Tenneco Automotive Grows Revenue and Improves Operational Profit
-- Record quarterly revenue of $1.03 billion
-- First quarter EBIT up 5 percent -- adjusted EBIT up 33 percent
-- Adjusted EPS improves significantly
-- Record low debt net of cash balances of $1.277 billion at quarter- end
LAKE FOREST, Ill., April 20 -- Tenneco Automotive announced today that the company reported a first quarter 2004 net loss of $2 million, or 5-cents per share, compared with net income of $1 million, or 2-cents per diluted share, in the first quarter of 2003. The company's reported EBIT (earnings before interest, taxes, and minority interest) increased 5 percent to $33 million versus $31 million in first quarter 2003. EBITDA (EBIT before depreciation and amortization expense) increased to $78 million compared with $70 million in first quarter 2003. (See the table that reconciles EBITDA in attachment 2 to the press release.)
Adjusted for the items described below, first quarter 2004 net income was $6 million, or 15-cents per diluted share, versus 1-cent per diluted share in first quarter 2003, and first quarter 2004 EBIT was $47 million compared to $36 million in first quarter 2003.
Adjusted first quarter 2004 and 2003 results:
Q1 2004 Q1 2003
Net Per Net Per
EBIT Income Share EBIT Income Share
GAAP earnings measures $33 $(2) $(0.05) $31 $1 $0.02
Adjustments:
Restructuring/restructuring
related expenses 5 3 0.07 5 2 0.07
Tax settlement adjustment - - - - (3) (0.08)
New Aftermarket customer
changeover costs 6 3 0.08 - - -
Consulting fees indexed to
stock price 3 2 0.05 - - -
Non-GAAP earnings measures $47 $6 $0.15 $36 $- $0.01
Additional information regarding Non GAAP financial results, including a
reconciliation to GAAP results is included in the tables which appear as
Attachment 2 to this press release.
First quarter 2004 adjustments:
-- Restructuring and restructuring related costs of $5 million pre-tax,
$3 million after-tax, or 7-cents per diluted share;
-- Expenses of $6 million pre-tax, $3 million after-tax, or 8-cents per
diluted share, associated with the changeover costs for a major new
aftermarket customer;
-- Expenses of $3 million pre-tax, $2 million after-tax, or 5-cents per
diluted share, related to consulting fees indexed to the stock price
based on a 1999 agreement for implementing EVA(R), a shareholder
value improvement initiative.
First quarter 2003 adjustments:
-- Restructuring and restructuring related costs of $5 million pre-tax,
$2 million after-tax, or 7-cents per diluted share;
-- Tax benefit of $3 million, or 8-cents per diluted share.
"We continue to build momentum toward achieving our long-term objectives as evidenced by our strong revenue generation of more than $1 billion in the quarter and a 33 percent improvement in operating income on an adjusted basis," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We are aggressively pursuing growth opportunities globally while maintaining our relentless focus on cost management and operational efficiency improvements."
Interest expense in the first quarter 2004 was $4 million higher than the same period one year ago as a result of the debt refinancing initiatives the company implemented in 2003. The 2003 debt refinancing initiatives improved the company's financial flexibility by providing a committed long-term source of liquidity and extending nearly all of its debt maturities to 2009 and beyond.
Cash flow before financing activities was a use of $2 million in the quarter compared with cash inflow of $10 million in the first quarter of 2003. Cash used for working capital was an outflow of $26 million in the quarter as a result of higher receivables related to sales volumes and higher inventory levels due to new customers and seasonal inventory builds in anticipation of the aftermarket summer selling period. This outflow was partially offset by $11 million in proceeds from the sale of the company's facility in Birmingham, U.K. Cash flow performance resulted in end of quarter cash balances of $149 million and total debt of $1.426 billion, or debt net of cash balances of $1.277 billion.
Tenneco Automotive outperformed the requirements of its bank debt covenants in the quarter. At March 31, the leverage ratio was 3.97, below the maximum limit of 5.00; the fixed charge coverage ratio was 1.76, exceeding the minimum required ratio of 1.10; and the interest coverage ratio was 2.77, exceeding the minimum coverage ratio of 2.00.
The company reported record high quarterly revenue of $1.03 billion, up 12 percent compared with $921 million in first quarter 2003. Favorable currency exchange rates benefited revenue by $62 million in the quarter. Excluding the impact of favorable currency, revenue was up 5 percent.
The company's operational improvement initiatives continued to generate savings. Six Sigma programs generated $5 million in savings toward a 2004 goal of $20 million and the company realized $6 million in incremental savings from restructuring activities including $2 million from Project Genesis restructuring. The company's gross margin in the quarter was 19.7 percent, an increase over first quarter 2003 gross margin of 19.3 percent.
"Our original equipment revenue in both North America and Europe outpaced market production as we continue to benefit from our position on top-selling vehicle platforms globally and our established presence with Japanese original equipment manufacturers," said Frissora. "Our results continue to be negatively impacted by the European aftermarket business. However, I am encouraged with the strengthening in our North American aftermarket business, where we launched significant new ride control business this quarter and where we have seen six consecutive months of improvement in the exhaust segment."
NORTH AMERICA
-- North American original equipment revenue was $381 million, up
2 percent compared with $373 million in first quarter 2003 and
versus a market production decline of 1 percent. Excluding the
impact of currency and catalytic converter pass-through sales,
revenue was up 1 percent. The company's strong position on high
volume OE models drove the increase.
-- North American aftermarket revenue was $122 million, up 13 percent
compared with first quarter 2003 revenue of $108 million. The
increase was primarily the result of a 19 percent increase in ride
control sales, largely driven by new customers as well as sales of
the company's new car care appearance products.
-- EBIT for North American operations was $30 million versus
$28 million in first quarter 2003. The EBIT increase was due to
strong OE and aftermarket volumes and improved manufacturing
efficiencies.
-- First quarter 2004 EBIT results include $2 million in restructuring
and restructuring related costs; $6 million related to changeover
costs with a new aftermarket customer (the company anticipates up to
$3 million in additional changeover costs through the end of 2004);
and a $1 million expense for consulting fees indexed to the stock
price based on a 1999 agreement. First quarter 2003 EBIT results
include $3 million in restructuring and restructuring related
expenses.
-- Excluding the above items, first quarter 2004 North America adjusted
EBIT was $39 million, versus adjusted 2003 EBIT of $31 million.
EUROPE
-- European original equipment revenue increased 22 percent to
$328 million, versus $269 million in first quarter 2003, despite a
1 percent market decline in light vehicle production. Excluding
catalytic converter pass-through sales and the impact of favorable
currency exchange rates, revenue increased 13 percent.
-- The company's European aftermarket revenue was $80 million compared
with $76 million in first quarter 2003. Excluding the favorable
currency impact, revenue was down 8 percent. Continued lower demand
for exhaust products and softer ride control sales negatively
impacted European aftermarket results.
-- European EBIT was a loss of $3 million compared with a first quarter
2003 loss of $1 million. Aftermarket volume declines and
overcapacity in the aftermarket exhaust segment more than offset the
benefit of higher OE ride control volumes, manufacturing
efficiencies and tight spending controls. Europe's operational
improvement was also negatively impacted by pull-forward pricing
adjustments made for two OE customers; higher aftermarket
promotional costs; higher depreciation expenses related to five new
just-in-time (JIT) manufacturing facilities opened within the past
year; and higher stock-based compensation costs, which, when
combined, totaled $6 million. First quarter 2004 EBIT benefited
from $1 million of favorable currency translation.
-- First quarter 2004 European EBIT results include $3 million in
restructuring and restructuring related costs; and a $1 million
expense for consulting fees indexed to the stock price based on a
1999 agreement. First quarter 2003 EBIT results include $2 million
in restructuring and restructuring related expenses.
-- Excluding the above items, European EBIT was flat year-over-year at
$1 million.
REST OF WORLD
-- Revenue from Asian operations increased to $39 million from
$36 million in the first quarter of last year. The increase was
driven by strong OE exhaust volumes in China.
-- In South America, revenue grew to $35 million compared with
$26 million in first quarter 2003. Improved OE sales and favorable
currency drove the increase. Excluding the impact of favorable
currency, revenue increased 18 percent.
-- Australian operations reported an increase in revenue to $49 million
from $33 million in first quarter 2003, driven by strong OE volumes
and favorable currency. Excluding the impact of favorable currency,
revenue increased 14 percent.
-- Reported combined EBIT for Asia, South America and Australia was
$6 million versus $4 million in first quarter 2003. The increase
was the result of strong OE volumes in all regions and favorable
currency in South America and Australia.
-- First quarter 2004 EBIT results include a $1 million expense for
consulting fees indexed to the stock price based on a 1999
agreement.
-- Excluding the above item, adjusted EBIT for Asia, South America and
Australia was $7 million versus $4 million in first quarter 2003.
Attachment 1 to this press release provides additional information on Tenneco Automotive's first quarter results.
CONFERENCE CALL
The company will host a conference call on April 20, 2004 at 10:30 a.m. EDT. The dial-in number is 888 730-9138 (domestic) or 630 395-0019 (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 the 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 the completion of the call on April 20, 2004 through April 27, 2004. To access this recording, dial 888 568-0399 (domestic) or 420 530-7938 (international).
2004 ANNUAL MEETING
Tenneco Automotive's annual meeting of shareholders will be on 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.
Tenneco Automotive is a $3.8 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,200 employees worldwide. Tenneco Automotive is one of the world's largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco Automotive markets its products principally under the Monroe(R), Walker(R), Gillet(R) and Clevite(R)Elastomer 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, Dynomax(R) performance exhaust products, and Clevite(R)Elastomer noise, vibration and harshness control components.
Attachment 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
(Unaudited)
THREE MONTHS ENDED MARCH 31,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues $1,034 (a) $921
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 830 (b) 743 (d)
Engineering, Research and
Development 17 19
Selling, General and
Administrative 109 (a) (b) (c) 88
Depreciation and Amortization of
Other Intangibles 45 39
Total Costs and Expenses 1,001 889
Other Income (Loss) - (1)
Income (Loss) before Interest
Expense, Income Taxes,
and Minority Interest
North America 30 (a) (b) (c) 28 (d)
Europe (3)(b) (c) (1)(d)
Other 6 (c) 4
33 31
Less:
Interest expense (net of
interest capitalized) 35 31
Income tax expense (benefit) (1) (2)(e)
Minority interest 1 1
Net income (loss) $(2) $1
Average common shares outstanding:
Basic 40.9 40.1
Diluted 43.5 40.9
Earnings (loss) per share of common
stock:
Basic $(0.05) $0.02
Diluted $(0.05) $0.02
(a) Includes changeover costs for a new aftermarket customer of
$6 million pre-tax, $3 million after-tax or $0.08 per share. Of the
adjustment $4 million is recorded in Sales and $2 million is
recorded in SG&A. Geographically all of the charge is recorded in
North America.
(b) Includes restructuring and restructuring related charges of
$5 million pre-tax, $3 million after tax or $0.07 per share. Of the
adjustment $2 million is recorded in SG&A and the remaining
$3 million is in cost of sales. Geographically, $2 million is
recorded in North America and $3 million in Europe.
(c) Consulting fees indexed to stock price of $3 million pre-tax,
$2 million after-tax or $0.05 per share. The entire charge is
recorded in SG&A. Geographically $1 million of the charge is
recorded in North America, Europe and Other respectively.
(d) Includes restructuring related charges of $5 million pre-tax,
$2 million after-tax or $0.07 per share. The entire charge is
recorded in cost of sales. Geographically, $3 million is recorded
in North America and $2 million in Europe.
(e) Includes a $3 million or $0.08 per share tax benefit related to the
resolution of outstanding tax issues.
Attachment 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
March 31, December 31,
2004 2003
Assets
Cash and Cash Equivalents $149 $145
Receivables, Net 512 442
Inventories 367 343
Other Current Assets 203 175
Investments and Other Assets 602 579
Plant, Property, and Equipment, Net 1,079 1,111
Total Assets $2,912 $2,795
Liabilities and Shareholders' Equity
Short-Term Debt $18 $20
Accounts Payable 692 621
Accrued Taxes 25 19
Accrued Interest 39 42
Other Current Liabilities 234 191
Long-Term Debt 1,408 1,410
Deferred Income Taxes 125 119
Deferred Credits and Other
Liabilities 297 292
Minority Interest 21 23
Total Shareholders' Equity 53 58
Total Liabilities and
Shareholders' Equity $2,912 $2,795
Attachment 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Three Months Ended
March 31,
2004 2003
Operating activities:
Net income (loss) $(2) $1
Adjustments to reconcile income
(loss) to net cash provided (used)
by operating activities -
Depreciation and amortization 45 39
Deferred income taxes (9) (7)
Changes in components of working
capital -
(Inc.)/dec. in receivables (70) (49)
(Inc.)/dec. in inventories (27) (12)
(Inc.)/dec. in prepayments and
other current assets (26) (6)
Inc./(dec.) in payables 79 78
Inc./(dec.) in taxes accrued 5 (4)
Inc./(dec.) in interest accrued (2) 11
Inc./(dec.) in other current
liabilities 15 (18)
Other 5 3
Net cash provided (used) by operating
activities 13 36
Investing activities:
Net proceeds from sale of assets 11 1
Expenditures for plant, property &
equipment (25) (26)
Investments and other (1) (1)
Net cash provided (used) by investing
activities (15) (26)
Net cash provided (used) before
financing activities (2) 10
Financing activities:
Issuance of common and treasury
shares 3 -
Retirement of long-term debt (2) (24)
Net inc./(dec.) in short-term debt
excluding current maturities
on long-term debt (2) 21
Other 1 -
Net cash provided (used) by financing
activities - (3)
Effect of foreign exchange rate
changes on cash and cash equivalents 6 (3)
Inc./(dec.) in cash and cash
equivalents 4 4
Cash and cash equivalents, January 1 145 54
Cash and cash equivalents, March 31 $149 $58
Cash paid during the period for
interest $37 $20
Cash paid during the period for
income taxes $3 $11
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME (LOSS) TO EBITDA
Unaudited
Q1 2004
North
America Europe Other Total
Net income (loss) (GAAP measure) $(2)
Minority interest 1
Income tax expense (benefit) (1)
Interest expense (net of interest
capitalized) 35
EBIT, Income (loss) before interest
expense, income taxes and minority
interest (GAAP measure) $30 $(3) $6 33
Depreciation and amortization of
other intangibles 24 17 4 45
Total EBITDA(2) $54 $14 $10 $78
Q1 2003
North
America Europe Other Total
Net income (loss) (GAAP measure) $1
Minority interest 1
Income tax expense (benefit) (2)
Interest expense (net of interest
capitalized) 31
EBIT, Income (loss) before interest
expense, income taxes and minority
interest (GAAP measure) $28 $(1) $4 31
Depreciation and amortization 22 14 3 39
Total EBITDA $50 $13 $7 $70
(1) Generally Accepted Accounting Principles
(2) EBITDA represents 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
performance. 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
Q1 2004 Q1 2003
EBITDA Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income Share
Earnings Measures $78 $33 $(2) $(0.05) $70 $31 $1 $0.02
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 5 5 3 0.07 5 5 2 0.07
Tax settlement
adjustment - - - - - - (3) (0.08)
New Aftermarket
customer changeover
costs 6 6 3 0.08 - - - -
Consulting fees
indexed to stock
price 3 3 2 0.05 - - - -
Non-GAAP earnings
measure $92 $47 $6 $0.15 $75 $36 $- $0.01
Q1 2004
North
America Europe Other Total
EBIT $30 $(3) $6 $33
Restructuring and
restructuring related
expenses 2 3 - 5
New Aftermarket
customer changeover
costs 6 - - 6
Consulting fees
indexed to stock
price 1 1 1 3
Adjusted EBIT $39 $1 $7 $47
Q1 2003
North
America Europe Other Total
EBIT $28 $(1) $4 $31
Restructuring and
restructuring related
expenses 3 2 - 5
Adjusted EBIT $31 $1 $4 $36
(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 first
quarters of 2004 and 2003 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) EBITDA represents 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
performance. 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
Q1 2004
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America
Aftermarket
Ride Control $85 $- $85 $- $85
Exhaust 37 - 37 - 37
Total North
America
Aftermarket 122 - 122 - 122
North America
Original
Equipment
Ride Control 118 - 118 - 118
Exhaust 263 5 258 88 170
Total North
America
Original
Equipment 381 5 376 88 288
Total North
America 503 5 498 88 410
Europe Aftermarket
Ride Control 38 4 34 - 34
Exhaust 42 6 36 - 36
Total Europe
Aftermarket 80 10 70 - 70
Europe Original
Equipment
Ride Control 85 10 75 - 75
Exhaust 243 21 222 77 145
Total Europe
Original
Equipment 328 31 297 77 220
Total Europe 408 41 367 77 290
Asia 39 - 39 13 26
South America 35 4 31 4 27
Australia 49 12 37 4 33
Total Other 123 16 107 21 86
Total Tenneco
Automotive $1,034 $62 $972 $186 $786
Q1 2003
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America
Aftermarket
Ride Control $72 $- $72 $- $72
Exhaust 36 - 36 - 36
Total North
America
Aftermarket 108 - 108 - 108
North America
Original
Equipment
Ride Control 116 - 116 - 116
Exhaust 257 - 257 87 170
Total North
America
Original
Equipment 373 - 373 87 286
Total North
America 481 - 481 87 394
Europe Aftermarket
Ride Control 35 - 35 - 35
Exhaust 41 - 41 - 41
Total Europe
Aftermarket 76 - 76 - 76
Europe Original
Equipment
Ride Control 57 - 57 - 57
Exhaust 212 - 212 74 138
Total Europe
Original
Equipment 269 - 269 74 195
Total Europe 345 - 345 74 271
Asia 36 - 36 13 23
South America 26 - 26 2 24
Australia 33 - 33 3 30
Total Other 95 - 95 18 77
Total Tenneco
Automotive $921 $- $921 $179 $742
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.