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Exhibit 99.2
TENNECO AUTOMOTIVE ANNOUNCES THIRD QUARTER EARNINGS;
ACCELERATES COST REDUCTION INITIATIVE BY REDUCING NORTH
AMERICAN SALARIED WORK FORCE
COMPANY EARNS 23 CENTS PER SHARE BEFORE ONE-TIME ITEMS; PAYS DOWN $72 MILLION IN
DEBT; ANNOUNCES COST REDUCTIONS AIMED AT GENERATING $45 MILLION IN ANNUAL
SAVINGS
LAKE FOREST, ILLINOIS, OCTOBER 24, 2000 - Tenneco Automotive (NYSE:TEN) today
reported third quarter 2000 income from continuing operations of $6 million, or
16 cents per diluted share. These results include a $13 million pre-tax charge
for a stock option buyback program and a $9 million reversal of a reserve for
transaction costs related to the November 1999 spin-off of Pactiv. The company
also generated strong cash flow, reduced outstanding debt by $72 million, and
complied with all debt covenants for the quarter. Further, the company announced
today that it is immediately eliminating 285 salaried positions in North America
as part of a cost reduction plan to eliminate up to 700 positions - or 16
percent -- from its worldwide salaried work force.
Excluding the stock buyback program and reserve reversal, income from continuing
operations would have been $9 million, or 23 cents per diluted share. Third
quarter 1999 income from continuing operations was $27 million, or 86 cents per
share. If the company had incurred the same level of stand-alone and interest
costs in 1999 as it did in 2000, its income from continuing operations and
earnings per diluted share for the third quarter of 1999 would have been $8
million, or 24 cents per share.
The company has reduced its debt by approximately $175 million since becoming an
independent company. The $72 million in debt reduction during the third quarter
was financed, in part, by the sale of $62 million of receivables in the United
States.
Tenneco Automotive estimates it will realize $45 million in annual savings as a
result of this worldwide cost reduction plan, which it expects to complete
during the second quarter 2001. All work force reductions will be completed in
compliance with all legal and contractual requirements including obligations to
consult with worker committees, union representatives and others. Year-to-date,
the company has already reduced approximately 140 salaried positions globally,
primarily through attrition, which will generate an additional $15 million in
annual savings. In addition, it has adjusted to lower production volumes by
eliminating, at minimal cost, approximately 310 hourly
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positions throughout North America in the past 60 days.
The company anticipates taking up to a $60 million charge in the fourth quarter
(of which up to $30 million could be cash) to cover many of these reductions,
and for other operational restructuring activities included in the initiative.
Those include consolidating its North American aftermarket exhaust production at
one plant, and scrapping certain North American aftermarket inventories. The
company is evaluating additional cost reduction initiatives for 2001, which will
require review and approval by the Board of Directors.
"We regret the impact on our people; however, we must make these difficult
decisions in order to move our businesses forward and position them for
long-term growth," said Mark P. Frissora, chairman and CEO, Tenneco Automotive.
"Recent market conditions and our structural costs, which are higher than the
industry average, currently impact our ability to deliver stronger financial
results."
THIRD QUARTER RESULTS
The company reported third quarter revenue of $870 million, including $48
million in pass through revenue from catalytic converter sales. Third quarter
1999 revenue was $816 million, which did not include pass through revenue from
catalytic converter sales.
Reported EBITDA for the third quarter was $87 million. EBITDA would have been
$91 million, excluding the one-time non-operational items, a slight decrease
from third quarter 1999 EBITDA of $97 million adjusted to include the same level
of stand-alone costs we incurred in 2000. The company reported EBIT of $47
million. Excluding the one-time items, EBIT for the quarter was $51 million,
lower than last year's third quarter of $58 million if the same stand-alone
costs were included in year ago results.
"The weakness in global currencies, the continuing softness in the global
aftermarket, and the significant downturn in the heavy-duty truck market have
negatively affected our results by at least $12 million in EBIT," said Frissora.
"Fortunately, our operational results helped to offset the impact of many of
these conditions. However, we're not satisfied with these results, and recognize
that we must bring more focus and efficiency to our operations, lower our costs,
and continue to reduce our debt."
As previously reported in its first and second quarter 10-Q filings, the stock
option buyback program was initiated to substantially lower the number of old
options issued by Tenneco Inc., primarily between 1996 and 1998. The company
believed that in order to keep and attract talent in the future, more options
would be needed. However, the company also felt there were too many options
outstanding and those options could be dilutive. Last May, employees were given
an opportunity to sell their options back to the company for a price determined
using the Black- Scholes financial model. As a result, the company recovered
more than 6 million options.
NORTH AMERICA
The company saw a slight decline in revenue from its North American original
equipment business, primarily from a decrease in the heavy-duty elastomer
business as well as slowing light vehicle production. North American original
equipment revenue was $315 million, including $48 million in pass through
revenue from catalytic converter sales, compared with $279 million in revenue
for the third quarter of 1999.
Third quarter revenue for the North American aftermarket was $154 million,
compared with third quarter 1999 results of $155 million. Despite continuing
softness in the aftermarket, results were nearly even as a result of successful
repositioning of the company's ride control and exhaust products, and gains in
market share for both product lines.
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The third quarter EBIT for North American operations was $36 million, compared
with $40 million in the previous year. In the original equipment business, the
decrease was largely due to lower heavy-duty volume and higher start-up expenses
on new exhaust platforms. On the aftermarket side, higher promotional expense
and lower pipe pricing impacted profitability.
EUROPE
The company reported third quarter 2000 revenue for the European original
equipment business of $216 million, a 16 percent increase compared with third
quarter 1999 revenue of $187 million. Revenue would have increased by 34 percent
if exchange rates had been the same in the third quarter 2000 as in the third
quarter of 1999. The increase was driven by strong volume in the original
equipment business, particularly in the exhaust side of the business.
Revenue from the European aftermarket business was $95 million, compared with
$120 million in the third quarter of 1999. Had exchange rates been the same in
the third quarter of 1999 as in 2000, revenue would have declined eight percent.
The decrease was primarily due to continued weakness in the broad market for
both product lines.
European EBIT was $16 million, compared with $23 million in the same quarter
last year. The stronger OE volumes were more than offset by lower aftermarket
volumes, higher aftermarket manufacturing costs due to increased steel prices,
and the currency impact.
Tenneco Automotive reported third quarter results in other geographical areas as
follows:
Region Revenue Growth (Decline) - year over year
- ------ ------- ---------------------------------
South America $42 million 45 percent
Australia $33 million (6 percent)
Asia $15 million 50 percent
- -------------------------------------------------------
Total $90 million 22 percent
Combined EBIT for South America, Australia, and Asia in the third quarter was $8
million, up 100 percent compared with the $4 million recorded in third quarter
1999.
The company also announced, in a separate news release issued today, that it has
agreed with its senior lenders to amend certain terms under its senior credit
facility. These amendments primarily allow the company to begin to implement the
cost reduction initiatives and relax the financial covenant ratios beginning in
the fourth quarter of 2000.
Looking forward, based on a continuation of third-quarter market conditions, the
company expects EBITDA from operations before restructuring charges and other
non-operating items for the year to be between $355 million and $365 million.
This forecast assumes a $5 million fourth quarter benefit for the restructuring
actions.
Attached are exhibits that provide additional information on Tenneco
Automotive's 2000 and 1999 operating results.
The company will host a conference call on October 24, 2000, at 10:30 a.m. EDT.
The dial in number is 888 390-7303 for domestic or 312 470-0014 for
international. Passcode is Tenneco Automotive. A recording of this call will be
available from 2:00 p.m. EDT on October 24 through November 1. To access this
recording, dial 800 677-7715 domestic or 402 220-0274 international, and enter
the passcode 8400. The call will also be available on the Tenneco Automotive web
site at www.tenneco-automotive.com.
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Tenneco Automotive is a $3.3 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) and Reflex(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.
#
The company's forecast in this press release of its EBITDA from operations
before restructuring charges and other non-operating items for the year and the
statements in this press release relating to (a) the total number of positions
the company plans to eliminate as part of its worldwide cost reduction plan, (b)
the total annual savings the company anticipates realizing through attrition and
the implementation of its cost reduction plan, (c) when the company expects to
complete the implementation of its worldwide cost reduction plan, (d) the charge
the company anticipates taking in the fourth quarter of 2000 in connection with
its implementation of the worldwide cost reduction plan, are forward-looking.
These forward-looking statements are based on the current expectations of the
company (including its subsidiaries). Because these forward-looking statements
involve risks and uncertainties, the company's plans, actions and actual results
could differ materially. Among the factors that could cause these 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, including
increases in the company's costs of borrowing (i.e. interest rate increases);
(iv) changes in automotive manufacturers' production rates and their 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 currency exchange rates; (vi) 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; (vii) the cost of compliance with changes in
regulations, including environmental regulations; (viii) workforce factors such
as strikes or labor interruptions; (ix) material substitutions and increases in
the costs of raw materials; (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; (xiii) the failure of the company's
Board of Directors to ultimately approve certain of the company's currently
planned cost reduction initiatives; and (xiv) 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.
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TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
INCOME STATEMENT
----------------
THREE MONTHS ENDED SEPTEMBER 30,
Unaudited
---------
2000 1999
----- -----
Net sales and operating revenues: $ 870 $ 816
===== =====
Operating income (loss):
North America $ 29 $ 40
Europe 14 23
Rest of World 8 4
Other (4) --
----- -----
47 67
Less:
Interest expense (net of
interest capitalized) 46 16
Income tax expense (benefit) (5) 16
Minority interest -- 8
----- -----
Income (loss) from continuing
operations 6 27
Income (loss) from discontinued
operations, net of income tax -- 12
Extraordinary loss, net of income
tax (1) (a) --
Cumulative effect of change in
accounting principle, net of
income tax -- --
----- -----
Net income (loss) $ 5 $ 39
===== =====
Average common shares outstanding:
Basic 35.1 33.5
===== =====
Diluted 35.2 33.5
===== =====
Earnings (loss) per share of common stock:
Basic-
Continuing operations $0.17 $0.86
Discontinued operations -- 0.32
Extraordinary loss (0.01) (a) --
Cumulative effect of change
in accounting principle -- --
----- -----
$0.16 $1.18
===== =====
Diluted-
Continuing operations $0.16 $0.86
Discontinued operations -- 0.32
Extraordinary loss (0.01) (a) --
Cumulative effect of change
in accounting principle -- --
----- -----
$0.15 $1.18
===== =====
(a) Loss on early retirement of debt.
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TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
INCOME STATEMENT
----------------
NINE MONTHS ENDED SEPTEMBER 30,
Unaudited
---------
2000 1999
------- -------
Net sales and operating revenues: $ 2,700 $ 2,473
======= =======
Operating income (loss):
North America $ 103 $ 143
Europe 48 74
Rest of World 15 2
Other (4) --
------- -------
162 219
Less:
Interest expense (net of
interest capitalized) 139 58
Income tax expense (benefit) (1) 60
Minority interest 2 21
------- -------
Income (loss) from continuing
operations 22 80
Income (loss) from discontinued
operations, net of income tax -- (99)
Extraordinary loss, net of income
tax (1)(a) (7)(b)
Cumulative effect of change in
accounting principle, net of
income tax -- (134)(c)
------- -------
Net income (loss) $ 21 $ (160)
======= =======
Average common shares outstanding:
Basic 34.4 33.4
======= =======
Diluted 34.6 33.5
======= =======
Earnings (loss) per share of common stock:
Basic-
Continuing operations $ 0.62 $ 2.40
Discontinued operations -- (2.98)
Extraordinary loss (0.01)(a) (0.20)(b)
Cumulative effect of change
in accounting principle -- (4.00)(c)
------- -------
$ 0.61 $ (4.78)
======= =======
Diluted-
Continuing operations $ 0.61 $ 2.40
Discontinued operations -- (2.98)
Extraordinary loss (0.01)(a) (0.20)(b)
Cumulative effect of change
in accounting principle -- (4.00)(c)
------- -------
$ 0.60 $ (4.78)
======= =======
(a) Loss on early retirement of debt.
(b) Loss on early retirement of debt used to finance a Containerboard facility.
(c) 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
aftermarket customer contracts of $32 million or $.95 per share.
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TENNECO AUTOMOTIVE
ANALYSIS OF OPERATING UNITS RESULTS
QUARTER ENDED SEPTEMBER 30, 2000
(MILLIONS EXCEPT PER SHARE AMOUNTS)
OPERATING STAND ALONE ONE-TIME
UNITS COMPANY NON-OPERATIONAL REPORTED
RESULTS EXPENSE ITEMS INCOME
--------- ----------- --------------- --------
EBIT
North America 36 (7) -- 29
Europe 16 (2) -- 14
Rest of World 8 -- -- 8
Other -- -- (4) (4)
-- -- -- ---
Total 60 (9) (4) 47
-- -- -- ---
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TENNECO AUTOMOTIVE
ANALYSIS OF OPERATING UNITS RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(MILLIONS EXCEPT PER SHARE AMOUNTS)
OPERATING STAND ALONE ONE-TIME
UNITS COMPANY NON-OPERATIONAL REPORTED
RESULTS EXPENSE ITEMS INCOME
--------- ----------- --------------- --------
EBIT
North America 128 (25) - 103
Europe 57 (9) - 48
Rest of World 17 (2) - 15
Other - - (4) (4)
-------- ----------- --------------- --------
Total 202 (36) (4) 162
-------- ----------- --------------- --------
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EXTERNAL BASIS
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
UNAUDITED
(Millions)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
----- -------
Operating activities:
Income (loss) from continuing operations $ 22 $ 80
Adjustments to reconcile income (loss) from continuing
operations to net cash provided (used) by
operating activities -
Depreciation and amortization 116 110
Deferred income taxes 20 44
(Gain)/loss on sale of businesses and assets, net 1 5
Changes in components of working capital -
(Inc.)/dec. in receivables (44) (244)
(Inc.)/dec. in inventories (11) (7)
(Inc.)/dec. in prepayments and other current assets (15) 15
Inc./(dec.) in payables 123 44
Inc./(dec.) in taxes accrued (28) (74)
Inc./(dec.) in interest accrued 20 39
Inc./(dec.) in other current liabilities (5) (62)
Other 4 (50)
----- -------
Cash provided (used) by continuing operations 203 (100)
Cash provided (used) by discontinued operations -- (66)
----- -------
Net cash provided (used) by operating activities 203 (166)
----- -------
Investing activities:
Net proceeds from sale of discontinued operations -- 342
Net proceeds from sale of assets 7 8
Expenditures for plant, property & equipment (108) (104)
Acquisition of businesses (5) (36)
Expenditures for plant, property & equipment-discontinued operations -- (1,249)
Investments and other (15) (29)
----- -------
Net cash provided (used) by investing activities (121) (1,068)
----- -------
Net Cash provided (used) before financing activities - continuing operations 82 (261)
Financing activities:
Issuance of common and treasury shares 13 28
Proceeds from subsidiary equity issuance 1 --
Purchase of common stock -- (4)
Issuance of long-term debt 1 1,761
Retirement of long-term debt (67) (30)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt (25) (360)
Dividends (common) (5) (151)
Other (11) --
----- -------
Net cash provided (used) by financing activities (93) 1,244
----- -------
Effect of foreign exchange rate changes on cash and
temporary cash investments (5) 3
----- -------
Inc./(dec.) in cash and temporary cash investments (16) 13
Cash and temporary cash investments, January 1 84 29
----- -------
Cash and temporary cash investments, September 30 $ 68 $ 42
===== =======
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TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
SEPTEMBER 2000 DECEMBER 1999
ACTUAL ACTUAL
-------------- -------------
ASSETS
RECEIVABLES, Net 625 571
INVENTORIES 395 412
OTHER CURRENT ASSETS 228 218
INVESTMENTS AND OTHER ASSETS 686 705
PLANT, PROPERTY, AND EQUIPMENT, NET 984 1,037
------ ------
TOTAL ASSETS $2,918 $2,943
====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
SHORT-TERM DEBT $ 35 $ 56
ACCOUNTS PAYABLE 436 348
OTHER CURRENT LIABILITIES 275 259
LONG-TERM DEBT 1,505 1,578
DEFERRED INCOME TAXES 129 108
DEFERRED CREDITS AND OTHER LIABILITIES 160 156
MINORITY INTEREST 15 16
TOTAL SHAREOWNERS' EQUITY 363 422
------ ------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $2,918 $2,943
====== ======
DEBT TO CAPITALIZATION RATIO 80.3% 78.9%
====== ======