Tenneco Posts 1997 Income from Continuing Operations of $2.11 In First Full Year After Restructuring
27 January 1998
Tenneco Posts 1997 Income from Continuing Operations of $2.11 In First Full Year After Restructuring
GREENWICH, Conn., Jan. 27 -- Tenneco today
reported income from continuing operations of $361 million, or $2.11 per
share, for 1997, compared to $218 million or $1.28 per share in 1996, an
improvement of 65 percent. Without one-time charges and gains in 1996 and
1997(A), earnings per share increased 34 percent, from $1.49 to $2.00.
Fourth quarter 1997 income from continuing operations was 44 cents per
share versus a loss of 21 cents per share a year ago. Without the one-time
charges in the fourth quarters of 1996 and 1997, earnings per share increased
156 percent to 46 cents per share versus 18 cents per share a year ago.
This improvement was driven by record operating income for the automotive
parts and specialty packaging units. Tenneco Automotive's 1997 operating
income increased 63 percent to $407 million on revenue growth of 8 percent.
Before the 1996 realignment charges and 1997 special charges, Tenneco
Automotive's income increased 31 percent to $411 million over the previous
year. Specialty Packaging's annual operating income rose 27 percent to $307
million, with revenues up 29 percent, driven by strong consumer business and
acquisition performance.(A)
Full year 1997 revenues grew 10 percent to $7.2 billion from $6.6 billion
in 1996. Full year 1997 operating income was $764 million, an increase of
22 percent compared to the earlier year. Before the charges and gains,
operating income for the full year 1997 was $730 million, an increase of
10 percent.
Tenneco Automotive's revenue and earnings improvements were due to
significant new original equipment business in North America and Europe, new
product introductions, continued market expansion in Eastern Europe and South
America, aggressive company-wide restructuring, and cost reductions.
Tenneco Packaging recorded revenues of $4.0 billion for 1997, an increase
of 11 percent over the prior year. Operating income for 1997 declined 8
percent to $371 million from $401 million in the year ago period, caused by a
16 percent decline in containerboard prices. Specialty Packaging's increase
was led by growth in its consumer product segment. Hefty OneZip(R) product
line unit volume grew 51 percent for the year. The acquisition of KNP BT's
protective and flexible packaging operations contributed $34 million in
operating income for an eight month period, more accretive to earnings than
originally anticipated.
Paperboard Packaging generated an increase of more than $20 million in
operating income for the fourth quarter, compared to the year ago quarter,
reflecting a strong pricing recovery for linerboard and medium. The mills
showed an improvement in operating income in the fourth quarter 1997 compared
to the third quarter 1997, while the corrugated business was down due to
seasonally lower volume and the traditional lag between linerboard price
increases and box price increases, which were not fully implemented until
year-end.
The company generated positive economic value in 1997 with a nearly
$200 million improvement over 1996. Also in the year, Tenneco's improved
capital management reduced base capital spending by more than $100 million.
Tenneco's Cost of Quality initiative to improve processes and reduce the
costs of business activities decreased failure costs by $65 million in the
fourth quarter and by $236 million for the full year. Tenneco Automotive's
global restructuring and Packaging's Paperboard mill cost reduction
initiatives each delivered $40 million in cost reductions for 1997.
This $80 million in savings has been incorporated in business unit operating
results.
"Our first full year of results following Tenneco's restructuring to
become a focused global manufacturing company in auto parts and packaging has
demonstrated the potential of these businesses for continued earnings and
revenue growth," said Dana G. Mead, Tenneco chairman and chief executive
officer. "We think 1998 will further underscore the fundamental strengths of
these businesses."
Similar to other companies with significant information technology
transformation projects underway, Tenneco is taking an accounting charge in
the fourth quarter to reflect the effects of a FASB Emerging Issues Task Force
decision which required companies to expense certain previously capitalized
reengineering costs. An after-tax non-cash charge of $46 million, or 27 cents
per share, was recorded below income from continuing operations in accordance
with this ruling.
(A) The fourth quarter 1996 charges of $87 million, or 39 cents per share,
were for the realignment and reorganization of the company in
December 1996. The special charges in the fourth quarter of 1997 of
$4 million, or 2 cents per share, were for a prior asset sale and a
customer bankruptcy. Tenneco also realized a gain from a 1996 mill
sale of $50 million, or 18 cents per share, and a one time benefit of
$38 million, or 13 cents per share, from the first quarter 1997 mill
lease refinancing.
Note: All references in this news release to earnings per share are on a
diluted basis reflecting the new FASB requirements in FAS No. 128,
"Earnings per Share."
For additional detail see Segment Analysis following the financial tables.
Tenneco is a $7 billion global manufacturing company headquartered in
Greenwich, Conn., with 50,000 employees worldwide. Tenneco Automotive is one
of the world's largest producers and marketers of ride control products and
exhaust systems, which are sold under the Monroe(R) and Walker(R) brand names.
Among its products are Sensa-Trac(R) and Rancho(R) shock absorbers, Walker
Quiet-Flow(TM) mufflers and DynoMax(TM) performance mufflers, and Monroe
Clevite(TM) vibration control components. Tenneco Packaging is among the
world's leading and most diversified packaging companies. Among its products
are Hefty(R) trash bags, Hefty OneZip(R) and Baggies(R) food storage bags and
E-Z Foil(R) single-use aluminum cookware.
For more information about Tenneco, visit the Tenneco web site at
http://www.tenneco.com.
TENNECO CONSOLIDATED EARNINGS RESULTS
(Unaudited)
QUARTER ENDED DECEMBER 31
1997 1996
Net sales and operating revenues:
Automotive $790,000,000 $757,000,000
Packaging 1,079,000,000 931,000,000
Other (1,000,000) (2,000,000)
$1,868,000,000 $1,686,000,000
Operating income (loss):
Automotive $77,000,000 $4,000,000
Packaging 102,000,000 60,000,000
Other (12,000,000) (21,000,000)
167,000,000 43,000,000
Less:
Interest expense (net of
interest capitalized) 59,000,000 50,000,000
Income tax expense 25,000,000 23,000,000
Minority interest 7,000,000 6,000,000
Income (loss) from continuing
operations 76,000,000 (36,000,000)
Loss from discontinued operations -- (90,000,000)(B)
Extraordinary loss -- (235,000,000)(C)
76,000,000 (361,000,000)
Cumulative effect of change
in accounting principle (46,000,000) (A) --
Net income (loss) 30,000,000 (361,000,000)
Preferred stock dividends -- 5,000,000
Net income (loss) to common stock $30,000,000 $(366,000,000)
Average common shares
outstanding:
Basic 169,800,000 169,400,000
Diluted 170,400,000 171,200,000
Earnings (loss) per average share:
Basic -
Continuing operations $.45 $(.21)
Discontinued operations -- (.57)(B)
Extraordinary loss -- (1.38)(C)
$.45 $(2.16)
Cumulative effect of change
in accounting principle (.27)(A) --
$.18 $(2.16)
Diluted -
Continuing operations $.44 $(.21)
Discontinued operations -- (.57)(B)
Extraordinary loss -- (1.38)(C)
$.44 $(2.16)
Cumulative effect of change
in accounting principle (.27)(A) --
$.17 $(2.16)
(A) Write-off of technology transformation process reengineering costs
pursuant to FASB Emerging Issues Task Force decision.
(B) Discontinued operations of the energy and shipbuilding businesses
along with direct transaction costs associated with the reorganization
of Tenneco.
(C) Cost incurred for the early retirement of debt.
TENNECO CONSOLIDATED EARNINGS RESULTS
Unaudited
YEAR ENDED DECEMBER 31
1997 1996
Net sales and operating revenues:
Automotive $3,226,000,000 $2,980,000,000
Packaging 3,995,000,000 3,602,000,000
Other (1,000,000) (10,000,000)
$7,220,000,000 $6,572,000,000
Operating income (loss):
Automotive $407,000,000 $249,000,000
Packaging 371,000,000 401,000,000
Other (14,000,000) (22,000,000)
764,000,000 628,000,000
Less:
Interest expense (net of
interest capitalized) 216,000,000 195,000,000
Income tax expense 163,000,000 194,000,000
Minority interest 24,000,000 21,000,000
Income from continuing operations 361,000,000 218,000,000
Income from discontinued operations -- 428,000,000(B)
Extraordinary loss -- (236,000,000)(C)
361,000,000 410,000,000
Cumulative effect of change
in accounting principle (46,000,000)(A) --
Net income 315,000,000 410,000,000
Preferred stock dividends -- 12,000,000
Net income to common stock $315,000,000 $398,000,000
Average common shares outstanding:
Basic 170,300,000 169,300,000
Diluted 170,800,000 170,500,000
Earnings (loss) per average share:
Basic -
Continuing operations $2.12 $1.29
Discontinued operations -- 2.45(B)
Extraordinary loss -- (1.39)(C)
$2.12 $2.35
Cumulative effect of change
in accounting principle (.27)(A) --
$1.85 $2.35
Diluted -
Continuing operations $2.11 $1.28
Discontinued operations -- 2.44(B)
Extraordinary loss -- (1.38)(C)
$2.11 $2.34
Cumulative effect of change
in accounting principle (.27)(A) --
$1.84 $2.34
(A) Write-off of technology transformation process reengineering costs
pursuant to FASB Emerging Issues Task Force decision.
(B) Discontinued operations of the energy, shipbuilding and farm and
construction equipment businesses along with direct transaction costs
associated with the reorganization of Tenneco.
(C)Cost incurred for the early retirement of debt.
Segment Analysis
Automotive
Tenneco Automotive's full year 1997 revenues rose 8 percent to
$3.2 billion. Fourth quarter revenues rose 4 percent to $790 million from
$757 million in the same quarter a year ago, extending the company's record to
17 consecutive quarter-over-quarter improvements.
Fourth quarter operating income increased to $81 million before the 1997
special charges, compared to $68 million before realignment charges of
$64 million in the year-ago quarter. For 1997, on an operating basis before
the fourth quarter one-time charges and the impact of exchange rates, income
would have totaled $88 million.
Exchange rates in total for Tenneco Automotive had an unfavorable impact
of $41 million and $7 million to revenue and operating income, respectively,
for the fourth quarter, and $141 million and $22 million for the full year.
Improved realizations, world-wide cost reduction efforts and a higher value
product mix helped offset the unfavorable impact of a strong U.S. dollar and a
soft North American aftermarket.
Full year operating income for the North American aftermarket and original
equipment businesses increased to $209 million, up 36 percent before the
effect of the 1996 and 1997 charges. North American original equipment
revenues were up 22 percent for the year and 18 percent for the fourth
quarter, while operating income for both periods rose substantially. These
strong results reflect the successful placement of the company's products on
the most popular selling vehicles, especially the hot-selling light truck
segment.
As a result of Tenneco Automotive's recent Autocan acquisition in Mexico,
the company will be supplying Volkswagen for the first time from North
America, manufacturing exhaust systems for the new Beetle. Also a first is
Tenneco Automotive's new General Motors ride control business in North America
to supply an innovative monotube shock absorber for the 1999 model year C/K
pickup truck, starting in 1998.
North American aftermarket revenues for the full year were flat despite an
overall industry decline of 8 percent. Despite the decline, Tenneco
Automotive gained market share through acquiring new accounts, a continued mix
shift to premium products and a strengthened distribution system.
European aftermarket revenues were down slightly for the year, but would
have increased 8 percent without the adverse exchange rate impact of nearly
$70 million. Significant aftermarket growth occurred in European emerging
markets. In the remainder of Europe, the product mix improved with a shift
toward premium lines. European original equipment revenues increased for the
year and the quarter, fueled by strong business growth with Ford, Nissan,
General Motors/Opel, Volkswagen, and other major car companies.
In South America, full year revenues more than doubled to $169 million.
Full year operating income was up 115 percent as strong aftermarket growth
offset weakness in original equipment. The strong aftermarket results came
from the successful integration of acquisitions in Argentina, record export
sales and the company's global restructuring program. In Asia, which
currently represents under 1 percent of Tenneco's total revenues, full year
and fourth quarter revenues rose significantly, albeit on a small base.
Automotive recorded a number of significant accomplishments in 1997,
including having its products on all of the top 10 selling light trucks in
North America. The company completed two strategic acquisitions, in Mexico
and Poland, and a joint venture in South Africa. New product launches of the
Sensa-Trac(R) shock absorber with Safe Tech(TM) technology and the Walker(R)
Quiet-Flow(TM) muffler, supported by strong advertising and marketing, are
expected to improve volumes and margins in 1998 and beyond.
Tenneco Automotive's global restructuring, aimed at improved operating
efficiency and intensified customer and market focus, is expected to provide
over $80 million in annual cost savings, $40 million of which were achieved in
1997, with an additional $40 million targeted for 1998.
Overall Packaging Results
Tenneco Packaging's revenues increased 16 percent to $1.1 billion in the
fourth quarter 1997 compared to $931 million in the fourth quarter of 1996.
For the year, revenues grew 11 percent to $4.0 billion from $3.6 billion
in 1996.
Operating income improved to $102 million in the fourth quarter of 1997
from $60 million after small realignment charges in both quarters. For the
full year, operating income declined 8 percent to $371 million from $401
million. Containerboard pricing adversely affected earnings by $130 million.
This was partially offset by improved containerboard mill performance,
earnings growth in Specialty Packaging and the benefits of the mill lease
refinancing.
Specialty Packaging
For the year, Specialty Packaging revenues increased 29 percent to
$2.6 billion from $2.0 billion. Fourth quarter 1997 revenues grew 25 percent
to $701 million from $561 million in the fourth quarter 1996. This growth was
driven by strong performances in the consumer business and clear plastic
containers sold to supermarkets, mass merchandisers and the foodservice
industry, as well as growth from acquisitions.
Full year operating income improved 27 percent to $307 million from
$242 million, as a result of solid growth in the consumer and food service
businesses. Fourth quarter operating income improved 35 percent to
$85 million from $63 million in the fourth quarter of 1996. Both revenues and
operating income were favorably affected by the first full year benefit of the
August 1996 foam products acquisition and inclusion of the protective and
flexible packaging businesses acquired from KNP BT in late April 1997.
Specialty Packaging continued to experience excellent acceptance of the
Hefty OneZip(R) product line, with market share growth resulting from the
success of high count value packs and their introduction in West Coast
markets. Clear plastic container unit volume grew 10 percent in the fourth
quarter and full year 1997 compared to the year ago periods on the strength of
new products with improved Smartlock(R) closures. Continued progress was made
in the home meal replacement market, for which Specialty Packaging launched
over 20 new items in late 1997.
Paperboard Packaging
In the fourth quarter, Paperboard Packaging operations, which include
containerboard mills, corrugated and folding carton facilities, reported a
slight increase in revenues to $378 million compared with $370 million in the
fourth quarter of 1996. For the full year, revenues decreased 11 percent to
$1.4 billion from $1.6 billion as a result of lower linerboard and medium
prices.
For the year ending 1997, operating income was $64 million compared to
$159 million in 1996, including special items in both periods. Offsetting
this decrease, the paperboard mills alone achieved $40 million in cost savings
in 1997 as part of its two-year $75 million cost reduction initiative. In
addition, income and margin improvements have resulted from a move to a more
profitable product mix and value-added grades.
Other Achievements
Tenneco was recognized for the second consecutive year by Industry Week
magazine as one of the world's 100 Best Managed Companies. In addition, the
Tenneco Automotive Paragould, Ark., plant was honored by Industry Week as one
of the 10 Best Plants in America, the second consecutive year that a Tenneco
plant received this distinction. Five of Automotive's North American plants
received the coveted Chrysler Gold Pentastar Award for quality.
Tenneco Packaging's Valdosta, Ga., linerboard mill received the American
Forest Products Association's 1997 Safety award. Eleven Tenneco plants in 1997
held the coveted OSHA Voluntary Protection Program (VPP) Star award. Tenneco
has the largest number of plants earning this award.
Outlook
"We have the fundamentals in place to deliver solid growth and value for
our shareowners with improved operating margins from new products, cost
reductions, and an improved pricing environment," said Mead. "Volume growth
will result from these new products, expanding market shares for our strong
branded products, and continued expansion of global markets."
Tenneco Automotive is well positioned with new products for the
aftermarket and is supplying original equipment for over 40 major new car
launches around the world. Ten just-in-time plants are scheduled to be opened
in 1998-99 throughout Europe to supply major original equipment customers like
Ford, General Motors, Peugeot, Volkswagen and Volvo.
Tenneco Packaging's focus on product innovations should lead the way to
improved margins, increased market share and penetration of new markets
in 1998. In Specialty Packaging, significant opportunities exist for new
applications of our OneZip(R) bag closure technology, as well as for new
products in the home meal replacement market. In the Paperboard business,
continued price improvement, ongoing cost reductions, new value-added
products, as well as productivity improvements should drive profitability. In
addition, it is expected that the company will continue to realize the benefit
of $250 million of cash flow for the five years ending 2001, due to lower mill
lease costs and other related benefits from the mill lease refinancing in
early 1997.
Several statements in this press release are forward looking and are
identified by the use of the following forward-looking words and phrases, such
as: "potential... for continued earnings and revenue growth," "expected,"
"fundamentals in place to deliver solid growth and value," "growth will result
from," "should lead the way," "should drive profitability," and "it is
expected." These forward-looking statements are based on the company's
current expectations. Because forward-looking statements involve risks and
uncertainties, the company's actual results could differ materially. Among
the factors that could cause results to differ materially from current
expectations are: (i) the general political, economic and competitive
conditions in markets and countries where the company and its subsidiaries
operate including currency fluctuations and other risks associated with
operating in foreign countries; (ii) changes in capital availability or costs;
(iii) changes in consumer demand and prices, including decreases in demand for
company products and the resulting negative impact on the company's revenues
and margins from such products; (iv) the cost of compliance with changes in
regulations, including environmental regulations; (v) employee workforce
factors; (vi) material substitutions and increases in the costs of the
company's raw materials; (vii) the company's ability to integrate the
operations of acquired businesses quickly and in a cost-effective manner; and
(viii) the timing and occurrence (or non-occurrence) of transactions and
events, which may be subject to circumstances beyond the company's control.
SOURCE Tenneco