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Tenneco Reports Improved Year-Over-Year Third Quarter Results on Record High Revenue Growth- Revenue up 39% driven by North America diesel launches
LAKE FOREST, Ill., Oct. 30 /PRNewswire-FirstCall/ -- Tenneco (NYSE: TEN) reported third quarter net income of $21 million, or 45-cents per diluted share, up from $7 million, or 16-cents per diluted share in third quarter 2006. Adjusted for the items below, net income was $19 million, or 39-cents per diluted share, versus net income of $11 million, or 26-cents per diluted share a year ago (the tables in this press release reconcile GAAP results to non-GAAP results). 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 $57 million, a 31% increase over $43 million a year ago. Adjusted EBIT was $65 million, versus $50 million in third quarter 2006. Strong OE volumes in North America from new diesel platform launches and growth in China drove the improvement. EBITDA (EBIT before depreciation and amortization) was $109 million, up from $88 million in third quarter 2006. Adjusted EBITDA was $117 million, compared to $95 million the prior year. Third quarter revenue rose to $1.556 billion from $1.121 billion in third quarter 2006. Revenue in the quarter included $430 million in substrate sales, a 94% increase over third quarter 2006. Excluding substrate sales and favorable currency of $68 million, revenue was $1.069 billion versus $900 million a year ago. The revenue increase was driven by volume ramp-ups on platform launches in North America and higher OE revenues in Europe and Asia, more than offsetting lower aftermarket sales in North America and Europe.
Adjusted third quarter 2007 and 2006 results:
Q3 2007 Q3 2006
Net Per Net Per
EBITDA EBIT Income Share EBITDA EBIT Income Share
Earnings Measures $109 $57 $21 $0.45 $88 $43 $7 $0.16
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 3 3 3 0.05 7 7 4 0.10
New aftermarket
customer changeover
costs 5 5 3 0.06 - - - -
Tax Adjustments - - (8) (0.17) - - - -
Non-GAAP earnings
measures $117 $65 $19 $0.39 $95 $50 $11 $0.26
Third quarter 2007 adjustments:
-- Restructuring and restructuring related expenses of $3 million pre-
tax, or 5-cents per diluted share;
-- Aftermarket customer changeover costs of $5 million pre-tax, or 6-
cents per diluted share (customer changeover costs are expenses
incurred to replace competitors' products with Tenneco products);
-- Tax benefits of $8 million, or 17-cents per diluted share, related to
a reduction in income tax rates in Germany and adjustments for prior
year income tax returns.
Third quarter 2006 adjustments:
-- Restructuring and restructuring related expenses of $7 million pre-tax
or 10-cents per diluted share.
Gross margin in the quarter was 15.6% versus 17.5% in third quarter 2006. Higher substrate sales - 28% of total revenue compared with 20% a year ago - accounted for 1.7 percentage points of the decline. Favorable currency and lower restructuring costs were offset by a shift toward a lower percentage of total revenue generated by higher margin aftermarket business. Total steel costs in the quarter increased $20 million year-over-year, which Tenneco continues to offset with cost reductions, material substitutions, low cost country sourcing and steel cost recovery from customers. The company anticipates that its gross steel costs in the fourth quarter will increase approximately $25 million, year-over-year. SGA&E (selling, general, administrative & engineering) costs as a percent of sales decreased to 8.4% from 9.4% a year ago as the rate of revenue growth far outpaced that of SGA&E spending. SGA&E in the quarter includes increased investments in engineering for technology development and future platform launches as well as an expense of $5 million for aftermarket customer changeover costs. Excluding third quarter 2007 changeover costs and restructuring costs in the prior year, SGA&E is 8.1% versus 9.3% the prior year. EBIT as a percent of revenue was 3.7% versus 3.9% a year ago. Higher substrate sales more than accounted for the decrease. The company continues to see margin benefits from advanced technology content on new large-volume OE emission control platforms, which helps counter higher substrate sales and a shift to a higher percentage of OE revenue. Cash used by operating activities was $9 million versus $5 million generated by operating activities a year ago, driven by a greater use of working capital to support revenue growth, partially offset by higher earnings. The increase in the use of working capital was primarily driven by higher inventories in the North American OE emission control and aftermarket businesses. The majority of the increase was higher inventories of catalytic converters sourced from South Africa to supply operations in North America. Because of changes in OE production schedules and the UAW strike at GM, the amount of inventory supporting these platforms increased. As expected, cash performance in the quarter was also impacted by higher tax payments. In addition, the company acquired Combustion Components Associates' ELIM-NOx(TM) technology, for $16 million. The company also made capital expenditures in the third quarter in preparation for the 2008 launch of newly awarded OE hot-end emission control business in North America, significant business that was recently sourced to Tenneco by one of the company's largest customers. At quarter-end, debt net of cash balances was $1.333 billion, compared with $1.294 billion a year ago. Cash balances at quarter-end were $203 million versus $116 million the prior year. Total debt was $1.536 billion, versus $1.410 billion at the end of third quarter 2006. At the end of the quarter, the ratio of debt net of cash balances to adjusted LTM (last twelve months) EBITDA was 2.9x, an improvement over 3.1x a year ago. "We are pleased with our performance this quarter. Advanced technology continues to fuel our top-line growth with strong OE revenue gains globally and we are improving our EBIT results on value-added sales," said Gregg Sherrill, chairman and CEO, Tenneco. "While our cash performance was not as strong year-over-year, it reflects investments made to grow our businesses including a technology investment, increased engineering spending and capital expenditures to prepare for new emission control business in North America."
NORTH AMERICA
-- OE revenue was $602 million, versus $307 million in third quarter
2006. Excluding substrate sales, revenue was $357 million, up 41%
year-over-year from $253 million. Industry production was up 3%. The
significant year-over-year increase was driven by Tenneco's presence
on diesel pick-up truck platforms like the Ford Super-Duty, GM
Silverado and Sierra, the Dodge heavy duty Ram and International's
medium duty commercial trucks as well as the Toyota Tundra and GM's
crossover vehicles.
-- Aftermarket revenue was $132 million, compared with $134 million a
year ago. A decrease in emission control sales due to lower
replacement rates more than offset an increase in ride control sales.
-- EBIT for North American operations was $24 million, up from $15
million a year ago. Adjusted for the items below, EBIT was $29
million compared with $18 million a year ago. EBIT improvement was
driven by higher OE volumes including new OE ride control launches and
more efficient production on the company's diesel pick-up truck
platforms launched earlier this year. These volume increases more
than offset aftermarket customer changeover costs and the impact of
the UAW strike at General Motors.
-- Third quarter 2007 EBIT includes $5 million in aftermarket changeover
costs and third quarter 2006 includes $3 million in restructuring
costs.
EUROPE, SOUTH AMERICA AND INDIA
-- OE revenue was $478 million, versus $393 million in third quarter
2006. Excluding substrate sales and favorable currency, revenue was
$315 million compared with $263 million. Higher emission control and
ride control volumes and content on strong selling platforms like the
BMW 1 and 3 Series, Daimler Sprinter, Ford Mondeo and the Volvo V70,
drove the revenue gain and outpaced a 6% increase in industry
production.
-- Aftermarket revenue was $108 million, versus $106 million a year ago.
Excluding favorable currency, revenue was $100 million. The decline
was driven by lower exhaust product sales.
-- South America and India revenue increased to $86 million from
$70 million a year ago. Excluding the impact of substrate sales and
favorable currency, revenue was $70 million compared with $61 million.
Higher OE volumes in South America drove the increase.
-- EBIT for Europe, South America and India was $22 million compared with
$23 million a year ago. Third quarter 2007 EBIT includes $3 million
in restructuring expenses and third quarter 2006 EBIT includes $2
million in restructuring expense. Adjusted EBIT was flat year-over-
year.
-- EBIT was impacted by a strike at the company's Wissembourg, France
facility due to announcing the intention to close the facility and an
industry-wide strike at its South Africa facilities; higher material
costs; and an increase in production costs at the Edenkoben, Germany
manufacturing facility as a result of a significant stamping equipment
breakdown resulting in temporary outsourcing. All of these issues
more than offset higher OE volumes and operating efficiencies in other
areas of the business.
ASIA PACIFIC
-- Asia revenue rose 51% to $99 million from $65 million a year ago.
Excluding substrate sales and favorable currency, revenue was $60
million versus $42 million a year ago. The increase was driven by
strong OE volumes in China, particularly with VW, GM and Brilliance.
-- Australia revenue was $51 million compared with $46 million in third
quarter 2006. Excluding the impact of substrate sales and favorable
currency, revenue was $37 million, down from $41 million a year ago.
The decline was driven by lower OE volumes and aftermarket sales.
-- Asia Pacific EBIT was $11 million, more than doubling the prior year
at $5 million. Third quarter 2006 EBIT includes $2 million in
restructuring costs. EBIT improvement was also driven by strong OE
volumes in China and the benefits of 2006 restructuring initiatives in
Australia.
"We don't expect global market conditions to change significantly through the remainder of the year. While industry light vehicle production in North America is projected to be down year-over-year in the fourth quarter, we believe continued growth from our North American diesel pick-up truck platform launches and a favorable platform mix will help us better manage these production declines. We also believe the global aftermarket will remain relatively soft," said Sherrill. "The fourth quarter is typically our strongest quarter for generating cash and we expect this trend to repeat itself this year. We also are confident we have the third quarter issues in Europe behind us." The company continues to generate growth with advanced technology, and by capturing opportunities in emerging markets and with fast-growing customers. Tenneco recently announced that its venture in Shanghai has won its first commercial vehicle development contract to supply a SCR diesel aftertreatment system with ELIM-NOx, the company's recently acquired advanced diesel emission control technology. The contract is with a major domestic commercial vehicle engine manufacturer in China and is currently scheduled to launch in 2011.
Attachment 1
Statements of Income - 3 Months
Statements of Income - 9 Months
Balance Sheets
Statements of Cash Flows - 3 Months
Statements of Cash Flows - 9 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 - 9 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 9 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenues - 3 Months
Reconciliation of GAAP Revenues to Non-GAAP Revenues - 9 Months
Reconciliation of Non-GAAP Measures - Ratio of Debt Net of Cash to
Adjusted EBITDA - LTM
Reconciliation of GAAP to Non-GAAP Earnings Measures - Adjusted SGA&E as a
Percent of Net Sales
CONFERENCE CALL The company will host a conference call on Tuesday, October 30, 2007 at 10:00 a.m. EDT. The dial-in number is 888-790-1408 (domestic) or 773-756- 0157(international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at http://www.tenneco.com. A recording of the call will be available one hour following completion of the call on October 30, 2007. To access this recording, dial 800-509-8621 (domestic) or 203-369-3807 (international). The purpose of the call is to discuss the company's operations for the quarter, as well as other matters that may impact the company's outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site. Tenneco is a $4.7 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,000 employees worldwide. Tenneco is one of the world's largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco markets its products principally under the Monroe(R), Walker(R), Gillet(TM) and Clevite(R)Elastomer brand names. 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 SEPTEMBER 30,
(Millions except per share amounts)
2007 2006 (1)
Net sales and operating revenues $1,556 $1,121
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 1,313 (a) 925 (d)
Engineering, Research and
Development 30 24
Selling, General and
Administrative 101 (b) 81 (d)
Depreciation and Amortization of
Other Intangibles 52 45
Total Costs and Expenses 1,496 1,075
Loss on sale of receivables (3) (3)
Other Income (Expense) - -
Total Other Expense (3) (3)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 24 (b) 15 (d)
Europe, South America & India 22 (a) 23 (d)
Asia Pacific 11 5 (d)
57 43
Less:
Interest expense (net of
interest capitalized) 32 30
Income tax expense - (c) 4
Minority interest 4 2
Net Income 21 7
Average common shares outstanding:
Basic 46.0 45.0
Diluted 47.9 47.2
Earnings per share of common stock:
Basic $0.47 $0.16
Diluted $0.45 $0.16
(a) Includes restructuring and restructuring related charges of
$3 million before and after tax or $0.05 per share, all of which is
recorded in cost of sales 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 an $8 million or $0.17 per share tax benefit, primarily
related to tax rate changes in Germany and adjustments for prior year
tax returns.
(d) Includes restructuring and restructuring related charges of
$7 million pre-tax, $4 million after tax or $0.10 per share. Of the
adjustment $6 million is recorded in cost of sales and $1 million is
recorded in SG&A. Geographically, $3 million is recorded in North
America, $2 million in Europe, South America and India and $2 million
is recorded in Asia Pacific.
(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
NINE MONTHS ENDED SEPTEMBER 30,
(Millions except per share amounts)
2007 2006 (1)
Net sales and operating revenues $4,619 $3,473
Costs and Expenses
Cost of Sales (exclusive of
depreciation shown below) 3,869 (a) 2,817 (e)
Engineering, Research and
Development 86 68
Selling, General and
Administrative 300 (a)(b) 288 (e)(f)
Depreciation and Amortization of
Other Intangibles 150 136
Total Costs and Expenses 4,405 3,309
Loss on sale of receivables (8) (7)
Other Income 3 -
Total Other Income / (Expense) (5) (7)
Income before Interest Expense,
Income Taxes, and Minority Interest
North America 104 (a)(b) 85 (e)(f)
Europe, South America & India 80 (a) 65 (e)
Asia Pacific 25 7 (e)
209 157
Less:
Interest expense (net of interest
capitalized) 112 (c) 102
Income tax expense 22 (d) 17 (g)
Minority interest 8 4
Net Income 67 34
Average common shares outstanding:
Basic 45.7 44.5
Diluted 47.5 46.8
Earnings per share of common stock:
Basic $1.48 $0.78
Diluted $1.42 $0.74
(a) Includes restructuring and restructuring related charges of
$7 million pre-tax, $5 million after tax or $0.11 per share, of which
$6 million is recorded in cost of sales and $1 million is recorded in
SG&A. Geographically, $1 million is recorded in North America,
$6 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 a pre-tax expense of $5 million, $4 million after-tax or
$0.07 per share related to the write off of debt issuance costs from
our debt refinancing in March of 2007.
(d) Includes an $8 million or $0.18 per share tax benefit, primarily
related to tax rate changes in Germany and adjustments for prior year
tax returns.
(e) Includes restructuring and restructuring related charges of
$21 million pre-tax, $13 million after tax or $0.31 per share, of
which $19 million is recorded in cost of sales and $2 million is
recorded in SG&A. Geographically, $10 million is recorded in North
America, $6 million in Europe, South America and India and $5 million
in Asia Pacific.
(f) Includes customer changeover costs of $6 million pre-tax, $4 million
after-tax or $0.09 per share.
(g) Includes a $3 million or $0.06 per share tax benefit, primarily
related to resolution of tax issues.
(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)
September 30, 2007 December 31, 2006 (1)
Assets
Cash and Cash Equivalents $203 $202
Receivables, Net 914 (a) 595 (a)
Inventories 580 441
Other Current Assets 197 177
Investments and Other Assets 784 766
Plant, Property, and Equipment,
Net 1,144 1,093
Total Assets $3,822 $3,274
Liabilities and Shareholders' Equity
Short-Term Debt $33 $28
Accounts Payable 1,025 781
Accrued Taxes 37 49
Accrued Interest 29 33
Other Current Liabilities 262 228
Long-Term Debt 1,503 (b) 1,357 (b)
Deferred Income Taxes 83 107
Deferred Credits and Other
Liabilities 404 437
Minority Interest 33 28
Total Shareholders' Equity 413 226
Total Liabilities and
Shareholders' Equity $3,822 $3,274
September 30, 2007 December 31, 2006
(a) Accounts receivable
securitization programs $149 $133
(b) Long term debt composed of: September 30, 2007 December 31, 2006
Borrowings against revolving
credit facilities $357 $-
Term loan A (Due 2012) 150 -
Term loan B (Due 2010) - 356
10.25% senior notes (Due 2013) 486 487
8.625% subordinated notes (Due 2014) 500 500
Other long term debt 10 14
$1,503 $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
September 30,
2007 2006 (1)
Operating activities:
Net income $21 $7
Adjustments to reconcile income
to net cash used by operating
activities -
Depreciation and amortization
of other intangibles 52 45
Stock option expense 3 1
Deferred income taxes (10) 2
(Gain)/loss on sale of assets, net 3 -
Changes in components of
working capital -
(Inc.)/dec. in receivables 29 14
(Inc.)/dec. in inventories (42) (8)
(Inc.)/dec. in prepayments
and other current assets (11) (7)
Inc./(dec.) in payables (46) (37)
Inc./(dec.) in taxes accrued (6) (8)
Inc./(dec.) in interest accrued (1) (1)
Inc./(dec.) in other current
liabilities 7 3
Other (8) (6)
Net cash provided (used) by
operating activities (9) 5
Investing activities:
Net proceeds from sale of assets 1 4
Cash payments for plant, property
& equipment (41) (45)
Cash payments for net assets
purchased from Combustion
Components Associated, Inc., net (16) -
Cash payments for software-
related intangibles (3) (3)
Investments and other (2) (2)
Net cash used by investing activities (61) (46)
Financing activities:
Issuance of common shares 2 3
Issuance of long-term debt - -
Debt issuance costs on long-term debt - -
Retirement of long-term debt (2) (1)
Net inc./(dec.) in revolver
borrowings and short-term debt
excluding current maturities on
long-term debt 87 32
Distributions to minority
interest partners (2) -
Other 2 -
Net cash used by financing activities 87 34
Effect of foreign exchange rate
changes on cash and cash equivalents 18 -
Increase (Decrease) in cash and
cash equivalents 35 (7)
Cash and cash equivalents, July 1 168 123
Cash and cash equivalents,
September 30 $203 $116
Cash paid during the period for interest $34 $36
Cash paid during the period for
income taxes 17 11
Non-cash Investing and Financing Activities
Period ended balance of payables
for plant, property and equipment 24 21
(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)
Nine Months Ended
September 30,
2007 2006 (1)
Operating activities:
Net income $67 $34
Adjustments to reconcile net income
to net cash provided (used) by
operating activities -
Depreciation and amortization
of other intangibles 150 136
Stock option expense 7 5
Deferred income taxes (23) 9
Loss on sale of assets, net 8 2
Changes in components of
working capital (net of
acquisition)-
(Inc.)/dec. in receivables (283) (86)
(Inc.)/dec. in inventories (113) (48)
(Inc.)/dec. in prepayments
and other current assets (35) (44)
Inc./(dec.) in payables 195 54
Inc./(dec.) in taxes accrued (10) (8)
Inc./(dec.) in interest accrued (4) -
Inc./(dec.) in other current
liabilities 26 8
Other (20) 3
Net cash provided (used) by
operating activities (35) 65
Investing activities:
Net proceeds from sale of assets 2 6
Cash payments for plant, property
& equipment (116) (134)
Cash payments for net assets
purchased from Combustion
Components Associated, Inc., net (16) -
Cash payments for software-
related intangibles (14) (9)
Investments and other - (1)
Net cash used by investing activities (144) (138)
Financing activities:
Issuance of common shares 6 13
Issuance of long-term debt 150 -
Debt issuance costs on long-term debt (6) -
Retirement of long-term debt (361) (3)
Net inc./(dec.) in revolver
borrowings and short-term debt
excluding current maturities on
long-term debt 360 29
Distributions to minority
interest partners (3) (1)
Other 2 2
Net cash provided by financing
activities 148 40
Effect of foreign exchange rate changes
on cash and cash equivalents 32 8
Increase (Decrease) in cash and
cash equivalents 1 (25)
Cash and cash equivalents, January 1 202 141
Cash and cash equivalents, September 30 $203 $116
Cash paid during the period for interest $111 $103
Cash paid during the period for
income taxes 45 $18
Non-cash Investing and Financing Activities
Period ended balance of payables
for plant, property and eqipment 24 21
(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
Q3 2007
North Europe Asia
America & SA Pacific Total
Net income $21
Minority interest 4
Income tax expense -
Interest expense (net of interest
capitalized) 32
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) $24 $22 $11 57
Depreciation and amortization of
other intangibles 27 22 3 52
Total EBITDA (2) $51 $44 $14 $109
Q3 2006 (3)
North Europe Asia
America & SA Pacific Total
Net income $7
Minority interest 2
Income tax expense 4
Interest expense (net of interest
capitalized) 30
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) $15 $23 $5 43
Depreciation and amortization of
other intangibles 22 20 3 45
Total EBITDA (2) $37 $43 $8 $88
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes,
minority interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net income
or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Tenneco has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco
believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco also believes EBITDA assists investors in comparing a
company's performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon many
factors. However, the EBITDA measure presented may not always be
comparable to similarly titled measures reported by other companies due to
differences in the components of the calculation.
(3) As disclosed in Tenneco's 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.
TENNECO INC.
RECONCILIATION OF GAAP(1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
Q3 2007 Q3 2006 (5)
EBITDA Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income Share
Earnings Measures $109 $57 $21 $0.45 $88 $43 $7 $0.16
Adjustments (reflects
non-GAAP measures):
Restructuring and
restructuring related
expenses 3 3 3 0.05 7 7 4 0.10
New aftermarket
customer changeover
costs (4) 5 5 3 0.06 - - - -
Tax adjustments - - (8) (0.17) - - - -
Non-GAAP earnings
measures $117 $65 $19 $0.39 $95 $50 $11 $0.26
Q3 2007
North Europe Asia
America & SA Pacific Total
EBIT $24 $22 $11 $57
Restructuring and
restructuring related
expenses - 3 - 3
New aftermarket
customer changeover
costs (4) 5 - - 5
Adjusted EBIT $29 $25 $11 $65
Q3 2006 (5)
North Europe Asia
America & SA Pacific Total
EBIT $15 $23 $5 $43
Restructuring and
restructuring related
expenses 3 2 2 7
Adjusted EBIT $18 $25 $7 $50
(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 third quarters
of 2007 and 2006 in a manner that allows a better understanding of the
results of operational activities separate from the financial impact of
decisions made for the long-term benefit of the company. Adjustments
similar to the ones reflected above have been recorded in earlier periods,
and similar types of adjustments can reasonably be expected to be recorded
in future periods. Using only the non-GAAP earnings measures to analyze
earnings would have material limitations because its calculation is based
on the subjective determinations of management regarding the nature and
classification of events and circumstances that investors may find
material. Management compensates for these limitations by utilizing both
GAAP and non-GAAP earnings measures reflected above to understand and
analyze the results of the business. The company believes investors find
the non-GAAP information helpful in understanding the ongoing performance
of operations separate from items that may have a disproportionate
positive or negative impact on the company's financial results in any
particular period.
(3) EBITDA represents income before interest expense, income taxes,
minority interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net income
or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Tenneco has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco
believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco also believes EBITDA assists investors in comparing a
company's performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon many
factors. However, the EBITDA measure presented may not always be
comparable to similarly titled measures reported by other companies due to
differences in the components of the calculation.
(4) Represents costs associated with changing new aftermarket customers
from their prior suppliers to an inventory of our products. Although
our aftermarket business regularly incurs changeover costs, we
specifically identify in the table above the changeover costs that,
based on the size or number of customers involved, we believe are of
an unusual nature for the quarter in which they were incurred.
(5) As disclosed in Tenneco's 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.
TENNECO INC.
RECONCILIATION OF GAAP (1) NET INCOME TO EBITDA
Unaudited
YTD 2007
North Europe Asia
America & SA Pacific Total
Net income $67
Minority interest 8
Income tax expense 22
Interest expense (net of interest
capitalized) 112
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) $104 $80 $25 209
Depreciation and amortization of
other intangibles 75 64 11 150
Total EBITDA(2) $179 $144 $36 $359
YTD 2006 (3)
North Europe Asia
America & SA Pacific Total
Net income $34
Minority interest 4
Income tax expense 17
Interest expense (net of interest
capitalized) 102
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) $85 $65 $7 157
Depreciation and amortization of
other intangibles 68 59 9 136
Total EBITDA(2) $153 $124 $16 $293
(1) Generally Accepted Accounting Principles
(2) EBITDA represents income before interest expense, income taxes,
minority interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net income
or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Tenneco has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco
believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco also believes EBITDA assists investors in comparing a
company's performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon many
factors. However, the EBITDA measure presented may not always be
comparable to similarly titled measures reported by other companies due to
differences in the components of the calculation.
(3) As disclosed in Tenneco's 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.
TENNECO INC.
RECONCILIATION OF GAAP (1) TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
YTD 2007 YTD 2006 (5)
EBITDA Net Per EBITDA Net Per
(3) EBIT Income Share (3) EBIT Income Share
Earnings Measures $359 $209 $67 $1.42 $293 $157 $34 $0.74
Adjustments (reflect
non-GAAP measures):
Restructuring and
restructuring related
expenses 7 7 5 0.11 21 21 13 0.31
Charges related to
refinancing 4 0.07 - - - -
New aftermarket
customer changeover
costs (4) 5 5 3 0.06 6 6 4 0.09
Tax adjustments (8) (0.18) - - (3) (0.06)
Non-GAAP earnings
measures $371 $221 $71 $1.48 $320 $184 $48 $1.08
YTD 2007
North Europe Asia
America & SA Pacific Total
EBIT $104 $80 $25 $209
Restructuring and
restructuring related
expenses 1 6 - 7
New aftermarket
customer changeover
costs (4) 5 - - 5
Adjusted EBIT $110 $86 $25 $221
YTD 2006 (5)
North Europe Asia
America & SA Pacific Total
EBIT $85 65 $7 $157
Restructuring and
restructuring related
expenses 10 6 5 21
New aftermarket
customer changeover
costs (4) 6 - - 6
Adjusted EBIT $101 $71 $12 $184
(1) Generally Accepted Accounting Principles
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP
earnings measures primarily to reflect the results for 2007 and 2006 in a
manner that allows a better understanding of the results of operational
activities separate from the financial impact of decisions made for the
long-term benefit of the company. Adjustments similar to the ones
reflected above have been recorded in earlier periods, and similar types
of adjustments can reasonably be expected to be recorded in future
periods. Using only the non-GAAP earnings measures to analyze earnings
would have material limitations because its calculation is based on the
subjective determinations of management regarding the nature and
classification of events and circumstances that investors may find
material. Management compensates for these limitations by utilizing both
GAAP and non-GAAP earnings measures reflected above to understand and
analyze the results of the business. The company believes investors find
the non-GAAP information helpful in understanding the ongoing performance
of operations separate from items that may have a disproportionate
positive or negative impact on the company's financial results in any
particular period.
(3) EBITDA represents income before interest expense, income taxes,
minority interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net income
or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Tenneco has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco
believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco also believes EBITDA assists investors in comparing a
company's performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon many
factors. However, the EBITDA measure presented may not always be
comparable to similarly titled measures reported by other companies due to
differences in the components of the calculation.
(4) Represents costs associated with changing new aftermarket customers
from their prior suppliers to an inventory of our products. Although
our aftermarket business regularly incurs changeover costs, we
specifically identify in the table above the changeover costs that,
based on the size or number of customers involved, we believe are of
an unusual nature for the quarter in which they were incurred.
(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 REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
Q3 2007
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America
Original Equipment
Ride Control $126 $- $126 $- $126
Exhaust 476 2 474 245 229
Total North
America Original
Equipment 602 2 600 245 355
North America
Aftermarket
Ride Control 92 - 92 - 92
Exhaust 40 - 40 - 40
Total North
America Aftermarket 132 - 132 - 132
Total North America 734 2 732 245 487
Europe Original
Equipment
Ride Control 97 9 88 - 88
Exhaust 381 30 351 124 227
Total Europe
Original Equipment 478 39 439 124 315
Europe Aftermarket
Ride Control 52 4 48 - 48
Exhaust 56 4 52 - 52
Total Europe
Aftermarket 108 8 100 - 100
South America & India 86 6 80 10 70
Total Europe,
South America & India 672 53 619 134 485
Asia 99 6 93 33 60
Australia 51 7 44 7 37
Total Asia Pacific 150 13 137 40 97
Total Tenneco Inc. $1,556 $68 $1,488 $419 $1,069
Q3 2006 (1)
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America
Original Equipment
Ride Control $109 $- $109 $- $109
Exhaust 198 - 198 54 144
Total North
America Original
Equipment 307 - 307 54 253
North America
Aftermarket
Ride Control 90 - 90 - 90
Exhaust 44 - 44 - 44
Total North
America Aftermarket 134 - 134 - 134
Total North America 441 - 441 54 387
Europe Original
Equipment
Ride Control 87 - 87 - 87
Exhaust 306 - 306 130 176
Total Europe
Original Equipment 393 - 393 130 263
Europe Aftermarket
Ride Control 48 - 48 - 48
Exhaust 58 - 58 - 58
Total Europe
Aftermarket 106 - 106 - 106
South America &
India 70 - 70 9 61
Total Europe,
South America & India 569 - 569 139 430
Asia 65 - 65 23 42
Australia 46 - 46 5 41
Total Asia Pacific 111 - 111 28 83
Total Tenneco Inc. $1,121 $- $1,121 $221 $900
Tenneco presents the above reconciliation of revenues in order to reflect
the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, substrate sales which
the company previously referred to as pass-through sales include precious
metals pricing, which may be volatile. Substrate sales occur when, at the
direction of its OE customers, Tenneco purchases catalytic converters or
components thereof from suppliers, uses them in its manufacturing
processes and sells them as part of the completed system. While Tenneco
original equipment customers assume the risk of this volatility, it
impacts reported revenue. Excluding substrate sales removes this impact.
Tenneco uses this information to analyze the trend in revenues before
these factors. Tenneco believes investors find this information useful in
understanding period to period comparisons in the company's revenues.
(1) As disclosed in Tenneco's 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.
TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES
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 $391 $- $391 $- $391
Exhaust 1,381 2 1,379 677 702
Total North
America Original
Equipment 1,772 2 1,770 677 1,093
North America
Aftermarket
Ride Control 300 - 300 - 300
Exhaust 115 - 115 - 115
Total North
America Aftermarket 415 - 415 - 415
Total North America 2,187 2 2,185 677 1,508
Europe Original
Equipment
Ride Control 311 25 286 - 286
Exhaust 1,174 82 1,092 387 705
Total Europe
Original Equipment 1,485 107 1,378 387 991
Europe Aftermarket
Ride Control 152 10 142 - 142
Exhaust 160 12 148 - 148
Total Europe
Aftermarket 312 22 290 - 290
South America &
India 237 13 224 28 196
Total Europe,
South America &
India 2,034 142 1,892 415 1,477
Asia 254 6 248 89 159
Australia 144 16 128 19 109
Total Asia Pacific 398 22 376 108 268
Total Tenneco Inc. $4,619 $166 $4,453 $1,200 $3,253
YTD 2006 (1)
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America
Original Equipment
Ride Control $371 $- $371 $- $371
Exhaust 677 - 677 181 496
Total North
America Original
Equipment 1,048 - 1,048 181 867
North America
Aftermarket
Ride Control 302 - 302 - 302
Exhaust 128 - 128 - 128
Total North
America Aftermarket 430 - 430 - 430
Total North America 1,478 - 1,478 181 1,297
Europe Original
Equipment
Ride Control 280 - 280 - 280
Exhaust 912 - 912 352 560
Total Europe
Original Equipment 1,192 - 1,192 352 840
Europe Aftermarket
Ride Control 138 - 138 - 138
Exhaust 161 - 161 - 161
Total Europe
Aftermarket 299 - 299 - 299
South America &
India 201 - 201 24 177
Total Europe,
South America &
India 1,692 - 1,692 376 1,316
Asia 173 - 173 59 114
Australia 130 - 130 14 116
Total Asia Pacific 303 - 303 73 230
Total Tenneco Inc. $3,473 $- $3,473 $630 $2,843
Tenneco presents the above reconciliation of revenues in order to reflect
the trend in the company's sales, in various product lines and
geographical regions, separately from the effects of doing business in
currencies other than the U.S. dollar. Additionally, substrate sales which
the company previously referred to as pass-through sales include precious
metals pricing, which may be volatile. Substrate sales occur when, at the
direction of its OE customers, Tenneco purchases catalytic converters or
components thereof from suppliers, uses them in its manufacturing
processes and sells them as part of the completed system. While Tenneco
original equipment customers assume the risk of this volatility, it
impacts reported revenue. Excluding substrate sales removes this impact.
Tenneco uses this information to analyze the trend in revenues before
these factors. Tenneco believes investors find this information useful in
understanding period to period comparisons in the company's revenues.
(1) As disclosed in Tenneco's 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 (8)
Debt net of cash / Adjusted EBITDA - LTM
Unaudited
Quarter Ended September 30
2007 2006
Total debt $1,536 $1,410
Cash and cash equivalents 203 116
Debt net of cash balances (1) 1,333 1,294
Adjusted LTM EBITDA 460 417
Ratio of net debt to adjusted LTM
EBITDA (2) 2.9x 3.1x
Q4 06 Q1 07 Q2 07 Q3 07 Q3 07
LTM
Net income 15 5 41 21 82
Minority interest 2 2 2 4 10
Income tax expense (12) 2 20 - 10
Interest expense (net of interest
capitalized) 34 40 40 32 146
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 39 49 103 57 248
Depreciation and amortization of
other intangibles 48 48 50 52 198
Total EBITDA (3) 87 97 153 109 446
Restructuring and restructuring
related expenses 6 2 2 3 13
New Aftermarket customer changeover
costs (4) - - - 5 5
Pension Curtailment (5) (7) - - - (7)
Reserve for receivables from former
affiliate 3 - - - 3
Total Adjusted EBITDA (7) 89 99 155 117 460
Q4 05 Q1 06 Q2 06 Q3 06 Q3 06
LTM
Net income 6 3 24 7 40
Minority interest 1 1 1 2 5
Income tax expense (2) - 13 4 15
Interest expense (net of interest
capitalized) 34 37 35 30 136
EBIT, Income before interest expense,
income taxes and minority interest
(GAAP measure) 39 41 73 43 196
Depreciation and amortization of
other intangibles 43 44 47 45 179
Total EBITDA(3) 82 85 120 88 375
Restructuring and restructuring
related expenses 5 6 8 7 26
New Aftermarket customer changeover
costs (4) 10 - 6 - 16
Total adjusted EBITDA(7) 97 91 134 95 417
(1) Tenneco presents debt net of cash balances because management
believes it is a useful measure of Tenneco's credit position and
progress toward reducing leverage. The calculation is limited in that
the company may not always be able to use cash to repay debt on a
dollar-for- dollar basis.
(2) Tenneco presents the above reconciliation of the ratio debt net of
cash to the last twelve months (LTM) of adjusted EBITDA to show trends
that investors may find useful in understanding the company's ability
to service its debt. For purposes of this calculation, adjusted LTM
EBITDA is used as an indicator of the company's performance over the
most recent twelve months and debt net of cash is presented as an
indicator of our credit position and progress toward reducing our
financial leverage. LTM adjusted EBITDA is used to reflect annual
values and remove seasonal fluctuations. This reconciliation is
provided as supplemental information and not intended to replace the
company's existing covenant ratios or any other financial measures that
investors may find useful in describing the company's financial
position. See notes (1), (3) and (4) for a description of the
limitations of using debt net of cash, EBITDA and adjusted EBITDA.
(3) EBITDA represents income before interest expense, income taxes,
minority interest and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In
addition, EBITDA should not be considered as an alternative to net income
or operating income as an indicator of the company's operating
performance, or as an alternative to operating cash flows as a measure of
liquidity. Tenneco Inc. has presented EBITDA because it regularly reviews
EBITDA as a measure of the company's performance. In addition, Tenneco
believes its debt holders utilize and analyze our EBITDA for similar
purposes. Tenneco also believes EBITDA assists investors in comparing a
company's performance on a consistent basis without regard to depreciation
and amortization, which can vary significantly depending upon many
factors. However, the EBITDA measure presented may not always be
comparable to similarly titled measures reported by other companies due to
differences in the components of the calculation.
(4) Represents costs associated with changing new aftermarket customers
from their prior suppliers to an inventory of our products. Although
our aftermarket business regularly incurs changeover costs, we
specifically identify in the table above those changeover costs that,
based on the size or number of customers involved, we believe are of an
unusual nature for the quarter in which they were incurred.
(5) In August 2006, we announced that we were freezing future accruals
under our U.S. defined benefit pension plans for substantially all our
U.S. salaried and non-union hourly employees effective December 31,
2006. In lieu of those benefits, we are offering additional benefits
under defined contribution plan.
(6) The adjustment is related to our past administration of stock
option grants and represents an adjustment for several prior years.
(7) Adjusted EBITDA is presented in order to reflect the results in a
manner that allows a better understanding of operational activities
separate from the financial impact of decisions made for the long term
benefit of the company and other items impacting comparability between
the periods. Adjustments similar to the ones reflected above have been
recorded in earlier periods, and similar types of adjustments can
reasonably be expected to be recorded in future periods. The company
believes investors find the non-GAAP information helpful in
understanding the ongoing performance of operations separate from items
that may have a disproportionate positive or negative impact on the
company's financial results in any particular period.
(8) As disclosed in Tenneco's 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 SGA&E as a Percent of Net Sales
Unaudited
Q3 2007 Q3 2006 (4)
SGA&E SGA&E
Net Sales $1,556 $1,121
SGA&E Expense $131 $105
Adjustments (reflects non-GAAP measures):
Restructuring and restructuring
related expenses (1)
New aftermarket customer changeover
costs (3) (5)
Non-GAAP SGA&E Expense $126 $104
Adjusted SGA&E as a percentage of
Net Sales 8.1% 9.3%
(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 third quarters
of 2007 and 2006 in a manner that allows a better understanding of the
results of operational activities separate from the financial impact of
decisions made for the long-term benefit of the company. Adjustments
similar to the ones reflected above have been recorded in earlier periods,
and similar types of adjustments can reasonably be expected to be recorded
in future periods. Using only the non-GAAP earnings measures to analyze
earnings would have material limitations because its calculation is based
on the subjective determinations of management regarding the nature and
classification of events and circumstances that investors may find
material. Management compensates for these limitations by utilizing both
GAAP and non-GAAP earnings measures reflected above to understand and
analyze the results of the business. The company believes investors find
the non-GAAP information helpful in understanding the ongoing performance
of operations separate from items that may have a disproportionate
positive or negative impact on the company's financial results in any
particular period
(3) 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.
(4) 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 Leslie Hunziker
Media Relations Investor Relations
847 482-5607 847 482-5042
jostrander@tenneco.com lhunziker@tenneco.com
Website: http://www.tenneco.com/ |
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