Tenneco Automotive Reports Record Revenue and Improved Earnings
-- EPS improves 40 percent; EBIT up 16 percent -- Record third quarter revenue of $998 million -- 11th consecutive quarter of year-over-year EBIT and EBITDA improvement -- European EBIT improves to $6 million versus a $3 million loss a year ago
LAKE FOREST, Ill., Oct. 20 -- Tenneco Automotive reported third quarter net income of $6 million, or 14-cents per diluted share, versus net income of $4 million, or 10-cents per diluted share in third quarter 2003. EBIT (earnings before interest, taxes and minority interest) for the quarter was $44 million versus $38 million a year ago. EBITDA (EBIT before depreciation and amortization) was $86 million, compared with $78 million in third quarter 2003.
The company's strong position on top-selling vehicles worldwide and strengthening North American aftermarket ride control sales generated record third quarter revenue of $998 million, versus $914 million a year ago. Favorable currency exchange rates impacted revenue by $33 million.
Adjusted for the items described below, third quarter adjusted net income increased to $7 million, or 16-cents per diluted share compared with $1 million, or 1-cent per diluted share, in third quarter 2003. Adjusted EBIT was $46 million and EBITDA was $88 million, up 18 percent and 11 percent, respectively.
Adjusted third quarter 2004 and 2003 results:
Q3 2004 Q3 2003
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $86 $44 $6 $0.14 $78 $38 $4 $0.10
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 2 2 2 0.04 1 1 1 0.02
Tax adjustments - - (1) (0.02) - - (3) (0.09)
Debt issuance cost
write off - - - - - - (1) (0.02)
Non-GAAP earnings
measures $88 $46 $7 $0.16 $79 $39 $1 $0.01
Additional information regarding Non-GAAP financial results, including a reconciliation of EBITDA and other Non-GAAP earnings measures, is included in the tables that appear in attachment 2 to this press release.
Third quarter 2004 adjustments:
-- Restructuring related expenses of $2 million pre-tax, or 4-cents per
diluted share;
-- Tax benefit of $1 million, or 2-cents per diluted share.
Third quarter 2003 adjustments:
-- Restructuring related expenses of $1 million pre-tax, or 2-cents per
diluted share;
-- Tax benefit of $3 million, or 9-cents per diluted share;
-- Debt issuance write-off costs of $1 million, or 2-cents per diluted
share.
"We delivered stronger year-over-year financial results this quarter despite challenging market conditions including escalating material costs, especially for carbon steel," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "While we have taken effective steps to help offset some of the price increases year-to-date, this remains our greatest challenge going forward. In addition to our focus on growth, we are working to lower our cost of doing business in order to maintain our momentum in spite of the materials cost burden."
The company's gross margin in the quarter was 20 percent compared with 20.5 percent in third quarter 2003. Gross margin was negatively impacted by .4 (four tenths) percent in the quarter due to a shifting business mix as the company's global OE growth outpaced higher margin aftermarket growth. The business mix coupled with the negative impact of approximately $10 million in steel price increases on materials not protected under contract offset strong OE volumes, aftermarket price increases, and the benefits from efficiency improvement and cost management activities. As it has in the past, the company anticipates achieving price recovery from its customers to help offset increased steel costs.
Restructuring activities in the quarter generated $4 million in savings and Six Sigma quality programs delivered $8 million in savings. The company's SGA&E (selling, general, administrative and engineering) expense in the quarter decreased to 11.3 percent of sales versus 11.9 percent a year earlier.
Tenneco Automotive reported its third consecutive quarter of record low net debt of $1.220 billion. Cash balances were $203 million at quarter-end and total debt was $1.423 billion.
The company outperformed the requirements of its bank debt covenants in the quarter. At September 30, the leverage ratio was 3.69, below the maximum limit of 4.75; the fixed charge coverage ratio was 1.78, exceeding the required ratio of 1.10; and the interest coverage ratio was 2.75, exceeding the minimum coverage ratio of 2.00.
NORTH AMERICA
-- North American original equipment revenue was $338 million, including
$71 million in catalytic converter pass-through sales, versus
$329 million in third quarter 2003 with $67 million in pass-through
sales. The company's strong position on top-selling vehicles and
growing business with Japanese OEMs drove the increase, outpacing a 1
percent industry production decline.
-- North American aftermarket revenue was $127 million, compared with
$123 million a year earlier. The increase was the result of sales to
new customers and higher ride control sales.
-- EBIT for North American operations was $31 million, compared with
$32 million the previous year. Higher material costs offset stronger
OE and aftermarket ride control sales and manufacturing efficiencies.
EUROPE
-- European original equipment revenue was $305 million, a 21 percent
increase over $252 million a year earlier. New ride control platform
launches and the company's position on better-selling vehicles drove
the increase, which outpaced industry production by six percentage
points. Results include $21 million in favorable currency and
$74 million in catalytic converter pass-through sales. Third quarter
2003 results include $56 million in pass-through sales.
-- European aftermarket revenue was $94 million, including $7 million in
favorable currency, versus $92 million in third quarter 2003. Lower
sales in both product lines more than offset market share gains and
price increases in the exhaust segment.
-- European EBIT was $6 million, including $1 million in favorable
currency, compared with a loss of $3 million a year earlier. Higher
OE volumes, successful cost management efforts and aftermarket price
increases drove the improvement.
-- Third quarter 2004 EBIT results include $2 million in restructuring
related expenses. Third quarter 2003 EBIT results include $1 million
in restructuring related expenses.
REST OF WORLD
-- Revenue from Asian operations was $42 million, flat with the previous
year. Weaker OE volumes in China impacted results with revenue from
the company's new joint ventures offsetting sales declines from other
China operations.
-- Revenue from South American operations was $42 million, versus
$31 million in third quarter 2003. The increase was driven by
stronger OE volumes and aftermarket sales in all markets.
-- Australian operations generated $50 million in revenue, compared with
$45 million in third quarter 2003. Revenue includes $4 million in
favorable currency and was driven by OE volumes.
-- Reported combined EBIT for Asia, South America and Australia was
$7 million versus $9 million in third quarter 2003. The decline was
largely the result of lower OE volumes in China and manufacturing
inefficiencies due to a customer start-up issue in Australia.
YEAR-TO-DATE RESULTS
YTD 2004 YTD 2003
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $284 $153 $34 $0.78 $256 $136 $29 $0.70
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 12 12 8 0.18 7 7 4 0.11
New Aftermarket
customer
changeover costs 8 8 5 0.13 - - - -
Consulting fees
indexed to stock
price 4 4 3 0.06 - - - -
Tax adjustments - - (6) (0.14) - - (14) (0.36)
Debt issuance cost
write off - - - - - - 2 0.05
Non-GAAP earnings
measures $308 $177 $44 $1.01 $263 $143 $21 $0.50
OUTLOOK
"We remain cautious about the fourth quarter and into 2005. We anticipate continued growth in our European operations with a significant number of new ride and emission control platform launches throughout 2005. In North America, we are winning new OE contracts in both business units and maintaining a strong position on top-selling platforms. We are also encouraged by this quarter's increase in North American aftermarket ride control sales," said Frissora. "However, despite these growth drivers, we are operating in a weaker OE environment in North America and China. In addition, we remain very concerned about the potential impact of rising steel prices on future results."
"We are currently negotiating 2005 steel contracts with our suppliers as well as negotiating with both our aftermarket and OE customers for steel price recovery," added Frissora. "In addition, we are actively pursuing material substitutions and other cost reduction opportunities to lessen our exposure to steel volatility and will initiate other actions, as necessary, to help offset the impact of price increases."
In addition to its actions on steel, the company is continuing to look at ways to lower its cost structure through consolidations, shared services and more aggressive discretionary spending targets.
Attachment 1 to this press release provides additional information on Tenneco Automotive's third quarter results:
Statement of Income - 3 months Statement of Income - 9 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 - 9 months Reconciliation of GAAP to Non-GAAP Earnings Measures - 9 months Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 3 months Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 9 months CONFERENCE CALL
The company will host a conference call on October 20, 2004 at 10:30 a.m. EDT. The dial-in number is 888-399-8606 (domestic) or 517-308-9007 (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 October 20, 2004 through October 27, 2004. To access this recording, dial 888-566-0635 (domestic) or 402-998-0730 (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 SEPTEMBER 30,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues: $998 $914
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 798 (a) 727 (c)
Engineering, Research and
Development 22 18
Selling, General and
Administrative 91 91
Depreciation and Amortization of
Other Intangibles 42 40
Total Costs and Expenses 953 876
Other Income (Loss) (1) -
Total Other Income (Loss) (1) -
Income (Loss) before Interest
Expense,
Income Taxes, and Minority Interest
North America 31 32
Europe 6 (a) (3)(c)
Other 7 9
44 38
Less:
Interest expense (net of
interest capitalized) 35 34 (d)
Income tax expense (benefit) 2 (b) (2)(e)
Minority interest 1 2
Net income $6 $4
Average common shares outstanding:
Basic 41.7 40.6
Diluted 44.3 42.2
Earnings per share of common stock:
Basic $0.15 $0.11
Diluted $0.14 $0.10
(a) Includes restructuring and restructuring related charges of
$2 million pre-tax, $2 million after-tax or $0.04 per share.
The entire charge is recorded in cost of sales. Geographically
all of the charge is recorded in Europe.
(b) Includes a $1 million or $0.02 per share tax benefit related to the
resolution of outstanding tax issues.
(c) Includes restructuring related charges of $1 million pre-tax,
$1 million after-tax or $0.02 per share. The entire charge is
recorded in cost of sales. Geographically all of the charge is
recorded in Europe.
(d) Includes a pre-tax reduction of $2 million, $1 million after-tax or
$0.02 per share related to debt issuance costs that were deferred on
the senior debt we paid down with the proceeds of the $350 million
bond offering.
(e) Includes a $3 million or $0.09 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
NINE MONTHS ENDED SEPTEMBER 30,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues: $3,146 (a) $2,833
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 2,502 (b) 2,249 (e)
Engineering, Research and
Development 56 50
Selling, General and
Administrative 302 (a)(b)(c) 276
Depreciation and Amortization of
Other Intangibles 131 120
Total Costs and Expenses 2,991 2,695
Loss on sale of receivables (1) (1)
Other Income (Loss) (1) (1)
Total Other Income (Loss) (2) (2)
Income (Loss) before Interest
Expense,
Income Taxes, and Minority Interest
North America 111 (a)(b)(c) 109 (e)
Europe 17 (b)(c) 7 (e)
Other 25 (c) 20
153 136
Less:
Interest expense (net of
interest capitalized) 104 103 (f)
Income tax expense (benefit) 11 (d) (1)(g)
Minority interest 4 5
Net income $34 $29
Average common shares outstanding:
Basic 41.3 40.3
Diluted 44.0 41.5
Earnings per share of common stock:
Basic $0.84 $0.72
Diluted $0.78 $0.70
(a) Includes changeover costs for a new aftermarket customer acquired in
the first quarter of $8 million pre-tax, $5 million after-tax or
$0.13 per share. Of the adjustment $6 million is recorded in Sales
and $2 million is recorded in SG&A. Geographically the entire amount
is recorded in North America.
(b) Includes restructuring and restructuring related charges of
$12 million pre-tax, $8 million after tax or $0.18 per share.
Of the adjustment $2 million is recorded in SG&A and the remaining
$10 million is in cost of sales. Geographically, $3 million is
recorded in North America and $9 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 $6 million or $0.14 per share tax benefit related to the
resolution of outstanding tax issues.
(e) Includes restructuring and restructuring related charges of
$7 million pre-tax, $4 million after-tax or $0.11 per share.
The entire charge is recorded in cost of sales. Geographically,
$3 million is recorded in North America and $4 million in Europe.
(f) Includes a pre-tax expense of $3 million, $2 million after-tax or
$0.05 per share related to debt issuance costs that were deferred
on the senior debt we paid down with the proceeds of the
$350 million bond offering.
(g) Includes a $14 million or $0.36 per share tax benefit related to the
resolution of several tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
September 30, 2004 December 31, 2003
Assets
Cash and Cash Equivalents $203 $145
Receivables, Net 511 (a) 442 (a)
Inventories 363 343
Other Current Assets 198 175
Investments and Other Assets 693 579
Plant, Property, and Equipment,
Net 1,070 1,111
Total Assets $3,038 $2,795
Liabilities and Shareholders' Equity
Short-Term Debt $20 $20
Accounts Payable 667 621
Accrued Taxes 22 19
Accrued Interest 42 42
Other Current Liabilities 237 191
Long-Term Debt 1,403 (b) 1,410 (b)
Deferred Income Taxes 171 119
Deferred Credits and Other
Liabilities 351 292
Minority Interest 24 23
Total Shareholders' Equity 101 58
Total Liabilities and
Shareholders' Equity $3,038 $2,795
(a) Accounts Receivables net of: September 30, 2004 December 31, 2003
Accounts Receivable
securitization programs $148 $123
Receivables collected under
advance payment programs $122 $99
(b) Long term debt composed of: September 30, 2004 December 31, 2003
Term loan B (Due 2010) $397 $400
10.25% senior notes (Due 2013) 490 491
11.625% subordinated notes
(Due 2009) 500 500
Other long term debt 16 19
$1,403 $1,410
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Nine Months Ended
September 30,
2004 2003
Operating activities:
Net income $34 $29
Adjustments to reconcile income
to net cash provided by
operating activities -
Depreciation and amortization 131 120
Deferred income taxes (12) (17)
(Gain)/loss on sale of assets,
net - 1
Changes in components of
working capital -
(Inc.)/dec. in receivables (66) (46)
(Inc.)/dec. in inventories (22) 43
(Inc.)/dec. in prepayments
and other current assets (21) 3
Inc./(dec.) in payables 55 31
Inc./(dec.) in taxes accrued 5 (25)
Inc./(dec.) in interest
accrued - 19
Inc./(dec.) in other current
liabilities 21 (15)
Other 10 19
Net cash provided by operating
activities 135 162
Investing activities:
Net proceeds from sale of assets 12 4
Expenditures for plant, property
& equipment (87) (83)
Investments and other - (5)
Net cash used by investing
activities (75) (84)
Financing activities:
Issuance of common shares 6 -
Proceeds from capital
contributions - 1
Purchase of common stock - -
Issuance of long-term debt - 350
Debt issuance costs on long-term
debt - (13)
Retirement of long-term debt (6) (277)
Net inc./(dec.) in short-term
debt excluding current
maturities on long-term debt 1 (119)
Other 1 (1)
Net cash provided (used) by
financing activities 2 (59)
Effect of foreign exchange rate
changes on cash and
cash equivalents (4) (10)
Inc./(dec.) in cash and cash
equivalents 58 9
Cash and cash equivalents,
January 1 145 54
Cash and cash equivalents,
September 30 $203 $63
Cash paid during the period for
interest $106 $79
Cash paid during the period for
income taxes $15 $41
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(a) NET INCOME TO EBITDA
Unaudited
Q3 2004
North Rest of
America Europe World Total
Net income $- $- $- $6
Minority interest - - - 1
Income tax expense (benefit) - - - 2
Interest expense (net of interest
capitalized) - - - 35
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 31 6 7 44
Depreciation and amortization of
other intangibles 22 16 4 42
Total EBITDA(b) $53 $22 $11 $86
Q3 2003
North Rest of
America Europe World Total
Net income $- $- $- $4
Minority interest - - - 2
Income tax expense (benefit) - - - (2)
Interest expense (net of interest
capitalized) - - - 34
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 32 (3) 9 38
Depreciation and amortization 22 15 3 40
Total EBITDA $54 $12 $12 $78
(a) Generally Accepted Accounting Principles
(b) 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(a) TO NON-GAAP EARNINGS MEASURES(b)
Unaudited
Q3 2004 Q3 2003
Net Per Net Per
EBITDA(c) EBIT Income Share EBITDA(c) EBIT Income Share
Earnings
Measures $86 $44 $6 $0.14 $78 $38 $4 $0.10
Adjustments
(reflects
non-GAAP
measures):
Restructuring
and
restructuring
related
expenses 2 2 2 0.04 1 1 1 0.02
Tax adjustments - - (1) (0.02) - - (3) (0.09)
Debt issuance
cost write
off - - - - - - (1) (0.02)
Non-GAAP
earnings
measures $88 $46 $7 $0.16 $79 $39 $1 $0.01
Q3 2004
North Rest of
America Europe World Total
EBIT $31 $6 $7 $44
Restructuring and restructuring related
expenses - 2 - 2
New Aftermarket customer changeover costs - - - -
Consulting fees indexed to stock price - - - -
Adjusted EBIT $31 $8 $7 $46
Q3 2003
North Rest of
America Europe World Total
EBIT $32 $(3) $9 $38
Restructuring and restructuring related
expenses - 1 - 1
Adjusted EBIT $32 $(2) $9 $39
(a) Generally Accepted Accounting Principles
(b) Tenneco Automotive presents the above reconciliation of GAAP to
non-GAAP earnings measures in order to reflect the results for the
third 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.
(c) 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(a) NET INCOME TO EBITDA
Unaudited
YTD 2004
North Rest of
America Europe World Total
Net income $- $- $- $34
Minority interest - - - 4
Income tax expense (benefit) - - - 11
Interest expense (net of interest
capitalized) - - - 104
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 111 17 25 153
Depreciation and amortization of
other intangibles 71 49 11 131
Total EBITDA(b) $182 $66 $36 $284
YTD 2003
North Rest of
America Europe World Total
Net income $- $- $- $29
Minority interest - - - 5
Income tax expense (benefit) - - - (1)
Interest expense (net of interest
capitalized) - - - 103
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 109 7 20 136
Depreciation and amortization 68 43 9 120
Total EBITDA $177 $50 $29 $256
(a) Generally Accepted Accounting Principles
(b) 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(a) TO NON-GAAP EARNINGS MEASURES(b)
Unaudited
YTD 2004 YTD 2003
Net Per Net Per
EBITDA(c) EBIT Income Share EBITDA(c) EBIT Income Share
Earnings
Measures $284 $153 $34 $0.78 $256 $136 $29 $0.70
Adjustments
(reflects
non-GAAP
measures):
Restructuring
and
restructuring
related
expenses 12 12 8 0.18 7 7 4 0.11
New Aftermarket
customer
changeover
costs 8 8 5 0.13 - - - -
Consulting
fees
indexed
to stock
price 4 4 3 0.06 - - - -
Tax
adjustments - - (6) (0.14) - - (14) (0.36)
Debt
issuance
cost
write
off - - - - - - 2 0.05
Non-GAAP
earnings
measures $308 $177 $44 $1.01 $263 $143 $21 $0.50
YTD 2004
North Rest of
America Europe World Total
EBIT $111 $17 $25 $153
Restructuring and restructuring related
expenses 3 9 - 12
New Aftermarket customer changeover costs 8 - - 8
Consulting fees indexed to stock price 2 1 1 4
Adjusted EBIT $124 $27 $26 $177
YTD 2003
North Rest of
America Europe World Total
EBIT $109 $7 $20 $136
Restructuring and restructuring related
expenses 3 4 - 7
Adjusted EBIT $112 $11 $20 $143
(a) Generally Accepted Accounting Principles
(b) Tenneco Automotive presents the above reconciliation of GAAP to
non-GAAP earnings measures in order to reflect the results for the
third 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.
(c) 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 REVENUE TO NON-GAAP REVENUE MEASURE
Unaudited
Q3 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 $83 $- $83 $- $83
Exhaust 44 - 44 - 44
Total North America
Aftermarket 127 - 127 - 127
North America Original Equipment
Ride Control 108 - 108 - 108
Exhaust 230 1 229 71 158
Total North America Original
Equipment 338 1 337 71 266
Total North America 465 1 464 71 393
Europe Aftermarket
Ride Control 44 3 41 - 41
Exhaust 50 4 46 - 46
Total Europe Aftermarket 94 7 87 - 87
Europe Original Equipment
Ride Control 81 7 74 - 74
Exhaust 224 14 210 74 136
Total Europe Original
Equipment 305 21 284 74 210
Total Europe 399 28 371 74 297
Asia 42 - 42 12 30
South America 42 - 42 4 38
Australia 50 4 46 4 42
Total Rest of World 134 4 130 20 110
Total Tenneco Automotive $998 $33 $965 $165 $800
Q3 2003
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $78 $- $78 $- $78
Exhaust 45 - 45 - 45
Total North America
Aftermarket 123 - 123 - 123
North America Original Equipment
Ride Control 102 - 102 - 102
Exhaust 227 - 227 67 160
Total North America Original
Equipment 329 - 329 67 262
Total North America 452 - 452 67 385
Europe Aftermarket
Ride Control 45 - 45 - 45
Exhaust 47 - 47 - 47
Total Europe Aftermarket 92 - 92 - 92
Europe Original Equipment
Ride Control 65 - 65 - 65
Exhaust 187 - 187 56 131
Total Europe Original
Equipment 252 - 252 56 196
Total Europe 344 - 344 56 288
Asia 42 - 42 15 27
South America 31 - 31 4 27
Australia 45 - 45 4 41
Total Rest of World 118 - 118 23 95
Total Tenneco Automotive $914 $- $914 $146 $768
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
Nine Months Ended September 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 $268 $- $268 $- $268
Exhaust 125 - 125 - 125
Total North America
Aftermarket 393 - 393 - 393
North America Original Equipment
Ride Control 346 - 346 - 346
Exhaust 752 7 745 243 502
Total North America Original
Equipment 1,098 7 1,091 243 848
Total North America 1,491 7 1,484 243 1,241
Europe Aftermarket
Ride Control 133 9 124 - 124
Exhaust 144 12 132 - 132
Total Europe Aftermarket 277 21 256 - 256
Europe Original Equipment
Ride Control 257 21 236 - 236
Exhaust 719 49 670 232 438
Total Europe Original
Equipment 976 70 906 232 674
Total Europe 1,253 91 1,162 232 930
Asia 139 1 138 45 93
South America 113 3 110 11 99
Australia 150 20 130 12 118
Total Rest of World 402 24 378 68 310
Total Tenneco Automotive $3,146 $122 $3,024 $543 $2,481
Nine Months Ended September 30, 2003
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $240 $- $240 $- $240
Exhaust 127 - 127 - 127
Total North America
Aftermarket 367 - 367 - 367
North America Original Equipment
Ride Control 336 - 336 - 336
Exhaust 731 - 731 229 502
Total North America Original
Equipment 1,067 - 1,067 229 838
Total North America 1,434 - 1,434 229 1,205
Europe Aftermarket
Ride Control 133 - 133 - 133
Exhaust 137 - 137 - 137
Total Europe Aftermarket 270 - 270 - 270
Europe Original Equipment
Ride Control 186 - 186 - 186
Exhaust 621 - 621 203 418
Total Europe Original
Equipment 807 - 807 203 604
Total Europe 1,077 - 1,077 203 874
Asia 118 - 118 42 76
South America 86 - 86 9 77
Australia 118 - 118 11 107
Total Rest of World 322 - 322 62 260
Total Tenneco Automotive $2,833 $- $2,833 $494 $2,339
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.