Tenneco Automotive Reports Improved Results
-- Company reports EPS of 2-cents per share, reversing prior year net loss -- EBIT improves 15 percent to $31 million -- EBITDA improves 14 percent to $70 million -- Revenues increase 14 percent as favorable platform mix helps original equipment sales outpace market -- Restructuring program realizes $6 million in savings
LAKE FOREST, Ill., April 22 -- Tenneco Automotive announced today that the company reported net income of $1 million, or 2-cents per share, in the first quarter of 2003, versus a net loss of $2 million, or 5-cents per share before the cumulative effect of a change in accounting principle, for the first quarter of 2002. First Call's analyst consensus estimate for the quarter was a loss of 4-cents per share. EBIT (income before interest, taxes and minority interest) improved to $31 million in the quarter, a 15 percent increase over $27 million the previous year. EBITDA was $70 million for the quarter, a 14 percent improvement over first quarter 2002 EBITDA of $61 million.
The first quarter 2003 results include pre-tax restructuring and restructuring related costs of $5 million, or 7-cents per share, and a tax benefit from resolution of outstanding tax issues of $3 million, or 8-cents per share. The first quarter 2002 results include a pre-tax non-accruable restructuring expense of $1 million, or one cent per share; pre-tax charges associated with the company's amendment of its senior debt agreements of $2 million, or 3-cents per share; and income from a tax benefit of $4 million, or 10-cents per share. (See the table entitled, "Reconciliation of GAAP Results to non-GAAP Results" attached to this press release for more information about these adjustments and other non-GAAP results in this press release.)
The company reported revenue of $921 million for the quarter, up 14 percent versus $809 million in the first quarter of 2002. Favorable currency exchange rates benefited revenue by $54 million in the quarter. Excluding the impact of currency, revenue was up 7 percent.
"We are pleased with our results, especially given industry and economic uncertainties at the beginning of the year. We benefited this quarter from our strong position on top-selling vehicle platforms as North American OE production volumes remained strong. We also continue to see steady improvement in our European original equipment exhaust business where revenues are up year-over-year, and gross margins improved over last quarter and are now even with first quarter 2002," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We still face challenges in the global aftermarket and are aggressively taking costs out of the businesses, including flexing our operations, while continuing to invest strategically in promoting our products and premium brands."
The company generated $10 million in positive cash flow before financing activities during the quarter compared with $14 million in the first quarter of 2002. The company used more cash in the quarter, compared with first quarter 2002, primarily to prepare for platform launches and for seasonal inventory builds. More aggressive receivables and payables management steps were taken in the quarter to offset this heavier cash use and to help preserve liquidity given the uncertainties in the market for the second quarter of 2003. Total bank and bond debt was $1.443 billion at quarter-end compared with $1.445 billion at the end of 2002.
Tenneco Automotive again significantly outperformed the requirements of its bank debt covenants. At March 31, the leverage ratio was 4.35, below the maximum limit of 5.75; the fixed charge coverage ratio was 1.31, exceeding the minimum required ratio of 0.80; and the interest coverage ratio was 2.31, exceeding the minimum required ratio of 1.65.
The company continues to improve its operational efficiency and realized $6 million in savings during the quarter from implementation of its Project Genesis restructuring program and $6 million in savings from Six Sigma initiatives. The company's SGA&E (selling, general and administrative expense plus engineering, research and development expense) as a percent of sales was 11.6 percent, within management's goal for the year of maintaining this ratio at less than 12 percent.
"We made progress this quarter as our original equipment businesses fueled top-line growth and we continued to successfully execute our restructuring and cost-cutting initiatives. We were especially encouraged that our North American aftermarket business equaled last year's profitability on softer sales," said Frissora. "Going forward, we're cautiously optimistic about OE revenue growth given our platform mix and we're launching new products and marketing programs to help counter industry conditions in the aftermarket. We also remain intensely focused on generating cash and see solid opportunities to reduce inventories and improve our working capital performance."
NORTH AMERICA
-- Strong OE production and the company's presence on high volume OE
vehicle models drove North American original equipment revenue to
$373 million in the quarter, a 9 percent increase over first quarter
2002 revenue of $341 million. Excluding catalytic converter
pass-through sales, revenue increased 12 percent.
-- Original equipment revenue included a 7 percent increase in heavy-duty
revenues versus last year.
-- North American aftermarket revenue was $108 million versus $126 million
one year ago. Sales were negatively impacted by lower consumer
confidence and the continued universal decline in the exhaust market.
Despite the decrease in aftermarket revenue, EBIT for that business was
flat on a year-over-year comparison.
-- EBIT for North American operations was $28 million compared with
$19 million in the first quarter of 2002. The 46 percent EBIT
improvement was primarily driven by OE volumes, improved operating
efficiency and continued tight cost controls. EBITDA was $50 million
versus $40 million in first quarter 2002.
-- First quarter 2003 EBIT results include $3 million in restructuring and
restructuring related costs. First quarter 2002 EBIT results include
$1 million in restructuring related costs and $1 million in charges
associated with the company's amendment of its senior debt
agreements.
EUROPE
-- European original equipment revenue increased 30 percent to
$269 million from $207 million in the first quarter of 2002. Excluding
catalytic converter pass-through sales and the impact of favorable
currency exchange rates, revenue would have increased 5 percent.
-- The company's European aftermarket revenue increased to $76 million,
versus $65 million one year ago. Excluding the impact of currency,
revenue would have decreased 4 percent.
-- European EBIT was a loss of $1 million, compared with positive EBIT of
$5 million in the first quarter of 2002. EBIT was impacted by a
$4 million increase in depreciation and higher aftermarket promotional
costs. EBITDA was $13 million compared with $15 million in first
quarter 2002.
-- First quarter 2003 EBIT results include $2 million in restructuring and
restructuring related costs. First quarter 2002 EBIT results include
$1 million in charges associated with the company's amendment of
its senior debt agreements and no restructuring costs.
REST OF WORLD
-- The company's Asian operations reported revenue of $36 million, versus
$18 million one year ago. Revenue growth was primarily driven by
strong China OE volumes and higher pass-through sales.
-- In South America, the company reported revenue of $26 million, flat
compared with the previous year. Unfavorable currency exchange rates
negatively impacted revenue by $7 million, which was offset by stronger
OE and aftermarket volumes.
-- The company's Australian operations reported revenue of $33 million for
the quarter, a 27 percent increase over first quarter 2002 revenue of
$26 million. A favorable currency exchange rate impacted revenue by
$4 million. Strong OE production offset softer sales in both the ride
control and exhaust segments of the aftermarket.
-- Combined EBIT for Asia, South America and Australia was $4 million,
versus $3 million in the first quarter of 2002. Higher OE volumes in
all the regions were primarily responsible for the increase. Combined
EBITDA for rest of world was $7 million compared with $6 million in
first quarter 2002.
The attachments provide additional information on Tenneco Automotive's first quarter 2003 results.
CONFERENCE CALL INFORMATION
The company will host a conference call on April 22, 2003 at 9 a.m. Eastern time. The dial-in number is 888 809-8968 domestic or 630 395-0038 international. Passcode is Tenneco Auto. The call will be available on the financial section of the Tenneco Automotive web site at www.tenneco-automotive.com . A copy of this press release, which includes in the attachments financial information to be discussed on this call, is also available on the financial and news sections of the Tenneco Automotive web site at www.tenneco-automotive.com . A recording of this call will be available one hour following the completion of the call on April 22 through April 29, 2003. To access this recording, dial 800 454 0157 domestic or 402 220-2123 international and enter passcode 8400.
Tenneco Automotive is a $3.5 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,600 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 Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers and DynoMax(R) performance exhaust products, and Monroe(R) Clevite(R) 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, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the countries where the company operates 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. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2002.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED MARCH 31,
Unaudited
2003 2002
Net sales and operating revenues: $921 $809
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 743 (a) 640 (c)
Engineering, Research and
Development 19 14
Selling, General and
Administrative 88 93 (d)
Depreciation and Amortization of
other intangibles 39 34
Total Costs and Expenses 889 781
Other Income (Loss) (1) (1)
Total Other Income (1) (1)
Income (Loss) before interest
expense, income taxes,
and minority interest
North America 28 (a) 19 (c) (d)
Europe (1)(a) 5 (d)
Other 4 3
31 27
Less:
Interest expense (net of
interest capitalized) 31 36
Income tax expense (benefit) (2)(b) (8)(e)
Minority interest 1 1
Income (loss) before Cumulative
Effect of
Change in Accounting Principle 1 (2)
Cumulative Effect of Change in
Accounting
Principle, net of income tax - (218)
Net income (loss) $1 $(220)
Average common shares outstanding:
Basic 40.1 39.7
Diluted 40.9 40.9
Earnings (loss) per share of common
stock:
Basic-
Before Cumulative Effect of
Change in Accounting Principle $0.02 $(0.05)
Cumulative Effect of Change in
Accounting Principle - (5.49)
$0.02 $(5.54)
Diluted-
Before Cumulative Effect of
Change in Accounting Principle $0.02 $(0.05)
Cumulative Effect of Change in
Accounting Principle - (5.49)
$0.02 $(5.54)
(a) Includes restructuring and restructuring related charges of
$5 million pre-tax, $2 million after-tax or $0.07 per share. The
entire charge is recorded in cost of sales. Geographically,
$3 million is recorded in North America and $2 million in Europe.
(b) Includes a $3 million or $.08 per share tax benefit related to the
resolution of outstanding tax issues.
(c) Includes restructuring and other charges of $1 million pre-tax, or
$0.01 per share. The entire charge is recorded in cost of sales.
Geographically, $1 million is recorded in North America.
(d) Includes costs associated with the amendment of the senior debt
agreement of $2 million pre-tax, $1 million after-tax or $0.03 per
share. The entire charge is recorded in SG&A. Geographically,
$1 million is recorded in both North America and Europe.
(e) Includes a $4 million or $.10 per 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 senior debt agreement
allowing a more efficient transaction to be completed.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
March 31, December 31,
2003 2002
Assets
Cash and Temporary Cash
Investments $58 $54
Receivables, Net 466 409
Inventories 373 352
Other Current Assets 162 151
Investments and Other Assets 485 512
Plant, Property, and Equipment,
Net 1,038 1,026
Total Assets $2,582 $2,504
Liabilities and Shareowners' Equity
Short-Term Debt $250 $228
Accounts Payable 592 505
Accrued Taxes 29 40
Accrued Interest 33 23
Other Current Liabilities 205 220
Long-Term Debt 1,193 1,217
Deferred Income Taxes 76 103
Deferred Credits and Other
Liabilities 252 243
Minority Interest 18 19
Total Shareholders' Equity (66) (94)
Total Liabilities and
Shareholders' Equity $2,582 $2,504
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
(Unaudited)
(Millions)
Three Months Ended
March 31,
2003 2002
Operating activities:
Net income (loss) before
cumulative effect of change in
accounting principle, net of tax $1 $(2)
Adjustments to reconcile income (loss)
to net cash provided (used) by
operating activities -
Depreciation and amortization 39 34
Deferred income taxes (7) (15)
Changes in components of working capital -
(Inc.)/dec. in receivables (49) (53)
(Inc.)/dec. in inventories (12) (2)
(Inc.)/dec. in prepayments
and other current assets (6) (9)
Inc./(dec.) in payables 78 58
Inc./(dec.) in taxes accrued (4) (2)
Inc./(dec.) in interest accrued 11 15
Inc./(dec.) in other current liabilities (18) 19
Other 3 (2)
Net cash provided by operating activities 36 41
Investing activities:
Net proceeds from sale of assets 1 -
Expenditures for plant, property & equipment (26) (23)
Investments and other (1) (4)
Net cash used by investing activities (26) (27)
Net cash provided before financing activities 10 14
Financing activities:
Retirement of long-term debt (24) -
Net inc./(dec.) in short-term
debt excluding current
maturities on long-term debt 21 (7)
Net cash used by financing activities (3) (7)
Effect of foreign exchange rate changes on
cash and temporary cash investments (3) (4)
Inc./(dec.) in cash and temporary
cash investments 4 3
Cash and temporary cash investments, January 1 54 53
Cash and temporary cash investments, March 31 $58 $56
Cash paid during the period for interest $20 $22
Cash paid during the period for
income taxes $11 $9
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(A) RESULTS TO NON-GAAP RESULTS
Unaudited
Q1 2003 Q1 2002
Amount Per Share Amount Per Share
Net Income before Cumulative Effect
of Change in Accounting Principle
(GAAP measure) $1 $0.02 $(2) $(0.05)
After tax adjustments (reflects non-
GAAP measures):
Restructuring and restructuring
related expenses 2 0.07 - 0.01
Tax settlement adjustment (3) (0.08) - -
Amendment fee - - 1 0.03
Tax repatriation reversal - - (4) (0.10)
Non-GAAP earnings measure(B) $- $0.01 $(5) $(0.11)
Q1 2003
North Rest of
America Europe World Total
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) 28 (1) 4 31
Depreciation and amortization of
other intangibles 22 14 3 39
Total EBITDA(C) 50 13 7 70
Q1 2002
North Rest of
America Europe World Total
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) 19 5 3 27
Depreciation and amortization of
other intangibles 21 10 3 34
Total EBITDA 40 15 6 61
(A) Generally Accepted Accounting Principles
(B) Tenneco Automotive presents the above reconciliation of GAAP to
non-GAAP results in order to reflect the results for the first
quarters of 2003 and 2002 in a manner that allows a better
understanding of the results of operational activities separate from
the financial impact of decisions made for the long-term benefit of
the company. Adjustments similar to the ones reflected above have been
recorded in earlier periods, and similar types of adjustments can
reasonably be expected to be recorded in future periods. However, the
management of Tenneco Automotive uses both the GAAP and non-GAAP
measures reflected above to understand and analyze the results of its
business, and believes investors find this information helpful in
understanding the ongoing performance of operations separate from
items that may have a disproportional positive or negative impact on
the company's financial results in any particular period.
(C) EBITDA represents income before cumulative effect of change in
accounting principle, interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles.
The amounts included in the EBITDA calculation, however, are derived
from amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net
income or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a
measure of liquidity. Tenneco Automotive has presented EBITDA
because it regularly reviews EBITDA as a measure of the company's
ability to incur and service debt. In addition, Tenneco Automotive
believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors
in comparing a company's performance on a consistent basis without
regard to depreciation and amortization, which can vary significantly
depending upon many factors. However, the EBITDA measure presented
may not always be comparable to similarly titled measures
reported by other companies due to differences in the components of
the calculation.
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Unaudited
Q1 2003
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control 72 - 72 - 72
Exhaust 36 - 36 - 36
Total North America
Aftermarket 108 - 108 - 108
North America Original
Equipment
Ride Control 116 - 116 - 116
Exhaust 257 - 257 87 170
Total North America
Original Equipment 373 - 373 87 286
Total North America 481 - 481 87 394
Europe Aftermarket
Ride Control 35 6 29 - 29
Exhaust 41 8 33 - 33
Total Europe Aftermarket 76 14 62 - 62
Europe Original Equipment
Ride Control 57 9 48 - 48
Exhaust 212 34 178 58 120
Total Europe Original
Equipment 269 43 226 58 168
Total Europe 345 57 288 58 230
Asia 36 - 36 13 23
South America 26 (7) 33 2 31
Australia 33 4 29 3 26
Total Other 95 (3) 98 18 80
Total Tenneco Automotive 921 54 867 163 704
Q1 2002
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control 84 - 84 - 84
Exhaust 42 - 42 - 42
Total North America
Aftermarket 126 - 126 - 126
North America Original
Equipment
Ride Control 100 - 100 - 100
Exhaust 241 - 241 85 156
Total North America
Original Equipment 341 - 341 85 256
Total North America 467 - 467 85 382
Europe Aftermarket
Ride Control 28 - 28 - 28
Exhaust 37 - 37 - 37
Total Europe Aftermarket 65 - 65 - 65
Europe Original Equipment
Ride Control 41 - 41 - 41
Exhaust 166 - 166 47 119
Total Europe Original
Equipment 207 - 207 47 160
Total Europe 272 - 272 47 225
Asia 18 - 18 5 13
South America 26 - 26 2 24
Australia 26 - 26 1 25
Total Other 70 - 70 8 62
Total Tenneco Automotive 809 - 809 140 669
Tenneco Automotive presents the above reconciliation of revenues in
order to reflect the trend in the company's sales, in various product
lines and geographical regions, separately from the effects of doing
business in currencies other than the U.S. dollar. Additionally,
pass-through catalytic converter sales include precious metals
pricing, which may be volatile. While Tenneco Automotive's original
equipment customers assume the risk of this volatility, it impacts
reported revenue. Excluding pass-through catalytic converter sales
removes this impact. Tenneco Automotive uses this information to
analyze the trend in revenues before these factors. Tenneco
Automotive believes investors find this information useful in
understanding period to period comparisons in the company's revenues.