LAKE FOREST, Ill., Jan. 24 /PRNewswire-FirstCall/ -- Tenneco 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 Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income 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
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 higher 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. Theincrease 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.
Adjusted full-year 2007 and 2006 results:
YTD 2007 YTD 2006
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income 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 http://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;
(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 http://www.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
recordedin 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 aftertax 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' EquityShort-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
(b) Long term debt composed of: December 31, 2007 December 31, 2006
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 amortizationof 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 Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income 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
AdjustedEBIT $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 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
Netincome (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 Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income 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
EquipmentRide 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'sForm 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 toreflect 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 repaydebt 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 EBITDAis 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.
Contacts:
Jane Ostrander, Media Relations Leslie Hunziker, Investor Relations
847 482-5607 847 482-5042
jostrander@tenneco.com
lhunziker@tenneco.com
Photo: http://www.newscom.com/cgi-bin/prnh/20051028/CGF002LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
Tenneco