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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 THIRD QUARTER REVENUE AND NET INCOME
- Earnings per share improves 64%
- Earnings before interest, taxes and minority interest up 17%
- 14th consecutive quarter of year-over-year revenue growth
- 15th consecutive quarter of year-over-year adjusted EBITDA improvement
LAKE FOREST, ILLINOIS, OCTOBER 25, 2005 - Tenneco Automotive (NYSE: TEN)
reported record third quarter revenue and net income since becoming a
stand-alone company. The company reported third quarter net income of $10
million, or 23-cents per diluted share, up from net income of $6 million, or
14-cents per diluted share in third quarter 2004. Adjusted for the items below,
net income rose to $12 million, or 27-cents per diluted share, compared with $7
million, or 16-cents per diluted share a year ago. The company reported third
quarter revenue of $1.096 billion, up from $996 million a year ago.
EBIT (earnings before interest, taxes and minority interest) was $50 million
compared with $44 million in third quarter 2004. EBITDA (EBIT before
depreciation and amortization) was $94 million, up from $86 million the previous
year. On an adjusted basis, EBIT was $52 million, up from $46 million a year ago
and EBITDA was $96 million, 10% higher than $88 million the previous year. See
the tables attached to the press release, which reconcile GAAP results to
non-GAAP results.
ADJUSTED THIRD QUARTER 2005 AND 2004 RESULTS:
Q3 2005 Q3 2004
------------------------------ -------------------------------
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
------ ---- ------ ----- ------ ---- ------ ------
Earnings Measures $94 $50 $10 $0.23 $86 $44 $ 6 $ 0.14
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses 2 2 2 0.04 2 2 2 0.04
Tax adjustments -- -- -- -- -- -- (1) (0.02)
--- --- --- ----- --- --- --- ------
Non-GAAP earnings measures $96 $52 $12 $0.27 $88 $46 $ 7 $ 0.16
=== === === ===== === === === ======
THIRD QUARTER 2005 ADJUSTMENTS:
- Restructuring related expenses of $2 million pre-tax, or 4-cents per
diluted share.
THIRD QUARTER 2004 ADJUSTMENTS:
- Restructuring related expenses of $2 million pre-tax, or 4-cents per
diluted share;
-More-
-2-
- Tax benefit of $1 million, or 2-cents per diluted share.
The quarterly revenue of $1.096 billion was the company's 14th consecutive
quarter of year-over-year revenue growth. The increase over $996 million in
third quarter 2004 was driven by higher global original equipment (OE)
production volumes and $19 million in favorable currency.
Tenneco Automotive's performance in the third quarter was driven by its platform
mix with products on strong selling vehicles globally; improved aftermarket ride
control volumes in North America and Europe; benefits from the company's ongoing
manufacturing efficiency programs; and reduced costs through tight controls on
discretionary spending. These efforts helped offset the negative impact of
higher material costs and higher transportation costs due to fuel surcharges.
"We delivered another solid quarter in spite of very challenging market
conditions," said Mark P. Frissora, chairman, CEO and president, Tenneco
Automotive. "Our ability to execute on consistent strategies for growing the
top-line while managing costs is proving successful despite lower OE industry
production volumes in North America and Europe, our two largest markets, and the
impact of higher material and fuel costs globally."
Cash generated by operations in the quarter was $33 million, which on a
year-over-year comparison basis includes a $9 million negative impact from the
discontinuation of General Motor's advanced payment program and a $20 million
cash outflow for incremental pension contributions. Cash generated by operations
was $76 million for the same period one year ago. The remaining difference in
the year-over-year comparison was due to working capital requirements -
primarily in accounts receivables - to support approximately $100 million in
higher revenue in the quarter.
At quarter-end, total debt was $1.429 billion, compared with $1.423 billion the
previous year. Debt net of cash was $1.340 billion versus $1.220 billion a year
ago, primarily due to the discontinuation of advance payment programs by General
Motors, Ford and DaimlerChrysler, which increased debt by $103 million over the
last 12 months. Debt net of cash at June 30, 2005 was $1.346 billion.
During the quarter, Tenneco resolved a commercial lawsuit that is recorded as
other income and settled a customer issue, which is netted against revenue. The
net of these transactions had no financial impact on the company's operating
results.
The company's gross margin decreased 1.2 percentage points year-over-year to
18.9%. Gross margin was negatively impacted by higher steel costs, fuel
surcharges on transportation costs and a shifting business mix between Europe
and North America, and between OE and aftermarket businesses. Additionally,
resolution of the OE customer issue mentioned above reduced gross margin. These
factors offset savings and improved efficiencies from Lean manufacturing, Six
Sigma and other cost reduction initiatives.
Total steel cost increases in the third quarter were $33 million, which were
largely offset by the company's cost reduction efforts, including SGA&E
restructuring savings, material cost savings, Six Sigma program savings and Lean
manufacturing efficiencies as well as steel cost recovery from OE and
aftermarket customers. Based on the company's efforts to offset increased steel
costs and trends in the steel market, the company doesn't currently anticipate a
significant year-over-year impact on operating results through the remainder of
2005.
-3-
Sales, General, Administrative and Engineering (SGA&E) expense in the quarter
was 10.8% of sales versus 11.3% a year ago. SGA&E improvement was driven by
higher revenues, cutbacks on discretionary spending and benefits from previously
announced restructuring programs.
Tenneco Automotive continued to outperform its bank debt covenants in the
quarter. At September 30, the leverage ratio was 3.39, lower than the maximum
limit of 4.50; the fixed charge ratio was 2.05, exceeding the minimum ratio of
1.10; and the interest coverage ratio was 3.12, exceeding the minimum ratio of
2.00.
NORTH AMERICA
- North American OE revenue was up 9% to $369 million, versus $338
million a year ago. Excluding the impact of currency and catalytic
converter pass-through sales, revenue was up 11%, outperforming a
light vehicle market production decline of 2%. The increase was driven
by the company's platform mix with products on strong selling
vehicles.
- North American aftermarket revenue was $133 million, up 5%
year-over-year. Stronger ride control volumes and price increases in
both product lines helped offset lower emission control volumes.
- EBIT for North American operations was $37 million, versus $31 million
in third quarter 2004. Stronger OE volumes and manufacturing
efficiencies more than offset unrecovered steel costs, higher
advertising costs to support the company's ride control aftermarket
product lines and the launch costs for its new line of aftermarket
brake products.
EUROPE, SOUTH AMERICA, INDIA
- European OE revenue was $341 million, versus $305 million a year ago.
Adjusted for favorable currency, catalytic converter pass-through
sales and a change in reporting for a customer contract, revenue was
up 14%. The year-over-year improvement - despite a market production
decline of 1% - was driven by the continued ramp up of new launches
and a favorable platform mix with product on many of the better
selling vehicles.
- European aftermarket revenue was $97 million, versus $94 million the
previous year. The 3% improvement was primarily due to stronger ride
control volumes and price increases in both product lines.
- South America and India revenue was $62 million, including $8 million
in favorable currency, compared with $45 million a year ago. Stronger
OE volumes drove the increase.
- EBIT for Europe, South America and India was $9 million, versus $10
million in third quarter 2004. The EBIT decrease was the result of
currency transactional losses with a $2 million negative impact,
manufacturing inefficiencies due to inventory reductions in the
quarter, costs for implementing a resource planning system for the
company's European emission control business and a reserve increase
related to a pending legal settlement.
- Third quarter 2004 and 2005 EBIT results include $2 million in
restructuring related expenses.
ASIA PACIFIC
- Asia operations generated $38 million in revenue, versus $37 million a
year ago.
- Australian revenue increased to $56 million from $50 million the
previous year, largely driven by $4 million in favorable currency.
- EBIT for Asia Pacific operations was $4 million, up from $3 million a
year ago. EBIT was up despite OE revenue weakness in China and
investments to increase Tenneco's aftermarket presence there.
-4-
YEAR-TO-DATE RESULTS
Through the first nine months of the year, Tenneco Automotive reported net
income of $50 million, or $1.11 per diluted share, versus net income of $34
million, or 78-cents per diluted share for the first nine months of 2004. On an
adjusted basis, year-to-date 2005 net income was $56 million, or $1.24 per
diluted share, versus adjusted net income of $44 million, or $1.01 per diluted
share for the same period one year ago.
Year-to-date EBIT was $177 million, compared with EBIT of $153 million for the
first nine months of 2004. Adjusted EBIT was $184 million versus $177 million a
year ago. Year-to-date 2005 EBITDA was $311 million, compared with $284 million
a year ago, and adjusted EBITDA was $318 million, versus adjusted EBITDA of $308
million for the same period a year ago.
OUTLOOK
"We do not expect an immediate turnaround in OE production rates in North
America or Europe, and we are closely monitoring the aftermarket in those
regions for a potential drop in consumer spending on vehicle maintenance due to
higher fuel prices. This landscape, coupled with continuing increases in
material costs and the impact of higher fuel costs on our transportation
expenses, creates a tough operating environment going forward," Frissora said.
"As a result, we will continue to focus on those areas within our
control--namely executing with discipline on the fundamentals and maintaining a
relentless focus on costs. We should also continue to benefit from our balance
and diversification in terms of products, markets served and customers. Finally,
we will capitalize on opportunities to win incremental OE and aftermarket
business from our competitors."
Attachment 1:
Statements of Income - 3 Months
Statements of Income - 9 Months
Balance Sheet
Statements of Cash Flow
Attachment 2:
Reconciliation of GAAP Net Income to EBITDA - 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 3 Months
Reconciliation of GAAP Net Income to EBITDA - 9 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 9 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 9 Months
CONFERENCE CALL
The company will host a conference call on Tuesday, October 25, 2005 at 10:30
a.m. EDT. The dial in number is 888-790-1408 (domestic) or 1-773-756-0157
(international). The pass code is Tenneco Auto. The call and accompanying slides
will be available on the financial section of the Tenneco Automotive web site at
www.tenneco-automotive.com. A recording of the call will be available one hour
following completion of the call on October 25,
-5-
2005. To access this recording, dial 866-365-2447 domestic or 203-369-0216
international. The purpose of the call is to discuss the company's operations
for the third quarter, as well as other matters that may impact the company's
outlook. A copy of the press release is available on the financial and news
sections of the Tenneco Automotive web site.
Tenneco Automotive is a $4.2 billion manufacturing company with headquarters in
Lake Forest, Illinois and approximately 18,400 employees worldwide. Tenneco
Automotive is one of the world's largest designers, manufacturers and marketers
of emission control and ride control products and systems for the automotive
original equipment market and the aftermarket. Tenneco Automotive markets its
products principally under the Monroe(R), Walker(R), Gillet(R) and
Clevite(R)Elastomer brand names. Among its products are Sensa-Trac(R) and Monroe
Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R)
mufflers, Dynomax(R) performance exhaust products, and Clevite(R)Elastomer
noise, vibration and harshness control components.
This press release contains forward-looking statements. Words such as
"continue," "will," "expects," "believe," "plans," 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 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) workforce factors such as strikes or labor
interruptions; (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 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 Financial Accounting Standards Board or
other accounting regulatory bodies to 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,
-6-
financial and social conditions in the countries where the company operates and
(xiv) the timing and occurrence (or non-occurrence) of transactions and events
which may be subject to circumstances beyond the control of the company and its
subsidiaries. The company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date of this press
release. Additional information regarding these risk factors and uncertainties
is detailed from time to time in the company's SEC filings, including but not
limited to its report on Form 10-K for the year ended December 31, 2004. 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
Unaudited
THREE MONTHS ENDED SEPTEMBER 30,
(Millions except share and per share amounts)
2005 2004
------ -----
Net sales and operating revenues $1,096 $ 996
====== =====
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 889 (a) 796 (b)
Engineering, Research and Development 22 20
Selling, General and Administrative 96 93
Depreciation and Amortization of Other Intangibles 44 42
------ -----
Total Costs and Expenses 1,051 951
====== =====
Loss on sale of receivables (1) --
Other Income (Expense) 6 (1)
------ -----
Total Other Income (Expense) 5 (1)
------ -----
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 37 31
Europe & South America 9 (a) 10 (b)
Asia Pacific 4 3
------ -----
50 44
Less:
Interest expense (net of
interest capitalized) 33 35
Income tax expense 7 2 (c)
Minority interest -- 1
------ -----
Net income $ 10 $ 6
====== =====
Average common shares outstanding:
Basic 43.3 41.7
====== =====
Diluted 45.6 44.3
====== =====
Earnings per share of common stock:
Basic $ 0.25 $0.15
====== =====
Diluted $ 0.23 $0.14
====== =====
(a) Includes restructuring and restructuring related charges of $2 million
pre-tax, $2 million after tax or $0.04 per share. The entire $2 million
adjustment is recorded in cost of sales and geographically in Europe and
South America.
(b) Includes restructuring and restructuring related charges of $2 million
pre-tax, $2 million after tax or $0.04 per share. The entire charge is
recorded in cost of sales. Geographically, the entire amount is recored in
Europe and South America.
(c) Includes a $1 million or $0.02 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
NINE MONTHS ENDED SEPTEMBER 30,
(Millions except share and per share amounts)
2005 2004
------ ------
Net sales and operating revenues $3,377 $3,142 (c)
====== ======
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 2,718 (a) 2,498 (d)
Engineering, Research and Development 64 56
Selling, General and Administrative 287 (a) 302 (c)(d)(e)
Depreciation and Amortization of Other Intangibles 134 131
------ ------
Total Costs and Expenses 3,203 2,987
====== ======
Loss on sale of receivables (2) (1)
Other Income (Expense) 5 (1)
------ ------
Total Other Income (Expense) 3 (2)
------ ------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 126 (a) 111 (c)(d)(e)
Europe & South America 41 (a) 26 (d)(e)
Asia Pacific 10 16 (e)
------ ------
177 153
Less:
Interest expense (net of
interest capitalized) 97 104
Income tax expense 29 (b) 11 (f)
Minority interest 1 4
------ ------
Net income $ 50 $ 34
====== ======
Average common shares outstanding:
Basic 43.0 41.3
====== ======
Diluted 45.2 44.0
====== ======
Earnings per share of common stock:
Basic $ 1.17 $ 0.84
====== ======
Diluted $ 1.11 $ 0.78
====== ======
(a) Includes restructuring and restructuring related charges of $7 million
pre-tax, $5 million after tax or $0.11 per share. Of the adjustment $6
million is recorded in cost of sales and $1 million is in SG&A.
Geographically, $2 million is recorded in North America and $5 million in
Europe and South America.
(b) Includes a $1 million or $0.02 per share tax expense primarily related to
adjusting state tax net operating loss carry forwards.
(c) Includes changeover costs for a new aftermarket customer acquired in the
first quarter of $8 million pre-tax, $5 million after-tax or $0.13 per
share. Of the adjustment $6 million is recorded in Sales and $2 million is
recorded in SG&A. Geographically all of the charge is recorded in North
America.
(d) Includes restructuring and restructuring related charges of $12 million
pre-tax, $8 million after tax or $0.18 per share. Of the adjustment $2
million is recorded in SG&A and the remaining $10 million is in cost of
sales. Geographically, $3 million is recorded in North America and $9
million in Europe and South America.
(e) Includes consulting fees indexed to stock price of $4 million pre-tax, $3
million after-tax or $0.06 per share. The entire charge is recorded in
SG&A. Geographically $2 million of the charge is recorded in North America,
$1 million in Europe and South America and $1 million in Asia Pacific.
(f) Includes a $6 million or $0.14 per share tax benefit related to the
resolution of outstanding tax issues.
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
(Unaudited)
(Millions)
September 30, 2005 December 31, 2004
------------------ -----------------
Assets
Cash and Cash Equivalents $ 89 $ 214
Receivables, Net 675 488
Inventories 395 396
Other Current Assets 179 194
Investments and Other Assets 661 693
Plant, Property, and Equipment, Net 1,051 1,134
------ ------
Total Assets $3,050 $3,119
====== ======
Liabilities and Shareholders' Equity
Short-Term Debt $ 71 $ 19
Accounts Payable 716 696
Accrued Taxes 30 24
Accrued Interest 33 35
Other Current Liabilities 263 273
Long-Term Debt 1,358 1,401
Deferred Income Taxes 70 126
Deferred Credits and Other Liabilities 336 362
Minority Interest 23 24
Total Shareholders' Equity 150 159
------ ------
Total Liabilities and Shareholders' Equity $3,050 $3,119
====== ======
(a) Accounts Receivables net of:
September 30, 2005 December 31, 2004
------------------ -----------------
Accounts Receivable securitization programs $146 $124
Receivables collected under advance payment programs $ -- $132
(b) Long term debt composed of:
September 30, 2005 December 31, 2004
------------------ -----------------
Term loan B (Due 2010) $ 356 $ 392
10.25% senior notes (Due 2013) 489 490
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 13 19
------ ------
$1,358 $1,401
====== ======
ATTACHMENT 1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
2005 2004
----- ----
Operating activities:
Net income $ 50 $ 34
Adjustments to reconcile net income
to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 134 131
Deferred income taxes 3 (12)
(Gain)/loss on sale of assets, net 2 1
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables (209) (66)
(Inc.)/dec. in inventories (22) (22)
(Inc.)/dec. in prepayments and other current assets (23) (21)
Inc./(dec.) in payables 52 55
Inc./(dec.) in taxes accrued 11 5
Inc./(dec.) in interest accrued (2) --
Inc./(dec.) in other current liabilities 5 21
Other (39) 9
----- ----
Net cash provided (used) by operating activities (38) 135
Investing activities:
Net proceeds from sale of assets 4 12
Expenditures for plant, property & equipment (100) (87)
Acquisition of business (11) --
Investments and other 1 --
----- ----
Net cash used by investing activities (106) (75)
----- ----
Financing activities:
Issuance of common shares 6 6
Issuance of long-term debt 1 --
Retirement of long-term debt (43) (6)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt 56 1
Other 1 1
----- ----
Net cash provided by financing activities 21 2
----- ----
Effect of foreign exchange rate changes on cash and
cash equivalents (2) (4)
----- ----
Inc./(dec.) in cash and cash equivalents (125) 58
Cash and cash equivalents, January 1 214 145
----- ----
Cash and cash equivalents, September 30 $ 89 $203
===== ====
Cash paid during the period for interest $ 94 $106
Cash paid during the period for income taxes $ 16 $ 15
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q3 2005
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income $10
Income tax expense 7
Interest expense (net of interest capitalized) 33
---
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) 37 9 4 50
Depreciation and amortization of other
intangibles 22 19 3 44
--- --- -- ---
Total EBITDA(2) $59 $28 $7 $94
=== === == ===
Q3 2004
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income $ 6
Minority interest 1
Income tax expense 2
Interest expense (net of interest capitalized) 35
---
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) 31 10 3 44
Depreciation and amortization 23 17 2 42
--- --- --- ---
Total EBITDA $54 $27 $5 $86
=== === === ===
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation
based upon generally accepted accounting principles. The amounts included
in the EBITDA calculation, however, are derived from amounts included in
the historical statements of income data. In addition, EBITDA should not be
considered as an alternative to net income or operating income as an
indicator of the company's operating performance, or as an alternative to
operating cash flows as a measure of liquidity. Tenneco Automotive has
presented EBITDA because it regularly reviews EBITDA as a measure of the
company's performance. In addition, Tenneco Automotive believes its debt
holders utilize and analyze our EBITDA for similar purposes. Tenneco
Automotive also believes EBITDA assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors.
However, the EBITDA measure presented may not always be comparable to
similarly titled measures reported by other companies due to differences in
the components of the calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q3 2005 Q3 2004
----------------------------------------- -----------------------------------------
EBITDA(3) EBIT Net Income Per Share EBITDA(3) EBIT Net Income Per Share
--------- ---- ---------- --------- --------- ---- ---------- ---------
Earnings Measures $94 $50 $10 $0.23 $86 $44 $ 6 $ 0.14
Adjustments (reflects non-GAAP
measures):
Restructuring and restructuring
related expenses 2 2 2 0.04 2 2 2 0.04
Tax adjustments -- -- -- -- -- -- (1) (0.02)
--- --- --- ----- --- --- --- ------
Non-GAAP earnings measures $96 $52 $12 $0.27 $88 $46 $ 7 $ 0.16
=== === === ===== === === === ======
Q3 2005
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $37 $ 9 $ 4 $50
Restructuring and restructuring
related expenses 2 -- 2
--- --- --- ---
Adjusted EBIT $37 $11 $ 4 $52
=== === === ===
Q3 2004
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $31 $10 $ 3 $44
Restructuring and restructuring
related expenses -- 2 -- 2
--- --- --- ---
Adjusted EBIT $31 $12 $ 3 $46
=== === === ===
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the third quarters of
2005 and 2004 in a manner that allows a better understanding of the results
of operational activities separate from the financial impact of decisions
made for the long-term benefit of the company. Adjustments similar to the
ones reflected above have been recorded in earlier periods, and similar
types of adjustments can reasonably be expected to be recorded in future
periods. Using only the non-GAAP earnings measures to analyze earnings
would have material limitations because its calculation is based on the
subjective determinations of management regarding the nature and
classification of events and circumstances that investors may find
material. Management compensates for these limitations by utilizing both
GAAP and non-GAAP earnings measures reflected above to understand and
analyze the results of the business. The company believes investors find
the non-GAAP information helpful in understanding the ongoing performance
of operations separate from items that may have a disproportionate positive
or negative impact on the company's financial results in any particular
period.
(3) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation
based upon generally accepted accounting principles. The amounts included
in the EBITDA calculation, however, are derived from amounts included in
the historical statements of income data. In addition, EBITDA should not be
considered as an alternative to net income or operating income as an
indicator of the company's operating performance, or as an alternative to
operating cash flows as a measure of liquidity. Tenneco Automotive has
presented EBITDA because it regularly reviews EBITDA as a measure of the
company's performance. In addition, Tenneco Automotive believes its debt
holders utilize and analyze our EBITDA for similar purposes. Tenneco
Automotive also believes EBITDA assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors.
However, the EBITDA measure presented may not always be comparable to
similarly titled measures reported by other companies due to differences in
the components of the calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
YTD 2005
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income $ 50
Minority interest 1
Income tax expense 29
Interest expense (net of interest capitalized) 97
----
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 126 41 10 177
Depreciation and amortization of other intangibles 68 57 9 134
---- --- --- ----
Total EBITDA(2) $194 $98 $19 $311
==== === === ====
YTD 2004
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income $ 34
Minority interest 4
Income tax expense 11
Interest expense (net of interest capitalized) 104
----
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 111 26 16 153
Depreciation and amortization 71 52 8 131
---- --- --- ----
Total EBITDA $182 $78 $24 $284
==== === === ====
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation
based upon generally accepted accounting principles. The amounts included
in the EBITDA calculation, however, are derived from amounts included in
the historical statements of income data. In addition, EBITDA should not be
considered as an alternative to net income or operating income as an
indicator of the company's operating performance, or as an alternative to
operating cash flows as a measure of liquidity. Tenneco Automotive has
presented EBITDA because it regularly reviews EBITDA as a measure of the
company's performance. In addition, Tenneco Automotive believes its debt
holders utilize and analyze our EBITDA for similar purposes. Tenneco
Automotive also believes EBITDA assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors.
However, the EBITDA measure presented may not always be comparable to
similarly titled measures reported by other companies due to differences in
the components of the calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
YTD 2005 YTD 2004
----------------------------------------- ------------------------------------------
EBITDA(3) EBIT Net Income Per Share EBITDA(3) EBIT Net Income Per Share
--------- ---- ---------- --------- --------- ----- ---------- ---------
Earnings Measures $311 $177 $50 $1.11 $284 $153 $34 $ 0.78
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related
expenses 7 7 5 0.11 12 12 8 0.18
New Aftermarket customer changeover
costs -- -- -- -- 8 8 5 0.13
Consulting fees indexed to stock price -- -- -- -- 4 4 3 0.06
Tax adjustments -- -- 1 0.02 -- -- (6) (0.14)
---- ---- --- ----- ---- ---- --- ------
Non-GAAP earnings measures $318 $184 $56 $1.24 $308 $177 $44 $ 1.01
==== ==== === ===== ==== ==== === ======
YTD 2005
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $126 $41 $10 $177
Restructuring and restructuring
related expenses 2 5 -- 7
---- --- --- ----
Adjusted EBIT $128 $46 $10 $184
==== === === ====
YTD 2004
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $111 $26 $16 $153
Restructuring and restructuring
related expenses 3 9 -- 12
New Aftermarket customer changeover
costs 8 -- -- 8
Consulting fees indexed to stock price 2 1 1 4
---- --- --- ----
Adjusted EBIT $124 $36 $17 $177
==== === === ====
(1) Generally Accepted Accounting Principles
(2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP
earnings measures in order to reflect the results for the six months of
2005 and 2004 in a manner that allows a better understanding of the results
of operational activities separate from the financial impact of decisions
made for the long-term benefit of the company. Adjustments similar to the
ones reflected above have been recorded in earlier periods, and similar
types of adjustments can reasonably be expected to be recorded in future
periods. Using only the non-GAAP earnings measures to analyze earnings
would have material limitations because its calculation is based on the
subjective determinations of management regarding the nature and
classification of events and circumstances that investors may find
material. Management compensates for these limitations by utilizing both
GAAP and non-GAAP earnings measures reflected above to understand and
analyze the results of the business. The company believes investors find
the non-GAAP information helpful in understanding the ongoing performance
of operations separate from items that may have a disproportionate positive
or negative impact on the company's financial results in any particular
period.
(3) See Reconciliation of GAAP Net Income to EBITDA on previous page. EBITDA
represents income before interest expense, income taxes, minority interest
and depreciation and amortization. EBITDA is not a calculation based upon
generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the
historical statements of income data. In addition, EBITDA should not be
considered as an alternative to net income or operating income as an
indicator of the company's operating performance, or as an alternative to
operating cash flows as a measure of liquidity. Tenneco Automotive has
presented EBITDA because it regularly reviews EBITDA as a measure of the
company's performance. In addition, Tenneco Automotive believes its debt
holders utilize and analyze our EBITDA for similar purposes. Tenneco
Automotive also believes EBITDA assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many factors.
However, the EBITDA measure presented may not always be comparable to
similarly titled measures reported by other companies due to differences in
the components of the calculation.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Q3 2005
------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Original Equipment
Ride Control $ 120 $-- $ 120 $ -- $120
Exhaust 249 3 246 69 177
------ --- ------ ---- ----
Total North America Original Equipment 369 3 366 69 297
North America Aftermarket
Ride Control 90 -- 90 -- 90
Exhaust 43 -- 43 -- 43
------ --- ------ ---- ----
Total North America Aftermarket 133 -- 133 -- 133
Total North America 502 3 499 69 430
Europe Original Equipment
Ride Control 84 (a) 3 81 -- 81 (a)
Exhaust 257 1 256 76 180
------ --- ------ ---- ----
Total Europe Original Equipment 341 4 337 76 261
Europe Aftermarket
Ride Control 46 -- 46 -- 46
Exhaust 51 -- 51 -- 51
------ --- ------ ---- ----
Total Europe Aftermarket 97 -- 97 -- 97
South America & India 62 8 54 6 48
Total Europe & South America 500 12 488 82 406
Asia 38 -- 38 10 28
Australia 56 4 52 4 48
------ --- ------ ---- ----
Total Asia Pacific 94 4 90 14 76
Total Tenneco Automotive $1,096 $19 $1,077 $165 $912
====== === ====== ==== ====
Q3 2004
------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Original Equipment
Ride Control $108 $-- $108 $ -- $108
Exhaust 230 -- 230 71 159
---- --- ---- ---- ----
Total North America Original Equipment 338 -- 338 71 267
North America Aftermarket
Ride Control 83 -- 83 -- 83
Exhaust 44 -- 44 -- 44
---- --- ---- ---- ----
Total North America Aftermarket 127 -- 127 -- 127
Total North America 465 -- 465 71 394
Europe Original Equipment
Ride Control 81 (a) -- 81 -- 81 (a)
Exhaust 224 -- 224 74 150
---- --- ---- ---- ----
Total Europe Original Equipment 305 -- 305 74 231
Europe Aftermarket
Ride Control 44 -- 44 -- 44
Exhaust 50 -- 50 -- 50
---- --- ---- ---- ----
Total Europe Aftermarket 94 -- 94 -- 94
South America & India 45 -- 45 4 41
Total Europe & South America 444 -- 444 78 366
Asia 37 -- 37 12 25
Australia 50 -- 50 4 46
---- --- ---- ---- ----
Total Asia Pacific 87 -- 87 16 71
Total Tenneco Automotive $996 $-- $996 $165 $831
==== === ==== ==== ====
Tenneco Automotive presents the above reconciliation of revenues in order to
reflect the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, pass-through catalytic
converter sales include precious metals pricing, which may be volatile. While
Tenneco Automotive's original equipment customers assume the risk of this
volatility, it impacts reported revenue. Excluding pass-through catalytic
converter sales removes this impact. Tenneco Automotive uses this information to
analyze the trend in revenues before these factors. Tenneco Automotive believes
investors find this information useful in understanding period to period
comparisons in the company's revenues.
(a) Beginning in the second quarter of 2005, Tenneco Automotive changed its
accounting for a customer contract in its European OE Ride Control unit.
The cost of sales for this contract are now netted against the revenues,
reducing reported revenues and cost of sales. In the third quarter of 2004,
Tenneco Automotive recorded $15 million in revenues for this contract.
Attachment 2
TENNECO AUTOMOTIVE
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Nine Months Ended September 30, 2005
------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Original Equipment
Ride Control $ 378 $-- $ 378 $ -- $ 378
Exhaust 756 8 748 204 544
------ --- ------ ---- ------
Total North America Original Equipment 1,134 8 1,126 204 922
North America Aftermarket
Ride Control 284 -- 284 -- 284
Exhaust 125 -- 125 -- 125
------ --- ------ ---- ------
Total North America Aftermarket 409 -- 409 -- 409
Total North America 1,543 8 1,535 204 1,331
Europe Original Equipment
Ride Control 291(a) 19 272 -- 272(a)
Exhaust 813 27 786 236 550
------ --- ------ ---- ------
Total Europe Original Equipment 1,104 46 1,058 236 822
Europe Aftermarket
Ride Control 134 3 131 -- 131
Exhaust 154 4 150 -- 150
------ --- ------ ---- ------
Total Europe Aftermarket 288 7 281 -- 281
South America & India 172 18 154 13 141
Total Europe & South America 1,564 71 1,493 249 1,244
Asia 108 1 107 34 73
Australia 162 9 153 13 140
------ --- ------ ---- ------
Total Asia Pacific 270 10 260 47 213
Total Tenneco Automotive $3,377 $89 $3,288 $500 $2,788
====== === ====== ==== ======
Nine Months Ended September 30, 2004
------------------------------------------------------------------
Pass-through Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Pass-through
Revenues Impact Currency Impact Sales
-------- -------- --------- ------------ ----------------
North America Original Equipment
Ride Control $ 346 $-- $ 346 $ -- $ 346
Exhaust 752 -- 752 243 509
------ --- ------ ---- ------
Total North America Original Equipment 1,098 -- 1,098 243 855
North America Aftermarket
Ride Control 268 -- 268 -- 268
Exhaust 125 -- 125 -- 125
------ --- ------ ---- ------
Total North America Aftermarket 393 -- 393 -- 393
Total North America 1,491 -- 1,491 243 1,248
Europe Original Equipment
Ride Control 257(a) -- 257 -- 257(a)
Exhaust 719 -- 719 232 487
------ --- ------ ---- ------
Total Europe Original Equipment 976 -- 976 232 744
Europe Aftermarket
Ride Control 133 -- 133 -- 133
Exhaust 144 -- 144 -- 144
------ --- ------ ---- ------
Total Europe Aftermarket 277 -- 277 -- 277
South America & India 121 -- 121 11 110
Total Europe & South America 1,374 -- 1,374 243 1,131
Asia 127 -- 127 45 82
Australia 150 -- 150 12 138
------ --- ------ ---- ------
Total Asia Pacific 277 -- 277 57 220
Total Tenneco Automotive $3,142 $-- $3,142 $543 $2,599
====== === ====== ==== ======
Tenneco Automotive presents the above reconciliation of revenues in order to
reflect the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, pass-through catalytic
converter sales include precious metals pricing, which may be volatile. While
Tenneco Automotive's original equipment customers assume the risk of this
volatility, it impacts reported revenue. Excluding pass-through catalytic
converter sales removes this impact. Tenneco Automotive uses this information to
analyze the trend in revenues before these factors. Tenneco Automotive believes
investors find this information useful in understanding period to period
comparisons in the company's revenues.
(a) Beginning in the second quarter of 2005, Tenneco Automotive changed its
accounting for a customer contract in its European OE Ride Control unit.
The cost of sales for this contract are now netted against the revenues,
reducing reported revenues and cost of sales. In the second and third
quarters of 2004, Tenneco Automotive recorded $30 million in revenues for
this contract.