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Investors

Tenneco Reports Fourth Quarter and Full-Year 2016 Results

February 07, 2017

Tenneco Reports Fourth Quarter and Full-Year 2016 Results
  • Record fourth quarter and full-year revenue
  • Record full-year EBIT, net income and earnings per share
  • Repurchased 4.2 million shares of common stock in 2016

LAKE FOREST, Ill.--(BUSINESS WIRE)-- Tenneco (NYSE: TEN) reported fourth quarter net income of $40 million, or $0.73 per diluted share, which includes an after-tax pension charge of $47 million. Fourth quarter 2015 net income was $68 million, or $1.17 per diluted share. Adjusted net income rose to $92 million, or $1.67 per diluted share, versus $80 million or $1.39 per diluted share last year.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170207005826/en/

Tenneco expects total revenue growth of 5% in 2017. (Graphic: Business Wire)

Tenneco expects total revenue growth of 5% in 2017. (Graphic: Business Wire)

Fourth Quarter Results

Revenue

Total revenue in the fourth quarter was $2.155 billion, up 6% year-over-year on stronger global light vehicle revenues, driven by both the Clean Air and Ride Performance product lines.

On a constant currency basis, total revenue increased 9% to $2.212 billion, driven by a 13% increase in light vehicle revenue, nearly doubling global light vehicle industry production growth of 7%. Tenneco’s fourth quarter OE commercial truck and off-highway revenues declined 7% year over year, remaining essentially even with the third quarter. The company’s global aftermarket revenue was up 1% versus a year ago. Value-add revenue increased 9% versus last year.

“We finished the year with a solid fourth quarter and another year of record results, with full-year total revenue again outpacing industry production,” said Gregg Sherrill, chairman and CEO, Tenneco. “We also continued to do an excellent job converting this top line growth to drive record-high earnings for 2016 and greater profitability with our seventh consecutive full year of value-add adjusted EBIT margin improvement.”

Adjusted fourth quarter 2016 and 2015 results

(millions except per share amounts)   Q4 2016   Q4 2015
      Net income       Net income  

attributable to

attributable to

EBITDA* EBIT

Tenneco Inc.

Per Share EBITDA* EBIT

Tenneco Inc.

Per Share
Earnings Measures $ 128 $ 75 $ 40 $ 0.73 $ 177 $ 128 $ 68 $ 1.17
 
Adjustments (reflects non-GAAP measures):
Restructuring and related expenses 9 10 9 0.18 16 16 15 0.26
Pension charges 72 72 47 0.85 4 4 3 0.05
Net tax adjustments - - (4 ) (0.09 ) - - (6 ) (0.09 )
 
               
Non-GAAP earnings measures $ 209 $ 157 $ 92   $ 1.67   $ 197 $ 148 $ 80   $ 1.39  
 
* EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
In addition to the items set forth above, the tables at the end of this press release reconcile GAAP to non-GAAP results.
 

EBIT and EBIT Margin

Fourth quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $75 million, versus $128 million last year. Adjusted EBIT rose 6% to $157 million, a fourth quarter record.

Tenneco EBIT as a percent of revenue was 3.5%, which included a pre-tax pension charge of $72 million, and $10 million in restructuring and related expenses. Adjusted EBIT as a percent of value-add revenue was 9.6%, consistent with a strong performance a year ago.

Both EBIT and EBIT margin results continue to be driven by capitalizing on light vehicle growth in excess of industry production, technology content growth in both product lines, higher aftermarket sales and a continued focus on launch execution and manufacturing improvements. The year over year comparison includes $10 million in negative currency.

Fourth quarter EBIT margin

 

Q4 2016

 

Q4 2015

 
EBIT as a percent of revenue 3.5% 6.3%
EBIT as a percent of value-add revenue 4.6% 8.3%
 
Adjusted EBIT as a percent of revenue 7.3%

7.3%

Adjusted EBIT as a percent of value-add revenue 9.6% 9.6%
 

Full-Year Results

Adjusted full year 2016 and 2015 results

(millions except per share amounts)   2016   2015
      Net income       Net income  
attributable to attributable to
EBITDA* EBIT Tenneco Inc. Per Share EBITDA* EBIT Tenneco Inc. Per Share
Earnings Measures $ 740 $ 528 $ 363 $ 6.44 $ 722 $ 519 $ 247 $ 4.11
 
Adjustments (reflects non-GAAP measures):
Restructuring and related expenses 32 36 32 0.57 59 63 58 0.96
Pension charges 72 72 47 0.83 4 4 3 0.05
Costs related to refinancing - - 15 0.27 - - - -
Net tax adjustments - - (110 ) (1.96 ) - - (15 ) (0.25 )
 
               
Non-GAAP earnings measures $ 844 $ 636 $ 347   $ 6.15   $ 785 $ 586 $ 293   $ 4.87  
 
* EBITDA including noncontrolling interests (EBIT before depreciation and amortization)
In addition to the items set forth above, the tables at the end of this press release reconcile GAAP to non-GAAP results.
 

Revenue

For the full year, total revenue was $8.599 billion. In constant currency, revenue increased 7% to $8.819 billion.

Revenue growth was driven by a 10% increase in light vehicle revenue and a 2% increase in aftermarket sales. Commercial truck and off-highway revenue was down 4%, which included a 2% increase in Clean Air revenue due to incremental content growth, offset by lower Ride Performance revenue due to weak industry commercial truck production and the sale of the Marzocchi specialty business.

EBIT and EBIT margin

Full-year EBIT increased to $528 million, versus $519 million a year ago. Adjusted EBIT rose 9% to $636 million.

EBIT as a percent of revenue was 6.1%. Adjusted EBIT as a percent of value-add revenue was 9.7%, up 40 basis points versus a year ago.

Improvements in EBIT and adjusted EBIT were driven by incremental Clean Air content on light vehicle and commercial truck programs, Monroe Intelligent Suspension revenue growth, higher global aftermarket sales, leveraging higher light vehicle volumes globally and ongoing operational improvements. The year-over-year comparison includes $33 million in negative currency.

 

2016

       

2015

 
EBIT as a percent of revenue 6.1% 6.3%
EBIT as a percent of value-add revenue 8.0% 8.2%
 
Adjusted EBIT as a percent of revenue 7.4% 7.1%
Adjusted EBIT as a percent of value-add revenue 9.7% 9.3%
 

Cash

Cash generated by operations in the fourth quarter was $250 million, compared with $329 million in fourth quarter 2015. For the full year, cash generated by operations was $489 million, down from $517 million a year ago, due to the timing of revenue growth at the end of the year and the resulting impact on accounts receivable.

During the quarter the company repurchased approximately 1.4 million shares of common stock for $79 million. For the full year, the company repurchased a total of 4.2 million shares for $225 million.

Tenneco continues to invest in growth with total capital spending in 2016 of $343 million, primarily for new programs in Europe, North America and China.

OUTLOOK

(Note: all forward looking revenue estimates reflect constant currency.)

First quarter 2017

Tenneco expects total revenue growth of 7% in the first quarter 2017, outpacing forecasted light vehicle industry production* growth of 3%. The company expects to better the industry with 4% organic growth, driven by incremental content to meet Tier 3 and Euro 6 emissions regulations, the ramp up of recently launched programs and Tenneco’s strong position on light vehicle platforms globally. Tenneco also expects a slight increase in commercial truck and off-highway revenues and a solid contribution from the global aftermarket. The company anticipates a currency headwind in the first quarter of approximately 2% based on current exchange rates.

Full year 2017

The company expects total revenue growth to outpace light vehicle industry production by 4 percentage points, resulting in 5% growth in 2017 driven by:

  • An outstanding position on light vehicle platforms globally;
  • Regulatory-driven Clean Air content;
  • Increasing demand for advanced suspension systems, and;
  • Tenneco’s global aftermarket leadership.

The company’s revenue growth estimate assumes light vehicle industry production growth* of 1%, global commercial truck production** growth of about 2%, and growth in off-highway engine production** in regulated regions (North America and Europe) of about 2%.

In 2018 and 2019, Tenneco expects continued revenue growth, outpacing industry production by 3 to 5 percentage points each year.

“Tenneco has exceptional growth opportunities, powered by sustainable growth drivers and outstanding balance in terms of product lines, end markets, geographic regions and customers we serve,” said Sherrill. “In 2017, we expect to build on our track record of growth and continue our annual margin expansion with regulatory-driven Clean Air content growth, increased penetration of our Monroe Intelligent Suspension technology, disciplined launch execution and a relentless focus on continuous operational improvements.”

In 2017, Tenneco expects:

  • Capital expenditures between $360 million and $390 million;
  • Annual interest expense of about $70 million;
  • Cash taxes between $125 million and $140 million;
  • Full year tax rate between 29% and 31%.

*IHS Automotive January 2017 global light vehicle production and Tenneco estimates.

**Power Systems Research January 2017 global commercial truck and bus production, PSR off-highway engine production in North America and Europe, and Tenneco estimates.

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 Net Income to EBITDA including noncontrolling interests – 3 Months

Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months

Reconciliation of GAAP Net Income to EBITDA including noncontrolling interests – 12 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 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 and Earnings to Non-GAAP Revenue and Earnings Measures – adjusted EBIT as a percentage of value-add revenue – Annual

Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway and other revenues – 3 Months and 12 Months

CONFERENCE CALL

The company will host a conference call on Tuesday, February 7, 2017 at 9:00 a.m. ET. The dial-in number is 888-989-6519 (domestic) or 630-395-0180 (international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.investors.tenneco.com. A recording of the call will be available one hour following completion of the call on February 7, 2016 through March 7, 2017. To access this recording, dial 888-568-0148 (domestic) or 203-369-3900 (international). The purpose of the call is to discuss the company’s operations for last fiscal quarter and year ending 2016, as well as provide updated information regarding matters impacting the company’s outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.

ANNUAL MEETING

The Tenneco Board of Directors has scheduled the corporation’s annual meeting of shareholders for Wednesday, May 17, 2017 at 10:00 a.m. CT. The meeting will be held at the corporate headquarters, 500 North Field Drive, Lake Forest, Illinois. The record date for shareholders eligible to vote at the meeting is March 20, 2017.

Tenneco is an $8.6 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 31,000 employees worldwide. Tenneco is one of the world’s largest designers, manufacturers and marketers of clean air and ride performance products and systems for automotive and commercial vehicle original equipment markets and the aftermarket. Tenneco’s principal brand names are Monroe®, Walker®, XNOx™ and Clevite®Elastomer.

Revenue estimates in this release are based on OE manufacturers’ programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco’s status as supplier for the existing program and its relationship with the customer.These revenue estimates are also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. Unless otherwise indicated, our revenue estimate methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency. For certain additional assumptions upon which these estimates are based, see the slides accompanying the February 7, 2017 webcast, which will be available on the financial section of the Tenneco website at www.investors.tenneco.com.

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

(i) general economic, business and market conditions;

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

(iii) the cost and outcome of existing and any future claims, legal proceedings, or investigations, including, but not limited to, any of the foregoing arising in connection with the ongoing global antitrust investigation, product performance, product safety or intellectual property rights;

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

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

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

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

(viii) the loss of any of our large original equipment manufacturer (“OEM”) customers (on whom we depend for a substantial portion of our revenues), or the loss of market shares by these customers if we are unable to achieve increased sales to other OEMs or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;

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

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

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

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

(xiii) the negative impact of fuel price volatility on transportation and logistics costs, raw material costs, discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment;

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

(xv) product warranty costs;

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

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

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

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

(xx) the impact of the extensive, increasing and changing laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved;

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

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

The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2015, and its quarterly report on Form 10-Q for the quarter ended September 30, 2016.

    ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited

THREE MONTHS ENDED DECEMBER 31,
(Millions except per share amounts)
 
 
  2016     2015  
Net sales and operating revenues
Clean Air Division - Value-add revenues $ 1,027 $ 967
Clean Air Division - Substrate sales 515 482
Ride Performance Division - Value-add revenues   613     582  
$ 2,155 $ 2,031
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below) 1,790 (a) 1,688 (d)
Engineering, research and development 37 (a) 32
Selling, general and administrative 199 (b) 132 (d) (e)
Depreciation and amortization of other intangibles   53   (a)   49  
Total costs and expenses   2,079     1,901  
 
Loss on sale of receivables (1 ) (1 )
Other income (expense)   -     (1 ) (d)
Total other income (expense)   (1 )   (2 )
 
Earnings before interest expense, income taxes,
and noncontrolling interests
Clean Air Division 122 (a) 116 (d)
Ride Performance Division 54 (a) 38 (d)
Other   (101 ) (a) (b)   (26 ) (e)
75 128
 
Interest expense (net of interest capitalized)   16     18  
Earnings before income taxes and noncontrolling interests 59 110
 
Income tax expense (benefit)   (2 ) (c)   27   (f)
Net income 61 83
 
Less: Net income attributable to noncontrolling interests   21     15  
Net income attributable to Tenneco Inc. $ 40   $ 68  
 
 
Weighted average common shares outstanding:
Basic   54.3     57.4  
Diluted   54.8     57.9  
 
Earnings per share of common stock:
Basic $ 0.74   $ 1.18  
Diluted $ 0.73   $ 1.17  
 
(a) Includes restructuring and related charges of $10 million pre-tax, $9 million after tax or $0.18 per diluted share. Of the amount, $8 million is recorded in cost of sales, $1 million is recorded in engineering expenses and $1 million is recorded in depreciation and amortization. $4 million is recorded in the Clean Air Division, $4 million is recorded in the Ride Performance Division and $2 million is recorded in Other.
 
(b) Includes pension charges of $72 million pre-tax, $47 million after tax or $0.85 per diluted share recorded in selling, general and administrative expense.
 
(c) Includes net tax benefits of $4 million or $0.09 per diluted share for tax adjustments to prior year estimates.
 
(d) Includes restructuring and related charges of $16 million pre-tax, $15 million after tax or $0.26 per diluted share. Of the amount, $9 million is recorded in cost of sales, $6 million is recorded in selling, general and administrative expenses and $1 million is recorded in other income (expense). $3 million is recorded in the Clean Air Division and $13 million is recorded in the Ride Performance Division.
 
(e) Includes pension charges of $4 million pre-tax, $3 million after tax or $0.05 per diluted share recorded in selling, general and administrative expense.
 
(f) Includes net tax benefits of $6 million or $0.09 per diluted share for tax adjustments to prior year estimates.
 

    ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited

TWELVE MONTHS ENDED DECEMBER 31,
(Millions except per share amounts)
 
 
  2016     2015  
Net sales and operating revenues
Clean Air Division - Value-add revenues $ 4,041 $ 3,807
Clean Air Division - Substrate sales 2,028 1,916
Ride Performance Division - Value-add revenues   2,530     2,486  
$ 8,599 $ 8,209
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below) 7,111 (a) 6,845 (e)
Engineering, research and development 154 (a) 146 (e)
Selling, general and administrative 589

(a) (b)

491 (e) (f)
Depreciation and amortization of other intangibles   212   (a)   203   (e)
Total costs and expenses   8,066     7,685  
 
Loss on sale of receivables (5 ) (4 )
Other income (expense)   -   (a)   (1 ) (e)
Total other income (expense)   (5 )   (5 )
 
Earnings before interest expense, income taxes,
and noncontrolling interests
Clean Air Division 478 (a) 417 (e)
Ride Performance Division 238 (a) 189 (e)
Other   (188 )

(a) (b)

  (87 ) (f)
528 519
 
Interest expense (net of interest capitalized)   92   (c)   67  
Earnings before income taxes and noncontrolling interests 436 452
 
Income tax expense   3   (d)   149   (g)
Net income 433 303
 
Less: Net income attributable to noncontrolling interests   70     56  
Net income attributable to Tenneco Inc. $ 363   $ 247  
 
 
Weighted average common shares outstanding:
Basic   55.9     59.7  
Diluted   56.4     60.2  
 
Earnings per share of common stock:
Basic $ 6.49   $ 4.14  
Diluted $ 6.44   $ 4.11  
 
(a) Includes restructuring and related charges of $36 million pre-tax, $32 million after tax or $0.57 per diluted share. Of the amount, $17 million is recorded in cost of sales, $12 million is recorded in selling, general and administrative expenses, $1 million is recorded in engineering expenses, $4 million is recorded in depreciation and amortization and $2 million is recorded in other income (expense). $7 million is recorded in the Clean Air Division, $27 million is recorded in the Ride Performance Division and $2 million is recorded in Other.
 
(b) Includes pension charges of $72 million pre-tax, $47 million after tax or $0.83 per diluted share recorded in selling, general and administrative expense.
 
(c) Includes pre-tax expenses of $24 million, $15 million after tax or $0.27 per diluted share for costs related to refinancing activities.
 
(d) Includes net tax benefits of $110 million or $1.96 per diluted share for tax adjustments related to foreign tax credits available for carryforward.
 
(e) Includes restructuring and related charges of $63 million pre-tax, $58 million after tax or $0.96 per diluted share. Of the amount, $46 million is recorded in cost of sales, $11 million is recorded in selling, general and administrative expenses, $1 million is recorded in engineering expenses, $4 million is recorded in depreciation and amortization and $1 million is recorded in other income (expense). $10 million is recorded in the Clean Air Division and $53 million is recorded in the Ride Performance Division.
 
(f) Includes pension charges of $4 million pre-tax, $3 million after tax or $0.05 per diluted share recorded in selling, general and administrative expense.
 
(g) Includes net tax benefits of $15 million or $0.25 per diluted share for tax adjustments to prior year estimates.
 

    ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
 
December 31, 2016 December 31, 2015
 
Assets
 
Cash and cash equivalents $ 347 $ 287
 
Restricted cash 2 1
 
Receivables, net 1,294 (a) 1,112 (a)
 
Inventories 730 682
 
Other current assets 229 229
 
Investments and other assets 383 413
 
Plant, property, and equipment, net   1,357     1,243
 
Total assets $ 4,342   $ 3,967
 
 
Liabilities and Shareholders' Equity
 
Short-term debt $ 90 $ 86
 
Accounts payable 1,496 1,376
 
Accrued taxes 41 37
 
Accrued interest 15 4
 
Other current liabilities 328 291
 
Long-term debt 1,294 (b) 1,124 (b)
 
Deferred income taxes 7 7
 
Deferred credits and other liabilities 389 524
 
Redeemable noncontrolling interests 43 43
 
Tenneco Inc. shareholders' equity 588 433
 
Noncontrolling interests   51     42
 
Total liabilities, redeemable noncontrolling interests
and shareholders' equity $ 4,342   $ 3,967
 
 
December 31, 2016 December 31, 2015
(a) Accounts Receivables net of:
Europe - Accounts receivables securitization programs $ 160 $ 174
 
December 31, 2016 December 31, 2015
(b) Long term debt composed of:
Borrowings against revolving credit facilities $ 300 $ 105
Term loan A (Due 2019) 270 285
6.875% senior notes (Due 2020) - 500
5.000% senior notes (Due 2026) 500 -
5.375% senior notes (Due 2024) 225 225
Other long term debt (1 ) 9
   
$ 1,294   $ 1,124
 

    ATTACHMENT 1
Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
 
Three Months Ended
December 31,
  2016     2015  
 
Operating activities:
Net income $ 61 $ 83
Adjustments to reconcile net income
to net cash provided by operating activities -
Depreciation and amortization of other intangibles 53 49
Stock-based compensation 1 2
Deferred income taxes (6 ) 1
Loss on sale of assets 2 2
Changes in components of working capital-
(Inc.)/dec. in receivables (26 ) 147
(Inc.)/dec. in inventories 4 29
(Inc.)/dec. in prepayments and other current assets 61 41
Inc./(dec.) in payables 54 20
Inc./(dec.) in accrued taxes (6 ) 6
Inc./(dec.) in accrued interest 3 (12 )
Inc./(dec.) in other current liabilities 33 (41 )
Changes in long-term assets 1 2
Changes in long-term liabilities 17 (2 )
Other   (2 )   2  
Net cash provided by operating activities 250 329
 
Investing activities:
Proceeds from sale of assets 2 1
Cash payments for plant, property & equipment (112 ) (65 )
Cash payments for software-related intangible assets (5 ) (10 )
Change in restricted cash   -     1  
Net cash used by investing activities   (115 )   (73 )
 
Financing activities:
Issuance of common shares 7 1
Purchase of common stock under the share repurchase program (79 ) (55 )
Tax impact from stock-based compensation - 5
Issuance of long-term debt 1 -
Debt issuance costs on long-term debt (1 ) -
Retirement of long-term debt (4 ) (12 )
Net inc./(dec.) in bank overdrafts 6 (1 )
Net inc./(dec.) in revolver borrowings and short-term debt excluding current maturities on
long-term debt and short-term borrowings secured by accounts receivable (21 ) (121 )
Net inc./(dec.) in short-term debt secured by accounts receivable   (20 )   -  
Net cash used by financing activities   (111 )   (183 )
 
Effect of foreign exchange rate changes on cash and
cash equivalents   (1 )   (6 )
 
Increase in cash and cash equivalents 23 67
Cash and cash equivalents, October 1   324     220  
Cash and cash equivalents, December 31 $ 347   $ 287  
 
Supplemental Cash Flow Information
Cash paid during the period for interest (net of interest capitalized) $ 14 $ 30
Cash paid during the period for income taxes (net of refunds) 25 26
 
Non-cash Investing and Financing Activities
Retirement of obligation and exchange of property
Period ended balance of payables for plant, property, and equipment $ 68 $ 50
 

    ATTACHMENT 1
Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
 
Twelve Months Ended
December 31,
  2016     2015  
 
Operating activities:
Net income $ 433 $ 303
Adjustments to reconcile net income
to net cash provided by operating activities -
Depreciation and amortization of other intangibles 212 203
Stock-based compensation 14 15
Deferred income taxes (79 ) -
Loss on sale of assets 4 4
Changes in components of working capital-
(Inc.)/dec. in receivables (215 ) (90 )
(Inc.)/dec. in inventories (57 ) (36 )
(Inc.)/dec. in prepayments and other current assets (8 ) 37
Inc./(dec.) in payables 109 90
Inc./(dec.) in accrued taxes 4 (1 )
Inc./(dec.) in accrued interest 12 1
Inc./(dec.) in other current liabilities 26 (10 )
Changes in long-term assets 6 3
Changes in long-term liabilities 26 (2 )
Other   2     -  
Net cash provided by operating activities 489 517
 
Investing activities:
Proceeds from sale of assets 6 4
Cash payments for plant, property & equipment (325 ) (286 )
Cash payments for software-related intangible assets (20 ) (23 )
Change in restricted cash   (1 )   2  
Net cash used by investing activities   (340 )   (303 )
 
Financing activities:
Issuance of common shares 18 6
Purchase of common stock under the share repurchase program (225 ) (213 )
Tax impact from stock-based compensation (10 ) 6
Issuance of long-term debt 509 1
Debt issuance costs on long-term debt (9 ) (1 )
Retirement of long-term debt (531 ) (37 )
Net inc./(dec.) in bank overdrafts 10 (22 )
Net inc./(dec.) in revolver borrowings and short-term debt excluding current maturities on
long-term debt and short-term borrowings secured by accounts receivable 202 102
Net inc./(dec.) in short-term debt secured by accounts receivable - 30
Distribution to noncontrolling interest partners   (55 )   (44 )
Net cash used by financing activities   (91 )   (172 )
 
Effect of foreign exchange rate changes on cash and
cash equivalents   2     (37 )
 
Increase in cash and cash equivalents 60 5
Cash and cash equivalents, January 1   287     282  
Cash and cash equivalents, December 31 $ 347   $ 287  
 
Supplemental Cash Flow Information
Cash paid during the period for interest (net of interest capitalized) $ 76 $ 68
Cash paid during the period for income taxes (net of refunds) 113 105
 
Non-cash Investing and Financing Activities
Retirement of obligation and exchange of property
Period ended balance of payables for plant, property, and equipment $ 68 $ 50
 

ATTACHMENT 2

TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDAINCLUDING NONCONTROLLING INTERESTS (2)

Unaudited

(Millions)
                     
 
Q4 2016
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 40
 
Net income attributable to noncontrolling interests   21  
 
Net income 61
 
Income tax benefit (2 )
 
Interest expense (net of interest capitalized)   16  
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 53 $ 28 $ 41 $ 122 $ 30 $ 6 $ 18 $ 54 $ (101 ) 75
 
Depreciation and amortization of other intangibles   16   11   8   35   9   8     1   18   -     53  
 
Total EBITDA including noncontrolling interests (2) $ 69 $ 39 $ 49 $ 157 $ 39 $ 14   $ 19 $ 72 $ (101 ) $ 128  
 
 
Q4 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 68
 
Net income attributable to noncontrolling interests   15  
 
Net income 83
 
Income tax expense 27
 
Interest expense (net of interest capitalized)   18  
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 65 $ 16 $ 35 $ 116 $ 30 $ (4 ) $ 12 $ 38 $ (26 ) 128
 
Depreciation and amortization of other intangibles   16   10   6   32   8   8     1   17   -     49  
 
Total EBITDA including noncontrolling interests (2) $ 81 $ 26 $ 41 $ 148 $ 38 $ 4   $ 13 $ 55 $ (26 ) $ 177  
(1) Generally Accepted Accounting Principles
 
(2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.

 

ATTACHMENT 2

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

Unaudited

(Millions except per share amounts)
                   
 
Q4 2016 Q4 2015
Net income Net income
attributable attributable
to Tenneco to Tenneco Per

EBITDA (3)

EBIT Inc. Per Share

EBITDA (3)

EBIT Inc. Share
Earnings Measures $ 128 $ 75 $ 40 $ 0.73 $ 177 $ 128 $ 68 $ 1.17
 
Adjustments (reflect non-GAAP measures):
Restructuring and related expenses 9 10 9 0.18 16 16 15 0.26
Pension charges (4) 72 72 47 0.85 4 4 3 0.05
Net tax adjustments - - (4 ) (0.09 ) - - (6 ) (0.09 )
               
Non-GAAP earnings measures $ 209 $ 157 $ 92   $ 1.67   $ 197 $ 148 $ 80   $ 1.39  
 
 
Q4 2016
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 53 $ 28 $ 41 $ 122 $ 30 $ 6 $ 18 $ 54 $ (101 ) $ 75
Restructuring and related expenses - 1 3 4 - 3 1 4 2 10
Pension charges (4)   -   -   -   -   -     -     -   -   72     72  
Adjusted EBIT $ 53 $ 29 $ 44 $ 126 $ 30   $ 9   $ 19 $ 58 $ (27 ) $ 157  
 
 
Q4 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 65 $ 16 $ 35 $ 116 $ 30 $ (4 ) $ 12 $ 38 $ (26 ) $ 128
Restructuring and related expenses - 2 1 3 - 13 - 13 - 16
Pension charges (4)   -   -   -   -   -     -     -   -   4     4  
Adjusted EBIT $ 65 $ 18 $ 36 $ 119 $ 30   $ 9   $ 12 $ 51 $ (22 ) $ 148  
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.
 
(3) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
 

(4) Charges related to Pension derisking.

 

ATTACHMENT 2

TENNECO INC.
RECONCILIATION OF GAAP(1) NET INCOME TO EBITDAINCLUDING NONCONTROLLING INTERESTS (2)

Unaudited

(Millions)
                     
 
YTD 2016
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 363
 
Net income attributable to noncontrolling interests   70
 
Net income 433
 
Income tax expense 3
 
Interest expense (net of interest capitalized)

 

  92
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 225 $ 103 $ 150 $ 478 $ 157 $ 25 $ 56 $ 238 $ (188 ) 528
 
Depreciation and amortization of other intangibles   66   43   28   137   35   34     6   75   -     212
 
Total EBITDA including noncontrolling interests (2) $ 291 $ 146 $ 178 $ 615 $ 192 $ 59   $ 62 $ 313 $ (188 ) $ 740
 
 
YTD 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net income attributable to Tenneco Inc. $ 247
 
Net income attributable to noncontrolling interests   56
 
Net income 303
 
Income tax expense 149
 
Interest expense (net of interest capitalized)   67
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 244 $ 52 $ 121 $ 417 $ 155 $ (5 ) $ 39 $ 189 $ (87 ) 519
 
Depreciation and amortization of other intangibles   65   40   25   130   33   34     6   73   -     203
 
Total EBITDA including noncontrolling interests (2) $ 309 $ 92 $ 146 $ 547 $ 188 $ 29   $ 45 $ 262 $ (87 ) $ 722
(1) Generally Accepted Accounting Principles
 
(2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.

 

ATTACHMENT 2

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

Unaudited

(Millions except per share amounts)
                   
 
YTD 2016 YTD 2015
Net income Net income
attributable attributable
to Tenneco to Tenneco

EBITDA (3)

EBIT Inc. Per Share

EBITDA (3)

EBIT Inc. Per Share
Earnings Measures $ 740 $ 528 $ 363 $ 6.44 $ 722 $ 519 $ 247 $ 4.11
 
Adjustments (reflect non-GAAP measures):
Restructuring and related expenses 32 36 32 0.57 59 63 58 0.96
Pension charges (4) 72 72 47 0.83 4 4 3 0.05
Costs related to refinancing - - 15 0.27 - - - -
Net tax adjustments - - (110 ) (1.96 ) - - (15 ) (0.25 )
               
Non-GAAP earnings measures $ 844 $ 636 $ 347   $ 6.15   $ 785 $ 586 $ 293   $ 4.87  
 
 
YTD 2016
Clean Air Division   Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 225 $ 103 $ 150 $ 478 $ 157 $ 25 $ 56 $ 238 $ (188 ) $ 528
Restructuring and related expenses - 3 4 7 6 20 1 27 2 36
Pension charges (4)   -   -   -   -   -     -     -   -   72     72  
Adjusted EBIT $ 225 $ 106 $ 154 $ 485 $ 163   $ 45   $ 57 $ 265 $ (114 ) $ 636  
 
 
YTD 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
EBIT $ 244 $ 52 $ 121 $ 417 $ 155 $ (5 ) $ 39 $ 189 $ (87 ) $ 519
Restructuring and related expenses - 6 4 10 2 49 2 53 - 63
Pension charges (4)   -   -   -   -   -     -     -   -   4     4  
Adjusted EBIT $ 244 $ 58 $ 125 $ 427 $ 157   $ 44   $ 41 $ 242 $ (83 ) $ 586  
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods. Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.
 
(3) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
 

(4) Charges related to Pension derisking.

 

ATTACHMENT 2

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

Unaudited

(Millions)
           
Q4 2016
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 751 $ 260 $ 491 $ - $ 491
Europe, South America & India 491 187 304 (15 ) 319
Asia Pacific   300   68   232   (14 )   246
Total Clean Air Division 1,542 515 1,027 (29 ) 1,056
 
Ride Performance Division
North America 282 - 282 (3 ) 285
Europe, South America & India 248 - 248 (4 ) 252
Asia Pacific   83   -   83   (6 )   89
Total Ride Performance Division 613 - 613 (13 ) 626
 
Total Tenneco Inc. $ 2,155 $ 515 $ 1,640 $ (42 ) $ 1,682
 
Q4 2015
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 701 $ 247 $ 454 $ - $ 454
Europe, South America & India 454 164 290 - 290
Asia Pacific   294   71   223   -     223
Total Clean Air Division 1,449 482 967 - 967
 
Ride Performance Division
North America 292 - 292 - 292
Europe, South America & India 226 - 226 - 226
Asia Pacific   64   -   64   -     64
Total Ride Performance Division 582 - 582 - 582
 
Total Tenneco Inc. $ 2,031 $ 482 $ 1,549 $ -   $ 1,549
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Tenneco uses this information to analyze the trend in revenues before these factors. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.

         

ATTACHMENT 2

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

Unaudited

(Millions)
 
YTD 2016
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 3,003 $ 1,052 $ 1,951 $ (1 ) $ 1,952
Europe, South America & India 1,989 735 1,254 (60 ) 1,314
Asia Pacific   1,077   241   836   (41 )   877
Total Clean Air Division 6,069 2,028 4,041 (102 ) 4,143
 
Ride Performance Division
North America 1,234 - 1,234 (13 ) 1,247
Europe, South America & India 1,019 - 1,019 (51 ) 1,070
Asia Pacific   277   -   277   (16 )   293
Total Ride Performance Division 2,530 - 2,530 (80 ) 2,610
 
Total Tenneco Inc. $ 8,599 $ 2,028 $ 6,571 $ (182 ) $ 6,753
 
YTD 2015
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
Clean Air Division
North America $ 2,851 $ 1,007 $ 1,844 $ - $ 1,844
Europe, South America & India 1,835 664 1,171 - 1,171
Asia Pacific   1,037   245   792   -     792
Total Clean Air Division 5,723 1,916 3,807 - 3,807
 
Ride Performance Division
North America 1,313 - 1,313 - 1,313
Europe, South America & India 944 - 944 - 944
Asia Pacific   229   -   229   -     229
Total Ride Performance Division 2,486 - 2,486 - 2,486
 
Total Tenneco Inc. $ 8,209 $ 1,916 $ 6,293 $ -   $ 6,293
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Tenneco uses this information to analyze the trend in revenues before these factors. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.

 

ATTACHMENT 2

TENNECO INC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES

Unaudited

(Millions except percents)
             
Q4 2016 vs. Q4 2015 $ Change and % Change Increase (Decrease)
Value-add
Revenues
Excluding
Revenues % Change   Currency % Change  
Clean Air Division
North America $ 50 7 % $ 37 8 %
Europe, South America & India 37 8 % 29 10 %
Asia Pacific   6   2 %   23   10 %
Total Clean Air Division 93 6 % 89 9 %
 
Ride Performance Division
North America (10 ) (3 %) (7 ) (2 %)
Europe, South America & India 22 10 % 26 12 %
Asia Pacific   19   30 %   25   39 %
Total Ride Performance Division 31 5 % 44 8 %
 
Total Tenneco Inc. $ 124 6 % $ 133 9 %
 
 
 
YTD Q4 2016 vs. YTD Q4 2015 $ Change and % Change Increase (Decrease)
Value-add
Revenues
Excluding
Revenues % Change   Currency % Change  
Clean Air Division
North America $ 152 5 % $ 108 6 %
Europe, South America & India 154 8 % 143 12 %
Asia Pacific   40   4 %   85   11 %
Total Clean Air Division 346 6 % 336 9 %
 
Ride Performance Division
North America (79 ) (6 %) (66 ) (5 %)
Europe, South America & India 75 8 % 126 13 %
Asia Pacific   48   21 %   64   28 %
Total Ride Performance Division 44 2 % 124 5 %
 
Total Tenneco Inc. $ 390 5 % $ 460 7 %

       

ATTACHMENT 2

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

Unaudited

(Millions except ratios)
 
Quarter Ended December 31,
 
  2016   2015
 
Total debt $ 1,384 $ 1,210
 
Total cash 349 288
   
Debt net of cash balances (1) $ 1,035 $ 922
 
 
Adjusted LTM EBITDA including noncontrolling interests (2) (3) $ 844 $ 785
 
Ratio of debt net of cash balances to adjusted LTM EBITDA including noncontrolling interests (4) 1.2x 1.2x
(1) Tenneco presents debt net of cash balances because management believes it is a useful measure of Tenneco's credit position and progress toward reducing leverage. The calculation is limited in that the company may not always be able to use cash to repay debt on a dollar-for-dollar basis.
 
(2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization. EBITDA including noncontrolling interests is not a calculation based upon generally accepted accounting principles. The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data. In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance. In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
 
(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 cash to LTM adjusted EBITDA including noncontrolling interests to show trends that investors may find useful in understanding the company's ability to service its debt. For purposes of this calculation, LTM adjusted EBITDA including noncontrolling interests is used as an indicator of the company's performance and debt net of cash is presented as an indicator of the company's credit position and progress toward reducing the company's financial leverage. This reconciliation is provided as supplemental information and not intended to replace the company's existing covenant ratios or any other financial measures that investors may find useful in describing the company's financial position. See notes (1), (2) and (3) for a description of the limitations of using debt net of cash, EBITDA including noncontrolling interests and adjusted EBITDA including noncontrolling interests.

 

ATTACHMENT 2

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

Unaudited

(Millions)
         
Q4 2016
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 1,672 $ (46 ) $ 1,718 $ 466 $ 1,252
Original equipment commercial truck, off-highway and other revenues 207 (7 ) 214 64 150
Aftermarket revenues   276   (4 )   280   -   280
Net sales and operating revenues $ 2,155 $ (57 ) $ 2,212 $ 530 $ 1,682
 
 
Q4 2015
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 1,522 $ - $ 1,522 $ 418 $ 1,104
Original equipment commercial truck, off-highway and other revenues 231 - 231 64 167
Aftermarket revenues   278   -     278   -   278
Net sales and operating revenues $ 2,031 $ - $ 2,031 $ 482 $ 1,549
 
 
 
YTD 2016
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 6,437 $ (160 ) $ 6,597 $ 1,799 $ 4,798
Original equipment commercial truck, off-highway and other revenues 920 (23 ) 943 267 676
Aftermarket revenues   1,242   (37 )   1,279   -   1,279
Net sales and operating revenues $ 8,599 $ (220 ) $ 8,819 $ 2,066 $ 6,753
 
 
YTD 2015
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 5,972 $ - $ 5,972 $ 1,644 $ 4,328
Original equipment commercial truck, off-highway and other revenues 978 - 978 272 706
Aftermarket revenues   1,259   -     1,259   -   1,259
Net sales and operating revenues $ 8,209 $ - $ 8,209 $ 1,916 $ 6,293
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar. Additionally, substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Tenneco uses this information to analyze the trend in revenues before these factors. Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues.

 

ATTACHMENT 2

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

Unaudited

(Millions except percents)
                   
 
Q4 2016
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 751 $ 491 $ 300 $ 1,542 $ 282 $ 248 $ 83 $ 613 $ - $ 2,155
 
Less: Substrate sales 260 187 68 515 - - - - - 515
                   
Value-add revenues $ 491   $ 304   $ 232   $ 1,027   $ 282   $ 248   $ 83   $ 613   $ -   $ 1,640  
 
EBIT $ 53 $ 28 $ 41 $ 122 $ 30 $ 6 $ 18 $ 54 $ (101 ) $ 75
 
EBIT as a % of revenue 7.1 % 5.7 % 13.7 % 7.9 % 10.6 % 2.4 % 21.7 % 8.8 % 3.5 %
EBIT as a % of value-add revenue 10.8 % 9.2 % 17.7 % 11.9 % 10.6 % 2.4 % 21.7 % 8.8 % 4.6 %
 
Adjusted EBIT $ 53 $ 29 $ 44 $ 126 $ 30 $ 9 $ 19 $ 58 $ (27 ) $ 157
 
Adjusted EBIT as a % of revenue 7.1 % 5.9 % 14.7 % 8.2 % 10.6 % 3.6 % 22.9 % 9.5 % 7.3 %
Adjusted EBIT as a % of value-add revenue 10.8 % 9.5 % 19.0 % 12.3 % 10.6 % 3.6 % 22.9 % 9.5 % 9.6 %
 
Q4 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 701 $ 454 $ 294 $ 1,449 $ 292 $ 226 $ 64 $ 582 $ - $ 2,031
 
Less: Substrate sales 247 164 71 482 - - - - - 482
                   
Value-add revenues $ 454   $ 290   $ 223   $ 967   $ 292   $ 226   $ 64   $ 582   $ -   $ 1,549  
 
EBIT $ 65 $ 16 $ 35 $ 116 $ 30 $ (4 ) $ 12 $ 38 $ (26 ) $ 128
 
EBIT as a % of revenue 9.3 % 3.5 % 11.9 % 8.0 % 10.3 % -1.8 % 18.8 % 6.5 % 6.3 %
EBIT as a % of value-add revenue 14.3 % 5.5 % 15.7 % 12.0 % 10.3 % -1.8 % 18.8 % 6.5 % 8.3 %
 
Adjusted EBIT $ 65 $ 18 $ 36 $ 119 $ 30 $ 9 $ 12 $ 51 $ (22 ) $ 148
 
Adjusted EBIT as a % of revenue 9.3 % 4.0 % 12.2 % 8.2 % 10.3 % 4.0 % 18.8 % 8.8 % 7.3 %
Adjusted EBIT as a % of value-add revenue 14.3 % 6.2 % 16.1 % 12.3 % 10.3 % 4.0 % 18.8 % 8.8 % 9.6 %
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect EBIT as a percent of both total revenues and value-add revenues. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting EBIT as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of such substrate sales.

 

ATTACHMENT 2

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

Unaudited

(Millions except percents)
                   
 
YTD 2016
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 3,003 $ 1,989 $ 1,077 $ 6,069 $ 1,234 $ 1,019 $ 277 $ 2,530 $ - $ 8,599
 
Less: Substrate sales 1,052 735 241 2,028 - - - - - 2,028
                   
Value-add revenues $ 1,951   $ 1,254   $ 836   $ 4,041   $ 1,234   $ 1,019   $ 277   $ 2,530   $ -   $ 6,571  
 
EBIT $ 225 $ 103 $ 150 $ 478 $ 157 $ 25 $ 56 $ 238 $ (188 ) $ 528
 
EBIT as a % of revenue 7.5 % 5.2 % 13.9 % 7.9 % 12.7 % 2.5 % 20.2 % 9.4 % 6.1 %
EBIT as a % of value-add revenue 11.5 % 8.2 % 17.9 % 11.8 % 12.7 % 2.5 % 20.2 % 9.4 % 8.0 %
 
Adjusted EBIT $ 225 $ 106 $ 154 $ 485 $ 163 $ 45 $ 57 $ 265 $ (114 ) $ 636
 
Adjusted EBIT as a % of revenue 7.5 % 5.3 % 14.3 % 8.0 % 13.2 % 4.4 % 20.6 % 10.5 % 7.4 %
Adjusted EBIT as a % of value-add revenue 11.5 % 8.5 % 18.4 % 12.0 % 13.2 % 4.4 % 20.6 % 10.5 % 9.7 %
 
YTD 2015
Clean Air Division Ride Performance Division
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total Other Total
Net sales and operating revenues $ 2,851 $ 1,835 $ 1,037 $ 5,723 $ 1,313 $ 944 $ 229 $ 2,486 $ - $ 8,209
 
Less: Substrate sales 1,007 664 245 1,916 - - - - - 1,916
                   
Value-add revenues $ 1,844   $ 1,171   $ 792   $ 3,807   $ 1,313   $ 944   $ 229   $ 2,486   $ -   $ 6,293  
 
EBIT $ 244 $ 52 $ 121 $ 417 $ 155 $ (5 ) $ 39 $ 189 $ (87 ) $ 519
 
EBIT as a % of revenue 8.6 % 2.8 % 11.7 % 7.3 % 11.8 % -0.5 % 17.0 % 7.6 % 6.3 %
EBIT as a % of value-add revenue 13.2 % 4.4 % 15.3 % 11.0 % 11.8 % -0.5 % 17.0 % 7.6 % 8.2 %
 
Adjusted EBIT $ 244 $ 58 $ 125 $ 427 $ 157 $ 44 $ 41 $ 242 $ (83 ) $ 586
 
Adjusted EBIT as a % of revenue 8.6 % 3.2 % 12.1 % 7.5 % 12.0 % 4.7 % 17.9 % 9.7 % 7.1 %
Adjusted EBIT as a % of value-add revenue 13.2 % 5.0 % 15.8 % 11.2 % 12.0 % 4.7 % 17.9 % 9.7 % 9.3 %
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect EBIT as a percent of both total revenues and value-add revenues. Substrate sales include precious metals pricing, which may be volatile. Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue. Excluding substrate sales removes this impact. Further, presenting EBIT as a percent of value-add revenue assists investors in evaluating the company's operational performance without the impact of such substrate sales.

TENNECO INC.
RECONCILIATION OF GAAP (1) REVENUE AND EARNINGS TO NON-GAAP REVENUE AND EARNINGS MEASURES (3)
Adjusted EBIT as a Percentage of Value-add Revenue

Unaudited

(Millions except percents)
                 
  2016     2015     2014     2013     2012     2011     2010     2009     2008     2007  
 
Net sales and operating revenues $ 8,599 $ 8,209 $ 8,420 $ 7,964 $ 7,363 $ 7,205 $ 5,937 $ 4,649 $ 5,916 $ 6,184
 
Less: Substrate sales   2,028     1,916     1,934     1,835     1,660     1,678     1,284     966     1,492     1,673  
 
Value-add revenues (2) $ 6,571 $ 6,293 $ 6,486 $ 6,129 $ 5,703 $ 5,527 $ 4,653 $ 3,683 $ 4,424 $ 4,511
 
 
EBIT $ 528 $ 519 $ 492 $ 424 $ 428 $ 379 $ 281 $ 92 $ (3 ) $ 252
 
Adjustments (reflect non-GAAP measures):
 
Restructuring and related expenses 36 63 49 78 13 8 19 21 40 25
 
Pullman recoveries - - - - (5 ) - - - - -
 
Asset impairment charge - - - - 7 - - - - -
 
Goodwill impairment - - - - - 11 - - 114 -
 
Bad debt charge - - 4 - - - - - - -
 
Pension/Postretirement charges 72 4 32 - - - 6 - - -
 
Environmental reserves - - - - - - - 5 - -
 
New aftermarket customer changeover costs   -     -     -     -     -     -     -     -     7     5  
 
Adjusted EBIT (non-GAAP Financial Measures) (3) $ 636 $ 586 $ 577 $ 502 $ 443 $ 398 $ 306 $ 118 $ 158 $ 282
 
Adjusted EBIT as a % of value-add revenue (4) 9.7 % 9.3 % 8.9 % 8.2 % 7.8 % 7.2 % 6.6 % 3.2 % 3.6 % 6.3 %
 

(1) Generally Accepted Accounting Principles

 

(2) 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.

 

(3) 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.

 

(4) Tenneco presents adjusted EBIT as a percentage of value-add revenue to assist investors in evaluating the company’s operational performance without the impact of substrate sales.

 

ATTACHMENT 2

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

Unaudited

(Millions)
                             
2016
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 Division
North America $ 92 $ 26 $ 66 $ 86 $ 28 $ 58 $ 63 $ 22 $ 41 $ 60 $ 22 $ 38 $ 301 $ 98 $ 203
Europe, South America & India 73 29 44 79 30 49 64 24 40 58 22 36 274 105 169
Asia Pacific 35 14 21 36 14 22 33 12 21 44 17 27 148 57 91
Total Clean Air Division 200 69 131 201 72 129 160 58 102 162 61 101 723 260 463
 
Total Ride Performance Division 52 - 52 52 - 52 48 - 48 45 - 45 197 - 197
                             
Total Tenneco Inc. $ 252 $ 69 $ 183 $ 253 $ 72 $ 181 $ 208 $ 58 $ 150 $ 207 $ 61 $ 146 $ 920 $ 260 $ 660
 
2015
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 Division
North America $ 86 $ 31 $ 55 $ 87 $ 31 $ 56 $ 81 $ 27 $ 54 $ 76 $ 26 $ 50 $ 330 $ 115 $ 215
Europe, South America & India 73 29 44 75 31 44 65 26 39 68 27 41 281 113 168
Asia Pacific 31 12 19 26 10 16 31 11 20 31 11 20 119 44 75
Total Clean Air Division 190 72 118 188 72 116 177 64 113 175 64 111 730 272 458
 
Total Ride Performance Division 67 - 67 68 - 68 57 - 57 56 - 56 248 - 248
                             
Total Tenneco Inc. $ 257 $ 72 $ 185 $ 256 $ 72 $ 184 $ 234 $ 64 $ 170 $ 231 $ 64 $ 167 $ 978 $ 272 $ 706
(1) 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.

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

Source: Tenneco Inc.