Tsakos Energy Navigation Ltd (TEN) 2002 Q4 法說會逐字稿

Good morning. Thank you all for standing by. All participants will be on a listen-only mode until the question and answer of today's conference. I would like to inform all parties the call is being recorded at the request of Tenneco Automotive. If anyone has any objections, please disconnect at this time.

Welcome to the Tenneco Automotive's fourth quarter and 2002 earnings conference call. I would now like to turn the call over to Mr. Jim Spangler, Vice President of Corporate Communications. Mr. Spangler, you may begin sir.

Thank you. Good morning, and welcome to Tenneco Automotive's conference call regarding fourth quarter and full year 2002 financial performance. Earlier this morning, we issued our press release and associated financial information regarding our fourth quarter and full year 2002 performance. And in a minute, I'll be turning the call over to Mark Frissora, Tenneco Automotive's Chairman and CEO, and Mark McCollum, our Chief Financial Officer. Mark and Mark will spend about 30 minutes walking you through a detailed explanation of our fourth quarter and full year performance. They will then take your questions. The conference call operator will explain the process for asking a question at that time.

I want to remind you that in addition to reviewing our fourth quarter and full year financial results, some of our comments today will include forward-looking statements. Please keep in mind that our actual results could differ materially from those projected in any of our forward-looking statements. We provided additional information in today's press release concerning factors that could cause actual results to differ materially from those in our forward-looking statements.

At this point, I'll turn the call over to Mark Frissora, our Chairman and CEO. Mark?

Okay. Thanks, Jim, and good morning, everyone. And thanks for joining us. This morning I'm going to give you an overview of our 2002 full year and our fourth quarter performance and then Mark McCollum will provide details on the fourth quarter results.

For Tenneco Automotive, last year was one of marked progress. We significantly improved our financial position in 2002, reducing total borrowings by $70 million. This was on top of the $12 million reduction that we realized in 2001. We also successfully amended our bank covenant agreement with a more generous three-year package and we soundly outperformed the new commitments in 2002, posting covenant test ratios in line with mid 2004 requirements. This enhanced financial condition was driven by a reduction in working capital of $79 million and an 85% higher operating profit. This higher EBIT resulted from a combination of favorable industry conditions reflected in a 3% increase in 2002 revenues and the continuation of the good management practices we inaugurated two years ago.

In 2002, we generated $25 million in cost savings from Six Sigma quality initiatives, which was 25% ahead of our goal. Another $12 million in savings resulted from actions related to Project Genesis, our program for improving global manufacturing capacity and distribution productivity. And our successful efforts to hold the line on overhead spending paid off when despite higher investments in sales and marketing SGA&E expenses remained flat at 12% of sales, meeting our 2002 target. This strong operating performance, coupled with lower interest expense and reduced borrowings and tax benefits allowed us to report net income of $0.74 per diluted share, reversing 2001's net loss of $3.43.

Our future performance should not only benefit from better cost management but also from our growing portfolio of new technologies, which helped to generate $440 million in annualized new business awards in 2002.

Now, let me give you a macro view of our operating environment and some detail on the initiatives we've undertaken to improve our position. Let's first turn to original equipment. North American production and selling rates finished the year at a pace of around 16.4 million and 16.8 million vehicles respectively. North American light vehicle production was up about 6% for 2002 compared with a year ago. And North American class eight heavy-duty truck production rates were up about 24% according to ACT, an industry research group. Conversely, light vehicle production in Europe was down about 2% for the year according to DRI Automotive Group. In 2002, our North American business represented 55% of total revenues, while European operations contributed 35% to total revenues. For original equipment businesses, worldwide revenues for 2002 rose 5% compared with 2001. In North America, our revenues were up 10% as a result of our strong position on top-selling platforms. And out better margin Elastomer business benefited from the class eight production increase that was driven by the October 1 diesel emission mandates. Tenneco's North American heavy-duty volume was up 26% year over year, a little better than the industry average. Total European OE revenues were down 11% adjusted for favorable exchange rates. A 6% increase in our ride control business was offset by an 8% decline in our exhaust operation as a result of lower pass-through sales and launch delays experienced in the second and third quarters of the year.

I'm pleased to be able to tell you, however, that we had a notable sequential quarterly improvement in the second half of 2002 in our European OE emission business. Nearly all of the platforms planned for launch in 2002 have commenced and most are now at or near expected volumes.

In the global aftermarket, total revenues declined by about 3%, as economic weakness worldwide and a shrinking exhaust market adversely impacted replacement rates and offset the benefits of global new business, as well as the new premium product and stronger currencies overseas. In North America, aftermarket revenues declined 5% from 2001. Uncertain economic conditions, working capital constraints driven by higher inventories due to recent consolidations and tightening credit, and the longer replacement cycle on exhaust products all appear to have contributed to the volume declined last year.

European aftermarket revenues were up 3%, primarily as a result of favorable exchange rates, excluding currency revenues, were actually down 4%. Our European ride control premium mix rose 4 percentage points to 31% due to the expanded rollout there of our reflex premium shop. For consolidated gross margin, we have a long-term goal of 23% that we're driving toward. We believe we'll get there through initiatives like Genesis, Six Sigma, and lean manufacturing. For 2002, gross margin adjusted for restructuring expenses was flat at 21%, as cost savings from Genesis and Six Sigma initiatives were offset by a less favorable sales mix, as the higher margin aftermarket business slipped to 26% of total revenues from 28% in 2001. The margin was also affected by manufacturing inefficiencies in Europe, related to reduced volumes, especially on transitioning platforms.

As many of you know, in the first half of 2002, our European OE exhaust business struggled to sufficiently flex down their operations in response to overall lower market volumes. Moreover, several of the new OE platforms that were on had experienced delays and launch problems that further aggravated the issue. When we encountered the dramatic volume declines in the second quarter of 2002, we committed to gaining sequential quarterly improvements in gross margin in the second half of the year. We met that goal by instituting leadership changes, reducing our workforce by more than 200 employees, and changing some manufacturing processes. As a result, fourth quarter 2002 gross margin was up about 2 percentage points in our Europe OE exhaust business, compared with the third quarter 2002 margin. During the same six-month period, volumes on several new models began ramping up, and consequently revenues for this business were moving in the right direction by year-end.

Today, there a still a couple of platforms with lower production volumes, such as the Volkswagen PQ34 platform, but the bottom line is that we are in a much better position to handle the challenges of the European marketplace in 2003, and we expect future gross margins to reflect that.

Now, let me take a minute to bring you up to date on project Genesis. As you know, in 2002 we implemented a manufacturing and distribution restructuring program to reduce capacity to more appropriate levels and streamline distribution processes. As planned, eight facilities were closed, two in North America and six in Europe. We eliminated 945 positions, 5% greater than anticipated. And we are remapping 21 plants for improved productivity; that's one more than what was targeted.

I'm pleased to tell you that we have been extremely efficient in executing on this project. In total, by the end of the first quarter of 2003, when phase one of the project will be completed, we expect to actually spend 20% less than the originally budgeted restructuring charges and non-accruable expenses. As I noted earlier, savings from Genesis in 2002 were nearly $12 million, 7% above planned. We expect to realize the full annualized savings of $30 million beginning in 2004.

Finally, we continue to make notable progress on our Six Sigma initiatives. To date, we have 11 master black belts, 38 certified black belts, and 86 green belts in the certification process globally. We have completed 545 Six Sigma projects worldwide and have another 900 active projects underway. The success of our Genesis and Six Sigma projects will be instrumental in driving gross margin to target levels.

In 2002, in terms of overhead spending, we achieved our goal of keeping SGA&E relatively flat at 12% of revenues. This was accomplished despite increased spending for advertising and sales promotion in the aftermarket. Increasing EBITDA and improving working capital are key strategies towards generating cash to reduce borrowings. At December 31, 2002, we reduced day sales outstanding, excluding factoring, to 53 days from 54 days a year ago. We increased day's payable outstanding from 54 days to 66 days. Our inventory days on hand, however, increased to 46 days from 44 days a year ago as we built inventories in anticipation of 2003 platform launches.

As we said before, there's plenty of opportunity still ahead. Based on ongoing benchmarking studies, we believe we still have at least $150 million opportunity over the next couple of years to further reduce working capital, especially in the areas of inventory, where we believe inventory turns may be 50% below the peer average.

Now, I want to take a couple of minutes to discuss some commercial and operational highlights before turning to the fourth quarter. Last year, we worked diligently to enhance process quality and service and advanced leading-edge technologies. As a result, we were recognized for our contribution to our customer successes with 11 prestigious industry awards throughout 2002. We also captured more than 95 OE business awards, valued at an estimated $440 million annually for platform launches from 2003 into 2005. Our JVs and alliances in Asia contributed about 15% of the value of the new businesses awarded, and our higher margin Elastomer business also contributed 15% of the 2002 awarded value.

We're continuing to invest in advanced technology to prepare for stricter safety and environmental regulations being mandated for 2004 and 2005 models. Advanced technology is a competitive advantage for Tenneco Automotive and it's an important new business driver for us. For example, we are working with several European heavy-duty and luxury carmakers on platforms that would incorporate our innovative diesel particulate filters, Ultra Thinwall catalytic converters, close-coupled converters, and fabricated manifolds. Another example of our success in this area is the CES shock, our first computerized electronic suspension system. We have been awarded one production and three development contracts in Europe for this technology.

Switching to the aftermarket, we expect to realize annualized revenues of $45 million from new customers added in 2002, including IFA, Midas Spain, Discount Auto, and Parts Authority. Also in the aftermarket in North America, we added 356 new emission control skews to expand the breadth of our Walker and DynoMax brands. Additionally, 211 new ride control skews were released in 2002, strengthening coverage on our Rancho, Sensa-Trac, and Reflex brands. In Europe, we added 409 new emission control part numbers and 302 new ride control part numbers to our product coverage. Additionally, we enhanced our global manufacturing position last year by improving our safety rating by 14%. Safety performance is based on a total case rate measure, which is calculated by the number of injuries per 100 employees. Our total case rate was 3.2 last year, which is 73% lower than the industry average of 11.7.

We also strengthened our North American manufacturing position by successfully maintaining our union-free mix of plants in the U.S. at 75%, allowing us to uphold our flexible labor structure. All in all, we thought it was a pretty good year for Tenneco, recognizing, of course, there's still a lot of work to be done and a lot of opportunity ahead.

Now, I'd like to give you some color on the fourth quarter before Mark McCollum takes you through a detailed financial review of the latest three months. As many of you know, earnings in the fourth quarter are historically lower than the second and third quarter results, reflecting the shutdown in OE production in late December and the seasonal slowdown in our global aftermarket business. In the latest fourth quarter, the North American aftermarket's weakness became even more pronounced than usual in November and December, which further restrained our gross margin and EBITDA potential.

Total North American aftermarket revenues fell 25% from a year ago period. Weak aftermarket conditions across the country are being driven by an uncertain economy, which is causing many customers to take a wait-and-see approach before placing orders. This coupled with higher than normal customer inventories due to recent consolidations depressed sales across both of our product lines. Some retail customers have reported total out the door sales declines as high as 20%. And tightening credit conditions may be constraining cash flow, restricting some customers from adding to inventories.

Finally, pricing pressure continues in the exhaust business, as commodity suppliers seek to increase share in this shrinking market. We had hoped to see the bottom of the exhaust aftermarket late in 2002, considering that stainless steel was introduced about a decade ago and has about a 10-year life, but that wasn't the case. Sales declines in the North American exhaust aftermarket continued to be significant.

On the ride control side, we also saw a decline in sales in the fourth quarter due to the weak economic environment that's driving down consumer confidence.

We haven't seen any strengthening as yet in the early part of the first quarter. Our North American ride control aftermarket business is highly profitable, so any loss of volume as a significant impact on earnings, as it did in the fourth quarter. Despite the difficult market conditions, we don't believe we've given up any significant share and we know that we haven't lost any major pieces of business.

Our team is working hard to implement programs to raise consumer awareness for the need for regular shock inspections to ensure the safety and stability of vehicles. We're stepping up those programs this year, which should put our North American ride control aftermarket business in a better position as the economy strengthens. Eventually the positive fundamentals of the replacement market, such as the growing and aging car par, increasing average miles driven per vehicle, increasing design complexity, and more content per vehicle also should begin to increase demand.

On the positive side, in the fourth quarter our North American OE business continued to generate strong volume and reported revenues were up 11%, 9 percentage points higher than the light vehicle production rate, which was 2%. And our European aftermarket has been implementing strategies for revenue and earnings growth, like the introduction of our premium Reflex shocks there, and the accumulating benefits of our Genesis restructuring, which we expect will be better reflected in our 2003 results.

In our European OE business, we reported an 8% increase in revenues, excluding currency, in the fourth quarter, compared with the year earlier period. We've still got to do a lot of work in terms of gross margin in this business. We were extremely pleased with the progress that was made in the last three months to increase manufacturing efficiencies.

With that, I'll turn the call over to Mark McCollum.

Thanks, Mark. Before I go into the business segment analysis, I'd like to recap some of the special variances that affect comparability between the fourth quarter of 2001 and 2002. Our fourth quarter 2001 results included four items. First: a restructuring and related charges for Project Genesis of $31 million after tax, or $0.81 per share. Second: a downward adjustment in the expected cost of an earlier restructuring plan of $3 million after tax, or $0.09 per share. Third: we had income of 2 million after tax, or $0.06 per share for an adjustment to the expected cost to clean up an environmental issue for which we took a charge in the first quarter of 2001. And finally: a tax charge of $66 million, or $1.68 per share, for the repatriation of earnings from some of our foreign subsidiaries.

Our fourth quarter 2002 results included three items: a favorable adjustment on the estimated cost to complete Project Genesis of $5 million after tax, or $0.12 per share, net of non-accruable Genesis cost. Additionally, we had a $7 million, or $0.17 per share, tax benefit related to accrual to return adjustments from the prior year. And finally, due to a tax rate change in Belgium, we recorded a $4 million, or $0.09 per share, tax benefit in the fourth quarter.

I should also mention that we completed our analysis on the effect of adopting the Financial Accounting Standards Board's new rules on accounting for goodwill. And as a result, recorded a charge for this change in accounting principles of $218 million, net of tax, or $5.48 per diluted share.

Now let's start the fourth quarter 2002 business segment analysis with the North American OE business. North American OE revenues for the fourth quarter 2002 were $338 million, an increase of $11 percent, compared with $306 million reported in the fourth quarter a year earlier. This compares favorably to a 2% increase in the average industry production rate for the fourth quarter. Excluding the impact of pass-through catalytic converter sales, our OE revenues were up 12%. Ride control and Elastomer revenues were up 8% compared with the prior year, while North American exhaust revenues rose 12%. Revenues benefited from overall increased production volumes, particularly on our Big Three and Honda platforms. Additionally, higher pass-through sales of catalytic converters contributed to the overall improvement. Pass-through catalytic converter sales increased by 6% to $74 million.

North American aftermarket revenues for the fourth quarter 2002 were $88 million, down 25% from the year earlier period. The mark is already outlined for many of the external factors that we believe drove this aftermarket decline.

Fourth quarter EBIT for total North American operations increased to $21 million from $12 million in the fourth quarter a year earlier. Significantly better OE volumes, manufacturing efficiencies, and tighter cost controls offset the decline in aftermarket volumes. The elimination of $3 million of goodwill amortization was also a factor.

Fourth quarter 2002 results included a benefit of $2 million for an adjustment in the estimated cost to complete Project Genesis, offset by non-accruable restructuring expenses of $2 million. Included in 2001's fourth quarter results were net restructuring charges of $8 million.

In Europe we reported fourth quarter 2002 OE revenues of $253 million, 22% higher than the $207 million recorded a year ago. Higher currency exchange rates benefited total OE revenues by $29 million. Excluding currency, total European OE revenues were up 8%, versus an industry-wide increase in production rates of 2%.

Pass-through catalytic converter sales were up 23% to $58 million. Excluding pass-through sales and currency, OE exhaust revenues were up 3% due to higher sales to DaimlerChrysler, PSA, and GM. Ride control revenues, excluding currency, rose 7%, substantially exceeding the market rate as a result of stronger sales on existing platforms with Ford, PSA, and Renault.

Fourth quarter European aftermarket revenues were $70 million, a 14% increase from the $61 million reported a year ago. Excluding currency, total revenues were up 1%.

Ride control aftermarket revenues, excluding currency, were up 1%, reflecting the continued positive impact of the Reflex introduction. Our ride control premium mix increased to 33% of revenues, up 6 percentage points from the fourth quarter 2001.

Exhaust revenues were essentially flat as new customers and higher sales of catalytic converters helped to offset the overall market decline due to the now standard use of stainless steel by OEMs.

In total, Europe generated $3 million of EBIT in the fourth quarter, compared with a loss of $16 million last year. The net favorable adjustment in 2002 and the cost to complete Project Genesis was $3 million.

Currency benefited the latest quarter by only $1 million. Comparably, in the prior-year quarter we recorded net charges for Project Genesis of $20 million and a reversal of an environmental reserve of $4 million.

Our South American operations reported revenues of $25 million during the fourth quarter of 2002, compared with $26 million reported in the year-earlier quarter. However, as you know, we experienced significant currency devaluation in both Brazil and Argentina. And excluding currency, revenues would have increased 30%.

Fourth quarter revenues for the company's Australian operations rose 27% to $33 million. The strength of the OE market, coupled with increased per-unit revenues on new Ford, GM, and Toyota models released during the 2002 third quarter, resulted in stronger fourth quarter sales.

And finally, our Asian operations reported revenues of $39 million during the fourth quarter of 2002, up 151% from the year-earlier period as a result of new business and increased volumes in our Chinese exhaust operation.

EBIT for the rest of the world, which includes South America, Australia and Asia combined, was up $1 million to $7 million. Included in 2002's results was a net favorable adjustment in the cost to complete Project Genesis of $1 million. Included in the 2001 EBIT was a $1 million charge for Genesis.

For the Company in total, currency favorably impacted our fourth quarter year-over-year revenues comparisons by $32 million. Stronger currency in Europe was offset by the weak South American currencies. There was no significant currency effect on EBIT.

Depreciation and amortization was $40 million for the quarter, compared with $38 million in the prior-year quarter. The increase was primarily due to depreciation related to our new plant in Poland, as well as to the stronger euro. Prior-year D&A included $4 million of goodwill amortization.

Interest expense for the fourth quarter of 2002 was $33 million. This was down $5 million compared with the year earlier due to lower average borrowing levels and lower interest rates. For the full year 2002, interest expense was $141 million, down 17% from the $170 million reported in 2001. I want to point out again that our current interest expense levels reflect the three-year floating-to-fixed rate swaps we put in place in early 2000 on $300 million of our senior term loans, a requirement under our Senior Credit Agreement.

Based on current short-term interest rates, these swaps were adding about $16 million annually to our interest expense. These swaps expire today and will result in about a $15 million decrease in interest expense this year. The swap expiration and our lower total borrowing level will bring interest expense down to roughly $125 to $130 million in 2003.

We had a net tax benefit of $13 million for the fourth quarter versus an expense of $63 million last year. Included in the prior year was a $66 million charge for repatriating earnings from foreign subsidiaries. The fourth quarter of 2002 included a $4 million benefit relating to a 6-percentage point decrease in the corporate tax rate in Belgium. We also reported a $7 million benefit in the latest fourth quarter related to accrual-to-return adjustments.

Cash taxes were a $5 million outflow in the latest three months, compared with a $7 million outflow for last year's fourth quarter. For all of 2002, cash taxes were $27 million.

For full-year 2002, we had a net tax benefit of $7 million versus an expense of $51 million last year. After stripping out all of the unusual benefits in the full year, we had a net tax expense of $12 million last year versus a benefit of $15 million in 2001. Going forward, we expect the effective tax rate to be around 40%. And for 2003, we're expecting cash taxes to run about $40 million.

Now, let's talk about cash and debt. Cash on hand was $54 million at December 31. On an overall basis, we completed the quarter with $121 million drawn on our $450 million revolving line of credit. Including letters of credit issued under this facility, we had $268 million available on the revolver at the end of the year. Our total borrowing level increased during the quarter by $38 million to $1,445,000,000. This was $70 million lower than December 31, 2001. The senior term loans were $788 million at December 31. As you may recall, the senior secured debt amortizes by just over $23 million a quarter. We made one senior debt principal amortization payment in the fourth quarter on December 31. For all of 2002, principal payments on our senior debt were $111 million. We also paid an old Tenneco bond issue for about $10 million during the period.

The company used cash before financing activities of $31 million in the fourth quarter of 2002, an improvement of $22 million from the fourth quarter of 2001. Accounts receivable sold under securitization arrangements declined $20 million during the fourth quarter, the seasonal change attributable to lower OE sales during this year-end holiday period. Absent this factor, cash used before financing activities was $11 million, which was driven in large part by an increase in inventories and anticipation of 2003 platform launches.

For the year, cash provided before financing activities was $81 million, versus $15 million in 2001, a $66-million increase in cash flow. Higher earnings and lower cash interest paid at 2002 had been offset somewhat by higher capital spending and cash taxes.

2002 cash flow also benefited from the reimbursement in the second quarter of $30 million of platform, development, and launch expenses by DaimlerChrysler and the proceeds from the sale of the York facility in England, which contributed $17 million.

Capital spending was $52 million for the fourth quarter; roughly even with the $53 million spent a year earlier. For 2002 full year, capital spending was $138 million, compared with $127 million in 2001. Of the difference, $11 million was related to Project Genesis.

Our worldwide factory receivables were $101 million at December 31, 2002, compared with $121 million at the end of the third quarter of 2002 and $110 million a year ago. Of the $101 million outstanding this quarter, $46 million was from the U.S. accounts receivable securitization program with Bank One and the balance from programs with regional institutions in Europe.

During 2002, funding from the U.S. Receivables Securitization Program averaged about $65 million, down from an average of $92 million in 2001. The decline in the U.S. Securitization program, however, was more than offset by the growth of our early payment programs with General Motors and DaimlerChrysler, from an average of $17 million in 2001 to $50 million in 2002.

Last week, we announced a two-year extension to our Accounts Receivable Securitization Program with Bank One in the U.S. The two-year program will next be subject to renewal on January 31, 2005. With this two-year extension, the size of the program has been reduced from $65 million to $50 million. We're comfortable with the reduced size of the program given the offsetting growth of the early payment programs with GM and DaimlerChrysler and efforts currently underway to expand our receivable sales programs in Europe. As you know, under the terms of our Senior Credit Agreement, Tenneco was allowed to sell up to $150 million of receivables, and we are continuing to explore other opportunities to take full advantage of this $150 million limit.

As Mark said earlier, we are significantly outperforming our bank covenant test ratios through improved performance and a reduction in borrowings, giving us additional breathing room in these calculations which are based on the last 12 months' results. At December 31, our leverage ratio was 4.39. It can be no more than 5.75. The fixed charge coverage ratio was 1.3. It must be at least 0.75. The third covenant, the interest coverage ratio was 2.26, and we needed to maintain this ratio above 1.65. It should be noted that our ratios, as of December 31, 2002, are in compliance with the increasingly more restrictive limits required to be maintained under the senior credit agreement all the way out to the second quarter of 2004.

Now I'll turn the call back to Mark Frissora.

Thanks, Mark, and let me start the discussion of our outlook by saying that we are optimistic about our company's future, and believe that Tenneco is heading in the right direction. We've identified substantial opportunities for incremental cost savings to support earnings growth in 2003. We also believe that we have an opportunity to reduce working capital by another $50 million this year. The combination of increased profitability and greater cash flow from working capital should help to extend our record of annual debt reduction into 2003. Our goal this year is to realize $15 million in incremental savings from the Genesis restructuring and another $20 million from Six Sigma initiatives. We also planned to step up the manufacturing efficiencies gained in our European operations to further enhance productivity there, which could add at least another $15 million of cost savings. And we're taking a hard look at supply chain management initiatives. With the rising cost of steel and other raw materials, we have strategies in place to improve our buying power through supply base reductions. We're also looking at substituting exempt steel grades of equal quality for the various hot and cold rolled items that we currently purchase. And we hope to increase the amount of purchasing we do in lower-cost countries.

These initiatives should help to offset the rising commodity prices we're seeing throughout the industry, while improving our margins. On the expense side of the business, we're targeting a 6% reduction in SGA&E this year through the better use of shared services, a centralized supply chain management team, and expected lower costs associated with the continuation of our headcount reduction programs. All of these savings initiatives are designed to try to more than offset the potential impact of higher material and labor costs, contractual price concessions, and OE buying weaknesses in the major world markets.

For 2003, we're planning around a 16 million unit build rate in North America. This assumption is based on current economic conditions and the potentially lower demand autos, if the generous OE incentive programs of 2002 are reduced or abandoned. In Western Europe, our assumptions are for a 1% to 2% decline in build rates this year. The European economies are very weak going into 2003, and the situation in Germany is even more uncertain. Our projections do not consider the impact of a war in the Middle East.

Despite the lower forecasted production rates for this year, our commitment to building our base business for the long-term is solid. On the OE side, as I mentioned earlier, advanced technologies make a difference, and Tenneco is a leader in design and development. We'll continue to identify new opportunities and invest in new technologies to improve the value of our relationships with OEM customers. In the aftermarket, we're going to be as disciplined as ever on advancing the rollout of our Reflex premium shock in Europe and penetrating the recently opened OE service market there. In the North American aftermarket, our emphasis is on raising awareness of the need for regular shock inspections will continue. This year, we plan to expand our installer education events to 17 additional cities and kick off a mobile marketing campaign designed to position Monroe as a leader in automotive safety awareness. These actions should help temper any declining revenues that could result in the softer aftermarket predicted by industry observers.

As I said that the onset, while we remain cautious in our outlook for 2003, we're excited about the prospects in front of us and believe we're well positioned to capitalize on them. Today, we have a more efficient organization through our Genesis restructuring, a stronger position with the Japanese OEMs through our alliances in JVs, new innovative technologies coming on-line, a broader product coverage in the global aftermarket, major new customers in the European heavy-duty truck and luxury car markets, and expanding market share in the high-growth China region, and still significant opportunities for reducing operating costs and working capital. With that, let's open it up to questions.

Thank you, sir. At this time, we are ready to begin the question and answer session. If you would like to ask a question, please press star one on your touchtone phone. You will be announced prior to asking your question. To withdraw your question, you may press star two. Once again, if you would like to ask a question, press star one on your touchtone phone.

And our first question comes from Monica Keany. Ms. Keany, please state your company.

Morgan Stanley. Good morning.

Morning.

I was wondering if you could talk a little bit about the European EBIT performance. First of all, with all the adjustments, would it be more like breakeven?

Yeah, I think it's basically breakeven when you take out the adjustments.

In the fourth quarter, Monica, we spent the Reflex launch monies for European aftermarket. We actually started the introduction in the third quarter and then spent some more moneys in the fourth quarter, so there was increased G&A in the European aftermarket. In addition to that, though, if you look at the OE emission control business, which was the biggest issue, we saw not only year-over-year improvement in gross margin, but quarter-over-quarter improvement in gross margin. In fact, I believe, in the earnings release, we actually cite the exact numbers. Mark, do you have those there? They're in the earnings release, I believe.

Well, I guess what I'm a little confused about is if you did sort of get a lot of the operational efficiencies on track in Europe, given the third quarter performance. Why would you not have shown some dollar improvement?

Well, I think what is masked by the way we report, because we consolidate the aftermarket against the OE results there in Europe, is that what you don't see is the improvement in Europe on the OE side of the business against the aftermarket performance, which was slightly weaker on a year over the year basis.

So the aftermarket business in Europe--sorry, what was that again? Stripping out FX on the top line?

I said that when we report EBIT, we consolidate OE and aftermarket together.

Right.

Right? So when you look at on a breakeven to breakeven, the OE business itself is up, particularly the exhaust business, on a year-over-year basis.

Right.

Considerably, the aftermarket business was down.

Okay, on an EBIT, but I guess I'm asking the European aftermarket, on a sales basis, wasn't it sort of flat?

Yeah, it's basically flat.

So what happened on the performance line?

I think that's where Mark was going to, is that some of the--we spend dollars associated with marketing and the Reflex--

Oh, Okay, and how much was that?

I don't know, it's a couple million. I mean I know we spent a couple million more on a year over year basis. I don't have the exact number, Monica, but it was several millions of dollars.

So what kind of trajectory should we be expecting for this business in the near-term in the European side?

I mean we've mentioned to you in the prepared remarks that we were going to expect a minimum $15 million improvement in EBITDA as a result of just the OE emission control business, and we also expect to have significant improvement beyond the OE emission control business in Europe. And I guess, if I were to arrange it, and we'll do it on the calls, is about $10 million and additional to that. So that's roughly a $25 million improvement year-over-year, and that's what we have built into the operating plan.

Okay, and then a question in terms of the aftermarket in North America. Would you have predicted such a drop-off? I mean 25%, obviously, is very high. And when I look at, say, an ArvinMeritor in the North American aftermarket, they weren't down nearly as much. Can you sort of help us understand that difference?

Yes, first of all, no, we were not expecting a 25% decline. Secondly, ArvinMeritor's numbers include their filter business. Filters are not off, okay? Filters is one of those categories that it's nice to have. We'd love to have filters right now as well.

In fact, Arvin includes OE filter sales in their aftermarket numbers.

That's an important point Mark's just brought up. Their OE filter sales is actually in their aftermarket numbers. And that's called out, so if you look at ArvinMeritor and compare us, those are the two biggest issues in comparisons, but in terms of market share and in general any lost business, we haven't lost anything. Our mix of business, as you know, is heavily skewed to the traditional side. And the traditional side, which represents 60% to 65% of our revenues, has two-step and three-step distribution; that business was off at a higher rate than the retail side. And as result of that, we had a significant decline, due to what would seem to be a weakening of orders from the traditional side, due to inventories being highly--people were highly sensitive to those.

Also got Dave Gabriel here in the room with me. He's our North American aftermarket General Manager. Dave, would you like to offer some comments too?

Yeah, Monica, I think the market went just extremely soft. We survey all of our customers, including our installer-based customers, our retail-based customers, and the traditional channel. There was a lot of reduction in bay traffic and the activity through the channel just wasn't there, whether that was consumer confidence, whether that was just people concerned about the war, we can't be certain. But clearly it was rather broad-based. As Mark said, it was across all the channels, and frankly, we just saw the Neiman numbers come in and they were off considerably for the industry in the quarter versus the full year.

What about the trajectory so far this quarter and would you expect us to continue to see that kind of downward pressure, or do you think that was isolated to the fourth quarter?

You know, I don't know that I can give--

Have you seen January?

We're seeing just the final results of January. I don't know that I want to give you projections for the first quarter because I don't think four weeks can establish a data trend for the quarter.

So would you say--

I'm hesitant to give you a forward-looking--

Industry wide, though, Dave, why don't tell her what you think like the industry is experiencing?

I think the start of January was a little soft. I think we saw some firming towards the end of January. We're hopeful that because of rough weather that we're seeing--which is good for our business--that the final two weeks of January would continue because they were much stronger than the first two weeks.

One of the things that's important, Monica, in just thinking about the year is the North American aftermarket is heavily skewed to making its operating results in the really second quarter and third quarter, and the first quarters and fourth quarters are traditionally weaker. So when we saw a big sales drop-off in the fourth quarter over what he had in terms of operating plan volumes, that's why it had a significant hit on our profitability. It's not the fourth quarter, where we generally generate, let's just say, a lot of income, anyways.

Right. But just in summary, it sounds like the traditional channel versus the retail side is having more of the problem.

Right. That's correct.

And you're more skewed to that versus your competitor.

That would be an accurate statement. It's a little softer than the retail side.

Okay. Thank you.

Thank you. Our next question comes from David Bitterman. Mr. Bitterman, you may ask your question and please state your company name.

Good morning, guys. A couple of things: One is what I like to typically do is set up sort of a cash sources and uses from some guidance you've give us so far in the call for '03. One of the things I wanted to ask you about is in terms of cash restructuring costs in '03, what is your expectation and I didn't hear, usually guys usually give a Cap Ex number. Maybe I just didn't hear it. Could you give us those two expectations for '03?

We may not have. On the Cap Ex I think we're still expecting that it's going to run about the level that it ran this year, 140. You know, our cap is $150 Million under our covenants with the bank, so. But we have a number of platform launches that our scheduled this year that look like it'll be closer to 140 level.

Okay. What about cash restructuring, Mark?

For the most part, it's just we reversed out some Genesis costs. You know, our expectation is that it's significantly lower. I think as we look at the completion of Project Genesis and what we're doing and in this first quarter, there might be maybe $8 million to $10 million, roughly, that would need to be spent to wrap everything up.

Okay. Based upon that and your working capital assumptions for next year, or for this year, it sounds like actually your comment would be that you're pretty comfortable meeting the amortization mostly out of cash from operations. Is that a fair way of thinking about you guys?

I think that's a fair way to see it. It's certainly going to be a challenge, like it was in '02. We had a lot of opportunity, though, in this working capital area and we have several projects that we're working on right now that are getting more granular, more specific, and going after some areas of opportunity there on a global basis.

So, Mark, I know one of the numbers that, I think it was Mark Frissora kind of handed out on working capital was, I think the expectation was perhaps another $50 million. The inventory number stepped up a little bit in the quarter. I mean I don't view that as a negative in the sense that obviously you're building that inventory to support new business, but was that a surprise to you relative to your working capital assumptions and how does that sort of affect you on the inventory line relative to your working capital expectations for '03?

Well, we actually are thinking inventory is what we're going to go after this year. It'd be one of our big drivers for working capital improvement. And whether or not this was a surprise, we'll have a one- or two-day typical range on forecasting accuracy anyway. So it was certainly a little bit of a surprise but not much of one given that it went up due to the fact that we had to have some banks established for the OE area, especially in Europe where they had some delayed launches that were ramping up and also in North America.

I was going to say about half of the currency increase on the balance sheet was currency driven.

On an absolute basis.

On an absolute basis.

He's exactly right. But if we could get 10 days out of inventory, that's just 10 days, all right. That would equate to $100 million opportunity for us, and our inventory turns our 50% below our peer average and our DSOs are about 10% higher than the average of the companies that we benchmark. Fifty-nine days sales outstanding for us versus 54 of our peer group. So we think there's some opportunity there in day sales outstanding as well. So we think the $50 million number is reasonable and is something that we feel that we can achieve this year.

Gotcha. Hey, Mark McCollum, one last question and that is if you look, the press release obviously describes the restructuring and tax adjustments in the quarter as 16 million. Obviously the bulk of that is really sort of tax driven more than it is in the add-back of the restructuring, which was 5 million. Is there a reason that, that you put that sort of in more of a one-time category versus in the tax line?

No, there really is not. I mean obviously, what we were trying to do was to be as transparent as we could to help you guys in terms of looking forward, and from my perspective I realize that these adjustments on taxes kind of cloud your ability to model going forward. The reality is every single fourth quarter we always have accrual to return adjustments. The Belgian tax rate change, it happened in the fourth quarter and GAAP requires that you book it, and so I would look as those things as being non-operational or non-recurring. In a fact, if you look at the words, we're very clear not to use that word. We talked about them being special adjustments because in effect they're not and we continue to be very active, at least in my department here, in working the tax issues to try to manage that effective rate down as much as we can. Since we're generating an NOL in the U.S., we see that as a receivable, an asset effectively, in trying to do things to allocate that NOL around the globe through tax-sharing arrangements or other things that we can do within the confines of the tax code we keep working on and that's what's creating some of this benefit. That's what created that big accrual to return adjustment.

Sure.

So it's effectively a cash benefit to us from, as we look back across 2001, and we're going to keep driving it so you'll keep seeing them.

Okay. No, the reason I bring it up, Mark, is because when I originally read the press release, I got concerned because I thought there might be, effectively, an overstatement of EBITDA to that effect in the quarter and that's really not the case so it was a bit of a red flag to me which I think I probably overreacted towards and I just want to say--

No, I mean it really is just as we got the returns filed and we look at tax strategies and things like that, we did a better job of managing down the forward-looking tax payments that we have to make in foreign jurisdictions. And one other way to look at it is that the tax accrual in prior quarters were higher than they necessarily needed to be as a result of the way we filed our return. And so if that had been tighter you wouldn't be seeing this as an adjustment.

Very good. I understand. Okay, thanks, Mark.

Chris Bauders, you may ask your question. Please state your company name.

Hi, Raymond James. Real quickly, are you forbidden from buying back your debt issue you have currently, under your bank agreement?

Yes, we are.

Okay. Thank you very much.

Thank you. Mike Kender, you may ask your question. Please state your company name.

Yes, Solomon Smith Barney. A couple of questions: One was on the aftermarkets. You talked about volume trends in North America; can you give us some more color on pricing? Are the volume declines driving the sort of pricing pressure to the downside?

Michael, I'll answer that in two parts. In the ride control business, clearly, I think there was just a demand issue and traffic in the bays more so in the fourth quarter. We really haven't seen that pricing pressure and we think our pricing strategy is right. On the exhaust side of the business, there is always short line price pressure that Mark talked about in his comments and that really isn't something that has changed. So I think the fourth quarter, if we looked at the trends through the year the fourth quarter was a very abnormal quarter in terms of sheer demand and how it kind of fell off. I'm not certain that the price linkage that you're trying to look for here, relative to the volume, is really tied in at least at this point.

So basically, your pricing is still intact in terms of what you're going out to your customers with.

Yes, it is.

Okay, and the other question I had was on the OE side for '03, if we look out. What are the largest launches for you guys that we should be keeping an eye on as we head into '03?

I'll give you a list. PSA407, the Ford Focus this year is in Europe, both of those are in Europe, and with Ford the F-Series and then GM, the Chevy Malibu in North America. So those are the major ones that we're launching. We have a lot of launches besides those, but those are the biggest ones that we've got coming up.

Okay, and on those, can you just walk through what the major content you have on them is?

No, I don't have that in front of me but we can get it to you if call us afterwards.

I think obviously the Ford Focus platform is a huge global platform for us. We are moving that production into Eastern Europe and I think that it is a full system platform. I think one of the platforms, the PQ35, the replacement for the PQ34, which is the Golf, and Jetta, that's another big platform for Volkswagen and we have a fairly big requirement that we'll be doing on that and I think that's hot end business.

Okay.

Most of the launches that I mentioned to you, I have a sheet here now in front of me that says that most of those are exhaust and they're actually hot end exhaust which is good news for us. That's higher margin business, generally speaking. Okay?

Okay. Thank you.

Thank you.

Thank you. [Jim Schulman], you may ask your question. Please state your company name.

Goldwater Capital. I was just looking at the units. You're talking about 16 million units in North America. How do you adjust your EBITDA calculations say for every 100,000 it's under $16 million? What's the relationship between slowed production assuming the financing incentives really hit a wall and they're cutting back production scheduling?

Well, let me tell you two things on that. I guess one is our planning volumes that we actually have the factories geared to or calibrated against are 15.4. Okay, so we think it'll be 16 million, but I'm just saying in general we try to plan for a lower volume capacity in the plants to hold cost. In general we have very high variable cross structure; 65% of our costs are variable and 75% of our plants are union free, so we're able to flex down fairly rapidly in North America. In Europe of course we have the same issues as all manufacturers. We're unable to flex down as quickly. It takes three to six months to react to a significant volume decline there. And we showed that, actually being the case, in our emission control business unit last year in Europe. But in general, we feel like if you're going to have a correction of 1% or 2%, that's not an issue for us in North America. You get into 5% and 10%, then we start having issues, but it's not everything in volume production has to do with what platforms you're on, not what the overall market is. For example, versus the industry, we were up significantly in Europe on our platforms as well as in North America, versus the industry we were up. So the point I'm making is a lot of it depends on what platforms you're on and when they're launching. It's not a clear line. I don't think we actually have a ratio that we calculate if the industry volumes go to 15.5--what does that mean versus 16--because it's not meaningful for us. What's more meaningful is for us to do a platform-by-platform analysis and how our platforms are doing.

Thank you.

Thank you. Lauren Soco you may ask your question. Please state your company name.

Hey, it's [Brendan Miles] actually, from Octagon. Two quick questions: One of them, Mark, could you talk about the cost of your aftermarket marketing and demo programs that you've rolled out and the results you've seen from that program? And then also, if you could just walk through the quarterly cash restructuring expenses that we should expect to see this year?

I'll let Mark answer the maybe quarterly cash restructuring and then I'll look at some sheets here to talk to you about our aftermarket expenses.

I think that for the 8 to 10 that I referenced earlier in the call on the cash restructuring is likely going to fall heavily in the first quarter. If there's something that tails off into the second quarter, it's probably only going to be a couple million dollars because all of our plans that targeted being completed with the restructuring by the end of March.

Okay, thanks.

Thank you. Laura Thurow you may ask your question and please state your company name.

Hang on just for a second; we had one more question to answer. Mark, you want to handle the aftermarket?

Yeah. The answer to the aftermarket question, the headline is that we spent about $1.5 million to $2 million on the ride and drive demonstrations and we get a significant benefit from it in terms of educating people to our products as well as obviously allowing our installers to up sale to the Monroe name. So that allows them to also increase their inspection rate. We encourage our safety inspections and we train them on how to do that. So the cost of that is anywhere between $1.5 million and $2 million. And that's what the investment is to have those ride and drive demonstrations across the country.

Okay, go ahead, Laura.

Hi, Laura Thurow from Robert Baird. Just two questions for you. One is a quick housekeeping; I may have missed it. Did you give an '03 EBITDA outlook? Was that the $15 million improvement?

No, we don't give any kind of forecast on EBITDA.

Okay, I must have misheard. And then the second question here on the debt. Debt was down at the end of September by about $100 million without the secured cash receivable impact and at the end of the year with a $70 million reduction, is the increase in the fourth quarter, is that a seasonal issue? I guess what was behind the sequential increase in that debt from Q3 to Q4?

Well, I don't know that I would call it a seasonal issue per se, although in the fourth quarter last year we saw a slight increase in our debt as well. Yeah, I think it's attributable to a couple different things. One it's at the end of the year, we have sort of an interest payment on the bonds that comes in. We have our last amortization payment that rolled out on December 31. We also had a decrease in the level of our factor receivables by $20 million as well. So in some sense that's sort of a refinancing, it's just sort of shifting into the revolver from the factoring itself. And then obviously because the seasonal, I think, portion happens because at that time of the year our sales slow down a bit, late shutdowns in December and things of that nature, we often see at the end of the year, customers being a little more stingy in terms of their cash management on collections and we typically use those shutdown periods to spend capital dollars to get our plants ready for next year platform launches on the OE side. So you have a combination of things that all sort of puts a fairly heavy demand on cash flow during the last quarter of the year. Obviously over the long pull we'd like to use that period to bring down our working capital more dramatically than we did. And that's going to be our continued focus in 2003 is to keep working that so that we see a quarter-over-quarter decrease in working capital. That's our goal.

Okay. And can you quantify your expectations for that reduction in '03?

No, I can't. Obviously, I think we've given you what the amortization requirements are. We've tried to give some information around some of the elements of cash flow that aren't really EBITDA driven, but we're not in the business of forecasting our earnings projector anymore and as a result I can't really give you a total cash flow forecast.

Okay. Thank you.

Thank you.

Once again, to ask a question, please press star one on your touchtone phone. Mr. Tom Cook, you may ask your question. Please state your company name.

Turnaround Capital. Good morning.

Good morning.

I just had a couple questions. You talked about some of the '03 savings initiatives and you talked about 15 million from Genesis and 20 million from Six Sigma, and I guess another 15 million from European manufacturing consolidation. And then in the answer to the first question, Monica's question, you also talked about a $25 million EBITDA improvement in Europe. So I'm trying to put all of this together. And then one last thing. You also said when you had that list of the savings, I think you said that those would be offset by some cost increases from higher labor and material costs. So I'm just trying to figure out the net effect of all those sound bits.

Let me just clarify one thing for you. The 25 million would've included the 15 million from Europe Emission Control. What I did say was that Europe as a whole, we thought would have a profitability improvement of 25 million; 15 million of that would come from the Emission Control business. So it's not added, you don't add the 25 million and the 15 million. The 25 million was all encompassing.

But that probably includes elements of the Genesis program and things like that.

Exactly. It includes elements of the Genesis program. So that's an important part. Again you can't just add it on the math on that. If we look at Europe, really 15 is the number if you were going to do additive, the way we're looking at it. And then Genesis we're expecting to get a $15 million incremental improvement year-over-year on Genesis as well. All we can do is give you what we expect to get out of these programs. We don't want to forecast or give guidance in any way, shape, or form. So for me to answer your question, I'd be essentially giving guidance and we don't want to get in that business. What we are trying to do is give you broad strokes in terms of strategic initiatives and what we hope to accomplish from those.

Okay. So then just to clarify, there is about 50 million from the strategic initiatives in savings, but you also did say that there will be an offset as far as some other cost increases to offset that? Correct?

Well, we talked about six percent SGA&E improvement, that's 24 million if you do the math. So that's more than 50 million; that adds up to about $74 million. And there will be offsets, yes. You never know what programs or platforms are going to be down. You don't know what the OE production levels are going to be. We don't know what the after market's going to do. So I mean you need to risk adjust all of those improvements and we have in some cases raw material increases in some region of the world in others. So there's a lot of moving pieces is my point. And I think anyone gets themselves in trouble if they try to just add the good guys and not talk about risk-adjusted numbers. So that's about as much as I can say about this.

Is labor a big factor here? Labor increases?

We had some labor increases in some markets, yes, that are tied to for example, union contracts that we have in North America as well as in Europe. Maybe good news for us is that we are union-free in a large percentage of our plants in North America.

Thank you.

Thank you. Lewis Palalino, you may ask your question. Please state your company name.

Yeah, I'm a private investor. I just wanted to know how you plan on getting the stock price up. The stock was trading around $8 and it looks like it was really oversold. Do you have any plan on buyback, or what methodology you used to kind of make it more of a competitive buy for a shareholder?

Well, I'll let Mark talk about the buyback. But before he goes into that, the stock market, as you know, has 1,000 different variables in it that impact your stock price. Obviously performance is not one of those. We were up to 8.30 or so in August, and then we, like all the automotive stocks in the whole industry, took a significant hit. Every automotive stock, this year, has taken a bigger hit actually than Tenneco did, and part of it's driven by the fact that people like Ford and GM have pension problems and then that covers all of the auto parts suppliers and we all get hit because of that. And the auto sector right now, in general, is out of favor. It's considered to be an asset intensive business and it's in the middle of a down cycle, or potentially going into a further down cycle. So in terms of getting interest as institutional holders, as well as individual investors, people are very concerned about investing in a down cycle. The other issue is frankly one of our balance sheet. We're considered a speculative buy because we are very highly leveraged compared to other companies. We think that we've got that leverage covered and we have tremendous liquidity and we can generate cash and we have a lot of great things going. But the fact is we have a lot of leverage and we are in a marketplace--the auto sector--that is not in favor right now. So we're focusing on day-to-day operations and improvement and we hope the stock price will improve as a result of this ongoing improvement that we've had. Mark, you want to talk about the other?

Yeah, Lewis, our debt agreements, the senior credit of the agreements, prohibit us from doing stock buybacks right now, based on our amendments from paying dividends. And so we're fairly limited in what we can do in that regard. The biggest single thing if you sort of do the math, that we can do to improve the stock price, because of the low number of shares that we have out there, is to improve our operating performance and pay down the debt. We look at those very closely and we, I guess, as a management team feel like that we're moving the needle on that regard and in 2003 we're going to continue to try to keep moving in that direction. Okay?

Thank you. Our last question comes from Monica Keany. Ms. Keany, please state your company name.

Hi. Morgan Stanley. Just a quick follow up. On the accounts payable days, yeah, I see they're up a lot year-over-year. Do you feel good about that level? Do you think it'll be sort of be moving much?

If you recall last year end our accounts payable days dropped fairly dramatically in the fourth quarter because in Europe where we had historically had longer terms, the European guys paid faster in order to take advantage of discounts and things like that. And so we had almost a $50 million to $60 million swing in our payables in the month of December 2001. And we got that back in the first quarter of this year and our payables levels have stayed fairly constant except for that one month. We feel fairly good about those levels and we're sort of holding them at that same point.

Is there much of a difference between Europe and the U.S.? Or is it pretty much the same?

Payable days are a little bit longer in Europe and I think that's just more cultural or within the business environment there. Like for instance, in France I think the days can go up to 80 or 90 days. You see it on the receivable side too.

Okay, so you're around that level in Europe?

Right. We're basically right within the norms of where most European suppliers are at. So the level that we were at in the fourth quarter, it looks like it increased, but really on a normalized basis it's the same as it's been.

Okay. Thank you.

Okay, this concludes our call. As a reminder an audio replay of this will be available on our website at www--

There's another question.

Is there? I'm sorry.

Our last question comes from Chet Mahaltra. Please state your company name.

Industrialist Capital. Sorry, I apologize, I may have missed this, but could you go over the accounts receivables securitization program and quantify exactly how much is drawn and the availability, I think you may have mentioned it, but I missed that.

Yeah, we did, but that's fine. I'll be happy to go back over it, okay? In total at the end of the year, 2002, our worldwide factory receivables were $101 million. That's down $20 million from the end of the third quarter. It's down only $9 million from a year ago, okay? Now if you recall, in our program, we have a U.S. program as well as some programs that exist in Europe. Under the U.S. program at the end of the year, the program that we have with Bank One, we had $46 million outstanding under that one. The rest of it came from Europe. What I've mentioned about the program itself is that during the year of 2002, the U.S. program averaged about $65 million. That was down from abut $92 million in 2001, and the reason it's fallen, and in fact it's actually been more than offset, is because we've seen a fairly dramatic growth in our early payment programs that we've had with General Motors and DaimlerChrysler. That grew from about $17 million in 2001 to $50 million in 2002. And we also talked about earlier that--we issued a press release about a week and a half ago--that we have a two-year extension now with the U.S. program with Bank One; it'll extend through January 31, 2005. Under that program it's dropped from $65 million to $50 million. So going forward, $50 million will be about the level that you'll see from the U.S. program itself with Bank One. We're comfortable with that because what we're trying to do right now is expand our programs, and there's several different programs that we have in Europe. We're trying to expand those programs to basically get more. And we're looking at some other opportunities as well. We have the capacity within the senior credit agreement to factor up to $150 million, so there's some liquidity that's available too if we can secure arrangements with various banks to do it. And we're going to see to do that.

And the current outstanding availability you have at this point in time?

You mean under the revolving line of credit?

No, not under the revolver, under the securitization program. I mean how much dry powder do you have?

Well, we had 101 million, so that says there's 49 million that we could do.

Got it. Okay.

Okay but now in terms of capacity the only program that exists that has a cap on it is the Bank One program and it's $50 million and we did 46. Okay?

Thanks.

Any more questions, Operator?

That was our last question, sir.

Great. Okay, this does conclude our call. As a reminder, you can reach an audio replay of this on our website. The address is www.tenneco-automotive.com. You can also access a taped playback of this call through the telephone. If you're located in North America then you can reach the playback toll free by dialing 800-284-7024 and callers from outside North America can reach it by dialing 402-220-9737. The pass code is 8400 and that taped playback will be available by 1:00 p.m. Eastern today and it will be available through 5:00 p.m. Eastern a week from today, Tuesday, February 11. That information can also be found in today's press release. Should you have any additional questions, please feel free to follow up with Leslie Hunziker, our Director of Investor Relations, or with Jane Ostrander, our Media Relations Director. Leslie can be reached at 847-482-5042. Jane can be reached at 847-482-5607. Again, their contact information is also in the release. Thank you again, and have a good day.