LAKE FOREST, Ill., April 26 /PRNewswire-FirstCall/ -- Tenneco Inc. reported first quarter 2007 net income of $3 million, or 7-cents per diluted share, compared with $7 million, or 14-cents per diluted share, in first quarter 2006. Adjusted for the items below, net income was $8 million, or 17-cents per diluted share, versus $8 million, or 17-cents per diluted share, a year ago (the tables attached to the press release reconcile GAAP results to non-GAAP results).
EBIT (earnings before interest, taxes and minority interest) increased to $50 million, from $42 million a year ago. On an adjusted basis, EBIT was $52 million, up from $48 million in first quarter 2006. EBITDA (EBIT before depreciation and amortization) was $98 million, versus $86 million a year ago. Adjusted EBITDA was $100 million, compared with $92 million in first quarter 2006.
First quarter revenue increased 24% to $1.4 billion from $1.1 billion a year ago. Substrate sales were up 73% to $339 million from $196 million in first quarter 2006. Excluding substrate sales and favorable currency of $49 million, revenue was up 9% to $1.0 billion from $936 million a year ago. The company benefited from its balanced operations as revenue growth in Europe and China as well as the launch of incremental new emission control business in North America helped offset an 8% industry OE production decline in North America.
Adjusted first quarter 2007 and 2006 results:
Q1 2007 Q1 2006
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $98 $50 $3 $0.07 $86 $42 $7 $0.14
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 2 2 1 0.03 6 6 4 0.09
Charges related to
refinancing - - 4 0.07 - - - -
Tax adjustments - - - - - - (3) (0.06)
Non-GAAP earnings
measures $100 $52 $8 $0.17 $92 $48 $8 $0.17
First quarter 2007 adjustments:
-- Restructuring related expenses of $2 million pre-tax, or 3-cents per
diluted share;
-- Charges of $5 million pre-tax, $4 million after-tax, or 7-cents per
diluted share, associated with refinancing the senior credit facility.
First quarter 2006 adjustments:
-- Restructuring related expenses of $6 million pre-tax, or 9-cents per
diluted share;
-- Tax benefit of $3 million, or 6-cents per diluted share, primarily
related to resolution of tax issues with former affiliates.
"We're pleased with how Tenneco is positioned with a well-balanced global footprint, a good mix of OE and aftermarket customers, technology-driven growth on new platforms and a relentless focus on controlling costs, all which helped counter North American OE industry production declines this quarter," said Gregg Sherrill, chairman and CEO, Tenneco. "We remain intensely focused on generating growth with our advanced technology capabilities, particularly as emission control opportunities expand with tighter emissions regulations. Equally important is our focus on launching new OE platforms flawlessly, improving our operating efficiency and offsetting higher material costs."
Gross margin in the quarter was 15.7% versus 18.6% a year ago. The significant diesel platform launches in North America resulted in a higher mix of substrate sales. Substrates, an integral part of the emission control system, typically carry lower margins. These large OE launches also shifted the revenue balance between OE and aftermarket. Other items including higher material costs, lower restructuring and benefits from Lean manufacturing and Six Sigma programs impacted gross margin to a lesser degree.
Total steel costs in the quarter increased $14 million year-over-year. Tenneco is working aggressively to minimize these higher costs through cost reductions, material substitutions and low-cost country sourcing. The company is also recovering some of these costs with aftermarket price increases and with OE customers, having already completed negotiations on some OE platforms. The company is still negotiating with other OE customers and anticipates completing nearly all the agreements by the end of the second quarter.
SGA&E (selling, general, administrative and engineering) expenses as a percent of sales decreased to 8.7% versus 10.9% a year ago. Tenneco successfully leveraged its revenue growth in the quarter while reducing SGA costs and continuing to invest in engineering for new platform launches and to meet changes in future emissions regulations.
EBIT margin in the quarter was relatively even year-over-year. The SGA&E percentage improvement helped offset the impact of the gross margin percentage decline.
Interest expense in the quarter increased to $42 million, versus $34 million in first quarter 2006, mostly due to the $5 million expense for successfully refinancing the company's senior credit facility in March. The transaction enhances Tenneco's financial flexibility by extending the expiration of its revolving line of credit; extending the maturities of its term loan facility; and enhancing debt covenant flexibility.
As expected, significant business growth in North America drove up cash use in the quarter to an outflow of $95 million versus an outflow of $25 million a year ago. The company's 24% revenue increase resulted in higher accounts receivable and also impacted inventory as two of the new platforms use converters sourced from the company's South Africa operations. Seasonal build-up in the aftermarket also increased inventory.
At quarter-end, debt net of cash balances was $1.317 billion, compared with $1.288 billion a year ago and total debt was $1.453 billion, versus $1.384 billion at the end of first quarter 2006. At quarter-end, the ratio of debt net of cash balances to adjusted LTM (last twelve months) EBITDA was 3.1x, equal to a year ago.
NORTH AMERICA
-- North America OE revenue was $509 million, a 36% increase over $374
million a year ago. Excluding substrate sales, revenue was $343
million, up 12% year-over-year from $308 million. Incremental volume
from new emissions control platform launches, like the Toyota Tundra
and Ford Super Duty, drove the increase and more than offset an 8%
decline in industry OE production.
-- North America aftermarket revenue was $134 million, down from $141
million a year ago. Lower ride and exhaust unit sales were only
partially offset by price increases to recover higher material costs.
-- EBIT for North American operations was $29 million, down $5 million
from a year ago. The positive benefits from new platform launches were
more than offset by start-up costs, higher material costs and added
engineering expense. Adjusted for the items below, EBIT was $30
million, versus $37 million in first quarter 2006.
-- First quarter 2007 EBIT includes $1 million in restructuring expense
and first quarter 2006 EBIT includes $3 million in restructuring
expense.
EUROPE, SOUTH AMERICA AND INDIA
-- Europe OE revenue increased 28% to $494 million from $387 million in
first quarter 2006. New launches on key platforms with BMW, Ford and
PSA drove the increase. Excluding $39 million in favorable currency
and higher substrate sales, revenue was $333 million compared with $285
million a year ago, a 17% increase versus an industry production
increase of 4% in the quarter.
-- Europe aftermarket revenue increased to $79 million from $75 million a
year ago. Excluding the benefit of currency, revenue was $73 million.
Improvedride control sales and price increases to recover steel cost
increases partially offset lower exhaust unit sales.
-- South America and India revenue increased year-over-year to $70 million
from $65 million, driven by stronger OE volumes and improved
aftermarket sales. Adjusting for currency and substrate sales, revenue
was $61 million, versus $58 million a year ago.
-- EBIT for Europe, South America and India increased 91% to $15 million,
versus $8 million in first quarter 2006. The significant improvement
was driven by OE volumes and manufacturing efficiencies gained through
Lean manufacturing and Six Sigma programs, which improved profitability
on existing business and generated more profit on new platform
launches. EBIT included $2 million in favorable currency.
-- EBIT in both first quarter 2007 and 2006 included $1 million in
restructuring expenses.
ASIA PACIFIC
-- Asia revenue increased 39% to $70 million, versus $50 million in first
quarter 2006. Excluding substrate sales, Asia revenue was $44 million,
versus $33 million a year ago. Higher OE volumes and new platform
launches in China drove the increase.
-- Australia revenue rose 6% to $43 million, from $40 million a year ago.
Excluding currency and substrate sales, revenue was $35 million
compared with $36 million in first quarter 2006.
-- Asia Pacific EBIT increased to $6 million, compared with breakeven a
year ago. The EBIT improvement was driven by higher OE volumes in
China combined with benefits from restructuring charges taken in the
first quarter of 2006.
-- First quarter 2006 EBIT includes $2 million in restructuring expenses
for Australia.
OUTLOOK
We're optimistic as we look ahead to the second quarter based on today's production schedules. We expect continued revenue growth from our emission control truck business as the ramp-up on these major platforms accelerates," said Sherrill. "We also expect the European segment and China operations will continue to perform well, which will help balance anticipated industry-wide OE production declines in North America. In addition, we will continue to benefit from our intense focus on all aspects of cost improvement and manufacturing efficiencies and anticipate finalizing nearly all of our negotiations with OE customers on steel cost recovery by the end of the quarter."
Attachment 1:
Statements of Income - 3 Months
Balance Sheet
Statements of Cash Flow - 3 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 Revenues to Non-GAAP Revenues Measures - 3 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, April 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 http://www.tenneco.com. A recording of the call will be available one hour following completion of the call on April 26, 2007. To access this recording, dial 866-509-3863 (domestic) or 203-369-1914 (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.
2007 ANNUAL MEETING
Tenneco will hold its annual meeting of shareholders on Tuesday, May 8, 2007 at 10:00 a.m. CDT. The meeting will be held at the corporate headquarters, 500 North Field Drive, Lake Forest, Illinois. The meeting will also be available by webcast. To access the listen-only annual meeting webcast, go to the financial section of the company's website at least 15 minutes prior to the meeting to register and download any necessary software. The webcast will include an audio transmission of the proceedings and slides used in the speaker presentation. Voting will not be available electronically through the webcast.
Tenneco is a $4.7 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, 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
(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 http://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 MARCH 31,
(Millions except share and per share amounts)
2007 2006
Net sales and operating revenues $1,399 $1,132
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 1,179 (a) 921 (c)
Engineering, Research and
Development 27 22
Selling, General and
Administrative 95 (a) 101
Depreciation and Amortization of
Other Intangibles 48 44
Total Costs and Expenses 1,349 1,088
Loss on sale of receivables (2) (1)
Other Income (Expense) 2 (1)
Total Other Expense - (2)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 29 (a) 34 (c)
Europe & South America 15 (a) 8 (c)
Asia Pacific 6 - (c)
50 42
Less:
Interest expense (net of
interest capitalized) 42 (b) 34
Income tax expense 3 - (d)
Minority interest 2 1
Net Income 3 7
Average common shares outstanding:
Basic 45.4 43.9
Diluted 47.3 46.7
Earnings per share ofcommon stock:
Basic $0.07 $0.15
Diluted $0.07 $0.14
(a) Includes restructuring and restructuring related charges of $2
million pre-tax, $1 million after tax or $0.03 per share, of which $1
million is recorded in cost of sales and $1 million is recorded in
SGA&E. Geographically, $1 million is recorded in North America and $1
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 $6
million pre-tax, $4 million after tax or $0.09 per share, all of which
is recorded in cost of sales. Geographically, $3 million is recorded
in North America, $1 million in Europe, South America and India and $2
million in Asia Pacific.
(d) Includes a $3 million or $0.06 per share tax benefit, primarily
related to resolution of tax issues with former affiliates.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
March 31, 2007 December 31, 2006
Assets
Cash and Cash Equivalents $136 $202
Receivables, Net 799 (a) 604 (a)
Inventories 516 439
Other Current Assets 187 177
Investments and Other Assets 755 748
Plant, Property, and Equipment,
Net 1,096 1,093
Total Assets $3,489 $3,263
Liabilities and Shareholders' Equity
Short-Term Debt $29 $28
Accounts Payable 950 782
Accrued Taxes 41 49
Accrued Interest 31 40
Other Current Liabilities 243 234
Long-Term Debt 1,424 (b) 1,350 (b)
Deferred Income Taxes 107 107
Deferred Credits and Other
Liabilities 390 424
Minority Interest 29 28
Total Shareholders' Equity 245 221
Total Liabilities and
Shareholders' Equity $3,489 $3,263
March 31, 2007 December 31, 2006
(a) Accounts receivable securitization
programs $145 $133
(b) Long term debt composed of: March 31, 2007 December 31, 2006
Borrowings against
revolving credit facilities $281 $-
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 6 7
$1,424 $1,350
ATTACHMENT 1
Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
Three Months Ended
March 31,
2007 2006
Operating activities:
Net income $3 $7
Adjustments to reconcile income
to net cash used by operating
activities --
Depreciation and amortization
of other intangibles 48 44
Stock option expense 1 1
Deferred income taxes (3) 5Loss on sale of assets, net 2 1
Changes in components of
working capital --
(Inc.)/dec. in receivables (198) (82)
(Inc.)/dec. in inventories (74) (27)
(Inc.)/dec. in prepayments
and other current assets (13) (14)
Inc./(dec.) in payables 150 65
Inc./(dec.) in taxes
accrued (4) (2)
Inc./(dec.) in interest
accrued (9) (4)
Inc./(dec.) in other
current liabilities 4 (18)
Other (2) (1)
Net cash used by operating
activities (95) (25)
Investing activities:
Net proceeds from sale of
assets - -
Cash Payments for plant,
property & equipment (38) (36)
Acquisition of business - -
Cash payments for software-
related intangibles (7) (3)
Investments and other 1 -
Net cash used by investing
activities (44) (39)
Financing activities:
Issuance of common shares 2 8
Issuance of long-term debt 150 -
Debt issuance costs on long-
term debt (6) -
Retirement of long-term debt (357) (1)
Net inc./(dec.) in short-term
debt excluding current
maturities on long-term debt 280 9
Other 1 -
Net cash provided (used) by
financing activities 70 16
Effect of foreign exchange rate
changes on cash and
cash equivalents 3 3
Decrease in cash and cash
equivalents (66) (45)
Cash and cash equivalents,
January 1 202 141
Cash and cash equivalents,
March 31 $136 $96
Cash paid during the period for
interest $42 $34
Cash paid during the period for
income taxes 8 -
Period ended balance of payables
for plant, property and equipment 17 16
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA
Unaudited
Q1 2007
North Europe Asia
America & SA Pacific Total
Net income $3
Minority interest 2
Income tax expense 3
Interest expense (net of interest
capitalized) 42
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) $29 $15 $6 50
Depreciation and amortization of
other intangibles 23 21 4 48
Total EBITDA(2) $52 $36 $10 $98
Q1 2006
North Europe Asia
America & SA Pacific Total
Net income $7
Minority interest 1
Income tax expense -
Interest expense (net of interest
capitalized) 34
EBIT, Income before interest expense,income taxes and minority interest
(GAAP measure) $34 $8 $- 42
Depreciation and amortization of
other intangibles 22 19 3 44
Total EBITDA(2) $56 $27 $3 $86
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes,
minority interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net
income or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure
of liquidity. Tenneco has presented EBITDA because it regularly
reviews EBITDA as a measure of the company's performance. In
addition, Tenneco believes its debt holders utilize and analyze our
EBITDA for similar purposes. Tenneco also believes EBITDA assists
investors in comparing a company's performance on a consistent basis
without regard to depreciation and amortization, which can vary
significantly depending upon many factors. However, the EBITDA
measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the
components of the calculation.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q1 2007 Q1 2006
EBITDA Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income Share
Earnings Measures $98 $50 $3 $0.07 $86 $42 $7 $0.14
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring
related expenses 2 2 1 0.03 6 6 4 0.09
Charges related to
refinancing- - 4 0.07 - - - -
Tax adjustments - - - - - - (3) (0.06)
Non-GAAP earnings
measures $100 $52 $8 $0.17 $92 $48 $8 $0.17
Q1 2007
North Europe Asia
America & SA Pacific Total
EBIT $29 $15 $6 $50
Restructuring and
restructuring related
expenses 1 1 - 2
Adjusted EBIT $30 $16 $6 $52
Q1 2006
North Europe Asia
America & SA Pacific Total
EBIT $34 $8 $- $42
Restructuring and
restructuring related
expenses 3 1 2 6
Adjusted EBIT $37 $9 $2 $48
(1) Generally Accepted Accounting Principles
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings
measures primarily to reflect the results for the first quarters of
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 separatefrom 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.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Q1 2007
Revenues
Sub- Exclud-
strate ing
Sales Currency
Revenues Exclud- and
Exclud- ing Sub-
Currency ing Currency strate
Revenues Impact Currency Impact Sales
North America Original
Equipment
Ride Control $133 $- $133 $ - $133
Exhaust 376 - 376 166 210
Total North America
Original Equipment 509 - 509 166 343
North America Aftermarket
Ride Control 98 - 98 - 98
Exhaust 36 - 36 - 36
Total North America
Aftermarket 134 - 134 - 134
Total North America 643 - 643 166 477
Europe Original Equipment
Ride Control 107 10 97 - 97
Exhaust 387 29 358 122 236
Total Europe
Original Equipment 494 39 455 122 333
Europe Aftermarket
Ride Control 39 2 37 - 37
Exhaust 40 4 36 - 36
Total Europe Aftermarket 79 6 73 - 73
South America & India 70 1 69 8 61
Total Europe,
South America & India 643 46 597 130 467
Asia 70 - 70 26 44
Australia 43 3 40 5 35
Total Asia Pacific 113 3 110 31 79
Total Tenneco Inc. $1,399 $49 $1,350 $327 $1,023
Q1 2006
Revenues
Sub- Exclud-
strate ing
Sales Currency
Revenues Exclud- and
Exclud- ing Sub-
Currency ing Currency strate
Revenues Impact Currency Impact Sales
North America
Original Equipment
Ride Control $131 $- $131 $- $131
Exhaust243 - 243 66 177
Total North
America Original
Equipment 374 - 374 66 308
North America Aftermarket
Ride Control 101 - 101 - 101
Exhaust 40 - 40 - 40
Total North
America Aftermarket 141 - 141 - 141
Total North America 515 - 515 66 449
Europe Original Equipment
Ride Control 95 - 95 - 95
Exhaust 292 - 292 102 190
Total Europe
Original Equipment 387 - 387 102 285
Europe Aftermarket
Ride Control 36 - 36 - 36
Exhaust 39 - 39 - 39
Total Europe Aftermarket 75 - 75 - 75
South America & India 65 - 65 7 58
Total Europe,
South America & India 527 - 527 109 418
Asia 50 - 50 17 33
Australia 40 - 40 4 36
Total Asia Pacific 90 - 90 21 69
Total Tenneco Inc. $1,132 $- $1,132 $196 $936
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.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
Debt net of cash / Adjusted EBITDA - LTM
Quarter Ended March 31
2007 2006
Total debt $1,453 $1,384
Cash and cash equivalents 136 96
Debt net of cash balances (1) 1,317 1,288
Adjusted LTM EBITDA 419 413
Ratio of net debt to adjusted LTM
EBITDA (2) 3.1x 3.1x
Q2 06 Q3 06 Q4 06 Q1 07 Q1 07 LTM
Net income 24 6 14 3 47
Minority interest 1 2 2 2 7
Income tax expense 15 3 (15) 3 6
Interest expense
(net of interest capitalized) 33 34 35 42 144
EBIT, Income before
interest expense,
income taxes and
minority interest
(GAAP measure) 73 45 36 50 204
Depreciation and
amortization of
other intangibles 47 45 48 48 188
Total EBITDA(3) 120 90 84 98 392
Restructuring and
restructuring related expenses 8 7 6 2 23
New Aftermarket customer
changeover costs (4) 6 - - - 6
Pension Curtailment (5) - - (7) (7)
Reserve for receivables from
former affiliate - - 3 3
Stock Option Adjustment (6) - - 2 2
Total Adjusted EBITDA (7) 134 97 88 100 419
Q2 05 Q3 05 Q4 05 Q1 06 Q1 06 LTM
Net income33 10 8 7 58
Minority interest - - 1 1 2
Income tax expense 18 7 (4) - 21
Interest expense
(net of interest capitalized) 32 33 33 34 132
EBIT, Income before
interest expense,
income taxes and
minority interest
(GAAP measure) 83 50 38 42 213
Depreciation and
amortization of
other intangibles 44 44 43 44 175
Total EBITDA(3) 127 94 81 86 388
Restructuring and restructuring
related expenses 2 2 5 6 15
New Aftermarket customer changeover
costs (4) - - 10 - 10
Total adjusted EBITDA(7) 129 96 96 92 413
(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 changeovercosts 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.
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Tenneco Inc.