Tenneco Automotive Achieves Significant Profit Improvement
Company Reports Positive Fourth Quarter Earnings
-- Reports full year net income of $31 million, or 74-cents per diluted
share, before the cumulative effect of a change for the accounting for
goodwill
-- EBIT increases 85 percent in 2002 on 3 percent revenue gain
-- Reports net income of $9 million, or 21-cents per diluted share in the
fourth quarter
-- Debt declines $70 million in 2002 driven by working capital reductions
-- Awarded $440 million in annualized OE business driven by new
technology initiatives
LAKE FOREST, Ill., Feb. 4 -- Tenneco Automotive
announced today that the company reported net income, before the
cumulative effect of a goodwill accounting change, for full-year 2002 of
$31 million, or 74-cents per diluted share, versus a net loss of $130 million,
or $3.43 per diluted share in 2001. The company reported net income of
$9 million, or 21-cents per diluted share, for the fourth quarter of 2002
compared with a net loss of $99 million, or $2.53 per diluted share, during
the fourth quarter of 2001.
The fourth quarter 2002 results include income related to special
adjustments for restructuring costs and taxes totaling $16 million after-tax,
or 38-cents per share. The fourth quarter 2001 results included net charges
related to restructuring, taxes and other items totaling $92 million after-
tax, or $2.34 per share. Before special adjustments, the fourth quarter 2002
results would have been a net loss of $7 million, or 17-cents per share even
with the 2001 fourth quarter. See the table entitled "Reconciliation to GAAP
Measure" attached to this press release for more information about these
adjustments.
Tenneco Automotive reported 2002 revenue of $3.5 billion, a 3 percent
increase. Reported EBITDA for the year was $313 million, an increase of 28
percent over 2001. For the fourth quarter, revenue was $846 million, compared
with $758 million in fourth quarter 2001, a 12 percent increase. Adjusted for
favorable currency, revenue increased 7 percent. Reported EBITDA for the
quarter was $71 million, compared with $40 million the previous year.
For the full year, the company improved its cash position primarily by
reducing its working capital balance by $79 million, or as a percent of sales,
from 7.6 percent to 5.1 percent. This and other cash management activities
helped the company reduce its total bank and bond debt by $70 million during
the year. The company met its 2002 goal of maintaining SGA&E expense at 12
percent of sales, reporting SGA&E expense during the fourth quarter of
11.6 percent. The company achieved its Project Genesis restructuring goals
for the year, generating almost $12 million in savings. The company also
significantly outperformed its bank debt covenant ratios for 2002.
The company was awarded $440 million in annualized OE business in 2002,
including a significant increase in hot-end business on the exhaust side, for
platforms expected to go into production in 2003 through 2005. The company's
Asian-based alliances generated approximately 15 percent of the new OE
business. The company also added new aftermarket customers in 2002 estimated
at $45 million in annualized revenue.
"I am very pleased with the progress we made in 2002 in improving our
operating and financial results and in achieving full-year profitability,"
said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We were
successful in generating cash and paying down debt for the year. We also
continued to win new OE business with our emission and ride control advanced
technologies and we broadened our aftermarket customer base as well."
The company's borrowings increased by $38 million during the fourth
quarter of 2002. Accounts receivable sold under the company's securitization
arrangements declined $20 million, reflecting a seasonal change attributable
to lower OE sales during the year-end holiday period. The remainder of the
increase in the company's borrowings resulted from cash used during the fourth
quarter, including an increase in inventories, primarily for 2003 platform
launches and an increase in cash balances of $8 million.
Despite the increase in borrowings during the quarter, the company again
significantly outperformed the requirements of its bank debt covenants. At
December 31, the leverage ratio was 4.39, below the maximum limit of 5.75; the
fixed charge coverage ratio was 1.30, exceeding the minimum required ratio of
0.75; and the interest coverage ratio was 2.26, exceeding the minimum required
ratio of 1.65.
"Our North American original equipment business continued to capitalize on
strong production rates in the fourth quarter while our OE business in Europe
continued to improve profitability, particularly in the emission control
business where gross margins improved 1.5 percentage points versus the third
quarter and 1.6 percentage points compared with fourth quarter last year,"
said Frissora. "The North American aftermarket showed increasing softness in
the quarter, which impacted our results. We're staying focused on controlling
the cost side of the business and working to stimulate demand for ride control
products through aggressive marketing and sales efforts."
NORTH AMERICA
Continued strong production volumes drove an 11 percent increase in North
American original equipment revenue during the quarter. The company reported
North American original equipment revenue of $338 million during the quarter
versus $306 million in fourth quarter 2001. Excluding catalytic converter
pass-through sales, revenue increased 12 percent. North American aftermarket
revenue for the quarter was $88 million versus $116 million one year ago.
Revenue was primarily impacted by the continuing decline in the exhaust market
and, to a lesser extent, lower volumes in the ride control market.
North American EBIT increased to $21 million from $12 million the previous
year. Higher OE volumes and improved manufacturing efficiency were offset by
the impact of lower volumes in both the ride control and exhaust segments of
the aftermarket. Fourth quarter 2002 results include a benefit of $2 million
for an adjustment in the estimate to complete Project Genesis and
non-accruable restructuring expenses of $2 million. Fourth quarter 2001
included $8 million in restructuring and related expenses.
EUROPE
The company reported a 22 percent increase in European OE revenue to
$253 million, compared with $207 million in the fourth quarter of 2001.
Higher currency exchange rates benefited total OE revenues by $29 million.
Excluding catalytic converter pass-through sales and currency exchange,
revenue was up 4 percent. The company's European aftermarket revenue
increased 14 percent to $70 million, versus $61 million in fourth quarter
2001. Excluding the impact of currency exchange, aftermarket revenue
increased 1 percent.
European EBIT was $3 million in the quarter, compared with a loss of
$16 million in the fourth quarter of 2001. Fourth quarter 2002 results
include a net benefit of $3 million for an adjustment in the estimate to
complete Project Genesis, net of non-accruable Genesis costs. Fourth quarter
2001 results include a net $20 million of restructuring and related expenses
and $4 million benefit for a reversal of an environmental reserve.
REST OF WORLD
The company reported revenue for its Asian operations of $39 million, a
151 percent increase compared with fourth quarter 2001. New business and
increased OE volumes in China drove the improvement.
Australian operations reported a 27 percent increase in revenue to
$33 million, versus $27 million one year ago.
In South America, the company reported revenue of $25 million compared
with $26 million in the fourth quarter of 2001. Revenues increased 30 percent
excluding the impact of currency devaluations.
Combined EBIT for Asia, Australia and South America was $7 million versus
$6 million in fourth quarter 2001. Fourth quarter 2002 results include a
$1 million favorable adjustment in the estimate to complete Project Genesis,
net of non-accruable Genesis costs. Fourth quarter 2001 results include a
$1 million restructuring charge for Project Genesis.
OUTLOOK
"Our top priority this year is to continue generating cash to pay down
debt, primarily through additional working capital improvements and
strengthening our margins. We are working to grow the top line of our
businesses by leveraging our advanced technologies and strong brands and
expanding to adjacent markets," said Frissora. "We are also doubling our
efforts to control what we can in order to help offset what we anticipate will
be a tougher operating environment in the coming year in light of current
global economic and political uncertainties."
CHANGE IN ACCOUNTING FOR GOODWILL
The company recorded a charge in full-year results of $218 million net of
tax, or $5.48 per diluted share, for adopting the Financial Accounting
Standards Board's new rules on accounting for goodwill. Including the
goodwill charge, the company reported a net loss for full-year 2002 of $187
million, or $4.74 per diluted share.
The attachments provide additional information on Tenneco Automotive's
fourth quarter and full year 2002 earnings.
CONFERENCE CALL INFORMATION
The company will host a conference call today, February 4, 2003 at 10:30
a.m. EST. The dial-in number is 888 809-8968 domestic or 630 395-0038
international. Passcode is Tenneco Auto. A recording of this call will be
available one hour following the completion of the call on February 4 through
February 11, 2003. To access this recording, dial 800 284-7024 domestic or
402 220-9737 international and enter passcode 8400. The call will also be
available on the Tenneco Automotive web site at http://www.tenneco-automotive.com .
2003 ANNUAL MEETING
The Tenneco Automotive board of directors has scheduled the corporation's
annual meeting of shareholders for Tuesday, May 13, 2003 at 10:00 a.m. The
meeting will be held at the corporate headquarters, 500 North Field Drive,
Lake Forest, Illinois. The record date for shareholders to vote at the
meeting is March 21, 2003.
Tenneco Automotive is a $3.5 billion manufacturing company with
headquarters in Lake Forest, Illinois and approximately 20,000 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 Monroe(R) Reflex(TM) shocks and struts, Rancho(R) shock
absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(R) performance
exhaust products, and Monroe(R) Clevite(TM) vibration control components.
This press release contains forward-looking statements. Words such as
"taking", "focused", "goal", "expect", "anticipate", "should", "believe",
"plan", "remain", "confident", "continue," "will", "may", "can", "intend",
"continue", "estimate" and "seek" and similar expressions identify forward-
looking statements. 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 book of business and
the overall highly competitive nature of the automotive parts industry; (v)
changes in consumer demand and prices, including longer product lives of
automobile parts and the cyclicality of automotive production and sales of
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 company's ability to execute restructuring and other cost reduction
plans and to realize anticipated benefits from these plans; (x) the company's
ability to develop and profitably commercialize new products and technologies,
and the acceptance of such new products and technologies by the company's
customers; (xi) further changes in the distribution channels for the company's
aftermarket products, further consolidations among automotive parts customers
and suppliers, and product warranty costs; (xii) changes by the Financing
Accounting Standards Board or other accounting regulatory bodies of
authoritative generally accepted accounting principles or policies; (xiii)
acts of war, riots or terrorism, including, but not limited to the events
taking place in the Middle East, and the impact of these acts on economic,
financial and social conditions in the countries where we operate 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. The company undertakes no obligation to update any forward-
looking statement to reflect events or circumstances after the date of this
press release.
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
INCOME STATEMENT
Unaudited
THREE MONTHS ENDED DECEMBER 31,
2002 2001
Net sales and operating revenues: $846 $758
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 677(a)(b) 623(d)(e)
Engineering, Research and Development 13 12
Selling, General and Administrative 85(b) 85(d)
Depreciation and Amortization 40 38
Total Costs and Expenses 815 758
Gain (Loss) on sale of assets (1) 3
Loss on sale of receivables - (1)
Other Income 1 -
Total Other Income - 2
Operating Income
North America 21(a)(b) 12(d)
Europe 3(a)(b) (16)(d)(e)
Rest of World 7(b) 6(d)
31 2
Less:
Interest expense (net of
interest capitalized) 33 38
Income tax expense (benefit) (13)(c) 63(f)
Minority interest 2 -
Net income (loss) $9 $(99)
Average common shares outstanding:
Basic 39.9 39.0
Diluted 41.7 39.2
Earnings (loss) per share of common
stock:
Basic- $0.22 $(2.53)
Diluted- $0.21 $(2.53)
(a) Includes non-accruable restructuring expenses of $5 million pre-tax,
$3 million after-tax or $ 0.07 per diluted share. All of the costs
are recorded in cost of sales. Geographically, $2 million is recorded
in North America and $3 million in Europe.
(b) Includes a favorable adjustment to the estimated costs to complete
Project Genesis of $9 million pre-tax, $8 million after tax or $0.19
per diluted share. Of the adjustment $2 million is recorded in SG&A
and the remaining $7 million is in cost of sales. Geographically,
$2 million is recorded in North America, $6 million in Europe and
$1 million in Rest of World.
(c) Includes tax adjustments of $11 million or $0.26 per diluted share
related to an adjustment in taxes based on filed tax returns and a tax
rate change in Belgium.
(d) Includes net restructuring and other charges of $29 million pre-tax,
$28 million after tax or $0.72 per share. Of the charges $4 million
is recorded in SG&A and the remaining $25 million is in cost of sales.
Geographically, $8 million is recorded in North America, $20 million
in Europe and $1 million in Rest of World
(e) Includes income for an adjustment of environmental reserves of
$4 million pre-tax, $2 million after tax or $0.06 per share. The
amount is recorded in cost of sales. Geographically the amount is
recorded in Europe.
(f) Includes tax charge for repatriation of earnings from foreign
subsidiaries of $66 million or $1.68 per share.
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
INCOME STATEMENT
Unaudited
TWELVE MONTHS ENDED DECEMBER 31,
2002 2001
Net sales and operating revenues: $3,459 $3,364
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 2,735 (a)(b) 2,699 (g)(h)
Engineering, Research and
Development 48 48
Selling, General and
Administrative 370 (b)(c) 372 (g)(i)
Depreciation and Amortization 144 153
Total Costs and Expenses 3,297 3,272
Gain on sale of assets 10 (d) 3
Loss on sale of receivables (2) (5)
Other Income (Loss) (1) 2
Total Other Income 7 -
Operating Income
North America 129 (a)(b)(c) 52 (g)(h)
Europe 18 (a)(b)(c) 23 (g)(h)(i)
Rest of World 22 (b) 17 (g)(i)
169 92
Less:
Interest expense (net of
interest capitalized) 141 170
Income tax expense (benefit) (7) (e)(f) 51 (j)
Minority interest 4 1
Income (loss) before Cumulative
Effect of Change in Accounting
Principle 31 (130)
Cumulative Effect of Change in
Accounting Principle, net of income
tax (218) -
Net income (loss) $(187) $(130)
Average common shares outstanding:
Basic 39.8 37.8
Diluted 41.7 38.0
Earnings (loss) per share of common
stock:
Basic-
Before Cumulative Effect of
Change in Accounting Principle $0.78 $(3.43)
Cumulative Effect of Change in
Accounting Principle (5.48) -
$(4.70) $(3.43)
Diluted-
Before Cumulative Effect of
Change in Accounting Principle $0.74 $(3.43)
Cumulative Effect of Change in
Accounting Principle (5.48) -
$(4.74) $(3.43)
(a) Includes non-accruable restructuring expenses of $11 million pre-tax,
$6 million after-tax or $ 0.16 per diluted share. All of the costs
are recorded in cost of sales. Geographically, $5 million is recorded
in North America and $6 million in Europe.
(b) Includes a favorable adjustment to the estimated costs to complete
Project Genesis of $9 million pre-tax, $8 million after tax or $0.19
per diluted share. Of the adjustment $2 million is recorded in SG&A
and the remaining $7 million is in cost of sales. Geographically,
$2 million is recorded in North America, $6 million in Europe and
$1 million in Rest of World.
(c) Includes costs associated with the renegotiation of senior debt of
$2 million pre-tax, $1 million after-tax or $0.03 per diluted share.
The entire charge is recorded in SG&A. Geographically, $1 million is
recorded in both North America and Europe.
(d) Includes a gain on the sale of a UK facility of $11 million pre-tax,
$5 million after-tax or $0.13 per diluted share. Geographically, the
entire gain is recorded in Europe.
(e) Includes a $4 million or $.10 per diluted share tax benefit related to
lower-than-expected costs for withholding taxes. The lower cost of tax
withholding for the fourth quarter 2001 tax repatriation transaction
resulted from an amendment in the bank agreement allowing a more
efficient transaction to be completed.
(f) Includes tax adjustments of $13 million or $0.30 per diluted share
related to an adjustment in taxes based on filed tax returns and a tax
rate change in Belgium.
(g) Includes net restructuring and other charges of $51 million pre-tax,
$43 million after-tax or $1.14 per share. Of the charges, $14 million
is recorded in SG&A and the remaining $37 million is in cost of sales.
Geographically, $26 million is recorded in North America, $22 million
in Europe and $3 million in Rest of World.
(h) Includes environmental charges of $2 million pre-tax, $2 million
after-tax or $0.04 per share. The entire charge is recorded in cost
of sales. Geographically, $1 million is recorded in both North
America and Europe.
(i) Includes costs associated with the renegotiation of senior debt of
$2 million pre-tax, $2 million after-tax or $0.04 per share. The
entire charge is recorded in SG&A. Geographically, $1 million is
recorded in both Europe and Rest of World.
(j) Includes tax charge for repatriation of earnings from foreign
subsidiaries of $66 million or $1.73 per share.
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
BALANCE SHEET
Unaudited
(Millions)
December 31, December 31,
2002 2001
Assets
Cash and Temporary Cash Investments $54 $53
Receivables, Net 409 395
Inventories 352 326
Other Current Assets 151 167
Investments and Other Assets 548 773
Plant, Property, and Equipment, Net 1,026 967
Total Assets $2,540 $2,681
Liabilities and Shareowners' Equity
Short-Term Debt $228 $191
Accounts Payable 505 401
Accrued Taxes 40 35
Accrued Interest 23 25
Other Current Liabilities 220 224
Long-Term Debt 1,217 1,324
Deferred Income Taxes 103 166
Deferred Credits and Other Liabilities 279 226
Minority Interest 19 15
Total Shareholders' Equity (94) 74
Total Liabilities and
Shareholders' Equity $2,540 $2,681
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
STATEMENT OF CASH FLOWS
Unaudited
(Millions)
Twelve Months Ended
December 31,
2002 2001
Operating activities:
Net income (loss) before Cumulative Effect of
Change in Accounting Principle $31 $(130)
Adjustments to reconcile income (loss) to net
cash provided (used) by operating activities -
Depreciation and amortization 144 153
Deferred income taxes (39) 30
(Gain)/loss on sale of businesses and assets,
net (8) 2
Changes in components of working capital -
(Inc.)/dec. in receivables 9 64
(Inc.)/dec. in inventories - 75
(Inc.)/dec. in prepayments and other current
assets 6 (18)
Inc./(dec.) in payables 56 (46)
Inc./(dec.) in taxes accrued 3 2
Inc./(dec.) in interest accrued (2) (9)
Inc./(dec.) in other current liabilities (5) 22
Other (7) (4)
Net cash provided (used) by operating activities 188 141
Investing activities:
Net proceeds from sale of assets 24 11
Expenditures for plant, property & equipment (138) (127)
Investments and other 7 (10)
Net cash provided (used) by investing activities (107) (126)
Net Cash provided (used) before financing
activities 81 15
Financing activities:
Issuance of common and treasury shares - 11
Issuance of long-term debt 3 -
Retirement of long-term debt (123) (57)
Net inc./(dec.) in short-term debt excluding
current maturities on long-term debt 47 49
Net cash provided (used) by financing activities (73) 3
Effect of foreign exchange rate changes on cash and
temporary cash investments (7) -
Inc./(dec.) in cash and temporary cash investments 1 18
Cash and temporary cash investments, January 1 53 35
Cash and temporary cash investments, December 31 $54 $53
Cash paid during the period for interest $145 $177
Cash paid during the period for income taxes $27 $17
TENNECO AUTOMOTIVE
RECONCILIATION TO GAAP(1) MEASURE
Unaudited
Fourth Quarter Full Year
2002 2001 2002 2001
Net Income before Cumulative Effect of
Change in Accounting Principle (GAAP
measure) 9 (99) 31 (130)
After tax adjustments (reflects Non-
GAAP measures(2)):
Restructuring charge adjustment (8) (3) (8) (3)
Non-accruable restructuring expenses 3 - 6 2
Amendment fee - - 1 2
York sale - (5)
Tax rate change in Belgium (4) - (4) -
Tax accrual to return adjustments (7) - (9) -
Other restructuring charges - - - 13
Genesis restructuring charge - 31 - 31
Tax repatriation charge - 66 (4) 66
Environmental reserve adjustment - (2) - 2
(7) (7) 8 (17)
(1) Generally Accepted Accounting Principles
(2) Non-GAAP measures are included for the benefit of investors to
identify information used by the company to assess the performance of
its operations. Non-GAAP information is useful to indicate decisions
made for the long-term benefit of the company overall. Non-GAAP
financial information may include non-recurring events, which may not
reflect the ongoing performance of operations and which may have a
disproportional positive or negative impact within the reporting
period.