Tenneco Automotive Adjusts Third Quarter 2003 Financial Results
LAKE FOREST, Ill., Nov. 13, 2003 -- Tenneco Automotive announced today that the company's third quarter results, as reported on October 21, 2003, understated net income by $1 million and earnings per diluted share (EPS) by 1-cent and overstated revenue and earnings before interest and taxes (EBIT) for the quarter by $1 million.
In filing its third quarter report on Form 10-Q today, the company reported third quarter 2003 net income of $4 million, an increase from $3 million as announced on October 21, 2003, and earnings per share of 10-cents, an increase from previously reported 9-cents. The company reported third quarter revenue of $914 million, versus $915 million as previously reported, and the company's EBIT in the quarter was $38 million, down from $39 million as originally reported.
These changes were made as a result of two adjustments. The first adjustment was identified in Germany during a routine monthly review of vehicle platform and customer financial performance. The revenue generated from one particular platform was not recorded properly during a period in the quarter when the company was transitioning its supply of product from one facility to a newly opened manufacturing facility. With the adjustment, European revenue for third quarter 2003 was $344 million versus the previously reported $345 million, and European EBIT was a loss of $3 million instead of a loss of $2 million.
The second adjustment related to the write-off of debt issuance costs by the company in connection with the refinancing of some of its debt earlier this year. The company reported lower interest expense of $2 million following re-examination of the calculation of the write-off.
Third quarter 2003 financial statements and reconciliations of GAAP to non-GAAP results reflecting the adjusted results are attached.
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.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
NINE MONTHS ENDED SEPTEMBER 30,
(Millions except share and per share amounts)
2003 2002
Net sales and operating revenues: $2,833 $2,613
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 2,249 (a) 2,058 (d)
Engineering, Research and
Development 50 49
Selling, General and
Administrative 276 271 (e)
Depreciation and Amortization of
Other Intangibles 120 104
Total Costs and Expenses 2,695 2,482
Gain on sale of assets - 11 (f)
Loss on sale of receivables (1) (2)
Other Income (Loss) (1) (2)
Total Other Income (Loss) (2) 7
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 109 (a) 108 (d) (e)
Europe 7 (a) 15 (d) (e) (f)
Other 20 15
136 138
Less:
Interest expense (net of
interest capitalized) 103 (b) 108
Income tax expense (benefit) (1)(c) 6 (g)
Minority interest 5 2
Income before Cumulative Effect of
Change in Accounting Principle 29 22
Cumulative Effect of Change in Accounting
Principle, net of income tax - (218)
Net income (loss) $29 $(196)
Average common shares outstanding:
Basic 40.3 39.8
Diluted 41.5 41.7
Earnings (loss) per share of common
stock:
Basic-
Before Cumulative Effect of
Change in Accounting
Principle $0.72 $0.56
Cumulative Effect of Change in
Accounting Principle - (5.48)
$0.72 $(4.92)
Diluted-
Before Cumulative Effect of
Change in Accounting
Principle $0.70 $0.53
Cumulative Effect of Change in
Accounting Principle - (5.48)
$0.70 $(4.95)
(a) Includes restructuring and restructuring related charges of
$7 million pre-tax, $4 million after-tax or $0.11 per share. The
entire charge is recorded in cost of sales. Geographically,
$3 million is recorded in North America and $4 million in Europe.
(b) Includes a pre-tax expense of $3 million, $2 million after-tax or
$.05 per share related to debt issuance costs that were deferred on
the senior debt we paid down with the proceeds of the $350 million
bond offering.
(c) Includes a $14 million or $.36 per share tax benefit related to the
resolution of several tax issues.
(d) Includes restructuring and restructuring related charges of
$6 million pre-tax, $3 million after-tax or $0.08 per share. The
entire charge is recorded in cost of sales. Geographically,
$3 million is recorded in both North America and 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 $6 million or $.17 per share tax benefit related to the
resolution of several tax issues.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
THREE MONTHS ENDED SEPTEMBER 30,
(Millions except share and per share amounts)
2003 2002
Net sales and operating revenues: $914 $856
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 727 (a) 675 (d)
Engineering, Research and
Development 18 18
Selling, General and
Administrative 91 85
Depreciation and Amortization of
Other Intangibles 40 35
Total Costs and Expenses 876 813
Loss on sale of receivables - (1)
Other Income (Loss) - (2)
Total Other Income (Loss) - (3)
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 32 36 (d)
Europe (3)(a) (1)(d)
Other 9 5
38 40
Less:
Interest expense (net of
interest capitalized) 34 (b) 36
Income tax expense (benefit) (2)(c) (2)(e)
Minority interest 2 1
Net income $4 $5
Average common shares outstanding:
Basic 40.6 39.8
Diluted 42.2 42.0
Earnings (loss) per share of common
stock:
Basic- $0.11 $0.13
Diluted- $0.10 $0.13
(a) Includes restructuring related charges of $1 million pre-tax,
$1 million after-tax or $0.02 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 reduction of $2 million, $1 million after-tax or
$.02 per share related to debt issuance costs that were deferred on
the senior debt we paid down with the proceeds of the $350 million
bond offering.
(c) Includes a $3 million or $.09 per share tax benefit related to the
resolution of outstanding tax issues.
(d) Includes restructuring and other charges of $3 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
North America and $2 million in Europe.
(e) Includes a $2 million or $.06 per share tax benefit related to a
change in the estimated effective tax rate.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
September 30, December 31,
2003 2002
Assets
Cash and Temporary Cash Investments $63 $54
Receivables, Net 483 409
Inventories 338 352
Other Current Assets 160 151
Investments and Other Assets 538 512
Plant, Property, and Equipment, Net 1,067 1,026
Total Assets $2,649 $2,504
Liabilities and Shareowners' Equity
Short-Term Debt $18 $228
Accounts Payable 569 505
Accrued Taxes 42 40
Accrued Interest 41 23
Other Current Liabilities 216 220
Long-Term Debt 1,386 1,217
Deferred Income Taxes 71 103
Deferred Credits and Other Liabilities 268 243
Minority Interest 21 19
Total Shareholders' Equity 17 (94)
Total Liabilities and Shareholders' Equity $2,649 $2,504
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Nine Months Ended
September 30,
2003 2002
Operating activities:
Net income (loss) before cumulative
effect of change in accounting
principle, net of tax $29 $22
Adjustments to reconcile income (loss)
to net cash provided (used) by
operating activities -
Depreciation and amortization 120 104
Deferred income taxes (17) (17)
(Gain)/loss on sale of businesses
and assets, net 1 (9)
Changes in components of working capital -
(Inc.)/dec. in receivables (46) (25)
(Inc.)/dec. in inventories 43 11
(Inc.)/dec. in prepayments and
other current assets 3 (20)
Inc./(dec.) in payables 31 76
Inc./(dec.) in taxes accrued (25) 3
Inc./(dec.) in interest accrued 19 14
Inc./(dec.) in other current liabilities (15) 10
Other 19 (1)
Net cash provided (used) by operating activities 162 168
Investing activities:
Net proceeds from sale of assets 4 20
Expenditures for plant, property & equipment (83) (86)
Investments and other (5) 10
Net cash provided (used) by investing
activities (84) (56)
Net Cash provided (used) before
financing activities 78 112
Financing activities:
Proceeds from capital contributions 1 -
Issuance of long-term debt 350 1
Debt issuance costs on long-term debt (13) -
Retirement of long-term debt (277) (89)
Net inc./(dec.) in short-term debt excluding
current maturities on long-term debt (119) (22)
Other (1) -
Net cash provided (used) by financing activities (59) (110)
Effect of foreign exchange rate changes on
cash and temporary cash investments (10) (9)
Inc./(dec.) in cash and temporary cash
investments 9 (7)
Cash and temporary cash investments,
January 1 54 53
Cash and temporary cash investments,
September 30 $63 $46
Cash paid during the period for interest $79 $94
Cash paid during the period for income taxes $41 $22
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(A) RESULTS TO NON-GAAP RESULTS
Unaudited
Q3 2003 Q3 2002
Amount Per Share Amount Per Share
Net Income (GAAP measure) $4 $0.10 $5 $0.13
After tax adjustments (reflects non-
GAAP measures):
Restructuring and restructuring
related expenses 1 0.02 2 0.04
Tax return to accrual adjustment (3) (0.09) - -
Debt issuance cost write off
adjustment (1) (0.02) - -
Effective tax rate change - - (2) (0.06)
Non-GAAP earnings measure(B) $1 $0.01 $5 $0.11
Q3 2003
North Rest of
America Europe World Total
Net income (loss) $4
Minority interest 2
Income tax expense (benefit) (2)
Interest expense (net of interest
capitalized) 34
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) $32 $(3) $9 38
Depreciation and amortization of
other intangibles 22 15 3 40
Total EBITDA(C) $54 $12 $12 $78
Q3 2002
North Rest of
America Europe World Total
Net income (loss) $5
Minority interest 1
Income tax expense (benefit) (2)
Interest expense (net of interest
capitalized) 36
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) $36 $(1) $5 40
Depreciation and amortization 22 10 3 35
Total EBITDA(C) $58 $9 $8 $75
(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 third
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 net income before 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(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) $29 $0.70 $22 $0.53
After tax adjustments (reflects non-
GAAP measures):
Restructuring and restructuring
related expenses 4 0.11 3 0.08
Tax adjustments (14) (0.36) (6) (0.17)
Debt issuance cost write off 2 0.05 - -
Gain on sale of York facility - - (5) (0.13)
Amendment fee - - 1 0.03
Non-GAAP earnings measure(B) $21 $0.50 $15 $0.34
YTD 2003
North Rest of
America Europe World Total
Net income (loss) $29
Minority interest 5
Income tax expense (benefit) (1)
Interest expense (net of interest
capitalized) 103
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) $109 $7 $20 136
Depreciation and amortization of
other intangibles 68 43 9 120
Total EBITDA(C) $177 $50 $29 $256
YTD 2002
North Rest of
America Europe World Total
Net income (loss) $(196)
Cumulative effect of change in
accounting principle, net of income
tax 218
Minority interest 2
Income tax expense (benefit) 6
Interest expense (net of interest
capitalized) 108
Income(loss) before interest expense,
income taxes and minority interest
(GAAP measure) $108 $15 $15 138
Depreciation and amortization 65 30 9 104
Total EBITDA(C) $173 $45 $24 $242
(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 nine
months 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 net 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
Q3 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 $78 $- $78 $- $78
Exhaust 45 - 45 - 45
Total North America
Aftermarket 123 - 123 - 123
North America Original
Equipment
Ride Control 102 - 102 - 102
Exhaust 227 5 222 67 155
Total North America
Original Equipment 329 5 324 67 257
Total North America 452 5 447 67 380
Europe Aftermarket
Ride Control 45 7 38 - 38
Exhaust 47 7 40 - 40
Total Europe Aftermarket 92 14 78 - 78
Europe Original Equipment
Ride Control 65 8 57 - 57
Exhaust 187 26 161 52 109
Total Europe Original
Equipment 252 34 218 52 166
Total Europe 344 48 296 52 244
Asia 42 - 42 15 27
South America 31 2 29 4 25
Australia 45 9 36 4 32
Total Rest of World 118 11 107 23 84
Total Tenneco Automotive $914 $64 $850 $142 $708
Q3 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 $80 $- $80 $- $80
Exhaust 49 - 49 - 49
Total North America
Aftermarket 129 - 129 - 129
North America Original
Equipment
Ride Control 101 - 101 - 101
Exhaust 236 - 236 74 162
Total North America
Original Equipment 337 - 337 74 263
Total North America 466 - 466 74 392
Europe Aftermarket
Ride Control 39 - 39 - 39
Exhaust 47 - 47 - 47
Total Europe Aftermarket 86 - 86 - 86
Europe Original Equipment
Ride Control 46 - 46 - 46
Exhaust 173 - 173 56 117
Total Europe Original
Equipment 219 - 219 56 163
Total Europe 305 - 305 56 249
Asia 30 - 30 9 21
South America 24 - 24 2 22
Australia 31 - 31 2 29
Total Rest of World 85 - 85 13 72
Total Tenneco Automotive $856 $- $856 $143 $713
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.
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Unaudited
Nine Months Ended September 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 $240 $- $240 $- $240
Exhaust 127 - 127 - 127
Total North America
Aftermarket 367 - 367 - 367
North America Original
Equipment
Ride Control 336 - 336 - 336
Exhaust 731 10 721 229 492
Total North America
Original Equipment 1,067 10 1,057 229 828
Total North America 1,434 10 1,424 229 1,195
Europe Aftermarket
Ride Control 133 23 110 - 110
Exhaust 137 23 114 - 114
Total Europe Aftermarket 270 46 224 - 224
Europe Original Equipment
Ride Control 186 28 158 - 158
Exhaust 621 97 524 166 358
Total Europe Original
Equipment 807 125 682 166 516
Total Europe 1,077 171 906 166 740
Asia 118 - 118 42 76
South America 86 (7) 93 9 84
Australia 118 20 98 11 87
Total Rest of World 322 13 309 62 247
Total Tenneco
Automotive $2,833 $194 $2,639 $457 $2,182
Nine Months Ended September 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 $256 $- $256 $- $256
Exhaust 147 - 147 - 147
Total North America
Aftermarket 403 - 403 - 403
North America Original
Equipment
Ride Control 315 - 315 - 315
Exhaust 754 - 754 249 505
Total North America
Original Equipment 1,069 - 1,069 249 820
Total North America 1,472 - 1,472 249 1,223
Europe Aftermarket
Ride Control 111 - 111 - 111
Exhaust 130 - 130 - 130
Total Europe
Aftermarket 241 - 241 - 241
Europe Original Equipment
Ride Control 136 - 136 - 136
Exhaust 521 - 521 160 361
Total Europe Original
Equipment 657 - 657 160 497
Total Europe 898 - 898 160 738
Asia 77 - 77 26 51
South America 78 - 78 7 71
Australia 88 - 88 4 84
Total Rest of World 243 - 243 37 206
Total Tenneco
Automotive $2,613 $- $2,613 $446 $2,167
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.