The lower earnings estimate is due to a number of factors, including softer than anticipated aftermarket sales volumes in North America and Europe. Global aftermarket sales are currently anticipated to be approximately six percent lower than second quarter 1999. The company also is experiencing margin pressure in the North American original equipment business due to recent slower sales in its heavy duty elastomer business and a mix shift to lower margin exhaust platforms launched earlier this year.
"Like other suppliers, we continue to be impacted by the softness in the worldwide aftermarket business," said Mark Frissora, chairman and CEO, Tenneco Automotive. "While June sales in the North American aftermarket are reflecting a more normal seasonal trend and the percentage of sales of Reflex® and Sensa-Trac® to total aftermarket sales in this region is up, these positive trends are not enough to offset the weakness in such sales earlier in the quarter. Higher steel costs in Europe, a weak Euro and higher interest rates are also affecting our results."
"While we're disappointed with today's earnings announcement, we are encouraged by our strengthening operating cash flow position," Frissora said. "We aim to continue this success by aggressively focusing on reducing capital spending, working capital and overhead costs to reduce our debt level as quickly as possible."
Tenneco Automotive plans to release 2000 second quarter earnings on July 27, 2000.
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® and Walker® global brand names. Among its products are Sensa-Trac® and Reflex® shocks and struts, Rancho® shock absorbers, Walker® Quiet-Flow(TM) mufflers and DynoMax(TM) performance exhaust products, and Monroe® Clevite(TM) vibration control components.
The statements in this press release regarding the company's estimates and expectations for its second quarter financial condition and results and its plans to continue focusing on reducing capital spending, working capital and overhead costs to reduce its debt level are forward-looking and are identified by the use of forward-looking words and phrases, such as "expects," "estimate," "anticipated," and "aim to continue." 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 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 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 in the Financial 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.