Tenneco Automotive Reports Improved Results
-- Company reports net income of $24 million and EPS of 58-cents per share -- Results reflect sixth consecutive quarter of year-over-year improvement in income, before the cumulative effect of the change in accounting for goodwill -- European original equipment emissions control business posts significant year-over-year profitability improvement -- Company achieves restructuring, SGA&E savings and Six Sigma improvement targets -- Significantly improves liquidity through successful bond offering
LAKE FOREST, Ill., July 22 -- Tenneco Automotive announced today that the company reported net income of $24 million, or 58-cents per diluted share, in the second quarter of 2003, versus net income of $19 million, or 45-cents per diluted share for the second quarter of 2002. EBIT (income before interest, taxes and minority interest) was $67 million in the quarter compared with $71 million in second quarter 2002. EBIT before depreciation and amortization (EBITDA) was $108 million for the quarter, versus second quarter 2002 EBITDA of $106 million. See the table entitled, "Reconciliation of GAAP Results to non-GAAP Results," which is attachment 2 to this press release for more information about EBITDA and other non-GAAP results in this press release.
The company reported revenue of $998 million for the quarter versus $948 million in second quarter 2002. Excluding a $76 million benefit from favorable currency exchange rates during the quarter, second quarter 2003 revenue was $922 million. The decline in revenues, after excluding the currency benefit, was primarily driven by softer global aftermarket sales. Global original equipment (OE) revenue was down only 1 percent, after currency adjustments, stronger than the industry market performance.
"We are pleased with our ability to deliver our sixth consecutive quarter of year-over-year improvement, despite overall industry conditions that are average at best. This consistent performance reflects our commitment to growth and improving the fundamentals of our business," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We are particularly encouraged with our progress in Europe, where we believe our OE business is back on track now that the emissions control business has substantially recovered."
The company captured savings in the quarter through a continued intense focus on controlling costs. SGA&E (selling, general, administrative and engineering expense), as a percent of sales, was 11.0 percent, compared with 11.6 percent in the second quarter of 2002. Project Genesis, the company's restructuring program, generated $7 million in savings in the second quarter, bringing the year-to-date savings to $13 million. The company anticipates total annualized savings of $27 million from Project Genesis in 2003. The company also generated almost $7 million in savings from Six Sigma, $13 million in savings year-to-date, and is well on track to meet its goal of $20 million in Six Sigma savings for the year.
The second quarter 2003 results include a pre-tax restructuring related expense of $1 million, or 3-cents per diluted share, a pre-tax expense of $5 million, or 7-cents per diluted share, related to the write-off of debt issuance costs that were deferred on the senior debt the company paid down with the proceeds of a $350 million bond offering, and a tax benefit of $8 million, or 19-cents per diluted share, related to a favorable tax resolution. The second quarter 2002 results include a pre-tax benefit of $11 million, or 13-cents per diluted share, for the sale of the company's York, U.K. manufacturing facility and a pre-tax restructuring related expense of $2 million, or 2-cents per diluted share.
The company continues to win new business with global original equipment manufacturers. The company won 18 new OE business awards in the quarter estimated to add $147 million of incremental revenue over five years beginning in 2003, including being selected as the full service exhaust supplier for the Ford gas and diesel 2007 model year F-Series Super-Duty truck. On the aftermarket side, the company added new business worth an estimated $11 million in annualized revenue with new customers in Europe and North America.
"Our business units have a renewed emphasis on growth this year, and we delivered some strong results this quarter," Frissora said. "The shrinking exhaust aftermarket worldwide continues to have the greatest impact on our aftermarket results. We are offsetting some of this downturn by adding incremental business and not letting up on our efforts to do everything possible to take out costs, especially in distribution."
Cash flow before financing activity was a negative $35 million during the second quarter 2003. Negative cash flow during the quarter was driven by increased working capital and higher tax settlement costs. Due to the seasonality of its business, cash use is typically higher in the second quarter as the company moves into the spring and summer selling seasons in the aftermarket. While working capital increased overall, the company made substantial progress toward its inventory reduction goals, generating $36 million in cash flow from reduced inventories. Total borrowings increased $54 million during the quarter, which included $12 million in fees paid in connection with the $350 million senior secured note offering. Tenneco Automotive's total bank and bond debt was $1.497 billion at the end of the second quarter 2003.
Tenneco Automotive again significantly outperformed the requirements of its bank debt covenants. At June 30, the leverage ratio was 4.56, below the maximum limit of 5.50; the fixed charge coverage ratio was 1.32, exceeding the minimum required ratio of 0.90; and the interest coverage ratio was 2.33, exceeding the minimum required ratio of 1.75.
NORTH AMERICA
-- Softer OE production during the quarter contributed to a 7 percent
decrease in North American original equipment revenue to $365 million
versus second quarter 2002 revenue of $391 million. The decline was
driven in part by lower precious metal prices on pass-through catalytic
converter sales. The company's continued strong position on top-
selling platforms helped offset the even larger overall industry
decline in sales.
-- North American aftermarket revenue was $136 million versus $148 million
one year ago. The 8 percent decline was primarily the result of a 17
percent decline in the aftermarket exhaust business.
-- EBIT for North American operations was $49 million compared with
$53 million in the second quarter of 2002, which included $1 million in
restructuring related expenses. EBIT was impacted by the continued
decline in the exhaust aftermarket and, to a lesser extent, lower OE
volumes. Improved manufacturing efficiency and continued emphasis on
controlling costs helped partially offset these factors.
EUROPE
-- European original equipment revenue increased to $286 million in the
quarter versus $231 million in second quarter 2002. Before catalytic
converter pass-through sales and the impact of favorable currency
exchange rates, revenue was still up 5 percent, versus an estimated
industry decline of 4 percent. The revenue increase was driven by the
company's position on top-selling vehicles and the launch of several
high-volume platforms.
-- European aftermarket revenue was $102 million compared with $90 million
in the second quarter of 2002. Excluding the impact of favorable
currency, second quarter 2003 revenue was $84 million. The decrease
was driven by the industry decline in the exhaust segment.
-- European EBIT was $11 million, flat year-over-year. EBIT for the
quarter includes $1 million of restructuring related expense and
$4 million of favorable currency effects. Second quarter 2002 EBIT
includes an $11 million gain on the sale of the York, U.K. facility and
restructuring related expenses of $1 million.
-- Before these items, EBIT improved significantly, primarily driven by
improved operational efficiencies throughout the European operations,
particularly in the original equipment emissions control business,
where gross margin increased almost 5 percentage points from the prior
year. Project Genesis savings added $4 million to earnings but were
substantially offset by the impact of lower aftermarket sales.
REST OF WORLD
-- Revenue from Asian operations increased 36 percent to $40 million in
the quarter. New business and strong OE volumes in China continue to
drive the growth.
-- In South America, the company reported revenue of $29 million, an
increase over $28 million in second quarter 2002. Currency
devaluations in both Brazil and Argentina had a $2 million negative
impact on revenues.
-- The company's Australian operations reported revenues of $40 million
compared with $31 million in second quarter 2002, a 32 percent
increase. Strong volumes on key platforms and a favorable currency
exchange rate of $7 million impacted revenues.
-- Combined EBIT for Asia, South America and Australia was $7 million,
flat with the previous year. Weak economic conditions in key South
American markets offset higher revenues and EBIT gains in China.
Tenneco Automotive closed on its bond offering of $350,000,000 of 10.25 percent senior secured notes in the quarter, which provides liquidity and greater financial flexibility going forward. The company used proceeds from the notes to pay off $87 million of borrowings under its revolving credit facility and to repay $251 million in senior term loans that were amortizing at the rate of $94 million annually through 2005. The company incurred $12 million in costs to complete the offering and expects to incur up to $19 million in higher annual interest expense. The notes are senior secured obligations of Tenneco Automotive and those subsidiaries that guarantee the notes, and will mature on July 15, 2013 with interest payable semi-annually beginning on January 15, 2004.
"We are very pleased with the successful completion of our bond offering and the positive response from the financial community. We believe the success of this offering contributed in part to the 59 percent rise in our stock price and the significant rise in trading value of our other debt instruments during the quarter," said Frissora. "This refinancing transaction provides Tenneco Automotive with long-term financial flexibility to address our primary goal of total debt reduction. At the same time, the $87 million revolver pay down and the deferral of debt amortization payments of over $210 million through 2005 strengthens the company's near-term liquidity, giving us sufficient resources to adjust to market uncertainties as we continue to implement strategies to grow the top line of our business and improve our operating performance."
The company also announced today a change to its retiree medical benefits program, which will provide participating retirees with continued access to group health coverage while reducing Tenneco Automotive's subsidization of the program. Based on current estimates, the company anticipates that this change will increase its net income by approximately $7 million annually, beginning in the third quarter of 2003.
Attachment 1 to this press release provides additional information on Tenneco Automotive's second quarter 2003 results.
CONFERENCE CALL INFORMATION
The company will host a conference call on July 22, 2003 at 10:30 a.m. Eastern time. The dial-in number is 888-709-9420 domestic or 210-234-8312 international. The 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 July 22 through July 29, 2003. To access this recording, dial 800-396-1242 domestic or 402 220-9833 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 as well as actions taken or to be taken by the United States or other governments as a result of 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.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
THREE MONTHS ENDED JUNE 30,
2003 2002
Net sales and operating revenues: $998 $948
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 779 (a) 743 (d)
Engineering, Research and
Development 13 17
Selling, General and
Administrative 97 93
Depreciation and Amortization of
Other Intangibles 41 35
Total Costs and Expenses 930 888
Gain on sale of assets - 11 (e)
Loss on sale of receivables (1) (1)
Other Income (Loss) - 1
Total Other Income (Loss) (1) 11
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 49 53 (d)
Europe 11 (a) 11 (d) (e)
Other 7 7
67 71
Less:
Interest expense (net of
interest capitalized) 38 (b) 36
Income tax expense (benefit) 3 (c) 16
Minority interest 2 -
Income (loss) before Cumulative
Effect of Change in Accounting
Principle 24 19
Cumulative Effect of Change in
Accounting Principle, net of
income tax - -
Net income (loss) $24 $19
Average common shares outstanding:
Basic 40.4 39.7
Diluted 41.3 41.8
Earnings (loss) per share of common
stock:
Basic-
Before Cumulative Effect of
Change in Accounting Principle $0.59 $0.48
Cumulative Effect of Change in
Accounting Principle - -
$0.59 $0.48
Diluted-
Before Cumulative Effect of
Change in Accounting Principle $0.58 $0.45
Cumulative Effect of Change in
Accounting Principle - -
$0.58 $0.45
(a) Includes restructuring and restructuring related charges of
$1 million pre-tax, $1 million after-tax or $0.03 per share. The
entire charge is recorded in cost of sales. Geographically all of
the charge is recorded in Europe.
(b) Includes a pre-tax expense of $5 million, $3 million after-tax or
$.07 per share related to the write-off of debt issuance costs that
were defined on the senior debt we paid down with the proceeds of the
$350 million bond offering.
(c) Includes a $8 million or $.19 per share tax benefit related to the
resolution of outstanding tax issues.
(d) Includes restructuring and other charges of $2 million pre-tax,
$1 million after-tax or $0.02 per share. The entire charge is
recorded in cost of sales. Geographically, $1 million is recorded in
both North America and Europe.
(e) Includes a gain on the sale of a UK facility of $11 million pre-tax,
$5 million after-tax or $0.13 per share. Geographically, all of the
gain is recorded in Europe.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
SIX MONTHS ENDED JUNE 30,
2003 2002
Net sales and operating revenues: $1,919 $1,757
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 1,522 (a) 1,383 (d)
Engineering, Research and
Development 32 31
Selling, General and
Administrative 185 186 (e)
Depreciation and Amortization of
Other Intangibles 80 69
Total Costs and Expenses 1,819 1,669
Gain on sale of assets - 11 (f)
Loss on sale of receivables (1) (1)
Other Income (Loss) (1) -
Total Other Income (Loss) (2) 10
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 77 (a) 72 (d) (e)
Europe 10 (a) 16 (d) (e)
(f)
Other 11 10
98 98
Less:
Interest expense (net of
interest capitalized) 69 (b) 72
Income tax expense (benefit) 1 (c) 8 (g)
Minority interest 3 1
Income (loss) before Cumulative
Effect of Change in Accounting
Principle 25 17
Cumulative Effect of Change in
Accounting Principle, net of
income tax - (218)
Net income (loss) $25 $(201)
Average common shares outstanding:
Basic 40.2 39.7
Diluted 41.1 41.4
Earnings (loss) per share of common
stock:
Basic-
Before Cumulative Effect of
Change in Accounting Principle $0.61 $0.42
Cumulative Effect of Change in
Accounting Principle - (5.49)
$0.61 $(5.07)
Diluted-
Before Cumulative Effect of
Change in Accounting Principle $0.60 $0.41
Cumulative Effect of Change in
Accounting Principle - (5.49)
$0.60 $(5.08)
(a) Includes restructuring and restructuring related charges of
$6 million pre-tax, $3 million after-tax or $0.09 per share. The
entire charge is recorded in cost of sales. Geographically,
$3 million is recorded in North America and $3 million in Europe.
(b) Includes a pre-tax expense of $5 million, $3 million after-tax or
$.07 per share related to the write-off of debt issuance costs that
were defined on the senior debt we paid down with the proceeds of the
$350 million bond offering.
(c) Includes a $11 million or $.26 per share tax benefit related to the
resolution of outstanding tax issues.
(d) Includes restructuring and restructuring related charges of
$3 million pre-tax, $1 million after-tax or $0.04 per share. The
entire charge is recorded in cost of sales. Geographically,
$2 million is recorded in North America and $1 million in Europe.
(e) 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
(f) Includes a gain on the sale of a UK facility of $11 million pre-tax,
$5 million after-tax or $0.13 per share. Geographically, all of the
gain is recorded in Europe.
(g) 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.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
June 30, 2003 December 31, 2002
Assets
Cash and Temporary Cash Investments $58 $54
Receivables, Net 522 409
Inventories 355 352
Other Current Assets 162 151
Investments and Other Assets 507 512
Plant, Property, and Equipment, Net 1,069 1,026
Total Assets $2,673 $2,504
Liabilities and Shareowners' Equity
Short-Term Debt $111 $228
Accounts Payable 567 505
Accrued Taxes 22 40
Accrued Interest 18 23
Other Current Liabilities 207 220
Long-Term Debt 1,386 1,217
Deferred Income Taxes 76 103
Deferred Credits and Other Liabilities 260 243
Minority Interest 20 19
Total Shareholders' Equity 6 (94)
Total Liabilities and Shareholders'
Equity $2,673 $2,504
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Six Months Ended
June 30,
2003 2002
Operating activities:
Net income (loss) before cumulative
effect of change in accounting
principle, net of tax $25 $17
Adjustments to reconcile income
(loss) to net cash provided (used)
by operating activities -
Depreciation and amortization 80 69
Deferred income taxes (10) (8)
(Gain)/loss on sale of businesses
and assets, net - (10)
Changes in components of working
capital -
(Inc.)/dec. in receivables (87) (50)
(Inc.)/dec. in inventories 24 9
(Inc.)/dec. in prepayments and
other current assets (1) (4)
Inc./(dec.) in payables 30 76
Inc./(dec.) in taxes accrued (19) 2
Inc./(dec.) in interest accrued (5) -
Inc./(dec.) in other current
liabilities (19) 26
Other 10 (3)
Net cash provided (used) by operating
activities 28 124
Investing activities:
Net proceeds from sale of assets 3 18
Expenditures for plant, property &
equipment (54) (52)
Investments and other (2) 13
Net cash provided (used) by investing
activities (53) (21)
Net Cash provided (used) before
financing activities (25) 103
Financing activities:
Proceeds from capital contributions 1 -
Issuance of long-term debt 350 -
Debt issuance costs on long-term
debt (12) -
Retirement of long-term debt (276) (25)
Net inc./(dec.) in short-term debt
excluding current
maturities on long-term debt (25) (71)
Other (1) -
Net cash provided (used) by financing
activities 37 (96)
Effect of foreign exchange rate
changes on cash and
temporary cash investments (8) (8)
Inc./(dec.) in cash and temporary
cash investments 4 (1)
Cash and temporary cash investments,
January 1 54 53
Cash and temporary cash investments,
June 30 $58 $52
Cash paid during the period for
interest $67 $72
Cash paid during the period for
income taxes $30 $16
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(A) RESULTS TO NON-GAAP RESULTS
Unaudited
Q2 2003 Q2 2002
Amount Per Share Amount Per Share
Net Income before Cumulative Effect
of Change in Accounting Principle
(GAAP measure) $24 $0.58 $19 $0.45
After tax adjustments (reflects non-
GAAP measures):
Restructuring and restructuring
related expenses 1 0.03 1 0.02
Tax settlement adjustment (8) (0.19) - -
Debt issuance cost write off 3 0.07 - -
Gain on sale of York facility - - (5) (0.13)
Amendment fee - - - -
Tax repatriation reversal - - - -
Non-GAAP earnings measure(B) $20 $0.49 $15 $0.34
Q1 2003
North Rest of
America Europe World Total
Net income (loss) $- $- $- $24
Cumulative effect of change in
accounting principle, net of income
tax - - - -
Minority interest - - - 2
Income tax expense (benefit) - - - 3
Interest expense (net of interest
capitalized) - - - 38
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) 49 11 7 67
Depreciation and amortization of
other intangibles 24 14 3 41
Total EBITDA(C) $73 $25 $10 $108
Q2 2002
North Rest of
America Europe World Total
Net income (loss) $- $- $- $19
Cumulative effect of change in
accounting principle, net of income
tax - - - -
Minority interest - - - -
Income tax expense (benefit) - - - 16
Interest expense (net of interest
capitalized) - - - 36
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) 53 11 7 71
Depreciation and amortization 22 10 3 35
Total EBITDA(C) $75 $21 $10 $106
(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 second 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. Using only the non-GAAP
earnings measure to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of
management regarding the nature and classification of events and
circumstances that investors may find material. Management
compensates for these limitations by utilizing both GAAP and non-GAAP
earnings measures reflected above to understand and analyze the
results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance
of operations separate from items that may have a disproportionate
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.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(A) RESULTS TO NON-GAAP RESULTS
Unaudited
YTD 2003 YTD 2002
Amount Per Share Amount Per Share
Net Income before Cumulative Effect
of Change in Accounting Principle
(GAAP measure) $25 $0.60 $17 $0.41
After tax adjustments (reflects non-
GAAP measures):
Restructuring and restructuring
related expenses 3 0.09 1 0.04
Tax settlement adjustment (11) (0.26) - -
Debt issuance cost write off 3 0.07 - -
Gain on sale of York facility - - (5) (0.13)
Amendment fee - - 1 0.03
Tax repatriation reversal - - (4) (0.10)
Non-GAAP earnings measure(B) $20 $0.50 $10 $0.25
YTD 2003
North Rest of
America Europe World Total
Net income (loss) $- $- $- $25
Cumulative effect of change in
accounting principle, net of income
tax - - - -
Minority interest - - - 3
Income tax expense (benefit) - - - 1
Interest expense (net of interest
capitalized) - - - 69
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) 77 10 11 98
Depreciation and amortization of
other intangibles 46 28 6 80
Total EBITDA(C) $123 $38 $17 $178
YTD 2002
North Rest of
America Europe World Total
Net income (loss) $- $- $- $(201)
Cumulative effect of change in
accounting principle, net of income
tax - - - 218
Minority interest - - - 1
Income tax expense (benefit) - - - 8
Interest expense (net of interest
capitalized) - - - 72
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) 72 16 10 98
Depreciation and amortization 43 20 6 69
Total EBITDA(C) $115 $36 $16 $167
(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 half
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. Using only the non-GAAP
earnings measure to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of
management regarding the nature and classification of events and
circumstances that investors may find material. Management
compensates for these limitations by utilizing both GAAP and non-GAAP
earnings measures reflected above to understand and analyze
the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing
performance of operations separate from items that may have a
disproportionate 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.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Unaudited
Q2 2003
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $90 $- $90 $- $90
Exhaust 46 - 46 - 46
Total North America
Aftermarket 136 - 136 - 136
North America Original Equipment
Ride Control 118 - 118 - 118
Exhaust 247 5 242 75 167
Total North America Original
Equipment 365 5 360 75 285
Total North America 501 5 496 75 421
Europe Aftermarket
Ride Control 53 10 43 - 43
Exhaust 49 8 41 - 41
Total Europe Aftermarket 102 18 84 - 84
Europe Original Equipment
Ride Control 64 11 53 - 53
Exhaust 222 37 185 56 129
Total Europe Original
Equipment 286 48 238 56 182
Total Europe 388 66 322 56 266
Asia 40 - 40 14 26
South America 29 (2) 31 3 28
Australia 40 7 33 4 29
Total Rest of World 109 5 104 21 83
Total Tenneco Automotive $998 $76 $922 $152 $770
Q2 2002
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $92 $- $92 $- $92
Exhaust 56 - 56 - 56
Total North America
Aftermarket 148 - 148 - 148
North America Original Equipment
Ride Control 114 - 114 - 114
Exhaust 277 - 277 90 187
Total North America Original
Equipment 391 - 391 90 301
Total North America 539 - 539 90 449
Europe Aftermarket
Ride Control 44 - 44 - 44
Exhaust 46 - 46 - 46
Total Europe Aftermarket 90 - 90 - 90
Europe Original Equipment
Ride Control 49 - 49 49
Exhaust 182 - 182 57 125
Total Europe Original
Equipment 231 - 231 57 174
Total Europe 321 - 321 57 264
Asia 29 - 29 12 17
South America 28 - 28 3 25
Australia 31 - 31 1 30
Total Rest of World 88 - 88 16 72
Total Tenneco Automotive $948 $- $948 $163 $785
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.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Unaudited
Six Months Ended June 30, 2003
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $162 $- $162 $- $162
Exhaust 82 - 82 - 82
Total North America
Aftermarket 244 - 244 - 244
North America Original Equipment
Ride Control 234 - 234 - 234
Exhaust 504 5 499 162 337
Total North America Original
Equipment 738 5 733 162 571
Total North America 982 5 977 162 815
Europe Aftermarket
Ride Control 88 16 72 - 72
Exhaust 90 16 74 - 74
Total Europe Aftermarket 178 32 146 - 146
Europe Original Equipment
Ride Control 121 20 101 - 101
Exhaust 434 71 363 114 249
Total Europe Original
Equipment 555 91 464 114 350
Total Europe 733 123 610 114 496
Asia 76 - 76 27 49
South America 55 (9) 64 5 59
Australia 73 11 62 7 55
Total Rest of World 204 2 202 39 163
Total Tenneco Automotive $1,919 $130 $1,789 $315 $1,474
Six Months Ended June 30, 2002
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $176 $- $176 $- $176
Exhaust 98 - 98 - 98
Total North America
Aftermarket 274 - 274 - 274
North America Original Equipment
Ride Control 214 - 214 - 214
Exhaust 518 - 518 175 343
Total North America Original
Equipment 732 - 732 175 557
Total North America 1,006 - 1,006 175 831
Europe Aftermarket
Ride Control 72 - 72 - 72
Exhaust 83 - 83 - 83
Total Europe Aftermarket 155 - 155 - 155
Europe Original Equipment
Ride Control 90 - 90 - 90
Exhaust 348 - 348 104 244
Total Europe Original
Equipment 438 - 438 104 334
Total Europe 593 - 593 104 489
Asia 47 - 47 17 30
South America 54 - 54 5 49
Australia 57 - 57 2 55
Total Rest of World 158 - 158 24 134
Total Tenneco Automotive $1,757 $- $1,757 $303 $1,454
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.