Tenneco Automotive Reports Record Third Quarter 2005
-- Earnings per share improves 64%
-- Earnings before interest, taxes and minority interest up 17%
-- 14th consecutive quarter of year-over-year revenue growth
-- 15th consecutive quarter of year-over-year adjusted EBITDA improvement
LAKE FOREST, Oct. 25 -- Tenneco Automotive reported record third quarter revenue and net income since becoming a stand-alone company. The company reported third quarter net income of $10 million, or 23-cents per diluted share, up from net income of $6 million, or 14-cents per diluted share in third quarter 2004. Adjusted for the items below, net income rose to $12 million, or 27-cents per diluted share, compared with $7 million, or 16-cents per diluted share a year ago. The company reported third quarter revenue of $1.096 billion, up from $996 million a year ago.
EBIT (earnings before interest, taxes and minority interest) was $50 million compared with $44 million in third quarter 2004. EBITDA (EBIT before depreciation and amortization) was $94 million, up from $86 million the previous year. On an adjusted basis, EBIT was $52 million, up from $46 million a year ago and EBITDA was $96 million, 10% higher than $88 million the previous year. See the tables attached to the press release, which reconcile GAAP results to non-GAAP results.
Adjusted third quarter 2005 and 2004 results:
Q3 2005 Q3 2004
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings
Measures $94 $50 $10 $0.23 $86 $44 $6 $0.14
Adjustments
(reflects
non-GAAP
measures):
Restruct-
uring
and re-
structuring
related
expenses 2 2 2 0.04 2 2 2 0.04
Tax adjust-
ments - - - - - - (1) (0.02)
Non-GAAP
earnings
measures $96 $52 $12 $0.27 $88 $46 $7 $0.16
Third quarter 2005 adjustments:
-- Restructuring related expenses of $2 million pre-tax, or 4-cents per
diluted share.
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.
The quarterly revenue of $1.096 billion was the company's 14th consecutive quarter of year-over-year revenue growth. The increase over $996 million in third quarter 2004 was driven by higher global original equipment (OE) production volumes and $19 million in favorable currency.
Tenneco Automotive's performance in the third quarter was driven by its platform mix with products on strong selling vehicles globally; improved aftermarket ride control volumes in North America and Europe; benefits from the company's ongoing manufacturing efficiency programs; and reduced costs through tight controls on discretionary spending. These efforts helped offset the negative impact of higher material costs and higher transportation costs due to fuel surcharges.
"We delivered another solid quarter in spite of very challenging market conditions," said Mark P. Frissora, chairman, CEO and president, Tenneco Automotive. "Our ability to execute on consistent strategies for growing the top-line while managing costs is proving successful despite lower OE industry production volumes in North America and Europe, our two largest markets, and the impact of higher material and fuel costs globally."
Cash generated by operations in the quarter was $33 million, which on a year-over-year comparison basis includes a $9 million negative impact from the discontinuation of General Motor's advanced payment program and a $20 million cash outflow for incremental pension contributions. Cash generated by operations was $76 million for the same period one year ago. The remaining difference in the year-over-year comparison was due to working capital requirements -- primarily in accounts receivables -- to support approximately $100 million in higher revenue in the quarter.
At quarter-end, total debt was $1.429 billion, compared with $1.423 billion the previous year. Debt net of cash was $1.340 billion versus $1.220 billion a year ago, primarily due to the discontinuation of advance payment programs by General Motors, Ford and DaimlerChrysler, which increased debt by $103 million over the last 12 months. Debt net of cash at June 30, 2005 was $1.346 billion.
During the quarter, Tenneco resolved a commercial lawsuit that is recorded as other income and settled a customer issue, which is netted against revenue. The net of these transactions had no financial impact on the company's operating results.
The company's gross margin decreased 1.2 percentage points year-over-year to 18.9%. Gross margin was negatively impacted by higher steel costs, fuel surcharges on transportation costs and a shifting business mix between Europe and North America, and between OE and aftermarket businesses. Additionally, resolution of the OE customer issue mentioned above reduced gross margin. These factors offset savings and improved efficiencies from Lean manufacturing, Six Sigma and other cost reduction initiatives.
Total steel cost increases in the third quarter were $33 million, which were largely offset by the company's cost reduction efforts, including SGA&E restructuring savings, material cost savings, Six Sigma program savings 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 10.8% of sales versus 11.3% a year ago. SGA&E improvement was driven by higher revenues, cutbacks on discretionary spending and benefits from previously announced restructuring programs.
Tenneco Automotive continued to outperform its bank debt covenants in the quarter. At September 30, the leverage ratio was 3.39, lower than the maximum limit of 4.50; the fixed charge ratio was 2.05, exceeding the minimum ratio of 1.10; and the interest coverage ratio was 3.12, exceeding the minimum ratio of 2.00.
NORTH AMERICA
-- North American OE revenue was up 9% to $369 million, versus $338
million a year ago. Excluding the impact of currency and catalytic
converter pass-through sales, revenue was up 11%, outperforming a
light vehicle market production decline of 2%. The increase was
driven by the company's platform mix with products on strong selling
vehicles.
-- North American aftermarket revenue was $133 million, up 5% year-over-
year. Stronger ride control volumes and price increases in both
product lines helped offset lower emission control volumes.
-- EBIT for North American operations was $37 million, versus $31 million
in third quarter 2004. Stronger OE volumes and manufacturing
efficiencies more than offset unrecovered steel costs, higher
advertising costs to support the company's ride control aftermarket
product lines and the launch costs for its new line of aftermarket
brake products.
EUROPE, SOUTH AMERICA, INDIA
-- European OE revenue was $341 million, versus $305 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 14%. The year-over-year improvement -- despite a market production
decline of 1% -- was driven by the continued ramp up of new launches
and a favorable platform mix with product on many of the better
selling vehicles.
-- European aftermarket revenue was $97 million, versus $94 million the
previous year. The 3% improvement was primarily due to stronger ride
control volumes and price increases in both product lines.
-- South America and India revenue was $62 million, including $8 million
in favorable currency, compared with $45 million a year ago. Stronger
OE volumes drove the increase.
-- EBIT for Europe, South America and India was $9 million, versus $10
million in third quarter 2004. The EBIT decrease was the result of
currency transactional losses with a $2 million negative impact,
manufacturing inefficiencies due to inventory reductions in the
quarter, costs for implementing a resource planning system for the
company's European emission control business and a reserve increase
related to a pending legal settlement.
-- Third quarter 2004 and 2005 EBIT results include $2 million in
restructuring related expenses.
ASIA PACIFIC
-- Asia operations generated $38 million in revenue, versus $37 million a
year ago.
-- Australian revenue increased to $56 million from $50 million the
previous year, largely driven by $4 million in favorable currency.
-- EBIT for Asia Pacific operations was $4 million, up from $3 million a
year ago. EBIT was up despite OE revenue weakness in China and
investments to increase Tenneco's aftermarket presence there.
YEAR-TO-DATE RESULTS
Through the first nine months of the year, Tenneco Automotive reported net income of $50 million, or $1.11 per diluted share, versus net income of $34 million, or 78-cents per diluted share for the first nine months of 2004. On an adjusted basis, year-to-date 2005 net income was $56 million, or $1.24 per diluted share, versus adjusted net income of $44 million, or $1.01 per diluted share for the same period one year ago.
Year-to-date EBIT was $177 million, compared with EBIT of $153 million for the first nine months of 2004. Adjusted EBIT was $184 million versus $177 million a year ago. Year-to-date 2005 EBITDA was $311 million, compared with $284 million a year ago, and adjusted EBITDA was $318 million, versus adjusted EBITDA of $308 million for the same period a year ago.
OUTLOOK
"We do not expect an immediate turnaround in OE production rates in North America or Europe, and we are closely monitoring the aftermarket in those regions for a potential drop in consumer spending on vehicle maintenance due to higher fuel prices. This landscape, coupled with continuing increases in material costs and the impact of higher fuel costs on our transportation expenses, creates a tough operating environment going forward," Frissora said. "As a result, we will continue to focus on those areas within our control- namely executing with discipline on the fundamentals and maintaining a relentless focus on costs. We should also continue to benefit from our balance and diversification in terms of products, markets served and customers. Finally, we will capitalize on opportunities to win incremental OE and aftermarket business from our competitors."
Attachment 1: Statements of Income - 3 Months Statements 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 Revenues to Non-GAAP Revenue 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 - 9 Months CONFERENCE CALL
The company will host a conference call on Tuesday, October 25, 2005 at 10:30 a.m. EDT. The dial in number is 888-790-1408 (domestic) or 1-773-756- 0157 (international). The pass code is Tenneco Auto. The call and accompanying slides 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 October 25, 2005. To access this recording, dial 866-365-2447 domestic or 203-369- 0216 international. The purpose of the call is to discuss the company's operations for the third 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.
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 SEPTEMBER 30,
(Millions except share and per share amounts)
2005 2004
Net sales and operating revenues $1,096 $996
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 889 (a) 796 (b)
Engineering, Research and
Development 22 20
Selling, General and
Administrative 96 93
Depreciation and Amortization of
Other Intangibles 44 42
Total Costs and Expenses 1,051 951
Loss on sale of receivables (1) -
Other Income (Expense) 6 (1)
Total Other Income (Expense) 5 (1)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 37 31
Europe & South America 9 (a) 10 (b)
Asia Pacific 4 3
50 44
Less:
Interest expense (net of
interest capitalized) 33 35
Income tax expense 7 2 (c)
Minority interest - 1
Net income $10 $6
Average common shares outstanding:
Basic 43.3 41.7
Diluted 45.6 44.3
Earnings per share of common stock:
Basic $0.25 $0.15
Diluted $0.23 $0.14
(a) Includes restructuring and restructuring related charges of
$2 million pre-tax, $2 million after tax or $0.04 per share. The
entire $2 million adjustment is recorded in cost of sales and
geographically in Europe and South America.
(b) 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, the
entire amount is recored in Europe and South America.
(c) Includes a $1 million or $0.02 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)
2005 2004
Net sales and operating revenues $3,377 $3,142 (c)
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 2,718 (a) 2,498 (d)
Engineering, Research and
Development 64 56
Selling, General and
Administrative 287 (a) 302 (c) (d) (e)
Depreciation and Amortization of
Other Intangibles 134 131
Total Costs and Expenses 3,203 2,987
Loss on sale of receivables (2) (1)
Other Income (Expense) 5 (1)
Total Other Income (Expense) 3 (2)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 126 (a) 111 (c) (d) (e)
Europe & South America 41 (a) 26 (d) (e)
Asia Pacific 10 16 (e)
177 153
Less:
Interest expense (net of
interest capitalized) 97 104
Income tax expense 29 (b) 11 (f)
Minority interest 1 4
Net income $50 $34
Average common shares outstanding:
Basic 43.0 41.3
Diluted 45.2 44.0
Earnings per share of common stock:
Basic $1.17 $0.84
Diluted $1.11 $0.78
(a) Includes restructuring and restructuring related charges of
$7 million pre-tax, $5 million after tax or $0.11 per share. Of the
adjustment $6 million is recorded in cost of sales and $1 million is
in SG&A. Geographically, $2 million is recorded in North America and
$5 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
$0.13 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
$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 and 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 $6 million or $0.14 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
September 30, 2005 December 31, 2004
Assets
Cash and Cash Equivalents $89 $214
Receivables, Net 675 488
Inventories 395 396
Other Current Assets 179 194
Investments and Other Assets 661 693
Plant, Property, and Equipment,
Net 1,051 1,134
Total Assets $3,050 $3,119
Liabilities and Shareholders' Equity
Short-Term Debt $71 $19
Accounts Payable 716 696
Accrued Taxes 30 24
Accrued Interest 33 35
Other Current Liabilities 263 273
Long-Term Debt 1,358 1,401
Deferred Income Taxes 70 126
Deferred Credits and Other
Liabilities 336 362
Minority Interest 23 24
Total Shareholders' Equity 150 159
Total Liabilities and
Shareholders' Equity $3,050 $3,119
(a) Accounts Receivables net of: September 30, 2005 December 31, 2004
Accounts Receivable
securitization programs $146 $124
Receivables collected under
advance payment programs $- $132
(b) Long term debt composed of: September 30, 2005 December 31, 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 13 19
$1,358 $1,401
ATTACHMENT 1
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
Nine Months Ended
September 30,
2005 2004
Operating activities:
Net income $50 $34
Adjustments to reconcile net
income to net cash provided
(used) by operating activities -
Depreciation and amortization
of other intangibles 134 131
Deferred income taxes 3 (12)
(Gain)/loss on sale of
assets, net 2 1
Changes in components of
working capital (net of
acquisition)-
(Inc.)/dec. in receivables (209) (66)
(Inc.)/dec. in inventories (22) (22)
(Inc.)/dec. in prepayments
and other current assets (23) (21)
Inc./(dec.) in payables 52 55
Inc./(dec.) in taxes accrued 11 5
Inc./(dec.) in interest accrued (2) -
Inc./(dec.) in other
current liabilities 5 21
Other (39) 9
Net cash provided (used) by
operating activities (38) 135
Investing activities:
Net proceeds from sale of
assets 4 12
Expenditures for plant,
property & equipment (100) (87)
Acquisition of business (11) -
Investments and other 1 -
Net cash used by investing
activities (106) (75)
Financing activities:
Issuance of common shares 6 6
Issuance of long-term debt 1 -
Retirement of long-term debt (43) (6)
Net inc./(dec.) in short-term
debt excluding current
maturities on long-term debt 56 1
Other 1 1
Net cash provided by financing
activities 21 2
Effect of foreign exchange rate
changes on cash and cash
equivalents (2) (4)
Inc./(dec.) in cash and cash
equivalents (125) 58
Cash and cash equivalents,
January 1 214 145
Cash and cash equivalents,
September 30 $89 $203
Cash paid during the period for
interest $94 $106
Cash paid during the period for
income taxes $16 $15
TENNECO AUTOMOTIVE ATTACHMENT 2
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q3 2005
North Europe Asia
America & SA Pacific Total
Net income $10
Income tax expense 7
Interest expense (net of interest
capitalized) 33
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 37 9 4 50
Depreciation and amortization of
other intangibles 22 19 3 44
Total EBITDA(2) $59 $28 $7 $94
Q3 2004
North Europe Asia
America & SA Pacific Total
Net income $6
Minority interest 1
Income tax expense 2
Interest expense (net of interest
capitalized) 35
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 31 10 3 44
Depreciation and amortization 23 17 2 42
Total EBITDA $54 $27 $5 $86
(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.
TENNECO AUTOMOTIVE ATTACHMENT 2
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q3 2005 Q3 2004
EBITDA Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income Share
Earnings Measures $94 $50 $10 $0.23 $86 $44 $6 $0.14
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 2 2 2 0.04 2 2 2 0.04
Tax adjustments - - - - - - (1) (0.02)
Non-GAAP earnings
measures $96 $52 $12 $0.27 $88 $46 $7 $0.16
Q3 2005
North Europe Asia
America & SA Pacific Total
EBIT $37 $9 $4 $50
Restructuring and
restructuring related
expenses 2 - 2
Adjusted EBIT $37 $11 $4 $52
Q3 2004
North Europe Asia
America & SA Pacific Total
EBIT $31 $10 $3 $44
Restructuring and
restructuring related
expenses - 2 - 2
Adjusted EBIT $31 $12 $3 $46
(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
third 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.
TENNECO AUTOMOTIVE ATTACHMENT 2
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
YTD 2005
North Europe Asia
America & SA Pacific Total
Net income $50
Minority interest 1
Income tax expense 29
Interest expense (net of interest
capitalized) 97
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 126 41 10 177
Depreciation and amortization of
other intangibles 68 57 9 134
Total EBITDA(2) $194 $98 $19 $311
YTD 2004
North Europe Asia
America & SA Pacific Total
Net income $34
Minority interest 4
Income tax expense 11
Interest expense (net of interest
capitalized) 104
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 111 26 16 153
Depreciation and amortization 71 52 8 131
Total EBITDA $182 $78 $24 $284
(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.
TENNECO AUTOMOTIVE ATTACHMENT 2
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
YTD 2005 YTD 2004
EBITDA Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income Share
Earnings Measures $311 $177 $50 $1.11 $284 $153 $34 $0.78
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 7 7 5 0.11 12 12 8 0.18
New Aftermarket
customer changeover
costs - - - - 8 8 5 0.13
Consulting fees indexed
to stock price - - - - 4 4 3 0.06
Tax adjustments - - 1 0.02 - - (6) (0.14)
Non-GAAP earnings
measures $318 $184 $56 $1.24 $308 $177 $44 $1.01
YTD 2005
North Europe Asia
America & SA Pacific Total
EBIT $126 $41 $10 $177
Restructuring and
restructuring related
expenses 2 5 - 7
Adjusted EBIT $128 $46 $10 $184
YTD 2004
North Europe Asia
America & SA Pacific Total
EBIT $111 $26 $16 $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 $36 $17 $177
(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.
TENNECO AUTOMOTIVE ATTACHMENT 2
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Q3 2005
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass
Currency Excluding Currency -through
Revenues Impact Currency Impact Sales
North America Original
Equipment
Ride Control $120 $- $120 $- $120
Exhaust 249 3 246 69 177
Total North America
Original
Equipment 369 3 366 69 297
North America Aftermarket
Ride Control 90 - 90 - 90
Exhaust 43 - 43 - 43
Total North America
Aftermarket 133 - 133 - 133
Total North America 502 3 499 69 430
Europe Original Equipment
Ride Control 84(a) 3 81 - 81(a)
Exhaust 257 1 256 76 180
Total Europe Original
Equipment 341 4 337 76 261
Europe Aftermarket
Ride Control 46 - 46 - 46
Exhaust 51 - 51 - 51
Total Europe
Aftermarket 97 - 97 - 97
South America & India 62 8 54 6 48
Total Europe &
South America 500 12 488 82 406
Asia 38 - 38 10 28
Australia 56 4 52 4 48
Total Asia Pacific 94 4 90 14 76
Total Tenneco
Automotive $1,096 $19 $1,077 $165 $912
Q3 2004
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass
Currency Excluding Currency -through
Revenues Impact Currency Impact Sales
North America Original
Equipment
Ride Control $108 $- $108 $- $108
Exhaust 230 - 230 71 159
Total North America
Original
Equipment 338 - 338 71 267
North America Aftermarket
Ride Control 83 - 83 - 83
Exhaust 44 - 44 - 44
Total North America
Aftermarket 127 - 127 - 127
Total North America 465 - 465 71 394
Europe Original Equipment
Ride Control 81(a) - 81 - 81(a)
Exhaust 224 - 224 74 150
Total Europe Original
Equipment 305 - 305 74 231
Europe Aftermarket
Ride Control 44 - 44 - 44
Exhaust 50 - 50 - 50
Total Europe
Aftermarket 94 - 94 - 94
South America & India 45 - 45 4 41
Total Europe &
South America 444 - 444 78 366
Asia 37 - 37 12 25
Australia 50 - 50 4 46
Total Asia Pacific 87 - 87 16 71
Total Tenneco
Automotive $996 $- $996 $165 $831
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 third
quarter of 2004, Tenneco Automotive recorded $15 million in revenues
for this contract.
TENNECO AUTOMOTIVE ATTACHMENT 2
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Nine Months Ended September 30, 2005
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass
Currency Excluding Currency -through
Revenues Impact Currency Impact Sales
North America Original
Equipment
Ride Control $378 $- $378 $- $378
Exhaust 756 8 748 204 544
Total North America
Original Equipment 1,134 8 1,126 204 922
North America
Aftermarket
Ride Control 284 - 284 - 284
Exhaust 125 - 125 - 125
Total North America
Aftermarket 409 - 409 - 409
Total North America 1,543 8 1,535 204 1,331
Europe Original
Equipment
Ride Control 291(a) 19 272 - 272(a)
Exhaust 813 27 786 236 550
Total Europe Original
Equipment 1,104 46 1,058 236 822
Europe Aftermarket
Ride Control 134 3 131 - 131
Exhaust 154 4 150 - 150
Total Europe
Aftermarket 288 7 281 - 281
South America & India 172 18 154 13 141
Total Europe &
South America 1,564 71 1,493 249 1,244
Asia 108 1 107 34 73
Australia 162 9 153 13 140
Total Asia Pacific 270 10 260 47 213
Total Tenneco
Automotive $3,377 $89 $3,288 $500 $2,788
Nine Months Ended September 30, 2004
Pass- Revenues
through Excluding
Sales Currency
Revenues Excluding and Pass
Currency Excluding Currency -through
Revenues Impact Currency Impact Sales
North America Original
Equipment
Ride Control $346 $- $346 $- $346
Exhaust 752 - 752 243 509
Total North America
Original Equipment 1,098 - 1,098 243 855
North America
Aftermarket
Ride Control 268 - 268 - 268
Exhaust 125 - 125 - 125
Total North America
Aftermarket 393 - 393 - 393
Total North America 1,491 - 1,491 243 1,248
Europe Original
Equipment
Ride Control 257(a) - 257 - 257(a)
Exhaust 719 - 719 232 487
Total Europe Original
Equipment 976 - 976 232 744
Europe Aftermarket
Ride Control 133 - 133 - 133
Exhaust 144 - 144 - 144
Total Europe
Aftermarket 277 - 277 - 277
South America & India 121 - 121 11 110
Total Europe &
South America 1,374 - 1,374 243 1,131
Asia 127 - 127 45 82
Australia 150 - 150 12 138
Total Asia Pacific 277 - 277 57 220
Total Tenneco
Automotive $3,142 $- $3,142 $543 $2,599
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
and third quarters of 2004, Tenneco Automotive recorded $30 million in
revenues for this contract.