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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9864
TENNECO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0233548
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
77002
TENNECO BUILDING, HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 757-2131
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
10% Notes due 1998; 8% Notes due 1999;
10 3/8% Notes due 2000; 9 7/8% Notes
due 2001;
7 7/8% Notes due 2002; 10% Debentures
due 2008;
9% Debentures due 2012 ................ New York Stock Exchange
Preferred Stock, without par value:
$7.40 cumulative series................ New York Stock Exchange
Common Stock, par value $5 per share.... New York, Chicago, Pacific, Toronto,
London, Paris, Frankfurt, Dusseldorf,
Basel, Geneva and Zurich Stock
Exchanges
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.
<TABLE>
<CAPTION>
MARKET VALUE HELD
CLASS OF VOTING STOCK AND NUMBER OF SHARES BY NON-
HELD BY NON-AFFILIATES AT MARCH 1, 1995 AFFILIATES*
------------------------------------------ -----------------
<S> <C>
$7.40 Cumulative Preferred Stock, 587,280 shares $ 58,874,820
Common Stock, 183,106,864 shares 8,468,692,460
</TABLE>
--------
* Based upon the closing sale prices on the Composite Tape for the $7.40
Cumulative Preferred Stock and the Common Stock on March 24, 1995.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE CLOSE OF THE LATEST PRACTICABLE DATE. Common Stock,
par value $5 per share, 183,477,880 shares outstanding as of March 1, 1995.
DOCUMENT INCORPORATED BY REFERENCE:
<TABLE>
<CAPTION>
PART OF THE FORM 10-K
DOCUMENT INTO WHICH INCORPORATED
-------- -----------------------
<S> <C>
Tenneco Inc.'s Definitive Proxy Statement for the Part III
Annual
Meeting of Stockholders to be Held May 9, 1995
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I
ITEM 1. BUSINESS...................................................... 1
Tenneco Inc............................................................ 1
Contributions of Major Businesses...................................... 1
Natural Gas Pipelines.................................................. 2
Automotive Parts....................................................... 8
Packaging.............................................................. 10
Shipbuilding........................................................... 11
Farm and Construction Equipment........................................ 12
Chemicals.............................................................. 14
Other.................................................................. 15
Business Strategy...................................................... 16
Environmental Matters.................................................. 16
ITEM 2. PROPERTIES.................................................... 16
ITEM 3. LEGAL PROCEEDINGS............................................. 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 19
ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.......................................... 21
ITEM 6. SELECTED FINANCIAL DATA...................................... 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................... 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 40
Index to Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries.......................................................... 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...................................... 71
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 71
ITEM 11. EXECUTIVE COMPENSATION........................................ 71
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................... 71
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 71
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K...................................................... 71
Financial Statements Included in Item 8................................ 71
Index to Financial Statements and Schedules Included in Item 14........ 71
Schedules Omitted as Not Required or Inapplicable...................... 71
Reports on Form 8-K.................................................... 77
Exhibits............................................................... 77
</TABLE>
i
<PAGE>
PART I
TENNECO INC.
ITEM 1. BUSINESS.
Tenneco Inc., a Delaware corporation, is a diversified industrial company
conducting all of its operations through its subsidiaries. As used herein,
"Tenneco" refers to Tenneco Inc. and its consolidated subsidiaries.
The major businesses of Tenneco are the transportation and sale of natural
gas; manufacture and sale of automotive exhaust system parts and ride control
products; construction and repair of ships; and manufacture and sale of
packaging materials, cartons, containers and specialty packaging products. On
December 13, 1994, Tenneco Inc. announced that it intended to sell its
chemicals business through an initial public offering of Albright & Wilson plc
primarily in the United Kingdom in the first quarter of 1995. The transaction
was completed on March 8, 1995. For more information see "Chemicals". Also, at
December 31, 1994, Tenneco owned approximately 44% of Case Corporation, a
manufacturer of farm and construction equipment. For more information see "Farm
and Construction Equipment". See also "Business Strategy".
At December 31, 1994, Tenneco had approximately 55,000 employees (excluding
employees of Albright & Wilson plc and Case Corporation and their respective
subsidiaries).
CONTRIBUTIONS OF MAJOR BUSINESSES
Information concerning Tenneco's principal industry segments and geographic
areas is set forth in Note 15 to the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries. The following tables summarize (i) net sales and
operating revenues from continuing operations, (ii) income (loss) from
continuing operations before interest expense, income taxes and minority
interest and (iii) capital expenditures for continuing operations of the major
business groups of Tenneco for the periods indicated.
NET SALES AND OPERATING REVENUES FROM CONTINUING OPERATIONS
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Natural gas pipelines................. $ 2,378 20% $ 2,862 23% $ 2,183 18%
Farm and construction equipment(a).... 3,881 32 3,748 30 3,829 32
Automotive parts...................... 1,989 16 1,785 15 1,763 14
Shipbuilding.......................... 1,753 14 1,861 15 2,265 19
Packaging............................. 2,184 18 2,042 17 2,078 17
Other................................. 3 -- 6 -- 39 --
Intergroup sales...................... (14) -- (17) -- (14) --
------- --- ------- --- ------- ---
Total............................... $12,174 100% $12,287 100% $12,143 100%
======= === ======= === ======= ===
</TABLE>
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST EXPENSE, INCOME TAXES
AND MINORITY INTEREST
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -------
(MILLIONS)
<S> <C> <C> <C>
Natural gas pipelines.......................... $ 415 $ 411 $ 360
Farm and construction equipment(a)............. 326(b) 82(b) (1,180)(b)
Automotive parts............................... 223 222 237
Shipbuilding................................... 200 225 249
Packaging...................................... 209 139 221
Other.......................................... 6 18 (32)
------ ------ -------
Total........................................ $1,379 $1,097 $ (145)
====== ====== =======
</TABLE>
1
<PAGE>
CAPITAL EXPENDITURES FOR CONTINUING OPERATIONS
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(DOLLAR AMOUNTS IN
MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Natural gas pipelines............................. $331 45% $170 32% $251 50%
Farm and construction equipment(a)................ 83 11 101 19 60 12
Automotive parts.................................. 113 15 93 18 62 12
Shipbuilding...................................... 29 4 36 7 35 7
Packaging......................................... 166 23 124 24 97 19
Other............................................. 14 2 1 -- 2 --
---- --- ---- --- ---- ---
Total........................................... $736 100% $525 100% $507 100%
==== === ==== === ==== ===
</TABLE>
The interest expense, income taxes and minority interest from continuing
operations which are not allocated to the major businesses were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Interest Expense (net of interest capitalized)................ $407 $427 $496
Income Tax Expense............................................ 301 257 73
Minority Interest............................................. 30 -- --
</TABLE>
--------
Notes: (a) In December 1994, Tenneco's accounting for its Farm and construction
equipment segment changed due to a reduction in its ownership
percentage. For the month of December 1994, the Farm and
construction equipment segment was reflected in Tenneco's financial
statements using the equity method of accounting. Accordingly, the
segment's revenues are included in Tenneco's reported revenues for
eleven months only. For additional information, see Notes 1 and 3 to
the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries.
(b) Includes restructuring charge of $920 million related to Farm and
construction equipment in 1992 reduced by $20 million in 1993 and $16
million in 1994. For additional information concerning these charges,
see Note 16 to the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries and Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
NATURAL GAS PIPELINES
Tenneco is engaged in the interstate and intrastate transportation and
marketing of natural gas. Its natural gas operations are conducted by Tenneco
Gas Inc. and other subsidiaries of Tenneco Inc. (collectively, "Tenneco Gas").
In addition, Tenneco Gas has started building new business units that are not
generally subject to regulation by the Federal Energy Regulatory Commission
("FERC") and that Tenneco Gas believes have the potential to generate higher
returns than its regulated businesses. The principal activities of these
business units include development of and participation in international
natural gas pipeline and international and domestic gas-fired power generation
projects; and establishment of natural gas production financing programs for
producers.
INTERSTATE PIPELINE OPERATIONS
Historically, interstate pipeline companies served primarily as merchants of
natural gas, purchasing gas under long-term contracts with numerous producers
and reselling gas to local distribution companies under long-term sales
agreements. Interstate pipelines were not required to transport gas for
customers who did not purchase the gas from the pipeline company.
2
<PAGE>
Commencing in 1984, the FERC issued a series of orders that have resulted in
a major restructuring of the natural gas transmission industry and its business
practices. This restructuring, coupled with a nationwide excess of deliverable
natural gas, resulted in increased competition for markets and decreased prices
for natural gas, and dramatically increased the ratio that pipelines'
transportation volumes bear to their total throughput. With full implementation
of the FERC's Order No. 636 (discussed below under the caption "Federal
Regulation"), most interstate pipeline companies now serve primarily as gas
transporters rather than gas merchants.
During this period, pipeline customers have turned more and more to marketers
of natural gas to secure natural gas supplies for them, make transportation
arrangements and provide other services. Generally, these gas marketers are not
subject to the extensive FERC regulations that apply to interstate pipelines,
and may be affiliates of regulated interstate pipeline companies. To respond to
the changing natural gas industry, Tenneco Gas has been providing natural gas
marketing services since 1984.
Tenneco Gas's interstate pipeline operations include the pipeline systems of
Tennessee Gas Pipeline Company ("Tennessee"), Midwestern Gas Transmission
Company ("Midwestern") and East Tennessee Natural Gas Company ("East
Tennessee"), which are engaged in the transportation, storage and, to a limited
extent, sale of natural gas primarily to or for other gas transmission or
distribution companies for resale.
Tennessee's multiple-line system begins in gas-producing regions of Texas and
Louisiana, including the continental shelf of the Gulf of Mexico, and extends
into the northeastern section of the United States, including the New York City
and Boston metropolitan areas. Midwestern's pipeline system extends from
Portland, Tennessee, to Chicago, and principally serves the Chicago
metropolitan area. East Tennessee's pipeline system serves the states of
Tennessee, Virginia and Georgia.
At December 31, 1994, Tenneco's interstate gas transmission systems included
approximately 16,300 miles of pipeline, gathering lines and sales laterals,
together with related facilities that include 91 compressor stations with an
aggregate of approximately 1.5 million horsepower. These systems also include
underground and above-ground gas storage facilities to permit increased
deliveries of gas during peak demand periods. The total design delivery
capacity of Tenneco's interstate systems at December 31, 1994, was
approximately 4,822 million cubic feet ("MMCF") of gas per day, and
approximately 5,628 MMCF on peak demand days, which includes gas withdrawn from
storage.
Joint Ventures
Tenneco also has interests in several joint ventures formed to own and
operate interstate pipeline systems. These interests include a 50% interest in
Kern River Gas Transmission Company ("Kern River") and a 13.2% interest in
Iroquois Gas Transmission Company ("Iroquois").
Kern River, which owns a 904-mile pipeline system extending from Wyoming to
California with a design capacity of 700 MMCF of gas per day, completed its
third year of operations in 1994. In 1993, Kern River implemented Order No. 636
with no adverse effect to the pipeline's normal business flow. In 1994, Kern
River successfully settled its rate case which was originally filed in August
1992. The settlement will become effective upon the issuance date of a final
FERC order, no longer subject to rehearing, which is expected during the second
quarter of 1995. An order approving the settlement was issued by the FERC on
January 25, 1995 and is currently pending rehearing. The settlement will not
have an impact on Tenneco's net income.
The 370-mile Iroquois pipeline began initial operation in late 1991 and
became fully operational in January 1992. The pipeline extends from the
Canadian border at Waddington, New York, to Long Island, New York, and, with
additional compression added in 1994, is designed to deliver (directly or
through interconnecting pipelines such as Tennessee) 714 MMCF of gas per day to
local distribution companies and electric generation facilities in six states.
For more information on Iroquois, see Item 3, "Legal Proceedings."
3
<PAGE>
Gas Sales and Transportation Volumes
The following table sets forth the volumes of gas, stated in billions of
British thermal units ("BBtu"), sold and transported by Tenneco's interstate
pipeline systems for the periods shown.
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Sales*......................................... 131,097 213,210 239,287
Transportation*................................ 2,183,944 2,118,936 2,015,440
--------- --------- ---------
Total........................................ 2,315,041 2,332,146 2,254,727
========= ========= =========
</TABLE>
--------
* These sales and transportation volumes include all natural gas sold or
transported by Tenneco's interstate pipeline companies. The table includes
Tenneco's proportionate share of sales and transportation volumes of the
joint ventures in which it has interests; of the total volumes shown,
167,961 BBtu was attributable to these joint venture interests in 1994,
169,871 BBtu in 1993 and 128,263 BBtu in 1992. Intercompany deliveries of
natural gas have not been eliminated from the table.
Federal Regulation
Tenneco's interstate natural gas pipeline companies are "natural gas
companies" as defined in the Natural Gas Act of 1938, as amended (the "Natural
Gas Act"). As such, these companies are subject to the jurisdiction of the
Department of Energy, including the FERC. Tenneco's interstate pipeline
operations are operated pursuant to certificates of public convenience and
necessity issued under the Natural Gas Act and pursuant to the Natural Gas
Policy Act of 1978. The FERC regulates the interstate transportation and
certain sales of natural gas, including, among other things, rates and charges
allowed natural gas companies, extensions and abandonments of facilities and
service, rates of depreciation and amortization and the accounting system
utilized by the companies.
Prior to the FERC's industry restructuring initiatives in the 1980's,
Tenneco's interstate pipeline companies operated primarily as merchants,
purchasing natural gas under long-term contracts and reselling the gas to
customers, again under long-term contracts. With the FERC mandated conversion
from a primarily merchant to a primarily transportation business, Tennessee's
sales, and hence its purchases of gas for resale, declined precipitously, and
Tennessee incurred significant liability to its producers under its long-term
gas supply contracts, many of which specified prices at above market levels. In
1992, pursuant to Order 636 issued by the FERC, 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 believes that
the Bastian Bay costs will ultimately be recovered as transition costs directly
related to Order 636, and no FERC order has questioned the ultimate
recoverability of these costs.
The filings implementing Tennessee's recovery mechanisms for the following
transition costs were accepted effective September 1, 1993, and made subject to
refund pending FERC review: 1) direct-billing of unrecovered PGA costs to its
former sales customers over a twelve-month period; 2) recovery of TBO costs,
which Tennessee is obligated to pay under existing contracts, through a
surcharge from firm transportation customers, adjusted annually; and 3) GSR
cost recovery of 90% of such costs over a period of up to 36 months from firm
transportation customers and recovery of 10% of such costs from interruptible
transportation customers.
4
<PAGE>
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. However, certain customers have requested a rehearing and
the FERC has deferred action on their issues to a later date. Tennessee
implemented the terms of the PGA Stipulation on December 1, 1994, and expects
to make refunds in 1995. Tennessee has recorded a liability which it believes
is adequate to cover the PGA refunds.
Tennessee is recovering TBO costs formerly incurred to perform its sales
functions, subject to refund, pending review of data submitted by Tennessee
through technical conference proceedings. 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, subject to FERC's review
at a second technical conference and FERC's consideration of a request for
rehearing. On November 30, 1994, Tennessee filed for a surcharge to recover
approximately $25 million of TBO costs in compliance with the FERC's 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 September 1,
1994, through a new TBO surcharge. The FERC accepted Tennessee's filing to
recover its projected TBO costs, subject to refund, pending review through
technical conference proceedings.
In connection with Tennessee's GSR cost recovery discussed below, Tennessee,
along with three other pipelines, executed four separate settlement agreements
with Dakota Gasification Company and the U.S. Department of Energy and
initiated four separate proceedings at the FERC seeking approval to implement
the settlement agreements. The settlement resolved litigation concerning
purchases made by Tennessee of synthetic gas produced from the Great Plains
Coal Gasification plant ("Great Plains"). On October 18, 1994, the FERC
consolidated the four proceedings and set them for hearing before an
administrative law judge who is to issue his initial decision by December 31,
1995. The FERC has committed to a final order by December 31, 1996. The FERC
order stated that the costs related to the Great Plains project are eligible
for recovery through GSR and other special recovery mechanisms and that the
costs are eligible for recovery for the duration of the term of the original
gas purchase agreements. The hearing will be limited to the issue of whether
the settlement agreements are prudent.
Also in connection with Tennessee's GSR cost recovery proceedings discussed
below, on October 14, 1993, Tennessee was sued in the State District Court of
Ector County, Texas, by ICA Energy, Inc. ("ICA") and TransTexas Gas Corporation
("TransTexas"). In that suit, ICA and TransTexas contended that Tennessee had
an obligation to purchase gas production which TransTexas thereafter attempted
to add unilaterally to the reserves originally dedicated to a 1979 gas
contract. On two subsequent occasions, TransTexas gave Tennessee notice that it
was adding new production and/or acreage "to the contract." 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 believes it has meritorious defenses to the claims of
ICA and TransTexas, which defenses it will vigorously assert.
As of December 31, 1994, Tennessee has deferred GSR costs yet to be recovered
from its customers of approximately $177 million, net of $187 million
previously collected from its customers, subject to refund. Proceedings have
commenced to review the recovery of these GSR costs; however, the FERC has also
generally encouraged pipelines to settle such issues through negotiations with
customers. Although Order 636 contemplates complete recovery by pipelines of
qualified transition costs, Tennessee has initiated
5
<PAGE>
settlement discussions with its customers concerning the amount of recoverable
GSR costs in response to recent FERC and customer statements acknowledging the
desirability of such settlements. Tennessee is also engaged in separate
settlement and contract reformation discussions with holders of certain gas
purchase contracts who have sued Tennessee, although Tennessee believes that
its defenses in the underlying gas purchase contract actions are meritorious.
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. For additional
information, see Note 6 in the "Notes to Financial Statements".
The FERC issued final orders approving Tennessee's Stipulation and Agreement
partially resolving its 1991 rate case. Pursuant to these final FERC orders,
rates for the period February 1, 1992, through August 31, 1993, were approved,
and Tennessee paid refunds for this period on June 3, 1994. The refunds had no
material effect on reported net income. Also pursuant to these orders, rates
for the period after September 1, 1993, were approved and Tennessee paid
refunds for the period September 1, 1993 to October 31, 1994, in February 1995.
As of December 31, 1994, Tennessee had recorded a liability which was adequate
to cover its estimated refund obligations.
On December 30, 1994, Tennessee filed a general rate increase in Docket No.
RP95-112 which reflected an increase in Tennessee's revenue requirement of $118
million, including recovery of certain environmental costs as discussed in Note
17 in the "Notes to Financial Statements". 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.
This order also required the convening of a technical conference to address
various concerns raised by the FERC and Tennessee's customers over, among other
issues, Tennessee's ability to provide its shippers with timely and accurate
operating and billing information, and the associated systems costs. The
ultimate resolution of these issues may result in adjustments to customer
billings. Subject to the outcome of these issues and certain modifications
identified in the FERC order, the increased rates will become effective on July
1, 1995, subject to refund.
Competition
The natural gas pipeline industry is experiencing increasing competition in
virtually every aspect of operations, 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. Competition between pipelines is particularly
intense in Midwestern's Chicago and Northern Indiana markets, in East
Tennessee's Roanoke, Chattanooga and Atlanta markets, and in Tennessee's supply
area, Louisiana and Texas. Even in other markets, such as Tennessee's New
England market, displacement of load to other pipelines is possible during
summer or other low demand seasons. Tenneco Gas pipelines have frequently been
required to discount their transportation rates to maintain market share.
Gas Supply
With full implementation of Order No. 636, Tennessee's firm sales obligations
requiring maintenance of long-term gas purchase contracts have declined from
over a 1.4 billion dekatherm maximum daily delivery obligation to less than a
200 million dekatherm maximum daily delivery obligation. As discussed above
under the caption "Federal Regulation", Tennessee has substantially reduced its
natural gas purchase portfolio in line with these requirements through
termination and assignment to third parties. Although Tennessee's requirements
for purchased gas are substantially less than prior to its implementation of
Order No. 636, Tenneco Gas is pursuing the attachment of gas supplies to, and
transportation by others through, Tennessee's
6
<PAGE>
system. Current gas supply activities include development of offshore and
onshore pipeline gathering projects and utilization of production financing
programs to spur exploration and development drilling in areas adjacent to
Tennessee's system. Major gathering systems in the Mobile Bay and Viosca Knoll
area of the Gulf of Mexico were completed during the fourth quarter of 1994.
GAS MARKETING AND INTRASTATE PIPELINES
Tenneco Energy Resources Corporation ("TERC") was established in 1993 as the
holding company for several subsidiaries of Tenneco Gas engaged in nonregulated
businesses, including Tenneco Gas Marketing Company, Tenneco Gas Gathering
Company, Tenneco Gas Trading Company, Tenneco Gas Processing Company and the
companies that collectively comprise the Tenneco Gas Intrastate Group. Together
these companies provide the gas industry with a wide range of products and
services, including buying, selling, gathering and shipping of natural gas;
price risk management services; and liquids processing.
The Tenneco Gas Intrastate Group owns approximately 1,200 miles of intrastate
pipelines in Texas and manages the buying, selling and transportation services
for a volume of approximately 1.1 Bcf of natural gas per day. Within the
Intrastate Group is an ownership in the Oasis Pipe Line which serves the Texas
Gulf Coast and West Texas markets. This group also provides swing storage
services and access to major intrastate and interstate pipelines in Texas.
The following table sets forth the volumes of gas, stated in BBtu, sold by
subsidiaries of TERC and transported by Tenneco's nonregulated pipelines for
the periods indicated:
<TABLE>
<CAPTION>
1994 1993 1992
--------- ------- -------
<S> <C> <C> <C>
Sales.............................................. 739,432 741,800 494,445
Transportation..................................... 273,587 235,940 168,776
--------- ------- -------
Total............................................ 1,013,019 977,740 663,221
========= ======= =======
</TABLE>
In 1994, TERC issued stock to Ruhrgas AG, resulting in dilution of Tenneco's
ownership interest in TERC from 100% to 80%.
TENNECO VENTURES
Tenneco Gas Production Corporation ("TGPC") and Tenneco Ventures Corporation
("Ventures"), subsidiaries of Tennessee, together with institutional investors
and partners, invest in oil and gas properties by acquiring interests in
properties or providing financing to producers for exploration and development.
As of December 31, 1994, Ventures and TGPC hold various ownership interests in
offshore oil and natural gas fields in the Gulf of Mexico and in onshore Texas
and Louisiana properties and own reserves in those fields estimated at over 100
Bcf equivalent.
OTHER
Tenneco Gas International and Tenneco Power Generation Company were formed to
extend Tennessee's traditional interests in North American pipelines to
pipeline, power, and energy-related projects throughout the world, with a
current focus on activities in four regions: South America, Southeast Asia,
Australia, and Europe. Tenneco Gas International, through an Australian
affiliate, has been selected to construct, own and operate a 470 mile natural
gas pipeline in Queensland, Australia; subject to the completion of all
agreements, construction of the pipeline is expected to commence in mid 1995
and be completed by the end of 1996. Tenneco Gas International also has
interests in two consortiums pursuing the development of two natural
7
<PAGE>
gas projects in South America (Argentina to Chile and Bolivia to Brazil)
including both pipelines and gas-fired electric generation plants. Tenneco
Power Generation Company has a 17.5% interest in a 240 megawatt power plant in
Springfield, Massachusetts and is in the process of completing the acquisition
of a 50% interest in two additional cogeneration projects with 224 megawatts
capacity.
AUTOMOTIVE PARTS
The principal business operations of Tenneco Automotive and its affiliates
are Walker Manufacturing Company and Monroe Auto Equipment Company.
Walker Manufacturing Company and its affiliates ("Walker") manufacture a
variety of automotive exhaust systems and emission control products. In the
United States, Walker operates eight manufacturing facilities and seven
distribution centers, three of which are located at manufacturing facilities,
and also has two research and development facilities. In addition to the
facilities included in the Gillet acquisition described below, Walker operates
ten manufacturing facilities located in Australia, Canada, the United Kingdom,
Mexico, Denmark, Germany, France, Portugal and Sweden.
Walker's products are sold to automotive manufacturers for use as original
equipment and to wholesalers and retailers for sale as replacement equipment.
Sales to the original equipment market are directly dependent on new car sales,
and sales to the replacement market are related to the service life of original
equipment and to the level of maintenance by individual owners of their
automobiles. The service life of exhaust systems has increased in recent years,
resulting in a longer time period for the exhaust replacement rate.
The following table sets forth information relating to Walker's sales:
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES
----------------
1994* 1993 1992
----- ---- ----
<S> <C> <C> <C>
United States Sales
Automotive replacement equipment (primarily exhaust
system parts)......................................... 48% 52% 53%
Automotive original equipment.......................... 52 48 47
--- --- ---
100% 100% 100%
=== === ===
Foreign Sales
Automotive replacement equipment....................... 68% 70% 73%
Automotive original equipment.......................... 32 30 27
--- --- ---
100% 100% 100%
=== === ===
Total Sales by Geographic Area
United States.......................................... 58% 60% 57%
European Community..................................... 24 23 27
Canada................................................. 10 12 12
Other areas............................................ 8 5 4
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
--------
* Does not include sales of Gillet (described below), which was acquired on
November 30, 1994.
On November 30, 1994, Walker acquired ownership of Heinrich Gillet GmbH &
Company and its affiliates ("Gillet"), a manufacturer of exhaust systems
headquartered at Edenkoben, Germany. The combination of Gillet, Europe's
largest original equipment exhaust supplier, and Walker's European division,
8
<PAGE>
which is Europe's biggest replacement market supplier, is expected to more than
double Walker's European business.
Gillet operates 14 plants in Germany, France, the United Kingdom, Spain,
Portugal and the Czech Republic and operates an engineering and technology
center in Edenkoben. As a part of Tenneco Automotive's European consolidation
plan, Tenneco Automotive plans to consolidate its headquarters and engineering
center in Europe with the Gillet facilities by the end of the second quarter of
1995. A consolidation of Tenneco Automotive's and Gillet's manufacturing
facilities will occur later in 1995 and early 1996.
In addition to the "Walker" line, Walker manufactures and distributes exhaust
systems under a number of other brand names in the United States and foreign
countries.
Monroe Auto Equipment Company and its affiliates ("Monroe") are engaged
principally in the design, manufacture and distribution of ride control
products. Monroe ride control products consist of hydraulic shock absorbers,
air adjustable shock absorbers, spring assisted shock absorbers, gas charged
shock absorbers, struts, replacement cartridges and electronically adjustable
suspension systems. Monroe manufactures and markets replacement shock absorbers
for virtually all domestic and most foreign makes of automobiles. In addition,
Monroe manufactures and markets shock absorbers and struts for use as original
equipment on passenger cars and trucks, as well as for other uses. Monroe has
six manufacturing facilities in the United States and eight foreign
manufacturing operations in Australia, Belgium, Brazil, Canada, Mexico, the
United Kingdom and Spain.
The following table sets forth information relating to Monroe's sales:
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES
----------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
United States Sales
Automotive replacement equipment...................... 72% 72% 78%
Automotive original equipment......................... 28 28 22
--- --- ---
100% 100% 100%
=== === ===
Foreign Sales
Automotive replacement equipment...................... 69% 63% 60%
Automotive original equipment......................... 31 37 40
--- --- ---
100% 100% 100%
=== === ===
Total Sales by Geographic Area
United States......................................... 49% 50% 49%
European Community.................................... 32 29 32
Canada................................................ 5 7 7
Other areas........................................... 14 14 12
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
Tenneco Automotive is actively pursuing opportunities to expand its business
by entering additional geographic areas, including countries in Eastern Europe,
Asia and South America. It is anticipated that this expansion will occur
through a variety of means, including joint ventures and acquisitions.
On December 23, 1994, the automotive parts business completed the sale of its
brakes business. The brakes business consisted of the manufacture of non-
asbestos friction material for brakes for cars and light trucks and the
manufacture of non-asbestos friction brakes for heavy-duty vehicles. For
additional information, see Note 3 in the "Notes to Financial Statements".
The operations of Tenneco Automotive face intense competition from other
manufacturers of automotive equipment.
9
<PAGE>
PACKAGING
Packaging Corporation of America and other Tenneco subsidiaries ("PCA")
manufacture and sell containerboard, paperboard, corrugated shipping
containers, folding cartons, disposable plastic and aluminum containers, molded
fiber products and other related products. Its shipping container products are
used in the packaging of food, paper products, metal products, rubber and
plastics, automotive products and point of purchase displays. Its folding
cartons are used in the packaging of soap and detergent, food products and a
wide range of other consumer goods. Uses for its molded fiber products include
produce and egg packaging, food service items and institutional and consumer
disposable dinnerware, as well as a wide range of other consumer and industrial
goods. Its disposable plastic and aluminum containers are sold to the food
service, food processing and related industries. In addition to products
bearing the name "Packaging Corporation of America", PCA manufactures and
distributes products under the names "EZ POR", "Packaging Company of
California", "Revere Foil Containers", "Dahlonega Packaging", "Dixie
Container," "Agri-Pak" and "Pressware International."
The following table sets forth information with respect to PCA's sales during
the past three years:
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES
----------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Sales by Product Type
Corrugated shipping containers and containerboard products. 56% 53% 53%
Disposable plastic and aluminum products................... 20 22 21
Molded fiber products...................................... 9 9 10
Folding cartons and recycled paperboard mill products...... 9 10 10
Paper stock and other...................................... 6 6 6
--- --- ---
100% 100% 100%
=== === ===
Total Sales by Geographic Area
United States.............................................. 90% 88% 88%
European Community......................................... 5 7 8
Canada..................................................... 2 2 1
Other areas................................................ 3 3 3
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
At December 31, 1994, PCA operated 55 container plants, seven folding carton
plants and 14 corrugated containerboard and paperboard machines at eight mills.
Two of the mills (located in Georgia and Wisconsin), including substantially
all of the equipment associated with both mills, are leased from third parties.
PCA also has eight molded fiber products plants, one pressed paperboard plant,
one lumber plant, three paper stock plants, and 10 disposable plastic and
aluminum container plants. PCA's plants are located primarily in the United
States. Its foreign plants are located in Great Britain, Spain, Canada,
Switzerland, Germany and Hungary. In 1994, PCA increased its ownership in a
Hungarian paperboard mill and folding carton plant from 30% to 100%, expanding
the number of foreign plants owned by PCA. In the United States, PCA has a 50%
ownership interest in a molded fiber distribution company and in a hardwood
chip mill. In addition, PCA has a 50% interest in a folding carton plant in
Dongguan, China, and a 50% interest in a folding carton plant in Bucharest,
Romania.
Generally, PCA faces intense competition from numerous competitors and
alternative products in each of its geographic and product markets.
The principal raw materials used by PCA in its mill operations are virgin
pulp and reclaimed paper stock and, in its specialty products operations,
aluminum and plastics. PCA obtains virgin pulp and reclaimed paper stock from
independent logging contractors, from timberlands owned or controlled by it,
from operation of its reclaimed paper stock collecting and processing plants
and from other sources. PCA obtains aluminum rolling stock and plastic feed
stock from various suppliers.
At December 31, 1994, PCA owned 183,000 acres of timberland in Alabama,
Michigan, Mississippi and Tennessee and leased, managed or had cutting rights
on an additional 820,000 acres of timberland in those
10
<PAGE>
states and in Florida, Wisconsin and Georgia. During the years 1994, 1993 and
1992 approximately 20%, 22% and 18%, respectively, of the virgin fiber and
timber used by PCA in its operations was obtained from timberlands controlled
by it.
SHIPBUILDING
Newport News Shipbuilding and Dry Dock Company ("Newport News"), a Tenneco
subsidiary located in Newport News, Virginia, is the largest privately owned
shipbuilding company in the United States. Its primary business is constructing
and overhauling nuclear-powered aircraft carriers for the United States Navy.
Newport News also overhauls and repairs U.S. Navy and commercial vessels and
refuels nuclear-powered ships. In recent months, Newport News has returned to
the commercial shipbuilding market with the October 1994 award of a two-ship
product tanker contract from a foreign owner. In addition, Newport News is
pursuing international sales of its fast frigate. Newport News' shipbuilding
facilities are located on the James River on approximately 475 acres of
property which it owns.
At December 31, 1994, the aggregate amount of Newport News' backlog of work
to be completed was approximately $5.6 billion (substantially all of which is
U.S. Navy-related), an increase from the backlog of $3.7 billion as of December
31, 1993. Although the cuts in naval shipbuilding following the end of the cold
war have continued to put pressure on the Newport News backlog, Newport News
was awarded the U.S. Navy contract in December 1994 to build Ronald Reagan, the
next aircraft carrier for the United States. At December 31, 1994, Newport
News anticipated that it would complete approximately $1.5 billion of the
current backlog by December 31, 1995, and an additional $1.0 billion in 1996.
The December 31, 1994, backlog of Newport News included contracts for the
construction of three Nimitz class aircraft carriers and four Los Angeles class
attack submarines. Also included in that backlog is a contract for the
conversion of two Sealift ships. The present backlog extends into 2002. Subject
to new orders, this existing backlog will decline as two submarines per year,
on average, are delivered through 1996, and the aircraft carriers are delivered
in 1995, 1998 and 2002.
Newport News has various other contracts for U.S. Navy design work and for
industrial projects. As is typical for similar Government contracts, all of
Newport News' contracts with the U.S. Navy are unilaterally terminable by the
U.S. Navy at its convenience with compensation for work completed and costs
incurred.
With respect to all U.S. Navy work, Newport News faces intense business
pressures in the future because of expected declines in the United States'
defense budget and excess ship building and repair capacity in the United
States. Due to uncertainties as to future defense spending levels and the
allocation of amounts appropriated for such spending to the various defense
programs involved, Tenneco is unable to predict the number or timing of
subsequent contracts for U.S. Navy construction or refueling and overhaul which
may be awarded.
To increase its competitiveness worldwide and in response to the anticipated
decline in U.S. Navy budgets, Newport News has reduced its workforce by
approximately 9,000 or 31% between December 31, 1990 and December 31, 1994.
Newport News is aggressively pursuing new business opportunities and
attempting to expand its business base in light of the declining U.S. Navy
backlog, although there is no assurance that it will be able to do so to a
material extent. Newport News recently executed contracts for two product
tankers and has been selected to build and manage a shipyard in Abu Dhabi.
These are examples of the early success in this diversification strategy. While
the mix of jobs between U.S. Navy and commercial work is expected to change
somewhat, the U.S. Navy will continue to be the leading customer of the
shipyard. Newport News is pursuing major U.S. Navy overhaul and repair work and
foreign military sales. For additional information, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
11
<PAGE>
FARM AND CONSTRUCTION EQUIPMENT
Case Corporation and its subsidiaries ("Case") design, manufacture, market
and distribute farm equipment and light- and medium-sized construction
equipment. Case was incorporated on April 22, 1994, as a wholly-owned
subsidiary of Tenneco for the purpose of acquiring Tenneco's farm and
construction equipment business (the "Case Business").
Case is a leading worldwide manufacturer and distributor of farm equipment
and light- and medium-sized construction equipment. Case's market position is
particularly significant in several product categories, including
loader/backhoes and large, high-horsepower farm tractors and self-propelled
combines.
Case also manufactures and distributes replacement parts for various models
of its farm and construction equipment. Case supplies over 350,000 parts, many
of which are proprietary, to support products it has sold. Case distributes
these parts to dealers and distributors through a network of parts depots
throughout the world.
Case products are distributed through a network of approximately 4,100
independent dealers and 113 company-owned retail stores located in all 50
states and in approximately 150 countries throughout the world.
REORGANIZATION AND PUBLIC OFFERINGS
In June 1994, pursuant to a Reorganization Agreement between Tenneco, Case
and Tenneco Equipment Corporation (the "Reorganization Agreement"), Case and
its subsidiaries acquired the business and assets of the farm and construction
equipment business (other than approximately $1.2 billion of U.S. retail
receivables) of Tenneco and its subsidiaries in exchange for the following:
(i) the assumption by Case and/or certain of its subsidiaries of all
liabilities of the Case Business existing prior to the acquisition of the Case
Business by Case and its subsidiaries (the "Reorganization"), except as
described below, (ii) demand notes in the aggregate principal amount of $1.552
billion (the "Demand Notes"), (iii) 70 million shares of Common Stock of Case,
(iv) 1,500,000 shares of Series A Cumulative Convertible Preferred Stock of
Case, and (v) $250 million aggregate principal amount of 10 1/2% Senior
Subordinated Notes due 2002 (the "Subordinated Notes") (accrued interest on
which is payable in additional Subordinated Notes in lieu of cash until the
second anniversary of issuance). In accordance with the Reorganization
Agreement, upon completion of an appraisal of the Case Business, Case paid to
Tenneco $10.6 million, which was the amount by which the fair market value of
the business and assets transferred in exchange for the Demand Notes exceeded
the principal amount of the Demand Notes. Case and its subsidiaries became
responsible and solely liable for all liabilities of the Case Business except
for the following liabilities retained by Tenneco and its subsidiaries:
(i) liabilities for pension benefits accrued by Case's then current and former
employees in the United States, both salaried and hourly, through the date of
the Reorganization, (ii) liabilities for postretirement health and life
insurance benefits for employees of the Case Business in the United States who
retired on or before July 1, 1994, and their dependents, in each case to the
extent that the Case Business was obligated on the date of the Reorganization,
(iii) certain liabilities for U.S. federal, state, local and foreign income
and franchise taxes as agreed by Tenneco and Case, (iv) approximately $1.9
billion of debt of Tenneco's finance subsidiaries not sold to Case arising
from the wholesale and retail financing programs historically offered by the
Case Business, and (v) certain remaining cash advances from affiliated
companies to subsidiaries that transferred net assets to Case but which
remained as subsidiaries of Tenneco. The Demand Notes were issued by Case and
certain of its subsidiaries in an aggregate principal amount equal to the
estimated fair market value of the business and assets transferred to them in
exchange for the Demand Notes and were paid in full contemporaneously with the
closing on June 30, 1994, of the initial public offering of Case's Common
Stock by certain subsidiaries of Tenneco (the "Initial Offering") from the
proceeds of a term loan and other available cash.
The Reorganization Agreement required that, after giving effect to the
Reorganization, Case and its subsidiaries have a consolidated stockholders'
equity (including Case's Series A Cumulative Convertible Preferred Stock and
the Cumulative Convertible Second Preferred Stock) of $1.152 billion. To the
extent
12
<PAGE>
stockholders' equity exceeded such amount, Case was required to pay a dividend
on the shares of Common Stock issued to Tenneco and its subsidiaries in the
amount of such excess. A dividend in the aggregate amount of $12.9 million was
paid by Case on August 12, 1994 in accordance with the Reorganization
Agreement.
On June 30, 1994, Tenneco sold approximately 29% of Case Corporation's common
stock in an underwritten initial public offering and shares of Case Corporation
Series A Cumulative Convertible Preferred Stock to unaffiliated investors in a
negotiated transaction, resulting in gross proceeds to Tenneco of approximately
$457,000,000.
On November 22, 1994, Tenneco sold an additional approximately 24% of the
Case Corporation common stock in an underwritten secondary public offering (the
"Secondary Offering"). On December 8, 1994, Tenneco Inc. and certain of its
subsidiaries sold an additional 3% of the Case Corporation common shares when
the underwriters involved in the Secondary Offering exercised their option to
purchase additional shares to cover over-allotments. At December 31, 1994,
Tenneco owned approximately 44% of the outstanding shares of common stock of
Case Corporation. The Secondary Offering resulted in gross proceeds to Tenneco
of approximately $368,000,000.
In addition, as part of the Reorganization, Tenneco Credit Corporation, a
wholly-owned subsidiary of Tenneco Inc., retained ownership of approximately
$1.2 billion of Case's United States retail receivables and related debt
existing at the time of the Reorganization which is not redeemable prior to
maturity. Since the Reorganization, United States retail finance activity has
been conducted by Case's newly-formed United States finance subsidiary. At
December 31, 1994, approximately $879 million of the retail receivables
remained outstanding. For additional information, see "Other."
RESTRUCTURING OF CASE OPERATIONS
On March 21, 1993, the Board of Directors of Tenneco Inc. adopted a
comprehensive restructuring program for Case (the "Case Restructuring Program")
which resulted in a pre-tax charge of $920 million ($843 million after taxes,
or $5.85 per average common share), all of which was reflected in the 1992 loss
from continuing operations before interest expense, income taxes and minority
interest. Such pre-tax charge was reduced by $20 million and $16 million in
1993 and 1994, respectively. Implementation of the Case Restructuring Program
was commenced in 1993, and various restructuring actions in the program were
completed in 1993 and 1994 and others are in process. The Case Restructuring
Program is expected to be substantially completed by 1997.
The Case Restructuring Program is highly complex, and effectively
implementing it continues to be a major undertaking. The specific restructuring
measures were based on management's best business judgment under prevailing
circumstances and on assumptions which may be revised over time and as
circumstances change. Case continues to believe that the successful completion
of the Case Restructuring Program will enhance its operating income and pre-tax
cash flow over 1992 levels by approximately $200 million annually by 1997. For
additional information about Case's restructuring program, see Note 16 to
"Notes to the Financial Statements."
OPERATIONS
The following were products manufactured by Case in 1994:
FARM EQUIPMENT CONSTRUCTION EQUIPMENT
two-wheel and four- excavators
wheel drive farm crawler dozers and loaders
tractors wheel loaders
combines loader/backhoes
cotton pickers rough terrain forklifts
hay and forage skid steer loaders
equipment trenchers
soil conditioning
equipment
crop production
equipment
implements
13
<PAGE>
Case also distributes excavators in North America that are manufactured by a
third party. Case manufactures and distributes equipment primarily under the
names "Case", "Case IH", "Case Poclain" and "Case International."
Case has a 50% interest in a joint venture with Cummins Engine Company, Inc.
("Cummins"), which manufactures a line of diesel engines. The joint venture
provides Case with a source of technically advanced, low cost, efficient and
reliable diesel engines which have been incorporated into virtually all of its
product lines. Cummins sells its share of engines manufactured by the joint
venture to third parties. The Tenneco Inc. General Employee Benefit Trust holds
approximately 8.6% of the outstanding common stock of Cummins.
In addition, Case owns a 50% interest in Hay and Forage Industries, a joint
venture with AGCO Corporation, which manufactures hay and forage equipment at a
plant in Hesston, Kansas. Each of the co-venturers markets and sells the
equipment manufactured by the joint venture under the Case and AGCO/Hesston
brand names, respectively, through their respective distribution systems.
The following table sets forth information with respect to sales during the
past three years:
<TABLE>
<CAPTION>
PERCENTAGE OF
SALES
----------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Sales by Product Type
Farm equipment.......................................... 60% 60% 60%
Construction equipment.................................. 40 40 40
--- --- ---
100% 100% 100%
=== === ===
Sales by Geographic Area
United States........................................... 57% 54% 52%
Europe.................................................. 27 25 30
Canada.................................................. 9 11 10
Other areas............................................. 7 10 8
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
The farm equipment industry is highly competitive, particularly in North
America and Europe. Case competes with several large national and international
full-line suppliers, as well as numerous short-line and specialty manufacturers
with differing manufacturing and marketing methods. The construction equipment
industry has a broad spectrum of competitors which specialize in various
product lines and which are globally dispersed.
CHEMICALS
On December 13, 1994, Tenneco announced its intention to sell its Albright &
Wilson Chemicals division in an underwritten initial public offering primarily
in the United Kingdom. The offering was completed on March 8, 1995. Tenneco has
agreed to indemnify Albright & Wilson for certain costs that might arise from a
patent dispute, the decommissioning of a plant and taxes for previous years.
Albright & Wilson plc, a British-based chemical company, and its subsidiaries
("Albright & Wilson"), are engaged in the chemical business. Albright & Wilson
has four manufacturing facilities in the United Kingdom, five manufacturing
facilities in the United States and, together with joint ventures, 26
additional manufacturing facilities in 14 other countries (Canada, Colombia,
Australia, Italy, France, Spain, Mexico
14
<PAGE>
and seven countries in Asia). In the years 1994, 1993 and 1992, approximately
82%, 81% and 84%, respectively, of Albright & Wilson's sales were made outside
the United States.
The principal products of Albright & Wilson are phosphorus chemicals and
surfactants and a range of specialty chemicals for water management, flame
retardants and intermediates for pharmaceuticals and agricultural chemicals.
The following table sets forth sales of Albright & Wilson by product lines for
the periods indicated:
<TABLE>
<CAPTION>
1994 1993 1992*
---- ---- -----
<S> <C> <C> <C>
Surfactants.................................................. 39% 40% 44%
Phosphorus chemicals......................................... 35 35 35
Specialty chemicals.......................................... 26 25 21
--- --- ---
Totals................................................... 100% 100% 100%
=== === ===
</TABLE>
--------
* Sales by Albright & Wilson's pulp chemicals business, which was sold
in 1992 have not been included.
Albright & Wilson has a 50% interest in a joint venture that owns and
operates a purified wet-process phosphoric acid plant in Aurora, North
Carolina, which has largely displaced the use of phosphorus as a feedstock for
phosphoric acid manufactured by Albright & Wilson in North America.
In December 1994, Albright & Wilson acquired a 50% interest in Troy Grupo
Industrial S.A. de C.V., a Mexican corporation whose principal subsidiary is
engaged in the manufacture of purified wet phosphoric acid and other phosphate
based chemicals.
OTHER
Tenneco has several wholly-owned finance subsidiaries which purchase
interest-bearing and noninterest-bearing trade receivables from its operating
subsidiaries. Through June 1994, Tenneco Credit Corporation and Tenneco Credit
Canada Corp. purchased retail receivables generated primarily by retail sales
of Case's products. As a part of the Reorganization, Tenneco Credit Corporation
retained ownership of approximately $1.2 billion of Case's United States retail
receivables and related debt existing at the time of the Reorganization which
is not redeemable prior to maturity. Since the Reorganization, United States
retail finance activity has been conducted by Case's newly-formed United States
finance subsidiary. Case services the retail receivables retained by Tenneco
Credit Corporation, for which it receives a monthly servicing fee based on the
amount of receivables outstanding at the beginning of each month. At December
31, 1994, approximately $879 million of the retail receivables owned by Tenneco
Credit Corporation remained outstanding. It is estimated that the receivables
retained by Tenneco Credit Corporation will be substantially liquidated by
1999.
Tenneco Credit Corporation in 1994 also purchased receivables from other
Tenneco operating subsidiaries. Funding for Tenneco Credit Corporation is
provided through the private and public debt markets. Funding for Tenneco
Credit Canada Corp. was provided through private debt markets.
Prior to the Reorganization, Case Finance Company, Tenneco International
Finance Limited and Case Canada Wholesale Finance Corporation purchased
wholesale receivables primarily generated by the sale or lease of Case farm and
construction equipment to its domestic and foreign dealers. The companies were
funded primarily through private debt markets. Case Finance Company, Tenneco
International Finance Limited and Case Canada Wholesale Finance Corporation
continue to be indirect wholly-owned subsidiaries of Tenneco Inc.
15
<PAGE>
BUSINESS STRATEGY
Since September 1991 the Company has focused on various initiatives and taken
steps designed to strengthen its financial results and improve its financial
flexibility and thereby generate greater returns to its stockholders. Asset
evaluation and redeployment have been and will continue to be important parts
of this strategy. The Company continues to study opportunities for the
strategic repositioning and restructuring of its operations (including through
acquisitions, dispositions, divestitures, spin-offs and joint venture
participation, wholly and partially, of various businesses).
ENVIRONMENTAL MATTERS
Tenneco Inc. estimates that its subsidiaries will make capital expenditures
for environmental matters of approximately $90 million in 1995 and that capital
expenditures for environmental matters will range from approximately $290
million to $484 million in the aggregate for the years 1996 through 2006.
For information regarding environmental matters see Item 3, "Legal
Proceedings--Environmental Proceedings" and "--Potential Superfund Liability",
Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Environmental Matters" and Note 17, "Commitments and
Contingencies" in the "Notes to Financial Statements." See also Note 1,
"Summary of Accounting Policies--Environmental Liabilities" in the "Notes to
Financial Statements."
ITEM 2. PROPERTIES.
Reference is made to Item 1 for a description of Tenneco's properties.
Tenneco believes that substantially all of its plants and equipment are, in
general, well maintained and in good operating condition. They are considered
adequate for present needs and as supplemented by planned construction are
expected to remain adequate for the near future.
Tenneco Inc. is of the opinion that its subsidiaries have generally
satisfactory title to the properties owned and used in their respective
businesses, subject to liens for current taxes and easements, restrictions and
other liens which do not materially detract from the value of such property or
the interests therein or the use of such properties in their businesses.
ITEM 3. 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,
the EPA has advised Tennessee that it is deferring to the Pennsylvania and New
York environmental agencies to specify the remediation requirements applicable
to Tennessee. Tennessee anticipates that it will soon reach an agreement with
the Pennsylvania Department of Environmental Resources ("PaDER") and will enter
into a consent order on remediation at the Pennsylvania stations (under which
Tennessee also agrees to pay a civil penalty and to make a contribution for
environmental projects); meanwhile, Tennessee will continue its negotiations
with the New York Department of Environmental Conservation on remediation at
the New York stations. Tenneco believes that the ultimate resolution of this
matter will not have a material adverse effect on the financial position or
results of operations of Tenneco Inc. and its consolidated subsidiaries. See
Notes 6 and 17 in the "Notes to Financial Statements" for additional
information.
16
<PAGE>
In Commonwealth of Kentucky, Natural Resources and Environmental Protection
Cabinet v. Tennessee Gas Pipeline Co. (Franklin County Circuit Court, Docket
No. 88-C1-1531, November 16, 1988), the Kentucky environmental agency alleges
that Tennessee discharged pollutants into the waters of the state without a
permit and seeks an injunction against future discharges and a civil penalty.
Counsel for Tenneco are unable to express an opinion as to its ultimate
outcome. Tenneco believes that the resolution of this issue will not have a
material adverse effect on its consolidated financial position or results of
operations.
A subsidiary of Tennessee owns a 13.2% general partnership interest in
Iroquois Gas Transmission System, L.P. ("Iroquois"), which owns an interstate
natural gas pipeline from the Canadian border through the states of New York
and Connecticut to Long Island. The operator of the pipeline is Iroquois
Pipeline Operating Company ("the Operator"), a subsidiary of TransCanada
Pipelines, Ltd., an affiliate of TransCanada Iroquois, Ltd., which is also a
partner in Iroquois.
In early 1992, Iroquois was informed by U.S. Attorneys' Offices for the
Northern, Southern, and Eastern Districts of New York that a civil
investigation had been initiated to determine whether civil environmental
violations occurred during construction of the pipeline. In February 1992, 26
alleged violations were identified to Iroquois in writing. In response,
Iroquois denied that such violations had occurred and asserted that all
concerns raised by governmental authorities during construction had been fully
addressed. Iroquois subsequently was informed that the alleged violations
included certain matters referred to in field reports prepared by a
Federal/State Inter-Agency Task Force which surveyed the right-of-way in
connection with the right-of-way restoration program. Iroquois responded to the
appropriate U.S. Attorneys' Offices that none of the matters referenced in
field reports issued to date represent violations of any law or governmental
authorization. As of March 28, 1995, no proceedings in connection with this
civil investigation have been commenced against Iroquois by the federal
government.
On December 3, 1993, Iroquois received notification from the Enforcement
Staff of the Federal Energy Regulatory Commission's Office of the General
Counsel ("Enforcement") that Enforcement has commenced a preliminary, non-
public investigation concerning the construction of certain of Iroquois'
pipeline facilities. That office has requested certain information regarding
such construction. In addition, on December 27, 1993, Iroquois received a
similar request for information from the Army Corps of Engineers requesting
certain information regarding permit compliance in connection with certain
aspects of the pipeline's construction. By a notice issued on February 6, 1995,
the Public Service Commission of the State of New York (the "NYPSC") also has
requested Iroquois to respond to certain allegations set out in a petition
filed by GASP Coalition and Anne Marie Mueser in January 1995 with the NYPSC
requesting an investigation by the NYPSC of aspects of the construction of the
pipeline. Iroquois has been evaluating and responding to these agencies'
requests for information. No proceedings have been commenced against Iroquois
in connection with these agency inquiries.
A criminal investigation relating to the construction of the pipeline
facilities has been initiated by the U.S. Attorney's Office for the Northern
District of New York in conjunction with the EPA and the Federal Bureau of
Investigation ("FBI"). According to a press release issued by the FBI in June
1992, areas under investigation include possible environmental violations, wire
fraud, mail fraud and providing false information or concealment of information
from federal agencies in conjunction with construction of the pipeline. While
no criminal charges have been filed to date, counsel for Iroquois and counsel
for the Operator have met with the Assistant U.S. Attorney in charge of the
investigation and plan to meet with him again in the near future in order to
discuss the issues under investigation and to explore the possibility of a
negotiated resolution of the issues raised in the criminal, civil and
administrative inquiries (a "global resolution"). In the absence of a
negotiated resolution, Iroquois deems it probable that the U.S. Attorney will
seek indictments and, in them, substantial fines and other sanctions.
As a general partner, Tennessee's subsidiary may be jointly and severally
liable with the other partners for the liabilities of Iroquois. Tennessee has a
contract to provide gas dispatching as well as post-construction field
operation and maintenance services for the Operator of Iroquois, but Tennessee
is not the Operator and is not an affiliate of the Operator. Moreover, the
foregoing proceedings and investigations have not affected pipeline operations.
Based upon information available to Tennessee at March 28, 1995, Tennessee
believes that neither Tennessee nor any of its subsidiaries is a target of the
criminal investigation described above.
17
<PAGE>
Further, while a global resolution of these inquiries could have a material
adverse effect on the financial condition of Iroquois, Tenneco believes that
the ultimate resolution of these matters will not have a material adverse
effect on the financial condition or results of operations of Tenneco Inc. and
its consolidated subsidiaries.
On August 2, 1993, the Department of Justice filed suit against Packaging
Corporation of America ("PCA") in the Federal District Court for the Northern
District of Indiana, alleging that wastewater from PCA's molded fiber products
plant in Griffith, Indiana interfered with or damaged the Town of Griffith's
municipal sewage pumping station on two occasions in 1991 and 1993, resulting
in discharges by the Town of Griffith of untreated wastewater into a river. PCA
and the Department of Justice have agreed in principle to settle the suit.
Specifics of the consent decree are still being negotiated by PCA and the
Department of Justice.
(2) Potential Superfund Liability.
At December 31, 1994, Tenneco has been designated as a potentially
responsible party in 66 "Superfund" sites. With respect to its pro rata share
of the remediation costs of certain sites, Tenneco is fully indemnified by
third parties. With respect to certain other sites, Tenneco has sought to
resolve its liability through payments to the other potentially responsible
parties. For the remaining sites, Tenneco has estimated its share of the
remediation costs to be between $13 million and $72 million or 0.4% to 2.2% of
the total remediation costs for those sites and has provided reserves that it
believes are adequate for such costs. Because the clean-up 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 the caption
"Environmental Matters" under Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and the caption "Environmental
Matters" under Note 17, in the "Notes to Financial Statements".
(3) 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 believes it has meritorious defenses to the claims of
ICA and TransTexas, which defenses it will vigorously assert. For additional
information, see Note 6 in the "Notes to Financial Statements".
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 Tenneco's consolidated financial condition or
results of operations.
18
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of Tenneco Inc.
during the fourth quarter of the fiscal year ended December 31, 1994.
ITEM 4.1 EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is a list of the executive officers of Tenneco Inc. at March
15, 1995. Each of such officers has served in the capacities indicated below
with Tenneco Inc. (or prior to a corporate reorganization in 1987 with the then
publicly held affiliate of Tenneco Inc. which bore the same name) since the
dates indicated below:
<TABLE>
<CAPTION>
NAME (AND AGE AT DECEMBER 31, 1994) OFFICES HELD* EFFECTIVE DATE OF TERM
----------------------------------- ------------- ----------------------
<S> <C> <C>
Dana G. Mead (58).............. Chairman May 1994
Chief Executive Officer February 1994
Director April 1992
Chairman of the Executive Committee February 1994
President May 1992
Member of the Executive Committee May 1992
Theodore R. Tetzlaff (50)...... General Counsel July 1992
Robert T. Blakely (53)......... Senior Vice President and Chief July 1981
Financial Officer
John J. Castellani (43)........ Senior Vice President--Government March 1995
Relations
Stacy S. Dick (38)............. Senior Vice President--Strategy August 1992
Arthur H. House (52)........... Senior Vice President--Corporate March 1995
Affairs
Peter Menikoff (53)............ Senior Vice President June 1994
Barry R. Schuman (53).......... Senior Vice President--Human March 1993
Resources
Kenneth D. Allen (55).......... Vice President March 1987
Matthew W. Appel (39).......... Vice President--Shared Services January 1995
Ilene S. Gordon (41)........... Vice President--Operations May 1994
Jack Lascar (40)............... Vice President--Investor Relations July 1994
Mark A. McCollum (35).......... Vice President--Financial Analysis January 1995
and Planning
M. W. Meyer (55)............... Vice President and Deputy General August 1979
Counsel
E. J. Milan (60)............... Vice President and Controller October 1989
Karen R. Osar (45)............. Vice President and Treasurer January 1994
Robert G. Simpson (42)......... Vice President--Tax May 1990
Stephen J. Smith (49).......... Vice President--Human Resources July 1994
Karl A. Stewart (51)........... Vice President May 1991
Secretary May 1986
S. D. Chesebro' (53)........... Chief Executive Officer--Tenneco Gas February 1994
Inc.
President--Tenneco Gas Inc. June 1990
W. R. Phillips, Jr. (63)....... Chairman and Chief Executive September 1994
Officer--Newport News Shipbuilding
and Dry Dock Company
R. A. Snell (53)............... President and Chief Executive September 1993
Officer--Tenneco Automotive, a
Division of Tennessee Gas Pipeline
Company
Paul T. Stecko (50)............ President and Chief Executive December 1993
Officer--Packaging Corporation of
America
</TABLE>
--------
* Unless otherwise indicated, all offices held are with Tenneco Inc.
19
<PAGE>
Each of the executive officers of Tenneco Inc. has been continuously engaged
in the business of Tenneco Inc., its subsidiaries, affiliates or predecessor
companies during the past five years except that: (i) from 1986 to 1992, Dana
G. Mead was employed by International Paper Co., last serving in the capacity
of Executive Vice President; (ii) Theodore R. Tetzlaff has been a partner in
the law firm of Jenner & Block, Chicago, for more than five years; (iii) from
1985 to 1992, Stacy S. Dick was employed by The First Boston Corporation, last
serving in the capacity of Managing Director; (iv) from 1980 to 1992, John J.
Castellani was employed by TRW Inc., last serving in the capacity of Vice
President of Government Relations and from August 1992 to March 1995 he served
as Vice President--Government Relations of Tenneco Inc.; (v) from 1988 until
his employment by Tenneco in 1992, Barry R. Schuman was employed by Union
Pacific Railroad Company, last serving in the capacity of Vice President of
Human Resources; (vi) from 1990 until 1992, Arthur H. House served as Vice
President, Corporate Communications of Aetna Life & Casualty Company; from 1988
to 1990 as Senior Vice President, Corporate Affairs of Shawmut National
Corporation; from June 1992 until March 1995, he served as Vice President--
Corporate Affairs of Tenneco Inc.; (vii) from 1975 to 1994, Karen R. Osar was
employed by J. P. Morgan & Co., Inc., last serving in the capacity of Managing
Director--Corporate Finance Group; (viii) from 1983 to 1990, Robert G. Simpson
was employed by Kraft Inc. and Philip Morris Management Co., last serving in
the capacity of Director of Kraft General Foods Federal Taxes; (ix) from 1980
to 1994, Mark A. McCollum was employed by Arthur Andersen LLP, last serving as
an Audit Partner; and (x) from 1977 to 1993, Paul T. Stecko was employed by
International Paper Co., last serving as Vice President and General Manager of
Publications Papers, Bristols and Converting Papers.
Tenneco Inc.'s Board of Directors is divided into three classes of directors
serving staggered three-year terms, with a minimum of eight directors and a
maximum of sixteen directors. At each annual meeting of stockholders,
successors to the directors whose terms expire at such meeting are elected.
Officers are elected at the annual meeting of directors held immediately
following the annual meeting of stockholders.
20
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The outstanding shares of Common Stock, par value $5 per share, of Tenneco
Inc. (the "Common Stock") are listed on the New York, Chicago, Pacific,
Toronto, London, Paris, Frankfurt, Dusseldorf, Basel, Geneva and Zurich Stock
Exchanges.
The following table sets forth the high and low sale prices of Common Stock
during the periods indicated on the New York Stock Exchange Composite
Transactions Tape and dividends paid per share of Common Stock during such
periods:
<TABLE>
<CAPTION>
SALE
PRICES
------------ DIVIDENDS
HIGH LOW PAID
---- ---- ---------
<S> <C> <C> <C>
1993
1st quarter..................................... $48 3/4 $39 1/8 $.40
2nd quarter..................................... 51 1/2 44 1/4 .40
3rd quarter..................................... 54 3/8 48 .40
4th quarter..................................... 55 47 5/8 .40
1994
1st quarter..................................... $58 3/4 $51 1/2 $.40
2nd quarter..................................... 54 7/8 45 1/8 .40
3rd quarter..................................... 49 1/2 43 1/4 .40
4th quarter..................................... 45 3/4 37 .40
</TABLE>
The number of holders of Common Stock of record as of March 1, 1995, was
approximately 112,000.
The declaration of dividends on the Company's capital stock is at the
discretion of the Company's Board of Directors. The Board has not adopted a
dividend policy as such; subject to legal and contractual restrictions, its
decisions regarding dividends are based on all considerations which in its
business judgement are relevant at the time, including past and projected
earnings, cash flows, economic, business and securities market conditions and
anticipated developments concerning Tenneco's business and operations. For
additional information concerning the payment of dividends by Tenneco Inc., see
"Years 1994 and 1993 --Ability to Pay Dividends" in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Tenneco's cash flow and the consequent ability of Tenneco Inc. to pay any
dividends on the Common Stock is substantially dependent upon Tenneco's
earnings and cash flow available after its debt service and the availability of
such earnings to Tenneco Inc. by way of dividends, distributions, loans and
other advances. The instruments setting forth the rights of the holders of the
Preferred Stock and Junior Preferred Stock contain provisions restricting
Tenneco Inc.'s right to pay dividends and make other distributions on the
Common Stock. Certain of Tenneco Inc.'s subsidiaries have provisions under
financing arrangements and an investment agreement which limit the amount of
dividends that may be paid by them to Tenneco Inc. At December 31, 1994, such
amount was calculated to be $2.9 billion. Tenneco Inc. is a party to credit
agreements containing provisions that limit the amount of dividends paid on its
common stock. At December 31, 1994, under the most restrictive provisions
contained in these credit agreements, Tenneco Inc. would be permitted to pay
dividends of as much as $900 million.
Under applicable corporate law, dividends may be paid by Tenneco Inc. out of
"surplus" (as defined under the law) or, if there is not a surplus, out of net
profits for the year in which the dividends are declared or the preceding
fiscal year. At December 31, 1994, Tenneco Inc. had surplus of at least $1.9
billion for the payment of dividends, and Tenneco Inc. will also be able to pay
dividends out of any net profits for the current and prior fiscal year.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE AMOUNTS)
---------------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
(LOSS) DATA:
Net sales and operating
revenues from
continuing
operations--
Natural gas pipelines. $ 2,378 $ 2,862 $ 2,183 $ 2,183 $ 2,460
Farm and construction
equipment(a)......... 3,881 3,748 3,829 4,449 5,396
Automotive parts...... 1,989 1,785 1,763 1,668 1,707
Shipbuilding.......... 1,753 1,861 2,265 2,216 2,113
Packaging............. 2,184 2,042 2,078 1,934 1,476
Other................. 3 6 39 34 51
Intergroup sales...... (14) (17) (14) (14) (14)
----------- ----------- ----------- ----------- -----------
Total................ $ 12,174 $ 12,287 $ 12,143 $ 12,470 $ 13,189
=========== =========== =========== =========== ===========
Income (loss) from con-
tinuing
operations before in-
terest expense,
income taxes and mi-
nority interest--
Natural gas pipelines. $ 415 $ 411 $ 360 $ 561 (d) $ 340
Farm and construction
equipment(a)......... 326 (e) 82 (e) (1,180)(e) (1,079)(e) 186
Automotive parts...... 223 222 237 188 222
Shipbuilding.......... 200 225 249 225 225
Packaging............. 209 139 221 139 (d) 190
Other................. 6 18 (32) (98)(e) 59
----------- ----------- ----------- ----------- -----------
Total................ 1,379 (b) 1,097 (c) (145) (64) 1,222
Interest expense (net
of interest
capitalized).......... 407 427 496 528 456
Income tax expense..... 301 257 73 25 279
Minority interest...... 30 -- -- -- --
----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing
operations............ 641 (f) 413 (f) (714)(f) (617)(f) 487
Income (loss) from dis-
continued
operations, net of in-
come tax.............. (189) 38 102 (115) 74
Extraordinary loss, net
of income tax......... (5) (25) (12) -- --
Cumulative effect of
changes in
accounting principles,
net of
income tax............ (39)(g) -- (699)(g) -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)...... 408 426 (1,323) (732) 561
Preferred stock divi-
dends................. 12 14 16 16 18
----------- ----------- ----------- ----------- -----------
Net income (loss) to
common stock.......... $ 396 $ 412 $ (1,339) $ (748) $ 543
=========== =========== =========== =========== ===========
Average number of
shares of common stock
outstanding........... 180,084,909 168,772,852 144,110,151 122,777,910 124,423,036
Earnings (loss) per
average share of
common stock--
Continuing operations. $ 3.49 (f) $ 2.36 (f) $ (5.07)(f) $ (5.15)(f) $ 3.77
Discontinued opera-
tions................ (1.04) .23 .72 (.94) .60
Extraordinary loss.... (.03) (.15) (.08) -- --
Cumulative effect of
changes in
accounting princi-
ples................. (.22)(g) -- (4.86)(g) -- --
----------- ----------- ----------- ----------- -----------
Net earnings (loss)... $ 2.20 (h) $ 2.44 (h) $ (9.29)(h) $ (6.09) $ 4.37
=========== =========== =========== =========== ===========
Cash dividends paid per
common share.......... $ 1.60 $ 1.60 $ 1.60 $ 2.80 $ 3.12
</TABLE>
(Table continued on next page)
22
<PAGE>
(Continued from previous page)
<TABLE>
<CAPTION>
(MILLIONS)
-----------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........... $ 12,542 $ 15,373 $ 16,584 $ 18,696 $ 19,034
Short-term debt........ 545 1,274 1,696 2,452 3,816
Long-term debt......... 3,570 4,799 6,400 6,837 5,976
Minority interest...... 320 153 165 182 --
Preferred stock with
mandatory
redemption provisions. 147 163 191 194 201
Stockholders' equity... 2,900 2,601 1,330 2,774 3,367
STATEMENT OF CASH FLOWS
DATA:
Net cash provided by
operating activities.. $ 450 $ 1,615 $ 929 $ 950 $ 360
Capital expenditures
for continuing
operations............ 736 525 507 668 699
</TABLE>
-------
Notes: (a) In December 1994, Tenneco's accounting for its Farm and
construction equipment segment changed due to a reduction in its
ownership percentage. For the month of December 1994, the Farm and
construction equipment segment was reflected in Tenneco's financial
statements using the equity method of accounting. Accordingly, the
segment's revenues are included in Tenneco's reported revenues for
eleven months only. For additional information, see Notes 1 and 3 to
the Financial Statements of Tenneco Inc. and Consolidated Subsidiaries.
(b) Includes the disposition of approximately 56% of Case common stock; a
20% interest in Tenneco Energy Resources Corporation; facility,
machinery and equipment at PCA; and facilities and equipment at Case
for a gain of $50 million.
(c) Includes the disposition of a number of assets and investments
including Newport News' Sperry Marine business; several PCA operations;
two wholly-owned pipeline companies, Viking Gas Transmission Company
and Dean Pipeline Company; and facilities and land of two foreign Farm
and construction equipment operations for a gain of $112 million.
(d) For Natural gas pipelines, includes a gain of $265 million related to
the sale of its natural gas liquids business including its interest in
an MTBE plant then under construction. Also, Packaging recorded a gain
of $42 million related to the sale of three short-line railroads.
(e) Includes restructuring charge of $920 million related to Farm and
construction equipment in 1992 reduced by $20 million in 1993 and $16
million in 1994. Losses in 1992 for the Farm and construction equipment
segment before the restructuring charge were $260 million. Of the total
$473 million restructuring charge recorded in 1991, $461 million
related to Farm and construction equipment and $12 million related to
Other. Losses in 1991 for the Farm and construction equipment segment
before the restructuring charge were $618 million.
(f) Includes after-tax restructuring charge reversal of $10 million, or
$.05 per average common share, and $12 million, or $.07 per average
common share, for 1994 and 1993, respectively, and an after-tax
restructuring charge of $843 million, or $5.85 per average common
share, and $413 million, or $3.36 per average common share, for 1992
and 1991, respectively.
(g) Effective January 1, 1994, Tenneco adopted Statement of Financial
Accounting Standards ("FAS") No. 112, Employers' Accounting for
Postemployment Benefits. This new accounting rule 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. Tenneco recorded an after-tax charge of $39
million ($.22 per average common share) which was reported as a
cumulative effect of change in accounting principle.
Tenneco elected early adoption of FAS No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, for its domestic
operations and FAS No. 109, Accounting for Income Taxes. Both standards
were adopted effective January 1, 1992, using the cumulative catch-up
method.
Under FAS No. 106, Tenneco is required to accrue the estimated costs of
retiree benefits other than pensions (primarily health care benefits and
life insurance) during the employees' active service period. Prior to
1992, Tenneco expensed the cost of these benefits as medical and
insurance claims were paid. Tenneco will adopt the new standard for its
non-U.S. plans in the first quarter of 1995 but does not expect that the
adoption will have a material effect on Tenneco's consolidated financial
position or results of operations.
The adoption of FAS No. 109 changed Tenneco's method of accounting for
income taxes from the deferred method to the liability method. The
liability method requires the recognition of deferred tax assets and
23
<PAGE>
(Continued from previous page)
liabilities for the future tax consequences of temporary differences
between the financial statement basis and the tax basis of assets and
liabilities.
The 1992 Statements of Income (Loss) include an after-tax charge of $699
million or $4.86 per average common share for the cumulative effect of
the accounting changes consisting of $414 million or $2.88 per share for
FAS No. 106 and $285 million or $1.98 per share for FAS No. 109.
(h) Earnings per share of common stock are based on the average number of
shares of common stock and Series A preferred stock (each share of
Series A preferred stock represents approximately two shares of common
stock) outstanding during each period. Because Series A preferred stock
outstanding is included in average common shares outstanding for
purposes of computing earnings per share, the preferred dividends paid
are not deducted from net income (loss) to determine net income (loss)
to common stock. The inclusion of Series A preferred stock in the
computation of earnings per share was antidilutive for the years and
certain quarters in 1994, 1993 and 1992. In December 1994, all Series A
preferred stock was converted into common stock. 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 December 31, 1994, the SECT had
utilized 4,944,146 of these shares. Other convertible securities and
common stock equivalents outstanding during each of the five years
ended December 31, 1994, 1993, 1992, 1991 and 1990 were not materially
dilutive.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following review of the results of operations and financial condition of
Tenneco Inc. and consolidated subsidiaries should be read in conjunction with
the Consolidated Financial Statements and related notes.
YEARS 1994 AND 1993
1994 STRATEGIC ACTIONS
During 1994, Tenneco completed or initiated several strategic objectives
designed to demonstrate its commitment to growing earnings per share and
building shareowner value. These actions included the following:
. In June, Tenneco completed an initial public offering ("IPO") of
approximately 29 percent of the common stock of Case Corporation ("Case"),
its farm and construction equipment segment. A secondary public offering in
November further reduced Tenneco's interest in Case to approximately 44
percent. Combined proceeds from the two transactions were $694 million, net
of commissions and expenses. The combined gain on the transactions was $36
million, including a $7 million income tax benefit. From July through
November 1994, Tenneco's income was reduced to reflect the 29 percent
minority interest in Case resulting from the IPO in June 1994. Subsequent to
November, Case was reflected in Tenneco's financial statements using the
equity method of accounting.
. In December, Tenneco announced its intent to offer 100 percent of Albright &
Wilson, its chemical segment, in an IPO offered primarily in the United
Kingdom. This resulted in an after-tax loss on the sale of $170 million, or
94 cents per average common share, and net proceeds of $707 million. The
offering was completed in early March 1995.
. Also in December, Tenneco began to repurchase up to $500 million of its
outstanding common shares. At December 31, 1994, 1,160,000 shares had been
acquired at a cost of $49 million. The repurchase program is expected to
continue into the second quarter of 1995.
. New projects or acquisitions have been announced representing capital
commitments of approximately $600 million over the next three years as a
part of the strategy to redeploy assets from slower-growth cyclical
businesses into higher-growth areas. These commitments include new
international projects in Australia, India, China and Germany, as well as
domestic opportunities in packaging and natural gas.
24
<PAGE>
RESULTS OF OPERATIONS
REVENUES
Revenues for 1994 were $12.17 billion, down slightly from $12.29 billion in
1993. Natural gas pipelines revenues were down $484 million or 17 percent as
customers shifted from sales to transportation service in the regulated
business and gas prices fell in the nonregulated gas marketing business.
Revenues for farm and construction equipment were $3.88 billion, compared with
$3.75 billion in 1993. Tenneco excluded Case's revenues for December because of
the change to the equity accounting method for Case. Case revenues were up in
1994 over 1993 due to higher sales volumes both in the European construction
equipment business and the North American agricultural equipment market.
Automotive parts revenues were $1,989 million, a $204 million, or 11 percent
increase, compared with 1993 primarily due to improved sales in both the
aftermarket and original equipment market. Revenues for shipbuilding decreased
to $1.75 billion, or six percent, due to a drop in carrier and submarine
construction work and the fourth quarter 1993 divestiture of Sperry Marine.
Packaging revenues increased $142 million, or seven percent, to $2.18 billion
in 1994, as prices in the containerboard business recovered from the seven-year
low reached in the third quarter of 1993.
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST (OPERATING
INCOME)
Operating income was $1,379 million for 1994. This was an improvement of $282
million over 1993's operating income of $1,097 million. Excluding gains from
asset sales and other special items including plant consolidations, 1994
operating income increased $364 million, or 37 percent, compared with 1993
primarily due to improved pricing in packaging's containerboard business and
higher volumes in the farm and construction equipment segment.
NATURAL GAS PIPELINES
REVENUES
Revenues for natural gas pipelines decreased $484 million to $2,378 million
in 1994. This primarily is a result of the implementation of Federal Energy
Regulatory Commission ("FERC") Order 636 during the fall of 1993, which
essentially ended natural gas sales by regulated pipelines. Additionally, the
decline in natural gas prices in 1994 lowered revenues in the nonregulated
segment. Revenues from the regulated businesses decreased $384 million to $918
million in 1994, while revenues from nonregulated businesses decreased $100
million to $1,460 million in 1994.
OPERATING INCOME
Natural gas pipelines operating income for 1994 was $415 million, compared
with $411 million in 1993. Special items, including gains on asset sales along
with regulatory and litigation settlements, amounted to $34 million in 1994 and
$28 million in 1993. Special items in 1994 included a $23 million gain on the
sale of a 20 percent interest in Tenneco Energy Resources Corporation to
Ruhrgas AG. When non-recurring items in both years are excluded, operating
income in 1994 declined slightly, compared with 1993. Significant growth in the
nonregulated businesses, including an increase in Tenneco Ventures' operating
income, was offset by declines in the regulated business caused by implementing
Order 636.
OUTLOOK
Tenneco Gas' strategy for future growth is to utilize its regulated pipelines
to provide a substantial base of income as well as monetize non-strategic
assets and redeploy those resources into more profitable, nonregulated
businesses. During 1994, Tenneco Gas achieved record transportation volumes in
both its regulated and nonregulated pipelines, and plans to continue
maintaining its market strength in the future. Tenneco Gas' regulated pipelines
moved to expand its markets by proposing to build the 350-mile Mid-Atlantic
Pipeline. In addition, Tenneco Gas has committed approximately one-half of its
capital budget for
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1995 to investments in the nonregulated businesses, compared with three percent
in 1992. Also, during 1994, Tenneco Gas was chosen to participate in
constructing a pipeline from Bolivia to Brazil and to conduct final feasibility
studies for an offshore pipeline in Taiwan. Tenneco Gas also was selected by
the government of Queensland, Australia, to develop, own and operate a 470-
mile, $170 million pipeline, which is expected to be on-line in 1996. In
addition, Tenneco Gas is engaged in a feasibility study for the construction,
ownership, and operation of a 750-mile pipeline from Argentina to Chile.
In October 1994, Tenneco Gas announced the acquisition of ARK Energy, Inc., a
privately-owned power generation company, for approximately $60 million in
Tenneco Inc. common stock and other consideration. Tenneco Gas is scheduled to
complete the acquisition by midyear 1995.
On December 30, 1994, Tennessee Gas Pipeline Company ("Tennessee") filed a
general rate increase in Docket No. RP95-112 which reflected an increase in
Tennessee's revenue requirement of $118 million, including recovery of certain
environmental costs. 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. This order also
required the convening of a technical conference to address various concerns
raised by the FERC and Tennessee's customers over, among other issues,
Tennessee's ability to provide its shippers with timely and accurate operating
and billing information and the associated systems costs. The ultimate
resolution of these issues may result in adjustments to customer billings.
Subject to the outcome of these issues and certain modifications identified in
the FERC order, the increased rates will become effective on July 1, 1995,
subject to refund. (Reference is made to Note 17, "Commitments and
Contingencies--Environmental Matters," in the "Notes to Financial Statements"
for additional information.)
AUTOMOTIVE PARTS
REVENUES
Revenues for automotive parts increased to $1,989 million in 1994 from $1,785
million in 1993 because of increased sales in both the aftermarket and original
equipment market. Major promotion efforts in support of Monroe's new Sensa-Trac
product were a big factor in the 11 percent revenue increase in the worldwide
replacement market for ride control products.
Increased new car and truck production in North America contributed to a 14
percent increase in worldwide original equipment sales. Total European revenues
improved 19 percent as the economy rebounded from the recession. Worldwide
aftermarket revenues were up 10 percent to $1,253 million in 1994 while
original equipment revenues increased 14 percent to $736 million.
OPERATING INCOME
Automotive parts operating income for 1994 was $223 million, compared with
$222 million in 1993. The 1994 operating income included a $17 million charge
for plant consolidations in Europe associated with acquiring Heinrich Gillet
GmbH & Company ("Gillet") in Germany and a $5 million charge taken in the
second quarter for closing a plant in Ohio. Excluding special items, operating
income increased $23 million, or 10 percent, compared with 1993. This increase
is a result of higher volumes in North America and Europe and was partially
offset by higher costs for new product development and new facility start-up.
In November 1994, Tenneco acquired Gillet for $44 million in cash and $69
million in assumed debt. Gillet is the leading manufacturer of original
equipment exhaust systems and components for European auto makers.
As part of the European consolidation plan, Tenneco consolidated the
headquarters and engineering center in Europe with the Gillet facilities in the
first quarter of 1995. The manufacturing facilities consolidation will occur
later in 1995.
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OUTLOOK
The Gillet acquisition added to Tenneco Automotive's global manufacturing and
engineering network. It also brought many new original equipment customers and
orders to Walker, making it the market share leader in the European original
equipment exhaust market.
Tenneco Automotive's future growth will also come from new product
introductions. Sensa-Trac shocks and struts were introduced in North America,
France, and Australia in 1994 with immediate positive customer response. In
1995 Sensa-Trac products will be introduced in South America and the rest of
Europe.
PACKAGING
REVENUES
Revenues for the packaging segment increased to $2,184 million in 1994 from
$2,042 million in 1993. Containerboard prices improved significantly, and
Packaging achieved record productivity levels despite tightening supply
conditions. Revenues from the containerboard business were up 11 percent to
$1,529 million in 1994 while revenues from the specialty business were
essentially flat.
OPERATING INCOME
Packaging's operating income for 1994 was $209 million, compared with $139
million in 1993. The 1993 operating income included $29 million from gains
related to asset realignment. Excluding these gains, operating income increased
$99 million, or 90 percent, compared with 1993 primarily because of improved
containerboard pricing.
The containerboard business earned $139 million, up $104 million compared
with 1993, excluding the 1993 asset realignment gains. Prices rose from
depressed levels in 1993 and contributed $125 million, excluding the recycling
business, of increased operating income. This was partially offset by higher
raw material costs of $32 million, but improved productivity helped counter
rising raw material costs. Containerboard productivity rose 1.6 percent, with
mill operating rates exceeding rated capacity for the full year. The specialty
business operating income for 1994 declined $5 million to $70 million,
excluding the asset realignment gains in 1993. Both the aluminum and plastic
packaging businesses reported improved operating income. Plastic packaging
volumes grew seven percent in 1994 and demand continues to be strong. Operating
income for plastics rose 40 percent in 1994, reflecting increased volumes and
higher pricing. The increase in operating income provided by the aluminum and
plastic businesses was more than offset by weak performance in the molded fiber
business, where higher raw material costs had a negative effect on operating
income. Prices for recycled newspaper, a major raw material for molded fiber,
rose to over $100 per ton, compared with $26 per ton in 1993.
OUTLOOK
Containerboard production increased six percent throughout the industry in
1994 and, with industry inventory levels at less than four weeks' supply in
December, Packaging expects demand to remain strong in 1995. Despite strong
demand overseas, export shipments during the fourth quarter of 1994 dropped
sharply, as producers worked to meet domestic demand. Packaging expects both
domestic and export demand to remain strong in 1995, and combined with limited
capacity additions, this should keep industry production at or near capacity.
In October 1994, Tenneco announced a $73 million upgrade at the Counce,
Tennessee, mill. This upgrade should be completed by the end of the second
quarter of 1996 and increase production capacity by 120,000 tons annually. The
upgrade will allow production of lighter weight linerboard with higher recycled
content and a smoother surface suitable for higher quality printing.
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The specialty business also offers opportunities for growth and higher
margins. The aluminum foil container market is growing at four percent per
year, and the plastic food service business has expanded at five to eight
percent per year over the past five years, a pace Packaging expects to
continue. To take advantage of these growth markets, Packaging is aggressively
managing its costs, developing new products and adding capacity as required.
Packaging also consistently reviews acquisition candidates, both domestic and
foreign, for additional sources of growth.
SHIPBUILDING
REVENUES
Revenues for shipbuilding of $1,753 million in 1994 were six percent below
revenues of $1,861 million in 1993. This decrease was due to the 1993
divestiture of Sperry Marine and lower volumes on carrier and submarine work.
OPERATING INCOME
Shipbuilding's operating income for 1994 was $200 million compared with $225
million in 1993. Special items in 1993 included a $15 million gain on the sale
of Sperry Marine and a $12 million benefit from recovering a portion of the
postretirement benefit costs reserve that was established when Statement of
Financial Accounting Standards ("FAS") No. 106 was adopted in 1992. If these
special items were excluded, operating income increased $2 million in 1994 on
revenues that were six percent lower due to aggressive efforts to improve
productivity and control costs.
OUTLOOK
Shipbuilding will continue to seek U.S. Navy work, but at the same time will
focus more on the large, global commercial and military markets. The target is
for Navy work to provide 60 percent of total revenues by 1999, with 40 percent
coming from commercial and international military sectors. U.S. Navy work was
more than 90 percent of total revenues for 1994. Newport News is making capital
investments in support of its efforts to capture future U.S. Navy work and its
expansion into commercial and international military markets, and to improve
its productivity. Major investments now underway include substantial
modifications to its steel production capability to achieve world class
efficiency, expansion of Dry Dock 12 (already the largest in the western
hemisphere) and construction of a consolidated nuclear powered ship refueling
facility.
The backlog at the end of 1994 was $5.6 billion, compared with $3.7 billion
at the end of 1993. The next aircraft carrier, RONALD REAGAN (CVN-76), a
defueling and deactivation contract for the nuclear cruiser LONG BEACH, and two
"Double Eagle" product tankers were added to the backlog in 1994. Newport News
became the first American shipyard since 1957 to obtain a commercial
construction contract from a foreign shipowner with the export order for two
"Double Eagle" product tankers, with an option for two more. The shipyard is
also a finalist for the possible sale of two to six fast frigates to the United
Arab Emirates.
In addition to the three new projects mentioned above, the 1994 backlog
included four LOS ANGELES-class submarines, two NIMITZ-class aircraft carriers
(JOHN C. STENNIS and HARRY S. TRUMAN) and the SEALIFT conversion contract
involving two ships. In addition, Newport News has ongoing engineering
contracts as the lead design yard for the LOS ANGELES-class and SEAWOLF-class
submarines. Newport News also has contracts to plan upcoming overhauls for the
carriers EISENHOWER and ROOSEVELT. Subject to new orders, this existing backlog
will decline as two submarines per year, on average, are delivered through
1996, and the aircraft carriers are delivered in 1995, 1998 and 2002.
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FARM AND CONSTRUCTION EQUIPMENT
In 1994, Tenneco reduced its ownership in Case to approximately 44 percent
through an initial public offering in June and a secondary public offering of
Case's stock in November. As a result, the method of accounting for Case's
financial results changed in December 1994 to the equity method of accounting.
In the months of January through November, Tenneco recorded 100 percent of
Case's revenues, operating income, interest expense and taxes. From July
through November 1994, Tenneco's income was reduced to reflect the 29 percent
minority interest in Case resulting from the initial public offering in June
1994. (For additional information, see "1994 Strategic Actions" above and Notes
1 and 3, "Summary of Accounting Policies" and "Discontinued Operations,
Disposition of Assets and Extraordinary Loss," in the "Notes to Financial
Statements.")
REVENUES
Revenues for Case increased to $3,881 million in 1994 from $3,748 million in
1993 due to higher sales volumes in both the construction and agricultural
equipment businesses. Revenues for Case reflected in Tenneco's consolidated
revenues included only the first eleven months of 1994 because of Tenneco's
reduced ownership following the secondary public offering that was completed in
November.
OPERATING INCOME
Case reported operating income of $326 million in 1994, a $244 million
improvement, compared with the $82 million reported in 1993. Several factors
contributed to this improvement in 1994. Higher sales volumes and a 16 percent
increase in worldwide production along with lower discounts and better top-line
pricing contributed to the operating income improvement. Cost reductions were
partially offset by retooling and reconfiguration expenses at the construction
equipment plant in Burlington, Iowa. Case also had higher engineering expenses
to support new product growth.
OUTLOOK
The worldwide outlook for sales of both agricultural and construction
equipment remains strong. Case should benefit from several significant new
products and higher-than-projected foreign purchases of United States grains.
In Europe the economic recovery that began in mid-1994 is expected to continue
to drive increased demand for construction equipment.
Tenneco intends to review its ownership position of Case periodically and may
consider future dispositions through sales of shares through public or private
offerings, through dividends or distributions to its stockholders, or
otherwise. Any such future dispositions will depend upon a number of factors,
including existing market conditions and the tax consequences of the
transactions in question. Under the terms of Case's credit facilities, Tenneco
has agreed that it, directly or indirectly, will own at least 30 percent of
Case's outstanding common stock until Case's senior debt has been rated
investment grade by two nationally recognized rating agencies, at least one of
which shall be Moody's Investors Service or Standard and Poor's Rating Group,
and at least $500 million of Case's term loan has been repaid.
OTHER
Tenneco's other operations reported operating income of $6 million in 1994,
compared with $18 million for 1993. The 1993 operating income included a gain
of $39 million from contributing Tenneco's investment in Cummins Engine Company
to the Case Corporation Pension Plan for Hourly Paid Employees, while the
operating income for 1994 included gains of $29 million from the Case initial
and secondary public offerings.
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INTEREST EXPENSE (NET OF INTEREST CAPITALIZED)
Net interest incurred declined $20 million from $427 million in 1993 to $407
million in 1994. The decrease was a result of lower debt levels, continued
emphasis on managing for cash flow and working capital and changing Case
reporting to the equity method of accounting in December 1994. Due to the
change in the method of financing dealer receivables as a result of the Case
IPO in June 1994, financing costs for Case's wholesale receivables were
reported as interest expense. Before the change in financing method, the Case
wholesale financing costs were reported as "Finance Charges--Tenneco Finance."
If the Case wholesale receivable interest was excluded for the full year,
interest expense would have decreased by an additional $24 million from last
year's level. Interest capitalized increased to $6 million in 1994 from $4
million in 1993 due to higher levels of major capital projects.
Finance charges (interest expense related to finance subsidiaries classified
as an operating expense) were $155 million in 1994 versus $254 million in 1993.
Approximately $2.0 billion in debt of Tenneco's finance subsidiaries was
retired during the year resulting in lower finance charges. Interest expense
related to debt on wholesale receivables was included as interest expense
rather than finance charges from July through November 1994 as indicated above.
In December, the method of reporting Case changed to the equity method, and
Case's debt is no longer consolidated with Tenneco's debt on the balance sheet.
In addition, Tenneco's finance subsidiaries reduced debt with proceeds from
issuing lower-cost asset backed securities.
MINORITY INTEREST
Minority interest expense was $30 million for the 1994 year. This primarily
reflected the minority shareholders' interest in Case's net income for July
through November 1994.
INCOME TAXES
Income tax expense for 1994 was $301 million versus $257 million reported for
1993. The increased tax expense in 1994 was from higher pre-tax income. This
was partially offset by tax benefits from the realization of deferred tax
assets resulting from consolidation of Tenneco's German operations and the tax
benefit associated with sale of businesses. (Reference is made to Note 7,
"Income Taxes," in the "Notes to Financial Statements" for additional
information.)
DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
Loss from discontinued operations in 1994 of $189 million, net of income tax
expense of $104 million, or $1.04 per average common share, resulted from the
sale of Tenneco's chemicals and brakes businesses. The loss of $196 million,
net of $100 million of income tax expense, on the sale of these businesses
included a $170 million loss, net of income tax expense of $115 million, from
the sale of the chemicals business, and a $26 million loss from the sale of the
brakes business, net of income tax benefit of $15 million. Net income from the
chemicals operations in 1994 was $12 million, net of income tax expense of $9
million. Net loss in 1994 from the brakes operations was $5 million, net of
income tax benefit of $5 million.
Income from discontinued operations in 1993 of $38 million, net of income tax
expense of $1 million, or 23 cents per average common share, was attributable
to the sale of Tenneco's brakes business and chemical operations in 1994. Net
loss for 1993 for the brakes business was $7 million, net of income tax benefit
of $4 million. Net income for the chemicals business was $45 million, net of
income tax expense of $5 million.
Extraordinary loss for 1994 was $5 million, net of income tax benefit of $2
million, or 3 cents per average common share. The 1993 amount was $25 million,
net of income tax benefit of $13 million, or 15 cents per average common share.
Both were the result of redemption premiums from prepaying high interest-
bearing long-term debt. (Reference is made to Note 3, "Discontinued Operations,
Disposition of Assets and Extraordinary Loss" in the "Notes to Financial
Statements" for additional information.)
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CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, Tenneco adopted 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 adopting this statement, the 1994 Statement of Income (Loss)
reflected an after-tax charge of $39 million, or 22 cents per average common
share, for the cumulative effect of the accounting change. (Reference is made
to Note 1, "Summary of Accounting Policies--Changes in Accounting Principles,"
in the "Notes to Financial Statements" for additional information.)
EARNINGS (LOSS) PER AVERAGE COMMON SHARE
Income from continuing operations for 1994 was $641 million, or $3.49 per
average common share after preferred dividends. This compares with income from
continuing operations of $413 million, or $2.36 per average common share after
preferred dividends, in 1993. Net income to common stock was $396 million, or
$2.20 per average common share, in 1994 compared with net income to common
stock of $412 million, or $2.44 per average common share in the prior year. The
1994 net income to common stock included the loss from discontinued operations
of $189 million, or $1.04 per average common share, the extraordinary loss of
the $5 million, or 3 cents per average common share, and the loss of $39
million, or 22 cents per average common share, from the cumulative effect of a
change in accounting principle. The 1993 net income to common stock included
income from discontinued operations of $38 million, or 23 cents per average
common share, and the extraordinary loss of $25 million, or 15 cents per
average common share. Preferred stock dividends were $12 million for 1994 and
$14 million for 1993.
Average number of shares of common stock outstanding used for calculating
earnings per average common share for 1994 were 180.1 million, compared with
168.8 million in 1993, excluding the SECT shares described below. Most of the
increase came from issuing the 23.5 million shares in the April 1993
underwritten public offering and issuing treasury shares and SECT shares to
employee benefit plans.
In November 1992, Tenneco established a stock employee compensation trust
("SECT") to fund a portion of its obligations arising from its various employee
compensation and benefit plans. Tenneco issued 12 million shares of treasury
stock to the SECT, which has a five-year life during which it will use the
common stock to satisfy those obligations. Shares of common stock issued to the
SECT are not considered to be outstanding in computing average shares of common
stock outstanding until the shares are used to fund the obligations for which
the trust was established. In 1994, the SECT issued approximately 2.5 million
shares of common stock, with a market value of $120 million, to fund employee
compensation and benefit plans. (Reference is made to Note 9 "Common Stock" and
to Note 10 "Preferred Stock" in the "Notes to Financial Statements" for
additional information.)
LIQUIDITY & CAPITAL RESOURCES
OPERATING ACTIVITIES
Net cash provided by operating activities was $450 million for the year 1994,
compared with $1,615 million for 1993, a decrease of $1,165 million. Excluding
discontinued operations, there was a decrease of $1,232 million. This decrease
was due in part to lower sales of Case retail receivables in the form of asset
backed securities. Proceeds from the sale of Case retail receivables in the
form of asset backed securities were $850 million in 1994 compared with $1.0
billion in 1993. Also, trade receivables sold to Asset Securitization
Cooperative Corporation were $313 million less in 1994 compared with 1993.
Higher dealer demand for farm and construction equipment in 1994 resulting in
higher receivables compared with 1993 also lowered cash from operating
activities. Finally, rate refund payments of approximately $250 million were
made to pipeline
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customers in 1994. The working capital increase of $587 million for 1994
resulted primarily from the reduction of the pipeline rate refund liability of
approximately $250 million and lower tax accruals of $255 million. The lower
tax accruals resulted from the utilization of capital losses related to the
sale of assets.
INVESTING ACTIVITIES
Net cash used by investing activities in 1994 was $117 million, compared with
$338 million in 1993. Net proceeds from the sale of businesses and assets were
$860 million in 1994, primarily due to the initial and secondary public
offerings of Case for $694 million. Net proceeds from the sale of businesses in
1993 of $266 million resulted from the sales of Dean Pipeline, Viking Pipeline,
Sperry Marine, and various international aluminum ventures. (Reference is made
to Note 3, "Discontinued Operations, Disposition of Assets and Extraordinary
Loss," in the "Notes to Financial Statements" for additional information.)
Expenditures for plant, property and equipment from continuing operations for
1994 were $736 million, compared with $525 million for 1993. Increased
expenditures for natural gas pipelines ($161 million), automotive parts ($20
million), packaging ($42 million) and other ($13 million) were partially offset
by declines for farm and construction equipment ($18 million) and shipbuilding
($7 million). (See Note 15, "Segment and Geographic Area Information" in the
"Notes to Financial Statements" for a complete breakdown of capital
expenditures by operating segment.)
FINANCING ACTIVITIES
Cash used for financing activities for 1994 was $151 million compared with
$1,166 million in 1993. In June 1994, as part of the Case reorganization and
IPO, Case borrowed $983 million of term loans and $478 million of short-term
debt to acquire the net assets of Tenneco's farm and construction equipment
segment. Tenneco utilized these funds to repay long-term debt. As a result of
the November 1994 secondary public offering which reduced Tenneco's ownership
in Case to approximately 44%, Case's debt is no longer consolidated with
Tenneco's debt on the balance sheet at December 31, 1994, due to reporting Case
on the equity method of accounting.
In December 1994, Tenneco sold a 25 percent preferred stock interest in a
subsidiary which resulted in net cash proceeds of $296 million. This was
included in minority interest in the balance sheet at December 31, 1994.
Concurrently, $160 million was used to retire equity securities of another
subsidiary which had been included in the balance sheet as minority interest.
(Reference is made to Note 11, "Minority Interest," in the "Notes to Financial
Statements" for additional information.)
CAPITALIZATION
Capitalization totaled $7.48 billion at December 31, 1994, a decrease of
$1.51 billion from December 31, 1993. The ratio of total debt to capitalization
decreased from 67.6 percent at December 31, 1993, to 55.0 percent at December
31, 1994. The ratio of total debt to capitalization was 52.9 percent at
December 31, 1994, including the market value of the SECT shares, compared with
64.0 percent at December 31, 1993. Total debt declined by $1.96 billion from
December 31, 1993 to December 31, 1994, while stockholders' equity increased
$299 million. Minority interest increased $167 million and preferred stock
decreased $16 million.
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FERC MATTERS
Tennessee has deferred certain costs associated with renegotiating gas supply
contracts as a result of FERC Order 636 ("GSR costs"). The amount to be
recovered from its customers is approximately $177 million, net of $187 million
previously collected subject to refund, at December 31, 1994. Proceedings have
commenced to review the recovery of these GSR costs; however, the FERC has also
generally encouraged pipelines to settle such issues through negotiations with
customers. Although Order 636 contemplates complete recovery by pipelines of
qualified transition costs, Tennessee has initiated settlement discussions with
its customers concerning the amount of recoverable GSR costs in response to
recent FERC and customer statements acknowledging the desirability of such
settlements. Tennessee is also engaged in separate settlement and contract
reformation discussions with holders of certain gas purchase contracts who have
sued Tennessee, although Tennessee believes that its defenses in the underlying
gas purchase contract actions are meritorious.
In connection with Tennessee's GSR cost recovery, 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 FERC consolidated the four
proceedings and set them for hearing before an administrative law judge who is
to issue his initial decision by December 31, 1995. The FERC has committed to a
final order by December 31, 1996. The FERC order stated that the costs related
to the Great Plains project are eligible for recovery through GSR and other
special recovery mechanisms and that the costs are eligible for recovery for
the duration of the term of the original gas purchase agreements. The hearing
will be limited to the issue of whether the settlement agreements are prudent.
Also in connection with Tennessee's GSR cost recovery 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 believes it has meritorious defenses to the claims of
ICA and TransTexas, which defenses it will vigorously assert.
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.
Following issuance of the final order by the FERC approving Tennessee's
partial settlement of its 1991 rate case, Tennessee has made refunds to its
customers of approximately $200 million in February 1995 related to rates
collected since September 1, 1993 to October 31, 1994. (See Note 6, "Federal
Energy Regulatory Commission ("FERC") Regulatory Matters," in the "Notes to
Financial Statements" for additional information.)
ENVIRONMENTAL MATTERS
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
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operations and that do not contribute to current or future revenue generation,
are expensed. Liabilities are recorded when environmental assessments indicate
that remedial efforts are probable and the costs can be reasonably estimated.
Estimates of the liability are based upon currently available facts, existing
technology, and presently enacted laws and regulations taking into
consideration the likely effects of inflation and other societal and economic
factors. All available evidence is considered, including prior experience in
remediation of contaminated sites, other companies' cleanup experience, and
data released by the United States Environmental Protection Agency ("EPA") or
other organizations. These liabilities are included in the balance sheet at
their undiscounted amounts. Recoveries are evaluated separately from the
liability and, when recovery is assured, are recorded separately from the
associated liability in the financial statements.
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 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 anticipates that it
will soon reach an agreement with the Pennsylvania Department of Environmental
Resources ("PaDER") and will enter into a consent order on remediation at the
Pennsylvania stations (under which Tennessee also agrees to pay a civil penalty
and to make a contribution for environmental projects); meanwhile, Tennessee
will continue its negotiations with the New York Department of Environmental
Conservation on remediation at the New York stations. Tenneco believes that the
ultimate resolution of this matter will not have a material adverse effect on
the financial condition or results of operations of Tenneco Inc. and its
consolidated subsidiaries. (See Note 6, "Federal Energy Regulatory Commission
("FERC") Regulatory Matters" in the "Notes to Financial Statements" for
additional information.)
A subsidiary of Tennessee owns a 13.2% general partnership interest in
Iroquois Gas Transmission System, L.P. ("Iroquois"), which owns an interstate
natural gas pipeline from the Canadian border through the states of New York
and Connecticut to Long Island. The operator of the pipeline is Iroquois
Pipeline Operating Company ("the Operator"), a subsidiary of TransCanada
Pipelines, Ltd., an affiliate of TransCanada Iroquois, Ltd. which is also a
partner in Iroquois.
In early 1992, Iroquois was informed by U.S. Attorney's Offices for the
Northern, Southern, and Eastern Districts of New York that a civil
investigation had been initiated to determine whether civil environmental
violations occurred during construction of the pipeline. In February 1992, 26
alleged violations were identified to Iroquois in writing. In response,
Iroquois denied that such violations had occurred and asserted that all
concerns raised by governmental authorities during construction had been fully
addressed. Iroquois subsequently was informed that the alleged violations
included certain field reports prepared by a Federal/State Inter-Agency Task
Force which surveyed the right-of-way in connection with the right-of-way
restoration program. Iroquois responded to the appropriate U.S. Attorneys'
Offices that none of the matters referenced in field reports issued to date
represent violations of any law or governmental authorization. As of March 28,
1995, no proceedings in connection with this civil investigation have been
commenced against Iroquois by the federal government.
On December 3, 1993, Iroquois received notification from the Enforcement
Staff of the Federal Energy Regulatory Commission's Office of the General
Counsel ("Enforcement") that Enforcement has commenced a preliminary, non-
public investigation concerning the construction of certain of Iroquois'
pipeline facilities. That office has requested certain information regarding
such construction. In addition, on December 27, 1993, Iroquois received a
similar request for information from the Army Corps of Engineers requesting
certain information regarding permit compliance in connection with certain
aspects of the pipeline's construction. By a notice issued on February 6, 1995,
the Public Service Commission of the State of New York (the "NYPSC") also has
requested Iroquois to respond to certain allegations set out in a petition
filed by GASP
34
<PAGE>
Coalition and Anne Marie Mueser in January 1995 with the NYPSC requesting an
investigation by the NYPSC of aspects of the construction of the pipeline.
Iroquois has been evaluating and responding to these agencies' requests for
information. No proceedings have been commenced against Iroquois in connection
with these agency inquiries.
A criminal investigation relating to the construction of the pipeline
facilities has been initiated by the U.S. Attorney's Office for the Northern
District of New York in conjunction with the EPA and the Federal Bureau of
Investigation ("FBI"). According to a press release issued by the FBI in June
1992, areas under investigation include possible environmental violations, wire
fraud, mail fraud and providing false information or concealment of information
from federal agencies in conjunction with construction of the pipeline. While
no criminal charges have been filed to date, counsel for Iroquois and counsel
for the Operator have met with the Assistant U.S. Attorney in charge of the
investigation and plan to meet with him again in the near future in order to
discuss the issues under investigation and to explore the possibility of a
negotiated resolution of the issues raised in the criminal, civil and
administrative inquiries (a "global resolution"). In the absence of a
negotiated resolution, Iroquois deems it probable that the U.S. Attorney will
seek indictments and, in them, substantial fines and other sanctions.
As a general partner, Tennessee's subsidiary may be jointly and severally
liable with the other partners for the liabilities of Iroquois. Tennessee has a
contract to provide gas dispatching as well as post-construction field
operation and maintenance services for the Operator of Iroquois, but Tennessee
is not the Operator and is not an affiliate of the Operator. Moreover, the
foregoing proceedings and investigations have not affected pipeline operations.
Based upon information available to Tennessee at March 28, 1995, Tennessee
believes that neither Tennessee nor any of its subsidiaries is a target of the
criminal investigation described above. Further, while a global resolution of
these inquiries could have a material adverse effect on the financial condition
of Iroquois, Tennessee believes that the ultimate resolution of these matters
will not have a material adverse effect on the financial condition or results
of operations of Tenneco Inc. and its consolidated subsidiaries.
At December 31, 1994, Tenneco has been designated as a potentially
responsible party in 66 "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
remediation costs to be between $13 million and $72 million or 0.4% to 2.2% of
the total remediation costs for those sites and has provided reserves that it
believes are adequate for such costs. Because the cleanup 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 believes that the costs
associated with its current status as a potentially responsible party in the
Superfund sites described above will not be material to its consolidated
financial position or results of operations. (For further information,
reference is made to Note 17, "Commitments and Contingencies--Environmental
Matters," in the "Notes to Financial Statements." )
CREDIT AGREEMENTS
In November 1994, Tenneco entered into a five-year $1.6 billion credit
agreement with banks to replace a $1.4 billion credit agreement that would
otherwise have terminated in December 1995. With this new credit agreement,
Tenneco and its consolidated subsidiaries had, at December 31, 1994, committed
credit agreements providing for $2,088 million of borrowing capacity. Of these
facilities, $2.0 billion are committed through 1999. As of December 31, 1994,
$34 million of borrowings were outstanding under these facilities,
35
<PAGE>
and the remaining $2,054 million was available for borrowing. The availability
of borrowings under Tenneco's credit agreements and facilities is subject to
its ability at the time to meet certain specified conditions, which Tenneco
believes it currently meets. These conditions include compliance with the
financial covenants and ratios required by such agreements, absence of default
under such agreements, and continued accuracy of the representations and
warranties contained in such agreements (including the absence of any material
adverse changes since the specified dates).
ABILITY TO PAY DIVIDENDS
As a holding company, Tenneco Inc.'s ability to pay dividends is
substantially dependent upon the cash flow from its subsidiaries by way of
dividends, distributions, loans and other advances. Under the most restrictive
of their covenants, however, Tenneco Inc.'s subsidiaries would have been able
to pay $2.9 billion of their retained earnings as dividends to Tenneco Inc. at
December 31, 1994.
Dividends may be paid by Tenneco Inc. out of "surplus" (as defined by
applicable corporate law) or, if there is not a surplus, out of net profits for
the year in which the dividends are declared or out of net profits for the
preceding fiscal year. At December 31, 1994, Tenneco Inc. had a surplus of at
least $1.9 billion available for the payment of dividends.
Tenneco Inc. is a party to credit agreements containing provisions that limit
the amount of dividends paid on its common stock. At December 31, 1994, under
the most restrictive provisions contained in these credit agreements, Tenneco
Inc. had in excess of $900 million available for the payment of dividends.
LIQUIDITY
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 discussed below,
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.
To minimize the cash flow requirements associated with the implementation of
the FERC Order 636 and the resolution of the GSR costs issues, Tenneco plans to
have available, if required, various financing arrangements to manage the
timing between recovery from pipeline customers and payments for transition
costs. The actual cash flows will depend upon negotiations between Tennessee,
its customers and suppliers, and developments in the restructuring proceedings
with the FERC as Order 636 undergoes clarification and judicial review.
YEARS 1993 AND 1992
RESULTS OF OPERATIONS
REVENUES
Revenues for 1993 were $12.29 billion, up slightly from $12.14 billion in
1992. An increase in natural gas pipeline revenues, up $679 million due to
higher gas volumes, was offset by decreased revenues in all other divisions
except automotive parts where revenues were slightly ahead of 1992.
Shipbuilding reported a $404 million decrease in revenues due to a declining
backlog as a result of reductions in defense spending. Revenues for farm and
construction equipment were down $81 million primarily due to weak construction
and agricultural equipment markets in Europe. Revenues also decreased for
packaging, down $36 million due to lower commodity prices.
INCOME (LOSS) BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST
(OPERATING INCOME OR LOSS)
Operating income for 1993 was $1,097 million, an improvement of $210 million
over 1992, excluding gains of $112 million from 1993 disposition of assets and
investments and the 1992 farm and construction
36
<PAGE>
equipment restructuring charge of $920 million. In 1992, Tenneco recorded a
pre-tax restructuring charge of $920 million ($843 million after tax or $5.85
per average common share) for the farm and construction equipment group.
(Reference is made to Note 16 "Restructuring Costs" and Note 3 "Discontinued
Operations, Disposition of Assets and Extraordinary Loss" in the "Notes to
Financial Statements" for additional information.)
Natural gas pipelines operating income for 1993 was $411 million compared
with $360 million in 1992. Revenues increased to $2,862 million in 1993 from
$2,183 million in 1992 due primarily to higher gas volumes as a result of the
acquisition in December 1992 of EnTrade Corporation, a natural gas marketing
firm. Transportation volumes increased due to a return to normal weather and
increased market demand. Partially offsetting these revenue increases were
higher gas purchase costs, higher depreciation relating to capital additions
placed in service in late 1992 and increased pipeline maintenance expenses. The
1993 operating income includes $31 million in gains on asset sales and $34
million from a favorable rate decision that allows collection from customers of
the transition obligation that was established at the time Tenneco adopted FAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." These gains were partially offset by a reserve of $10 million
established for gas costs as well as by litigation settlements related to
divested operations and a one-time expense related to a gas inventory charge.
Farm and construction equipment reported operating income of $82 million in
1993, a $342 million improvement over the $260 million operating loss in 1992,
excluding the restructuring charge of $920 million. The $342 million
improvement in 1993 results (excluding the restructuring charge) came despite a
$81 million drop in revenues compared to the prior year. The decreased revenues
were driven by continued weakness in European markets and loss of sales from
products discontinued under the Case restructuring programs. Lower worldwide
sales volumes in 1993 were more than offset by savings in several critical
operating areas. Improved price realization was the major profit driver as Case
continued its value-based pricing strategy of lower discounts and higher
pricing. The company-wide focus on operating cost reductions and manufacturing
performance improvements also contributed to 1993 results.
Automotive parts operating income for 1993 declined $15 million to $222
million compared with $237 million in 1992. Revenues were slightly ahead of
1992. Higher revenues were led by an increase in North American original
equipment sales relating to Walker exhaust products and Monroe ride control
products due to increased new car and light truck production. North American
exhaust aftermarket sales were also up. Offsetting the increased revenues were
lower revenues in European original equipment and aftermarkets due to the
continuing recession in Europe and lower sales in the North American ride
control aftermarket due to sluggish demand and stiff price competition.
Improvements in 1993 operating income from the higher North American original
equipment market and aftermarket exhaust revenues, combined with aggressive
cost management and quality program initiatives, were more than offset by the
effects of the weaker North American ride control aftermarket conditions,
unfavorable foreign exchange rates and the recessionary conditions in Europe.
Shipbuilding's 1993 operating income was $225 million compared with $249
million in 1992. Revenues decreased $404 million in 1993 due to a declining
backlog resulting from lower defense spending. The 1993 operating income
included a $15 million gain on the sale of the Sperry Marine business and a $12
million benefit from the recognition of the recovery of a portion of the
postretirement benefit costs reserve that was established when FAS No. 106 was
adopted in 1992. Excluding the gain on the sale of the Sperry Marine business
and the recovery of a portion of the postretirement benefit costs, operating
income decreased from 1992 due to the declining backlog. Partially offsetting
the lower operating income were the effects of several management initiatives
undertaken in 1993 and 1992, which included headcount reductions and
organization changes that improved operating efficiencies.
Packaging ended the year with $139 million in operating income, down from
$221 million in 1992. Revenues decreased only slightly by $36 million, as
higher containerboard volumes were more than offset by
37
<PAGE>
lower linerboard prices which fell from an average price of approximately $345
per ton in 1992 to an average price of $295 per ton in 1993. Earnings were
depressed by weak linerboard and paperboard prices in the commodity business
where profitability fell from $134 million in 1992 to $38 million in 1993. The
specialty businesses ended the year at $101 million in operating income, which
included gains from asset sales, partially offset by asset realignment costs,
of $26 million, versus operating income of $87 million for 1992, in spite of
extreme pricing pressures in molded fiber markets. Offsetting some of the
pricing and market conditions were operating cost reductions and favorable
purchasing initiatives.
Tenneco's other operations reported operating income of $18 million for 1993,
compared to a loss of $32 million in 1992. The improvement was primarily
attributable to the gain of $39 million from the contribution of Tenneco's
investment in Cummins Engine Company of 3.2 million shares of common stock to
the Case Corporation Pension Plan for Hourly-Paid Employees ("Case Plan") in
December 1993.
INTEREST EXPENSE (NET OF INTEREST CAPITALIZED)
Net interest incurred declined $69 million, from $496 million in 1992 to $427
million in 1993, due primarily to lower debt levels from the retirement of $1.0
billion in debt with the proceeds of the April 1993 equity offering. Interest
capitalized decreased to $4 million in 1993 from $5 million in 1992 due to
lower levels of major capital projects. Finance charges (interest expense
related to finance subsidiaries classified as an operating expense) were $254
million in 1993 versus $364 million in 1992. The lower expense was due to lower
average debt levels primarily due to the retirement of $1.0 billion of
Tenneco's finance subsidiaries' debt with proceeds from the issuance of lower-
cost asset backed securities as well as lower interest rates.
INCOME TAXES
Income tax expense for 1993 was $257 million versus $73 million reported for
1992. The increased tax expense in 1993 was attributable to higher pre-tax
income and the increase in the U.S. corporate tax rate from 34 percent to 35
percent. Partially offsetting these increases was a $48 million tax benefit
from a tax realignment of Tenneco's operations in Germany and a lower level of
unbenefitted foreign losses.
DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
Extraordinary loss for 1993 of $25 million, net of income tax benefit of $13
million, or 15 cents per average common share, and for 1992 of $12 million, net
of income tax benefit of $6 million, or 8 cents per average common share, were
attributable to redemption premiums related to the prepayment of higher
interest-bearing long-term debt.
Income from discontinued operations in 1993 of $38 million, net of income tax
expense of $1 million, or 23 cents per average common share, was attributable
to the sales of Tenneco's brakes business and chemical operations in 1994. Net
loss for 1993 for the brakes business was $7 million, net of income tax benefit
of $4 million. Net income for the chemicals business was $45 million, net of
income tax expense of $5 million.
Income from discontinued operations in 1992 of $102 million, net of income
tax expense of $49 million, or 72 cents per average common share, was
attributable to the sales of Tenneco's minerals and pulp chemicals businesses
in 1992, and brakes and chemicals businesses in 1994. The sales of businesses
resulted in a $96 million gain, net of $45 million income tax expense, from the
sale of the minerals business, and a $25 million loss from the sale of the pulp
chemicals business (no tax effect). Net income for 1992 from minerals
operations was $3 million, net of income tax expense of $3 million. Net loss
from the brakes business was $7 million, net of income tax benefit of $5
million, and net income from the chemicals operations, including the pulp
chemicals business, was $35 million, net of income tax expense of $6 million.
(Reference is made to Note 3, "Discontinued Operations, Disposition of Assets
and Extraordinary Loss," in the "Notes to Financial Statements" for additional
information.)
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<PAGE>
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1992, Tenneco elected early adoption of FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," for
its domestic operations and FAS No. 109, "Accounting for Income Taxes." Both
standards were adopted using the cumulative catch-up method. As a result of the
adoption of these two statements, the 1992 Statement of Income (Loss) included
an after-tax charge of $699 million, or $4.86 per average common share, for the
cumulative effect of the accounting changes consisting of $414 million, or
$2.88 per average common share, for FAS No. 106, and $285 million, or $1.98 per
average common share, for FAS No. 109.
EARNINGS (LOSS) PER AVERAGE COMMON SHARE
Income from continuing operations for 1993 was $413 million, or $2.36 per
average common share after preferred dividends, compared with a loss from
continuing operations of $714 million, or $5.07 per average common share after
preferred dividends in 1992. Net income to common stock was $412 million, or
$2.44 per average common share in 1993, versus a net loss to common stock of
$1.34 billion, or $9.29 per average common share in the prior year. Included in
the 1993 net income (loss) to common stock was income from discontinued
operations of $38 million, or 23 cents per average common share and an
extraordinary loss of $25 million, or 15 cents per average common share.
Included in 1992 net income (loss) to common stock was income from discontinued
operations of $102 million, or 72 cents per average common share, the
extraordinary loss of $12 million, or 8 cents per average common share and a
charge of $699 million, or $4.86 per average common share relating to the
cumulative effect of changes in accounting principles. The 1992 loss from
continuing operations of $5.07 per average common share included an after-tax
restructuring charge of $5.85 per average common share. Preferred stock
dividends were $14 million for 1993 and $16 million for 1992.
Average shares outstanding used for the calculation of earnings per average
common share for 1993 were 168.8 million compared to 144.1 million in 1992,
excluding the SECT shares. The increase was primarily attributable to the 23.5
million shares issued in the April 1993 underwritten public offering and the
issuance of treasury shares and SECT shares to employee benefit plans.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $1,615 million for the year
1993 compared to $929 million for 1992, an increase of $686 million. Excluding
discontinued operations, there was an improvement of $673 million. This
improvement was due primarily to higher income from continuing operations and
the sale of approximately $1.0 billion of Case retail receivables to limited
purpose business trusts, which issued asset backed securities to the public in
1993. Partially offsetting these improvements were increased refunds to
customers in final settlement of the collection of take-or-pay costs. The
variance of the information reflected in the "Other" category is due primarily
to the reserves established in 1992 for restructuring measures. The working
capital decrease of $475 million for 1993 was due primarily to the sale of
receivables to limited purpose business trusts, which issued asset backed
securities to the public. Partially offsetting the decrease is the reduction in
taxes payable due to higher state tax payments associated with shipbuilding
contract completions and tax deductions associated with the early funding of
the Case Plan through the contribution of Tenneco's investment in Cummins
Engine Company to the pension plan.
Net cash used by investing activities in 1993 was $338 million compared to
$105 million of cash provided in 1992. Net proceeds (expenditures) from the
sale of discontinued operations were $663 million lower in 1993, primarily due
to the sale of Tenneco's minerals and pulp chemicals operations in 1992. This
was partially offset by proceeds from the sale of businesses in 1993 of $266
million, primarily the sales of Dean Pipeline Company and Viking Gas
Transmission Company, shipbuilding's Sperry Marine business, several packaging
operations, and facilities and land of two foreign Case operations. (Reference
is made to Note 3, "Discontinued Operations, Disposition of Assets and
Extraordinary Loss," in the "Notes to Financial Statements" for additional
information on cash provided by these investing activities.)
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<PAGE>
Expenditures for plant, property and equipment from continuing operations
for 1993 were $525 million compared to $507 million for 1992. Increased
expenditures for automotive parts ($31 million), farm and construction
equipment ($41 million) and packaging ($27 million) were basically offset by
declines for natural gas pipelines ($81 million).
Capitalization totaled $8.99 billion at December 31, 1993, a decrease of
$792 million from December 31, 1992. The resulting ratio of total debt to
capitalization dropped from 82.8 percent to 67.6 percent. The total debt to
capitalization ratio was 64.0 percent including the market value of the SECT
shares compared to 78.8 percent at December 31, 1992. The major changes in
capitalization were: total debt down $2.02 billion, stockholders' equity up
$1.27 billion and preferred stock down $28 million. The increase in
stockholders' equity was primarily due to the issuance of 23.5 million shares
of common stock in the April 1993 underwritten public offering, the proceeds
of which were used to retire debt and redeem variable rate preferred stock.
The remaining decrease in debt resulted from the issuance of asset backed
securities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS OF TENNECO INC.
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent public accountants.................................. 41
Statements of income (loss) for each of the three years in the period
ended December 31, 1994.................................................. 42
Balance sheets--December 31, 1994 and 1993................................ 44
Statements of cash flows for each of the three years in the period ended
December 31, 1994........................................................ 46
Statements of changes in stockholders' equity for each of the three years
in the period ended December 31, 1994.................................... 48
Notes to financial statements............................................. 49
</TABLE>
40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Tenneco Inc.:
We have audited the accompanying balance sheets of Tenneco Inc. (a Delaware
corporation) and consolidated subsidiaries as of December 31, 1994 and 1993,
and the related statements of income (loss), cash flows and changes in
stockholders' equity for each of the three years in the period ended December
31, 1994. These financial statements and the schedules referred to below are
the responsibility of Tenneco's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tenneco Inc. and consolidated
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations, cash flows and changes in stockholders' equity for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As more fully discussed in Note 6 to the financial statements, Tennessee Gas
Pipeline Company is a party to litigation, the outcome of which impacts its
ongoing customer settlement discussions over the recoverability of its contract
reformation costs. The ultimate outcome of the litigation and the extent of its
recoverability cannot be presently determined. Accordingly, no provisions for
the resolution of these matters have been made in the accompanying financial
statements.
As discussed in Note 1 to the financial statements, effective January 1, 1994,
Tenneco changed its method of accounting for postemployment benefits. Also as
discussed in Note 1 to the financial statements, effective January 1, 1992,
Tenneco changed its methods of accounting for income taxes and postretirement
benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
index to Part IV, Item 14 relating to Tenneco Inc. and consolidated
subsidiaries are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
The supplemental schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements of Tenneco Inc. and
consolidated subsidiaries taken as a whole.
Arthur Andersen LLP
Houston, Texas
February 16, 1995
41
<PAGE>
<TABLE>
Statements of Income (Loss)
Tenneco Inc. and Consolidated Subsidiaries
-------------------------------------------
Years Ended December 31 (Millions Except Share Amounts) 1994 1993 1992
------------------------------------------------------- ------- ------- --------
<S> <C> <C> <C>
Revenues
Net sales and operating revenues--
Natural gas pipelines $ 2,378 $ 2,862 $ 2,183
Farm and construction equipment 3,881 3,748 3,829
Automotive parts 1,989 1,785 1,763
Shipbuilding 1,753 1,861 2,265
Packaging 2,184 2,042 2,078
Other (11) (11) 25
------- ------- -------
12,174 12,287 12,143
------- ------- -------
Other income--
Interest income 192 277 358
Equity in net income of affiliated companies 54 52 43
Gain (loss) on sale of businesses and assets, net 27 112 (1)
Gain on the sale by a subsidiary of its stock 23 -- --
Other income, net (51) 14 (10)
------- ------- -------
12,419 12,742 12,533
------- ------- -------
Costs and Expenses
Cost of sales (exclusive of depreciation shown below) 7,517 7,532 7,993
Operating expenses 1,856 2,268 1,635
Selling, general and administrative 1,120 1,140 1,256
Finance charges--Tenneco Finance 155 254 364
Depreciation, depletion and amortization 408 471 510
Restructuring costs (16) (20) 920
------- ------- -------
11,040 11,645 12,678
------- ------- -------
Income
Income (loss) before interest expense, income
taxes and minority interest 1,379 1,097 (145)
Interest expense (net of interest capitalized) 407 427 496
------- ------- -------
Income (loss) before income taxes and minority interest 972 670 (641)
Income tax expense (benefit) 301 257 73
------- ------- -------
Income (loss) before minority interest 671 413 (714)
Minority interest 30 -- --
------- ------- -------
Income (loss) from continuing operations 641 413 (714)
Income (loss) from discontinued operations,
net of income tax (189) 38 102
------- ------- -------
Income (loss) before extraordinary loss 452 451 (612)
Extraordinary loss, net of income tax (5) (25) (12)
------- ------- -------
Income (loss) before cumulative effect of
changes in accounting principles 447 426 (624)
Cumulative effect of changes in accounting principles,
net of income tax (39) -- (699)
------- ------- -------
Net income (loss) 408 426 (1,323)
Preferred stock dividends 12 14 16
------- ------- -------
Net income (loss) to common stock $ 396 $ 412 $(1,339)
------- ------- -------
Per Share
Average number of shares of common stock outstanding 180,084,909 168,772,852 144,110,151
Earnings (loss) per average share of common
stock:
Continuing operations $ 3.49 $ 2.36 $ (5.07)
Discontinued operations (1.04) .23 .72
Extraordinary loss (.03) (.15) (.08)
Cumulative effect of changes in accounting principles (.22) -- (4.86)
------- ------- -------
$ 2.20 $ 2.44 $ (9.29)
------- ------- -------
Cash dividends per share of common stock $ 1.60 $ 1.60 $ 1.60
------- ------- -------
The accompanying notes to financial statements are an integral part of these statements of income (loss).
Reference is made to Note 1 for definitions of "Tenneco Industrial" and "Tenneco Finance."
</TABLE>
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<TABLE>
Statements of Income (Loss)
Tenneco Industrial Tenneco Finance
------------------------------- ------------------------------
Years Ended December 31 (Millions Except Share Amounts) 1994 1993 1992 1994 1993 1992
------------------------------------------------------- ------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net sales and operating revenues--
Natural gas pipelines $ 2,378 $ 2,862 $ 2,183 $ -- $ -- $ --
Farm and construction equipment 3,881 3,748 3,829 -- -- --
Automotive parts 1,989 1,785 1,763 -- -- --
Shipbuilding 1,753 1,861 2,265 -- -- --
Packaging 2,184 2,042 2,078 -- -- --
Other (11) (11) 25 -- -- --
------- ------- ------- ------- ------- -------
12,174 12,287 12,143 -- -- --
------- ------- ------- ------- ------- -------
Other income--
Interest income 61 46 62 313 494 675
Equity in net income of affiliated companies 140 158 175 -- -- --
Gain (loss) on sale of businesses and assets, net 27 112 (1) -- -- --
Gain on the sale by a subsidiary of its stock 23 -- -- -- -- --
Other income, net (45) 27 (1) 5 6 6
------- ------- ------- ------- ------- -------
12,380 12,630 12,378 318 500 681
------- ------- ------- ------- ------- -------
Costs and Expenses
Cost of sales (exclusive of depreciation shown below) 7,523 7,538 7,998 -- -- --
Operating expenses 1,882 2,265 1,625 (23) 10 16
Selling, general and administrative 1,225 1,288 1,437 13 10 7
Finance charges--Tenneco Finance -- -- -- 159 275 379
Depreciation, depletion and amortization 406 469 508 2 2 2
Restructuring costs (16) (20) 920 -- -- --
------- ------- ------- ------- ------- -------
11,020 11,540 12,488 151 297 404
------- ------- ------- ------- ------- -------
Income
Income (loss) before interest expense, income taxes
and minority interest 1,360 1,090 (110) 167 203 277
Interest expense (net of interest capitalized) 447 493 618 22 24 58
------- ------- ------- ------- ------- -------
Income (loss) before income taxes and minority interest 913 597 (728) 145 179 219
Income tax expense (benefit) 247 184 (14) 54 73 87
------- ------- ------- ------- ------- -------
Income (loss) before minority interest 666 413 (714) 91 106 132
Minority interest 25 -- -- 5 -- --
------- ------- ------- ------- ------- -------
Income (loss) from continuing operations 641 413 (714) 86 106 132
Income (loss) from discontinued operations, net of
income tax (189) 38 102 -- -- --
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary loss 452 451 (612) 86 106 132
Extraordinary loss, net of income tax (5) (25) (12) (4) (1) --
------- ------- ------- ------- ------- -------
Income (loss) before cumulative effect of changes
in accounting principles 447 426 (624) 82 105 132
Cumulative effect of changes in accounting principles,
net of income tax (39) -- (699) -- -- (6)
------- ------- ------- ------- ------- -------
Net income (loss) 408 426 (1,323) 82 105 126
Preferred stock dividends 12 14 16 -- -- --
------- ------- ------- ------- ------- -------
Net income (loss) to common stock $ 396 $ 412 $(1,339) $ 82 $ 105 $ 126
------- ------- ------- ------- ------- -------
</TABLE>
43
<PAGE>
<TABLE>
Balance Sheets
Tenneco Inc. and Consolidated Subsidiaries
-------------------------------------------
December 31 (Millions) 1994 1993
---------------------- ------- ------
<S> <C> <C>
Assets
Current assets:
Cash and temporary cash investments $ 405 $ 218
Receivables--
Customer notes and accounts (net) 1,535 2,669
Affiliated companies 67 2
Gas transportation and exchange 214 228
Income taxes 234 133
Other 192 139
Inventories 910 1,581
Deferred income taxes 23 61
Prepayments and other 315 386
------- -------
3,895 5,417
------- -------
Investments and other assets:
Investment in affiliated companies 997 470
Other investments, at cost 47 58
Long-term receivables--
Notes and other (net) 805 1,961
Affiliated companies 264 --
Investment in subsidiaries in excess of fair value
of net assets at date of acquisition,
less amortization 331 422
Deferred income taxes 49 38
Other 927 1,327
------- -------
3,420 4,276
------- -------
Plant, property and equipment, at cost 11,108 12,115
Less--Reserves for depreciation, depletion and amortization 5,881 6,435
------- -------
5,227 5,680
------- -------
$12,542 $15,373
------- -------
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt (including current maturities on
long-term debt) $ 545 $ 1,274
Payables--
Trade 1,053 1,315
Affiliated companies 35 22
Gas transportation and exchange 159 136
Taxes accrued 86 158
Interest accrued 127 154
Restructuring liability -- 213
Natural gas pipeline revenue reservation 190 291
Other 859 1,347
------- -------
3,054 4,910
------- -------
Long-term debt 3,570 4,799
------- -------
Deferred income taxes 1,459 1,225
------- -------
Postretirement benefits 603 893
------- -------
Deferred credits and other liabilities 489 629
------- -------
Commitments and contingencies
Minority interest 320 153
------- -------
Preferred stock with mandatory redemption provisions 147 163
------- -------
Stockholders' equity:
Series A preferred stock -- 9
Common stock 957 870
Stock Employee Compensation Trust (common stock held in trust) (298) (499)
Premium on common stock and other capital surplus 3,553 3,714
Cumulative translation adjustments (237) (303)
Retained earnings (accumulated deficit) (905) (980)
------- -------
3,070 2,811
Less--Shares held as treasury stock, at cost 170 210
------- -------
2,900 2,601
------- -------
$12,542 $15,373
------- -------
The accompanying notes to financial statements are an integral part of these balance sheets.
Reference is made to Note 1 for definitions of "Tenneco Industrial" and "Tenneco Finance."
</TABLE>
44
<PAGE>
<TABLE>
Balance Sheets
Tenneco Industrial Tenneco Finance
----------------------------- ----------------------------
December 31 (Millions) 1994 1993 1994 1993
--------------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and temporary cash investments $ 172 $ 213 $ 233 $ 5
Receivables--
Customer notes and accounts (net) 650 561 882 2,098
Affiliated companies 65 57 186 373
Gas transportation and exchange 214 228 -- --
Income taxes 234 133 -- --
Other 187 126 5 13
Inventories 910 1,581 -- --
Deferred income taxes 23 40 -- 21
Prepayments and other 315 393 2 3
------- ------- ------ ------
2,770 3,332 1,308 2,513
------- ------- ------ ------
Investments and other assets:
Investment in affiliated companies 1,762 1,526 -- --
Other investments, at cost 42 53 5 5
Long-term receivables--
Notes and other (net) 214 243 566 1,690
Affiliated companies 264 -- -- 32
Investment in subsidiaries in excess of fair value
of net assets at date of acquisition, less amortization 331 422 -- --
Deferred income taxes 49 38 -- --
Other 951 1,372 3 7
------- ------- ------ ------
3,613 3,654 574 1,734
------- ------- ------ ------
Plant, property and equipment, at cost 11,038 12,046 70 69
Less--Reserves for depreciation, depletion
and amortization 5,863 6,419 18 16
------- ------- ------ ------
5,175 5,627 52 53
------- ------- ------ ------
$11,558 $12,613 $1,934 $4,300
------- ------- ------ ------
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt (including current maturities
on long-term debt) $ 310 $ 179 $ 410 $1,382
Payables--
Trade 1,053 1,315 -- --
Affiliated companies 36 148 7 14
Gas transportation and exchange 159 136 -- --
Taxes accrued 86 132 -- 26
Interest accrued 102 102 25 52
Restructuring liability -- 213 -- --
Natural gas pipeline revenue reservation 190 291 -- --
Other 853 1,286 7 61
-------- ------- ------ ------
2,789 3,802 449 1,535
-------- ------- ------ ------
Long-term debt 2,865 3,143 705 1,710
-------- ------- ------ ------
Deferred income taxes 1,446 1,227 13 (2)
-------- ------- ------ ------
Postretirement benefits 603 893 -- --
-------- ------- ------ ------
Deferred credits and other liabilities 488 631 2 1
-------- ------- ------ ------
Commitments and contingencies
Minority interest 320 153 -- --
-------- ------- ------ ------
Preferred stock with mandatory redemption provisions 147 163 -- --
-------- ------- ------ ------
Stockholders' equity:
Series A preferred stock -- 9 -- --
Common stock 957 870 71 317
Stock Employee Compensation Trust (common stock
held in trust) (298) (499) -- --
Premium on common stock and other capital surplus 3,553 3,714 264 268
Cumulative translation adjustments (237) (303) 2 (8)
Retained earnings (accumulated deficit) (905) (980) 428 479
-------- ------- ------ ------
3,070 2,811 765 1,056
Less--Shares held as treasury stock, at cost 170 210 -- --
-------- ------- ------ ------
2,900 2,601 765 1,056
-------- ------- ------ ------
$11,558 $12,613 $1,934 $4,300
-------- ------- ------ ------
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Tenneco Inc. and Consolidated Subsidiaries
--------------------------------------------
Years Ended December 31 (Millions) 1994 1993 1992
---------------------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Operating Activities
Income (loss) from continuing operations $ 641 $ 413 $ (714)
Adjustments to reconcile income (loss) from continuing operations
to cash provided (used) by continuing operations--
Depreciation, depletion and amortization 408 471 510
Deferred income taxes 179 121 (516)
(Gain) loss on sale of businesses and assets, net (50) (112) 1
Changes in components of working capital--
(Increase) decrease in receivables (111) 483 161
(Increase) decrease in inventories (160) 107 292
(Increase) decrease in prepayments and other current assets 34 23 (5)
Increase (decrease) in payables 92 (124) (156)
Increase (decrease) in taxes accrued (255) (57) 24
Increase (decrease) in interest accrued (31) (46) (19)
Increase (decrease) in restructuring liability (72) (78) (57)
Increase (decrease) in natural gas pipeline revenue reservation (91) 136 144
Increase (decrease) in other current liabilities 7 31 65
(Increase) decrease in long-term notes and receivables (173) 440 580
Take-or-pay (refunds to customers) recoupments, net 26 (34) 92
Other (30) (128) 571
----------- ----------- ------------
Cash provided (used) by continuing operations 414 1,646 973
Cash provided (used) by discontinued operations 36 (31) (44)
----------- ----------- ------------
Net cash provided (used) by operating activities 450 1,615 929
----------- ----------- ------------
Investing Activities
Net proceeds (expenditures) related to the sale of discontinued operations (17) (54) 609
Net proceeds from sale of businesses and assets 860 266 141
Expenditures for plant, property and equipment--
Continuing operations (736) (525) (507)
Discontinued operations (68) (62) (88)
Acquisitions of businesses (51) (14) (10)
Investments and other (105) 51 (40)
----------- ----------- ------------
Net cash provided (used) by investing activities (117) (338) 105
----------- ----------- ------------
Financing Activities
Issuance of common, treasury and SECT shares 188 1,215 318
Purchase of common stock (26) (7) (3)
Issuance of equity securities by a subsidiary 296 -- --
Redemption of equity securities by a subsidiary (160) -- --
Redemption of preferred stock (20) (30) (6)
Issuance of long-term debt 980 3 1,075
Retirement of long-term debt (1,466) (2,019) (1,206)
Net increase (decrease) in short-term debt
excluding current maturities on long-term debt 375 (21) (1,048)
Dividends (common and preferred) (318) (307) (266)
----------- ----------- ------------
Net cash provided (used) by financing activities (151) (1,166) (1,136)
----------- ----------- ------------
Effect of foreign exchange rate changes on cash and temporary
cash investments 5 (4) (18)
----------- ----------- ------------
Increase (decrease) in cash and temporary cash investments 187 107 (120)
Cash and temporary cash investments, January 1 218 111 231
----------- ----------- ------------
Cash and temporary cash investments, December 31 (Note) $ 405 $ 218 $ 111
----------- ----------- ------------
Cash paid during the year for interest $ 613 $ 759 $ 926
Cash paid during the year for income taxes (net of refunds) $ 380 $ 349 $ 729
----------- ----------- ------------
</TABLE>
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."
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at date of purchase.
46
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Tenneco Industrial Tenneco Finance
-------------------------- ---------------------------
Years Ended December 31 (Millions) 1994 1993 1992 1994 1993 1992
---------------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Operating Activities
Income (loss) from continuing operations $ 641 $ 413 $ (714) $ 86 $ 106 $ 132
Adjustments to reconcile income (loss) from continuing operations
to cash provided (used) by continuing operations--
Depreciation, depletion and amortization 406 469 508 2 2 2
Deferred income taxes 167 127 (510) 12 (6) (6)
(Gain) loss on sale of businesses and assets, net (50) (112) 1 -- -- --
Changes in components of working capital--
(Increase) decrease in receivables (1,235) 70 (134) 1,027 612 406
(Increase) decrease in inventories (160) 107 292 -- -- --
(Increase) decrease in prepayments and other current assets 37 15 6 4 13 (10)
Increase (decrease) in payables (110) (272) (255) 89 (7) 27
Increase (decrease) in taxes accrued (235) (46) 38 (20) (11) (14)
Increase (decrease) in interest accrued (3) (29) 11 (29) (17) (30)
Increase (decrease) in restructuring liability (72) (78) (57) -- -- --
Increase (decrease) in natural gas pipeline revenue reservation (91) 136 144 -- -- --
Increase (decrease) in other current liabilities 27 37 39 (20) (6) 26
(Increase) decrease in long-term notes and receivables (46) (1) (2) (134) 405 566
Take-or-pay (refunds to customers) recoupments, net 26 (34) 92 -- -- --
Other (69) (156) 602 6 (30) (52)
------- ------- ------- ------- ------- -------
Cash provided (used) by continuing operations (767) 646 61 1,023 1,061 1,047
Cash provided (used) by discontinued operations (32) (31) (44) -- -- --
------- ------- ------- ------- ------- -------
Net cash provided (used) by operating activities (799) 615 17 1,023 1,061 1,047
------- ------- ------- ------- ------- -------
Investing Activities
Net proceeds (expenditures) related to the sale of discontinued
operations (17) (54) 653 -- -- --
Net proceeds from sale of businesses and assets 872 266 141 (12) -- --
Expenditures for plant, property and equipment--
Continuing operations (736) (525) (507) -- -- --
Discontinued operations (68) (62) (88) -- -- --
Acquisitions of businesses (51) (14) (10) -- -- --
Investments and other (350) (7) (30) 78 59 (61)
------- ------- ------- ------- ------- -------
Net cash provided (used) by investing activities (350) (396) 159 66 59 (61)
------- ------- ------- ------- ------- -------
Financing Activities
Issuance of common, treasury and SECT shares 188 1,215 318 185 9 --
Purchase of common stock (26) (7) (3) -- -- --
Issuance of equity securities by a subsidiary 296 -- -- -- -- --
Redemption of equity securities by a subsidiary (160) -- -- -- -- --
Redemption of preferred stock (20) (30) (6) -- -- --
Issuance of long-term debt 1,035 9 950 12 11 125
Retirement of long-term debt (302) (1,264) (721) (1,276) (785) (492)
Net increase (decrease) in short-term debt
excluding current maturities on long-term debt 411 277 (545) 235 (348) (519)
Dividends (common and preferred) (318) (307) (266) (18) (8) (105)
------- ------- ------- ------- ------- -------
Net cash provided (used) by financing activities 1,104 (107) (273) (862) (1,121) (991)
------- ------- ------- ------- ------- -------
Effect of foreign exchange rate changes on cash and temporary
cash investments 4 (1) (8) 1 (3) (10)
------- ------- ------- ------- ------- -------
Increase (decrease) in cash and temporary cash investments (41) 111 (105) 228 (4) (15)
Cash and temporary cash investments, January 1 213 102 207 5 9 24
------- ------- ------- ------- ------- -------
Cash and temporary cash investments, December 31 (Note) $ 172 $ 213 $ 102 $ 233 $ 5 $ 9
------- ------- ------- ------- ------- -------
Cash paid during the year for interest $ 498 $ 596 $ 702 $ 212 $ 316 $ 467
Cash paid during the year for income taxes (net of refunds) $ 319 $ 273 $ 635 $ 61 $ 76 $ 94
------- ------- ------- ------- ------- -------
</TABLE>
47
<PAGE>
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Tenneco Inc. and Consolidated Subsidiaries
------------------------------------------------------------------
1994 1993 1992
Years Ended December 31 -------------------- -------------------- --------------------
(Millions Except Share Amounts) Shares Amount Shares Amount Shares Amount
------------------------------- ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Series A Preferred Stock
Balance January 1 8,935,175 $ 9 8,935,175 $ 9 8,935,175 $ 9
Shares converted (8,935,175) (9) -- -- -- --
----------- ------ ----------- ------ ----------- ------
Balance December 31 -- -- 8,935,175 9 8,935,175 9
----------- ------ ----------- ------ ----------- ------
Common Stock
Balance January 1 173,953,012 870 150,300,224 752 149,831,446 749
Issued to convert Series A preferred stock 17,342,763 87 -- -- -- --
Issued to retire debt -- -- 23,500,000 117 -- --
Issued pursuant to benefit plans 37,996 -- 151,678 1 468,114 3
Other 1,422 -- 1,110 -- 664 --
----------- ------ ----------- ------ ----------- ------
Balance December 31 191,335,193 957 173,953,012 870 150,300,224 752
----------- ------ ----------- ------ ----------- ------
Stock Employee Compensation Trust (SECT)
Balance January 1 (499) (488) --
Establishment of SECT -- -- (432)
Shares issued 120 119 --
Adjustment to market value 81 (130) (56)
------ ------ ------
Balance December 31 (298) (499) (488)
------ ------ ------
Premium on Common Stock and
Other Capital Surplus
Balance January 1 3,714 2,637 2,841
Premium on common stock issued
to retire debt -- 935 --
Premium on common stock issued
pursuant to benefit plans 2 6 15
Conversion of Series A preferred stock (78) -- --
Loss on issuance of treasury stock (9) (3) (112)
Loss on shares issued by SECT (5) (6) --
Cost less market value of treasury
shares issued to SECT -- -- (177)
Dividends on shares held by SECT 13 17 5
Adjustment of SECT to market value (81) 130 56
Other (3) (2) 9
------ ------ ------
Balance December 31 3,553 3,714 2,637
------ ------ ------
Cumulative Translation Adjustments
Balance January 1 (303) (230) (24)
Translation of foreign currency statements 68 (78) (236)
Hedges of net investment in foreign
subsidiaries (net of income taxes) (2) 5 30
------ ------ ------
Balance December 31 (237) (303) (230)
------ ------ ------
Retained Earnings (Accumulated Deficit)
Balance January 1 (980) (1,082) 515
Net income (loss) 408 426 (1,323)
Dividends--
Preferred stock (8) (11) (13)
Series A preferred stock (48) (50) (51)
Common stock (273) (260) (207)
Accretion of excess of redemption value
of preferred stock over fair value
at date of issue (4) (3) (3)
------ ------ ------
Balance December 31 (905) (980) (1,082)
------ ------ ------
Less--Common Stock Held
as Treasury Stock, at Cost
Balance January 1 4,166,835 210 5,323,912 268 25,990,390 1,316
Shares acquired 1,731,263 75 234,434 12 150,123 7
Shares issued to SECT -- -- -- -- (12,000,000) (607)
Shares issued pursuant to benefit and
dividend reinvestment plans (2,280,588) (115) (1,391,511) (70) (8,356,389) (425)
Shares issued for acquisition -- -- -- -- (460,212) (23)
----------- ------ ----------- ------ ----------- ------
Balance December 31 3,617,510 170 4,166,835 210 5,323,912 268
----------- ------ ----------- ------ ----------- ------
Total $2,900 $2,601 $1,330
------ ------ ------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of changes in stockholders' equity.
48
<PAGE>
Notes to Financial Statements
1. Summary of Accounting Policies
Consolidation and Presentation
The financial statements of Tenneco Inc. and consolidated subsidiaries
("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. At December 31,
1994, equity in undistributed earnings (losses) and cumulative translation
adjustments amounted to $154 million and $(29) million, respectively; at
December 31, 1993, the corresponding amounts were $(57) million and $(10)
million, respectively.
Reference is made to Note 8, "Investment in Affiliated Companies," for
summarized financial information of Tenneco's proportionate share of 50% or
less owned companies accounted for by the equity method of accounting.
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%. From January through November, Case's financial statements
were fully consolidated with Tenneco's. From July through November, the
financial statements reflected the 29% minority stockholders' interest in Case.
Subsequent to November, Case was reflected in Tenneco's financial statements
using the equity method of accounting. For further information on this subject,
reference is made to Note 3, "Discontinued Operations, Disposition of Assets
and Extraordinary Loss."
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.
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 industrial subsidiaries. As a result of this change, interest
expense related to the wholesale (dealer) credit operations has been reported
as "Interest expense" rather than "Finance charges--Tenneco Finance" as in
prior periods. If prior periods were reclassified to reflect this prospective
presentation of interest expense related to wholesale (dealer) credit
operations, consolidated "Finance charges--Tenneco Finance" would have been
reduced and "Interest expense" would have increased by $22 million, $69 million
and $123 million for 1994, 1993 and 1992, respectively, with no effect on
consolidated net income. At December 31, 1993, this change would have increased
receivables and debt of Tenneco Industrial by $1.5 billion, with no effect on
the consolidated balance sheet.
All significant intercompany transactions, including activity within and
between the "Tenneco Industrial" and "Tenneco Finance" business units, have
been eliminated.
Gains or losses on the sale by a subsidiary of its stock are included in the
Statements of Income (Loss).
Environmental Liabilities
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations,
and which do not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when environmental assessments indicate that
remedial efforts are probable and the costs can be reasonably estimated.
Estimates of the liability are based upon currently available facts, existing
technology and presently enacted laws and regulations taking into consideration
the likely effects of inflation and other societal and economic factors. All
available evidence is considered including prior experience in remediation of
contaminated sites, other companies' clean-up experience and data released by
the Environmental Protection Agency or other organizations. These liabilities
are included in the
49
<PAGE>
balance sheet at their undiscounted amounts. Recoveries are evaluated separately
from the liability and, when recovery is assured, are recorded and reported
separately from the associated liability in the financial statements.
For further information on this subject, reference is made to Note 17,
"Commitments and Contingencies--Environmental Matters."
Depreciation and Amortization
Depreciation of Tenneco's properties is provided on a straight-line basis in
amounts which, in the opinion of management, are adequate to allocate the cost
of properties over their estimated useful lives.
The excess of investment in subsidiaries over fair value of net assets at
date of acquisition is being amortized over periods ranging from 15 years to 40
years. Such amortization relative to continuing operations amounted to $21
million, $15 million and $13 million for 1994, 1993 and 1992, respectively, and
is included in the income statement caption, "Other income, net."
Revenue Recognition
Newport News Shipbuilding and Dry Dock Company ("Newport News"), a
wholly-owned subsidiary, reports profits on its long-term shipbuilding
contracts on the percentage-of-completion method of accounting, determined on
the basis of total costs incurred to date to estimated final total costs.
Losses on contracts are reported when first estimated. The performance of
contracts usually extends over several years, requiring periodic reviews and
revisions of estimated final contract prices and costs during the term of the
contracts. The effect of these revisions is included in income in the period
the revisions are made.
Sales by Case to independent dealers are recorded at the time of shipment to
those dealers. Sales through company-owned retail stores are recorded at the
time of sale to retail customers. Case grants certain sales incentives to
stimulate sales of the farm and construction equipment products to retail
customers. The expense for such incentive programs is recorded at the time of
sale.
Tenneco's other divisions recognize revenue on the accrual method when title
passes to the customer or when the service is performed.
Risk Management Activities
Tenneco has utilized financial instruments for many years to mitigate its
exposure to various risks. Tenneco is currently a party to financial instruments
to hedge its exposure to changes in interest rates, foreign currency exchange
rates and natural gas prices. These activities are summarized in the following
paragraphs.
Tenneco is a party to various interest rate swaps under which it has agreed
with other parties to pay or receive, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated by reference
to agreed notional principal amounts. The amount paid or received under these
agreements is recognized as an adjustment to interest expense.
Tenneco utilizes a combination of forward exchange contracts and
currency/interest rate swaps to hedge the translation effects of its net
investment in certain foreign subsidiaries. The after-tax translation gains
(losses) incurred are included in the balance sheet caption "Cumulative
translation adjustments." Various foreign currency purchase and sale contracts
are also utilized to minimize the transaction effect in the income statement of
exchange rate movement on receivables and payables denominated in foreign
currencies. Tenneco identifies naturally occurring offsetting positions and
then hedges residual exposures.
Tenneco also utilizes various financial instruments to hedge firm
commitments and transactions associated with its natural gas business. Gains
and losses related to hedges are recognized in income when the hedged
transaction occurs. As of December 31, 1994 and 1993, Tenneco's deferred gains
and losses associated with these transactions were not significant.
Changes in Accounting Principles
Effective January 1, 1994, Tenneco adopted Statement of Financial Accounting
Standards ("FAS") No. 112, "Employers' Accounting for Postemployment Benefits."
This new accounting rule 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. Tenneco
recorded an after-tax charge of $39 million ($.22 per average common share)
which was reported as a cumulative effect of change in accounting principle.
Tenneco elected early adoption of FAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," for its domestic operations and
FAS No. 109, "Accounting for Income Taxes." Both standards were adopted
effective January 1, 1992, using the cumulative catch-up method.
Under FAS No. 106, Tenneco is required to accrue the estimated costs of
retiree benefits other than pensions (primarily health care benefits and life
insurance) during the employees' active service period. Prior to 1992, Tenneco
expensed the cost of these benefits as medical and insurance claims were paid.
Tenneco will adopt the new standard for its non-U.S. plans in the first quarter
of 1995 but does not expect that the adoption will have a material effect on
Tenneco's consolidated financial position or results of operations.
50
<PAGE>
The adoption of FAS No. 109 changed Tenneco's method of accounting for
income taxes from the deferred method to the liability method. The liability
method requires the recognition of deferred tax assets and liabilities for the
future tax consequences of temporary differences between the financial
statement basis and the tax basis of assets and liabilities.
In 1992, Tenneco recorded an after-tax charge of $699 million or $4.86 per
average common share for the cumulative effect of the accounting changes
consisting of $414 million or $2.88 per share for FAS No. 106 and $285 million
or $1.98 per share for FAS No. 109.
Reference is made to Note 7, "Income Taxes," and Note 13, "Postretirement
and Postemployment Benefits," for further information regarding these changes.
Inventories
At December 31, 1994 and 1993, inventory by major classification was as
follows:
<TABLE>
<CAPTION>
(Millions) 1994 1993
---------- ----- ------
<S> <C> <C>
Finished goods $333 $ 918
Work in process 92 163
Long-term contracts in progress,
less progress billings 138 66
Raw materials 191 281
Materials and supplies 156 153
---- ------
$910 $1,581
---- ------
</TABLE>
A portion of domestic inventories are valued using the "last-in, first-out"
method, which is not in excess of market. All other inventories are valued at
the lower of cost (determined on the "first-in, first-out" ("FIFO") or
"average" methods) or market based on estimated realizable value. If the FIFO
or average method of inventory accounting had been used by Tenneco for all
inventories, inventories would have been $54 million, $47 million and $57
million higher at December 31, 1994, 1993 and 1992, respectively.
Notes Receivable
Short-term notes receivable of $337 million and $1,359 million were
outstanding at December 31, 1994 and 1993, respectively, of which $289 million
and $1,299 million, respectively, related to Tenneco Finance. These notes
receivable are presented net of unearned finance charges of $43 million and $96
million at December 31, 1994 and 1993, respectively, which related principally
to Tenneco Finance. At December 31, 1994 and 1993, unearned finance charges
related to long-term notes and other receivables were $66 million and $139
million, respectively, which related principally to Tenneco Finance.
Allowance for Doubtful Accounts and Notes Receivable
At December 31, 1994 and 1993, the allowance for doubtful accounts and notes
receivable was $48 million and $129 million, respectively, of which $42 million
related to Tenneco Finance at December 31, 1993.
Restrictions on the Payment of Dividends
Tenneco Inc. is a party to credit agreements containing provisions that
limit the amount of dividends paid on its common stock. At December 31, 1994,
under the most restrictive provisions contained in these credit agreements,
Tenneco Inc. had in excess of $900 million available for the payment of
dividends.
At December 31, 1994, Tennessee Gas Pipeline Company ("Tennessee"), a
wholly-owned consolidated subsidiary, had retained earnings of $3,640 million
of which $748 million was restricted as to the payment of dividends under
certain of its notes and debentures. Also at December 31, 1994, Case, a 44%
owned affiliate, had retained earnings of $83 million of which $72 million was
restricted as to the payment of dividends pursuant to Case's revolving credit
agreement. The payment of unrestricted amounts by such subsidiaries or
affiliates would not affect the amount of retained earnings of Tenneco Inc.
available for dividends on common stock.
Reclassifications
Prior years' financial statements have been reclassified where appropriate
to conform to 1994 presentations.
2. Acquisitions
On October 6, 1994, Tenneco Inc. (hereinafter referred to as the "Company")
announced that Tenneco Power Generation Company, a division of Tenneco Gas,
signed a letter of intent to complete the acquisition of ARK Energy, Inc., for
approximately $60 million in Tenneco Inc. common stock and other consideration.
The acquisition is expected to be completed by midyear 1995. ARK Energy, Inc.
is a privately-owned power generation company.
On November 30, 1994, the Company announced that its Tenneco Automotive
subsidiary completed the acquisition of Heinrich Gillet GmbH & Company for $44
million in cash and $69 million in assumed debt. Heinrich Gillet GmbH & Company
is the leading manufacturer of original equipment exhaust systems and components
for European automakers.
51
<PAGE>
3. Discontinued Operations, Disposition of Assets and Extraordinary Loss
Discontinued Operations
In December 1994, the Company announced its intent to offer 100% of its
Albright & Wilson chemicals segment in an IPO. The offering was underwritten in
the United Kingdom and was offered primarily in the United Kingdom. Also in
1994, Tenneco sold its brakes operation.
Net proceeds from the sale of the chemicals operations are expected to be
$707 million when the sale is completed in early March 1995. Proceeds from the
sale of the brakes operations were $18 million. The sales of these discontinued
operations resulted in a loss of $170 million and $26 million, net of income
tax expense (benefit) of $115 million and $(15) million, respectively.
Revenues for the chemicals discontinued operations were $986 million, $914
million and $951 million for 1994, 1993 and 1992, respectively. Net income was
$12 million, $45 million and $38 million, net of income tax expense of
$9 million, $5 million and $8 million for 1994, 1993 and 1992, respectively.
Net assets for the chemicals operations were $639 million and $558 million at
December 31, 1994 and 1993, respectively.
Revenues for the brakes discontinued operations were $62 million, $54 million
and $45 million for 1994, 1993 and 1992, respectively. Net loss was $5 million,
$7 million and $7 million, net of income tax benefit of $5 million, $4 million
and $5 million for 1994, 1993 and 1992, respectively. Net assets of the brakes
operations were $61 million at December 31, 1993.
The allocation of interest expense to discontinued operations is based on the
ratio of net assets of discontinued operations to consolidated net assets plus
debt. Interest expense, net of income tax, of $19 million, $19 million and $20
million was allocated to the chemicals operations and $2 million, $3 million and
$3 million was allocated to the brakes operations for 1994, 1993 and 1992,
respectively.
During 1992, Tenneco sold its minerals and pulp chemicals operations for
proceeds of $500 million and $202 million, respectively. The sales of these
discontinued operations resulted in a gain (loss) of $96 million and $(25)
million, net of income tax expense of $45 million and $0, respectively. Revenues
for the minerals discontinued operations were $55 million for 1992. Net income
was $3 million, net of income tax expense of $3 million for 1992. Revenues for
the pulp chemicals discontinued operations were $54 million for 1992. Net loss
was $3 million, net of income tax benefit of $2 million for 1992.
Interest expense, net of income tax, of $5 million each was allocated to the
minerals operations and the pulp chemicals operations for 1992.
Disposition of Assets
In June 1994, Tenneco completed an IPO of approximately 29% of the common
stock of Case. In November 1994, a secondary offering of Case common stock
reduced Tenneco's ownership interest in Case to approximately 44%. Combined
proceeds from the two transactions was $694 million, net of commissions and
expenses. The combined gain on the transactions was $36 million, including a $7
million tax benefit.
Tenneco disposed of several other assets and investments during 1994 including a
facility, machinery and equipment at its Packaging segment ("PCA") and
facilities and equipment at Case. Proceeds from these dispositions were $125
million resulting in a pre-tax loss of $2 million.
In 1994, Tenneco Energy Resources Corporation, a subsidiary which operates
non-regulated gas marketing and intrastate pipeline businesses, issued 50
shares of its common stock diluting Tenneco's ownership in this subsidiary to
80%. Cash proceeds were $41 million resulting in a gain of $23 million. No taxes
were provided on the gain because management expects that the recorded
investment will be recovered in a tax-free manner.
During 1993, Tenneco disposed of a number of assets and investments
including its Newport News' Sperry Marine business; several PCA operations; two
wholly-owned pipeline companies, Viking Gas Transmission Company
and Dean Pipeline Company; and facilities and land of two foreign Case
operations. The proceeds from dispositions were $266 million and the pre-tax
gain was $112 million.
Extraordinary Loss
In June 1994, an extraordinary loss of $5 million was recorded, net of $2
million income tax benefit, for the redemption premium resulting from the
prepayment of debt.
In April 1993, the Company issued 23.5 million shares of common stock for
approximately $1.1 billion. The proceeds were used to retire $327 million of
short-term debt, $688 million of long-term debt and $14 million of
variable-rate preferred stock. In November 1993, Tenneco retired DM250 million
bonds. The redemption premium related to the retirement of long-term debt
resulting from these two transactions ($25 million, net of income tax benefits
of $13 million) was recorded as an extraordinary loss.
In December 1992, Tenneco deposited cash with a trustee to defease $310
million of its high interest-bearing long-term debt. Accordingly, this amount
was excluded from long-term debt on the balance sheet at December 31, 1992.
This debt was prepaid in January and February 1993. In November 1992, Tenneco
also prepaid $71 million of high interest-bearing long-term debt related to an
investment in a partnership. Tenneco recorded an extraordinary loss of
$12 million (net of income tax benefits of $6 million) for the redemption
premium resulting from these transactions.
52
<PAGE>
4. Long-Term Debt, Short-Term Debt and Financing Arrangements
Long-Term Debt
A summary of long-term debt outstanding at December 31, 1994 and 1993, is set
forth in the following table:
<TABLE>
<CAPTION>
(Millions) 1994 1993
---------- ------ ------
<S> <C> <C>
Tenneco Industrial
Tenneco Inc.--
Debentures due 1998 through 2012, average effective interest rate 9.7% in 1994 and 1993
(net of $2 million in 1994 and 1993 of unamortized discount) $ 398 $ 398
Notes due 1995 through 2005, average effective interest rate 9.2% in 1994 and 9.3% in 1993
(net of $4 million in 1994 and 1993 of unamortized discount) 1,681 1,830
Tennessee Gas Pipeline Company--
Debentures due 2011, effective interest rate 15.1% in 1994 and 1993
(net of $219 million in 1994 and $222 million in 1993 of unamortized discount) 181 178
Notes due 1995 through 1997, average effective interest rate 10.1% in 1994 and 1993
(net of $8 million in 1994 and $11 million in 1993 of unamortized discount) 808 805
Other subsidiaries--
Notes due 1995 through 2014, average effective interest rate 8.6% in 1994 and 5.9% in 1993
(net of $20 million in 1994 and 1993 of unamortized discount) 51 82
------ ------
3,119 3,293
Less--Current maturities 254 150
------ ------
2,865 3,143
------ ------
Tenneco Finance
Tenneco Credit Corporation--
Senior notes due 1995 through 2001, average effective interest rate 9.6% in 1994 and 9.4%
in 1993 (net of $2 million in 1994 and 1993 of unamortized discount) 749 1,248
Medium-term notes due 1995 through 2002, average interest rate 9.4% in 1994 and 9.3% in 1993 73 74
Subordinated notes due 1998 through 2001, average interest rate 9.9% in 1994 and 1993 92 92
Case Finance Company(a)--
Notes due through 1996, average interest rate 5.3% -- 500
Medium-term notes due through 1997, average interest rate 9.8% -- 92
Subordinated notes due through 1998, average interest rate 5.7% -- 31
Tenneco International Finance Ltd.(a)--
Notes due through 1996, average interest rate 5.5% -- 123
Other subsidiaries--
Notes due 1995 through 2010, average effective interest rate 12.7% in 1994 and 13.3% in 1993
(net of $28 million in 1994 and $30 million in 1993 of unamortized discount) 30 32
Intercompany debt with Tenneco Industrial(a) -- 54
------ ------
944 2,246
Less--Current maturities 239 536
------ ------
705 1,710
------ ------
Elimination of intercompany debt -- (54)
------ ------
$3,570 $4,799
------ ------
</TABLE>
Note: (a) These notes were prepaid as part of the actions taken pursuant to the
Case IPO.
At December 31, 1994 and 1993, approximately $154 million and $272 million,
respectively, of gross plant, property and equipment was pledged as collateral
to secure $31 million and $34 million, respectively, principal amounts of long-
term debt.
The aggregate maturities and sinking fund requirements applicable to the issues
outstanding at December 31, 1994, are $493 million, $437 million, $518 million,
$843 million and $256 million for 1995, 1996, 1997, 1998 and 1999,
respectively.
53
<PAGE>
Short-Term Debt
Information for the years ended December 31, 1994 and 1993, regarding short-term
debt follows:
<TABLE>
<CAPTION>
1994 1993
------------------------ -------------------------
Commercial Lines Commercial Lines
(Dollars in Millions) Paper of Credit* Paper of Credit*
--------------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Outstanding borrowings at end of year--
Tenneco Industrial $ -- $ 44 $ -- $ 29
Tenneco Finance -- -- 496 63
---------- ---------- ---------- -----------
$ -- $ 44 $ 496 $ 92
---------- ---------- ---------- -----------
Average interest rate on outstanding borrowings at end of year -- 9.8% 4.0% 7.0%
Approximate maximum month-end outstanding borrowings during year $ 362 $ 1,023 $ 608 $ 470
Approximate average month-end outstanding borrowings during year $ 164 $ 375 $ 501 $ 203
Weighted average interest rate on approximate average month-end
outstanding borrowings during year 4.6% 6.4% 4.4% 5.9%
---------- ---------- ---------- -----------
</TABLE>
* Includes borrowings under both committed and uncommitted lines of credit and
similar arrangements.
Tenneco had other short-term borrowings outstanding of $8
million at December 31, 1994.
Financing Arrangements
As of December 31, 1994, Tenneco and its subsidiaries had arranged total lines
of credit of $2.2 billion, of which $2.1 billion are committed lines of credit
as more fully described below:
<TABLE>
<CAPTION>
Committed Lines of Credit(a)
----------------------------------------------
(Millions) Term Commitments Borrowed Available
---------- ------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Tenneco Inc. credit agreements Various $2,000(b) $ -- $2,000
Finance subsidiary credit agreement 1996 25 -- 25
Other subsidiaries credit agreements Various 63 34 29
------ ---- ------
$2,088 $ 34 $2,054
------ ---- ------
</TABLE>
Notes: (a) Tenneco and its subsidiaries generally are required to pay commitment
fees on the unused portion of the total commitment and facility fees
on the total commitment.
(b) Of the $2 billion lines of credit, $1.9 billion are committed through
1999 and $100 million expire on December 31, 1995. Since December
31, 1994, the $100 million lines of credit due to expire in 1995 have
been replaced with $100 million which are committed through 1999. Of
the total lines of credit, $300 million are available to both Tenneco
Inc. and Tenneco Finance.
5. Financial Instruments
The estimated fair values of Tenneco's financial instruments at December 31,
1994 and 1993, were as follows:
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Carrying Fair Carrying Fair
(Millions) Amount Value Amount Value
---------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Cash and temporary cash investments $ 405 $ 405 $ 218 $ 218
-------- ------- -------- -------
Receivables (customer and long-term) 2,604 2,604 4,630 4,630
-------- ------- -------- -------
Other investments 39 39 41 41
-------- ------- -------- -------
Short-term debt (excluding current maturities) 52 52 588 588
-------- ------- -------- -------
Long-term debt (including current maturities of $493 and $686 million) 4,063 4,286 5,485 6,328
-------- ------- -------- -------
Interest rate swaps:
In a net receivable position -- -- -- 43
In a net payable position -- (30) -- (92)
-------- ------- -------- -------
Foreign currency contracts receivable 15 20 10 11
-------- ------- -------- -------
</TABLE>
54
<PAGE>
The following methods and assumptions were used to estimate the fair value
of financial instruments:
Cash and Temporary Cash Investments--Fair value was considered to be the
same as the carrying amount.
Receivables--Tenneco believes that in the aggregate, the carrying amount of its
receivables, both current and non-current, was not materially different from the
fair value of those receivables. At December 31, 1994, the remainder of the
United States retail receivables retained by Tenneco Credit Corporation when
Tenneco transferred its Case assets to Case Equipment Corporation in June 1994
accounted for approximately 30% of total customer and long-term receivables; the
Case Corporation 10 1/2% Senior Subordinated Note due June 30, 2002, with a
current carrying amount of $264 million accounts for an additional 10%. The
Automotive parts segment (15%), Natural gas pipelines segment (11%) and
Packaging segment (11%) accounted for the other significant concentrations. At
December 31, 1993, approximately 75% of customer and long-term receivables were
concentrated in the Farm and construction equipment segment.
Other Investments--At December 31, 1994, these investments included preferred
stock ($17 million) in Steerage Corporation (the acquiror of Newport News'
Sperry Marine Business) and venture capital investments ($5 million). At
December 31, 1993, these investments included preferred stock ($17 million) in
Steerage Corporation and venture capital investments ($8 million). Because of
the nature of these investments, it was not practicable to estimate their fair
value.
Short-Term Debt--Fair value was considered to be the same as the carrying
amount.
Long-Term Debt--The fair value of fixed-rate long-term debt was based on the
market value of debt with similar maturities and interest rates; the carrying
amount of floating-rate long-term debt was assumed to approximate its fair
value.
Interest Rate Swaps--The fair value of interest rate swaps was based on the
cost that would have been incurred to buy out those swaps in a loss position
and the consideration that would have been received to terminate those swaps in
a gain position. At December 31, 1994 and 1993, Tenneco was a party to swaps
with a notional value of $1.6 billion and $944 million, respectively, which
were in a net payable position and $775 million for 1993 which were in a net
receivable position. The amount paid or received on interest rate swap
agreements was recognized as an adjustment to interest expense.
Consistent with its overall policy, Tenneco uses these instruments from time
to time only to hedge known, quantifiable risks arising from fluctuations in
interest rates. The counterparties to these interest rate swaps are major
international financial institutions. The risk associated with counterparty
default on interest rate swaps is measured as the cost of replacing, at the
prevailing market rates, those contracts in a gain position. In the event of
non-performance by the counterparties, the cost to replace outstanding interest
rate swaps at December 31, 1994 and 1993, would not have been material.
Foreign Currency Contracts--At December 31, 1994 and 1993, Tenneco was a
party to currency/interest rate swaps and foreign exchange forward contracts
totaling $518 million and $133 million, respectively. These instruments hedge
certain translation effects of Tenneco's investment in net assets in certain
foreign countries, primarily Great Britain. Pursuant to these arrangements,
Tenneco recognized aggregate after-tax translation gains (losses) of $(2)
million, $5 million and $30 million for 1994, 1993 and 1992, respectively,
which have been included in the balance sheet caption "Cumulative translation
adjustments."
In the normal course of business, Tenneco and its foreign subsidiaries
routinely enter into various foreign currency purchase and sale contracts to
hedge the transaction effect of exchange rate movements on receivables and
payables denominated in foreign currencies. These contracts generally mature in
one year or less. At December 31, 1994, Tenneco had net purchase contracts
(primarily Australian Dollars, Belgian Francs, French Francs, Dutch Guilders,
Danish Krone, Spanish Pesetas, Italian Lira and Swedish Krona) with a notional
value of $278 million and net sale contracts (primarily Canadian Dollars,
German Marks and British Pounds) with a notional value of $276 million. At
December 31, 1993, Tenneco had net purchase contracts (primarily Belgian
Francs, French Francs, Dutch Guilders, Danish Krone, Italian Lira and Swedish
Krona) with a notional value of $308 million and net sale contracts (primarily
Canadian Dollars, U.S. Dollars and British Pounds) with a notional value of
$315 million. Based on exchange rates at December 31, 1994 and 1993, the cost
of replacing these contracts in the event of non-performance by the
counterparties would not have been material.
Subsequent to the Case IPO and secondary offering, Tenneco has continued to
perform certain administrative functions for Case, including certain foreign
currency management activities. At December 31, 1994, Tenneco had net purchase
contracts (primarily Canadian Dollars, Australian Dollars, Spanish Pesetas,
German Marks and British Pounds) with a notional value of $152 million and net
sale contracts (primarily U.S. Dollars) with a notional value of $152 million
with Case which is now reflected in Tenneco's financial statements using the
equity method of accounting.
Price Risk Management--Tenneco enters into short-term price swap agreements
to hedge against the price risk associated with natural gas sales and supply
contracts. Tenneco also
55
<PAGE>
hedges anticipated injections and withdrawals from gas storage expected to occur
within a year. Consistent with its overall policy, Tenneco uses these
instruments from time to time to mitigate quantifiable risks arising from
fluctuations in gas prices. Tenneco had swap agreements to exchange monthly
payments on notional quantities amounting to 70.2 Bcf and 19.3 Bcf as of
December 31, 1994 and 1993, respectively. Based upon natural gas prices at
December 31, 1994, Tenneco would be required to pay approximately $0.4 million
related to these swap agreements. Tenneco is exposed to credit-related losses in
the event of non-performance by counterparties to financial instruments.
However, Tenneco believes that these counterparties will be able to fully
satisfy their obligations under these contracts.
Guarantees--At December 31, 1994 and 1993, Tenneco had guaranteed payment
and performance of approximately $50 million and $95 million, respectively,
primarily with respect to letters of credit and other guarantees supporting
various financing and operating activities.
--------------------------------------------------------------------------------
6. Federal Energy Regulatory Commission ("FERC") Regulatory Matters
Restructuring Proceedings
Pursuant to Order 636 issued by the FERC on April 8, 1992, 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.
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.
However, certain customers have requested a rehearing and the FERC has deferred
action on their issues to a later date. Tennessee implemented the terms of the
PGA Stipulation on December 1, 1994, and expects to make refunds in 1995.
Tennessee has recorded a liability which it believes is adequate to cover the
PGA refunds.
Tennessee is recovering TBO costs formerly incurred to perform its sales
functions, subject to refund, pending review of data submitted by Tennessee
through technical conference proceedings. 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, subject to FERC's review
at a second technical conference and FERC's consideration of a request for
rehearing. On November 30, 1994, Tennessee filed for a surcharge to recover
approximately $25 million of TBO costs in compliance with the FERC's 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 September 1,
1994, through a new TBO surcharge. The FERC accepted Tennessee's filing to
recover its projected TBO costs, subject to refund, pending review through
technical conference proceedings.
In connection with Tennessee's GSR cost recovery discussed below, Tennessee,
along with three other pipelines, executed four separate settlement agreements
with Dakota Gasification Company and the U.S. Department of Energy and
initiated
56
<PAGE>
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 FERC consolidated
the four proceedings and set them for hearing before an administrative law judge
who is to issue his initial decision by December 31, 1995. The FERC has
committed to a final order by December 31, 1996. The FERC order stated that the
costs related to the Great Plains project are eligible for recovery through GSR
and other special recovery mechanisms and that the costs are eligible for
recovery for the duration of the term of the original gas purchase agreements.
The hearing will be limited to the issue of whether the settlement agreements
are prudent.
Also in connection with Tennessee's GSR cost recovery proceedings discussed
below, on October 14, 1993, Tennessee was sued in the State District Court of
Ector County, Texas, by ICA Energy, Inc. ("ICA") and TransTexas Gas Corporation
("TransTexas"). In that suit, ICA and TransTexas contended that Tennessee had
an obligation to purchase gas production which TransTexas thereafter attempted
to add unilaterally to the reserves originally dedicated to a 1979 gas
contract. On two subsequent occasions, TransTexas gave Tennessee notice that it
was adding new production and/or acreage "to the contract." 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 believes it has meritorious defenses to the claims of
ICA and TransTexas, which defenses it will vigorously assert.
As of December 31, 1994, Tennessee has deferred GSR costs yet to be recovered
from its customers of approximately $177 million, net of $187 million previously
collected from its customers, subject to refund. Proceedings have commenced to
review the recovery of these GSR costs; however, the FERC has also generally
encouraged pipelines to settle such issues through negotiations with customers.
Although Order 636 contemplates complete recovery by pipelines of qualified
transition costs, Tennessee has initiated settlement discussions with its
customers concerning the amount of recoverable GSR costs in response to recent
FERC and customer statements acknowledging the desirability of such settlements.
Tennessee is also engaged in separate settlement and contract reformation
discussions with holders of certain gas purchase contracts who have sued
Tennessee, although Tennessee believes that its defenses in the underlying gas
purchase contract actions are meritorious.
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.
Rate Proceedings
The FERC issued final orders approving Tennessee's Stipulation and Agreement
partially resolving its 1991 rate case. Pursuant to these final FERC orders,
rates for the period February 1, 1992, through August 31, 1993, were approved,
and Tennessee paid refunds for this period in June 1994. The refunds had no
material effect on reported net income. Also pursuant to these orders, rates for
the period after September 1, 1993, were approved and Tennessee paid refunds for
the period September 1, 1993, to October 31, 1994, in February 1995. As of
December 31, 1994, Tennessee had recorded a liability which is adequate to cover
estimated refund obligations.
The approved Stipulation and Agreement discussed above also established
procedures for resolving the recovery of certain environmental expenditures.
These environmental costs are currently being collected in Tennessee's rates
subject to further review and possible refund. Tennessee intends to pursue full
recovery of the costs at issue. Tennessee is also currently pursuing the
possibility of a global settlement with its customers that would not only
address recovery of the environmental costs currently being recovered in its
rates, but would also establish a mechanism for recovering a substantial
portion of the environmental costs discussed in Note 17, "Commitments and
Contingencies--Environmental Matters," that will be expended in the future. The
total amount of and timing for any recovery pursuant to such a global
settlement will depend upon the results of Tennessee's negotiations with its
customers and will be subject to FERC approval.
On December 30, 1994, Tennessee filed a general rate increase in Docket No.
RP95-112 which reflected an increase in Tennessee's revenue requirement of $118
million, including recovery of certain environmental costs as discussed in Note
17. 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. This order also required the
convening of a technical conference to address various concerns raised by the
FERC and Tennessee's customers over, among other issues, Tennessee's ability to
provide its shippers with timely and accurate operating and billing information,
and the associated systems costs. The ultimate resolution of these issues may
result in adjustments to customer billings. Subject to the outcome of these
issues and certain modifications identified in the FERC order, the increased
rates will become effective on July 1, 1995, subject to refund.
57
<PAGE>
7. Income Taxes
Effective January 1, 1992, Tenneco changed its method of accounting for income
taxes from the deferred method to the liability method required by FAS No. 109,
"Accounting for Income Taxes," using the cumulative catch-up method. This
standard requires that a deferred tax be recorded to reflect the tax expense
(benefit) resulting from the recognition of temporary differences. Temporary
differences are differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements that will result in
differences between income for tax purposes and income for financial statement
purposes in future years. No provision has been made for U.S. income taxes on
unremitted earnings of foreign subsidiaries ($440 million at December 31, 1994)
except for earnings attributable to Albright & Wilson. It is the present
intention of management to reinvest a major portion of such unremitted earnings
in foreign operations.
The components of income (loss) from continuing operations before income
taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31 (Millions) 1994 1993 1992
---------------------------------- ------ ------ ------
<S> <C> <C> <C>
U.S. income before
income taxes $ 766 $ 530 $ 34
Foreign income (loss) before
income taxes 206 140 (675)
------ ------ ------
Income (loss) before
income taxes $ 972 $ 670 $ (641)
------ ------ ------
</TABLE>
Following is an analysis of the components of consolidated income tax expense
applicable to continuing operations:
<TABLE>
<CAPTION>
Years Ended December 31 (Millions) 1994 1993 1992
---------------------------------- ------ ------ ------
<S> <C> <C> <C>
Current--
U.S. $ (13) $ 51 $ 464
State and local 42 56 70
Foreign 98 30 70
------ ------ ------
127 137 604
------ ------ ------
General business credits (U.S.)--
Current (5) (1) (15)
Deferred -- -- 10
------ ------ ------
(5) (1) (5)
------ ------ ------
Deferred--
U.S. 211 121 (503)
State and local 14 11 (23)
Foreign (46) (11) --
------ ------ ------
179 121 (526)
------ ------ ------
Income tax expense $ 301 $ 257 $ 73
------ ------ ------
</TABLE>
In August 1993, the U.S. federal income tax rate was increased from 34% to
35%, retroactive to January 1, 1993. For 1992, this rate was 34%. Following is
a reconciliation of income taxes computed at the U.S. federal income tax rate
to the income tax expense from continuing operations reflected in the
Statements of Income (Loss):
<TABLE>
<CAPTION>
Years Ended December 31 (Millions) 1994 1993 1992
---------------------------------- ------ ------ ------
<S> <C> <C> <C>
Tax expense (benefit) computed at the U.S.
federal income tax rate $ 340 $ 235 $ (218)
Increases (reductions) in income tax expense
resulting from:
Foreign income taxed at different rates and
foreign losses with no tax benefit 30 26 75
Restructuring costs -- -- 188
Permanent differences on sale of businesses (48) (6) --
State and local taxes on income, net of U.S.
federal income tax benefit 36 43 31
U.S. federal income tax rate change -- 8 --
Realization of unrecognized deferred tax assets (42) (37) --
Other (15) (12) (3)
------ ------ ------
Income tax expense $ 301 $ 257 $ 73
------ ------ ------
</TABLE>
58
<PAGE>
The components of Tenneco's net deferred tax liability at December 31, 1994
and 1993, were as follows:
<TABLE>
<CAPTION>
(Millions) 1994 1993
---------- ------ ------
<S> <C> <C>
Deferred tax assets--
Tax loss carryforwards $ 356 $ 227
Restructuring costs -- 145
Postretirement benefits other than pensions 181 206
Environmental reserve 83 82
Sales returns and allowances reserve 9 55
Bad debt reserve 15 36
Other 159 224
Valuation allowance (374) (236)
------ ------
Net deferred tax asset 429 739
------ ------
Deferred tax liabilities--
Tax over book depreciation 798 832
Pension 163 202
Asset related to environmental costs
relative to operations regulated by the FERC 56 59
Installment sales -- 39
Long-term shipbuilding contracts 54 91
Interest capitalized 23 28
Debt related items 44 47
Book versus tax gains and losses
on asset disposals 475 293
Other 203 274
------ ------
Total deferred tax liability 1,816 1,865
------ ------
Net deferred tax liability $1,387 $1,126
------ ------
</TABLE>
As reflected in the table to the left, Tenneco had potential tax benefits of
$374 million and $236 million which were not recognized in the Statements of
Income (Loss) when generated. These benefits resulted primarily from tax loss
carryforwards which are available to reduce future tax liabilities. During 1994
and 1993, $12 million and $37 million, respectively, were realized as a result
of consolidation of Tenneco's German operations. In the first eleven months of
1994, Case generated income which supported a reduction in the valuation
allowance of $30 million. The remainder of the change from 1993 to 1994
resulted primarily from the change to the equity method of accounting for Case.
At December 31, 1994, Tenneco had unrecognized tax benefits of $267 million
related to U.S. capital loss carryforwards which expire in 1999 and had $89
million of foreign net operating loss carryforwards which will carry forward
indefinitely.
--------------------------------------------------------------------------------
8. Investment in Affiliated Companies
Summarized financial information of Tenneco's proportionate share of 50% or
less owned companies accounted for by the equity method of accounting at
December 31, 1994, 1993 and 1992, and for the years then ended is as follows:
<TABLE>
<CAPTION>
(Millions) 1994 1993 1992
---------- ------ ------ ------
<S> <C> <C> <C>
Current assets $1,249 $ 161 $ 160
Non-current assets 2,133 970 935
Short-term debt 278 36 43
Other current liabilities 676 100 71
Long-term debt 1,147 510 478
Other non-current liabilities 284 15 19
Equity in net assets 997 470 484
Revenues and other income 738 581 509
Costs and expenses 684 529 466
Net income 54 52 43
------ ------ ------
</TABLE>
Note: Principal investments include a 44% interest in Case Corporation and a 50%
interest in Kern River Gas Transmission Company. Case was reflected in
Tenneco's financial statements using the equity method of accounting
subsequent to November 1994. Accordingly, "Revenues and other income,"
"Costs and expenses" and "Net income" in the table above include 44% of
Case's respective amounts for the month of December 1994 only. All balance
sheet related captions reflect 44% of Case's respective amounts at
December 31, 1994.
59
<PAGE>
9. Common Stock
Tenneco Inc. has authorized 350 million shares ($5.00 par value) of common
stock, and 191,335,193 and 173,953,012 shares were issued at December 31, 1994
and 1993, respectively. Tenneco transferred 12,000,000 shares of common stock
to the Stock Employee Compensation Trust when it was established in November
1992. At December 31, 1994, the Trust held 7,055,854 shares which are included
in the issued shares quoted above. Treasury stock held by Tenneco was 3,617,510
and 4,166,835 shares at the respective dates.
Stock Repurchase Plan
On December 13, 1994, Tenneco announced that it plans to repurchase up to $500
million of its issued and outstanding common shares. Purchases executed through
the program will be made in the open market or in negotiated purchases. Timing
of purchases, number of shares purchased and prices paid under the program will
be at Tenneco's discretion, based upon prevailing market conditions and legal
limitations. At December 31, 1994, 1,160,000 shares had been repurchased and are
included in treasury stock on the balance sheet.
Equity Offering
In April 1993, Tenneco Inc. completed an underwritten public offering of
23.5 million shares of common stock for approximately $1.1 billion. The
proceeds were used to retire $327 million of short-term debt, $688 million of
long-term debt and $14 million of variable-rate preferred stock.
Reserved
At December 31, 1994, the shares of Tenneco Inc. common stock reserved for
issuance were as follows:
<TABLE>
<CAPTION>
Original Issue Shares
---------------------
<S> <C>
Restricted Stock Plan 356,082
Stock Option Plan 3,245,334
Performance Unit Plan 1,654,494
Conversion of Tenneco 10% Loan Stock through December 24, 1995 40,481
Other 8,000
---------
5,304,391
---------
Treasury Stock
--------------
Dividend Reinvestment Plan 649,000
---------
</TABLE>
Stock Plans
1994 Tenneco Inc. Stock Ownership Plan--In May 1994, Tenneco adopted the
1994 Tenneco Inc. Stock Ownership Plan effective as of December 8, 1993. This
plan provides Tenneco the latitude to grant a variety of awards, such as common
stock, stock equivalent units, dividend equivalents, performance units, stock
appreciation rights ("SAR's") and stock options, to officers and key employees
of the Tenneco companies. The plan requires that options and SAR's be granted
at not less than the fair market value of a share of common stock on the grant
date. The plan also requires that no award granted shall vest in less than six
months after the grant date. The Company can issue 8,400,000 shares of
common stock under this plan, which will terminate December 31, 1998. At
December 31, 1994, 316,805 restricted shares and 23,515 restricted units were
outstanding under this plan at an average price of $53.20 per share.
1988 Key Employee Restricted Stock Plan--At December 31, 1994, 825,393
restricted shares and 82,740 restricted units were outstanding under this plan
at an average price of $44.84 per share. These awards generally require, among
other things, that the employee remain an employee of Tenneco during the
restriction period. This plan was superseded by the 1994 Tenneco Inc. Stock
Ownership Plan.
Under another arrangement, 250 shares of restricted stock or restricted
units are issued annually to each member of the Board of Directors who is not
also an officer of Tenneco. At December 31, 1994, 10,000 restricted shares and
no restricted units were outstanding under this program at an average price of
$46.30 per share.
Options and Stock Appreciation Rights--Tenneco Inc. has granted stock
options and stock appreciation rights to key employees. The options and SAR's
became exercisable over four years and lapse after ten years from the date of
grant. This plan was superseded by the 1994 Tenneco Inc. Stock Ownership Plan.
60
<PAGE>
The following table reflects the status and activity for all stock options
issued by Tenneco Inc., including those outside the option plans discussed
above, for the periods indicated:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------- ------------------------- -------------------------
Shares Shares Shares
Under Option Under Option Under Option
Stock Options Option Prices Option Prices Option Prices
------------- --------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 434,114 $36.44-$53.13 434,379 $34.94-$53.13 454,395 $34.94-$53.13
Granted--Options 1,718,320 $45.75-$57.50 75,000 $48.69 -- --
Exercised--Options 2,250 $39.06-$41.13 3,942 $34.94-$41.13 125 $40.88
--SAR's 28,832 $39.06-$48.38 68,347 $34.94-$48.38 10,313 $34.94-$41.13
Cancelled 36,410 -- 2,976 -- 9,578 --
--------- ------------- ------- ------------- ------- -------------
Outstanding, end of year 2,084,942 $36.44-$57.50 434,114 $36.44-$53.13 434,379 $34.94-$53.13
--------- ------------- ------- ------------- ------- -------------
Exercisable at end of year 471,732 $36.44-$53.13 275,780 $36.44-$53.13 267,712 $34.94-$53.13
--------- ------------- ------- ------------- ------- -------------
</TABLE>
For the years ended December 31, 1994, 1993 and 1992, compensation expense for
these stock plans was not material.
Employee Stock Purchase Plan--On June 1, 1992, Tenneco initiated an Employee
Stock Purchase Plan. The Plan allows U.S. and Canadian Tenneco employees to
purchase Tenneco Inc. common stock at a 15% discount. Each year employees in
the plan may purchase shares with a discounted value not to exceed $21,250.
Tenneco reserved 5,000,000 shares of treasury stock to be issued through this
plan. At December 31, 1994, 1,210,849 shares had been issued to participants
and the remaining shares are held by the Stock Employee Compensation Trust
(discussed below) for issuance to employees in this plan.
Stock Employee Compensation Trust ("SECT")
In November 1992, Tenneco established a SECT to fund a portion of its
obligations arising from its various employee compensation and benefit plans.
Tenneco issued 12,000,000 shares of treasury stock to the SECT in exchange for
a promissory note of $432 million that bears interest at the rate of 7.8% per
annum. The SECT has a five-year life during which it will utilize the common
stock to satisfy those obligations. At December 31, 1994, 4,944,146 shares had
been utilized.
Shareholder Rights Plan
In 1988, Tenneco Inc. adopted a Shareholder Rights Plan ("the Plan") to
deter coercive takeover tactics and to prevent a potential acquiror from
gaining control of Tenneco without offering a fair price to all Tenneco Inc.
shareholders. Under the Plan, each outstanding share of Tenneco Inc. common
stock received one Purchase Right, exercisable at $130, subject to adjustment.
In the event a person or group acquires 20% or more of the outstanding Tenneco
Inc. common stock other than pursuant to an offer for all shares of such common
stock which is fair and in the best interests of Tenneco Inc. and its
shareholders, or has in the judgment of the Tenneco Inc. Board of Directors
acquired a substantial amount of common stock under certain motives deemed
adverse to Tenneco's best interests, each Purchase Right entitles the holder to
purchase shares of common stock or other securities of Tenneco Inc. or, under
certain circumstances, of the acquiring person, having a value of twice the
exercise price. The Purchase Rights, under certain circumstances, are
redeemable by Tenneco Inc. at a price of $.02 per Purchase Right.
Dividend Reinvestment and Stock Purchase Plan
Under the Tenneco Inc. Dividend Reinvestment and Stock Purchase Plan, holders of
Tenneco Inc. common stock and $7.40 preferred stock may apply their cash
dividends and optional cash investments to the purchase of shares of common
stock.
Earnings Per Share
Earnings per share of common stock are based on the average number of shares of
common stock and Series A preferred stock (each share of Series A preferred
stock represents approximately two shares of common stock) outstanding during
each period. Because Series A preferred stock outstanding is included in average
common shares outstanding for purposes of computing earnings per share, the
preferred dividends paid are not deducted from net income (loss) to determine
net income (loss) to common stock. The inclusion of Series A preferred stock in
the computation of earnings per share was antidilutive for the years and certain
quarters in 1994, 1993 and 1992. In December 1994, all Series A preferred stock
was converted into common stock.
In 1992, 12,000,000 shares of common stock were issued to the 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 outstanding until the
shares are utilized to fund the obligations for which the trust was
established. At December 31, 1994, 4,944,146 shares had been utilized. Other
convertible securities and common stock equivalents outstanding during each of
the three years ended December 31, 1994, 1993 and 1992, were not materially
dilutive.
61
<PAGE>
10. Preferred Stock
At December 31, 1994, Tenneco Inc. had authorized 15,000,000 shares of preferred
stock. In addition, Tenneco Inc. has an authorized class of stock consisting of
50,000,000 shares of junior preferred stock, without par value, none of which
has been issued. Tenneco has reserved 3,500,000 shares of junior preferred stock
for the Shareholder Rights Plan.
The preferred stock issues outstanding at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Shares Redemption Periods
Issued and ------------------------- Optional
Issue Outstanding Optional Mandatory Redemption Price
----- ----------- --------- --------- ----------------
<S> <C> <C> <C> <C>
$7.40 preferred (no par value) 783,041 1995-1998 1995-1998 $100
$4.50 preferred (no par value) 803,723 1995-1999 1999 $100
---------
1,586,764
---------
</TABLE>
In December 1991, Tenneco issued 17,870,350 Depositary Shares, each
representing one-half of a share of a new series of cumulative preferred stock
designated as Series A preferred stock. On December 16, 1994, Tenneco exercised
its option to call all of the outstanding shares, which were converted into
shares of Tenneco Inc. common stock. In addition, $11 million was paid for
dividends on the Series A preferred stock that were accrued but unpaid at the
conversion date.
The $7.40 and $4.50 preferred stock issues have a mandatory redemption value
of $100 per share (an aggregate of $159 million and $178 million at December
31, 1994 and 1993, respectively). Tenneco recorded these preferred stocks at
their fair value at the date of original issue (an aggregate of $250 million)
and is making periodic accretions of the excess of the redemption value over
the fair value at the date of issue. Such accretions are included in the income
statement caption "Preferred stock dividends" as a reduction of net income to
arrive at net income (loss) to common stock.
During 1993, Tenneco retired the remainder of a variable rate preferred
stock issue at the redemption price of $100 per share, or $17 million.
The aggregate maturities applicable to preferred stock issues outstanding at
December 31, 1994, are $20 million for each of the years 1995, 1996, 1997, $19
million for 1998 and $80 million for 1999.
In 1991, a French subsidiary issued equity securities that were convertible
into Tenneco Inc. preferred stock in 1996. In December 1994, Tenneco redeemed
these equity securities for $160 million in cash.
Changes in Preferred Stock with Mandatory Redemption Provisions*
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ------------------- -------------------
(Millions Except Share Amounts) Shares Amount Shares Amount Shares Amount
------------------------------ --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1 1,782,508 $ 163 2,084,796 $ 191 2,143,462 $ 194
Shares redeemed (195,744) (20) (302,288) (31) (58,666) (6)
Accretion of excess of redemption value
over fair value at date of issue -- 4 -- 3 -- 3
--------- ------ --------- ------ --------- ------
Balance December 31 1,586,764 $ 147 1,782,508 $ 163 2,084,796 $ 191
--------- ------ --------- ------ --------- ------
</TABLE>
* For additional information on Series A preferred stock see Statements of
Changes in Stockholders' Equity.
62
<PAGE>
11. Minority Interest
At December 31, 1994 and 1993, Tenneco reported minority interest in the balance
sheet of $320 million and $153 million, respectively. At December 31, 1994, $300
million of minority interest resulted from the December 1994 sale by Tenneco of
a 25% preferred stock interest in Tenneco International Holding Corp. ("TIHC")
to a financial investor. TIHC is a separate legal entity from the Company and
holds certain assets including the capital stock of Tenneco Canada Inc., S.A.
Tenneco Belgium, Monroe Australia Pty. Limited, Walker France and other
subsidiaries included in Tenneco's Automotive parts segment. TIHC also holds
financial obligations of Tenneco or guaranteed by Tenneco. At December 31, 1994,
the Company had borrowings of $264 million from TIHC. For financial reporting
purposes, the assets, liabilities and earnings of TIHC and its subsidiaries have
continued to be consolidated in Tenneco's financial statements, and the
financial investor's preferred stock interest has been recorded as minority
interest.
Dividends on the TIHC preferred stock are based on the issue price ($300
million) times a rate per annum equal to 1.12% over LIBOR and are payable
quarterly in arrears on the last business day of each quarter commencing on
March 31, 1995. Additionally, beginning in 1996, the holder of the 12,000,000
shares of preferred stock will be entitled to receive, when and if declared by
the Board of Directors of TIHC, participating dividends based on the operating
income growth rate of TIHC.
At December 31, 1993, $148 million of minority interest resulted from the
1991 issuance of equity securities by a French subsidiary. In December 1994,
these equity securities were redeemed for $160 million in cash.
12. Plant, Property and Equipment, at Cost
At December 31, 1994 and 1993, plant, property and equipment, at cost, by
major segment was as follows:
<TABLE>
<CAPTION>
(Millions) 1994 1993
---------- ------- -------
<S> <C> <C>
Natural gas pipelines $ 5,654 $ 5,246
Farm and construction equipment -- 1,937
Automotive parts 1,331 1,014
Shipbuilding 1,494 1,527
Packaging 1,661 1,468
Discontinued chemicals operations 780 739
Other 188 184
------- -------
$11,108 $12,115
------- -------
</TABLE>
13. Postretirement and Postemployment Benefits
Postretirement Benefits
Tenneco has postretirement health care and life insurance plans which cover
substantially all of its domestic employees. For salaried employees, the plans
cover employees retiring from Tenneco on or after attaining age 55 who have had
at least 10 years service with Tenneco after attaining age 45. The salaried
plans were amended during 1993 to reduce the cost of providing future benefits.
For hourly employees, the postretirement benefit plans generally cover employees
who retire pursuant to one of Tenneco's hourly employee retirement plans. All
of these benefits may be subject to deductibles, copayment provisions and other
limitations, and Tenneco has reserved the right to change these benefits.
Effective January 1, 1992, for its domestic operations, Tenneco adopted FAS No.
106 which requires employers to account for the cost of these postretirement
benefits on the accrual basis rather than on the "pay-as-you-go" basis which was
Tenneco's previous practice. Tenneco elected to recognize this change in
accounting principle on the cumulative catch-up basis. The effect on 1992 income
of immediately recognizing the transition obligation was as follows:
<TABLE>
<CAPTION>
(Millions Except Per Share Amount)
----------------------------------
<S> <C>
Accumulated postretirement benefit obligation $ 629
Income tax benefit (215)
------
Decrease in net income $ 414
------
Decrease in earnings per average share
of common stock $ 2.88
------
</TABLE>
63
<PAGE>
Tenneco will adopt FAS No. 106 for its international operations in the first
quarter of 1995 but does not expect the adoption to have a material effect on
Tenneco's financial position or results of operations.
The majority of Tenneco's postretirement benefit plans are not funded. In
June 1994, two trusts were established to fund postretirement benefits for
certain plan participants of the Natural gas pipelines segment. The
contributions are collected from customers in FERC approved rates. As of
December 31, 1994, cumulative contributions were $5 million. Plan assets
consist principally of fixed income securities.
The funded status of the domestic plans reconciles with amounts recognized
on the balance sheet at December 31, 1994 and 1993, as follows:
<TABLE>
<CAPTION>
(Millions) 1994 1993
---------- ------ ------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation
at September 30:
Retirees $ 510 $ 520
Fully eligible active plan participants 46 73
Other active plan participants 61 131
----- -----
Total accumulated postretirement
benefit obligation 617 724
Plan assets at fair value at September 30 2 --
----- -----
Accumulated postretirement benefit obligation
in excess of plan assets at September 30 (615) (724)
Claims paid during the fourth quarter 16 16
Unrecognized reduction of prior service
obligations resulting from plan amendments (107) (99)
Unrecognized net loss resulting from plan
experience and changes in actuarial
assumptions 142 158
----- -----
Accrued postretirement benefit cost
at December 31 $ (564) $ (649)
----- -----
</TABLE>
In conjunction with the Case IPO in June 1994, active Case salaried
employees were transferred from the Tenneco Inc. plans to new Case salaried
plans, and Case hourly retirees were transferred from the Case hourly plans to
the Tenneco Inc. plans. Amendments to reduce the cost of providing future
benefits for Case hourly retirees were reflected at that time.
In November 1994, through a secondary offering of Case stock, Tenneco's
ownership in Case dropped below 50%. Therefore, all Case liabilities for the
new Case plans are excluded from the Tenneco disclosure information for 1994.
Benefit costs for these plans have been included up to the date of the
secondary offering (for 11 months of 1994). For additional information
concerning Tenneco's changing ownership in Case, reference is made to Note 1,
"Summary of Accounting Policies" and Note 3, "Discontinued Operations,
Dispositions of Assets and Extraordinary Loss."
The net periodic postretirement benefit cost from continuing operations for
the years 1994, 1993 and 1992 consist of the following components:
<TABLE>
<CAPTION>
(Millions) 1994 1993 1992
---------- ---- ---- ----
<S> <C> <C> <C>
Service cost for benefits earned
during the year $ 11 $12 $10
Interest cost on accumulated
postretirement benefit obligation 53 56 52
Net amortization of unrecognized
amounts (12) (4) --
---- --- ---
Net periodic postretirement benefit cost $ 52 $64 $62
---- --- ---
</TABLE>
A pre-tax loss resulting from curtailments, settlements and special termination
benefits under these plans was $3 million, $0 and $40 million for 1994, 1993 and
1992, respectively, which related primarily to restructuring at Case.
The initial weighted average assumed health care cost trend rate used in
determining the 1994, 1993 and 1992 accumulated postretirement benefit
obligation was 8%, 9% and 12%, respectively, declining to 5% in 1997 and
remaining at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage-point
in each year would increase the 1994, 1993 and 1992 accumulated postretirement
benefit obligations by approximately $34 million, $47 million and $94 million,
respectively, and would increase the aggregate of the service cost and interest
cost components of the net postretirement benefit cost for 1994, 1993 and 1992
by approximately $5 million, $10 million and $11 million, respectively.
The discount rates (which are based on long-term market rates) used in
determining the 1994, 1993 and 1992 accumulated postretirement benefit
obligations were 8.25%, 7.50% and 8.75%, respectively.
Postemployment Benefits
Tenneco adopted FAS No. 112, "Employers' Accounting for Postemployment
Benefits," in the first quarter of 1994. This new accounting rule 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. Implementation of this new rule reduced 1994
net income by $39 million, or $.22 per share, net of income tax benefits of $26
million, which was reported as the cumulative effect of a change in accounting
principle.
64
<PAGE>
14. Pension Plans
Tenneco has retirement plans which cover substantially all of its employees.
Benefits are based on years of service and, for most salaried employees, on
final average compensation. Tenneco's funding policies are to contribute to the
plans amounts necessary to satisfy the funding requirements of federal laws and
regulations. Plan assets consist principally of listed equity and fixed income
securities.
The funded status of the plans reconciles with amounts recognized on the balance
sheet at December 31, 1994 and 1993, as follows:
<TABLE>
<CAPTION>
Plans in Which Plans in Which
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets All Plans (Note)
---------------------- -------------------- ------------------
(Millions) 1994 1993 1994 1993 1994 1993
--------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefits based on service
to date and present pay levels at September 30:
Vested benefit obligation $2,733 $2,864 $ 27 $ 181 $2,760 $3,045
Non-vested benefit obligation 88 157 2 10 90 167
------- ------ ---- ----- ------ ------
Accumulated benefit obligation 2,821 3,021 29 191 2,850 3,212
Additional amounts related to projected salary
increases 231 336 4 9 235 345
------- ------ ---- ----- ------ ------
Total projected benefit obligation at September 30 3,052 3,357 33 200 3,085 3,557
Plan assets at fair value at September 30 3,314 3,531 10 84 3,324 3,615
------- ------ ---- ----- ------ ------
Plan assets in excess of (less than) total projected
benefit obligation at September 30 262 174 (23) (116) 239 58
Contributions during the fourth quarter 16 177 -- 2 16 179
Unrecognized net (gain) loss resulting from plan
experience and changes in actuarial assumptions 255 205 3 11 258 216
Unrecognized prior service obligations
resulting from plan amendments 155 241 1 10 156 251
Remaining unrecognized net obligation (asset)
at initial application (203) (244) 2 8 (201) (236)
Adjustment recorded to recognize minimum liability -- -- (3) (32) (3) (32)
------- ------ ---- ----- ------ ------
Prepaid (accrued) pension cost at December 31 $ 485 $ 553 $(20) $(117) $ 465 $ 436
------- ------ ---- ----- ------ ------
</TABLE>
Note: Assets of one plan may not be utilized to pay benefits of other plans.
In December 1993, all liabilities and assets were transferred from the Case
Corporation Pension Plan for Hourly-Paid Employees ("Case Plan") to the Tenneco
Inc. Retirement Plan. In June 1994, all future accruals for the salaried and
hourly active Case employees were transferred from the Tenneco Inc. Retirement
Plan to new Case plans. In November 1994, through a secondary offering of Case
stock, Tenneco's ownership in Case dropped below 50%. Therefore, all domestic
and foreign Case liabilities and assets in the new Case plans are excluded from
the Tenneco disclosure information for 1994. Pension cost (income) for these
plans has been included up to the date of the secondary offering (for 11 months
of 1994).
Net periodic pension costs from continuing operations for the years 1994,
1993 and 1992 consist of the following components:
<TABLE>
<CAPTION>
(Millions) 1994 1993 1992
---------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned during the year $ 75 $ 76 $ 72
Interest accrued on prior year's projected
benefit obligation 225 216 196
Expected return on plan assets--
Actual (return) loss 35 (442) (274)
Unrecognized excess (deficiency)
of actual return over expected return (335) 165 9
---- ----- ----
(300) (277) (265)
Net amortization of unrecognized amounts 3 (5) (10)
----- ----- -----
Net periodic pension costs $ 3 $ 10 $ (7)
----- ----- -----
</TABLE>
Pre-tax gains (losses) resulting from curtailments, settlements and special
termination benefits under these plans were $(19) million, $(37) million and
$(46) million for 1994, 1993 and 1992, respectively, all of which related
primarily to restructuring at Case.
The weighted average discount rates (which are based on long-term market rates)
used in determining the 1994, 1993 and 1992 actuarial present value of the
benefit obligations were 8.4%, 7.6% and 8.9%, respectively. The rate of increase
in future compensation was 5.0%, 5.1% and 6.6% for 1994, 1993 and 1992,
respectively. The weighted average expected long-term rate of return on plan
assets was 10.0%, 9.9% and 10.0% for 1994, 1993 and 1992, respectively.
65
<PAGE>
15. Segment and Geographic Area Information
<TABLE>
<CAPTION>
Segment
---------------------------------------------------------------------
Natural Farm and Auto- Reclass.
Gas Construction motive Ship- and Consol-
(Millions) Pipelines Equipment(c) Parts building Packaging Chemicals Other Elimination idated
---------- --------- ------------ ------- --------- --------- --------- ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1994, and for the
Year Then Ended
Net sales and operating revenues(a) $2,378 $ 3,881 $1,989 $1,753 $2,184 $ -- $ 3 $(14) $12,174
------ ------- ------ ------ ------ ---- ------ ---- -------
Operating profit 379 339 231 213 217 -- 14 -- 1,393
Equity in net income (loss) of
affiliated companies 52 3 -- -- -- -- (1) -- 54
General corporate expenses (16) (16) (8) (13) (8) -- (7) -- (68)
------ ------- ------ ------ ------ ---- ------ ---- -------
Income before interest expense,
income taxes and minority interest 415 326 223 200 209 -- 6 -- 1,379
------ ------- ------ ------ ------ ---- ------ ---- -------
Identifiable assets 3,241 -- 1,505 1,353 1,574 -- 3,383 (353) 10,703
Investment in affiliated companies 359 530 2 -- 3 -- -- -- 894
Identifiable assets related to
discontinued operations -- -- -- -- -- 849 -- (7) 842
Investment in affiliated companies
related to discontinued operations -- -- -- -- -- 103 -- -- 103
------ ------- ------ ------ ------ ---- ------ ---- -------
Total assets 3,600 530 1,507 1,353 1,577 952 3,383 (360) 12,542
------ ------- ------ ------ ------ ---- ------ ---- -------
Depreciation, depletion and
amortization 100 102 49 70 82 -- 5 -- 408
------ ------- ------ ------ ------ ---- ------ ---- -------
Capital expenditures for
continuing operations 331 83 113 29 166 -- 14 -- 736
------ ------- ------ ------ ------ ---- ------ ---- -------
At December 31, 1993, and for the
Year Then Ended
Net sales and operating revenues(a) $2,862 $ 3,748 $1,785 $1,861 $2,042 $ -- $ 6 $(17) $12,287
------ ------- ------ ------ ------ ---- ------ ---- -------
Operating profit 376 98 230 238 146 -- 26 -- 1,114
Equity in net income (loss) of
affiliated companies 49 2 -- -- 2 -- (1) -- 52
General corporate expenses (14) (18) (8) (13) (9) -- (7) -- (69)
------ ------- ------ ------ ------ ---- ------ ---- -------
Income before interest expense,
income taxes and minority interest 411 82 222 225 139 -- 18 -- 1,097
------ ------- ------ ------ ------ ---- ------ ---- -------
Identifiable assets 2,953 6,122 1,016 1,277 1,468 -- 1,673 (392) 14,117
Investment in affiliated companies 307 90 4 -- 6 -- 1 -- 408
Identifiable assets related to
discontinued operations -- -- 70 -- -- 721 -- (5) 786
Investment in affiliated companies
related to discontinued operations -- -- -- -- -- 62 -- -- 62
------ ------- ------ ------ ------ ---- ------ ---- -------
Total assets 3,260 6,212 1,090 1,277 1,474 783 1,674 (397) 15,373
------ ------- ------ ------ ------ ---- ------ ---- -------
Depreciation, depletion and
amortization 166 101 50 72 77 -- 5 -- 471
------ ------- ------ ------ ------ ---- ------ ---- -------
Capital expenditures for
continuing operations 170 101 93 36 124 -- 1 -- 525
------ ------- ------ ------ ------ ---- ------ ---- -------
At December 31, 1992, and for the
Year Then Ended
Net sales and operating revenues(a) $2,183 $ 3,829 $1,763 $2,265 $2,078 $ -- $ 39 $ (14) $12,143
------ ------- ------ ------ ------ ---- ------ ---- -------
Operating profit (loss) 334 (1,160) 244 262 225 -- (22) -- (117)
Equity in net income (loss) of
affiliated companies 40 -- -- -- 4 -- (1) -- 43
General corporate expenses (14) (20) (7) (13) (8) -- (9) -- (71)
------ ------- ------ ------ ------ ---- ------ ---- -------
Income (loss) before interest expense,
income taxes and minority interest 360 (1,180) 237 249 221 -- (32) -- (145)
------ ------- ------ ------ ------ ---- ------ ---- -------
Identifiable assets 3,117 7,562 950 1,469 1,406 -- 1,468 (659) 15,313
Investment in affiliated companies 296 103 1 -- 23 -- -- -- 423
Identifiable assets related to
discontinued operations -- -- 71 -- -- 718 -- (2) 787
Investment in affiliated companies
related to discontinued operations -- -- -- -- -- 61 -- -- 61
------ ------- ------ ------ ------ ---- ------ ---- -------
Total assets 3,413 7,665 1,022 1,469 1,429 779 1,468 (661) 16,584
------ ------- ------ ------ ------ ---- ------ ---- -------
Depreciation, depletion and
amortization 156 154 47 74 73 -- 6 -- 510
------ ------- ------ ------ ------ ---- ------ ---- -------
Capital expenditures for
continuing operations 251 60 62 35 97 -- 2 -- 507
------ ------- ------ ------ ------ ---- ------ ---- -------
See notes on following page.
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Geographic Area(c)
----------------------------------------------------- Reclass.
United European Other and Consol-
(Millions) States Canada Community Foreign Elimination idated
---------- ------- --------- ------------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1994, and for the
Year Then Ended
Net sales and operating revenues:
External(a) $ 9,492 $532 $1,656 $494 $ -- $12,174
Intergeographic area(b) 454 61 303 39 (857) --
------- ---- ------ ---- ----- -------
Total 9,946 593 1,959 533 (857) 12,174
------- ---- ------ ---- ----- -------
Operating profit 1,165 82 74 72 -- 1,393
Equity in net income (loss) of
affiliated companies 55 -- -- (1) -- 54
General corporate expenses (68) -- -- -- -- (68)
------- ---- ------ ---- ----- -------
Income before interest expense, income
taxes and minority interest 1,152 82 74 71 - 1,379
------- ---- ------ ---- ----- -------
Identifiable assets 9,361 154 1,135 256 (203) 10,703
Investment in affiliated companies 891 -- -- 3 -- 894
Identifiable assets related to
discontinued operations 176 43 602 42 (21) 842
Investment in affiliated companies
related to discontinued operations 26 -- 3 74 -- 103
------- ---- ------ ---- ----- -------
Total assets 10,454 197 1,740 375 (224) 12,542
------- ---- ------ ---- ----- -------
At December 31, 1993, and for the
Year Then Ended
Net sales and operating revenues:
External(a) $ 9,684 $598 $1,582 $423 $ -- $12,287
Intergeographic area(b) 484 36 293 28 (841) --
------- ---- ------ ---- ----- -------
Total 10,168 634 1,875 451 (841) 12,287
------- ---- ------ ---- ----- -------
Operating profit 949 87 13 65 -- 1,114
Equity in net income (loss) of
affiliated companies 51 -- 4 (3) -- 52
General corporate expenses (69) -- -- -- -- (69)
------- ---- ------ ---- ----- -------
Income before interest expense,
income taxes and minority interest 931 87 17 62 -- 1,097
------- ---- ------ ---- ----- -------
Identifiable assets 11,622 726 1,703 439 (373) 14,117
Investment in affiliated companies 403 -- 2 3 -- 408
Identifiable assets related to
discontinued operations 217 66 471 43 (11) 786
Investment in affiliated companies
related to discontinued operations 26 -- 5 31 -- 62
------- ---- ------ ---- ----- -------
Total assets 12,268 792 2,181 516 (384) 15,373
------- ---- ------ ---- ----- -------
At December 31, 1992, and for the
Year Then Ended
Net sales and operating revenues:
External(a) $ 9,332 $543 $ 1,898 $370 $ -- $12,143
Intergeographic area(b) 436 34 378 31 (879) --
------- ---- ------ ---- ----- -------
Total 9,768 577 2,276 401 (879) 12,143
------- ---- ------ ---- ----- -------
Operating profit (loss) 518 63 (721) 23 -- (117)
Equity in net income of
affiliated companies 40 -- 3 -- -- 43
General corporate expenses (71) -- -- -- -- (71)
------- ---- ------ ---- ----- -------
Income (loss) before interest expense,
income taxes and minority interest 487 63 (718) 23 -- (145)
------- ---- ------ ---- ----- -------
Identifiable assets 12,661 717 2,348 421 (834) 15,313
Investment in affiliated companies 401 -- 15 7 -- 423
Identifiable assets related to
discontinued operations 213 73 476 34 (9) 787
Investment in affiliated companies
related to discontinued operations 23 -- 8 30 -- 61
------- ---- ------ ---- ----- -------
Total assets 13,298 790 2,847 492 (843) 16,584
------- ---- ------ ---- ----- -------
Notes: (a) Contracts with U.S. government agencies (primarily shipbuilding contracts with the U.S. Navy) accounted for $1.8
billion, $1.9 billion and $2.4 billion for 1994, 1993 and 1992, respectively.
(b) Products are transferred between geographic areas on a basis intended to reflect as nearly as possible the "market
value" of the products.
(c) Case was reflected in Tenneco's financial statements using the equity method of accounting subsequent to November 1994.
Reference is made to Note 1, "Summary of Accounting Policies -- Consolidation and Presentation."
</TABLE>
67
<PAGE>
Tenneco is engaged in the sale of products for export from the United
States. Such sales are reflected in the table below:
<TABLE>
<CAPTION>
(Millions)
------------------------------------
Geographic Area Principal Products 1994 1993 1992
--------------- ------------------ ------- -------- -------
<S> <C> <C> <C> <C>
Canada Farm and construction equipment, exhaust and ride
control systems, natural gas, paperboard products,
molded and pressed pulp goods, corrugated boxes $318 $380 $347
European Community Navigation aids, farm and construction equipment,
molded and pressed pulp goods, paperboard products 98 127 147
Other Foreign Farm and construction equipment, ride control systems,
molded and pressed pulp goods, paperboard products,
corrugated boxes 204 208 183
---- ---- ----
Total Export Sales $620 $715 $677
---- ---- ----
</TABLE>
16. Restructuring Costs
To respond to depressed market conditions facing the farm and construction
equipment business and to improve Case's performance, aggressive measures were
taken at Case since September 1991 resulting in significant improvement in
Case's performance. However, the worldwide farm and construction equipment
market continued to deteriorate during 1992, and Tenneco Management and the
Board of Directors determined that major structural and strategic changes were
necessary in order to (1) rationalize certain component production operations to
reduce the fixed cost portion of the manufacturing process; (2) reduce excess
capacity; (3) focus, discontinue or replace unprofitable and noncompetitive
product lines; and (4) restructure and refocus product and component parts
distribution to strengthen Case's competitive position in the global
marketplace.
Consequently, on March 21, 1993, the Board of Directors of the Company adopted a
comprehensive restructuring program for Case. Adoption of this program resulted
in a pre-tax restructuring charge of $920 million ($843 million after tax, or
$5.85 per average common share), all of which was reflected in the 1992 loss
from continuing operations before interest expense and income taxes. The $920
million pre-tax charge was recorded as a $340 million reduction of net plant,
property and equipment, a $55 million reduction of inventory, a $63 million
reduction of intangibles and other accounts and a $462 million reserve for the
future cost of implementing the various restructuring actions.
As of December 31, 1994, approximately $271 million of the actions necessary to
complete the program had been implemented. Also, as a result of restructuring
actions taken to date and changes in estimates for planned actions, it was
determined that there were excess reserves of $36 million. Therefore, $20
million and $16 million of the restructuring reserve was reversed in 1993 and
1994, respectively.
The specific restructuring measures were based on management's best business
judgment under prevailing circumstances and on assumptions which may be revised
over time and as circumstances change. The estimated costs associated with such
measures may require further revision in the future.
68
<PAGE>
17. Commitments and Contingencies
Capital Commitments
Tenneco estimates that expenditures aggregating approximately $1.0 billion
will be required after December 31, 1994, to complete facilities and projects
authorized at such date, and substantial commitments have been made in
connection therewith.
Purchase Obligations
In connection with the financing commitments of certain joint ventures,
Tenneco has entered into unconditional purchase obligations for products and
services of $190 million ($139 million on a present value basis) at December
31, 1994. Tenneco's annual obligations under these agreements are $27 million
for 1995, $27 million for 1996, $25 million for 1997, $23 million for 1998 and
$23 million for 1999. Payments under such obligations, including additional
purchases in excess of contractual obligations, were $34 million, $31 million
and $33 million for the years 1994, 1993 and 1992, respectively. In addition,
in connection with the Great Plains coal gasification project (Dakota
Gasification Company), Tennessee has contracted to purchase 30% of the output
of the plant's original design capacity for a remaining period of 15 years.
Tennessee is in the process of settling this contract as a part of its Gas
Supply Realignment negotiations discussed in Note 6.
Lease Commitments
Tenneco holds certain of its facilities and equipment under long-term
leases. The minimum rental commitments under non-cancelable operating leases
with lease terms in excess of one year are $141 million, $124 million, $120
million, $119 million and $110 million for the years 1995, 1996, 1997, 1998
and 1999, respectively, and $968 million for subsequent years. Of these
amounts, $79 million for 1995, $81 million for 1996, $84 million for 1997, $93
million for 1998, $86 million for 1999 and $781 million for subsequent years
are lease payment commitments to GECC, John Hancock and Metropolitan Life for
assets purchased from Georgia-Pacific in January 1991 and leased to Tenneco.
Commitments under capital leases were not significant to
the accompanying financial statements. Total rental expense for continuing
operations for the years 1994, 1993 and 1992, was $197 million, $200 million
and $209 million, respectively, including minimum rentals under non-cancelable
operating leases of $189 million, $196 million and $206 million for the
corresponding periods.
Litigation
Reference is made to Note 6, "FERC Regulatory Matters," 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 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.
Environmental Matters
Tennessee is engaged in an internal project to identify and deal with the
presence of 1) polychlorinated biphenyls ("PCBs") and 2) 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 is 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 December
31, 1994, Tenneco has charged approximately $88 million against the
environmental reserve. Of the remaining reserve, $30 million has been recorded
on the balance sheet under "Payables-Trade" and $145 million under "Deferred
credits and other liabilities."
Due to the current uncertainty regarding the further activity necessary for
Tennessee to address the substances on the HS List and other substances of
concern, including the requirements for site characterization, the actual
presence 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 project what additional costs, if
any, may result from such activity. While there are still many uncertainties
relating to the ultimate costs which may be incurred, based upon Tennessee's
continuing evaluation and experience to date, Tenneco continues to believe that
the amount of the reserve is 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. Tennessee is currently recovering environmental
expenses annually in its rates. Reference is made to Note 6 for more
information regarding recovery of environmental costs. A significant portion of
these expenses remains subject to review and refund in Tennessee's 1991 rate
case. Tennessee is also currently pursuing the possibility of a global
settlement with its customers that would not only address recovery of the
environmental costs currently being recovered in its rates, but would also
establish a mechanism for recovering a substantial portion of the environmental
costs that will be expended in the future. The total amount of and timing for
any recovery pursuant to such a global settlement will depend upon the results
of Tennessee's negotiations with its customers and will be subject to FERC
approval. As of December 31, 1994, the asset balance is $135 million.
69
<PAGE>
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
received payment from several 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. Any such recovery
would likely be considered in resolving environmental cost recoveries with
Tennessee's customers.
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.
Tenneco has identified other sites in its various operating divisions where
environmental remediation expense may be required should there be a change in
ownership, operations or applicable regulations. These possibilities cannot be
predicted or quantified at this time and accordingly, no provision has been
recorded. However, provisions have been made for all instances where it has
been determined that the incurrence of any material remedial expense is
reasonably possible.
18. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Income Income
Before Interest (Loss) from Cumulative
Net Sales Expense, Discontinued Effect of Change
and Income Taxes Income from Operations, Extraordinary in Accounting
Quarter Operating and Minority Continuing Net of Loss, Net of Principle, Net Net
(Millions) Revenues Interest Operations Income Tax Income Tax of Income Tax Income
---------- ---------- --------------- ----------- ------------ ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1st $ 3,049 $ 294 $121 $ 1 $ -- $(39) $ 83
2nd 3,258 375 161 (14) (5) -- 142
3rd 3,049 347 150 1 -- -- 151
4th 2,818 363 209 (177) -- -- 32
------- ------ ---- ----- ---- ---- ----
$12,174 $1,379 $641 $(189) $ (5) $(39) $408
------- ------ ---- ----- ---- ---- ----
1993 1st $ 3,015 $ 256 $ 68 $ 3 $ -- $ -- $ 71
2nd 3,224 278 97 11 (23) -- 85
3rd 2,913 253 111 2 (2) -- 111
4th 3,135 310 137 22 -- -- 159
------- ------ ---- ----- ---- ---- ----
$12,287 $1,097 $413 $ 38 $(25) $ -- $426
------- ------ ---- ----- ---- ---- ----
</TABLE>
<TABLE>
<CAPTION>
Earnings (Loss) per Average Share of Common Stock
----------------------------------------------------------------------------
Cumulative Effect of
Continuing Discontinued Extraordinary Change in Accounting Net
Quarter Operations Operations Loss Principle Income
------- ---------- ------------ ------------- -------------------- --------
<S> <C> <C> <C> <C> <C>
1994 1st $ .66 $ .01 $ -- $ (.22) $ .45
2nd .88 (.08) (.03) -- .77
3rd .81 .01 -- -- .82
4th 1.14 (.98) -- -- .16
----- ------ ------ ------ -----
$3.49 $(1.04) $ (.03) $ (.22) $2.20
----- ------ ------ ------ -----
1993 1st $ .42 $ .02 $ -- $ -- $ .44
2nd .55 .06 (.13) -- .48
3rd .61 .01 (.01) -- .61
4th .75 .13 -- -- .88
----- ------ ------ ------ -----
$2.36 $ .23 $ (.15) $ -- $2.44
----- ------ ------ ------ -----
Notes: Reference is made to Notes 1, 3 and 16 for discussion of items affecting quarterly results.
The sum of the quarters may not equal the total of the respective year's earnings per share due to
the issuance of additional shares throughout the year.
</TABLE>
The preceding notes are an integral part of the foregoing financial statements.
70
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There has been no change in accountants during 1994 or 1993, nor has there
been any disagreement on any matter of accounting principles or practices or
financial disclosure which in either case is required to be reported pursuant
to this Item 9.
PART III
Item 10, "Directors and Executive Officers of the Registrant", Item 11,
"Executive Compensation", Item 12, "Security Ownership of Certain Beneficial
Owners and Management", and Item 13, "Certain Relationships and Related
Transactions", have been omitted from this report inasmuch as Tenneco Inc. will
file with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days after the end of the fiscal year covered by this report a
definitive Proxy Statement for the Annual Meeting of Stockholders of Tenneco
Inc. to be held on May 9, 1995, at which meeting the stockholders will vote
upon the election of directors. The information under the caption "Election of
Directors" in such Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS INCLUDED IN ITEM 8
See "Index to Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries" set forth in Item 8, "Financial Statements and Supplementary
Data."
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES INCLUDED IN ITEM 14
<TABLE>
<CAPTION>
PAGE
----
Schedules of Tenneco Inc. and Consolidated Subsidiaries--
<C> <S> <C>
Schedule I --Condensed financial information of registrant............ 72
Schedule II --Valuation and qualifying accounts--three years ended
December 31, 1994......................................... 76
</TABLE>
SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE
<TABLE>
<C> <S>
Schedule III --Real estate and accumulated depreciation
Schedule IV --Mortgage loans on real estate
Schedule V --Supplemental Information Concerning Property--Casualty
Insurance Operations
</TABLE>
71
<PAGE>
SCHEDULE I
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TENNECO INC.
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
(MILLIONS)
YEARS ENDED DECEMBER
31,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Interest Income from Affiliated Companies........... $ 79 $ 41 $ --
Other Income (Loss), Net............................ -- 39 --
------- ------- -------
79 80 --
------- ------- -------
Interest Expense and Other:
Affiliated companies............................... 229 83 89
Other.............................................. 206 211 189
------- ------- -------
435 294 278
------- ------- -------
Loss from Continuing Operations Before Income Taxes
and Equity in Net Income (Loss) from Continuing
Operations of Affiliated Companies................. (356) (214) (278)
------- ------- -------
Income Tax Expense (Benefit):
Current............................................ (171) (100) (78)
Deferred........................................... (16) 20 (15)
------- ------- -------
(187) (80) (93)
------- ------- -------
Equity in Net Income (Loss) from Continuing
Operations of Affiliated Companies................. 810 547 (529)
------- ------- -------
Income (Loss) from Continuing Operations............ 641 413 (714)
Income (Loss) from Discontinued Operations, Net of
Income Tax......................................... (189) 38 102
------- ------- -------
Income (Loss) Before Extraordinary Loss............. 452 451 (612)
Extraordinary Loss, Net of Income Tax............... (5) (25) (12)
------- ------- -------
Income (Loss) before Cumulative Effect of Changes in
Accounting Principles.............................. 447 426 (624)
Cumulative Effect of Changes in Accounting
Principles, Net of Income Tax...................... (39) -- (699)
------- ------- -------
Net Income (Loss)................................... 408 426 (1,323)
Preferred Stock Dividends........................... 12 14 16
------- ------- -------
Net Income (Loss) to Common Stock................... $ 396 $ 412 $(1,339)
======= ======= =======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of income (loss).)
72
<PAGE>
SCHEDULE I
(CONTINUED)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TENNECO INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(MILLIONS)
YEARS ENDED DECEMBER
31,
-----------------------
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Operating Activities:
Income (loss) from continuing operations............. $ 641 $ 413 $ (714)
Adjustments to reconcile income (loss) from
continuing operations to net cash provided (used)
by operating activities--
Deferred income taxes.............................. (16) 20 (15)
Undistributed (earnings) losses of affiliated
companies......................................... (809) (547) 650
Changes in components of working capital--
(Increase) decrease in receivables................ 57 200 (163)
Increase (decrease) in payables................... 50 (27) 103
Increase (decrease) in taxes accrued.............. -- (19) (8)
Increase (decrease) in interest accrued........... -- (7) 17
Other.............................................. 19 (18) 23
------- ------ ------
Net cash provided (used) by operating activities...... (58) 15 (107)
------- ------ ------
Investing Activities:
Investment in affiliated companies and other......... (2,603) (224) (371)
------- ------ ------
Financing Activities:
Issuance of common, treasury and SECT shares......... 188 1,234 318
Purchase of common stock............................. (26) (7) (3)
Redemption of preferred stock........................ (20) (30) (6)
Issuance of long-term debt........................... -- -- 888
Retirement of long-term debt--
Note payable to Tenneco France Finance S.A......... (160) -- --
Other.............................................. (150) (256) (5)
Net increase in advances from affiliated companies... 195 -- --
Net increase (decrease) in short-term debt excluding
current maturities on long-term debt--
Notes payable to affiliated companies.............. (64) (615) (356)
Demand notes payable to affiliated companies....... 3,009 243 --
Other.............................................. 7 (53) (92)
Dividends (common and preferred)..................... (318) (307) (266)
------- ------ ------
Net cash provided by financing activities............. 2,661 209 478
------- ------ ------
Increase (Decrease) in Cash and Temporary Cash
Investments.......................................... -- -- --
Cash and Temporary Cash Investments, January 1........ -- -- --
------- ------ ------
Cash and Temporary Cash Investments, December 31
(Note)............................................... $ -- $ -- $ --
======= ====== ======
Cash paid during the year for interest................ $ 433 $ 304 $ 269
Cash paid during the year for income taxes (net of
refunds)............................................. $ (123) $ 99 $ 567
</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.)
73
<PAGE>
SCHEDULE I
(CONTINUED)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TENNECO INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(MILLIONS)
DECEMBER 31,
---------------
1994 1993
------- ------
<S> <C> <C>
ASSETS
Current Assets:
Receivables--
Affiliated companies........................................ $ 241 $ 221
Income taxes................................................ 234 133
Other....................................................... 16 6
Deferred income taxes........................................ 2 --
------- ------
493 360
------- ------
Investments and Other Assets:
Investment in affiliated companies........................... 9,514 5,999
Other........................................................ 25 32
------- ------
9,539 6,031
------- ------
$10,032 $6,391
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities on long-term debt......................... $ 8 $ 135
Commercial paper with affiliated company..................... 62 51
Payables--
Affiliated companies........................................ 463 225
Other....................................................... 31 5
Interest-bearing notes payable to affiliated companies....... 240 304
Demand notes payable to affiliated companies................. 3,810 541
Interest accrued............................................. 60 60
Other........................................................ 5 3
------- ------
4,679 1,324
------- ------
Long-term Debt--
Interest-bearing note payable to Tenneco France
Finance S.A................................................. -- 148
Other........................................................ 2,072 2,093
------- ------
2,072 2,241
------- ------
Advances from Affiliated Companies............................ 195 --
------- ------
Deferred Income Taxes......................................... 5 26
------- ------
Deferred Credits and Other Liabilities........................ 34 36
------- ------
Preferred Stock............................................... 147 163
------- ------
Stockholders' Equity:
Series A preferred stock..................................... -- 9
Common stock................................................. 957 870
Stock Employee Compensation Trust (common stock held in
trust)...................................................... (298) (499)
Premium on common stock and other capital surplus............ 3,553 3,714
Cumulative translation adjustments........................... (237) (303)
Retained earnings (accumulated deficit)...................... (905) (980)
------- ------
3,070 2,811
Less--Shares held as treasury stock, at cost................. 170 210
------- ------
2,900 2,601
------- ------
$10,032 $6,391
======= ======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
balance sheets.)
74
<PAGE>
SCHEDULE I
(CONTINUED)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
TENNECO INC.
NOTES TO FINANCIAL STATEMENTS
Accounting Policies
The financial statements of Tenneco Inc. should be read in conjunction with
the financial statements of Tenneco Inc. and Consolidated Subsidiaries
presented in this document.
Majority-owned subsidiaries and companies in which at least a 20% voting
interest is owned are carried at cost plus equity in undistributed earnings
since date of acquisition and cumulative translation adjustments. At December
31, 1994, equity in undistributed earnings and cumulative translation
adjustments amounted to $3,241 million and $(199) million, respectively; at
December 31, 1993, the corresponding amounts were $1,979 million and $(280)
million, respectively.
Dividends received from companies accounted for on an equity basis amounted
to $1 million, none and $121 million for 1994, 1993 and 1992, respectively.
Income Taxes
Tenneco Inc., together with certain of its respective subsidiaries which are
owned 80% or more, have entered into an agreement to file a consolidated
federal income tax return. Such agreement provides, among other things, that
(1) each company in a taxable income position will be currently charged with an
amount equivalent to its federal income tax computed on a separate return basis
and (2) each company in a tax loss position will be currently reimbursed to the
extent its deductions, including general business credits, are utilized in the
consolidated return.
Tenneco Inc.'s pre-tax earnings (losses) from continuing operations
(excluding equity in net income (loss) from continuing operations of affiliated
companies) for the years 1994, 1993 and 1992 are principally domestic. The
differences between the U.S. income tax benefit, reflected in the Statements of
Income (Loss), of $187 million, $80 million and $93 million for the years 1994,
1993 and 1992 and the income tax expense (benefit), computed at the U.S.
federal income tax rates, of $159 million, $117 million and $(274) million,
respectively, consisted principally of the tax effect of equity in net income
(loss) from continuing operations of affiliated companies in each of the three
years, and permanent differences on the sale of businesses in 1994.
Long-Term Debt and Current Maturities
The aggregate maturities and sinking fund requirements applicable to the
long-term debt issues outstanding at December 31, 1994, are $8 million, $9
million, $16 million, $769 million and $251 million for 1995, 1996, 1997, 1998
and 1999, respectively.
Financial Instruments
Tenneco Inc. has guaranteed the performance of certain subsidiaries pursuant
to arrangements under which receivables are factored on a nonrecourse basis
with Tenneco Credit Corporation. Also, Tenneco Inc. has agreed to pay to
Tenneco Credit Corporation a service charge to the extent necessary so that the
earnings of Tenneco Credit Corporation and its consolidated subsidiaries
(before fixed charges and income taxes) are not less than 125% of the fixed
charges.
(The above notes are an integral part of the foregoing financial statements.)
75
<PAGE>
SCHEDULE II
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(MILLIONS)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------------------------------------------------------------------------
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (NOTE) OF YEAR
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Deducted from
Assets to Which it
Applies:
Year Ended December 31,
1994.................. $129 $66 $ 2 $149 $ 48
==== === === ==== ====
Year Ended December 31,
1993.................. $119 $48 $ 3 $ 41 $129
==== === === ==== ====
Year Ended December 31,
1992.................. $103 $57 $11 $ 52 $119
==== === === ==== ====
</TABLE>
--------
Note: For 1994, primarily the result of the change to the equity method of
accounting for Case. For 1994, 1993 and 1992, includes uncollectible
accounts written off, net of recoveries on accounts previously written
off.
76
<PAGE>
REPORTS ON FORM 8-K
Tenneco Inc. did not file any Current Reports on Form 8-K during the fourth
quarter of the fiscal year ended December 31, 1994.
EXHIBITS
The following exhibits are filed with Tenneco Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1994, or incorporated therein by
reference (exhibits designated by an asterisk were filed with the Report; all
other exhibits were incorporated by reference):
<TABLE>
<C> <S>
*3(a)(1) --Certificate of Incorporation as amended and supplemented as of March 1,
1995.
3(b) --Copy of By-Laws of Tenneco Inc. as amended March 9, 1993 (Exhibit 3(b)
to Form 10-K for the fiscal year ended December 31, 1992, File No. 1-
9864).
4 --Included in Exhibits 3(a) and 3(b).
9 --None.
+10(a)(1) --Copy of Tenneco Inc. Board of Directors Deferred Compensation Plan,
amended and restated January 1, 1988 (Exhibit 10(a)(1) to Form 10-K for
the fiscal year ended December 31, 1988, File No. 1-9864).
+10(a)(2) --Copy of Tenneco Inc. Executive Incentive Compensation Plan, amended and
restated July 31, 1986 (Exhibit 10(a)(2) to Registration No. 33-17815).
+10(a)(3) --Copy of Tenneco Inc. Deferred Compensation Plan, amended and restated
November 1, 1988, together with form of Deferred Compensation Agreement
(Exhibit 10(a)(3) to Form 10-K for the fiscal year ended December 31,
1988, File No. 1-9864).
+10(a)(4) --Copy of 1981 Tenneco Inc. Key Employee Stock Option Plan, amended and
restated January 13, 1987 (Exhibit 10(a)(4) to Registration No. 33-
17815).
+10(a)(5) --Copy of Tenneco Inc. Key Employee Restricted Stock and Restricted Unit
Plan effective May 10, 1988 (Exhibit 10(a)(8) to Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-9864).
+10(a)(6) --Copy of Tenneco Inc. Supplemental Executive Retirement Plan effective
January 1, 1989 (Exhibit 10(a)(9) to Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-9864).
+10(a)(7) --Copy of Amendment No. 1 to Tenneco Inc. Supplemental Executive
Retirement Plan (Exhibit 10(a)(9) to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-9864).
+10(a)(8) --Copy of Tenneco Inc. Benefit Equalization Plan (Exhibit 10(a)(10) to
Form 10-K for the fiscal year ended December 31, 1988, File No. 1-9864).
+10(a)(9) --Copy of Amendment No. 1 to Tenneco Inc. Benefit Equalization Plan
(Exhibit 10(a)(11) to Form 10-K for the fiscal year ended December 31,
1988, File No. 1-9864).
+10(a)(10) --Copy of Tenneco Inc. Board of Directors Restricted Stock and Restricted
Unit Program (Exhibit 10(a)(12) to Form 10-K for the fiscal year ended
December 31, 1990, File No. 1-9864).
+10(a)(11) --Copy of 1994 Tenneco Inc. Stock Ownership Plan (Exhibit 10(a)(13) to
Form 10-K for the fiscal year ended December 31, 1993, File No. 1-9864).
*+10(a)(12) --Copy of Tenneco Inc. Outside Directors Retirement Plan.
</TABLE>
77
<PAGE>
<TABLE>
<C> <S>
10(b)(1) --Lease Agreement, Tomahawk, dated as of January 30, 1991, between The
Connecticut National Bank, as Owner Trustee, and Packaging Corporation of
America (Exhibit 10(b)(1) to Form 10-K for the fiscal year ended December
31, 1990, File No. 1-9864).
10(b)(2) --Lease Agreement, Valdosta, dated as of January 30, 1991, between The
Connecticut National Bank, Philip G. Kane, Jr., Frank McDonald, Jr., and
William R. Monroe, as Owner Trustee, and Packaging Corporation of America
(Exhibit 10(b)(2) to Form 10-K for the fiscal year ended December 31,
1990, File No. 1-9864).
10(b)(3) --Timberland Lease dated January 31, 1991, by and between Four States
Timber Venture and Packaging Corporation of America (Exhibit 10(b)(3) to
Form 10-K for the fiscal year ended December 31, 1990, File No. 1-9864).
+10(c)(1) --Employment Agreement dated June 29, 1992, between Stacy S. Dick and
Tenneco Inc. (Exhibit 10(c)(3) to Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-9864).
+10(c)(2) --Employment Agreement dated March 12, 1992, between Dana G. Mead and
Tenneco Inc. (Exhibit 10(c)(2) to Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-9864).
+10(c)(3) --Employment Agreement dated December 3, 1993, between Paul T. Stecko and
Tenneco Inc. (Exhibit 10(c)(5) to Form 10-K for the year ended December
31, 1993, File No. 1-9864).
+10(c)(4) --Employment Agreement dated September 9, 1992, between Theodore R.
Tetzlaff and Tenneco Inc. (Exhibit 10(c)(6) to Form 10-K for the fiscal
year ended December 31, 1993, File No. 1-9864).
*11 --Computation of Earnings (Loss) Per Share of Common Stock.
*12 --Computation of Ratio of Earnings to Fixed Charges.
13 --None.
16 --None.
18 --None.
*21 --List of Subsidiaries and Affiliates of Tenneco Inc.
22 --None.
*23 --Consent of Arthur Andersen LLP, Independent Public Accountants for
Tenneco Inc.
*24 --Powers of Attorney of the following directors of Tenneco Inc.:
Mark Andrews
W. Michael Blumenthal
M. Kathryn Eickhoff
Peter T. Flawn
Henry U. Harris, Jr.
Belton K. Johnson
John B. McCoy
Joseph J. Sisco
William L. Weiss
Clifton R. Wharton, Jr.
*27(a) --Financial Data Schedule.
*27(b) --Financial Data Schedule for September 30, 1994 (restated).
28 --None.
99 --None.
</TABLE>
--------
+ Management contract or compensatory plan or arrangement.
78
<PAGE>
UNDERTAKING.
The undersigned, Tenneco Inc., hereby undertakes pursuant to Regulation S-K,
Item 601(b), paragraph (4)(iii), to furnish to the Securities and Exchange
Commission upon request all constituent instruments defining the rights of
holders of long-term debt of Tenneco Inc. and its consolidated subsidiaries not
filed herewith for the reason that the total amount of securities authorized
under any of such instruments does not exceed 10% of the total consolidated
assets of Tenneco Inc. and its consolidated subsidiaries.
79
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Dana G. Mead
By___________________________________
Chairman and Chief Executive
Officer
Date: March 29, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Dana G. Mead Principal Executive
------------------------------------------- Officer
Dana G. Mead and Director March 29, 1995
Robert T. Blakely Principal Financial and
------------------------------------------- Accounting Officer March 29, 1995
Robert T. Blakely
Mark Andrews, W. Michael Blumenthal,
M. Kathryn Eickhoff, Peter T. Flawn,
Henry U. Harris, Jr., Belton K. Johnson,
John B. McCoy, Joseph J. Sisco,
William L. Weiss, Clifton R. Wharton, Jr.
Directors
</TABLE>
T. R. Tetzlaff March 29, 1995
By___________________________________
Attorney-in-fact
80
<PAGE>
EXHIBIT 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
COMPUTATION FOR STATEMENTS OF INCOME
(LOSS)
Primary Earnings Per Share (average
shares outstanding):
Income (loss) from continuing opera-
tions................................ $ 641 $ 413 $ (714)
Income (loss) from discontinued oper-
ations, net of income tax............ (189) 38 102
----------- ----------- -----------
Income (loss) before extraordinary
loss................................. 452 451 (612)
Extraordinary loss, net of income
tax.................................. (5) (25) (12)
----------- ----------- -----------
Income (loss) before cumulative ef-
fect of changes in accounting prin-
ciples............................... 447 426 (624)
Cumulative effect of changes in ac-
counting principles, net of income
tax.................................. (39) -- (699)
----------- ----------- -----------
Net income (loss)..................... 408 426 (1,323)
Preferred stock dividends............. 12 14 16
----------- ----------- -----------
Net income (loss) to common stock..... $ 396 $ 412 $ (1,339)
=========== =========== ===========
Average shares of common stock
outstanding(a),(b)................... 180,084,909 168,772,852 144,110,151
=========== =========== ===========
Earnings (loss) per average share of
common stock:
Continuing operations............... $ 3.49 $ 2.36 $ (5.07)
Discontinued operations............. (1.04) .23 .72
Extraordinary loss.................. (.03) (.15) (.08)
Cumulative effect of changes in ac-
counting principles................ (.22) -- (4.86)
----------- ----------- -----------
$ 2.20 $ 2.44 $ (9.29)
=========== =========== ===========
ADDITIONAL COMPUTATIONS(C)
Net income (loss) to common stock, per
above................................. $ 396 $ 412 $ (1,339)
=========== =========== ===========
Primary Earnings Per Share (including
common stock equivalents):
Average shares of common stock
outstanding(a),(b)................... 180,084,909 168,772,852 144,110,151
Incremental common shares applicable
to common stock options based on the
common stock daily average market
price during the year................ 74,087 38,171 --
----------- ----------- -----------
Average common shares, as adjusted.... 180,158,996 168,811,023 144,110,151
=========== =========== ===========
Earnings (loss) per average share of
common stock (including common
stock equivalents):
Continuing operations............... $ 3.49 $ 2.36 $ (5.07)
Discontinued operations............. (1.04) .23 .72
Extraordinary loss.................. (.03) (.15) (.08)
Cumulative effect of changes in ac-
counting principles................ (.22) -- (4.86)
----------- ----------- -----------
$ 2.20 $ 2.44 $ (9.29)
=========== =========== ===========
Fully Diluted Earnings Per Share:
Average shares of common stock
outstanding(a),(b)................... 180,084,909 168,772,852 144,110,151
Incremental common shares applicable
to common stock options based on the
more dilutive of the common stock
ending or average market price
during the year...................... 75,223 106,901 --
Average common shares issuable assum-
ing conversion of Tenneco Inc. 10%
loan stock........................... 41,356 42,663 43,467
----------- ----------- -----------
Average common shares assuming full
dilution............................. 180,201,488 168,922,416 144,153,618
=========== =========== ===========
Fully diluted earnings (loss) per
average share, assuming conversion
of all applicable securities:
Continuing operations............... $ 3.49 $ 2.36 $ (5.07)
Discontinued operations............. (1.04) .23 .72
Extraordinary loss.................. (.03) (.15) (.08)
Cumulative effect of changes in ac-
counting principles................ (.22) -- (4.86)
----------- ----------- -----------
$ 2.20 $ 2.44 $ (9.29)
=========== =========== ===========
</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 December 31, 1994, the SECT had utilized 4,944,146
of these shares.
(b) Series A preferred stock is converted into common stock under the
Contingent Share method. The above computation includes 8,935,175
shares of Series A preferred stock which were converted into
17,342,763 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
years and certain quarters in 1994, 1993 and 1992.
(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)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1994 1993 1992 1991 1990
------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations.. $ 641 $ 413 $(714) $ (617) $ 487
Add:
Interest................................. 597 717 898 977 917
Portion of rentals representative of
interest factor......................... 67 67 70 69 40
Income tax expense and other taxes on
income.................................. 302 258 167 63 322
Amortization of interest capitalized
applicable to nonutility companies...... 6 6 5 5 5
Interest capitalized applicable to
utility companies....................... 1 1 2 4 3
Undistributed (earnings) losses of
affiliated companies in which less than
a 50% voting interest is owned.......... (4) 4 (2) (4) 2
------ ------ ----- ------ ------
Earnings as defined................... $1,610 $1,466 $ 426 $ 497 $1,776
====== ====== ===== ====== ======
Interest.................................. $ 597 $ 717 $ 898 $ 977 $ 917
Interest capitalized...................... 6 4 8 23 10
Portion of rentals representative of
interest factor.......................... 67 67 70 69 40
------ ------ ----- ------ ------
Fixed charges as defined.............. $ 670 $ 788 $ 976 $1,069 $ 967
====== ====== ===== ====== ======
Ratio of earnings to fixed charges........ 2.40 1.86 (a) (a) 1.84
====== ====== ======
</TABLE>
--------
Note:(a) For the years ended December 31, 1992 and 1991, earnings were
inadequate to cover fixed charges by $550 million and $572 million,
respectively.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ------------
<C> <S> <C>
3(a)(1) --Certificate of Incorporation as amended and
supplemented as of March 1, 1995.
3(b) --Copy of By-Laws of Tenneco Inc. as amended March *
9, 1993 (Exhibit 3(b) to Form 10-K for the fiscal
year ended December 31, 1992, File No. 1-9864).
+10(a)(1) --Copy of Tenneco Inc. Board of Directors Deferred *
Compensation Plan, amended and restated January 1,
1988 (Exhibit 10(a)(1) to Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-9864).
+10(a)(2) --Copy of Tenneco Inc. Executive Incentive *
Compensation Plan, amended and restated July 31,
1986 (Exhibit 10(a)(2) to Registration No. 33-
17815).
+10(a)(3) --Copy of Tenneco Inc. Deferred Compensation Plan, *
amended and restated November 1, 1988, together
with form of Deferred Compensation Agreement
(Exhibit 10(a)(3) to Form 10-K for the fiscal year
ended December 31, 1988, File No. 1-9864).
+10(a)(4) --Copy of 1981 Tenneco Inc. Key Employee Stock *
Option Plan, amended and restated January 13, 1987
(Exhibit 10(a)(4) to Registration No. 33-17815).
+10(a)(5) --Copy of Tenneco Inc. Key Employee Restricted Stock *
and Restricted Unit Plan effective May 10, 1988
(Exhibit 10(a)(8) to Form 10-K for the fiscal year
ended December 31, 1988, File No. 1-9864).
+10(a)(6) --Copy of Tenneco Inc. Supplemental Executive *
Retirement Plan effective January 1, 1989 (Exhibit
10(a)(9) to Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-9864).
+10(a)(7) --Copy of Amendment No. 1 to Tenneco Inc. *
Supplemental Executive Retirement Plan (Exhibit
10(a)(9) to Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-9864).
+10(a)(8) --Copy of Tenneco Inc. Benefit Equalization Plan *
(Exhibit 10(a)(10) to Form 10-K for the fiscal year
ended December 31, 1988, File No. 1-9864).
+10(a)(9) --Copy of Amendment No. 1 to Tenneco Inc. Benefit *
Equalization Plan (Exhibit 10(a)(11) to Form 10-K
for the fiscal year ended December 31, 1988, File
No. 1-9864).
+10(a)(10) --Copy of Tenneco Inc. Board of Directors Restricted *
Stock and Restricted Unit Program (Exhibit
10(a)(12) to Form 10-K for the fiscal year ended
December 31, 1990, File No. 1-9864).
+10(a)(11) --Copy of 1994 Tenneco Inc. Stock Ownership Plan *
(Exhibit 10(a)(13) to Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-9864).
10(a)(12) --Copy of Tenneco Inc. Outside Directors Retirement
Plan.
10(b)(1) --Lease Agreement, Tomahawk, dated as of January 30, *
1991, between The Connecticut National Bank, as
Owner Trustee, and Packaging Corporation of America
(Exhibit 10(b)(1) to Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-9864).
10(b)(2) --Lease Agreement, Valdosta, dated as of January 30, *
1991, between The Connecticut National Bank, Philip
G. Kane, Jr., Frank McDonald, Jr., and William R.
Monroe, as Owner Trustee, and Packaging Corporation
of America (Exhibit 10(b)(2) to Form 10-K for the
fiscal year ended December 31, 1990, File No. 1-
9864).
</TABLE>
--------
* Exhibit incorporated by reference.
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
------- ----------------------- ------------
<C> <S> <C>
10(b)(3) --Timberland Lease dated January 31, 1991, by and *
between Four States Timber Venture and Packaging
Corporation of America (Exhibit 10(b)(3) to Form 10-
K for the fiscal year ended December 31, 1990, File
No. 1-9864).
+10(c)(1) --Employment Agreement dated June 29, 1992, between *
Stacy S. Dick and Tenneco Inc. (Exhibit 10(c)(3) to
Form 10-K for the fiscal year ended December 31,
1993, File No. 1-9864).
+10(c)(2) --Employment Agreement dated March 12, 1992, between *
Dana G. Mead and Tenneco Inc. (Exhibit 10(c)(4) to
Form 10-K for the fiscal year ended December 31,
1993, File No. 1-9864.
+10(c)(3) --Employment Agreement dated December 3, 1993, *
between Paul T. Stecko and Tenneco Inc. (Exhibit
10(c)(5) to Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-9864).
+10(c)(4) --Employment Agreement dated September 9, 1992, *
between Theodore R. Tetzlaff and Tenneco Inc.
(Exhibit 10(c)(6) to Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-9864).
11 --Computation of Earnings (Loss) Per Share of Common
Stock.
12 --Computation of Ratio of Earnings to Fixed Charges.
21 --List of Subsidiaries and Affiliates of Tenneco Inc.
23 --Consent of Arthur Andersen LLP, Independent Public
Accountants for Tenneco Inc.
24 --Powers of Attorney of the following directors of
Tenneco Inc.:
Mark Andrews
W. Michael Blumenthal
M. Kathryn Eickhoff
Peter T. Flawn
Henry U. Harris, Jr.
Belton K. Johnson
John B. McCoy
Joseph J. Sisco
William L. Weiss
Clifton R. Wharton, Jr.
27(a) --Financial Data Schedule.
27(b) --Financial Data Schedule for September 30, 1994
(restated).
</TABLE>
--------
+ Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 3(a)(1)
[CONFORMED COPY]
CERTIFICATE OF INCORPORATION
OF
TENNECO HOLDINGS, INC.
* * * * *
FIRST: The name of the corporation is Tenneco Holdings, Inc.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall be authorized to issue is 415,000,000 shares, divided into
15,000,000 shares of Preferred Stock, without par value (herein called
"Preferred Stock"), 50,000,000 shares of Junior Preferred Stock, without par
value ( herein called "Junior Preferred Stock"), and 350,000,000 shares of
Common Stock, of the par value of $5 per share (herein called "Common Stock").
The following is a statement of the designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, of the
classes of stock of the corporation.
I.
l. The Preferred Stock may be issued in one or more series. The designations,
preferences and relative, participating, optional, or other special rights, and
the qualifications, limitations or restrictions thereof, of the Preferred Stock
of each series shall be such as are stated and expressed herein and, to the
extent not stated and expressed herein, shall be such as may be fixed by the
Board of Directors (authority so to do being hereby expressly granted) and
stated and expressed in a resolution or resolutions adopted by the Board of
Directors providing for the issue of Preferred Stock of such series. Such
resolution or resolutions shall (a) specify the series to which such Preferred
Stock shall belong, (b) fix the dividend rate therefor, (c) fix the amount
which the holders of the Preferred Stock of such series shall be entitled to be
paid in the event of a voluntary or involuntary liquidation, dissolution or
winding up of the corporation, provided that such amount in the event of an
involuntary liquidation shall not exceed $100 per share, (d) state whether or
not the Preferred Stock of such series shall be redeemable and at what times and
under what conditions and the amount or amounts payable thereon in the event of
redemption; and may, in a manner not inconsistent with the provisions of this
Article FOURTH, (i) limit the number of shares of such series which may be
issued, (ii) provide for a sinking fund for the purchase or redemption, or a
purchase fund for the purchase, of shares of such series and the terms and
provisions governing the operation of any such fund and the status as to
reissuance of shares of Preferred Stock purchased or otherwise reacquired or
redeemed or retired through the operation thereof, and that so long as the
corporation is in default as to such sinking or purchase fund the corporation
shall not (with such exceptions, if any, as may be provided) pay any dividends
upon or purchase or redeem shares of capital stock ranking junior to the
Preferred Stock with respect to dividends or distributions of assets upon
liquidation (referred to in this Part I of Article FOURTH as "stock ranking
junior to the Preferred Stock"), (iii) grant voting rights to the holders of
shares of such series in addition to and not inconsistent with those granted by
this Part I of Article FOURTH to the holders of Preferred Stock, and in the
absence of such grant the holders of such series of Preferred Stock shall have
no such additional voting rights, (iv) impose conditions or restrictions upon
the creation of indebtedness of the corporation or upon the issue of
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additional Preferred Stock or other capital stock ranking on a parity therewith
or prior thereto with respect to dividends or distribution of assets upon
liquidation, (v) impose conditions or restrictions upon the payment of dividends
upon, or the making of other distributions to, or the acquisition of, stock
ranking junior to the Preferred Stock, (vi) grant to the holders of the
Preferred Stock of such series the right to convert such stock into shares of
stock ranking junior to the Preferred Stock, and (vii) grant such other special
rights to the holders of shares of such series as the Board of Directors may
determine and as shall not be inconsistent with the provisions of this Article
FOURTH. The term "fixed for such series" and similar terms as used in this Part
I of Article FOURTH shall mean stated and expressed in this Part I of Article
FOURTH or in a resolution or resolutions adopted by the Board of Directors
providing for the issue of Preferred Stock of the series referred to therein.
2. The holders of the Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of any funds legally available
therefor, cumulative preferential dividends in cash, at the rate per annum fixed
for such series, and no more, payable quarter-yearly on the last days of March,
June, September and December in each year to the stockholders of record on a
date, not exceeding fifty days preceding each such dividend payment date, fixed
for the purpose by the Board of Directors in advance of payment of each
particular dividend. Dividends on shares of the Preferred Stock shall accrue
from the date of issuance, or from such other date or dates as may be fixed by
the Board of Directors for any series, and shall be cumulative. Each share of
Preferred Stock shall rank on a parity with each other share of Preferred Stock,
irrespective of series, with respect to preferential dividends at the respective
rates fixed for such series, and no dividend shall be declared or paid or set
apart for payment for the Preferred Stock of any series unless at the same time
a dividend in like proportion to the dividends accrued upon the Preferred Stock
of each other series shall be declared or paid or set apart for payment, as the
case may be, on Preferred Stock of each other series then outstanding.
3. So long as any shares of Preferred Stock shall remain outstanding, in no
event shall any dividends whatsoever, whether in cash, stock, or otherwise, be
paid or declared, or any distribution be made, on any class of stock ranking
junior to the Preferred Stock, nor shall any shares of stock ranking junior to
the Preferred Stock be purchased, retired or otherwise acquired for a valuable
consideration by the corporation, unless all dividends on the Preferred Stock
for all past quarter-yearly dividend periods shall have been paid, or declared
and a sum sufficient for the payment thereof set apart, and the full dividend
thereon for the then current quarter-yearly dividend period shall have been paid
or declared.
4. The corporation at the option of the Board of Directors may redeem the
Preferred Stock of any series which by its terms is redeemable, at the time or
times and on the terms and conditions fixed for such series, upon notice duly
given as hereinafter provided, by paying therefor in cash the sum fixed for such
series, together, in each case, with an amount equal to accrued and unpaid
dividends thereon. The term "accrued and unpaid dividends" as used in this Part
I of Article FOURTH with respect to Preferred Stock of any series shall mean
dividends on all outstanding shares of Preferred Stock of such series at the
rate fixed for such series, from the date or dates from which such dividends
accrued to the date as of which accrued and unpaid dividends are being
determined, less the aggregate amount of all dividends theretofore declared and
paid or set apart for payment upon such outstanding Preferred Stock.
At least thirty days' previous notice of any such redemption of Preferred
Stock shall be mailed, addressed to the holders of record of the shares to be
redeemed at their respective addresses as the same shall appear on the books of
the corporation, and such notice may also be published in a newspaper printed in
the English language and published daily for at least five days per calendar
week (other than legal holidays) and of general circulation in the Borough of
Manhattan, The City of New York, New York.
In case of the redemption of only part of the Preferred Stock of any series at
the time outstanding, subject to the limitations and provisions herein
contained, the shares to be redeemed may be selected pro rata, or by lot, or by
such other equitable method as may be determined by the Board of Directors, and
the Board of Directors shall have full power and authority to prescribe the
manner in which the redemption shall be conducted.
If such notice of redemption shall have been duly given by publication as
aforesaid at least thirty days prior to the redemption date, and if on or before
the redemption date specified in such notice all funds
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necessary for such redemption shall have been set aside by the corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares so called for redemption, so as to be and continue to
be available therefor, then, notwithstanding that any certificate for shares of
Preferred Stock so called for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding, the right to receive dividends thereon shall cease to accrue from
and after the date of redemption so designated and all rights with respect to
such shares of Preferred Stock so called for redemption shall forthwith on such
redemption date cease and terminate except only the right of the holders thereof
to receive the redemption price of such shares so to be redeemed, but without
interest thereon.
The corporation may, however, prior to the redemption date specified in the
notice of redemption, deposit in trust for the account of the holders of the
Preferred Stock to be redeemed, with a bank or trust company in good standing
organized under the laws of the United States of America or of the State of New
York, doing business in the Borough of Manhattan, The City of New York, having a
capital, surplus and undivided profits aggregating at least $50,000,000,
designated in such notice of redemption, all funds necessary for such
redemption, together with irrevocable written instructions authorizing such bank
or trust company, on behalf and at the expense of the corporation, to cause the
notice of redemption to be duly mailed and, at the option of the corporation,
the publication of such notice to be made as herein provided at least thirty
days prior to the redemption date, and thereupon, notwithstanding that any
certificate for shares of Preferred Stock so called for redemption shall not
have been surrendered for cancellation, all shares of Preferred Stock with
respect to which such deposit shall have been made shall no longer be deemed to
be outstanding and all rights with respect to such shares of Preferred Stock
shall forthwith upon such deposit in trust cease and terminate, except only the
right of the holders thereof to receive from such bank or trust company, at any
time after the time of such deposit, the redemption price of such shares so to
be redeemed.
Any moneys so deposited by the corporation and unclaimed at the end of six
months from the date fixed for such redemption shall be repaid to the
corporation upon its request expressed in a resolution of its Board of
Directors, after which repayment the holders of the shares so called for
redemption shall look only to the corporation for payment thereof.
5. (A) So long as any shares of Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least two-thirds
of the number of shares of Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose, amend, alter or repeal any of the
provisions of this Article FOURTH (other than provisions relating exclusively
to the shares of Preferred Stock of a particular series) so as to affect
adversely the rights, powers or preferences of Preferred Stock or of the holders
thereof; and so long as any shares of any particular series of Preferred Stock
are outstanding the corporation shall not, without the consent of the holders of
at least two-thirds of the number of shares of Preferred Stock of such series at
the time outstanding, given in person or by proxy, either in writing or by a
vote at an annual meeting or a special meeting called for the purpose, amend,
alter or repeal any of the provisions of this Article FOURTH or of any
resolution or resolutions relating exclusively to the shares of Preferred Stock
of such series, so as to affect adversely the rights, powers or preferences of
the Preferred Stock of such series or the holders thereof.
(B) So long as any shares of Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, given in person or
by proxy, either in writing or by vote at an annual meeting or a special meeting
called for that purpose:
(a) create or authorize any class of stock ranking prior to the Preferred
Stock in respect of dividends or distribution of assets on liquidation; or
increase the authorized amount of any class of stock ranking prior to the
Preferred Stock in respect of dividends or distribution of assets on
liquidation; or create or authorize any obligation or security convertible
into shares of stock of any class ranking prior to the Preferred Stock in
respect of dividends or distribution of assets on liquidation; or
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(b) sell, lease, transfer or convey all, or substantially all, of its
property or business, or consolidate with or merge into any other corporation
or corporations; provided, however, that this subparagraph shall not apply to
any merger of another corporation into the corporation or to any mortgage,
pledge or other hypothecation of property of the corporation.
(C) So long as any shares of Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, given in person or
by proxy, either in writing or by vote at an annual meeting or a special meeting
called for the purpose:
(a) create or authorize any class of stock ranking on a parity with the
Preferred Stock in respect of dividends or distribution of assets on
liquidation; or
(b) increase the authorized amount of the Preferred Stock or of any class
of stock ranking on a parity with the Preferred Stock in respect of dividends
or distributions of assets on liquidation; or
(c) create or authorize any obligation or security convertible into shares
of Preferred Stock or shares of stock of any class ranking on a parity with
the Preferred Stock in respect of dividends or distribution of assets on
liquidation.
(D) So long as any shares of Preferred Stock are outstanding the corporation
shall not purchase, redeem or otherwise acquire for value any shares of
Preferred Stock or of any other stock ranking on a parity with the Preferred
Stock in respect of dividends or distribution of assets on liquidation during
the continuance of any default in the payment of dividends on the Preferred
Stock without the consent, given in person or by proxy or by vote at an annual
meeting or at a special meeting called for that purpose, of the holders of at
least a majority of the number of shares of Preferred Stock present in person or
by proxy at such meeting, provided that a quorum, consisting of at least a
majority of the then outstanding shares of Preferred Stock, is present.
(E) Any action specified in this subdivision 5 as requiring the consent of the
holders of at least a specified proportion of the number of shares of Preferred
Stock or of any particular series thereof at the time outstanding or represented
at a meeting may be taken with such consent and with such additional vote or
consent, if any, of stockholders as may be from time to time required by this
Certificate of Incorporation, as amended from time to time, or by law.
6. In the event of any liquidation, dissolution or winding up of the affairs
of the corporation, then, before any distribution or payment shall be made to
the holders of any class of stock of the corporation ranking junior to the
Preferred Stock, the holders of the Preferred Stock of the respective series
shall be entitled to be paid in full the respective amounts fixed for such
series. After such payment shall have been made in full to the holders of the
Preferred Stock, the remaining assets and funds of the corporation shall be
distributed among the holders of the stock of the corporation ranking junior to
the Preferred Stock according to their respective rights. In the event that the
assets of the corporation available for distribution to holders of Preferred
Stock shall not be sufficient to make the payment herein required to be made in
full, such assets shall be distributed to the holders of the respective shares
of Preferred Stock pro rata in proportion to the amounts payable hereunder upon
each share thereof.
7. Except as otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Preferred Stock,
Preferred Stock redeemed or otherwise acquired by the corporation shall assume
the status of authorized but unissued Preferred Stock and may thereafter,
subject to the provisions of this Part I of Article FOURTH and of any
restrictions contained in any resolution of the Board of Directors providing for
the issue of any particular series of Preferred Stock, be reissued in the same
manner as other authorized but unissued Preferred Stock.
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II.
1. The Junior Preferred Stock may be issued in one or more series. The
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, of the
Junior Preferred Stock of each series shall be such as are stated and expressed
herein and, to the extent not stated and expressed herein, shall be such as may
be fixed by the Board of Directors (authority so to do being hereby expressly
granted) and stated and expressed in a resolution or resolutions adopted by the
Board of Directors providing for the issue of Junior Preferred Stock of such
series. Subject to the prior rights of the holders of the Preferred Stock as set
forth in Part I of this Article FOURTH, such resolution or resolutions shall
(a) specify the series to which such Junior Preferred Stock shall belong, (b)
state whether a dividend shall be payable in cash, stock or otherwise, whether
such dividend shall be cumulative or non-cumulative and whether the Junior
Preferred Stock of such series shall rank on a parity with or junior to other
series of Junior Preferred Stock as to dividends, and fix the dividend rate
therefor (or the manner of computing the rate of such dividends), (c) fix the
amount which the holders of the Junior Preferred Stock of such series shall be
entitled to be paid in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the corporation, (d) state whether or not the
Junior Preferred Stock of such series shall be redeemable and at what times and
under what conditions and the amount or amounts payable thereon in the event of
redemption; and may, in a manner not inconsistent with the provisions of this
Article FOURTH, (i) limit the number of shares of such series which may be
issued, (ii) provide for a sinking fund for the purchase or redemption, or a
purchase fund for the purchase, of shares of such series and the terms and
provisions governing the operation of any such fund and the status as to
reissuance of shares of Junior Preferred Stock purchased or otherwise reacquired
or redeemed or retired through the operation thereof, and that so long as the
corporation is in default as to such sinking or purchase fund the corporation
shall not (with such exceptions, if any, as may be provided) pay any dividends
upon or purchase or redeem shares of capital stock ranking junior to the Junior
Preferred Stock with respect to dividends or distribution of assets upon
liquidation (referred to in this Part II of Article FOURTH as "stock ranking
junior to the Junior Preferred Stock"), (iii) grant voting rights to the holders
of shares of such series in addition to and not inconsistent with those granted
by this Part II of Article FOURTH to the holders of Junior Preferred Stock, and
in the absence of such grant the holders of such series of Junior Preferred
Stock shall have no such additional voting rights, (iv) impose conditions or
restrictions upon the creation of indebtedness of the corporation or upon the
issue of additional Junior Preferred Stock or other capital stock ranking on a
parity therewith or prior thereto with respect to dividends or distribution of
assets upon liquidation, (v) impose conditions or restrictions upon the payment
of dividends upon, or the making of other distributions to, or the acquisition
of, stock ranking junior to the Junior Preferred Stock, (vi) grant to the
holders of the Junior Preferred Stock of such series the right to convert such
stock into shares of stock ranking junior to the Junior Preferred Stock, and
(vii) grant such other special rights to the holders of shares of such series as
the Board of Directors may determine and as shall not be inconsistent with the
provisions of this Article FOURTH or the prior rights of the holders of
Preferred Stock as set forth in Part I of this Article FOURTH. The term "fixed
for such series" and similar terms as used in this Part II of Article FOURTH
shall mean stated and expressed in this Part II of Article FOURTH or in a
resolution or resolutions adopted by the Board of Directors providing for the
issue of Junior Preferred Stock of the series referred to therein.
2. So long as any shares of Junior Preferred Stock shall remain outstanding,
in no event shall any dividends whatsoever, whether in cash, stock or otherwise,
be paid or declared, or any distribution be made on any class of stock ranking
junior to the Junior Preferred Stock, nor shall any shares of stock ranking
junior to the Junior Preferred Stock be purchased, retired or otherwise acquired
for a valuable consideration by the corporation, unless all dividends on the
Junior Preferred Stock for all past periods shall have been paid, or declared
and a sum sufficient for the payment of such dividends set apart, and the full
dividend thereon for the then current dividend period shall have been paid or
declared.
3. (A) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least two-thirds
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose, amend, alter, or repeal any of the
provisions of this Article FOURTH (other than provisions relating exclusively
to the shares of Junior Preferred Stock of a particular
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series) so as to affect adversely the rights, powers or preferences of Junior
Preferred Stock or of the holders thereof, and so long as any shares of any
particular series of Junior Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least two-thirds of the
number of shares of Junior Preferred Stock of such series at the time
outstanding, given in person or by proxy, either in writing or by a vote at an
annual meeting or a special meeting called for the purpose, amend, alter or
repeal any of the provisions of this Article FOURTH (relating exclusively to
the shares of Junior Preferred Stock of a particular series) or of any
resolution or resolutions relating exclusively to the shares of Junior Preferred
Stock of such series, so as to affect adversely the rights, powers or
preferences of the Junior Preferred Stock of such series or the holders thereof.
(B) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for that purpose:
(a) create or authorize any additional class of stock ranking prior to the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation; or increase the authorized amount of Preferred Stock or any
additional class of stock ranking prior to the Junior Preferred Stock in
respect of dividends or distribution of assets on liquidation; or create or
authorize any obligation or security convertible into shares of Preferred
Stock or shares of stock of any additional class ranking prior to the Junior
Preferred Stock in respect of dividends or distribution of assets on
liquidation; or
(b) sell, lease, transfer or convey all, or substantially all, of its
property or business, or consolidate with or merge into any other corporation
or corporations; provided, however, that this subparagraph shall not apply to
any merger of another corporation into the corporation or to any mortgage,
pledge or other hypothecation of property of the corporation.
(C) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose:
(a) create or authorize any class of stock ranking on a parity with the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation; or
(b) increase the authorized amount of the Junior Preferred Stock or of any
class of stock ranking on a parity with the Junior Preferred Stock in respect
of dividends or distributions of assets on liquidation; or
(c) create or authorize any obligation or security convertible into shares
of Junior Preferred Stock or shares of stock of any class ranking on a parity
with the Junior Preferred Stock in respect of dividends or distribution of
assets on liquidation.
(D) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not purchase, redeem or otherwise acquire for value any shares
of Junior Preferred Stock or of any other stock ranking on a parity with the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation during the continuance of any default in the payment of dividends on
the Junior Preferred Stock without the consent, given in person or by proxy or
by vote at an annual meeting or at a special meeting called for that purpose, of
the holders of at least a majority of the number of shares of Junior Preferred
Stock present in person or by proxy at such meeting, provided that a quorum,
consisting of at least a majority of the then outstanding shares of Junior
Preferred Stock, is present.
(E) Any action specified in this subdivision 3 as requiring the consent of the
holders of at least a specified proportion of the number of shares of Junior
Preferred Stock or of any particular series thereof at the time outstanding or
represented at a meeting may be taken with such consent and with such additional
vote or consent, if any, of stockholders as may be from time to time required by
this Certificate of Incorporation, as amended from time to time, or by law.
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4. In the event of any liquidation, dissolution or winding up of the affairs
of the corporation, then, before any distribution or payment shall be made to
the holders of any class of stock of the corporation ranking junior to the
Junior Preferred Stock, the holders of the Junior Preferred Stock of the
respective series (subject to the rights of the Preferred Stock) shall be
entitled to be paid in full the respective amounts fixed for such series. After
such payment shall have been made in full to the holders of the Junior Preferred
Stock, the remaining assets and funds of the corporation shall be distributed
among the holders of the stock of the corporation ranking junior to the Junior
Preferred Stock according to their respective rights. In the event that the
assets of the corporation available for distribution to holders of Junior
Preferred Stock shall not be sufficient to make the payment herein required to
be made in full, such assets shall be distributed to the holders of the
respective shares of Junior Preferred Stock pro rata in proportion to the
amounts payable hereunder upon each share thereof.
5. Except as otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Junior Preferred Stock,
shares of Junior Preferred Stock redeemed or otherwise acquired by the
corporation shall assume the status of authorized but unissued Junior Preferred
Stock and may thereafter, subject to the provisions of this Part II of Article
FOURTH and of any restrictions contained in any resolution of the Board of
Directors providing for the issue of any particular series of Junior Preferred
Stock, be reissued in the same manner as other authorized but unissued Junior
Preferred Stock.
III.
Subject to the prior and superior rights of the Preferred Stock and Junior
Preferred Stock, and on the conditions set forth in the foregoing Parts I and II
of this Article FOURTH or in any resolution of the Board of Directors providing
for the issuance of any particular series of Preferred Stock or Junior Preferred
Stock, and not otherwise, such dividends (payable in cash, stock or otherwise)
as may be determined by the Board of Directors may be declared and paid on the
Common Stock from time to time out of any funds legally available therefor.
Subject to the provisions of Parts I and II of this Article FOURTH, the
holders of the Common Stock shall be entitled to one vote for each share held at
all meetings of the stockholders of the corporation.
After payment shall have been made in full to the holders of the Preferred
Stock and Junior Preferred Stock in the event of any liquidation, dissolution or
winding up of the affairs of the corporation, the remaining assets and funds of
the corporation shall be distributed among the holders of the Common Stock
according to their respective shares.
IV.
Ownership of shares of any class of the capital stock of the corporation shall
not entitle the holders thereof to any preemptive right to subscribe for or
purchase or to have offered to them for subscription or purchase any additional
shares of capital stock of any class of the corporation or any securities
convertible into any class of capital stock of the corporation, however
acquired, issued or sold by the corporation, it being the purpose and intent
that the Board of Directors shall have full right, power and authority to offer
for subscription or sell or to make any disposal of any or all unissued shares
of the capital stock of the corporation or any securities convertible into stock
or any or all shares of stock or convertible securities issued and thereafter
acquired by the corporation, for such consideration, not less than the par value
of shares having a par value, in money or property, as the Board of Directors
shall determine.
FIFTH: (A) The business and affairs of the corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than three
nor more than sixteen directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II
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and Class III. Each class shall consist, as nearly as may be possible, of one-
third of the total number of directors constituting the entire Board of
Directors. The incorporator of the corporation shall elect the initial directors
of the corporation and shall designate the class of each director. Class I
directors shall serve until the first annual meeting of the stockholders of the
corporation, Class II directors shall serve until the second annual meeting of
stockholders of the corporation, and Class III directors shall serve until the
third annual meeting of stockholders of the corporation. At each annual meeting
of stockholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock or Junior Preferred Stock or any other class of
stock issued by the corporation shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article FIFTH unless expressly provided by
such terms.
(B) In furtherance and not in limitation of the powers which are now or may
hereafter be conferred by statute or the By-Laws of the corporation, the Board
of Directors is expressly authorized:
(a) To fix, determine and vary from time to time the amount to be
maintained as surplus and the amount or amounts to be set apart as working
capital.
(b) To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purposes and/or to abolish any
such reserve in the manner in which it was created.
(c) To make, amend, alter, change, add to or repeal By-Laws for the
corporation, without any action on the part of the stockholders. The By-Laws
made by the Board of Directors may be amended, altered, changed, added to or
repealed by the stockholders.
(d) To authorize and cause to be executed mortgages and liens, without
limit as to amount, upon the real and personal property of the corporation.
(e) From time to time to determine whether and to what extent, at what time
and place, and under what conditions and regulations the accounts and books
of the corporation or any of them, shall be open to the inspection of any
stockholder, and no stockholder shall have any right to inspect any account
or book or document of the corporation except as conferred by statute or the
By-Laws or as authorized by a resolution of the stockholders or the Board of
Directors.
(f) To authorize the payment of compensation to the directors for services
to the corporation, including fees for attendance at meetings of the Board of
Directors, and of any committees, and to determine the amount of such
compensation and fees.
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(g) To designate by resolution or resolutions passed by a majority of the
whole Board one or more committees, each committee to consist of two or more
of the directors of the corporation, which to the extent provided in said
resolution or resolutions or in the By-Laws of the corporation shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation and may have power to authorize the
seal of the corporation to be affixed to all papers which may require it.
(h) At any time or from time to time (without any action by the
stockholders of the corporation) to create and issue, whether or not in
connection with the issue and sale of any shares of stock or other securities
of the corporation, rights or options entitling the holders thereof to
purchase from the corporation any shares of its capital stock of any class or
classes or of any series of any class or classes, such rights or options to
be evidenced by or in such instrument or instruments as shall be approved by
the Board of Directors. The terms upon which, the time or times, which may be
limited or unlimited in duration, at or within which, and the price or prices
at which any such shares may be purchased from the corporation upon the
exercise of any such right or option shall be such as shall be fixed and
stated in the resolution or resolutions adopted by the Board of Directors
providing for the creation and issue of such rights or options and, in every
case, set forth or incorporated by reference in the instrument or instruments
evidencing such rights or options.
SIXTH: The name and mailing address of the sole incorporator is the following:
Tenneco Inc., P.O. Box 2511, Houston, Texas 77252-2511.
SEVENTH: A director of this corporation shall not be disqualified by his
office from dealing or contracting with the corporation either as a vendor,
purchaser or otherwise, nor shall any transaction or contract of the corporation
be void or voidable by reason of the fact that any director or any firm of which
any director is a member, or any corporation of which any director is a
shareholder, officer or director, is in any way interested in such transaction
or contract, provided that such transaction or contract is or shall be
authorized, ratified or approved either (1) by a vote of a majority of a quorum
of the Board of Directors or of the Executive Committee, without counting in
such majority or quorum any director so interested or a member of a firm so
interested, or a shareholder, officer or director of a corporation so
interested, or (2) by the written consent, or by the vote at any stockholders'
meeting, of the holders of record of a majority of all the outstanding shares of
stock of the corporation entitled to vote, nor shall any director be liable to
account to the corporation for any profits realized by or from or through any
such transaction or contract of the corporation authorized, ratified or approved
as aforesaid by reason of the fact that he, or any firm of which he is a member
or any corporation of which he is a shareholder, officer or director was
interested in such transaction or contract. Nothing herein contained shall
create liability in the events above described or prevent the authorization,
ratification or approval of such contracts in any other manner permitted by law.
A director shall be fully protected in relying in good faith upon the books of
account of the corporation or statements prepared by any of its officials as to
the value and amount of the assets, liabilities and/or net profits of the
corporation, or any other facts pertinent to the existence and amount of surplus
or other funds from which dividends might properly be declared and paid.
EIGHTH: The corporation is to have perpetual existence.
NINTH: A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-Laws of the corporation, and except as
otherwise expressly provided in Section B of this Article NINTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than 66 2/3% of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock (as hereinafter defined), voting together as a single class, excluding
Voting Stock beneficially owned by any Interested Stockholder. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage or separate class vote may be specified, by law or in
any agreement with any national securities exchange or otherwise.
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B. The provisions of Section A of this Article NINTH shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by any
other provision of this Certificate of Incorporation or the By-Laws of the
corporation, or any agreement with any national securities exchange, if all of
the conditions specified in either of the following Paragraphs 1 or 2 are met
or, in the case of a Business Combination not involving the payment of
consideration to the holders of the corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following Paragraph I is
met:
1. The Business Combination shall have been approved either specifically or
as a transaction which is within an approved category of transactions, by a
majority (whether such approval is made prior to or subsequent to the
acquisition of, or announcement or public disclosure of the intention to
acquire, beneficial ownership of the Voting Stock that caused the Interested
Stockholder to become an Interested Stockholder) of the Continuing Directors
(as hereinafter defined).
2. All of the following conditions shall have been met:
a. the aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock (x) within the two-year
period immediately prior to the first public announcement of the proposed
Business Combination (the "Announcement Date") or (y) in the transaction
in which it became an Interested Stockholder, whichever is higher, in
either case as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Stock; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"), whichever is
higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Stock.
b. The aggregate amount of cash and the Fair Market Value, as of the date
of the consummation of the Business Combination, of consideration other
than cash to be received per share by holders of shares of any class or
series of outstanding Capital Stock, other than Common Stock, shall be at
least equal to the highest amount determined under clauses (i), (ii),
(iii) and (iv) below
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees ) paid
by or on behalf of the Interested Stockholder for any share of such class
or series of Capital Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period immediately prior
to the Announcement Date, or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in either case as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock;
(ii) the Fair Market Value per share of such class or series of Capital
Stock on the Announcement Date or on the Determination Date, whichever is
higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of
Capital Stock;
(iii) (if applicable) the price per share equal to the Fair Market
Value per share of such class or series of Capital Stock determined
pursuant to the immediately preceding clause (ii), multiplied by the
ratio of (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or on
behalf of
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the Interested Stockholder for any share of such class or series of
Capital Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of such class or series of
Capital Stock within the two-year period immediately prior to the
Announcement Date, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class or
series of Capital Stock to (y) the Fair Market Value per share of such
class or series of Capital Stock on the first day in such two-year period
on which the Interested Stockholder acquired beneficial ownership of any
share of such class or series of Capital Stock, as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification
with respect to such class or series of Capital Stock; and
(iv) (if applicable) the highest preferential amount per share to which
the holders of shares of such class or series of Capital Stock would be
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation regardless of
whether the Business Combination to be consummated constitutes such an
event.
The provisions of this Paragraph 2 shall be required to be met with
respect to every class or series of outstanding Capital Stock, whether or
not the Interested Stockholder has previously acquired beneficial ownership
of any shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders of a particular class or
series of outstanding Capital Stock shall be in cash or in the same form as
previously has been paid by or on behalf of the Interested Stockholder in
connection with its direct or indirect acquisition of beneficial ownership
of shares of such class or series of Capital Stock. If the consideration so
paid for shares of any class or series of Capital Stock varied as to form,
the form of consideration for such class or series of Capital Stock shall
be either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the consummation of such
Business Combination: (i) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors; (iii) there shall have
been an increase in the annual rate of dividends paid on the Common Stock
as necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction that
has the effect of reducing the number of outstanding shares of Common
Stock, unless the failure so to increase such annual rate is approved by a
majority of the Continuing Directors; and (iv) such Interested Stockholder
shall not have become the beneficial owner of any additional shares of
Capital Stock except as part of the transaction that results in such
Interested Stockholder becoming an Interested Stockholder and except in a
transaction that, after giving effect thereto, would not result in any
increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
e. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (the "Act") (or any
subsequent provisions replacing such Act, rules or regulations) shall be
mailed to all stockholders of the corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on
the first page thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Combination that the
Continuing Directors, or any of them, may choose to make and, if deemed
advisable by a majority of the
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Continuing Directors, the opinion of an investment banking firm selected by
a majority of the Continuing Directors as to the fairness (or not) of the
terms of the Business Combination from a financial point of view to the
holders of the outstanding shares of Capital Stock other than the
Interested Stockholder and its Affiliates or Associates (as hereinafter
defined), such investment banking firm to be paid a reasonable fee for its
services by the corporation.
f. Such Interested Stockholder shall not have made any major change in
the corporation's business or equity capital structure without the approval
of a majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article NINTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the corporation or any Subsidiary (as
hereinafter defined) with (i) any Interested Stockholder or (ii) any
other company (whether or not itself an Interested Stockholder) which is
or after such merger or consolidation would be an Affiliate or Associate
of an Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of credit,
joint venture participation or other arrangement (in one transaction or a
series of transactions) with or for the benefit of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder
involving any assets, securities or commitments of the corporation, any
Subsidiary or any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder which (except for any arrangement, whether as
employee, consultant or otherwise, other than as a director, pursuant to
which any Interested Stockholder or any Affiliate or Associate thereof
shall, directly or indirectly, have any control over or responsibility
for the management of any aspect of the business or affairs of the
corporation, with respect to which arrangements the value tests set forth
below shall not apply), together with all other such arrangements
(including all contemplated future events), has an aggregate Fair Market
Value and/or involves aggregate commitments of $25,000,000 or more or
constitutes more than five percent of the book value of the total assets
(in the case of transactions involving assets or commitments other than
capital stock) or five percent of the stockholders' equity (in the case
of transactions in capital stock) of the entity in question (the
"Substantial Part"), as reflected in the most recent fiscal year-end
consolidated balance sheet of such entity existing at the time the
stockholders of the corporation would be required to approve or authorize
the Business Combination involving the assets, securities and/or
commitments constituting any Substantial Part; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of the corporation or for any amendment to the corporation's
By-Laws; or
d. any reclassification of securities (including any reverse stock
split), or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
e. any agreement, contract or other arrangement providing for any one
or more of the actions specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of the corporation
authorized to be issued from time to time under Article FOURTH of this
Certificate of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to
stockholders of the corporation generally.
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3. The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other than the
corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who (a) is or has announced or publicly disclosed
a plan or intention to become the beneficial owner of Voting Stock
representing five percent or more of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial owner of
Voting Stock representing five percent or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock (a) which
such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement
or understanding; or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this Section C, the number
of shares of Capital Stock deemed to be outstanding shall include shares
deemed beneficially owned by such person through application of this
Paragraph 5 of Section C, but shall not include any other shares of Capital
Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
6. The terms "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Act as in effect on March 5,
1985 (the term "registrant" in said Rule 12b-2 meaning in this case the
corporation).
7. The term "Subsidiary" means any company of which a majority of any class
of equity securities are beneficially owned by the corporation; provided,
however, that for the purposes of the definition of Interested Stockholder
set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean
only a company of which a majority of each class of equity security is
beneficially owned by the corporation.
8. The term "Continuing Director" means any member of the Board of
Directors of the corporation (the "Board of Directors"), while such person is
a member of the Board of Directors, who is not an Affiliate or Associate or
representative of the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Continuing Director while such
successor is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended
or elected to succeed the Continuing Director by a majority of Continuing
Directors.
9. The term "Fair Market Value" means (a) in the case of cash, the amount
of such cash; (b) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on the New
York Stock Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Act on which
such stock is listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotation System or any
similar system then in use, or if no such quotations are available, the fair
market value
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on the date in question of a share of such stock as determined by a majority
of the Continuing Directors in good faith; and (c) in the case of property
other than cash or stock, the fair market value of such property on the date
in question as determined in good faith by a majority of the Continuing
Directors.
10. In the event of any Business Combination in which the corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs 2.a and 2.b of Section B of this Article NINTH shall include
the shares of Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article NINTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
NINTH, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether a Proposed Action is with, or proposed by, or
on behalf of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, (e) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $25,000,000 or more, and (f)
whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article NINTH shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section B of this Article NINTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
G. For the purposes of this Article NINTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article NINTH (collectively, "Proposed
Action") is presumed to have been proposed by or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (1) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the corporation who with respect to such Interested Stockholder
would not qualify to serve as a Continuing Director or (2) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person a majority of the Continuing Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or person, based on
information known to them after reasonable inquiry.
H. Notwithstanding any other provisions of this Certificate of Incorporation
or the By-Laws of the corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, this Certificate of
Incorporation or the By-Laws of the corporation), any proposal to amend, repeal
or adopt any provision of this Certificate of Incorporation inconsistent with
this Article NINTH which is proposed by or on behalf of an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder shall
require the affirmative vote of the holders of not less than 66 2/3% of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock, voting together as a single class, excluding Voting Stock
beneficially owned by any Interested Stockholder, provided, however, that this
Section H shall not apply to, and such 66 2/3% vote shall not be required for,
any amendment, repeal or adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would be eligible to serve as
Continuing Directors within the meaning of Paragraph 8 of Section C of this
Article NINTH.
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TENTH: A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, said Tenneco Inc., being the sole incorporator, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, has caused this Certificate to be signed by J. L. Ketelsen,
its Chairman and Chief Executive Officer, and its corporate seal to be affixed
and attested by Karl A. Stewart, its Secretary, this 7th day of October, 1987,
thereby declaring and certifying that this is its act and deed and the facts
herein stated are true.
TENNECO INC.
Sole Incorporator
By: /s/ J. L. KETELSEN
--------------------------------
J. L. Ketelsen,
Chairman and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
-----------------------------------
Karl A. Stewart, Secretary
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[CONFORMED COPY]
TENNECO HOLDINGS, INC
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
1,859,000 SHARES OF PREFERRED STOCK DESIGNATED
"PARTICIPATING PREFERRED STOCK"
-----------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General Corporation
Law of the State of Delaware, dated as of October 9, 1987, adopted a resolution
providing for the issuance of a series of Preferred Stock, to be designated
"Participating Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, without par
value, of the Corporation, to be designated "Participating Preferred Stock"
(hereinafter referred to as the "Participating Preferred Stock"), consisting of
1,859,000 shares, and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the Participating Preferred Stock are not stated and expressed
in the Certificate of Incorporation, does hereby fix and herein state and
express such designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions thereof, as follows
(all terms used herein which are defined in the Certificate of Incorporation
shall be deemed to have the meanings provided therein):
(1) Dividends on shares of the Participating Preferred Stock shall accrue
from, and as if issued on, January 31, 1985, except that if the number of
shares of Participating Preferred Stock shall hereafter be increased by
further resolution of the Board of Directors, dividends on such additional
shares shall accrue from such other date or dates as may be fixed by the
Board of Directors in such resolution.
(2) (a) On or before April 15, 1988 and each April 15 thereafter so long as
any shares of the Participating Preferred Stock are outstanding, the
Corporation shall pay in cash as dividends to each holder of record of such
shares the lesser of
(i) $10 per share, or
(ii) an amount per share computed by multiplying "Adjusted Operating
Income", for the next preceding calendar year, by .025, and dividing the
product thereof by 1,859,000.
For purposes hereof, the term "Adjusted Operating Income" for any year shall
be determined as follows:
The amount shown as "Income (loss) from continuing operations before
allocated overhead, management fee and taxes" on a statement of income and
retained earnings of J. I. Case Company and its consolidated subsidiaries
for such year, prepared in accordance with generally accepted accounting
principles and certified by independent public accountants of recognized
standing, reduced by the cumulative amount of losses, if any, shown as
"Income (loss) from continuing operations before allocated overhead,
management fee and taxes" on statements of income and retained earnings of
J. I. Case Company and its consolidated subsidiaries, prepared in
accordance with generally accepted accounting principles and certified by
independent public accountants of recognized standing, for 1985 and each
year thereafter to the extent such losses have not previously been applied
as a reduction in any prior year in computing Adjusted Operating Income.
<PAGE>
With respect to the calendar year 1985, the amount of losses, if any, which
may be applied to reduce Adjusted Operating Income in subsequent years shall
be equal to the product of (x) a fraction, the numerator of which is the
number of months in 1985 remaining after the end of the month in which the
closing under the Purchase Agreement dated as of November 26, 1984 among
Tenneco Inc., J. I. Case Company and International Harvester Company (the
"Purchase Agreement") occurs, and the denominator of which is twelve, and (y)
the amount shown as "Income (loss) from continuing operations before
allocated overhead, management fee and taxes" on a statement of income and
retained earnings of J. I. Case Company and its consolidated subsidiaries for
the calendar year 1985, prepared in accordance with generally accepted
accounting principles and certified by independent public accountants of
recognized standing.
(b) For purposes hereof, the holder of record of any share of the
Participating Preferred Stock entitled to receive a dividend payment pursuant
to the provisions of clause 2(a) above shall be the holder of record of such
share as of the close of business on the first day of April in the year such
dividend payment is to be made, as shown on the stockholder records of the
Corporation.
(3) The amounts which the holders of the Participating Preferred Stock
shall be entitled to receive in the event of a liquidation, dissolution, or
winding-up of the affairs of the Corporation shall, in the event of a
voluntary or involuntary liquidation, dissolution or winding-up, be $100.00
per share, plus in each case a sum equal to accrued and unpaid dividends to
the date of payment.
(4) The Participating Preferred Stock shall be redeemable in whole or in
part at any time or from time to time at the option of the Corporation at the
applicable prices set forth below; the sums payable upon the redemption
thereof at the option of the Corporation (in addition to accrued and unpaid
dividends) shall be
(i) $106 per share if redeemed prior to April 30, 1988, or
(ii) $103 per share if redeemed on or after April 30, 1988 and prior to
April 30, 1989, or
(iii) $101 per share if redeemed on or after April 30, 1989 and prior to
April 30, 1990, or
(iv) $100 per share if redeemed on or after April 30, 1990.
(5) Within each twelve month period commencing with the twelve month period
ended December 31, 1990, the Corporation shall have the right to, and shall,
acquire (and retire), either by redemption thereof at $100.00 per share plus
accrued and unpaid dividends (hereinafter referred to as the "mandatory
redemption price") or by purchase thereof in such manner as the Board of
Directors may determine from time to time at a price not exceeding the
mandatory redemption price thereof, an amount of Participating Preferred
Stock issued in connection with the transactions contemplated by the Purchase
Agreement equal to the lesser of (i) 250,000 shares of Participating
Preferred Stock or (ii) the number of shares of Participating Preferred Stock
outstanding.
If (i) more than said amounts of Participating Preferred Stock shall be
so acquired pursuant to the first paragraph of this clause (5) in any such
twelve month period, or (ii) shares of Participating Preferred Stock are
redeemed under clause (4) above, or (iii) shares of Participating Preferred
Stock are acquired by purchase at any time, and in any such case, the
certificates therefor are cancelled, the number of shares so acquired may be
credited against the amount required to be acquired in any one or more of the
twelve month periods described in the first paragraph of this clause (5)
subsequent to the date of acquisition of such shares which the Corporation
may designate.
(6) Any shares of the Participating Preferred Stock which shall have been
redeemed or otherwise acquired shall assume the status of authorized but
unissued Preferred Stock.
2
<PAGE>
(7) The number of shares of Participating Preferred Stock may, to the
extent of the Corporation's authorized and unissued Preferred Stock, be
increased by further resolution duly adopted by the Board of Directors and
the filing and recording of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase
has been so authorized.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
----------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
----------------------------------
Karl A. Stewart, Secretary
3
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
1,957,607 SHARES OF PREFERRED STOCK DESIGNATED
"$7.40 CUMULATIVE PREFERRED STOCK"
----------------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware, dated as of October 9, 1987, adopted a
resolution providing for the issuance of a series of Preferred Stock, to be
designated "$7.40 Cumulative Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred Stock, without par value,
of the Corporation, to be designated "$7.40 Cumulative Preferred Stock"
(hereinafter referred to as the "$7.40 Preferred Stock"), consisting of
1,957,607 shares, and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the $7.40 Preferred Stock are not stated and expressed in the
Certificate of Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Certificate of Incorporation shall be deemed to
have the meanings provided therein):
(1) The dividend rate on the $7.40 Preferred Stock shall be $7.40 per
annum. Dividends shall accrue on shares of the $7.40 Preferred Stock from,
and as if issued on, the quarter-yearly dividend payment date next preceding
the date of issuance thereof unless the date of issuance is a quarter-yearly
dividend payment date, in which event dividends thereon shall accrue from
such date.
(2) The amounts which the holders of the $7.40 Preferred Stock shall be
entitled to receive in the event of a liquidation, dissolution or winding-up
of the affairs of the corporation shall, in the event of a voluntary
liquidation, dissolution or winding-up, be the respective amounts which they
would be entitled to receive if on the date of such liquidation, dissolution
or winding-up the shares of the $7.40 Preferred Stock held by them had been
redeemed by the Corporation in accordance with the provisions of Subdivision
4 of Part I of Article FOURTH of the Certificate of Incorporation at the
prices set forth in paragraph (3) of this resolution, or if the $7.40
Preferred Stock shall not at the time be redeemable at the option of the
Corporation, then at $101.00 per share, or, in the event of an involuntary
liquidation, dissolution or winding-up, at $100.00 per share, plus in each
case a sum equal to accrued and unpaid dividends to the date of payment.
(3) Commencing March 1, 1988, the $7.40 Preferred Stock shall be redeemable
in whole or in part at any time or from time to time at the option of the
corporation at the applicable prices set forth below; the sums payable upon
the redemption thereof at the option of the corporation (in addition to
accrued and unpaid dividends) shall be
$101.00 per share if redeemed on or after March 1, 1988 and prior to
March 1, 1993 or
$100.00 per share if redeemed on or after March 1, 1993.
(4) (a) Within each twelve months period commencing with the twelve months
period ended March 1, 1989, the Corporation shall acquire (and retire)
either by redemption thereof at $100.00 per share plus accrued and unpaid
dividends (hereinafter referred to as the "mandatory redemption price") or by
purchase thereof in such manner as the Board of Directors may
<PAGE>
determine from time to time at a price not exceeding the mandatory
redemption prices thereof, l95,761 shares of $7.40 Preferred Stock, provided,
however, that all shares of $7.40 Preferred Stock outstanding on March 1,
1998 shall be so acquired by the corporation on such date.
If more than said amounts of $7.40 Preferred Stock shall be so acquired
pursuant to this clause (a) in any such twelve months period and the
certificates therefor cancelled, the excess may be credited against the
amount required to be acquired in any one or more of the subsequent twelve
months periods which the Corporation may designate.
(b) Within each twelve months period commencing with the twelve months
period ended March 1, 1989, the Corporation, at its option, shall be entitled
to acquire (and retire) by redemption thereof at $100.00 per share plus
accrued and unpaid dividends an amount of $7.40 Preferred Stock up to but not
exceeding 195,761 shares, which option, if not exercised, is noncumulative.
(5) (a) The holders of $7.40 Preferred Stock shall be entitled to one vote
for each share held at all meetings of the stockholders of the Corporation.
(b) Whenever, at any time or times, dividends payable on the $7.40
Preferred Stock shall be in arrears in an aggregate amount equivalent to six
full quarter-yearly dividends (in determining the amount of dividends in
arrears, the full amount of the quarter-yearly dividend shall be included for
each quarter-yearly dividend which was not paid in full), the holders of
outstanding $7.40 Preferred Stock shall have the exclusive right, voting
separately and as a class, to elect two directors of the Corporation and the
remaining directors shall be elected by the holders of the class or classes
of stock entitled to vote therefor at each meeting of the stockholders held
for the purpose of electing directors, until such time as all accrued and
unpaid dividends on the $7.40 Preferred Stock shall have been paid in full,
at which time the right of the holders of the $7.40 Preferred Stock to vote
pursuant to the provisions of this clause (b) shall terminate, subject to
revesting in the event of each and every subsequent default of the character
and for the time above mentioned. During any period of time in which the
holders of the $7.40 Preferred Stock shall have the right to elect two
directors of the Corporation as herein in this clause (b) provided, the
voting right conferred upon the holders of such stock by clause (a) of this
paragraph (5) shall be suspended with respect to the election of directors,
but shall otherwise continue in effect.
At any time when voting rights shall, pursuant to the provisions of this
clause (b), be vested in the $7.40 Preferred Stock, the number of directors
of the Corporation shall be not less than that number required so that two
directors may be elected by the holders of the $7.40 Preferred Stock and a
proper officer of the Corporation shall, upon the written request of the
holders of record of at least ten percent (10%) in aggregate stated value of
the $7.40 Preferred Stock then outstanding, addressed to the Secretary of the
Corporation, call a special meeting of holders of the $7.40 Preferred Stock
and of any other class or classes of stock having voting power with respect
to the election of directors. Such meeting shall be held at the earliest
practicable date at the place at which the last preceding annual meeting of
the stockholders of the Corporation was held, but may be held at the time and
place of the annual meeting if such annual meeting is to be held within 60
days after such voting rights shall be vested in the $7.40 Preferred Stock.
If such meeting shall not be called by the proper officer of the Corporation
as required within 20 days after personal service of the said written request
upon the Secretary of the Corporation, or within 20 days after mailing the
same within the United States of America by registered mail addressed to the
Secretary of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of at least ten percent (10%) in aggregate stated value of
the $7.40 Preferred Stock then outstanding may designate in writing one of
their number to call such meeting, and such meeting may be called by such
person designated upon the notice required for annual meetings of
stockholders and shall be held at the place at which the last preceding
annual meeting of the stockholders of the Corporation was held. Any holder of
the $7.40 Preferred Stock so designated shall have access to the stock books
of the Corporation for the purpose of causing a meeting of stockholders to be
called pursuant to these provisions.
2
<PAGE>
At any meeting so called, and at any other meeting of stockholders held for
the purpose of electing directors at which the holders of the $7.40 Preferred
Stock shall have the right, voting separately and as a class, to elect
directors as aforesaid, the presence in person or by proxy of one-third of
the outstanding shares of the $7.40 Preferred Stock shall be required to
constitute a quorum of such class for the election of any director by the
holders of the $7.40 Preferred Stock voting as a class.
At any such meeting or adjournment thereof, (x) the absence of a quorum of
the $7.40 Preferred Stock shall not prevent the election of directors other
than those to be elected by the $7.40 Preferred Stock voting as a class and
the absence of a quorum for the election of such other directors shall not
prevent the election of the directors to be elected by the $7.40 Preferred
Stock voting as a class, and (y) in the absence of either or both such
quorums, a majority of the holders present in person or by proxy of the stock
or stocks which lack a quorum shall have power to adjourn the meeting for the
election of directors which they are entitled to elect from time to time
without notice other than announcement at the meeting until a quorum shall be
present.
The term of office of all directors in office at any time when voting power
shall, as aforesaid, become vested in the $7.40 Preferred Stock shall
terminate upon the election of any new directors at any meeting of
stockholders called for the purpose of electing directors. Upon any
termination of the right of the holders of the $7.40 Preferred Stock to vote
for directors as a class as in this clause (b) provided, the term of office
of all directors then in office shall terminate upon the election of new
directors at a meeting of the class or classes of the Corporation then
entitled to vote for directors, which meeting may be held at any time after
such termination of such voting right of the $7.40 Preferred Stock, upon
notice as above provided, and shall be called by the Secretary of the
Corporation upon written request of the holders of record of ten percent
(10%) of the aggregate number of outstanding shares of such class or classes
of stock then entitled to vote for directors.
(6) Any shares of the $7.40 Preferred Stock which shall have been redeemed
or otherwise acquired shall assume the status of authorized but unissued
Preferred Stock and shall not be reissued as shares of the $7.40 Preferred
Stock.
(7) The number of shares of $7.40 Preferred Stock may, to the extent of the
Corporation's authorized and unissued Preferred Stock, be increased by
further resolution duly adopted by the Board of Directors and the filing and
recording of a certificate pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such increase has been
so authorized.
(8) No shares of Preferred Stock, in addition to the shares designated
herein as $7.40 Preferred Stock shall be issued as $7.40 Preferred Stock.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
--------------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
-------------------------------------
Karl A. Stewart, Secretary
3
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
803,723 SHARES OF PREFERRED STOCK DESIGNATED
"$4.50 CUMULATIVE PREFERRED STOCK"
--------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141 (f) of the General
Corporation Law of the State of Delaware, dated as of October 9, 1987, adopted a
resolution providing for the issuance of a series of Preferred Stock, to be
designated "$4.50 Cumulative Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, without par
value, of the Corporation, to be designated "$4.50 Cumulative Preferred Stock"
(hereinafter referred to as the "$4.50 Preferred Stock"), consisting of 803,723
shares, and to the extent that the designations, powers, preferences and
relative and other special rights and the qualifications, limitations and
restrictions of the $4.50 Preferred Stock are not stated and expressed in the
Certificate of Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms
used herein which are defined in the Certificate of Incorporation shall be
deemed to have the meanings provided therein):
(1) (a) The dividend rate on the $4.50 Preferred Stock shall be $4.50 per
annum, payable by the corporation on each 12th day of March commencing in the
year 1988 (each annual dividend payment date is hereinafter referred to as an
"Annual Dividend Payment Date") so long as any shares of the $4.50 Preferred
Stock are outstanding, in cash in United States dollars to each holder of
record of such shares.
(b) The holder of record of any share of the $4.50 Preferred Stock entitled
to receive a dividend payment pursuant to the provisions of clause (1) (a)
above shall be the holder of record of such shares as of the close of
business on the first day of March in the year such dividend payment is to be
made, as shown on the stockholder records of the Corporation.
(2) Dividends on shares of the $4.50 Preferred Stock shall accrue from, and
as if issued on, March 12, 1987, except that if the number of shares of $4.50
Preferred Stock shall hereafter be increased by further resolution of the
Board of Directors, dividends on such additional shares shall accrue from
such other date or dates as may be fixed by the Board of Directors in such
resolution.
(3) The amounts which the holders of the $4.50 Preferred Stock shall be
entitled to receive in the event of a liquidation, dissolution, or winding-up
of the affairs of the Corporation shall be $100.00 per share, plus in each
case a sum equal to accrued and unpaid dividends to the date of payment.
(4) (a) The $4.50 Preferred Stock shall be redeemable in whole or in part
at any time or from time to time at the option of the Corporation at $100.00
per share plus accrued and unpaid dividends.
(b) In the event of the redemption of only part of the $4.50 Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected
pro rata.
<PAGE>
(5) On or before the Annual Dividend Payment Date in the year 1999,
the Corporation shall acquire (and retire) the $4.50 Preferred Stock by
redemption thereof at $100.00 per share plus accrued and unpaid
dividends (hereinafter referred to as the "mandatory redemption price"),
or by purchase thereof in such manner as the Board of Directors may
determine from time to time at a price not exceeding the mandatory
redemption price thereof.
(6) At least 90 days' prior notice of any redemption of the $4.50
Preferred Stock pursuant to either clause (4) or clause (5) above shall
be mailed, addressed to the holders of record of the shares to be
redeemed at their respective addresses as the same shall appear on the
books of the Corporation.
(7) Any shares of the $4.50 Preferred Stock which shall have been
redeemed or otherwise acquired by the Corporation shall assume the
status of authorized but unissued Preferred Stock and shall not be
reissued as shares of the $4.50 Preferred Stock.
(8) The number of shares of $4.50 Preferred Stock may, to the extent
of the Corporation's authorized and unissued Preferred Stock, be
increased by further resolution duly adopted by the Board of Directors
and the filing and recording of a certificate pursuant to the provisions
of the General Corporation Law of the State of Delaware stating that
such increase has been so authorized.
(9) No shares of Preferred Stock shall be issued as $4.50 Preferred
Stock after December 31, 1987.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
-------------------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
----------------------------------
Karl A. Stewart, Secretary
2
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
200,396 SHARES OF PREFERRED STOCK DESIGNATED
"VARIABLE RATE PREFERRED STOCK"
--------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General Corporation
Law of the State of Delaware, dated as of October 9, 1987, adopted a resolution
providing for the issuance of a series of Preferred Stock, to be designated
"Variable Rate Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, without par
value, of the Corporation, to be designated "Variable Rate Preferred Stock"
(hereinafter referred to as the "Variable Rate Preferred Stock"), consisting
of 200,396 shares, and to the extent that the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions of the Variable Rate Preferred Stock are not
stated and expressed in the Certificate of Incorporation, does hereby fix and
herein state and express such designations, powers, preferences and relative
and other special rights and the qualifications, limitations and restrictions
thereof, as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
(1) Dividends on shares of the Variable Rate Preferred Stock shall accrue
from, and as if issued on, April 30, 1987, except that if the number of
shares of Variable Rate Preferred Stock shall hereafter be increased by
further resolution of the Board of Directors, dividends on such additional
shares shall accrue from such other date or dates as may be fixed by the
Board of Directors in such resolution.
(2) (a) On or before April 30, 1988 and each April 30 thereafter so long
as any shares of the Variable Rate Preferred Stock are outstanding, the
Corporation shall pay in cash and in U.S. dollars as dividends to each
holder of record of such shares an amount calculated as follows:
DIVIDEND PAYABLE APRIL 30
IN EACH OF THE YEARS: DIVIDEND RATE PER ANNUM
------------------------- -----------------------
1988............................... $ 3.00 per share
1989-1991.......................... 5.00 per share
1992-1994.......................... 9.00 per share
1995-1997.......................... 10.00 per share
(b) For purposes hereof, the holder of record of any share of the Variable
Rate Preferred Stock entitled to receive a dividend payment pursuant to the
provisions of clause (2)(a) above shall be the holder of record of such
share as of the close of business on the first day of April in the year such
dividend payment is to be made, as shown on the stockholder records of the
Corporation.
(3) The amounts which the holders of the Variable Rate Preferred Stock
shall be entitled to receive in the event of a liquidation, dissolution, or
winding-up of the affairs of the Corporation shall, in the event of a
voluntary or involuntary liquidation, dissolution or winding-up, be $100.00
per share, plus in each case a sum equal to accrued and unpaid dividends to
the date of payment.
<PAGE>
(4) The Variable Rate Preferred Stock shall be redeemable in whole or in
part at any time or from time to time at the option of the Corporation at
$100.00 per share plus accrued and unpaid dividends.
(5) Within each twelve month period commencing with the twelve month
period ended April 30, 1992, the Corporation shall have the right to, and
shall, acquire (and retire) either by redemption thereof at $100.00 per
share plus accrued and unpaid dividends (hereinafter referred to as the
"mandatory redemption price") or by purchase thereof in such manner as the
Board of Directors may determine from time to time at a price not exceeding
the mandatory redemption price thereof, 32,564 shares of Variable Rate
Preferred Stock; provided however, that all shares of Variable Rate
Preferred Stock outstanding on April 30, 1997 shall be so acquired by the
Corporation on that date.
If (i) more than said amounts of Variable Rate Preferred Stock shall be so
acquired pursuant to the first paragraph of this clause (5) in any such
twelve month period, or (ii) shares of Variable Rate Preferred Stock are
redeemed under clause (4) above, or (iii) shares of Variable Rate Preferred
Stock are acquired by purchase at any time, and in any such case, the
certificates therefor are cancelled, the number of shares so acquired may be
credited against the amount required to be acquired in any one or more of
the twelve month periods described in the first paragraph of this clause (5)
subsequent to the date of acquisition of such shares which the Corporation
may designate.
(6) Any shares of the Variable Rate Preferred Stock which shall have been
redeemed or otherwise acquired shall assume the status of authorized but
unissued Preferred Stock.
(7) The number of shares of Variable Rate Preferred Stock may, to the
extent of the Corporation's authorized and unissued Preferred Stock, be
increased by further resolution duly adopted by the Board of Directors and
the filing and recording of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase
has been so authorized.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
----------------------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
----------------------------------
Karl A. Stewart, Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO HOLDINGS, INC.
----------------------
TENNECO HOLDINGS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company, by Unanimous Written
Consent dated December 7, 1987, adopted a resolution setting forth a proposed
amendment to the Certificate of Incorporation of the Company, declaring said
amendment to be advisable, the resolution setting forth the proposed amendment
is as follows:
RESOLVED, that the Certificate of Incorporation of the Company be amended by
deleting in its entirety Article FIRST thereof, and by inserting in lieu
thereof the provision hereinafter set forth so that, as amended, the said
Article FIRST shall be and read as follows:
"FIRST: The name of the corporation is Tenneco Inc."
;and it is further
RESOLVED, that the Certificate of Incorporation of the Company be amended by
deleting in its entirety the first sentence of Article FIFTH, Subsection (A)
thereof, and by inserting in lieu thereof the provision hereinafter set forth
so that, as amended, the said Article FIFTH, Subsection (A) shall be and read
as follows:
"The business and affairs of the corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than eight nor
more than sixteen directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of
the entire Board of Directors."
SECOND: That thereafter, the said Amendment has been consented to and
authorized by the holder of all the issued and outstanding stock entitled to
vote thereon by a written Consent given in accordance with the provisions of
Section 228 of the General Corporation Law of the State of Delaware and filed
with the Corporation on the 7th day of December, 1987.
<PAGE>
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said TENNECO HOLDINGS, INC. has caused this Certificate to
be signed by M. W. Meyer, Vice President, and its corporate seal to be hereunto
affixed and attested by Karl A. Stewart, Secretary, this 7th day of December,
1987.
TENNECO HOLDINGS, INC.
By: /s/ M. W. Meyer
----------------------------------
M. W. Meyer
Vice President
[CORPORATE SEAL]
ATTEST:
By: /s/ Karl A. Stewart
-------------------------
Karl A. Stewart,
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO INC.
------------
TENNECO INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Company"), DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company resolutions
were adopted setting forth a proposed amendment to the Certificate of
Incorporation of said corporation, declaring said amendment to be advisable and
directing that the amendment be considered at the annual meeting of the
stockholders of said corporation. The resolutions setting forth the proposed
amendment are as follows:
RESOLVED, that Section 2 and Section 3 of Part I of Article FOURTH to the
Company's Certificate of Incorporation providing for the payment of
dividends on Preferred Stock of the Company, be, and the same hereby are,
amended and restated in their entirety as follows:
"2. The holders of the Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any funds legally
available therefor, cumulative preferential dividends in cash, at the rate
per annum fixed for such series, and no more, payable to the stockholders
of record on a date fixed for the purpose by the Board of Directors in
advance of payment of each particular dividend. Unless other dividend
periods and dividend payment dates are fixed for any series of Preferred
Stock, dividends on the Preferred Stock shall be payable quarter-yearly on
the last days of March, June, September and December in each year.
Dividends on shares of the Preferred Stock shall accrue from the date of
issuance, or from such other date or dates as may be fixed by the Board of
Directors for any series, and shall be cumulative. Each share of Preferred
Stock shall rank on a parity with each other share of Preferred Stock,
irrespective of series, with respect to preferential dividends at the
respective rates fixed for such series, and no dividend shall be declared
or paid or set apart for payment on the Preferred Stock of any series
unless at the same time there shall have been theretofore or concurrently
declared or paid or set apart for payment, as the case may be, a dividend
in like proportion upon the Preferred Stock of each other
<PAGE>
series in respect of all past dividend periods and any then current
dividend period the payment date for which precedes or coincides with the
dividend payment date for the dividend proposed to be so declared or paid
or set apart for payment.
"3. So long as any shares of Preferred Stock shall remain outstanding,
in no event shall any dividends whatsoever, whether in cash, stock, or
otherwise, be paid or declared, or any distribution be made, on any class
of stock ranking junior to the Preferred Stock, nor shall any shares of
stock ranking junior to the Preferred Stock be purchased, retired or
otherwise acquired for a valuable consideration by the corporation, unless
all dividends on the Preferred Stock in respect of all past dividend
periods shall have been paid, or declared and a sum sufficient for the
payment thereof set apart, and unless there shall have been theretofore or
concurrently declared or paid the full dividend thereon in respect of any
then current dividend period the payment date for which precedes or
coincides with the proposed date of payment or distribution on, or
proposed date of purchase, retirement or acquisition of, as the case may
be, any stock ranking junior to the Preferred Stock."
and it is further
RESOLVED, that the amendment to the Company's Certificate of Incorporation
as set forth in the preceding resolution shall be submitted to those
stockholders of the Company who are entitled under applicable law to vote on
the adoption of such provisions, for their consideration at the 1988 Annual
Meeting of Stockholders to be held on May 10, 1988, and that the Board of
Directors does hereby declare said amendment advisable and in the best
interests of the Company, and does hereby recommend that the stockholders of
the Company vote in favor of such amendment; and it is further
RESOLVED, that upon the adoption by the stockholders of the Company
entitled to vote thereon at the Annual Meeting of Stockholders to be held on
May 10, 1988, of the amendment to the Company's Certificate of Incorporation
set forth in the above resolution to be acted upon at said meeting, the
officers of the Company be, and they hereby are, authorized, empowered and
directed (i) to file with the Secretary of State of the State of Delaware a
Certificate of Amendment of the Certificate of Incorporation of the
Corporation, and (ii) to take such further action as may be deemed necessary
or advisable by such officers to carry out the intent and purpose of said
resolutions.
2
<PAGE>
SECOND: That thereafter, pursuant to the resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting a majority of the outstanding stock
entitled to vote thereon, as required by the General Corporation Law of the
State of Delaware and the Company's Certificate of Incorporation, as amended,
voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That said amendment does not effect any change in the issued shares of
the Company.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by M. W. Meyer, as Vice President, and its corporate seal to be hereunto affixed
and attested by Karl A. Stewart, as Secretary, this 17th day of May, 1988.
TENNECO INC.
By: /s/ M. W. MEYER
-------------------
M. W. Meyer
Vice President
TENNECO INC.
DELAWARE
CORPORATE
1987
SEAL
ATTEST:
By: /s/ KARL A. STEWART
------------------------
Karl A. Stewart
Secretary
3
<PAGE>
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF SERIES A
PARTICIPATING JUNIOR PREFERRED STOCK
TENNECO INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, J. L. Ketelsen, Chairman of the Board and Karl A. Stewart, Secretary, of
Tenneco Inc., a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), in accordance with the
provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on May 24, 1988, adopted the following resolution creating a series of
3,500,000 shares of Junior Preferred Stock designated as Series A Participating
Junior Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Junior Preferred Stock of the Corporation be and it
hereby is created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Junior Preferred Stock" and the number of
shares constituting such series shall be 3,500,000.
Section 2. Dividends and Distributions.
(A) The dividend rate on the shares of Series A Participating Junior Preferred
Stock for each quarterly dividend period (hereinafter referred to as a
"quarterly dividend period"), which quarterly dividend periods shall commence on
January 1, April 1, July 1 and October 1 in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date") (or in the case of
original issuance, from the date of original issuance) and shall end on and
include the day next preceding the first date of the next quarterly dividend
period,
<PAGE>
shall be equal (rounded to the nearest cent) to the greater of (a) $5 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in cash, based upon the fair market value at the time
the non-cash dividend or other distribution is declared as determined in good
faith by the Board of Directors) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared (but not withdrawn) on the common stock, par value $5.00
per share, of this Corporation (the "Common Stock") during the immediately
preceding quarterly dividend period, or, with respect to the first quarterly
dividend period, since the first issuance of any share or fraction of a share of
Series A Participating Junior Preferred Stock. In the event the Corporation
shall at any time after May 24, 1988 (the "Rights Declaration Date") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders
of shares of Series A Participating Junior Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares of
Series A Participating Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Participating Junior Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Participating Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Participating Junior
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a
2
<PAGE>
record date for the determination of holders of shares of Series A Participating
Junior Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 45 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Participating
Junior Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share
of Series A Participating Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation and will vote together with the shares of Common Stock as one
class on all such matters. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Participating Junior Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) (i) If at any time dividends on any Series A Participating Junior
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the holders of the Series A Participating Junior Preferred
Stock, voting as a separate series from all other series of Junior Preferred
Stock and classes of capital stock, shall be entitled to elect two members of
the Board of Directors in addition to any Directors elected by any other series,
class or classes of securities and the authorized number of Directors will
automatically be increased by two. Promptly thereafter, the Board of Directors
of this Corporation shall, as soon as may be practicable, call a special meeting
of holders of Series A Participating Junior Preferred Stock for the purpose of
electing such members of the Board of Directors. Said special meeting shall in
any event be held within 45 days of the occurrence of such arrearage.
(ii) During any period when the holders of Series A Participating Junior
Preferred Stock, voting as a separate series, shall be entitled and shall have
exercised their right to elect two Directors, then and during such time as such
right continues (a) the then authorized number of Directors shall
3
<PAGE>
be increased by two, and the holders of Series A Participating Junior Preferred
Stock, voting as a separate series, shall be entitled to elect the additional
Director so provided for, and (b) each such additional Director shall not be a
member of Class I, Class II or Class III of the Board of Directors, but shall
serve until the next annual meeting of stockholders for the election of
Directors, or until his successor shall be elected and shall qualify, or until
his right to hold such office terminates pursuant to the provisions of this
Section 3B.
(iii) A Director elected pursuant to the terms hereof may be removed with or
without cause by the holders of Series A Participating Junior Preferred Stock
entitled to vote in an election of such Director.
(iv) If, during any interval between annual meetings of stockholders for the
election of Directors and while the holders of Series A Participating Junior
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board of Directors shall cause a special meeting of the holders
of Series A Participating Junior Preferred Stock for the purpose of filling such
vacancy and such vacancy shall be filled at such special meeting. Such special
meeting shall in any event be held within 45 days of the occurrence of such
vacancy.
(v) At such time as the arrearage is fully cured, and all dividends
accumulated and unpaid on any shares of Series A Participating Junior Preferred
Stock outstanding are paid, and, in addition thereto, at least one regular
dividend has been paid when subsequent to curing such arrearage, the term of
office of any Director elected pursuant hereto, or his successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Participating Junior Preferred Stock to vote as provided in this
Section shall cease, subject to renewal from time to time upon the same terms
and conditions, and the holders of shares of the Series A Participating Junior
Preferred Stock shall have only the limited voting rights elsewhere herein set
forth.
Section 4. Required Shares. Any shares of Series A Participating Junior
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Junior Preferred Stock and may be reissued as part of a new
series of Junior Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
4
<PAGE>
Section 5. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the Series A Participating Junior Preferred Stock
shall be entitled to receive the greater of (a) $100 per share, plus accrued
dividends to the date of distribution, whether or not earned or declared, or (b)
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount to be distributed per share to
holders of Common Stock. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A Participating
Junior Preferred Stock were entitled immediately prior to such event pursuant to
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction of the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 6. Optional Redemption. (a) The Company shall have the option to
redeem the whole or any part of the Series A Participating Junior Preferred
Stock at any time at a redemption price equal to, subject to the provision for
adjustment hereinafter set forth, 100 times the "current per share market price"
of the Common Stock on the date of the mailing of the notice of redemption,
together with unpaid accumulated dividends to the date of such redemption. In
the event the Company shall at any time after June 10, 1988 (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Participating Junior Preferred Stock were otherwise entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. The "current per share market
price" on any date shall be deemed to be the average of the closing price per
share of such Common Stock for the 10 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date. The closing price for each
day shall be the last sale price, regular way, or, in case no such
5
<PAGE>
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use or, if on any such date the Common Stock is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected by
the Board of Directors of the Company. If on such date no such market maker is
making a market in the Common Stock, the fair value of the Common Stock on such
date as determined in good faith by the Board of Directors of the Company shall
be used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the State of New
York are not authorized or obligated by law or executive order to close.
(b) Notice of any such redemption shall be given by mailing to the holders
of the Series A Participating Junior Preferred Stock a notice of such
redemption, first class postage prepaid, not later than the thirtieth day and
not earlier than the sixtieth day before the date fixed for redemption, at their
last address as the same shall appear upon the books of the Company. Any notice
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the shareholder received such notice, and
failure duly to give such notice by mail, or any defect in such notice, to any
holder of Series A Participating Junior Preferred Stock shall not affect the
validity of the proceedings for the redemption of such Series A Participating
Junior Preferred Stock. If less than all the outstanding shares of Series A
Participating Junior Preferred Stock are to be redeemed, the redemption shall be
made by lot as determined by the Board of Directors.
6
<PAGE>
(c) The notice of redemption to each holder of Series A Participating Junior
Preferred Stock shall specify (a) the number of shares of Series A Participating
Junior Preferred Stock of such holder to be redeemed, (b) the date fixed for
redemption, (c) the redemption price and (d) the place of payment of the
redemption price.
(d) If any such notice of redemption shall have been duly given or if the
Company shall have given to the bank or trust company hereinafter referred to
irrevocable written authorization promptly to give or complete such notice, and
if on or before the redemption date specified therein the funds necessary for
such redemption shall have been deposited by the Company with the bank or trust
company designated in such notice, doing business in the City of Houston, State
of Texas, and having a capital, surplus and undivided profits aggregating at
least $25,000,000 according to its last published statement of condition, in
trust for the benefit of the holders of Series A Participating Junior Preferred
Stock called for redemption, then, notwithstanding that any certificate for such
shares so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit all such shares called for
redemption shall no longer be deemed outstanding and all rights with respect to
such shares shall no longer be deemed outstanding and shall forthwith cease and
terminate, except the right of the holders thereof to receive from such bank or
trust company at any time after the time of such deposit the funds so deposited,
without interest, and the right to exercise, up to the close of business on the
fifth day before the date fixed for redemption. In case less than all the shares
represented by any surrendered certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares. Any interest accrued on such funds
shall be paid to the Company from time to time. Any funds so deposited and
unclaimed at the end of six years from such redemption date shall be repaid to
the Company, after which the holders of shares of Series A Participating Junior
Preferred Stock called for redemption shall look only to the Company for payment
thereof.
Section 7. Fractional Shares. Series A Participating Junior Preferred Stock
may be issued in fractions of a share that shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Participating Junior Preferred Stock.
7
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury as of the 24th day
of May, 1988.
/s/ J. L. KETELSEN
-------------------------------
J. L. Ketelsen
[CORPORATE SEAL] Chairman of the Board
Attest:
/s/ K. A. STEWART
---------------------------
K. A. Stewart
Secretary
8
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: That this Certificate of Retirement shall be effective on March 1,
1989.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Peter Menikoff, a Vice President, and attested by Karl A. Stewart, Secretary,
this 21st day of February, A.D., 1989.
TENNECO INC. TENNECO INC.
DELAWARE
CORPORATE
1987 /s/ Peter Menikoff
SEAL ------------------------------
Vice President
ATTEST:
/s/ Karl A. Stewart
-----------------------------
Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: That this Certificate of Retirement shall be effective on March 1,
1990.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Peter Menikoff, a Vice President and Treasurer, and attested by Karl A.
Stewart, Secretary, this 21st day of February, A.D., 1990.
TENNECO INC. TENNECO INC.
DELAWARE
CORPORATE
1987 /s/ Peter Menikoff
SEAL ------------------------------
Vice President and Treasurer
ATTEST:
/s/ Karl A. Stewart
------------------------------
Secretary
<PAGE>
TENNEC0 INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1991.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Peter Menikoff, a Vice President and Treasurer, and attested by Karl A.
Stewart, Secretary, this 21st day of February, 1991.
TENNECO INC.
BY: /s/ Peter Menikoff
-----------------------------
Peter Menikoff,
Vice President and Treasurer
[CORPORATE SEAL]
ATTEST:
/s/ Karl A. Stewart
------------------------------
Karl A. Stewart, Secretary
<PAGE>
[CONFORMED COPY]
TENNECO INC.
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTIONS OF THE BOARD OF DIRECTORS
PROVIDING FOR AN ISSUE OF
10,062,500 SHARES
OF PREFERRED STOCK DESIGNATED
"SERIES A CUMULATIVE PREFERRED STOCK"
-------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Inc. (hereinafter referred to as the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 151 thereof, DO HEREBY
CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), the Board of Directors is
authorized to issue Preferred Stock, without par value, of the Corporation
in one or more series, and the Board of Directors (i) has authorized the
issuance of the series of Preferred Stock hereinafter provided for, (ii) has
authorized a special committee of the Board of Directors (hereinafter referred
to as the "Stock Issuance Committee") to adopt the resolution set forth below
creating a series of 10,062,500 shares of Preferred Stock, without par value,
designated as Series A Cumulative Preferred Stock and (iii) has adopted the
immediately following resolution granting voting rights to the holders of such
series of Preferred Stock in addition to the voting rights granted to holders of
Preferred Stock by the Certificate of Incorporation:
RESOLVED, that the series of Preferred Stock that the Stock Issuance
Committee has been authorized by the Board of Directors to create (hereinafter
called "Preferred Stock of Such Series") shall have the following voting
rights in addition to the voting rights granted to holders of Preferred Stock
by the Certificate of Incorporation:
Whenever, at any time or times, dividends payable on the Preferred Stock of
Such Series shall be in arrears in an aggregate amount equivalent to six full
quarter-yearly dividends (in determining the amount of dividends in arrears,
the full amount of the quarter-yearly dividend shall be included for each
quarter-yearly dividend which was not paid in full), the holders of
outstanding Preferred Stock of Such Series shall have the exclusive right,
voting separately and as a class, to elect two directors of the Corporation
and the remaining directors shall be elected by the holders of the class or
classes of stock entitled to vote therefor at each meeting of the stockholders
held for the purpose of electing directors, until such time as all accrued and
unpaid dividends on the Preferred Stock of Such Series shall have been paid in
full, at which time the right of the holders of the Preferred Stock of Such
Series to vote pursuant to the provisions of this resolution shall terminate,
subject to revesting in the event of each and every subsequent default of the
character and for the time above mentioned.
At any time when voting rights shall, pursuant to the provisions of this
resolution, be vested in the Preferred Stock of Such Series, the number of
directors of the Corporation shall be not less than that number required so
that two directors may be elected by the holders of the Preferred Stock of
Such Series and a proper officer of the Corporation shall, upon the written
request of the holders of record of at least ten percent in aggregate stated
value of the Preferred Stock of Such Series then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of the
Preferred Stock of Such Series and of any other class or classes of stock
having voting power with respect to the election of directors. Such meeting
shall be held at the earliest practicable date at the place at which the last
preceding annual meeting of the stockholders of the Corporation was held, but
may be held at the time
<PAGE>
and place of the annual meeting if such annual meeting is to be held within 60
days after such voting rights shall be vested in the Preferred Stock of Such
Series. If such meeting shall not be called by the proper officer of the
Corporation as required within 20 days after personal service of the said
written request upon the Secretary of the Corporation, or within 20 days after
mailing the same within the United States of America by registered mail
addressed to the Secretary of the Corporation at its principal office (such
mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of at least ten percent of the
aggregate stated value of the Preferred Stock of Such Series then outstanding
may designate in writing one of their number to call such meeting, and such
meeting may be called by such person designated upon the notice required for
annual meetings of stockholders and shall be held at the place at which the
last preceding annual meeting of the stockholders of the Corporation was held.
Any holder of the Preferred Stock of Such Series so designated shall have
access to the stock books of the Corporation for the purpose of causing a
meeting of stockholders to be called pursuant to these provisions.
At any meeting so called, and at any other meeting of stockholders held for
the purpose of electing directors at which the holders of the Preferred Stock
of Such Series shall have the right, voting separately and as a class, to
elect directors as aforesaid, the presence in person or by proxy of a majority
of the outstanding shares of the Preferred Stock of Such Series shall be
required to constitute a quorum of such class for the election of any director
by the holders of the Preferred Stock of Such Series voting as a class.
At any such meeting or adjournment thereof, (x) the absence of a quorum of
the Preferred Stock of Such Series shall not prevent the election of directors
other than those to be elected by the Preferred Stock of Such Series voting as
a class and the absence of a quorum for the election of such other directors
shall not prevent the election of the directors to be elected by the Preferred
Stock of Such Series voting as a class, and (y) in the absence of either or
both such quorums, a majority of the holders present in person or by proxy of
the stock or stocks which lack a quorum shall have power to adjourn the
meeting for the election of directors which they are entitled to elect from
time to time without notice other than announcement at the meeting until a
quorum shall be present.
Upon any termination of the right of the holders of the Preferred Stock of
Such Series to vote for directors as a class as herein provided, the term of
office of the directors so elected by the holders of the Preferred Stock of
Such Series shall terminate and the number of directors shall be reduced
accordingly.
and that the Stock Issuance Committee has adopted the following resolution
creating a series of 10,062,500 shares of Preferred Stock, without par value,
designated as Series A Cumulative Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation and the authority vested
by such Board in a Stock Issuance Committee, all of the members of which are
members of such Board, a series of Preferred Stock, without par value, of the
Corporation be, and hereby is created, to be designated "Series A Cumulative
Preferred Stock" (hereinafter referred to as the "Series A Preferred Stock"),
consisting of l0,062,500 shares, and to the extent that the designations,
powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A Preferred Stock
are not stated and expressed in the Certificate of Incorporation or in
resolutions adopted by the Board of Directors of the Corporation, such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, are hereby fixed and
stated to be as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
Section 1. Dividends. The dividend rate on the Series A Preferred Stock
shall be $5.60 per annum ($l.40 per quarter-year). Dividends on shares of the
Series A Preferred Stock shall accrue on a daily basis from December 24, l991
to and including the Final Conversion Date (as defined in Section 2) or such
earlier date on which such shares are converted as provided herein. The first
dividend payment
2
<PAGE>
will be for the period from December 24, 1991 to and including March 31, 1992.
Dividends payable on the Series A Preferred Stock for any period shorter than
a quarter-yearly dividend period shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 2. Conversions (a) Final Conversion. Unless earlier converted in
accordance with the provisions hereof, on December 31, 1994 (the "Final
Conversion Date"), all outstanding shares of Series A Preferred Stock shall be
converted automatically into, through the issue by the Corporation in the manner
provided hereinafter of, fully paid and non-assessable shares of Common Stock.
On such date, each holder of shares of Series A Preferred Stock, upon conversion
of the Series A Preferred Stock, shall:
(i) receive the number of shares of Common Stock equal to the product of the
Common Equivalent Rate (determined as provided in paragraph (d) of this
Section 2) in effect on the Final Conversion Date multiplied by the number of
shares of Series A Preferred Stock owned by such holder; and
(ii) be entitled to receive an amount in cash equal to all accrued and
unpaid dividends to and including the Final Conversion Date, whether or not
earned or declared, out of funds legally available therefor.
(b) Upon Certain Mergers or Consolidations or Other Events. Upon either:
(1) immediately prior to the effectiveness of a merger or consolidation of
the Corporation that results in the conversion or exchange of the Common Stock
into the right to receive other securities or other property (whether of the
Corporation or any other entity) (any such merger or consolidation is referred
to herein as a "Merger or Consolidation"), or
(2) immediately prior to the close of business on the business day
immediately preceding the Distribution Date (as defined in clause (iv) of
paragraph (h) of this Section 2) (the occurrence of the Distribution Date is
referred to herein as the "Distribution Date Event").
then, in either event each outstanding share of Series A Preferred Stock shall
be converted automatically into the following:
(i) one share of Common Stock multiplied by the Common Equivalent Rate in
effect on the effective date of a Merger or Consolidation or on such business
day immediately preceding the Distribution Date, as the case may be; plus
(ii) the right to receive an amount in cash equal to all accrued and unpaid
dividends, out of funds legally available therefor, on such share of Series A
Preferred Stock to and including the Settlement Date (as defined in clause
(vi) of paragraph (h) of this Section 2) (and dividends shall cease to accrue
as of the Settlement Date); plus
(iii) the right to receive an amount in cash initially equal to $7.20,
reduced by $0.006624 on each day from December 24, 199l (computed on the basis
of a 360-day year of twelve 30-day months) to and including October 31, 1994,
and equal to zero thereafter, in each case to and including the Settlement
Date, unless sooner converted.
At the option of the Corporation, it may deliver on the Settlement Date, in
lieu of the cash consideration described in clauses (ii) and (iii) of the
preceding sentence, a number of shares of Common Stock equal to one times a
fraction, the numerator of which is the amount of cash consideration described
in such clauses (ii) and (iii) and the denominator of which is the Current
Market Price of the Common Stock determined, in the case of a Merger or
Consolidation, as of the second Trading Date immediately preceding the Notice
Date and, in the case of a Distribution Date Event, as of the second Trading
Date immediately preceding the Distribution Date.
Such option may be exercised by the Corporation in whole or in part with respect
to the outstanding Series A Preferred Stock.
3
<PAGE>
(c) Right to Call for Conversion. At any time and from time to time prior to
the Final Conversion Date, the Corporation shall have the right to call, in
whole or in part, the outstanding shares of Series A Preferred Stock for
conversion into shares of Common Stock (subject to the notice provisions set
forth in paragraph (i) of this Section 2) and to deliver to the holders thereof
in exchange for each such share called for conversion, a number of shares of
Common Stock equal to one times a fraction, the numerator of which is the Call
Price (as defined in paragraph (h) of this Section 2) on the conversion date and
the denominator of which is the Current Market Price (as defined in clause (v)
of paragraph (d) of this Section 2) of the Common Stock determined as of the
second Trading Date preceding the Notice Date, plus in each case an amount in
cash equal to accrued and unpaid dividends to and including the date of
conversion.
(d) Common Equivalent Rate; Adjustments. The Common Equivalent Rate to be used
to determine the number of shares of Common Stock to be delivered on the
conversion of the Series A Preferred Stock into shares of Common Stock pursuant
to paragraphs (a) and (b) of this Section 2 shall be initially two shares of
Common Stock for each share of Series A Preferred Stock; provided, however, that
such Common Equivalent Rate shall be subject to adjustment from time to time as
provided below in this paragraph (d). All adjustments to the Common Equivalent
Rate shall be calculated to the nearest l/100th of a share of Common Stock. Such
rate in effect at any time is herein called the "Common Equivalent Rate."
(i) If the Corporation shall either:
(l) pay a dividend or make a distribution with respect to Common Stock in
shares of Common Stock,
(2) subdivide or split its outstanding shares of Common Stock,
(3) combine its outstanding shares of Common Stock into a smaller number
of shares, or
(4) issue by reclassification of its shares of Common Stock any shares of
common stock of the Corporation
then, in any such event, the Common Equivalent Rate in effect immediately
prior thereto shall be adjusted so that the holder of a share of the Series A
Preferred Stock shall be entitled to receive on the conversion of such share
of the Series A Preferred Stock, the number of shares of Common Stock of the
Corporation which such holder would have owned or been entitled to receive
after the happening of any of the events described above had such shares of
the Series A Preferred Stock been surrendered for conversion at the Common
Equivalent Rate in effect immediately prior to such time. Such adjustment
shall become effective at the opening of business on the business day next
following the record date for determination of stockholders entitled to
receive such dividend or distribution in the case of a dividend or
distribution and shall become effective immediately after the effective date
in case of a subdivision, combination or reclassification; and any shares of
Common Stock issuable in payment of a dividend shall be deemed to have been
issued immediately prior to the close of business on the record date for such
dividend for purposes of calculating the number of outstanding shares of
Common Stock under clauses (ii) and (iii) below.
(ii) If the Corporation shall issue rights or warrants to all holders of its
Common Stock entitling them (for a period not exceeding 45 days from the date
of such issuance) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price per share (determined
pursuant to clause (v) below) of the Common Stock on the record date for the
determination of stockholders entitled to receive such rights or warrants,
then in each case the Common Equivalent Rate shall be adjusted by multiplying
the Common Equivalent Rate in effect immediately prior thereto by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall he
the number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants, immediately prior to such issuance, plus the number
of shares which the aggregate offering
4
<PAGE>
price of the total number of shares so offered for subscription or purchase
would purchase at such Current Market Price (determined by multiplying such
total number of shares by the exercise price of such rights or warrants and
dividing the product so obtained by such Current Market Price). Shares of
Common Stock owned by the Corporation or by another corporation of which a
majority of the shares entitled to vote in the election of directors are held,
directly or indirectly, by the Corporation shall not be deemed to be
outstanding for purposes of such computation. Such adjustment shall become
effective at the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the Common
Equivalent Rate shall be readjusted to the Common Equivalent Rate which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered.
(iii) If the Corporation shall pay a dividend or make a distribution to all
holders of its Common Stock of evidence of its indebtedness or other assets
(including shares of capital stock but excluding any cash dividends or
distributions and dividends referred to in clause (i) above), or shall
distribute to all holders of its Common Stock rights or warrants to subscribe
for or purchase securities of the Corporation or any of its subsidiaries
(other than those referred to in clause (ii) above), then in each such case
the Common Equivalent Rate shall be adjusted by multiplying the Common
Equivalent Rate in effect immediately prior to the date of such distribution
by a fraction, of which the numerator shall be the Current Market Price per
share of Common Stock (determined pursuant to clause (v) below) on the record
date mentioned below, and of which the denominator shall be such Current
Market Price per share of Common Stock less the then fair market value (as
determined by the Board of Directors of the Corporation, whose determination
shall be conclusive) as of such record date of the portion of the assets or
evidences of indebtedness so distributed, or of such subscription rights or
warrants, applicable to one share of Common Stock. Such adjustment shall
become effective on the opening of business on the business day next following
the record date for the determination of stockholders entitled to receive such
distribution.
(iv) Anything in this Section 2 notwithstanding, the Corporation shall be
entitled to make such increases in the Common Equivalent Rate, in addition to
those required by this Section 2, as it in its discretion shall determine to
be advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or a distribution of
securities convertible into or exchangeable for stock (or any transaction
which could be treated as any of the foregoing transactions pursuant to
Section 305 of the Internal Revenue Code of l986, as amended) hereafter made
by the Corporation to its stockholders shall not be taxable. No adjustment in
the Common Equivalent Rate shall be made as a result of the rights issued in
connection with the Rights Agreement (as defined in clause (iv) of paragraph
(h) of this Section 2).
(v) As used in this Section 2, the Current Market Price per share of Common
Stock on any date shall be the average of the daily Closing Prices for the
five consecutive Trading Dates ending on the date of determination of the
Current Market Price (appropriately adjusted to take into account the
occurrence during such five-day period of any event that results in an
adjustment of the Common Equivalent Rate); provided, however, that if the
Closing Price for the Trading Date next succeeding such five-day period (the
"next-day closing price") is less than 95% of such five-day average, then the
Current Market Price per share of Common Stock on such date of determination
shall be the next-day closing price.
(vi) In any case in which paragraph (d) of this Section 2 shall require that
an adjustment as a result of any event become effective at the opening of
business on the business day next following a record date and the date fixed
for conversion pursuant to paragraph (a) or (c) of this Section 2 occurs after
such record date, but before the occurrence of such event, the Corporation may
in its sole discretion elect to defer the following until after the occurrence
of such event:
(1) issuing to the holder of any shares of the Series A Preferred Stock
surrendered for conversion the additional shares of Common Stock issuable
upon such conversion over and above
5
<PAGE>
the shares of Common Stock issuable upon such conversion on the basis of the
Common Equivalent Rate prior to adjustment; and
(2) paying to such holder any amount in cash in lieu of a fractional share
of Common Stock pursuant to paragraph (f) of this Section 2.
(e) Notice of Adjustments. Whenever the Common Equivalent Rate is adjusted as
herein provided the Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate in accordance with
this Section 2 and prepare a certificate signed by the Chief Executive
Officer, the President or any Vice President of the Corporation setting forth
the adjusted Common Equivalent Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which such
adjustment is based, and file such certificate forthwith with the transfer
agent or agents for the Series A Preferred Stock and the Common Stock; and
(ii) mail a notice stating that the Common Equivalent Rate has been
adjusted, the facts requiring such adjustment and upon which such adjustment
is based and setting forth the adjusted Common Equivalent Rate to the holders
of record of the outstanding shares of the Series A Preferred Stock at or
prior to the time the Corporation mails an interim statement to its
stockholders covering the quarter-yearly period during which the facts
requiring such adjustment occurred, but in any event within 45 days of the end
of such quarter.
(f) No Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of shares of the Series A Preferred Stock but, in lieu of any
fraction of a share of Common Stock which would otherwise be issuable in respect
of the aggregate number of shares of the Series A Preferred Stock surrendered by
the same holder for conversion on any conversion date, the holders shall have
the right to receive in lieu of such fraction an amount in cash equal to the
same fraction of the Current Market Price of the Common Stock determined, in the
case of any conversion other than a conversion in connection with a Distribution
Date Event, as of the second Trading Date immediately preceding the relevant
Notice Date and, in the case of a conversion in connection with a Distribution
Date Event, as of the second Trading Date immediately preceding the Distribution
Date.
(g) Cancellation. All shares of Series A Preferred Stock which shall have been
converted or exchanged for shares of Common Stock or which shall have been
purchased or otherwise acquired by the Corporation shall assume the status of
authorized but unissued shares of Preferred Stock undesignated as to series.
(h) Definitions. As used in this Section 2,
(i) the term "business day" shall have the same meaning set forth in the
Rights Agreement (as defined in subparagraph (iv) of this paragraph (h));
(ii) the term "Call Price" shall mean the per share price, which shall be
initially $92.70, reduced by $0.006624 on each day from December 24, 1991
(computed on the basis of a 360-day year of twelve 30-day months) to and
including October 31, 1994 and to $85.50 thereafter, if not sooner converted;
(iii) the term "Closing Price" on any day shall mean the closing sales price
regular way on such day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in each case
on the New York Stock Exchange, or, if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or, if
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices of the Common Stock on the over-
the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted reporting
service, or if not so available in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of
Directors of the Corporation for that purpose;
6
<PAGE>
(iv) the term "Distribution Date" shall have the meaning set forth in the
Rights Agreement dated as of May 24, 1988, as amended and restated as of
October 1, 1989 between the Corporation and First Chicago Trust Company of New
York, as Rights Agent, as the same may be further amended, modified or
supplemented (the "Rights Agreement");
(v) the term "Notice Date" with respect to any notice given by the
Corporation in connection with a conversion of any of the Series A Preferred
Stock shall be the date of the commencement of the mailing of such notice to
the holders of Series A Preferred Stock or the date such notice is first
published in accordance with paragraph (i) of this Section 2; and
(vi) the term "Settlement Date" shall mean the following:
(x) with respect to a Distribution Date Event, the business day
immediately preceding the Distribution Date, and
(y) with respect to a Merger or Consolidation, immediately prior to the
effective time of the Merger or Consolidation; and
(vii) the term "Trading Date" shall mean a date on which the New York Stock
Exchange (or any successor to such Exchange) is open for the transaction of
business.
(i) Notice of Conversion. The Corporation will provide notice of any
conversion (including any potential conversion described in paragraph (b) of
this Section 2) of shares of Series A Preferred Stock to holders of record of
the Series A Preferred Stock to be converted not less than 30 nor more than 60
days prior to the date fixed for conversion (including the effective date of any
applicable Merger or Consolidation defined in clause (l) of paragraph (b) of
this Section 2); provided, however, that such notice need only be given in the
case of a potential Distribution Date Event not less than seven business days
prior to any Distribution Date but not less than 30 days prior to the Settlement
Date if the Corporation elects to deliver cash pursuant to clauses (ii) or (iii)
of paragraph (b) of Section 2. Such notice will be provided by mailing notice of
such conversion, first class postage prepaid, to the holders of record of the
Series A Preferred Stock to be converted, at such holder's address as it appears
on the stock register of the Corporation. In addition, such notice may be given
by publishing notice thereof in The Wall Street Journal or The New York Times,
or, if neither such newspaper is then being published, any other daily newspaper
of national circulation (each, an "Authorized Newspaper"). In the case of notice
of conversion upon a potential Distribution Date Event, upon such notice by
mail, the Corporation shall also publish notice of such conversion promptly in
an Authorized Newspaper. Each such mailed or published notice shall state, as
appropriate, the following:
(i) the conversion date; provided, however, that, in the case of a potential
Distribution Date Event, the notice need only specify the earliest anticipated
conversion date and that the Distribution Date may not occur;
(ii) the number of shares of Series A Preferred Stock to be converted and,
if less than all the shares held by such holder are to be converted, the
number of such shares to be converted from such holder;
(iii) the Call Price (in the case of an optional conversion pursuant to
paragraph (c) of this Section 2) and the number of shares of Common Stock
deliverable and the amount of accrued dividends payable upon conversion;
(iv) the place or places where certificates for such shares are to be
surrendered for conversion; and
(v) that dividends on the shares of Series A Preferred Stock to be converted
will cease to accrue on such conversion date unless the corporation shall
default in providing the shares of Common Stock and any funds necessary for
the conversion at the time and place specified in such notice.
In the event, following the giving of a notice in connection with a potential
Distribution Date Event, the rights issued under the Rights Agreement are
redeemed or expire or the occurrence of a Distribution Date as a result of the
event which gave rise to the giving of such notice will not occur, a notice to
such effect shall promptly be given to the holders of Series A Preferred Stock.
7
<PAGE>
The Corporation's obligation to deliver shares of Common Stock and provide
funds in accordance with this Section 2 shall be deemed fulfilled if, on or
before the conversion date, the Corporation shall deposit, with (a) a
corporation organized and doing business under the laws of the United States or
of the States of New York or Texas (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the States of New York or Texas), in good standing, having a
principal office in the States of New York or Texas, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination and which has at the time of such deposit a combined
capital and surplus of at least $50,000,000 or (b) an affiliate of a corporation
described in clause (a) of this sentence, shares of Common Stock for conversion
(including the payment of fractional share amounts), together with shares of
Common Stock or funds sufficient to pay all accrued and unpaid dividends and
amounts to be paid under Section 2(b)(iii) on the shares to be converted as
required by this Section 2, in trust for the account of the holders of the
shares to be converted (and so as to be and continue to be available therefor),
with irrevocable instructions and authority to such corporation that such shares
and funds be delivered upon conversion of the shares of Series A Preferred Stock
so called for conversion. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any shares of Common Stock or funds so
deposited and unclaimed at the end of three years from such conversion date
shall be repaid and released to the Corporation, after which the holder or
holders of such shares of Series A Preferred Stock so called for conversion
shall look only to the Corporation for delivery of shares of Common Stock
following such surrender and the date of conversion. Each holder of shares of
Series A Preferred Stock called for conversion shall surrender the certificates
evidencing such shares to the Corporation at a place designated in such notice
and shall thereupon be entitled to receive certificates evidencing shares of
Common Stock. In case less than all the shares represented by any such
surrendered certificate are converted, a new certificate shall be issued at the
expense of the Corporation representing the unconverted shares. If notice of
conversion shall have been duly given by publication in an Authorized Newspaper
at least 30 days prior to the Settlement Date, and if on the date fixed for
conversion shares of Common Stock and any funds necessary for the conversion
shall have been either set aside by the Corporation separate and apart from its
other funds or assets in trust for the account of the holders of the shares so
to be converted (and so as to be and continue to be available therefor) or
deposited with a corporation as provided above, then, notwithstanding that the
certificates evidencing any shares of Series A Preferred Stock so called for
conversion shall not have been surrendered, the shares represented thereby so
called for conversion shall be deemed no longer outstanding, dividends with
respect to the shares so called for conversion shall cease to accrue after the
date fixed for conversion and all rights with respect to the shares so called
for conversion shall forthwith after such date cease and terminate, except for
the right of the holders to receive the shares of Common Stock (and any funds
required by this Section 2) without interest upon surrender of their
certificates therefor. If less than all the outstanding shares of Series A
Preferred Stock are to be called for conversion, shares to be converted shall be
selected by the Corporation from outstanding shares of Series A Preferred Stock
not previously converted by lot or pro rata (as nearly as may be) or by any
other equitable method determined by the Board of Directors of the Corporation.
Section 3. Liquidation Rights. The amount which the holders of Series A
Preferred Stock shall be entitled to receive in the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary (collectively, a "Liquidation"), shall be $59.00 per share plus
accrued and unpaid dividends to the date of Liquidation, and no more. After such
amount is paid in full, no further distributions or payments shall be made in
respect of shares of Series A Preferred Stock, such shares of Series A Preferred
Stock shall no longer be deemed to be outstanding or be entitled to any
privilege of exchange or conversion or to any other powers, preferences, rights
or privileges, including voting rights, and such shares of Series A Preferred
Stock shall be surrendered for cancellation to the Corporation.
Section 4. Voting Rights. Except as otherwise provided in the Certificate of
Incorporation or in resolutions adopted by the Board of Directors of the
Corporation or as required by law, the holders of shares of Series A Preferred
Stock shall not be entitled to vote on any matter on which the holders of any
voting securities of the Corporation shall be entitled to vote.
8
<PAGE>
Section 5. Increase in Shares. The number of shares of Series A Preferred
Stock may, to the extent of the Corporation's authorized and unissued Preferred
Stock, be increased by further resolution duly adopted by the Board of Directors
and the filing and recording of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase has
been so authorized.
Section 6. Issuance of Additional Shares. No shares of Series A Preferred
Stock, in addition to the shares designated herein as Series A Preferred Stock,
shall be issued as Series A Preferred Stock after March 3l, 1992.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Robert T. Blakely, as Senior Vice President, and its corporate seal to be
hereunto affixed and attested by Karl A. Stewart, as Secretary, this 19th day of
December, 1991.
TENNECO INC.
By: /s/ Robert T. Blakely
---------------------------
Robert T. Blakely
Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ Karl A. Stewart
--------------------------
Karl A. Stewart, Secretary
9
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1,1992.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by Karl A. Stewart,
Secretary, this 21st day of February, 1992.
TENNECO INC.
BY: /s/ E. J. Milan
---------------------------
E. J. Milan, Vice President
and Controller
ATTEST:
/s/ Karl A. Stewart
--------------------------
Karl A. Stewart, Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
--------------------------------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the Corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1993.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by Karl A. Stewart,
Secretary, this 22nd day of February, 1993.
TENNECO INC.
BY: /s/ E. J. Milan
---------------------------
E. J. Milan, Vice President
and Controller
ATTEST:
/s/ Karl A. Stewart
--------------------------
Karl A. Stewart, Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
--------------------------------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1994.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by James D. Gaughan,
Assistant Secretary, this 14th day of February, 1994.
TENNECO INC.
By: /s/ E. J. Milan
---------------------------
E. J. Milan, Vice President
and Controller
ATTEST:
/s/ James D. Gaughan
--------------------
James D. Gaughan
Assistant Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One-Hundred
Ninety-Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1995.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by James D. Gaughan,
Assistant Secretary, this 15th day of February, 1995.
TENNECO INC.
(SIGNATURE OF E. J. MILAN
BY: APPEARS HERE)
---------------------------------
E. J. Milan, Vice President
ATTEST: and Controller
(SIGNATURE OF JAMES D. GAUGHAN
APPEARS HERE)
-------------------------------
James D. Gaughan
Assistant Secretary
<PAGE>
Exhibit 10(a)(12)
Tenneco Inc.
Outside Directors Retirement Plan
June 14, 1994
1. Purpose. The purpose of this Plan is to provide retirement income to
persons who have served as outside (nonemployee) directors on the Board of
Directors of Tenneco Inc.
2. Eligibility. Effective for an outside director who separates from Board
Service on or after June 14, 1994, such outside director who has served as an
outside director of Tenneco Inc. for five or more years will, upon ceasing to
serve as a director, receive a monthly retirement payment based upon his or her
years of service (or fractional years based on whole months of service actually
completed) as an outside director, and based on the retainer amounts being
received at the time he or she ceased to serve as an outside director, according
to the schedule in Section 3.
3. Payment Schedule.
(a) An eligible director with years of Board service as an outside director
equal to or greater than 5 years but less than 15 years, shall receive a
monthly retirement payment equal to the sum of the basic monthly retainer
plus any committee or committee chairman monthly retainers. Such monthly
payments shall continue for a period equal to the number of years (or
fractional years) of Board service as an outside director, provided that if
the director dies before receiving all of the foregoing monthly payments, the
remaining payments shall be made to the director's designated beneficiary or,
if none, to his or her estate, or if the estate is closed, to his or her
heirs at law.
(b) An eligible director with years of Board service as an outside director
equal to or greater than 15 years, shall receive a monthly retirement payment
equal to the sum of the basic monthly retainer plus any committee or
committee chairman monthly retainer. Such monthly payments shall continue
for the director's life, provided that if the director dies before receiving
15 years of payment, the remainder of the 15 years of payments shall be made
to the director's designated beneficiary or, if none, to his or her estate,
or if the estate is closed, to his or her heirs at law.
4. Method of Payment. The foregoing monthly retirement payments shall be
payable on the first of the month. After the death of a director, any
remaining payments due the beneficiary or estate may be paid as a lump sum
present value.
<PAGE>
5. Amendment or Termination. Tenneco Inc. may, at any time, amend or terminate
this retirement Plan for outside directors, provided that the retirement benefit
based on years (or fractional years) of Board service as an outside director up
to the time of plan amendment or termination shall be preserved. In case of plan
amendment or termination, Tenneco Inc. may pay the earned retirement benefit to
an eligible director or beneficiary as a lump sum present value.
6. Assignment or Attachment. Payments due under this Plan may not be assigned,
transferred, pledged or encumbered by the director nor will such payments be
subject to garnishment, attachment, execution or other levy.
7. Withholdinq. Any payments under the Plan may be subject to tax or other
withholding, as required by law.
8. Desiqnation of Beneficiary. To be valid, a designation of beneficiary form
must, before the date of the director's death, be filed with the Secretary of
Tenneco Inc. in a form reasonably acceptable to the Secretary.
9. Controllinq Law. This Plan shall be interpreted exclusively under the laws
of the State of Texas without regard for Texas conflict of laws provisions.
<PAGE>
EXHIBIT 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
COMPUTATION FOR STATEMENTS OF INCOME
(LOSS)
Primary Earnings Per Share (average
shares outstanding):
Income (loss) from continuing opera-
tions................................ $ 641 $ 413 $ (714)
Income (loss) from discontinued oper-
ations, net of income tax............ (189) 38 102
----------- ----------- -----------
Income (loss) before extraordinary
loss................................. 452 451 (612)
Extraordinary loss, net of income
tax.................................. (5) (25) (12)
----------- ----------- -----------
Income (loss) before cumulative ef-
fect of changes in accounting prin-
ciples............................... 447 426 (624)
Cumulative effect of changes in ac-
counting principles, net of income
tax.................................. (39) -- (699)
----------- ----------- -----------
Net income (loss)..................... 408 426 (1,323)
Preferred stock dividends............. 12 14 16
----------- ----------- -----------
Net income (loss) to common stock..... $ 396 $ 412 $ (1,339)
=========== =========== ===========
Average shares of common stock
outstanding(a),(b)................... 180,084,909 168,772,852 144,110,151
=========== =========== ===========
Earnings (loss) per average share of
common stock:
Continuing operations............... $ 3.49 $ 2.36 $ (5.07)
Discontinued operations............. (1.04) .23 .72
Extraordinary loss.................. (.03) (.15) (.08)
Cumulative effect of changes in ac-
counting principles................ (.22) -- (4.86)
----------- ----------- -----------
$ 2.20 $ 2.44 $ (9.29)
=========== =========== ===========
ADDITIONAL COMPUTATIONS(C)
Net income (loss) to common stock, per
above................................. $ 396 $ 412 $ (1,339)
=========== =========== ===========
Primary Earnings Per Share (including
common stock equivalents):
Average shares of common stock
outstanding(a),(b)................... 180,084,909 168,772,852 144,110,151
Incremental common shares applicable
to common stock options based on the
common stock daily average market
price during the year................ 74,087 38,171 --
----------- ----------- -----------
Average common shares, as adjusted.... 180,158,996 168,811,023 144,110,151
=========== =========== ===========
Earnings (loss) per average share of
common stock (including common
stock equivalents):
Continuing operations............... $ 3.49 $ 2.36 $ (5.07)
Discontinued operations............. (1.04) .23 .72
Extraordinary loss.................. (.03) (.15) (.08)
Cumulative effect of changes in ac-
counting principles................ (.22) -- (4.86)
----------- ----------- -----------
$ 2.20 $ 2.44 $ (9.29)
=========== =========== ===========
Fully Diluted Earnings Per Share:
Average shares of common stock
outstanding(a),(b)................... 180,084,909 168,772,852 144,110,151
Incremental common shares applicable
to common stock options based on the
more dilutive of the common stock
ending or average market price
during the year...................... 75,223 106,901 --
Average common shares issuable assum-
ing conversion of Tenneco Inc. 10%
loan stock........................... 41,356 42,663 43,467
----------- ----------- -----------
Average common shares assuming full
dilution............................. 180,201,488 168,922,416 144,153,618
=========== =========== ===========
Fully diluted earnings (loss) per
average share, assuming conversion
of all applicable securities:
Continuing operations............... $ 3.49 $ 2.36 $ (5.07)
Discontinued operations............. (1.04) .23 .72
Extraordinary loss.................. (.03) (.15) (.08)
Cumulative effect of changes in ac-
counting principles................ (.22) -- (4.86)
----------- ----------- -----------
$ 2.20 $ 2.44 $ (9.29)
=========== =========== ===========
</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 December 31, 1994, the SECT had utilized 4,944,146
of these shares.
(b) Series A preferred stock is converted into common stock under the
Contingent Share method. The above computation includes 8,935,175
shares of Series A preferred stock which were converted into
17,342,763 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
years and certain quarters in 1994, 1993 and 1992.
(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)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1994 1993 1992 1991 1990
------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing operations.. $ 641 $ 413 $(714) $ (617) $ 487
Add:
Interest................................. 597 717 898 977 917
Portion of rentals representative of
interest factor......................... 67 67 70 69 40
Income tax expense and other taxes on
income.................................. 302 258 167 63 322
Amortization of interest capitalized
applicable to nonutility companies...... 6 6 5 5 5
Interest capitalized applicable to
utility companies....................... 1 1 2 4 3
Undistributed (earnings) losses of
affiliated companies in which less than
a 50% voting interest is owned.......... (4) 4 (2) (4) 2
------ ------ ----- ------ ------
Earnings as defined................... $1,610 $1,466 $ 426 $ 497 $1,776
====== ====== ===== ====== ======
Interest.................................. $ 597 $ 717 $ 898 $ 977 $ 917
Interest capitalized...................... 6 4 8 23 10
Portion of rentals representative of
interest factor.......................... 67 67 70 69 40
------ ------ ----- ------ ------
Fixed charges as defined.............. $ 670 $ 788 $ 976 $1,069 $ 967
====== ====== ===== ====== ======
Ratio of earnings to fixed charges........ 2.40 1.86 (a) (a) 1.84
====== ====== ======
</TABLE>
--------
Note:(a) For the years ended December 31, 1992 and 1991, earnings were
inadequate to cover fixed charges by $550 million and $572 million,
respectively.
<PAGE>
Exhibit 21
TENNECO INC.
SUBSIDIARIES AND AFFILIATES
Ownership Chart
As of December 31, 1994
(Revised March 15, 1995)
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
<S> <C>
TENNECO INC. (Delaware)
Autopartes Walker, S.A. de C.V. (Mexico)............................................................... 0.02%
(Tennessee Gas Pipeline Company owns 99.92%; Tenneco Inc. owns 0.02%; Tenneco Corporation owns
0.02%; Tenneco International Inc. owns 0.02%; and Monroe Auto Equipment Company owns 0.02%.)
Case Assets Management Ltda. (Brazil).................................................................. 100
Monroe do Brazil Industria e Comercio Ltda. (Brazil)............................................... 100
Monroe Auto Pecas S.A. (Brazil)................................................................ 82.71
(Monroe do Brazil Industria e Comercio Ltda. owns 82.71%; Monroe Auto Equipment Company
owns 2.82%; and Monteiro Aranha S/A, an unaffiliated company owns 14.47%.)
Case Corporation (Delaware)............................................................................ 31.29
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment Corporation
owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco Equipment Holding II
Company owns 0.24%; Tenneco Equipment Holding III Company owns 0.42%; Tenneco Equipment
Holding IV Company owns 3.94%; Tenneco Equipment Holding V Company owns 0.01%;
Tenneco Equipment Holding VI Company owns 0.29%;and Tenneco International Inc. owns 1.92%.
Series A Cumulative Convertible Preferred Stock: Public owns 100%. Cumulative Convertible
Second Preferred Stock: owned 100% by Case Corporation Key Employees.)
Case Brazil Holdings, Inc. (Delaware).............................................................. 100
J. I. Case do Brasil & Cia (Brazilian Partnership)............................................. 87.86
(Case Brazil Holdings, Inc. owns 87.86%; and Case Equipment International Corporation
owns 12.14%)
Brascor Corretora de Seguros, Participacoes e Servicos S.A. (Brazil)....................... 90
(J. I. Case do Brasil & Cia owns 90%; and PPM do Brasil Ltda. owns 10%)
Poclain do Brasil S.A. (Brazil)............................................................ 0.29
(J. I. Case do Brasil & Cia owns 0.29% of the Common Stock and 100% of the Preferred
Stock; and Case Corporation owns 99.71% of the Common Stock)
PPM do Brasil Ltda. (Brazil)........................................................... 1.4
(Poclain do Brasil S.A. owns 1.4%; and J. I. Case do Brasil & Cia owns 98.6%)
Brascor Corretora de Seguros, Participacoes e Servicos S.A. (Brazil)............... 10
(PPM do Brasil Ltda. owns 10%; and J. I. Case do Brasil & Cia owns 90%)
PPM do Brasil Ltda. (Brazil)............................................................... 98.6
(J. I. Case do Brasil & Cia owns 98.6%; and Poclain do Brasil S.A. owns 1.4%)
Brascor Corretora de Seguros, Participacoes e Servicos S.A. (Brazil)................... 10
(PPM do Brasil Ltda. owns 10%; and J. I. Case do Brasil & Cia owns 90%)
Case Canada Corporation (Ontario).................................................................. 100
Case Canada Equipment Corporation (Delaware)....................................................... 100
Case CDC Holdings, Inc. (Delaware)................................................................. 100
Consolidated Diesel Company (North Carolina General Partnership)............................... 50
(Case CDC Holdings, Inc. owns 50%; and Cummins Engine Holding Company, Inc.,
an unaffiliated company, owns 50%)
Consolidated Diesel, Inc. (Delaware)....................................................... 100
Consolidated Diesel of North Carolina, Inc. (North Carolina)........................... 100
Case Credit Corporation (Delaware)................................................................. 100
Case Canada Receivables, Inc. (Alberta)........................................................ 100
Case Credit Ltd. (Alberta)..................................................................... 100
Case Receivables, Inc. (Delaware).............................................................. 100
Case Receivables II Inc. (Delaware)............................................................ 100
Case Equipment Baumaschinen GmbH (Germany)......................................................... 1
(Case Corporation owns 1%; and J. I. Case GmbH owns 99%)
</TABLE>
1
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Case Corporation (Delaware) (continued)
Subsidiaries of Case Equipment Baumaschinen GmbH (Germany) (continued)
<S> <C>
Case Poclain GmbH & Co. K. G. (Germany)........................................................ 98%
(Case Equipment Baumaschinen GmbH owns 98%; and Poclain GmbH owns 2%)
Poclain GmbH (Germany)......................................................................... 100
Case Poclain GmbH & Co. K. G. (Germany).................................................... 2
(Poclain GmbH owns 2%; and Case Equipment Baumaschinen GmbH owns 98%)
Case Equipment International Corporation (Delaware)................................................ 100
J. I. Case do Brasil & Cia (Brazilian Partnership)............................................. 12.14
(Case Equipment International Corporation owns 12.14%; and Case Brazil Holdings, Inc.
owns 87.86%.)
J. I. Case GmbH (Germany)...................................................................... 99
(Case Equipment International Corporation owns 1%; and Case Corporation owns 99%)
Case Bodenverdichtungsgerate Verwaltungs GmbH (Germany).................................... 100
Case Equipment Baumaschinen GmbH (Germany)................................................. 99
(J. I. Case GmbH owns 99%; and Case Corporation owns 1%.)
S. A. Case Belgium N. V. (Belgium)............................................................. 99.02
(Case Equipment International Corporation owns 99.02%; and Case Corporation owns 0.08%)
International Harvester Company of Belgium N. V. (Belgium)................................. 99
(S. A. Case Belgium N. V. owns 99%; and Case Corporation owns 1%)
Case Equipment International Marketing, Inc. (Delaware)............................................ 100
Case Europe S.A.R.L. (France)...................................................................... 100
Case Irrigation Company (Delaware)................................................................. 100
Case Licensing/Lending Company (Delaware).......................................................... 100
Case Poclain S. A. (France)........................................................................ 100
J. I. Case SpA (Italy)......................................................................... 99.99
(Case Poclain S. A. owns 99.99%; and Case Corporation owns 0.01%)
Poclain Far East, Ltd. (Hong Kong)............................................................. 100
Poclain Services North America Inc. (Delaware)................................................. 100
HFI Holdings, Inc. (Delaware)...................................................................... 100
Hay & Forage Industries (Kansas General Partnership)........................................... 50
(HFI Holdings, Inc. owns 50%; and Hesston Ventures Corporation, an unaffiliated company,
owns 50%)
International Harvester Company (Delaware)......................................................... 100
International Harvester Company of Belgium N. V. (Belgium)......................................... 1
(Case Corporation owns 10%; and S. A. Case Belgium N. V. owns 90%)
International Harvester Company of Great Britain Limited (United Kingdom).......................... 100
J. I. Case A/S (Denmark)........................................................................... 100
J. I. Case (Australia) Pty. Limited (Australia).................................................... 100
Case Tractors & Equipment (NZ) Limited (New Zealand)........................................... 100
J. I. Case Credit Corporation of Australia Pty. Ltd. (Australia)............................... 100
J. I. Case Europe Limited (United Kingdom)......................................................... 100
Case Credit Limited (United Kingdom)........................................................... 100
Case-Poclain Limited (United Kingdom).......................................................... 100
David Brown Tractors Limited (United Kingdom).................................................. 100
J. I. Case Company Limited (United Kingdom).................................................... 100
J. I. Case Germany Holdings, Inc. (Delaware)....................................................... 100
J. I. Case GmbH (Germany).......................................................................... 1
(Case Corporation owns 1%; and Case Equipment International Corporation owns 99%.)
</TABLE>
2
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Case Corporation (Delaware) (continued)
<S> <C>
J. I. Case Leasing Corporation (Wisconsin)......................................................... 100%
J. I. Case Property Company (Delaware)............................................................. 100
J. I. Case S. A. (Spain)........................................................................... 100
J. I. Case SpA (Italy)............................................................................. 0.01
(Case Corporation owns 0.01%; and Case Poclain S. A. owns 99.99%)
J. I. Case Sweden AB (Sweden)...................................................................... 100
Poclain do Brasil S. A. (Brazil)................................................................... 99.71
(Case Corporation owns 99.71% of the Common Stock; and J. I. Case do Brasil & Cia owns 0.29%
of the Common Stock and 100% of the Preferred Stock. The subsidiaries of Poclain do
Brasil S. A. are listed on page 1 hereof.)
Poclain Mexicana S. A. (Mexico).................................................................... 99.99
(Case Corporation owns 99.99%; and Pryor Foundry, Inc. owns 0.01%)
Pryor Foundry, Inc. (Oklahoma)..................................................................... 100
Case Credits Limited (United Kingdom).......................................................... 100
David Brown Tractors (Belfast) Ltd. (United Kingdom)........................................... 100
David Brown Tractors (Ireland) Ltd. (Ireland).................................................. 100
David Brown Tractors (Retail) Ltd. (United Kingdom)............................................ 100
A. M. Exports Limited (United Kingdom)..................................................... 100
Poclain Limited (United Kingdom)........................................................... 100
Grand Detour Plow Company (Wisconsin).......................................................... 100
Kase, S. A. De C. V. (Mexico).............................................................. 100
J. I. Case Argentina, S. A. (Argentina)........................................................ 100
J. I. Case International, S. A. (Venezuela).................................................... 100
J. I. Case Threshing Machine Company (Wisconsin)............................................... 100
Poclain Mexicana S. A. (Mexico)................................................................ 0.01
(Pryor Foundry, Inc. owns 0.01%; and Case Corporation owns 99.99%)
Steiger Credit Company (North Dakota).......................................................... 100
Steiger Credit Canada Ltd. (Canada)........................................................ 100
Steiger International, Ltd. (Guam)............................................................. 100
Tractorwork, Limited (United Kingdom).......................................................... 100
Universaltrac Beteiligungs GmbH (Germany)...................................................... 100
S. A. Case Belgium N. V. (Belgium)................................................................. 0.08
(Case Corporation owns 0.08%; and Case Equipment International Corporation owns 99.02%.
The subsidiaries of S. A. Case Belgium N. V. are listed on page 2 hereof.)
Viscosity Oil of Canada Ltd. (Alberta)............................................................. 100
Kern County Land Company (Delaware).................................................................... 100
Tenneco Equipment Corporation (Delaware)........................................................... 100
Case Corporation (Delaware).................................................................... 5.40
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco Equipment
Holding II Company owns 0.24%; Tenneco Equipment Holding III Company owns 0.42%; Tenneco
Equipment Holding IV Company owns 3.94%; Tenneco Equipment Holding V Company owns 0.01%;
Tenneco Equipment Holding VI Company owns 0.29%; and Tenneco International Inc. owns 1.92%.
Series A Cumulative Convertible Preferred Stock: Public owns 100%. Cumulative Convertible
Second Preferred Stock: owned 100% by Case Corporation Key Employees. The subsidiaries
of Case Corporation are listed beginning on Page 1 hereof.)
Marlin Drilling Co., Inc. (Delaware)........................................................... 100
Bluefin Supply Company (Delaware).......................................................... 100
Marlin do Brasil Perfuracoes Maritimas Ltda. (Brazil) (in dissolution)................ 0.16
(Bluefin Supply Company owns 0.16%; and Marlin Drilling Co., Inc. owns 99.84%.)
</TABLE>
3
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Kern County Land Company (Delaware) (continued)
Subsidiaries of Tenneco Equipment Corporation (Delaware) (continued)
Subsidiaries of Marlin Drilling Co., Inc. (Delaware) (continued)
<S> <C>
Marlin do Brasil Perfuracoes Maritimas Ltda. (Brazil) (in dissolution)..................... 99.84%
(Marlin Drilling Co., Inc. owns 99.84% and Bluefin Supply Company owns 0.16%.)
Tenneco Equipment Holding I Company (Delaware)................................................. 100
Case Corporation (Delaware)................................................................ 1.14
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco
Equipment Holding II Company owns 0.24%; Tenneco Equipment Holding III Company
owns 0.42%; Tenneco Equipment Holding IV Company owns 3.94%; Tenneco Equipment
Holding V Company owns 0.01%; Tenneco Equipment Holding VI Company owns 0.29%;
and Tenneco International Inc. owns 1.92%. Series A Cumulative Convertible
Preferred Stock: Public owns 100%. Cumulative Convertible Second Preferred Stock:
owned 100% by Case Corporation Key Employees. The subsidiaries of Case Corporation
are listed beginning on Page 1 hereof.)
Tenneco Equipment Holding II Company (Delaware)................................................ 100
Case Corporation (Delaware)................................................................ 0.24
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco
Equipment Holding II Company owns 0.24%; Tenneco Equipment Holding III Company
owns 0.42%; Tenneco Equipment Holding IV Company owns 3.94%; Tenneco Equipment
Holding V Company owns 0.01%; Tenneco Equipment Holding VI Company owns 0.29%;
and Tenneco International Inc. owns 1.92%. Series A Cumulative Convertible
Preferred Stock: Public owns 100%. Cumulative Convertible Second Preferred
Stock: owned 100% by Case Corporation Key Employees. The subsidiaries of Case
Corporation are listed beginning on Page 1 hereof.)
Tenneco Equipment Holding III Company (Delaware)............................................... 100
Case Corporation (Delaware)................................................................ 0.42
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco
Equipment Holding II Company owns 0.24%; Tenneco Equipment Holding III Company
owns 0.42%; Tenneco Equipment Holding IV Company owns 3.94%; Tenneco Equipment
Holding V Company owns 0.01%; Tenneco Equipment Holding VI Company owns 0.29%;
and Tenneco International Inc. owns 1.92%. Series A Cumulative Convertible
Preferred Stock: Public owns 100%. Cumulative Convertible Second Preferred Stock:
owned 100% by Case Corporation Key Employees. The subsidiaries of Case Corporation
are listed beginning on Page 1 hereof.)
Tenneco Equipment Holding V Company (North Dakota)......................................... 100
Case Corporation (Delaware)............................................................ 0.01
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco
Equipment Holding II Company owns 0.24%; Tenneco Equipment Holding III Company
owns 0.42%; Tenneco Equipment Holding IV Company owns 3.94%; Tenneco Equipment
Holding V Company owns 0.01%; Tenneco Equipment Holding VI Company owns 0.29%;
and Tenneco International Inc. owns
</TABLE>
4
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Kern County Land Company (Delaware) (continued)
Subsidiaries of Tenneco Equipment Corporation (Delaware) (continued)
Subsidiaries of Tenneco Equipment Holding III Company (Delaware) (continued)
Subsidiaries of Tenneco Equipment Holding V Company (North Dakota) (continued)
Subsidiaries of Case Corporation (Delaware) (continued)
<S> <C>
1.92%. Series A Cumulative Convertible Preferred Stock: Public owns 100%.
Cumulative Convertible Second Preferred Stock: owned 100% by Case Corporation
Key Employees. The subsidiaries of Case Corporation are listed beginning
on Page 1 hereof.)
Tenneco Equipment Holding IV Company (Wisconsin)............................................... 100%
Case Corporation (Delaware)................................................................ 3.94
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco
Equipment Holding II Company owns 0.24%; Tenneco Equipment Holding III Company
owns 0.42%; Tenneco Equipment Holding IV Company owns 3.94%; Tenneco Equipment
Holding V Company owns 0.01%; Tenneco Equipment Holding VI Company owns 0.29%;
and Tenneco International Inc. owns 1.92%. Series A Cumulative Convertible
Preferred Stock: Public owns 100%. Cumulative Convertible Second Preferred
Stock: owned 100% by Case Corporation Key Employees. The subsidiaries of Case
Corporation are listed beginning on Page 1 hereof.)
Tenneco Equipment Holding VI Company (Illinois)................................................ 100
Case Corporation (Delaware)................................................................ 0.29
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco Equipment
Corporation owns 5.40%; Tenneco Equipment Holding I Company owns 1.14%; Tenneco
Equipment Holding II Company owns 0.24%; Tenneco Equipment Holding III Company
owns 0.42%; Tenneco Equipment Holding IV Company owns 3.94%; Tenneco Equipment
Holding V Company owns 0.01%; Tenneco Equipment Holding VI Company owns 0.29%;
and Tenneco International Inc. owns 1.92%. Series A Cumulative Convertible
Preferred Stock: Public owns 100%. Cumulative Convertible Second Preferred Stock:
owned 100% by Case Corporation Key Employees. The subsidiaries of Case Corporation
are listed beginning on Page 1 hereof.)
Tenneco International Holding Corp. (Delaware)................................................. 21.97
(Tenneco Equipment Corporation owns 21.97% of Common Stock and 50% of $8.00 Junior
Preferred Stock; Tenneco International Inc. owns 70.15% of Common Stock and 50% of
$8.00 Preferred Stock; Tenneco Corporation owns 7.88% of Common Stock; MW Investors
L.L.C., an unaffiliated company, owns 100% of Variable Rate Voting Participating
Preferred Stock.)
Monroe Australia Pty. Limited (Australia).................................................. 100
Walker Australia Pty. Limited (Australia).............................................. 100
Monroe Superannuation Pty. Ltd. (Australia)............................................ 100
S.A. Monroe Europe N.V. (Belgium).......................................................... 100
Borusan Amortisor Imalat Ve Ticaret A.S. (Turkey)...................................... 16.67
(S. A. Monroe Europe N.V. owns 16.67%; Borusan Holding AS, an unaffiliated
company, owns 83.03%; and various unaffiliated individual stockholders own 0.3%.)
Monroe Europe Coordination Center N.V. (Belgium)....................................... 99.9
(S. A. Monroe Europe N.V. owns 99.9%; and Monroe Auto Equipment France, S.A.
owns 0.1%.)
Monroe Packaging N.V. (Belgium)........................................................ 99.9
(S. A. Monroe Europe N.V. owns 99.9%; and Monroe Auto Equipment France, S.A.
owns 0.1%.)
</TABLE>
5
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Kern County Land Company (Delaware) (continued)
Subsidiaries of Tenneco Equipment Corporation (Delaware) (continued)
Subsidiaries of Tenneco International Holding Corp. (Delaware) (continued)
<S> <C>
Tenneco Canada Inc. (Ontario).............................................................. 51.28%
(Tenneco International Holding Corp. owns 100% of the issued and outstanding Common
Stock, 51.28% of total equity; and Albright & Wilson UK Limited owns 100% of the
Class A Stock, 48.72% of total equity.)
982174 Ontario Limited (Ontario)....................................................... 100
Albright & Wilson Americas Inc. (Canada)............................................... 100
Case Canada Wholesale Finance Company (Alberta)........................................ 100
Dunville Mining Company Limited (Newfoundland)......................................... 100
Electric Reduction Sales Company, Limited (Canada)..................................... 100
ERCO Industries of Canada Limited (Canada)............................................. 100
Tenneco Credit Canada Corporation (Alberta)............................................ 100
Tenneco Espana Holdings, Inc. (Delaware)................................................... 100
Tenneco Espana S.A. (Spain)............................................................ 100
Omni-Pac Embalajes S.A. (Spain).................................................... 100
Gillet Iberica S.A. (Spain)........................................................ 100
Tenneco Holdings Danmark A/S (Denmark)..................................................... 100
Gillet Exhaust Technologie (Proprietary) Limited (South Africa)........................ 100
Gillet Lazne Belohrad s.r.o. (Republic of Czechoslovakia).............................. 100
Heinrich Gillet Portuguesa - Sistemas de Escape Lda. (Portugal)........................ 100
Walker Danmark A/S (Denmark)........................................................... 100
Walker Inapel Escapes, S.A. (Portugal)................................................. 90
(Tenneco Holdings Danmark A/S owns 90%; Inapal, Industria Nacional de Acessorios
Para Automoveis, SA, an unaffiliated company, owns 9.99%; and Walker
Danmark A/S owns 0.01%.)
Walker France S.A. (France)................................................................ 100
Gillet Tubes Technologies SARL (France)................................................ 60
(Walker France S.A. owns 60%; and Constructions Metallurgiques de
Wissembourg - Wimetal owns 40%.)
Constructions Metallurgiques de Wissembourg - Wimetal (France)......................... 100
Gillet Tubes Technologies SARL (France)............................................ 40
(Constructions Metallurgiques de Wissemourg - Wimetal owns 40%; and Walker
France S.A. owns 60%.)
Societe Europeennes des Ensembles-Montes (France).................................. 100
Walker Sverige A.B. (Sweden)............................................................... 100
Tenneco West, Inc. (Delaware)...................................................................... 100
Kern County Land Company, Inc. (California).................................................... 100
Tenneco Arizona Property Corporation (Arizona)................................................. 100
Tenneco Credit Corporation (Delaware).................................................................. 100
Counce Limited Partnership (Texas Limited Partnership)............................................. 95
(Tenneco Credit Corporation owns 95%, as Limited Partner; and Tenneco InterAmerica Inc.
owns 5%, as General Partner.)
Counce Finance Corporation (Delaware).......................................................... 100
TenFac Corporation (Delaware)...................................................................... 100
Tenneco France Finance S.A. (France)................................................................... 99.80
(Tenneco Inc. owns 99.80%; Tenneco International Inc. owns .04%; Albright & Wilson plc
owns .04%; Tenneco International Finance Limited owns .04%; Tenneco Corporation owns .04%
and Tenneco United Kingdom Holdings Limited owns .04%.)
Tenneco Management Company (Delaware).................................................................. 100
Tenneco OLP Inc. (Delaware)............................................................................ 100
</TABLE>
6
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
<S> <C>
Tennessee Gas Pipeline Company (Delaware).............................................................. 100%
Albright & Wilson Americas Inc. (Delaware)......................................................... 100
Albright & Wilson Company (Virginia General Partnership)....................................... 50
(Albright & Wilson Americas Inc. owns 50%, as General Partner; and Texasgulf Inc.,
an unaffiliated company, owns 50%, as General Partner.)
Purified Acid Partners (Virginia General Partnership)...................................... 58.33
(Albright & Wilson Company, owns 58.33%, as General Partner; and Olin Corporation,
an unaffiliated company, owns 41.67%, as General Partner.)
Albright & Wilson North America Inc. (Delaware).................................................... 100
A&W Troy Grupo Industrial, S.A. de C.V. (Mexico)............................................... 50
(Albright & Wilson North America Inc. owns 50%; and unaffiliated individuals own 50%.)
A&W Troy de Mexico S.A. de C.V. (Mexico)................................................... 100
Chemrich, Inc. (Louisiana)..................................................................... 100
Rio Linda Chemical Co., Inc. (Delaware)........................................................ 100
RLCC Technologies, Inc. (Delaware)............................................................. 100
Altamont Service Corporation (Delaware)............................................................ 100
Altamont Gas Transmission Canada Limited (Canada).............................................. 100
(Altamont Service Corporation is the registered holder of all of the issued and
outstanding shares of Altamont Gas Transmission Canada Limited, as Trustee for
Altamont Gas Transmission Company, a Joint Venture.)
Autopartes Walker, S.A. de C.V. (Mexico)........................................................... 99.92
(Tennessee Gas Pipeline Company owns 99.92%; Tenneco Inc. owns 0.02%; Tenneco Corporation owns
0.02%; Tenneco International Inc. owns 0.02%; and Monroe Auto Equipment Company owns 0.02%.)
Border Gas, Inc. (Delaware) (a close corp.)........................................................ 37.5
(Tennessee Gas Pipeline Company owns 100% of the Class A Common Stock, 371/2% of the total
equity, and 371/2% total voting stock; Texas Eastern Transmission Corporation, an
unaffiliated company, owns 100% of the Class B Common Stock, 271/2% of the total equity,
and 271/2% total voting stock; El Paso Natural Gas Company, an unaffiliated company,
owns 100% of the Class C Common Stock, 15% of the total equity, and 15% total voting stock;
Transcontinental Gas Pipe Line Corporation, an unaffiliated company, owns 100% of the
Class D Common Stock, 10% of the total equity, and 10% total voting stock; Southern Natural
Gas Company, an unaffiliated company, owns 100% of the Class E Common Stock, 62/3% of the
total equity, and 62/3% total voting stock; and Florida Gas Transmission Company, an
unaffiliated company, owns 100% of the Class F Common Stock, 31/3% of the total equity,
and 31/3% total voting stock.)
East Tennessee Natural Gas Company (Tennessee)..................................................... 100
Tenneco East Natural Gas L.P. (Delaware Limited Partnership)................................... 1
(East Tennessee Natural Gas Company, as General Partner, owns 1%; and Tenneco East
Corporation, as Limited Partner, owns 99%.)
Eastern Insurance Company Limited (Bermuda)........................................................ 100
Energy Tracs, Inc. (Delaware)...................................................................... 100
Kern River Corporation (Delaware).................................................................. 100
Kern River Gas Transmission Company (Texas General Partnership)................................ 50
(Kern River Corporation owns 50%, as General Partner; and Williams Western Pipeline
Company, an unaffiliated company, owns 50%, as General Partner.)
Kern River Gas Supply Corporation (Delaware)....................................................... 50
(Tennessee Gas Pipeline Company owns 50%; and The Williams Companies, an unaffiliated
company, owns 50%.)
Kern River Service Corporation (Delaware).......................................................... 50
(Tennessee Gas Pipeline Company owns 50%; and The Williams Companies, an unaffiliated
company, owns 50%.)
</TABLE>
7
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
<S> <C>
Land Ventures, Inc. (Delaware)..................................................................... 100%
Midwestern Gas Marketing Company (Delaware)........................................................ 100
Midwestern Gas Transmission Company (Delaware)..................................................... 100
Tenneco Midwest Natural Gas L.P. (Delaware Limited Partnership)................................ 1
(Midwestern Gas Transmission Company, as General Partner, owns 1%; and Tenneco
Midwest Corporation, as Limited Partner, owns 99%.)
Monroe Auto Equipment Company (Delaware)........................................................... 100
Autopartes Walker, S.A. de C.V. (Mexico)....................................................... 0.02
(Tennessee Gas Pipeline Company owns 99.92%; Tenneco Inc. owns 0.02%; Tenneco
Corporation owns 0.02%; Tenneco International Inc. owns 0.02%; and Monroe Auto
Equipment Company owns 0.02%.)
Consorcio Terranova S.A. de C.V. (Mexico)...................................................... 99
(Monroe Auto Equipment Company owns 99%; and Josan Latinamericana S.A. de C.V.
an unaffiliated company, owns 1%.)
McPherson Strut Company Inc. (Delaware)........................................................ 100
Monroe Auto Equipement France, S.A. (France)................................................... 100
Monroe Europe Coordination Center N.V. (Belgium)........................................... 0.1
(S.A. Monroe Europe N.V. owns 99.9%; and Monroe Auto Equipement France,
S.A. owns 0.1%.)
Tenneco Automotive Italia S.r.l. (Italy)................................................... 15
(Monroe Auto Equipment Company owns 85%; and Monroe Auto Equipement France,
S.A. owns 15%.)
Monroe Packaging N.V. (Belgium)............................................................ 0.1
(S.A. Monroe Europe N.V. owns 99.9%; and Monroe Auto Equipement France,
S.A. owns 0.1%.)
Monroe Auto Pecas S.A. (Brazil)................................................................ 2.82
(Monroe Auto Equipment Company owns 2.82%; Monroe do Brasil Industria e Comercio Ltda.
owns 82.71%; and Monteiro Aranha S/A, an unaffiliated company, owns 14.47%.)
Tenneco Automotive Italia S.r.l. (Italy)....................................................... 85
(Monroe Auto Equipment Company owns 85%; and Monroe Auto Equipement France, S.A. owns 15%.)
Monroe-Mexico S.A. de C.V. (Mexico)............................................................ 99.99
(Monroe Auto Equipment Company owns 99.99% and Tennessee Gas Pipeline Company owns 0.01%.)
Precision Modular Assembly Corp. (Delaware).................................................... 100
Rancho Industries Europe B.V. (Netherlands).................................................... 100
Tenneco Automotive Foreign Sales Corporation Limited (Jamaica)................................. 99
(Monroe Auto Equipment Company owns 99%; and Tenneco Automotive, a Division of
Tennessee Gas Pipeline Company, owns 1%.)
Tenneco Automotive International Sales Corporation (Delaware) (In Dissolution)................. 100
Tenneco Automotive Japan Ltd. (Japan).......................................................... 100
Monroe-Mexico S.A. de C.V. (Mexico)................................................................ 0.01
(Tennessee Gas Pipeline Company owns 0.01%; and Monroe Auto Equipment Company owns 99.99%.)
Mont Belvieu Land Company (Delaware)............................................................... 100
New Tenn Company (Delaware)........................................................................ 100
New Tennessee Gas Pipeline Company (Delaware)...................................................... 100
S. K. Petroleum Company (Delaware)................................................................. 100
Sandbar Petroleum Company (Delaware)............................................................... 100
Tenneco Alaska, Inc. (Alaska)...................................................................... 100
</TABLE>
8
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipline Company (continued)
<S> <C>
Tenneco-Altamont Corporation (Delaware)............................................................ 100%
Altamont Gas Transmission Company (Delaware Joint Venture)..................................... 53.34
(Tenneco-Altamont Corporation owns 53 1/3%; Amoco Altamont Company, an unaffiliated
company, owns 33 1/3%; and Entech Altamont, Inc., an unaffiliated company, owns 13 1/3%.)
Tenneco Argentina Corporation (Delaware)........................................................... 100
Tenneco Automotive Foreign Sales Corporation Limited (Jamaica)..................................... 1
(Tenneco Automotive, a Division of Tennessee Gas Pipeline Company, owns 1%; and Monroe Auto
Equipment Company owns 99%.)
Tenneco Baja Corporation (Delaware)................................................................ 100
Tenneco China Trade Inc. (Delaware)................................................................ 100
Tenneco Coal Company (Delaware).................................................................... 100
Tenneco Communications Corporation (Delaware)...................................................... 100
Tenneco Brake, Inc. (Delaware)..................................................................... 100
Tenneco Corporation (Delaware)..................................................................... 94.3
(Tennessee Gas Pipeline Company owns 100% of the Common Stock, 94.3% of total equity; and
Tenneco International Inc. owns 100% of the Second Preferred Stock, 5.7% of total equity.)
Autopartes Walker, S.A. DE C.V. (Mexico)....................................................... 0.02
(Tennessee Gas Pipeline Company owns 99.92%; Tenneco Inc. owns 0.02%; Tenneco Corporation
owns 0.02%; Tenneco International Inc. owns 0.02%; and Monroe Auto Equipment Company
owns 0.02%.)
Entrade Engine Company (Kentucky).............................................................. 100
H. T. Gathering Company (Texas)................................................................ 50
(Tenneco Corporation owns 50% of the issued and outstanding Class A Voting Stock and 20%
of the Class B Nonvoting Stock, 29% of total equity; and Houston Pipe Line Company,
an unaffiliated company, owns 50% of the issued and outstanding Class A Voting Stock
and 80% of the Class B Nonvoting Stock, 71% of total equity. The voting stock is
split 50% - 50%.)
Houston Oil and Minerals Explorations Company (Texas).......................................... 100
Petro-Tex Chemical Corporation (Delaware)...................................................... 100
SWL Security Corp. (Texas)..................................................................... 100
TGP Corporation (Delaware)..................................................................... 100
Tenneco Deutschland Holdinggesellschaft mbH (Germany).......................................... 99.97
(Tenneco Corporation owns 99.97%; and Atlas Bermoegensverwaltung, an unaffiliated company,
owns 0.03%.)
GILLET Unternehmesverwaltungs GmbH (Germany)............................................... 100
Heinrich Gillet GmbH & Co. KG (Germany)................................................ 0.1
(GILLET Unternehmesverwaltungs GmbH owns 0.1%; and Tenneco Deutschland
Holdinggesellschaft mbH owns 99.9%.)
Heinrich Gillet GmbH & Co. KG (Germany).................................................... 99.9
(Tenneco Deutchland Holdinggesellschaft mbH owns 99.9%; and GILLET
Unternehmesverwaltungs GmbH owns 0.1%.)
Gillet Abgassysteme Zwickau GmbH (Germany)............................................. 100
Monroe Auto Equipment GmbH (Germany)....................................................... 100
Omni-Pac Ekco GmbH Verpackungsmittel (Germany)............................................. 100
Omni-Pac Poland Sp. z o. o. (Poland)................................................... 100
PCA Embalajes Espana, S.L. (Spain)..................................................... 1
(Omni-Pac Ekco GmbH Verpackungsmittel owns 1%; and PCA Verpackungsmittel
GmbH owns 99%.)
</TABLE>
9
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco Corporation (Delaware) (continued)
Subsidiaries of Tenneco Deutschland Holdinggesellschaft mbH (Germany) (continued)
<S> <C>
Omni-Pac GmbH (Germany).................................................................... 99%
(Tenneco Deutschland Holdinggesellschaft mbH owns 99%; and Tenneco International Inc.
owns 1%.)
Omni-Pac ApS (Denmark)................................................................. 100
Omni-Pac A.B. (Sweden)................................................................. 100
Omni-Pac S.A.R.L. (France)............................................................. 3
(Omni-Pac GmbH owns 3%; and Tenneco International Inc. owns 97%.)
Walker Deutschland GmbH (Germany).......................................................... 99
(Tenneco Deutschland Holdinggesellschaft mbH owns 99%; and Tenneco Corporation
owns 1%.)
Tenneco Energy Resources Corporation (Delaware)................................................ 80
(Tenneco Corporation owns 100% of the Common Stock, 80% of total equity; and Ruhrgas
Aktiengesellschaft, an unaffiliated company, owns 100% of the issued and outstanding
Series A Common Stock, 20% of total equity.)
Channel Gas Marketing Company (Delaware)................................................... 100
Channel Gas Supply Company (Delaware)...................................................... 100
Oasis Pipe Line Company (Delaware)..................................................... 30
(Channel Gas Supply Company owns 100% of the issued and outstanding Series B
Preference Stock and 30% of the Common Stock, 30% of total equity; Dow
Chemical Company, an unaffiliated company, 100% of the issued and outstanding
Series A Preference Stock and 45% of the Common Stock, 45% of total equity;
and Houston Pipe Line Company, and unaffiliated company, 100% of the issued and
outstanding Series C Preference Stock and 25% of the Common Stock, 25% of total
equity.)
Channel Industries Gas Company (Delaware).................................................. 100
Tenneco Gas Gathering Company (Delaware)................................................... 100
Tenneco Gas Marketing Company (Kentucky)................................................... 100
Creole Gas Pipeline Corporation (Louisiana)............................................ 100
Entrade Pipeline Company (Kentucky).................................................... 100
Tenneco Gas Processing Company (Delaware).................................................. 100
Tenneco Gas Trading Company (Delaware)..................................................... 100
Tennessee Gas Marketing Company (Delaware)................................................. 100
Tenneco International Holding Corp. (Delaware)................................................. 7.88
(Tenneco Corporation owns 7.88% of Common Stock; Tenneco Equipment Corporation owns
21.97% of Common Stock and 50% of $8.00 Junior Preferred Stock; Tenneco International
Inc. owns 70.15% of Common Stock and 50% of $8.00 Junior Preferred Stock; MW Investors
L.L.C., an unaffiliated company, owns 100% of Variable Rate Voting Participating
Preferred Stock. The subsidiaries of Tenneco International Holding Corp. are listed
beginning on page 5 hereof.)
Tenneco France Finance S.A. (France)........................................................... 0.04
(Tenneco Corporation owns .04%; Tenneco Inc. owns 99.80%; Tenneco International Inc.
owns .04%; Albright & Wilson plc owns .04%; Tenneco International Finance Limited
owns .04%; and Tenneco United Kingdom Holdings Limited owns .04%.)
Tenneco Independent Power I Company (Delaware)................................................. 100
Tenneco Independent Power II Company (Delaware)................................................ 100
Tenneco Insurance Ventures Inc. (Delaware)..................................................... 100
Tenneco Inc. (Nevada).......................................................................... 100
Tenneco InterAmerica Inc. (Delaware)........................................................... 100
</TABLE>
10
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco Corporation (Delaware) (continued)
Subsidiaries of Tenneco InterAmerica Inc. (Delaware) (continued)
<S> <C>
Counce Limited Partnership (Texas Limited Partnership)..................................... 5%
(Tenneco InterAmerica Inc. owns 5%, as General Partner; and Tenneco Credit
Corporation owns 95%, as Limited Partner.)
Counce Finance Corporation (Delaware).................................................. 100
Newport News Shipbuilding and Dry Dock Company (Virginia).................................. 100
Asheville Industries Inc. (North Carolina)............................................. 100
Greeneville Industries Inc. (Virginia)................................................. 100
The James River Oyster Corporation (Virginia).......................................... 100
Newport News Industrial Corporation (Virginia)......................................... 100
Newport News Industrial Corporation of Ohio (Ohio)................................. 100
Newport News Reactor Services, Inc. (Virginia)......................................... 100
Newport News Offshore Corporation (U.S. Virgin Islands)................................ 100
PCA Leasing Company (Delaware)............................................................. 100
Packaging Corporation of America (Delaware)................................................ 100
A&E Plastics, Inc. (Delaware).......................................................... 100
Alupak A.G. (Switzerland).............................................................. 100
American Cellulose Corporation (Delaware).............................................. 50
(Packaging Corporation of America owns 50%; and Larry E. Homan, an unaffiliated
individual, owns 50%.)
The Corinth and Counce Railroad Company (Mississippi).................................. 100
Marinette, Tomahawk & Western Railroad Company (Wisconsin)......................... 100
Valdosta Southern Railroad Company (Florida)....................................... 100
Dahlonega Packaging Corporation (Delaware)............................................. 100
Dixie Container Corporation (Virginia)................................................. 100
Dixie Convoy Corporation (North Carolina).............................................. 100
Dongguan PCA Packaging Co., Ltd. (Peoples Republic of China)........................... 50
(Packaging Corporation of America owns 50%; and Dongguan Dong Ya Color Printing
& Packaging Factory, an unaffiliated company, owns 50%.)
EKCO Products, Inc. (Illinois)......................................................... 100
E-Z Por Corporation (Delaware)......................................................... 100
Packaging Corporation of America (Nevada).............................................. 100
PCA Box Company (Delaware)............................................................. 100
PCA-Budafok (Kartongyar) Kft. (Hungary)................................................ 100
PCA Hydro, Inc. (Delaware)............................................................. 100
PCA Romania Srl (Romania).............................................................. 50
(Packaging Corporation of America owns 50%; and Kraftcorr Inc., an unaffiliated
company, owns 50%.)
PCA Tomahawk Corporation (Delaware).................................................... 100
PCA Valdosta Corporation (Delaware).................................................... 100
PCA Verpackungsmittel GmbH (Germany)................................................... 100
PCA Embalajes Espana S.L. (Spain).................................................. 99
(PCA Verpackungsmittel GmbH owns 99%; and Omni-Pac Ekco GmbH
Verpackungsmittel owns 1%.)
PCA West Inc. (Delaware)............................................................... 100
Coast-Packaging Company (California General Partnership)........................... 50
(PCA West Inc. owns 50%, as General Partner; and J. G. Haddy Sales Company,
an unaffiliated company, owns 50%, as General Partner.)
</TABLE>
11
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco Corporation (Delaware) (continued)
Subsidiaries of Tenneco InterAmerica Inc. (Delaware) (continued)
Subsidiaries of Packaging Corporation of America (Delaware) (continued)
<S> <C>
Pressware International, Inc. (Delaware)............................................... 100%
Revere Foil Containers, Inc. (Delaware)................................................ 100
798795 Ontario Limited (Ontario)....................................................... 100
PCA Canada Inc. (Ontario).......................................................... 100
Tenneco Minerals Company - California (Delaware)............................................... 100
Tenneco Minerals Company - Nevada (Delaware)................................................... 100
Tenneco OCS Company, Inc. (Delaware)........................................................... 100
Tenneco Oil Company (Delaware)................................................................. 100
Tenneco Polymers, Inc. (Delaware).............................................................. 100
Tenneco Eastern Realty, Inc. (New Jersey).................................................. 100
Tenneco Power Generation Company (Delaware).................................................... 100
Tenneco Ethanol Company (Delaware)......................................................... 100
Tenneco Ethanol Services Company (Delaware)................................................ 100
West Campus Cogeneration Company (Delaware)................................................ 100
Tenneco Synfuels Company (Delaware)............................................................ 100
Tennessee Overthrust Gas Company (Delaware).................................................... 100
Walker Deutschland GmbH (Germany).............................................................. 1
(Tenneco Corporation owns 1%; and Tenneco
Deutschland Holdinggesellschaft mbH owns 99%.)
Tenneco Deepwater Gathering Company (Delaware)..................................................... 100
Tenneco Delta XII Gas Co., Inc. (Delaware)......................................................... 100
Tenneco East Corporation (Delaware)................................................................ 100
Tenneco East Natural Gas L.P. (Delaware Limited Partnership)................................... 99
(Tenneco East Corporation, as Limited Partner, owns 99%; and East Tennessee
Natural Gas Company, as General Partner, owns 1%.)
Tenneco Energy Ltd. (Canada)....................................................................... 100
Tenneco Gas Australia Pty. Limited (Australia)..................................................... 100
Tenneco Gas Canada, Ltd. (Ontario)................................................................. 100
Tenneco Gas Inc. (Delaware)........................................................................ 100
Tenneco Gas Transportation Company (Delaware).................................................. 100
Tenneco Gas International Inc. (Delaware).......................................................... 100
Tenneco Gas Chile Corporation (Delaware)....................................................... 100
Tenneco Gas Services (Chile) Corporation (Delaware)............................................ 100
Tenneco Gas Transportes S.A. (Chile)....................................................... 100
Tenneco Gas South America Inc. (Delaware)...................................................... 100
Tenneco Gas Louisiana Inc. (Delaware).............................................................. 100
Martin Exploration Company (Delaware)......................................................... 100
Tenneco Gas Production Corporation (Delaware)...................................................... 100
Tenneco Gas Properties Inc. (Delaware)............................................................. 100
Tenneco Gas Services, Inc. (Delaware).............................................................. 100
Tenneco Gas Supply Corporation (Delaware).......................................................... 100
Tenneco Gas Trinidad Corporation (Delaware)........................................................ 100
Tenneco International Inc. (Delaware).............................................................. 100
Autopartes Walker, S.A. DE C.V. (Mexico)....................................................... 0.02
(Tennessee Gas Pipeline Company owns 99.92%; Tenneco Inc. owns 0.02%;
Tenneco Corporation owns 0.02%; Tenneco International Inc. owns 0.02%; and
Monroe Auto Equipment Company owns 0.02%.)
</TABLE>
12
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco International Inc. (Delaware) (continued)
<S> <C>
Case Corporation (Delaware).................................................................... 1.92%
(Common Stock: Public owns 55.32%; Tenneco Inc. owns 31.29%; Tenneco
Equipment Corporation owns 5.40%; Tenneco Equipment Holding I Company
owns 1.14%; Tenneco Equipment Holding II Company owns 0.24%; Tenneco
Equipment Holding III Company owns 0.42%; Tenneco Equipment Holding IV
Company owns 3.94%; Tenneco Equipment Holding V Company owns 0.01%;
Tenneco Equipment Holding VI Company owns 0.29%; and Tenneco International
Inc. owns 1.92%. Series A Cumulative Convertible Preferred Stock: Public owns
100%. Cumulative Convertible Second Preferred Stock: owned 100% by Case
Corporation Key Employees. The subsidiaries of Case Corporation are listed
beginning on Page 1 hereof.)
Omni-Pac GmbH (Germany)........................................................................ 1
(Tenneco International Inc. owns 1%; and Tenneco Deutschland Holdinggesellschaft
mbH owns 99%. The subsidiaries of Omni-Pac GmbH are listed on page 10 hereof.)
Omni-Pac S.A.R.L. (France)..................................................................... 97
(Tenneco International Inc. owns 97%; and Omni-Pac GmbH owns 3%.)
Tenneco Automotive Trading Company (Delaware).................................................. 100
Tenneco Corporation (Delaware)................................................................. 5.7
(Tenneco International Inc. owns 100% of the Second Preferred Stock, 5.7% of
total equity; and Tennessee Gas Pipeline Company owns 100% of the Common
Stock, 94.3% of total equity. The Subsidiaries of Tenneco Corporation are listed
beginning on page 9 hereof.)
Tenneco France Finance S.A. (France)........................................................... 0.04
(Tenneco International Inc. owns .04%; Tenneco Inc. owns 99.80%; Albright &
Wilson plc owns .04%; Tenneco International Finance Limited owns .04%;
Tenneco Corporation owns .04% and Tenneco United Kingdom Holdings Limited
owns .04%.)
Tenneco International Holding Corp. (Delaware)................................................. 70.15
(Tenneco International Inc. owns 70.15% of Common Stock and 50% of $8.00
Junior Preferred Stock; Tenneco Corporation owns 7.88% of Common Stock;
Tenneco Equipment Corporation owns 21.97% of Common Stock and 50% of $8.00
Junior Preferred Stock; MW Investors L.L.C., an unaffiliated company, owns
100% of Variable Rate Voting Participating Preferred Stock. The subsidiaries of
Tenneco International Holding Corp. are listed beginning on page 5 hereof.)
Tenneco Nederland B.V. (Netherlands)........................................................... 100
Tenneco Offshore Netherlands Company (Delaware)................................................ 100
Tenneco United Kingdom Holdings Limited (Delaware)............................................. 100
Albright & Wilson plc (United Kingdom)..................................................... 100
Albright & Wilson UK Limited (United Kingdom).......................................... 100
Albright & Wilson A.B. (Sweden).................................................... 100
Albright & Wilson A/S (Norway)..................................................... 100
Albright & Wilson Asia (China) Limited (Hong Kong)................................. 100
Albright & Wilson Asia Pacific Pte. Ltd. (Singapore)............................... 100
Albright & Wilson Asia Taiwan Limited (Taiwan)..................................... 75
(Albright & Wilson UK Limited owns 75%; and Mr. Robert Peck, an
unaffiliated individual, owns 25%.)
Albright & Wilson Asia Trading (Malaysia) Sdn Bhd (Malaysia)....................... 100
Albright & Wilson ESP Trustees Ltd. (United Kingdom)............................... 100
</TABLE>
13
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco International Inc. (Delaware) (continued)
Subsidiaries of Tenneco United Kingdom Holdings Limited (Delaware) (continued)
Subsidiaries of Albright & Wilson plc (United Kingdom) (continued)
Subsidiaries of Albright & Wilson UK Limited (United Kingdom) (continued)
<S> <C>
Albright & Wilson Chemicals (Pty), Ltd. (Australia)................................ 100%
Albright & Wilson (Australia) Limited (Australia).............................. 50
(Albright & Wilson Chemicals (Pty), Ltd. owns 50%; and Salim
Oleochemicals (SEA) Pty Ltd., an unaffiliated company, owns
50%.)
Albright & Wilson New Zealand Limited (New Zealand)........................ 100
Albright & Wilson Specialities Pty. Ltd. (Australia)........................... 100
Albright & Wilson Denmark A/S (Denmark)............................................ 100
Albright & Wilson Hellas Limited (Greece).......................................... 100
Albright & Wilson Lavera S.A.R.L. (France)......................................... 100
Albright & Wilson Lojingki Sdn Bhd (Malaysia)...................................... 50
(Albright & Wilson UK Limited owns 50%; and Lojingki Holdings
Sdn Bhd, an unaffiliated company, owns 50%.)
Albright & Wilson (Malaysia) Sdn Bhd (Malaysia).................................... 100
Albright & Wilson (Marchon) Pte. Limited (Singapore)............................... 55
(Albright & Wilson UK Limited owns 55%; and Albright & Wilson
Overseas Ltd. owns 45%.)
Albright & Wilson Oils Sdn Bhd (Malaysia).......................................... 100
Albright & Wilson Overseas Limited (United Kingdom)................................ 100
Albright & Wilson B. V. (Netherlands).......................................... 100
Albright & Wilson (Marchon) Pte. Limited (Singapore)........................... 45
(Albright & Wilson UK Limited owns 55%; and Albright &
Wilson Overseas Ltd. owns 45%.)
Albright & Wilson S.r.l. (Italy)............................................... 100
Albright & Wilson Castiglione S.r.l. (Italy)............................... 100
Albright & Wilson Espana S.A. (Spain)...................................... 100
Albright & Wilson Patrica S.r.l. (Italy)................................... 100
Albright & Wilson Saint Mihiel S.A. (France)............................... 100
Bush Boake Allen Italia SpA (Italy)........................................ 50
(Albright & Wilson S.r.l. owns 50%; and Bush Boake
Allen Ltd., an unaffiliated company, owns 50%.)
Albright & Wilson Produtos Quimicos Ltda. (Brazil)................................. 100
Albright Dentifrice Phosphates Sdn Bhd (Malaysia).................................. 100
Albright, Morarji and Pandit Limited (India)....................................... 39.9
(Albright & Wilson UK Limited owns 39.9%; and various unaffiliated
stockholders own 60.1%.)
Chemphil Albright & Wilson Corporation............................................. 40
(Albright & Wilson Limited UK owns 40%; and Chemical Industries
of Phillipines Inc., an unaffiliated company, owns 60%.)
Dai-Ichi Albright Kabushiki Kaisha (Japan)......................................... 100
Detergentes y Productos de Higiene SA (Spain)...................................... 100
P. T. Albright & Wilson Manyar (Indonesia)......................................... 50
(Albright & Wilson UK Limited owns 50%; and various unaffiliated
groups own 50%.)
Proban Limited (United Kingdom).................................................... 100
Specialty Phosphates (Malaysia) Sdn Bhd (Malaysia)................................. 51
(Albright & Wilson UK Limited owns 51%, and Omichi Seiyaku
Company KK, an unaffiliated company, owns 49%.)
</TABLE>
14
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco International Inc. (Delaware) (continued)
Subsidiaries of Tenneco United Kingdom Holdings Limited (Delaware) (continued)
Subsidiaries of Albright & Wilson plc. (United Kingdom) (continued)
Subsidiaries of Albright & Wilson UK Limited (United Kingdom) (continued)
<S> <C>
Tenneco Canada Inc. (Ontario)...................................................... 48.72%
(Albright & Wilson UK Limited owns 100% of the Class A Stock,
48.72% of total equity; and Tenneco International Holding Corp.
owns 100% of the issued and outstanding Common Stock, 51.28% of
total equity. The subsidiaries of Tenneco Canada Inc. are listed on
page 6 hereof.)
Tenneco Malros Limited (United Kingdom)............................................ 100
Tenneco Organics Limited (United Kingdom).......................................... 100
Tenneco France Finance S.A. (France)................................................... 0.04
(Albright & Wilson plc owns .04%; Tenneco Inc. owns 99.80%; Tenneco
International Inc. owns .04%; Tenneco International Finance Limited
owns .04%; Tenneco Corporation owns .04% and Tenneco United
Kingdom Holdings Limited owns .04%.)
Tenneco - Walker (U.K.) Limited (United Kingdom)....................................... 100
Tenneco West Limited (United Kingdom).................................................. 100
Thompson and Stammers Dunmow (Number 6) Limited (United Kingdom)....................... 100
Thompson and Stammers Dunmow (Number 7) Limited (United Kingdom)....................... 100
Thompson and Stammers Dunmow (Number 8) Limited (United Kingdom)....................... 100
Walker UK Ltd. (United Kingdom)........................................................ 100
J. W. Hartley (Motor Trade) Limited (United Kingdom)............................... 100
Thompson and Stammers (Dunmow) Number 5 Limited (United Kingdom)................... 100
Omni-Pac U.K. Limited (United Kingdom)..................................................... 100
Packaging Corporation of America (UK) Limited (United Kingdom)............................. 100
Polbeth Packaging Limited (Scotland)................................................... 100
Brucefield Plastics Limited (Scotland)............................................. 100
Polbeth Packaging (Corby) Limited (Scotland)....................................... 100
Tenneco Europe Limited (Delaware).......................................................... 100
Tenneco Asia Limited (United Kingdom).................................................. 100
Tenneco France Finance SA (France)......................................................... 0.04
(Tenneco United Kingdom Holdings Limited owns .04%; Tenneco Inc. owns
99.80%; Tenneco International Inc. owns .04%; Albright & Wilson plc owns
.04%; Tenneco International Finance Limited owns .04% and Tenneco
Corporation owns .04%.)
Tenneco International Finance Limited (United Kingdom)..................................... 100
Tenneco France Finance S.A. (France)................................................... 0.04
(Tenneco International Finance Limited owns .04%; Tenneco Inc. owns
99.80%; Tenneco International Inc. owns .04%; Albright & Wilson plc
owns .04%; Tenneco Corporation owns .04% and Tenneco United
Kingdom Holdings Limited owns .04%.)
Tenneco International Finance B.V. (Netherlands)....................................... 100
Tenneco Management (Europe) Limited (United Kingdom)................................... 100
Walker Limited (United Kingdom)................................................................ 100
Gillet Pressings Cardiff Limited (United Kingdom).......................................... 100
Gillet Exhaust Manufacturing Limited (United Kingdom)...................................... 100
</TABLE>
15
<PAGE>
TENNECO INC. AND SUBSIDIARIES AND AFFILIATES
As of December 31, 1994
<TABLE>
Subsidiaries of Tenneco Inc. (continued)
Subsidiaries of Tennessee Gas Pipeline Company (continued)
Subsidiaries of Tenneco International Inc. (Delaware) (continued)
Subsidiaries of Walker Limited (United Kingdom) (continued)
<S> <C>
Gillet Torsmaskiner UK Limited (United Kingdom)............................................ 50%
(Walker Limited owns 100 A Ordinary Shares, 50% of total equity; and AB
Torsmaskiner, an unaffiliated company, owns 100 B Ordinary Shares, 50% of
total equity.)
Exhaust Systems Technology Limited (United Kingdom).................................... 99.99
(Gillet Torsmaskiner UK Limited owns 99.99%; and Heinrich Gillet
GmbH & Co. KG & AB Torsmaskiner, an unaffiliated company, owns
0.01%.)
Walker Europe, Inc. (Delaware)................................................................. 100
Walker Norge A/S (Norway)...................................................................... 100
Tenneco International Marketing & Sourcing, Inc. (Delaware)........................................ 100
Tenneco Liquids Corporation (Delaware)............................................................. 100
Tenneco Marketing Services Company (Delaware)...................................................... 100
Tenneco Mobile Bay Gathering Company (Delaware).................................................... 100
Tenneco MTBE, Inc. (Delaware)...................................................................... 100
Tenneco Midwest Corporation (Delaware)............................................................. 100
Tenneco Midwest Natural Gas L.P. (Delaware Limited Partnership)................................ 99
(Tenneco Midwest Corporation, as Limited Partner, owns 99%; and Midwestern
Gas Transmission Company, as General Partner, owns 1%.)
Tenneco Pittsfield Corporation (Delaware).......................................................... 100
Tenneco Portland Corporation (Delaware)............................................................ 100
Tenneco Realty, Inc. (Delaware).................................................................... 100
TRI Realty, Inc. (Texas)....................................................................... 100
Tennchase, Inc. (Texas)........................................................................ 100
Tenneco Shale Oil Company (Delaware)............................................................... 100
Tenneco SNG Inc. (Delaware)........................................................................ 100
Tenneco Trinidad LNG, Inc. (Delaware).............................................................. 100
Tenneco Ventures Corporation (Delaware)............................................................ 100
Tenneco Western Market Center Corporation (Delaware)............................................... 100
The Western Market Center Joint Venture (Joint Venture)........................................ 50
(Tenneco Western Market Center Corporation owns 50%; Entech Gas Ventures,
Inc., an unaffiliated company, owns 15%; and Questar WMC Corporation, an
unaffiliated company, owns 35%.)
Tenneco Western Market Center Service Corporation (Delaware)....................................... 100
TennEcon Services, Inc. (Delaware)................................................................. 100
Tennessee Gas Transmission Company (Delaware)...................................................... 100
Tennessee/New England Pipeline Company (Delaware).................................................. 100
Tennessee Ozark Gas Company (Delaware)............................................................. 100
Tennessee Storage Company (Delaware)............................................................... 100
Tennessee Trailblazer Gas Company (Delaware)....................................................... 100
Ten Ten Parking Garage Inc. (Delaware)............................................................. 100
The Fontanelle Corporation (Louisiana)............................................................. 100
The F and E Oyster Partnership (Louisiana Partnership)......................................... 64
(The Fontanelle Corporation owns 64%, as General Partner; and Expedite Oyster,
Inc., an unaffiliated company, owns 36% as General Partner.)
The LaChute Corporation (Louisiana)................................................................ 100
Walker Electronic Mufflers, Inc. (Delaware)........................................................ 100
Walker Manufacturing Company (Delaware)............................................................ 100
Ced's Inc. (Illinois).......................................................................... 100
</TABLE>
16
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 16, 1995, included in the Annual Report
of Tenneco Inc. on Form 10-K for the year ended December 31, 1994, into the
following Registration Statements previously filed with the Securities and
Exchange Commission:
<TABLE>
<CAPTION>
REGISTRATION NO. FORM SECURITIES REGISTERED
------------------ ---- -------------------------------------
<S> <C> <C>
2-78521 S-8 Common Stock, par value $5 per share,
of Tenneco Inc. (formerly Tenneco
Holdings, Inc.) ("Common Stock")
issuable under the Tenneco Inc. Key
Employee Stock Option Plan.
33-18788 S-3 Common Stock of Tenneco Inc. issuable
upon conversion of 10 percent
Sterling/Dollar Convertible Unsecured
Loan Stock 1991/95 of Tennessee Gas
Pipeline Company (formerly Tenneco
Inc.).
33-46579 S-8 5,000,000 shares of Common Stock of
Tenneco Inc. offered in connection
with the Tenneco Inc. 1992 Employee
Stock Purchase Plan.
33-52595 S-3 1,000,000 shares of Common Stock of
Tenneco Inc. offered in connection
with the Dividend Reinvestment and
Stock Purchase Plan.
33-54593 S-8 Packaging Corporation of America
401(k) Savings Plan, contributions
thereunder and Common Stock of
Tenneco Inc. offered thereunder.
33-54597 S-8 Newport News Shipbuilding Savings
(401(k)) Plan for Union Eligible
Employees, contributions thereunder
and Common Stock of Tenneco Inc.
offered thereunder.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGISTRATION NO. FORM SECURITIES REGISTERED
------------------ ---- ------------------------------------
<S> <C> <C>
33-54595 S-8 Tenneco Automotive Hourly Employees
Savings Plan, contributions
thereunder and Common Stock of
Tenneco Inc. offered thereunder.
33-54184 S-3 $500,000,000 aggregate principal
amount of Debt Securities of
Tenneco Inc. offered pursuant to
Rule 415 of the General Rules and
Regulations under the Securities
Act of 1933, as amended (of which
$400,000,000 has been issued).
33-55622 S-3 2,800,000 shares of Common Stock of
Tenneco Inc. offered to the trustee
of the Tenneco Inc. General Employee
Benefit Trust.
33-55720 S-3 550,000 shares of Common Stock of
Tenneco Inc. offered in connection
with the merger of EnTrade
Corporation with a subsidiary of
Tenneco Inc.
33-54599 S-8 Tenneco Inc. Thrift Plan,
contributions thereunder and Common
Stock of Tenneco Inc. offered
thereunder.
</TABLE>
ARTHUR ANDERSEN LLP
Houston, Texas
March 29, 1995
<PAGE>
Exhibit 24
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ Mark Andrews
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ W.M Blumenthal
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ M. Kathryn Eickhoff
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ Peter T. Flawn
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ Henry U. Harris, Jr.
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ Belton K. Johnson
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 20th
day of March, A.D. 1995.
/s/ John B. McCoy
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ Joseph J. Sisco
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 14th
day of March, A.D. 1995.
/s/ W. L. Weiss
------------------------------
<PAGE>
TENNECO INC.
POWER OF ATTORNEY
TENNECO INC. ANNUAL REPORT ON FORM 10-K
The undersigned, in his capacity as a Director of Tenneco Inc., does hereby
appoint T. R. Tetzlaff, M. W. Meyer and K. A. Stewart, and each of them,
severally, his true and lawful attorneys, or attorney, to execute in his name,
place and stead, in his capacity as a Director of said Company, an Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and any and all
amendments and post-effective amendments to said Annual Report, and all
instruments necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission. Each of said attorneys shall
have the power to act hereunder with or without the other of said attorneys and
shall have full power and authority to do and perform, in the name and on behalf
of the undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys and each of them.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this 29th
day of March, A.D. 1995.
/s/ Clifton R. Wharton, Jr.
------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Tenneco Inc. and Consolidated Subsidiaries Financial Statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 405
<SECURITIES> 0
<RECEIVABLES> 1,535
<ALLOWANCES> 0
<INVENTORY> 910
<CURRENT-ASSETS> 3,895
<PP&E> 11,108
<DEPRECIATION> 5,881
<TOTAL-ASSETS> 12,542
<CURRENT-LIABILITIES> 3,054
<BONDS> 3,570
<COMMON> 957
147
0
<OTHER-SE> 1,943
<TOTAL-LIABILITY-AND-EQUITY> 12,542
<SALES> 12,174
<TOTAL-REVENUES> 12,174
<CGS> 9,373
<TOTAL-COSTS> 9,373
<OTHER-EXPENSES> 1,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 407
<INCOME-PRETAX> 972
<INCOME-TAX> 301
<INCOME-CONTINUING> 641
<DISCONTINUED> (189)
<EXTRAORDINARY> (5)
<CHANGES> (39)
<NET-INCOME> 408
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.20
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Tenneco Inc. and Consolidated Subsidiaries Financial Statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 492
<SECURITIES> 0
<RECEIVABLES> 3,255
<ALLOWANCES> 0
<INVENTORY> 1,720
<CURRENT-ASSETS> 6,525
<PP&E> 12,579
<DEPRECIATION> 6,672
<TOTAL-ASSETS> 16,310
<CURRENT-LIABILITIES> 5,218
<BONDS> 4,616
<COMMON> 870
146
9
<OTHER-SE> 2,104
<TOTAL-LIABILITY-AND-EQUITY> 16,310
<SALES> 9,356
<TOTAL-REVENUES> 9,356
<CGS> 7,231
<TOTAL-COSTS> 7,231
<OTHER-EXPENSES> 1,256
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306
<INCOME-PRETAX> 710
<INCOME-TAX> 266
<INCOME-CONTINUING> 432
<DISCONTINUED> (12)
<EXTRAORDINARY> (5)
<CHANGES> (39)
<NET-INCOME> 376
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 2.04
</TABLE>
