Tenneco Automotive Significantly Improves Operating Results
-- Fourth quarter EBIT up 27 percent - adjusted EBIT up 51 percent -- Full year net income before accounting change down 12 percent - adjusted full year net income up 184 percent -- Year-end debt net of cash balances at $1.285 billion -- Wins more than $900 million in new business in 2003
LAKE FOREST, Ill., Jan. 27 -- Tenneco Automotive announced today that the company reported a fourth quarter net loss of $2 million, or 4-cents per diluted share, compared with fourth quarter 2002 net income of $9 million, or 21-cents per diluted share. The company reported full year 2003 net income of $27 million, or 65-cents per diluted share, compared with net income before an accounting change in 2002 of $31 million, or 74-cents per diluted share.
"When you consider our quarter-over-quarter results on an operational basis, excluding certain items, our strong cash and earnings performance in the quarter helped us deliver our best operational year since becoming a stand-alone company," said Mark P. Frissora, chairman and CEO, Tenneco Automotive.
Adjusted for the items described below, fourth quarter 2003 net income was $2 million, or 6-cents per diluted share, versus a loss of $7 million, or 17- cents per diluted share, in the fourth quarter of 2002. Adjusted for the items described below, full year 2003 net income was $23 million, or 55-cents per diluted share, a 162 percent increase in earnings per share compared with net income of $8 million, or 21-cents per diluted share for full year 2002. See the tables that reconcile GAAP results to non-GAAP results, which are in attachment 2 to the press release.
Adjustments to reported fourth quarter 2003 results are:
-- expenses of $9 million pre-tax, $6 million after-tax, or 13-cents per
share, associated with refinancing of the company's senior debt;
-- restructuring expenses of $1 million pre-tax, $1 million after-tax, or
2-cents per share;
-- a benefit of $3 million, or 5-cents per share, related to a foreign
tax adjustment.
Adjustments to reported fourth quarter 2002 results are:
-- net benefits of $16 million after-tax, or 38-cents per share, for
adjustments to restructuring costs and taxes.
Adjustments to reported full year 2003 results are:
-- restructuring and related expenses of $8 million pre-tax, $5 million
after-tax, or 13-cents per share;
-- expenses of $12 million pre-tax, $8 million after-tax, or 18-cents per
share, due to debt refinancing;
-- a benefit of $17 million, or 41-cents per share, related to several
tax adjustments.
Adjustments to reported full year 2002 results are:
-- a net benefit of $23 million after-tax, or 53-cents per share, due to
restructuring and related activities; costs associated with the
amendment of the senior debt agreement; a gain on the sale of a
facility; and a benefit related to several tax adjustments.
"We improved in every region and I am especially pleased with the turnaround in our European original equipment operations," said Frissora. "Europe also took the lead in winning significant new ride and emissions control business. We were awarded more than $900 million in new business in 2003 for OE platforms expected to begin production in 2004 through 2007. We are also encouraged by some strengthening in the North America aftermarket where revenue grew quarter-over-quarter for the first time since the second quarter of 2002."
FOURTH QUARTER PERFORMANCE
The company's fourth quarter 2003 results benefited from higher volumes, improved manufacturing efficiencies and favorable currency exchange rates. However, results were negatively impacted by $4 million in higher interest expense on the company's debt refinancing.
Fourth quarter revenue was $933 million, compared with $846 million in fourth quarter 2002, a 10 percent increase. Adjusted for $86 million in favorable currency, revenue was slightly up quarter-over-quarter.
The company's reported EBIT (earnings before interest, taxes, and minority interest) increased 27 percent to $40 million in the fourth quarter, compared with $31 million in fourth quarter 2002. Adjusted for certain items described above (see attachment 2), EBIT was $41 million, a 51 percent increase compared with fourth quarter 2002 adjusted EBIT of $27 million. The company generated $76 million in cash flow before financing activities during the quarter, largely driven by $68 million in cash from working capital improvements.
Reported EBIT before depreciation and amortization expense (EBITDA) was $83 million for the quarter, an 18 percent increase compared with $71 million in fourth quarter 2002. Adjusted for certain items described above (see attachment 2), fourth quarter EBITDA was $84 million, a 28 percent increase versus adjusted fourth quarter 2002 EBITDA of $67 million.
The company decreased its SGA&E (selling, general, administrative and engineering) expense to 11.3 percent of sales in the quarter compared with 11.6 percent in fourth quarter 2002. The higher margin aftermarket continues to represent a smaller percentage of revenues and gross margin. Gross margin was 20.2 percent in the quarter, compared with 20.0 percent reported in fourth quarter 2002. Without the benefits of an income adjustment related to restructuring costs, fourth quarter 2002 gross margin would have been 19.7 percent.
The company operated well within the requirements of its bank debt covenants in the quarter. At December 31, the leverage ratio was 4.17, below the maximum limit of 5.00; the fixed charge coverage ratio was 1.87, exceeding the minimum required ratio of 1.00; and the interest coverage ratio was 3.04, exceeding the minimum required ratio of 1.95.
FULL YEAR PERFORMANCE
The company reported 2003 revenue of $3.8 billion, a 9 percent increase over 2002. Adjusted for the impact of favorable currency, revenue increased 1 percent.
Full year reported EBIT was $176 million, a 4 percent increase compared with 2002 EBIT of $169 million. Adjusted for certain items described above (see attachment 2), 2003 EBIT was $184 million, compared with adjusted 2002 EBIT of $162 million. For the full year, Tenneco Automotive reported net cash before financing activities of $154 million, up 90 percent from a year ago. The company strengthened its financial position in 2003, ending the year with cash balances of $145 million and total debt at $1.430 billion, or debt net of cash balances of $1.285 billion, the lowest level since becoming a stand-alone company.
Tenneco Automotive reported EBITDA for the full year of $339 million, an increase from $313 million reported in 2002. EBITDA was $347 million adjusted for certain items described above (see attachment 2), compared with 2002 adjusted EBITDA of $306 million.
The company reported SGA&E for the year of 11.4 percent of sales, meeting its 2003 goal of maintaining SGA&E expense at less than 12 percent of sales. Gross margin for 2003 was 20.5 percent versus 20.9 percent in 2002. The decline was driven by a lower percentage of sales generated by the higher margin aftermarket business. The company also achieved its Project Genesis restructuring goals for the year, generating $29 million in savings. Manufacturing improvements driven by the company's Six Sigma initiative generated an additional $27 million in savings in 2003.
FOURTH QUARTER - NORTH AMERICA
-- North American original equipment revenue was $347 million for the
quarter versus $338 million in fourth quarter 2002. Excluding the
impact of lower pass-through catalytic converter sales, revenue was
$270 million, up 2 percent versus a market decline of almost one
percent. Higher ride control volumes drove the increase.
-- North American aftermarket revenue was $99 million, up 12 percent
versus fourth quarter 2002 revenue of $88 million. The increase was
driven by an 11 percent increase in ride control sales and a 14
percent increase in emissions control sales.
-- Reported EBIT for North American operations was $22 million compared
with $21 million reported in the fourth quarter of 2002. Adjusted for
$1 million in restructuring related expenses, EBIT in fourth quarter
2003 was $23 million, versus EBIT of $21 million in the same period
one year ago. The EBIT improvement was driven by higher volumes,
improved manufacturing efficiency and cost control measures.
FOURTH QUARTER - EUROPE
-- European original equipment revenue increased to $290 million from
$253 million in fourth quarter 2002. Before the impact of favorable
currency and pass-through catalytic converter sales, revenue was
$193 million, down less than one percent and even with the market
decline. A 33 percent increase in OE ride control volumes offset a 12
percent decline in emissions control volumes, adjusted for currency
and pass-through sales.
-- European aftermarket revenue was $76 million compared with $70 million
in fourth quarter 2002. Excluding the impact of favorable currency,
revenue was $62 million. The revenue decline was the result of
continued market softness in both ride and emissions control.
-- Reported European EBIT was $7 million compared with reported fourth
quarter 2002 EBIT of $3 million, or zero when adjusted for a net
benefit of $3 million for a favorable adjustment in the estimate to
complete Project Genesis restructuring, net of restructuring related
expenses. Favorable currency, higher OE ride control volumes,
improved manufacturing efficiencies and tight cost controls drove the
EBIT improvement.
FOURTH QUARTER - REST OF WORLD
-- The company's Australian operations increased revenue to $45 million
from $33 million in fourth quarter 2002. Revenue increased 2 percent
to $34 million, excluding the impact of favorable currency. The
revenue gain was driven by higher OE volumes.
-- Revenue from Asian operations increased to $43 million from
$39 million in fourth quarter 2002, primarily driven by growing OE
revenues in China.
-- The company reported revenue from South American operations of
$33 million, a 33 percent increase over fourth quarter 2002 revenue of
$25 million. Revenue was impacted by $5 million in favorable currency
and higher OE volumes, primarily in Brazil.
-- Reported combined EBIT for Asia, South America and Australia was
$11 million in the fourth quarter versus $7 million in the fourth
quarter of 2002. The improvement in reported EBIT was due to
manufacturing efficiencies, increased volumes and favorable currency
exchange rates. Fourth quarter 2002 results include a net benefit of
$1 million for an adjustment in the estimate to complete Project
Genesis.
2004 OUTLOOK
In 2004, the company will maintain its emphasis on aggressive cost management, top-line growth and cash generation to further reduce its debt. The company's long-term goals include reducing SGA&E expense to 10 percent of sales; improving gross margin to 22 percent of sales; and generating at least $100 million in new business annually. For 2004 the company also anticipates generating an additional $30 million in cash from working capital improvements.
"Our strategy is to capitalize on growth opportunities with advanced technologies and in new markets, such as China and Eastern Europe, while continuing our intense focus on cost management and manufacturing improvement initiatives," said Frissora. "In the aftermarket, we expect to grow with new products and in categories beyond our traditional product lines, while continuing to size our European aftermarket business to the market."
The company anticipates that its original equipment book of business in 2004 and 2005 will be about $75 million and $315 million higher, respectively, than the 2003 book of business. Before pass-through catalytic converter sales, the book of business is expected to be about $45 million and $270 million higher than 2003 in 2004 and 2005, respectively. These revenue estimates are based on original equipment manufacturers' programs that have been formally awarded to the company as well as programs where the company is highly confident that it will be awarded business based on informal customer indications, Tenneco Automotive's status as a supplier on the existing program, and the relationship with the customer.
Attachment 1 to this press release provides additional information on Tenneco Automotive's fourth quarter and full year 2003 results.
CONFERENCE CALL INFORMATION
The company will host a conference call on January 27, 2004 at 10:30 a.m. EST. The dial-in number is 888 394-4822 domestic or 773 756-4631 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 is available on the financial and news sections of the Tenneco Automotive web site. A recording of this call will be available one hour following completion of the call on January 27, 2004 through February 3, 2004. To access this recording, dial 800 679-9662 domestic or 402 220-0283 international.
2004 ANNUAL MEETING
The Tenneco Automotive board of directors has scheduled the corporation's annual meeting of shareholders for Tuesday, May 11, 2004 at 10:00 a.m. CDT. 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 19, 2004.
Tenneco Automotive is a $3.8 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 within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "will," "improving," "generating," "goals," "strategy," "continuing," "expect," "expected," "anticipates," "estimates," 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 the strength of other currencies relative to the U.S. dollar and 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), the amount of the company's debt, the ability of the company to access capital markets and the credit ratings of the company's debt; (iv) changes in automotive manufacturers' production rates and their actual and forecasted requirements for the company's products, including the overall highly competitive nature of the automotive parts industry, and the company's resultant inability to realize the sales represented by its book of business, which is based on original equipment manufacturer's programs that have been formally awarded as well as programs where the company is highly confident that it will be awarded business based on informal customer indications, the company's status as a supplier on the existing program and the relationship with the customer, and is based on anticipated pricing for the applicable program over its life, and is subject to increases or decreases due to changes in customer requirements, customer and consumer preferences, and the number of vehicles actually produced by customers; (v) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector, and 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 and outcome of existing and any future legal proceedings, and 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 continued success in cost reduction and cash management programs and its 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 and the market; (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 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. 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 report on Form 10-K for the year ended December 31, 2002. Further information can be found on the company's web site at www.tenneco-automotive.com .
Attachment 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
THREE MONTHS ENDED DECEMBER 31,
(Millions except share and per share amounts)
2003 2002
Net sales and operating revenues: $933 $846
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 745 (a) 677 (d) (e)
Engineering, Research and
Development 17 18
Selling, General and
Administrative 88 80 (e)
Depreciation and Amortization of
Other Intangibles 43 40
Total Costs and Expenses 893 815
Loss on sale of assets - (1)
Loss on sale of receivables (1) -
Other Income (Loss) 1 1
Total Other Income (Loss) - -
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 22 (a) 21 (d) (e)
Europe 7 3 (d) (e)
Other 11 7 (e)
40 31
Less:
Interest expense (net of
interest capitalized) 46 (b) 33
Income tax expense (benefit) (5)(c) (13)(f)
Minority interest 1 2
Net income (loss) $(2) $9
Average common shares outstanding:
Basic 40.7 39.9
Diluted 42.4 41.7
Earnings (loss) per share of common
stock:
Basic- $(0.04) $0.22
Diluted- $(0.04) $0.21
(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 North America.
(b) Includes a pre-tax expense of $9 million, $6 million after-tax or
$.13 per share related to debt issuance costs that were deferred on
the senior debt refinanced in December 2003.
(c) Includes a $3 million or $.05 per share tax benefit related to a
foreign tax adjustment.
(d) Includes restructuring related charges of $5 million pre-tax,
$3 million after-tax or $0.07 per share. The entire charge is
recorded in cost of sales. Geographically, $2 million is recorded in
North America and $3 million in Europe.
(e) 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 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
Other.
(f) Includes tax adjustments of $11 million or $.26 per share related to
an adjustment in taxes based on filed tax returns and a tax rate
change in Belgium.
Attachment 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
TWELVE MONTHS ENDED DECEMBER 31,
(Millions except share and per share amounts)
2003 2002
Net sales and operating revenues: $3,766 $3,459
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 2,994(a) 2,735(d)(e)
Engineering, Research and
Development 67 67
Selling, General and
Administrative 364 351(e)(f)
Depreciation and Amortization of
Other Intangibles 163 144
Total Costs and Expenses 3,588 3,297
Gain on sale of assets - 10(g)
Loss on sale of receivables (2) (2)
Other Income (Loss) - (1)
Total Other Income (Loss) (2) 7
Income (Loss) before Interest
Expense,
Income Taxes, and Minority Interest
North America 131(a) 129(d)(e)(f)
Europe 14(a) 18(d)(e)(f)(g)
Other 31 22(e)
176 169
Less:
Interest expense (net of
interest capitalized) 149(b) 141
Income tax expense (benefit) (6)(c) (7)(h)
Minority interest 6 4
Income (loss) before Cumulative
Effect of Change in Accounting
Principle 27 31
Cumulative Effect of Change in
Accounting Principle, net of income tax - (218)
Net income (loss) $27 $(187)
Average common shares outstanding:
Basic 40.4 39.8
Diluted 41.8 41.7
Earnings (loss) per share of common
stock:
Basic-
Before Cumulative Effect of
Change in Accounting Principle $0.67 $0.78
Cumulative Effect of Change in
Accounting Principle - (5.48)
$0.67 $(4.70)
Diluted-
Before Cumulative Effect of
Change in Accounting Principle $0.65 $0.74
Cumulative Effect of Change in
Accounting Principle - (5.48)
$0.65 $(4.74)
(a) Includes restructuring and related charges of $8 million pre-tax,
$5 million after-tax or $0.13 per share. The entire charge is
recorded in cost of sales. Geographically, $4 million is recorded in
North America and $4 million in Europe.
(b) Includes pre-tax expenses of $12 million, $8 million after-tax or
$.18 per share related to debt issuance costs that were deferred on
the senior debt paid down with the proceeds of the 2003 debt
refinancings.
(c) Includes a $17 million or $.41 per share tax benefit related to the
resolution of several tax issues.
(d) Includes restructuring and restructuring related charges of
$11 million pre-tax, $6 million after-tax or $0.16 per share. The
entire charge is recorded in cost of sales. Geographically,
$5 million is recorded in North America and $6 million in Europe.
(e) 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 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
Other.
(f) 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.
(g) 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.
(h) Includes a $17 million or $.40 per share tax benefit related to the
resolution of several tax issues.
Attachment 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
December 31, 2003 December 31, 2002
Assets
Cash and Temporary Cash
Investments $145 $54
Receivables, Net 442 409
Inventories 343 352
Other Current Assets 175 151
Investments and Other Assets 597 512
Plant, Property, and Equipment,
Net 1,111 1,026
Total Assets $2,813 $2,504
Liabilities and Shareowners' Equity
Short-Term Debt $20 $228
Accounts Payable 621 505
Accrued Taxes 19 40
Accrued Interest 42 23
Other Current Liabilities 191 220
Long-Term Debt 1,410 1,217
Deferred Income Taxes 119 103
Deferred Credits and Other
Liabilities 310 243
Minority Interest 23 19
Total Shareholders' Equity 58 (94)
Total Liabilities and
Shareholders' Equity $2,813 $2,504
Attachment 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Twelve Months Ended
December 31,
2003 2002
Operating activities:
Net income (loss) before
cumulative effect of change in
accounting principle, net of tax $27 $31
Adjustments to reconcile income (loss)
to net cash provided (used) by
operating activities -
Depreciation and amortization 163 144
Deferred income taxes (29) (39)
(Gain)/loss on sale of
businesses and assets, net 2 (8)
Changes in components of
working capital -
(Inc.)/dec. in receivables 13 9
(Inc.)/dec. in inventories 55 -
(Inc.)/dec. in prepayments
and other current assets (1) 6
Inc./(dec.) in payables 52 56
Inc./(dec.) in taxes accrued (30) 3
Inc./(dec.) in interest
accrued 19 (2)
Inc./(dec.) in other current
liabilities (30) (5)
Other 40 (7)
Net cash provided (used) by
operating activities 281 188
Investing activities:
Net proceeds from sale of assets 8 24
Expenditures for plant, property
& equipment (130) (138)
Investments and other (5) 7
Net cash provided (used) by
investing activities (127) (107)
Net Cash provided (used) before
financing activities 154 81
Financing activities:
Proceeds from capital
contributions 1 -
Issuance of long-term debt 891 3
Debt issuance costs on long-term debt (27) -
Retirement of long-term debt (791) (123)
Net inc./(dec.) in short-term
debt excluding current
maturities on long-term debt (121) 47
Other (2) -
Net cash provided (used) by
financing activities (49) (73)
Effect of foreign exchange rate
changes on cash and
temporary cash investments (14) (7)
Inc./(dec.) in cash and temporary
cash investments 91 1
Cash and temporary cash
investments, January 1 54 53
Cash and temporary cash
investments, December 31 $145 $54
Cash paid during the period for
interest $115 $145
Cash paid during the period for
income taxes $46 $27
Non-cash Investing and Financing
Activities
Obligation for long-term capital
lease $- $(3)
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q4 2003
North Rest of
America Europe World Total
Net income (loss) (GAAP Measure) $- $- $- $(2)
Minority interest - - - 1
Income tax expense (benefit) - - - (5)
Interest expense (net of interest
capitalized) - - - 46
EBIT, Income/(loss) before interest
expense, income taxes and minority
interest (GAAP measure) 22 7 11 40
Depreciation and amortization of other
intangibles 23 16 4 43
Total EBITDA(2) $45 $23 $15 $83
Q4 2002
North Rest of
America Europe World Total
Net income (loss) (GAAP Measure) $- $- $- $9
Minority interest - - - 2
Income tax expense (benefit) - - - (13)
Interest expense (net of interest
capitalized) - - - 33
EBIT, Income/(loss) before interest
expense, income taxes and minority
interest (GAAP measure) 21 3 7 31
Depreciation and amortization 23 13 4 40
Total EBITDA $44 $16 $11 $71
(1) Generally Accepted Accounting Principles
(2) 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(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q4 2003 Q4 2002
EBITDA(3) EBIT Net Per EBITDA(3) EBIT Net Per
Income Share Income Share
Earnings
Measures
before
Cumulative
Effect of
Change in
Accounting
Principle $83 $40 $(2) $(0.04) $71 $31 $9 $0.21
Adjustments
(reflects
non-GAAP
measures):
Restructuring
and
restructuring
related
expenses 1 1 1 0.02 (4) (4) (5) (0.12)
Tax settlement
adjustments - - (3) (0.05) - - (11) (0.26)
Debt issuance
cost write
off - - 6 0.13 - - - -
Non-GAAP earnings
measure $84 $41 $2 $0.06 $67 $27 $(7) $(0.17)
Q4 2003
North Rest of
America Europe World Total
EBIT $22 $7 $11 $40
Restructuring and restructuring
related expenses 1 - - 1
Adjusted EBIT $23 $7 $11 $41
Q4 2002
North Rest of
America Europe World Total
EBIT $21 $3 $7 $31
Restructuring and restructuring
related expenses - (3) (1) (4)
Adjusted EBIT $21 $- $6 $27
Cost of Gross Gross
Gross Margin Revenues Sales Margin Margin %
Reported Q4 2002 $846 $677 $169 20.0%
Net benefit of restructuring related
expense adjustment - 2 (2)
Adjusted Q4 2002 $846 $679 $167 19.7%
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-
GAAP earnings measures in order to reflect the results for the fourth
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 measures 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.
(3) See Reconciliation of GAAP Net Income to EBITDA on previous page.
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(1) NET INCOME TO EBITDA
Unaudited
YTD 2003
North Rest of
America Europe World Total
Net income (loss) (GAAP Measure) $- $- $- $27
Cumulative effect of change in
accounting principle, net of income
tax - - - -
Minority interest - - - 6
Income tax expense (benefit) - - - (6)
Interest expense (net of interest
capitalized) - - - 149
EBIT, Income/(loss) before interest
expense, income taxes and minority
interest (GAAP measure) 131 14 31 176
Depreciation and amortization of
other intangibles 91 59 13 163
Total EBITDA(2) $222 $73 $44 $339
YTD 2002
North Rest of
America Europe World Total
Net income (loss) (GAAP Measure) $- $- $- $(187)
Cumulative effect of change in
accounting principle, net of income
tax - - - 218
Minority interest - - - 4
Income tax expense (benefit) - - - (7)
Interest expense (net of interest
capitalized) - - - 141
EBIT, Income/(loss) before interest
expense, income taxes and minority
interest (GAAP measure) 129 18 22 169
Depreciation and amortization 88 43 13 144
Total EBITDA $217 $61 $35 $313
(1) Generally Accepted Accounting Principles
(2) 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(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
YTD 2003 YTD 2002
EBITDA(3) EBIT Net Per EBITDA(3) EBIT Net Per
Income Share Income Share
Earnings
Measures
before
Cumulative
Effect of
Change in
Accounting
Principle $339 $176 $27 $0.65 $313 $ 169 $31 $0.74
Adjustments
(reflects
non-GAAP
measures):
Restructuring
and
restructuring
related
expenses 8 8 5 0.13 2 2 (2) (0.03)
Tax settlement
adjustments - - (17) (0.41) - - (17) (0.40)
Debt issuance
cost write
off - - 8 0.18 - - - -
Gain on sale
of York
facility - - - - (11) (11) (5) (0.13)
Amendment
fee - - - - 2 2 1 0.03
Non-GAAP earnings
measure $347 $184 $23 $0.55 $306 $162 $8 $0.21
YTD 2003
North Rest of
America Europe World Total
EBIT $131 $14 $31 $176
Restructuring and restructuring
related expenses 4 4 - 8
Adjusted EBIT $135 $18 $31 $184
YTD 2002
North Rest of
America Europe World Total
EBIT $129 $18 $22 $169
Restructuring and restructuring
related expenses 3 - (1) 2
Gain on sale of York facility - (11) - (11)
Amendment fee 1 1 - 2
Adjusted EBIT $133 $8 $21 $162
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-
GAAP earnings measures in order to reflect the results for the years
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 measures 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.
(3) See Reconciliation of GAAP Net Income to EBITDA on previous page.
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 REVENUES TO NON-GAAP REVENUE MEASURE
Unaudited
Q4 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 $63 $- $63 $- $63
Exhaust 36 - 36 - 36
Total North America
Aftermarket 99 - 99 - 99
North America Original Equipment
Ride Control 106 - 106 - 106
Exhaust 241 8 233 77 156
Total North America Original
Equipment 347 8 339 77 262
Total North America 446 8 438 77 361
Europe Aftermarket
Ride Control 37 7 30 - 30
Exhaust 39 7 32 - 32
Total Europe Aftermarket 76 14 62 - 62
Europe Original Equipment
Ride Control 79 12 67 - 67
Exhaust 211 35 176 50 126
Total Europe Original
Equipment 290 47 243 50 193
Total Europe 366 61 305 50 255
Asia 43 1 42 15 27
South America 33 5 28 3 25
Australia 45 11 34 4 30
Total Rest of World 121 17 104 22 82
Total Tenneco Automotive $933 $86 $847 $149 $698
Q4 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 $56 $- $56 $- $56
Exhaust 32 - 32 - 32
Total North America
Aftermarket 88 - 88 - 88
North America Original Equipment
Ride Control 95 - 95 - 95
Exhaust 243 - 243 74 169
Total North America Original
Equipment 338 - 338 74 264
Total North America 426 - 426 74 352
Europe Aftermarket
Ride Control 31 - 31 - 31
Exhaust 39 - 39 - 39
Total Europe Aftermarket 70 - 70 - 70
Europe Original Equipment
Ride Control 51 - 51 - 51
Exhaust 202 - 202 58 144
Total Europe Original
Equipment 253 - 253 58 195
Total Europe 323 - 323 58 265
Asia 39 - 39 9 30
South America 25 - 25 3 22
Australia 33 - 33 2 31
Total Rest of World 97 - 97 14 83
Total Tenneco Automotive $846 $- $846 $146 $700
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 REVENUES TO NON-GAAP REVENUE MEASURE
Unaudited
Year Ended December 31, 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 $303 $- $303 $- $303
Exhaust 163 - 163 - 163
Total North America
Aftermarket 466 - 466 - 466
North America Original Equipment
Ride Control 442 - 442 - 442
Exhaust 972 18 954 306 648
Total North America Original
Equipment 1,414 18 1,396 306 1,090
Total North America 1,880 18 1,862 306 1,556
Europe Aftermarket
Ride Control 170 30 140 - 140
Exhaust 176 30 146 - 146
Total Europe Aftermarket 346 60 286 - 286
Europe Original Equipment
Ride Control 265 40 225 - 225
Exhaust 832 132 700 216 484
Total Europe Original
Equipment 1,097 172 925 216 709
Total Europe 1,443 232 1,211 216 995
Asia 161 1 160 57 103
South America 119 (2) 121 12 109
Australia 163 31 132 15 117
Total Rest of World 443 30 413 84 329
Total Tenneco Automotive $3,766 $280 $3,486 $606 $2,880
Year Ended December 31, 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 $312 $- $312 $- $312
Exhaust 179 - 179 - 179
Total North America
Aftermarket 491 - 491 - 491
North America Original Equipment
Ride Control 410 - 410 - 410
Exhaust 997 - 997 323 674
Total North America Original
Equipment 1,407 - 1,407 323 1,084
Total North America 1,898 - 1,898 323 1,575
Europe Aftermarket
Ride Control 142 - 142 - 142
Exhaust 169 - 169 - 169
Total Europe Aftermarket 311 - 311 - 311
Europe Original Equipment
Ride Control 187 - 187 - 187
Exhaust 723 - 723 218 505
Total Europe Original
Equipment 910 - 910 218 692
Total Europe 1,221 - 1,221 218 1,003
Asia 116 - 116 35 81
South America 103 - 103 10 93
Australia 121 - 121 6 115
Total Rest of World 340 - 340 51 289
Total Tenneco Automotive $3,459 $- $3,459 $592 $2,867
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.