Tenneco Reports Second Quarter 2019 Results

Date : 08/06/2019 @ 10:30AM
Source : PR Newswire (US)
Stock : Tenneco Inc (TEN)
Quote : 10.79  0.11 (1.03%) @ 1:00AM
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Tenneco Reports Second Quarter 2019 Results

Tenneco (NYSE:TEN)
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LAKE FOREST, Ill., Aug. 6, 2019 /PRNewswire/ -- Tenneco Inc. (NYSE: TEN) reported second quarter 2019 revenueof $4.5 billion, a 78% increase versus $2.5 billion a year ago, which includes $1.9 billion from acquisitions.  On a constant currency pro forma basis, total revenue increased 1% versus last year, while light vehicle industry production* declined 8% in the quarter. Value-add revenue for the second quarter was $3.7 billion.     

Tenneco, Inc. Logo (PRNewsfoto/Tenneco, Inc.)

The company reported net income for second quarter 2019 of $26 million, or 32-cents per diluted share.  Second quarter 2018 net income was $47 million, or 92-cents per diluted share.  Second quarter 2019 adjusted net income was $97 million, or $1.20 per diluted share, compared with $96 million, or $1.84 per diluted share last year. Diluted shares outstanding in the second quarter increased 57% to 80.9 million shares, from 51.6 million shares in the second quarter 2018, primarily due to the acquisition of Federal-Mogul.  

Second quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $141 million including the acquired Federal-Mogul business, versus $111 million last year.  EBIT as a percent of revenue was 3.1% versus 4.4% last year and compares to -0.5% last quarter.  

Second quarter adjusted EBITDA was $414 million versus $233 million last year.  Adjusted EBITDA as a percent of value-add revenue was 11.1%.  Second quarter performance improved 240 basis points sequentially, compared to first quarter 2019, driven by the ramp up of synergy benefits and cost control initiatives.  Cash generated from operations was $50 million

"Tenneco's revenue growth outpaced industry production by nine percentage points, driven by higher light vehicle, commercial truck and off-highway revenues," said Brian Kesseler, co-CEO, Tenneco. "We delivered sequential earnings improvement on flat revenue quarter to quarter, with disciplined cost management and effective synergy capture actions."

OUTLOOK

Third Quarter 2019
Tenneco expects third quarter revenue in the range of $4.3 billion to $4.4 billion.  Further, the company expects its third quarter adjusted EBITDA to be in the range of $390 million to $410 million, including year-over-year pro forma margin improvement of approximately 100 basis points in both the DRiV and New Tenneco divisions.

Full Year 2019
The company updated its 2019 full year outlook, and now expects:

  • Total revenues in the range of $17.6 billion to $17.8 billion.
  • Value-add revenues in the range of $14.6 billion to $14.8 billion
  • Value-add adjusted EBITDA margin of 10.4% to 10.6%
  • Adjusted EBITDA of $1,515 million to $1,565 million
  • Interest expense of ~$335 million
  • Cash taxes in the range of $180 million to $200 million
  • Capital expenditures of ~$730 million
  • Net debt/LTM adjusted EBITDA of 3.3x

"In the third quarter, we expect our revenues to outgrow the markets we serve," said Roger Wood, co-CEO, Tenneco.  "More importantly, we anticipate higher margins on a year-over-year basis in both divisions supported by operational performance improvements, synergy realization and our continued focus on eliminating waste and cost throughout the business."

Leverage and Spin Update
The company confirmed its targeted timing for the separation of the business into two standalone companies, and expects the DRiV™ spinoff to occur mid-2020. Management remains focused and committed to the separation of the businesses.

*Source: IHS Markit July 2019 global light vehicle production forecast and Tenneco estimates.  


Financial results for the second quarter of 2018 have been revised for certain immaterial adjustments, which are further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


See "About revenue and EBITDA guidance" below for further information about revenue guidance and forecasted performance measures.

Attachment 1
Statements of Income – 3 Months
Statements of Income – 6 Months
Balance Sheets
Statements of Cash Flows – 3 Months
Statements of Cash Flows – 6 Months

Attachment 2
Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures – 6 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 6 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 and 6 Months
Reconciliation of Non-GAAP Measures – Debt Net of Cash/Pro Forma Adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue  – 3 and 6 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 3 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 6 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway, Industrial and other revenues – 3 and 6 Months
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures – 2018 quarterly
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures – 2018 and 2017 annual
Division Level Q3 and FY 2019 Outlook

CONFERENCE CALL
The company will host a conference call on Tuesday, August 6, 2019 at 9:30 a.m. ET.  The dial-in number is 833-366-1121 (domestic) or 412-902-6733 (international).  The passcode is: Tenneco Inc. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.investors.tenneco.com.  A recording of the call will be available one hour following completion of the call on August 6, 2019 through August 13, 2019.  To access this recording, dial 877-344-7529 (domestic) or 412-317-0088 (international) or 855 669-9658 (Canada). The replay access code is 10133241. The purpose of the call is to discuss the company's operations for the second fiscal quarter 2019, as well as provide updated information regarding matters impacting the company's outlook, including the plan to separate its businesses to form two new, independent companies, an Aftermarket and Ride Performance company as well as a new Powertrain Technology company. A copy of the press release is available on the financial and news sections of the Tenneco web site.

About Tenneco
Headquartered in Lake Forest, Illinois, Tenneco is one of the world's leading designers, manufacturers and marketers of Aftermarket, Ride Performance, Clean Air and Powertrain products and technology solutions for diversified markets, including light vehicle, commercial truck, off-highway, industrial and the aftermarket, with 2018 revenues of $11.8 billion and approximately 81,000 employees worldwide. On October 1, 2018, Tenneco completed the acquisition of Federal-Mogul, a leading global supplier to original equipment manufacturers and the aftermarket.  Additionally, the company expects to separate its businesses to form two new, independent companies, an Aftermarket and Ride Performance company as well as a new Powertrain Technology company.

About DRiV - the future Aftermarket and Ride Performance Company
Following the expected separation of Tenneco to form two new, independent companies, an Aftermarket and Ride Performance company (DRiV™) as well as a new Powertrain Technology company, DRiV will be one of the largest global multi-line, multi-brand aftermarket companies, and one of the largest global OE ride performance and braking companies.  DRiV's principal product brands will feature Monroe®Öhlins®, Walker®, Clevite®Elastomers, MOOG®, Fel-Pro®, Wagner®, Ferodo®, Champion® and others. DRiV would have 2018 pro-forma revenues of $6.4 billion, with 54% of those revenues from aftermarket and 46% from original equipment customers.

About the new Tenneco - the future Powertrain Technology company
Following Tenneco's expected separation to form two new, independent companies, an Aftermarket and Ride Performance company (DRiV™), as well as a new Powertrain Technology company, the new Tenneco will be one of the world's largest pure-play powertrain companies serving OE markets worldwide with engineered solutions addressing fuel economy, power output, and criteria pollution requirements for gasoline, diesel and electrified powertrains. The new Tenneco would have 2018 pro-forma revenues of $11.4 billion, serving light vehicle, commercial truck, off-highway and industrial markets.

About Revenue and EBITDA Guidance
Revenue estimates and other forecasted information in this release are based on OE manufacturers' programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco's status as supplier for the existing program and its relationship with the customer.  This information is also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. Unless otherwise indicated, our methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately.  In this respect, we are not able to reconcile forecasted adjusted EBITDA (and the related margins) on a forward-looking basis to the most comparable GAAP measures without unreasonable efforts on account of these factors and other factors not in our control.  For certain additional assumptions upon which these estimates are based, see the slides accompanying the August 6, 2019 webcast, which will be available on the financial section of the Tenneco website at www.investors.tenneco.com.

About Forward-Looking Statements
This press release contains forward-looking statements. The words "may," "will," "believe," "should," "could," "plan," "expect," "anticipate," "estimate," and similar expressions (and variations thereof), identify these forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries).  Because these statements involve risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:

  • general economic, business and market conditions;
  • our ability to source and procure needed materials, components and other products and services in accordance with customer demand and at competitive prices;
  • the cost and outcome of existing and any future claims, legal proceedings or investigations, including, but not limited to, any of the foregoing arising in connection with the ongoing global antitrust investigation, product performance, product safety or intellectual property rights;
  • changes in consumer demand, prices and our ability to have our products included on top selling vehicles, including any shifts in consumer preferences away from historically higher margin products for our customers and us, to other lower margin vehicles, for which we may or may not have supply arrangements, and the cyclical nature of the global vehicle industry, including the performance of the global aftermarket sector;
  • changes in consumer demand for our original equipment products or aftermarket products, or changes in automotive and commercial vehicle manufacturers' production rates and their actual and forecasted requirements for our products, due to difficult economic conditions and/or regulatory or legal changes affecting internal combustion engines and/or aftermarket products;
  • our dependence on certain large customers, including the loss of any of our large original equipment manufacturer customers (on whom we depend for a substantial portion of our revenues), or the loss of market shares by these customers if we are unable to achieve increased sales to other customers or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;
  • new technologies that reduce the demand for certain of our products or otherwise render them obsolete;
  • our ability to introduce new products and technologies that satisfy customers' needs in a timely fashion;
  • the overall highly competitive nature of the automotive and commercial vehicle parts industries, and any resultant inability to realize the sales represented by our awarded book of business (which is based on anticipated pricing and volumes over the life of the applicable program);
  • changes in capital availability or costs, including increases in our cost of borrowing (i.e., interest rate increases), the amount of our debt, our ability to access capital markets at favorable rates, and the credit ratings of our debt;
  • our ability to comply with the covenants contained in our debt instruments;
  • our working capital requirements;
  • our ability to successfully execute cash management and other cost reduction plans, and to realize the anticipated benefits from these plans;
  • risks inherent in operating a multi-national company, including economic conditions, such as currency exchange and inflation rates, and political conditions in the countries where we operate or sell our products, adverse changes in trade agreements, tariffs, immigration policies, political stability, and tax and other laws, and potential disruptions of production and supply;
  • increasing competition from lower cost, private-label products;
  • damage to the reputation of one or more of our leading brands;
  • the effect of improvements in automotive parts on aftermarket demand for some of our products;
  • industrywide strikes, labor disruptions at our facilities or any labor or other economic disruptions at any of our significant customers or suppliers or any of our customers' other suppliers;
  • developments relating to our intellectual property, including our ability to adapt to changes in technology;
  • costs related to product warranties and other customer satisfaction actions;
  • the failure or breach of our information technology systems, including the consequences of any misappropriation, exposure or corruption of sensitive information stored on such systems and the interruption to our business such failure or breach may cause;
  • the effect of consolidation among vehicle parts suppliers and customers on our ability to compete in the highly competitive automotive and commercial vehicle supplier industry;
  • changes in distribution channels or competitive conditions in the markets and countries where we operate;
  • the evolution towards autonomous vehicles and car and ride sharing;
  • customer acceptance of new products;
  • our ability to successfully integrate, and benefit from, any acquisitions we complete;
  • our ability to effectively manage our joint ventures and other third-party relationships;
  • the potential impairment in the carrying value of our long-lived assets, goodwill, or indefinite-lived intangible assets or our inability to realize our deferred tax assets;
  • the negative effect of fuel price volatility on transportation and logistics costs, raw material costs, discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment;
  • increases in the costs of raw materials or components, including our ability to successfully reduce the effect of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery, and other methods;
  • changes by the Financial Accounting Standards Board or the Securities and Exchange Commission of authoritative generally accepted accounting principles or policies;
  • changes in accounting estimates and assumptions, including changes based on additional information;
  • any changes by the International Organization for Standardization (ISO) or other such committees in their certification protocols for processes and products, which may have the effect of delaying or hindering our ability to bring new products to market;
  • the effect of the extensive, increasing, and changing laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved or increased costs or loss of revenues relating to products subject to changing regulation;
  • potential volatility in our effective tax rate;
  • disasters, such as fires, earthquakes and flooding, and any resultant disruptions in the supply or production of goods or services to us or by us, in demand by our customers or in the operation of our system, disaster recovery capabilities or business continuity capabilities;
  • acts of war and/or terrorism, as well as actions taken or to be taken by the United States and other governments as a result of further acts or threats of terrorism, and the effect of these acts on economic, financial, and social conditions in the countries where we operate;
  • pension obligations and other postretirement benefits;
  • our hedging activities to address commodity price fluctuations; and
  • the timing and occurrence (or non-occurrence) of other transactions, events and circumstances which may be beyond our control.

In addition, important factors related to the acquisition of Federal-Mogul LLC ("Federal-Mogul") and the planned separation of our company into a powertrain technology company and an aftermarket and ride performance company that could cause actual results to differ materially from the expectations reflected in the forward-looking statements, including:

  • the risk the Company may not complete a separation of its powertrain technology business and its aftermarket and ride performance business (or achieve some or all of the anticipated benefits of the separation);
  • the risk the combined company and each separate company following the separation will underperform relative to our expectations;
  • the ongoing transaction costs and risk we may incur greater costs following separation of the business;
  • the risk the spin-off is determined to be a taxable transaction;
  • the risk the benefits of the acquisition of Federal-Mogul, including synergies, may not be fully realized or may take longer to realize than expected;
  • the risk the acquisition of Federal-Mogul may not advance our business strategy;
  • the risk we may experience difficulty integrating or separating employees or operations; and
  • the risk the transaction may have an adverse effect on existing arrangements with us, including those related to transition, manufacturing and supply services and tax matters; our ability to retain and hire key personnel; or our ability to maintain relationships with customers, suppliers or other business partners.

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, and will be, detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2018.  

Investor inquiries:

Media inquiries:



Linae Golla

Bill Dawson

847-482-5162

847-482-5807 

lgolla@tenneco.com

bdawson@tenneco.com



Rich Kwas

Steve Blow

248-849-1340

517-262-0655

rich.kwas@tenneco.com

sblow@tenneco.com

 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

THREE MONTHS ENDED JUNE 30,

(Millions except per share amounts)












2019


2018*


Net sales and operating revenues:





Clean Air - Value-add revenues

$ 1,050


$ 1,073


Clean Air - Substrate sales

777


621


Powertrain

1,133


-


Motorparts

835


333


Ride Performance

709


506


          Total net sales and operating revenues

$ 4,504


$ 2,533







Costs and expenses:





   Cost of sales

3,793

(e) (f) (g)

2,134


   Selling, general and administrative

288

(b) (c)

154

(j) (k) (l) (m)

   Depreciation and amortization

169

(a)

60


   Engineering, research, and development

78


39


   Restructuring charges and asset impairments

61

(a) (d)

29

(i) (l)

          Total costs and expenses

4,389


2,416







Other expense (income):





Non-service pension and other postretirement benefit costs (credits)

4


3


Equity in (earnings) losses of nonconsolidated affiliates, net of tax

(17)


-


Other expense (income), net

(13)


3


          Total other expense (income)

(26)


6







Earnings before interest expense, income taxes, and noncontrolling interests:





Clean Air

113

(a) (f)

103

(i) (l)

Powertrain

42

(a) (d)

-


Motorparts

75

(a) (c) (d) (e) (g)

51

(i) (l)

Ride Performance

(11)

(a) (d) (e) 

3

(i) (j)

Corporate

(78)

(b) (c) (d)

(46)

(k) (l) (m)

          Total earnings before interest expense, income taxes, and noncontrolling interests

141


111







   Interest expense

82

(o)

22

(o)

Earnings before income taxes and noncontrolling interests

59


89







   Income tax expense

14

(h)

26

(n)

Net income 

45


63







   Less: Net income attributable to noncontrolling interests

19


16


Net income attributable to Tenneco Inc.

$      26


$      47












Weighted average common shares outstanding:





   Basic

80.9


51.3


   Diluted

80.9


51.6







Earnings per share of common stock:





   Basic

$   0.32


$   0.92


   Diluted

$   0.32


$   0.92



* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(a) Includes restructuring and related charges of $60 million pre-tax, $44 million after tax and noncontrolling interests or $0.54 per diluted share. Of the amount, $57 million is recorded in restructuring charges and asset impairments and $3 million is recorded in depreciation and amortization. $15 million is recorded in Clean Air, $16 million is recorded in Powertrain, $3 million is recorded in Motorparts and $26 million is recorded in Ride Performance.


(b) Includes costs related to cost reduction initiatives of $2 million pre-tax, $1 million after tax or $0.02 per diluted share.


(c) Includes acquisition and expected spin costs of $27 million pre-tax, $19 million after tax or $0.23 per diluted share. $1 million is recorded in Motorparts and $26 million is recorded in Corporate.


(d) Includes costs to achieve synergies of $7 million pre-tax, $5 million after tax or $0.06 per diluted share. Of the amount, $4 million is recorded in restructuring charges and asset impairments and $3 million is recorded in selling, general and administrative. $2 million is recorded in Powertrain, $4 million is recorded in Motorparts, $(1) million is recorded in Ride Performance and $2 million is recorded in Corporate.


(e) Includes charges related to purchase accounting of $3 million pre-tax, $1 million after tax or $0.02 per diluted share. $1 million is recorded in Motorparts and $2 million is recorded in Ride Performance.


(f) Includes process harmonization charge of $1 million pre-tax.


(g) Includes warranty charge of $7 million pre-tax, $5 million after tax or $0.06 per diluted share.


(h) Includes net tax benefit of $4 million or $0.05 per diluted share for discrete tax adjustments recognized in the period.


(i) Includes restructuring and related charges of $21 million pre-tax, $14 million after tax and noncontrolling interests or $0.26 per diluted share. $11 million is recorded in Clean Air,  $2 million is recorded in Motorparts and $8 million is recorded in Ride Performance.


(j) Includes costs related to cost reduction initiatives of $10 million pre-tax, $7 million after tax or $0.14 per diluted share.


(k) Includes acquisition costs of $18 million pre-tax, $14 million after tax or $0.27 per diluted share. 


(l) Includes costs to achieve synergies of $9 million pre-tax, $7 million after tax or $0.11 per diluted share. Of the amount, $8 million is recorded in restructuring charges and asset impairments and $1 million is recorded in selling, general and administrative. $6 million is recorded in Clean Air, $1 million is recorded in Motorparts and $2 million is recorded in Corporate.


(m) Includes environmental charge of $4 million pre-tax, $3 million after tax or $0.06 per diluted share related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.


(n) Includes net tax expense of $4 million or $0.08 per diluted share for discrete tax adjustments recognized in the period.


(o) Financing charges on sale of receivables are included in interest expense.

 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

SIX MONTHS ENDED JUNE 30,

(Millions except per share amounts)












2019


2018*


Net sales and operating revenues:





Clean Air - Value-add revenues

$ 2,123


$ 2,177


Clean Air - Substrate sales

1,483


1,273


Powertrain

2,308


-


Motorparts

1,632


645


Ride Performance

1,442


1,019


          Total net sales and operating revenues

$ 8,988


$ 5,114







Costs and expenses:





   Cost of sales

7,657

(e) (g) (h)

4,327

(n)

   Selling, general and administrative

604

(b) (c) (d)

305

(k) (l) (m) (o)

   Depreciation and amortization

338

(a)

120


   Engineering, research, and development

170


79


   Restructuring charges and asset impairments

85

(a) (d)

41

(j) (m)

   Goodwill impairment charge

60

(f)

-


          Total costs and expenses

8,914


4,872







Other expense (income):





Non-service pension and other postretirement benefit costs (credits)

6


6


Equity in (earnings) losses of nonconsolidated affiliates, net of tax

(33)


-


Other expense (income), net

(16)


3


          Total other expense (income)

(43)


9







Earnings before interest expense, income taxes, and noncontrolling interests:





Clean Air

207

(a) (d) (g)

223

(j) (m)

Powertrain

96

(a) (d) (e)

-


Motorparts

84

(a) (c) (d) (e) (g) (h)

90

(j) (m)

Ride Performance

(92)

(a) (d) (e) (f)

10

(j) (k) (n)

Corporate

(178)

(a) (b) (c) (d)

(90)

(l) (m) (o)

          Total earnings before interest expense, income taxes, and noncontrolling interests

117


233







   Interest expense

163

(q)

45

(q)

Earnings (Loss) before income taxes and noncontrolling interests

(46)


188







   Income tax expense

14

(i)

51

(p)

Net income (loss)

(60)


137







   Less: Net income attributable to noncontrolling interests

31


30


Net income (loss) attributable to Tenneco Inc.

$     (91)


$    107












Weighted average common shares outstanding:





   Basic

80.9


51.2


   Diluted

80.9


51.5







Earnings (Loss) per share of common stock:





   Basic

$ (1.13)


$   2.08


   Diluted

$ (1.13)


$   2.07



* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(a) Includes restructuring and related charges of $80 million pre-tax, $60 million after tax and noncontrolling interests or $0.73 per diluted share. Of the amount, $74 million is recorded in restructuring charges and asset impairments and $6 million is recorded in depreciation and amortization. $19 million is recorded in Clean Air, $17 million is recorded in Powertrain, $4 million is recorded in Motorparts, $39 million is recorded in Ride Performance and $1 million is recorded in Corporate.


(b) Includes costs related to cost reduction initiatives of $10 million pre-tax, $7 million after tax or $0.09 per diluted share.


(c) Includes acquisition and expected spin costs of $67 million pre-tax, $51 million after tax or $0.62 per diluted share. $1 million is recorded in Motorparts and $66 million is recorded in Corporate.


(d) Includes costs to achieve synergies of $14 million pre-tax, $11 million after tax or $0.14 per diluted share. Of the amount, $11 million is recorded in restructuring charges and asset impairments and $3 million is recorded in selling, general and administrative.  $1 million is recorded in Clean Air, $2 million is recorded in Powertrain, $7 million is recorded in Motorparts, $2 million is recorded in Ride Performance and $2 million is recorded in Corporate.


(e) Includes charges related to purchase accounting of $44 million pre-tax, $35 million after tax or $0.44 per diluted share. $2 million is recorded in Powertrain, $37 million is recorded in Motorparts and $5 million is recorded in Ride Performance.


(f) Represents goodwill impairment charges of $60 million pre-tax, $60 million after tax or $0.74 per diluted share.


(g) Includes process harmonization charge of $10 million pre-tax, $7 million after tax or $0.09 per diluted share, of which $5 million is recorded in Clean Air and $5 million is recorded in Motorparts.


(h) Includes warranty charge of $7 million pre-tax, $5 million after tax or $0.06 per diluted share.


(i) Includes net tax benefit of $6 million or $0.07 per diluted share for discrete tax adjustments recognized in the period.


(j) Includes restructuring and related charges of $33 million pre-tax, $22 million after tax and noncontrolling interests or $0.42 per diluted share. $12 million is recorded in Clean Air, $4 million is recorded in Motorparts and $17 million is recorded in Ride Performance.


(k) Includes costs related to cost reduction initiatives of $10 million pre-tax, $7 million after tax or $0.15 per diluted share.


(l) Includes acquisition costs of $31 million pre-tax, $25 million after tax or $0.48 per diluted share. 


(m) Includes costs to achieve synergies of $9 million pre-tax, $7 million after tax or $0.12 per diluted share. Of the amount, $8 million is recorded in restructuring charges and asset impairments and $1 million is recorded in selling, general and administrative. $6 million is recorded in Clean Air, $1 million is recorded in Motorparts and $2 million is recorded in Corporate.


(n) Includes warranty charge of $5 million pre-tax, $4 million after tax or $0.08 per diluted share.  


(o) Includes environmental charge of $4 million pre-tax, $3 million after tax or $0.06 per diluted share related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.


(p) Includes net tax expense of $4 million or $0.09 per diluted share for discrete tax adjustments recognized in the period.


(q) Financing charges on sale of receivables are included in interest expense.

 



ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS

Unaudited

(Millions)











June 30, 2019


December 31, 2018









 Assets














Cash and cash equivalents

$               384


$                          697











Restricted cash

6


5











Receivables, net

2,847

 (a) 

2,572

 (a) 










Inventories

2,207


2,245











Prepayments and other current assets

550


590











Other noncurrent assets

4,029


3,622











Property, plant and equipment, net

3,569


3,501











Total assets

$          13,592


$                    13,232






























Liabilities and Shareholders' Equity














Short-term debt, including current maturities of long-term debt

$               170


$                          153











Accounts payable

2,725


2,759











Accrued compensation and employee benefits

391


343











Accrued income taxes

-


64











Accrued expenses and other current liabilities

1,024


1,001











Long-term debt

5,508

 (b) 

5,340

 (b) 










Deferred income taxes

110


88











Pension and postretirement benefits

1,129


1,167











Deferred credits and other liabilities

546


263











Redeemable noncontrolling interests

145


138











Tenneco Inc. shareholders' equity

1,638


1,726











Noncontrolling interests

206


190











Total liabilities, redeemable noncontrolling interests and equity

$          13,592


$                    13,232





















June 30, 2019


December 31, 2018


(a)

Accounts receivable net of:







Accounts receivable outstanding and derecognized

$                  1,098


$                               1,011












June 30, 2019


December 31, 2018


(b)

Long-term debt composed of:







Revolver Borrowings

$                     250


$                                      -




LIBOR plus 1.75% Term Loan A due 2019 through 2023

1,649


1,691




LIBOR plus 3.00% Term Loan B due 2019 through 2025

1,626


1,629




$225 million of 5.375% Senior Notes due 2024

222


222




$500 million of 5.000% Senior Notes due 2026

494


493




€415 million 4.875% Euro Fixed Rate Notes due 2022

489


496




€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024

345


349




€350 million of 5.000% Euro Fixed Rate Notes due 2024

422


427




Other Debt, primarily foreign instruments

91


106





5,588


5,413




Less: maturities classified as current

80


73




Total long-term debt

$                  5,508


$                               5,340


 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Unaudited

(Millions)










Three Months Ended June 30,


2019


2018*





Operating Activities




Net income

$     45


$     63

Adjustments to reconcile net income to cash provided by operating activities:




Depreciation and amortization

169


60

Deferred income taxes

(6)


(8)

Stock-based compensation

6


2

Restructuring charges and asset impairments, net of cash paid

28


14

Change in pension and other postretirement benefit plans

(15)


2

Equity in earnings of nonconsolidated affiliates

(17)


-

Cash dividends received from nonconsolidated affiliates

12


-

Loss (gain) on sale of assets

(1)


-

Changes in operating assets and liabilities:




Receivables

(89)


(12)

Inventories

90


(19)

Payables and accrued expenses

(109)


21

Accrued interest and accrued income taxes

(28)


2

Other assets and liabilities

(35)


(47)

Net cash provided by operating activities

50


78





Investing Activities




Proceeds from sale of assets

4


3

Cash payments for property, plant and equipment

(169)


(85)

Proceeds from deferred purchase price of factored receivables

87


32

Other

(3)


2

Net cash used by investing activities

(81)


(48)





Financing Activities




Proceeds from term loans and notes

83


3

Repayments of term loans and notes

(126)


(15)

Borrowings on revolving lines of credit

2,406


1,402

Payments on revolving lines of credit

(2,273)


(1,425)

Issuance (repurchase) of common shares

-


1

Cash dividends

-


(12)

Debt issuance cost of long-term debt

-


(2)

Net increase (decrease) in bank overdrafts

(7)


(3)

Other

2


10

Distributions to noncontrolling interest partners

(19)


(28)

Net cash provided (used) by financing activities

66


(69)





Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

(8)


(14)

Increase (Decrease) in cash, cash equivalents and restricted cash

27


(53)





Cash, cash equivalents and restricted cash, beginning of period

363


290

Cash, cash equivalents and restricted cash, end of period

$   390


$   237









Supplemental Cash Flow Information




Cash paid during the period for interest

$     71


$     17

Cash paid during the period for income taxes, net of refunds

57


31





Non-cash Investing Activities




Period end balance of accounts payables for property, plant and equipment

$   116


$     54

Deferred purchase price of receivables factored in the period

52


71


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.

 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Unaudited

(Millions)










Six Months Ended June 30,


2019


2018*





Operating Activities




Net income (loss)

$    (60)


$   137

Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:




Goodwill impairment charge

60


-

Depreciation and amortization

338


120

Deferred income taxes

(14)


(9)

Stock-based compensation

13


7

Restructuring charges and asset impairments, net of cash paid

14


10

Change in pension and other postretirement benefit plans

(32)


2

Equity in earnings of nonconsolidated affiliates

(33)


-

Cash dividends received from nonconsolidated affiliates

27


-

Loss (gain) on sale of assets

(1)


-

Changes in operating assets and liabilities:




Receivables

(401)


(233)

Inventories

101


(51)

Payables and accrued expenses

48


206

Accrued interest and accrued income taxes

(66)


(2)

Other assets and liabilities

(94)


(109)

Net cash provided (used) by operating activities

(100)


78





Investing Activities




Proceeds from sale of assets

5


5

Net proceeds from sale of business

22


-

Cash payments for property, plant and equipment

(379)


(174)

Acquisition of business (net of cash acquired)

(158)


-

Proceeds from deferred purchase price of factored receivables

147


66

Other

(1)


2

Net cash used by investing activities

(364)


(101)





Financing Activities




Proceeds from term loans and notes

111


9

Repayments of term loans and notes

(190)


(28)

Borrowings on revolving lines of credit

4,525


2,669

Payments on revolving lines of credit

(4,254)


(2,614)

Issuance (repurchase) of common shares

(2)


(1)

Cash dividends

(20)


(25)

Debt issuance cost of long-term debt

-


(2)

Net increase (decrease) in bank overdrafts

(8)


(7)

Other

(1)


(20)

Distributions to noncontrolling interest partners

(20)


(28)

Net cash provided (used) by financing activities

141


(47)





Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

11


(11)

Decrease in cash, cash equivalents and restricted cash

(312)


(81)





Cash, cash equivalents and restricted cash, beginning of period

702


318

Cash, cash equivalents and restricted cash, end of period

$   390


$   237









Supplemental Cash Flow Information




Cash paid during the period for interest

$   145


$     40

Cash paid during the period for income taxes, net of refunds

100


56





Non-cash Investing Activities




Period end balance of accounts payables for property, plant and equipment

$   116


$     54

Deferred purchase price of receivables factored in the period

52


71


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP(1)TO NON-GAAP EARNINGS MEASURES(2)

Unaudited

(Millions except per share amounts)





































Q2 2019


Q2 2018*



Net income
attributable to
Tenneco Inc.


Per Share


EBIT


EBITDA (3)


Net income
attributable to
Tenneco Inc.


Per Share


EBIT


EBITDA (3)

Earnings Measures

$           26


$       0.32


$           141


$           310


$           47


$      0.92


$ 111


$       171


















Adjustments:

















Restructuring and related expenses(4)

44


0.54


60


57


14


0.26


21


21


Cost reduction initiatives (5)

1


0.02


2


2


7


0.14


10


10


Acquisition and spin costs (6)

19


0.23


27


27


14


0.27


18


18


Costs to achieve synergies (7)

5


0.06


7


7


7


0.11


9


9


Purchase accounting charges (8)

1


0.02


3


3


-


-


-


-


Process harmonization (9)

-


-


1


1


-


-


-


-


Warranty charge (10)

5


0.06


7


7


-


-


-


-


Environmental charge (11)

-


-


-


-


3


0.06


4


4


Net tax adjustments

(4)


(0.05)


-


-


4


0.08


-


-


















Adjusted Net income, EPS, EBIT, and EBITDA

$           97


$       1.20


$           248


$           414


$           96


$      1.84


$ 173


$       233





































Q2 2019





Global Segments









Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total



Net income attributable to Tenneco Inc.













$   26




















Net income attributable to noncontrolling interests













19




















Net income













45




















Income tax expense













14




















Interest expense













82




















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

$         113


$         42


$             75


$            (11)


$         219


$       (78)


$ 141




















Depreciation and amortization

39


58


35


37


169


-


169




















Total EBITDA including noncontrolling interests (3)

$         152


$        100


$           110


$             26


$         388


$       (78)


$ 310





















Restructuring and related expenses(4)

15


16


3


23


57


-


57




Cost reduction initiatives (5)

-


-


-


-


-


2


2




Acquisition and spin costs (6)

-


-


1


-


1


26


27




Costs to achieve synergies (7)

-


2


4


(1)


5


2


7




Purchase accounting charges (8)

-


-


1


2


3


-


3




Process harmonization (9)

1


-


-


-


1


-


1




Warranty charge (10)

-


-


7


-


7


-


7




















Adjusted EBITDA

$         168


$        118


$           126


$             50


$         462


$       (48)

(12)

$ 414







































Q2 2018*







Global Segments











Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total





Net income attributable to Tenneco Inc.











$        47






















Net income attributable to noncontrolling interests











16






















Net income











63






















Income tax expense











26






















Interest expense











22






















EBIT, Earnings before interest expense, income taxes and noncontrolling interests

$         103


$         51


$               3


$           157


$          (46)


$       111






















Depreciation and amortization

39


4


17


60


-


60






















Total EBITDA including noncontrolling interests (3)

$         142


$         55


$             20


$           217


$          (46)


$       171























Restructuring and related expenses

11


2


8


21


-


21






Cost reduction initiatives (5)

-


-


10


10


-


10






Acquisition costs (6)

-


-


-


-


18


18






Costs to achieve synergies (7)

6


1


-


7


2


9






Environmental charge (11)

-


-


-


-


4


4






















Adjusted EBITDA

$         159


$         58


$             38


$           255


$          (22)


$       233






* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2)Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results 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 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.  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 including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income attributable to Tenneco Inc. 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 including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests 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 including noncontrolling interests 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)Q2 2019 includes $3 million of accelerated depreciation related to plant closures.


(5)Costs related to cost reduction initiatives.


(6)Costs related to acquisitions and costs related to expected spin.


(7)Costs to achieve synergies related to Federal-Mogul acquisition.


(8)This primarily relates to a non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.


(9)Charge due to process harmonization.


(10)Charge related to warranty. Although Tenneco regularly incurs warranty costs, this specific charge is of an unusual nature in the period incurred.


(11)Environmental charge related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.


(12)Corporate costs for each division are $23M for New Tenneco and $25M for DRiV.

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP(1)TO NON-GAAP EARNINGS MEASURES(2)

Unaudited

(Millions except per share amounts)





































YTD 2019


YTD 2018*



Net income
(loss)
attributable to
Tenneco Inc.


Per Share


EBIT


EBITDA (3)


Net income
attributable to
Tenneco Inc.


Per Share


EBIT


EBITDA (3)

Earnings (Loss) Measures

$             (91)


$      (1.13)


$           117


$           455


$         107


$      2.07


$ 233


$       353


















Adjustments:

















Restructuring and related expenses(4)

60


0.73


80


74


22


0.42


33


33


Cost reduction initiatives (5)

7


0.09


10


10


7


0.15


10


10


Acquisition and spin costs (6)

51


0.62


67


67


25


0.48


31


31


Costs to achieve synergies (7)

11


0.14


14


14


7


0.12


9


9


Purchase accounting charges (8)

35


0.44


44


44


-


-


-


-


Goodwill impairment charge (9)

60


0.74


60


60


-


-


-


-


Process harmonization (10)

7


0.09


10


10


-


-


-


-


Warranty charge (11)

5


0.06


7


7


4


0.08


5


5


Environmental charge (12)

-


-


-


-


3


0.06


4


4


Net tax adjustments

(6)


(0.07)


-


-


4


0.09


-


-


















Adjusted Net income, EPS, EBIT, and EBITDA

$            139


$       1.71


$           409


$           741


$         179


$      3.47


$ 325


$       445





































YTD 2019





Global Segments









Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total



Net loss attributable to Tenneco Inc.













$  (91)




















Net income attributable to noncontrolling interests













31




















Net loss













(60)




















Income tax expense













14




















Interest expense













163




















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

$            207


$         96


$             84


$            (92)


$         295


$      (178)


$ 117




















Depreciation and amortization

76


117


71


73


337


1


338




















Total EBITDA including noncontrolling interests (3)

$            283


$        213


$           155


$            (19)


$         632


$      (177)


$ 455





















Restructuring and related expenses(4)

19


17


4


33


73


1


74




Cost reduction initiatives (5)

-


-


-


-


-


10


10




Acquisition and spin costs (6)

-


-


1


-


1


66


67




Costs to achieve synergies (7)

1


2


7


2


12


2


14




Purchase accounting charges (8)

-


2


37


5


44


-


44




Goodwill impairment charge (9)

-


-


-


60


60


-


60




Process harmonization (10)

5


-


5


-


10


-


10




Warranty charge (11)

-


-


7


-


7


-


7




















Adjusted EBITDA

$            308


$        234


$           216


$             81


$         839


$       (98)

(13)

$ 741







































YTD 2018*







Global Segments











Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total





Net income attributable to Tenneco Inc.











$       107






















Net income attributable to noncontrolling interests











30






















Net income











137






















Income tax expense











51






















Interest expense











45






















EBIT, Earnings before interest expense, income taxes and noncontrolling interests

$            223


$         90


$             10


$           323


$          (90)


$       233






















Depreciation and amortization

76


10


34


120


-


120






















Total EBITDA including noncontrolling interests (3)

$            299


$        100


$             44


$           443


$          (90)


$       353























Restructuring and related expenses

12


4


17


33


-


33






Cost reduction initiatives (5)

-


-


10


10


-


10






Acquisition costs (6)

-


-


-


-


31


31






Costs to achieve synergies (7)

6


1


-


7


2


9






Warranty charge (11)

-


-


5


5


-


5






Environmental charge (12)

-


-


-


-


4


4






















Adjusted EBITDA

$            317


$        105


$             76


$           498


$          (53)


$       445






* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2)Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results 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 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.  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 including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income attributable to Tenneco Inc. 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 including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests 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 including noncontrolling interests 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)YTD 2019 includes $6 million of accelerated depreciation related to plant closures.


(5)Costs related to cost reduction initiatives.


(6)Costs related to acquisitions and costs related to expected spin.


(7)Costs to achieve synergies related to Federal-Mogul acquisition.


(8)This primarily relates to a non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.


(9)Non-cash asset impairment charge related to goodwill.


(10)Charge due to process harmonization.


(11)Charge related to warranty. Although Tenneco regularly incurs warranty costs, this specific charge is of an unusual nature in the period incurred.


(12)Environmental charge related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.


(13)Corporate costs for each division are $43M for New Tenneco and $55M for DRiV.

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)

Unaudited

(Millions)














Q2 2019









Currency


Value-add









Impact on


Revenues





Substrate


Value-add


Value-add


excluding



Revenues


Sales


Revenues


Revenues


Currency













Clean Air

$     1,827


$       777


$      1,050


$          (31)


$      1,081


Powertrain

1,133


-


1,133


-


1,133


Motorparts

835


-


835


(8)


843


Ride Performance

709


-


709


(20)


729












Total Tenneco Inc.

$     4,504


$       777


$      3,727


$          (59)


$      3,786














Q2 2018*









Currency


Value-add









Impact on


Revenues





Substrate


Value-add


Value-add


excluding



Revenues


Sales


Revenues


Revenues


Currency













Clean Air

$     1,694


$       621


$      1,073


$           -


$      1,073


Motorparts

333


-


333


-


333


Ride Performance

506


-


506


-


506












Total Tenneco Inc.

$     2,533


$       621


$      1,912


$           -


$      1,912


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar.  Additionally, substrate 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 (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)

Unaudited

(Millions)














YTD 2019









Currency


Value-add









Impact on


Revenues





Substrate


Value-add


Value-add


excluding



Revenues


Sales


Revenues


Revenues


Currency













Clean Air

$     3,606


$    1,483


$      2,123


$          (82)


$      2,205


Powertrain

2,308


-


2,308


-


2,308


Motorparts

1,632


-


1,632


(26)


1,658


Ride Performance

1,442


-


1,442


(51)


1,493












Total Tenneco Inc.

$     8,988


$    1,483


$      7,505


$        (159)


$      7,664














YTD 2018*









Currency


Value-add









Impact on


Revenues





Substrate


Value-add


Value-add


excluding



Revenues


Sales


Revenues


Revenues


Currency













Clean Air

$     3,450


$    1,273


$      2,177


$           -


$      2,177


Motorparts

645


-


645


-


645


Ride Performance

1,019


-


1,019


-


1,019












Total Tenneco Inc.

$     5,114


$    1,273


$      3,841


$           -


$      3,841


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar.  Additionally, substrate 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 (1)REVENUE TO NON-GAAP REVENUE MEASURES

Unaudited

(Millions except percents)












Q2 2019 vs. Q2 2018 $ Change and % Change Increase (Decrease)



Revenues


% Change


Value-add
Revenues
Excluding
Currency


% Change











Clean Air

$      133


8%


$          8


1%


Powertrain

1,133


NM


1,133


NM


Motorparts

502


151%


510


153%


Ride Performance

203


40%


223


44%

Total Tenneco Inc.

$   1,971


78%


$    1,874


98%






























YTD Q2 2019 vs. YTD Q2 2018 $ Change and % Change Increase (Decrease)



Revenues


% Change


Value-add
Revenues
Excluding
Currency


% Change











Clean Air

$      156


5%


$        28


1%


Powertrain

2,308


NM


2,308


NM


Motorparts

987


153%


1,013


157%


Ride Performance

423


42%


474


47%

Total Tenneco Inc.

$   3,874


76%


$    3,823


100%


(1)U.S. Generally Accepted Accounting Principles.

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF NON-GAAP MEASURES 

Debt net of total cash / Pro Forma Adjusted LTM EBITDA including noncontrolling interests

Unaudited

(Millions except ratios)
















June 30, 2019




December 31, 2018













Total debt







$         5,678




$                 5,493













Total cash, cash equivalents and restricted cash (total cash)







390




702













Debt net of total cash balances (1)







$         5,288




$                 4,791

























Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5)







$         1,514




$                 1,627













Pro forma ratio of debt net of total cash balances to Pro forma Adjusted LTM EBITDA including noncontrolling interests (4) (5)







 3.5x 




 2.9x 


















































Q1 18*


Q2 18*


Q3 18*


Q4 18


Q1 19


Q2 19













Net income (loss) attributable to Tenneco Inc.

$   60


$   47


$   57


$          (109)


$(117)


$                      26













Net income attributable to noncontrolling interests

14


16


9


17


12


19













Net income (loss)

74


63


66


(92)


(105)


45













Income tax expense (benefit)

25


26


22


(10)


-


14













Interest expense

23


22


24


79


81


82













EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

122


111


112


(23)


(24)


141













Depreciation and amortization

60


60


60


165


169


169













Total EBITDA including noncontrolling interests (2)

$ 182


$ 171


$ 172


$           142


$ 145


$                    310













Adjustments:












Restructuring and related expenses

12


21


12


17


17


57

Cost reduction initiatives (6)

-


10


-


8


8


2

Acquisition and spin costs (7)

13


18


12


53


40


27

Warranty charge (8)

5


-


-


-


-


7

Costs to achieve synergies(9)

-


9


4


49


7


7

Purchase accounting charges (10)

-


-


-


106


41


3

Goodwill impairment charge (11)

-


-


-


3


60


-

Process harmonization (12)

-


-


-


-


9


1

Anti-dumping duty charge (13)

-


-


-


16


-


-

Environmental charge (14)

-


4


-


-


-


-

Litigation settlement accrual

-


-


10


-


-


-

Loss on debt modification (15)

-


-


-


10


-


-

Pension charges (16)

-


-


-


3


-


-













Total Adjusted EBITDA including noncontrolling interests (3)

$ 212


$ 233


$ 210


$           407


$ 327


$                    414

























Legacy Federal-Mogul Reconciliation of Non-GAAP earnings measures








Q1 18


Q2 18


Q3 18



















Net income attributable to Federal-Mogul

$   26


$   25


$   35



















Net income attributable to noncontrolling interests

3


3


1



















Net income

29


28


36



















Income tax expense

15


13


16



















Interest expense

48


52


49



















EBIT, Earnings before interest expense, income taxes and noncontrolling interests

92


93


101



















Depreciation and amortization

100


96


99



















Total EBITDA including noncontrolling interests (2)

$ 192


$ 189


$ 200



















Adjustments:












Restructuring charges and asset impairments, net 

-


-


15







Purchase price contingency

5


-


-







Transaction related costs

1


13


-







Cost to exit a multiemployer pension plan

-


5


-







Gain (loss) on sale of assets 

-


-


(65)







Charge for extinguishment of dissenting shareholders shares 

-


-


5







Other 

2


2


1



















Total Adjusted EBITDA including noncontrolling interests (3)

$ 200


$ 209


$ 156




















Q1 18*


Q2 18*


Q3 18*


Q4 18


Q1 19


Q2 19

Pro forma Adjusted EBITDA including noncontrolling interests(2) (3) (5)

$ 412


$ 442


$ 366


$           407


$ 327


$                    414

Q4 2018 Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5)







$         1,627





Q2 2019 Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5)











$                 1,514


* Financial results for the first three quarters of 2018 have been revised for certain immaterial adjustments as discussed in Tenneco's Form 10-K for the year ended December 31, 2018.


(1) Tenneco presents debt net of total 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 including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. 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 including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests 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 including noncontrolling interests 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 including noncontrolling interests 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 including noncontrolling interests have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.


(4) Tenneco presents the above reconciliation of the ratio of debt net of total cash to LTM Adjusted EBITDA including noncontrolling interests 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 and Pro Forma adjusted LTM EBITDA including noncontrolling interests is used as an indicator of the company's performance and debt net of total cash is presented as an indicator of the company's credit position and progress toward reducing the company's 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 total cash, EBITDA including noncontrolling interests and Adjusted EBITDA including noncontrolling interests. 


(5) Tenneco is providing Pro Forma Adjusted LTM EBITDA and the ratio of debt net of cash balances to Pro Forma Adjusted LTM EBITDA to show the company's Adjusted LTM EBITDA as if Federal-Mogul had been consolidated with Tenneco for the entirety of 2018 and LTM Q2 2019 (and the resultant impact on the net debt ratio).  Tenneco believes this supplemental information is useful to investors who are trying to understand the results of the entire enterprise, including Federal-Mogul, for 2018 and 2019 and the ability of the company to service its debt.


(6)Costs related to cost reduction initiatives.


(7)Costs related to acquisitions and costs related to expected spin.


(8)Charge related to warranty. Although Tenneco regularly incurs warranty costs, this specific charge is of an unusual nature in the period incurred.


(9)Costs to achieve synergies related to Federal-Mogul acquisition.


(10)This primarily relates to a non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.


(11)Non-cash asset impairment charge related to goodwill.


(12)Charge due to process harmonization.


(13)Charge due to retroactive application of anti-dumping duty on a supplier's products.


(14)Environmental charge related to an acquired site whereby an indemnification reverted back to the Company resulting from a 2009 bankruptcy filing of Mark IV Industries.


(15)Loss on debt modification.


(16)Charges related to pension derisking and the acceleration of restricted stock vesting in accordance with the long-term incentive plan.

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)

Unaudited

(Millions)


Q2 2019


Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency











Original equipment light vehicle revenues

$    2,850


$      (56)


$    2,906


$       679


$     2,227

Original equipment commercial truck, off-highway, industrial and other revenues

819


(10)


829


113


716

Aftermarket revenues

835


(8)


843


-


843

Net sales and operating revenues

$    4,504


$      (74)


$    4,578


$       792


$     3,786






















Q2 2018*


Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency











Original equipment light vehicle revenues

$    1,841


$        -


$    1,841


$       520


$     1,321

Original equipment commercial truck, off-highway, industrial and other revenues

359


-


359


101


258

Aftermarket revenues

333


-


333


-


333

Net sales and operating revenues

$    2,533


$        -


$    2,533


$       621


$     1,912
































YTD 2019


Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency











Original equipment light vehicle revenues

$    5,667


$    (145)


$    5,812


$    1,293


$     4,519

Original equipment commercial truck, off-highway, industrial and other revenues

1,689


(30)


1,719


232


1,487

Aftermarket revenues

1,632


(26)


1,658


-


1,658

Net sales and operating revenues

$    8,988


$    (201)


$    9,189


$    1,525


$     7,664






















YTD 2018*


Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency











Original equipment light vehicle revenues

$    3,734


$        -


$    3,734


$    1,063


$     2,671

Original equipment commercial truck, off-highway, industrial and other revenues

735


-


735


210


525

Aftermarket revenues

645


-


645


-


645

Net sales and operating revenues

$    5,114


$        -


$    5,114


$    1,273


$     3,841


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar.  Additionally, substrate 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 (1)REVENUE AND EARNINGS TO NON-GAAP REVENUE AND EARNINGS MEASURES(2)

Unaudited

(Millions except percents)






























Q2 2019


Global Segments






Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total

Net sales and operating revenues

$   1,827


$      1,133


$           835


$           709


$    4,504


$         -


$ 4,504















Less: Substrate sales

777


-


-


-


777


-


777















Value-add revenues

$   1,050


$      1,133


$           835


$           709


$    3,727


$         -


$ 3,727















 EBITDA

$     152


$         100


$           110


$             26


$       388


$        (78)


$    310















 EBITDA as a % of revenue

8.3%


8.8%


13.2%


3.7%


8.6%




6.9%

 EBITDA as a % of value-add revenue

14.5%


8.8%


13.2%


3.7%


10.4%




8.3%















 Adjusted EBITDA

$     168


$         118


$           126


$             50


$       462


$        (48)


$    414















 Adjusted EBITDA as a % of revenue

9.2%


10.4%


15.1%


7.1%


10.3%




9.2%

 Adjusted EBITDA as a % of value-add revenue

16.0%


10.4%


15.1%


7.1%


12.4%




11.1%






























Q2 2018*




Global Segments








Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total



Net sales and operating revenues

$   1,694


$         333


$           506


$         2,533


$         -


$    2,533

















Less: Substrate sales

621


-


-


621


-


621

















Value-add revenues

$   1,073


$         333


$           506


$         1,912


$         -


$    1,912

















 EBITDA

$     142


$           55


$             20


$           217


$        (46)


$       171

















 EBITDA as a % of revenue

8.4%


16.5%


4.0%


8.6%




6.8%



 EBITDA as a % of value-add revenue

13.2%


16.5%


4.0%


11.3%




8.9%

















 Adjusted EBITDA

$     159


$           58


$             38


$           255


$        (22)


$       233

















 Adjusted EBITDA as a % of revenue

9.4%


17.4%


7.5%


10.1%




9.2%



 Adjusted EBITDA as a % of value-add revenue

14.8%


17.4%


7.5%


13.3%




12.2%




* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2) Tenneco presents the above reconciliation of revenues in order to reflect EBITDA and adjusted EBITDA as a percent of both total revenues and value-add revenues.  Substrate 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.  Further, presenting EBITDA and adjusted EBITDA as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of such substrate sales.  

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP (1)REVENUE AND EARNINGS TO NON-GAAP REVENUE AND EARNINGS MEASURES(2)

Unaudited

(Millions except percents)






























YTD 2019


Global Segments






Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total

Net sales and operating revenues

$   3,606


$      2,308


$         1,632


$         1,442


$    8,988


$         -


$ 8,988















Less: Substrate sales

1,483


-


-


-


1,483


-


1,483















Value-add revenues

$   2,123


$      2,308


$         1,632


$         1,442


$    7,505


$         -


$ 7,505















 EBITDA

$     283


$         213


$           155


$            (19)


$       632


$      (177)


$    455















 EBITDA as a % of revenue

7.8%


9.2%


9.5%


-1.3%


7.0%




5.1%

 EBITDA as a % of value-add revenue

13.3%


9.2%


9.5%


-1.3%


8.4%




6.1%















 Adjusted EBITDA

$     308


$         234


$           216


$             81


$       839


$        (98)


$    741















 Adjusted EBITDA as a % of revenue

8.5%


10.1%


13.2%


5.6%


9.3%




8.2%

 Adjusted EBITDA as a % of value-add revenue

14.5%


10.1%


13.2%


5.6%


11.2%




9.9%






























YTD 2018*




Global Segments








Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total



Net sales and operating revenues

$   3,450


$         645


$         1,019


$         5,114


$         -


$    5,114

















Less: Substrate sales

1,273


-


-


1,273


-


1,273

















Value-add revenues

$   2,177


$         645


$         1,019


$         3,841


$         -


$    3,841

















 EBITDA

$     299


$         100


$             44


$           443


$        (90)


$       353

















 EBITDA as a % of revenue

8.7%


15.5%


4.3%


8.7%




6.9%



 EBITDA as a % of value-add revenue

13.7%


15.5%


4.3%


11.5%




9.2%

















 Adjusted EBITDA

$     317


$         105


$             76


$           498


$        (53)


$       445

















 Adjusted EBITDA as a % of revenue

9.2%


16.3%


7.5%


9.7%




8.7%



 Adjusted EBITDA as a % of value-add revenue

14.6%


16.3%


7.5%


13.0%




11.6%




* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended June 30, 2019.


(1)U.S. Generally Accepted Accounting Principles.


(2) Tenneco presents the above reconciliation of revenues in order to reflect EBITDA and adjusted EBITDA as a percent of both total revenues and value-add revenues.  Substrate 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.  Further, presenting EBITDA and adjusted EBITDA as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of such substrate sales.  

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP(1)REVENUE TO NON-GAAP REVENUE MEASURES(2)- Original equipment commercial truck, off-highway, industrial and other revenues

Unaudited

(Millions)






















2019



Q1


Q2


YTD





Substrate


Value-add




Substrate


Value-add




Substrate


Value-add



Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Clean Air

$     319


$     115


$     204


$     300


$     110


$     190


$        619


$   225


$     394





















Powertrain

426


-


426


401


-


401


827


-


827





















Ride Performance

125


-


125


118


-


118


243


-


243




















Total Tenneco Inc.

$     870


$     115


$     755


$     819


$     110


$     709


$     1,689


$   225


$  1,464






















2018



Q1


Q2


YTD





Substrate


Value-add




Substrate


Value-add




Substrate


Value-add



Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Clean Air

$     307


$     109


$     198


$     290


$     101


$     189


$        597


$   210


$     387





















Ride Performance

69


-


69


69


-


69


138


-


138




















Total Tenneco Inc.

$     376


$     109


$     267


$     359


$     101


$     258


$        735


$   210


$     525


(1)U.S. Generally Accepted Accounting Principles.


(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from substrate sales which 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(1) REVENUE TO PRO FORMA(2) REVENUE AND NON-GAAP EARNINGS MEASURES - 2018 Quarterly

Unaudited

(Millions except percents)
























Q1 2018
























Pro forma New Tenneco


Pro forma DRiV







Clean Air


Powertrain


Corporate -
New
Tenneco


New
Tenneco


Motorparts


Ride
Performance


Corporate -
DRiV


DRiV


Other/Elim


Total Pro
forma
Tenneco






















Net sales and operating revenues

$   1,756


$      1,260


$           -


$  3,016


$        903


$         761


$           -


$  1,664


$          -


$    4,680

Less: Substrate sales

652


-


-


652


-


-


-


-


-


652

Value-add revenues (3)

1,104


1,260


-


2,364


903


761


-


1,664


-


4,028






















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

119


60


-


179


96


(18)


-


78


(51)


206

Depreciation and amortization

37


61


-


98


24


38


-


62


-


160

Total EBITDA including noncontrolling interests(4)

156


121


-


277


120


20


-


140


(51)


366

Financing charges on sale of receivables reclass

1


1


1


3


5


-


-


5


-


8

Segment change impact

2


12


(16)


(2)


(19)


17


(32)


(34)


36


-

Total EBITDA including noncontrolling interests after reclass and segment change(4)

159


134


(15)


278


106


37


(32)


111


(15)


374






















Adjustments:





















Restructuring and related expenses

1


-


-


1


2


7


-


9


-


10


Cost reduction initiatives

-


-


-


-


-


2


-


2


-


2


Acquisition and spin costs

-


-


-


-


-


-


-


-


13


13


Warranty charge

-


-


-


-


-


5


-


5


-


5


Purchase price contingency

-


5


-


5


-


-


-


-


-


5


Transaction related costs

-


-


-


-


-


-


-


-


1


1


Other

-


1


-


1


-


-


-


-


1


2






















Adjusted EBITDA(5)

$      160


$        140


$          (15)


$     285


$        108


$           51


$          (32)


$     127


$            -


$      412






















Adjusted EBITDA as a percent of value-add revenue(6)

14.5%


11.1%




12.1%


12.0%


6.7%




7.6%




10.2%
























Q2 2018
























Pro forma New Tenneco


Pro forma DRiV







Clean Air


Powertrain


Corporate -
New
Tenneco


New
Tenneco


Motorparts


Ride
Performance


Corporate -
DRiV


DRiV


Other/Elim


Total Pro
forma
Tenneco






















Net sales and operating revenues

$   1,694


$      1,243


$           -


$  2,937


$        930


$         753


$           -


$  1,683


$          -


$    4,620

Less: Substrate sales

621


-


-


621


-


-


-


-


-


621

Value-add revenues (3)

1,073


1,243


-


2,316


930


753


-


1,683


-


3,999






















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

103


70


-


173


109


(19)


-


90


(65)


198

Depreciation and amortization

39


61


-


100


21


34


-


55


1


156

Total EBITDA including noncontrolling interests(4)

142


131


-


273


130


15


-


145


(64)


354

Financing charges on sale of receivables reclass

-


-


1


1


5


-


-


5


-


6

Segment change impact

3


13


(16)


-


(17)


14


(24)


(27)


27


-

Total EBITDA including noncontrolling interests after reclass and segment change(4)

145


144


(15)


274


118


29


(24)


123


(37)


360






















Adjustments:





















Restructuring and related expenses

11


1


-


12


1


10


-


11


-


23


Cost reduction initiatives

-


-


-


-


-


8


-


8


-


8


Acquisition and spin costs

-


-


-


-


-


-


-


-


18


18


Costs to achieve synergies

6


-


-


6


1


-


-


1


2


9


Environmental charge

-


-


-


-


-


-


-


-


4


4


Transaction related costs

-


-


-


-


-


-


-


-


13


13


Cost to exit a multiemployer pension plan

-


5


-


5


-


-


-


-


-


5


Other

-


(2)


-


(2)


5


(1)


-


4


-


2






















Adjusted EBITDA(5)

$      162


$        148


$          (15)


$     295


$        125


$           46


$          (24)


$     147


$            -


$      442






















Adjusted EBITDA as a percent of value-add revenue(6)

15.1%


11.9%




12.7%


13.4%


6.1%




8.7%




11.1%
























Q3 2018
























Pro forma New Tenneco


Pro forma DRiV







Clean Air


Powertrain


Corporate -
New
Tenneco


New
Tenneco


Motorparts


Ride
Performance


Corporate -
DRiV


DRiV


Other/Elim


Total Pro
forma
Tenneco






















Net sales and operating revenues

$   1,602


$      1,122


$           -


$  2,724


$        867


$         690


$           -


$  1,557


$          -


$    4,281

Less: Substrate sales

596


-


-


596


-


-


-


-


-


596

Value-add revenues (3)

1,006


1,122


-


2,128


867


690


-


1,557


-


3,685






















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

105


21


-


126


102


28


-


130


(51)


205

Depreciation and amortization

38


62


-


100


22


35


-


57


2


159

Total EBITDA including noncontrolling interests(4)

143


83


-


226


124


63


-


187


(49)


364

Financing charges on sale of receivables reclass

1


1


1


3


5


-


-


5


-


8

Segment change impact

4


13


(18)


(1)


(16)


16


(28)


(28)


29


-

Total EBITDA including noncontrolling interests after reclass and segment change(4)

148


97


(17)


228


113


79


(28)


164


(20)


372






















Adjustments:





















Restructuring and related expenses

1


8


-


9


8


10


-


18


-


27


Acquisition and spin costs

-


-


-


-


-


-


-


-


12


12


Costs to achieve synergies

-


-


-


-


-


1


-


1


3


4


Litigation settlement accrual

-


-


-


-


-


9


-


9


1


10


Gain (loss) on sale of assets

-


-


-


-


-


(65)


-


(65)


-


(65)


Charge for extinguishment of dissenting shareholders shares

-


-


-


-


-


-


-


-


5


5


Other

-


4


-


4


(3)


1


-


(2)


(1)


1






















Adjusted EBITDA(5)

$      149


$        109


$          (17)


$     241


$        118


$           35


$          (28)


$     125


$            -


$      366






















Adjusted EBITDA as a percent of value-add revenue(6)

14.8%


9.7%




11.3%


13.6%


5.1%




8.0%




9.9%
























Q4 2018
























Pro forma New Tenneco


Pro forma DRiV







Clean Air


Powertrain


Corporate -
New
Tenneco


New
Tenneco


Motorparts


Ride
Performance


Corporate -
DRiV


DRiV


Other/Elim


Total Pro
forma
Tenneco






















Net sales and operating revenues

$   1,655


$      1,112


$           -


$  2,767


$        827


$         684


$           -


$  1,511


$          -


$    4,278

Less: Substrate sales

631


-


-


631


-


-


-


-


-


631

Value-add revenues (3)

1,024


1,112


-


2,136


827


684


-


1,511


-


3,647






















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

116


33


-


149


(31)


(47)


-


(78)


(102)


(31)

Depreciation and amortization

40


59


-


99


29


37


-


66


-


165

Total EBITDA including noncontrolling interests(4)

156


92


-


248


(2)


(10)


-


(12)


(102)


134

Financing charges on sale of receivables reclass

-


-


1


1


6


1


-


7


-


8

Segment change impact

3


1


(4)


-


(17)


12


(19)


(24)


24


-

Total EBITDA including noncontrolling interests after reclass and segment change(4)

159


93


(3)


249


(13)


3


(19)


(29)


(78)


142






















Adjustments:





















Restructuring and related expenses

(2)


(2)


-


(4)


2


19


-


21


-


17


Cost reduction initiatives

-


-


-


-


-


-


-


-


8


8


Acquisition and spin costs

-


-


-


-


-


-


-


-


53


53


Costs to achieve synergies

(3)


-


-


(3)


35


10


-


45


7


49


Purchase accounting adjustments

-


44


-


44


57


5


-


62


-


106


Anti-dumping duty charge

-


-


-


-


16


-


-


16


-


16


Loss on debt modification

-


-


-


-


-


-


-


-


10


10


Pension charges / Stock vesting

-


-


-


-


-


3


-


3


-


3


Goodwill impairment charge

-


-


-


-


-


3


-


3


-


3






















Adjusted EBITDA(5)

$      154


$        135


$           (3)


$     286


$          97


$           43


$          (19)


$     121


$            -


$      407






















Adjusted EBITDA as a percent of value-add revenue(6)

15.0%


12.1%




13.4%


11.7%


6.3%




8.0%




11.2%


(1)U.S. Generally Accepted Accounting Principles.


(2)   Tenneco presents pro forma revenues and earnings measures to show what the company's performance would have been had Federal-Mogul been consolidated with Tenneco for each quarter of 2018.  We believe this supplemental information is useful to investors who are trying to understand the results of the entire enterprise, including Federal-Mogul.   The Motorparts segment reflects the company's historical Aftermarket segment plus the Motorparts aftermarket business acquired in the Federal-Mogul acquisition.  The Ride Performance segment reflects the company's historical Ride Performance segment plus the Motorparts OE business acquired in the Federal-Mogul acquisition.


(3)  Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from substrate sales.  Substrate 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. 


(4)   EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  We have also presented  EBITDA including noncontrolling interests to give effect to the reclassification of financing charges on sale of receivables that took place in the first quarter 2019 and to give effective to the impact of the segment changes that occurred in the first quarter of 2019. EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. 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 including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests 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 including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


(5)"Adjusted EBITDA" is EBITDA including noncontrolling interests (after giving effect to the reclassification and segment change described above) and 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 including noncontrolling interests 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.


(6)  Tenneco presents the above reconciliation in order to reflect Adjusted EBITDA as a percent of both value-add revenues.  Presenting Adjusted EBITDA as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of substrate sales, which can be volatile.  

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP(1) REVENUE TO PRO FORMA(2) REVENUE AND NON-GAAP EARNINGS MEASURES - 2018 and 2017 Annual

Unaudited

(Millions except percents)
























FY 2018
























Pro forma New Tenneco


Pro forma DRiV







Clean Air


Powertrain


Corporate -
New
Tenneco


New
Tenneco


Motorparts


Ride
Performance


Corporate -
DRiV


DRiV


Other/Elim


Total Pro
forma
Tenneco






















Net sales and operating revenues

$   6,707


$      4,737


$           -


$  11,444


$      3,527


$       2,888


$           -


$   6,415


$          -


$  17,859

Less: Substrate sales

2,500


-


-


2,500


-


-


-


-


-


2,500

Value-add revenues (3)

4,207


4,737


-


8,944


3,527


2,888


-


6,415


-


15,359






















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

443


184


-


627


276


(56)


-


220


(269)


578

Depreciation and amortization

154


243


-


397


96


144


-


240


3


640

Total EBITDA including noncontrolling interests(4)

597


427


-


1,024


372


88


-


460


(266)


1,218

Financing charges on sale of receivables reclass

2


2


4


8


21


1


-


22


-


30

Segment change impact

12


39


(54)


(3)


(69)


59


(103)


(113)


116


-

Total EBITDA including noncontrolling interests after reclass and segment change(4)

611


468


(50)


1,029


324


148


(103)


369


(150)


1,248






















Adjustments:





















Restructuring and related expenses

11


7


-


18


13


46


-


59


-


77


Cost reduction initiatives

-


-


-


-


-


10


-


10


8


18


Acquisition and spin costs

-


-


-


-


-


-


-


-


96


96


Costs to achieve synergies

3


-


-


3


36


11


-


47


12


62


Purchase accounting adjustments

-


44


-


44


57


5


-


62


-


106


Anti-dumping duty charge

-


-


-


-


16


-


-


16


-


16


Environmental charge

-


-


-


-


-


-


-


-


4


4


Warranty charge

-


-


-


-


-


5


-


5


-


5


Litigation settlement accrual

-


-


-


-


-


9


-


9


1


10


Loss on debt modification

-


-


-


-


-


-


-


-


10


10


Pension charges / Stock vesting

-


-


-


-


-


3


-


3


-


3


Goodwill impairment charge

-


-


-


-


-


3


-


3


-


3


Purchase price contingency

-


5


-


5


-


-


-


-


-


5


Transaction related costs

-


-


-


-


-


-


-


-


14


14


Cost to exit a multiemployer pension plan

-


5


-


5


-


-


-


-


-


5


Gain (loss) on sale of assets

-


-


-


-


-


(65)


-


(65)


-


(65)


Charge for extinguishment of dissenting shareholders shares

-


-


-


-


-


-


-


-


5


5


Other

-


3


-


3


2


-


-


2


-


5






















Adjusted EBITDA(5)

$      625


$        532


$          (50)


$    1,107


$        448


$         175


$        (103)


$     520


$            -


$    1,627






















Adjusted EBITDA as a percent of value-add revenue(6)

14.9%


11.2%




12.4%


12.7%


6.1%




8.1%




10.6%
























FY 2017
























Pro forma New Tenneco


Pro forma DRiV







Clean Air


Powertrain


Corporate -
New
Tenneco


New
Tenneco


Motorparts


Ride
Performance


Corporate -
DRiV


DRiV


Other/Elim


Total Pro
forma
Tenneco






















Net sales and operating revenues

$   6,216


$      4,573


$           -


$  10,789


$      3,678


$       2,686


$           -


$   6,364


$          -


$  17,153

Less: Substrate sales

2,187


-


-


2,187


-


-


-


-


-


2,187

Value-add revenues (3)

4,029


4,573


-


8,602


3,678


2,686


-


6,364


-


14,966






















EBIT, Earnings (Loss) before interest expense, income taxes and noncontrolling interests

420


234


-


654


394


(42)


-


352


(272)


734

Depreciation and amortization

142


254


-


396


92


132


-


224


4


624

Total EBITDA including noncontrolling interests(4)

562


488


-


1,050


486


90


-


576


(268)


1,358

Financing charges on sale of receivables reclass

2


2


-


4


16


1


-


17


-


21

Segment change impact

7


54


(71)


(10)


(67)


75


(114)


(106)


116


-

Total EBITDA including noncontrolling interests after reclass and segment change(4)

571


544


(71)


1,044


435


166


(114)


487


(152)


1,379






















Adjustments:





















Restructuring and related expenses

23


16


-


39


21


23


-


44


1


84


Cost reduction initiatives

4


-


-


4


3


12


-


15


3


22


Loss on debt modification

-


-


-


-


-


-


-


-


5


5


Pension charges / Stock vesting

-


-


-


-


-


-


-


-


13


13


Goodwill impairment charge

-


11


-


11


4


7


-


11


-


22


Warranty settlement

-


-


-


-


-


7


-


7


132


139


Gain on sale of unconsolidated JV

-


-


-


-


-


-


-


-


(5)


(5)


Gain from termination of customer contract

-


-


-


-


-


(6)


-


(6)


-


(6)


Warranty release

-


-


-


-


(4)


-


-


(4)


-


(4)


Release of deferred purchase price payment

-


-


-


-


-


(3)


-


(3)


-


(3)


EBITDA contribution of pending asset sales

-


(2)


-


(2)


-


-


-


-


-


(2)


Transaction related costs

-


3


-


3


1


-


-


1


3


7


Gain (loss) on sale of business

-


(3)


-


(3)


-


-


-


-


-


(3)


Gain (loss) on sale of nonconsolidated affiliates

-


-


-


-


2


-


-


2


-


2


Gain (loss) on sale of assets

-


(6)


-


(6)


-


(1)


-


(1)


-


(7)






















Adjusted EBITDA(5)

$      598


$        563


$          (71)


$    1,090


$        462


$         205


$        (114)


$     553


$            -


$    1,643






















Adjusted EBITDA as a percent of value-add revenue(6)

14.8%


12.3%




12.7%


12.6%


7.6%




8.7%




11.0%


(1)U.S. Generally Accepted Accounting Principles.


(2)   Tenneco presents pro forma revenues and earnings measures to show what the company's performance would have been had Federal-Mogul been consolidated with Tenneco for the entirety of 2017 and 2018.  We believe this supplemental information is useful to investors who are trying to understand the results of the entire enterprise, including Federal-Mogul.   The Motorparts segment reflects the company's historical Aftermarket segment plus the Motorparts aftermarket business acquired in the Federal-Mogul acquisition.  The Ride Performance segment reflects the company's historical Ride Performance segment plus the Motorparts OE business acquired in the Federal-Mogul acquisition.


(3)  Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from substrate sales.  Substrate 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. 


(4)   EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  We have also presented  EBITDA including noncontrolling interests to give effect to the reclassification of financing charges on sale of receivables that took place in the first quarter 2019 and to give effective to the impact of the segment changes that occurred in the first quarter of 2019. EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. 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 including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests 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 including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


(5)"Adjusted EBITDA" is EBITDA including noncontrolling interests (after giving effect to the reclassification and segment change described above) and 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 including noncontrolling interests 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.


(6)  Tenneco presents the above reconciliation in order to reflect Adjusted EBITDA as a percent of both value-add revenues.  Presenting Adjusted EBITDA as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of substrate sales, which can be volatile.  

 

ATTACHMENT 2

TENNECO INC.

Division Level Q3 and FY 2019 Outlook

Unaudited




DRiV™ 2019 YOY Expectations



Q3 Outlook:


Revenue expected down ~3%(1) or around $1.5 billion


Expect adjusted EBITDA margin rate improvement of approximately 100 bps(2)

Full Year Outlook:


Revenue expected down 3% to 4%(1), or $6.0 billion to $6.1 billion


Adjusted EBITDA margin up 20 to 40 bps(2)


Capital expenditures in the range of $250 million to $260 million



New Tenneco 2019 YOY Expectations



Q3 Outlook:


VA Revenue expected (1)% to 1%(1)or around $2.1 billion


Expect VA adjusted EBITDA margin rate improvement of approximately 120 bps(2)

Full Year Outlook:


VA Revenue expected flat to (2)%(1)or $8.6 billion to $8.7 billion


VA adjusted EBITDA margin down between 40 to 60 bps (2)


Capital expenditures in the range of $470 million to $485 million


(1) Pro Forma revenue growth is measured at 2018 constant currency rates and includes FM acquisition in prior periods.

(2) Measured vs. proforma 2018

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/tenneco-reports-second-quarter-2019-results-300896703.html

SOURCE Tenneco Inc.

Copyright 2019 PR Newswire

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