Exhibit 99.1
TENNECO REPORTS STRONG SECOND QUARTER RESULTS
- NET INCOME UP 67%, EPS UP 65% YEAR-OVER-YEAR
- EBIT UP 39%; EBITDA UP 26% YEAR-OVER-YEAR
- RECORD HIGH QUARTERLY REVENUE OF $1.7 BILLION
Lake Forest, Illinois, July 26, 2007 - Tenneco (NYSE: TEN) reported second
quarter 2007 net income of $40 million, or 84-cents per diluted share, a
significant increase from $24 million, or 51-cents per diluted share in second
quarter 2006. Adjusted for the items below, net income was $41 million, or
87-cents per diluted share, versus $33 million, or 71-cents per diluted share
one year ago (the tables attached to the press release reconcile GAAP results to
non-GAAP results). The comparative 2006 financial results reflect the
preliminary results of the restatement discussed in the company's July 23, 2007
press release. Final 2006 results will be reflected in Tenneco's restated
financial statements that it expects to file in August 2007.
EBIT (earnings before interest, taxes and minority interest) increased to $102
million, from $74 million a year ago. Adjusted EBIT was $104 million, compared
with $88 million in second quarter 2006. Growth in global sales on OE platforms
featuring advanced technology content and operational efficiencies drove the
year-over-year profit improvement.
EBITDA (EBIT before depreciation and amortization) was $152 million, up from
$121 million and adjusted EBITDA rose to $154 million from $135 million for the
same period last year.
Second quarter revenue increased 36% to $1.7 billion versus $1.2 billion a year
ago. Substrate sales were $460 million, up from $213 million in second quarter
2006. Excluding substrate sales and favorable currency of $49 million, revenue
was up 16% to $1.16 billion from $1.0 billion. The revenue growth was driven by
volume increases on large North American OE emission control platforms as well
as continued revenue growth in the European OE businesses and in expanding
markets like China.
ADJUSTED SECOND QUARTER 2007 AND 2006 RESULTS:
Q2 2007 Q2 2006
----------------------------------------- -----------------------------------------
EBITDA EBIT Net Income Per Share EBITDA EBIT Net Income Per Share
--------- ---- ---------- --------- --------- ---- ---------- ---------
Earnings Measures $152 $102 $40 $0.84 $121 $74 $24 $0.51
Adjustments (reflects non-GAAP
measures):
Restructuring and restructuring
related expenses 2 2 1 0.03 8 8 5 0.12
New aftermarket customer changeover
costs -- -- -- -- 6 6 4 0.08
---- ---- --- ----- ---- --- --- -----
Non-GAAP earnings measures $154 $104 $41 $0.87 $135 $88 $33 $0.71
==== ==== === ===== ==== === === =====
1
SECOND QUARTER 2007 ADJUSTMENTS:
- Restructuring and restructuring related expense of $2 million pre-tax,
or 3-cents per diluted share.
SECOND QUARTER 2006 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $8 million
pre-tax, or 12-cents per diluted share;
- Aftermarket customer changeover costs of $6 million pre-tax, or
8-cents per diluted share.
"We are very pleased with our results this quarter. In North America, the
ramp-up and execution on our large diesel after treatment truck business is
reaching the production levels we had anticipated," said Gregg Sherrill,
chairman and CEO, Tenneco. "In addition, we saw robust performance in Europe and
China, which reflects Tenneco's strong geographic position."
Gross margin in the quarter was 17.2% versus 20.5% in second quarter 2006. The
decline was driven by substantially higher substrate sales, primarily from
volume increases on diesel truck platforms in North America, lower OE ride
control sales for commercial vehicles due to the significant production decline
in that industry, and a shift toward a lower percentage of total revenue
generated by higher margin aftermarket business.
Total steel costs in the quarter increased $18 million year-over-year. The
company offset these increases with cost reductions, material substitutions, low
cost country sourcing and steel price recovery efforts with aftermarket and OE
customers. The company has completed nearly all its customer steel recovery
negotiations.
SGA&E (selling, general, administrative & engineering) expenses as a percent of
sales decreased to 8.1% from 10.5% at the end of second quarter 2006. The
company held overhead costs flat while increasing revenues and continuing to
invest in engineering and technology development for its OE emission control and
ride control businesses globally.
EBIT as a percent of revenue in the quarter was up year-over-year. The margin
benefit from advanced technology content on new large-volume OE platform
launches, cost reduction efforts and an improvement in SGA&E as a percent of
sales offset the unfavorable margin impact of higher substrate sales and the
shift to a higher percentage of OE revenues.
Interest expense in the quarter was $40 million, up from $35 million a year ago.
The requirement to mark Tenneco fixed to floating interest rate swaps to market
increased interest expense by $3 million in second quarter 2007, versus an
increased expense of $2 million in the second quarter 2006. A higher level of
borrowings in the quarter drove the remainder of the interest expense increase.
2
Cash provided by operating activities was an inflow of $67 million, versus $73
million in second quarter 2006. Cash used for working capital was $14 million
versus $10 million a year ago despite higher revenues in second quarter 2007.
At quarter-end, debt net of cash balances was $1.282 billion, compared with
$1.256 billion a year ago. Total debt was $1.450 billion versus $1.379 billion
at the end of second quarter 2006, driven by working capital investments to
service a higher level of revenues. At quarter-end, the ratio of debt net of
cash balances to adjusted LTM (last twelve months) EBITDA was 2.9X, improved
from 3.0X a year ago.
NORTH AMERICA
- North America OE revenue increased 80% to $661 million from $367
million a year ago. Industry production was down 3% in the quarter.
Excluding substrate sales, revenue was $395 million, up 29%
year-over-year from $306 million. Higher volumes on the Toyota Tundra,
GM cross-over vehicles and the ramp-up on significant new diesel
emission control platforms including the Ford Super-Duty, the GM
Duramax engines, the Dodge heavy-duty RAM and International's
medium-duty diesel trucks drove the increase.
- North America aftermarket revenue was down 5% to $149 million from
$156 million a year ago. Softer market conditions for both ride and
emission control products were partially offset by price increases to
recover steel costs.
- EBIT for North American operations was $49 million, versus $37 million
a year ago. Adjusted for the items below, EBIT was $49 million, versus
$47 million in second quarter 2006. Strong OE emission control volumes
and manufacturing efficiencies, particularly the efficient ramp-up on
key emission control truck platforms, offset lower aftermarket volumes
and higher material costs.
- Second quarter 2006 EBIT includes $4 million in restructuring and $6
million for customer changeover costs.
EUROPE, SOUTH AMERICA AND INDIA
- Europe OE revenue was $513 million, up 25% from $412 million in second
quarter 2006. Industry production increased 4% in the quarter.
Excluding $29 million in favorable currency and higher substrate
sales, revenue was $347 million, up 18% compared with $292 million a
year ago. The increase was largely driven by increased volumes on
emission control platforms and new ride control model launches.
- Europe aftermarket revenue increased 5% to $124 million from $118
million the previous year. Excluding favorable currency, revenue was
relatively flat year-over-year. Stronger ride control volumes were
offset by lower emission control product sales.
- South America and India revenue increased to $81 million from $66
million the previous year, driven by favorable currency and stronger
volumes in South America. Excluding currency and substrate sales,
revenue was $65 million, versus $58 million a year ago, an increase of
12%.
- EBIT for Europe, South America and India increased 29% to $45 million,
versus $35 million a year ago. Stronger OE volumes and operating
efficiency improvements more than offset the impact of higher material
costs. Favorable currency had a $3 million impact on EBIT. Adjusted
for
3
the items below, EBIT was $47 million, versus $38 million in second
quarter 2006.
- Second quarter 2007 EBIT includes $2 million in restructuring costs
and second quarter 2006 EBIT includes $3 million in restructuring
costs.
ASIA PACIFIC
- Asia revenue was up 48% to $85 million, compared with $58 million a
year ago. Excluding substrate sales, Asia revenue was up 43% to $55
million from $39 million a year ago. The China operations drove the
increase with strong OE volumes and a 57% year-over-year revenue gain.
- Australia revenue increased 14% to $50 million from $44 million in
second quarter 2006. Excluding favorable currency and substrate sales,
revenue was $37 million, down from $39 million a year ago.
- Asia Pacific EBIT was $8 million, up from $2 million in second quarter
2006, driven by OE volume growth in China. Excluding the items below,
EBIT increased 146%.
- Second quarter 2006 EBIT includes $1 million in restructuring costs.
OUTLOOK
Industry predictions indicate stronger year-over-year OE production in North
America through the remainder of the year and Tenneco is well-positioned to
benefit with its new diesel pick-up truck platforms and a good position on
strong-selling cross-over vehicles. However, the company will continue to
closely monitor market uncertainties, namely rising inventory levels and labor
negotiations in North America.
The company also expects its strong performance will continue in Europe and in
emerging markets like China, where industry conditions are expected to remain
positive. In the aftermarket, the company continues to support its strong brands
and aggressively pursue new customers, actions that it hopes will counter any
continued softness in the European and North American markets.
Tenneco will continue to invest in engineering and new technologies, primarily
to develop next generation emissions and ride control products. The company's
diesel aftertreatment capabilities and innovative hot-end emission control
solutions are generating new business opportunities and positioning Tenneco for
future growth.
"The next five years offer significant opportunities for Tenneco as emissions
standards tighten in key markets worldwide. We are staying focused on using our
technology and global footprint to capture this new business," said Sherrill.
"Equally important, we are working to continue growing profitably, keeping a
sharp eye on costs and continuously improving our manufacturing efficiency."
ATTACHMENT 1
Statements of Income - 3 Months
Statements of Income - 6 Months
Balance Sheets
Statements of Cash Flows - 3 Months
Statements of Cash Flows - 6 Months
4
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 - 6 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 6 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenues - 3 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenues - 6 Months
Reconciliation of Non-GAAP Measures - Ratio of Debt Net of Cash to Adjusted
EBITDA - LTM
CONFERENCE CALL
The company will host a conference call on Thursday, July 26, 2007 at 10:30 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 July 26, 2007. To access this recording, dial
866-395-4188 (domestic) or 203-369-0476 (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. 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 "hopes,"
"estimates," "continue," "will," "plans," "outlook" "scheduled" 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,
5
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;
(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
6
(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, 2006. Further information can be found
on the company's web site at www.tenneco.com.
###
7
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
---------
THREE MONTHS ENDED JUNE 30,
(Millions except per share amounts)
2007 2006 (1)
------------- -------------
Net sales and operating revenues $ 1,663 $ 1,221
============= =============
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 1,377(a) 971(b)
Engineering, Research and Development 29 22
Selling, General and Administrative 105 106(b)(c)
Depreciation and Amortization of Other Intangibles 50 47
------------- -------------
Total Costs and Expenses 1,561 1,146
============= =============
Loss on sale of receivables (1) (1)
Other Income (Expense) 1 --
------------- -------------
Total Other Expense -- (1)
------------- -------------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 49 37(b)(c)
Europe & South America 45(a) 35(b)
Asia Pacific 8 2(b)
------------- -------------
102 74
Less:
Interest expense (net of
interest capitalized) 40 35
Income tax expense 20 14
Minority interest 2 1
------------- -------------
Net Income 40 24
------------- -------------
Average common shares outstanding:
Basic 45.8 44.5
============= =============
Diluted 47.7 47.2
============= =============
Earnings per share of common stock:
Basic $ 0.88 $ 0.55
============= =============
Diluted $ 0.84 $ 0.51
============= =============
(a) Includes restructuring and restructuring related charges of $2 million
pre-tax, $1 million after tax or $0.03 per share, which is recorded in cost of
sales in Europe, South America and India.
(b) Includes restructuring and restructuring related charges of $8 million
pre-tax, $5 million after tax or $0.12 per share. Of the adjustment $7 million
is recorded in cost of sales and $1 million is recorded in SG&A. Geographically,
$4 million is recorded in North America, $3 million in Europe and South America
and $1 million is recorded in Asia Pacific.
(c) Includes customer changeover costs of $6 million pre-tax, $4 million
after-tax or $0.08 per share.
(1) As disclosed in Tenneco's July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
---------
SIX MONTHS ENDED June 30,
(Millions except per share amounts)
2007 (1) 2006 (1)
------------ ------------
Net sales and operating revenues $ 3,063 $ 2,352
============ ============
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 2,557(a) 1,892(c)
Engineering, Research and Development 56 44
Selling, General and Administrative 200(a) 207(c)(d)
Depreciation and Amortization of Other Intangibles 98 91
------------ ------------
Total Costs and Expenses 2,911 2,234
============ ============
Loss on sale of receivables (3) (2)
Other Income 3 (1)
------------ ------------
Total Other Income / (Expense) -- (3)
------------ ------------
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 79(a) 70(c)(d)
Europe, South America & India 59(a) 43(c)
Asia Pacific 14 2(c)
------------ ------------
152 115
Less:
Interest expense (net of interest capitalized) 81(b) 72
Income tax expense 22 14(e)
Minority interest 4 2
------------ ------------
Net Income 45 27
------------ ------------
Average common shares outstanding:
Basic 45.6 44.2
============ ============
Diluted 47.4 46.9
============ ============
Earnings per share of common stock:
Basic $ 0.98 $ 0.62
============ ============
Diluted $ 0.95 $ 0.59
============ ============
(a) Includes restructuring and restructuring related charges of $4 million
pre-tax, $3 million after tax or $0.06 per share, of which $3 million is
recorded in cost of sales and $1 million is recorded in SG&A. Geographically, $1
million is recorded in North America, $3 million in Europe, South America and
India.
(b) 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.
(c) Includes restructuring and restructuring related charges of $14 million
pre-tax, $9 million after tax or $0.21 per share, of which $13 million is
recorded in cost of sales and $1 million is recorded in SG&A. Geographically, $7
million is recorded in North America, $4 million in Europe and South America and
$3 million in Asia Pacific.
(d) Includes customer changeover costs of $6 million pre-tax, $4 million
after-tax or $0.09 per share.
(e) Includes a $3 million or $0.06 per share tax benefit, primarily related to
resolution of tax issues.
(1) As disclosed in Tenneco's July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
June 30, 2007 December 31, 2006 (1)
------------- ---------------------
Assets
Cash and Cash Equivalents $ 168 $ 202
Receivables, Net 913(a) 592(a)
Inventories 523 441
Other Current Assets 209 176
Investments and Other Assets 773 753
Plant, Property, and Equipment, Net 1,104 1,093
------------- -------------
Total Assets $ 3,690 $ 3,257
============= =============
Liabilities and Shareholders' Equity
Short-Term Debt $ 31 $ 28
Accounts Payable 1,049 782
Accrued Taxes 49 49
Accrued Interest 30 33
Other Current Liabilities 247 237
Long-Term Debt 1,419(b) 1,356(b)
Deferred Income Taxes 122 107
Deferred Credits and Other Liabilities 402 424
Minority Interest 32 28
Total Shareholders' Equity 309 213
------------- -------------
Total Liabilities and Shareholders' Equity $ 3,690 $ 3,257
============= =============
June 30, 2007 December 31, 2006
------------- -----------------
(a) Accounts receivable securitization programs $ 148 $ 133
(b) Long term debt composed of: June 30, 2007 December 31, 2006
------------- -----------------
Borrowings against revolving credit facilities $ 272 $ --
Term loan A (Due 2012) 150 --
Term loan B (Due 2010) -- 356
10.25% senior notes (Due 2013) 487 487
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 10 13
------------- -------------
$ 1,419 $ 1,356
============= =============
(1) As disclosed in Tenneco's July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
THREE MONTHS ENDED
JUNE 30,
--------------------------------
2007 2006 (1)
------------- -------------
Operating activities:
Net income $ 40 $ 24
Adjustments to reconcile income to net cash used by
operating activities --
Depreciation and amortization of other intangibles 50 47
Stock option expense 1 1
Deferred income taxes (10) 2
Loss on sale of assets, net 1 1
Changes in components of working capital --
(Inc.)/dec. in receivables (112) (20)
(Inc.)/dec. in inventories 3 (13)
(Inc.)/dec. in prepayments and other current assets (14) (14)
Inc./(dec.) in payables 89 16
Inc./(dec.) in taxes accrued -- 2
Inc./(dec.) in interest accrued 6 5
Inc./(dec.) in other current liabilities 14 14
Other (1) 8
------------- -------------
Net cash provided by operating activities 67 73
Investing activities:
Net proceeds from sale of assets 1 2
Cash Payments for plant, property & equipment (36) (42)
Cash payments for software-related intangibles (4) (3)
Investments and other 1 1
------------- -------------
Net cash used by investing activities (38) (42)
------------- -------------
Financing activities:
Issuance of common shares 2 2
Issuance of long-term debt -- --
Debt issuance costs on long-term debt -- --
Retirement of long-term debt (2) (1)
Net inc./(dec.) in short-term debt excluding current maturities
on long-term debt (7) (12)
Other (1) 2
------------- -------------
Net cash used by financing activities (8) (9)
------------- -------------
Effect of foreign exchange rate changes on cash and
cash equivalents 11 5
------------- -------------
Increase in cash and cash equivalents 32 27
Cash and cash equivalents, April 1 136 96
------------- -------------
Cash and cash equivalents, June 30
$ 168 $ 123
============= =============
Cash paid during the period for interest $ 35 $ 33
Cash paid during the period for income taxes 20 7
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property and eqipment 15 23
(1) As disclosed in Tenneco's July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
SIX MONTHS ENDED
JUNE 30,
--------------------------------
2007 (1) 2006 (1)
------------- -------------
Operating activities:
Net income $ 45 $ 27
Adjustments to reconcile net income
to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 98 91
Stock option expense 2 2
Deferred income taxes (12) 7
Loss on sale of assets, net 3 2
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables (310) (102)
(Inc.)/dec. in inventories (71) (40)
(Inc.)/dec. in prepayments and other current assets (26) (28)
Inc./(dec.) in payables 240 92
Inc./(dec.) in taxes accrued (4) --
Inc./(dec.) in interest accrued (3) 1
Inc./(dec.) in other current liabilities 17 (4)
Other (6) 11
------------- -------------
Net cash provided (used) by operating activities (27) 59
Investing activities:
Net proceeds from sale of assets 1 2
Expenditures for plant, property & equipment (75) (89)
Expenditures for software-related intangibles (11) (6)
Investments and other 2 1
------------- -------------
Net cash used by investing activities (83) (92)
------------- -------------
Financing activities:
Issuance of common shares 4 10
Issuance of long-term debt 150 --
Debt issuance costs on long-term debt (6) --
Retirement of long-term debt (359) (2)
Net inc. in short-term debt excluding current
maturities on long-term debt 273 (3)
Other -- 2
------------- -------------
Net cash provided by financing activities 62 7
------------- -------------
Effect of foreign exchange rate changes on cash and
cash equivalents 14 8
------------- -------------
Decrease in cash and cash equivalents (34) (18)
Cash and cash equivalents, January 1 202 141
------------- -------------
Cash and cash equivalents, June 30 $ 168 $ 123
============= =============
Cash paid during the period for interest $ 77 $ 67
Cash paid during the period for income taxes 28 $ 7
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property and eqipment 15 23
(1) As disclosed in Tenneco's July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
---------
Q2 2007
-------------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- ------------- ------------- -------------
Net income $ 40
Minority interest 2
Income tax expense 20
Interest expense (net of interest capitalized) 40
-------------
EBIT, Income before interest expense, income taxes and
minority interest (GAAP measure) $ 49 $ 45 $ 8 102
Depreciation and amortization of other intangibles 25 21 4 50
------------- ------------- ------------- -------------
Total EBITDA(2) $ 74 $ 66 $ 12 $ 152
============= ============= ============= =============
Q2 2006 (3)
-------------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- ------------- ------------- -------------
Net income $ 24
Minority interest 1
Income tax expense 14
Interest expense (net of interest capitalized) 35
-------------
EBIT, Income before interest expense, income taxes and
minority interest (GAAP measure) $ 37 $ 35 $ 2 74
Depreciation and amortization of other intangibles 24 20 3 47
------------- ------------- ------------- -------------
Total EBITDA(2) $ 61 $ 55 $ 5 $ 121
============= ============= ============= =============
(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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q2 2007 Q2 2006 (5)
----------------------------------------- ---------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
--------- ------- ---------- --------- --------- ----- ---------- ---------
Earnings Measures $ 152 $ 102 $ 40 $ 0.84 $ 121 $ 74 $ 24 $ 0.51
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring
related expenses 2 2 1 0.03 8 8 5 0.12
New aftermarket customer changeover
costs (4) -- -- -- 6 6 4 0.08
--------- ------- --------- -------- --------- ----- --------- ---------
Non-GAAP earnings measures $ 154 $ 104 $ 41 $ 0.87 $ 135 $ 88 $ 33 $ 0.71
========= ======= ========= ======== ========= ===== ========= =========
Q2 2007
-------------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- ------------- ------------- -------------
EBIT $ 49 $ 45 $ 8 $ 102
Restructuring and restructuring
related expenses -- 2 -- 2
------------- ------------- ------------- -------------
Adjusted EBIT $ 49 $ 47 $ 8 $ 104
============= ============= ============= =============
Q2 2006 (5)
-------------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- ------------- ------------- -------------
EBIT $ 37 $ 35 $ 2 $ 74
Restructuring and restructuring
related expenses 4 3 1 8
New Aftermarket customer
changeover costs(4) 6 -- -- 6
------------- ------------- ------------- -------------
Adjusted EBIT $ 47 $ 38 $ 3 $ 88
============= ============= ============= =============
(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 second 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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
YTD 2007 (3)
-------------------------------------------------------
North Europe Asia
America & SA Pacific Total
---------- ---------- ---------- ----------
Net income $ 45
Minority interest 4
Income tax expense 22
Interest expense (net of interest capitalized) 81
----------
EBIT, Income before interest expense, income taxes and
minority interest (GAAP measure) $ 79 $ 59 $ 14 152
Depreciation and amortization of other intangibles 48 42 8 98
---------- ---------- ---------- ----------
Total EBITDA(2) $ 127 $ 101 $ 22 $ 250
========== ========== ========== ==========
YTD 2006 (3)
-------------------------------------------------------
North Europe Asia
America & SA Pacific Total
---------- ---------- ---------- ----------
Net income $ 27
Minority interest 2
Income tax expense 14
Interest expense (net of interest capitalized) 72
----------
EBIT, Income before interest expense, income taxes and
minority interest (GAAP measure) $ 70 $ 43 $ 2 115
Depreciation and amortization of other intangibles 46 39 6 91
---------- ---------- ---------- ----------
Total EBITDA(2) $ 116 $ 82 $ 8 $ 206
========== ========== ========== ==========
(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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
---------
YTD 2007 (5) YTD 2006 (5)
--------------------------------------- ----------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
---------- ------- ---------- --------- ---------- ------- ---------- ---------
Earnings Measures $ 250 $ 152 $ 45 $ 0.95 $ 206 $ 115 $ 27 $ 0.59
Adjustments (reflect non-GAAP measures):
Restructuring and restructuring related expenses 4 4 2 0.06 14 14 9 0.21
Charges related to refinancing -- -- 4 0.07 -- -- -- --
New aftermarket customer changeover costs (4) 6 6 4 0.09
Tax adjustments -- -- -- -- -- -- (3) (0.06)
------- ------- ------- ------- ------- ------- ------- -------
Non-GAAP earnings measures $ 254 $ 156 $ 51 $ 1.08 $ 226 $ 135 $ 37 $ 0.83
======= ======= ======= ======= ======= ======= ======= =======
YTD 2007 (5)
-------------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- ------------- ------------- -------------
EBIT $ 79 $ 59 $ 14 $ 152
Restructuring and restructuring related expenses 1 3 -- 4
------------- ------------- ------------- -------------
Adjusted EBIT $ 80 $ 62 $ 14 $ 156
============= ============= ============= =============
YTD 2006 (5)
-------------------------------------------------------------------
North Europe Asia
America & SA Pacific Total
------------- ------------- ------------- -------------
EBIT $ 70 43 $ 2 $ 115
Restructuring and restructuring related expenses 7 4 3 14
New Aftermarket customer changeover costs (4) 6 -- -- 6
------------- ------------- ------------- -------------
Adjusted EBIT $ 83 $ 47 $ 5 $ 135
============= ============= ============= =============
(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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
---------
Q2 2007
-------------------------------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
------------- ------------- ------------- ------------- -------------
North America Original Equipment
Ride Control $ 132 $ -- $ 132 $ -- $ 132
Exhaust 529 -- 529 266 263
------------- ------------- ------------- ------------- -------------
Total North America Original Equipment 661 -- 661 266 395
North America Aftermarket
Ride Control 110 -- 110 -- 110
Exhaust 39 -- 39 -- 39
------------- ------------- ------------- ------------- -------------
Total North America Aftermarket 149 -- 149 -- 149
Total North America 810 -- 810 266 544
Europe Original Equipment
Ride Control 107 6 101 -- 101
Exhaust 406 23 383 137 246
------------- ------------- ------------- ------------- -------------
Total Europe Original Equipment 513 29 484 137 347
Europe Aftermarket
Ride Control 61 4 57 -- 57
Exhaust 63 4 59 -- 59
------------- ------------- ------------- ------------- -------------
Total Europe Aftermarket 124 8 116 -- 116
South America & India 81 6 75 10 65
Total Europe, South America & India 718 43 675 147 528
Asia 85 -- 85 30 55
Australia 50 6 44 7 37
------------- ------------- ------------- ------------- -------------
Total Asia Pacific 135 6 129 37 92
Total Tenneco Inc. $ 1,663 $ 49 $ 1,614 $ 450 $ 1,164
============= ============= ============= ============= =============
Q2 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 $ 131 $ -- $ 131 $ -- $ 131
Exhaust 236 -- 236 61 175
------------- ------------- ------------- ------------- -------------
Total North America Original Equipment 367 -- 367 61 306
North America Aftermarket
Ride Control 112 -- 112 -- 112
Exhaust 44 -- 44 -- 44
------------- ------------- ------------- ------------- -------------
Total North America Aftermarket 156 -- 156 -- 156
Total North America 523 -- 523 61 462
Europe Original Equipment
Ride Control 98 -- 98 -- 98
Exhaust 314 -- 314 120 194
------------- ------------- ------------- ------------- -------------
Total Europe Original Equipment 412 -- 412 120 292
Europe Aftermarket
Ride Control 54 -- 54 -- 54
Exhaust 64 -- 64 -- 64
------------- ------------- ------------- ------------- -------------
Total Europe Aftermarket 118 -- 118 -- 118
South America & India 66 -- 66 8 58
Total Europe, South America & India 596 -- 596 128 468
Asia 58 -- 58 19 39
Australia 44 -- 44 5 39
------------- ------------- ------------- ------------- -------------
Total Asia Pacific 102 -- 102 24 78
Total Tenneco Inc. $ 1,221 $ -- $ 1,221 $ 213 $ 1,008
============= ============= ============= ============= =============
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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
YTD 2007 (1)
-----------------------------------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
------------- ------------- ------------- ------------- -------------
North America Original Equipment
Ride Control $ 265 $ -- $ 265 $ -- 265
Exhaust 905 -- 905 432 473
------------- ------------- ------------- ------------- -------------
Total North America Original Equipment 1,170 -- 1,170 432 738
North America Aftermarket
Ride Control 208 -- 208 -- 208
Exhaust 75 -- 75 -- 75
------------- ------------- ------------- ------------- -------------
Total North America Aftermarket 283 -- 283 -- 283
Total North America 1,453 -- 1,453 432 1,021
Europe Original Equipment
Ride Control 214 16 198 -- 198
Exhaust 793 52 741 263 478
------------- ------------- ------------- ------------- -------------
Total Europe Original Equipment 1,007 68 939 263 676
Europe Aftermarket
Ride Control 100 6 94 -- 94
Exhaust 104 8 96 -- 96
------------- ------------- ------------- ------------- -------------
Total Europe Aftermarket 204 14 190 -- 190
South America & India 151 7 144 18 126
Total Europe, South America & India 1,362 89 1,273 281 992
Asia 155 -- 155 56 99
Australia 93 9 84 12 72
------------- ------------- ------------- ------------- -------------
Total Asia Pacific 248 9 239 68 171
Total Tenneco Inc. $ 3,063 $ 98 $ 2,965 $ 781 $ 2,184
============= ============= ============= ============= =============
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 $ 262 $ -- $ 262 $ -- $ 262
Exhaust 479 -- 479 127 352
------------- ------------- ------------- ------------- -------------
Total North America Original Equipment 741 -- 741 127 614
North America Aftermarket
Ride Control 212 -- 212 -- 212
Exhaust 84 -- 84 -- 84
------------- ------------- ------------- ------------- -------------
Total North America Aftermarket 296 -- 296 -- 296
Total North America 1,037 -- 1,037 127 910
Europe Original Equipment
Ride Control 193 -- 193 -- 193
Exhaust 606 -- 606 222 384
------------- ------------- ------------- ------------- -------------
Total Europe Original Equipment 799 -- 799 222 577
Europe Aftermarket
Ride Control 90 -- 90 -- 90
Exhaust 103 -- 103 -- 103
------------- ------------- ------------- ------------- -------------
Total Europe Aftermarket 193 -- 193 -- 193
South America & India 131 -- 131 15 116
Total Europe, South America & India 1,123 -- 1,123 237 886
Asia 108 -- 108 36 72
Australia 84 -- 84 9 75
------------- ------------- ------------- ------------- -------------
Total Asia Pacific 192 -- 192 45 147
Total Tenneco Inc. $ 2,352 $ -- $ 2,352 $ 409 $ 1,943
============= ============= ============= ============= =============
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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES (8)
Debt net of cash / Adjusted EBITDA - LTM
Unaudited
Quarter Ended June 30
-------------------------------
2007 2006
------------- -------------
Total debt $ 1,450 $ 1,379
Cash and cash equivalents 168 123
Debt net of cash balances(1) 1,282 1,256
Adjusted LTM EBITDA 441 419
Ratio of net debt to adjusted LTM EBITDA(2) 2.9x 3.0x
Q3 06 Q4 06 Q1 07 Q2 07 Q2 07 LTM
---------- ----------- ---------- --------- -----------
Net income 9 17 5 40 71
Minority interest 2 2 2 2 8
Income tax expense 3 (15) 2 20 10
Interest expense (net of interest capitalized) 30 35 41 40 146
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) 44 39 50 102 235
Depreciation and amortization of other intangibles 45 48 48 50 191
Total EBITDA(3) 89 87 98 152 426
Restructuring and restructuring related expenses 7 6 2 2 17
New Aftermarket customer changeover costs(4) -- -- -- --
Pension Curtailment(5) -- (7) (7)
Reserve for receivables from former affiliate -- 3 3
Stock Option Adjustment(6) -- 2 2
---------- ----------- ---------- --------- -----------
Total Adjusted EBITDA(7) 96 91 100 154 441
========== =========== ========== ========= ===========
Q3 05 Q4 05 Q1 06 Q2 06 Q2 06 LTM
---------- ----------- ---------- --------- -----------
Net income 10 8 2 24 44
Minority interest -- 1 1 1 3
Income tax expense 7 (4) 1 14 18
Interest expense (net of interest capitalized) 33 34 37 35 139
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) 50 39 41 74 204
Depreciation and amortization of other intangibles 44 43 44 47 178
Total EBITDA(3) 94 82 85 121 382
Restructuring and restructuring related expenses 2 5 6 8 21
New Aftermarket customer changeover costs(4) -- 10 -- 6 16
---------- ----------- ---------- --------- -----------
Total adjusted EBITDA(7) 96 97 91 135 419
========== =========== ========== ========= ===========
(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 July 23, 2007 press release, Tenneco is restating
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 preliminary results of the
restatement.