Tenneco Automotive Reports Strong Second Quarter 2005 Operating Results
- 13th consecutive quarter of year-over-year revenue growth
- 14th consecutive quarter of year-over-year adjusted EBITDA improvement
- Strong cash performance offsets loss of customer advance payment program
- EBIT and EPS improve year-over-year
- Europe and South America EBIT up 43% on 13% revenue gain
LAKE FOREST, Ill., July 21 -- Tenneco Automotive reported second quarter net income of $33 million, or 71-cents per diluted share, up from net income of $30 million, or 69-cents per diluted share a year ago. Adjusted for the items below, second quarter net income rose to $35 million, or 77-cents per diluted share, compared with $31 million, or 70-cents per diluted share in second quarter 2004.
EBIT (earnings before interest, taxes and minority interest) was $83 million compared with $76 million a year ago. EBITDA (EBIT before depreciation and amortization) was $127 million, versus $120 million in second quarter 2004. On an adjusted basis, EBIT was $85 million, up from $84 million a year ago, and the company reported its 14th consecutive quarter of year- over-year improved adjusted EBITDA at $129 million, up from $128 million in second quarter 2004. See the tables attached to the press release, which reconcile GAAP results to non-GAAP results.
Adjusted second quarter 2005 and 2004 results:
Q2 2005 Q2 2004
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $127 $83 $33 $0.71 $120 $76 $30 $0.69
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 2 2 1 0.03 5 5 3 0.07
New Aftermarket
customer changeover
costs - - - - 2 2 1 0.02
Consulting fees
indexed to stock
price - - - - 1 1 1 0.01
Tax adjustments - - 1 0.03 - - (4) (0.09)
Non-GAAP earnings
measures $129 $85 $35 $0.77 $128 $84 $31 $0.70
Second quarter 2005 adjustments:
-- Restructuring related expenses of $2 million pre-tax, or 3-cents per
diluted share;
-- Tax expense of $1 million, or 3-cents per diluted share, primarily
related to adjusting state tax net operating loss carry forwards.
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 changeover costs for a new aftermarket customer;
-- Expenses of $1 million pre-tax, or 1-cent per diluted share, for stock
price indexed consulting fees;
-- Tax benefit of $4 million, or 9-cents per diluted share.
Despite a $65 million impact in the quarter from the discontinuation of General Motor's advance payment program, operating cash inflow in the quarter was $28 million, versus a $46 million inflow in the second quarter of 2004. The strong cash performance was driven by inventory reductions and improved accounts payable. At quarter-end, total debt was $1.412 billion, down from $1.419 billion a year ago. Debt net of cash was $1.346 billion versus $1.253 billion a year ago, primarily due to the discontinuation of advance payment programs by General Motors, Ford and DaimlerChrysler, which had a $94 million impact on debt over the last 12 months.
Tenneco Automotive generated its 13th consecutive quarter of year-over- year revenue growth with revenue of $1.180 billion, compared with $1.113 billion a year ago. Favorable currency benefited revenue by $33 million. Total OE revenues were up 7% year-over-year, outpacing a 2% increase in global industry production. Revenue was driven by the company's strong position on top-selling vehicles, continued gains from new OE business in Europe and stronger Japanese OE business in North America.
"Our strategies for generating top-line growth and cash continue to be effective despite difficult and volatile market conditions," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We are also benefiting from our intense focus on managing costs and improving operational efficiency through Lean and Six Sigma. In addition, our balance in terms of products, markets, customers and vehicle platform mix gives us a competitive edge and continues to drive our progress."
The company's gross margin in the quarter was 20.3%, down 1.3 percentage points from a year ago. Higher steel costs, restructuring charges and business mix offset savings and improved efficiencies from Lean manufacturing, Six Sigma programs and other cost reduction initiatives.
Total steel cost increases in the second quarter were $35 million, which were largely offset by the company's cost reduction efforts, including SGA&E restructuring savings, material cost savings, Six Sigma program savings of $9 million and Lean manufacturing efficiencies as well as steel cost recovery from OE and aftermarket customers. Based on the company's efforts to offset increased steel costs and trends in the steel market, the company doesn't currently anticipate a significant year-over-year impact on operating results through the remainder of 2005.
Sales, General, Administrative and Engineering (SGA&E) expense in the quarter was 9.4% of sales versus 10.7% one year ago. SGA&E improvement was driven by restructuring and tight controls on discretionary spending.
The company outperformed its bank debt covenants in the quarter. At June 30, the leverage ratio was 3.41, below the maximum limit of 4.75; the fixed charge ratio was 2.03, exceeding the minimum ratio of 1.10; and the interest coverage ratio was 3.06, exceeding the minimum coverage ratio of 2.0.
NORTH AMERICA
-- North American original equipment revenue was up 3% to $390 million,
versus $379 million a year ago. Excluding the impact of currency and
catalytic converter pass-through sales, revenue was up 8%, outpacing a
2% industry production decline (Tables to this press release reconcile
GAAP revenues to revenues adjusted for catalytic converter pass-through
sales and currency). The increase was driven by exhaust business on
better selling passenger vehicle and medium truck platforms, stronger
commercial vehicle volumes, volume growth on key Japanese OE platforms
and specialty market revenue from acquiring the Harley Davidson exhaust
business.
-- North American aftermarket revenue was $146 million, versus
$144 million in second quarter 2004. Ride control price increases,
driven by higher steel costs, offset lower ride control volumes and
exhaust sales.
-- EBIT for North American operations was $52 million, versus $50 million
a year ago. Adjusted second quarter 2005 EBIT was $52 million compared
with adjusted EBIT of $54 million in second quarter 2004. The impact
of higher steel costs in the quarter more than offset benefits from
restructuring and stronger value-added volumes.
-- Second quarter 2004 EBIT results include $4 million in costs related to
the adjustments described above.
EUROPE AND SOUTH AMERICA
-- European original equipment revenue was $382 million, up 12% versus
$343 million a year ago. Adjusted for favorable currency, catalytic
converter pass-through sales and a change in reporting for a customer
contract, revenue was up 13%. Strong ride control volumes and the
company's exhaust business on top-selling platforms drove the increase.
-- European aftermarket revenue was $109 million, up from $103 million in
second quarter 2004. Excluding currency, revenue was still up 3%,
driven by higher exhaust revenues due to market share gains and price
increases. A 10% year-over-year increase in exhaust sales helped
offset a decrease in ride control revenue due to lower sales in
Southern Europe and the Middle East.
-- South America operations generated $50 million in revenue versus
$35 million a year ago. Excluding the benefit of currency, revenue was
up 25%, driven by stronger OE ride and exhaust volumes.
-- EBIT for European and South American operations was $27 million, up
43% from $17 million in second quarter 2004. Adjusted EBIT in the
quarter was $29 million, up from adjusted EBIT of $21 million a year
ago. The strong EBIT performance was driven by higher OE and AM
exhaust volumes, restructuring savings and manufacturing efficiencies,
which more than offset the negative impact of higher steel costs.
-- Second quarter 2005 EBIT results include $2 million in restructuring
related expenses and second quarter 2004 EBIT includes $4 million in
restructuring related expenses.
ASIA PACIFIC
-- Revenue from Asia operations was $44 million, versus $58 million a year
ago. The decline was due to lower OE volumes in China as a result of
government actions to control consumer lending and soft consumer sales
at the company's largest customer in China.
-- Australian revenue was $59 million, compared with $51 million in second
quarter 2004. Excluding the impact of currency and pass-through sales,
revenue was up 7%, driven by higher volumes on existing OE platforms.
-- Lower OE volumes in China had a significant impact on Asia Pacific
EBIT, which was $4 million, down from $9 million a year ago.
YEAR-TO-DATE RESULTS
Through the first half of the year, Tenneco Automotive reported net income of $40 million, or 88-cents per diluted share, versus net income of $28 million, or 65-cents per diluted share reported for the first six months of 2004. On an adjusted basis, year-to-date 2005 net income was $44 million, or 97-cents per diluted share, versus adjusted net income of $37 million, or 85-cents per diluted share for the same period one year ago.
Year-to-date EBIT was $127 million compared with EBIT of $109 million in the first six months of 2004. EBITDA was $217 million versus $198 million a year ago. Adjusted year-to-date 2005 EBIT was $132 million, compared with $131 million a year ago, and adjusted EBITDA was $222 million, versus adjusted EBITDA of $220 million for the same period a year ago.
Attachment 1: Statements of Income - 3 months Statements of Income - 6 months Balance Sheet Statements of Cash Flows Attachment 2: Reconciliation of GAAP Net Income to EBITDA - 3 months Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 months Reconciliation of GAAP Revenue to Non-GAAP Revenue Measure - 3 months Reconciliation of GAAP Net Income to EBITDA - 6 months Reconciliation of GAAP to Non-GAAP Earnings Measures - 6 months Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 6 months
Tenneco Automotive is a $4.2 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 18,400 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)
2005 2004
Net sales and operating revenues $1,180 $1,113 (c)
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 941 (a) 873 (d)
Engineering, Research and
Development 18 19
Selling, General and
Administrative 93 100 (e)
Depreciation and Amortization of
Other Intangibles 44 44
Total Costs and Expenses 1,096 1,036
Loss on sale of receivables (1) (1)
Total Other Loss (1) (1)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 52 50 (c)(d)(e)
Europe & South America 27 (a) 17 (d)
Asia Pacific 4 9
83 76
Less:
Interest expense (net of
interest capitalized) 32 34
Income tax expense 18 (b) 10 (f)
Minority interest - 2
Net income $33 $30
Average common shares outstanding:
Basic 43.0 41.5
Diluted 45.1 44.2
Earnings per share of common stock:
Basic $0.75 $0.73
Diluted $0.71 $0.69
(a) Includes restructuring and restructuring related charges of
$2 million pre-tax, $1 million after tax or $0.03 per share. The
entire $2 million adjustment is recorded in cost of sales and
geographically in Europe and South America.
(b) Includes a $1 million or $0.03 per share tax expense primarily
related to adjusting state tax net operating loss carry forwards.
(c) 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.
(d) 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 and
South America.
(e) 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.
(f) Includes a $4 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
SIX MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
2005 2004
Net sales and operating revenues $2,281 $2,146 (c)
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 1,829 (a) 1,702 (d)
Engineering, Research and
Development 42 36
Selling, General and
Administrative 191 (a) 209 (c)(d)(e)
Depreciation and Amortization of
Other Intangibles 90 89
Total Costs and Expenses 2,152 2,036
Loss on sale of receivables (1) (1)
Other Loss (1) -
Total Other Loss (2) (1)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 89 (a) 80 (c)(d)(e)
Europe & South America 32 (a) 17 (d)(e)
Asia Pacific 6 12 (e)
127 109
Less:
Interest expense (net of
interest capitalized) 64 69
Income tax expense 22 (b) 9 (f)
Minority interest 1 3
Net income $40 $28
Average common shares outstanding:
Basic 42.8 41.1
Diluted 45.0 43.8
Earnings per share of common stock:
Basic $0.92 $0.69
Diluted $0.88 $0.65
(a) Includes restructuring and restructuring related charges of
$5 million pre-tax, $3 million after tax or $0.07 per share. Of the
adjustment $4 is recorded in cost of sales and $1 million is in
SG&A. Geographically, $2 million is recorded in North America and
$3 million in Europe and South America.
(b) Includes a $1 million or $0.02 per share tax expense primarily
related to adjusting state tax net operating loss carry forwards.
(c) 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.
(d) 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 in South America.
(e) 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.
(f) Includes a $5 million or $0.11 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, December 31,
2005 2004
Assets
Cash and Cash Equivalents $66 $214
Receivables, Net 662 488
Inventories 404 396
Other Current Assets 203 194
Investments and Other Assets 682 693
Plant, Property, and Equipment, Net 1,050 1,134
Total Assets $3,067 $3,119
Liabilities and Shareholders' Equity
Short-Term Debt $49 $19
Accounts Payable 726 696
Accrued Taxes 39 24
Accrued Interest 37 35
Other Current Liabilities 246 273
Long-Term Debt 1,363 1,401
Deferred Income Taxes 118 126
Deferred Credits and Other Liabilities 338 362
Minority Interest 22 24
Total Shareholders' Equity 129 159
Total Liabilities and Shareholders'
Equity $3,067 $3,119
(a) Accounts Receivables net of: June 30, December 31,
2005 2004
Accounts Receivable
securitization programs $148 $124
Receivables collected under
advance payment programs $9 $132
(b) Long term debt composed of: June 30, December 31,
2005 2004
Term loan B (Due 2010) $356 $392
10.25% senior notes (Due 2013) 489 490
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 18 19
$1,363 $1,401
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
Six Months Ended
June 30,
2005 2004
Operating activities:
Net income $40 $28
Adjustments to reconcile net income to net
cash provided (used) by operating activities -
Depreciation and amortization of other
intangibles 90 89
Deferred income taxes (5) (5)
(Gain)/loss on sale of assets, net 1 -
Changes in components of working capital
(net of acquisition)-
(Inc.)/dec. in receivables (200) (113)
(Inc.)/dec. in inventories (33) (16)
(Inc.)/dec. in prepayments
and other current assets (19) (27)
Inc./(dec.) in payables 64 60
Inc./(dec.) in taxes accrued 19 13
Inc./(dec.) in interest accrued 2 (2)
Inc./(dec.) in other current liabilities (10) 24
Other (20) 8
Net cash provided (used) by operating activities (71) 59
Investing activities:
Net proceeds from sale of assets 3 11
Expenditures for plant, property & equipment (63) (54)
Acquisition of business (11) -
Investments and other 2 (2)
Net cash used by investing activities (69) (45)
Financing activities:
Issuance of common shares 4 4
Retirement of long-term debt (42) (4)
Net inc./(dec.) in short-term debt excluding
current maturities on long-term debt 34 1
Other - 2
Net cash provided (used) by financing activities (4) 3
Effect of foreign exchange rate changes on
cash and cash equivalents (4) 4
Inc./(dec.) in cash and cash equivalents (148) 21
Cash and cash equivalents, January 1 214 145
Cash and cash equivalents, June 30 $66 $166
Cash paid during the period for interest $61 $74
Cash paid during the period for
income taxes $11 $7
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q2 2005
North Europe Asia
America & SA Pacific Total
Net income $33
Income tax expense 18
Interest expense (net of
interest capitalized) 32
EBIT, Income before
interest expense, income
taxes and minority
interest (GAAP measure) 52 27 4 83
Depreciation and amortization
of other intangibles 23 18 3 44
Total EBITDA (2) $75 $45 $7 $127
Q2 2004
North Europe Asia
America & SA Pacific Total
Net income $30
Minority interest 2
Income tax expense 10
Interest expense (net of
interest capitalized) 34
EBIT, Income before
interest expense, income
taxes and minority
interest (GAAP measure) 50 17 9 76
Depreciation and amortization 24 18 2 44
Total EBITDA $74 $35 $11 $120
(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 2005 Q2 2004
Net Per Net Per
EBITDA(3) EBIT Income Share EBITDA(3) EBIT Income Share
Earnings Measures $127 $83 $33 $0.71 $120 $76 $30 $0.69
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 2 2 1 0.03 5 5 3 0.07
New Aftermarket
customer changeover
costs - - - - 2 2 1 0.02
Consulting fees
indexed to stock
price - - - - 1 1 1 0.01
Tax adjustments - - 1 0.03 - - (4) (0.09)
Non-GAAP earnings
measures $129 $85 $35 $0.77 $128 $84 $31 $0.70
Q2 2005
North Europe Asia
America & SA Pacific Total
EBIT $52 $27 $4 $83
Restructuring and
restructuring related
expenses - 2 - 2
Adjusted EBIT $52 $29 $4 $85
Q2 2004
North Europe Asia
America & SA Pacific Total
EBIT $50 $17 $9 $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 $21 $9 $84
(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 2005 and 2004 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 2005
North Europe Asia
America & SA Pacific Total
Net income $40
Minority interest 1
Income tax expense 22
Interest expense (net of
interest capitalized) 64
EBIT, Income before
interest expense, income
taxes and minority
interest (GAAP measure) 89 32 6 127
Depreciation and amortization
of other intangibles 46 38 6 90
Total EBITDA(2) $135 $70 $12 $217
YTD 2004
North Europe Asia
America & SA Pacific Total
Net income $28
Minority interest 3
Income tax expense 9
Interest expense (net of
interest capitalized) 69
EBIT, Income before
interest expense, income
taxes and minority
interest (GAAP measure) 80 17 12 109
Depreciation and amortization 48 35 6 89
Total EBITDA $128 $52 $18 $198
(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 2005 YTD 2004
Net Per Net Per
EBITDA(3) EBIT Income Share EBITDA(3) EBIT Income Share
Earnings Measures $217 $127 $40 $0.88 $198 $109 $28 $0.65
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 5 5 3 0.07 10 10 6 0.14
New Aftermarket
customer changeover
costs - - - - 8 8 5 0.11
Consulting fees
indexed to stock
price - - - - 4 4 3 0.06
Tax adjustments - - 1 0.02 - - (5) (0.11)
Non-GAAP earnings
measures $222 $132 $44 $0.97 $220 $131 $37 $0.85
YTD 2005
North Europe Asia
America & SA Pacific Total
EBIT $89 $32 $6 $127
Restructuring and
restructuring related
expenses 2 3 - 5
Adjusted EBIT $91 $35 $6 $132
YTD 2004
North Europe Asia
America & SA Pacific Total
EBIT $80 $17 $12 $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 $25 $13 $131
(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 2005 and 2004 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 REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Q2 2005
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $103 $- $103 $- $103
Exhaust 43 - 43 - 43
Total North America
Aftermarket 146 - 146 - 146
North America Original
Equipment
Ride Control 131 - 131 - 131
Exhaust 259 3 256 68 188
Total North America
Original Equipment 390 3 387 68 319
Total North America 536 3 533 68 465
Europe Aftermarket
Ride Control 51 1 50 - 50
Exhaust 58 2 56 - 56
Total Europe Aftermarket 109 3 106 - 106
Europe Original Equipment
Ride Control 98 (a) 5 93 - 93 (a)
Exhaust 284 10 274 85 189
Total Europe Original
Equipment 382 15 367 85 282
South America 50 7 43 3 40
Total Europe & South America 541 25 516 88 428
Asia 44 1 43 11 32
Australia 59 4 55 5 50
Total Asia Pacific 103 5 98 16 82
Total Tenneco Automotive $1,180 $33 $1,147 $172 $975
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 - 259 84 175
Total North America
Original Equipment 379 - 379 84 295
Total North America 523 - 523 84 439
Europe Aftermarket
Ride Control 51 - 51 - 51
Exhaust 52 - 52 - 52
Total Europe Aftermarket 103 - 103 - 103
Europe Original Equipment
Ride Control 91 - 91 - 91
Exhaust 252 - 252 81 171
Total Europe Original
Equipment 343 - 343 81 262
South America 35 - 35 3 32
Total Europe & South America 481 - 481 84 397
Asia 58 - 58 20 38
Australia 51 - 51 4 47
Total Asia Pacific 109 - 109 24 85
Total Tenneco Automotive $1,113 $- $1,113 $191 $922
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.
(a) Beginning in the second quarter of 2005, Tenneco Automotive changed
its accounting for a customer contract in its European OE Ride
Control unit. The cost of sales for this contract are now netted
against the revenues, reducing reported revenues and cost of sales.
In the second quarter of 2004, Tenneco Automotive recorded
$15 million in revenues for this contract.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Six Months Ended June 30, 2005
Revenues
Pass- Excluding
through Currency
Sales and
Revenues Excluding Pass-
Currency Excluding Currency through
Revenues Impact Currency Impact Sales
North America Aftermarket
Ride Control $194 $- $194 $- $194
Exhaust 82 - 82 - 82
Total North America
Aftermarket 276 - 276 - 276
North America Original
Equipment
Ride Control 258 - 258 - 258
Exhaust 507 5 502 135 367
Total North America
Original Equipment 765 5 760 135 625
Total North America 1,041 5 1,036 135 901
Europe Aftermarket
Ride Control 88 3 85 - 85
Exhaust 103 4 99 - 99
Total Europe Aftermarket 191 7 184 - 184
Europe Original Equipment
Ride Control 207 (a) 16 191 - 191 (a)
Exhaust 556 26 530 160 370
Total Europe Original
Equipment 763 42 721 160 561
South America 94 10 84 7 77
Total Europe & South
America 1,048 59 989 167 822
Asia 86 1 85 24 61
Australia 106 5 101 9 92
Total Asia Pacific 192 6 186 33 153
Total Tenneco Automotive $2,281 $70 $2,211 $335 $1,876
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 - 522 172 350
Total North America
Original Equipment 760 - 760 172 588
Total North America 1,026 - 1,026 172 854
Europe Aftermarket
Ride Control 89 - 89 - 89
Exhaust 94 - 94 - 94
Total Europe Aftermarket 183 - 183 - 183
Europe Original Equipment
Ride Control 176 - 176 - 176
Exhaust 495 - 495 158 337
Total Europe Original
Equipment 671 - 671 158 513
South America 69 - 69 7 62
Total Europe & South America 923 - 923 165 758
Asia 97 - 97 33 64
Australia 100 - 100 8 92
Total Asia Pacific 197 - 197 41 156
Total Tenneco Automotive $2,146 $- $2,146 $378 $1,768
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.
(a) Beginning in the second quarter of 2005, Tenneco Automotive changed
its accounting for a customer contract in its European OE Ride
Control unit. The cost of sales for this contract are now netted
against the revenues, reducing reported revenues and cost of sales.
In the second quarter of 2004, Tenneco Automotive recorded
$15 million in revenues for this contract.