MRO Magazine

Tenneco Reports Second Quarter 2015 Results


July 24, 2015
By Business Wire News

LAKE FOREST, Ill.

Tenneco Inc. (NYSE: TEN) reported second quarter net income of $78 million, or $1.26 per diluted share, compared with $81 million, or $1.32 per diluted share, in second quarter 2014. Excluding expenses for restructuring and tax adjustments, net income was $86 million, or $1.39 per diluted share.

Revenue

Tenneco reported quarterly revenue of $2.130 billion. Excluding a negative currency impact of $176 million, total revenue in the quarter rose 3% year-over-year to $2.306 billion, driven by growth in both the Clean Air and Ride Performance businesses. Excluding currency, OE light vehicle revenue improved 4% on higher volumes globally and new platform launches, and global aftermarket revenue rose 6% on strong ride performance sales in North and South America and growth with new customers. While commercial truck and off-highway customer unit demand was down about 25% versus last year, excluding currency, Tenneco’s commercial truck and off-highway revenues were down 7%, or 4% on a value-add basis, based on the launch and ramp up of significant new incremental content.

EBIT

Second quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $155 million, versus $156 million last year. Adjusted EBIT for the second quarter was $162 million. Excluding a negative currency impact of $17 million, adjusted EBIT rose to $179 million.

“Tenneco delivered another solid quarter of profitability improvement, leveraging our strong light vehicle position globally and generating strong aftermarket sales. I’m especially pleased with our performance given the currency headwinds we faced and continuing weakness in commercial truck and off-highway markets around the world,” said Gregg Sherrill, Tenneco chairman and CEO. “In addition to our light vehicle and aftermarket performance, our focus on product cost leadership and execution on our restructuring initiatives contributed to our ninth consecutive quarter of margin improvement.”

Adjusted second quarter 2015 and 2014 results:

(millions except per share amounts)   Q2 2015   Q2 2014
      Net income       Net income  
attributable to attributable to
EBITDA* EBIT Tenneco Inc. Per Share EBITDA* EBIT Tenneco Inc. Per Share
Earnings Measures $ 206 $ 155 $ 78 $ 1.26 $ 208 $ 156 $ 81 $ 1.32
 
Adjustments (reflects non-GAAP measures):
Restructuring and related expenses 7 7 6 0.10 10 10 7 0.11
Net tax adjustments 2 0.03 1 0.02
 
               
Non-GAAP earnings measures $ 213 $ 162 $ 86 $ 1.39 $ 218 $ 166 $ 89 $ 1.45
 
* EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
In addition to the items set forth above, the tables at the end of this press release reconcile GAAP to non-GAAP results.

EBIT Margin

Tenneco continued margin expansion in the quarter with year-over-year improvement in both reported and adjusted value-add EBIT margin for the company. Ride Performance adjusted EBIT as a percentage of value-add revenue rose to 11.5% from 10.7% last year on higher light vehicle volumes, strong aftermarket sales in North and South America and the benefit of our product cost leadership and restructuring activities. Clean Air adjusted EBIT as a percent of value-add revenue was 11.2% versus 11.7% a year ago, reflecting higher light vehicle volumes but impacted by lower commercial truck and off-highway volumes and costs associated with the startup of new Clean Air plants in the U.S. and Poland, as well as a major expansion of a facility in the UK to support a number of new light vehicle and commercial truck programs.

         

Q2 2015

       

Q2 2014

EBIT as a percent of revenue 7.3% 7.0%
EBIT as a percent of value-add revenue 9.5% 9.0%
 
Adjusted EBIT as a percent of revenue 7.6% 7.4%
Adjusted EBIT as a percent of value-add revenue 9.9% 9.6%

Cash

Cash generated by operations in the quarter increased to $132 million, versus $114 million a year ago, driven by strong working capital management, especially inventory improvements.

In the quarter, capital expenditures to support structural growth were $80 million versus $83 million last year.

The company repurchased 556,000 shares of common stock for $33 million in the second quarter, and year-to-date has repurchased a total of 748,000 shares for $44 million. Taking into account the company’s performance year-to-date, Tenneco now anticipates accelerating its share repurchase program and completing it by the end of 2016.

Outlook

In the third quarter, Tenneco expects growth will continue to be supported by well-established structural growth drivers:

  • Increasing global light vehicle industry production;
  • Emissions regulations which require new content to meet more stringent requirements;
  • Increased demand for MONROE® Intelligent Suspension technologies;
  • The growing global car parc, which the company serves with industry-leading aftermarket brands.

Global light vehicle industry production is expected to increase 4% in the regions where Tenneco operates. The company is well-positioned to leverage higher light vehicle volumes with its strong platform position with leading global OEMs, including launching 43 new light vehicle and commercial truck and off-highway programs.

Tenneco also expects continued content growth on commercial truck and off-highway programs to meet global emissions requirements, despite ongoing production weakness in these markets.

Increased penetration of the MONROE Intelligent Suspension system technology, including the recent launches on the Volvo XC-90 and Renault Espace is expected to further support Ride Performance growth.

The company also expects strong year-over-year sales growth from its global aftermarket business in the third quarter.

Excluding currency, Tenneco anticipates total revenue growth of about 6% in the third quarter. Based on current exchange rates, the company anticipates a currency headwind in the third quarter of approximately 7%.

Based on the most recent third party industry light vehicle production forecasts and further industry production weakness in the company’s commercial truck and off-highway business, Tenneco expects total full year revenue growth of 5%, excluding currency, within the company’s original range.

“We continue to win new business, launch new programs and ramp up incremental content, further strengthening our foundation for long term growth,” said Sherrill. “Our focus on execution, regardless of market cycles, has helped us deliver steady margin expansion, and together with our structural growth drivers, puts Tenneco in a unique position for continued profitable growth and enhanced shareholder value.”

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 Net Income to EBITDA including noncontrolling interests – 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months
Reconciliation of GAAP Net Income to EBITDA including noncontrolling interests – 6 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 Months and 6 Months
Reconciliation of Non-GAAP Measures – Debt Net of Cash/Adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue – 3 Months 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

CONFERENCE CALL

The company will host a conference call on Friday, July 24, 2015 at 8:30 a.m. ET. The dial-in number is 888-847-6590 (domestic) or 517-308-9117 (international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.tenneco.com. A recording of the call will be available one hour following completion of the call on July 24, 2015 through August 24, 2015. To access this recording, dial 800-551-8143 (domestic) or 402-220-2056 (international). The purpose of the call is to discuss the company’s operations for the quarter, as well as other matters that may impact the company’s outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.

Tenneco is an $8.4 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 29,000 employees worldwide. Tenneco is one of the world’s largest designers, manufacturers and marketers of clean air and ride performance products and systems for automotive and commercial vehicle original equipment markets and the aftermarket. Tenneco’s principal brand names are Monroe®, Walker®, XNOx™ and Clevite®Elastomer.

Revenue estimates in this release are based on OE manufacturers’ programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; Tenneco’s status as supplier for the existing program and its relationship with the customer; and the actual original equipment revenues achieved by the company for each of the last several years compared to the amount of those revenues that the company estimated it would generate at the beginning of each year. These revenue estimates are also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. For certain additional assumptions upon which these estimates are based, see the slides accompanying the July 24, 2015 webcast, which will be available on the financial section of the Tenneco website at www.tenneco.com.

This press release contains forward-looking statements. Words such as “may,” “expects,” “anticipate,” ”projects,” “will,” “outlook” and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these forward-looking statements involve risks and uncertainties, the company’s plans, actions and actual results could differ materially. Among the factors that could cause these plans, actions and results to differ materially from current expectations are:

(i) general economic, business and market conditions;

(ii) the company’s ability to source and procure needed materials, components and other products and services in accordance with customer demand and at competitive prices;

(iii) 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;

(iv) changes in capital availability or costs, including increases in the company’s costs of borrowing (i.e., interest rate increases), the amount of the company’s debt, the ability of the company to access capital markets at favorable rates, and the credit ratings of the company’s debt;

(v) changes in consumer demand, prices and the company’s ability to have our products included on top selling vehicles, including any shifts in consumer preferences to lower margin vehicles, for which we may or may not have supply arrangements;

(vi) changes in automotive and commercial vehicle manufacturers’ production rates and their actual and forecasted requirements for the company’s products such as the significant production cuts during recent years by automotive manufacturers in response to difficult economic conditions;

(vii) the overall highly competitive nature of the automobile and commercial vehicle parts industries, and any resultant inability to realize the sales represented by the company’s awarded book of business which is based on anticipated pricing and volumes over the life of the applicable program;

(viii) the loss of any of our large original equipment manufacturer (“OEM”) 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 OEMs or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;

(ix) the company’s continued success in cost reduction and cash management programs and its ability to execute restructuring and other cost reduction plans, including our current European cost reduction initiatives, and to realize anticipated benefits from these plans;

(x) economic, exchange rate and political conditions in the countries where we operate or sell our products;

(xi) workforce factors such as strikes or labor interruptions;

(xii) increases in the costs of raw materials, including the company’s ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery and other methods;

(xiii) the negative impact 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;

(xiv) the cyclical nature of the global vehicular industry, including the performance of the global aftermarket sector and longer product lives of automobile parts;

(xv) product warranty costs;

(xvi) the failure or breach of our information technology systems and the consequences that such failure or breach may have to our business;

(xvii) the company’s ability to develop and profitably commercialize new products and technologies, and the acceptance of such new products and technologies by the company’s customers and the market;

(xviii) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to authoritative generally accepted accounting principles or policies;

(xix) changes in accounting estimates and assumptions, including changes based on additional information;

(xx) the impact 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;

(xxi) natural disasters, acts of war and/or terrorism and the impact of these occurrences or acts on economic, financial, industrial and social condition, including, without limitation, with respect to supply chains and customer demand in the countries where the company operates; and

(xxii) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the company and its subsidiaries.

The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company’s SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2014.

 
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited

THREE MONTHS ENDED JUNE 30,
(Millions except per share amounts)
     
 
2015 2014
Net sales and operating revenues
Clean Air Division – Value-add revenues $ 966 $ 1,026
Clean Air Division – Substrate sales 495 515
Ride Performance Division – Value-add revenues   669     700  
$ 2,130 $ 2,241
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below) 1,764 (a) 1,851 (c)
Engineering, research and development 38 42 (c)
Selling, general and administrative 121 (a) 139 (c)
Depreciation and amortization of other intangibles   51     52  
Total costs and expenses   1,974     2,084  
 
Loss on sale of receivables (1 ) (1 )
Other income (expense)         (c)
Total other income (expense)   (1 )   (1 )
 
Earnings before interest expense, income taxes,
and noncontrolling interests
Clean Air Division 107 (a) 115 (c)
Ride Performance Division 71 (a) 70 (c)
Other   (23 )   (29 )
155 156
 
Interest expense (net of interest capitalized)   17     19  
Earnings before income taxes and noncontrolling interests 138 137
 
Income tax expense   47   (b)   46   (d)
Net income 91 91
 
Less: Net income attributable to noncontrolling interests   13     10  
Net income attributable to Tenneco Inc. $ 78   $ 81  
 
 
Weighted average common shares outstanding:
Basic   60.8     60.7  
Diluted   61.4     61.7  
 
Earnings per share of common stock:
Basic $ 1.27   $ 1.34  
Diluted $ 1.26   $ 1.32  
 
 
(a) Includes restructuring and related charges of $7 million pre-tax, $6 million after tax or $0.10 per diluted share. Of the adjustment, $6 million is recorded in cost of sales and $1 million is recorded in selling, general and administrative expenses. $1 million is recorded in the Clean Air Division and $6 million is recorded in the Ride Performance Division.
 
(b) Includes net tax adjustments of $2 million or $0.03 per diluted share for tax adjustments to prior year estimates.
 
(c) Includes restructuring and related charges of $10 million pre-tax, $7 million after tax or $0.11 per diluted share. Of the adjustment, $5 million is recorded in cost of sales, $3 million is recorded in selling, general and administrative expenses, $1 million is recorded in engineering expenses and $1 million is recorded in other income (expense). $5 million is recorded in the Clean Air Division and $5 million is recorded in the Ride Performance Division.
 
(d) Includes net tax adjustments of $1 million or $0.02 per diluted share for tax adjustments to prior year estimates.
 
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited

SIX MONTHS ENDED JUNE 30,
(Millions except per share amounts)
       
 
2015 2014
Net sales and operating revenues
Clean Air Division – Value-add revenues $ 1,907 $ 1,986
Clean Air Division – Substrate sales 959 999
Ride Performance Division – Value-add revenues   1,287     1,350  
$ 4,153 $ 4,335
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below) 3,450 (a) 3,605 (c)
Engineering, research and development 79 84 (c)
Selling, general and administrative 246 (a) 271 (c)
Depreciation and amortization of other intangibles   101     103  
Total costs and expenses   3,876     4,063  
 
Loss on sale of receivables (2 ) (2 )
Other income (expense)       (1 ) (c)
Total other income (expense)   (2 )   (3 )
 
Earnings before interest expense, income taxes,
and noncontrolling interests
Clean Air Division 198 (a) 200 (c)
Ride Performance Division 124 (a) 123 (c)
Other   (47 )   (54 )
275 269
 
Interest expense (net of interest capitalized)   33     38  
Earnings before income taxes and noncontrolling interests 242 231
 
Income tax expense   88   (b)   86   (d)
Net income 154 145
 
Less: Net income attributable to noncontrolling interests   27     18  
Net income attributable to Tenneco Inc. $ 127   $ 127  
 
 
Weighted average common shares outstanding:
Basic   60.9     60.6  
Diluted   61.5     61.6  
 
Earnings per share of common stock:
Basic $ 2.08   $ 2.10  
Diluted $ 2.06   $ 2.06  
 
 
(a) Includes restructuring and related charges of $12 million pre-tax, $10 million after tax or $0.17 per diluted share. Of the adjustment, $10 million is recorded in cost of sales and $2 million is recorded in selling, general and administrative expenses. $3 million is recorded in the Clean Air Division and $9 million is recorded in the Ride Performance Division.
 
(b) Includes net adjustments of $3 million or $0.04 per diluted share for tax adjustments to prior year estimates.
 
(c) Includes restructuring and related charges of $20 million pre-tax, $17 million after tax or $0.28 per diluted share. Of the adjustment, $15 million is recorded in cost of sales, $3 million is recorded in selling, general and administrative expenses, $1 million is recorded in engineering expenses and $1 million is recorded in other income (expense). $13 million is recorded in the Clean Air Division and $7 million is recorded in the Ride Performance Division.
 
(d) Includes net tax adjustments of $1 million or $0.02 per diluted share for tax adjustments to prior year estimates.
 
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
           
June 30, 2015 December 31, 2014
 
Assets
 
Cash and cash equivalents $ 250 $ 282
 
Restricted cash 2 3
 
Receivables, net 1,285 (a) 1,088 (a)
 
Inventories 713 688
 
Other current assets 356 365
 
Investments and other assets 362 (c) 352 (c)
 
Plant, property, and equipment, net   1,233   1,218
 
Total assets $ 4,201 $ 3,996
 
 
 
 
Liabilities and Shareholders’ Equity
 
Short-term debt $ 127 $ 60
 
Accounts payable 1,391 1,372
 
Accrued taxes 61 40
 
Accrued interest 4 3
 
Other current liabilities 343 324
 
Long-term debt 1,103 (b) (c) 1,055 (b) (c)
 
Deferred income taxes 20 18
 
Deferred credits and other liabilities 531 551
 
Redeemable noncontrolling interests 30 35
 
Tenneco Inc. shareholders’ equity 550 497
 
Noncontrolling interests   41   41
 
Total liabilities, redeemable noncontrolling interests
and shareholders’ equity $ 4,201 $ 3,996
 
 
 
June 30, 2015 December 31, 2014
(a) Accounts Receivables net of:
Europe – Accounts receivables securitization programs $ 187 $ 153
 
June 30, 2015 December 31, 2014
(b) Long term debt composed of:
Borrowings against revolving credit facilities $ 67 $
Term loan A (Due 2019) 293 300
6.875% senior notes (Due 2020) 500 500
5.375% senior notes (Due 2024) 225 225
Other long term debt 18 30
   
$ 1,103 $ 1,055
 
(c) In April 2015, the FASB issued Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. Tenneco adopted this standard for the first quarter of 2015 and applied retrospectively. The balance for unamortized debt issuance costs was $13 million and $14 million at June 30, 2015 and December 31, 2014, respectively.
 
ATTACHMENT 1
Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
         
 
 
Three Months Ended
June 30,
20152014
 
Operating activities:
Net income $ 91 $ 91
Adjustments to reconcile net income
to net cash provided by operating activities –
Depreciation and amortization of other intangibles 51 52
Stock-based compensation 3 3
Deferred income taxes (7 ) (3 )
Loss on sale of assets 1 1
Changes in components of working capital-
(Inc.)/dec. in receivables (26 ) (69 )
(Inc.)/dec. in inventories 13 (23 )
(Inc.)/dec. in prepayments and other current assets 4 (14 )
Inc./(dec.) in payables (14 ) 73
Inc./(dec.) in accrued taxes 10 (5 )
Inc./(dec.) in accrued interest (12 ) (4 )
Inc./(dec.) in other current liabilities 20 11
Changes in long-term assets (1 )
Changes in long-term liabilities 1 3
Other   (2 )   (2 )
Net cash provided by operating activities 132 114
 
Investing activities:
Proceeds from sale of assets 1
Cash payments for plant, property & equipment (73 ) (84 )
Cash payments for software-related intangible assets (3 ) (2 )
Change in restricted cash   (2 )   1  
Net cash used by investing activities   (77 )   (85 )
 
Financing activities:
Issuance of common shares 5 1
Purchase of common stock under the share repurchase program (33 )
Tax benefit from stock-based compensation 3 5
Issuance of long-term debt 45
Debt issuance costs on long-term debt (1 )
Retirement of long-term debt (17 ) (7 )
Net inc./(dec.) in bank overdrafts (3 ) (5 )

Net inc./(dec.) in revolver borrowings and short-term debt excluding current maturities on

long-term debt and short-term borrowings secured by accounts receivable

(26 ) (30 )
Net inc./(dec.) in short-term debt secured by accounts receivable (30 )
Capital contribution from noncontrolling interest partner 4
Distribution to noncontrolling interest partners   (22 )   (23 )
Net cash used by financing activities   (94 )   (40 )
 

Effect of foreign exchange rate changes on cash and cash equivalents

  1     4  
 
Decrease in cash and cash equivalents (38 ) (7 )
Cash and cash equivalents, April 1   288     267  
Cash and cash equivalents, June 30 $ 250   $ 260  
 
Supplemental Cash Flow Information
Cash paid during the period for interest (net of interest capitalized) $ 29 $ 24
Cash paid during the period for income taxes (net of refunds) 35 53
 
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment $ 41 $ 39
 

ATTACHMENT 1

Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
         
 
 
Six Months Ended
June 30,
20152014
 
Operating activities:
Net income $ 154 $ 145
Adjustments to reconcile net income
to net cash provided (used) by operating activities –
Depreciation and amortization of other intangibles 101 103
Stock-based compensation 9 8
Deferred income taxes (13 ) (1 )
Loss on sale of assets 1 2
Changes in components of working capital-
(Inc.)/dec. in receivables (220 ) (303 )
(Inc.)/dec. in inventories (46 ) (104 )
(Inc.)/dec. in prepayments and other current assets (3 ) (52 )
Inc./(dec.) in payables 63 160
Inc./(dec.) in accrued taxes 22
Inc./(dec.) in accrued interest 1
Inc./(dec.) in other current liabilities 18 24
Changes in long-term assets 1 1
Changes in long-term liabilities (2 ) (10 )
Other   (4 )   1  
Net cash provided (used) by operating activities 82 (26 )
 
Investing activities:
Proceeds from sale of assets 2
Cash payments for plant, property & equipment (150 ) (167 )
Cash payments for software-related intangible assets (8 ) (9 )
Change in restricted cash   1      
Net cash used by investing activities   (155 )   (176 )
 
Financing activities:
Issuance (Repurchase) of common shares 5 (1 )
Purchase of common stock under the share repurchase program (44 )
Tax benefit from stock-based compensation 6 17
Issuance of long-term debt 45
Debt issuance costs on long-term debt (1 )
Retirement of long-term debt (21 ) (10 )
Net inc./(dec.) in bank overdrafts (11 ) (1 )

Net inc./(dec.) in revolver borrowings and short-term debt excluding current maturities on

long-term debt and short-term borrowings secured by accounts receivable

85 167
Net inc./(dec.) in short-term debt secured by accounts receivable 50 (10 )
Capital contribution from noncontrolling interest partner 5
Distribution to noncontrolling interest partners   (22 )   (23 )
Net cash provided by financing activities   47     189  
 

Effect of foreign exchange rate changes on cash and cash equivalents

  (6 )   (2 )
 
Decrease in cash and cash equivalents (32 ) (15 )
Cash and cash equivalents, January 1   282     275  
Cash and cash equivalents, June 30 $ 250   $ 260  
 
Supplemental Cash Flow Information
Cash paid during the period for interest (net of interest capitalized) $ 33 $ 38
Cash paid during the period for income taxes (net of refunds) 35 74
 
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment $ 41 $ 39
 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA INCLUDING NONCONTROLLING INTERESTS (2)

Unaudited

(Millions)
                     
 
Q2 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 78
 
Net income attributable to noncontrolling interests   13
 
Net income 91
 
Income tax expense 47
 
Interest expense (net of interest capitalized)   17
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 67 $ 12 $ 28 $ 107 $ 51 $ 12 $ 8 $ 71 $ (23 ) 155
 
Depreciation and amortization of other intangibles   17   10   6   33   9   7   2   18       51
 
Total EBITDA including noncontrolling interests (2) $ 84 $ 22 $ 34 $ 140 $ 60 $ 19 $ 10 $ 89 $ (23 ) $ 206
 
 
Q2 2014
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 81
 
Net income attributable to noncontrolling interests   10
 
Net income 91
 
Income tax expense 46
 
Interest expense (net of interest capitalized)   19
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 74 $ 18 $ 23 $ 115 $ 48 $ 14 $ 8 $ 70 $ (29 ) 156
 
Depreciation and amortization of other intangibles   17   11   5   33   8   9   2   19       52
 
Total EBITDA including noncontrolling interests (2) $ 91 $ 29 $ 28 $ 148 $ 56 $ 23 $ 10 $ 89 $ (29 ) $ 208
 
 
 
(1) Generally Accepted Accounting Principles
 
(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 generally accepted accounting principles. 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.
 
 
 

ATTACHMENT 2

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

Unaudited

(Millions except per share amounts)
 
 
Q2 2015 Q2 2014
EBITDA (3) EBIT

Net income
attributable
to Tenneco
Inc.

Per Share EBITDA (3) EBIT

Net income
attributable
to Tenneco
Inc.

Per Share
Earnings Measures $ 206 $ 155 $ 78 $ 1.26 $ 208 $ 156 $ 81 $ 1.32
 
Adjustments (reflect non-GAAP measures):
Restructuring and related expenses 7 7 6 0.10 10 10 7 0.11
Net tax adjustments 2 0.03 1 0.02
               
Non-GAAP earnings measures $ 213 $ 162 $ 86 $ 1.39 $ 218 $ 166 $ 89   $ 1.45
 
 
Q2 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 67 $ 12 $ 28 $ 107 $ 51 $ 12 $ 8 $ 71 $ (23 ) $ 155
Restructuring and related expenses     1     1   1   4   1   6       7
Adjusted EBIT $ 67 $ 13 $ 28 $ 108 $ 52 $ 16 $ 9 $ 77 $ (23 ) $ 162
 
 
Q2 2014
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 74 $ 18 $ 23 $ 115 $ 48 $ 14 $ 8 $ 70 $ (29 ) $ 156
Restructuring and related expenses     1   4   5     4   1   5       10
Adjusted EBIT $ 74 $ 19 $ 27 $ 120 $ 48 $ 18 $ 9 $ 75 $ (29 ) $ 166
 
 
(1) 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 generally accepted accounting principles. 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.
 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF GAAP(1) NET INCOME TO EBITDA INCLUDING NONCONTROLLING INTERESTS (2)

Unaudited

(Millions)
                     
 
YTD 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 127
 
Net income attributable to noncontrolling interests   27
 
Net income 154
 
Income tax expense 88
 
Interest expense (net of interest capitalized)   33
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 121 $ 22 $ 55 $ 198 $ 86 $ 20 $ 18 $ 124 $ (47 ) 275
 
Depreciation and amortization of other intangibles   34   20   12   66   17   15   3   35       101
 
Total EBITDA including noncontrolling interests (2) $ 155 $ 42 $ 67 $ 264 $ 103 $ 35 $ 21 $ 159 $ (47 ) $ 376
 
 
YTD 2014
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 127
 
Net income attributable to noncontrolling interests   18
 
Net income 145
 
Income tax expense 86
 
Interest expense (net of interest capitalized)   38
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 130 $ 27 $ 43 $ 200 $ 78 $ 30 $ 15 $ 123 $ (54 ) 269
 
Depreciation and amortization of other intangibles   33   23   10   66   16   18   3   37       103
 
Total EBITDA including noncontrolling interests (2) $ 163 $ 50 $ 53 $ 266 $ 94 $ 48 $ 18 $ 160 $ (54 ) $ 372
 
 
 
(1) Generally Accepted Accounting Principles
 
(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 generally accepted accounting principles. 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.
 
 
 

ATTACHMENT 2

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

Unaudited

(Millions except per share amounts)
 
 
YTD 2015 YTD 2014
EBITDA (3) EBIT

Net income
attributable
to Tenneco
Inc.

Per Share EBITDA (3) EBIT

Net income
attributable
to Tenneco
Inc.

Per Share
Earnings Measures $ 376 $ 275 $ 127 $ 2.06 $ 372 $ 269 $ 127 $ 2.06
 
Adjustments (reflect non-GAAP measures):
Restructuring and related expenses 12 12 10 0.17 20 20 17 0.28
Net tax adjustments 3 0.04 1 0.02
               
Non-GAAP earnings measures $ 388 $ 287 $ 140 $ 2.27 $ 392 $ 289 $ 145   $ 2.36
 
 
YTD 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 121 $ 22 $ 55 $ 198 $ 86 $ 20 $ 18 $ 124 $ (47 ) $ 275
Restructuring and related expenses     2   1   3   1   7   1   9       12
Adjusted EBIT $ 121 $ 24 $ 56 $ 201 $ 87 $ 27 $ 19 $ 133 $ (47 ) $ 287
 
 
YTD 2014
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 130 $ 27 $ 43 $ 200 $ 78 $ 30 $ 15 $ 123 $ (54 ) $ 269
Restructuring and related expenses     9   4   13     6   1   7       20
Adjusted EBIT $ 130 $ 36 $ 47 $ 213 $ 78 $ 36 $ 16 $ 130 $ (54 ) $ 289
 
 
(1) 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 generally accepted accounting principles. 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.
 

ATTACHMENT 2

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

Unaudited

(Millions)
             
Q2 2015
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 746 $ 269 $ 477 $ (2 ) $ 479
Europe, South America & India 471 170 301 (68 ) 369
Asia Pacific   244   56   188   (3 )   191
Total Clean Air Division 1,461 495 966 (73 ) 1,039
 
Ride Performance Division
North America 360 360 (7 ) 367
Europe, South America & India 252 252 (57 ) 309
Asia Pacific   57     57   (2 )   59
Total Ride Performance Division 669 669 (66 ) 735
 
Total Tenneco Inc. $ 2,130 $ 495 $ 1,635 $ (139 ) $ 1,774
 
Q2 2014
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 755 $ 285 $ 470

$

$ 470
Europe, South America & India 523 174 349 349
Asia Pacific   263   56   207       207
Total Clean Air Division 1,541 515 1,026 1,026
 
Ride Performance Division
North America 364 364 364
Europe, South America & India 280 280 280
Asia Pacific   56     56       56
Total Ride Performance Division 700 700 700
 
Total Tenneco Inc. $ 2,241 $ 515 $ 1,726 $   $ 1,726
 
 
(1) 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 2015
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 1,430 $ 509 $ 921 $ (3 ) $ 924
Europe, South America & India 928 334 594 (132 ) 726
Asia Pacific   508   116   392   (8 )   400
Total Clean Air Division 2,866 959 1,907 (143 ) 2,050
 
Ride Performance Division
North America 691 691 (12 ) 703
Europe, South America & India 482 482 (103 ) 585
Asia Pacific   114     114   (5 )   119
Total Ride Performance Division 1,287 1,287 (120 ) 1,407
 
Total Tenneco Inc. $ 4,153 $ 959 $ 3,194 $ (263 ) $ 3,457
 
YTD 2014
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 1,453 $ 549 $ 904

$

$ 904
Europe, South America & India 1,029 346 683

 

683
Asia Pacific   503   104   399       399
Total Clean Air Division 2,985 999 1,986 1,986
 
Ride Performance Division
North America 699 699 699
Europe, South America & India 543 543 543
Asia Pacific   108     108       108
Total Ride Performance Division 1,350 1,350 1,350
 
Total Tenneco Inc. $ 4,335 $ 999 $ 3,336 $   $ 3,336
 
 
(1) 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 REVENUE TO NON-GAAP REVENUE MEASURES

Unaudited

(Millions except percents)
             
Q2 2015 vs. Q2 2014 $ Change and % Change Increase (Decrease)
Value-add Revenues
Excluding
Revenues % Change Currency % Change
Clean Air Division
North America $ (9 ) (1 %) $ 9 2 %
Europe, South America & India (52 ) (10 %) 20 6 %
Asia Pacific   (19 ) (7 %)   (16 ) (8 %)
Total Clean Air Division (80 ) (5 %) 13 1 %
 
Ride Performance Division
North America (4 ) (1 %) 3 1 %
Europe, South America & India (28 ) (10 %) 29 10 %
Asia Pacific   1   2 %   3   5 %
Total Ride Performance Division (31 ) (4 %) 35 5 %
 
Total Tenneco Inc. $ (111 ) (5 %) $ 48 3 %
 
 
 
YTD Q2 2015 vs. YTD Q2 2014 $ Change and % Change Increase (Decrease)
Value-add Revenues
Excluding
Revenues % Change Currency % Change
Clean Air Division
North America $ (23 ) (2 %) $ 20 2 %
Europe, South America & India (101 ) (10 %) 43 6 %
Asia Pacific   5   1 %   1   0 %
Total Clean Air Division (119 ) (4 %) 64 3 %
 
Ride Performance Division
North America (8 ) (1 %) 4 1 %
Europe, South America & India (61 ) (11 %) 42 8 %
Asia Pacific   6   6 %   11   10 %
Total Ride Performance Division (63 ) (5 %) 57 4 %
 
Total Tenneco Inc. $ (182 ) (4 %) $ 121 4 %
 

ATTACHMENT 2

TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
Debt net of cash / Adjusted LTM EBITDA including noncontrolling interests

Unaudited

(Millions except ratios)
           
Quarter Ended June 30,
 
2015 2014
 
Total debt (1) $ 1,230 $ 1,285
 
Total cash 252 265
   
Debt net of cash balances (2) $ 978 $ 1,020
 
 
Adjusted LTM EBITDA including noncontrolling interests (3) (4) $ 780 $ 754
 
Ratio of debt net of cash balances to adjusted LTM EBITDA including noncontrolling interests (5) 1.3x 1.4x
 
 
 
 
Q3 14 Q4 14 Q1 15 Q2 15 Q2 15 LTM
 
Net income attributable to Tenneco Inc. $ 78 $ 21 $ 49 $ 78 $ 226
 
Net income attributable to noncontrolling interests 11 15 14 13 53
 
Income tax expense 31 14 41 47 133
 
Interest expense (net of interest capitalized) 20 33 16 17 86
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 140 83 120 155 498
 
Depreciation and amortization of other intangibles 52 53 50 51 206
 
Total EBITDA including noncontrolling interests (3) 192 136 170 206 704
 
Restructuring and related expenses 8 20 5 7 40
 
Bad debt charge (6) 4 4
 
Pension/Postretirement charges (7) 32 32
         
Total Adjusted EBITDA including noncontrolling interest (4) $ 204 $ 188 $ 175 $ 213 $ 780
 
 
Q3 13 Q4 13 Q1 14 Q2 14 Q2 14 LTM
 
Net income attributable to Tenneco Inc. $ 12 $ 54 $ 46 $ 81 $ 193
 
Net income attributable to noncontrolling interests 10 11 8 10 39
 
Income tax expense 30 33 40 46 149
 
Interest expense (net of interest capitalized) 20 20 19 19 78
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 72 118 113 156 459
 
Depreciation and amortization of other intangibles 51 54 51 52 208
 
Total EBITDA including noncontrolling interests (3) 123 172 164 208 667
 
Restructuring and related expenses 58 9 10 10 87
         
Total Adjusted EBITDA including noncontrolling interest (4) $ 181 $ 181 $ 174 $ 218 $ 754
 
 
(1) In April 2015, the FASB issued Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. Tenneco adopted this standard for the first quarter of 2015 and applied retrospectively. The balance for unamortized debt issuance costs was $13 million and $12 million at June 30, 2015 and June 30, 2014, respectively.
 

(2) Tenneco presents debt net of cash balances because management believes it is a useful measure of Tenneco’s credit position and progress toward reducing leverage. The calculation is limited in that the company may not always be able to use cash to repay debt on a dollar-for- dollar basis.

 
(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 generally accepted accounting principles. 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.
 
(4) 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.
 
(5) Tenneco presents the above reconciliation of the ratio of debt net of 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, LTM adjusted EBITDA including noncontrolling interests is used as an indicator of the company’s performance and debt net of 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 (2), (3) and (4) for a description of the limitations of using debt net of cash, EBITDA including noncontrolling interests and adjusted EBITDA including noncontrolling interests.
 
(6) Charge related to the bankruptcy of an aftermarket customer in Europe.
 
(7) Charges related to Pension derisking and postretirement medical true-up.
 

ATTACHMENT 2

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

Unaudited

(Millions)
      Q2 2015
        Value-add
Revenues Substrate Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 1,522 $ (121 ) $ 1,643 $ 453 $ 1,190
Original equipment commercial truck, off-highway and other revenues 256 (24 ) 280 79 201
Aftermarket revenues   352   (31 )   383     383
Net sales and operating revenues $ 2,130 $ (176 ) $ 2,306 $ 532 $ 1,774
 
 
Q2 2014
Value-add
Revenues Substrate Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 1,577 $ 1,577 423 $ 1,154
Original equipment commercial truck, off-highway and other revenues 302 302 92 210
Aftermarket revenues   362       362     362
Net sales and operating revenues $ 2,241 $ $ 2,241 $ 515 $ 1,726
 
 
 
YTD 2015
Value-add
Revenues Substrate Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 2,988 $ (238 ) $ 3,226 $ 875 $ 2,351
Original equipment commercial truck, off-highway and other revenues 513 (46 ) 559 157 402
Aftermarket revenues   652   (52 )   704     704
Net sales and operating revenues $ 4,153 $ (336 ) $ 4,489 $ 1,032 $ 3,457
 
 
YTD 2014
Value-add
Revenues Substrate Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 3,085 $ $ 3,085 $ 826 $ 2,259
Original equipment commercial truck, off-highway and other revenues 579 579 173 406
Aftermarket revenues   671       671     671
Net sales and operating revenues $ 4,335 $ $ 4,335 $ 999 $ 3,336
 
 
(1) 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 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 746 $ 471 $ 244 $ 1,461 $ 360 $ 252 $ 57 $ 669 $ $ 2,130
 
Less: Substrate sales 269 170 56 495 495
                   
Value-add revenues $ 477   $ 301   $ 188   $ 966   $ 360   $ 252   $ 57   $ 669   $   $ 1,635  
 
EBIT $ 67 $ 12 $ 28 $ 107 $ 51 $ 12 $ 8 $ 71 $ (23 ) $ 155
 
EBIT as a % of revenue 9.0 % 2.5 % 11.5 % 7.3 % 14.2 % 4.8 % 14.0 % 10.6 % 7.3 %
EBIT as a % of value-add revenue 14.0 % 4.0 % 14.9 % 11.1 % 14.2 % 4.8 % 14.0 % 10.6 % 9.5 %
 
Adjusted EBIT $ 67 $ 13 $ 28 $ 108 $ 52 $ 16 $ 9 $ 77 $ (23 ) $ 162
 
Adjusted EBIT as a % of revenue 9.0 % 2.8 % 11.5 % 7.4 % 14.4 % 6.3 % 15.8 % 11.5 % 7.6 %
Adjusted EBIT as a % of value-add revenue 14.0 % 4.3 % 14.9 % 11.2 % 14.4 % 6.3 % 15.8 % 11.5 % 9.9 %
 
Q2 2014
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 755 $ 523 $ 263 $ 1,541 $ 364 $ 280 $ 56 $ 700 $ $ 2,241
 
Less: Substrate sales 285 174 56 515 515
                   
Value-add revenues $ 470   $ 349   $ 207   $ 1,026   $ 364   $ 280   $ 56   $ 700   $   $ 1,726  
 
EBIT $ 74 $ 18 $ 23 $ 115 $ 48 $ 14 $ 8 $ 70 $ (29 ) $ 156
 
EBIT as a % of revenue 9.8 % 3.4 % 8.7 % 7.5 % 13.2 % 5.0 % 14.3 % 10.0 % 7.0 %
EBIT as a % of value-add revenue 15.7 % 5.2 % 11.1 % 11.2 % 13.2 % 5.0 % 14.3 % 10.0 % 9.0 %
 
Adjusted EBIT $ 74 $ 19 $ 27 $ 120 $ 48 $ 18 $ 9 $ 75 $ (29 ) $ 166
 
Adjusted EBIT as a % of revenue 9.8 % 3.6 % 10.3 % 7.8 % 13.2 % 6.4 % 16.1 % 10.7 % 7.4 %
Adjusted EBIT as a % of value-add revenue 15.7 % 5.4 % 13.0 % 11.7 % 13.2 % 6.4 % 16.1 % 10.7 % 9.6 %
 
 
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect EBIT 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 EBIT 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 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 1,430 $ 928 $ 508 $ 2,866 $ 691 $ 482 $ 114 $ 1,287 $ $ 4,153
 
Less: Substrate sales 509 334 116 959 959
                   
Value-add revenues $ 921   $ 594   $ 392   $ 1,907   $ 691   $ 482   $ 114   $ 1,287   $   $ 3,194  
 
EBIT $ 121 $ 22 $ 55 $ 198 $ 86 $ 20 $ 18 $ 124 $ (47 ) $ 275
 
EBIT as a % of revenue 8.5 % 2.4 % 10.8 % 6.9 % 12.4 % 4.1 % 15.8 % 9.6 % 6.6 %
EBIT as a % of value-add revenue 13.1 % 3.7 % 14.0 % 10.4 % 12.4 % 4.1 % 15.8 % 9.6 % 8.6 %
 
Adjusted EBIT $ 121 $ 24 $ 56 $ 201 $ 87 $ 27 $ 19 $ 133 $ (47 ) $ 287
 
Adjusted EBIT as a % of revenue 8.5 % 2.6 % 11.0 % 7.0 % 12.6 % 5.6 % 16.7 % 10.3 % 6.9 %
Adjusted EBIT as a % of value-add revenue 13.1 % 4.0 % 14.3 % 10.5 % 12.6 % 5.6 % 16.7 % 10.3 % 9.0 %
 
YTD 2014
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 1,453 $ 1,029 $ 503 $ 2,985 $ 699 $ 543 $ 108 $ 1,350 $ $ 4,335
 
Less: Substrate sales 549 346 104 999 999
                   
Value-add revenues $ 904   $ 683   $ 399   $ 1,986   $ 699   $ 543   $ 108   $ 1,350   $   $ 3,336  
 
EBIT $ 130 $ 27 $ 43 $ 200 $ 78 $ 30 $ 15 $ 123 $ (54 ) $ 269
 
EBIT as a % of revenue 8.9 % 2.6 % 8.5 % 6.7 % 11.2 % 5.5 % 13.9 % 9.1 % 6.2 %
EBIT as a % of value-add revenue 14.4 % 4.0 % 10.8 % 10.1 % 11.2 % 5.5 % 13.9 % 9.1 % 8.1 %
 
Adjusted EBIT $ 130 $ 36 $ 47 $ 213 $ 78 $ 36 $ 16 $ 130 $ (54 ) $ 289
 
Adjusted EBIT as a % of revenue 8.9 % 3.5 % 9.3 % 7.1 % 11.2 % 6.6 % 14.8 % 9.6 % 6.7 %
Adjusted EBIT as a % of value-add revenue 14.4 % 5.3 % 11.8 % 10.7 % 11.2 % 6.6 % 14.8 % 9.6 % 8.7 %
 
 
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect EBIT 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 EBIT as a percent of value-add revenue assists investors in evaluating the company’s operational performance without the impact of such substrate sales.

Tenneco
Investor Inquiries
Linae Golla, 847-482-5162
lgolla@tenneco.com
or
Media Inquiries
Bill Dawson, 847-482-5807
bdawson@tenneco.com