Common Stock

12 Months Ended

Dec. 31, 2011

Common Stock [Abstract]

Common Stock

8. Common Stock

We have authorized 135 million shares ($0.01 par value) of common stock, of which 62,101,335 shares and 61,541,760 shares were issued at December 31, 2011 and 2010, respectively. We held 1,694,692 and 1,294,692 shares of treasury stock at December 31, 2011 and 2010, respectively.

Equity Plans — In December 1996, we adopted the 1996 Stock Ownership Plan, which permitted the granting of a variety of awards, including common stock, restricted stock, performance units, stock equivalent units, stock appreciation rights (“SARs”) and stock options to our directors, officers, employees and consultants. The 1996 plan, which terminated as to new awards on December 31, 2001, was renamed the “Stock Ownership Plan.” In December 1999, we adopted the Supplemental Stock Ownership Plan, which permitted the granting of a variety of similar awards to our directors, officers, employees and consultants. We were authorized to deliver up to about 1.1 million treasury shares of common stock under the Supplemental Stock Ownership Plan, which also terminated as to new awards on December 31, 2001. In March 2002, we adopted the 2002 Long-Term Incentive Plan which permitted the granting of a variety of similar awards to our officers, directors, employees and consultants. Up to 4 million shares of our common stock were authorized for delivery under the 2002 Long-Term Incentive Plan. In March 2006, we adopted the 2006 Long-Term Incentive Plan which replaced the 2002 Long-Term Incentive Plan and permits the granting of a variety of similar awards to directors, officers, employees and consultants. On May 13, 2009, our stockholders approved an amendment to the Tenneco Inc. 2006 Long-Term Incentive Plan to increase the shares of common stock available thereunder by 2.3 million. Each share underlying an award generally counts as one share against the total plan availability. Each share underlying a full value award (e.g. restricted stock), however, counts as 1.25 shares against the total plan availability. As of December 31, 2011, up to 1,569,025 shares of our common stock remain authorized for delivery under the 2006 Long-Term Incentive Plan. Our nonqualified stock options have seven to 20 year terms and vest equally over a three-year service period from the date of the grant.

We have granted restricted common stock and stock options to our directors and certain key employees and restricted stock units, payable in cash, to certain key employees. These awards generally require, among other things, that the award holder remain in service to our company during the restriction period, which is currently three years, with a portion of the award vesting equally each year. We also have granted stock equivalent units and long-term performance units to certain key employees that are payable in cash. At December 31, 2011, the long-term performance units outstanding included a three-year grant for 2010-2012 (“the 2010 Grant”) payable in the first quarter of 2013 and a three-year grant for 2011-2013 (“the 2011 Grant”) payable in the first quarter of 2014. Payment is based on the attainment of specified performance goals. Grant value is based on stock price, cumulative EBITDA and free cashflow metrics. In addition, we have granted SARs to certain key employees in our Asian and Indian operations that are payable in cash after a three-year service period. The grant value is indexed to the stock price.

In November 2009, we successfully completed the public offering of 12 million shares of common stock at a price of $16.50 per share. We received $198 million in gross proceeds and approximately $188 million in net proceeds, after expenses from the sales of our common stock. We used the proceeds to repay outstanding borrowings under our revolving credit facility and for general corporate purposes.

Accounting Methods — We have recorded compensation expense of $3 million in each of the three years ended December 31, 2011, 2010 and 2009, respectively, related to nonqualified stock options as part of our selling, general and administrative expense. This resulted in a decrease in basic and diluted earnings per share of $0.05 in both 2011 and 2010, and $0.06 in 2009.

We immediately expense stock options and restricted stock awarded to employees who are eligible to retire. When employees become eligible to retire during the vesting period, we recognize the remaining expense associated with their stock options and restricted stock.

As of December 31, 2011, there was approximately $5 million of unrecognized compensation costs related to our stock options awards that we expect to recognize over a weighted average period of 0.7 years.

Compensation expense for restricted stock, restricted stock units, long-term performance units and SARs was $11 million, $14 million and $5 million for each of the years ended 2011, 2010 and 2009, respectively, and was recorded in selling, general, and administrative expense on the consolidated statements of income (loss).

Cash received from stock option exercises was $6 million in both 2011 and 2010, and $1 million in 2009. Stock option exercises would have generated an excess tax benefit of $4 million in both 2011 and 2010, and $1 million in 2009. We did not record the excess tax benefit as we have federal and state net operating losses which are not currently being utilized.

Assumptions — We calculated the fair values of stock option awards using the Black-Scholes option pricing model with the weighted average assumptions listed below. The fair value of share-based awards is determined at the time the awards are granted which is generally in January of each year, and requires judgment in estimating employee and market behavior.

	Year Ended December 31,
	2011			2010			2009
Stock Options Granted
Weighted average grant date fair value, per share	$	26.13		$	11.76		$	1.34
Weighted average assumptions used:
Expected volatility		70.1	%		75.4	%		82.6	%
Expected lives		4.8			4.6			4.5
Risk-free interest rates		1.8	%		2.2	%		1.48	%
Dividends yields		0.00	%		0.00	%		0.00	%

Expected volatility is calculated based on current implied volatility and historical realized volatility for the Company.

Expected lives of options are based upon the historical and expected time to post-vesting forfeiture and exercise. We believe this method is the best estimate of the future exercise patterns currently available.

The risk-free interest rates are based upon the Constant Maturity Rates provided by the U.S. Treasury. For our valuations, we used the continuous rate with a term equal to the expected life of the options.

Stock Options — The following table reflects the status and activity for all options to purchase common stock for the period indicated:

	Year Ended December 31, 2011
	Shares Under Option			Weighted  Avg. Exercise Prices		Weighted  Avg. Remaining Life in Years		Aggregate Intrinsic Value
	(Millions)
Outstanding Stock Options
Outstanding, January 1, 2011		3,168,474		$	14.27		4.3	$	68
Granted		201,133			45.42
Expired		(56,046	)		3.66
Forfeited		(13,184	)		9.36
Exercised		(125,624	)		17.10				3
Outstanding, March 31, 2011		3,174,753		$	16.34		4.4	$	80
Granted		2,711			43.51
Forfeited		(23,841	)		14.26
Exercised		(82,166	)		11.50				3
Outstanding, June 30, 2011		3,071,457		$	16.51		4.2	$	76
Granted		1,649			44.02
Forfeited		(450	)		4.03
Exercised		(115,249	)		8.94				3
Outstanding, September 30, 2011		2,957,407		$	16.83		4.0	$	54
Granted		173			24.97
Expired		(10,000	)		1.57
Forfeited		(17,716	)		1.82
Exercised		(186,665	)		10.19				3
Outstanding, December 31, 2011		2,743,199		$	17.43		4.0	$	37
Vested and Expected to Vest, December 31, 2011		2,700,577			17.17		4.0	$	37
Exercisable, December 31, 2011		2,164,226		$	15.95		3.9	$	30

The weighted average grant-date fair value of options granted during the years 2011, 2010 and 2009 was $45.37, $11.84 and $1.34, respectively. The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was $13 million, $10 million and $4 million, respectively. The total fair value of shares vested was $3 million in both 2011 and 2010, and $4 million in 2009.

Restricted Stock — The following table reflects the status for all nonvested restricted shares for the period indicated:

	Year Ended December 31, 2011
	Shares			Weighted Avg. Grant Date Fair Value
Nonvested Restricted Shares
Nonvested balance at January 1, 2011		558,198		$	11.58
Granted		141,036			45.42
Vested		(268,891	)		12.00
Forfeited		(4,822	)		13.74
Nonvested balance at March 31, 2011		425,521		$	22.51
Granted		1,381			43.51
Vested		(3,851	)		15.47
Forfeited		(7,190	)		23.82
Nonvested balance at June 30, 2011		415,861		$	22.62
Granted		1,042			44.02
Vested		(3,206	)		15.41
Forfeited		(158	)		1.86
Nonvested balance at September 30, 2011		413,539		$	22.74
Granted		109			24.97
Vested		(5,735	)		29.92
Forfeited		(162	)		1.87
Nonvested balance at December 31, 2011		407,751		$	22.64

The fair value of restricted stock grants is equal to the average market price of our stock at the date of grant. As of December 31, 2011, approximately $5 million of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.8 years.

The weighted average grant-date fair value of restricted stock granted during the years 2011, 2010 and 2009 was $45.38, $19.60 and $2.02, respectively. The total fair value of restricted shares vested was $3 million in 2011 and $2 million in both 2010 and 2009.

Share Repurchase Program — In May 2011, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 400,000 shares of our outstanding common stock over a 12 month period. This share repurchase program was intended to offset dilution from shares of restricted stock and stock options that were issued in 2011 to employees. We purchased all of the 400,000 shares through open market purchases, which were funded through cash from operations, as of August 3, 2011 at a total cost of $16 million through this program. These repurchased shares are held as part of our treasury stock which increased to 1,694,692 shares at December 31, 2011 from 1,294,692 shares at December 31, 2010.

In January 2012, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 600,000 shares of the Company’s outstanding common stock over a 12 month period. This share repurchase program is intended to offset dilution from shares of restricted stock and stock options issued in 2012 to employees.

Long-Term Performance Units, Restricted Stock Units and SARs — Long-term performance units, restricted stock units, and SARs are paid in cash and recognized as a liability based upon their fair value. As of December 31, 2011, $7 million of total unrecognized compensation costs is expected to be recognized over a weighted-average period of approximately 1.2 years.