Tenneco Automotive Announces Earnings and Cash Improvement
25 April 2000
Tenneco Automotive Announces Earnings and Cash Improvement On Strong Revenue Growth
LAKE FOREST, Ill.--APRIL 26, 2000--Tenneco Automotive (NYSE:TEN) today announced revenues of $882 million for the first quarter ending March 31, 2000, a 12 percent increase over last year. The company also reported net income of $1 million, or $.03 per diluted share, in the first quarter.Included in first quarter results are incremental pre-tax stand-alone costs of $14 million that were incurred as a result of operating as an independent company and $19 million of additional costs from Tenneco Automotive's new capital structure following the November 4, 1999 spin-off of Pactiv Corporation. If the company had incurred the same level of stand-alone and interest costs in 1999 as it did in 2000, its net income and earnings per diluted share for the first quarter of 1999 would have been break-even. (See attached chart titled, "Tenneco Automotive Statement Of Income (Loss) Quarter Ended March 31, 1999".)
"We are very pleased with our financial performance in this quarter. We're leveraging our technology leadership position by developing new products more quickly and aggressively expanding into new markets," said Mark Frissora, chairman and CEO.
The company continues to report quarterly EBIT and EBITDA improvements. Before stand-alone costs, first quarter EBIT improved seven percent to $61 million compared to $55 million in the first quarter 1999. EBITDA, before stand-alone costs, for the quarter was $100 million compared to $93 million a year ago.
Operating cash flow, after stand-alone costs, improved by $48 million in the first quarter of 2000 compared to a year ago, driven by improved working capital performance. Earnings improvement and reduction of assets employed in the businesses drove a $16 million improvement in EVA(R) (Economic Value Added) performance.
NORTH AMERICA
North American revenues for the first quarter were $514 million, up 23 percent over 1999 first quarter results. The company's North American original equipment business reported revenues of $382 million, an increase of 33 percent. Strong original equipment production levels, market positions on many top-selling light truck platforms, and an increase in market share fueled growth in this segment. In addition, a change in revenue recognition for catalytic converter sales accounted for $50 million of the increase.
The North American aftermarket business also contributed to the increase with revenues for the first quarter 2000 of $132 million, up two percent compared to first quarter 1999. Introduction of the new premium Monroe Reflex(TM) shock absorber and re-positioning of Monroe Sensa-Trac(R) into the retail segment contributed to the continuing turnaround in the aftermarket business.
"Aggressive product launches and re-positioning marketing efforts are really paying off in the North American aftermarket," said Mark Frissora. "We saw incremental annualized revenue of $14 million from new customers and products in this quarter and increases in market share as well. Most recent MEMA market share data (fourth quarter 1999) shows that our ride control market share rose nearly 2 points in that quarter to 48 percent, and exhaust rose 5 points to 37 percent."
Before stand-alone costs, the first quarter EBIT for North American operations was $43 million, compared to $34 million in first quarter 1999. Operating efficiency gains in the aftermarket more than offset the one-time costs of $3 million associated with closing an original equipment manufacturing plant and a change in the OE exhaust mix toward new lower margin platforms.
EUROPE
The company reported first quarter 2000 revenues for the European original equipment business of $202 million, a slight decrease compared to first quarter 1999 revenues of $205 million. Had exchange rates been the same in first quarter 2000 as in first quarter 1999, revenue would have increased 10 percent. Revenues for the European aftermarket business were $92 million for the first quarter, a 14 percent decline from first quarter 1999. Had exchange rates been the same in first quarter 2000 as in first quarter 1999, revenue would have decreased six percent.
Before stand-alone costs, European EBIT declined in the first quarter of 2000 to $15 million, compared to $26 million in first quarter 1999. The general weakness in European currencies reduced European EBIT by $2 million and Europe incurred one-time costs of $1 million in the quarter related to its restructuring efforts. Increased OE volumes and benefits from lean manufacturing and total quality initiatives were more than offset by higher steel costs; soft aftermarket sales volumes; unfavorable mix; and increased distribution cost due to customer demand for more frequent deliveries.
"We've begun to address the challenges confronting our European aftermarket operations. We're being impacted by some of the same issues that affected our North American aftermarket business and our plan is to implement, where possible, solutions we found successful in turning around that business," Frissora said. "As a first step, we have already initiated efforts to restructure and reduce costs in our European aftermarket distribution operations."
Tenneco Automotive reported growth in other geographical areas as follows:
Region Revenue Growth --------- ------- ------ South America $33 million 50 percent Australia $29 million even Asia $11 million 39 percent
Stronger sales, efficiency improvements, and headcount reductions drove improvement in EBIT for South America, Australia, and Asia. Combined EBIT, before stand-alone costs, for these areas in the first quarter was $2 million compared to a loss of $3 million in first quarter 1999.
OUTLOOK
Tenneco Automotive continues to win new OE business globally. In the aftermarket segment, the company intends to expand successful North American product introductions and re-positioning to the European market. In addition, the company continues to see savings as a result of its restructuring and manufacturing initiatives and has accelerated these efforts by recently initiating Six Sigma, a program to improve efficiencies at its operating facilities.
"Tenneco Automotive is fortunate to have significant external influencers helping drive our growth," said Frissora. "We are well positioned with products that address increased content due to modularity trends, environmental regulations, and safety concerns. Coupled with our technology leadership and market positions, we continue to increase incrementally our OE book of business," he concluded.
Tenneco Automotive is a $3.3 billion manufacturing company headquartered in Lake Forest, Illinois with 24,000 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa-Trac(R) and Reflex(TM) 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.
Also attached are four exhibits that provide further information about 2000 and 1999 operating results.
Several statements in the "Outlook" in this press release are forward-looking and are identified by the use of forward-looking words and phrases, such as "intends," "continues to see," and "continues to increase." 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 MARCH 31,
2000 1999
-------------- -------------
Net sales and operating revenues: $ 882,000,000 $ 789,000,000
-------------- -------------
Operating income (loss):
North America $ 34,000,000 $ 33,000,000
Europe 12,000,000 26,000,000
Rest of World 1,000,000 (2,000,000)
Other - (2,000,000)
-------------- -------------
47,000,000 55,000,000
Less:
Interest expense (net of
interest capitalized) 45,000,000 19,000,000
Income tax expense (benefit) (1,000,000) 14,000,000
Minority interest 2,000,000 6,000,000
-------------- -------------
Income (loss) from continuing
operations 1,000,000 16,000,000
Income (loss) from discontinued
operations, net of income tax - (166,000,000)
Extraordinary loss, net of income
tax - (7,000,000)(a)
Cumulative effect of change in
accounting principle, net of
income tax - (134,000,000)(b)
-------------- -------------
Net income (loss) $ 1,000,000 $(291,000,000)
============== =============
Average common shares outstanding:
Basic 33,700,000 33,300,000
============== =============
Diluted 33,900,000 33,400,000
============== =============
Earnings (loss) per share of common
Basic-
Continuing operations $ 0.03 $ 0.47
Discontinued operations - (4.99)
Extraordinary loss - (0.20)(a)
Cumulative effect of change
in accounting principle - (4.00)(b)
-------------- -------------
$ 0.03 $ (8.72)
============== =============
Diluted-
Continuing operations $ 0.03 $ 0.47
Discontinued operations - (4.99)
Extraordinary loss - (0.20)(a)
Cumulative effect of change
in accounting principle - (4.00)(b)
-------------- -------------
$ 0.03 $ (8.72)
============== =============
a) Loss on early retirement of debt used to finance a Containerboard
facility.
b) Change in accounting principle related to costs of start-up
activities of $102 million or $3.05 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 $.95 per share.
Tenneco Automotive Inc. and Consolidated Subsidiaries
Balance Sheet
(Unaudited)
(Millions)
1998
----------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
----------------------------------------------------------------------
Assets
Current Assets $ 1,158 $ 1,156 $ 1,301 $ 1,064
Investments and
Other Assets 836 836 851 863
Plant, Property and
Equipment, net 1,035 1,044 1,074 1,093
Net Assets of
Discontinued
Operations 1,768 1,793 1,773 1,739
----- ----- ----- -----
Total $ 4,797 $ 4,829 $ 4,999 $ 4,759
===== ===== ===== =====
Liabilities and Shareholders' Equity
Short-term Debt $ 131 $ 168 $ 197 $ 304
Other Current
Liabilities 632 585 625 605
Long-term Debt 727 747 822 671
Deferred Income Taxes 201 197 134 98
Deferred Credits and
Other Liabilities 170 166 147 170
Minority Interest 408 407 410 407
Shareholders' Equity 2,528 2,559 2,664 2,504
----- ----- ----- -----
Total $ 4,797 $ 4,829 $ 4,999 $ 4,759
===== ===== ===== =====
Debt to Capitalization
Ratio 22.6% 23.6% 24.9% 25.1%
===== ===== ===== =====
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 Shareholders' 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
Shareholders' Equity 2,096 2,122 2,140 422
----- ----- ----- -----
Total $ 4,335 $ 4,416 $ 4,494 $ 2,943
===== ===== ===== =====
Debt to Capitalization
Ratio 29.5% 29.1% 28.8% 78.9%
===== ===== ===== =====
2000
------
Mar 31
------
Assets
Current Assets $ 1,251
Investments and
Other Assets 697
Plant, Property and
Equipment, net 1,013
Net Assets of
Discontinued
Operations -
------
Total $ 2,961
======
Liabilities and Shareholders' Equity
Short-term Debt $ 77
Other Current
Liabilities 637
Long-term Debt 1,571
Deferred Income Taxes 106
Deferred Credits and
Other Liabilities 160
Minority Interest 17
Shareholders' Equity 393
------
Total $ 2,961
======
Debt to Capitalization
Ratio 80.1%
======
Tenneco Automotive
Statement of Income (Loss)
Quarter Ended March 31, 1999
(Millions Except Per Share Amounts)
Stand Alone &
Reported Capital Structure Adjusted
Results Adjustments Results
--------------- ---------------------- --------
BIT 55 (12) (a) 43
Interest 19 26 (b) 45
Taxes 14 (15) (c) (1)
Minority Interest 6 (7) (b) (1)
--------------- ---------------------- --------
Income (Loss) from
Continuing Operations 16 (4) -
=============== ====================== ========
Average Diluted Shares
Outstanding 33.4 33.4 33.4
EPS from Continuing
Operations - Diluted $ 0.47 $ (0.47) $ -
=============== ====================== ========
(a) Adjustment to increase stand alone costs to 2000 level ($14
million).
(b) Adjustment to recognize cost of capital structure existing
following November 4, 1999 spin-off of Pactiv Corporation.
(c) Adjustment to recognize tax effect of stand-alone and interest
adjustments.
Statement of Income (Loss)
Quarter Ended March 31, 2000
(Millions Except Per Share Amounts)
Operating Stand Alone
Units Company Reported
Results Expense Income
--------- ----------- --------
EBIT
North America 43 (9) 34
Europe 15 (4) 11
Rest of World 3 (1) 2
Other - - -
--------- ----------- --------
Total 61 (14) 47
--------- ----------- --------
Tenneco Automotive Inc. Consolidated
Statements of Income (Loss)
(Millions Except Per Share Amounts)
1998
-----------------------------------------
1st Q 2nd Q 3rd Q 4th Q Year
----- ----- ----- ----- -----
Revenues
Net Sales and
Operating Revenues $800 $864 $804 $769 $3,237
Other Income, net 6 1 5 (37) (25)
----- ----- ----- ----- ----
806 865 809 732 3,212
----- ----- ----- ----- ----
Costs and Expenses
Cost of Sales
(exclusive of depr.
shown below) 574 587 570 601 2,332
Operating Expenses 11 2 5 13 31
Selling, General
and Administrative 103 115 115 139 472
Depreciation, Depletion
and Amortization 35 37 38 40 150
----- ----- ----- ----- ----
723 741 728 793 2,985
----- ----- ----- ----- ----
Operating Income (Loss) 83 124 81 (61) 227
Interest Expense
(net of interest capitalized) 13 17 19 20 69
Income Tax Expense (Benefit) 19 36 (7) (35) 13
Minority Interest 8 8 6 7 29
----- ----- ----- ----- ----
Income (Loss) from Continuing
Operations 43 63 63 (53) 116
Income (Loss) from Discontinued
Operations, net of
income tax 32 74 40 (7) 139
Extraordinary Loss, net of
income tax - - - - -
Cumulative Effect of Change
in Accounting Principle,
net of income tax - - - - -
----- ----- ----- ----- -----
Net Income (Loss) $ 75 $137 $103 $ (60) $ 255
===== ===== ===== ===== =====
Average Common Shares Outstanding:
Basic 33.9 33.8 33.6 33.5 33.7
===== ===== ===== ===== =====
Diluted 34.0 34.0 33.7 33.5 33.8
===== ===== ===== ===== =====
Earnings (Loss) Per Share of Common Stock:
Basic -
Continuing Operations $ 1.26 $ 1.88 $ 1.85 $(1.57) $ 3.45
Discontinued Operations 0.95 2.16 1.24 (0.23) 4.13
Extraordinary Loss - - - - -
Cum Change in Accounting
Principle - - - - -
----- ----- ----- ----- ----
$ 2.21 $ 4.04 $ 3.09 $(1.80) $ 7.58
===== ===== ===== ===== ====
Diluted -
Continuing Operations $ 1.26 $ 1.88 $ 1.84 $(1.57) $ 3.44
Discontinued Operations 0.94 2.15 1.24 (0.23) 4.12
Extraordinary Loss - - - - -
Cum Change in Accounting
Principle - - - - -
----- ----- ----- ----- ----
$ 2.20 $ 4.03 $ 3.08 $(1.80) $ 7.56
===== ===== ===== ===== ====
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)
Income (Loss) from Discontinued
Operations, net of
income tax (166) 55 12 (109) (208)
Extraordinary Loss, net of
income tax (7) - - (11) (18)
Cumulative Effect of Change
in Accounting Principle,
net of income tax (134) - - - (134)
----- ----- ----- ----- ----
Net Income (Loss) $ (291) $ 92 $ 39 $(263) $(423)
===== ===== ===== ===== ====
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)
Discontinued Operations (4.99) 1.67 0.32 (3.24) (6.23)
Extraordinary Loss (0.20) - - (0.34) (0.55)
Cum Change in Accounting
Principle (4.00) - - - (3.99)
----- ----- ----- ----- ----
$(8.72) $ 2.74 $ 1.18 $(7.83)$(12.64)
===== ===== ===== ===== ====
Diluted -
Continuing Operations $ 0.47 $ 1.06 $ 0.86 $(4.25)$ (1.87)
Discontinued Operations (4.99) 1.67 0.32 (3.24) (6.23)
Extraordinary Loss (0.20) - - (0.34) (0.55)
Cum Change in Accounting
Principle (4.00) - - - (3.99)
----- ----- ----- ----- ----
$(8.72) $ 2.73 $ 1.18 $(7.83)$(12.64)
===== ===== ===== ===== ====
2000
----
1st Q
-----
Revenues
Net Sales and
Operating Revenues $ 882
Other Income, net 1
-----
883
-----
Costs and Expenses
Cost of Sales
(exclusive of depr.
shown below) 672
Operating Expenses 15
Selling, General
and Administrative 110
Depreciation, Depletion
and Amortization 39
-----
836
-----
Operating Income (Loss) 47
Interest Expense
(net of interest capitalized) 45
Income Tax Expense (Benefit) (1)
Minority Interest 2
-----
Income (Loss) from Continuing
Operations 1
Income (Loss) from Discontinued
Operations, net of
income tax -
Extraordinary Loss, net of
income tax -
Cumulative Effect of Change
in Accounting Principle,
net of income tax -
-----
Net Income (Loss) $ 1
=====
Average Common Shares Outstanding:
Basic 33.7
=====
Diluted 33.9
=====
Earnings (Loss) Per Share of Common Stock:
Basic -
Continuing Operations $ 0.03
Discontinued Operations -
Extraordinary Loss -
Cum Change in Accounting
Principle -
-----
$ 0.03
=====
Diluted -
Continuing Operations $ 0.03
Discontinued Operations -
Extraordinary Loss -
Cum Change in Accounting
Principle -
-----
$ 0.03
=====