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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
APRIL 12, 1999
(Date of earliest event reported)
TENNECO INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction
of Incorporation)
1-12387
(Commission File Number)
76-0515284
(IRS Employer
Identification Number)
1275 KING STREET, GREENWICH, CONNECTICUT 06831
(Address of Principal Executive Offices) (Zip Code)
(203) 863-1000
(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 12, 1999, pursuant to a Contribution Agreement (the "Contribution
Agreement") dated as of January 25, 1999, among Tenneco Packaging Inc., a wholly
owned subsidiary of Tenneco Inc. ("TPI"), PCA Holdings LLC, an affiliate of
Madison Dearborn Partners, Inc. ("PCA Holdings") and Packaging Corporation of
America, TPI completed the contribution of the containerboard assets of its
Paperboard Packaging business to a new joint venture with PCA Holdings in
exchange for cash and debt assumption totaling approximately $2.0 billion and a
45% common equity interest in the joint venture, which interest is valued at
approximately $200 million. The consideration received in the transaction was
determined through arms-length negotiations with Madison Dearborn Partners, Inc.
The containerboard assets represent substantially all of the assets of the
Paperboard Packaging segment and include four mills, 67 corrugated products
facilities and an ownership or controlling interest in approximately 950,000
acres of timberland. Paperboard Packaging's folding carton business was not
included in the transaction. The new joint venture entity (called Packaging
Corporation of America) will be headed by Paul T. Stecko, serving as its
chairman and chief executive officer. Upon closing of the transaction, Mr.
Stecko resigned his position as president and chief operating officer of Tenneco
Inc., but will continue to serve on Tenneco Inc.'s Board of Directors.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Financial Statements of Tenneco
Inc. and Consolidated Subsidiaries ("Tenneco") illustrate the effects of the
contribution of the containerboard assets of Tenneco's Paperboard Packaging
segment to a new joint venture with PCA Holdings LLC, an affiliate of Madison
Dearborn Partners, Inc. ("PCA Holdings"). The following events occurred prior to
or as a part of the transaction: (i) Tenneco Packaging Inc., a wholly owned
subsidiary of Tenneco Inc. ("TPI"), borrowed $1,760 million; (ii) TPI used
$1,108 million of the debt proceeds to acquire containerboard mill and
timberland assets previously used by the containerboard business pursuant to
operating leases; (iii) TPI used approximately $150 million of the debt proceeds
to purchase containerboard business accounts receivable that had been sold to a
third party; and (iv) TPI contributed the containerboard assets, subject to the
new indebtedness and the existing containerboard business liabilities, to the
joint venture with PCA Holdings in exchange for $247 million in cash and a 45%
common equity interest in the venture valued at approximately $200 million.
Following the completion of the transaction, TPI remitted the net cash proceeds
of approximately $720 million to Tenneco Inc. Tenneco Inc. used the proceeds to
retire short-term debt.
The Unaudited Pro Forma Condensed Balance Sheet has been prepared as if
such events and transactions occurred on December 31, 1998. The Unaudited Pro
Forma Condensed Statement of Income has been prepared as if such events and
transactions occurred as of January 1, 1998.
The Unaudited Pro Forma Condensed Financial Statements should be read in
conjunction with the historical financial statements of Tenneco included in
Tenneco's Annual Report on Form 10-K for the year ended December 31, 1998. The
Unaudited Pro Forma Condensed Financial Statements are not necessarily
indicative of actual operating results or financial position had the events and
transactions reflected therein occurred as of the dates indicated above, nor do
they purport to indicate operating results or financial position which may be
attained in the future.
The pro forma adjustments, as described in the accompanying Notes to the
Unaudited Pro Forma Condensed Financial Statements, are based on available
information and certain assumptions that management believes are reasonable.
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1998
(MILLIONS)
PRO FORMA ADJUSTMENTS
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CONSIDERATION,
CONTRIBUTION USE OF
TENNECO OF PROCEEDS, CONSOLIDATED
AS FINANCING CONTAINERBOARD AND OTHER TENNECO
ASSETS REPORTED TRANSACTIONS (D) ADJUSTMENTS PRO FORMA
------ -------- ------------ -------------- -------------- ------------
Current assets:
Cash and temporary cash
investments................. $ 36 $ 473(c) $ -- $ 247(e) $ 36
(720)(g)
Receivables.................... 864 150(b) (152) -- 862
Inventories.................... 988 -- (147) -- 841
Other current assets........... 269 -- (29) (37)(j) 203
------ ------ ------- ------ ------
Total current assets... 2,157 623 (328) (510) 1,942
Plant, property, and equipment,
net............................ 3,628 1,108(b) (2,072) -- 2,664
Investment in PCA................ -- -- -- 194(f) 194
Goodwill and intangibles, net.... 1,613 -- (62) -- 1,551
Other assets and deferred
charges........................ 1,393 -- (210) (27)(i) 1,156
------ ------ ------- ------ ------
Total assets........... $8,791 $1,731 $(2,672) $ (343) $7,507
====== ====== ======= ====== ======
LIABILITIES AND SHAREOWNERS'
EQUITY
Current liabilities:
Short-term debt (including
current maturities on long
term debt).................. $1,071 $ -- $ -- $ (720)(g) $ 374
23(h)
Trade payables................. 701 (5)(c) (104) -- 592
Other current liabilities...... 615 -- (66) 35(h) 584
------ ------ ------- ------ ------
Total current
liabilities.......... 2,387 (5) (170) (662) 1,550
Long-term debt................... 2,360 1,760(a) (1,760) -- 2,343
(17)(c)
Deferred income taxes............ 649 -- (4) (154)(j) 491
Other liabilities and deferred
credits........................ 470 -- (105) -- 365
Minority interest................ 421 -- -- -- 421
Shareowners' equity.............. 2,504 (7)(c) (633) 473(k) 2,337
------ ------ ------- ------ ------
Total liabilities and
shareowners'
equity............... $8,791 $1,731 $(2,672) $ (343) $7,507
====== ====== ======= ====== ======
See the accompanying Notes to Unaudited Pro Forma Condensed Financial
Statements.
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS
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CONTRIBUTION CONSIDERATION,
TENNECO OF USE OF PROCEEDS, CONSOLIDATED
AS FINANCING CONTAINERBOARD AND OTHER TENNECO
REPORTED TRANSACTIONS (L) ADJUSTMENTS PRO FORMA(P)
-------- ------------ -------------- ---------------- ------------
REVENUES
Net sales and operating
revenues................... $ 7,597 $ -- $(1,483) $ -- $ 6,114
Other income, net............. 8 -- (13) 8(m) 3
----------- ---- ------- ------ -----------
7,605 -- (1,496) 8 6,117
----------- ---- ------- ------ -----------
COSTS AND EXPENSES:
Cost of sales (exclusive of
depreciation shown
below)..................... 5,344 -- (1,096) -- 4,248
Engineering, research, and
development................ 66 -- (5) -- 61
Selling, general, and
administrative............. 1,106 -- (171) -- 935
Depreciation, depletion, and
amortization............... 448 -- (97) -- 351
----------- ---- ------- ------ -----------
6,964 -- (1,369) -- 5,595
----------- ---- ------- ------ -----------
INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES AND MINORITY
INTEREST...................... 641 -- (127) 8 522
INTEREST EXPENSE................ 240 -- (3) (40)(n) 197
INCOME TAX EXPENSE.............. 116 -- (50) 19(o) 85
MINORITY INTEREST............... 30 -- -- -- 30
----------- ---- ------- ------ -----------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS
APPLICABLE TO COMMON STOCK.... $ 255 $ -- $ (74) $ 29 $ 210
=========== ==== ======= ====== ===========
EARNINGS PER SHARE
Average shares of common
stock --
Basic......................... 168,505,573 168,505,573
Diluted....................... 168,834,531 168,834,531
Earnings from continuing
operations per share of common
stock --
Basic......................... $ 1.52 $ 1.25
Diluted....................... $ 1.51 $ 1.24
See the accompanying Notes to Unaudited Pro Forma Condensed Financial
Statements.
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TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(a) To reflect borrowings of $1,760 million by TPI.
(b) To reflect use of the debt proceeds to: (i) acquire containerboard mill and
timberland assets previously used by the containerboard business pursuant to
operating leases; and (ii) purchase containerboard business accounts
receivable which had been sold to a third party.
(c) To reflect the amount paid by Tenneco to retire certain debt of the
containerboard business. As a result of this debt extinguishment, Tenneco
incurred an after-tax extraordinary loss of approximately $7 million that is
not reflected in the Unaudited Pro Forma Condensed Statement of Income due
its non-recurring impact. Remaining proceeds from the borrowings following
asset acquisition and debt retirement are reflected in cash.
(d) To reflect the contribution of the containerboard assets of Tenneco's
Paperboard Packaging business, subject to the new indebtedness and the
containerboard business liabilities, to the new joint venture with PCA
Holdings. The contribution and assumption of liabilities is subject to a
post-closing adjustment based on the net working capital of the
containerboard business as of the contribution date.
(e) To reflect cash consideration of $247 million received for TPI's
contribution of the containerboard assets, subject to the new indebtedness
and containerboard business liabilities.
(f) To reflect the consideration received in the form of a 45% common equity
interest in the new joint venture formed with PCA Holdings.
(g) To reflect the use of cash proceeds to pay down short-term corporate debt.
(h) To reflect the estimated legal, investment banking, and other costs paid and
incurred by Tenneco in connection with the transaction and liabilities
retained by Tenneco.
(i) To reflect certain intangible assets related to the containerboard business
not contributed to the new joint venture that were no longer realizable as a
result of the transaction.
(j) To reflect the adjustment to deferred taxes resulting from the transaction.
(k) To reflect the impact on shareowners' equity resulting from the transaction.
(l) To reflect the adjustment to Tenneco's results of operations for the
contribution of the containerboard business assets, subject to the
containerboard business liabilities, to the new joint venture formed with
PCA Holdings.
(m) To reflect Tenneco's 45% common equity interest in the results of operations
of the joint venture.
(n) To reflect the adjustment to interest expense from the reduction of
short-term corporate debt using cash consideration from the transactions.
(o) To reflect the income tax expense effects of pro forma adjustments at an
assumed statutory tax rate of 40%.
(p) The pre-tax loss of approximately $290 million, $180 million after-tax or
$1.07 per basic and diluted share resulting from the sale of the
containerboard business assets, subject to the containerboard business
liabilities, has been excluded from the Unaudited Pro Forma Condensed
Statement of Income due to its non-recurring impact.
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(c) EXHIBITS. The following exhibits are filed with this Report
on Form 8-K (exhibits designated by an asterisk are filed
with the Report; the other exhibit is incorporated by
reference):
10.30 Contribution Agreement (the "Contribution Agreement"), dated
as of January 25, 1999, among Tenneco Packaging Inc., PCA
Holdings LLC and Packaging Corporation of America
(incorporated herein by reference to Exhibit 10.30 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998, File No. 1-12387).
*10.31 Letter Agreement (the "Letter Agreement"), dated as of April
12, 1999 among Tenneco Packaging Inc., PCA Holdings LLC and
Packaging Corporation of America, amending the Contribution
Agreement.
*10.32 Stockholders Agreement, as amended, dated as of April 12,
1999, among Tenneco Packaging Inc., PCA Holdings LLC and
Packaging Corporation of America.
*10.33 Registration Rights Agreement, as amended, dated as of April
12, 1999, among Tenneco Packaging Inc., PCA Holdings LLC and
Packaging Corporation of America.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Tenneco Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TENNECO INC.
By: /s/ Robert T. Blakely
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Robert T. Blakely
Executive Vice President and
Chief Financial Officer
April 27, 1999
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EXHIBIT INDEX
The following exhibits are filed with this Report on Form 8-K (exhibits
designated by an asterisk are filed with the Report; the other exhibit is
incorporated by reference):
EXHIBIT DESCRIPTION
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10.30 Contribution Agreement (the "Contribution Agreement"), dated
as of January 25, 1999, among Tenneco Packaging Inc., PCA
Holdings LLC and Packaging Corporation of America
(incorporated herein by reference to Exhibit 10.30 of
Tenneco Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998, File No. 1-12387).
*10.31 Letter Agreement (the "Letter Agreement"), dated as of April
12, 1999 among Tenneco Packaging Inc., PCA Holdings LLC and
Packaging Corporation of America, amending the Contribution
Agreement.
*10.32 Stockholders Agreement, as amended, dated as of April 12,
1999, among Tenneco Packaging Inc., PCA Holdings LLC and
Packaging Corporation of America.
*10.33 Registration Rights Agreement, as amended, dated as of April
12, 1999, among Tenneco Packaging Inc., PCA Holdings LLC and
Packaging Corporation of America.
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