EXHIBIT 99.1
NEWS RELEASE [TENNECO LOGO]
TENNECO REPORTS IMPROVED YEAR-OVER-YEAR THIRD QUARTER RESULTS ON RECORD
HIGH REVENUE GROWTH
- REVENUE UP 39% DRIVEN BY NORTH AMERICA DIESEL LAUNCHES
- NET INCOME RISES TO $21 MILLION; EPS UP AT 45-CENTS PER DILUTED SHARE
- EBIT UP 31%; EBITDA UP 24%
Lake Forest, Illinois, October 30, 2007 -- Tenneco (NYSE: TEN) reported third
quarter net income of $21 million, or 45-cents per diluted share, up from $7
million, or 16-cents per diluted share in third quarter 2006. Adjusted for the
items below, net income was $19 million, or 39-cents per diluted share, versus
net income of $11 million, or 26-cents per diluted share a year ago (the tables
in this press release reconcile GAAP results to non-GAAP results). The
comparative 2006 results reflect adjustments made in Tenneco's restated
financial statements filed in August 2007.
EBIT (earnings before interest, taxes and minority interest) was $57 million, a
31% increase over $43 million a year ago. Adjusted EBIT was $65 million, versus
$50 million in third quarter 2006. Strong OE volumes in North America from new
diesel platform launches and growth in China drove the improvement.
EBITDA (EBIT before depreciation and amortization) was $109 million, up from $88
million in third quarter 2006. Adjusted EBITDA was $117 million, compared to $95
million the prior year.
Third quarter revenue rose to $1.556 billion from $1.121 billion in third
quarter 2006. Revenue in the quarter included $430 million in substrate sales, a
94% increase over third quarter 2006. Excluding substrate sales and favorable
currency of $68 million, revenue was $1.069 billion versus $900 million a year
ago. The revenue increase was driven by volume ramp-ups on platform launches in
North America and higher OE revenues in Europe and Asia, more than offsetting
lower aftermarket sales in North America and Europe.
ADJUSTED THIRD QUARTER 2007 AND 2006 RESULTS:
<Table>
<Caption>
Q3 2007 Q3 2006
--------------------------------------- ----------------------------------------
EBITDA EBIT Net Income Per Share EBITDA EBIT Net Income Per Share
------ ------ ---------- --------- ------ ------ ---------- ---------
Earnings Measures $ 109 $ 57 $ 21 $ 0.45 $ 88 $ 43 $ 7 $ 0.16
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related
expenses 3 3 3 0.05 7 7 4 0.10
New aftermarket customer changeover costs 5 5 3 0.06 - - - -
Tax Adjustments - - (8) (0.17) - - - -
------ ------ --------- --------- ------ ------ ---------- ---------
Non-GAAP earnings measures $ 117 $ 65 $ 19 $ 0.39 $ 95 $ 50 $ 11 $ 0.26
====== ====== ========= ========= ====== ====== ========== =========
</Table>
-More-
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THIRD QUARTER 2007 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $3 million
pre-tax, or 5-cents per diluted share;
- Aftermarket customer changeover costs of $5 million pre-tax, or
6-cents per diluted share (customer changeover costs are expenses
incurred to replace competitors' products with Tenneco products);
- Tax benefits of $8 million, or 17-cents per diluted share, related to
a reduction in income tax rates in Germany and adjustments for prior
year income tax returns.
THIRD QUARTER 2006 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $7 million pre-tax
or 10-cents per diluted share.
Gross margin in the quarter was 15.6% versus 17.5% in third quarter 2006. Higher
substrate sales -- 28% of total revenue compared with 20% a year ago - accounted
for 1.7 percentage points of the decline. Favorable currency and lower
restructuring costs were offset by a shift toward a lower percentage of total
revenue generated by higher margin aftermarket business.
Total steel costs in the quarter increased $20 million year-over-year, which
Tenneco continues to offset with cost reductions, material substitutions, low
cost country sourcing and steel cost recovery from customers. The company
anticipates that its gross steel costs in the fourth quarter will increase
approximately $25 million, year-over-year.
SGA&E (selling, general, administrative & engineering) costs as a percent of
sales decreased to 8.4% from 9.4% a year ago as the rate of revenue growth far
outpaced that of SGA&E spending. SGA&E in the quarter includes increased
investments in engineering for technology development and future platform
launches as well as an expense of $5 million for aftermarket customer changeover
costs. Excluding third quarter 2007 changeover costs and restructuring costs in
the prior year, SGA&E is 8.1% versus 9.3% the prior year.
EBIT as a percent of revenue was 3.7% versus 3.9% a year ago. Higher substrate
sales more than accounted for the decrease. The company continues to see margin
benefits from advanced technology content on new large-volume OE emission
control platforms, which helps counter higher substrate sales and a shift to a
higher percentage of OE revenue.
Cash used by operating activities was $9 million versus $5 million generated by
operating activities a year ago, driven by a greater use of working capital to
support revenue growth, partially offset by higher earnings. The increase in the
use of working capital was primarily driven by higher inventories in the North
American OE emission control and aftermarket businesses. The majority of the
increase was higher inventories of catalytic converters sourced from South
Africa to supply operations in North America. Because of changes in OE
production schedules and the UAW strike at GM, the amount of inventory
supporting these platforms increased.
As expected, cash performance in the quarter was also impacted by higher tax
payments. In addition, the company acquired Combustion Components Associates'
ELIM-NOx(TM) technology, for $16 million. The company also made capital
expenditures in the third quarter in preparation for the 2008 launch of newly
awarded OE hot-end emission control business in North America, significant
business that was recently sourced to Tenneco by one of the company's largest
customers.
At quarter-end, debt net of cash balances was $1.333 billion, compared with
$1.294 billion a year ago. Cash balances at quarter-end were $203 million versus
$116 million the prior year. Total debt was $1.536 billion, versus
-3-
$1.410 billion at the end of third quarter 2006. At the end of the quarter, the
ratio of debt net of cash balances to adjusted LTM (last twelve months) EBITDA
was 2.9x, an improvement over 3.1x a year ago.
"We are pleased with our performance this quarter. Advanced technology continues
to fuel our top-line growth with strong OE revenue gains globally and we are
improving our EBIT results on value-added sales," said Gregg Sherrill, chairman
and CEO, Tenneco. "While our cash performance was not as strong year-over-year,
it reflects investments made to grow our businesses including a technology
investment, increased engineering spending and capital expenditures to prepare
for new emission control business in North America."
NORTH AMERICA
- OE revenue was $602 million, versus $307 million in third quarter
2006. Excluding substrate sales, revenue was $357 million, up 41%
year-over-year from $253 million. Industry production was up 3%. The
significant year-over-year increase was driven by Tenneco's presence
on diesel pick-up truck platforms like the Ford Super-Duty, GM
Silverado and Sierra, the Dodge heavy duty Ram and International's
medium duty commercial trucks as well as the Toyota Tundra and GM's
crossover vehicles.
- Aftermarket revenue was $132 million, compared with $134 million a
year ago. A decrease in emission control sales due to lower
replacement rates more than offset an increase in ride control sales.
- EBIT for North American operations was $24 million, up from $15
million a year ago. Adjusted for the items below, EBIT was $29 million
compared with $18 million a year ago. EBIT improvement was driven by
higher OE volumes including new OE ride control launches and more
efficient production on the company's diesel pick-up truck platforms
launched earlier this year. These volume increases more than offset
aftermarket customer changeover costs and the impact of the UAW strike
at General Motors.
- Third quarter 2007 EBIT includes $5 million in aftermarket changeover
costs and third quarter 2006 includes $3 million in restructuring
costs.
EUROPE, SOUTH AMERICA AND INDIA
- OE revenue was $478 million, versus $393 million in third quarter
2006. Excluding substrate sales and favorable currency, revenue was
$315 million compared with $263 million. Higher emission control and
ride control volumes and content on strong selling platforms like the
BMW 1 and 3 Series, Daimler Sprinter, Ford Mondeo and the Volvo V70,
drove the revenue gain and outpaced a 6% increase in industry
production.
- Aftermarket revenue was $108 million, versus $106 million a year ago.
Excluding favorable currency, revenue was $100 million. The decline
was driven by lower exhaust product sales.
- South America and India revenue increased to $86 million from $70
million a year ago. Excluding the impact of substrate sales and
favorable currency, revenue was $70 million compared with $61 million.
Higher OE volumes in South America drove the increase.
- EBIT for Europe, South America and India was $22 million compared with
$23 million a year ago. Third quarter 2007 EBIT includes $3 million in
restructuring expenses and third quarter 2006 EBIT includes $2 million
in restructuring expense. Adjusted EBIT was flat year-over-year.
- EBIT was impacted by a strike at the company's Wissembourg, France
facility due to announcing the intention to close the facility and an
industry-wide strike at its South Africa facilities; higher material
costs; and an increase in production costs at the Edenkoben, Germany
manufacturing facility as a result of a significant stamping equipment
breakdown resulting in temporary outsourcing. All of these issues more
than offset higher OE volumes and operating efficiencies in other
areas of the business.
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ASIA PACIFIC
- Asia revenue rose 51% to $99 million from $65 million a year ago.
Excluding substrate sales and favorable currency, revenue was $60
million versus $42 million a year ago. The increase was driven by
strong OE volumes in China, particularly with VW, GM and Brilliance.
- Australia revenue was $51 million compared with $46 million in third
quarter 2006. Excluding the impact of substrate sales and favorable
currency, revenue was $37 million, down from $41 million a year ago.
The decline was driven by lower OE volumes and aftermarket sales.
- Asia Pacific EBIT was $11 million, more than doubling the prior year
at $5 million. Third quarter 2006 EBIT includes $2 million in
restructuring costs. EBIT improvement was also driven by strong OE
volumes in China and the benefits of 2006 restructuring initiatives in
Australia.
"We don't expect global market conditions to change significantly through the
remainder of the year. While industry light vehicle production in North America
is projected to be down year-over-year in the fourth quarter, we believe
continued growth from our North American diesel pick-up truck platform launches
and a favorable platform mix will help us better manage these production
declines. We also believe the global aftermarket will remain relatively soft,"
said Sherrill. "The fourth quarter is typically our strongest quarter for
generating cash and we expect this trend to repeat itself this year. We also are
confident we have the third quarter issues in Europe behind us."
The company continues to generate growth with advanced technology, and by
capturing opportunities in emerging markets and with fast-growing customers.
Tenneco recently announced that its venture in Shanghai has won its first
commercial vehicle development contract to supply a SCR diesel aftertreatment
system with ELIM-NOx, the company's recently acquired advanced diesel emission
control technology. The contract is with a major domestic commercial vehicle
engine manufacturer in China and currently scheduled to launch in 2011.
ATTACHMENT 1
Statements of Income -- 3 Months
Statements of Income -- 9 Months
Balance Sheets
Statements of Cash Flows -- 3 Months
Statements of Cash Flows -- 9 Months
ATTACHMENT 2
Reconciliation of GAAP Net Income to EBITDA -- 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures -- 3 Months
Reconciliation of GAAP Net Income to EBITDA -- 9 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures -- 9 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenues -- 3 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenues -- 9 Months
Reconciliation of Non-GAAP Measures -- Ratio of Debt Net of Cash to Adjusted
EBITDA -- LTM
Reconciliation of GAAP to Non-GAAP Earnings Measure -- Adjusted SGA&E as a
Percent of Net Sales
CONFERENCE CALL
The company will host a conference call on Tuesday, October 30, 2007 at 10:00
a.m. EDT. The dial-in number is 888-790-1408 (domestic) or 773-756-0157
(international). The passcode is TENNECO. The call and accompanying slides will
be available on the financial section of the Tenneco web site at
www.tenneco.com. A recording of the call will be available one hour following
completion of the call on October 30, 2007. To access this recording, dial
-5-
800-509-8621 (domestic) or 203-369-3807 (international). The purpose of the call
is to discuss the company's operations for the quarter, as well as other matters
that may impact the company's outlook. A copy of the press release is available
on the financial and news sections of the Tenneco web site.
Tenneco is a $4.7 billion manufacturing company with headquarters in Lake
Forest, Illinois and approximately 19,000 employees worldwide. Tenneco is one of
the world's largest designers, manufacturers and marketers of emission control
and ride control products and systems for the automotive original equipment
market and the aftermarket. Tenneco markets its products principally under the
Monroe(R), Walker(R), Gillet(TM) and Clevite(R)Elastomer brand names.
This press release contains forward-looking statements. Words such as "hopes,"
"may," "expects," "anticipate," "will," and "outlook" and similar expressions
identify forward-looking statements. These forward-looking statements are based
on the current expectations of the company (including its subsidiaries). Because
these forward-looking statements involve risks and uncertainties, the company's
plans, actions and actual results could differ materially. Among the factors
that could cause these plans, actions and results to differ materially from
current expectations are:
(i) changes in automotive manufacturers' production rates and their actual and
forecasted requirements for the company's products;
(ii) the overall highly competitive nature of the automotive parts industry,
including pricing pressure from the company's OE customers and the loss of any
awards of business, or the failure to obtain new awards of business, from our
large customers, on which we are dependent for a substantial portion of our
revenues; for example, Ford, from whom the company derived more than 10% of its
2006 net sales, announced in 2006 a plan to significantly reduce the number of
its global suppliers. While the company currently believes that its relationship
with Ford will not be impacted by this plan, any significant reduction in sales
to Ford could have a material adverse effect on the company;
(iii) the company's resultant inability to realize the sales represented by its
awarded book of business which is based on anticipated pricing for the
applicable program over its life, and is subject to increases or decreases due
to changes in customer requirements, customer and consumer preferences, and the
number of vehicles actually produced by customers;
(iv) increases in the costs of raw materials, including the company's ability to
successfully reduce the impact of any such cost increases through materials
substitutions, cost reduction initiatives, customer recovery and other methods;
(v) the cyclical nature of the global vehicular industry, including the
performance of the global aftermarket sector, and changes in consumer demand and
prices, including longer product lives of automobile parts and the cyclicality
of automotive production and sales of automobiles which include the company's
products, and the potential negative impact on the company's revenues and
margins from such products;
(vi) the company's continued success in cost reduction and cash management
programs and its ability to execute restructuring and other cost reduction plans
and to realize anticipated benefits from these plans;
(vii) the general political, economic and competitive conditions in markets and
countries where the company and its subsidiaries operate, including the strength
of other currencies relative to the U.S. dollar and currency fluctuations and
other risks associated with operating in foreign countries;
(viii) governmental actions, including the ability to receive regulatory
approvals and the timing of such approvals;
(ix) changes in capital availability or costs, including increases in the
company's costs of borrowing (i.e., interest rate increases), the amount of the
company's debt, the ability of the company to access capital markets and the
credit ratings of the company's debt;
(x) the cost and outcome of existing and any future legal proceedings, and
compliance with changes in regulations, including environmental regulations;
(xi) workforce factors such as strikes or labor interruptions;
-6-
(xii) the company's ability to develop and profitably commercialize new products
and technologies, and the acceptance of such new products and technologies by
the company's customers and the market;
(xiii) further changes in the distribution channels for the company's
aftermarket products, further consolidations among automotive parts customers
and suppliers, and product warranty costs;
(xiv) changes by the Financial Accounting Standards Board or other accounting
regulatory bodies to authoritative generally accepted accounting principles or
policies;
(xv) acts of war, riots or terrorism, including, but not limited to the events
taking place in the Middle East, the current military action in Iraq and the
continuing war on terrorism, as well as actions taken or to be taken by the
United States or other governments as a result of further acts or threats of
terrorism, and the impact of these acts on economic, financial and social
conditions in the countries where the company operates; and
(xvi) 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/A for the year ended December 31, 2006. Further information can be
found on the company's web site at www.tenneco.com.
###
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
THREE MONTHS ENDED SEPTEMBER 30,
(Millions except per share amounts)
<Table>
<Caption>
2007 2006 (1)
----------- -----------
Net sales and operating revenues $ 1,556 $ 1,121
=========== ===========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 1,313 (a) 925 (d)
Engineering, Research and Development 30 24
Selling, General and Administrative 101 (b) 81 (d)
Depreciation and Amortization of Other Intangibles 52 45
----------- -----------
Total Costs and Expenses 1,496 1,075
=========== ===========
Loss on sale of receivables (3) (3)
Other Income (Expense) - -
----------- -----------
Total Other Expense (3) (3)
----------- -----------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 24 (b) 15 (d)
Europe, South America & India 22 (a) 23 (d)
Asia Pacific 11 5 (d)
----------- -----------
57 43
Less:
Interest expense (net of
interest capitalized) 32 30
Income tax expense - (c) 4
Minority interest 4 2
----------- -----------
Net Income 21 7
----------- -----------
Average common shares outstanding:
Basic 46.0 45.0
=========== ===========
Diluted 47.9 47.2
=========== ===========
Earnings per share of common stock:
Basic $ 0.47 $ 0.16
=========== ===========
Diluted $ 0.45 $ 0.16
=========== ===========
</Table>
(a) Includes restructuring and restructuring related charges of $3 million
before and after tax or $0.05 per share, all of which is recorded in cost of
sales in Europe, South America and India.
(b) Includes customer changeover costs of $5 million pre-tax, $3 million
after-tax or $0.06 per share.
(c) Includes an $8 million or $0.17 per share tax benefit, primarily related to
tax rate changes in Germany and adjustments for prior year tax returns.
(d) Includes restructuring and restructuring related charges of $7 million
pre-tax, $4 million after tax or $0.10 per share. Of the adjustment $6 million
is recorded in cost of sales and $1 million is recorded in SG&A. Geographically,
$3 million is recorded in North America, $2 million in Europe, South America and
India and $2 million is recorded in Asia Pacific.
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
NINE MONTHS ENDED SEPTEMBER 30,
(Millions except per share amounts)
2007 2006 (1)
---------- ----------
Net sales and operating revenues $ 4,619 $ 3,473
========== ==========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 3,869 (a) 2,817 (e)
Engineering, Research and Development 86 68
Selling, General and Administrative 300 (a)(b) 288 (e)(f)
Depreciation and Amortization of Other Intangibles 150 136
---------- ----------
Total Costs and Expenses 4,405 3,309
========== ==========
Loss on sale of receivables (8) (7)
Other Income 3 -
---------- ----------
Total Other Income/(Expense) (5) (7)
---------- ----------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 104 (a)(b) 85 (e)(f)
Europe, South America & India 80 (a) 65 (e)
Asia Pacific 25 7 (e)
---------- ----------
209 157
Less:
Interest expense (net of interest capitalized) 112 (c) 102
Income tax expense 22 (d) 17 (g)
Minority interest 8 4
---------- ----------
Net Income 67 34
---------- ----------
Average common shares outstanding:
Basic 45.7 44.5
========== ==========
Diluted 47.5 46.8
========== ==========
Earnings per share of common stock:
Basic $ 1.48 $ 0.78
========== ==========
Diluted $ 1.42 $ 0.74
========== ==========
(a) Includes restructuring and restructuring related charges of $7 million
pre-tax, $5 million after tax or $0.11 per share, of which $6 million is
recorded in cost of sales and $1 million is recorded in SG&A. Geographically, $1
million is recorded in North America, $6 million in Europe, South America and
India.
(b) Includes customer changeover costs of $5 million pre-tax, $3 million
after-tax or $0.06 per share.
(c) Includes a pre-tax expense of $5 million, $4 million after-tax or $0.07 per
share related to the write off of debt issuance costs from our debt refinancing
in March of 2007.
(d) Includes an $8 million or $0.18 per share tax benefit, primarily related to
tax rate changes in Germany and adjustments for prior year tax returns.
(e) Includes restructuring and restructuring related charges of $21 million
pre-tax, $13 million after tax or $0.31 per share, of which $19 million is
recorded in cost of sales and $2 million is recorded in SG&A. Geographically,
$10 million is recorded in North America, $6 million in Europe, South America
and India and $5 million in Asia Pacific.
(f) Includes customer changeover costs of $6 million pre-tax, $4 million
after-tax or $0.09 per share.
(g) Includes a $3 million or $0.06 per share tax benefit, primarily related to
resolution of tax issues.
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
September 30, 2007 December 31, 2006 (1)
------------------ ---------------------
Assets
Cash and Cash Equivalents $ 203 $ 202
Receivables, Net 914 (a) 595 (b)
Inventories 580 441
Other Current Assets 197 177
Investments and Other Assets 784 766
Plant, Property, and Equipment, Net 1,144 1,093
----------------- --------------------
Total Assets $ 3,822 $ 3,274
================= ====================
Liabilities and Shareholders' Equity
Short-Term Debt $ 33 $ 28
Accounts Payable 1,025 781
Accrued Taxes 37 49
Accrued Interest 29 33
Other Current Liabilities 262 228
Long-Term Debt 1,503 (b) 1,357 (b)
Deferred Income Taxes 83 107
Deferred Credits and Other Liabilities 404 437
Minority Interest 33 28
Total Shareholders' Equity 413 226
----------------- --------------------
Total Liabilities and Shareholders' Equity $ 3,822 $ 3,274
================= ====================
September 30, 2007 December 31, 2006
------------------ ---------------------
(a) Accounts receivable securitization programs $ 149 $ 133
(b) Long term debt composed of: September 30, 2007 December 31, 2006
------------------ ---------------------
Borrowings against revolving credit facilities $ 357 $ -
Term loan A (Due 2012) 150 -
Term loan B (Due 2010) - 356
10.25% senior notes (Due 2013) 486 487
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 10 14
----------------- --------------------
$ 1,503 $ 1,357
================= ====================
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2007 2006 (1)
-------- ---------
Operating activities:
Net income $ 21 $ 7
Adjustments to reconcile income
to net cash used by operating activities -
Depreciation and amortization of other intangibles 52 45
Stock option expense 3 1
Deferred income taxes (10) 2
(Gain)/loss on sale of assets, net 3 -
Changes in components of working capital -
(Inc.)/dec. in receivables 29 14
(Inc.)/dec. in inventories (42) (8)
(Inc.)/dec. in prepayments and other current assets (11) (7)
Inc./(dec.) in payables (46) (37)
Inc./(dec.) in taxes accrued (6) (8)
Inc./(dec.) in interest accrued (1) (1)
Inc./(dec.) in other current liabilities 7 3
Other (8) (6)
-------- -------
Net cash provided (used) by operating activities (9) 5
Investing activities:
Net proceeds from sale of assets 1 4
Cash payments for plant, property & equipment (41) (45)
Cash payments for net assets purchased from Combustion Components Associated, Inc., net (16) -
Cash payments for software-related intangibles (3) (3)
Investments and other (2) (2)
-------- -------
Net cash used by investing activities (61) (46)
-------- -------
Financing activities:
Issuance of common shares 2 3
Issuance of long-term debt - -
Debt issuance costs on long-term debt - -
Retirement of long-term debt (2) (1)
Net inc./(dec.) in revolver borrowings and short-term debt excluding current
maturities on long-term debt 87 32
Distributions to minority interest partners (2) -
Other 2 -
-------- -------
Net cash used by financing activities 87 34
-------- -------
Effect of foreign exchange rate changes on cash and
cash equivalents 18 -
-------- -------
Increase (Decrease) in cash and cash equivalents 35 (7)
Cash and cash equivalents, July 1 168 123
-------- -------
Cash and cash equivalents, September 30 $ 203 $ 116
======== =======
Cash paid during the period for interest $ 34 $ 36
Cash paid during the period for income taxes 17 11
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property and equipment 24 21
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2007 2006 (1)
---------- ----------
Operating activities:
Net income $ 67 $ 34
Adjustments to reconcile net income
to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 150 136
Stock option expense 7 5
Deferred income taxes (23) 9
Loss on sale of assets, net 8 2
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables (283) (86)
(Inc.)/dec. in inventories (113) (48)
(Inc.)/dec. in prepayments and other current assets (35) (44)
Inc./(dec.) in payables 195 54
Inc./(dec.) in taxes accrued (10) (8)
Inc./(dec.) in interest accrued (4) -
Inc./(dec.) in other current liabilities 26 8
Other (20) 3
---------- ----------
Net cash provided (used) by operating activities (35) 65
Investing activities:
Net proceeds from sale of assets 2 6
Cash payments for plant, property & equipment (116) (134)
Cash payments for net assets purchased from Combustion Components Associated, Inc., net (16) -
Cash payments for software-related intangibles (14) (9)
Investments and other - (1)
---------- ----------
Net cash used by investing activities (144) (138)
---------- ----------
Financing activities:
Issuance of common shares 6 13
Issuance of long-term debt 150 -
Debt issuance costs on long-term debt (6) -
Retirement of long-term debt (361) (3)
Net inc./(dec.) in revolver borrowings and short-term debt excluding current
maturities on long-term debt 360 29
Distributions to minority interest partners (3) (1)
Other 2 2
---------- ----------
Net cash provided by financing activities 148 40
---------- ----------
Effect of foreign exchange rate changes on cash and
cash equivalents 32 8
---------- ----------
Increase (Decrease) in cash and cash equivalents 1 (25)
Cash and cash equivalents, January 1 202 141
---------- ----------
Cash and cash equivalents, September 30 $ 203 $ 116
========== ==========
Cash paid during the period for interest $ 111 $ 103
Cash paid during the period for income taxes 45 $ 18
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property and equipment 24 21
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q3 2007
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
-------- -------- -------- --------
Net income $ 21
Minority interest 4
Income tax expense -
Interest expense (net of interest capitalized) 32
--------
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) $ 24 $ 22 $ 11 57
Depreciation and amortization of other intangibles 27 22 3 52
-------- -------- -------- --------
Total EBITDA(2) $ 51 $ 44 $ 14 $ 109
======== ======== ======== ========
Q3 2006 (3)
--------------------------------------------------------
North Europe Asia
America & SA Pacific Total
-------- -------- -------- --------
Net income $ 7
Minority interest 2
Income tax expense 4
Interest expense (net of interest capitalized) 30
--------
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) $ 15 $ 23 $ 5 43
Depreciation and amortization of other intangibles 22 20 3 45
-------- -------- -------- --------
Total EBITDA(2) $ 37 $ 43 $ 8 $ 88
======== ======== ======== ========
(1) Generally Accepted Accounting Principles
(2)EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco has presented EBITDA because it regularly reviews EBITDA
as a measure of the company's performance. In addition, Tenneco believes its
debt holders utilize and analyze our EBITDA for similar purposes. Tenneco 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.
(3) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q3 2007 Q3 2006 (5)
------------------------------------------ -----------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
--------- ------- ---------- --------- --------- ------- ---------- ---------
Earnings Measures $ 109 $ 57 $ 21 $ 0.45 $ 88 $ 43 $ 7 $ 0.16
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related
expenses 3 3 3 0.05 7 7 4 0.10
New aftermarket customer changeover
costs (4) 5 5 3 0.06 - - - -
Tax adjustments - - (8) (0.17) - - - -
-------- ------- ---------- --------- --------- ------- -------- ----------
Non-GAAP earnings measures $ 117 $ 65 $ 19 $ 0.39 $ 95 $ 50 $ 11 $ 0.26
======== ======= ========== ========= ========= ======= ======== ==========
Q3 2007
-----------------------------------------
North Europe Asia
America & SA Pacific Total
--------- ------- -------- ----------
EBIT $ 24 $ 22 $ 11 $ 57
Restructuring and restructuring related expenses - 3 - 3
New aftermarket customer changeover costs (4) 5 - - 5
--------- ------- -------- ----------
Adjusted EBIT $ 29 $ 25 $ 11 $ 65
========= ======= ======== ==========
Q3 2006 (5)
-----------------------------------------
North Europe Asia
America & SA Pacific Total
--------- ------- -------- ----------
EBIT $ 15 $ 23 $ 5 $ 43
Restructuring and restructuring related expenses 3 2 2 7
--------- ------- -------- ----------
Adjusted EBIT $ 18 $ 25 $ 7 $ 50
========= ======= ======== ==========
(1) Generally Accepted Accounting Principles
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings
measures primarily to reflect the results for the third quarters of 2007 and
2006 in a manner that allows a better understanding of the results of
operational activities separate from the financial impact of decisions made for
the long-term benefit of the company. Adjustments similar to the ones reflected
above have been recorded in earlier periods, and similar types of adjustments
can reasonably be expected to be recorded in future periods. Using only the
non-GAAP earnings measures to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of management
regarding the nature and classification of events and circumstances that
investors may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above to understand
and analyze the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate positive or
negative impact on the company's financial results in any particular period.
(3)EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco has presented EBITDA because it regularly reviews EBITDA
as a measure of the company's performance. In addition, Tenneco believes its
debt holders utilize and analyze our EBITDA for similar purposes. Tenneco 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.
(4) Represents costs associated with changing new aftermarket customers from
their prior suppliers to an inventory of our products. Although our aftermarket
business regularly incurs changeover costs, we specifically identify in the
table above the changeover costs that, based on the size or number of customers
involved, we believe are of an unusual nature for the quarter in which they were
incurred.
(5) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
YTD 2007
---------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ -------- ------
Net income $ 67
Minority interest 8
Income tax expense 22
Interest expense (net of interest capitalized) 112
------
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) $ 104 $ 80 $ 25 209
Depreciation and amortization of other intangibles 75 64 11 150
------ ------ ------ ------
Total EBITDA(2) $ 179 $ 144 $ 36 $ 359
====== ====== ====== ======
YTD 2006 (3)
---------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ -------- ------
Net income $ 34
Minority interest 4
Income tax expense 17
Interest expense (net of interest capitalized) 102
------
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) $ 85 $ 65 $ 7 157
Depreciation and amortization of other intangibles 68 59 9 136
------ ------ ------ ------
Total EBITDA(2) $ 153 $ 124 $ 16 $ 293
====== ====== ====== ======
(1) Generally Accepted Accounting Principles
(2)EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco has presented EBITDA because it regularly reviews EBITDA
as a measure of the company's performance. In addition, Tenneco believes its
debt holders utilize and analyze our EBITDA for similar purposes. Tenneco 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.
(3) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
YTD 2007 YTD 2006 (5)
------------------------------------------ ------------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
---------- ------ ---------- --------- --------- ------ ---------- ---------
Earnings Measures $ 359 $ 209 $ 67 $ 1.42 $ 293 $ 157 $ 34 $ 0.74
Adjustments (reflect non-GAAP measures):
Restructuring and restructuring related
expenses 7 7 5 0.11 21 21 13 0.31
Charges related to refinancing 4 0.07 - - - -
New aftermarket customer changeover
costs (4) 5 5 3 0.06 6 6 4 0.09
Tax adjustments (8) (0.18) - - (3) (0.06)
------ ------ ----- ------- ------ ----- ----- -------
Non-GAAP earnings measures $ 371 $ 221 $ 71 $ 1.48 $ 320 $ 184 $ 48 $ 1.08
====== ====== ===== ======= ====== ===== ===== =======
YTD 2007
----------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -------
EBIT $ 104 $ 80 $ 25 $ 209
Restructuring and restructuring related expenses 1 6 - 7
New aftermarket customer changeover costs (4) 5 - - 5
------- ----- ----- -------
Adjusted EBIT $ 110 $ 86 $ 25 $ 221
======= ===== ===== =======
YTD 2006 (5)
----------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -------
EBIT $ 85 $ 65 $ 7 $ 157
Restructuring and restructuring related expenses 10 6 5 21
New aftermarket customer changeover costs (4) 6 - - 6
------- ----- ----- -------
Adjusted EBIT $ 101 $ 71 $ 12 $ 184
======= ===== ===== =======
(1) Generally Accepted Accounting Principles
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings
measures primarily to reflect the results for 2007 and 2006 in a manner that
allows a better understanding of the results of operational activities separate
from the financial impact of decisions made for the long-term benefit of the
company. Adjustments similar to the ones reflected above have been recorded in
earlier periods, and similar types of adjustments can reasonably be expected to
be recorded in future periods. Using only the non-GAAP earnings measures to
analyze earnings would have material limitations because its calculation is
based on the subjective determinations of management regarding the nature and
classification of events and circumstances that investors may find material.
Management compensates for these limitations by utilizing both GAAP and non-GAAP
earnings measures reflected above to understand and analyze the results of the
business. The company believes investors find the non-GAAP information helpful
in understanding the ongoing performance of operations separate from items that
may have a disproportionate positive or negative impact on the company's
financial results in any particular period.
(3) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco has presented EBITDA because it regularly reviews EBITDA
as a measure of the company's performance. In addition, Tenneco believes its
debt holders utilize and analyze our EBITDA for similar purposes. Tenneco 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.
(4) Represents costs associated with changing new aftermarket customers from
their prior suppliers to an inventory of our products. Although our aftermarket
business regularly incurs changeover costs, we specifically identify in the
table above the changeover costs that, based on the size or number of customers
involved, we believe are of an unusual nature for the time period in which they
were incurred.
(5) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
<Table>
<Caption>
Q3 2007
----------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 126 $ - $ 126 $ - $ 126
Exhaust 476 2 474 245 229
------ ------ ------ ------ ------
Total North America Original Equipment 602 2 600 245 355
North America Aftermarket
Ride Control 92 - 92 - 92
Exhaust 40 - 40 - 40
------ ------ ------ ------ ------
Total North America Aftermarket 132 - 132 - 132
Total North America 734 2 732 245 487
Europe Original Equipment
Ride Control 97 9 88 - 88
Exhaust 381 30 351 124 227
------ ------ ------ ------ ------
Total Europe Original Equipment 478 39 439 124 315
Europe Aftermarket
Ride Control 52 4 48 - 48
Exhaust 56 4 52 - 52
------ ------ ------ ------ ------
Total Europe Aftermarket 108 8 100 - 100
South America & India 86 6 80 10 70
Total Europe, South America & India 672 53 619 134 485
Asia 99 6 93 33 60
Australia 51 7 44 7 37
------ ------ ------ ------ ------
Total Asia Pacific 150 13 137 40 97
Total Tenneco Inc. $1,556 $ 68 $1,488 $ 419 $1,069
====== ====== ====== ====== ======
<Caption>
Q3 2006 (1)
----------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 109 $ - $ 109 $ - $ 109
Exhaust 198 - 198 54 144
------ ------ ------ ------ ------
Total North America Original Equipment 307 - 307 54 253
North America Aftermarket
Ride Control 90 - 90 - 90
Exhaust 44 - 44 - 44
------ ------ ------ ------ ------
Total North America Aftermarket 134 - 134 - 134
Total North America 441 - 441 54 387
Europe Original Equipment
Ride Control 87 - 87 - 87
Exhaust 306 - 306 130 176
------ ------ ------ ------ ------
Total Europe Original Equipment 393 - 393 130 263
Europe Aftermarket
Ride Control 48 - 48 - 48
Exhaust 58 - 58 - 58
------ ------ ------ ------ ------
Total Europe Aftermarket 106 - 106 - 106
South America & India 70 - 70 9 61
Total Europe, South America & India 569 - 569 139 430
Asia 65 - 65 23 42
Australia 46 - 46 5 41
------ ------ ------ ------ ------
Total Asia Pacific 111 - 111 28 83
Total Tenneco Inc. $1,121 $ - $1,121 $ 221 $ 900
====== ====== ====== ====== ======
</Table>
Tenneco 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, substrate sales which the company previously referred to
as pass-through sales include precious metals pricing, which may be volatile.
Substrate sales occur when, at the direction of its OE customers, Tenneco
purchases catalytic converters or components thereof from suppliers, uses them
in its manufacturing processes and sells them as part of the completed system.
While Tenneco original equipment customers assume the risk of this volatility,
it impacts reported revenue. Excluding substrate sales removes this impact.
Tenneco uses this information to analyze the trend in revenues before these
factors. Tenneco believes investors find this information useful in
understanding period to period comparisons in the company's revenues.
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
<Table>
<Caption>
YTD 2007
---------------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 391 $ - $ 391 $ - $ 391
Exhaust 1,381 2 1,379 677 702
------ ------ ------ ------ ------
Total North America Original Equipment 1,772 2 1,770 677 1,093
North America Aftermarket
Ride Control 300 - 300 - 300
Exhaust 115 - 115 - 115
------ ------ ------ ------ ------
Total North America Aftermarket 415 - 415 - 415
Total North America 2,187 2 2,185 677 1,508
Europe Original Equipment
Ride Control 311 25 286 - 286
Exhaust 1,174 82 1,092 387 705
------ ------ ------ ------ ------
Total Europe Original Equipment 1,485 107 1,378 387 991
Europe Aftermarket
Ride Control 152 10 142 - 142
Exhaust 160 12 148 - 148
------ ------ ------ ------ ------
Total Europe Aftermarket 312 22 290 - 290
South America & India 237 13 224 28 196
Total Europe, South America & India 2,034 142 1,892 415 1,477
Asia 254 6 248 89 159
Australia 144 16 128 19 109
------ ------ ------ ------ ------
Total Asia Pacific 398 22 376 108 268
Total Tenneco Inc. $4,619 $ 166 $4,453 $1,200 $3,253
====== ====== ====== ====== ======
<Caption>
YTD 2006 (1)
---------------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 371 $ - $ 371 $ - $ 371
Exhaust 677 - 677 181 496
------ ------ ------ ------ ------
Total North America Original Equipment 1,048 - 1,048 181 867
North America Aftermarket
Ride Control 302 - 302 - 302
Exhaust 128 - 128 - 128
------ ------ ------ ------ ------
Total North America Aftermarket 430 - 430 - 430
Total North America 1,478 - 1,478 181 1,297
Europe Original Equipment
Ride Control 280 - 280 - 280
Exhaust 912 - 912 352 560
------ ------ ------ ------ ------
Total Europe Original Equipment 1,192 - 1,192 352 840
Europe Aftermarket
Ride Control 138 - 138 - 138
Exhaust 161 - 161 - 161
------ ------ ------ ------ ------
Total Europe Aftermarket 299 - 299 - 299
South America & India 201 - 201 24 177
Total Europe, South America & India 1,692 - 1,692 376 1,316
Asia 173 - 173 59 114
Australia 130 - 130 14 116
------ ------ ------ ------ ------
Total Asia Pacific 303 - 303 73 230
Total Tenneco Inc. $3,473 $ - $3,473 $ 630 $2,843
====== ====== ====== ====== ======
</Table>
Tenneco 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, substrate sales which the company previously referred to
as pass-through sales include precious metals pricing, which may be volatile.
Substrate sales occur when, at the direction of its OE customers, Tenneco
purchases catalytic converters or components thereof from suppliers, uses them
in its manufacturing processes and sells them as part of the completed system.
While Tenneco original equipment customers assume the risk of this volatility,
it impacts reported revenue. Excluding substrate sales removes this impact.
Tenneco uses this information to analyze the trend in revenues before these
factors. Tenneco believes investors find this information useful in
understanding period to period comparisons in the company's revenues.
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES (8)
Debt net of cash / Adjusted EBITDA - LTM
Unaudited
Quarter Ended September 30
--------------------------
2007 2006
------- -------
Total debt $1,536 $1,410
Cash and cash equivalents 203 116
Debt net of cash balances (1) 1,333 1,294
Adjusted LTM EBITDA 460 417
Ratio of net debt to adjusted LTM EBITDA (2) 2.9x 3.1x
Q4 06 Q1 07 Q2 07 Q3 07 Q3 07 LTM
----- ----- ----- ----- ---------
Net income 15 5 41 21 82
Minority interest 2 2 2 4 10
Income tax expense (12) 2 20 - 10
Interest expense (net of interest capitalized) 34 40 40 32 146
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 39 49 103 57 248
Depreciation and amortization of other intangibles 48 48 50 52 198
Total EBITDA(3) 87 97 153 109 446
Restructuring and restructuring related expenses 6 2 2 3 13
New Aftermarket customer changeover costs (4) - - - 5 5
Pension Curtailment (5) (7) - - - (7)
Reserve for receivables from former affiliate 3 - - - 3
---- ---- ---- ---- ----
Total Adjusted EBITDA (7) 89 99 155 117 460
==== ==== ==== ==== ====
Q4 05 Q1 06 Q2 06 Q3 06 Q3 06 LTM
----- ----- ----- ----- ---------
Net income 6 3 24 7 40
Minority interest 1 1 1 2 5
Income tax expense (2) - 13 4 15
Interest expense (net of interest capitalized) 34 37 35 30 136
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 39 41 73 43 196
Depreciation and amortization of other intangibles 43 44 47 45 179
Total EBITDA(3) 82 85 120 88 375
Restructuring and restructuring related expenses 5 6 8 7 26
New Aftermarket customer changeover costs (4) 10 - 6 - 16
---- ---- ---- ---- ----
Total adjusted EBITDA(7) 97 91 134 95 417
==== ==== ==== ==== ====
(1) Tenneco presents debt net of cash balances because management believes it is
a useful measure of Tenneco's credit position and progress toward reducing
leverage. The calculation is limited in that the company may not always be able
to use cash to repay debt on a dollar-for- dollar basis.
(2) Tenneco presents the above reconciliation of the ratio debt net of cash to
the last twelve months (LTM) of adjusted EBITDA to show trends that investors
may find useful in understanding the company's ability to service its debt. For
purposes of this calculation, adjusted LTM EBITDA is used as an indicator of the
company's performance over the most recent twelve months and debt net of cash is
presented as an indicator of our credit position and progress toward reducing
our financial leverage. LTM adjusted EBITDA is used to reflect annual values and
remove seasonal fluctuations. This reconciliation is provided as supplemental
information and not intended to replace the company's existing covenant ratios
or any other financial measures that investors may find useful in describing the
company's financial position. See notes (1), (3) and (4) for a description of
the limitations of using debt net of cash, EBITDA and adjusted EBITDA.
(3) EBITDA represents income before interest expense, income taxes, minority
interest and depreciation and amortization. EBITDA is not a calculation based
upon generally accepted accounting principles. The amounts included in the
EBITDA calculation, however, are derived from amounts included in the historical
statements of income data. In addition, EBITDA should not be considered as an
alternative to net income or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco Inc. has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco believes
its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco
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.
(4) Represents costs associated with changing new aftermarket customers from
their prior suppliers to an inventory of our products. Although our aftermarket
business regularly incurs changeover costs, we specifically identify in the
table above those changeover costs that, based on the size or number of
customers involved, we believe are of an unusual nature for the quarter in which
they were incurred.
(5) In August 2006, we announced that we were freezing future accruals under our
U.S. defined benefit pension plans for substantially all our U.S. salaried and
non-union hourly employees effective December 31, 2006. In lieu of those
benefits, we are offering additional benefits under defined contribution plan.
(6) The adjustment is related to our past administration of stock option grants
and represents an adjustment for several prior years.
(7) Adjusted EBITDA is presented in order to reflect the results in a manner
that allows a better understanding of operational activities separate from the
financial impact of decisions made for the long term benefit of the company and
other items impacting comparability between the periods. 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. 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.
(8) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Adjusted SGA&E as a Percent of Net Sales
Unaudited
Q3 2007 Q3 2006 (4)
--------- -----------
SGA&E SGA&E
--------- -----------
Net Sales $ 1,556 $ 1,121
SGA&E Expense $ 131 $ 105
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related expenses (1)
New aftermarket customer changeover costs (3) (5)
--------- -----------
Non-GAAP SGA&E Expense $ 126 $ 104
========= ===========
Adjusted SGA&E as a percentage of Net Sales 8.1% 9.3%
(1) Generally Accepted Accounting Principles
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings
measures primarily to reflect the results for the third quarters of 2007 and
2006 in a manner that allows a better understanding of the results of
operational activities separate from the financial impact of decisions made for
the long-term benefit of the company. Adjustments similar to the ones reflected
above have been recorded in earlier periods, and similar types of adjustments
can reasonably be expected to be recorded in future periods. Using only the
non-GAAP earnings measures to analyze earnings would have material limitations
because its calculation is based on the subjective determinations of management
regarding the nature and classification of events and circumstances that
investors may find material. Management compensates for these limitations by
utilizing both GAAP and non-GAAP earnings measures reflected above to understand
and analyze the results of the business. The company believes investors find the
non-GAAP information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate positive or
negative impact on the company's financial results in any particular period.
(3) Represents costs associated with changing new aftermarket customers from
their prior suppliers to an inventory of our products. Although our aftermarket
business regularly incurs changeover costs, we specifically identify in the
table above the changeover costs that, based on the size or number of customers
involved, we believe are of an unusual nature for the quarter in which they were
incurred.
(4) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005 and
2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006 and
September 30, 2006. The amounts presented in this table reflect the results of
the restatement.