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Tenneco Inc. (ticker: TEN, exchange: New York Stock Exchange)

Tenneco Provides Update to Certain Fourth Quarter and Full Year 2019 Results

March 2, 2020

LAKE FOREST, Ill., March 2, 2020 /PRNewswire/ -- Tenneco Inc. (NYSE: TEN) (the "Company") today announced that, in conjunction with the completion of the Company's financial statements for the year ended December 31, 2019, it is updating certain fourth quarter and full year 2019 results. This update reconciles the fourth quarter and full year 2019 financial results disclosed and discussed on February 20, 2020 (see table below). Specifically, an adjustment to inventory primarily within one distribution center related to the legacy Federal-Mogul North America Motorparts business resulted in a reduction to pre-tax income of $27 million, or a $20 million impact to net income, for fourth quarter 2019. This adjustment encompassed manual processes that have largely been automated over the past year.

The Company determined that the impact of the adjustment was not material to any prior periods in 2019 and as such concluded that it was appropriate to record the aggregate amount of the expense in the fourth quarter of 2019. The amount of the adjustment relating to previous quarters would have been approximately evenly distributed among all four quarters had the Company determined it was necessary to revise the prior quarterly results.

The Company believes that this adjustment will not materially impact its 2020 first quarter and full year outlook provided on February 20, 2020.

During 2019, the continued integration of the Federal-Mogul acquisition increased the complexity and level of certain financial reporting activities within the North America Motorparts business, without a corresponding change in centralized resource levels. The Company concluded that it has a material weakness in its internal control over financial reporting resulting from a lack of incremental resources in its North America Motorparts business. To address this issue, management is implementing various remediation steps, including, adding additional accounting resources and improving its execution of and oversight over internal controls.

Full Year 2019 Reconciliation
The table below reconciles the financial results disclosed in a February 20, 2020 press release announcing the Company's financial results for the fourth quarter and full year ended December 31, 2019 to the final results that will be filed today in the Company's 10-K.  

($ millions, except per share amounts)


YTD 2019





Net income
(loss)
attributable to
Tenneco Inc.


Per Share


Income tax
(expense)
benefit


EBIT


EBITDA (2)


As of February 20, 2020 Press Release(1): Earnings (Loss) Measures


$         (314)


$        (3.88)


$            (26)


$          148


$          821


Inventory adjustment


(20)


(0.24)


7


(27)


(27)


Updated:Earnings (Loss) Measures


$         (334)


(4.12)


$            (19)


$          121


$          794















As of February 20, 2020 Press Release(1): Adjusted Net income, EPS, Tax,
EBIT, and EBITDA(2)


$          261


$         3.22


$          (138)


$          784


$       1,442


Inventory adjustment


(20)


(0.24)


7


(27)


(27)


Updated:Adjusted Net income, EPS, Tax, EBIT, and EBITDA(2)(3)


$          241


2.98


$          (131)


$          757


$       1,415









































(1) From February 20, 2020 press release announcing the company's fourth quarter and full year 2019 results.  














(2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  














(3) Tables at the end of this press release include reconciliations for GAAP to non-GAAP results and fourth quarter 2019 reconciliations.

 

Attachment 1
Statements of Income – 3 Months
Statements of Income – 12 Months
Balance Sheets
Statements of Cash Flows – 3 Months
Statements of Cash Flows – 12 Months

Attachment 2
Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures – 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months and 12 Months
Reconciliation of Non-GAAP Measures – Debt Net of Cash/Adjusted LTM and pro forma adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue – 3 Months and 12 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 – 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway, Industrial and other revenues – quarterly and annual
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 Full Year 2020 Outlook

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 2019 revenues of $17.45 billion and approximately 78,000 employees worldwide. On October 1, 2018, Tenneco completed the acquisition of Federal-Mogul, a leading global supplier to original equipment ("OE") 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 separation, 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 2019 revenues of $5.9 billion, with 53% of those revenues from aftermarket and 47% from original equipment customers.

About the new Tenneco - the future Powertrain Technology Company
Following the separation, 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 2019 revenues of $11.5 billion, serving light vehicle, commercial truck, off-highway and industrial markets.

Safe Harbor
This release contains forward-looking statements. These forward-looking statements include, among others, statements relating to our strategies and plans to separate into two independent public companies. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from those described in the forward-looking statements, including the possibility that Tenneco may not complete the separation of the Aftermarket & Ride Performance business from the Powertrain Technology business (or achieve some or all of the anticipated benefits of such a separation); the possibility that the separation may have an adverse impact on existing arrangements with Tenneco, including those related to transition, manufacturing and supply services and tax matters; the ability to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners; the risk that the benefits of the separation may not be fully realized or may take longer to realize than expected; the risk that the separation may not advance Tenneco's business strategy; the potential diversion of Tenneco management's attention resulting from the separation; as well as the risk factors and cautionary statements included in Tenneco's periodic and current reports (Forms 10-K, 10-Q and 8-K) filed from time to time with the SEC. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Unless otherwise indicated, the forward-looking statements in this release are made as of the date of this communication, and, except as required by law, Tenneco does not undertake any obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements. 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, 2018 and Form 10-Q for the quarter ended September 30, 2019.

Investor inquiries:
Linae Golla
847-482-5162
lgolla@tenneco.com

Rich Kwas
248-849-1340
rich.kwas@tenneco.com

Media inquiries:
Bill Dawson
847-482-5807
bdawson@tenneco.com

 

 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

THREE MONTHS ENDED DECEMBER 31,

(Millions except per share amounts)









2019


2018


Net sales and operating revenues:






Clean Air - Value-add revenues


$    974


$ 1,024


Clean Air - Substrate sales


769


631


Powertrain


1,018


1,112


Motorparts


741


827


Ride Performance


641


684


          Total net sales and operating revenues


$ 4,143


$ 4,278








Costs and expenses:






   Cost of sales (exclusive of depreciation and amortization)


3,581


3,673


   Selling, general, and administrative


276


309


   Depreciation and amortization


170


165


   Engineering, research, and development


76


82


   Restructuring charges and asset impairments


28


60


   Goodwill and intangibles impairment charge


172


3


          Total costs and expenses


4,303


4,292








Other income (expense):






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


(3)


(10)


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


9


18


Loss on extinguishment of debt


-


(10)


Other income (expense), net


10


(7)


          Total other income (expense) 


16


(9)








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


(144)


(23)








   Interest expense


(80)


(79)


Earnings (loss) before income taxes and noncontrolling interests


(224)


(102)








   Income tax (expense) benefit


(14)


10


Net income (loss)


(238)


(92)








   Less: Net income (loss) attributable to noncontrolling interests


75


17


Net income (loss) attributable to Tenneco Inc.


$  (313)


$  (109)














Weighted average common shares outstanding:






   Basic


80.9


80.7


   Diluted


80.9


80.7








Earnings (loss) per share of common stock:






   Basic


$ (3.87)


$ (1.35)


   Diluted


$ (3.87)


$ (1.35)


 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

TWELVE MONTHS ENDED DECEMBER 31,

(Millions except per share amounts)









2019


2018


Net sales and operating revenues:






Clean Air - Value-add revenues


$    4,094


$    4,207


Clean Air - Substrate sales


3,027


2,500


Powertrain


4,408


1,112


Motorparts


3,167


1,780


Ride Performance


2,754


2,164


          Total net sales and operating revenues


$ 17,450


$ 11,763








Costs and expenses:






   Cost of sales (exclusive of depreciation and amortization)


14,912


10,002


   Selling, general, and administrative


1,138


752


   Depreciation and amortization


673


345


   Engineering, research, and development


324


200


   Restructuring charges and asset impairments


126


117


   Goodwill and intangibles impairment charge


241


3


          Total costs and expenses


17,414


11,419








Other income (expense):






Non-service pension and postretirement benefit (costs) credits


(11)


(20)


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


43


18


Loss on extinguishment of debt


-


(10)


Other income (expense), net


53


(10)


          Total other income (expense) 


85


(22)








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


121


322








   Interest expense


(322)


(148)


Earnings (loss) before income taxes and noncontrolling interests


(201)


174








   Income tax (expense) benefit


(19)


(63)


Net income (loss)


(220)


111








   Less: Net income (loss) attributable to noncontrolling interests


114


56


Net income (loss) attributable to Tenneco Inc.


$     (334)


$         55














Weighted average common shares outstanding:






   Basic


80.9


58.6


   Diluted


80.9


58.8








Earnings (loss) per share of common stock:






   Basic


$    (4.12)


$      0.93


   Diluted


$    (4.12)


$      0.93


 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS

Unaudited

(Millions)













December 31, 2019


December 31, 2018










 Assets
















Cash and cash equivalents


$                          564


$                          697












Restricted cash


2


5












Receivables, net


2,538

 (a) 

2,572

 (a) 











Inventories


1,999


2,245












Prepayments and other current assets


632


590












Other noncurrent assets


3,864


3,622












Property, plant and equipment, net


3,627


3,501












Total assets


$                    13,226


$                    13,232


















Liabilities and Shareholders' Equity
















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


$                          185


$                          153












Accounts payable


2,647


2,759












Accrued compensation and employee benefits


325


343












Accrued income taxes


72


64












Accrued expenses and other current liabilities


1,070


1,001












Long-term debt


5,371

 (b) 

5,340

 (b) 











Deferred income taxes


106


88












Pension and postretirement benefits


1,145


1,167












Deferred credits and other liabilities


490


263












Redeemable noncontrolling interests


196


138












Tenneco Inc. shareholders' equity


1,425


1,726












Noncontrolling interests


194


190












Total liabilities, redeemable noncontrolling interests, and equity


$                    13,226


$                    13,232






















December 31, 2019


December 31, 2018


(a)

Accounts receivable net of:








Accounts receivable outstanding and derecognized


$                               1,037


$                               1,011














December 31, 2019


December 31, 2018


(b)

Long-term debt composed of:








Revolver Borrowings


$                                   183


$                                      -




LIBOR plus 1.75% Term Loan A due 2019 through 2023


1,608


1,691




LIBOR plus 3.00% Term Loan B due 2019 through 2025


1,623


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


479


496




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


340


349




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


413


427




Other Debt, primarily foreign instruments


13


44






5,375


5,351




Less: maturities classified as current


4


11




Total long-term debt


$                               5,371


$                               5,340


 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Unaudited

(Millions)









Three Months Ended December 31,




2019


2018








Operating Activities






Net income (loss)


$  (238)


$        (92)


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






Goodwill and intangible impairment charge


172


3


Depreciation and amortization


170


165


Deferred income taxes


(36)


(44)


Stock-based compensation


5


2


Restructuring charges and asset impairments, net of cash paid


(1)


41


Change in pension and other postretirement benefit plans


(8)


(11)


Equity in earnings of nonconsolidated affiliates


(9)


(18)


Cash dividends received from nonconsolidated affiliates


8


2


Changes in operating assets and liabilities:






Receivables


232


86


Inventories


172


142


Payables and accrued expenses


(165)


137


Accrued interest and income taxes


15


(14)


Other assets and liabilities


63


3


Net cash provided (used) by operating activities


380


402








Investing Activities






Acquisitions, net of cash acquired


-


(2,194)


Proceeds from sale of assets


12


3


Proceeds from sale of investment in nonconsolidated affiliates


2


-


Cash payments for property, plant and equipment


(203)


(252)


Proceeds from deferred purchase price of factored receivables


47


72


Other


2


6


Net cash provided (used) by investing activities


(140)


(2,365)








Financing Activities






Proceeds from term loans and notes


29


3,414


Repayments of term loans and notes


(63)


(418)


Borrowings on revolving lines of credit


2,316


1,098


Payments on revolving lines of credit


(2,336)


(1,331)


Issuance of common shares


-


1


Cash dividends


-


(20)


Debt issuance cost of long-term debt


-


(95)


Net decrease in bank overdrafts


(1)


-


Acquisition of additional ownership interest in consolidated affiliates


(10)


-


Distributions to noncontrolling interest partners


(23)


(7)


Other


(2)


(178)


Net cash provided (used) by financing activities


(90)


2,464








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


21


(2)


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


171


499








Cash, cash equivalents and restricted cash, beginning of period


395


203


Cash, cash equivalents and restricted cash, end of period


$   566


$       702














Supplemental Cash Flow Information






Cash paid during the period for interest


$     54


$         78


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


38


34








Non-cash Investing and Financing Activities






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


$   134


$       135


Deferred purchase price of receivables factored in the period


45


49


Stock issued for acquisition of Federal-Mogul


-


(1,236)


Stock transferred for acquisition of Federal-Mogul


-


1,236


Redeemable noncontrolling interest transaction with owner


53


-


 


ATTACHMENT 1


TENNECO INC. AND CONSOLIDATED SUBSIDIARIES


STATEMENTS OF CASH FLOWS


Unaudited


(Millions)











Twelve Months Ended December 31,





2019


2018










Operating Activities







Net income (loss)


$  (220)


$       111



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







Goodwill and intangible impairment charge


241


3



Depreciation and amortization


673


345



Deferred income taxes


(151)


(65)



Stock-based compensation


25


14



Restructuring charges and asset impairments, net of cash paid


11


49



Change in pension and other postretirement benefit plans


(57)


(8)



Equity in earnings of nonconsolidated affiliates


(43)


(18)



Cash dividends received from nonconsolidated affiliates


53


2



Changes in operating assets and liabilities:







Receivables


(225)


(174)



Inventories


284


27



Payables and accrued expenses


(66)


291



Accrued interest and income taxes


3


(19)



Other assets and liabilities


(84)


(119)



Net cash provided (used) by operating activities


444


439










Investing Activities







Acquisitions, net of cash acquired


(158)


(2,194)



Proceeds from sale of assets


20


9



Net proceeds from sale of business


22


-



Proceeds from sale of investment in nonconsolidated affiliates


2


-



Cash payments for property, plant and equipment


(744)


(507)



Proceeds from deferred purchase price of factored receivables


250


174



Other


2


4



Net cash provided (used) by investing activities


(606)


(2,514)










Financing Activities







Proceeds from term loans and notes


200


3,426



Repayments of term loans and notes


(341)


(453)



Borrowings on revolving lines of credit


9,120


5,149



Payments on revolving lines of credit


(8,884)


(5,405)



Repurchase of common shares


(2)


(1)



Cash dividends


(20)


(59)



Debt issuance cost of long-term debt


-


(95)



Net decrease in bank overdrafts


(13)


(5)



Acquisition of additional ownership interest in consolidated affiliates


(10)


-



Distributions to noncontrolling interest partners


(43)


(51)



Other


(4)


(30)



Net cash provided (used) by financing activities


3


2,476










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


23


(17)



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


(136)


384










Cash, cash equivalents and restricted cash, beginning of period


702


318



Cash, cash equivalents and restricted cash, end of period


$   566


$       702

















Supplemental Cash Flow Information







Cash paid during the period for interest


$   284


$       143



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


177


113










Non-cash Investing and Financing Activities







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


$   134


$       135



Deferred purchase price of receivables factored in the period in investing


253


154



Stock issued for acquisition of Federal-Mogul


-


(1,236)



Stock transferred for acquisition of Federal-Mogul


-


1,236



Redeemable noncontrolling interest transaction with owner


53


-


 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions except per share amounts)
























































Q4 2019


Q4 2018




Net income
(loss)
attributable
to Tenneco
Inc.


Per Share


Net income
(loss)
attributable to
noncontrolling
interests


Income tax
(expense)
benefit


EBIT


EBITDA (3)


Net income
(loss)
attributable to
Tenneco Inc.


Per Share


Net income
(loss)
attributable to
noncontrolling
interests


Income tax
(expense)
benefit


EBIT


EBITDA (3)

Earnings (Loss) Measures


$        (313)


$     (3.87)


$             75


$            (14)


$(144)


$        26


$        (109)


$    (1.35)


$             17


$         10


$  (23)


$     142



























Adjustments:


























Restructuring and related expenses(5)


34


0.41


1


(7)


42


36


15


0.18


1


(4)


20


17


Cost reduction initiatives (6)


-


-


-


1


(1)


(1)


6


0.08


-


(2)


8


8


Acquisition and separation costs(7)


28


0.36


-


(2)


30


30


41


0.50


-


(12)


53


53


Costs to achieve synergies (8)


7


0.09


-


(1)


8


8


44


0.54


-


(5)


49


49


Purchase accounting charges (9)


4


0.05


-


2


2


2


88


1.09


-


(18)


106


106


Goodwill and intangible impairment charge (10)


172


2.13


-


-


172


172


3


0.04


-


-


3


3


Process harmonization (11)


14


0.17


-


(2)


16


16


-


-


-


-


-


-


Noncontrolling interests adjustments (12)


58


0.71


(58)


-


-


-


-


-


-


-


-


-


Pension charges/adjustments (13)


(1)


(0.02)


-


1


(2)


(2)


2


0.03


-


(1)


3


3


Anti-dumping duty charge (14)


-


-


-


-


-


-


12


0.15


-


(4)


16


16


Loss on debt modification (15)


-


-


-


-


-


-


8


0.10


-


(2)


10


10


Net tax adjustments


-


-


-


-


-


-


(5)


(0.06)


-


(5)


-


-



























Adjusted Net income, EPS, NCI, Tax, EBIT, and EBITDA(4)


$          3


$      0.03


$             18


$            (22)


$ 123


$       287


$         105


$     1.30


$             18


$        (43)


$ 245


$     407
























































Q4 2019














Global Segments


















Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total











Net income (loss) attributable to Tenneco Inc.














$        (313)





































Net income (loss) attributable to noncontrolling interests














75





































Net income (loss)














(238)





































Income tax expense (benefit)














(14)





































Interest expense














(80)





































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














(144)





































Depreciation and amortization














170





































Total EBITDA including noncontrolling interests (3)


$         130


$         60


$            (84)


$              7


$ 113


$       (87)


$          26






































Restructuring and related expenses(5)


3


2


-


23


28


8


36












Cost reduction initiatives (6)


-


-


-


-


-


(1)


(1)












Acquisition and separation costs(7)


-


-


-


-


-


30


30












Costs to achieve synergies (8)


1


-


2


-


3


5


8












Purchase accounting charges (9)


-


2


-


-


2


-


2












Goodwill and intangible impairment charge (10)


-


18


154


-


172


-


172












Process harmonization (11)


8


-


4


4


16


-


16












Pension adjustments(13)


-


-


-


-


-


(2)


(2)





































Adjusted EBITDA(4)


$         142


$         82


$            76


$             34


$ 334


$       (47)

(16)

$         287


































































Q4 2018














Global Segments


















Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total











Net income (loss) attributable to Tenneco Inc.














$        (109)





































Net income (loss) attributable to noncontrolling interests














17





































Net income (loss)














(92)





































Income tax expense (benefit)














10





































Interest expense














(79)





































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














(23)





































Depreciation and amortization














165





































Total EBITDA including noncontrolling interests (3)


$         156


$         93


$               8


$             11


$ 268


$      (126)


$         142






































Restructuring and related expenses(5)


(2)


(2)


2


19


17


-


17












Cost reduction initiatives (6)


-


-


-


-


-


8


8












Acquisition and separation costs(7)


-


-


-


-


-


53


53












Costs to achieve synergies (8)


(3)


-


35


10


42


7


49












Purchase accounting charges (9)


-


44


57


5


106


-


106












Goodwill impairment charge (10)


-


-


-


3


3


-


3












Pension charges (13)


-


-


-


3


3


-


3












Anti-dumping duty charge (14)


-


-


16


-


16


-


16












Loss on debt modification (15)


-


-


-


-


-


10


10





































Adjusted EBITDA(4)


$         151


$       135


$            118


$             51


$ 455


$       (48)


$         407












(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) Adjusted results are 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 periods.  Similar adjustments 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) Q4 2019 includes $6 million and Q4 2018 includes $3 million of accelerated depreciation related to plant closures.


(6) Costs related to cost reduction initiatives.


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


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


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


(10) Non-cash asset impairment charge related to goodwill and intangibles.


(11) Charge due to process harmonization.


(12) Amount relates to adjustments made to mark certain redeemable noncontrolling interests to their redemption values.


(13) Charges related to pension derisking and other adjustments.


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


(15) Loss on debt modification related to Federal-Mogul acquisition.


(16) Corporate costs for each division are $21 million for New Tenneco and $26 million 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


Net income
(loss)

attributable to

noncontrolling

interests


Income tax
(expense)
benefit


EBIT


EBITDA (3)


Net income
(loss)
attributable to
Tenneco Inc.


Per Share


Net income
(loss)
attributable to
noncontrolling
interests


Income tax
(expense)
benefit


EBIT


EBITDA (3)

Earnings (Loss) Measures


$         (334)


$      (4.12)


$             114


$            (19)


$    121


$       794


$            55


$      0.93


$               56


$         (63)


$  322


$     667



























Adjustments:


























Restructuring and related expenses(5)


116


1.43


6


(31)


153


138


46


0.76


8


(11)


65


62


Cost reduction initiatives (6)


12


0.15


-


(3)


15


15


13


0.24


-


(5)


18


18


Acquisition and separation costs(7)


102


1.27


-


(25)


127


127


74


1.26


-


(22)


96


96


Costs to achieve synergies (8)


23


0.29


-


(6)


29


29


53


0.90


-


(9)


62


62


Purchase accounting charges (9)


49


0.61


-


(8)


57


57


88


1.50


-


(18)


106


106


Goodwill and intangible impairment charge (10)


241


2.98


-


-


241


241


3


0.05


-


-


3


3


Process harmonization (11)


21


0.26


-


(5)


26


26


-


-


-


-


-


-


Warranty charge (12)


6


0.07


-


(2)


8


8


4


0.06


-


(1)


5


5


Antitrust reserve change in estimate (13)


(7)


(0.09)


-


2


(9)


(9)


-


-


-


-


-


-


Brazil tax credit (14)


(14)


(0.18)


-


8


(22)


(22)


-


-


-


-


-


-


Out of period adjustment (15)


4


0.05


1


-


5


5


-


-


-


-


-


-


Impairment of assets held for sale


6


0.07


-


(2)


8


8


-


-


-


-


-


-


Noncontrolling interests adjustments(16)


58


0.71


(58)


-


-


-


-


-


-


-


-


-


Pension charges/adjustments (17)


(1)


(0.02)


-


1


(2)


(2)


2


0.04


-


(1)


3


3


Litigation settlement accrual


-


-


-


-


-


-


8


0.13


-


(2)


10


10


Anti-dumping duty charge (18)


-


-


-


-


-


-


12


0.21


-


(4)


16


16


Environmental charge (19)


-


-


-


-


-


-


3


0.06


-


(1)


4


4


Loss on debt modification (20)


-


-


-


-


-


-


8


0.14


-


(2)


10


10


Net tax adjustments


(41)


(0.50)


-


(41)


-


-


-


-


-


-


-


-



























Adjusted Net income, EPS, NCI, Tax, EBIT, and EBITDA(4)


$          241


$       2.98


$              63


$          (131)


$    757


$    1,415


$           369


$      6.28


$               64


$       (139)


$  720


$  1,062
























































YTD 2019














Global Segments


















Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total











Net income (loss) attributable to Tenneco Inc.














$          (334)





































Net income (loss) attributable to noncontrolling interests














114





































Net income (loss)














(220)





































Income tax expense (benefit)














(19)





































Interest expense














(322)





































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














121





































Depreciation and amortization














673





































Total EBITDA including noncontrolling interests (3)


$          582


$        363


$             184


$              8


$  1,137


$      (343)


$           794






































Restructuring and related expenses(5)


24


30


4


71


129


9


138












Cost reduction initiatives (6)


-


-


-


-


-


15


15












Acquisition and separation costs(7)


-


-


1


-


1


126


127












Costs to achieve synergies (8)


6


2


11


2


21


8


29












Purchase accounting charges (9)


-


12


41


4


57


-


57












Goodwill and intangible impairment charge (10)


-


18


154


69


241


-


241












Process harmonization (11)


13


-


9


4


26


-


26












Warranty charge (12)


-


-


8


-


8


-


8












Antitrust reserve change in estimate (13)


(9)


-


-


-


(9)


-


(9)












Brazil tax credit (14)


(9)


-


(7)


(6)


(22)


-


(22)












Out of period adjustment (15)


-


-


-


5


5


-


5












Impairment of assets held for sale


-


-


8


-


8


-


8












Pension adjustments (17)


-


-


-


-


-


(2)


(2)





































Adjusted EBITDA(4)


$          607


$        425


$             413


$           157


$  1,602


$      (187)

(21)

$        1,415


































































YTD 2018














Global Segments


















Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total











Net income (loss) attributable to Tenneco Inc.














$            55





































Net income (loss) attributable to noncontrolling interests














56





































Net income (loss)














111





































Income tax expense (benefit)














(63)





































Interest expense














(148)





































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














322





































Depreciation and amortization














345





































Total EBITDA including noncontrolling interests (3)


$          599


$          93


$             161


$             69


$    922


$      (255)


$           667






































Restructuring and related expenses(5)


11


(2)


7


46


62


-


62












Cost reduction initiatives (6)


-


-


-


10


10


8


18












Acquisition and separation costs(7)


-


-


-


-


-


96


96












Costs to achieve synergies (8)


3


-


36


11


50


12


62












Purchase accounting charges (9)


-


44


57


5


106


-


106












Goodwill impairment charge (10)


-


-


-


3


3


-


3












Warranty charge (12)


-


-


-


5


5


-


5












Pension charges (17)


-


-


-


3


3


-


3












Litigation settlement accrual


-


-


-


9


9


1


10












Anti-dumping duty charge (18)


-


-


16


-


16


-


16












Environmental charge (19)


-


-


-


-


-


4


4












Loss on debt modification (20)


-


-


-


-


-


10


10





































Adjusted EBITDA(4)


$          613


$        135


$             277


$           161


$  1,186


$      (124)


$        1,062












(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) Adjusted results are 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 periods.  Similar adjustments 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) FY 2019 includes $15 million and FY 2018 includes $3 million of accelerated depreciation related to plant closures.


(6) Costs related to cost reduction initiatives.


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


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


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


(10) Non-cash asset impairment charge related to goodwill and intangibles.


(11) Charge due to process harmonization.


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


(13) Reduction in estimated antitrust accrual.


(14) Recovery of value-added tax in a foreign jurisdiction.


(15) Inventory losses attributable to prior periods.


(16) Amount relates to adjustments made to mark certain redeemable noncontrolling interests to their redemption values.


(17) Charges related to pension derisking and other adjustments.


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


(19) 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.


(20) Loss on debt modification related to Federal-Mogul acquisition.


(21) Corporate costs for each division are $85 million for New Tenneco and $102 million for DRiV.

 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions)
















Q4 2019










Currency


Value-add










Impact on


Revenues






Substrate


Value-add


Value-add


excluding




Revenues


Sales


Revenues


Revenues


Currency














Clean Air


$   1,743


$     769


$      974


$        (11)


$                985


Powertrain


1,018


-


1,018


(12)


1,030


Motorparts


741


-


741


(9)


750


Ride Performance


641


-


641


(10)


651













Total Tenneco Inc.


$   4,143


$     769


$   3,374


$        (42)


$             3,416
















Q4 2018










Currency


Value-add










Impact on


Revenues






Substrate


Value-add


Value-add


excluding




Revenues


Sales


Revenues


Revenues


Currency














Clean Air


$   1,655


$     631


$   1,024


$         -


$             1,024


Powertrain


1,112


-


1,112


-


1,112


Motorparts


827


-


827


-


827


Ride Performance


684


-


684


-


684













Total Tenneco Inc.


$   4,278


$     631


$   3,647


$         -


$             3,647


(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


$   7,121


$   3,027


$   4,094


$      (113)


$    4,207


Powertrain


4,408


-


4,408


(12)


4,420


Motorparts


3,167


-


3,167


(42)


3,209


Ride Performance


2,754


-


2,754


(75)


2,829













Total Tenneco Inc.


$  17,450


$   3,027


$  14,423


$      (242)


$   14,665
















YTD 2018










Currency


Value-add










Impact on


Revenues






Substrate


Value-add


Value-add


excluding




Revenues


Sales


Revenues


Revenues


Currency














Clean Air


$   6,707


$   2,500


$   4,207


$         -


$    4,207


Powertrain


1,112


-


1,112


-


1,112


Motorparts


1,780


-


1,780


-


1,780


Ride Performance


2,164


-


2,164


-


2,164













Total Tenneco Inc.


$  11,763


$   2,500


$   9,263


$         -


$    9,263


(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)
















Q4 2019 vs. Q4 2018 $ Change and % Change Increase (Decrease)





Revenues


% Change


Value-add
Revenues
Excluding
Currency


% Change













Clean Air


$                   88


5%


$                  (39)


(4%)


Powertrain


(94)


(8%)


(82)


(7%)


Motorparts


(86)


(10%)


(77)


(9%)


Ride Performance


(43)


(6%)


(33)


(5%)

Total Tenneco Inc.


$                (135)


(3%)


$                (231)


(6%)






































YTD Q4 2019 vs. YTD Q4 2018 $ Change and % Change Increase (Decrease)





Revenues


% Change


Value-add
Revenues
Excluding
Currency


% Change













Clean Air


$                 414


6%


$                   -


-%


Powertrain


3,296


296%


3,308


297%


Motorparts


1,387


78%


1,429


80%


Ride Performance


590


27%


665


31%

Total Tenneco Inc.


$              5,687


48%


$              5,402


58%



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

 

ATTACHMENT 2

TENNECO INC.


RECONCILIATION OF NON-GAAP MEASURES 


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


Unaudited


(Millions except ratios)



























December 31, 2019




December 31, 2018


















Total debt












$                 5,556




$                 5,493


















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











566




702


















Debt net of total cash balances (1)












$                 4,990




$                 4,791



































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












$                 1,415




$                 1,627


















Ratio of debt net of total cash balances and Pro forma ratio of debt net of total cash balances to Adjusted LTM and 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


Q3 19


Q4 19


















Net income (loss) attributable to Tenneco Inc.


$   60


$   47


$   57


$  (109)


$(117)


$                      26


$   70


$                   (313)


















Net income (loss) attributable to noncontrolling interests

14


16


9


17


12


19


8


75


















Net income (loss)


74


63


66


(92)


(105)


45


78


(238)


















Income tax (expense) benefit


(25)


(26)


(22)


10


-


(14)


9


(14)


















Interest expense


(23)


(22)


(24)


(79)


(81)


(82)


(79)


(80)


















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


122


111


112


(23)


(24)


141


148


(144)


















Depreciation and amortization


60


60


60


165


169


169


165


170


















Total EBITDA including noncontrolling interests (2)


$ 182


$ 171


$ 172


$   142


$ 145


$                    310


$ 313


$                      26


















Adjustments:

















Restructuring and related expenses


12


21


12


17


17


57


28


36

Cost reduction initiatives (6)


-


10


-


8


8


2


6


(1)

Acquisition and separation costs(7)


13


18


12


53


40


27


30


30

Warranty charge (8)


5


-


-


-


-


7


1


-

Costs to achieve synergies(9)


-


9


4


49


7


7


7


8

Purchase accounting charges (10)


-


-


-


106


41


3


11


2

Goodwill and intangible impairment charge (11)


-


-


-


3


60


-


9


172

Process harmonization (12)


-


-


-


-


9


1


-


16

Anti-dumping duty charge (13)


-


-


-


16


-


-


-


-

Antitrust reserve change in estimate (14)


-


-


-


-


-


-


(9)


-

Brazil tax credit (15)


-


-


-


-


-


-


(22)


-

Out of period adjustment (16)


-


-


-


-


-


-


5


-

Impairment of assets held for sale


-


-


-


-


-


-


8


-

Environmental charge (17)


-


4


-


-


-


-


-


-

Litigation settlement accrual


-


-


10


-


-


-


-


-

Loss on debt modification (18)


-


-


-


10


-


-


-


-

Pension charges/adjustments (19)


-


-


-


3


-


-


-


(2)


















Total Adjusted EBITDA including noncontrolling interests (3)

$ 212


$ 233


$ 210


$   407


$ 327


$                    414


$ 387


$                    287



































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 (loss) attributable to noncontrolling interests

3


3


1




























Net income (loss)


29


28


36




























Income tax (expense) benefit


(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


Q3 19


Q4 19

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


$ 412


$ 442


$ 366


$   407


$ 327


$                    414


$ 387


$                    287

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








$1,627









Q4 2019 Adjusted LTM EBITDA including noncontrolling interests(2) (3)
















$                 1,415


* 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 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 separation.


(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 and intangibles.


(12) Charge due to process harmonization.


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


(14) Reduction in estimated antitrust accrual.


(15) Recovery of value-added tax in a foreign jurisdiction.


(16) Inventory losses attributable to prior periods.


(17) 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.


(18) Loss on debt modification.


(19) Charges related to pension derisking and other adjustments.

 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions)




Q4 2019




Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency













Original equipment light vehicle revenues


$    2,635


$         3


$    2,632


$              663


$           1,969

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

767


(48)


815


118


697

Aftermarket revenues


741


(9)


750


-


750

Net sales and operating revenues


$    4,143


$      (54)


$    4,197


$              781


$           3,416




























Q4 2018




Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency













Original equipment light vehicle revenues


$    2,647


$        -


$    2,647


$              531


$           2,116

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

804


-


804


100


704

Aftermarket revenues


827


-


827


-


827

Net sales and operating revenues


$    4,278


$        -


$    4,278


$              631


$           3,647








































YTD 2019




Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency













Original equipment light vehicle revenues


$  11,001


$     (180)


$  11,181


$           2,644


$           8,537

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

3,282


(88)


3,370


451


2,919

Aftermarket revenues


3,167


(42)


3,209


-


3,209

Net sales and operating revenues


$  17,450


$     (310)


$  17,760


$           3,095


$         14,665




























YTD 2018




Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding

Currency













Original equipment light vehicle revenues


$    8,104


$        -


$    8,104


$           2,092


$           6,012

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

1,879


-


1,879


408


1,471

Aftermarket revenues


1,780


-


1,780


-


1,780

Net sales and operating revenues


$  11,763


$        -


$  11,763


$           2,500


$           9,263


(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)






















Q4 2019






Global Segments










Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total



Net sales and operating revenues


$         1,743


$         1,018


$            741


$            641


$         4,143


$              -


$         4,143





















Less: Substrate sales


769


-


-


-


769


-


769





















Value-add revenues


$            974


$         1,018


$            741


$            641


$         3,374


$              -


$         3,374





















 EBITDA


$            130


$             60


$            (84)


$               7


$            113


$            (87)


$             26





















 EBITDA as a % of revenue


7.5%


5.9%


-11.3%


1.1%


2.7%




0.6%



 EBITDA as a % of value-add revenue


13.3%


5.9%


-11.3%


1.1%


3.3%




0.8%





















 Adjusted EBITDA


$            142


$             82


$            76


$             34


$            334


$            (47)


$            287





















 Adjusted EBITDA as a % of revenue


8.1%


8.1%


10.3%


5.3%


8.1%




6.9%



 Adjusted EBITDA as a % of value-add revenue


14.6%


8.1%


10.3%


5.3%


9.9%




8.5%










































Q4 2018








Global Segments










Clean Air


Powertrain


Motorparts


Ride

Performance


Total


Corporate


Total



Net sales and operating revenues


$         1,655


$         1,112


$            827


$            684


$         4,278


$              -


$         4,278





















Less: Substrate sales


631


-


-


-


631


-


631





















Value-add revenues


$         1,024


$         1,112


$            827


$            684


$         3,647


$              -


$         3,647





















 EBITDA


$            156


$             93


$               8


$             11


$            268


$           (126)


$            142





















 EBITDA as a % of revenue


9.4%


8.4%


1.0%


1.6%


6.3%




3.3%



 EBITDA as a % of value-add revenue


15.2%


8.4%


1.0%


1.6%


7.3%




3.9%





















 Adjusted EBITDA


$            151


$            135


$            118


$             51


$            455


$            (48)


$            407





















 Adjusted EBITDA as a % of revenue


9.1%


12.1%


14.3%


7.5%


10.6%




9.5%



 Adjusted EBITDA as a % of value-add revenue


14.7%


12.1%


14.3%


7.5%


12.5%




11.2%




(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.  See prior pages for a discussion of EBITDA and adjusted EBITDA.

 

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


$   7,121


$     4,408


$      3,167


$         2,754


$17,450


$         -


$17,450





















Less: Substrate sales


3,027


-


-


-


3,027


-


3,027





















Value-add revenues


$   4,094


$     4,408


$      3,167


$         2,754


$14,423


$         -


$14,423





















 EBITDA


$     582


$        363


$         184


$               8


$  1,137


$      (343)


$     794





















 EBITDA as a % of revenue


8.2%


8.2%


5.8%


0.3%


6.5%




4.6%



 EBITDA as a % of value-add revenue


14.2%


8.2%


5.8%


0.3%


7.9%




5.5%





















 Adjusted EBITDA


$     607


$        425


$         413


$           157


$  1,602


$      (187)


$  1,415





















 Adjusted EBITDA as a % of revenue


8.5%


9.6%


13.0%


5.7%


9.2%




8.1%



 Adjusted EBITDA as a % of value-add revenue


14.8%


9.6%


13.0%


5.7%


11.1%




9.8%
























YTD 2018








Global Segments










Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total



Net sales and operating revenues


$   6,707


$     1,112


$      1,780


$         2,164


$11,763


$         -


$11,763





















Less: Substrate sales


2,500


-


-


-


2,500


-


2,500





















Value-add revenues


$   4,207


$     1,112


$      1,780


$         2,164


$  9,263


$         -


$  9,263





















 EBITDA


$     599


$          93


$         161


$             69


$     922


$      (255)


$     667





















 EBITDA as a % of revenue


8.9%


8.4%


9.0%


3.2%


7.8%




5.7%



 EBITDA as a % of value-add revenue


14.2%


8.4%


9.0%


3.2%


10.0%




7.2%





















 Adjusted EBITDA


$     613


$        135


$         277


$           161


$  1,186


$      (124)


$  1,062





















 Adjusted EBITDA as a % of revenue


9.1%


12.1%


15.6%


7.4%


10.1%




9.0%



 Adjusted EBITDA as a % of value-add revenue


14.6%


12.1%


15.6%


7.4%


12.8%




11.5%




(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.  See prior pages for a discussion of EBITDA and adjusted EBITDA.

 

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


Q3


Q4


YTD






Substrate


Value-add




Substrate


Value-add




Substrate


Value-add




Substrate


Value-add




Substrate


Value-add




Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Clean Air


$     319


$     115


$     204


$     300


$     110


$     190


$     271


$       99


$     172


$      277


$   115


$     162


$   1,167


$   439


$     728


































Powertrain


426


-


426


401


-


401


385


-


385


379


-


379


1,591


-


1,591


































Ride Performance


150


-


150


136


-


136


127


-


127


111


-


111


524


-


524

































Total Tenneco Inc.


$     895


$     115


$     780


$     837


$     110


$     727


$     783


$       99


$     684


$      767


$   115


$     652


$   3,282


$   439


$  2,843




































2018




Q1


Q2


Q3


Q4


YTD






Substrate


Value-add




Substrate


Value-add




Substrate


Value-add




Substrate


Value-add




Substrate


Value-add




Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Revenues


Sales


Revenues


Clean Air


$     307


$     109


$     198


$     290


$     101


$     189


$     273


$       98


$     175


$      273


$   100


$     173


$   1,143


$   408


$     735


































Powertrain


-


-


-


-


-


-


-


-


-


420


-


420


420


-


420


































Ride Performance


69


-


69


69


-


69


67


-


67


111


-


111


316


-


316

































Total Tenneco Inc.


$     376


$     109


$     267


$     359


$     101


$     258


$     340


$       98


$     242


$      804


$   100


$     704


$   1,879


$   408


$  1,471


(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 separation 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 separation 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 separation 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 separation 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


-


-


-


-


-


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 separation 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


-


-


-


-


-


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


Antitrust settlement accrual


-


-


-


-


-


-


-


-


132


132


Warranty settlement


-


-


-


-


-


7


-


7


-


7


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 FY 2020 Outlook

Unaudited




New Tenneco 2020 Outlook




VA Revenue $8.05 billion to $8.3 billion


Adjusted EBITDA between $850 million to $915 million







DRiV™ 2020 Outlook




Revenue $5.65 billion to $5.8 billion


Adjusted EBITDA between $450 million to $535 million

 

 

SOURCE Tenneco Inc.

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