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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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January 31, 2008 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant o |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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o Definitive Proxy Statement |
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þ Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Tenneco Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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| SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
The following are materials that will be given to certain executive
officers of Tenneco Inc. on or about April 10, 2006 for their use in
personal solicitations of proxies in connection with Tenneco’s
2006 Annual Meeting of Stockholders.
| The foregoing presentation contains forward-looking statements that involve risks and uncertainties
which could cause the company’s plans,actions and results to differ materially from its current
expectations.Such risks and uncertainties include,but are not limited to, the following: (i) the
general political, economic and competitive conditions in markets and countries where the company
operates, including currency fluctuations; (ii) governmental actions, including the ability to
receive regulatory approvals and the timing of such approvals; (iii) changes in capital
availability or costs, including increases in the company’s costs of borrowing, the amount of the
company’s debt, the ability of the company to access capital markets and the credit ratings of the
company’s debt; (iv) changes in automotive manufacturers’ production rates and their actual and
forecasted requirements for the company’s products; (v) the overall highly competitive nature of
the automotive parts industry; (vi) the company’s ability to realize the sales represented by its
book of business which is based on a number of factors,including,but not limited to,the original
equipment manufacturers’ programs that have been formally awarded as well as programs where the
company is highly confident that it will be awarded business based on informal customer
indications,the company’s status as a supplier on the existing program,and the relationship with
the customer,and anticipated pricing for the applicable program over its life; (vii) the cyclical
nature of the global vehicular industry, including the performance of the global aftermarket
sector; (viii) the cost and outcome of existing and any future legal proceedings, and compliance
with changes in regulations; (ix) workforce factors such as strikes or labor interruptions; (x)
material substitutions and increases in the costs of raw materials; (xi) the company’s continued
success in cost reduction and cash management programs; (xii) the company’s ability to develop and
profitably commercialize new products and technologies, and the acceptance of such new products and
technologies by the company’s customers and the market; (xiii) further changes in the distribution
channels for the company’s aftermarket products, further consolidations among automotive parts
customers and suppliers, and product warranty costs; (xiv) changes by the Financial Accounting
Standards Board or other accounting regulatory bodies of authoritative generally accepted
accounting principles or policies; (xv) acts of war, riots or terrorism, including, but not limited
to the events taking place in the Middle East; and (xvi) the timing and occurrence (or
non-occurrence) of transactions and events which may be subject to circumstances beyond the control
of the company. |
| CORPORATE GOVERNANCE
ISS’s Corporate Governance Quotient TEN
Board composed of majority of independent directors 9 of 11independent
Full Board elected annually
Compensation/Nominating/Governance Committee
composed entirely of independent directors
Governance guidelines are publicly disclosed
Audit Committee composed entirely of independent
directors
Executives and directors subject to stock
ownership guidelines
All independent directors meet in executive
session at each meeting
Designated lead independent director
Board can appoint independent advisors |
| As of April1, 2006, Tenneco Inc.’s ISS Corporate Governance Quotient was better than that
of 99.1% of Russell 3000 companies and 96.1% of Automobiles & Components companies |
| Elect 11 Directors to Board of Directors |
Ratify the appointment of Deloitte & Touche LLP as
independent public accountants for 2006 |
| Approve 2006 Long-Term Incentive Plan |
| SUMMARY: 2006 LONG-TERM INCENTIVE PLAN |
| 2006 LTIP provides for the issuance of 2,000,000 shares, including 500,000 “full
value“awards (e.g.restricted stock) |
| The 2006 LTIP will also include any shares remaining under the 2002 LTIP at the time of
approval of the 2006 LTIP (231,700 shares as of March 14,2006) |
| Substantially identical to 2002 LTIP that was previously approved by Tenneco’s
stockholders |
| SUMMARY: 2006 LONG-TERM INCENTIVE PLAN |
| Options issued under the Plan may not be repriced, replaced or regranted through
cancellation or by lowering the exercise price of a previously granted option |
| No material revision of the 2006 LTIP could be made without obtaining stockholder
approval |
| Restricted stock granted to employees could not fully vest sooner than three years after
the grant |
| CALCULATION OF OVERHANG
As of March14,2006: |
| - 4,537,138 shares of common stock were reserved for outstanding options under the 2002 LTIP and prior plans |
| - 737,475 shares of restricted stock were outstanding under the 2002 LTIP and prior plans |
| - 231,700 shares remained available for grant under the 2002 LTIP |
| - 45,169,180 shares of Tenneco common stock were outstanding |
| Overhang was 11.0%,calculated as follows: |
| 4,537,138 + 737,475 + 231,700 |
| 45,169,180 + 4,537,138 + 231,700 |
| Giving effect to the approval of the 2006 LTIP,the overhang would be14.5%,calculated as
follows: |
| 4,537,138 + 737,475 + 231,700 + 2,000,000 |
| 45,169,180 + 4,537,138 + 231,700 + 2,000,000 |
| LTIP: PROMOTES LONG-TERM SUCCESS |
| Attract and retain top caliber employees through competitive compensation |
| Continue to align existing and future employees’ interests with those of Tenneco’s other
stockholders |
| - compensation based on Tenneco’s common stock performance |
| Top 800 managers participating in LTIP |
| GLOBAL SUPPLIER OF EMISSION AND RIDE CONTROL SYSTEMS
Revenues (Millions) $4,441 $4,213
Total Emission Control/
62/38 63/37
Ride Control Balance
Original Equipment/
77/23 76/24 |
| “EBIT” is income before
interest expense, taxes and
minority interest. |
| BALANCE — A KEY ADVANTAGE
63% of total 2005 sales to customers other than the Big 3
- 20% of North America OE revenues from Japanese customers |
| 54% of 2005 revenues generated outside of North America |
| Exposure to a variety of markets |
| - light vehicle,commercial & specialty vehicle,automotive aftermarket |
| Innovative technologies across several product lines |
| - ride control,emission control,elastomers |
| Products on a diversified mix of more than 200 platforms |
| LEADING MARKET POSITIONS — 2004
Regions / |
| Product
Category Market
Position*
Key Competitors** |
| Aftermarket North America #1 ArvinMeritor,Goerlich |
| Emission Control Europe ** #1 ArvinMeritor,Bosal |
| Aftermarket North America #1 ArvinMeritor,Kayaba |
| Ride Control Europe ** #1 ZF Sachs,Kayaba |
| Original Equipment North America #2 ArvinMeritor,Faurecia |
| Emission Control Europe #1 Faurecia,ArvinMeritor,Eberspächer |
| Original Equipment North America #2 Delphi,ZF Sachs |
| Ride Control Europe #2 ZF Sachs,Kayaba |
| Top Customers as a % of 2005 Revenues |
| EC — Emission Control RC — Ride Control EL — Elastomers |
| SIX YEARS OF PROGRESS
2005 2000 |
| Revenues $4.441BB $3.528 BB
Adjusted SGA&E (% of Sales) 10.3% 13.0%
Reported SGA&E (% of Sales) 10.5% 14.0%
Adjusted EBITDA $414MM $338 MM
Reported EBITDA $392MM $273 MM
Adjusted EPS $ 1.52 $ 0.14
Reported EPS $ 1.29 $(1.16)
Working Capital (% of Sales) 2.2% 10.6%
CAPEX (% of Sales) 3.2% 4.1%
Net Debt/Adjusted EBITDA 3.0x 4.4x
Stock Price (as of December 31) $19.61 $ 3.00 |
| Reconciliation of non-GAAP adjustments on slides 20- 23. |
| PRICE PERFORMANCE — TEN VS.INDICES |
| 2000 — 2005 Indexed Performance |
| STRATEGIC INITIATIVES — INVEST IN GROWING MARKETS |
| •
Emissions technologies for
environmental mandates |
| • Advanced technology for safety ratings
• China for rapid growth |
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Emerging OEMs for enhanced
customer mix |
| •
Aftermarket service products
for incremental sales |
| NEW DIESEL BUSINESSSUPPORTS GROWTH IN 2007 |
| • F-250/350 N. America Diesel & Gasoline EC • GM Duramax N. America Diesel EC • OEM #1 Light Duty
N. America Diesel EC • International Truck N. America Medium Duty |
| Diesel EC • Toyota Tundra N. America EC components • OEM #2 Crossover N. America EC complete system
• OEM #3 Europe Electronic shocks • Audi A6 & A6 Avant Europe Electronic shocks |
| *See slide 24 for information regarding the OE revenue estimate. |
| Balanced mix of customers,geographies,markets,products,platforms Leading Tier1OE
supplier positioned on top selling platforms No.1 aftermarket supplier driven by
leading brands Advanced technology leadership Proven strategies for business
development |
| Demonstrated commitment to balance sheet strength and financial stability |
| Experienced management team |
| SIX YEARS OF PROGRESS
RECONCILIATION OF NON-GAAP RESULTS
EBITDA
$ Millions,Unaudited
Years Ended December 31
2005 2000 |
| Net Income (loss) $58 $(41)
Minority interest 2 2
Income tax expense (benefit) 25 (27)
Interest expenses,net of interest capitalized 130 188
Depreciation and amoritzation of other
intangibles 177 151
Total EBITDA $392 $273 |
| EBITDA represents income before interest expense,income taxes,minority interest and depreciation
and amortization. EBITDA is not a calculation based upon generally
accepted accounting principles. The amounts included in the EBITDA calculation,however,are derived
from amounts included in the historical statements of income. In
addition,EBITDA should not be considered as an alternative to net income or operating income as an
indicator of the company’s operating performance,or as an alternative
to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA because it
regularly reviews EBITDA as a measure of the company’s performance. In
addition,Tenneco believes that its security holders utilize and analyze its EBITDA for similar
purposes. Tenneco also believes EBITDA assists investors in comparing a
company’s performance on a consistent basis without regard to depreciation and amortization,which
can vary significantly depending upon many factors. However,the
EBITDA measure presented may not always be comparable to similarly titled measures reported by
other companies due to differences in the components of the calculation.
4477-CORP-4/06 (20)
20 |
| SIX YEARS OF PROGRESS
RECONCILIATION OF NON-GAAP RESULTS
$ Millions,Unaudited
SGA&E EBITDA EPS
2005 2000 2005 2000 2005 2000 |
| Financial Measures $468 $496 $392 $273 $1.29 $(1.16)
Adjustments (reflect
non-GAAP(1) measures):
Restructuring and restructuring
related expenses (2) (38) 12 61 0.17 1.21
New aftermarket customer
changeover costs (10) — 10 — 0.15 -
Consulting fees indexed
to stock price — — — — — -
Tax adjustments — — — — (0.09) -
Cost related to refinancing — — — — — -
Other non-operational items — — — 4 — 0.07
Extraordinary loss — — — — — 0.02
Non-GAAP financial
measures(2)
$456 $458 $414 $338 $1.52 $ 0.14 |
| (1) Generally Accepted Accounting Principles |
| (2) Tenneco presents the above reconciliation of non-GAAP results in order to reflect the results
for the full year 2005 and the full year 2000 in a manner that allows a better under- |
| standing of the results of operational activities separate from the financial impact of decisions
made for the long-term benefit of the company. Adjustments similar to the ones |
| reflected above have been recorded in earlier periods,and similar types of adjustments can
reasonably be expected to be recorded in future periods. Using only the non-GAAP |
| earnings measure to analyze earnings would have material limitations because its calculation is
based on the subjective determinations of management regarding the nature and |
| classification of events and circumstances that investors may find material. Management compensates
for these limitations by utilizing both GAAP and non-GAAP earnings |
| measures reflected above to understand and analyze the results of the business. The company
believes investors find the non-GAAP information helpful in understanding the |
| ongoing performance of operations separate from items that may have a disproportionate positive or
negative impact on the company’s financial results in any particular period. |
| SIX YEARS OF PROGRESS
RECONCILIATION OF NON-GAAP RESULTS
Working Capital (% of Sales) $ Millions,Unaudited
Years Ended December 31
2005 2000 |
| Current Assets
Receivables — Customer notes and accounts $ 515 $ 457
Receivables — Other 28 30
Inventories 360 438
Deferred income taxes 43 76
Prepayments and other 110 89
$1,056 $1,090
Current Liabilities
Trade payables $ 651 $ 464
Accrued taxes 31 16
Accrued interest 38 35
Accrued liabilities 208 134
Other accruals 29 68
$ 957 $717
Working Capital (Current assets less current liabilities) $ 99 $373
Net sales and operating revenues $4,441 $3,528
Working capital as percent of sales 2.2% 10.6% |
* For purposes of computing working capital as a percentage of sales,
we exclude cash and the current portion of |
| long term debt from the calculation. We exclude these items because we manage our working capital
activity through |
| cash and short term debt. To include these items in the calculation would distort actual working
capital changes. |
| SIX YEARS OF PROGRESS
RECONCILIATION OF NON-GAAP RESULTS
Net Debt/Adjusted EBITDA
$ Millions,Unaudited
Years Ended December 31
2005 2000 |
| Total debt $1,378 $1,527
Cash and cash equivalents 141 35
Debt net of cash balances 1,237 1,492
Adjusted EBITDA $414 $338
Ratio of net debt to adjusted EBITDA 3.0x 4.4x |
| * We review net debt as an indicator of our credit position and progress toward reducing our
leverage. |
| GLOBAL OE REVENUE ESTIMATE |
| Tenneco’s global OE revenue estimate is based on original equipment manufacturers’ programs
that have been formally awarded to the company; programs where the company is highly
confident that it will be awarded business based on informal customer indications consistent
with past practices,Tenneco’s status as supplier for the existing program and its
relationship with the customer; and the actual original equipment revenues achieved by the
company for each of the last several years compared to the amount of those revenues that the
company estimated it would generate at the beginning of each year. The company’s revenue
estimate is subject to increase or decrease due to changes in customer requirements,
customer and consumer preferences, and the number of vehicles actually produced by the
company’s customers. The company’s revenue estimate is as of January 2006 and the company
does not intend to update the estimate due to these changes. In addition, the company’s
revenue estimate is based on its anticipated pricing for each applicable program over its
life. However, the company is under continuing pricing pressures from its OE customers. The
company does not intend to update the amounts shown above for any price changes. Finally,
for the company’s foreign operations, its revenue estimate assumes a fixed foreign currency
value. This value is used to translate foreign business to the US dollar. Currency in the
company’s foreign operations is subject to fluctuation based on the economic conditions in
each of its foreign operations. The company does not intend to update its revenue estimate
due to these fluctuations. See “Cautionary Statement for Purposes of the ‘Safe Harbor’
Provisions of the Private Securities Litigation Reform Act of 1995” and “Risk Factors” in
the company’s Annual Report on Form 10-K for the year ended December 31, 2005 for additional
information regarding the company’s revenue estimate. |
