Tenneco Automotive Delivers Record Fourth Quarter and Full Year Revenues
Company Reports Quarterly Loss Due to Restructuring and Refinancing Costs
-- Record fourth quarter revenue of $1.1 billion, up 15%
-- Fourth quarter EBIT $18 million; adjusted EBIT $46 million, up 12%
-- Record full year revenue of $4.2 billion, up 12%
-- Record low year-end debt net of cash balances of $1.206 billion
-- Awarded $1.2 billion in future annualized new business in 2004
LAKE FOREST, Ill., Jan. 25 -- Tenneco Automotive reported a fourth quarter loss of $21 million, or 49-cents per diluted share, versus a net loss of $2 million, or 4-cents per diluted share, in fourth quarter 2003. Adjusted for the items below, fourth quarter net income increased to $8 million, or 17-cents per diluted share, compared with net income of $2 million, or 6-cents per diluted share a year ago.
EBIT (earnings before interest, taxes and minority interest) was $18 million, compared with $40 million in fourth quarter 2003. EBITDA (EBIT before depreciation and amortization) was $64 million versus $83 million a year ago. With fourth quarter adjustments, the company delivered its 12th consecutive quarter of EBIT and EBITDA improvement with adjusted EBIT of $46 million and EBITDA of $92 million, up 12% and 10% respectively. See the tables in attachment 2 to the press release, which reconcile GAAP results to non-GAAP results.
Adjusted fourth quarter 2004 and 2003 results:
Q4 2004 Q4 2003
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $64 $18 $(21) $(0.49) $83 $40 $(2) $(0.04)
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 28 28 17 0.40 1 1 1 0.02
Tax adjustments - - (15) (0.34) - - (3) (0.05)
Cost related to
refinancing - - 27 0.60 - - 6 0.13
Non-GAAP earnings
measures $92 $46 $8 $0.17 $84 $41 $2 $0.06
Fourth quarter 2004 adjustments:
-- Restructuring and related expenses of $28 million pre-tax, or 40-cents
per diluted share, primarily to implement a reduction in force
announced in the quarter to save $20 million annually;
-- Tax benefits of $15 million, or 34-cents per diluted share, primarily
to recognize benefits related to previous tax losses in foreign
operations;
-- Expenses of $42 million pre-tax, or 60-cents per diluted share, for
refinancing the company's 11.625% subordinated debt to 8.625%,
expected to save $15 million annually in interest expense.
Fourth quarter 2003 adjustments:
-- Restructuring expenses of $1 million pre-tax, or 2-cents per diluted
share;
-- A benefit of $3 million, or 5-cents per diluted share, related to a
foreign tax adjustment;
-- Expenses of $9 million pre-tax, or 13-cents per diluted share,
associated with refinancing the company's senior debt.
Tenneco Automotive's strong cash performance in the quarter resulted in cash balances of $214 million at quarter-end, up from $203 million at the end of third quarter 2004, and record low net debt of $1.206 billion compared with $1.285 at year-end 2003. Total debt was $1.420 billion at year-end 2004 versus $1.430 billion a year ago.
"Our ability to generate cash and improve earnings delivered another excellent quarter with strong financial results despite facing industry-wide challenges including escalating steel costs," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We are working aggressively to offset the impact of higher steel costs with price recovery from our customers, and by continuing to lower our costs and improve manufacturing efficiency through Lean and Six Sigma programs."
Tenneco Automotive again posted quarterly record revenue of $1.1 billion, up 15 percent over fourth quarter 2003 revenue of $933 million. Favorable currency exchange rates impacted revenue by $52 million. The company continues to benefit from having products on better-selling vehicles in North America and Europe and from stronger North American aftermarket sales.
The company's gross margin in the quarter was 18.5% compared with 20.2% a year ago. Gross margin was negatively impacted by 1.0 percentage point due to restructuring costs in the quarter and 1.4 percentage points due to the impact of $15 million in higher steel costs. These costs offset strong volumes, aftermarket price increases and the benefits from cost reduction activities.
Fourth quarter SGA&E expense was 12.6% of sales, or 10.9% excluding the impact of restructuring costs, versus 11.3% a year ago. Restructuring activities in the quarter delivered $4 million in savings and Six Sigma quality programs generated $7 million.
The company outperformed its bank debt covenants in the quarter. At December 31, the leverage ratio was 3.60, below the maximum limit of 4.75; the fixed charge ratio was 1.78, exceeding the required ratio of 1.10; and the interest coverage ratio was 2.67, exceeding the minimum coverage ratio of 2.00.
NORTH AMERICA
-- North American original equipment revenue increased to $358 million
versus $347 million in 2003. Catalytic converter pass-through sales
were flat year-over-year at $77 million. Revenues outpaced industry
production due to the company's position on top-selling platforms and
stronger year-over-year heavy duty volumes.
-- North American aftermarket revenue was $110 million, up from
$99 million in fourth quarter 2003 due to higher aftermarket ride
control sales to new and existing customers.
-- EBIT for North American operations was $19 million, compared with
$22 million a year ago. Adjusting for $8 million in restructuring
costs, fourth quarter 2004 EBIT was $27 million. Higher material
costs of $11 million in the OE ride control and the aftermarket
businesses offset increased profit from OE and aftermarket revenues.
EUROPE AND SOUTH AMERICA
-- European original equipment revenue was $385 million, including
$89 million in catalytic converter pass-through sales and $39 million
in favorable currency, versus $290 million a year ago with $60 million
in pass-through sales. Higher OE emission control volumes drove the
increase, outpacing a 2% decline in industry production.
-- European aftermarket revenue was $82 million, including $7 million in
favorable currency, versus $76 million a year ago. Improving emission
control sales from market share gains were more than offset by lower
ride control sales.
-- South American operations generated $44 million in revenue, up from
$33 million a year ago, due to higher OE volumes in Brazil and
Argentina. As previously announced the company changed its management
structure and operating segments in the fourth quarter. Year-over-
year result comparisons have been adjusted to report South American
EBIT with the company's European results.
-- EBIT for European and South American operations was a loss of
$5 million versus income of $10 million in fourth quarter 2003.
Adjusted for $17 million in restructuring costs, Europe and South
America EBIT was $12 million in the quarter versus $10 million in
fourth quarter 2003. EBIT improved due to strong OE volumes and
manufacturing efficiencies despite higher material costs of $4
million.
ASIA PACIFIC
Fourth quarter 2004 results have been adjusted to reflect the change in operating segments, which created the Asia Pacific strategic business unit with the company's Asian and Australian operations. Previously, the company reported combined EBIT for Asia, Australia and South America.
-- Revenue from Asian operations was $37 million, versus $43 million in
fourth quarter 2003. The decrease was primarily the result of slowing
OE sales in China.
-- Australian revenue was $55 million including $3 million in favorable
currency compared with $45 million a year ago. Strong OE volumes
drove the increase.
-- EBIT for the company's Asia Pacific operations was $4 million versus
$8 million in fourth quarter 2003. Excluding restructuring costs of
$3 million, fourth quarter 2004 EBIT was $7 million. The decline was
largely the result of lower OE volumes in China.
FULL-YEAR 2004 PERFORMANCE
In 2004, Tenneco Automotive generated its highest ever annual revenue of $4.2 billion, driven by its strong position on top-selling platforms worldwide and strengthening aftermarket sales in some sectors. The company reported full-year net income of $13 million, or 31-cents per diluted share, versus $27 million, or 65-cents per diluted share, in 2003. EBIT was $171 million, versus $176 million a year ago and EBITDA was $348 million compared with $339 million for full year 2003.
Adjusted for the items below, full year net income was $52 million, or $1.18 per diluted share, compared with $23 million, or 55-cents per diluted share, in 2003. Adjusted EBIT increased 21% to $223 million and adjusted EBITDA was up 15% to $400 million.
Adjusted full year 2004 and 2003 results:
Full Year 2004 Full Year 2003
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $348 $171 $13 $0.31 $339 $176 $27 $0.65
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 40 40 25 0.56 8 8 5 0.13
New Aftermarket
customer changeover
costs 8 8 5 0.12 - - - -
Consulting fees indexed
to stock price 4 4 3 0.06 - - - -
Tax adjustments - - (21) (0.47) - - (17) (0.41)
Cost related to
refinancing - - 27 0.60 - - 8 0.18
Non-GAAP earnings
measures $400 $223 $52 $1.18 $347 $184 $23 $0.55
Full-year 2004 adjustments:
-- Restructuring and related expenses of $40 million pre-tax, or 56-cents
per share, to improve manufacturing efficiency and reduce costs;
-- Expenses of $8 million, or 12-cents per diluted share, associated with
changeover costs for a new aftermarket customer;
-- Expenses of $4 million pre-tax, or 6-cents per diluted share, for
consulting fees indexed to the stock price based on a 1999 agreement
for implementing EVA(R);
-- Tax benefits of $21 million or 47-cents per diluted share;
-- Expenses of $42 million pre-tax, or 60-cents per diluted share, for
refinancing the company's subordinated debt.
Full-year 2003 adjustments:
-- Restructuring and related expenses of $8 million pre-tax, or 13-cents
per diluted share;
-- Tax benefits of $17 million, or 41-cents per diluted share;
-- Expenses of $12 million, or 18-cents per diluted share, for debt
refinancing.
The company reported SGA&E for the year of 11.7% of sales, or 11.0% excluding the impact of restructuring costs, aftermarket customer changeover costs and the consulting fees indexed to the stock price, compared with 11.4% in 2003. Gross margin for the year was 20% versus 20.5% a year ago. The decline was driven by higher material costs (0.6 percentage points negative impact), restructuring expenses (0.2 percentage points) and a lower percentage of sales generated by higher margin aftermarket business (0.2 percentage points). The company's Six Sigma programs generated $26 million in savings in 2004 and restructuring actions resulted in savings of $13 million.
The company continued to win new business in 2004 with $1.2 billion in annualized new OE contracts for platforms launching between 2004 and 2007.
2005 OUTLOOK
In 2005, Tenneco Automotive plans to continue to aggressively manage costs, adjust its businesses to the market and grow revenues by expanding in new markets and winning new business with its advanced technology offerings. The company's goals include maintaining SGA&E expense at less than 11 percent of sales; achieving a ratio of net debt to EBITDA of 2.8x; and generating at least $300 million in new business annually.
Tenneco Automotive expects that vehicle mix will continue to be a key revenue driver in 2005 and the company will benefit from its strong position on better-selling platforms helping to counter industry production volatility in North America and Europe.
The company anticipates that its original equipment book of business in 2005 and 2006 will be approximately $3.5 billion and $3.6 billion, or about $270 million and $420 million higher, respectively, than the 2004 book of business. Before catalytic converter pass-through sales, the book of business is expected to be about $2.7 billion and $2.8 billion in 2005 and 2006, or about $210 million higher in 2005 and $280 million higher in 2006. These revenue estimates are based on original equipment manufacturers' programs that have been formally awarded to the company as well as programs where the company is highly confident that it will be awarded business based on informal customer indications, Tenneco Automotive's status as a supplier on the existing program, and the relationship with the customer. The book of business is also based on anticipated vehicle production levels, as well as the company's pricing and currency assumptions.
Tenneco Automotive is actively addressing higher steel costs, expected to continue through 2005. The company anticipates that steel costs increases, net of other expected material cost savings and recovery from customers, will be between $30 million and $50 million for 2005. The company is intensely focused on mitigating the impact of higher costs by implementing a restructuring initiative announced in the fourth quarter, which is expected to generate $20 million in annual savings; improving manufacturing efficiency with Lean; generating at least $20 million in Six Sigma savings; and capitalizing on the projected $270 million increase in the 2005 OE book of business. Lower interest expense as a result of the company's debt refinancing in the fourth quarter will also help offset the impact.
Attachment 1 to this press release provides additional information on Tenneco Automotive's fourth quarter and full year 2004 results.
Statements of Income (Loss) - 3 Months Statements of Income (Loss) - 12 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 - 12 months Reconciliation of GAAP to Non-GAAP Earnings Measures - 12 months Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 months Reconciliation of GAAP Revenue to Non-GAAP Revenue Measure - 12 months CONFERENCE CALL
The company will host a conference call on January 25, 2005 at 10:30 a.m. EST. The dial-in number is 866-556-1093 domestic or 1 630-395-0047 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 recording of the call will be available one hour following completion of the call on January 25, 2005 through February 1, 2005. To access this recording, dial 866-475-1455 domestic or 203-369-1503 international. The purpose of the call is to discuss the company's results of operations for the last fiscal quarter, as well as other matters that may impact the company's outlook. A copy of the press release is available on the financial and news sections of the Tenneco Automotive web site.
2005 ANNUAL MEETING
The Tenneco Automotive board of directors has scheduled the corporation's annual meeting of shareholders for Tuesday, May 10, 2005 at 10:00 a.m. CDT. The meeting will be held at the corporate headquarters, 500 North Field Drive, Lake Forest, Illinois. The record date for shareholders to vote at the meeting is March 15, 2005.
Tenneco Automotive is a $4.2 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 18,800 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 DECEMBER 31,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues: $1,071 $933
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 873 (a) 745 (d)
Engineering, Research and
Development 20 17
Selling, General and
Administrative 115 (a) 88
Depreciation and Amortization of
Other Intangibles 46 43
Total Costs and Expenses 1,054 893
Gain on sale of assets 1 -
Loss on sale of receivables - (1)
Other Income (Loss) - 1
Total Other Income (Loss) 1 -
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 19 (a) 22 (d)
Europe and South America (5)(a) 10
Asia Pacific 4 (a) 8
18 40
Less:
Interest expense (net of
interest capitalized) 75 (b) 46 (e)
Income tax benefit (36)(c) (5)(f)
Minority interest - 1
Net income (Loss) $(21) $(2)
Average common shares outstanding:
Basic 42.2 40.7
Diluted 44.7 42.4
Earnings (loss) per share of
common stock:
Basic $(0.49) $(0.04)
Diluted $(0.49) $(0.04)
(a) Includes restructuring and restructuring related charges of $28
million pre-tax, $17 million after-tax or $0.40 per share. Of the
adjustment $18 million is recorded in SG&A and the remaining $10
million is in cost of sales. Geographically, $8 million is recorded
in North America, $17 million in Europe and South America and $3
million in Asia Pacific.
(b) Includes a pre-tax expense of $42 million, $27 million after-tax
or $0.60 per share related to the call premium fee, interest expense
and the write off of debt issuance costs that related to the $500
million bond refinancing in November of 2004.
(c) Includes a $15 million or $0.34 per share tax benefit primarily to
recognize benefits related to previous tax losses in foreign
operations.
(d) Includes restructuring related charges of $1 million pre-tax,
$1 million after-tax or $0.02 per share. The entire charge is
recorded in cost of sales. Geographically all of the charge is
recorded in North America.
(e) Includes a pre-tax reduction of $9 million, $6 million after-tax or
$0.13 per share related to debt issuance costs that were deferred on
the senior debt we refinanced in December 2003.
(f) Includes a $3 million or $0.05 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
TWELVE MONTHS ENDED DECEMBER 31,
(Millions except share and per share amounts)
2004 2003
Net sales and operating revenues: $4,213 (a) $3,766
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 3,371 (b) 2,994 (f)
Engineering, Research and
Development 76 67
Selling, General and
Administrative 417 (a)(b)(c) 364
Depreciation and Amortization of
Other Intangibles 177 163
Total Costs and Expenses 4,041 3,588
Gain on sale of assets 1 -
Loss on sale of receivables (1) (2)
Other Income (Loss) (1) -
Total Other Income (Loss) (1) (2)
Income (Loss) before Interest
Expense,
Income Taxes, and Minority Interest
North America 130 (a)(b)(c) 131 (f)
Europe and South America 22 (b)(c) 23 (f)
Asia Pacific 19 (b)(c) 22
171 176
Less:
Interest expense (net of
interest capitalized) 179 (d) 149 (g)
Income tax benefit (25)(e) (6)(h)
Minority interest 4 6
Net income $13 $27
Average common shares outstanding:
Basic 41.5 40.4
Diluted 44.2 41.8
Earnings per share of common stock:
Basic $0.33 $0.67
Diluted $0.31 $0.65
(a) Includes changeover costs for a new aftermarket customer acquired in
the first quarter of $8 million pre-tax, $5 million after-tax or
$0.12 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 $40
million pre-tax, $25 million after tax or $0.56 per share. Of the
adjustment $20 million is recorded in SG&A and the remaining
$20 million is in cost of sales. Geographically, $11 million is
recorded in North America, $26 million in Europe and South America
and $3 million in Asia Pacific.
(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 South America and
$1 million in Asia Pacific.
(d) Includes a pre-tax expense of $42 million, $27 million after-tax or
$0.60 per share related to the call premium fee, interest expense and
the write off of debt issuance costs that related to the $500 million
bond refinancing in November of 2004.
(e) Includes a $21 million or $0.47 per share tax benefit related to the
resolution of outstanding tax issues and to recognize benefits
related to previous tax losses in foreign operations.
(f) Includes restructuring and restructuring related charges of
$8 million pre-tax, $5 million after-tax or $0.13 per share. The
entire charge is recorded in cost of sales. Geographically,
$4 million is recorded in North America and $4 million in Europe and
South America.
(g) Includes a pre-tax expense of $12 million, $8 million after-tax or
$0.18 per share related to debt issuance costs that were deferred on
the senior debt we paid down with the proceeds of the 2003 debt
refinancings.
(h) Includes a $17 million or $0.41 per share tax benefit related to the
resolution of several tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
December 31, 2004 December 31, 2003
Assets
Cash and Cash Equivalents $214 $145
Receivables, Net 486 (a) 442 (a)
Inventories 382 343
Other Current Assets 198 175
Investments and Other Assets 677 629
Plant, Property, and Equipment, Net 1,134 1,111
Total Assets $3,091 $2,845
Liabilities and Shareholders' Equity
Short-Term Debt $19 $20
Accounts Payable 696 621
Accrued Taxes 21 19
Accrued Interest 35 42
Other Current Liabilities 272 191
Long-Term Debt 1,401 (b) 1,410 (b)
Deferred Income Taxes 123 123
Deferred Credits and Other
Liabilities 382 338
Minority Interest 24 23
Total Shareholders' Equity 118 58
Total Liabilities and
Shareholders' Equity $3,091 $2,845
(a) Accounts Receivables net of: December 31, 2004 December 31, 2003
Accounts Receivable
securitization programs $124 $123
Receivables collected under
advance payment programs $132 $99
(b) Long term debt composed of: December 31, 2004 December 31, 2003
Term loan B (Due 2010) $392 $396
10.25% senior notes (Due 2013) 490 491
11.625% subordinated notes
(Due 2009) - 500
8.625% subordinated notes
(Due 2014) 500 -
Other long term debt 19 23
$1,401 $1,410
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
Twelve Months Ended
December 31,
2004 2003
Operating activities:
Net income $13 $27
Adjustments to reconcile income (loss)
to net cash provided (used) by
operating activities -
Depreciation and amortization 177 163
Deferred income taxes (41) (29)
(Gain)/loss on sale of assets, net - 2
Changes in components of working capital -
(Inc.)/dec. in receivables (7) 13
(Inc.)/dec. in inventories (19) 55
(Inc.)/dec. in prepayments
and other current assets (4) (1)
Inc./(dec.) in payables 53 52
Inc./(dec.) in taxes accrued (16) (30)
Inc./(dec.) in interest accrued (7) 19
Inc./(dec.) in other current liabilities 30 (30)
Other 21 40
Net cash provided by operating activities 200 281
Investing activities:
Net proceeds from sale of assets 15 8
Expenditures for plant, property & equipment (130) (130)
Investments and other (1) (5)
Net cash used by investing activities (116) (127)
Financing activities:
Issuance of common shares 10 -
Proceeds from capital contributions - 1
Issuance of long-term debt 500 891
Debt issuance costs on long-term debt (13) (27)
Retirement of long-term debt (508) (791)
Net inc./(dec.) in short-term debt
excluding current maturities
on long-term debt (1) (121)
Other - (2)
Net cash used by financing activities (12) (49)
Effect of foreign exchange rate
changes on cash and cash equivalents (3) (14)
Inc./(dec.) in cash and cash equivalents 69 91
Cash and cash equivalents, January 1 145 54
Cash and cash equivalents, December 31 $214 $145
Cash paid during the period for interest $185 $115
Cash paid during the period for income taxes $18 $46
Non-cash Investing and Financing Activities
Obligation for long-term capital lease $- $(3)
Write-off of Unamortized Debt Issuance Cost $(9) $(12)
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(a) NET INCOME TO EBITDA
Unaudited
Q4 2004
North Europe Asia
America & SA Pacific Total
Net income $- $- $- $(21)
Minority interest - - - -
Income tax expense (benefit) - - - (36)
Interest expense (net of interest
capitalized) - - - 75
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 19 (5) 4 18
Depreciation and amortization of
other intangibles 23 20 3 46
Total EBITDA(b) $42 $15 $7 $64
Q4 2003
North Europe Asia
America & SA Pacific Total
Net income $- $- $- $(2)
Minority interest - - - 1
Income tax expense (benefit) - - - (5)
Interest expense (net of interest
capitalized) - - - 46
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 22 10 8 40
Depreciation and amortization 23 17 3 43
Total EBITDA $45 $27 $11 $83
(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
Q4 2004 Q4 2003
EBITDA Net Per EBITDA Net Per
(c) EBIT Income Share (c) EBIT Income Share
Earnings Measures $64 $18 $(21) $(0.49) $83 $40 $(2) $(0.04)
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 28 28 17 0.40 1 1 1 0.02
Tax adjustments - - (15) (0.34) - - (3) (0.05)
Cost related to
refinancing - - 27 0.60 - - 6 0.13
Non-GAAP earnings
measures $92 $46 $8 $0.17 $84 $41 $2 $0.06
Q4 2004
North Europe Asia
America & SA Pacific Total
EBIT $19 $(5) $4 $18
Restructuring and
restructuring
related expenses 8 17 3 28
Adjusted EBIT $27 $12 $7 $46
Q4 2003
North Europe Asia
America & SA Pacific Total
EBIT $22 $10 $8 $40
Restructuring and
restructuring
related expenses 1 - - 1
Adjusted EBIT $23 $10 $8 $41
(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 fourth
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 Europe Asia
America & SA Pacific Total
Net income $- $- $- $13
Minority interest - - - 4
Income tax expense (benefit) - - - (25)
Interest expense (net of interest
capitalized) - - - 179
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 130 22 19 171
Depreciation and amortization of
other intangibles 94 72 11 177
Total EBITDA(b) $224 $94 $30 $348
YTD 2003
North Europe Asia
America & SA Pacific Total
Net income $- $- $- $27
Minority interest - - - 6
Income tax expense (benefit) - - - (6)
Interest expense (net of interest
capitalized) - - - 149
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 131 23 22 176
Depreciation and amortization 91 62 10 163
Total EBITDA $222 $85 $32 $339
(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
EBITDA Net Per EBITDA Net Per
(c) EBIT Income Share (c) EBIT Income Share
Earnings Measures $348 $171 $13 $0.31 $339 $176 $27 $0.65
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 40 40 25 0.56 8 8 5 0.13
New Aftermarket
customer changeover
costs 8 8 5 0.12 - - - -
Consulting fees indexed
to stock price 4 4 3 0.06 - - - -
Tax adjustments - - (21) (0.47) - - (17) (0.41)
Cost related to
refinancing - - 27 0.60 - - 8 0.18
Non-GAAP earnings
measures $400 $223 $52 $1.18 $347 $184 $23 $0.55
YTD 2004
North Europe Asia
America & SA Pacific Total
EBIT $130 $22 $19 $171
Restructuring and
restructuring related
expenses 11 26 3 40
New Aftermarket
customer changeover
costs 8 - - 8
Consulting fees indexed
to stock price 2 1 1 4
Adjusted EBIT $151 $49 $23 $223
YTD 2003
North Europe Asia
America & SA Pacific Total
EBIT $131 $23 $22 $176
Restructuring and
restructuring related
expenses 4 4 - 8
Adjusted EBIT $135 $27 $22 $184
(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 twelve
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.
(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
Q4 2004
Rev-
enues
Pass- Excl-
through uding
Rev- Sales Curr-
enues Excl- ency
Excl- uding and
Curr- uding Curr- Pass-
Rev- ency Curr- ency through
enues Impact ency Impact Sales
North America Aftermarket
Ride Control $74 $- $74 $- $74
Exhaust 36 - 36 - 36
Total North America Aftermarket 110 - 110 - 110
North America Original Equipment
Ride Control 109 - 109 - 109
Exhaust 249 2 247 77 170
Total North America Original
Equipment 358 2 356 77 279
Total North America 468 2 466 77 389
Europe Aftermarket
Ride Control 36 3 33 - 33
Exhaust 46 4 42 - 42
Total Europe Aftermarket 82 7 75 - 75
Europe Original Equipment
Ride Control 99 12 87 - 87
Exhaust 286 27 259 89 170
Total Europe Original Equipment 385 39 346 89 257
South America 44 1 43 4 39
Total Europe & South America 511 47 464 93 371
Asia 37 - 37 9 28
Australia 55 3 52 4 48
Total Asia Pacific 92 3 89 13 76
Total Tenneco Automotive $1,071 $52 $1,019 $183 $836
Q4 2003
Rev-
enues
Pass- Excl-
through uding
Rev- Sales Curr-
enues Excl- ency
Excl- uding and
Curr- uding Curr- Pass-
Rev- ency Curr- ency through
enues Impact ency Impact Sales
North America Aftermarket
Ride Control $63 $- $63 $- $63
Exhaust 36 - 36 - 36
Total North America Aftermarket 99 - 99 - 99
North America Original Equipment
Ride Control 106 - 106 - 106
Exhaust 241 - 241 77 164
Total North America Original
Equipment 347 - 347 77 270
Total North America 446 - 446 77 369
Europe Aftermarket
Ride Control 37 - 37 - 37
Exhaust 39 - 39 - 39
Total Europe Aftermarket 76 - 76 - 76
Europe Original Equipment
Ride Control 79 - 79 - 79
Exhaust 211 - 211 60 151
Total Europe Original Equipment 290 - 290 60 230
South America 33 - 33 3 30
Total Europe & South America 399 - 399 63 336
Asia 43 - 43 15 28
Australia 45 - 45 4 41
Total Asia Pacific 88 - 88 19 69
Total Tenneco Automotive $933 $- $933 $159 $774
Tenneco Automotive presents the above reconciliation of revenues in
order to reflect the trend in the company's sales, in various product
lines and geographical regions, separately from the effects of doing
business in currencies other than the U.S. dollar. Additionally, pass-
through catalytic converter sales include precious metals pricing,
which may be volatile. While Tenneco Automotive's original equipment
customers assume the risk of this volatility, it impacts reported
revenue. Excluding pass-through catalytic converter sales removes this
impact. Tenneco Automotive uses this information to analyze the trend
in revenues before these factors. Tenneco Automotive believes
investors find this information useful in understanding period to
period comparisons in the company's revenues.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUES TO NON-GAAP REVENUE MEASURE
Unaudited
Year ended December 31, 2004
Rev-
enues
Pass- Excl-
through uding
Rev- Sales Curr-
enues Excl- ency
Excl- uding and
Curr- uding Curr- Pass-
Rev- ency Curr- ency through
enues Impact ency Impact Sales
North America Aftermarket
Ride Control $342 $- $342 $- $342
Exhaust 161 - 161 - 161
Total North America Aftermarket 503 - 503 - 503
North America Original Equipment
Ride Control 455 - 455 - 455
Exhaust 1,001 9 992 320 672
Total North America Original
Equipment 1,456 9 1,447 320 1,127
Total North America 1,959 9 1,950 320 1,630
Europe Aftermarket
Ride Control 169 12 157 - 157
Exhaust 190 16 174 - 174
Total Europe Aftermarket 359 28 331 - 331
Europe Original Equipment
Ride Control 356 33 323 - 323
Exhaust 1,005 76 929 321 608
Total Europe Original Equipment 1,361 109 1,252 321 931
South America 153 4 149 15 134
Total Europe & South America 1,873 141 1,732 336 1,396
Asia 176 1 175 54 121
Australia 205 23 182 16 166
Total Asia Pacific 381 24 357 70 287
Total Tenneco Automotive $4,213 $174 $4,039 $726 $3,313
Year ended December 31, 2003
Rev-
enues
Pass- Excl-
through uding
Rev- Sales Curr-
enues Excl- ency
Excl- uding and
Curr- uding Curr- Pass-
Rev- ency Curr- ency through
enues Impact ency Impact Sales
North America Aftermarket
Ride Control $303 $- $303 $- $303
Exhaust 163 - 163 - 163
Total North America Aftermarket 466 - 466 - 466
North America Original Equipment
Ride Control 442 - 442 - 442
Exhaust 972 - 972 306 666
Total North America Original
Equipment 1,414 - 1,414 306 1,108
Total North America 1,880 - 1,880 306 1,574
Europe Aftermarket
Ride Control 170 - 170 - 170
Exhaust 176 - 176 - 176
Total Europe Aftermarket 346 - 346 - 346
Europe Original Equipment
Ride Control 265 - 265 - 265
Exhaust 832 - 832 263 569
Total Europe Original Equipment 1,097 - 1,097 263 834
South America 119 - 119 12 107
Total Europe & South America 1,562 - 1,562 275 1,287
Asia 161 - 161 57 104
Australia 163 - 163 15 148
Total Asia Pacific 324 - 324 72 252
Total Tenneco Automotive $3,766 $- $3,766 $653 $3,113
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.