EX-99.1 3 c80181exv99w1.txt PRESS RELEASE, DATED 10/21/03 EXHIBIT 99.1 For immediate release Contacts: Jane Ostrander Media Relations 847 482-5607 jane.ostrander@tenneco-automotive.com Leslie Hunziker Investor Relations 847 482-5042 leslie.hunziker@tenneco-automotive.com TENNECO AUTOMOTIVE REPORTS THIRD QUARTER RESULTS COMPANY REDUCES TOTAL DEBT o Company reports net income of $3 million, or 9-cents per diluted share o Original Equipment business improves gross margin performance o Company lowers total debt by $93 million o Working capital improvements generate $87 million in cash Lake Forest, Illinois, October 21, 2003 -- Tenneco Automotive (NYSE: TEN) announced today that the company reported net income of $3 million, or 9-cents per diluted share, in the third quarter of 2003, versus net income of $5 million, or 13-cents per diluted share in the third quarter of 2002. The company generated $103 million in cash flow before financing activities, which reduced bank and bond debt to $1.404 billion. The company's strong cash performance in the quarter was primarily driven by $87 million in cash from working capital improvements, including reductions in receivables and inventory, and a 15 percent decrease in capital spending year-over-year. "We are pleased with our performance in generating cash and continuing to pay down debt. We ended the quarter with borrowings under our credit facility at zero and our bank and bond debt at the lowest level since becoming a stand-alone company," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. The company reported revenue of $915 million for the quarter versus $856 million in the third quarter 2002. EBIT (earnings before interest, taxes, and minority interest) was $39 million in the quarter, down $1 million compared with third quarter 2002. EBIT before depreciation and amortization (EBITDA) was $79 million for the quarter, versus third quarter 2002 EBITDA of $75 million. See the table entitled, "Reconciliation of GAAP Results to non- GAAP Results," which is attachment 2 to the press release for more information about EBITDA and other non-GAAP results in this press release. The third quarter 2003 results include pre-tax restructuring related expenses of $1 million, or 2-cents per diluted share, and a $3 million, or 9-cents per diluted share, tax benefit related to adjusting tax accounts to reflect the 2002 tax returns filed in the third quarter. In addition, the company reduced inventory balances by $17 million, primarily in the European aftermarket, which decreased the quarter's EBIT by $4 million. This EBIT decrease was the result of inventory absorption costs -- fixed manufacturing costs that the company continued to incur in spite of the lower production levels necessary to drive inventory down. Because of the lower production levels, a greater portion of the fixed manufacturing costs were recognized in the income statement rather than allocated to inventory balances. The third quarter 2002 results include pre-tax restructuring related expenses of $3 million, or 4-cents per diluted share, and a $2 million, or 6-cents per diluted share, tax benefit as a result of a change in the effective tax rate. The company's total gross margin for the quarter was 20.5 percent versus 21.1 percent one year ago. Gross margin performance was negatively impacted by lower global aftermarket sales and the higher absorption costs associated with inventory reductions, which together more than offset improved gross margins in the company's original equipment business. Compared to one year ago, the gross margin for the European original equipment business improved nearly two percentage points and nearly one percentage point in the North American original equipment business. The original equipment business gross margin improvement reflects cost savings generated by the company's focus on integrating its operations and improving manufacturing and distribution efficiency worldwide. In addition to Lean initiatives and global supply chain improvements, Six Sigma programs generated $6 million in savings during the quarter and Project Genesis, a global restructuring program, generated $5 million in incremental savings. "We have a more variable cost structure in place to help offset some of the volume softness that we're seeing in our markets worldwide. However, we must continue to control costs and implement processes to improve our operating efficiency," said Frissora. "The global aftermarket continues to pull down our overall performance. We are continuing to adjust our manufacturing footprint and reduce capacity to help offset the tough market conditions. We are also pursuing opportunities to expand into new aftermarket product categories." Tenneco Automotive again outperformed the requirements of its bank debt covenants. At September 30, the leverage ratio was 4.30, below the maximum limit of 5.25; the fixed charge coverage ratio was 1.47, exceeding the minimum required ratio of 0.95; and the interest coverage ratio was 2.55; exceeding the minimum required ratio of 1.80. NORTH AMERICA o North American original equipment revenue was $329 million for the quarter versus $337 million in third quarter 2002. Revenue was down 2 percent, versus an estimated market decline of 5 percent. Excluding the impact of lower pass-through catalytic converter sales, revenue was flat. o North American aftermarket revenue was $123 million versus $129 million one year ago. The decline was primarily due to a 9 percent decline in exhaust sales. o EBIT for North American operations was $32 million compared with $36 million in the third quarter of 2002. The EBIT decline was the result of lower volumes and higher marketing costs in the aftermarket business, which were partially offset by improved manufacturing efficiency in the original equipment operations. Third quarter 2002 EBIT included $1 million in restructuring related expenses. EUROPE o European original equipment revenue increased to $253 million from $219 million in third quarter 2002. Before the impact of favorable currency and pass-through catalytic converter sales, revenue was $167 million, versus third quarter 2002 revenue of $163 million excluding pass-through sales. Significant year-over-year reductions in OE exhaust volumes impacted revenue and partially offset OE ride control volume increases on new platforms. o European aftermarket revenue was $92 million compared with $86 million in third quarter 2002. Excluding the impact of currency, revenue was $78 million. The revenue decline was largely the result of a 14 percent decline in aftermarket exhaust sales, adjusted for currency. o European EBIT was a loss of $2 million compared with a loss of $1 million the previous year. Favorable currency exchange rates benefited third quarter 2003 EBIT by $1 million. The company's European original equipment business posted year-over-year earnings improvement. However, absorption costs of $4 million for reducing inventories and restructuring related expenses of $1 million as well as the continuing aftermarket volume decline drove down overall earnings performance. Earnings were also negatively impacted by higher depreciation costs of $5 million associated with the opening of a new facility in Eastern Europe and the appreciating Euro. Third quarter 2002 EBIT included $2 million in restructuring related expenses. REST OF WORLD o The company's Australian operations increased revenue to $45 million from $31 million in third quarter 2002. Excluding the favorable impact of currency, revenue was $36 million. The increase was fueled by higher pass-through catalytic converter sales and strong volumes on existing platforms. o Increased OE volumes in China and Thailand, including higher exhaust pass-through volumes in China, continue to drive revenue growth in Asia. Revenue from Asian operations was $42 million versus $30 million in third quarter 2002. o In South America, the company reported revenue of $31 million, a 31 percent increase over the third quarter 2002 revenue. Excluding the impact of favorable currency exchange rates, revenue was up 22 percent. o Combined EBIT for Asia, South America and Australia was $9 million in the third quarter 2003, compared with $5 million in the third quarter of 2002. Higher revenue, favorable currency exchange rates and manufacturing efficiencies drove the improvement. Attachment 1 to this press release provides additional information on Tenneco Automotive's third quarter results. CONFERENCE CALL INFORMATION The company will host a conference call on October 21, 2003 at 10:30 a.m. EDT. The dial-in number is 888-779-7694 domestic or 630-395-0023 international. The passcode is Tenneco Auto. The call will be available on the financial section of the Tenneco Automotive web site at www.tenneco-automotive.com. A copy of this press release, which includes in the attachments financial information to be discussed on this call, is also available on the financial and news sections of the Tenneco Automotive web site at www.tenneco-automotive.com. A recording of this call will be available one hour following the completion of the call on October 21, 2003 through October 28, 2003. To access this recording, dial 800-839-8559 domestic or 402-998-1013 international and enter passcode 8400. Tenneco Automotive is a $3.5 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,600 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers and DynoMax(R) performance exhaust products, and Monroe(R) Clevite(R) vibration control components. This press release contains forward-looking statements. Words such as "continue", "must", "pursuing", "implement" and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these forward-looking statements involve risks and uncertainties, the company's plans, actions and actual results could differ materially. Among the factors that could cause these plans, actions and results to differ materially from current expectations are: (i) the general political, economic and competitive conditions in markets and countries where the company and its subsidiaries operate, including currency fluctuations and other risks associated with operating in foreign countries; (ii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (iii) changes in capital availability or costs, including increases in the company's costs of borrowing (i.e., interest rate increases); (iv) changes in automotive manufacturers' production rates and their actual and forecasted requirements for the company's products, including the company's resultant inability to realize the sales represented by its awarded book of business and the overall highly competitive nature of the automotive parts industry; (v) changes in consumer demand and prices, including longer product lives of automobile parts and the cyclicality of automotive production and sales of automobiles which include the company's products, and the potential negative impact on the company's revenues and margins from such products; (vi) the cost of compliance with changes in regulations, including environmental regulations; (vii) workforce factors such as strikes or labor interruptions; (viii) material substitutions and increases in the costs of raw materials; (ix) the company's ability to execute restructuring and other cost reduction plans and to realize anticipated benefits from these plans; (x) the company's ability to develop and profitably commercialize new products and technologies, and the acceptance of such new products and technologies by the company's customers; (xi) further changes in the distribution channels for the company's aftermarket products, further consolidations among automotive parts customers and suppliers, and product warranty costs; (xii) changes by the Financing Accounting Standards Board or other accounting regulatory bodies of authoritative generally accepted accounting principles or policies; (xiii) acts of war, riots or terrorism, including, but not limited to the events taking place in the Middle East, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the countries where we operate and (xiv) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company and its subsidiaries. The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-K for the year ended December 31, 2002. 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 NINE MONTHS ENDED SEPTEMBER 30, (Millions except share and per share amounts)
2003 2002 -------------- -------------- Net sales and operating revenues: $ 2,834 $ 2,613 ============== ============== Costs and Expenses Cost of Sales (exclusive of depreciation shown below) 2,249 (a) 2,058 (d) Engineering, Research and Development 50 49 Selling, General and Administrative 276 271 (e) Depreciation and Amortization of Other Intangibles 120 104 -------------- -------------- Total Costs and Expenses 2,695 2,482 ============== ============== Gain on sale of assets -- 11 (f) Loss on sale of receivables (1) (2) Other Income (Loss) (1) (2) -------------- -------------- Total Other Income (Loss) (2) 7 -------------- -------------- Income before Interest Expense, Income Taxes, and Minority Interest North America 109 (a) 108 (d) (e) Europe 8 (a) 15 (d) (e) (f) Other 20 15 -------------- -------------- 137 138 Less: Interest expense (net of interest capitalized) 105 (b) 108 Income tax expense (benefit) (1)(c) 6 (g) Minority interest 5 2 -------------- -------------- Income before Cumulative Effect of Change in Accounting Principle 28 22 -------------- -------------- Cumulative Effect of Change in Accounting Principle, net of income tax -- (218) -------------- -------------- Net income (loss) $ 28 $ (196) ============== ============== Average common shares outstanding: Basic 40.3 39.8 ============== ============== Diluted 41.5 41.7 ============== ============== Earnings (loss) per share of common stock: Basic- Before Cumulative Effect of Change in Accounting Principle $ 0.71 $ 0.56 Cumulative Effect of Change in Accounting Principle -- (5.48) -------------- -------------- $ 0.71 $ (4.92) ============== ============== Diluted- Before Cumulative Effect of Change in Accounting Principle $ 0.69 $ 0.53 Cumulative Effect of Change in Accounting Principle -- (5.48) -------------- -------------- $ 0.69 $ (4.95) ============== ==============
(a) Includes restructuring and restructuring related charges of $7 million pre-tax, $4 million after-tax or $0.11 per share. The entire charge is recorded in cost of sales. Geographically, $3 million is recorded in North America and $4 million in Europe. (b) Includes a pre-tax expense of $5 million, $3 million after-tax or $.07 per share related to debt issuance costs that were deferred on the senior debt we paid down with the proceeds of the $350 million bond offering. (c) Includes a $14 million or $.36 per share tax benefit related to the resolution of several tax issues. (d) Includes restructuring and restructuring related charges of $6 million pre-tax, $3 million after-tax or $0.08 per share. The entire charge is recorded in cost of sales. Geographically, $3 million is recorded in both North America and Europe. (e) Includes costs associated with the amendment of the senior debt agreement of $2 million pre-tax, $1 million after-tax or $0.03 per share. The entire charge is recorded in SG&A. Geographically, $1 million is recorded in both North America and Europe. (f) Includes a gain on the sale of a UK facility of $11 million pre-tax, $5 million after-tax or $0.13 per share. Geographically, all of the gain is recorded in Europe. (g) Includes a $6 million or $.17 per share tax benefit related to the resolution of several tax issues. ATTACHMENT 1 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME (LOSS) Unaudited THREE MONTHS ENDED SEPTEMBER 30, (Millions except share and per share amounts)
2003 2002 -------------- -------------- Net sales and operating revenues: $ 915 $ 856 ============== ============== Costs and Expenses Cost of Sales (exclusive of depreciation shown below) 727 (a) 675 (c) Engineering, Research and Development 18 18 Selling, General and Administrative 91 85 Depreciation and Amortization of Other Intangibles 40 35 -------------- -------------- Total Costs and Expenses 876 813 ============== ============== Loss on sale of receivables (1) (1) Other Income (Loss) 1 (2) -------------- -------------- Total Other Income (Loss) -- (3) -------------- -------------- Income (Loss) before Interest Expense, Income Taxes, and Minority Interest North America 32 36 (c) Europe (2)(a) (1)(c) Other 9 5 -------------- -------------- 39 40 Less: Interest expense (net of interest capitalized) 36 36 Income tax expense (benefit) (2)(b) (2)(d) Minority interest 2 1 -------------- -------------- Net income $ 3 $ 5 ============== ============== Average common shares outstanding: Basic 40.6 39.8 ============== ============== Diluted 42.2 42.0 ============== ============== Earnings (loss) per share of common stock: Basic- $ 0.10 $ 0.13 ============== ============== Diluted- $ 0.09 $ 0.13 ============== ==============
(a) 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 Europe. (b) Includes a $3 million or $.09 per share tax benefit related to the resolution of outstanding tax issues. (c) Includes restructuring and other charges of $3 million pre-tax, $2 million after-tax or $0.04 per share. The entire charge is recorded in cost of sales. Geographically, $1 million is recorded in North America and $2 million in Europe. (d) Includes a $2 million or $.06 per share tax benefit related to a change in the estimated effective tax rate. ATTACHMENT 1 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEET (Unaudited) (Millions)
September 30, 2003 December 31, 2002 ------------------- ------------------- Assets Cash and Temporary Cash Investments $ 63 $ 54 Receivables, Net 484 409 Inventories 338 352 Other Current Assets 160 151 Investments and Other Assets 537 512 Plant, Property, and Equipment, Net 1,067 1,026 ------------------- ------------------- Total Assets $ 2,649 $ 2,504 =================== =================== Liabilities and Shareowners' Equity Short-Term Debt $ 18 $ 228 Accounts Payable 569 505 Accrued Taxes 43 40 Accrued Interest 41 23 Other Current Liabilities 216 220 Long-Term Debt 1,386 1,217 Deferred Income Taxes 71 103 Deferred Credits and Other Liabilities 267 243 Minority Interest 21 19 Total Shareholders' Equity 17 (94) ------------------- ------------------- Total Liabilities and Shareholders' Equity $ 2,649 $ 2,504 =================== ===================
ATTACHMENT 1 TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES Statement of Cash Flows (Unaudited) (Millions)
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------- 2003 2002 ------------------ ------------------ Operating activities: Net income (loss) before cumulative effect of change in accounting principle, net of tax $ 28 $ 22 Adjustments to reconcile income (loss) to net cash provided (used) by operating activities - Depreciation and amortization 120 104 Deferred income taxes (18) (17) (Gain)/loss on sale of businesses and assets, net 1 (9) Changes in components of working capital - (Inc.)/dec. in receivables (47) (25) (Inc.)/dec. in inventories 43 11 (Inc.)/dec. in prepayments and other current assets 3 (20) Inc./(dec.) in payables 31 76 Inc./(dec.) in taxes accrued (24) 3 Inc./(dec.) in interest accrued 19 14 Inc./(dec.) in other current liabilities (15) 10 Other 21 (1) ------------------ ------------------ Net cash provided (used) by operating activities 162 168 Investing activities: Net proceeds from sale of assets 4 20 Expenditures for plant, property & equipment (83) (86) Investments and other (5) 10 ------------------ ------------------ Net cash provided (used) by investing activities (84) (56) ------------------ ------------------ Net Cash provided (used) before financing activities 78 112 Financing activities: Proceeds from capital contributions 1 -- Issuance of long-term debt 350 1 Debt issuance costs on long-term debt (13) -- Retirement of long-term debt (277) (89) Net inc./(dec.) in short-term debt excluding current maturities on long-term debt (119) (22) Other (1) -- ------------------ ------------------ Net cash provided (used) by financing activities (59) (110) ------------------ ------------------ Effect of foreign exchange rate changes on cash and temporary cash investments (10) (9) ------------------ ------------------ Inc./(dec.) in cash and temporary cash investments 9 (7) Cash and temporary cash investments, January 1 54 53 ------------------ ------------------ Cash and temporary cash investments, September 30 $ 63 $ 46 ================== ================== Cash paid during the period for interest $ 79 $ 94 Cash paid during the period for income taxes $ 41 $ 22
ATTACHMENT 2 TENNECO AUTOMOTIVE RECONCILIATION OF GAAP(1) RESULTS TO NON-GAAP RESULTS Unaudited
Q3 2003 Q3 2002 ----------------------- ----------------------- Amount Per Share Amount Per Share ---------- ----------- ---------- ----------- Net Income (GAAP measure) $ 3 $ 0.09 $ 5 $ 0.13 After tax adjustments (reflects non-GAAP measures): Restructuring and restructuring related expenses 1 0.02 2 0.04 Tax return to accrual adjustment (3) (0.09) -- -- Effective tax rate change -- -- (2) (0.06) ------- ------- ------- ------- Non-GAAP earnings measure(2) $ 1 $ 0.02 $ 5 $ 0.11 ======= ======= ======= ======= Q3 2003 --------------------------------------------------- North Rest of America Europe World Total ----------- ------------ --------- ---------- Net income (loss) $ 3 Minority interest 2 Income tax expense (benefit) (2) Interest expense (net of interest capitalized) 36 -------- Income(loss) before interest expense, income taxes and minority interest (GAAP measure) $ 32 $ (2) $ 9 39 Depreciation and amortization of other intangibles 22 15 3 40 -------- -------- -------- -------- Total EBITDA(3) $ 54 $ 13 $ 12 $ 79 ======== ======== ======== ======== Q3 2002 ----------------------------------------------------- North Rest of America Europe World Total ----------- ------------ --------- ------------ Net income (loss) $ 5 Minority interest 1 Income tax expense (benefit) (2) Interest expense (net of interest capitalized) 36 -------- Income(loss) before interest expense, income taxes and minority interest (GAAP measure) $ 36 $ (1) $ 5 40 Depreciation and amortization 22 10 3 35 -------- -------- -------- -------- Total EBITDA(3) $ 58 $ 9 $ 8 $ 75 ======== ======== ======== ========
(1) Generally Accepted Accounting Principles (2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP results in order to reflect the results for the third quarters of 2003 and 2002 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measure to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both 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 net 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 ability to incur and service debt. In addition, Tenneco Automotive believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco Automotive also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. ATTACHMENT 2 TENNECO AUTOMOTIVE RECONCILIATION OF GAAP(1) RESULTS TO NON-GAAP RESULTS Unaudited
YTD 2003 YTD 2002 --------------------------- ------------------------------- Amount Per Share Amount Per Share ------------ ------------ ------------ ------------ Net Income before Cumulative Effect of Change in Accounting Principle (GAAP measure) $ 28 $ 0.69 $ 22 $ 0.53 After tax adjustments (reflects non-GAAP measures): Restructuring and restructuring related expenses 4 0.11 3 0.08 Tax adjustments (14) (0.36) (6) (0.17) Debt issuance cost write off 3 0.07 -- -- Gain on sale of York facility -- -- (5) (0.13) Amendment fee -- -- 1 0.03 ------------ ------------ ------------ ------------ Non-GAAP earnings measure(2) $ 21 $ 0.51 $ 15 $ 0.34 ============ ============ ============ ============ YTD 2003 ------------------------------------------------------------ North Rest of America Europe World Total ------------ ------------ ------------ ------------ Net income (loss) $ 28 Minority interest 5 Income tax expense (benefit) (1) Interest expense (net of interest capitalized) 105 ------------ Income(loss) before interest expense, income taxes and minority interest (GAAP measure) $ 109 $ 8 $ 20 137 Depreciation and amortization of other intangibles 68 43 9 120 ------------ ------------ ------------ ------------ Total EBITDA(3) $ 177 $ 51 $ 29 $ 257 ============ ============ ============ ============ YTD 2002 ------------------------------------------------------------ North Rest of America Europe World Total ------------ ------------ ------------ ------------ Net income (loss) $ (196) Cumulative effect of change in accounting principle, net of income tax 218 Minority interest 2 Income tax expense (benefit) 6 Interest expense (net of interest capitalized) 108 ------------ Income(loss) before interest expense, income taxes and minority interest (GAAP measure) $ 108 $ 15 $ 15 138 Depreciation and amortization 65 30 9 104 ------------ ------------ ------------ ------------ Total EBITDA(3) $ 173 $ 45 $ 24 $ 242 ============ ============ ============ ============
(1) Generally Accepted Accounting Principles (2) Tenneco Automotive presents the above reconciliation of GAAP to non-GAAP results in order to reflect the results for the first nine months of 2003 and 2002 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measure to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both 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 net income before cumulative effect of change in accounting principle, interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco Automotive has presented EBITDA because it regularly reviews EBITDA as a measure of the company's ability to incur and service debt. In addition, Tenneco Automotive believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco Automotive also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. ATTACHMENT 2 TENNECO AUTOMOTIVE RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS Unaudited
Q3 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 $ 78 $ -- $ 78 $ -- $ 78 Exhaust 45 -- 45 -- 45 ------------ ------------ ------------ ------------ ------------ Total North America Aftermarket 123 -- 123 -- 123 North America Original Equipment Ride Control 102 -- 102 -- 102 Exhaust 227 5 222 67 155 ------------ ------------ ------------ ------------ ------------ Total North America Original Equipment 329 5 324 67 257 Total North America 452 5 447 67 380 Europe Aftermarket Ride Control 45 7 38 -- 38 Exhaust 47 7 40 -- 40 ------------ ------------ ------------ ------------ ------------ Total Europe Aftermarket 92 14 78 -- 78 Europe Original Equipment Ride Control 65 8 57 -- 57 Exhaust 188 26 162 52 110 ------------ ------------ ------------ ------------ ------------ Total Europe Original Equipment 253 34 219 52 167 Total Europe 345 48 297 52 245 Asia 42 -- 42 15 27 South America 31 2 29 4 25 Australia 45 9 36 4 32 ------------ ------------ ------------ ------------ ------------ Total Rest of World 118 11 107 23 84 Total Tenneco Automotive $ 915 $ 64 $ 851 $ 142 $ 709 ============ ============ ============ ============ ============ Q3 2002 ------------------------------------------------------------------------- Pass-through Revenues Sales Excluding Revenues Excluding Currency Currency Excluding Currency and Pass-through Revenues Impact Currency Impact Sales ------------ ------------ ------------ ------------ ---------------- North America Aftermarket Ride Control $ 80 $ -- $ 80 $ -- $ 80 Exhaust 49 -- 49 -- 49 ------------ ------------ ------------ ------------ ------------ Total North America Aftermarket 129 -- 129 -- 129 North America Original Equipment Ride Control 101 -- 101 -- 101 Exhaust 236 -- 236 74 162 ------------ ------------ ------------ ------------ ------------ Total North America Original Equipment 337 -- 337 74 263 Total North America 466 -- 466 74 392 Europe Aftermarket Ride Control 39 -- 39 -- 39 Exhaust 47 -- 47 -- 47 ------------ ------------ ------------ ------------ ------------ Total Europe Aftermarket 86 -- 86 -- 86 Europe Original Equipment Ride Control 46 -- 46 -- 46 Exhaust 173 -- 173 56 117 ------------ ------------ ------------ ------------ ------------ Total Europe Original Equipment 219 -- 219 56 163 Total Europe 305 -- 305 56 249 Asia 30 -- 30 9 21 South America 24 -- 24 2 22 Australia 31 -- 31 2 29 ------------ ------------ ------------ ------------ ------------ Total Rest of World 85 -- 85 13 72 Total Tenneco Automotive $ 856 $ -- $ 856 $ 143 $ 713 ============ ============ ============ ============ ============
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 RESULTS TO NON-GAAP RESULTS Unaudited
Nine Months Ended September 30, 2003 -------------------------------------------------------------------------------------- Pass-through Revenues Sales Excluding Revenues Excluding Currency Currency Excluding Currency and Pass-through Revenues Impact Currency Impact Sales ------------ ----------- -------------- ----------------- --------------------- North America Aftermarket Ride Control $ 240 $ -- $ 240 $ -- $ 240 Exhaust 127 -- 127 -- 127 ------------- ----------- -------------- ----------------- --------------------- Total North America Aftermarket 367 -- 367 -- 367 North America Original Equipment Ride Control 336 -- 336 -- 336 Exhaust 731 10 721 229 492 ------------- ----------- -------------- ----------------- --------------------- Total North America Original Equipment 1,067 10 1,057 229 828 Total North America 1,434 10 1,424 229 1,195 Europe Aftermarket Ride Control 133 23 110 -- 110 Exhaust 137 23 114 -- 114 ------------- ----------- -------------- ----------------- --------------------- Total Europe Aftermarket 270 46 224 -- 224 Europe Original Equipment Ride Control 186 28 158 -- 158 Exhaust 622 97 525 166 359 ------------- ----------- -------------- ----------------- --------------------- Total Europe Original Equipment 808 125 683 166 517 Total Europe 1,078 171 907 166 741 Asia 118 - 118 42 76 South America 86 (7) 93 9 84 Australia 118 20 98 11 87 ------------- ----------- -------------- ----------------- --------------------- Total Rest of World 322 13 309 62 247 Total Tenneco Automotive $ 2,834 $ 194 $ 2,640 $ 457 $ 2,183 ============= =========== ============== ================= ===================== Nine Months Ended September 30, 2002 ------------------------------------------------------------------------------------- Pass-through Revenues Sales Excluding Revenues Excluding Currency Currency Excluding Currency and Pass-through Revenues Impact Currency Impact Sales ------------- ------------ --------------- ----------------- -------------------- North America Aftermarket Ride Control $ 256 $ -- $ 256 $ -- $ 256 Exhaust 147 -- 147 -- 147 ------------- ------------ --------------- ----------------- --------------------- Total North America Aftermarket 403 -- 403 -- 403 North America Original Equipment Ride Control 315 -- 315 -- 315 Exhaust 754 -- 754 249 505 ------------- ------------ --------------- ----------------- --------------------- Total North America Original Equipment 1,069 -- 1,069 249 820 Total North America 1,472 -- 1,472 249 1,223 Europe Aftermarket Ride Control 111 -- 111 -- 111 Exhaust 130 -- 130 -- 130 ------------- ------------ --------------- ----------------- --------------------- Total Europe Aftermarket 241 -- 241 -- 241 Europe Original Equipment Ride Control 136 -- 136 -- 136 Exhaust 521 -- 521 160 361 ------------- ------------ --------------- ----------------- --------------------- Total Europe Original Equipment 657 -- 657 160 497 Total Europe 898 -- 898 160 738 Asia 77 -- 77 26 51 South America 78 -- 78 7 71 Australia 88 -- 88 4 84 ------------- ------------ --------------- ----------------- --------------------- Total Rest of World 243 -- 243 37 206 Total Tenneco Automotive $ 2,613 $ -- $ 2,613 $ 446 $ 2,167 ============= ============ =============== ================= =====================
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.