Improved Profitability

Equally as important as driving revenue is our ability to deliver shareholder value by converting our top line growth to strong earnings performance and we made solid progress during the year.

In 2011, Tenneco achieved all-time high earnings measures with records in adjusted EBIT, adjusted net income and earnings per share. We also improved our adjusted EBIT as a percentage of value-add revenue to its highest level ever at 7.2%. Our earnings performance was driven by our ability to capitalize on overall higher light vehicle production volumes, as well as the benefit we’re seeing from commercial vehicle programs, which will continue to increase as these programs ramp-up.

We also benefited from our relentless focus on delivering operational improvements that flow through to the bottom line, driven by the Tenneco Manufacturing System. As we have done in the past, our global supply chain and cost management programs allowed Tenneco to substantially offset material cost increases during the year. We continued to leverage our SGA&E spend across higher revenues and, in 2011, SGA&E improved to 7.8 percent of sales compared with 9.0 percent in 2010.

Tenneco continued to invest in future growth with spending to increase capacity in fast-growing markets and to support new light and commercial vehicle programs globally. Effective management of this investment again resulted in capital spending for 2011 of approximately 3 percent of revenue. The organization also maintained a relentless focus on cash generation. Our continued focus on working capital management, combined with the improved earnings performance, helped generate $245 million in cash from operations for 2011. Our improving earnings and cash generation drove our net debt to adjusted EBITDA* ratio to a record low of 1.7x at the end of the year. In addition, we returned value to shareholders by completing the repurchase of 400,000 shares of the company’s outstanding common stock.

*including non-controlling interests