-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OymGGwdi/C5Ml/xtGmY5bMNhl0VvGauTczNURow5dwfvqw1FNAMK03eqoeLKAReZ ZeytMpFDkb770TWQED0P6w== /in/edgar/work/0000950137-00-004510/0000950137-00-004510.txt : 20001026 0000950137-00-004510.hdr.sgml : 20001026 ACCESSION NUMBER: 0000950137-00-004510 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001024 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENNECO AUTOMOTIVE INC CENTRAL INDEX KEY: 0001024725 STANDARD INDUSTRIAL CLASSIFICATION: [3714 ] IRS NUMBER: 760515284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12387 FILM NUMBER: 745826 BUSINESS ADDRESS: STREET 1: 500 NORTH FIELD DRIVE CITY: LAKE FOREST STATE: IL ZIP: 60045 BUSINESS PHONE: 847-482-50 MAIL ADDRESS: STREET 1: 500 N FIELD DR STREET 2: ROOM T 2560B CITY: LAKE FOREST STATE: IL ZIP: 60045 FORMER COMPANY: FORMER CONFORMED NAME: NEW TENNECO INC DATE OF NAME CHANGE: 19961011 8-K 1 c58035e8-k.txt CURRENT REPORT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K ------------------------ CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 24, 2000 TENNECO AUTOMOTIVE INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 1-12387 76-0515284 (STATE OR OTHER (COMMISSION (IRS EMPLOYER JURISDICTION OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 482-5000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ITEM 5. OTHER EVENTS. On October 24, 2000, Tenneco Automotive Inc. announced its results of operations for the third quarter 2000. In that announcement, Tenneco Automotive described certain cost-reduction initiatives which it has begun to implement and anticipates continuing to implement throughout the fourth quarter of 2000. A copy of the press release announcing the company's third quarter results and these restructuring initiatives is filed as an exhibit to this Form 8-K report, and is incorporated herein by reference. Also on October 24, Tenneco Automotive announced that it had reached agreement with its senior lenders to amend various provisions of its senior credit facility. The amendments will (1) permit the company to implement certain cost-reduction initiatives, including those described above, by excluding cash charges and expenses related to these initiatives from calculation of the financial covenant ratios under the facility, and (2) relax the financial ratios under the facility beginning in the fourth quarter 2000, with two of the relaxed ratios continuing through the third quarter 2001 and the remaining relaxed ratio continuing through the term of the facility. A copy of the press release announcing the amendment of the company's senior credit facility, as well as the text of the actual amendment agreement, is filed as an exhibit to this Form 8-K report, and is incorporated herein by reference. It should be noted that the press release erroneously indicates that the company's capital expenditure limitation will be $150 million for 2004; as amended, this limitation will be $250 million for 2004. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 First Amendment to the Credit Agreement, dated October 20, 2000, among Tenneco Automotive Inc., The Chase Manhattan Bank and Citicorp USA, Inc. 99.1 Press Release, dated October 24, 2000, announcing the amendments to the Tenneco Automotive senior credit facility. 99.2 Press Release, dated October 24, 2000, announcing Tenneco Automotive's third quarter 2000 earnings.
1 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TENNECO AUTOMOTIVE INC. By: /s/ MARK A. MCCOLLUM ------------------------------------ Mark A. McCollum Senior Vice President and Chief Financial Officer Date: October 25, 2000 2 4 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 First Amendment to the Credit Agreement, dated October 20, 2000, among Tenneco Automotive Inc., The Chase Manhattan Bank and Citicorp USA, Inc. 99.1 Press Release, dated October 24, 2000, announcing the amendments to the Tenneco Automotive senior credit facility. 99.2 Press Release, dated October 24, 2000, announcing Tenneco Automotive's third quarter 2000 earnings.
EX-4.1 2 c58035ex4-1.txt CREDIT AGREEMENT AMENDMENT 1 EXHIBIT 4.1 FIRST AMENDMENT TO THE CREDIT AGREEMENT FIRST AMENDMENT, dated as of October 20, 2000 (this "First Amendment"), to the Credit Agreement, dated as of September 30, 1999 (as amended, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among TENNECO AUTOMOTIVE INC., a Delaware corporation (the "Borrower"), the several lenders from time to time parties thereto (the "Lenders"), THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), and the other financial institutions named therein as agents for the Lenders (in such capacity, collectively, the "Other Agents"). WITNESSETH: WHEREAS, the Borrower, the Lenders and the Administrative Agent and the Other Agents are parties to the Credit Agreement; WHEREAS, the Borrower has requested that the Lenders amend the Credit Agreement as set forth herein; WHEREAS, the Lenders, the Administrative Agent and the Other Agents are willing to agree to such amendment to the Credit Agreement, subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Borrower, the Lenders, the Administrative Agent and the Other Agents hereby agree as follows: Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as therein defined. Amendments to Credit Agreement. (a) Section 1.1 of the Credit Agreement is amended as follows: (i) by deleting the definition of "Applicable Margin" in its entirety and substituting, in lieu thereof, the following: "Applicable Margin": for each Type of Loan, the rate per annum set forth under the relevant column heading below: ABR Loans Eurodollar Loans --------- ---------------- Revolving Loans and Swingline Loans 2.00% 3.00% Tranche A Term Loans 2.00% 3.00% Tranche B Term Loans 2.50% 3.50% Tranche C Term Loans 2.75% 3.75% 2 2 ; provided, that on and after the first Adjustment Date, the Applicable Margin with respect to Revolving Loans, Swingline Loans and Tranche A Term Loans will be determined pursuant to the Pricing Grid. (ii) by adding the following two sentences at the end of the definition of "Consolidated EBITDA": In addition, Consolidated EBITDA for each fiscal quarter of the Borrower, commencing with the last quarter of the Borrower's 2000 fiscal year and ending with the last quarter of the Borrower's 2001 fiscal year, shall be increased by the amount of cash restructuring charges and related expenses associated with restructurings (restructurings will include a rationalization of selling and administrative costs and a resizing of manufacturing plants both domestically and internationally) undertaken by the Borrower in the United States and internationally included in the calculation of Consolidated Net Income for such fiscal quarter, provided that (i) the aggregate amount of such cash restructuring charges in such five fiscal quarter period shall not exceed $80,000,000, (ii) the aggregate amount of such cash restructuring charges associated with North American restructurings shall not exceed $55,000,000 and (iii) the aggregate amount of such cash restructuring charges associated with other restructurings shall not exceed $45,000,000. For purposes of the foregoing sentence, "cash" restructuring charges and related expenses shall be deemed to include any accrual of or reserve for cash restructuring charges and related expenses for any future period. (iii) by (A) deleting clause (a) of the definition of "Interest Period" and replacing it with the following: (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending two weeks, or one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto, or any other period agreed upon between the Borrower and the Lenders; and (B) by adding at the end of clause (iii) of the definition of "Interest Period" the phrase "unless such Interest Period has a duration of less than one month"; (iv) by deleting the last sentence of the definition of "Permitted Receivables Financing" and replacing it with the following sentences: The aggregate principal amount of the proceeds received from parties outside of Borrower's consolidated group and which remains outstanding in all transactions described in the preceding clauses (a) and (b) will not exceed $150,000,000 at any time and from time to time. In addition to receivables and their proceeds, the assets transferred in a Permitted Receivables Financing may include (i) any collateral for transferred receivables (other than any interest in goods the sale of which gave rise to such receivables) and any agreements supporting or securing 3 3 payment of transferred receivables, (ii) any service contracts or other agreements associated with such receivables and records relating to such receivables, (iii) any bank account or lock box maintained primarily for the purpose of receiving collections of transferred receivables and (iv) proceeds of all of the foregoing. (b) Section 6.2 of the Credit Agreement is amended by (i) deleting the phrase "clause (f)" from the first sentence thereof and replacing it with the phrase "clause (g)", (ii) deleting the word "and" from the end of clause (e), (iii) relettering the existing clause (f) as clause (g) and (iv) adding thereto the following new clause (f): (f) as soon as available, but in any event not later than 45 days after the end of each fiscal year of the Borrower (but only if the Borrower's Consolidated Leverage Ratio is greater than 3.50 to 1.0 as of the end of the Borrower's third fiscal quarter in such ending fiscal year, it being understood that in any event such projections shall be required to be delivered for the Borrower's 2001 and 2002 fiscal years), a copy of the projections by the Borrower of its operating budget and cash flow budget for each quarter of the fiscal year in which such delivery is required to be made, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared based upon good faith estimates and assumptions and on the basis of sound financial planning practice; and (c) Section 7.1 of the Credit Agreement is amended by deleting paragraphs (a), (b) and (c) in their entirety and substituting, in lieu thereof, the following: (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter during any period set forth below to exceed the ratio set forth below opposite such period: Consolidated Period Leverage Ratio ------ -------------- Third Quarter 2000 4.75 Fourth Quarter 2000 4.90 First Quarter 2001 4.75 Second Quarter 2001 4.50 Third Quarter 2001 4.50 Fourth Quarter 2001 4.25 Fiscal Year 2002 3.75 Fiscal Year 2003 3.50 Fiscal Year 2004 3.50 Fiscal Year 2005 3.50 Fiscal Year 2006 3.50 Fiscal Year 2007 3.50 Fiscal Year 2008 3.50 4 4 (b) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter during any period set forth below to be less than the ratio set forth below opposite such period: Consolidated Interest Period Coverage Ratio ------ --------------------- Third Quarter 2000 2.00 Fourth Quarter 2000 1.70 First Quarter 2001 1.70 Second Quarter 2001 1.80 Third Quarter 2001 1.80 Fourth Quarter 2001 1.90 First Quarter 2002 2.20 Second Quarter 2002 2.20 Third Quarter 2002 2.20 Fourth Quarter 2002 2.50 Fiscal Year 2003 2.75 Fiscal Year 2004 3.00 Fiscal Year 2005 3.00 Fiscal Year 2006 3.00 Fiscal Year 2007 3.00 Fiscal Year 2008 3.00 ; provided that for the purpose of determining the ratio described for the period ending September 30, 2000, such determination shall be made for the three consecutive fiscal quarters ending with such fiscal quarter. (c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter during any period set forth below to be less than the ratio set forth below opposite such period: Consolidated Fixed Period Charge Coverage Ratio ------ --------------------- Fourth Quarter 2000 0.75 First Quarter 2001 0.75 Second Quarter 2001 0.85 Third Quarter 2001 0.85 Fourth Quarter 2001 1.00 Fiscal Year 2002 1.25 Fiscal Year 2003 1.50 Fiscal Year 2004 1.75 5 5 Fiscal Year 2005 1.75 Fiscal Year 2006 1.75 Fiscal Year 2007 1.75 Fiscal Year 2008 1.75 (d) Section 7.7 of the Credit Agreement is amended by deleting the phrase "and (b) $275,000,000 per fiscal year thereafter" and replacing it with the following: , (b) $200,000,000 for fiscal year 2000, (c) $225,000,000 for each of fiscal year 2001, fiscal year 2002 and fiscal year 2003, (d) $250,000,000 for fiscal year 2004 and (e) $275,000,000 for each fiscal year thereafter; (e) Section 7.8 of the Credit Agreement is amended by (i) deleting the word "and" from the end of clause (i), (ii) relettering the existing clause (j) as clause (k) and (iii) adding thereto the following new clause (j): (j) the Finance Subsidiary may execute and deliver one or more subordinated promissory notes (having terms customary for similar notes issued in transactions similar to a Permitted Receivables Financing) to the Borrower and its Subsidiaries representing the deferred purchase price of receivables sold to the Finance Subsidiary in a Permitted Receivables Financing, and the Borrower and its Subsidiaries may contribute receivables and other assets of the type referred to in the definition of "Permitted Receivables Financing" to the capital of the Finance Subsidiary in connection with a Permitted Receivables Financing; and Representations and Warranties. The Borrower hereby confirms, reaffirms and restates the representations and warranties set forth in Section 4 of the Credit Agreement, as amended by this First Amendment. The Borrower represents and warrants that, after giving effect to this First Amendment, no Default or Event of Default has occurred and is continuing. Effectiveness. This First Amendment shall become effective as of the date of receipt by the Administrative Agent of (a) counterparts of this First Amendment executed by the Borrower and the Required Lenders and (b) payment for all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel) (the "Effective Date"). Continuing Effect of the Credit Agreement. This First Amendment shall not constitute an amendment of any other provision of the Credit Agreement not expressly referred to herein and shall not be construed as a waiver or consent to any further or future action on the part of the Borrower that would require a waiver or consent of the Lenders, the Administrative Agent or the 6 6 Other Agents. Except as expressly amended hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. Counterparts. This First Amendment may be executed by the parties hereto in any number of separate counterparts (including telecopied counterparts), each of which shall be deemed to be an original, and all of which taken together shall be deemed to constitute one and the same instrument. 2. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 7 7 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. TENNECO AUTOMOTIVE INC. By: --------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By: --------------------------------------- Name: Title: CITICORP USA, INC., as Syndication Agent and as a Lender By: --------------------------------------- Name: Title: EX-99.1 3 c58035ex99-1.txt PRESS RELEASE, DATED 10/24/00 1 Exhibit 99.1 TENNECO AUTOMOTIVE SUCCESSFULLY AMENDS SENIOR CREDIT AGREEMENT LAKE FOREST, ILLINOIS, OCTOBER 24, 2000 - Tenneco Automotive (NYSE: TEN) announced today that it has agreed with its senior lenders to amend certain terms of its senior credit facility. These amendments allow the company to implement worldwide cost reduction initiatives, some of which were outlined in its third quarter earnings announcement today, and relax the financial covenant ratios under the facility beginning in the fourth quarter of 2000. The amendments, which required the approval of lenders representing a majority of commitments under the senior credit facility, were approved by 87 percent. "While we are successfully executing the key initiatives underlying our business plan, we must accelerate our efforts to improve our cost structure by implementing work force reductions, and further rationalizing the manufacturing, distribution, and administrative facilities of our businesses worldwide," said Mark A. McCollum, senior vice president, and chief financial officer for Tenneco Automotive. "It is particularly important now as we face very difficult industry and market conditions, including higher interest rates, a weak euro, softness in the global aftermarket, a significant decline in the heavy-duty truck market, and slowing in North American light vehicle production." The senior credit agreement has been amended to exclude from the calculation of the company's financial covenant ratios through 2001 the cash portion -- up to $80 million before taxes -- of the charges and expenses related to cost reduction initiatives. As outlined in its third quarter earnings announcement today, the company has begun to implement some of these initiatives and anticipates implementing additional initiatives throughout the remainder of the fourth quarter and during 2001. The company anticipates taking up to a $60 million charge (of which up to $30 million could be in cash) in the fourth quarter to cover many of these restructuring actions. Other initiatives are being evaluated for 2001 and will require review and approval by the Board of Directors. The amendments also include certain minor technical corrections to certain provisions in the agreement relating to the permitted receivable securitization transactions. The senior lenders also agreed to relax the financial covenant ratios beginning in the fourth quarter of 2000 in anticipation of the current difficult market conditions continuing into next year. Tenneco Automotive is required to meet three financial ratios under its senior credit agreement: a 2 maximum leverage ratio (total debt/EBITDA); a minimum interest coverage ratio (EBITDA/cash interest payments); and a minimum fixed charge coverage ratio (EBITDA - capital expenditures/cash interest payments). For the fourth quarter, the maximum leverage ratio was increased from 4.75 to 4.90; the minimum interest coverage ratio was reduced from 2.00 to 1.70; and the minimum fixed charge coverage ratio was reduced from 1.00 to .75. The attached table shows the ratio adjustments in 2001 and beyond. In return for these revisions, Tenneco Automotive agreed to increase the current interest rate margins on the $500 million revolving facility and the $450 million A term loans by 25 basis points. This increase in interest rate margins will apply through the first quarter of 2001, after which these margins will be subject to adjustment under the existing terms of the senior credit agreement based on the company's leverage ratio. The interest rate margins on the $300 million B and C term loans were increased by 25 basis points for the full terms of these loans. The company paid each lender that approved the amendments a fee equal to 0.2 percent of that lender's loan commitment under the senior credit facility, for an aggregate fee to all consenting lenders of approximately $3 million. Tenneco Automotive also agreed to lower the limit on annual capital expenditures from $275 million to $200 million in 2000; $225 million in each of 2001, 2002, and 2003; and to $150 million in 2004. 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.
2001 2002 2003 2004 -------------------------------- ---- ---- ---- Q1 Q2 Q3 Q4 Leverage Ratio Prior Covenant 4.25 4.25 4.25 4.25 3.75 3.50 3.50 Revised Covenant 4.75 4.50 4.50 4.25 3.75 3.50 3.50 Interest Coverage Ratio Prior Covenant 2.25 2.25 2.25 2.25 2.75 3.25 3.50** Revised Covenant 1.70 1.80 1.80 1.90 2.50* 2.75 3.00** Fixed Charge Coverage Ratio Prior Covenant 1.00 1.00 1.00 1.00 1.25 1.50 1.75 Revised Covenant 0.75 0.85 0.85 1.00 1.25 1.50 1.75
* The interest coverage ratio in the first, second and third quarters of 2001 was reduced from 2.75 to 2.20 ** Interest coverage ratio was reduced from 3.50 to 3.00 in 2005 through 2008. EX-99.2 4 c58035ex99-2.txt PRESS RELEASE, DATED 10/24/00 1 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 2 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. 3 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. 4 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. 5 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. 6 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. 7 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 -- -- -- ---
8 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 -------- ----------- --------------- --------
9 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 ===== =======
10 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% ====== ======
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