Exhibit 99.1
news release (TENNECO LOGO)
TENNECO REPORTS RECORD HIGH 4Q AND FULL-YEAR REVENUES
COMPANY'S GLOBAL POSITION AND TECHNOLOGY-DRIVEN NEW BUSINESS DELIVER STRONG
OPERATIONAL PERFORMANCE
- Cash flow from operations in 4Q of $200 million, up 45%
- Due to previously announced $87 million in refinancing costs and
non-cash tax charges to realign European ownership structure, company
reports 4Q net loss of $72 million, $1.57 per diluted share,
- Adjusted net income of $15 million, 34-cents per diluted share; up from
$3 million, 5-cents per diluted share
- Projects average compounded annual OE revenue growth rate of 11% to 13%
between 2008 and 2012
Lake Forest, Illinois, January 24, 2008 - Tenneco (NYSE: TEN) reported a fourth
quarter net loss of $72 million, or $1.57 per diluted share, versus net income
of $15 million, or 31-cents per diluted share in fourth quarter 2006. The loss
was due to previously announced charges taken in the fourth quarter for actions
that advance Tenneco's financial strategy. These include costs for refinancing a
portion of the company's debt, which will reduce interest expense, and non-cash
tax charges for realigning the European ownership structure, which more
effectively aligns the company's U.S. and European assets and revenues with
liabilities and expenses. This action will reduce cash taxes and accelerates the
use of U.S. net operating losses.
After adjusting for charges below, net income was $15 million, or 34-cents per
diluted share, up from net income of $3 million, or 5-cents per diluted share a
year ago. The tables in this press release reconcile GAAP results to non-GAAP
results and the comparative 2006 results reflect adjustments made in Tenneco's
restated financial statements filed in August 2007.
EBIT (earnings before interest, taxes and minority interest) was $43 million
versus $39 million a year ago. Adjusted EBIT was $61 million, up 53% from $41
million in fourth quarter 2006. EBITDA (EBIT before depreciation and
amortization) was $98 million, up from $87 million the previous year. Adjusted
EBITDA was $116 million, a 30% increase over $89 million a year ago.
ADJUSTED FOURTH QUARTER 2007 AND 2006 RESULTS:
Q4 2007 Q4 2006
---------------------------------- ----------------------------------
Net Net
EBITDA EBIT Income Per Share EBITDA EBIT Income Per Share
------ ---- ------ --------- ------ ---- ------ ---------
Earnings Measures $ 98 $43 $(72) $(1.57) $87 $39 $ 15 $ 0.31
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related
expenses 18 18 11 0.26 6 6 4 0.08
Charges related to refinancing -- -- 14 0.31 -- -- -- --
Net tax Adjustments -- -- 62 1.34 -- -- (13) (0.28)
Pension replacement -- -- -- -- (7) (7) (5) (0.10)
Reserve for receivables from former
affiliate -- -- -- -- 3 3 2 0.04
---- --- ---- ------ --- --- ---- ------
Non-GAAP earnings measures $116 $61 $ 15 $ 0.34 $89 $41 $ 3 $ 0.05
==== === ==== ====== === === ==== ======
-More-
FOURTH QUARTER 2007 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $18 million
pre-tax, or 26-cents per diluted share primarily related to a
previously announced facility closing;
- Charge of $21 million pre-tax, or 31-cents per diluted share, for
refinancing a portion of the company's debt;
- Net tax expenses of $62 million, or $1.34 per diluted share, including
$66 million in non-cash expenses to realign the European ownership
structure and a net benefit of $4 million primarily related to
adjustments for prior year income tax returns.
FOURTH QUARTER 2006 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $6 million
pre-tax, or 8-cents per diluted share;
- A reserve of $3 million pre-tax, or 4-cents per diluted share, for
receivables from a former affiliate;
- Benefit of $7 million pre-tax, or 10-cents per diluted share, from
replacing the defined benefit pension plans in the U.S. with an
enhanced defined contribution plan;
- Tax benefits of $13 million or 28-cents per diluted share, related to
an investment income tax credit in the Czech Republic and final
adjustments related to prior year income tax returns.
"Tenneco delivered excellent results this quarter thanks to technology-driven
growth and our global geographic balance, particularly in expanding markets like
China and South America," said Gregg Sherrill, chairman and CEO, Tenneco. "A
relentless focus on working capital improvements drove strong cash performance
in the quarter. Our execution on managing accounts receivable and inventories
helped convert earnings into strong cash flow."
Fourth quarter revenues increased 29% to $1.565 billion versus $1.209 billion a
year ago. Substrate sales grew to $440 million from $297 million in fourth
quarter 2006. Excluding substrate sales and favorable currency, revenue was
$1.054 billion, up 16% from $912 million the previous year. The revenue increase
was driven by higher volumes on new diesel platforms in North America, volume
increases on key European emission control platforms and growth in China.
EBIT margin declined to 2.8% versus 3.2% in fourth quarter 2006, primarily due
to a 48% increase in substrate sales, higher restructuring costs and a lower
percentage of revenue generated from aftermarket sales, which typically carry
higher margins. These factors also negatively impacted gross margin, which was
14.3% compared with 15.7% in fourth quarter 2006. The negative impact of these
factors was partially offset by the sale of higher margin OE emission control
technologies in the quarter.
Adjusted EBIT as a percent of value-added sales (revenue excluding substrate
sales) grew to 5.4% from 4.4%, an indication that the company is realizing the
margin benefit from its advanced hot-end and diesel aftertreatment technologies.
Cash generated by operations in the quarter was $200 million, up significantly
from $138 million a year ago. The increase was driven by higher earnings and
working capital improvements. The company generated $175 million in cash from
working capital versus $130 million a year ago.
"Our ability to generate cash flow in the quarter helped us to end the year with
a 45% increase in cash from operations, resulting in nearly flat year-over-year
net debt" Sherrill said. "This was particularly outstanding given that we made
significant investments throughout the year to fund our business growth with
higher spending on engineering, capital expenditures and an emissions control
technology acquisition."
At quarter-end, debt net of cash balances was $1.186 billion, compared with
$1.183 billion at the end of fourth quarter 2006. Cash balances were $188
million versus $202 million the prior year. Total debt was $1.374 billion,
versus $1.385 billion a year ago. At the end of the quarter, the ratio of debt
net of cash balances to adjusted annual EBITDA was 2.4x, down from 2.9x at the
end of fourth quarter 2006.
Total steel costs in the quarter increased $17 million year-over-year. These
costs were offset by material substitutions, low-cost country sourcing, steel
cost recovery from customers and other cost reductions.
The rate of revenue growth in the quarter continued to outpace overhead spending
to support that growth. SGA&E (selling, general, administrative & engineering)
costs as a percent of sales decreased to 8.1% versus 8.7% a year ago despite an
increase in engineering spending to support technology development and future
new business launches.
NORTH AMERICA
- OE revenue was $592 million, up 63% from $363 million a year ago.
Excluding substrate sales and currency, revenue was $342 million, a
26% year-over-year increase from $272 million. The increase was driven
by incremental volume from diesel pick-up truck platforms like the
Ford SuperDuty, GM Duramax engine vehicles and International's medium
duty commercial trucks. Emission control content on GM crossover
vehicles, the Toyota Tundra and ride control business on GM platforms
that include the Suburban, Yukon, Silverado, Sierra, Trailblazer and
Envoy also drove the increase. The increase was partially offset by
volume declines on existing platforms.
- Aftermarket revenue was $122 million, up 5% from $115 million in
fourth quarter 2006. New business and increases in both ride control
and exhaust sales drove the increase.
- EBIT for North America operations was $16 million versus $18 million
in fourth quarter 2006. Fourth quarter 2007 EBIT includes $2 million
in restructuring costs. Fourth quarter 2006 EBIT includes $3 million
in restructuring costs, a $3 million reserve for receivables from a
former affiliate and a $7 million benefit for the U.S. pension plan
replacement. Adjusted for these items, EBIT was $18 million, up $1
million year-over-year.
- The EBIT benefit from higher volumes on new emission and ride control
platforms was mostly offset by:
- $5 million in net engineering spending due to customer
recovery timing;
- $2 million for inventory shrinkage on substrates at one
Mexican emissions control facility;
- $3 million in accelerated depreciation on OE service-part
equipment; and
- the impact of lower commercial vehicle ride control
production volumes.
EUROPE, SOUTH AMERICA AND INDIA
- OE revenue was $511 million, a 13% increase from $452 million a year
ago. Excluding substrate sales and the impact of favorable currency,
revenue was $337 million versus $285 million, an 18% increase. The
increase was driven by higher volumes on platforms with hot-end and
diesel aftertreatment technology like the Daimler Sprinter, the BMW 1
and 3 Series and the Audi A4.
- Aftermarket revenue was $96 million, up from $90 million a year ago.
Excluding favorable currency, revenue was $87 million. Lower exhaust
sales more than offset increases in ride control sales.
- South America and India revenue increased to $96 million from $71
million in fourth quarter 2006. Excluding substrate sales and the
impact of favorable currency, revenue was $74 million compared with
$63 million. The increase was due to higher OE volumes in South
America.
- EBIT for Europe, South America and India was $19 million, up from $16
million a year ago. Favorable currency benefited EBIT by $2 million.
- Adjusted EBIT was up 84% to $35 million from $19 million a year ago.
The EBIT increase was driven by strong manufacturing performance and
OE volume increases, which more than offset higher material costs and
lower aftermarket emission control sales.
- Fourth quarter 2007 EBIT includes $16 million in restructuring and
restructuring related costs and fourth quarter 2006 includes $3
million in restructuring and restructuring related costs.
ASIA PACIFIC
- Asia revenue increased 35% to $98 million from $73 million a year ago.
Excluding substrate sales and favorable currency, revenue was up 18%
to $55 million from $47 million. The increase was due to growth in
China with new OE business and higher OE volumes.
- Australia revenue increased 12% to $50 million compared with $45
million in fourth quarter 2006. Excluding substrate sales and the
impact of favorable currency, revenue was $37 million versus $40
million a year ago, primarily the result of lower aftermarket sales.
- Asia Pacific EBIT was $8 million, a 59% increase over $5 million a
year ago. Favorable currency benefited EBIT by $1 million. Operational
efficiencies and strong OE volumes in China drove the EBIT increase.
FULL-YEAR 2007 RESULTS
Tenneco reported record high annual revenue of $6.2 billion, a 32% increase over
$4.7 billion in 2006. Substrate sales grew to $1.673 billion from $927 million
in 2007. Excluding substrate sales and favorable currency, revenue was up 15%.
New diesel aftertreatment business on pick-up truck platforms in North America,
growth in China and strong OE volumes in Europe drove the significant increase.
The company reported a net loss of $5 million, or 11-cents per diluted share,
compared with net income of $49 million, or $1.05 per diluted share in 2006.
Adjusted for the items below, including $66 million in non-cash tax charges to
realign the European ownership structure, net income was up 69% to $86 million,
or $1.82 per diluted share, from $51 million, or $1.12 per diluted share in
2006.
Full year EBIT was $252 million, a 28% increase over $196 million a year ago.
Adjusted EBIT was $282 million, a 25% increase from $225 million in 2006. 2007
EBITDA was $457 million, up from $380 million in 2006. Adjusted EBITDA was $487
million, a 19% increase from $409 million a year ago.
EBIT margin for the year declined to 4.1% versus 4.2% in 2006 due to an increase
in substrate sales and a lower percentage of revenue generated from aftermarket
sales, which typically carry higher margins. These factors also negatively
impacted gross margin, which was 15.8% compared with 18.1% in 2006. The negative
impact of these factors was partially offset by the sale of higher margin OE
emission control technologies.
Adjusted EBIT as a percent of value-added sales (revenue excluding substrate
sales) grew to 6.2% from 6.0%, which reflects the improved margin benefit from
sales of the company's advanced hot-end and diesel aftertreatment technologies.
SGA&E as a percent of sales for 2007 was 8.3%, a significant improvement from
9.8% in 2006.
-5-
ADJUSTED FULL-YEAR 2007 AND 2006 RESULTS:
YTD 2007 YTD 2006
---------------------------------- ----------------------------------
Net Net
EBITDA EBIT Income Per Share EBITDA EBIT Income Per Share
------ ---- ------ --------- ------ ---- ------ ---------
Earnings Measures $457 $252 $(5) $(0.11) $380 $196 $ 49 $ 1.05
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring related
expenses 25 25 16 0.35 27 27 17 0.39
New aftermarket customer changeover
costs 5 5 3 0.06 6 6 4 0.08
Charges related to refinancing -- -- 18 0.37 -- -- -- --
Net tax Adjustments -- -- 54 1.15 -- -- (16) (0.34)
Pension replacement -- -- -- -- (7) (7) (5) (0.10)
Reserve for receivables from former
affiliate -- -- -- -- 3 3 2 0.04
---- ---- --- ------ ---- ---- ---- ------
Non-GAAP earnings measures $487 $282 $86 $ 1.82 $409 $225 $ 51 $ 1.12
==== ==== === ====== ==== ==== ==== ======
FULL-YEAR 2007 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $25 million
pre-tax, or 35-cents per diluted share;
- Aftermarket customer changeover costs of $5 million pre-tax, or
6-cents per diluted share;
- Refinancing charges of $26 million pre-tax, or 37-cents per diluted
share;
- Net tax expenses of $54 million, or $1.15 per diluted share, which
includes $66 million in non-cash tax expenses to realign the company's
European ownership structure, and net tax benefits of $12 million
related to a reduction in income tax rates in Germany and adjustments
for prior year income tax returns.
FULL-YEAR 2006 ADJUSTMENTS:
- Restructuring and restructuring related expenses of $27 million
pre-tax, or 39-cents per diluted share;
- Aftermarket customer changeover costs of $6 million pre-tax, or
8-cents per diluted share;
- A reserve of $3 million pre tax, or 4-cents per diluted share, for
receivables from a former affiliate;
- Benefit of $7 million pre-tax, or 10-cents per diluted share, from
replacing the defined benefit pension plans in the U.S.;
- Tax benefits of $16 million, or 34-cents per diluted share, primarily
for an investment tax credit in the Czech Republic, resolution of tax
issues with former affiliates, and final adjustments to prior year
income tax returns.
The company benefited in 2007 from its geographic and customer balance.
Geographically, 53% of total 2007 revenue and 52% of EBIT was generated outside
North America with a growing share in expanding markets like China and Eastern
Europe.
"Tenneco performed exceptionally well in a year marked by industry challenges.
We profitably launched more than $1 billion in new OE business globally, the
majority of which featured advanced technology products and systems," Sherrill
said. "We executed on our global growth strategies by investing in growing
markets like Russia and China, and making strategic investments in engineering
and innovative technologies that are already generating new business. At the
same time, we improved our financial flexibility and successfully managed our
overhead costs."
OUTLOOK
Tenneco anticipates ongoing industry volatility in 2008. The company expects
that North America industry OE production volumes will be lower, Europe OE
volumes will remain relatively stable, and strong sales growth in expanding
markets like China, India and Brazil will continue.
In the first quarter, Tenneco expects higher year-over-year revenues in North
America given its market position and the anticipated benefit of incremental
sales from new OE emission control business it launched in 2007, which will be
at higher production levels compared to first quarter last year. In Europe, the
company also expects to benefit from its strong position in Eastern Europe and
Russia, where industry growth is predicted.
In 2007, Tenneco generated $5.1 billion in global original equipment revenues.
Adjusted for substrate sales, global original equipment value-added sales were
$3.4 billion. Tenneco estimates that its global original equipment revenues will
be approximately $5.5 billion in 2008 and $6.0 billion in 2009. Adjusted for
substrate sales, original equipment value-added sales are estimated to be
approximately $3.7 billion in 2008 and $4.1 billion in 2009.
The company expects the pricing environment for steel will increase gross steel
costs year-over-year by up to $40 million in 2008, which it anticipates fully
offsetting through cost reductions, manufacturing efficiencies, material
substitutions, low-cost country sourcing and customer recovery.
As part of its five year strategic vision, Tenneco projects it will achieve an
average compounded annual OE revenue growth rate of 11% to 13% between 2008 and
2012, primarily driven by tightening emission control regulations globally. This
projection reflects new business the company has been already awarded or expects
to win with light vehicle and commercial vehicle original equipment
manufacturers.
"Tenneco has a proven track-record of execution and implementing the right
strategies to be successful, even in tough markets," Sherrill said. "Given our
leading technology and engineering capabilities, favorable geographic and
customer balance, cost flexibility and a relentless focus on managing costs and
improving operations, Tenneco is well-positioned to address the industry
challenges in 2008 while capturing additional new business opportunities, which
will fuel our growth globally over the next five to seven years."
ATTACHMENT 1:
Statements of Income - 3 Months
Statements of Income - 12 Months
Balance Sheet
Statements of Cash Flow - 3 Months
Statements of Cash Flow - 12 Months
ATTACHMENT 2:
Reconciliation of GAAP Net Income to EBITDA - 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months
Reconciliation of GAAP Net Income to EBITDA - 12 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 12 Months
Reconciliation of Non-GAAP Measures - Ratio of Debt Net of Cash to Adjusted
EBITDA - 12 Months
Reconciliation of adjusted EBIT as a percent of value-added sales - 3 Months and
12 Months
CONFERENCE CALL
The company will host a conference call on Thursday, January 24, 2008 at 10:30
a.m. EST. 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 January 24, 2008.
To access this recording, dial 866-365-2445 (domestic) or 203-369-0215
(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.
2008 ANNUAL MEETING
The Tenneco Board of Directors has scheduled the corporation's annual meeting of
shareholders for Tuesday, May 6, 2008 at 10:00 a.m. CDT. The meeting will be
held at the corporate headquarters, 500 North Field Drive, Lake Forest,
Illinois. The record date for shareholders to vote at the meeting is March 11,
2008.
Tenneco is a $6.2 billion manufacturing company with headquarters in Lake
Forest, Illinois and approximately 21,000 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.
Revenue estimates in this release are based on OE manufacturers' programs that
have been formally awarded to the company; programs where Tenneco is highly
confident that it will be awarded business based on informal customer
indications consistent with past practices; Tenneco's status as supplier for the
existing program and its relationship with the customer; and the actual original
equipment revenues achieved by the company for each of the last several years
compared to the amount of those revenues that the company estimated it would
generate at the beginning of each year. These revenue estimates are also based
on anticipated vehicle production levels and pricing, including precious metals
pricing and certain actions to recover a portion of materials cost increases.
The revenue estimates assume that foreign currency exchange rates will remain
constant over the entire period.
This press release contains forward-looking statements. Words such as "hopes,"
"may," "expects," "anticipate," "will," and "outlook" and similar expressions
identify forward-looking statements. These forward-looking statements are based
on the current expectations of the company (including its subsidiaries). Because
these forward-looking statements involve risks and uncertainties, the company's
plans, actions and actual results could differ materially. Among the factors
that could cause these plans, actions and results to differ materially from
current expectations are:
(i) changes in automotive manufacturers' production rates and their actual and
forecasted requirements for the company's products;
(ii) the overall highly competitive nature of the automotive parts industry,
including pricing pressure from the company's OE customers and the loss of any
awards of business, or the failure to obtain new awards of business, from our
large customers, on which we are dependent for a substantial portion of our
revenues; for example, Ford, from whom the company derived more than 10% of its
2006 net sales, announced in 2006 a plan to significantly reduce the number of
its global suppliers. While the company currently believes that its relationship
with Ford will not be impacted by this plan, any significant reduction in sales
to Ford could have a material adverse effect on the company;
(iii) the company's resultant inability to realize the sales represented by its
awarded book of business which is based on anticipated pricing for the
applicable program over its life, and is subject to increases or decreases due
to changes in customer requirements, customer and consumer preferences, and the
number of vehicles actually produced by customers;
-8-
(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
(xvi) the timing and occurrence (or non-occurrence) of transactions and events
which may be subject to circumstances beyond the control of the company and its
subsidiaries.
The company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date of this press release. Additional
information regarding these risk factors and uncertainties is detailed from time
to time in the company's SEC filings, including but not limited to its report on
Form 10-K/A for the year ended December 31, 2006. Further information can be
found on the company's web site at www.tenneco.com.
###
Contacts: Jane Ostrander, Leslie Hunziker,
Media Relations Investor Relations
847-482-5607 847-482-5042
jostrander@tenneco.com lhunziker@tenneco.com
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
THREE MONTHS ENDED DECEMBER 31,
(Millions except per share amounts)
2007 2006(1)
------ ------
Net sales and operating revenues $1,565 $1,209
====== ======
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 1,341(a) 1,019(d)
Engineering, Research and Development 28 20
Selling, General and Administrative 99(a) 85(d)(e)(f)
Depreciation and Amortization of Other Intangibles 55 48
------ ------
Total Costs and Expenses 1,523 1,172
====== ======
Loss on sale of receivables (2) (2)
Other Income / (Expense) 3 4
------ ------
Total Other Income / (Expense) 1 2
------ ------
Income before Interest Expense, Income Taxes, and Minority Interest
North America 16(a) 18(d)(e)(f)
Europe, South America & India 19(a) 16(d)
Asia Pacific 8 5
------ ------
43 39
Less:
Interest expense (net of interest capitalized) 52(b) 34
Income tax expense (benefit) 61(c) (12)(g)
Minority interest 2 2
------ ------
Net Income (Loss) (72) 15
------ ------
Average common shares outstanding:
Basic 46.1 45.1
====== ======
Diluted 47.8 47.2
====== ======
Earnings (Loss) per share of common stock:
Basic $(1.57) $ 0.32
====== ======
Diluted $(1.57) $ 0.31
====== ======
(a) Includes restructuring and restructuring related charges of $18 million
pre-tax, $11 million after tax or $0.26 per share. Of the adjustment $16
million is recorded in cost of sales and $2 million is recorded in SG&A.
Geographically, $2 million is recorded in North America and $16 million in
Europe, South America and India.
(b) Includes a charge of $21 million pre-tax, $14 million after-tax or $0.31
per share for cost related to refinancing our 10.25% senior secured notes.
(c) Includes a $62 million or $1.34 per share tax charge for tax adjustments,
including realigning the European ownership structure.
(d) Includes restructuring and restructuring related charges of $6 million
pre-tax, $4 million after tax or $0.08 per share. Of the adjustment $4
million is recorded in cost of sales and $2 million is recorded in SG&A.
Geographically, $3 million is recorded in North America and $3 million in
Europe, South America and India.
(e) Includes pension replacement benefit of $7 million pre-tax, $5 million
after tax or $0.10 per share. The entire $7 million adjustment is recorded
in SG&A and geographically in North America.
(f) Includes reserve for receivables from former affiliate adjustment of $3
million pre-tax and $2 million after tax or $0.04 per share. The entire $3
million adjustment is recorded in SG&A and geographically in North America.
(g) Includes a $13 million or $0.28 per share tax benefit primarily related to
FAS 109 adjustment, prior year true-up and Czech investment tax credit.
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
Unaudited
TWELVE MONTHS ENDED DECEMBER 31,
(Millions except per share amounts)
2007 2006(1)
------ ------
Net sales and operating revenues $6,184 $4,682
====== ======
Costs and Expenses
Cost of Sales (exclusive of depreciation shown below) 5,210(a) 3,836(e)
Engineering, Research and Development 114 88
Selling, General and Administrative 399(a)(b) 373(e)(f)(g)(h)
Depreciation and Amortization of Other Intangibles 205 184
------ ------
Total Costs and Expenses 5,928 4,481
====== ======
Loss on sale of receivables (10) (9)
Other Income / (Expense) 6 4
------ ------
Total Other Income / (Expense) (4) (5)
------ ------
Income before Interest Expense, Income Taxes, and Minority Interest
North America 120(a)(b) 103(e)(f)(g)(h)
Europe, South America & India 99(a) 81(e)
Asia Pacific 33 12(e)
------ ------
252 196
Less:
Interest expense (net of interest capitalized) 164(c) 136
Income tax expense 83(d) 5(i)
Minority interest 10 6
------ ------
Net Income (Loss) (5) 49
------ ------
Average common shares outstanding:
Basic 45.8 44.6
====== ======
Diluted 47.5 46.8
====== ======
Earnings (Loss) per share of common stock:
Basic $(0.11) $ 1.11
====== ======
Diluted $(0.11) $ 1.05
====== ======
(a) Includes restructuring and restructuring related charges of $25 million
pre-tax, $16 million after tax or $0.35 per share, of which $22 million is
recorded in cost of sales and $3 million is recorded in SG&A.
Geographically, $3 million is recorded in North America and $22 million in
Europe, South America and India.
(b) Includes customer changeover costs of $5 million pre-tax, $3 million
after-tax or $0.06 per share.
(c) Includes pre-tax expenses of $26 million, $18 million after-tax or $0.37
per share for costs related to refinancing activities.
(d) Includes a $54 million or $1.15 per share tax charge for tax adjustments,
including realigning the European ownership structure.
(e) Includes restructuring and restructuring related charges of $27 million
pre-tax, $17 million after tax or $0.39 per share, of which $23 million is
recorded in cost of sales and $4 million is recorded in SG&A.
Geographically, $13 million is recorded in North America, $8 million in
Europe, South America and India and $6 million in Asia Pacific.
(f) Includes customer changeover costs of $6 million pre-tax, $4 million
after-tax or $0.08 per share.
(g) Includes pension replacement benefit of $7 million pre-tax, $5 million
after tax or $0.10 per share. The entire $7 million adjustment is recorded
in SG&A and geographically in North America.
(h) Includes reserve for receivables from former affiliate adjustment of $3
million pre-tax and $2 million after tax or $0.04 per share. The entire $3
million adjustment is recorded in SG&A and geographically in North America.
(i) Includes a $16 million or $0.34 per share tax benefit primarily related to
FAS 109 adjustment, prior year true-up, Czech investment tax credit and
resolution of tax issues with former affiliates.
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
December 31, 2007 December 31, 2006(1)
----------------- --------------------
Assets
Cash and Cash Equivalents $ 188 $ 202
Receivables, Net 757(a) 595(a)
Inventories 539 441
Other Current Assets 157 177
Investments and Other Assets 764 766
Plant, Property, and Equipment, Net 1,185 1,093
------ ------
Total Assets $3,590 $3,274
====== ======
Liabilities and Shareholders' Equity
Short-Term Debt $ 46 $ 28
Accounts Payable 987 781
Accrued Taxes 41 49
Accrued Interest 22 33
Other Current Liabilities 262 228
Long-Term Debt 1,328(b) 1,357(b)
Deferred Income Taxes 114 107
Deferred Credits and Other Liabilities 359 437
Minority Interest 31 28
Total Shareholders' Equity 400 226
------ ------
Total Liabilities and Shareholders' Equity $3,590 $3,274
====== ======
December 31, 2007 December 31, 2006
----------------- --------------------
(a) Accounts Receivables net of:
Accounts receivables securitization programs $ 157 $ 133
December 31, 2007 December 31, 2006
----------------- --------------------
(b) Long term debt composed of:
Borrowings against revolving credit facilities $ 169 $ --
Term loan A (Due 2012) 150 --
Term loan B (Due 2010) -- 356
10.25% senior notes (Due 2013) 251 487
8.625% subordinated notes (Due 2014) 500 500
8.125% senior notes (Due 2015) 250 --
Other long term debt 8 14
------ ------
$1,328 $1,357
====== ======
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
THREE MONTHS ENDED
DECEMBER 31,
------------------
2007 2006(1)
----- -------
Operating activities:
Net income (loss) $ (72) $ 15
Adjustments to reconcile net
income (loss) to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 55 48
Stock option expense 2 2
Deferred income taxes 48 (50)
Loss on sale of assets, net -- 1
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables 173 62
(Inc.)/dec. in inventories 47 (9)
(Inc.)/dec. in prepayments and other current assets 50 19
Inc./(dec.) in payables (72) 38
Inc./(dec.) in taxes accrued (15) 23
Inc./(dec.) in interest accrued (6) 2
Inc./(dec.) in other current liabilities (2) (5)
Other (8) (8)
----- ----
Net cash provided by operating activities 200 138
Investing activities:
Net proceeds from sale of assets 8 11
Cash payments for plant, property & equipment (61) (43)
Cash payments for software-related intangibles (5) (4)
Investments and other -- 2
----- ----
Net cash used by investing activities (58) (34)
----- ----
Financing activities:
Issuance of common shares 2 4
Issuance of long-term debt 250 --
Debt issuance costs on long-term debt (5)
Retirement of long-term debt (230) (1)
Net inc./(dec.) in revolver borrowings and short-term debt excluding current
maturities on long-term debt (177) (26)
Distribution to minority interest partners (3) (3)
Other (2) (2)
----- ----
Net cash provided (used) by financing activities (165) (28)
----- ----
Effect of foreign exchange rate changes on cash and cash equivalents 8 10
----- ----
Increase (Decrease) in cash and cash equivalents (15) 86
Cash and cash equivalents, October 1 203 116
----- ----
Cash and cash equivalents, December 31 $ 188 $202
===== ====
Cash paid during the period for interest $ 64 $ 34
Cash paid during the period for income taxes 15 8
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment $ 40 $ 18
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions)
TWELVE MONTHS ENDED
DECEMBER 31,
-------------------
2007 2006(1)
----- -------
Operating activities:
Net income (loss) $ (5) $ 49
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 205 184
Stock option expense 9 7
Deferred income taxes 25 (41)
Loss on sale of assets, net 8 3
Changes in components of working capital (net of acquisition)-
(Inc.)/dec. in receivables (117) (24)
(Inc.)/dec. in inventories (66) (57)
(Inc.)/dec. in prepayments and other current assets 15 (25)
Inc./(dec.) in payables 123 92
Inc./(dec.) in taxes accrued (25) 15
Inc./(dec.) in interest accrued (10) 2
Inc./(dec.) in other current liabilities 24 3
Other (21) (5)
----- -----
Net cash provided by operating activities 165 203
Investing activities:
Net proceeds from sale of assets 10 17
Cash payments for plant, property & equipment (177) (177)
Cash payments for software-related intangibles (19) (13)
Cash payment for net assets purchased (16) --
Investments and other -- 1
----- -----
Net cash used by investing activities (202) (172)
----- -----
Financing activities:
Issuance of common shares 8 17
Issuance of long-term debt 400 --
Debt issuance costs on long-term debt (11)
Retirement of long-term debt (591) (4)
Net inc./(dec.) in revolver borrowings and short-term debt excluding current
maturities on long-term debt 183 3
Distribution to minority interest partners (6) (4)
Other -- --
----- -----
Net cash provided (used) by financing activities (17) 12
----- -----
Effect of foreign exchange rate changes on cash and
cash equivalents 40 18
----- -----
Increase (Decrease) in cash and cash equivalents (14) 61
Cash and cash equivalents, January 1 202 141
----- -----
Cash and cash equivalents, December 31 $ 188 $ 202
===== =====
Cash paid during the period for interest $ 177 $ 137
Cash paid during the period for income taxes 60 26
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment $ 40 $ 18
(1) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q4 2007
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income (loss) $(72)
Minority interest 2
Income tax expense 61
Interest expense (net of interest capitalized) 52
----
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) $16 $19 $ 8 43
Depreciation and amortization of other intangibles 28 22 5 55
--- --- --- ----
Total EBITDA(2) $44 $41 $13 $ 98
=== === === ====
Q4 2006 (3)
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income (loss) $ 15
Minority interest 2
Income tax benefit (12)
Interest expense (net of interest capitalized) 34
----
EBIT, Income before interest expense, income
taxes and minority interest (GAAP measure) $18 $16 $ 5 39
Depreciation and amortization of other intangibles 24 20 4 48
--- --- --- ----
Total EBITDA(2) $42 $36 $ 9 $ 87
=== === === ====
(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 investors utilize and
analyze our EBITDA for similar purposes. Tenneco also believes EBITDA
assists investors in comparing a company's performance on a consistent
basis without regard to depreciation and amortization, which can vary
significantly depending upon many factors. However, the EBITDA measure
presented may not always be comparable to similarly titled measures
reported by other companies due to differences in the components of the
calculation.
(3) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q4 2007 Q4 2006 (5)
--------------------------------------- ---------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
---------- ---- ---------- --------- ---------- ---- ---------- ---------
Earnings Measures $ 98 $43 $(72) $(1.57) $87 $39 $ 15 $0.31
Adjustments (reflect non-GAAP measures):
Restructuring and restructuring related
expenses 18 18 11 0.26 6 6 4 0.08
Charges related to refinancing -- -- 14 0.31 -- -- -- --
Net tax adjustments -- -- 62 1.34 -- -- (13) (0.28)
Pension replacement (4) -- -- -- -- (7) (7) (5) (0.10)
Reserve for receivables from former affiliate -- -- -- -- 3 3 2 0.04
---- --- ---- ------ --- --- ---- -----
Non-GAAP earnings measures $116 $61 $ 15 $ 0.34 $89 $41 $ 3 $0.05
==== === ==== ====== === === ==== =====
Q4 2007
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $16 $19 $ 8 $43
Restructuring and restructuring related expenses 2 16 -- 18
--- --- --- ---
Adjusted EBIT $18 $35 $ 8 $61
=== === === ===
Q4 2006 (5)
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $18 16 $ 5 $39
Restructuring and restructuring related expenses 3 3 -- 6
Pension replacement (4) (7) -- -- (7)
Reserve for receivables from former affiliate 3 -- -- 3
--- --- --- ---
Adjusted EBIT $17 $19 $ 5 $41
=== === === ===
(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 fourth 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 investors 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) 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.
(5) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA(2)
Unaudited
YTD 2007
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income (loss) $ (5)
Minority interest 10
Income tax expense 83
Interest expense (net of interest capitalized) 164
----
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) $120 $ 99 $33 252
Depreciation and amortization of other intangibles 103 86 16 205
---- ---- --- ----
Total EBITDA(2) $223 $185 $49 $457
==== ==== === ====
YTD 2006 (3)
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
Net income (loss) $ 49
Minority interest 6
Income tax expense 5
Interest expense (net of interest capitalized) 136
----
EBIT, Income before interest expense, income taxes
and minority interest (GAAP measure) $103 $ 81 $12 196
Depreciation and amortization of other intangibles 92 79 13 184
---- ---- --- ----
Total EBITDA(2) $195 $160 $25 $380
==== ==== === ====
(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 investors utilize and
analyze our EBITDA for similar purposes. Tenneco also believes EBITDA
assists investors in comparing a company's performance on a consistent
basis without regard to depreciation and amortization, which can vary
significantly depending upon many factors. However, the EBITDA measure
presented may not always be comparable to similarly titled measures
reported by other companies due to differences in the components of the
calculation.
(3) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
YTD 2007 YTD 2006 (6)
--------------------------------------- ---------------------------------------
EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share
---------- ---- ---------- --------- ---------- ---- ---------- ---------
Earnings Measures $457 $252 $(5) $(0.11) $380 $196 $ 49 $1.05
Adjustments (reflect non-GAAP measures):
Restructuring and restructuring related
expenses 25 25 16 0.35 27 27 17 0.39
New aftermarket customer changeover costs (4) 5 5 3 0.06 6 6 4 0.08
Charges related to refinancing activities -- -- 18 0.37 -- -- -- --
Net tax adjustments -- -- 54 1.15 -- -- (16) (0.34)
Pension replacement (5) -- -- -- -- (7) (7) (5) (0.10)
Reserve for receivables from former affiliate -- -- -- -- 3 3 2 0.04
---- ---- --- ------ ---- ---- ---- -----
Non-GAAP earnings measures $487 $282 $86 $ 1.82 $409 $225 $ 51 $1.12
==== ==== === ====== ==== ==== ==== =====
YTD 2007
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $120 $ 99 $33 $252
Restructuring and restructuring related expenses 3 22 -- 25
New aftermarket customer changeover costs (4) 5 -- -- 5
---- ---- --- ----
Adjusted EBIT $128 $121 $33 $282
==== ==== === ====
YTD 2006 (6)
----------------------------------
North Europe Asia
America & SA Pacific Total
------- ------ ------- -----
EBIT $103 81 $12 $196
Restructuring and restructuring related expenses 13 8 6 27
New aftermarket customer changeover costs (4) 6 -- -- 6
Pension replacement (5) (7) -- -- (7)
Reserve for receivables from former affiliate 3 -- -- 3
---- --- --- ----
Adjusted EBIT $118 $89 $18 $225
==== === === ====
(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 investors 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) 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) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES (1)
Unaudited
Q4 2007
-----------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 123 $-- $ 123 $ -- $ 123
Exhaust 469 3 466 247 219
------ --- ------ ---- ------
Total North America Original Equipment 592 3 589 247 342
North America Aftermarket
Ride Control 85 -- 85 -- 85
Exhaust 37 -- 37 -- 37
------ --- ------ ---- ------
Total North America Aftermarket 122 -- 122 -- 122
Total North America 714 3 711 247 464
Europe Original Equipment
Ride Control 116 12 104 -- 104
Exhaust 395 38 357 124 233
------ --- ------ ---- ------
Total Europe Original Equipment 511 50 461 124 337
Europe Aftermarket
Ride Control 49 5 44 -- 44
Exhaust 47 4 43 -- 43
------ --- ------ ---- ------
Total Europe Aftermarket 96 9 87 -- 87
South America & India 96 11 85 11 74
Total Europe, South America & India 703 70 633 135 498
Asia 98 9 89 34 55
Australia 50 7 43 6 37
------ --- ------ ---- ------
Total Asia Pacific 148 16 132 40 92
Total Tenneco Inc. $1,565 $89 $1,476 $422 $1,054
====== === ====== ==== ======
Q4 2006 (2)
-----------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 112 $-- $ 112 $ -- $ 112
Exhaust 251 -- 251 91 160
------ --- ------ ------ ------
Total North America Original Equipment 363 -- 363 91 272
North America Aftermarket
Ride Control 81 -- 81 -- 81
Exhaust 34 -- 34 -- 34
------ --- ------ ------ ------
Total North America Aftermarket 115 -- 115 -- 115
Total North America 478 -- 478 91 387
Europe Original Equipment
Ride Control 100 -- 100 -- 100
Exhaust 352 -- 352 167 185
------ --- ------ ------ ------
Total Europe Original Equipment 452 -- 452 167 285
Europe Aftermarket
Ride Control 40 -- 40 -- 40
Exhaust 50 -- 50 -- 50
------ --- ------ ------ ------
Total Europe Aftermarket 90 -- 90 -- 90
South America & India 71 -- 71 8 63
Total Europe, South America & India 613 -- 613 175 438
Asia 73 -- 73 26 47
Australia 45 -- 45 5 40
------ --- ------ ------ ------
Total Asia Pacific 118 -- 118 31 87
Total Tenneco Inc. $1,209 $-- $1,209 $ 297 $ 912
====== === ====== ====== ======
(1) 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.
(2) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES (1)
Unaudited
YTD 2007
-----------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 514 $ -- $ 514 $ -- $ 514
Exhaust 1,850 5 1,845 924 921
------ ---- ------ ------ ------
Total North America Original Equipment 2,364 5 2,359 924 1,435
North America Aftermarket
Ride Control 385 -- 385 -- 385
Exhaust 152 -- 152 -- 152
------ ---- ------ ------ ------
Total North America Aftermarket 537 -- 537 -- 537
Total North America 2,901 5 2,896 924 1,972
Europe Original Equipment
Ride Control 427 37 390 -- 390
Exhaust 1,569 120 1,449 511 938
------ ---- ------ ------ ------
Total Europe Original Equipment 1,996 157 1,839 511 1,328
Europe Aftermarket
Ride Control 201 15 186 -- 186
Exhaust 207 16 191 -- 191
------ ---- ------ ------ ------
Total Europe Aftermarket 408 31 377 -- 377
South America & India 333 24 309 39 270
Total Europe, South America & India 2,737 212 2,525 550 1,975
Asia 352 15 337 123 214
Australia 194 23 171 25 146
------ ---- ------ ------ ------
Total Asia Pacific 546 38 508 148 360
Total Tenneco Inc. $6,184 $255 $5,929 $1,622 $4,307
====== ==== ====== ====== ======
YTD 2006 (2)
-----------------------------------------------------------
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
-------- -------- --------- --------- -------------
North America Original Equipment
Ride Control $ 483 $-- $ 483 $ -- $ 483
Exhaust 928 -- 928 272 656
------ --- ------ ---- ------
Total North America Original Equipment 1,411 -- 1,411 272 1,139
North America Aftermarket
Ride Control 383 -- 383 -- 383
Exhaust 162 -- 162 -- 162
------ --- ------ ---- ------
Total North America Aftermarket 545 -- 545 -- 545
Total North America 1,956 -- 1,956 272 1,684
Europe Original Equipment
Ride Control 380 -- 380 -- 380
Exhaust 1,264 -- 1,264 519 745
------ --- ------ ---- ------
Total Europe Original Equipment 1,644 -- 1,644 519 1,125
Europe Aftermarket
Ride Control 178 -- 178 -- 178
Exhaust 211 -- 211 -- 211
------ --- ------ ---- ------
Total Europe Aftermarket 389 -- 389 -- 389
South America & India 272 -- 272 32 240
Total Europe, South America & India 2,305 -- 2,305 551 1,754
Asia 246 -- 246 85 161
Australia 175 -- 175 19 156
------ --- ------ ---- ------
Total Asia Pacific 421 -- 421 104 317
Total Tenneco Inc. $4,682 $-- $4,682 $927 $3,755
====== === ====== ==== ======
(1) 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.
(2) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES (5)
Debt net of cash / Adjusted EBITDA - 12 months
Year Ended
December 31
---------------
2007 2006
------ ------
Total debt $1,374 $1,385
Cash and cash equivalents 188 202
Debt net of cash balances (1) 1,186 1,183
Adjusted EBITDA (2) (3) 487 409
Ratio of net debt to adjusted EBITDA (4) 2.4x 2.9x
(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) 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 investors 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) 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.
Similar adjustments to EBITDA 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.
(4) Tenneco presents the above reconciliation of the ratio of debt net of cash
to annual 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, annual adjusted EBITDA is used as an indicator of the
company's performance and debt net of cash is presented as an indicator of
our credit position and progress toward reducing our financial leverage.
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), (2) and (3) for a description
of the limitations of using debt net of cash, EBITDA and adjusted EBITDA.
(5) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Adjusted EBIT as a Percent of Value Added Sales
Unaudited
Q4 2007 Q4 2006 (3) (2007) (2006) (3)
------- ----------- ------ ----------
Net Sales $1,565 $1,209 $6,184 $4,682
Substrate Sales $ 440 $ 297 $1,673 $ 927
------ ------ ------ ------
Value-Added Sales $1,125 $ 912 $4,511 $3,755
Adjusted EBIT $ 61 $ 41 $ 282 $ 225
Adjusted EBIT as a percentage of Value Added Sales 5.4% 4.4% 6.2% 6.0%
(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 fourth quarters of 2007
and 2006 and full year 2006 and 2007 in a manner that allows a better
understanding of our operational results compared to our value-added sales
by excluding the impact of substrate sales, which generally carry lower
margins. Using only the GAAP revenue measures to analyze Adjusted EBIT
margin would have material limitations because the impact of lower-margin
substrate sales can obscure the impact of Tenneco's higher technology value
add hot-end emissions business. Management compensates for these
limitations by utilizing both Adjusted EBIT as a percentage of Net Sales
and Adjusted EBIT as a percentage of Value-Added Sales to understand and
analyze the results of the business. The company believes investors find
the non-GAAP information helpful in understanding the trends in Tenneco's
EBIT margins.
(3) As disclosed in Tenneco's Form 10-K/A filed August 14, 2007, Tenneco
restated its financial results for the years ended December 31, 2004, 2005
and 2006 and for the quarters ended March 31, 2006 and 2007, June 30, 2006
and September 30, 2006. The amounts presented in this table reflect the
results of the restatement.