EXHIBIT 99.1
news release [TENNECO AUTOMOTIVE LOGO]
Contacts:
Jane Ostrander Leslie Hunziker
Media Relations Investor Relations
847-482-5607 847-482-5042
jane.ostrander@tenneco-automotive.com leslie.hunziker@tenneco-automotive.com
TENNECO AUTOMOTIVE REPORTS RECORD REVENUE AND EARNINGS
o HIGHEST EVER QUARTERLY REVENUE OF $1.114 BILLION
o RECORD QUARTERLY NET INCOME AND EPS OF $30 MILLION, OR 69-CENTS PER
SHARE
o RECORD LOW DEBT NET OF CASH BALANCES AT $1.253 BILLION
o EUROPEAN EBIT IMPROVES 27 PERCENT; ADJUSTED EUROPEAN EBIT UP 55 PERCENT
Lake Forest, Illinois, July 20, 2004 - Tenneco Automotive (NYSE: TEN) announced
today that the company reported a 25 percent increase in net income and a 19
percent increase in earnings per diluted share with second quarter net income of
$30 million, or 69-cents per diluted share, versus net income of $24 million, or
58-cents per diluted share, in the second quarter of 2003. The company reported
a 15 percent improvement in EBIT (earnings before interest, taxes, and minority
interest) to $76 million over second quarter 2003 EBIT of $67 million. EBITDA
(EBIT before depreciation and amortization) in the quarter increased 12 percent
to $120 million compared with $108 million a year earlier. (See the table that
reconciles EBITDA in attachment 2 to the press release.)
Adjusted for the items described below, second quarter 2004 net income improved
55 percent to $31 million and earnings per share was up 43 percent to 70-cents
per diluted share. Second quarter EBIT was up 24 percent to $84 million and
EBITDA improved 17 percent to $128 million.
ADJUSTED SECOND QUARTER 2004 AND 2003 RESULTS:
Q2 2004 Q2 2003
----------------------------------------- ------------------------------------------
EBITDA EBIT Net Income Per Share EBITDA EBIT Net Income Per Share
------ ----- ---------- --------- ------ ---- ---------- ---------
Earnings Measures $120 $ 76 $ 30 $0.69 $108 $ 67 $ 24 $0.58
Adjustments:
- Restructuring and restructuring
related expenses 5 5 3 0.07 1 1 1 0.03
- New Aftermarket customer
changeover costs 2 2 1 0.02 -- -- -- --
- Consulting fees indexed to
stock price 1 1 1 0.01 -- -- -- --
- Debt issuance cost write off -- -- -- -- -- -- 3 0.07
- Tax adjustments -- -- (4) (0.09) -- -- (8) (0.19)
---- ---- ---- ----- ---- ---- ---- -----
Non-GAAP earnings measures $128 $ 84 $ 31 $0.70 $109 $ 68 $ 20 $0.49
==== ==== ==== ===== ==== ==== ==== =====
Additional information regarding Non-GAAP financial results, including a
reconciliation of EBITDA and a reconciliation of other Non-GAAP earnings
measures are included in the tables that appear in attachment 2 to this press
release.
SECOND QUARTER 2004 ADJUSTMENTS:
o Restructuring related expenses of $5 million pre-tax, or 7-cents per
diluted share;
o Expenses of $2 million pre-tax, or 2-cents per diluted share, associated
with continuing changeover costs for a new aftermarket customer acquired
in the first quarter;
o Expenses of $1 million pre-tax, or 1-cent per diluted share, for
consulting fees indexed to the stock price based on a 1999 agreement for
implementing EVA(R);
o A tax benefit of $4 million, or 9-cents per diluted share.
-more-
SECOND QUARTER 2003 ADJUSTMENTS:
o Restructuring related expenses of $1 million pre-tax, or 3-cents per
diluted share;
o Expenses of $5 million pre-tax, or 7-cents per diluted share, related to
the write-off of debt issuance costs;
o Tax benefits of $8 million, or 19-cents per diluted share.
"Our strategies for top-line growth, cash generation and aggressive cost
management continue to prove effective as we posted another solid quarter with
strong revenues and improved operational performance," said Mark P. Frissora,
chairman and CEO, Tenneco Automotive. "We are well-positioned with the
flexibility to adapt quickly to changing market conditions. Going forward, we
will continue to benefit from our strong geographical balance, highly variable
cost structure and more efficient manufacturing operations."
The company reported its highest ever quarterly revenue of $1.114 billion
compared with $998 million in second quarter 2003, driven by higher volumes on
top-selling vehicle platforms worldwide and strengthening aftermarket sales in
North America and South America. Favorable currency exchange rates benefited
revenue by $27 million.
Tenneco Automotive was awarded approximately $495 million in new business, over
the life of the contracts, in the second quarter for OE platforms expected to
begin production in 2006-2007 and approximately $5 million annualized in new
aftermarket business. The new business includes one of the company's largest
ever contracts to supply the full diesel exhaust system on a major pick-up truck
platform in North America.
The company's cost management activities and operational efficiency programs
continued to generate savings in the second quarter. SGA&E (selling, general,
administrative and engineering) expense decreased to 10.7 percent of sales,
versus 11.0 percent one year ago, on track toward an annual goal of less than
11.5 percent of sales. Six Sigma initiatives generated $7 million in savings and
the company realized $3 million in savings from Project Genesis restructuring
activities. The company's gross margin in the quarter was 21.5 percent, versus
21.9 percent one year ago. Excluding restructuring related expenses, gross
margin was flat year-over-year. Gross margin in the quarter was also impacted by
a shifting business mix as the company's global OE growth outpaced higher margin
aftermarket growth.
A record low net debt of $1.253 billion was driven by improved cash flow
performance in the quarter. Cash balances were $166 million at quarter-end and
total debt was $1.419 billion.
Tenneco Automotive outperformed the requirements of its bank debt covenants in
the quarter. At June 30, the leverage ratio was 3.78, below the maximum limit of
5.00; the fixed charge coverage ratio was 2.04, exceeding the minimum required
ratio of 1.10; and the interest coverage ratio was 3.15, exceeding the minimum
coverage ratio of 2.00.
NORTH AMERICA
o North American original equipment revenue was $379 million, up 4 percent
compared with $365 million in second quarter 2003. The company
outperformed the market's flat production rate due to its strong
position on better-selling platforms and higher heavy-duty truck
volumes.
2
o North American aftermarket revenue was $144 million, a 7 percent
increase versus $136 million in second quarter 2003. An 11 percent
improvement in ride control sales drove the increase and offset a 3
percent decline in exhaust sales.
o EBIT for North American operations was $50 million, flat with second
quarter 2003. Excluding the items below, EBIT increased 6 percent,
driven by manufacturing efficiencies and cost savings.
o Second quarter 2004 EBIT results include $1 million in restructuring
costs, $2 million for an aftermarket customer changeover costs, and $1
million associated with stock price indexed consulting fees.
EUROPE
o European original equipment revenue was $343 million in the quarter, a
20 percent increase over second quarter 2003 revenue of $286 million.
Excluding $18 million in favorable currency, revenue was up 14 percent
compared with one year ago. The launch of new ride control platforms and
higher exhaust volumes drove the increase.
o European aftermarket revenue was $103 million, flat with second quarter
2003. Excluding the impact of favorable currency, revenue was $99
million. The decrease was due to lower sales in both product lines.
o European EBIT was $14 million, including $1 million in favorable
currency, compared with second quarter 2003 EBIT of $11 million.
Excluding the items below, EBIT increased 55 percent to $18 million,
versus $12 million one year ago. The improvement was driven by OE volume
increases, manufacturing efficiencies and lower overhead costs.
o Second quarter 2004 EBIT results include $4 million in restructuring
related expenses. Second quarter 2003 EBIT results include $1 million in
restructuring related expenses.
REST OF WORLD
o Revenue from Asian operations increased 47 percent to $58 million from
$40 million in second quarter 2003, primarily driven by a 58 percent
increase in China OE revenues.
o Revenue from South America operations was $36 million, a 22 percent
increase versus $29 million in second quarter 2003. The increase was the
result of higher OE volumes and stronger aftermarket sales.
o Australian operations generated revenue of $51 million, a 27 percent
increase compared with $40 million a year earlier. Excluding the impact
of $4 million in favorable currency, revenue increased 15 percent, due
to higher OE volumes and stronger aftermarket sales.
o Reported combined EBIT for Asia, South America and Australia was $12
million versus $7 million in second quarter 2003, primarily driven by
higher OE volumes.
"Despite some market uncertainties, we are cautiously optimistic that our
improving performance will continue over the second half of 2004 due to our
geographical balance, strong position on top-selling vehicles globally, upcoming
new platform launches and strong foothold in growing markets such as China and
commercial vehicles," said Frissora. "Our intense focus on reducing
discretionary spending, improving operational efficiency and leveraging our
global supply chain management system should also help counter any changes in
the marketplace."
Attachment 1 to this press release provides additional information on Tenneco
Automotive's second quarter results:
Statement of Income - 3 months
Statement of Income - 6 months
Balance Sheet
Statements of Cash Flow
3
Attachment 2
Reconciliation of GAAP Net Income to EBITDA - 3 months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 months
Reconciliation of GAAP Net Income to EBITDA - 6 months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 6 months
Reconciliation of GAAP Revenues to Non-GAAP Revenue Measure - 3 months
Reconciliation of GAAP Revenues to Non-GAAP Revenue Measure - 6 months
CONFERENCE CALL
The company will host a conference call on July 20, 2004 at 10:30 a.m. EDT. The
dial-in number is 888-455-9642 (domestic) or 210-839-8504 (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 the
press release is available on the financial and news sections of the Tenneco
Automotive web site. A recording of this call will be available one hour
following completion of the call on July 20, 2004 through July 27, 2004. To
access this recording, dial 800-297-0768 (domestic) or 402-220-3822
(international).
THE COMPANY
Tenneco Automotive is a $3.8 billion manufacturing company with headquarters in
Lake Forest, Illinois and approximately 19,200 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.
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "will,"
"should," "continue" 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 the strength of other currencies relative to the U.S. dollar and
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), the amount of the company's debt, the ability
of the company to access capital markets and the credit ratings of the company's
debt; (iv) changes in automotive manufacturers' production rates and their
actual and forecasted requirements for the company's products, including the
overall highly competitive nature of the automotive parts industry, and the
company's resultant inability to realize the sales represented by its awarded
book of business which is based on anticipated pricing for the applicable
program over its life, and is subject to increases or decreases due to changes
in customer requirements, customer and consumer preferences, and the number of
vehicles actually produced by customers; (v) the cyclical nature of the global
vehicular industry, including the performance of the global aftermarket sector,
and 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
and outcome of existing and any future legal proceedings, and 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 continued
success in cost reduction and cash management programs and its 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
4
and the market; (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, the current military action in Iraq and the continuing
war on terrorism, as well as actions taken or to be taken by the United States
or other governments as a result of further acts or threats of terrorism, 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. Additional information
regarding these risk factors and uncertainties is detailed from time to time in
the company's SEC filings, including but not limited to its report on Form 10-K
for the year ended December 31, 2003. Further information can be found on the
company's web site at www.tenneco-automotive.com.
###
5
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
---------
THREE MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
<Table>
<Caption>
2004 2003
------- -----------
Net sales and operating revenues: $ 1,114 (a) $ 998
======= ===========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 874 (b) 779 (e)
Engineering, Research and Development 19 13
Selling, General and Administrative 100 (c) 97
Depreciation and Amortization of Other Intangibles 44 41
------- -----------
Total Costs and Expenses 1,037 930
======= ===========
Loss on sale of receivables (1) (1)
------- -----------
Total Other Income (Loss) (1) (1)
------- -----------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 50 (a)(b)(c) 49
Europe 14 (b) 11 (e)
Other 12 7
------- -----------
76 67
Less:
Interest expense (net of
interest capitalized) 34 38 (f)
Income tax expense (benefit) 10 (d) 3 (g)
Minority interest 2 2
------- -----------
Net income $ 30 $ 24
======= ===========
Average common shares outstanding:
Basic 41.5 40.4
======= ===========
Diluted 44.2 41.3
======= ===========
Earnings per share of common stock:
Basic $ 0.73 $ 0.59
======= ===========
Diluted $ 0.69 $ 0.58
======= ===========
(a) Includes continuing changeover costs for a new aftermarket customer acquired
in the first quarter of $2 million pre-tax, $1 million after-tax or $0.02 per
share. The entire cost is recorded in Sales. Geographically all of the charge is
recorded in North America.
(b) Includes restructuring and restructuring related charges of $5 million
pre-tax, $3 million after tax or $0.07 per share. The entire charge is recorded
in cost of sales. Geographically, $1 million is recorded in North America and $4
million in Europe.
(c) Includes consulting fees indexed to stock price of $1 million pre-tax, $1
million after-tax or $0.01 per share. The entire charge is recorded in SG&A.
Geographically the entire charge is recorded in North America.
(d) Includes a $4 million or $0.09 per share tax benefit related to the
resolution of outstanding tax issues.
(e) 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.
(f) Includes a pre-tax expense of $5 million, $3 million after-tax or $0.07 per
share related to debt issuance costs that were deferred on the senior debt we
paid down with the proceeds of the June 2003 $350 million bond offering.
(g) Includes an $8 million or $0.19 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
---------
SIX MONTHS ENDED JUNE 30,
(Millions except share and per share amounts)
2004 2003
------- -------
Net sales and operating revenues: $ 2,148 (a) $ 1,919
======= =======
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 1,704 (b) 1,522 (e)
Engineering, Research and Development 36 32
Selling, General and Administrative 209 (a)(b)(c) 185
Depreciation and Amortization of Other Intangibles 89 80
------- -------
Total Costs and Expenses 2,038 1,819
======= =======
Loss on sale of receivables (1) (1)
Other Income (Loss) - (1)
------- -------
Total Other Income (Loss) (1) (2)
------- -------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 80 (a)(b)(c) 77 (e)
Europe 11 (b)(c) 10 (e)
Other 18 (c) 11
------- -------
109 98
Less:
Interest expense (net of
interest capitalized) 69 69 (f)
Income tax expense (benefit) 9 (d) 1 (g)
Minority interest 3 3
------- -------
Net income $ 28 $ 25
======= =======
Average common shares outstanding:
Basic 41.1 40.2
======= =======
Diluted 43.8 41.1
======= =======
Earnings per share of common stock:
Basic $ 0.69 $ 0.61
======= =======
Diluted $ 0.65 $ 0.60
======= =======
(a) Includes changeover costs for a new aftermarket customer acquired in the
first quarter of $8 million pre-tax, $5 million after-tax or $0.11 per share. Of
the adjustment $6 million is recorded in Sales and $2 million is recorded in
SG&A. Geographically all of the charge is recorded in North America.
(b) Includes restructuring and restructuring related charges of $10 million
pre-tax, $6 million after tax or $0.14 per share. Of the adjustment $2 million
is recorded in SG&A and the remaining $8 million is in cost of sales.
Geographically, $3 million is recorded in North America and $7 million in
Europe.
(c) Includes consulting fees indexed to stock price of $4 million pre-tax, $3
million after-tax or $0.06 per share. The entire charge is recorded in SG&A.
Geographically $2 million of the charge is recorded in North America, $1 million
in Europe and $1 million in Other.
(d) Includes a $5 million or $0.11 per share tax benefit related to the
resolution of outstanding tax issues.
(e) 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.
(f) Includes a pre-tax expense of $5 million, $3 million after-tax or $0.07 per
share related to debt issuance costs that were deferred on the senior debt we
paid down with the proceeds of the June 2003 $350 million bond offering.
(g) Includes an $11 million or $0.26 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
June 30, 2004 December 31, 2003
------------- -----------------
Assets
Cash and Cash Equivalents $ 166 $ 145
Receivables, Net 550 442
Inventories 352 343
Other Current Assets 202 175
Investments and Other Assets 594 579
Plant, Property, and Equipment, Net 1,059 1,111
------ ------
Total Assets $2,923 $2,795
====== ======
Liabilities and Shareholders' Equity
Short-Term Debt $ 20 $ 20
Accounts Payable 669 621
Accrued Taxes 30 19
Accrued Interest 39 42
Other Current Liabilities 239 191
Long-Term Debt 1,399 1,410
Deferred Income Taxes 124 119
Deferred Credits and Other Liabilities 307 292
Minority Interest 23 23
Total Shareholders' Equity 73 58
------ ------
Total Liabilities and Shareholders' Equity $2,923 $2,795
====== ======
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
(UNAUDITED)
(Millions)
SIX MONTHS ENDED
JUNE 30,
------------------
2004 2003
------ -------
Operating activities:
Net income $ 28 $ 25
Adjustments to reconcile income
to net cash provided by operating activities -
Depreciation and amortization 89 80
Deferred income taxes (5) (10)
Changes in components of working capital -
(Inc.)/dec. in receivables (113) (87)
(Inc.)/dec. in inventories (16) 24
(Inc.)/dec. in prepayments and other current assets (27) (1)
Inc./(dec.) in payables 60 30
Inc./(dec.) in taxes accrued 13 (19)
Inc./(dec.) in interest accrued (2) (5)
Inc./(dec.) in other current liabilities 24 (19)
Other 8 10
----- -----
Net cash provided by operating activities 59 28
Investing activities:
Net proceeds from sale of assets 11 3
Expenditures for plant, property & equipment (54) (54)
Investments and other (2) (2)
----- -----
Net cash used by investing activities (45) (53)
----- -----
Net cash provided (used) before financing activities 14 (25)
Financing activities:
Issuance of common shares 4 -
Proceeds from capital contributions - 1
Issuance of long-term debt - 350
Debt issuance costs on long-term debt - (12)
Retirement of long-term debt (4) (276)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt 1 (25)
Other 2 (1)
----- -----
Net cash provided by financing activities 3 37
----- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments 4 (8)
----- -----
Inc./(dec.) in cash and temporary cash investments 21 4
Cash and temporary cash investments, January 1 145 54
----- -----
Cash and temporary cash investments, June 30 $ 166 $ 58
===== =====
Cash paid during the period for interest $ 74 $ 67
Cash paid during the period for income taxes $ 7 $ 30
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
---------
<Table>
<Caption>
Q2 2004
---------------------------------------
North Rest of
America Europe World Total
-------- ------ ------- -------
Net income $ - $ - $ - $ 30
Minority interest - - - 2
Income tax expense (benefit) - - - 10
Interest expense (net of interest capitalized) - - - 34
-------
EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 50 14 12 76
Depreciation and amortization of other intangibles 24 16 4 44
------- ------ ------- -------
Total EBITDA(2) $ 74 $ 30 $ 16 $ 120
======= ====== ======= =======
<Caption>
Q2 2003
---------------------------------------
North Rest of
America Europe World Total
------- ------ ------- -------
Net income $ - $ - $ - $ 24
Minority interest - - - 2
Income tax expense (benefit) - - - 3
Interest expense (net of interest capitalized) - - - 38
-------
EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 49 11 7 67
Depreciation and amortization 24 14 3 41
------- ------ ------- -------
Total EBITDA $ 73 $ 25 $ 10 $ 108
======= ====== ======= =======
</Table>
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Automotive has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors. However,
the EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the
calculation.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
---------
Q2 2004 Q2 2003
-------------------------------------- ----------------------------------------
EBITDA(3) EBIT Net Income Per Share EBITDA(3) EBIT Net Income Per Share
--------- ----- ---------- --------- --------- ---- ---------- ---------
Earnings Measures $ 120 $ 76 $ 30 $ 0.69 $ 108 $ 67 $ 24 $ 0.58
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 5 5 3 0.07 1 1 1 0.03
New Aftermarket customer changeover costs 2 2 1 0.02 - - - -
Consulting fees indexed to stock price 1 1 1 0.01 - - - -
Tax adjustments - - (4) (0.09) - - (8) (0.19)
Debt issuance cost write off - - - - - - 3 0.07
----- ---- ---- ------ ----- ---- ---- ------
Non-GAAP earnings measures $ 128 $ 84 $ 31 $ 0.70 $ 109 $ 68 $ 20 $ 0.49
===== ==== ==== ====== ===== ==== ==== ======
Q2 2004
--------------------------------------
North Rest of
America Europe World Total
------- ------ ------- ------
EBIT $ 50 $ 14 $ 12 $ 76
Restructuring and restructuring related expenses 1 4 - 5
New Aftermarket customer changeover costs 2 - - 2
Consulting fees indexed to stock price 1 - - 1
----- ---- ---- ------
Adjusted EBIT $ 54 $ 18 $ 12 $ 84
===== ==== ==== ======
<Caption>
Q2 2003
--------------------------------------
North Rest of
America Europe World Total
------- ------ ------- ------
EBIT $ 49 $ 11 $ 7 $ 67
Restructuring and restructuring related expenses - 1 - 1
----- ---- ---- ------
Adjusted EBIT $ 49 $ 12 $ 7 $ 68
===== ==== ==== ======
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the second quarters of
2004 and 2003 in a manner that allows a better understanding of the results of
operational activities separate from the financial impact of decisions made for
the long-term benefit of the company. Adjustments similar to the ones reflected
above have been recorded in earlier periods, and similar types of adjustments
can reasonably be expected to be recorded in future periods. Using only the
non-GAAP earnings measures to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of management
regarding the nature and classification of events and circumstances that
investors may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above to understand
and analyze the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate positive or
negative impact on the company's financial results in any particular period.
(3)EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Automotive has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in comparing
a company's performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors. However,
the EBITDA measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the components of the
calculation.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
---------
YTD 2004
--------------------------------------
North Rest of
America Europe World Total
------- ------ ------- -----
Net income $ - $ - $ - $ 28
Minority interest - - - 3
Income tax expense (benefit) - - - 9
Interest expense (net of interest capitalized) - - - 69
----
EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 80 11 18 109
Depreciation and amortization of other intangibles 48 33 8 89
---- ---- ---- ----
Total EBITDA(2) $128 $ 44 $ 26 $198
==== ==== ==== ====
YTD 2003
--------------------------------------
North Rest of
America Europe World Total
------- ------ ------- -----
Net income $ - $ - $ - $ 25
Minority interest - - - 3
Income tax expense (benefit) - - - 1
Interest expense (net of interest capitalized) - - - 69
----
EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) 77 10 11 98
Depreciation and amortization 46 28 6 80
---- ---- ---- ----
Total EBITDA $123 $ 38 $ 17 $178
==== ==== ==== ====
(1) Generally Accepted Accounting Principles
(2)EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Automotive has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In addition, Tenneco
Automotive believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco Automotive also believes EBITDA assists investors in
comparing a company's performance on a consistent basis without regard to
depreciation and amortization, which can vary significantly depending upon many
factors. However, the EBITDA measure presented may not always be comparable to
similarly titled measures reported by other companies due to differences in the
components of the calculation.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
---------
<Table>
<Caption>
YTD 2004 YTD 2003
-------------------------------------- ---------------------------------------
EBITDA(3) EBIT Net Income Per Share EBITDA(3) EBIT Net Income Per Share
--------- ---- ---------- --------- --------- ---- ---------- ---------
Earnings Measures $198 $109 $ 28 $0.65 $178 $ 98 $ 25 $0.60
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 10 10 6 0.14 6 6 3 0.09
New Aftermarket customer changeover costs 8 8 5 0.11 - - - -
Consulting fees indexed to stock price 4 4 3 0.06 - - - -
Tax adjustments - - (5) (0.11) - - (11) (0.26)
Debt issuance cost write off - - - - - - 3 0.07
---- ---- ---- ----- ---- ---- ---- -----
Non-GAAP earnings measures $220 $131 $ 37 $0.85 $184 $104 $ 20 $0.50
==== ==== ==== ===== ==== ==== ==== =====
<Caption>
YTD 2004
---------------------------------------
North Rest of
America Europe World Total
-------- ------ ------- ------
EBIT $ 80 $ 11 $ 18 $ 109
Restructuring and restructuring related expenses 3 7 - 10
New Aftermarket customer changeover costs 8 - - 8
Consulting fees indexed to stock price 2 1 1 4
---- ---- ---- -----
Adjusted EBIT $ 93 $ 19 $ 19 $ 131
==== ==== ==== =====
<Caption>
YTD 2003
---------------------------------------
North Rest of
America Europe World Total
------- ------ ------ -----
EBIT $ 77 $ 10 $ 11 $ 98
Restructuring and restructuring related expenses 3 3 - 6
---- ---- ---- -----
Adjusted EBIT $ 80 $ 13 $ 11 $ 104
==== ==== ==== =====
</Table>
(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 2004 and
2003 in a manner that allows a better understanding of the results of
operational activities separate from the financial impact of decisions made for
the long-term benefit of the company. Adjustments similar to the ones reflected
above have been recorded in earlier periods, and similar types of adjustments
can reasonably be expected to be recorded in future periods. Using only the
non-GAAP earnings measures to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of management
regarding the nature and classification of events and circumstances that
investors may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above to understand
and analyze the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate positive or
negative impact on the company's final 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 tilted
measures reported by other companies due to differences in the components of the
calculation.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUES TO NON-GAAP REVENUE MEASURE
Unaudited
---------
Q2 2004
--------------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Aftermarket
Ride Control $ 100 $ - $ 100 $ - $ 100
Exhaust 44 - 44 - 44
------ ------ ------ ------ ------
Total North America Aftermarket 144 - 144 - 144
North America Original Equipment
Ride Control 120 - 120 - 120
Exhaust 259 1 258 84 174
------ ------ ------ ------ ------
Total North America Original Equipment 379 1 378 84 294
Total North America 523 1 522 84 438
Europe Aftermarket
Ride Control 51 2 49 - 49
Exhaust 52 2 50 - 50
------ ------ ------ ------ ------
Total Europe Aftermarket 103 4 99 - 99
Europe Original Equipment
Ride Control 91 4 87 - 87
Exhaust 252 14 238 81 157
------ ------ ------ ------ ------
Total Europe Original Equipment 343 18 325 81 244
Total Europe 446 22 424 81 343
Asia 58 1 57 20 37
South America 36 (1) 37 3 34
Australia 51 4 47 4 43
------ ------ ------ ------ ------
Total Rest of World 145 4 141 27 114
Total Tenneco Automotive $1,114 $ 27 $1,087 $ 192 $ 895
====== ====== ====== ====== ======
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 - 247 75 172
----- --- ----- ----- -----
Total North America Original Equipment 365 - 365 75 290
Total North America 501 - 501 75 426
Europe Aftermarket
Ride Control 53 - 53 - 53
Exhaust 49 - 49 - 49
----- --- ----- ----- -----
Total Europe Aftermarket 102 - 102 - 102
Europe Original Equipment
Ride Control 64 - 64 - 64
Exhaust 222 - 222 73 149
----- --- ----- ----- -----
Total Europe Original Equipment 286 - 286 73 213
Total Europe 388 - 388 73 315
Asia 40 - 40 14 26
South America 29 - 29 3 26
Australia 40 - 40 4 36
----- --- ----- ----- -----
Total Rest of World 109 - 109 21 88
Total Tenneco Automotive $ 998 $ - $ 998 $ 169 $ 829
===== === ===== ===== =====
Tenneco Automotive presents the above reconciliation of revenues in order to
reflect the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, pass-through catalytic
converter sales include precious metals pricing, which may be volatile. While
Tenneco Automotive's original equipment customers assume the risk of this
volatility, it impacts reported revenue. Excluding pass-through catalytic
converter sales removes this impact. Tenneco Automotive uses this information to
analyze the trend in revenues before these factors. Tenneco Automotive believes
investors find this information useful in understanding period to period
comparisons in the company's revenues.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUES TO NON-GAAP REVENUE MEASURE
Unaudited
---------
Six Months Ended June 30, 2004
-----------------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- ---------- ----------- ----------------
North America Aftermarket
Ride Control $ 185 $ - $ 185 $ - $ 185
Exhaust 81 - 81 - 81
------- ---- ------- ----- -------
Total North America Aftermarket 266 - 266 - 266
North America Original Equipment
Ride Control 238 - 238 - 238
Exhaust 522 6 516 172 344
------- ---- ------- ----- -------
Total North America Original Equipment 760 6 754 172 582
Total North America 1,026 6 1,020 172 848
Europe Aftermarket
Ride Control 89 6 83 - 83
Exhaust 94 8 86 - 86
------- ---- ------- ----- -------
Total Europe Aftermarket 183 14 169 - 169
Europe Original Equipment
Ride Control 176 14 162 - 162
Exhaust 495 35 460 158 302
------- ---- ------- ----- -------
Total Europe Original Equipment 671 49 622 158 464
Total Europe 854 63 791 158 633
Asia 97 1 96 33 63
South America 71 3 68 7 61
Australia 100 16 84 8 76
------- ---- ------- ----- -------
Total Rest of World 268 20 248 48 200
Total Tenneco Automotive $ 2,148 $ 89 $ 2,059 $ 378 $ 1,681
======= ==== ======= ===== =======
<Caption>
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 - 504 162 342
------- ---- ------- ----- -----
Total North America Original Equipment 738 - 738 162 576
Total North America 982 - 982 162 820
Europe Aftermarket
Ride Control 88 - 88 - 88
Exhaust 90 - 90 - 90
------- ---- ------- ----- ------
Total Europe Aftermarket 178 - 178 - 178
Europe Original Equipment
Ride Control 121 - 121 - 121
Exhaust 434 - 434 147 287
------- ---- ------- ----- -----
Total Europe Original Equipment 555 - 555 147 408
Total Europe 733 - 733 147 586
Asia 76 - 76 27 49
South America 55 - 55 5 50
Australia 73 - 73 7 66
------- ---- ------- ----- -----
Total Rest of World 204 - 204 39 165
Total Tenneco Automotive $ 1,919 $ - $ 1,919 $ 348 $ 1,571
======= ==== ======= ===== =======
</Table>
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.