Tenneco Reports Q4 Record Revenues and Strong Earnings Improvement
25 January 2000
Tenneco Automotive Reports Fourth Quarter Record Revenues, Strong Earnings Improvement and Significant Debt Reduction
LAKE FOREST, Ill.--Jan. 25, 2000--Tenneco Automotive today reported record fourth quarter revenues of $806 million. Tenneco Automotive also reported a fourth quarter 1999 loss from continuing operations of $143 million, or $4.25 per diluted share, which includes transaction costs, a restructuring charge and stand-alone company costs.Included in fourth quarter results are transaction and other non-recurring charges of $94 million after tax, or $2.80 per diluted share, primarily resulting from the November 4 spin-off of Tenneco Packaging, now known as Pactiv Corporation; a previously announced restructuring charge of $50 million after tax, or $1.50 per diluted share; and, $6 million, or 17 cents per diluted share, in after tax costs associated with becoming a stand-alone company. (See the attached chart for a detailed breakdown of the impact of the charges and costs.)
Before these stand-alone costs and charges, income from continuing operations improved dramatically for the fourth quarter 1999 to $7 million, or 22 cents per diluted share. This compares to a loss of $16 million, or 47 cents per diluted share, in the fourth quarter of 1998, before including an after tax restructuring charge of $34 million, or $1.02 per diluted share, and previously unallocated Tenneco Inc. after-tax costs of $3 million, or 8 cents per diluted share. Strong double-digit revenue growth in North America coupled with restructuring programs in the North American aftermarket business drove this year-over-year improvement.
The company improved its cash flow from operations 230 percent, generating $99 million in the fourth quarter 1999 compared to $30 million in the fourth quarter of 1998. The company's strong cash performance since the spin-off allowed Tenneco Automotive to reduce its debt level by $68 million, to $1,634 million at year-end 1999. This performance was driven primarily by working capital improvements in receivables, inventory and payables. In addition, Tenneco Automotive had $84 million in cash balances at year-end 1999.
"We stated at the time of the spin that as a new stand-alone company, our primary focus would be to improve cash management," said Tenneco Automotive President and CEO Mark Frissora. "I think our fourth quarter results reflect that commitment. We have already begun the important task of bringing down our debt and we expect to continue to make significant progress toward further reducing our debt level over the next two years."
EBIT for the quarter, before the charges and costs, increased significantly to $52 million compared to a loss of $4 million, before restructuring and the previously unallocated Tenneco Inc. costs, in the fourth quarter of 1998. EBITDA for the quarter was $86 million, before the charges and stand-alone costs, compared to $36 million, before restructuring charges and unallocated costs, in the fourth quarter a year earlier.
Revenues for the fourth quarter 1999 rose 5 percent to $806 million - the most ever for a fourth quarter -- from $769 million in the same period one year earlier. "We've now put together back-to-back record setting quarters from a revenue standpoint," Frissora said.
Fourth Quarter Business Review (Operating Units Results)
Tenneco Automotive's North American revenues for the fourth quarter 1999 were $439 million compared to $393 million the prior year. North American original equipment (OE) revenues were $301 million, an increase of 14 percent compared to $265 million reported in the fourth quarter 1998. North American aftermarket revenues rose 9 percent to $138 million from $128 million in the prior year, marking the first quarter-over-quarter revenues improvement for the North American aftermarket since the third quarter of 1997.
EBIT for the North American operations improved significantly to $38 million from a loss of $23 million, before restructuring charges, in the fourth quarter 1998. A record breaking OE build, a solid position on top-selling light trucks, the introduction of our new premium aftermarket shock, Reflex, drove the increase in revenue. Lean manufacturing practices in the OE business and lower aftermarket promotion and operating expenses were responsible for the EBIT improvement.
Fourth quarter European revenues were $290 million compared with $303 million reported in 1998. European OE revenues declined 3 percent to $204 million from $211 million reported a year earlier. European aftermarket revenues were $86 million, a 7 percent decline from $92 million recorded in the fourth quarter of 1998. European EBIT declined 32 percent in the fourth quarter to $8 million from $12 million in 1998. Increased revenue from the full ramp-up of the Ford Focus was offset by the weakened Euro, OE price pressure and aftermarket mix shift. The currency impact and a change in accounting for engineering expenses more than offset gains realized by quality initiatives, resulting in a decline in EBIT.
Tenneco Automotive's rest of the world (ROW) operations, consisting of operations in South America, Asia and Australia, reported revenues of $77 million in the fourth quarter of 1999, an increase of 5 percent compared to $73 million reported in 1998. Combined ROW EBIT was $6 million in the fourth quarter compared to $7 million in the prior year. Difficult economic conditions in South America and softer OE sales in Australia were partially offset by increased OE exhaust business in China, and improved aftermarket business in India and Japan.
"The dramatic improvement in our results this quarter over last year demonstrates that the North American aftermarket restructuring actions and the pull marketing tactics we initiated are taking hold," Frissora said. "The outstanding year for the North American OE business offset the softness in our European operations and the economic difficulties that continue to impact us in South America. The restructuring charge we took in the fourth quarter should allow us to reduce capacity and headcount in Europe and South America, positioning our operations in these regions for improvement in 2000."
Tenneco Transaction and Other Non-Recurring Charges
Tenneco Automotive recorded pre tax transaction costs of $59 million to complete the series of actions necessary to separate Tenneco Automotive and Pactiv. These costs include severance, legal, banking, accounting and other fees. Also included is a charge of approximately $12 million to write down the value of a receivable from a former business which was sold in the mid-1990s. Deteriorating performance by that business, as well as a consolidation in its primary industry, has caused Tenneco Automotive to revise its estimate of the proceeds it will ultimately collect on the receivable.
Restructuring Charge
As previously announced, Tenneco Automotive recorded a pre tax restructuring charge of $55 million in the fourth quarter of 1999. This charge includes $37 million to close a European ride control manufacturing facility and to restructure other European units; $15 million in North America to close an OE exhaust facility; and $3 million for headcount reductions in South America and Asia. Once the restructuring is complete in early 2001, the company is expected to realize annual cost savings of $25 million.
Stand-Alone Company Expenses
Tenneco Automotive incurred incremental pre tax stand-alone costs in the fourth quarter of 1999 of $9 million. These costs, incurred after the November 4 transaction date, include the addition of functions necessary to operate as a public company as well as administrative costs for information technology and payroll and accounts payable services, which the company receives from Pactiv under a contractual agreement entered into in connection with Pactiv's November 4 separation from Tenneco. While these costs will continue in 2000 and beyond, they did not exist in the fourth quarter of 1998.
Full Year Results
For the full year 1999, Tenneco Automotive reported a loss from continuing operations of $63 million, or $1.87 per diluted share. Before the fourth quarter charges and previously unallocated Tenneco Inc. costs, income from continuing operations for the full year was $89 million, or $2.65 per diluted share, compared to $163 million from continuing operations, or $4.83 per diluted share, before charges and costs, for the full year 1998. EBIT for the year, before the charges and costs, was $275 million, compared to $301 million, before restructuring charges and previously unallocated Tenneco Inc. costs, in the previous year. Revenues for the full year 1999 improved to $3,279 million from $3,237 million in 1998.
Outlook
Going forward, Tenneco Automotive expects to report quarter-over-quarter improvements on EBITDA and cash.
"The successful deployment of major initiatives, such as process re-engineering and the Economic Value Added (EVA) management system, will allow us to focus on operating our business more efficiently and profitably," Frissora said. "We will drive the adoption of EVA all the way to the shop-floor level.
"I have put in place an exceptional team of managers and have instituted new processes that should enable us to manage our cash more effectively, strengthen our technological leadership position and streamline our operations around the world," concluded Frissora.
Tenneco Automotive is a $3.2 billion manufacturing company headquartered in Lake Forest, Ill., with 24,000 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are 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.
Several statements in this press release are forward-looking and are identified by the use of forward-looking words and phrases, such as "will," "should," "expect," "to continue," "are taking hold," "going forward," and "estimate." These forward-looking statements are based on the current expectations of the Company (including its subsidiaries). Because forward-looking statements involve risks and uncertainties, the Company's 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) changes in automotive manufacturers' actual and forecasted requirements for the Company's products, including the Company's resultant inability to realize the sales represented by its awarded business; (v) changes in consumer demand and prices, including decreases in demand for automobiles which include the Company's products, and the potential negative impact on the Company's 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 of the Company and its subsidiaries to transition to being an independent, stand-alone public company in a timely and cost-effective manner; (x) the introduction and acceptance of new technologies; (xi) further changes in the distribution channels for the Company's aftermarket products, and further consolidations among automotive parts customers and suppliers; (xii) changes by the Financing Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or policies; 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.
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
Unaudited
THREE MONTHS ENDED DECEMBER 31,
1999 1998
----------------------- ----------------------
Net sales and
operating revenues: $ 806,000,000 $ 769,000,000
======================= ======================
Operating income (loss):
Automotive $ (70,000,000) $ (57,000,000)(b)
Other (1,000,000) (4,000,000)
----------------------- ----------------------
(71,000,000) (61,000,000)
Less:
Interest expense (net of
interest capitalized) 48,000,000 20,000,000
Income tax expense (benefit) 22,000,000 (35,000,000)
Minority interest 2,000,000 7,000,000
----------------------- ----------------------
Income (loss) from continuing
operations $ (143,000,000)(a) $ (53,000,000)(b)
======================= ======================
Average common shares outstanding:
Basic 33,600,000 33,500,000
======================= ======================
Diluted 33,800,000 33,500,000
======================= ======================
Earnings (loss) from continuing operations
per share of common
stock:
Basic $ (4.25)(a) $ (1.57)(b)
======================= ======================
Diluted $ (4.25)(a) $ (1.57)(b)
======================= ======================
a) Includes pretax incremental costs to become a stand alone public
company of $9 million, $6 million or $.17 per share on an after
tax basis, restructuring expense of $55 million, $50 million or
$1.50 per share on an after-tax basis, and pretax transaction and
other expenses of $69 million, $94 million or $2.80 per share on
an after-tax basis.
b) Includes a pretax restructuring charge of $53 million, $34
million or $1.02 per share on an after-tax basis.
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
Unaudited
YEAR ENDED DECEMBER 31,
1999 1998
----------------------- ----------------------
Net sales and
operating revenues: $ 3,279,000,000 $ 3,237,000,000
======================= ======================
Operating income (loss):
Automotive $ 153,000,000 $ 248,000,000 (b)
Other (5,000,000) (21,000,000)
----------------------- ----------------------
148,000,000 227,000,000
Less:
Interest expense (net of
interest capitalized) 106,000,000 69,000,000
Income tax expense
(benefit) 82,000,000 13,000,000
Minority interest 23,000,000 29,000,000
----------------------- ----------------------
Income (loss) from continuing
operations $ (63,000,000)(a) $ 116,000,000 (b)
======================= ======================
Average common shares outstanding:
Basic 33,500,000 33,700,000
======================= ======================
Diluted 33,700,000 33,800,000
======================= ======================
Earnings (loss) from continuing operations
per share of common
stock:
Basic $ (1.87)(a) $ 3.45 (b)
======================= ======================
Diluted $ (1.87)(a) $ 3.44 (b)
======================= ======================
a) Includes pretax incremental costs to become a stand alone public
company of $13 million, $8 million or $.22 per share on an after
tax basis, restructuring expense of $55 million, $50 million or
$1.50 per share on an after-tax basis, and pretax transaction and
other expenses of $69 million, $94 million or $2.80 per share on
an after-tax basis.
b) Includes a pretax restructuring charge of $53 million, $34
million or $1.02 per share on an after-tax basis.
Tenneco Automotive
Statement of Income (Loss)
Quarter Ended December 31, 1999
(Millions Except Per Share Amounts)
Operating Stand Alone Transaction
Units Company Restructuring & Other Reported
Results Expense Charge Expenses Income
--------- --------- --------- --------- ---------
EBIT
North America 38 - (15) - 23
Europe 8 - (37) (1) (30)
Rest of World 6 - (3) - 3
Other - (9) - (58) (67)
--------- --------- --------- --------- ---------
Total 52 (9) (55) (59) (71)
--------- --------- --------- --------- ---------
Interest 38 - - 10 48
Taxes 5 (3) (5) 25 22
Minority Interest 2 - - - 2
--------- --------- --------- --------- ---------
Income (Loss) from
Continuing
Operations 7 (6) (50) (94) (143)
========= ========= ========= ========= =========
Average Diluted
Shares
Outstanding 33.8 33.8 33.8 33.8 33.8
EPS from Continuing
Operations -
Diluted $ 0.22 $ (0.17) $ (1.50) $ (2.80) $ (4.25)
========= ========= ========= ========= =========
Tenneco Automotive
Statement of Income (Loss)
Quarter Ended December 31, 1998
(Millions Except Per Share Amounts)
Previously
Operating Unallocated
Units Tenneco Inc. Restructuring Reported
Results Expense Charge Income
--------- --------- --------- ---------
EBIT
North America (23) - (48) (71)
Europe 12 - (4) 8
Rest of World 7 - (1) 6
Other - (4) - (4)
--------- --------- --------- ---------
Total (4) (4) (53) (61)
--------- --------- --------- ---------
Interest 20 - - 20
Taxes (15) (1) (19) (35)
Minority Interest 7 - - 7
--------- --------- --------- ---------
Income (Loss) from
Continuing
Operations (16) (3) (34) (53)
========= ========= ========= =========
Average Diluted
Shares
Outstanding 33.5 33.5 33.5 33.5
EPS from Continuing
Operations -
Diluted $ (0.47) $ (0.08) $ (1.02) $ (1.57)
========= ========= ========= =========
Tenneco Automotive
Statement of Income (Loss)
Year Ended December 31, 1999
(Millions Except Per Share Amounts)
Operating Stand Alone Transaction
Units Company Restructuring & Other Reported
Results Expense Charge Expenses Income
--------- --------- --------- --------- ---------
EBIT
North America 181 - (15) - 166
Europe 82 - (37) (1) 44
Rest of World 12 - (3) - 9
Other - (13) - (58) (71)
--------- --------- --------- --------- ---------
Total 275 (13) (55) (59) 148
--------- --------- --------- --------- ---------
Interest 96 - - 10 106
Taxes 67 (5) (5) 25 82
Minority Interest 23 - - - 23
--------- --------- --------- --------- ---------
Income (Loss) from
Continuing
Operations 89 (8) (50) (94) (63)
========= ========= ========= ========= =========
Average Diluted
Shares
Outstanding 33.7 33.7 33.7 33.7 33.7
EPS from Continuing
Operations -
Diluted $ 2.65 $ (0.22) $ (1.50) $ (2.80) $ (1.87)
========= ========= ========= ========= =========
Tenneco Automotive
Statement of Income (Loss)
Year Ended December 31, 1998
(Millions Except Per Share Amounts)
Previously
Operating Unallocated
Units Tenneco Inc. Restructuring Reported
Results Expense Charge Income
--------- --------- --------- ---------
EBIT
North America 106 - (48) 58
Europe 159 - (4) 155
Rest of World 36 - (1) 35
Other - (21) - (21)
--------- --------- --------- ---------
Total 301 (21) (53) 227
--------- --------- --------- ---------
Interest 69 - - 69
Taxes 40 (8) (19) 13
Minority Interest 29 - - 29
--------- --------- --------- ---------
Income (Loss) from
Continuing
Operations 163 (13) (34) 116
========= ========= ========= =========
Average Diluted
Shares
Outstanding 33.8 33.8 33.8 33.8
EPS from Continuing
Operations -
Diluted $ 4.83 $ (0.38) $ (1.02) $ 3.44
========= ========= ========= =========
Tenneco Automotive Inc. Consolidated
Statements of Income (Loss)
(Millions Except Per Share Amounts)
1997 1998
--------- ------------------------------------
Year 1st Q 2nd Q 3rd Q 4th Q Year
--------- ------------------------------------
Revenues
Net Sales and
Operating Revenues $ 3,226 $ 800 $ 864 $ 804 $ 769 $3,237
Other Income, net 37 6 1 5 (37) (25)
--------- ------------------------------------
3,263 806 865 809 732 3,212
--------- ------------------------------------
Costs and Expenses
Cost of Sales
(exclusive of depr.
shown below) 2,303 574 587 570 601 2,332
Operating Expenses 34 11 2 5 13 31
Selling, General and
Administrative 421 103 115 115 139 472
Depreciation, Depletion
and Amortization 110 35 37 38 40 150
--------- ------------------------------------
2,868 723 741 728 793 2,985
--------- ------------------------------------
Operating Income (Loss) 395 83 124 81 (61) 227
Interest Expense (net of
interest capitalized) 58 13 17 19 20 69
Income Tax Expense
(Benefit) 80 19 36 (7) (35) 13
Minority Interest 23 8 8 6 7 29
--------- ------------------------------------
Income (Loss) from
Continuing Operations 234 43 63 63 (53) 116
Average Common Shares
Outstanding:
Basic 34.1 33.9 33.8 33.6 33.5 33.7
--------- ------------------------------------
Diluted 34.2 34.0 34.0 33.7 33.5 33.8
--------- ------------------------------------
Earnings (Loss) Per
Share of Common Stock:
Basic -
Continuing
Operations $ 6.87 $ 1.26 $ 1.88 $ 1.85 $ (1.57) $3.45
Diluted -
Continuing
Operations $ 6.85 $ 1.26 $ 1.88 $ 1.84 $ (1.57) $3.44
1999
------------------------------------
1st Q 2nd Q 3rd Q 4th Q Year
------------------------------------
Revenues
Net Sales and
Operating Revenues $ 789 $ 868 $ 816 $ 806 $3,279
Other Income, net 2 6 2 3 13
------------------------------------
791 874 818 809 3,292
------------------------------------
Costs and Expenses
Cost of Sales
(exclusive of depr.
shown below) 585 627 600 615 2,427
Operating Expenses 11 16 12 13 52
Selling, General and
Administrative 105 98 100 218 521
Depreciation, Depletion
and Amortization 35 36 39 34 144
------------------------------------
736 777 751 880 3,144
------------------------------------
Operating Income (Loss) 55 97 67 (71) 148
Interest Expense (net of
interest capitalized) 19 23 16 48 106
Income Tax Expense
(Benefit) 14 30 16 22 82
Minority Interest 6 7 8 2 23
------------------------------------
Income (Loss) from
Continuing Operations 16 37 27 (143) (63)
Average Common Shares
Outstanding:
Basic 33.3 33.4 33.5 33.6 33.5
------------------------------------
Diluted 33.4 33.5 33.5 33.8 33.7
------------------------------------
Earnings (Loss) Per
Share of Common Stock:
Basic -
Continuing
Operations $ 0.47 $ 1.07 $ 0.86 $ (4.25)$(1.87)
Diluted -
Continuing
Operations $ 0.47 $ 1.06 $ 0.86 $ (4.25)$(1.87)
Tenneco Automotive Inc. and Consolidated Subsidiaries
Balance Sheet
(Unaudited)
(Millions)
1997 1998
--------- -----------------------------------
Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
Assets
Current Assets $ 1,050 $ 1,158 $ 1,156 $ 1,301 $ 1,064
Investments and
Other Assets 832 836 836 851 863
Plant, Property and
Equipment, net 1,029 1,035 1,044 1,074 1,093
Net Assets of
Discontinued
Operations 1,771 1,768 1,793 1,773 1,739
-----------------------------------------------
Total $ 4,682 $ 4,797 $ 4,829 $ 4,999 $ 4,759
==================================================
Liabilities and Shareowners' Equity
Short-term Debt $ 75 $ 131 $ 168 $ 197 $ 304
Other Current
Liabilities 616 632 585 625 605
Long-term Debt 713 727 747 822 671
Deferred Income Taxes 165 201 197 134 98
Deferred Credits and
Other Liabilities 177 170 166 147 170
Minority Interest 408 408 407 410 407
Shareowners' Equity 2,528 2,528 2,559 2,664 2,504
---------------------------------------------
Total $ 4,682 $ 4,797 $ 4,829 $ 4,999 $ 4,759
=============================================
1999
--------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
Assets
Current Assets $ 1,113 $ 1,176 $ 1,216 $ 1,201
Investments and
Other Assets 748 770 740 705
Plant, Property and
Equipment, net 1,046 1,049 1,055 1,037
Net Assets of
Discontinued
Operations 1,428 1,421 1,483 -
------------------------------------------------
Total $ 4,335 $ 4,416 $ 4,494 $ 2,943
===============================================
Liabilities and Shareowners' Equity
Short-term Debt $ 368 $ 206 $ 237 $ 56
Other Current
Liabilities 581 638 651 607
Long-term Debt 677 832 796 1,578
Deferred Income
Taxes 32 39 104 108
Deferred Credits
and Other
Liabilities 174 168 155 156
Minority Interest 407 411 411 16
Shareowners'
Equity 2,096 2,122 2,140 422
------------------------------------------------
Total $ 4,335 $ 4,416 $ 4,494 $ 2,943
================================================