Millions)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Income from continuing operations............................................ $ 552 $ 432
Add:
Interest................................................................. 345 457
Portion of rentals representative of interest factor..................... 44 50
Preferred stock dividend requirements of majority-owned subsidiaries..... 17 -
Income tax expense and other taxes on income............................. 253 267
Amortization of interest capitalized applicable to nonutility companies.. 3 4
Interest capitalized applicable to utility companies..................... 1 1
Undistributed earnings of affiliated companies in which less than
a 50% voting interest is owned......................................... (98) (4)
Earnings as defined.................................................. $ 1,117 $ 1,207
Interest..................................................................... $ 345 $ 457
Interest capitalized......................................................... 5 4
Portion of rentals representative of interest factor......................... 44 50
Preferred stock dividend requirements of majority-owned
subsidiaries on a pretax basis.............................................. 29 -
Fixed charges as defined............................................. $ 423 $ 511
Ratio of earnings to fixed charges........................................... 2.64 2.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 712
<SECURITIES> 0
<RECEIVABLES> 1,026
<ALLOWANCES> 0
<INVENTORY> 1,002
<CURRENT-ASSETS> 3,665
<PP&E> 11,000
<DEPRECIATION> 5,629
<TOTAL-ASSETS> 12,383
<CURRENT-LIABILITIES> 2,875
<BONDS> 3,310
<COMMON> 957
129
0
<OTHER-SE> 2,172
<TOTAL-LIABILITY-AND-EQUITY> 12,383
<SALES> 6,497
<TOTAL-REVENUES> 6,497
<CGS> 4,819
<TOTAL-COSTS> 4,819
<OTHER-EXPENSES> 961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 249
<INCOME-PRETAX> 821
<INCOME-TAX> 252
<INCOME-CONTINUING> 552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $552
<EPS-PRIMARY> $3.11
<EPS-DILUTED> $3.11
</TABLE>
