[TENNECO AUTOMOTIVE LOGO]
NEWS 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 DELIVERS RECORD FOURTH QUARTER AND FULL YEAR REVENUES
COMPANY REPORTS QUARTERLY LOSS DUE TO RESTRUCTURING AND REFINANCING COSTS
o Record fourth quarter revenue of $1.1 billion, up 15%
o Fourth quarter EBIT $18 million; adjusted EBIT $46 million, up 12%
o Record full year revenue of $4.2 billion, up 12%
o Record low year-end debt net of cash balances of $1.206 billion
o Awarded $1.2 billion in future annualized new business in 2004
Lake Forest, Illinois, January 25, 2005 - Tenneco Automotive (NYSE: TEN)
reported a fourth quarter loss of $21 million, or 49-cents per diluted share,
versus a net loss of $2 million, or 4-cents per diluted share, in fourth quarter
2003. Adjusted for the items below, fourth quarter net income increased to $8
million, or 17-cents per diluted share, compared with net income of $2 million,
or 6-cents per diluted share a year ago.
EBIT (earnings before interest, taxes and minority interest) was $18 million,
compared with $40 million in fourth quarter 2003. EBITDA (EBIT before
depreciation and amortization) was $64 million versus $83 million a year ago.
With fourth quarter adjustments, the company delivered its 12th consecutive
quarter of EBIT and EBITDA improvement with adjusted EBIT of $46 million and
EBITDA of $92 million, up 12% and 10% respectively. See the tables in attachment
2 to the press release, which reconcile GAAP results to non-GAAP results.
ADJUSTED FOURTH QUARTER 2004 AND 2003 RESULTS:
Q4 2004 Q4 2003
---------------------------------------- --------------------------------------
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
------- ----- -------- --------- ------- ------ --------- -------
Earnings Measures $ 64 $ 18 $(21) $(0.49) $ 83 $ 40 $ (2) $(0.04)
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring
related expenses 28 28 17 0.40 1 1 1 0.02
Tax adjustments -- -- (15) (0.34) -- -- (3) (0.05)
Cost related to refinancing -- -- 27 0.60 -- -- 6 0.13
---- ---- ---- ----- ----- ----- ---- -----
Non-GAAP earnings measures $ 92 $ 46 $ 8 $0.17 $ 84 $ 41 $ 2 $0.06
---- ---- ---- ----- ----- ----- ---- -----
-2-
FOURTH QUARTER 2004 ADJUSTMENTS:
o Restructuring and related expenses of $28 million pre-tax, or 40-cents
per diluted share, primarily to implement a reduction in force
announced in the quarter to save $20 million annually;
o Tax benefits of $15 million, or 34-cents per diluted share, primarily
to recognize benefits related to previous tax losses in foreign
operations;
o Expenses of $42 million pre-tax, or 60-cents per diluted share, for
refinancing the company's 11.625% subordinated debt to 8.625%, expected
to save $15 million annually in interest expense.
FOURTH QUARTER 2003 ADJUSTMENTS:
o Restructuring expenses of $1 million pre-tax, or 2-cents per diluted
share;
o A benefit of $3 million, or 5-cents per diluted share, related to a
foreign tax adjustment;
o Expenses of $9 million pre-tax, or 13-cents per diluted share,
associated with refinancing the company's senior debt.
Tenneco Automotive's strong cash performance in the quarter resulted in cash
balances of $214 million at quarter-end, up from $203 million at the end of
third quarter 2004, and record low net debt of $1.206 billion compared with
$1.285 at year-end 2003. Total debt was $1.420 billion at year-end 2004 versus
$1.430 billion a year ago.
"Our ability to generate cash and improve earnings delivered another excellent
quarter with strong financial results despite facing industry-wide challenges
including escalating steel costs," said Mark P. Frissora, chairman and CEO,
Tenneco Automotive. "We are working aggressively to offset the impact of higher
steel costs with price recovery from our customers, and by continuing to lower
our costs and improve manufacturing efficiency through Lean and Six Sigma
programs."
Tenneco Automotive again posted quarterly record revenue of $1.1 billion, up 15
percent over fourth quarter 2003 revenue of $933 million. Favorable currency
exchange rates impacted revenue by $52 million. The company continues to benefit
from having products on better-selling vehicles in North America and Europe and
from stronger North American aftermarket sales.
The company's gross margin in the quarter was 18.5% compared with 20.2% a year
ago. Gross margin was negatively impacted by 1.0 percentage point due to
restructuring costs in the quarter and 1.4 percentage points due to the impact
of $15 million in higher steel costs. These costs offset strong volumes,
aftermarket price increases and the benefits from cost reduction activities.
Fourth quarter SGA&E expense was 12.6% of sales, or 10.9% excluding the impact
of restructuring costs, versus 11.3% a year ago. Restructuring activities in the
quarter delivered $4 million in savings and Six Sigma quality programs generated
$7 million.
The company outperformed its bank debt covenants in the quarter. At December 31,
the leverage ratio was 3.60, below the maximum limit of 4.75; the fixed charge
ratio was 1.78, exceeding the required ratio of 1.10; and the interest coverage
ratio was 2.67, exceeding the minimum coverage ratio of 2.00.
NORTH AMERICA
o North American original equipment revenue increased to $358 million
versus $347 million in 2003. Catalytic converter pass-through sales
were flat year-over-year at $77 million. Revenues outpaced industry
production due to the company's position on top-selling platforms and
stronger year-over-year heavy duty volumes.
-3-
o North American aftermarket revenue was $110 million, up from $99
million in fourth quarter 2003 due to higher aftermarket ride control
sales to new and existing customers.
o EBIT for North American operations was $19 million, compared with $22
million a year ago. Adjusting for $8 million in restructuring costs,
fourth quarter 2004 EBIT was $27 million. Higher material costs of $11
million in the OE ride control and the aftermarket businesses offset
increased profit from OE and aftermarket revenues.
EUROPE AND SOUTH AMERICA
o European original equipment revenue was $385 million, including $89
million in catalytic converter pass-through sales and $39 million in
favorable currency, versus $290 million a year ago with $60 million in
pass-through sales. Higher OE emission control volumes drove the
increase, outpacing a 2% decline in industry production.
o European aftermarket revenue was $82 million, including $7 million in
favorable currency, versus $76 million a year ago. Improving emission
control sales from market share gains were more than offset by lower
ride control sales.
o South American operations generated $44 million in revenue, up from $33
million a year ago, due to higher OE volumes in Brazil and Argentina.
As previously announced the company changed its management structure
and operating segments in the fourth quarter. Year-over-year result
comparisons have been adjusted to report South American EBIT with the
company's European results.
o EBIT for European and South American operations was a loss of $5
million versus income of $10 million in fourth quarter 2003. Adjusted
for $17 million in restructuring costs, Europe and South America EBIT
was $12 million in the quarter versus $10 million in fourth quarter
2003. EBIT improved due to strong OE volumes and manufacturing
efficiencies despite higher material costs of $4 million.
ASIA PACIFIC
Fourth quarter 2004 results have been adjusted to reflect the change in
operating segments, which created the Asia Pacific strategic business unit with
the company's Asian and Australian operations. Previously, the company reported
combined EBIT for Asia, Australia and South America.
o Revenue from Asian operations was $37 million, versus $43 million in
fourth quarter 2003. The decrease was primarily the result of slowing
OE sales in China.
o Australian revenue was $55 million including $3 million in favorable
currency compared with $45 million a year ago. Strong OE volumes drove
the increase.
o EBIT for the company's Asia Pacific operations was $4 million versus $8
million in fourth quarter 2003. Excluding restructuring costs of $3
million, fourth quarter 2004 EBIT was $7 million. The decline was
largely the result of lower OE volumes in China.
FULL-YEAR 2004 PERFORMANCE
--------------------------
In 2004, Tenneco Automotive generated its highest ever annual revenue of $4.2
billion, driven by its strong position on top-selling platforms worldwide and
strengthening aftermarket sales in some sectors. The company reported full-year
net income of $13 million, or 31-cents per diluted share, versus $27 million, or
65-cents per diluted share, in 2003. EBIT was $171 million, versus $176 million
a year ago and EBITDA was $348 million compared with $339 million for full year
2003.
-4-
Adjusted for the items below, full year net income was $52 million, or $1.18 per
diluted share, compared with $23 million, or 55-cents per diluted share, in
2003. Adjusted EBIT increased 21% to $223 million and adjusted EBITDA was up 15%
to $400 million.
ADJUSTED FULL YEAR 2004 AND 2003 RESULTS:
Full Year 2004 Full Year 2003
---------------------------------------- ----------------------------------------
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
------- ------- -------- --------- ------- ------ --------- ---------
Earnings Measures $348 $171 $ 13 $ 0.31 $339 $176 $ 27 $ 0.65
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring
related expenses 40 40 25 0.56 8 8 5 0.13
New Aftermarket customer changeover
costs 8 8 5 0.12 -- -- -- --
Consulting fees indexed to stock price 4 4 3 0.06 -- -- -- --
Tax adjustments -- -- (21) (0.47) -- -- (17) (0.41)
Cost related to refinancing -- -- 27 0.60 -- -- 8 0.18
------- ------- -------- --------- ------- ------ --------- ---------
Non-GAAP earnings measures $400 $223 $ 52 $1.18 $347 $184 $ 23 $0.55
------- ------- -------- --------- ------- ------ --------- ---------
FULL-YEAR 2004 ADJUSTMENTS:
o Restructuring and related expenses of $40 million pre-tax, or 56-cents
per share, to improve manufacturing efficiency and reduce costs;
o Expenses of $8 million, or 12-cents per diluted share, associated with
changeover costs for a new aftermarket customer;
o Expenses of $4 million pre-tax, or 6-cents per diluted share, for
consulting fees indexed to the stock price based on a 1999 agreement
for implementing EVA(R);
o Tax benefits of $21 million or 47-cents per diluted share.
o Expenses of $42 million pre-tax, or 60-cents per diluted share for
refinancing the company's subordinated debt.
FULL-YEAR 2003 ADJUSTMENTS:
o Restructuring and related expenses of $8 million pre-tax, or 13-cents
per diluted share;
o Tax benefits of $17 million, or 41-cents per diluted share.
o Expenses of $12 million, or 18-cents per diluted share, for debt
refinancing.
The company reported SGA&E for the year of 11.7% of sales, or 11.0% excluding
the impact of restructuring costs, aftermarket customer changeover costs and the
consulting fees indexed to the stock price, compared with 11.4% in 2003. Gross
margin for the year was 20% versus 20.5% a year ago. The decline was driven by
higher material costs (0.6 percentage points negative impact), restructuring
expenses (0.2 percentage points) and a lower percentage of sales generated by
higher margin aftermarket business (0.2 percentage points). The company's Six
Sigma programs generated $26 million in savings in 2004 and restructuring
actions resulted in savings of $13 million.
The company continued to win new business in 2004 with $1.2 billion in
annualized new OE contracts for platforms launching between 2004 and 2007.
-5-
2005 OUTLOOK
------------
In 2005, Tenneco Automotive plans to continue to aggressively manage costs,
adjust its businesses to the market and grow revenues by expanding in new
markets and winning new business with its advanced technology offerings. The
company's goals include maintaining SGA&E expense at less than 11 percent of
sales; achieving a ratio of net debt to EBITDA of 2.8x; and generating at least
$300 million in new business annually.
Tenneco Automotive expects that vehicle mix will continue to be a key revenue
driver in 2005 and the company will benefit from its strong position on
better-selling platforms helping to counter industry production volatility in
North America and Europe.
The company anticipates that its original equipment book of business in 2005 and
2006 will be approximately $3.5 billion and $3.6 billion, or about $270 million
and $420 million higher, respectively, than the 2004 book of business. Before
catalytic converter pass-through sales, the book of business is expected to be
about $2.70 billion and $2.8 billion in 2005 and 2006, or about $210 million
higher in 2005 and $280 million higher in 2006. These revenue estimates are
based on original equipment manufacturers' programs that have been formally
awarded to the company as well as programs where the company is highly confident
that it will be awarded business based on informal customer indications, Tenneco
Automotive's status as a supplier on the existing program, and the relationship
with the customer. The book of business is also based on anticipated vehicle
production levels, as well as the company's pricing and currency assumptions.
Tenneco Automotive is actively addressing higher steel costs, expected to
continue through 2005. The company anticipates that steel costs increases, net
of other expected material cost savings and recovery from customers, will be
between $30 million and $50 million for 2005. The company is intensely focused
on mitigating the impact of higher costs by implementing a restructuring
initiative announced in the fourth quarter, which is expected to generate $20
million in annual savings; improving manufacturing efficiency with Lean;
generating at least $20 million in Six Sigma savings; and capitalizing on the
projected $270 million increase in the 2005 OE book of business. Lower interest
expense as a result of the company's debt refinancing in the fourth quarter will
also help offset the impact.
Attachment 1 to this press release provides additional information on Tenneco
Automotive's fourth quarter and full year 2004 results.
Statements of Income (Loss) - 3 Months
Statements of Income (Loss) - 12 Months
Balance Sheet
Statements of Cash Flow
Attachment 2
Reconciliation of GAAP Net Income to EBITDA - 3 months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 months
Reconciliation of GAAP Net Income to EBITDA - 12 months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 12 months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measure - 12 months
-6-
CONFERENCE CALL
The company will host a conference call on January 25, 2005 at 10:30 a.m. EST.
The dial-in number is 866-556-1093 domestic or 1 630-395-0047 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 recording of
the call will be available one hour following completion of the call on January
25, 2005 through February 1, 2005. To access this recording, dial 866-475-1455
domestic or 203-369-1503 international. The purpose of the call is to discuss
the company's results of operations for the last fiscal quarter, as well as
other matters that may impact the company's outlook. A copy of the press release
is available on the financial and news sections of the Tenneco Automotive web
site.
2005 ANNUAL MEETING
The Tenneco Automotive board of directors has scheduled the corporation's annual
meeting of shareholders for Tuesday, May 10, 2005 at 10:00 a.m. CDT. 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 15,
2005.
Tenneco Automotive is a $4.2 billion manufacturing company with headquarters in
Lake Forest, Illinois and approximately 18,800 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. Words such as
"continue," "goal," "anticipate," "will," "estimate" 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) 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; (ii) increases in the costs
of raw materials, including the company's ability to successfully reduce the
impact of any such cost increases through materials substitutions, cost
reduction initiatives and other methods; (iii) 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; (iv) 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; (v) 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; (vi) governmental actions, including the
ability to receive regulatory approvals and the timing of such approvals; (vii)
changes in capital
-6-
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; (viii) the cost and outcome of existing and any future legal proceedings,
and compliance with changes in regulations, including environmental regulations;
(ix) 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 and the market; (x) further changes in the distribution
channels for the company's aftermarket products, further consolidations among
automotive parts customers and suppliers, and product warranty costs; (xi)
changes by the Financing Accounting Standards Board or other accounting
regulatory bodies of authoritative generally accepted accounting principles or
policies; (xii) 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 the company operates and (xiii) 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.
###
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
---------
THREE MONTHS ENDED DECEMBER 31,
(Millions except share and per share amounts)
2004 2003
-------------- -------------
Net sales and operating revenues: $ 1,071 $ 933
============== =============
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 873 (a) 745 (d)
Engineering, Research and Development 20 17
Selling, General and Administrative 115 (a) 88
Depreciation and Amortization of Other Intangibles 46 43
-------------- --------------
Total Costs and Expenses 1,054 893
============== ==============
Gain on sale of assets 1 -
Loss on sale of receivables - (1)
Other Income (Loss) - 1
-------------- -------------
Total Other Income (Loss) 1 -
-------------- -------------
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 19 (a) 22 (d)
Europe and South America (5)(a) 10
Asia Pacific 4 (a) 8
-------------- -------------
18 40
Less:
Interest expense (net of
interest capitalized) 75 (b) 46 (e)
Income tax benefit (36)(c) (5)(f)
Minority interest - 1
-------------- -------------
Net income (Loss) $ (21) $ (2)
============== =============
Average common shares outstanding:
Basic 42.2 40.7
============== =============
Diluted 44.7 42.4
============== =============
Earnings (Loss) per share of common stock:
Basic $ (0.49) $ (0.04)
============== =============
Diluted $ (0.49) $ (0.04)
============== =============
(a) Includes restructuring and restructuring related charges of $28 million
pre-tax, $17 million after-tax or $0.40 per share. Of the adjustment $18 million
is recorded in SG&A and the remaining $10 million is in cost of sales.
Geographically, $8 million is recorded in North America, $17 million in Europe
and South America and $3 million in Asia Pacific.
(b) Includes a pre-tax expense of $42 million, $27 million after-tax or $0.60
per share related to the call premium fee, interest expense and the write off of
debt issuance costs that related to the $500 million bond refinancing in
November of 2004.
(c) Includes a $15 million or $0.34 per share tax benefit primarily to recognize
benefits related to previous tax losses in foreign operations.
(d) Includes restructuring related charges of $1 million pre-tax, $1 million
after-tax or $0.02 per share. The entire charge is recorded in cost of sales.
Geographically all of the charge is recorded in North America.
(e) Includes a pre-tax reduction of $9 million, $6 million after-tax or $0.13
per share related to debt issuance costs that were deferred on the senior debt
we refinanced in December 2003.
(f) Includes a $3 million or $0.05 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
---------
TWELVE MONTHS ENDED DECEMBER 31,
(Millions except share and per share amounts)
2004 2003
-------------- --------------
Net sales and operating revenues: $ 4,213 (a) $ 3,766
============== ==============
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 3,371 (b) 2,994 (f)
Engineering, Research and Development 76 67
Selling, General and Administrative 417 (a)(b)(c) 364
Depreciation and Amortization of Other Intangibles 177 163
-------------- --------------
Total Costs and Expenses 4,041 3,588
============== ==============
Gain on sale of assets 1 -
Loss on sale of receivables (1) (2)
Other Income (Loss) (1) -
-------------- --------------
Total Other Income (Loss) (1) (2)
-------------- --------------
Income (Loss) before Interest Expense,
Income Taxes, and Minority Interest
North America 130 (a)(b)(c) 131 (f)
Europe and South America 22 (b)(c) 23 (f)
Asia Pacific 19 (b)(c) 22
-------------- --------------
171 176
Less:
Interest expense (net of
interest capitalized) 179 (d) 149 (g)
Income tax benefit (25)(e) (6)(h)
Minority interest 4 6
-------------- --------------
Net income $ 13 $ 27
============== ==============
Average common shares outstanding:
Basic 41.5 40.4
============== ==============
Diluted 44.2 41.8
============== ==============
Earnings (Loss) per share of common stock:
Basic $ 0.33 $ 0.67
============== ==============
Diluted $ 0.31 $ 0.65
============== ==============
(a) Includes changeover costs for a new aftermarket customer acquired in the
first quarter of $8 million pre-tax, $5 million after-tax or $0.12 per share. Of
the adjustment $6 million is recorded in Sales and $2 million is recorded in
SG&A. Geographically, the entire amount is recorded in North America.
(b) Includes restructuring and restructuring related charges of $40 million
pre-tax, $25 million after tax or $0.56 per share. Of the adjustment $20 million
is recorded in SG&A and the remaining $20 million is in cost of sales.
Geographically, $11 million is recorded in North America, $26 million in Europe
and South America and $3 million in Asia Pacific.
(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 South America and $1 million in Asia Pacific.
(d) Includes a pre-tax expense of $42 million, $27 million after-tax or $0.60
per share related to the call premium fee, interest expense and the write off of
debt issuance costs that related to the $500 million bond refinancing in
November of 2004.
(e) Includes a $21 million or $0.47 per share tax benefit related to the
resolution of outstanding tax issues and to recognize benefits related to
previous tax losses in foreign operations.
(f) Includes restructuring and restructuring related charges of $8 million
pre-tax, $5 million after-tax or $0.13 per share. The entire charge is recorded
in cost of sales. Geographically, $4 million is recorded in North America and $4
million in Europe and South America.
(g) Includes a pre-tax expense of $12 million, $8 million after-tax or $0.18 per
share related to debt issuance costs that were deferred on the senior debt we
paid down with the proceeds of the 2003 debt refinancings.
(h) Includes a $17 million or $0.41 per share tax benefit related to the
resolution of several tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
December 31, 2004 December 31, 2003
-------------------- --------------------
Assets
Cash and Cash Equivalents $ 214 $ 145
Receivables, Net 486 (a) 442(a)
Inventories 382 343
Other Current Assets 198 175
Investments and Other Assets 677 629
Plant, Property, and Equipment, Net 1,134 1,111
-------------------- --------------------
Total Assets $ 3,091 $ 2,845
==================== ====================
Liabilities and Shareholders' Equity
Short-Term Debt $ 19 $ 20
Accounts Payable 696 621
Accrued Taxes 21 19
Accrued Interest 35 42
Other Current Liabilities 272 191
Long-Term Debt 1,401 (b) 1,410 (b)
Deferred Income Taxes 123 123
Deferred Credits and Other Liabilities 382 338
Minority Interest 24 23
Total Shareholders' Equity 118 58
-------------------- --------------------
Total Liabilities and Shareholders' Equity $ 3,091 $ 2,845
==================== ====================
(a) Accounts Receivables net of: December 31, 2004 December 31, 2003
-------------------- --------------------
Accounts Receivable securitization programs $ 124 $ 123
Receivables collected under advance payment programs $ 132 $ 99
(b) Long term debt composed of: December 31, 2004 December 31, 2003
-------------------- --------------------
Term loan B (Due 2010) $ 392 $ 396
10.25% senior notes (Due 2013) 490 491
11.625% subordinated notes (Due 2009) - 500
8.625% subordinated notes (Due 2014) 500 -
Other long term debt 19 23
-------------------- --------------------
$ 1,401 $ 1,410
==================== ====================
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
TWELVE MONTHS ENDED
DECEMBER 31,
-------------------------------------------------
2004 2003
---------------------- ---------------------
Operating activities:
Net income $ 13 $ 27
Adjustments to reconcile income (loss)
to net cash provided (used) by operating activities -
Depreciation and amortization 177 163
Deferred income taxes (41) (29)
(Gain)/loss on sale of assets, net - 2
Changes in components of working capital -
(Inc.)/dec. in receivables (7) 13
(Inc.)/dec. in inventories (19) 55
(Inc.)/dec. in prepayments and other current assets (4) (1)
Inc./(dec.) in payables 53 52
Inc./(dec.) in taxes accrued (16) (30)
Inc./(dec.) in interest accrued (7) 19
Inc./(dec.) in other current liabilities 30 (30)
Other 21 40
---------------------- ---------------------
Net cash provided by operating activities 200 281
Investing activities:
Net proceeds from sale of assets 15 8
Expenditures for plant, property & equipment (130) (130)
Investments and other (1) (5)
---------------------- ---------------------
Net cash used by investing activities (116) (127)
---------------------- ---------------------
Financing activities:
Issuance of common shares 10 -
Proceeds from capital contributions - 1
Issuance of long-term debt 500 891
Debt issuance costs on long-term debt (13) (27)
Retirement of long-term debt (508) (791)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt (1) (121)
Other - (2)
---------------------- ---------------------
Net cash used by financing activities (12) (49)
---------------------- ---------------------
Effect of foreign exchange rate changes on cash and
cash equivalents (3) (14)
----------------------- ---------------------
Inc./(dec.) in cash and cash equivalents 69 91
Cash and cash equivalents, January 1 145 54
---------------------- ---------------------
Cash and cash equivalents, December 31 $ 214 $ 145
====================== =====================
Cash paid during the period for interest $ 185 $ 115
Cash paid during the period for income taxes $ 18 $ 46
Non-cash Investing and Financing Activities
Obligation for long-term capital lease $ - $ (3)
Write-off of Unamortized Debt Issuance Cost $ (9) $ (12)
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(a) NET INCOME TO EBITDA
Unaudited
Q4 2004
----------------------------------------------
North Europe Asia
America & SA Pacific Total
--------- --------- --------- ---------
Net income $ - $ - $ - $ (21)
Minority interest - - - -
Income tax expense (benefit) - - - (36)
Interest expense (net of interest capitalized) - - - 75
--------- --------- --------- ---------
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 19 (5) 4 18
Depreciation and amortization of other intangibles 23 20 3 46
--------- --------- --------- ---------
Total EBITDA(b) $ 42 $ 15 $ 7 $ 64
========= ========= ========= =========
Q4 2003
----------------------------------------------
North Europe Asia
America & SA Pacific Total
--------- --------- --------- ---------
Net income $ - $ - $ - $ (2)
Minority interest - - - 1
Income tax expense (benefit) - - - (5)
Interest expense (net of interest capitalized) - - - 46
--------- --------- --------- ---------
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 22 10 8 40
Depreciation and amortization 23 17 3 43
--------- --------- --------- ---------
Total EBITDA $ 45 $ 27 $ 11 $ 83
========= ========= ========= =========
(a) Generally Accepted Accounting Principles
(b)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(a) TO NON-GAAP EARNINGS MEASURES(b)
Unaudited
Q4 2004 Q4 2003
--------------------------------------- --------------------------------------
EBITDA(c) EBIT Net Income Per Share EBITDA(c) EBIT Net Income Per Share
------ ----- ---------- --------- ------ ----- ---------- ---------
Earnings Measures $ 64 $ 18 $ (21) $ (0.49) $ 83 $ 40 $ (2) $ (0.04)
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 28 28 17 0.40 1 1 1 0.02
Tax adjustments - - (15) (0.34) - - (3) (0.05)
Cost related to refinancing - - 27 0.60 - - 6 0.13
------ ------ ------- --------- ------ ---- ---------- --------
Non-GAAP earnings measures $ 92 $ 46 $ 8 $ 0.17 $ 84 $ 41 $ 2 $ 0.06
====== ===== ======== ========= ====== ==== ========== ========
Q4 2004
-----------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------ ---------- -------------- ------------
EBIT $ 19 $ (5) $ 4 $ 18
Restructuring and restructuring related expenses 8 17 3 28
------------ ---------- -------------- ------------
Adjusted EBIT $ 27 $ 12 $ 7 $ 46
============ ========== ============== ============
Q4 2003
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------ ---------- -------------- ------------
EBIT $ 22 $ 10 $ 8 $ 40
Restructuring and restructuring related expenses 1 - - 1
------------ ---------- -------------- ------------
Adjusted EBIT $ 23 $ 10 $ 8 $ 41
============ ========== ============== ============
(a) Generally Accepted Accounting Principles
(b) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the fourth 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
financial results in any particular period.
(c)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(a) NET INCOME TO EBITDA
Unaudited
YTD 2004
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- --------- -------------- -------------
Net income $ - $ - $ - $ 13
Minority interest - - - 4
Income tax expense (benefit) - - - (25)
Interest expense (net of interest capitalized) - - - 179
-------------
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 130 22 19 171
Depreciation and amortization of other intangibles 94 72 11 177
------------- --------- -------------- -------------
Total EBITDA(b) $ 224 $ 94 $ 30 $ 348
============= ========= ============== =============
YTD 2003
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- --------- -------------- -------------
Net income $ - $ - $ - $ 27
Minority interest - - - 6
Income tax expense (benefit) - - - (6)
Interest expense (net of interest capitalized) - - - 149
-------------
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 131 23 22 176
Depreciation and amortization 91 62 10 163
------------- --------- -------------- -------------
Total EBITDA $ 222 $ 85 $ 32 $ 339
============= ========= ============== =============
(a) Generally Accepted Accounting Principles
(b)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(a) TO NON-GAAP EARNINGS MEASURES(b)
Unaudited
YTD 2004 YTD 2003
-------------------------------------- --------------------------------------
EBITDA(c) EBIT Net Income Per Share EBITDA(c) EBIT Net Income Per Share
------ ---- ---------- --------- ------ ---- ----------- ---------
Earnings Measures $ 348 $171 $ 13 $ 0.31 $ 339 $176 $ 27 $ 0.65
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 40 40 25 0.56 8 8 5 0.13
New Aftermarket customer changeover costs 8 8 5 0.12 - - - -
Consulting fees indexed to stock price 4 4 3 0.06 - - - -
Tax adjustments - - (21) (0.47) - - (17) (0.41)
Cost related to refinancing - - 27 0.60 - - 8 0.18
------ ---- --------- --------- ------ ---- ----------- ----------
Non-GAAP earnings measures $ 400 $223 $ 52 $ 1.18 $ 347 $184 $ 23 $ 0.55
====== ==== ========= ========= ====== ==== =========== ==========
YTD 2004
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- --------- -------------- -------------
EBIT $ 130 $ 22 $ 19 $ 171
Restructuring and restructuring related expenses 11 26 3 40
New Aftermarket customer changeover costs 8 - - 8
Consulting fees indexed to stock price 2 1 1 4
------------- --------- -------------- -------------
Adjusted EBIT $ 151 $ 49 $ 23 $ 223
============= ========= ============== =============
YTD 2003
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- --------- -------------- -------------
EBIT $ 131 $ 23 $ 22 $ 176
Restructuring and restructuring related expenses 4 4 - 8
------------- --------- -------------- -------------
Adjusted EBIT $ 135 $ 27 $ 22 $ 184
============= ========= ============== =============
(a) Generally Accepted Accounting Principles
(b) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the twelve 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
no financial results in any particular period.
(c)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
amort companies due to differences in the components of the calculation.
ATTACHMENT 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURE
Unaudited
Q4 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 $ 74 $ - $ 74 $ - $ 74
Exhaust 36 - 36 - 36
----------- ---------- ------------ --------------- --------------------
Total North America Aftermarket 110 - 110 - 110
North America Original Equipment
Ride Control 109 - 109 - 109
Exhaust 249 2 247 77 170
----------- ---------- ------------ --------------- --------------------
Total North America Original Equipment 358 2 356 77 279
Total North America 468 2 466 77 389
Europe Aftermarket
Ride Control 36 3 33 - 33
Exhaust 46 4 42 - 42
----------- ---------- ------------ --------------- --------------------
Total Europe Aftermarket 82 7 75 - 75
Europe Original Equipment
Ride Control 99 12 87 - 87
Exhaust 286 27 259 89 170
----------- ---------- ------------ --------------- --------------------
Total Europe Original Equipment 385 39 346 89 257
South America 44 1 43 4 39
Total Europe & South America 511 47 464 93 371
Asia 37 - 37 9 28
Australia 55 3 52 4 48
----------- ---------- ------------ --------------- --------------------
Total Asia Pacific 92 3 89 13 76
Total Tenneco Automotive $ 1,071 $ 52 $ 1,019 $ 183 $ 836
=========== ========== ============ =============== ====================
Q4 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 $ 63 $ - $ 63 $ - $ 63
Exhaust 36 - 36 - 36
------------ ----------- ------------- ---------------- ---------------------
Total North America Aftermarket 99 - 99 - 99
North America Original Equipment
Ride Control 106 - 106 - 106
Exhaust 241 - 241 77 164
------------ ----------- ------------- ---------------- ---------------------
Total North America Original Equipment 347 - 347 77 270
Total North America 446 - 446 77 369
Europe Aftermarket
Ride Control 37 - 37 - 37
Exhaust 39 - 39 - 39
------------ ----------- ------------- ---------------- ---------------------
Total Europe Aftermarket 76 - 76 - 76
Europe Original Equipment
Ride Control 79 - 79 - 79
Exhaust 211 - 211 60 151
------------ ----------- ------------- ---------------- ---------------------
Total Europe Original Equipment 290 - 290 60 230
South America 33 - 33 3 30
Total Europe & South America 399 - 399 63 336
Asia 43 - 43 15 28
Australia 45 - 45 4 41
------------ ----------- ------------- ---------------- ---------------------
Total Asia Pacific 88 - 88 19 69
Total Tenneco Automotive $ 933 $ - $ 933 $ 159 $ 774
============ =========== ============= ================ =====================
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
Year ended December 31, 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 $ 342 $ - $ 342 $ - $ 342
Exhaust 161 - 161 - 161
-------------- ------------ -------------- ---------------- ----------------------
Total North America Aftermarket 503 - 503 - 503
North America Original Equipment
Ride Control 455 - 455 - 455
Exhaust 1,001 9 992 320 672
-------------- ------------ -------------- ---------------- ----------------------
Total North America Original Equipment 1,456 9 1,447 320 1,127
Total North America 1,959 9 1,950 320 1,630
Europe Aftermarket
Ride Control 169 12 157 - 157
Exhaust 190 16 174 - 174
-------------- ------------ -------------- ---------------- ----------------------
Total Europe Aftermarket 359 28 331 - 331
Europe Original Equipment
Ride Control 356 33 323 - 323
Exhaust 1,005 76 929 321 608
-------------- ------------ -------------- ---------------- ----------------------
Total Europe Original Equipment 1,361 109 1,252 321 931
South America 153 4 149 15 134
Total Europe & South America 1,873 141 1,732 336 1,396
Asia 176 1 175 54 121
Australia 205 23 182 16 166
-------------- ------------ -------------- ---------------- ----------------------
Total Asia Pacific 381 24 357 70 287
Total Tenneco Automotive $ 4,213 $ 174 $ 4,039 $ 726 $ 3,313
============== ============ ============== ================ ======================
Year ended December 31, 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 $ 303 $ - $ 303 $ - $ 303
Exhaust 163 - 163 - 163
-------------- ------------ -------------- ---------------- ----------------------
Total North America Aftermarket 466 - 466 - 466
North America Original Equipment
Ride Control 442 - 442 - 442
Exhaust 972 - 972 306 666
-------------- ------------ -------------- ---------------- ----------------------
Total North America Original Equipment 1,414 - 1,414 306 1,108
Total North America 1,880 - 1,880 306 1,574
Europe Aftermarket
Ride Control 170 - 170 - 170
Exhaust 176 - 176 - 176
-------------- ------------ -------------- ---------------- ----------------------
Total Europe Aftermarket 346 - 346 - 346
Europe Original Equipment
Ride Control 265 - 265 - 265
Exhaust 832 - 832 263 569
-------------- ------------ -------------- ---------------- ----------------------
Total Europe Original Equipment 1,097 - 1,097 263 834
South America 119 - 119 12 107
Total Europe & South America 1,562 - 1,562 275 1,287
Asia 161 - 161 57 104
Australia 163 - 163 15 148
-------------- ------------ -------------- ---------------- ----------------------
Total Asia Pacific 324 - 324 72 252
Total Tenneco Automotive $ 3,766 $ - $ 3,766 $ 653 $ 3,113
============== ============ ============== ================ ======================
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.