Tenneco Earnings Reflect Strong Specialty Packaging
29 April 1999
Tenneco Earnings Reflect Strong Specialty Packaging, Automotive OE Results and Aftermarket Profit Rebound
GREENWICH, Conn.--April 29, 1999--Tenneco today reported first quarter 1999 income from continuing operations of $45 million, or 27 cents per share, on revenue of $1.85 billion, before charges related to the sale of the containerboard business and other transactions related to the realignment of Tenneco's corporate functions.First quarter 1998 revenue was $1.8 billion and income from continuing operations was $75 million, or 44 cents per share. First quarter 1999 charges totaled $322 million pre-tax, $195 million after-tax or $1.17 per share.
First quarter results reflect strong growth and earnings performance in the company's specialty packaging businesses, steady improvement in its automotive original equipment (OE) business, a return to profitability in the automotive aftermarket and early indications of containerboard price improvement versus 1998's fourth quarter.
Tenneco today also announced that its board of directors has approved the separation of Tenneco Automotive and Tenneco Packaging in a tax-free spin-off to Tenneco shareowners (see related release).
"Our core automotive original equipment and specialty packaging businesses performed well and contributed solid operating earnings," said Dana G. Mead, Tenneco chairman and chief executive officer. "The North American automotive aftermarket business has returned to profitability after a weak fourth quarter, and the former Tenneco containerboard business also improved."
Revenue from Tenneco's specialty packaging operations rose 6 percent to $666 million in the quarter from $630 million in the 1998 first quarter. Operating income increased 12 percent in the quarter to $83 million from $74 million a year ago as each business unit turned in double-digit growth.
Foodservice packaging volume increased about 11 percent with Hefty(R)products' unit volume up about 12 percent. Protective packaging sales increased 15 percent in the quarter.
In its last quarter as a Tenneco business, paperboard packaging revenue increased 3 percent to $414 million from $402 million in 1998. Operating income before charges was $18 million, down 47 percent from $34 million in 1998, due to lower linerboard prices than a year ago. However, paperboard revenue and income were up 1 percent and 38 percent, respectively, compared to the fourth quarter of 1998.
The company used the $2 billion in proceeds from the sale of its containerboard business to pay down debt and leases, and it retains a 45 percent equity stake in Packaging Corporation of America, worth approximately $200 million. Market conditions in that business are currently favorable, and any future sale of the equity stake could potentially offset the majority of the reported first quarter loss from the sale.
Tenneco Automotive's first quarter 1999 global revenue was $789 million compared with $800 million in the first quarter of 1998, a 1 percent decline. Global automotive operating income was $57 million compared to $89 million a year earlier, but rose $60 million over the 1998 fourth quarter.
Tenneco Automotive's worldwide OE revenue increased 8 percent over the prior year's quarter and 2 percent over the fourth quarter 1998. North American OE revenue improved 8 percent over a year earlier and 8 percent over the previous quarter as the company continued placing its products on many of the world's best-selling vehicles, including the top 10 selling light trucks and sport utility vehicles in North America. Worldwide OE operating income declined 24 percent from a year earlier, but included higher costs related to a first quarter 1999 change in accounting for platform start-up costs from a capitalization to an expense basis, and currency devaluation in Brazil. First quarter 1999 earnings improved 39 percent compared to the 1998 fourth quarter.
Worldwide aftermarket revenue decreased 16 percent and aftermarket operating income declined 53 percent compared to the previous year's first quarter. When compared to the fourth quarter 1998, revenue increased 4 percent and income increased $49 million. These improvements were driven by volume increases and the company's restructuring in the aftermarket, initiated in the fourth quarter 1998, which has reduced the breakeven point in the business.
In addition, Tenneco adopted accounting principle changes related to start-up costs and new aftermarket customer activities. The cumulative after-tax effect of these accounting changes was $134 million, or 80 cents per share. Tenneco also incurred an after-tax extraordinary loss of $7 million or 4 cents per share related to early retirement of debt in connection with the sale of the containerboard business. These charges, combined with the charges described in the first paragraph, resulted in a net loss of $1.74 per share.
Until the separation of its businesses, Tenneco is a $6 billion manufacturing company with 40,000 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems, which are sold under the Monroe(R) and Walker(R) global brand names. Products include Sensa-Trac(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(TM) performance exhaust products, and Monroe(R) Clevite(TM) vibration control components. Tenneco Packaging is among the world's leading and most diversified packaging companies. Products include Hefty(R) trash bags, Hefty OneZip(R) and Baggies(R) food storage bags, E-Z Foil(R) single-use aluminum cookware, Hexacomb(R) paper products and Propyflex medical bags.
For more information about Tenneco, visit the Tenneco website at http://www.tenneco.com
TENNECO CONSOLIDATED EARNINGS RESULTS
Unaudited
THREE MONTHS ENDED MARCH 31,
1999 1998
--------------- ---------------
Net sales and
operating revenues:
Automotive $ 789,000,000 $ 800,000,000
Specialty Packaging 666,000,000 630,000,000
Paperboard Packaging 414,000,000 402,000,000
Other (22,000,000) (23,000,000)
--------------- ---------------
$ 1,847,000,000 $ 1,809,000,000
=============== ===============
Operating income
(loss):
Automotive $ 57,000,000 $ 89,000,000
Specialty Packaging 83,000,000 74,000,000
Paperboard Packaging (275,000,000)(a) 34,000,000
Other (40,000,000)(b) (11,000,000)
--------------- ---------------
(175,000,000) 186,000,000
Less:
Interest expense
(net of Interest
capitalized) 63,000,000 56,000,000
Income tax
expense (benefit) (94,000,000) 47,000,000
Minority interest 6,000,000 8,000,000
--------------- ---------------
Income (loss)
from continuing
Operations (150,000,000)(a)(b) 75,000,000
Extraordinary Loss,
net of income Tax (7,000,000)(c) -
Cumulative effect
of change in
Accounting principle,
net of Income tax (134,000,000)(d) -
--------------- ---------------
Net income (loss) $ (291,000,000) $ 75,000,000
=============== ===============
Average common
shares outstanding:
Basic 166,700,000 169,500,000
=============== ===============
Diluted 167,200,000 170,100,000
=============== ===============
Earnings (loss)
per share of
common Stock:
Basic-
Continuing operations $ (.90)(a)(b) $ .44
Extraordinary loss (.04)(c) -
Cumulative effect
of change in
accounting principle (.80)(d) -
---------------- ----------------
$ (1.74) $ .44
================ ================
Diluted-
Continuing operations $ (.90)(a)(b) $ .44
Extraordinary loss (.04)(c) -
Cumulative effect of change
in accounting principle (.80)(d) -
---------------- ----------------
$ (1.74) $ .44
================ ================
a) Includes the pretax loss on the sale of the Containerboard
business of $293 million, $178 million or $1.07 per share on an
after-tax basis.
b) Includes charges related to realigning Tenneco's headquarters
functions of $29 million, $17 million or $.10 per share on an
after-tax basis. Before this charge and that in footnote (a) EPS
was 27 cents.
c) Loss on early retirement of debt used to finance a Containerboard
facility.
d) Change in accounting principle related to costs of start-up
activities of $102 million or $.61 per share pursuant to AICPA
Statement of Position 98-05 and change in accounting principle
related to costs to acquire new after-market customer contracts
of $32 million or $.19 per share.
Several statements in this press release are forward-looking and are identified by the use of forward- looking words and phrases, such as "could potentially" and "future." These forward-looking statements are based on the current expectations of the Company and its subsidiaries. Because forward-looking statements involve risks and uncertainties, the plans, actions and actual results could differ materially. Among the factors that could cause plans, actions and 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) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (iii) changes in capital availability or costs; (iv) results of analysis regarding strategic alternatives; (v) changes in consumer demand and prices, including decreases in demand for products and the resulting negative impact on revenues and margins from such products; (vi) the cost of compliance with changes in regulations, including environmental regulations; (vii) workforce factors such as strikes or labor interruptions; (viii) material substitutions and increases in the costs of raw materials; (ix) the ability to integrate operations of acquired businesses quickly and in a cost-effective manner; (x) new technologies; (xi) the ability of the Company and its subsidiaries and those with whom they conduct business to timely resolve the Year 2000 issue (relating to potential equipment and computer failures by or at the change of the century), unanticipated costs of, problems with, or delays in resolving the Year 2000 issue, and the costs and impacts if the Year 2000 issue is not timely resolved; (xii) changes by the Financing Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or polices; and (xiii) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the Company and its subsidiaries.