[TENNECO AUTOMOTIVE LOGO]
news release
For Immediate Release
Contacts: Jane Ostrander
Media Relations
847 482-5607
jane.ostrander@tenneco-automotive.com
Leslie Hunziker
Investor Relations
847 482-5042
leslie.hunziker@tenneco-automotive.com
TENNECO AUTOMOTIVE ACHIEVES SIGNIFICANT PROFIT IMPROVEMENT
Company Reports Positive Fourth Quarter Earnings
o REPORTS FULL YEAR NET INCOME OF $31 MILLION, OR 74-CENTS PER DILUTED SHARE,
BEFORE THE CUMULATIVE EFFECT OF A CHANGE FOR THE ACCOUNTING FOR GOODWILL
o EBIT INCREASES 85 PERCENT IN 2002 ON 3 PERCENT REVENUE GAIN
o REPORTS NET INCOME OF $9 MILLION, OR 21-CENTS PER DILUTED SHARE IN THE FOURTH
QUARTER
o DEBT DECLINES $70 MILLION IN 2002 DRIVEN BY WORKING CAPITAL REDUCTIONS
o AWARDED $440 MILLION IN ANNUALIZED OE BUSINESS DRIVEN BY NEW TECHNOLOGY
INITIATIVES
LAKE FOREST, ILLINOIS, FEBRUARY 4, 2003 -Tenneco Automotive (NYSE: TEN)
announced today that the company reported net income, before the cumulative
effect of a goodwill accounting change, for full-year 2002 of $31 million, or
74-cents per diluted share, versus a net loss of $130 million, or $3.43 per
diluted share in 2001. The company reported net income of $9 million, or
21-cents per diluted share, for the fourth quarter of 2002 compared with a net
loss of $99 million, or $2.53 per diluted share, during the fourth quarter of
2001.
The fourth quarter 2002 results include income related to special adjustments
for restructuring costs and taxes totaling $16 million after-tax, or 38-cents
per share. The fourth quarter 2001
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results included net charges related to restructuring, taxes and other items
totaling $92 million after-tax, or $2.34 per share. Before special adjustments,
the fourth quarter 2002 results would have been a net loss of $7 million, or
17-cents per share even with the 2001 fourth quarter. See the table entitled
"Reconciliation to GAAP Measure" attached to this press release for more
information about these adjustments.
Tenneco Automotive reported 2002 revenue of $3.5 billion, a 3 percent increase.
Reported EBITDA for the year was $313 million, an increase of 28 percent over
2001. For the fourth quarter, revenue was $846 million, compared with $758
million in fourth quarter 2001, a 12 percent increase. Adjusted for favorable
currency, revenue increased 7 percent. Reported EBITDA for the quarter was $71
million, compared with $40 million the previous year.
For the full year, the company improved its cash position primarily by reducing
its working capital balance by $79 million, or as a percent of sales, from 7.6
percent to 5.1 percent. This and other cash management activities helped the
company reduce its total bank and bond debt by $70 million during the year. The
company met its 2002 goal of maintaining SGA&E expense at 12 percent of sales,
reporting SGA&E expense during the fourth quarter of 11.6 percent. The company
achieved its Project Genesis restructuring goals for the year, generating almost
$12 million in savings. The company also significantly outperformed its bank
debt covenant ratios for 2002.
The company was awarded $440 million in annualized OE business in 2002,
including a significant increase in hot-end business on the exhaust side, for
platforms expected to go into
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production in 2003 through 2005. The company's Asian-based alliances generated
approximately 15 percent of the new OE business. The company also added new
aftermarket customers in 2002 estimated at $45 million in annualized revenue.
"I am very pleased with the progress we made in 2002 in improving our operating
and financial results and in achieving full-year profitability," said Mark P.
Frissora, chairman and CEO, Tenneco Automotive. "We were successful in
generating cash and paying down debt for the year. We also continued to win new
OE business with our emission and ride control advanced technologies and we
broadened our aftermarket customer base as well."
The company's borrowings increased by $38 million during the fourth quarter of
2002. Accounts receivable sold under the company's securitization arrangements
declined $20 million, reflecting a seasonal change attributable to lower OE
sales during the year-end holiday period. The remainder of the increase in the
company's borrowings resulted from cash used during the fourth quarter,
including an increase in inventories, primarily for 2003 platform launches, and
an increase in cash balances of $8 million.
Despite the increase in borrowings during the quarter, the company again
significantly outperformed the requirements of its bank debt covenants. At
December 31, the leverage ratio was 4.39, below the maximum limit of 5.75; the
fixed charge coverage ratio was 1.30, exceeding the minimum required ratio of
0.75; and the interest coverage ratio was 2.26, exceeding the minimum required
ratio of 1.65.
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"Our North American original equipment business continued to capitalize on
strong production rates in the fourth quarter while our OE business in Europe
continued to improve profitability, particularly in the emission control
business where gross margins improved 1.5 percentage points versus the third
quarter and 1.6 percentage points compared with fourth quarter last year," said
Frissora. "The North American aftermarket showed increasing softness in the
quarter, which impacted our results. We're staying focused on controlling the
cost side of the business and working to stimulate demand for ride control
products through aggressive marketing and sales efforts."
NORTH AMERICA
Continued strong production volumes drove an 11 percent increase in North
American original equipment revenue during the quarter. The company reported
North American original equipment revenue of $338 million during the quarter
versus $306 million in fourth quarter 2001. Excluding catalytic converter
pass-through sales, revenue increased 12 percent. North American aftermarket
revenue for the quarter was $88 million versus $116 million one year ago.
Revenue was primarily impacted by the continuing decline in the exhaust market
and, to a lesser extent, lower volumes in the ride control market.
North American EBIT increased to $21 million from $12 million the previous year.
Higher OE volumes and improved manufacturing efficiency were offset by the
impact of lower volumes in both the ride control and exhaust segments of the
aftermarket. Fourth quarter 2002 results include a benefit of $2 million for an
adjustment in the estimate to complete Project Genesis and
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non-accruable restructuring expenses of $2 million. Fourth quarter 2001 included
$8 million in restructuring and related expenses.
EUROPE
The company reported a 22 percent increase in European OE revenue to $253
million, compared with $207 million in the fourth quarter of 2001. Higher
currency exchange rates benefited total OE revenues by $29 million. Excluding
catalytic converter pass-through sales and currency exchange, revenue was up 4
percent. The company's European aftermarket revenue increased 14 percent to $70
million, versus $61 million in fourth quarter 2001. Excluding the impact of
currency exchange, aftermarket revenue increased 1 percent.
European EBIT was $3 million in the quarter, compared with a loss of $16 million
in the fourth quarter of 2001. Fourth quarter 2002 results include a net benefit
of $3 million for an adjustment in the estimate to complete Project Genesis, net
of non-accruable Genesis costs. Fourth quarter 2001 results include a net $20
million of restructuring and related expenses and $4 million benefit for a
reversal of an environmental reserve.
REST OF WORLD
The company reported revenue for its Asian operations of $39 million, a 151
percent increase compared with fourth quarter 2001. New business and increased
OE volumes in China drove the improvement.
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Australian operations reported a 27 percent increase in revenue to $33 million,
versus $27 million one year ago.
In South America, the company reported revenue of $25 million compared with $26
million in the fourth quarter of 2001. Revenues increased 30 percent excluding
the impact of currency devaluations.
Combined EBIT for Asia, Australia and South America was $7 million versus $6
million in fourth quarter 2001. Fourth quarter 2002 results include a $1 million
favorable adjustment in the estimate to complete Project Genesis, net of
non-accruable Genesis costs. Fourth quarter 2001 results include a $1 million
restructuring charge for Project Genesis.
OUTLOOK
"Our top priority this year is to continue generating cash to pay down debt,
primarily through additional working capital improvements and strengthening our
margins. We are working to grow the top line of our businesses by leveraging our
advanced technologies and strong brands and expanding to adjacent markets," said
Frissora. "We are also doubling our efforts to control what we can in order to
help offset what we anticipate will be a tougher operating environment in the
coming year in light of current global economic and political uncertainties."
CHANGE IN ACCOUNTING FOR GOODWILL
The company recorded a charge in full-year results of $218 million net of tax,
or $5.48 per diluted share, for adopting the Financial Accounting Standards
Board's new rules on accounting
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for goodwill. Including the goodwill charge, the company reported a net loss for
full-year 2002 of $187 million, or $4.74 per diluted share.
The attachments provide additional information on Tenneco Automotive's fourth
quarter and full year 2002 earnings.
CONFERENCE CALL INFORMATION
The company will host a conference call today, February 4, 2003 at 10:30 a.m.
EST. The dial-in number is 888 809-8968 domestic or 630 395-0038 international.
Passcode is Tenneco Auto. A recording of this call will be available one hour
following the completion of the call on February 4 through February 11, 2003. To
access this recording, dial 800 284-7024 domestic or 402 220-9737 international
and enter passcode 8400. The call will also be available on the Tenneco
Automotive web site at www.tenneco-automotive.com
2003 ANNUAL MEETING
The Tenneco Automotive board of directors has scheduled the corporation's annual
meeting of shareholders for Tuesday, May 13, 2003 at 10:00 a.m. 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 21,
2003.
Tenneco Automotive is a $3.5 billion manufacturing company with headquarters in
Lake Forest, Illinois and approximately 20,000 employees worldwide. Tenneco
Automotive is one of the world's largest producers and marketers of ride control
and exhaust systems and products, which are sold under the Monroe(R) and
Walker(R) global brand names. Among its products are Sensa-Trac(R) and Monroe(R)
Reflex(TM) shocks and struts, Rancho(R) shock absorbers, Walker(R)
Quiet-Flow(TM) mufflers and DynoMax(R) performance exhaust products, and
Monroe(R) Clevite(TM) vibration control components.
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This press release contains forward-looking statements. Words such as "taking",
"focused", "goal", "expect", "anticipate", "should", "believe", "plan",
"remain", "confident", "continue," "will", "may", "can", "intend", "continue",
"estimate" and "seek" and similar expressions identify forward-looking
statements. These forward-looking statements are based on the current
expectations of the company (including its subsidiaries). Because these
forward-looking statements involve risks and uncertainties, the company's plans,
actions and actual results could differ materially. Among the factors that could
cause these plans, actions and results to differ materially from current
expectations are: (i) the general political, economic and competitive conditions
in markets and countries where the company and its subsidiaries operate,
including currency fluctuations and other risks associated with operating in
foreign countries; (ii) governmental actions, including the ability to receive
regulatory approvals and the timing of such approvals; (iii) changes in capital
availability or costs, including increases in the company's costs of borrowing
(i.e., interest rate increases); (iv) changes in automotive manufacturers'
production rates and their actual and forecasted requirements for the company's
products, including the company's resultant inability to realize the sales
represented by its awarded book of business and the overall highly competitive
nature of the automotive parts industry; (v) changes in consumer demand and
prices, including longer product lives of automobile parts and the cyclicality
of automotive production and sales of automobiles which include the company's
products, and the potential negative impact on the company's revenues and
margins from such products; (vi) the cost of compliance with changes in
regulations, including environmental regulations; (vii) workforce factors such
as strikes or labor interruptions; (viii) material substitutions and increases
in the costs of raw materials; (ix) the company's ability to execute
restructuring and other cost reduction plans and to realize anticipated benefits
from these plans; (x) the company's ability to develop and profitably
commercialize new products and technologies, and the acceptance of such new
products and technologies by the company's customers; (xi) further changes in
the distribution channels for the company's aftermarket products, further
consolidations among automotive parts customers and suppliers, and product
warranty costs; (xii) changes by the Financing Accounting Standards Board or
other accounting regulatory bodies of authoritative generally accepted
accounting principles or policies; (xiii) acts of war, riots or terrorism,
including, but not limited to the events taking place in the Middle East, and
the impact of these acts on economic, financial and social conditions in the
countries where we operate and (xiv) the timing and occurrence (or
non-occurrence) of transactions and events which may be subject to circumstances
beyond the control of the company and its subsidiaries. The company undertakes
no obligation to update any forward-looking statement to reflect events or
circumstances after the date of this press release.
###
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
INCOME STATEMENT
Unaudited
THREE MONTHS ENDED DECEMBER 31,
<Table>
<Caption>
2002 2001
-------- --------
Net sales and operating revenues: $ 846 $ 758
======== ========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 677 (a)(b) 623 (d)(e)
Engineering, Research and Development 13 12
Selling, General and Administrative 85 (b) 85 (d)
Depreciation and Amortization 40 38
-------- --------
Total Costs and Expenses 815 758
-------- --------
Gain (Loss) on sale of assets (1) 3
Loss on sale of receivables -- (1)
Other Income 1 --
-------- --------
Total Other Income -- 2
-------- --------
Operating Income
North America 21 (a)(b) 12 (d)
Europe 3 (a)(b) (16)(d)(e)
Rest of World 7 (b) 6 (d)
-------- --------
31 2
Less:
Interest expense (net of
interest capitalized) 33 38
Income tax expense (benefit) (13)(c) 63 (f)
Minority interest 2 --
-------- --------
Net income (loss) $ 9 $ (99)
======== ========
Average common shares outstanding:
Basic 39.9 39.0
======== ========
Diluted 41.7 39.2
======== ========
Earnings (loss) per share of common stock:
Basic- $ 0.22 $ (2.53)
======== ========
Diluted- $ 0.21 $ (2.53)
======== ========
</Table>
(a) Includes non-accruable restructuring expenses of $5 million pre-tax, $3
million after-tax or $ 0.07 per diluted share. All of the costs are recorded in
cost of sales. Geographically, $2 million is recorded in North America and $3
million in Europe.
(b) Includes a favorable adjustment to the estimated costs to complete Project
Genesis of $9 million pre-tax, $8 million after tax or $0.19 per diluted share.
Of the adjustment $2 million is recorded in SG&A and the remaining $7 million is
in cost of sales. Geographically, $2 million is recorded in North America, $6
million in Europe and $1 million in Rest of World.
(c) Includes tax adjustments of $11 million or $0.26 per diluted share related
to an adjustment in taxes based on filed tax returns and a tax rate change in
Belgium.
(d) Includes net restructuring and other charges of $29 million pre-tax, $28
million after tax or $0.72 per share. Of the charges $4 million is recorded in
SG&A and the remaining $25 million is in cost of sales. Geographically, $8
million is recorded is recorded in North America, $20 million in Europe and $1
million in Rest of World
(e) Includes income for an adjustment of environmental reserves of $4 million
pre-tax, $2 million after tax or $0.06 per share. The amount is recorded in cost
of sales. Geographically the amount is recorded in Europe.
(f) Includes tax charge for repatriation of earnings from foreign subsidiaries
of $66 million or $1.68 per share.
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
INCOME STATEMENT
Unaudited
TWELVE MONTHS ENDED DECEMBER 31,
<Table>
<Caption>
2002 2001
------------ ------------
Net sales and operating revenues: $ 3,459 $ 3,364
============ ============
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 2,735(a)(b) 2,699(g)(h)
Engineering, Research and Development 48 48
Selling, General and Administrative 370(b)(c) 372(g)(i)
Depreciation and Amortization 144 153
------------ ------------
Total Costs and Expenses 3,297 3,272
------------ ------------
Gain on sale of assets 10(d) 3
Loss on sale of receivables (2) (5)
Other Income (Loss) (1) 2
------------ ------------
Total Other Income 7 --
------------ ------------
Operating Income
North America 129(a)(b)(c) 52(g)(h)
Europe 18(a)(b)(c) 23(g)(h)(i)
Rest of World 22(b) 17(g)(i)
------------ ------------
169 92
Less:
Interest expense (net of
interest capitalized) 141 170
Income tax expense (benefit) (7)(e)(f) 51(j)
Minority interest 4 1
------------ ------------
Income (loss) before Cumulative Effect of
Change in Accounting Principle 31 (130)
------------ ------------
Cumulative Effect of Change in Accounting
Principle, net of income tax (218) --
------------ ------------
Net income (loss) $ (187) $ (130)
============ ============
Average common shares outstanding:
Basic 39.8 37.8
============ ============
Diluted 41.7 38.0
============ ============
Earnings (loss) per share of common stock:
Basic-
Before Cumulative Effect of Change in Accounting Principle $ 0.78 $ (3.43)
Cumulative Effect of Change in Accounting Principle (5.48) --
------------ ------------
$ (4.70) $ (3.43)
============ ============
Diluted-
Before Cumulative Effect of Change in Accounting Principle $ 0.74 $ (3.43)
Cumulative Effect of Change in Accounting Principle (5.48) --
------------ ------------
$ (4.74) $ (3.43)
============ ============
</Table>
(a) Includes non-accruable restructuring expenses of $11 million pre-tax, $6
million after-tax or $ 0.16 per diluted share. All of the costs are recorded in
cost of sales. Geographically, $5 million is recorded in North America and $6
million in Europe.
(b) Includes a favorable adjustment to the estimated costs to complete Project
Genesis of $9 million pre-tax, $8 million after tax or $0.19 per diluted share.
Of the adjustment $2 million is recorded in SG&A and the remaining $7 million is
in cost of sales. Geographically, $2 million is recorded in North America, $6
million in Europe and $1 million in Rest of World.
(c) Includes costs associated with the renegotiation of senior debt of $2
million pre-tax, $1 million after-tax or $0.03 per diluted share. The entire
charge is recorded in SG&A. Geographically, $1 million is recorded in both North
America and Europe.
(d) Includes a gain on the sale of a UK facility of $11 million pre-tax, $5
million after-tax or $0.13 per diluted share. Geographically, the entire gain is
recorded in Europe.
(e) Includes a $4 million or $.10 per diluted share tax benefit related to
lower-than-expected costs for withholding taxes. The lower cost of tax
withholding for the fourth quarter 2001 tax repatriation transaction resulted
from an amendment in the bank agreement allowing a more efficient transaction to
be completed.
(f) Includes tax adjustments of $13 million or $0.30 per diluted share related
to an adjustment in taxes based on filed tax returns and a tax rate change in
Belgium.
(g) Includes net restructuring and other charges of $51 million pre-tax, $43
million after-tax or $1.14 per share. Of the charges, $14 million is recorded in
SG&A and the remaining $37 million is in cost of sales. Geographically, $26
million is recorded in North America, $22 million in Europe and $3 million in
Rest of World.
(h) Includes environmental 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, $1 million is recorded in both North America and Europe.
(i) Includes costs associated with the renegotiation of senior debt of $2
million pre-tax, $2 million after-tax or $0.04 per share. The entire charge is
recorded in SG&A. Geographically, $1 million is recorded in both Europe and Rest
of World.
(j) Includes tax charge for repatriation of earnings from foreign subsidiaries
of $66 million or $1.73 per share.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
Balance Sheet
(Unaudited)
(Millions)
2002 2001
-------- ------
Dec 31 Dec 31
-------- ------
ASSETS
Cash $ 54 $ 53
Receivables, Net 409 $ 395
Inventories 352 326
Other Current Assets 151 167
Investments and Other Assets 548 773
Plant, Property and Equipment, net 1,026 967
-------- ------
Total $ 2,540 $2,681
======== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term Debt $ 228 $ 191
Accounts Payable 505 401
Accrued Taxes 40 35
Accrued Interest 23 25
Other Current Liabilities 220 224
Long-term Debt 1,217 1,324
Deferred Income Taxes 103 166
Deferred Credits and Other Liabilities 279 226
Minority Interest 19 15
Shareholders' Equity (94) 74
-------- ------
Total $ 2,540 $2,681
======== ======
TENNECO AUTOMOTIVE INC. CONSOLIDATED EARNINGS RESULTS
STATEMENT OF CASH FLOWS
Unaudited
(Millions)
<Table>
<Caption>
TWELVE MONTHS ENDED
DECEMBER 31,
----------------------
2002 2001
-------- --------
Operating activities:
Net income (loss) $ 31 $ (130)
Adjustments to reconcile income (loss)
to net cash provided (used) by operating activities -
Depreciation and amortization 144 153
Deferred income taxes (39) 30
(Gain)/loss on sale of businesses and assets, net (8) 2
Changes in components of working capital -
(Inc.)/dec. in receivables 9 64
(Inc.)/dec. in inventories -- 75
(Inc.)/dec. in prepayments and other current assets 6 (18)
Inc./(dec.) in payables 56 (46)
Inc./(dec.) in taxes accrued 3 2
Inc./(dec.) in interest accrued (2) (9)
Inc./(dec.) in other current liabilities (5) 22
Other (7) (4)
-------- --------
Net cash provided (used) by operating activities 188 141
-------- --------
Investing activities:
Net proceeds from sale of assets 24 11
Expenditures for plant, property & equipment (138) (127)
Acquisition of businesses -- --
Investments and other 7 (10)
-------- --------
Net cash provided (used) by investing activities (107) (126)
-------- --------
Net Cash provided (used) before financing activities 81 15
Financing activities:
Issuance of common and treasury shares -- 11
Proceeds from subsidiary equity issuance -- --
Issuance of long-term debt 3 --
Retirement of long-term debt (123) (57)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt 47 49
Dividends (common) --
Other --
-------- --------
Net cash provided (used) by financing activities (73) 3
-------- --------
Effect of foreign exchange rate changes on cash and
temporary cash investments (7) --
-------- --------
Inc./(dec.) in cash and temporary cash investments 1 18
Cash and temporary cash investments, January 1 53 35
-------- --------
Cash and temporary cash investments, December 31 $ 54 $ 53
======== ========
Cash paid during the period for interest $ 145 $ 177
Cash paid during the period for income taxes $ 27 $ 17
</Table>
TENNECO AUTOMOTIVE
RECONCILIATION TO GAAP(1) MEASURE
Unaudited
<Table>
<Caption>
Fourth Quarter Full Year
------------------ ------------------
2002 2001 2002 2001
------ ------ ------ ------
Net Income before Cumulative Effect of Change in
Accounting Principle (GAAP measure) 9 (99) 31 (130)
After tax adjustments (reflects Non-GAAP measures(2)):
Restructuring charge adjustment (8) (3) (8) (3)
Non-accruable restructuring expenses 3 -- 6 2
Amendment fee -- -- 1 2
York sale -- -- (5) --
Tax rate change in Belgium (4) -- (4) --
Tax accrual to return adjustments (7) -- (9) --
Other restructuring charges -- -- -- 13
Genesis restructuring charge -- 31 -- 31
Tax repatriation charge -- 66 (4) 66
Environmental reserve adjustment -- (2) -- 2
------ ------ ------ ------
(7) (7) 8 (17)
</Table>
(1) Generally Accepted Accounting Principles
(2) Non-GAAP measures are included for the benefit of investors to identify
information used by the company to assess the performance of its
operations. Non-GAAP information is useful to indicate decisions made for
the long-term benefit of the company overall. Non-GAAP financial
information may include non-recurring events, which may not reflect the
ongoing performance of operations and which may have a disproportional
positive or negative impact within the reporting period.