-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, It7g9FMdJ/igKYQ1OBXdN0Sb7gv0YYx1FWLVtWQ2GgEJ6guOaKo0aCxzDgvUfLmV rtop3Wk8Ofubm/HrBgGdbg== 0000950137-07-001109.txt : 20070130 0000950137-07-001109.hdr.sgml : 20070130 20070130085445 ACCESSION NUMBER: 0000950137-07-001109 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070130 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070130 DATE AS OF CHANGE: 20070130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENNECO INC CENTRAL INDEX KEY: 0001024725 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 760515284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12387 FILM NUMBER: 07563055 BUSINESS ADDRESS: STREET 1: 500 NORTH FIELD DRIVE CITY: LAKE FOREST STATE: IL ZIP: 60045 BUSINESS PHONE: 847-482-50 MAIL ADDRESS: STREET 1: 500 N FIELD DR STREET 2: ROOM T 2560B CITY: LAKE FOREST STATE: IL ZIP: 60045 FORMER COMPANY: FORMER CONFORMED NAME: TENNECO AUTOMOTIVE INC DATE OF NAME CHANGE: 19991112 FORMER COMPANY: FORMER CONFORMED NAME: NEW TENNECO INC DATE OF NAME CHANGE: 19961011 8-K 1 c11785e8vk.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K Current Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 ---------- Date of Report (Date of earliest event reported): January 30, 2007 TENNECO INC. (Exact Name of Registrant as Specified in Charter) Delaware 1-12387 76-0515284 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation File Number) of Incorporation or organization) Identification No.)
500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045 (Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (847) 482-5000 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION On January 30, 2007, Tenneco Inc. announced its fourth quarter 2006 results of operations. Exhibit 99.1 to this Current Report on Form 8-K presents the company's press release, including the company's consolidated statements of income, balance sheets and statements of cash flows for the periods ended December 31, 2005 and 2006, as released by the company on January 30, 2007, and such Exhibit is incorporated herein by reference. Exhibit 99.1 also includes information regarding the company's scheduled conference call to discuss the company's results of operations for the fourth quarter of 2006, as well as other matters that may impact the company's outlook. ITEM 8.01 OTHER EVENTS The company also announced that its Board of Directors has scheduled the company's annual meeting of stockholders for Tuesday, May 8, 2007 at 10:00 a.m. CDT. The meeting will be held at the company's headquarters, 500 North Field Drive, Lake Forest, Illinois. The record date for stockholders to vote is March 13, 2007. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description - ----------- ----------- 99.1 Press release issued January 30, 2007
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TENNECO INC. Date: January 30, 2007 By: /s/ Kenneth R. Trammell -------------------------------- Kenneth R. Trammell Executive Vice President and Chief Financial Officer EX-99.1 2 c11785exv99w1.txt PRESS RELEASE NEWS RELEASE (TENNECO LOGO) Contacts: Jim Spangler Media Relations 847 482-5810 jspangler@tenneco.com Leslie Hunziker Investor Relations 847 482-5042 lhunziker@tenneco.com TENNECO REPORTS FOURTH QUARTER AND FULL-YEAR 2006 RESULTS - - 4Q NET INCOME OF $14 MILLION, OR 30-CENTS PER DILUTED SHARE - - FULL YEAR NET INCOME OF $51 MILLION, OR $1.10 PER DILUTED SHARE - - EUROPEAN SEGMENT 4Q EBIT IMPROVES 13% YEAR-OVER YEAR - - COMPANY DELIVERS $132 MILLION IN 4Q CASH FLOW FROM OPERATIONS - - COMPANY EXPECTS $1.1 BILLION IN ESTIMATED OE REVENUE GROWTH IN 2007; ESTIMATES ADDITIONAL $300 MILLION IN 2008 LAKE FOREST, ILLINOIS, JANUARY 30, 2007 - Tenneco Inc. (NYSE: TEN) reported fourth quarter 2006 net income of $14 million, or 30-cents per diluted share, up from $8 million, or 18-cents per diluted share a year ago. Excluding the adjustments below, net income was $3 million, or 6-cents per diluted share, versus $13 million, or 28-cents per diluted share, in fourth quarter 2005 (the attached tables reconcile GAAP results to Non-GAAP results). EBIT (earnings before interest expense, taxes and minority interest) was $36 million, down from $38 million the prior year. On an adjusted basis, EBIT was $40 million, compared with $53 million in fourth quarter 2005. EBITDA (EBIT before depreciation and amortization) was $84 million versus $81 million a year ago. On an adjusted basis, EBITDA was $88 million compared with $96 million. Fourth quarter revenue was $1.2 billion, compared with $1.1 billion a year ago. Favorable currency benefited revenue by $55 million and substrate sales increased to $282 million from $173 million a year ago. Excluding the impact of currency and substrate sales, revenue was $872 million, down from $891 million in the fourth quarter of 2005. Tenneco's fourth quarter results reflect the tough North American market conditions facing all automotive suppliers. The company's revenues were negatively impacted as the North American OEMs continued to cut production schedules. However, the company's geographic balance - more than half of Tenneco's revenue is generated outside North America - and diverse customer base helped partially offset the impact of scaled back OE production volumes -2- in North America. In addition, the company has a substantial global aftermarket business, which posted solid results worldwide. The company generated $132 million in cash flow from operations in the quarter despite challenging North American market conditions and a $32 million inventory build in preparation for significant North American OE platform launches scheduled in 2007. This compares to $160 million in cash flow from operations in fourth quarter 2005, which did not have the same level of launch activity. At quarter-end, total debt was $1.378 billion, even with a year ago. Debt net of cash balances was $1.176 billion, down from $1.237 billion at the end of fourth quarter 2005. At quarter-end, the ratio of debt net of cash balances to annual adjusted EBITDA was 2.9x. "Tenneco's global footprint, diverse OE customer base and strong global aftermarket business continued to help buffer the very soft market conditions we and other suppliers faced in North America over the last year," said Gregg Sherrill, Tenneco Chairman and CEO. "Once again, our European segment and rapidly growing business in China, as well as our relentless focus on managing costs, improving efficiency and flexing our operations, carried Tenneco in a difficult quarter." ADJUSTED FOURTH QUARTER 2006 AND 2005 RESULTS:
Q4 2006 Q4 2005 ------------------------------- ------------------------------- Net Net EBITDA EBIT Income Per Share EBITDA EBIT Income Per Share ------ ---- ------ --------- ------ ---- ------ --------- Earnings Measures $84 $ 36 $14 $ 0.30 $ 81 $38 $ 8 $ 0.18 Adjustments (reflect non-GAAP measures): Restructuring and restructuring related expenses 6 6 4 0.08 5 5 3 0.06 New aftermarket customer changeover costs -- -- -- -- 10 10 7 0.15 Pension replacement (7) (7) (5) (0.10) -- -- -- -- Tax adjustments -- -- (13) (0.28) -- -- (5) (0.11) Reserve for receivables from former affiliate 3 3 2 0.04 -- -- -- -- Stock option adjustment 2 2 1 0.02 -- -- -- -- --- ---- --- ------ ------ --- ---- ------ Non-GAAP earnings measures $88 $ 40 $ 3 $ 0.06 $ 96 $53 $ 13 $ 0.28 === ==== === ====== ====== === ==== ======
FOURTH QUARTER 2006 ADJUSTMENTS: - - Restructuring related expenses of $6 million pre-tax, or 8-cents per diluted share; - - Expense of $2 million pre-tax, or 2-cents per diluted share, related to an accounting charge for employee stock options; - - 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. -3- FOURTH QUARTER 2005 ADJUSTMENTS: - - Restructuring related expenses of $5 million pre-tax or 6-cents per diluted share; - - New aftermarket customer changeover costs of $10 million pre-tax, or 15-cents per diluted share; - - Tax benefit of $5 million, or 11-cents per diluted share, related to the favorable resolution of foreign tax contingencies. Gross margin in the quarter was 15.6% versus 18.7% for fourth quarter 2005. As expected, higher substrate sales, which typically carry lower margins, continue to impact Tenneco's gross margin. Substrate sales were 25% of total revenue in the quarter versus 16% a year ago, due to more diesel aftertreatment and hot-end exhaust business. This mix shift accounted for 2.5 percentage points of the gross margin decline. In addition, higher year-over-year steel costs of $8 million negatively impacted gross margin. Tenneco's efforts to cut costs globally through tight spending controls and the benefit from replacing the defined benefit pension plan in the U.S., announced in August 2006, significantly lowered SGA&E (selling, general, administrative and engineering) expense to 8.9% of sales in the quarter versus 11.0% of sales a year ago. The replacement of the defined benefit pension plan accounted for 0.5 percentage points of the change. Last year's SGA&E expense as a percent of sales included 1.0 percentage point related to aftermarket changeover costs. NORTH AMERICA - - North American OE revenue was $363 million, versus $372 million a year ago. Excluding substrate sales, revenue was down 10% from $304 million to $272 million, reflecting an industry production decline of 8% and a 13% production decline among the domestic U.S. automakers. Revenue was impacted by significant volume declines, particularly on key exhaust platforms like the GM Trailblazer/Envoy and the Ford F-150 and Dodge Ram pick-up trucks. - - North American aftermarket revenue increased to $115 million from $113 million, primarily driven by price increases to help offset higher material costs in both product lines and higher ride control sales from previously announced new customers, which more than offset lower exhaust product unit sales. - - EBIT for North American operations was down $3 million year-over-year to $16 million. Adjusted for the items below, EBIT was $17 million versus $31 million the prior year. OE volume declines and higher material costs had a significant negative impact on EBIT and more than offset the benefits from cost reduction efforts. - - Fourth quarter 2006 EBIT includes expenses of $3 million for restructuring, $2 million for an accounting charge for employee stock options and a $3 million reserve for receivables from a former affiliate. It also included a benefit of $7 million for the U.S. pension plan replacement. Fourth quarter 2005 EBIT includes expenses of $2 million for restructuring and $10 million for new aftermarket customer changeover costs. EUROPE, SOUTH AMERICA AND INDIA - - European OE revenue was $452 million, compared with $352 million a year ago. Excluding the benefit of stronger currency, revenue was $409 million. The revenue increase was driven by the ramp-up of new emission control platforms and stronger volumes overall in both the ride control and emission control segments despite the production build-out on some key exhaust platforms. Adjusting for currency and higher year-over-year substrate sales, revenue was $257 -4- million, versus $268 million in fourth quarter 2005, as the mix of emission control business continues to move to hot-end exhaust and diesel aftertreatment. - - European aftermarket revenue increased to $90 million from $76 million a year ago, driven by higher ride control and exhaust volumes. Excluding the impact of currency, revenue increased to $82 million in the quarter. - - South America and India revenue increased to $71 million, versus $61 million the previous year. Excluding the impact of currency and substrate sales, revenue was up 7%, driven by strong OE and aftermarket volumes in South America. - - EBIT for Europe, South America and India improved 13% to $15 million from $13 million a year ago. The fourth quarter EBIT improvement was driven by operational improvements, especially in the company's OE emission control business, and currency benefits, which more than offset the impact of higher material costs. - - Excluding $3 million in restructuring costs in both fourth quarter 2006 and 2005, EBIT was $18 million compared with $16 million a year ago. ASIA PACIFIC - - Asia revenue was $72 million compared with $41 million in fourth quarter 2005. Excluding substrate sales, revenue was up 50% from $31 million to $46 million. The increase was driven by stronger OE volumes in China including business on strong selling GM, Ford and VW platforms. - - Industry OE production declines continued to impact Australian revenue, which was $46 million, down from $49 million the previous year. Excluding currency and substrate sales, revenue was down 14%, from $44 million to $38 million. - - Asia Pacific EBIT was $5 million compared with $6 million a year ago. The decline in Australian OE volumes offset stronger volumes in Asia. FULL YEAR 2006 RESULTS Tenneco reported annual revenue of $4.7 billion in 2006, up from $4.4 billion in 2005, largely driven by new OE and aftermarket business, which helped offset significant OE production volume declines in North America during the last half of the year. Favorable currency benefited 2006 annual revenue by $71 million. The company reported net income of $51 million, or $1.10 per diluted share, compared with last year's net income of $58 million, or $1.29 per diluted share. Full year EBIT was $196 million, versus $215 million last year. EBITDA declined to $380 million from $392 million in 2005. Adjusted for the items below, full year net income was $55 million, or $1.21 per diluted share, compared with $69 million, or $1.52 per diluted share, in 2005. Adjusted EBIT was $228 million, versus $237 million in 2005 and adjusted EBITDA was $412 million compared with $414 million the prior year. -5- ADJUSTED FULL YEAR 2006 AND 2005 RESULTS:
YTD 20O6 YTD 2005 --------------------------------- -------------------------------- Net Net EBITDA EBIT Income Per Share EBITDA EBIT Income Per Share ------ ----- ------ --------- ------ ----- ------ --------- Earnings Measures $380 $196 $ 51 $ 1.10 $392 $215 $58 $ 1.29 Adjustments (reflect non-GAAP measures): Restructuring and restructuring related expenses 27 27 17 0.39 12 12 8 0.17 New aftermarket customer changeover costs 6 6 4 0.08 10 10 7 0.15 Pension replacement (7) (7) (5) (0.10) -- -- -- -- Stock based compensation accounting change 1 1 1 0.02 -- -- -- -- Tax adjustments -- -- (16) (0.34) -- -- (4) (0.09) Reserve for receivables from former affiliate 3 3 2 0.04 -- -- -- -- Stock option adjustment 2 2 1 0.02 -- -- -- -- ---- ---- ---- ------ ---- ---- --- ------ Non-GAAP earnings measures $412 $228 $ 55 $ 1.21 $414 $237 $69 $ 1.52 ==== ==== ==== ====== ==== ==== === ======
FULL-YEAR 2006 ADJUSTMENTS: - - Restructuring related expenses of $27 million pre-tax, or 39-cents per diluted share; - - An expense of $2 million pre-tax, or 2-cents per diluted share, related to an accounting charge for employee stock options; - - A reserve of $3 million pre tax, or 4-cents per diluted share for receivables from a former affiliate; - - Aftermarket customer changeover costs of $6 million pre-tax, or 8-cents per diluted share; - - An expense of $1 million pre-tax, or 2-cents per diluted share, to adjust for new stock-based compensation accounting standard; - - 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. FULL-YEAR 2005 ADJUSTMENTS: - - Restructuring related expenses of $12 million pre-tax, or 17-cents per diluted share; - - Aftermarket changeover costs of $10 million pre-tax, or 15-cents per diluted share; - - Tax benefits of $4 million, or 9-cents per diluted share. Gross margin for the year was 18.1% versus 19.3% in 2005. The decline in gross margin was largely due to a higher percentage of substrate sales and higher material costs during the year. Tenneco successfully controlled overhead costs in 2006, bringing SGA&E expense down to 9.9% of sales versus 10.5% in 2005. 2007 OUTLOOK Tenneco anticipates that 2007 will be another challenging year given current predictions on OE production levels, especially during the first half of the year when the North American OE market is expected to continue to be down. The company anticipates stable market conditions in the global aftermarket. In addition, Tenneco expects that the pricing environment for steel will increase the company's costs by up to $100 million in 2007. Tenneco will work to offset these increases through cost reductions, manufacturing efficiencies, material substitutions, low-cost country sourcing and customer recovery. -6- "Although our industry continues to face significant challenges in 2007, Tenneco is well-positioned given the new business we're launching that is expected to add more than $1 billion in OE revenues this year," said Sherrill. "We remain relentlessly focused on managing costs, strengthening margins and launching programs flawlessly. We also expect to continue benefiting from our geographic and customer balance and will pursue additional opportunities to leverage our advanced technologies." The company's goals for 2007 include maintaining SGA&E as a percent of sales at 9% of sales and achieving net debt/adjusted annual EBITDA of 2.7x. Tenneco estimates that its global original equipment revenues will be approximately $4.7 billion in 2007 and $5.0 billion in 2008. Adjusted for lower margin substrate sales, the company's global original equipment revenues are estimated to be approximately $3.1 billion in 2007 and $3.4 billion in 2008. These revenue estimates are based on original equipment manufacturers' programs that have been formally awarded to the company; programs where the company 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. 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 CONFERENCE CALL The company will host a conference call on Tuesday, January 30, 2007 at 10:30 a.m. EST. The dial-in number is 888-790-1408 (domestic) or 773-756-0157(international). The passcode -7- is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.tenneco.com. A recording of the call will be available one hour following completion of the call on January 30, 2007. To access this recording, dial 800-677-5211 (domestic) or 402-998-1032 (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 The Tenneco board of directors has scheduled the corporation's annual meeting of shareholders for 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 record date for shareholders to vote at the meeting is March 13, 2007. 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(R) and Clevite(R) Elastomer brand names. Among its products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers, Dynomax(R) performance exhaust products, and Clevite(R) Elastomer noise, vibration and harshness control components. This press release contains forward-looking statements. Words such as "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; -8- (iv) increases in the costs of raw materials, including the company's ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery and other methods; (v) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector, and changes in consumer demand and prices, including longer product lives of automobile parts and the cyclicality of automotive production and sales of automobiles which include the company's products, and the potential negative impact on the company's revenues and margins from such products; (vi) the company's continued success in cost reduction and cash management programs and its ability to execute restructuring and other cost reduction plans and to realize anticipated benefits from these plans; (vii) the general political, economic and competitive conditions in markets and countries where the company and its subsidiaries operate, including the strength of other currencies relative to the U.S. dollar and currency fluctuations and other risks associated with operating in foreign countries; (viii) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals; (ix) changes in capital availability or costs, including increases in the company's costs of borrowing (i.e., interest rate increases), the amount of the company's debt, the ability of the company to access capital markets and the credit ratings of the company's debt; (x) the cost and outcome of existing and any future legal proceedings, and compliance with changes in regulations, including environmental regulations; (xi) workforce factors such as strikes or labor interruptions; (xii) the company's ability to develop and profitably commercialize new products and technologies, and the acceptance of such new products and technologies by the company's customers and the market; (xiii) further changes in the distribution channels for the company's aftermarket products, further consolidations among automotive parts customers and suppliers, and product warranty costs; (xiv) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies; (xv) acts of war, riots or terrorism, including, but not limited to the events taking place in the Middle East, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the countries where the company operates; and (xvi) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company and its subsidiaries. The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-K for the year ended December 31, 2005. Further information can be found on the company's web site at www.tenneco.com. -9- ### ATTACHMENT 1 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME Unaudited THREE MONTHS ENDED DECEMBER 31, (Millions except per share amounts)
2006 2005 ------ ------ Net sales and operating revenues $1,209 $1,064 ====== ====== Costs and Expenses Cost of Sales (exclusive of depreciation shown below) 1,021(a) 865(f) Engineering, Research and Development 20 19 Selling, General and Administrative 87 (a)(b)(c)(d) 98(f)(g) Depreciation and Amortization of Other Intangibles 48 43 ------ ------ Total Costs and Expenses 1,176 1,025 ====== ====== Loss on sale of receivables (2) (1) Equity Income 2 1 Other Income 3 (1) ------ ------ Total Other Income / (Expense) 3 (1) ------ ------ Income before Interest Expense, Income Taxes, and Minority Interest North America 16 (a)(b)(c)(d) 19(f)(g) Europe, South America & India 15 (a) 13(f) Asia Pacific 5 6 ------ ------ 36 38 Less: Interest expense (net of interest capitalized) 35 33 Income tax (benefit) (15)(e) (4)(h) Minority interest 2 1 ------ ------ Net Income 14 8 ------ ------ Average common shares outstanding: Basic 45.1 43.5 ====== ====== Diluted 47.2 45.6 ====== ====== Earnings per share of common stock: Basic $ 0.31 $ 0.19 ====== ====== Diluted $ 0.30 $ 0.18 ====== ======
(a) 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. (b) 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. (c) Includes Stock option expense adjustment of $2 million pre-tax and $1 million after tax or $0.02 per share. The entire $2 million adjustment is recorded in SG&A and geographically in North America. (d) 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. (e) 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. (f) Includes restructuring and restructuring related charges of $5 million pre-tax, $3 million after-tax or $0.06 per share. Of the adjustment $4 million is recorded in cost of sales and the remaining $1 million is in SG&A. Geographically, $3 million is recorded in Europe, South America and India and $2 million in North America. (g) Includes changeover costs for new aftermarket customers of $10 million pre-tax, $7 million after-tax or $0.15 per share. The adjustment is recorded in SG&A. Geographically, the entire amount is recorded in North America. (h) Includes a $5 million or $0.11 per share tax benefit primarily related to favorable resolution of foreign tax contingencies. ATTACHMENT 1 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME Unaudited TWELVE MONTHS ENDED DECEMBER 31, (Millions except per share amounts)
2006 2005 ------ ------ Net sales and operating revenues $4,685 $4,441 ====== ====== Costs and Expenses Cost of Sales (exclusive of depreciation shown below) 3,838(a) 3,583(h) Engineering, Research and Development 88 83 Selling, General and Administrative 377(a)(b)(c)(d)(e)(f) 385(h)(i) Depreciation and Amortization of Other Intangibles 184 177 ------ ------ Total Costs and Expenses 4,487 4,228 ====== ====== Loss on sale of receivables (6) (3) Equity Income 3 1 Other Income 1 4 ------ ------ Total Other Income / (Expense) (2) 2 ------ ------ Income before Interest Expense, Income Taxes, and Minority Interest North America 103(a)(b)(c)(d)(e)(f) 145(h)(i) Europe, South America & India 81(a) 54(h) Asia Pacific 12(a) 16 ------ ------ 196 215 Less: Interest expense (net of interest capitalized) 136 130 Income tax expense 3(g) 25(j) Minority interest 6 2 ------ ------ Net Income 51 58 ------ ------ Average common shares outstanding: Basic 44.6 43.1 ====== ====== Diluted 46.8(b) 45.3 ====== ====== Earnings per share of common stock: Basic $ 1.15 $ 1.35 ====== ====== Diluted $ 1.10(b) $ 1.29 ====== ======
(a) Includes restructuring and restructuring related charges of $27 million pre-tax, $17 million after tax or $0.39 per share, of which $23 million is recorded in cost of sales and $4 million is recorded in SG&A. Geographically, $13 million is recorded in North America, $8 million in Europe, South America and India and $6 million in Asia Pacific. (b) Includes $1 million pre-tax and after tax increase in stock compensation expense associated with the adoption of FAS 123R. Adoption of this accounting standard also increased the calculated number of diluted shares by .6 million for a combined impact of $0.02 per share. (c) Includes customer changeover costs of $6 million pre-tax, $4 million after-tax or $0.08 per share. (d) 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. (e) Includes Stock option expense adjustment of $2 million pre-tax and $1 million after tax or $0.02 per share. The entire $2 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 $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. (h) Includes restructuring and restructuring related charges of $12 million pre-tax, $8 million after tax or $0.17 per share. Of the adjustment $10 million is recorded in cost of sales and $2 million is in SG&A. Geographically, $4 million is recorded in North America and $8 million in Europe, South America and India. (i) Includes changeover costs for new aftermarket customers of $10 million pre-tax, $7 million after-tax or $0.15 per share. The adjustment is recorded in SG&A. Geographically, the entire amount is recorded in North America. (j) Includes a $4 million or $0.09 per share tax benefit primarily related to favorable resolution of foreign tax contingencies. ATTACHMENT 1 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES BALANCE SHEETS (Unaudited) (Millions)
December 31, 2006 December 31, 2005 ----------------- ----------------- Assets Cash and Cash Equivalents $ 202 $ 141 Receivables, Net 604(a) 543(a) Inventories 439 360 Other Current Assets 177 153 Investments and Other Assets 748 700 Plant, Property, and Equipment, Net 1,093 1,043 ------ ------ Total Assets $3,263 $2,940 ====== ====== Liabilities and Shareholders' Equity Short-Term Debt $ 28 $ 22 Accounts Payable 782 651 Accrued Taxes 49 31 Accrued Interest 40 38 Other Current Liabilities 234 237 Long-Term Debt 1,350(b) 1,356(b) Deferred Income Taxes 107 86 Deferred Credits and Other Liabilities 424 366 Minority Interest 28 24 Total Shareholders' Equity 221 129 ------ ------ Total Liabilities and Shareholders' Equity $3,263 $2,940 ====== ======
December 31, 2006 December 31, 2005 ----------------- ----------------- (a) Accounts Receivables net of: Accounts receivables securitization programs $133 $129
December 31, 2006 December 31, 2005 ----------------- ----------------- (b) Long term debt composed of: Term loan B (Due 2010) $ 356 $ 356 10.25% senior notes (Due 2013) 487 489 8.625% subordinated notes (Due 2014) 500 500 Other long term debt 7 11 ------ ------ $1,350 $1,356 ====== ======
ATTACHMENT 1 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED) (Millions)
THREE MONTHS ENDED DECEMBER 31, ------------ 2006 2005 ----- ---- Operating activities: Net income $ 14 $ 8 Adjustments to reconcile net income to net cash provided (used) by operating activities - Depreciation and amortization of other intangibles 48 43 Stock option expense 2 -- Deferred income taxes (52) (3) Loss on sale of assets, net 1 1 Changes in components of working capital (net of acquisition)- (Inc.)/dec. in receivables 56 115 (Inc.)/dec. in inventories (9) 29 (Inc.)/dec. in prepayments and other current assets 20 28 Inc./(dec.) in payables 36 (51) Inc./(dec.) in taxes accrued 23 2 Inc./(dec.) in interest accrued 6 6 Inc./(dec.) in other current liabilities (6) (21) Other (7) 3 ---- ---- Net cash provided by operating activities 132 160 Investing activities: Net proceeds from sale of assets 11 -- Expenditures for plant, property & equipment (40) (44) Acquisition of business -- (3) Expenditures for software-related intangibles (4) (2) Investments and other 2 -- ---- ---- Net cash used by investing activities (31) (49) ---- ---- Financing activities: Issuance of common shares 4 1 Issuance of long-term debt -- -- Retirement of long-term debt (1) (2) Net inc. in short-term debt excluding current maturities on long-term debt (26) (55) Other (2) (1) ---- ---- Net cash used by financing activities (25) (57) ---- ---- Effect of foreign exchange rate changes on cash and cash equivalents 10 (2) ---- ---- Increase in cash and cash equivalents 86 52 Cash and cash equivalents, October 1 116 89 ---- ---- Cash and cash equivalents, December 31 $202 $141 ==== ==== Cash paid during the period for interest $ 34 $ 32 Cash paid during the period for income taxes 8 $ 7 Non-cash Investing and Financing Activities Retirement of obligation and exchange of property -- (2)
ATTACHMENT 1 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED) (Millions)
TWELVE MONTHS ENDED DECEMBER 31, ------------------- 2006 2005 ----- ----- Operating activities: Net income $ 51 $ 58 Adjustments to reconcile net income to net cash provided (used) by operating activities - Depreciation and amortization of other intangibles 184 177 Stock option expense 5 -- Deferred income taxes (43) -- Loss on sale of assets, net 3 3 Changes in components of working capital (net of acquisition)- (Inc.)/dec. in receivables (29) (94) (Inc.)/dec. in inventories (56) 7 (Inc.)/dec. in prepayments and other current assets (14) 5 Inc./(dec.) in payables 87 1 Inc./(dec.) in taxes accrued 15 13 Inc./(dec.) in interest accrued 2 4 Inc./(dec.) in other current liabilities (6) (16) Other (7) (24) ----- ----- Net cash provided by operating activities 192 134 Investing activities: Net proceeds from sale of assets 17 4 Expenditures for plant, property & equipment (170) (144) Acquisition of business -- (14) Expenditures for software-related intangibles (13) (14) Investments and other 1 1 ----- ----- Net cash used by investing activities (165) (167) ----- ----- Financing activities: Issuance of common shares 17 7 Issuance of long-term debt -- 1 Retirement of long-term debt (4) (45) Net inc. in short-term debt excluding current maturities on long-term debt 3 1 Other -- -- ----- ----- Net cash provided (used) by financing activities 16 (36) ----- ----- Effect of foreign exchange rate changes on cash and cash equivalents 18 (4) ----- ----- Increase (Decrease) in cash and cash equivalents 61 (73) Cash and cash equivalents, January 1 141 214 ----- ----- Cash and cash equivalents, December 31 $ 202 $ 141 ===== ===== Cash paid during the period for interest $ 137 $ 126 Cash paid during the period for income taxes 26 $ 23 Non-cash Investing and Financing Activities Retirement of obligation and exchange of property -- (2)
ATTACHMENT 2 TENNECO INC. RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA Unaudited
Q4 2006 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- Net income $ 14 Minority interest 2 Income tax benefit (15) Interest expense (net of interest capitalized) 35 ---- EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) $16 $15 $5 36 Depreciation and amortization of other intangibles 24 20 4 48 --- --- --- ---- Total EBITDA(2) $40 $35 $9 $ 84 === === === ====
Q4 2005 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- Net income $ 8 Minority interest 1 Income tax benefit (4) Interest expense (net of interest capitalized) 33 --- EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) $19 $13 $6 38 Depreciation and amortization of other intangibles 23 18 2 43 --- --- --- --- Total EBITDA(2) $42 $31 $8 $81 === === === ===
(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
Q4 2006 Q4 2005 ------------------------------------------ ------------------------------------------- EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share ---------- ---- ---------- --------- ---------- ---- ---------- --------- Earnings Measures $84 $36 $ 14 $ 0.30 $81 $38 $ 8 $ 0.18 Adjustments (reflect non-GAAP measures): Restructuring and restructuring related expenses 6 6 4 0.08 5 5 3 0.06 New aftermarket customer changeover costs (4) -- -- -- -- 10 10 7 0.15 Pension replacement (7) (7) (5) (0.10) -- -- -- -- Tax adjustments -- -- (13) (0.28) -- -- (5) (0.11) Reserve for receivables from former affiliate 3 3 2 0.04 Stock option adjustment 2 2 1 0.02 -- -- -- -- --- --- ---- ------ --- --- --- ------ Non-GAAP earnings measures $88 $40 $ 3 $ 0.06 $96 $53 $13 $ 0.28 === === ==== ====== === === === ======
Q4 2006 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- EBIT $ 16 $ 15 $ 5 $36 Restructuring and restructuring related expenses 3 3 -- 6 Pension replacement (7) -- -- (7) Reserve for receivables from former affiliate 3 -- -- 3 Stock option adjustment 2 -- -- 2 ---- ---- --- --- Adjusted EBIT $ 17 $ 18 $ 5 $40 ==== ==== === ===
Q4 2005 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- EBIT $19 13 $ 6 $38 Restructuring and restructuring related expenses 2 3 -- 5 New aftermarket customer changeover costs 10 -- -- 10 --- --- --- --- Adjusted EBIT $31 $16 $ 6 $53 === === === ===
(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 2006 and 2005 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period. (3) EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. (4) Represents costs associated with changing new aftermarket customers from their prior suppliers to an inventory of our products. Although our aftermarket business regularly incurs changeover costs, we specifically identify in the table above the changeover costs that, based on the size or number of customers involved, we believe are of an unusual nature for the quarter in which they were incurred. ATTACHMENT 2 TENNECO INC. RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA Unaudited
YTD 2006 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- Net income $ 51 Minority interest 6 Income tax expense 3 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 ==== ==== === ====
YTD 2005 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- Net income $ 58 Minority interest 2 Income tax expense 25 Interest expense (net of interest capitalized) 130 ---- EBIT, Income before interest expense, income taxes and minority interest (GAAP measure) $145 $ 54 $16 215 Depreciation and amortization of other intangibles 91 75 11 177 ---- ---- --- ---- Total EBITDA(2) $236 $129 $27 $392 ==== ==== === ====
(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
YTD 2006 YTD 2005 --------------------------------------- ---------------------------------------- EBITDA (3) EBIT Net Income Per Share EBITDA (3) EBIT Net Income Per Share ---------- ---- ---------- --------- ---------- ---- ---------- ---------- Earnings Measures $380 $196 $ 51 $ 1.10 $392 $215 $58 $ 1.29 Adjustments (reflect non-GAAP measures): Restructuring and restructuring related expenses 27 27 17 0.39 12 12 8 0.17 New aftermarket customer changeover costs (4) 6 6 4 0.08 10 10 7 0.15 Pension replacement (7) (7) (5) (0.10) -- -- -- -- Stock based compensation accounting change (5) 1 1 1 0.02 -- -- -- -- Tax adjustments -- -- (16) (0.34) -- -- (4) (0.09) Reserve for receivables from former affiliate 3 3 2 0.04 -- -- -- -- Stock option adjustment 2 2 1 0.02 -- -- -- -- ---- ---- ---- ------ ---- ---- --- ------ Non-GAAP earnings measures $412 $228 $ 55 $ 1.21 $414 $237 $69 $ 1.52 ==== ==== ==== ====== ==== ==== === ======
YTD 2006 ---------------------------------- 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 (7) (7) Stock based compensation accounting change (5) 1 -- -- 1 Reserve for receivables from former affiliate 3 -- -- 3 Stock option adjustment 2 2 ---- --- --- ---- Adjusted EBIT $121 $89 $18 $228 ==== === === ====
YTD 2005 ---------------------------------- North Europe Asia America & SA Pacific Total ------- ------ ------- ----- EBIT $145 54 $16 $215 Restructuring and restructuring related expenses 4 8 -- 12 New aftermarket customer changeover costs 10 -- -- 10 ---- --- --- ---- Adjusted EBIT $159 $62 $16 $237 ==== === === ====
(1) Generally Accepted Accounting Principles (2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results for 2006 and 2005 in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period. (3) EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. (4) Represents costs associated with changing new aftermarket customers from their prior suppliers to an inventory of our products. Although our aftermarket business regularly incurs changeover costs, we specifically identify in the table above the changeover costs that, based on the size or number of customers involved, we believe are of an unusual nature for the time period in which they were incurred. (5) 2006 includes adjustments to eliminate the additional stock based compensation expense and the impact on the diluted shares calculation associated with FAS 123R, which the company adopted in 2006. See also Attachment I, Statements of Income footnote (b for the twelve months ended December 31). ATTACHMENT 2 TENNECO INC. RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES Unaudited
Q4 2006 ------------------------------------------------------- Revenues Substrate Excluding Sales Currency Revenues Excluding and Currency Excluding Currency 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 9 91 -- 91 Exhaust 352 34 318 152 166 ------ --- ------ ---- ---- Total Europe Original Equipment 452 43 409 152 257 Europe Aftermarket Ride Control 40 3 37 -- 37 Exhaust 50 5 45 -- 45 ------ --- ------ ---- ---- Total Europe Aftermarket 90 8 82 -- 82 South America & India 71 1 70 8 62 Total Europe, South America & India 613 52 561 160 401 Asia 72 -- 72 26 46 Australia 46 3 43 5 38 ------ --- ------ ---- ---- Total Asia Pacific 118 3 115 31 84 Total Tenneco Inc. $1,209 $55 $1,154 $282 $872 ====== === ====== ==== ====
Q4 2005 ------------------------------------------------------- Revenues Substrate Excluding Sales Currency Revenues Excluding and Currency Excluding Currency Substrate Revenues Impact Currency Impact Sales -------- -------- --------- --------- --------- North America Original Equipment Ride Control $ 117 $-- $ 117 $ -- $117 Exhaust 255 -- 255 68 187 ------ --- ------ ---- ---- Total North America Original Equipment 372 -- 372 68 304 North America Aftermarket Ride Control 77 -- 77 -- 77 Exhaust 36 -- 36 -- 36 ------ --- ------ ---- ---- Total North America Aftermarket 113 -- 113 -- 113 Total North America 485 -- 485 68 417 Europe Original Equipment Ride Control 87 -- 87 -- 87 Exhaust 265 -- 265 84 181 ------ --- ------ ---- ---- Total Europe Original Equipment 352 -- 352 84 268 Europe Aftermarket Ride Control 35 -- 35 -- 35 Exhaust 41 -- 41 -- 41 ------ --- ------ ---- ---- Total Europe Aftermarket 76 -- 76 -- 76 South America & India 61 -- 61 6 55 Total Europe, South America & India 489 -- 489 90 399 Asia 41 -- 41 10 31 Australia 49 -- 49 5 44 ------ --- ------ ---- ---- Total Asia Pacific 90 -- 90 15 75 Total Tenneco Inc. $1,064 $-- $1,064 $173 $891 ====== === ====== ==== ====
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 GAAP REVENUE TO NON-GAAP REVENUE MEASURES Unaudited
YTD 2006 -------------------------------------------------------- Revenues Substrate Excluding Sales Currency Revenues Excluding and Currency Excluding Currency Substrate Revenues Impact Currency Impact Sales -------- -------- --------- --------- --------- North America Original Equipment Ride Control $ 483 $ -- $ 483 $ -- $ 483 Exhaust 928 6 922 272 650 ------ ---- ------ ---- ------ Total North America Original Equipment 1,411 6 1,405 272 1,133 North America Aftermarket Ride Control 385 -- 385 -- 385 Exhaust 163 -- 163 -- 163 ------ ---- ------ ---- ------ Total North America Aftermarket 548 -- 548 -- 548 Total North America 1,959 6 1,953 272 1,681 Europe Original Equipment Ride Control 380(a) 10 370 -- 370(a) Exhaust 1,264 34 1,230 504 726 ------ ---- ------ ---- ------ Total Europe Original Equipment 1,644 44 1,600 504 1,096 Europe Aftermarket Ride Control 178 3 175 -- 175 Exhaust 211 5 206 -- 206 ------ ---- ------ ---- ------ Total Europe Aftermarket 389 8 381 -- 381 South America & India 272 14 258 32 226 Total Europe, South America & India 2,305 66 2,239 536 1,703 Asia 246 -- 246 85 161 Australia 175 (1) 176 19 157 ------ ---- ------ ---- ------ Total Asia Pacific 421 (1) 422 104 318 Total Tenneco Inc. $4,685 $ 71 $4,614 $912 $3,702 ====== ==== ====== ==== ======
YTD 2005 -------------------------------------------------------- Revenues Substrate Excluding Sales Currency Revenues Excluding and Currency Excluding Currency Substrate Revenues Impact Currency Impact Sales -------- -------- --------- --------- --------- North America Original Equipment Ride Control $ 495 $-- $ 495 $ -- $ 495 Exhaust 1,011 -- 1,011 272 739 ------ --- ------ ---- ------ Total North America Original Equipment 1,506 -- 1,506 272 1,234 North America Aftermarket Ride Control 361 -- 361 -- 361 Exhaust 161 -- 161 -- 161 ------ --- ------ ---- ------ Total North America Aftermarket 522 -- 522 -- 522 Total North America 2,028 -- 2,028 272 1,756 Europe Original Equipment Ride Control 378(a) -- 378 -- 378(a) Exhaust 1,078 -- 1,078 327 751 ------ --- ------ ---- ------ Total Europe Original Equipment 1,456 -- 1,456 327 1,129 Europe Aftermarket Ride Control 169 -- 169 -- 169 Exhaust 195 -- 195 -- 195 ------ --- ------ ---- ------ Total Europe Aftermarket 364 -- 364 -- 364 South America & India 233 -- 233 20 213 Total Europe, South America & India 2,053 -- 2,053 347 1,706 Asia 149 -- 149 43 106 Australia 211 -- 211 19 192 ------ --- ------ ---- ------ Total Asia Pacific 360 -- 360 62 298 Total Tenneco Inc. $4,441 $-- $4,441 $681 $3,760 ====== === ====== ==== ======
Tenneco presents the above reconciliation of revenues in order to reflect the trend in the company's sales, in various product lines and geographical regions, separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, substrate sales which the company previously referred to as pass-through sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Tenneco uses this information to analyze the trend in revenues before these factors. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues. (a) Beginning in the second quarter of 2005, Tenneco changed its accounting for a customer contract in its European OE Ride Control unit. The cost of sales for this contract are now netted against the revenues, reducing reported revenues and cost of sales. In the first quarter of 2005, Tenneco recorded $15 million in revenues for this contract. ATTACHMENT 2 TENNECO INC. RECONCILIATION OF NON-GAAP MEASURES Debt net of cash / Adjusted EBITDA - 12 months
Year Ended December 31 --------------- 2006 2005 ------ ------ Total debt $1,378 $1,378 Cash and cash equivalents 202 141 Debt net of cash balances (1) 1,176 1,237 Adjusted EBITDA (2) (3) 412 414 Ratio of net debt to adjusted EBITDA (4) 2.9x 3.0x
(1) Tenneco presents debt net of cash balances because management believes it is a useful measure of Tenneco's credit position and progress toward reducing leverage. The calculation is limited in that the company may not always be able to use cash to repay debt on a dollar-for- dollar basis. (2) EBITDA represents income before interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco Inc. has presented EBITDA because it regularly reviews EBITDA as a measure of the company's performance. In addition, Tenneco believes its debt holders utilize and analyze our EBITDA for similar purposes. Tenneco also believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. (3) 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 debt net of cash to annual adjusted EBITDA to show trends that investors may find useful in understanding the company's ability to service its debt. For purposes of this calculation, annual adjusted EBITDA is used as an indicator of the company's performance and debt net of cash is presented as an indicator of our credit position and progress toward reducing our financial leverage. This reconciliation is provided as supplemental information and not intended to replace the company's existing covenant ratios or any other financial measures that investors may find useful in describing the company's financial position. See notes (1), (2) and (3) for a description of the limitations of using debt net of cash, EBITDA and adjusted EBITDA. -----END PRIVACY-ENHANCED MESSAGE-----