EXHIBIT 99.1
news release (TENNECO LOGO)
Contacts: Jane Ostrander Leslie Hunziker
Media Relations Investor Relations
847 482-5607 847 482-5042
jostrander@tenneco.com lhunziker@tenneco.com
TENNECO REPORTS FIRST QUARTER RESULTS
- Cash flow from operations improves $73 million year-over-year
- European segment EBIT up 45%
- North American aftermarket improves; revenue up 8%
- Debt net of cash down $52 million year-over-year
LAKE FOREST, ILLINOIS, APRIL 27, 2006 - Tenneco Inc. (NYSE: TEN) reported first
quarter 2006 net income of $7 million, or 14-cents per diluted share, versus $7
million, or 16-cents per diluted share in first quarter 2005. Adjusted for the
items below, net income was $9 million, or 20-cents per diluted share, even with
a year ago (see the tables attached to the press release, which reconcile GAAP
results to non-GAAP results). This quarter's net income includes an expense of
$1 million for adopting the new accounting standard for expensing stock-based
compensation.
EBIT (earnings before interest, taxes and minority interest) was $42 million
compared with $44 million in first quarter 2005. On an adjusted basis, EBIT was
$49 million, up from $47 million a year ago. Currency had a $2 million negative
impact on EBIT in the quarter, versus first quarter 2005. EBITDA (EBIT before
depreciation and amortization) was $86 million, compared with $90 million the
previous year. Adjusted EBITDA was $93 million, even with first quarter 2005.
Currency had a $3 million negative impact on EBITDA in the quarter, versus first
quarter 2005.
Cash used by operations in the quarter was an outflow of $23 million, reflecting
the seasonality of the business, compared with an outflow of $96 million for the
same period one year ago. The $73 million improvement was driven by working
capital improvements and reflects year-over-year improvement of $19 million in
inventory and $46 million in cash from accounts payable.
The strong cash performance resulted in debt net of cash of $1.288 billion, an
improvement versus $1.340 billion a year ago. The ratio of debt net of cash
balances to adjusted LTM (Last Twelve Months) EBITDA was 3.1, down from 3.3 for
the same period last year. Total debt was $1.384 billion, down from $1.408
billion a year ago.
ADJUSTED FIRST QUARTER 2006 AND 2005 RESULTS:
Q1 2006 Q1 2005
------------------------------ ------------------------------
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
------ ---- ------ ----- ------ ---- ------ -----
Earnings Measures $86 $42 $ 7 $0.14 $90 $44 $ 7 $0.16
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related 6 6 4 0.09 3 3 2 0.04
expenses
Stock based compensation accounting
change 1 1 1 0.03 -- -- -- --
Tax adjustments -- -- (3) (0.06) -- -- -- --
--- --- --- ----- --- --- --- -----
Non-GAAP earnings measures $93 $49 $ 9 $0.20 $93 $47 $ 9 $0.20
=== === === ===== === === === =====
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First quarter 2006 adjustments:
- Restructuring related expenses of $6 million pre-tax, or 9-cents per
diluted share;
- Expense of $1 million, or 3-cents per diluted share, to adjust for new
stock-based compensation accounting standard and the impact of a
higher number of diluted shares outstanding due to the new accounting
standard.
- Tax benefit of $3 million, or 6-cents per diluted share, primarily
related to resolution of tax issues with former affiliates.
First quarter 2005 adjustments:
- Restructuring related expenses of $3 million pre-tax, or 4-cents per
diluted share.
Tenneco's first quarter revenue was $1.13 billion, up 3% year-over-year.
Excluding the negative impact of currency and substrate sales, quarterly revenue
increased 2%.
Tenneco's balanced global presence helped drive first quarter results with
earnings gains in Europe; stronger North American aftermarket performance on
higher ride control volumes; and increased OE revenues in China due to the
ramp-up of new platform launches. The company's North American OE revenues and
earnings were negatively impacted by the wind down on several emission control
vehicle platforms. Also, an increase in substrate sales in the company's
European OE emission control business had an impact on Europe's year-over-year
earnings improvement. Tenneco's ongoing efforts to improve manufacturing
efficiency and reduce costs partially offset the impact from these issues.
"Our earnings results reflect current North American market conditions including
the earlier than anticipated wind down on a large platform. Additionally,
unfavorable currency had a negative impact on our EBIT results and
year-over-year comparison. However, our geographical balance helped offset North
American OE market pressure as we continued to see improvement in our European
operations, North American aftermarket and in China," said Mark P. Frissora,
chairman, CEO and president, Tenneco. "We are also pleased with the momentum we
maintained on key strategies - improving cash performance, reducing debt and
controlling costs - as we prepare for significant new business launches
scheduled for later this year."
The company's gross margin was 18.6%. The decrease from 19.3% in first quarter
2005 was driven by an increase in substrate sales, which, on average,
carry lower margins; timing on recovering costs on some steel increases; $7
million in gross material cost increases; $3 million in restructuring costs; and
$1 million in higher fuel surcharges, all of which offset improved manufacturing
performance from Lean and Six Sigma efforts.
Sales, General, Administrative and Engineering (SGA&E) expense in the quarter
improved to 10.9% of sales from 11.1% of sales for the prior year as the company
benefited from spending controls and previously announced restructuring. SGA&E
on an LTM basis was 10.5%, improved from 11.4% for the same period a year ago.
NORTH AMERICA
- North American OE revenue was $374 million, slightly down from revenue
of $375 million a year ago. Excluding the impact of currency and
substrate sales, revenue was $305 million, compared with $308 million
in first quarter 2005. (Tables to the press release reconcile GAAP
revenues to revenues adjusted for substrate sales and currency.)
Higher ride control revenues were offset by lower exhaust volumes,
primarily due to the wind down on several exhaust platforms.
- North American aftermarket revenue increased 8% to $141 million from
$130 million the previous year, driven by stronger ride control unit
sales and higher pricing in both product lines.
- EBIT for North American operations was $34 million, down from $37
million in first quarter 2005. Volume declines on key exhaust
platforms more than offset improved manufacturing efficiencies and
cost reduction
-3-
efforts. EBIT results reflect a negative currency impact of $1 million
and $1 million in costs associated with preparing for new business
launches later in the year.
- EBIT for first quarter 2006 includes $3 million in restructuring and
$1 million for adopting the new accounting standard for stock-based
compensation. First quarter 2005 EBIT includes $2 million in
restructuring.
EUROPE, SOUTH AMERICA, INDIA
- European OE revenue was $387 million up from $381 a year ago. Adjusted
for currency, substrate sales and a change in reporting for a customer
contract, revenue was up 5% from the previous year, driven by higher
volumes in both exhaust and ride control product lines.
- European aftermarket revenue declined to $75 million, versus $82
million the previous year. Excluding the impact of currency, revenue
was $81 million compared with $82 million in first quarter 2005. The
decline was primarily due to slightly lower exhaust unit sales, which
offset higher ride control sales and price increases in the exhaust
business.
- South America and India revenue was $65 million, up from $51 million a
year ago. South America drove the increase with higher OE volumes and
a slight increase in aftermarket ride control sales. Adjusting for
currency and substrate sales, revenue was $52 million, up from $47
million the prior year.
- EBIT for Europe, South America and India was $8 million, up from $5
million in first quarter 2005 as a result of improved manufacturing
performance and continued benefits from restructuring and cost
reduction efforts. EBIT results reflect a negative currency impact of
$1 million.
- EBIT included $1 million in restructing costs in both first quarter
2006 and 2005.
ASIA PACIFIC
- Asia operations generated $50 million in revenue, a 45% increase from
$35 million a year ago. Newly launched platforms and 69% higher OE
volumes in China drove the improvement. Excluding substrate sales,
revenue was $33 million compared with $22 million a year ago.
- Australian revenue was $40 million versus $47 million the prior year,
largely the result of lower volumes due to the weakening Australian OE
market and lower aftermarket sales. Excluding the impact of currency
and substrate sales, revenue was down 11%.
- Asia Pacific EBIT was breakeven, versus $2 million a year ago.
Adjusted for $2 million in restructuring in first quarter 2006, EBIT
was flat year-over-year. Stronger OE volumes in China offset OE volume
declines and lower aftermarket sales in Australia.
"Looking ahead, we are cautiously optimistic as we manage this year and prepare
for significant growth in 2007," said Frissora. "We expect year-over-year
profitability improvements to continue in our European operations as well as in
the North American aftermarket. We will also begin to see early benefits in our
North American OE businesses from significant new platforms scheduled to launch
later this year, and our operations in China are expected to continue to grow."
Attachment 1:
Statements of Income - 3 Months
Balance Sheet
Statements of Cash Flow
Attachment 2:
Reconciliation of GAAP Net Income to EBITDA - 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenue Measures - 3 Months
Reconciliation of Non-GAAP Measures - Ratio of Debt Net of Cash to Adjusted
EBITDA- LTM
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Reconciliation of Non-GAAP Measures - SGA&E as Percent of Sales - LTM
CONFERENCE CALL
The company will host a conference call on Thursday, April 27, 2006 at 10:30
a.m. EDT. The dial in number is 888-790-1408 (domestic) or 773-756-0157
(international). The pass code 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 April 27, 2006. To access this recording, dial
866-422-8164 (domestic) or 203-369-0833 (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.
2006 ANNUAL MEETING
Tenneco's annual meeting of shareholders will be on Tuesday, May 9, 2006 at
10:00 a.m. CDT. The meeting will be held at the corporate headquarters, 500
North Field Drive, Lake Forest, Illinois. The meeting will also be available by
webcast. To access the listen-only annual meeting webcast, go to the financial
section of the company's website at least 15 minutes prior to the meeting to
register and download any necessary software. The webcast will include an audio
transmission of the proceedings and slides used in the speaker presentation.
Voting will not be available electronically through the webcast.
Tenneco is a $4.4 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(R) and Clevite(R)Elastomer brand names. Among its
products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R)
shock absorbers, Walker(R) Quiet-Flow(R) mufflers, Dynomax(R) performance
exhaust products, and Clevite(R) Elastomer noise, vibration and harshness
control components.
This press release contains forward-looking statements. Words such as
"estimates," "continue," "will," "plans," "outlook" and "goal" 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 12% of its 2005 net
sales, recently announced 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
-5-
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;
(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 for the year ended December 31, 2005. 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 MARCH 31,
(Millions except share and per share amounts)
2006 2005
--------- ---------
Net sales and operating revenues $ 1,132 $ 1,101
========= =========
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 921(a) 888(d)
Engineering, Research and Development 22 24
Selling, General and Administrative 101(b) 98(d)
Depreciation and Amortization of Other Intangibles 44 46
--------- ---------
Total Costs and Expenses 1,088 1,056
========= =========
Loss on sale of receivables (1) --
Other Expense (1) (1)
--------- ---------
Total Other Expense (2) (1)
--------- ---------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 34(a)(b) 37(d)
Europe & South America 8(a) 5(d)
Asia Pacific --(a) 2
--------- ---------
42 44
Less:
Interest expense (net of
interest capitalized) 34 32
Income tax expense --(c) 4
Minority interest 1 1
--------- ---------
Net Income 7 7
--------- ---------
Average common shares outstanding:
Basic 43.9 42.7
========= =========
Diluted 46.7(b) 45.0
========= =========
Earnings per share of common stock:
Basic $ 0.15 $ 0.17
========= =========
Diluted $ 0.14(b) $ 0.16
========= =========
(a) Includes restructuring and restructuring related charges of $6 million
pre-tax, $4 million after tax or $0.09 per share, all of which is recorded in
cost of sales. Geographically, $3 million is recorded in North America, $1
million in Europe and South America and $2 million is recorded in Asia Pacific.
(b) Includes $1 million pre-tax and after tax increase in stock compensation
expense associated with the adoption of FAS 123R. Adoption of this accounting
standard also increased the calculated number of diluted shares by 0.6 million
for a combined impact of $0.03 per share.
(c) Includes a $3 million or $0.06 per share tax benefit, primarily related to
resolution of tax issues with former affiliates.
(d) Includes restructuring and restructuring related charges of $3 million
pre-tax, $2 million after tax or $0.04 per share. Of the charges, $2 million is
recorded in cost of sales and the remaining $1 million is in SG&A.
Geographically, $2 million is recorded in North America and $1 million in Europe
and South America.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
March 31, 2006 December 31, 2005
-------------- -----------------
Assets
Cash and Cash Equivalents $ 96 $ 141
Receivables, Net 628(a) 543(a)
Inventories 392 360
Other Current Assets 161 153
Investments and Other Assets 703 700
Plant, Property, and Equipment, Net 1,052 1,043
--------- ---------
Total Assets $ 3,032 $ 2,940
========= =========
Liabilities and Shareholders' Equity
Short-Term Debt $ 32 $ 22
Accounts Payable 729 651
Accrued Taxes 43 31
Accrued Interest 33 38
Other Current Liabilities 212 237
Long-Term Debt 1,352(b) 1,356(b)
Deferred Income Taxes 81 86
Deferred Credits and Other Liabilities 367 366
Minority Interest 26 24
Total Shareholders' Equity 157 129
--------- ---------
Total Liabilities and Shareholders' Equity $ 3,032 $ 2,940
========= =========
March 31, 2006 December 31, 2005
-------------- -----------------
(a) Accounts receivable securitization programs $ 147 $ 129
(b) Long term debt composed of: March 31, 2006 December 31, 2005
-------------- -----------------
Term loan B (Due 2010) $ 356 $ 356
10.25% senior notes (Due 2013) 488 489
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 8 11
--------- ---------
$ 1,352 $ 1,356
========= =========
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
THREE MONTHS ENDED
MARCH 31,
--------------------
2006 2005
------- -------
Operating activities:
Net income $ 7 $ 7
Adjustments to reconcile income
to net cash used by operating activities -
Depreciation and amortization of other intangibles 44 46
Stock option expense 1 --
Deferred income taxes 5 (4)
Loss on sale of assets, net 1 --
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables (82) (78)
(Inc.)/dec. in inventories (27) (46)
(Inc.)/dec. in prepayments and other current assets (14) (23)
Inc./(dec.) in payables 67 21
Inc./(dec.) in taxes accrued (2) --
Inc./(dec.) in interest accrued (4) (3)
Inc./(dec.) in other current liabilities (18) (8)
Other (1) (8)
------- -------
Net cash used by operating activities (23) (96)
Investing activities:
Net proceeds from sale of assets -- 1
Expenditures for plant, property & equipment (38) (32)
Acquisition of business -- (11)
Expenditures for software-related intangibles (3) (3)
Investments and other -- 3
------- -------
Net cash used by investing activities (41) (42)
------- -------
Financing activities:
Issuance of common shares 8 2
Retirement of long-term debt (1) (41)
Net inc./(dec.) in short-term debt excluding current
maturities on long-term debt 9 33
Other -- 1
------- -------
Net cash provided (used) by financing activities 16 (5)
------- -------
Effect of foreign exchange rate changes on cash and
cash equivalents 3 (3)
------- -------
Decrease in cash and cash equivalents (45) (146)
Cash and cash equivalents, January 1 141 214
------- -------
Cash and cash equivalents, March 31 $ 96 $ 68
======= =======
Cash paid during the period for interest $ 34 $ 31
Cash paid during the period for income taxes -- $ 7
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q1 2006
-------------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
Net income $ 7
Minority interest 1
Income tax expense --
Interest expense (net of interest capitalized) 34
-------
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) $ 34 $ 8 $ -- 42
Depreciation and amortization of other intangibles 22 19 3 44
------- ------- ----- -------
Total EBITDA(2) $ 56 $ 27 $ 3 $ 86
======= ======= ======= =======
<Table>
<Caption>
Q1 2005
-------------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
Net income $ 7
Minority interest 1
Income tax expense 4
Interest expense (net of interest capitalized) 32
-------
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) $ 37 $ 5 $ 2 44
Depreciation and amortization of other intangibles 23 20 3 46
------- ------- ------- -------
Total EBITDA(2) $ 60 $ 25 $ 5 $ 90
======= ======= ======= =======
(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.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
<Table>
<Caption>
Q1 2006 Q1 2005
---------------------------------------- ---------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
---------- ------- ---------- --------- ---------- ------- ---------- ---------
Earnings Measures $ 86 $ 42 $ 7 $ 0.14 $ 90 $ 44 $ 7 $ 0.16
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring
related expenses 6 6 4 0.09 3 3 2 0.04
Stock based compensation
accounting change 1 1 1 0.03 -- -- -- --
Tax adjustments -- -- (3) (0.06) -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Non-GAAP earnings measures $ 93 $ 49 $ 9 $ 0.20 $ 93 $ 47 $ 9 $ 0.20
======= ======= ======= ======= ======= ======= ======= =======
Q1 2006
-------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
EBIT $ 34 $ 8 $ -- $ 42
Restructuring and restructuring related expenses 3 1 2 6
Stock based compensation accounting change 1 -- -- 1
------- ------- ------- -------
Adjusted EBIT $ 38 $ 9 $ 2 $ 49
======= ======= ======= =======
Q1 2005
-------------------------------------
North Europe Asia
America & SA Pacific Total
------- ------- ------- -------
EBIT $ 37 5 $ 2 $ 44
Restructuring and restructuring related expenses 2 1 -- 3
------- ------- ------- -------
Adjusted EBIT $ 39 $ 6 $ 2 $ 47
======= ======= ======= =======
(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 first quarters of 2006 and
2005 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.
In addition, 2006 includes adjustments to eliminate the additional stock based
compensation expense and the impact on the diluted shares calculation associated
with FAS 123R, which the company adopted in 2006. The company plans to continue
making this adjustment for the remainder of 2006 to enhance investors'
understanding of the comparability between 2006 and 2005 results. See also
Attachment 1, Statements of Income footnote (b).
(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.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Q1 2006
-------------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- -------- -------- -------------
North America Original Equipment
Ride Control $ 131 $ -- $ 131 $ -- $ 131
Exhaust 243 3 240 66 174
-------- -------- -------- -------- --------
Total North America Original Equipment 374 3 371 66 305
North America Aftermarket
Ride Control 101 -- 101 -- 101
Exhaust 40 -- 40 -- 40
-------- -------- -------- -------- --------
Total North America Aftermarket 141 -- 141 -- 141
Total North America 515 3 512 66 446
Europe Original Equipment
Ride Control 95(a) (6) 101 -- 101
Exhaust 292 (19) 311 111 200
-------- -------- -------- -------- --------
Total Europe Original Equipment 387 (25) 412 111 301
Europe Aftermarket
Ride Control 36 (2) 38 -- 38
Exhaust 39 (4) 43 -- 43
-------- -------- -------- -------- --------
Total Europe Aftermarket 75 (6) 81 -- 81
South America & India 65 6 59 7 52
Total Europe, South America & India 527 (25) 552 118 434
Asia 50 -- 50 17 33
Australia 40 (2) 42 4 38
-------- -------- -------- -------- --------
Total Asia Pacific 90 (2) 92 21 71
Total Tenneco Inc. $ 1,132 $ (24) $ 1,156 $ 205 $ 951
======== ======== ======== ======== ========
Q1 2005
-------------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- -------- -------- -------------
North America Original Equipment
Ride Control $ 127 $ -- $ 127 $ -- $ 127
Exhaust 248 -- 248 67 181
-------- -------- -------- -------- --------
Total North America Original Equipment 375 -- 375 67 308
North America Aftermarket
Ride Control 91 -- 91 -- 91
Exhaust 39 -- 39 -- 39
-------- -------- -------- -------- --------
Total North America Aftermarket 130 -- 130 -- 130
Total North America 505 -- 505 67 438
Europe Original Equipment
Ride Control 109(a) -- 109 -- 109
Exhaust 272 -- 272 79 193
-------- -------- -------- -------- --------
Total Europe Original Equipment 381 -- 381 79 302
Europe Aftermarket
Ride Control 37 -- 37 -- 37
Exhaust 45 -- 45 -- 45
-------- -------- -------- -------- --------
Total Europe Aftermarket 82 -- 82 -- 82
South America & India 51 -- 51 4 47
Total Europe, South America & India 514 -- 514 83 431
Asia 35 -- 35 13 22
Australia 47 -- 47 4 43
-------- -------- -------- -------- --------
Total Asia Pacific 82 -- 82 17 65
Total Tenneco Inc. $ 1,101 $ -- $ 1,101 $ 167 $ 934
======== ======== ======== ======== ========
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.
(a) Beginning in the second quarter of 2005, Tenneco changed its accounting for
a customer contract in its European OE Ride Control unit. The cost of sales for
this contract are now netted against the revenues, reducing reported revenues
and cost of sales. In the first quarter of 2005, Tenneco Inc. recorded $15
million in revenues for this contract.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
Debt net of cash / Adjusted EBITDA - LTM
Quarter Ended March 31
-----------------------------
2006 2005
------------ ------------
Total debt $ 1,384 $ 1,408
Cash and cash equivalents 96 68
Debt net of cash balances(1) 1,288 1,340
Adjusted LTM EBITDA 414 404
Ratio of net debt to adjusted LTM EBITDA(2) 3.1x 3.3x
Q2 05 Q3 05 Q4 05 Q1 06 Q1 06 LTM
---------- ---------- ---------- ---------- ----------
Net income 33 10 8 7 58
Minority interest -- -- 1 1 2
Income tax expense 18 7 (4) -- 21
Interest expense (net of interest capitalized) 32 33 33 34 132
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 83 50 38 42 213
Depreciation and amortization of other intangibles 44 44 43 44 175
Total EBITDA(3) 127 94 81 86 388
Restructuring and restructuring related expenses 2 2 5 6 15
Stock based compensation accounting change -- -- -- 1 1
New Aftermarket customer changeover costs -- -- 10 -- 10
---------- ---------- ---------- ---------- ----------
Total Adjusted EBITDA(4) 129 96 96 93 414
========== ========== ========== ========== ==========
Q2 04 Q3 04 Q4 04 Q1 05 Q1 05 LTM
---------- ---------- ---------- ---------- ----------
Net income 30 6 (19) 7 24
Minority interest 2 1 -- 1 4
Income tax expense 10 2 (35) 4 (19)
Interest expense (net of interest capitalized) 34 35 75 32 176
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 76 44 21 44 185
Depreciation and amortization of other intangibles 44 42 46 46 178
Total EBITDA(3) 120 86 67 90 363
Restructuring and restructuring related expenses 5 2 28 3 38
New Aftermarket customer changeover costs 2 -- -- -- 2
Consulting fees indexed to stock price 1 -- -- -- 1
---------- ---------- ---------- ---------- ----------
Total adjusted EBITDA(4) 128 88 95 93 404
========== ========== ========== ========== ==========
(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) 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. In addition, 2006 includes adjustments to
eliminate the additional stock based compensation expense and the impact on the
diluted shares calculation associated with FAS 123R, which the company adopted
in 2006. The company plans to continue making this adjustment for the remainder
of 2006 to enhance investors' understanding of the comparability between 2006
and 2005 results. See also Attachment 1, Statements of Income footnote (b).
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
SGA&E as Percent of Sales - LTM
Q2 05 Q3 05 Q4 05 Q1 06 Q1 06 LTM
---------- ---------- ---------- ---------- ----------
Revenues 1,180 1,096 1,064 1,132 4,472
Engineering, research, and development 18 22 19 22 81
Selling, general, and administrative 93 96 98 101 388
---------- ---------- ---------- ---------- ----------
Total SGA&E 111 118 117 123 469
----------
SGA&E as Percent of Sales 10.5%
==========
Q2 04 Q3 04 Q4 04 Q1 05 Q1 05 LTM
---------- ---------- ---------- ---------- ----------
Revenues 1,113 996 1,071 1,101 4,281
Engineering, research, and development 19 20 20 24 83
Selling, general, and administrative 100 93 115 98 406
---------- ---------- ---------- ---------- ----------
Total SGA&E 119 113 135 122 489
----------
SGA&E as Percent of Sales 11.4%
==========
Tenneco presents the above reconciliation of the last twelve months (LTM) of
selling, general, administrative and engineering (SGA&E) expenses as a
percentage of revenues to provide information investors may find useful in
measuring the company's progress toward its goals to lower selected operating
expenses supported by existing revenues. LTM values are used to highlight annual
trends and remove seasonal fluctuations. This reconciliation is provided as
supplemental information and not as a replacement for any other financial ratios
that investors may find useful for measuring the company's operating
performance.