EXHIBIT 99.1
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 REPORTS IMPROVED RESULTS
o Company reports net income of $24 million and EPS of 58-cents
per share
o Results reflect sixth consecutive quarter of year-over-year
improvement in income, before the cumulative effect of the
change in accounting for goodwill
o European original equipment emissions control business posts
significant year-over-year profitability improvement
o Company achieves restructuring, SGA&E savings and Six Sigma
improvement targets
o Significantly improves liquidity through successful bond
offering
Lake Forest, Illinois, July 22, 2003 -- Tenneco Automotive (NYSE: TEN)
announced today that the company reported net income of $24 million, or
58-cents per diluted share, in the second quarter of 2003, versus net
income of $19 million, or 45-cents per diluted share for the second
quarter of 2002. EBIT (income before interest, taxes and minority
interest) was $67 million in the quarter compared with $71 million in
second quarter 2002. EBIT before depreciation and amortization (EBITDA)
was $108 million for the quarter, versus second quarter 2002 EBITDA of
$106 million. See the table entitled, "Reconciliation of GAAP Results
to non-GAAP Results" which is attachment 2 to this press release for
more information about EBITDA and other non-GAAP results in this press
release.
The company reported revenue of $998 million for the quarter versus
$948 million in second quarter 2002. Excluding a $76 million benefit
from favorable currency exchange rates during the quarter, second
quarter 2003 revenue was $922 million. The decline in revenues, after
excluding the currency benefit, was primarily driven by softer global
aftermarket sales. Global original equipment (OE) revenue was down only
1 percent, after currency adjustments, stronger than the industry
market performance.
1
"We are pleased with our ability to deliver our sixth consecutive
quarter of year-over-year improvement, despite overall industry
conditions that are average at best. This consistent performance
reflects our commitment to growth and improving the fundamentals of our
business, " said Mark P. Frissora, chairman and CEO, Tenneco
Automotive. "We are particularly encouraged with our progress in
Europe, where we believe our OE business is back on track now that the
emissions control business has substantially recovered."
The company captured savings in the quarter through a continued intense
focus on controlling costs. SGA&E (selling, general, administrative and
engineering expense), as a percent of sales, was 11.0 percent, compared
with 11.6 percent in the second quarter of 2002. Project Genesis, the
company's restructuring program, generated $7 million in savings in the
second quarter, bringing the year-to-date savings to $13 million. The
company anticipates total annualized savings of $27 million from
Project Genesis in 2003. The company also generated almost $7 million
in savings from Six Sigma, $13 million in savings year-to-date, and is
well on track to meet its goal of $20 million in Six Sigma savings for
the year.
The second quarter 2003 results include a pre-tax restructuring related
expense of $1 million, or 3-cents per diluted share, a pre-tax expense
of $5 million, or 7-cents per diluted share, related to the write-off
of debt issuance costs that were deferred on the senior debt the
company paid down with the proceeds of a $350 million bond offering,
and a tax benefit of $8 million, or 19-cents per diluted share, related
to a favorable tax resolution. The second quarter 2002 results include
a pre-tax benefit of $11 million, or 13-cents per diluted share, for
the sale of the company's York, U.K. manufacturing facility and a
pre-tax restructuring related expense of $2 million, or 2-cents per
diluted share.
The company continues to win new business with global original
equipment manufacturers. The company won 18 new OE business awards in
the quarter estimated to add $147 million of incremental revenue over
five years beginning in 2003, including being selected as the full
service exhaust supplier for the Ford gas and diesel 2007 model year
F-Series Super-Duty truck. On the aftermarket side, the company added
new business worth an estimated $11 million in annualized revenue with
new customers in Europe and North America.
"Our business units have a renewed emphasis on growth this year, and we
delivered some strong results this quarter," Frissora said. "The
shrinking exhaust aftermarket worldwide continues to have the greatest
impact on our aftermarket results. We are offsetting some of this
downturn by adding incremental business and not letting up on our
efforts to do everything possible to take out costs, especially in
distribution."
Cash flow before financing activity was a negative $35 million during
the second quarter 2003. Negative cash flow during the quarter was
driven by increased
2
working capital and higher tax settlement costs. Due to the seasonality
of its business, cash use is typically higher in the second quarter as
the company moves into the spring and summer selling seasons in the
aftermarket. While working capital increased overall, the company made
substantial progress toward its inventory reduction goals, generating
$36 million in cash flow from reduced inventories. Total borrowings
increased $54 million during the quarter, which included $12 million in
fees paid in connection with the $350 million senior secured note
offering. Tenneco Automotive's total bank and bond debt was $1.497
billion at the end of the second quarter 2003.
Tenneco Automotive again significantly outperformed the requirements of
its bank debt covenants. At June 30, the leverage ratio was 4.56, below
the maximum limit of 5.50; the fixed charge coverage ratio was 1.32,
exceeding the minimum required ratio of 0.90; and the interest coverage
ratio was 2.33, exceeding the minimum required ratio of 1.75.
NORTH AMERICA
o Softer OE production during the quarter contributed to a 7
percent decrease in North American original equipment revenue
to $365 million versus second quarter 2002 revenue of $391
million. The decline was driven in part by lower precious
metal prices on pass-through catalytic converter sales. The
company's continued strong position on top-selling platforms
helped offset the even larger overall industry decline in
sales.
o North American aftermarket revenue was $136 million versus
$148 million one year ago. The 8 percent decline was primarily
the result of a 17 percent decline in the aftermarket exhaust
business.
o EBIT for North American operations was $49 million compared
with $53 million in the second quarter of 2002, which included
$1 million in restructuring related expenses. EBIT was
impacted by the continued decline in the exhaust aftermarket
and, to a lesser extent, lower OE volumes. Improved
manufacturing efficiency and continued emphasis on controlling
costs helped partially offset these factors.
EUROPE
o European original equipment revenue increased to $286 million
in the quarter versus $231 million in second quarter 2002.
Before catalytic converter pass-through sales and the impact
of favorable currency exchange rates, revenue was still up 5
percent, versus an estimated industry decline of 4 percent.
The revenue increase was driven by the company's position on
top-selling vehicles and the launch of several high-volume
platforms.
o European aftermarket revenue was $102 million compared with
$90 million in the second quarter of 2002. Excluding the
impact of favorable
3
currency, second quarter 2003 revenue was $84 million. The
decrease was driven by the industry decline in the exhaust
segment.
o European EBIT was $11 million, flat year-over-year. EBIT for
the quarter includes $1 million of restructuring related
expense and $4 million of favorable currency effects. Second
quarter 2002 EBIT includes an $11 million gain on the sale of
the York, U.K. facility and restructuring related expenses of
$1 million.
o Before these items, EBIT improved significantly, primarily
driven by improved operational efficiencies throughout the
European operations, particularly in the original equipment
emissions control business, where gross margin increased
almost 5 percentage points from the prior year. Project
Genesis savings added $4 million to earnings but were
substantially offset by the impact of lower aftermarket sales.
REST OF WORLD
o Revenue from Asian operations increased 36 percent to $40
million in the quarter. New business and strong OE volumes in
China continue to drive the growth.
o In South America, the company reported revenue of $29 million,
an increase over $28 million in second quarter 2002. Currency
devaluations in both Brazil and Argentina had a $2 million
negative impact on revenues.
o The company's Australian operations reported revenues of $40
million compared with $31 million in second quarter 2002, a 32
percent increase. Strong volumes on key platforms and a
favorable currency exchange rate of $7 million impacted
revenues.
o Combined EBIT for Asia, South America and Australia was $7
million, flat with the previous year. Weak economic conditions
in key South American markets offset higher revenues and EBIT
gains in China.
Tenneco Automotive closed on its bond offering of $350,000,000 of 10.25
percent senior secured notes in the quarter, which provides liquidity
and greater financial flexibility going forward. The company used
proceeds from the notes to pay off $87 million of borrowings under its
revolving credit facility and to repay $251 million in senior term
loans that were amortizing at the rate of $94 million annually through
2005. The company incurred $12 million in costs to complete the
offering and expects to incur up to $19 million in higher annual
interest expense. The notes are senior secured obligations of Tenneco
Automotive and
4
those subsidiaries that guarantee the notes, and will mature on July
15, 2013 with interest payable semi-annually beginning on January 15,
2004.
"We are very pleased with the successful completion of our bond
offering and the positive response from the financial community. We
believe the success of this offering contributed in part to the 59
percent rise in our stock price and the significant rise in trading
value of our other debt instruments during the quarter," said Frissora.
"This refinancing transaction provides Tenneco Automotive with
long-term financial flexibility to address our primary goal of total
debt reduction. At the same time, the $87 million revolver pay down and
the deferral of debt amortization payments of over $210 million through
2005 strengthens the company's near-term liquidity, giving us
sufficient resources to adjust to market uncertainties as we continue
to implement strategies to grow the top line of our business and
improve our operating performance."
The company also announced today a change to its retiree medical
benefits program, which will provide participating retirees with
continued access to group health coverage while reducing Tenneco
Automotive's subsidization of the program. Based on current estimates,
the company anticipates that this change will increase its net income
by approximately $7 million annually, beginning in the third quarter of
2003.
Attachment 1 to this press release provides additional information on
Tenneco Automotive's second quarter 2003 results.
CONFERENCE CALL INFORMATION
The company will host a conference call on July 22, 2003 at 10:30 a.m.
Eastern time. The dial-in number is 888-709-9420 domestic or
210-234-8312 international. The passcode is Tenneco Auto. The call will
be available on the financial section of the Tenneco Automotive web
site at www.tenneco-automotive.com. A copy of this press release, which
includes in the attachments financial information to be discussed on
this call, is also available on the financial and news sections of the
Tenneco Automotive web site at www.tenneco-automotive.com. A recording
of this call will be available one hour following the completion of the
call on July 22 through July 29, 2003. To access this recording, dial
800-396-1242 domestic or 402-220-9833 international and enter passcode
8400.
Tenneco Automotive is a $3.5 billion manufacturing company with
headquarters in Lake Forest, Illinois and approximately 19,600
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 Reflex(R) shocks
and struts, Rancho(R) shock absorbers, Walker(R)
5
Quiet-Flow(R) mufflers and DynoMax(R) performance exhaust products, and
Monroe(R) Clevite(R) vibration control components.
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 as well
as actions taken or to be taken by the United States or other
governments as a result of acts or threats of terrorism, and the impact
of these acts on economic, financial and social conditions in the
countries where the company operates 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. Additional information regarding these risk
factors and uncertainties is detailed from time to time in the
company's SEC filings, including
6
but not limited to its annual report on Form 10-K for the year ended
December 31, 2002.
7
Attachment 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
THREE MONTHS ENDED JUNE 30,
2003 2002
--------- ---------
Net sales and operating revenues: $ 998 $ 948
===== =====
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 779 (a) 743 (d)
Engineering, Research and Development 13 17
Selling, General and Administrative 97 93
Depreciation and Amortization of Other Intangibles 41 35
----- -----
Total Costs and Expenses 930 888
===== =====
Gain on sale of assets - 11 (e)
Loss on sale of receivables (1) (1)
Other Income (Loss) - 1
----- -----
Total Other Income (Loss) (1) 11
----- -----
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 49 53 (d)
Europe 11 (a) 11 (d) (e)
Other 7 7
----- -----
67 71
Less:
Interest expense (net of
interest capitalized) 38 (b) 36
Income tax expense (benefit) 3 (c) 16
Minority interest 2 -
Income (loss) before Cumulative Effect of
----- -----
Change in Accounting Principle 24 19
----- -----
Cumulative Effect of Change in Accounting
Principle, net of income tax - -
----- -----
Net income (loss) $ 24 $ 19
===== =====
Average common shares outstanding:
Basic 40.4 39.7
===== =====
Diluted 41.3 41.8
===== =====
Earnings (loss) per share of common stock:
Basic-
Before Cumulative Effect of Change in Accounting Principle $0.59 $0.48
Cumulative Effect of Change in Accounting Principle - -
----- -----
$0.59 $0.48
===== =====
Diluted-
Before Cumulative Effect of Change in Accounting Principle $0.58 $0.45
Cumulative Effect of Change in Accounting Principle - -
----- -----
$0.58 $0.45
===== =====
(a) Includes restructuring and restructuring related charges of $1 million
pre-tax, $1 million after-tax or $0.03 per share. The entire charge is recorded
in cost of sales. Geographically all of the charge is recorded in Europe.
(b) Includes a pre-tax expense of $5 million, $3 million after-tax or $.07 per
share related to the write-off of debt issuance costs that were defined on the
senior debt we paid down with the proceeds of the $350 million bond offering.
(c) Includes a $8 million or $.19 per share tax benefit related to the
resolution of outstanding tax issues.
(d) Includes restructuring and other charges of $2 million pre-tax, $1 million
after-tax or $0.02 per share. The entire charge is recorded in cost of sales.
Geographically, $1 million is recorded in both North America and Europe.
(e) Includes a gain on the sale of a UK facility of $11 million pre-tax, $5
million after-tax or $0.13 per share. Geographically, all of the gain is
recorded in Europe.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
SIX MONTHS ENDED JUNE 30,
2003 2002
----------- -----------
Net sales and operating revenues: $ 1,919 $ 1,757
======= =======
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 1,522 (a) 1,383 (d)
Engineering, Research and Development 32 31
Selling, General and Administrative 185 186 (e)
Depreciation and Amortization of Other Intangibles 80 69
------- -------
Total Costs and Expenses 1,819 1,669
======= =======
Gain on sale of assets - 11 (f)
Loss on sale of receivables (1) (1)
Other Income (Loss) (1) -
------- -------
Total Other Income (Loss) (2) 10
------- -------
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 77 (a) 72 (d) (e)
Europe 10 (a) 16 (d) (e) (f)
Other 11 10
------- -------
98 98
Less:
Interest expense (net of
interest capitalized) 69 (b) 72
Income tax expense (benefit) 1 (c) 8 (g)
Minority interest 3 1
Income (loss) before Cumulative Effect of
------- -------
Change in Accounting Principle 25 17
------- -------
Cumulative Effect of Change in Accounting
Principle, net of income tax - (218)
------- -------
Net income (loss) $ 25 $ (201)
======= =======
Average common shares outstanding:
Basic 40.2 39.7
======= =======
Diluted 41.1 41.4
======= =======
Earnings (loss) per share of common stock:
Basic-
Before Cumulative Effect of Change in Accounting Principle $ 0.61 $ 0.42
Cumulative Effect of Change in Accounting Principle - (5.49)
------- -------
$ 0.61 $ (5.07)
======= =======
Diluted-
Before Cumulative Effect of Change in Accounting Principle $ 0.60 $ 0.41
Cumulative Effect of Change in Accounting Principle - (5.49)
------- -------
$ 0.60 $ (5.08)
======= =======
(a) Includes restructuring and restructuring related charges of $6 million
pre-tax, $3 million after-tax or $0.09 per share. The entire charge is recorded
in cost of sales. Geographically, $3 million is recorded in North America and $3
million in Europe.
(b) Includes a pre-tax expense of $5 million, $3 million after-tax or $.07 per
share related to the write-off of debt issuance costs that were defined on the
senior debt we paid down with the proceeds of the $350 million bond offering.
(c) Includes a $11 million or $.26 per share tax benefit related to the
resolution of outstanding tax issues.
(d) Includes restructuring and restructuring related charges of $3 million
pre-tax, $1 million after-tax or $0.04 per share. The entire charge is recorded
in cost of sales. Geographically, $2 million is recorded in North America and $1
million in Europe.
(e) Includes costs associated with the amendment of the senior debt agreement of
$2 million pre-tax, $1 million after-tax or $0.03 per share. The entire charge
is recorded in SG&A. Geographically, $1 million is recorded in both North
America and Europe.
(f) Includes a gain on the sale of a UK facility of $11 million pre-tax, $5
million after-tax or $0.13 per share. Geographically, all of the gain is
recorded in Europe.
(g) Includes a $4 million or $.10 per 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 senior debt agreement allowing a more efficient
transaction to be completed.
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
June 30, 2003 December 31, 2002
------------- -----------------
Assets
Cash and Temporary Cash Investments $ 58 $ 54
Receivables, Net 522 409
Inventories 355 352
Other Current Assets 162 151
Investments and Other Assets 507 512
Plant, Property, and Equipment, Net 1,069 1,026
------- -------
Total Assets $ 2,673 $ 2,504
======= =======
Liabilities and Shareowners' Equity
Short-Term Debt $ 111 $ 228
Accounts Payable 567 505
Accrued Taxes 22 40
Accrued Interest 18 23
Other Current Liabilities 207 220
Long-Term Debt 1,386 1,217
Deferred Income Taxes 76 103
Deferred Credits and Other Liabilities 260 243
Minority Interest 20 19
Total Shareholders' Equity 6 (94)
------- -------
Total Liabilities and Shareholders' Equity $ 2,673 $ 2,504
======= =======
Tenneco Automotive Inc. and Consolidated Subsidiaries
Statement of Cash Flows
(Unaudited)
(Millions)
Six Months Ended
June 30,
-----------------------
2003 2002
----- -----
Operating activities:
Net income (loss) before cumulative effect of change in accounting
principle, net of tax $ 25 $ 17
Adjustments to reconcile income (loss)
to net cash provided (used) by operating activities -
Depreciation and amortization 80 69
Deferred income taxes (10) (8)
(Gain)/loss on sale of businesses and assets, net - (10)
Changes in components of working capital -
(Inc.)/dec. in receivables (87) (50)
(Inc.)/dec. in inventories 24 9
(Inc.)/dec. in prepayments and other current assets (1) (4)
Inc./(dec.) in payables 30 76
Inc./(dec.) in taxes accrued (19) 2
Inc./(dec.) in interest accrued (5) -
Inc./(dec.) in other current liabilities (19) 26
Other 10 (3)
----- -----
Net cash provided (used) by operating activities 28 124
Investing activities:
Net proceeds from sale of assets 3 18
Expenditures for plant, property & equipment (54) (52)
Investments and other (2) 13
----- -----
Net cash provided (used) by investing activities (53) (21)
----- -----
Net Cash provided (used) before financing activities (25) 103
Financing activities:
Proceeds from capital contributions 1 -
Issuance of long-term debt 350 -
Debt issuance costs on long-term debt (12) -
Retirement of long-term debt (276) (25)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt (25) (71)
Other (1) -
----- -----
Net cash provided (used) by financing activities 37 (96)
----- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments (8) (8)
----- -----
Inc./(dec.) in cash and temporary cash investments 4 (1)
Cash and temporary cash investments, January 1 54 53
----- -----
Cash and temporary cash investments, June 30 $ 58 $ 52
===== =====
Cash paid during the period for interest $ 67 $ 72
Cash paid during the period for income taxes $ 30 $ 16
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) RESULTS TO NON-GAAP RESULTS
Unaudited
Q2 2003 Q2 2002
------------------ ------------------
Amount Per Share Amount Per Share
------ --------- ------ ---------
Net Income before Cumulative Effect of Change in Accounting Principle (GAAP measure) $ 24 $0.58 $ 19 $0.45
After tax adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 1 0.03 1 0.02
Tax settlement adjustment (8) (0.19) - -
Debt issuance cost write off 3 0.07 - -
Gain on sale of York facility - - (5) (0.13)
Amendment fee - - - -
Tax repatriation reversal - - - -
---- ----- ---- -----
Non-GAAP earnings measure(2) $ 20 $0.49 $ 15 $0.34
==== ===== ==== =====
Q1 2003
-------------------------------------
North Rest of
America Europe World Total
------- ------ ------- -----
Net income (loss) $ - $ - $ - $ 24
Cumulative effect of change in accounting principle, net of income tax - - - -
Minority interest - - - 2
Income tax expense (benefit) - - - 3
Interest expense (net of interest capitalized) - - - 38
-----
Income(loss) before interest expense, income taxes and minority interest (GAAP measure) 49 11 7 67
Depreciation and amortization of other intangibles 24 14 3 41
---- ----- ---- -----
Total EBITDA(3) $ 73 $ 25 $ 10 $ 108
==== ===== ==== =====
Q2 2002
-------------------------------------
North Rest of
America Europe World Total
------- ------ ------- -----
Net income (loss) $ - $ - $ - $ 19
Cumulative effect of change in accounting principle, net of income tax - - - -
Minority interest - - - -
Income tax expense (benefit) - - - 16
Interest expense (net of interest capitalized) - - - 36
-----
Income(loss) before interest expense, income taxes and minority interest (GAAP measure) 53 11 7 71
Depreciation and amortization 22 10 3 35
---- ----- ---- -----
Total EBITDA(3) $ 75 $ 21 $ 10 $ 106
==== ===== ==== =====
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
results in order to reflect the results for the second quarters of 2003 and
2002 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 measure 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 the 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 cumulative effect of change in accounting
principle, 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 ability to
incur and service debt. 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
RECONCILIATION OF GAAP(1) RESULTS TO NON-GAAP RESULTS
Unaudited
YTD 2003 YTD 2002
---------------- ----------------
Amount Per Share Amount Per Share
------ --------- ------ ---------
Net Income before Cumulative Effect of Change in Accounting Principle (GAAP measure) $ 25 $0.60 $ 17 $0.41
After tax adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 3 0.09 1 0.04
Tax settlement adjustment (11) (0.26) - -
Debt issuance cost write off 3 0.07 - -
Gain on sale of York facility - - (5) (0.13)
Amendment fee - - 1 0.03
Tax repatriation reversal - - (4) (0.10)
----- ----- ----- -----
Non-GAAP earnings measure(2) $ 20 $0.50 $ 10 $0.25
===== ===== ===== =====
YTD 2003
--------------------------------------
North Rest of
America Europe World Total
------- ------ ----- -----
Net income (loss) $ - $ - $ - $ 25
Cumulative effect of change in accounting principle, net of income tax - - - -
Minority interest - - - 3
Income tax expense (benefit) - - - 1
Interest expense (net of interest capitalized) - - - 69
-----
Income(loss) before interest expense, income taxes and minority interest (GAAP measure) 77 10 11 98
Depreciation and amortization of other intangibles 46 28 6 80
----- ----- ----- -----
Total EBITDA(3) $ 123 $ 38 $ 17 $ 178
===== ===== ===== =====
YTD 2002
--------------------------------------
North Rest of
America Europe World Total
------- ------ ----- -----
Net income (loss) $ - $ - $ - $(201)
Cumulative effect of change in accounting principle, net of income tax - - - 218
Minority interest - - - 1
Income tax expense (benefit) - - - 8
Interest expense (net of interest capitalized) - - - 72
-----
Income(loss) before interest expense, income taxes and minority interest (GAAP measure) 72 16 10 98
Depreciation and amortization 43 20 6 69
----- ----- ----- -----
Total EBITDA(3) $ 115 $ 36 $ 16 $ 167
===== ===== ===== =====
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
results in order to reflect the results for the first half of 2003 and 2002
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 measure 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 the 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 cumulative effect of change in accounting
principle, 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 ability to
incur and service debt. 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
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Unaudited
Q2 2003
----------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Aftermarket
Ride Control $ 90 $ - $ 90 $ - $ 90
Exhaust 46 - 46 - 46
---- ---- ---- ---- ----
Total North America Aftermarket 136 - 136 - 136
North America Original Equipment
Ride Control 118 - 118 - 118
Exhaust 247 5 242 75 167
---- ---- ---- ---- ----
Total North America Original Equipment 365 5 360 75 285
Total North America 501 5 496 75 421
Europe Aftermarket
Ride Control 53 10 43 - 43
Exhaust 49 8 41 - 41
---- ---- ---- ---- ----
Total Europe Aftermarket 102 18 84 - 84
Europe Original Equipment
Ride Control 64 11 53 - 53
Exhaust 222 37 185 56 129
---- ---- ---- ---- ----
Total Europe Original Equipment 286 48 238 56 182
Total Europe 388 66 322 56 266
Asia 40 - 40 14 26
South America 29 (2) 31 3 28
Australia 40 7 33 4 29
---- ---- ---- ---- ----
Total Rest of World 109 5 104 21 83
Total Tenneco Automotive $998 $ 76 $922 $152 $770
==== ==== ==== ==== ====
Q2 2002
----------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Aftermarket
Ride Control $ 92 $ - $ 92 $ - $ 92
Exhaust 56 - 56 - 56
---- ---- ---- ---- ----
Total North America Aftermarket 148 - 148 - 148
North America Original Equipment
Ride Control 114 - 114 - 114
Exhaust 277 - 277 90 187
---- ---- ---- ---- ----
Total North America Original Equipment 391 - 391 90 301
Total North America 539 - 539 90 449
Europe Aftermarket
Ride Control 44 - 44 - 44
Exhaust 46 - 46 - 46
---- ---- ---- ---- ----
Total Europe Aftermarket 90 - 90 - 90
Europe Original Equipment
Ride Control 49 - 49 - 49
Exhaust 182 - 182 57 125
---- ---- ---- ---- ----
Total Europe Original Equipment 231 - 231 57 174
Total Europe 321 - 321 57 264
Asia 29 - 29 12 17
South America 28 - 28 3 25
Australia 31 - 31 1 30
---- ---- ---- ---- ----
Total Rest of World 88 - 88 16 72
Total Tenneco Automotive $948 $ - $948 $163 $785
==== ==== ==== ==== ====
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.
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
Unaudited
Six Months Ended June 30, 2003
------------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Aftermarket
Ride Control $ 162 $ - $ 162 $ - $ 162
Exhaust 82 - 82 - 82
------ ------ ------ ------ ------
Total North America Aftermarket 244 - 244 - 244
North America Original Equipment
Ride Control 234 - 234 - 234
Exhaust 504 5 499 162 337
------ ------ ------ ------ ------
Total North America Original Equipment 738 5 733 162 571
Total North America 982 5 977 162 815
Europe Aftermarket
Ride Control 88 16 72 - 72
Exhaust 90 16 74 - 74
------ ------ ------ ------ ------
Total Europe Aftermarket 178 32 146 - 146
Europe Original Equipment
Ride Control 121 20 101 - 101
Exhaust 434 71 363 114 249
------ ------ ------ ------ ------
Total Europe Original Equipment 555 91 464 114 350
Total Europe 733 123 610 114 496
Asia 76 - 76 27 49
South America 55 (9) 64 5 59
Australia 73 11 62 7 55
------ ------ ------ ------ ------
Total Rest of World 204 2 202 39 163
Total Tenneco Automotive $1,919 $ 130 $1,789 $ 315 $1,474
====== ====== ====== ====== ======
Six Months Ended June 30, 2002
------------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Aftermarket
Ride Control $ 176 $ - $ 176 $ - $ 176
Exhaust 98 - 98 - 98
------ ------ ------ ------ ------
Total North America Aftermarket 274 - 274 - 274
North America Original Equipment
Ride Control 214 - 214 - 214
Exhaust 518 - 518 175 343
------ ------ ------ ------ ------
Total North America Original Equipment 732 - 732 175 557
Total North America 1,006 - 1,006 175 831
Europe Aftermarket
Ride Control 72 - 72 - 72
Exhaust 83 - 83 - 83
------ ------ ------ ------ ------
Total Europe Aftermarket 155 - 155 - 155
Europe Original Equipment
Ride Control 90 - 90 - 90
Exhaust 348 - 348 104 244
------ ------ ------ ------ ------
Total Europe Original Equipment 438 - 438 104 334
Total Europe 593 - 593 104 489
Asia 47 - 47 17 30
South America 54 - 54 5 49
Australia 57 - 57 2 55
------ ------ ------ ------ ------
Total Rest of World 158 - 158 24 134
Total Tenneco Automotive $1,757 $ - $1,757 $ 303 $1,454
====== ====== ====== ====== ======
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.