Item 6. Selected Financial Data.

 TENNECO INC. AND CONSOLIDATED SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA

Year Ended December 31,   2008     2007     2006     2005     2004(a)(b)  
(Millions Except Share and Per Share Amounts)
Statements of Income (Loss) Data:                                        
Net sales and operating revenues —                                        
North America   $ 2,641     $ 2,910     $ 1,963     $ 2,033     $ 1,966  
Europe, South America and India     2,983       3,135       2,387       2,110       1,940  
Asia Pacific     543       560       436       371       380  
Intergroup sales     (251 )     (421 )     (104 )     (74 )     (73 )
    $ 5,916     $ 6,184     $ 4,682     $ 4,440     $ 4,213  
Income (loss) before interest expense, income taxes, and minority interest —                                        
North America   $ (107 )   $ 120     $ 103     $ 148     $ 131  
Europe, South America and India     85       99       81       53       19  
Asia Pacific     19       33       12       16       20  
Total     (3 )     252       196       217       170  
Interest expense (net of interest capitalized)     113       164       136       133       178  
Income tax expense (benefit)     289       83       5       26       (21 )
Minority interest     10       10       6       2       4  
Net income (loss)   $ (415 )   $ (5 )   $ 49     $ 56     $ 9  
Average number of shares of common stock outstanding                                        
Basic     46,406,095       45,809,730       44,625,220       43,088,558       41,534,810  
Diluted     46,406,095       45,809,730       46,755,573       45,321,225       44,180,460  
Basic earnings (loss) per share of common stock   $ (8.95 )   $ (0.11 )   $ 1.11     $ 1.30     $ 0.22  
Diluted earnings (loss) per share of common stock   $ (8.95 )   $ (0.11 )   $ 1.05     $ 1.24     $ 0.21  
 

Year Ended December 31,   2008     2007     2006     2005     2004(a)(b)  
(Millions Except Ratio and Percent Amounts)
Balance Sheet Data:                                        
Total assets   $ 2,828     $ 3,590     $ 3,274     $ 2,945     $ 3,134  
Short-term debt     49       46       28       22       19  
Long-term debt     1,402       1,328       1,357       1,361       1,402  
Minority interest     31       31       28       24       24  
Shareholders’ equity     (251 )     400       226       137       170  
Statement of Cash Flows Data:                                        
Net cash provided by operating activities   $ 160     $ 158     $ 203     $ 123     $ 218  
Net cash used by investing activities     (261 )     (202 )     (172 )     (164 )     (131 )
Net cash provided (used) by financing activities     58       (10 )     12       (28 )     (15 )
Cash payments for plant, property and equipment     (233 )     (177 )     (177 )     (140 )     (132 )
Other Data:                                        
EBITDA including minority interest(c)   $ 219     $ 457     $ 380     $ 394     $ 347  
Ratio of EBITDA including minority interest to interest expense     1.94       2.79       2.79       2.96       1.95  
Ratio of total debt to EBITDA including minority interest     6.63       3.01       3.64       3.51       4.10  
Ratio of earnings to fixed charges(d)     —       1.46       1.35       1.55       —  

NOTE: Our consolidated financial statements for the three years ended December 31, 2008, which are discussed in the following notes, are included in this Form 10-K under Item 8.

(a)   Prior to the first quarter of 2005, inventories in the U.S. based operations (17 percent of our total consolidated inventories at December 31, 2004) were valued using the last-in, first-out (“LIFO”) method and all other inventories were valued using the first-in, first-out (“FIFO”) or average cost methods at the lower of cost or market value. Effective January 1, 2005, we changed our accounting method for valuing inventory for our U.S. based operations from the LIFO method to the FIFO method. As a result, all U.S. inventories are now stated at the lower of cost, determined on a FIFO basis, or market. We elected to change to the FIFO method as we believe it is preferable for the following reasons: 1) the change provides better matching of revenue and expenditures and 2) the change achieves greater consistency in valuing our global inventory. Additionally, we initially adopted LIFO as it provided certain U.S. tax benefits which we no longer realize due to our U.S. net operating losses (when applied for tax purposes, tax laws require that LIFO be applied for accounting principles generally accepted in the United States of America (“GAAP”) as well). In accordance with GAAP, the change in inventory accounting has been applied by restating prior years’ consolidated financial statements.
 
(b)   In October 2004 and July 2005, we announced a change in the structure of our organization which changed the components of our reportable segments. The European segment now includes our South American and Indian operations. While this has no impact on our consolidated results, it changes our segment results.
 
(c)   EBITDA including minority interest is a non-GAAP measure defined as net income before extraordinary items, cumulative effect of changes in accounting principle, interest expense, income taxes, depreciation and amortization and minority interest. We use EBITDA including minority interest, together with GAAP measures, to evaluate and compare our operating performance on a consistent basis between time periods and with other companies that compete in our markets but which may have different capital structures and tax positions, which can have an impact on the comparability of interest expense, minority interest and tax expense. We also believe that using this measure allows us to understand and compare operating performance both with and without depreciation expense, which can vary based on several factors. We believe EBITDA including minority interest is useful to our investors and other parties for these same reasons.

EBITDA including minority interest should not be used as a substitute for net income or for net cash provided by operating activities prepared in accordance with GAAP. It should also be noted that EBITDA including minority interest may not be comparable to similarly titled measures used by other companies and, furthermore, that it excludes expenditures for debt financing, taxes and future capital requirements that are essential to our ongoing business operations. For these reasons, EBITDA including minority interest is of value to management and investors only as a supplement to, and not in lieu of, GAAP results. EBITDA including minority interest is derived from the statements of income (loss) as follows:
Year Ended December 31,   2008     2007     2006     2005     2004(a)  
(Millions)      
Net income (loss)   $ (415 )   $ (5 )   $ 49     $ 56     $ 9  
Minority interest     10       10       6       2       4  
Income tax expense (benefit)     289       83       5       26       (21 )
Interest expense, net of interest capitalized     113       164       136       133       178  
Depreciation and amortization of other intangibles     222       205       184       177       177  
Total EBITDA including minority interest   $ 219     $ 457     $ 380     $ 394     $ 347  
(d)   For purposes of computing this ratio, earnings generally consist of income before income taxes and fixed charges excluding capitalized interest. Fixed charges consist of interest expense, the portion of rental expense considered representative of the interest factor and capitalized interest. Earnings were insufficient to cover fixed charges by $121 million for the year ended December 31, 2008 and by $9 million for the year ended December 31, 2004. See Exhibit 12 to this Form 10-K for the calculation of this ratio.


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