Tenneco Automotive Reports Record Revenue and Earnings
-- Highest ever quarterly revenue of $1.114 billion -- Record quarterly net income and EPS of $30 million, or 69-cents per share -- Record low debt net of cash balances at $1.253 billion -- European EBIT improves 27 percent; adjusted European EBIT up 55 percent
LAKE FOREST, Ill., July 20 -- Tenneco Automotive announced today that the company reported a 25 percent increase in net income and a 19 percent increase in earnings per diluted share with second quarter net income of $30 million, or 69-cents per diluted share, versus net income of $24 million, or 58-cents per diluted share, in the second quarter of 2003. The company reported a 15 percent improvement in EBIT (earnings before interest, taxes, and minority interest) to $76 million over second quarter 2003 EBIT of $67 million. EBITDA (EBIT before depreciation and amortization) in the quarter increased 12 percent to $120 million compared with $108 million a year earlier. (See the table that reconciles EBITDA in attachment 2 to the press release.)
Adjusted for the items described below, second quarter 2004 net income improved 55 percent to $31 million and earnings per share was up 43 percent to 70-cents per diluted share. Second quarter EBIT was up 24 percent to $84 million and EBITDA improved 17 percent to $128 million.
Adjusted second quarter 2004 and 2003 results:
Q2 2004 Q2 2003
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $120 $76 $30 $0.69 $108 $67 $24 $0.58
Adjustments:
-Restructuring and
restructuring
related expenses 5 5 3 0.07 1 1 1 0.03
-New Aftermarket
customer changeover
costs 2 2 1 0.02 - - - -
-Consulting fees
indexed to stock
price 1 1 1 0.01 - - - -
-Debt issuance cost
write off - - - - - - 3 0.07
-Tax adjustments - - (4) (0.09) - - (8) (0.19)
Non-GAAP earnings
measures $128 $84 $31 $0.70 $109 $68 $20 $0.49
Additional information regarding Non-GAAP financial results, including a reconciliation of EBITDA and a reconciliation of other Non-GAAP earnings measures are included in the tables that appear in attachment 2 to this press release.
Second quarter 2004 adjustments:
-- Restructuring related expenses of $5 million pre-tax, or 7-cents per
diluted share;
-- Expenses of $2 million pre-tax, or 2-cents per diluted share,
associated with continuing changeover costs for a new aftermarket
customer acquired in the first quarter;
-- Expenses of $1 million pre-tax, or 1-cent per diluted share, for
consulting fees indexed to the stock price based on a 1999 agreement
for implementing EVA(R);
-- A tax benefit of $4 million, or 9-cents per diluted share.
Second quarter 2003 adjustments:
-- Restructuring related expenses of $1 million pre-tax, or 3-cents per
diluted share;
-- Expenses of $5 million pre-tax, or 7-cents per diluted share, related
to the write-off of debt issuance costs;
-- Tax benefits of $8 million, or 19-cents per diluted share.
"Our strategies for top-line growth, cash generation and aggressive cost management continue to prove effective as we posted another solid quarter with strong revenues and improved operational performance," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We are well-positioned with the flexibility to adapt quickly to changing market conditions. Going forward, we will continue to benefit from our strong geographical balance, highly variable cost structure and more efficient manufacturing operations."
The company reported its highest ever quarterly revenue of $1.114 billion compared with $998 million in second quarter 2003, driven by higher volumes on top-selling vehicle platforms worldwide and strengthening aftermarket sales in North America and South America. Favorable currency exchange rates benefited revenue by $27 million.
Tenneco Automotive was awarded approximately $495 million in new business, over the life of the contracts, in the second quarter for OE platforms expected to begin production in 2006-2007 and approximately $5 million annualized in new aftermarket business. The new business includes one of the company's largest ever contracts to supply the full diesel exhaust system on a major pick-up truck platform in North America.
The company's cost management activities and operational efficiency programs continued to generate savings in the second quarter. SGA&E (selling, general, administrative and engineering) expense decreased to 10.7 percent of sales, versus 11.0 percent one year ago, on track toward an annual goal of less than 11.5 percent of sales. Six Sigma initiatives generated $7 million in savings and the company realized $3 million in savings from Project Genesis restructuring activities. The company's gross margin in the quarter was 21.5 percent, versus 21.9 percent one year ago. Excluding restructuring related expenses, gross margin was flat year-over-year. Gross margin in the quarter was also impacted by a shifting business mix as the company's global OE growth outpaced higher margin aftermarket growth.
A record low net debt of $1.253 billion was driven by improved cash flow performance in the quarter. Cash balances were $166 million at quarter-end and total debt was $1.419 billion.
Tenneco Automotive outperformed the requirements of its bank debt covenants in the quarter. At June 30, the leverage ratio was 3.78, below the maximum limit of 5.00; the fixed charge coverage ratio was 2.04, exceeding the minimum required ratio of 1.10; and the interest coverage ratio was 3.15, exceeding the minimum coverage ratio of 2.00.
NORTH AMERICA
-- North American original equipment revenue was $379 million, up 4
percent compared with $365 million in second quarter 2003. The company
outperformed the market's flat production rate due to its strong
position on better-selling platforms and higher heavy-duty truck
volumes.
-- North American aftermarket revenue was $144 million, a 7 percent
increase versus $136 million in second quarter 2003. An 11 percent
improvement in ride control sales drove the increase and offset a 3
percent decline in exhaust sales.
-- EBIT for North American operations was $50 million, flat with second
quarter 2003. Excluding the items below, EBIT increased 6 percent,
driven by manufacturing efficiencies and cost savings.
-- Second quarter 2004 EBIT results include $1 million in restructuring
costs, $2 million for an aftermarket customer changeover costs, and
$1 million associated with stock price indexed consulting fees.
EUROPE
-- European original equipment revenue was $343 million in the quarter, a
20 percent increase over second quarter 2003 revenue of $286 million.
Excluding $18 million in favorable currency, revenue was up 14 percent
compared with one year ago. The launch of new ride control platforms
and higher exhaust volumes drove the increase.
-- European aftermarket revenue was $103 million, flat with second quarter
2003. Excluding the impact of favorable currency, revenue was
$99 million. The decrease was due to lower sales in both product
lines.
-- European EBIT was $14 million, including $1 million in favorable
currency, compared with second quarter 2003 EBIT of $11 million.
Excluding the items below, EBIT increased 55 percent to $18 million,
versus $12 million one year ago. The improvement was driven by OE
volume increases, manufacturing efficiencies and lower overhead costs.
-- Second quarter 2004 EBIT results include $4 million in restructuring
related expenses. Second quarter 2003 EBIT results include $1 million
in restructuring related expenses.
REST OF WORLD
-- Revenue from Asian operations increased 47 percent to $58 million from
$40 million in second quarter 2003, primarily driven by a 58 percent
increase in China OE revenues.
-- Revenue from South America operations was $36 million, a 22 percent
increase versus $29 million in second quarter 2003. The increase was
the result of higher OE volumes and stronger aftermarket sales.
-- Australian operations generated revenue of $51 million, a 27 percent
increase compared with $40 million a year earlier. Excluding the
impact of $4 million in favorable currency, revenue increased 15
percent, due to higher OE volumes and stronger aftermarket sales.
-- Reported combined EBIT for Asia, South America and Australia was
$12 million versus $7 million in second quarter 2003, primarily driven
by higher OE volumes.
"Despite some market uncertainties, we are cautiously optimistic that our improving performance will continue over the second half of 2004 due to our geographical balance, strong position on top-selling vehicles globally, upcoming new platform launches and strong foothold in growing markets such as China and commercial vehicles," said Frissora. "Our intense focus on reducing discretionary spending, improving operational efficiency and leveraging our global supply chain management system should also help counter any changes in the marketplace."
Attachment 1 to this press release provides additional information on Tenneco Automotive's second quarter results:
Statement of Income - 3 months Statement of Income - 6 months Balance Sheet Statements of Cash Flow Attachment 2 Reconciliation of GAAP Net Income to EBITDA - 3 months Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 months Reconciliation of GAAP Net Income to EBITDA - 6 months Reconciliation of GAAP to Non-GAAP Earnings Measures - 6 months Reconciliation of GAAP Revenues to Non-GAAP Revenue Measure - 3 months Reconciliation of GAAP Revenues to Non-GAAP Revenue Measure - 6 months CONFERENCE CALL
The company will host a conference call on July 20, 2004 at 10:30 a.m. EDT. The dial-in number is 888-455-9642 (domestic) or 210-839-8504 (international). The passcode is Tenneco Auto. The call will be available on the financial section of the Tenneco Automotive web site at http://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 completion of the call on July 20, 2004 through July 27, 2004. To access this recording, dial 800-297-0768 (domestic) or 402-220-3822 (international).
THE COMPANY
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
Unaudited
THREE MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues: $1,114 (a) $998
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 874 (b) 779 (e)
Engineering, Research and
Development 19 13
Selling, General and Administrative 100 (c) 97
Depreciation and Amortization of
Other Intangibles 44 41
Total Costs and Expenses 1,037 930
Loss on sale of receivables (1) (1)
Total Other Income (Loss) (1) (1)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 50 (a) (b) (c) 49
Europe 14 (b) 11 (e)
Other 12 7
76 67
Less:
Interest expense (net of
interest capitalized) 34 38 (f)
Income tax expense (benefit) 10 (d) 3 (g)
Minority interest 2 2
Net income $30 $24
Average common shares outstanding:
Basic 41.5 40.4
Diluted 44.2 41.3
Earnings per share of common stock:
Basic $0.73 $0.59
Diluted $0.69 $0.58
(a) Includes continuing changeover costs for a new aftermarket customer
acquired in the first quarter of $2 million pre-tax, $1 million after-
tax or $0.02 per share. The entire cost is recorded in Sales.
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. The
entire charge is recorded in cost of sales. Geographically,
$1 million is recorded in North America and $4 million in Europe.
(c) Includes consulting fees indexed to stock price of $1 million pre-
tax, $1 million after-tax or $0.01 per share. The entire charge is
recorded in SG&A. Geographically the entire charge is recorded in
North America.
(d) Includes a $4 million or $0.09 per share tax benefit related to the
resolution of outstanding tax issues.
(e) 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.
(f) Includes a pre-tax expense of $5 million, $3 million after-tax or
$0.07 per share related to debt issuance costs that were deferred on
the senior debt we paid down with the proceeds of the June 2003
$350 million bond offering.
(g) Includes an $8 million or $0.19 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
SIX MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues: $2,148 (a) $1,919
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 1,704 (b) 1,522 (e)
Engineering, Research and
Development 36 32
Selling, General and
Administrative 209 (a) (b) (c) 185
Depreciation and Amortization of
Other Intangibles 89 80
Total Costs and Expenses 2,038 1,819
Loss on sale of receivables (1) (1)
Other Income (Loss) - (1)
Total Other Income (Loss) (1) (2)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 80 (a) (b) (c) 77 (e)
Europe 11 (b) (c) 10 (e)
Other 18 (c) 11
109 98
Less:
Interest expense (net of
interest capitalized) 69 69 (f)
Income tax expense (benefit) 9 (d) 1 (g)
Minority interest 3 3
Net income $28 $25
Average common shares outstanding:
Basic 41.1 40.2
Diluted 43.8 41.1
Earnings per share of common stock:
Basic $0.69 $0.61
Diluted $0.65 $0.60
(a) Includes changeover costs for a new aftermarket customer acquired in
the first quarter of $8 million pre-tax, $5 million after-tax or $0.11
per share. Of the adjustment $6 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
$10 million pre-tax, $6 million after tax or $0.14 per share. Of the
adjustment $2 million is recorded in SG&A and the remaining $8 million
is in cost of sales. Geographically, $3 million is recorded in North
America and $7 million in Europe.
(c) Includes consulting fees indexed to stock price of $4 million pre-
tax, $3 million after-tax or $0.06 per share. The entire charge is
recorded in SG&A. Geographically $2 million of the charge is recorded
in North America, $1 million in Europe and $1 million in Other.
(d) Includes a $5 million or $0.11 per share tax benefit related to the
resolution of outstanding tax issues.
(e) 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.
(f) Includes a pre-tax expense of $5 million, $3 million after-tax or
$0.07 per share related to debt issuance costs that were deferred on
the senior debt we paid down with the proceeds of the June 2003
$350 million bond offering.
(g) Includes an $11 million or $0.26 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
June 30, 2004 December 31, 2003
Assets
Cash and Cash Equivalents $166 $145
Receivables, Net 550 442
Inventories 352 343
Other Current Assets 202 175
Investments and Other Assets 594 579
Plant, Property, and Equipment,
Net 1,059 1,111
Total Assets $2,923 $2,795
Liabilities and Shareholders' Equity
Short-Term Debt $20 $20
Accounts Payable 669 621
Accrued Taxes 30 19
Accrued Interest 39 42
Other Current Liabilities 239 191
Long-Term Debt 1,399 1,410
Deferred Income Taxes 124 119
Deferred Credits and Other
Liabilities 307 292
Minority Interest 23 23
Total Shareholders' Equity 73 58
Total Liabilities and
Shareholders' Equity $2,923 $2,795
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Six Months Ended
June 30,
2004 2003
Operating activities:
Net income $28 $25
Adjustments to reconcile income to net
cash provided by operating activities -
Depreciation and amortization 89 80
Deferred income taxes (5) (10)
Changes in components of working
capital -
(Inc.)/dec. in receivables (113) (87)
(Inc.)/dec. in inventories (16) 24
(Inc.)/dec. in prepayments
and other current assets (27) (1)
Inc./(dec.) in payables 60 30
Inc./(dec.) in taxes accrued 13 (19)
Inc./(dec.) in interest accrued (2) (5)
Inc./(dec.) in other
current liabilities 24 (19)
Other 8 10
Net cash provided by operating activities 59 28
Investing activities:
Net proceeds from sale of assets 11 3
Expenditures for plant, property
& equipment (54) (54)
Investments and other (2) (2)
Net cash used by investing activities (45) (53)
Net cash provided (used) before
financing activities 14 (25)
Financing activities:
Issuance of common shares 4 -
Proceeds from capital contributions - 1
Issuance of long-term debt - 350
Debt issuance costs on long-term debt - (12)
Retirement of long-term debt (4) (276)
Net inc./(dec.) in short-term debt
excluding current maturities on long-term
debt 1 (25)
Other 2 (1)
Net cash provided by financing activities 3 37
Effect of foreign exchange rate changes on
cash and temporary cash investments 4 (8)
Inc./(dec.) in cash and temporary
cash investments 21 4
Cash and temporary cash investments,
January 1 145 54
Cash and temporary cash investments,
June 30 $166 $58
Cash paid during the period for interest $74 $67
Cash paid during the period for income
taxes $7 $30
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q2 2004
North Rest of
America Europe World Total
Net income $- $- $- $30
Minority interest - - - 2
Income tax expense (benefit) - - - 10
Interest expense (net of interest
capitalized) - - - 34
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 50 14 12 76
Depreciation and amortization of
other intangibles 24 16 4 44
Total EBITDA(2) $74 $30 $16 $120
Q2 2003
North Rest of
America Europe World Total
Net income $- $- $- $24
Minority interest - - - 2
Income tax expense (benefit) - - - 3
Interest expense (net of interest
capitalized) - - - 38
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 49 11 7 67
Depreciation and amortization 24 14 3 41
Total EBITDA $73 $25 $10 $108
(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
Q2 2004 Q2 2003
Net Per Net Per
EBITDA(3) EBIT Income Share EBITDA(3) EBIT Income Share
Earnings
Measures $120 $76 $30 $0.69 $108 $67 $24 $0.58
Adjustments
(reflects
non-GAAP
measures):
Restructuring
and
restructuring
related
expenses 5 5 3 0.07 1 1 1 0.03
New Aftermarket
customer
changeover
costs 2 2 1 0.02 - - - -
Consulting
fees indexed
to stock
price 1 1 1 0.01 - - - -
Tax
adjustments - - (4) (0.09) - - (8) (0.19)
Debt issuance
cost write
off - - - - - - 3 0.07
Non-GAAP
earnings
measures $128 $84 $31 $0.70 $109 $68 $20 $0.49
Q2 2004
North Rest of
America Europe World Total
EBIT $50 $14 $12 $76
Restructuring and restructuring related
expenses 1 4 - 5
New Aftermarket customer changeover costs 2 - - 2
Consulting fees indexed to stock price 1 - - 1
Adjusted EBIT $54 $18 $12 $84
Q2 2003
North Rest of
America Europe World Total
EBIT $49 $11 $7 $67
Restructuring and restructuring related
expenses - 1 - 1
Adjusted EBIT $49 $12 $7 $68
(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 second
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(1) NET INCOME TO EBITDA
Unaudited
YTD 2004
North Rest of
America Europe World Total
Net income $- $- $- $28
Minority interest - - - 3
Income tax expense (benefit) - - - 9
Interest expense (net of interest
capitalized) - - - 69
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 80 11 18 109
Depreciation and amortization of
other intangibles 48 33 8 89
Total EBITDA(2) $128 $44 $26 $198
YTD 2003
North Rest of
America Europe World Total
Net income $- $- $- $25
Minority interest - - - 3
Income tax expense (benefit) - - - 1
Interest expense (net of interest
capitalized) - - - 69
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 77 10 11 98
Depreciation and amortization 46 28 6 80
Total EBITDA $123 $38 $17 $178
(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
YTD 2004 YTD 2003
Net Per Net Per
EBITDA(3) EBIT Income Share EBITDA(3) EBIT Income Share
Earnings
Measures $198 $109 $28 $0.65 $178 $98 $25 $0.60
Adjustments
(reflects
non-GAAP
measures):
Restructuring
and
restructuring
related
expenses 10 10 6 0.14 6 6 3 0.09
New
Aftermarket
customer
changeover
costs 8 8 5 0.11 - - - -
Consulting
fees indexed
to stock
price 4 4 3 0.06 - - - -
Tax
adjustments - - (5) (0.11) - - (11) (0.26)
Debt issuance
cost write
off - - - - - - 3 0.07
Non-GAAP
earnings
measures $220 $131 $37 $0.85 $184 $104 $20 $0.50
YTD 2004
North Rest of
America Europe World Total
EBIT $80 $11 $18 $109
Restructuring and restructuring related
expenses 3 7 - 10
New Aftermarket customer changeover costs 8 - - 8
Consulting fees indexed to stock price 2 1 1 4
Adjusted EBIT $93 $19 $19 $131
YTD 2003
North Rest of
America Europe World Total
EBIT $77 $10 $11 $98
Restructuring and restructuring related
expenses 3 3 - 6
Adjusted EBIT $80 $13 $11 $104
(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 six
months 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) See Reconciliation of GAAP Net Income to EBITDA on previous page.
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
Q2 2004
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $100 $- $100 $- $100
Exhaust 44 - 44 - 44
Total North America
Aftermarket 144 - 144 - 144
North America Original
Equipment
Ride Control 120 - 120 - 120
Exhaust 259 1 258 84 174
Total North America
Original Equipment 379 1 378 84 294
Total North America 523 1 522 84 438
Europe Aftermarket
Ride Control 51 2 49 - 49
Exhaust 52 2 50 - 50
Total Europe Aftermarket 103 4 99 - 99
Europe Original Equipment
Ride Control 91 4 87 - 87
Exhaust 252 14 238 81 157
Total Europe Original
Equipment 343 18 325 81 244
Total Europe 446 22 424 81 343
Asia 58 1 57 20 37
South America 36 (1) 37 3 34
Australia 51 4 47 4 43
Total Rest of World 145 4 141 27 114
Total Tenneco Automotive $1,114 $27 $1,087 $192 $895
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 - 247 75 172
Total North America
Original Equipment 365 - 365 75 290
Total North America 501 - 501 75 426
Europe Aftermarket
Ride Control 53 - 53 - 53
Exhaust 49 - 49 - 49
Total Europe Aftermarket 102 - 102 - 102
Europe Original Equipment
Ride Control 64 - 64 - 64
Exhaust 222 - 222 73 149
Total Europe Original
Equipment 286 - 286 73 213
Total Europe 388 - 388 73 315
Asia 40 - 40 14 26
South America 29 - 29 3 26
Australia 40 - 40 4 36
Total Rest of World 109 - 109 21 88
Total Tenneco Automotive $998 $- $998 $169 $829
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
Six Months Ended June 30, 2004
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $185 $- $185 $- $185
Exhaust 81 - 81 - 81
Total North America
Aftermarket 266 - 266 - 266
North America Original
Equipment
Ride Control 238 - 238 - 238
Exhaust 522 6516 172 344
Total North America
Original Equipment 760 6 754 172 582
Total North America 1,026 6 1,020 172 848
Europe Aftermarket
Ride Control 89 6 83 - 83
Exhaust 94 8 86 - 86
Total Europe Aftermarket 183 14 169 - 169
Europe Original Equipment
Ride Control 176 14 162 - 162
Exhaust 495 35 460 158 302
Total Europe Original
Equipment 671 49 622 158 464
Total Europe 854 63 791 158 633
Asia 97 1 96 33 63
South America 71 3 68 7 61
Australia 100 16 84 8 76
Total Rest of World 268 20 248 48 200
Total Tenneco Automotive $2,148 $89 $2,059 $378 $1,681
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 - 504 162 342
Total North America
Original Equipment 738 - 738 162 576
Total North America 982 - 982 162 820
Europe Aftermarket
Ride Control 88 - 88 - 88
Exhaust 90 - 90 - 90
Total Europe Aftermarket 178 - 178 - 178
Europe Original Equipment
Ride Control 121 - 121 - 121
Exhaust 434 - 434 147 287
Total Europe Original
Equipment 555 - 555 147 408
Total Europe 733 - 733 147 586
Asia 76 - 76 27 49
South America 55 - 55 5 50
Australia 73 - 73 7 66
Total Rest of World 204 - 204 39 165
Total Tenneco Automotive $1,919 $- $1,919 $348 $1,571
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.