U.S. Markets close in 1 hr 23 mins

Tenneco Reports First Quarter 2019 Results

- Segment reporting changed to align with operating structure of future companies

- Updated full-year guidance

- Targeted spin timing updated

LAKE FOREST, Ill., May 9, 2019 /PRNewswire/ -- Tenneco Inc. (TEN) reported first quarter 2019 revenue** of $4.5 billion, a 74% increase versus $2.6 billion a year ago. On a constant currency basis, organic revenue grew 4% and net revenue growth from acquisitions and divestitures was 75%, while the impact of exchange rates was negative 5%.  On a constant currency pro forma basis, total revenue increased 1% versus last year, while light vehicle industry production declined 7%.  Value add revenue for the first quarter was $ 3.8 billion.

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

The company reported a net loss for first quarter 2019 of $117 million, or a loss of $1.44 per diluted share.  First quarter 2018 net income** was $60 million, or $1.17 per diluted share.  First quarter 2019 adjusted net income was $42 million, or 52-cents per diluted share, compared with $83 million, or $1.62 per diluted share last year.**

First quarter EBIT (earnings before interest, taxes and noncontrolling interests) was $(24) million, versus $122 million last year.  EBIT as a percent of revenue was -0.5% versus 4.7% last year. 

First quarter adjusted EBITDA was $327 million versus $212 million last year.  Adjusted EBITDA as a percent of value-add revenue was 8.7% compared with 11.0% a year ago.  In addition to the inclusion of the acquired Federal-Mogul business, the comparison includes the unfavorable mix impact on earnings of weaker aftermarket and China OE volumes and related operational inefficiencies.  

Cash used by operations was $150 million, excluding proceeds from the deferred purchase price of factored receivables of $60 million. Capital investments in the quarter were $173 million. During the quarter, the company returned $20 million to shareholders through a dividend payment of 25-cents per common share.

"Tenneco delivered organic revenue growth that outpaced industry production by eight percentage points, driven by higher light vehicle, commercial truck and off-highway revenues," said Roger Wood, co-CEO Tenneco. "While lower aftermarket sales and China volume declines impacted earnings in the quarter, we are confident in the strength of our growth drivers and actions underway to reduce cost and improve cash generation."

OUTLOOK

Second Quarter Outlook
Tenneco expects second quarter revenue in the range of $4.45 billion to $4.55 billion, about flat with the first quarter.  Further, the company expects its second quarter adjusted EBITDA to be in the range of $375 - $395 million, nearly a 20% sequential improvement from the prior quarter at the range midpoint, with aftermarket revenues returning to expected levels and the ramping up of synergies and other initiatives.

Full year 2019
The company has revised its 2019 full year outlook, and now expects total revenues in the range of $17.7 billion to $18.1 billion, including 3% pro forma organic revenue growth, and outpacing light vehicle industry production* by 6 percentage points.

The following table summarizes the full year guidance.

Total revenue 

$17.7-$18.1B

Value-add revenue

$14.95-$15.35B

Adjusted EBITDA

$1,500 -$1,620M

VA Adjusted EBITDA margin 

10.0-10.6%

Pro forma organic revenue growth

3%

Currency translation impact

-2%


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

Leverage and Spin Update
The company anticipates year-end 2019 leverage (net debt/adjusted EBITDA) to be approximately 3.3x, based on the midpoint of its adjusted EBITDA guidance. As a result, and due in part to the current weak market environment, the company has revised its timing target for the separation of the business into two standalone companies, and now expects the DRiV™ spinoff to occur mid-2020. The additional time will allow the two new organizations to align and stabilize business processes and systems, solidify margin and cash flow performance metrics, and strengthen their balance sheets.

"We expect revenue to continue to outperform industry production in the second quarter and deliver sequential improvements in profitability," said Brian Kesseler, co- CEO.  "The global market and technology trends driving demand remain positive, and customers are enthusiastic about the two new companies' unique capabilities to deliver value through tailored solutions. We continue to believe significant value can be unlocked by separating the current Tenneco portfolio into two, purpose-built businesses and remain committed to the separation as soon as favorable conditions exist."

*Source: IHS Markit April 2019 global light vehicle production forecast and Tenneco estimates.
**Financial results for the first quarter of 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.

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

Attachment 2
Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of Non-GAAP Measures – Debt Net of Cash/Pro Forma Adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue – 3 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment Commercial Truck, Off-Highway, Industrial and other revenues – 3 Months
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures – 2018 quarterly
Reconciliation of GAAP revenue to pro forma revenue and Non-GAAP earnings measures – 2018 and 2017 annual
Division Level Q2 and FY 2019 Outlook

CONFERENCE CALL
The company will host a conference call on Thursday, May 9, 2019 at 9:30 a.m. ET.  The dial-in number is 833-366-1121 (domestic) or 412-902-6733 (international).  The passcode is: Tenneco Inc. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.investors.tenneco.com.  A recording of the call will be available one hour following completion of the call on May 9, 2019 through May 16, 2019.  To access this recording, dial 877-344-7529 (domestic) or 412-317-0088 (international) or 855 669-9658 (Canada). The replay access code is 10130965. The purpose of the call is to discuss the company's operations for the first fiscal quarter 2019, 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 company's annual meeting of shareholders for Wednesday, May 15, 2019 at 1:00 p.m. ET.  The meeting will be held at the Detroit Foundation Hotel, 250 W Larned Street, Detroit, Michigan.  The record date for shareholders eligible to vote at the meeting is March 18, 2019.

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

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

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

About Revenue and EBITDA Guidance
Revenue estimates and other forecasted information in this release are based on OE manufacturers' programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco's status as supplier for the existing program and its relationship with the customer.  This information is also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. Unless otherwise indicated, our methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately.  In this respect, we are not able to reconcile forecasted EBITDA (and the related margins) on a forward-looking basis to GAAP measures without unreasonable efforts on account of these factors and the difficulty in predicting GAAP revenues (for purposes of a margin calculation) due to variability in production rates and volatility of precious metal pricing in the substrates that we pass through to our customers. For certain additional assumptions upon which these estimates are based, see the slides accompanying the May 9, 2019 webcast, which will be available on the financial section of the Tenneco website at www.investors.tenneco.com.

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

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

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

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

The company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is, and will be, detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2018.  

Investor inquiries:

Media inquiries:



Linae Golla

Bill Dawson   

847-482-5162

847-482-5807 

lgolla@tenneco.com

bdawson@tenneco.com



Rich Kwas

Steve Blow

248-849-1340

517-262-0655

rich.kwas@federalmogul.com

sblow@tenneco.com

 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF INCOME (LOSS)

Unaudited

THREE MONTHS ENDED MARCH 31,

(Millions except per share amounts)












2019


2018*


Net sales and operating revenues:





Clean Air - Value-add revenues

$ 1,073


$ 1,104


Clean Air - Substrate sales

706


652


Powertrain

1,175


-


Motorparts

797


312


Ride Performance

733


513


          Total net sales and operating revenues

$ 4,484


$ 2,581







Costs and expenses:





   Cost of sales

3,864

(e) (g)

2,193

(k)

   Selling, general and administrative

316

(b) (c)

151

(j)

   Depreciation and amortization

169

(a)

60


   Engineering, research, and development

92


40


   Restructuring charges and asset impairments

24

(a) (d)

12

(i)

   Goodwill impairment charge

60

(f)

-


          Total costs and expenses

4,525


2,456







Other expense (income):





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

2


3


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

(16)


-


Other expense (income), net

(3)


-


          Total expense (income)

(17)


3







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





Clean Air

94

(a) (d) (g)

120

(i)

Powertrain

54

(a) (e)

-


Motorparts

9

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

39

(i)

Ride Performance

(81)

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

7

(i) (k)

Corporate

(100)

(a) (b) (c)

(44)

(j)






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

(24)


122







   Interest expense

81

(l)

23

(l)

Earnings (Loss) before income taxes and noncontrolling interests

(105)


99







   Income tax expense

-

(h)

25


Net income (loss)

(105)


74







   Less: Net income attributable to noncontrolling interests

12


14


Net income (loss) attributable to Tenneco Inc.

$  (117)


$      60












Weighted average common shares outstanding:





   Basic

80.9


51.2


   Diluted

80.9


51.5







Earnings (Loss) per share of common stock:





   Basic

$ (1.44)


$   1.17


   Diluted

$ (1.44)


$   1.17



* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.


(a) Includes restructuring and related charges of $20 million pre-tax, $16 million after tax and noncontrolling interests or $0.19 per diluted share. Of the amount, $17 million is recorded in restructuring charges and asset impairments and $3 million is recorded in depreciation and amortization. $4 million is recorded in Clean Air, $1 million is recorded in Powertrain, $1 million is recorded in Motorparts, $13 million is recorded in Ride Performance and $1 million is recorded in Corporate.


(b) Includes costs related to cost reduction initiatives of $8 million pre-tax, $6 million after tax or $0.07 per diluted share.


(c) Includes acquisition and expected spin costs of $40 million pre-tax, $32 million after tax or $0.39 per diluted share.


(d) Includes costs to achieve synergies of $7 million pre-tax, $6 million after tax or $0.08 per diluted share. $1 million is recorded in Clean Air, $3 million is recorded in Motorparts and $3 million is recorded in Ride Performance.


(e) Includes purchase accounting adjustments of $41 million pre-tax, $34 million after tax or $0.42 per diluted share, of which $2 million is recorded in Powertrain, $36 million is recorded in Motorparts and $3 million is recorded in Ride Performance.


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


(g) Includes process harmonization charge of $9 million pre-tax, $7 million after tax or $0.09 per diluted share, of which $4 million is recorded in Clean Air and $5 million is recorded in Motorparts.


(h) Includes net tax benefit of $2 million or $0.02 per diluted share for discrete tax adjustments recognized in the period.


(i) Includes restructuring and related charges of $12 million pre-tax, $8 million after tax and noncontrolling interests or $0.16 per diluted share. $1 million is recorded in Clean Air, $2 million is recorded in Motorparts and $9 million is recorded in Ride Performance.


(j) Includes acquisition costs of $13 million pre-tax, $11 million after tax or $0.21 per diluted share.


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


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

 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS

Unaudited

(Millions)











March 31, 2019


December 31, 2018









 Assets














Cash and cash equivalents

$                 357


$                          697











Restricted cash

6


5











Receivables, net

2,843

 (a) 

2,572

 (a) 










Inventories

2,266


2,245











Prepayments and other current assets

553


590











Other noncurrent assets

4,070


3,622











Property, plant and equipment, net

3,519


3,501











Total assets

$            13,614


$                    13,232






























Liabilities and Shareholders' Equity














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

$                 159


$                          153











Accounts payable

2,861


2,759











Accrued compensation and employee benefits

363


343











Accrued income taxes

30


64











Accrued expenses and other current liabilities

992


1,001











Long-term debt

5,417

 (b) 

5,340

 (b) 










Deferred income taxes

110


88











Pension and postretirement benefits

1,138


1,167











Deferred credits and other liabilities

564


263











Redeemable noncontrolling interests

153


138











Tenneco Inc. shareholders' equity

1,628


1,726











Noncontrolling interests

199


190











Total liabilities, redeemable noncontrolling interests and equity

$            13,614


$                    13,232





















March 31, 2019


December 31, 2018


(a)

Accounts receivable net of:







Accounts receivable outstanding and derecognized

$                     1,124


$                               1,011












March 31, 2019


December 31, 2018


(b)

Long-term debt composed of:







Revolver Borrowings

$                        132


$                                      -




LIBOR plus 1.75% Term Loan A due 2019 through 2023

1,670


1,691




LIBOR plus 2.75% Term Loan B due 2019 through 2025

1,628


1,629




$225 milion of 5.375% Senior Notes due 2024

222


222




$500 million of 5.000% Senior Notes due 2026

493


493




415 million 4.875% Euro Fixed Rate Notes due 2022

483


496




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

341


349




350 million of 5.000% Euro Fixed Rate Notes due 2024

417


427




Other Debt, primarily foreign instruments

104


106





5,490


5,413




Less: maturities classified as current

73


73




Total long-term debt

$                     5,417


$                               5,340


 

ATTACHMENT 1

TENNECO INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

Unaudited

(Millions)


















Three Months Ended March 31,


2019


2018*





Operating Activities




Net income (loss)

$   (105)


$      74

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




Goodwill impairment charge

60


-

Depreciation and amortization

169


60

Deferred income taxes

(8)


(1)

Stock-based compensation

7


5

Restructuring charges and asset impairments, net of cash paid

(14)


(4)

Change in pension and other postretirement benefit plans

(17)


-

Equity in earnings of nonconsolidated affiliates

(16)


-

Cash dividends received from nonconsolidated affiliates

15


-

Loss (gain) on sale of assets

(1)


-

Changes in operating assets and liabilities:




Receivables

(312)


(220)

Inventories

11


(32)

Payables and accrued expenses

157


185

Accrued interest and income taxes

(65)


(4)

Other assets and liabilities

(31)


(63)

Net cash used by operating activities

(150)


-





Investing Activities




Proceeds from sale of assets

1


2

Net proceeds from sale of business

22


-

Cash payments for property, plant and equipment

(210)


(89)

Acquisition of business (net of cash acquired)

(158)


-

Proceeds from deferred purchase price of factored receivables

60


34

Other

2


-

Net cash used by investing activities

(283)


(53)





Financing Activities




Proceeds from term loans and notes

28


6

Repayments of term loans and notes

(64)


(13)

Borrowings on revolving lines of credit

2,119


1,267

Payments on revolving lines of credit

(1,981)


(1,189)

Issuance (repurchase) of common shares

(2)


(2)

Cash dividends

(20)


(13)

Net increase (decrease) in bank overdrafts

(1)


(4)

Other

(3)


(30)

Distributions to noncontrolling interest partners

(1)


-

Net cash provided by financing activities

75


22





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

19


3

Decrease in cash, cash equivalents and restricted cash

(339)


(28)





Cash, cash equivalents and restricted cash, beginning of period

702


318

Cash, cash equivalents and restricted cash, end of period

$    363


$    290









Supplemental Cash Flow Information




Cash paid during the period for interest

$      74


$      23

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

43


25





Non-cash Investing Activities




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

$    101


$      55

Deferred purchase price of receivables factored in the period

58


37


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.

 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions except per share amounts)





































Q1 2019


Q1 2018*



Net income
(loss)
attributable
to Tenneco
Inc.


Per Share


EBIT


EBITDA (3)


Net income
attributable
to Tenneco
Inc.


Per Share


EBIT


EBITDA (3)

Earnings (Loss) Measures

$         (117)


$        (1.44)


$           (24)


$          145


$            60


$         1.17


$           122


$          182


















Adjustments:

















Restructuring and related expenses(4)

16


0.19


20


17


8


0.16


12


12


Cost reduction initiatives (5)

6


0.07


8


8


-


-


-


-


Acquisition and spin costs (6)

32


0.39


40


40


11


0.21


13


13


Costs to achieve synergies (7)

6


0.08


7


7


-


-


-


-


Purchase accounting adjustments (8)

34


0.42


41


41


-


-


-


-


Goodwill impairment charge (9)

60


0.74


60


60


-


-


-


-


Process harmonization (10)

7


0.09


9


9


-


-


-


-


Warranty charge (11)

-


-


-


-


4


0.08


5


5


Net tax adjustments

(2)


(0.02)


-


-


-


-


-


-


















Adjusted Net income, EPS, EBIT, and EBITDA

$            42


$         0.52


$          161


$          327


$            83


$         1.62


$           152


$          212





































Q1 2019





Global Segments









Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total



Net loss attributable to Tenneco Inc.













$          (117)




















Net income attributable to noncontrolling interests













12




















Net loss













(105)




















Income tax expense













-




















Interest expense













81




















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

$            94


$            54


$             9


$           (81)


$            76


$         (100)


$           (24)




















Depreciation and amortization

37


59


36


36


168


1


169




















Total EBITDA including noncontrolling interests (3)

$          131


$          113


$            45


$           (45)


$          244


$           (99)


$           145





















Restructuring and related expenses(4)

4


1


1


10


16


1


17




Cost reduction initiatives (5)

-


-


-


-


-


8


8




Acquisition and spin costs (6)

-


-


-


-


-


40


40




Costs to achieve synergies (7)

1


-


3


3


7


-


7




Purchase accounting adjustments (8)

-


2


36


3


41


-


41




Goodwill impairment charge (9)

-


-


-


60


60


-


60




Process harmonization (10)

4


-


5


-


9


-


9




















Adjusted EBITDA

$          140


$          116


$            90


$            31


$          377


$           (50)


$           327







































Q1 2018*







Global Segments











Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total





Net income attributable to Tenneco Inc.











$            60






















Net income attributable to noncontrolling interests











14






















Net income











74






















Income tax expense











25






















Interest expense











23






















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

$          120


$            39


$             7


$          166


$           (44)


122






















Depreciation and amortization

37


6


17


60


-


60






















Total EBITDA including noncontrolling interests (3)

$          157


$            45


$            24


$          226


$           (44)


$          182























Restructuring and related expenses

1


2


9


12


-


12






Acquisition and spin costs (6)

-


-


-


-


13


13






Warranty charge (11)

-


-


5


5


-


5






















Adjusted EBITDA

$          158


$            47


$            38


$          243


$           (31)


$          212






* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.


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


(2)Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results in a manner that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the company and other items impacting comparability between the periods.  Adjustments similar to the ones reflected above have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods.  Using only the non-GAAP earnings measures to analyze earnings would have material limitations because its calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material.  Management compensates for these limitations by utilizing both GAAP and non-GAAP earnings measures reflected above to understand and analyze the results of the business.  The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.


(3) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity.  Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors.  However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


(4)Q1 2019 includes $3 million of accelerated depreciation related to plant closures.


(5)Costs related to cost reduction initiatives.


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


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


(8)Purchase accounting adjustments related to acquisitions.


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


(10)Charge due to process harmonization.


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

 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions)














Q1 2019









Currency


Value-add









Impact on


Revenues





Substrate


Value-add


Value-add


excluding



Revenues


Sales


Revenues


Revenues


Currency













Clean Air

$     1,779


$       706


$      1,073


$          (51)


$      1,124


Powertrain

1,175


-


1,175


-


1,175


Motorparts

797


-


797


(18)


815


Ride Performance

733


-


733


(31)


764












Total Tenneco Inc.

$     4,484


$       706


$      3,778


$        (100)


$      3,878














Q1 2018*









Currency


Value-add









Impact on


Revenues





Substrate


Value-add


Value-add


excluding



Revenues


Sales


Revenues


Revenues


Currency













Clean Air

$     1,756


$       652


$      1,104


$           -


$      1,104


Motorparts

312


-


312


-


312


Ride Performance

513


-


513


-


513












Total Tenneco Inc.

$     2,581


$       652


$      1,929


$           -


$      1,929


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.


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


(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar.  Additionally, substrate sales include precious metals pricing, which may be volatile.  Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue.  Excluding substrate sales removes this impact.  Tenneco uses this information to analyze the trend in revenues before these factors.  Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues. 

 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions except percents)




Q1 2019 vs. Q1 2018 $ Change and % Change Increase (Decrease)



Revenues


% Change


Value-add
Adjusted
Revenues
Excluding
Currency


% Change











Clean Air

$        23


1%


$        20


2%


Powertrain

1,175


NM


1,175


NM


Motorparts

485


155%


503


161%


Ride Performance

220


43%


251


49%

Total Tenneco Inc.

$   1,903


74%


$    1,949


101%


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

 

ATTACHMENT 2

TENNECO INC.

RECONCILIATION OF NON-GAAP MEASURES 

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

Unaudited

(Millions except ratios)












March 31, 2019




December 31, 2018











Total debt





$             5,576




$                  5,493











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





363




702











Debt net of total cash balances (1)





$             5,213




$                  4,791





















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





$             1,542




$                  1,627











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





 3.4x 




 2.9x 
































Q1 18*


Q2 18*


Q3 18*


Q4 18


Q1 19











Net income (loss) attributable to Tenneco Inc.

$    60


$    47


$                 57


$   (109)


$                    (117)











Net income attributable to noncontrolling interests

14


16


9


17


12











Net income (loss)

74


63


66


(92)


(105)











Income tax expense (benefit)

25


26


22


(10)


-











Interest expense

23


22


24


79


81











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

122


111


112


(23)


(24)











Depreciation and amortization

60


60


60


165


169











Total EBITDA including noncontrolling interests (2)

$  182


$  171


$               172


$    142


$                     145











Adjustments:










Restructuring and related expenses

12


23


12


17


17

Cost reduction initiatives (6)

-


8


-


8


8

Acquisition and spin costs (7)

13


18


12


53


40

Warranty charge (8)

5


-


-


-


-

Costs to achieve synergies(9)

-


9


4


49


7

Purchase accounting adjustments (10)

-


-


-


106


41

Goodwill impairment charge (11)

-


-


-


3


60

Process harmonization (12)

-


-


-


-


9

Anti-dumping duty charge (13)

-


-


-


16


-

Environmental charge (14)

-


4


-


-


-

Litigation settlement accrual

-


-


10


-


-

Loss on debt modification (15)

-


-


-


10


-

Pension charges (16)

-


-


-


3


-











Total Adjusted EBITDA including noncontrolling interests (3)

$  212


$  233


$               210


$    407


$                     327





















Legacy Federal-Mogul Reconciliation of Non-GAAP earnings measures






Q1 18


Q2 18


Q3 18















Net income attributable to Federal-Mogul

$    26


$    25


$                 35















Net income attributable to noncontrolling interests

3


3


1















Net income

29


28


36















Income tax expense

15


13


16















Interest expense

48


52


49















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

92


93


101















Depreciation and amortization

100


96


99















Total EBITDA including noncontrolling interests (2)

$  192


$  189


$               200















Adjustments:










Restructuring charges and asset impairments, net 

-


-


15





Purchase price contingency

5


-


-





Transaction related costs

1


13


-





Cost to exit a multiemployer pension plan

-


5


-





Gain (loss) on sale of assets 

-


-


(65)





Charge for extinguishment of dissenting shareholders shares 

-


-


5





Other 

2


2


1















Total Adjusted EBITDA including noncontrolling interests (3)

$  200


$  209


$               156
















Q1 18*


Q2 18*


Q3 18*


Q4 18


Q1 19

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

$  412


$  442


$               366


$    407


$                     327

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







$  1,627



Q1 2019 Pro forma Adjusted LTM EBITDA including noncontrolling interests(2) (3) (5)









$                  1,542


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


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


(2) EBITDA including noncontrolling interests represents income before interest expense, income taxes, noncontrolling interests and depreciation and amortization.  EBITDA including noncontrolling interests is not a calculation based upon GAAP.  The amounts included in the EBITDA including noncontrolling interests calculation, however, are derived from amounts included in the historical statements of income data.  In addition, EBITDA including noncontrolling interests should not be considered as an alternative to net income (loss) attributable to Tenneco Inc. or operating income as an indicator of the company's operating performance, or as an alternative to operating cash flows as a measure of liquidity.  Tenneco has presented EBITDA including noncontrolling interests because it regularly reviews EBITDA including noncontrolling interests as a measure of the company's performance.  In addition, Tenneco believes its investors utilize and analyze the company's EBITDA including noncontrolling interests for similar purposes.  Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors.  However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.


(3) Adjusted EBITDA including noncontrolling interests is presented in order to reflect the results in a manner that allows a better understanding of operational activities separate from the financial impact of decisions made for the long term benefit of the company and other items impacting comparability between the periods.  Similar adjustments to EBITDA including noncontrolling interests have been recorded in earlier periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. The company believes investors find the non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the company's financial results in any particular period.


(4) Tenneco presents the above reconciliation of the ratio of debt net of total cash to LTM Adjusted EBITDA including noncontrolling interests to show trends that investors may find useful in understanding the company's ability to service its debt.  For purposes of this calculation, Adjusted LTM and Pro Forma adjusted LTM EBITDA including noncontrolling interests is used as an indicator of the company's performance and debt net of total cash is presented as an indicator of the company's credit position and progress toward reducing the company's financial leverage.  This reconciliation is provided as supplemental information and not intended to replace the company's existing covenant ratios or any other financial measures that investors may find useful in describing the company's financial position. See notes (1), (2) and (3) for a description of the limitations of using debt net of total cash, EBITDA including noncontrolling interests and Adjusted EBITDA including noncontrolling interests. 


(5) Tenneco is providing Pro Forma Adjusted LTM EBITDA and the ratio of debt net of cash balances to Pro Forma Adjusted LTM EBITDA to show the company's Adjusted LTM EBITDA as if Federal-Mogul had been consolidated with Tenneco for the entirety of 2018 and LTM Q1 2019 (and the resultant impact on the net debt ratio).  Tenneco believes this supplemental information is useful to investors who are trying to understand the results of the entire enterprise, including Federal-Mogul, for 2018 and 2019 and the ability of the company to service its debt.


(6)Costs related to cost reduction initiatives.


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


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


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


(10)Purchase accounting adjustments related to acquisitions.


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


(12)Charge due to process harmonization.


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


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


(15)Loss on debt modification.


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

 

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions)


Q1 2019


Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency











Original equipment light vehicle revenues

$    2,817


$      (89)


$    2,906


$       614


$     2,292

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

870


(20)


890


119


771

Aftermarket revenues

797


(18)


815


-


815

Net sales and operating revenues

$    4,484


$    (127)


$    4,611


$       733


$     3,878






















Q1 2018*


Revenues


Currency


Revenues
Excluding
Currency


Substrate Sales
Excluding
Currency


Value-add
Revenues
Excluding
Currency











Original equipment light vehicle revenues

$    1,893


$        -


$    1,893


$       543


$     1,350

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

376


-


376


109


267

Aftermarket revenues

312


-


312


-


312

Net sales and operating revenues

$    2,581


$        -


$    2,581


$       652


$     1,929


* Financial results for 2018 have been revised for certain immaterial adjustments, which will be further discussed in Tenneco's Form 10-Q for the quarter ended March 31, 2019.


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


(2) Tenneco presents the above reconciliation of revenues in order to reflect value-add revenues separately from the effects of doing business in currencies other than the U.S. dollar.  Additionally, substrate sales include precious metals pricing, which may be volatile.  Substrate sales occur when, at the direction of its OE customers, Tenneco purchases catalytic converters or components thereof from suppliers, uses them in its manufacturing processes and sells them as part of the completed system. While Tenneco original equipment customers assume the risk of this volatility, it impacts reported revenue.  Excluding substrate sales removes this impact.  Tenneco uses this information to analyze the trend in revenues before these factors.  Tenneco believes investors find this information useful in understanding period to period comparisons in the company's revenues. 

 

...

ATTACHMENT 2

TENNECO INC.

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

Unaudited

(Millions except percents)












































Q1 2019


Global Segments






Clean Air


Powertrain


Motorparts


Ride
Performance


Total


Corporate


Total

Net sales and operating revenues

$   1,779


$      1,175


$           797


$           733


$    4,484


$         -


$ 4,484















Less: Substrate sales

706


-


-


-


706


-


706















Value-add revenues

$   1,073


$      1,175


$           797


$           733


$    3,778


$         -


$ 3,778















 EBITDA

$     131


$         113


$             45


$            (45)


$       244


$        (99)


$    145















 EBITDA as a % of revenue

7.4%


9.6%


5.6%


-6.1%


5.4%




3.2%

 EBITDA as a % of value-add revenue

12.2%


9.6%


5.6%


-6.1%


6.5%




3.8%















 Adjusted EBITDA

$     140


$         116


$             90


$             31


$       377


$        (50)


$    327















 Adjusted EBITDA as a % of revenue

7.9%


9.9%


11.3%


4.2%


8.4%




7.3%

 Adjusted EBITDA as a % of value-add revenue

13.0%


9.9%


11.3%


4.2%


10.0%




8.7%






























Q1 2018*




Global Segments








Clean Air


Motorparts


Ride
Performance


Total


Corporate


Total



Net sales and operating revenues

$   1,756


$         312


$           513


$         2,581


$         -


$    2,581

















Less: Substrate sales

652


-


-


652


-


652

















Value-add revenues

$   1,104


$         312


$           513


$         1,929


$         -


$    1,929