Tenneco Reports Second Quarter Financial Results

Tenneco Inc. (NYSE: TEN) reported second quarter net income of $87 million, or $1.42 per diluted share, versus net income of $50 million, or 81-cents per diluted share, in second quarter 2011. On an adjusted basis, net income rose to $70 million, or $1.14 per diluted share, compared with $50 million, or 81-cents per diluted share, a year ago.

Adjusted second quarter 2012 and 2011 results:
(millions except per share amounts)   Q2 2012   Q2 2011
  EBITDA*   EBIT  

Net incomeattributable toTenneco Inc.
  Per Share EBITDA*   EBIT  

Net incomeattributable toTenneco Inc.
  Per Share
Earnings Measures $ 187 $ 137 $ 87 $ 1.42 $ 167 $ 113 $ 50 $ 0.81
 
Adjustments (reflects non-GAAP measures):
Restructuring and related expenses 2 2 1 0.02 2 2 1 0.02
Costs related to refinancing - - 1 0.01 - - - -
Net tax adjustments - - (19 ) (0.31 ) - - (1 ) (0.02 )
 
               
Non-GAAP earnings measures $ 189 $ 139 $ 70   $ 1.14   $ 169 $ 115 $ 50   $ 0.81  
 
* EBITDA including noncontrolling interests (EBIT before depreciation and amortization)

In addition to the information set forth above, the tables at the end of this press release reconcile GAAP results to non-GAAP results.

Second quarter 2012 adjustments:

  • Restructuring and related expenses of $2 million pre-tax, or 2-cents per diluted share;
  • Costs related to refinancing of $1 million pre-tax or 1-cent per diluted share;
  • Net tax benefits of $19 million, or 31-cents per diluted share, primarily related to U.S. taxable income with no associated tax expense due to the valuation allowance on the company’s net operating loss position.

Second quarter 2011 adjustments:
  • Restructuring and related expenses of $2 million pre-tax, or 2-cents per diluted share;
  • Net tax benefits of $1 million, or 2-cents per diluted share, related to U.S. taxable income with no associated tax expense due to the valuation allowance on the company’s net operating loss position, partially offset by losses in certain foreign jurisdictions and adjustments to tax estimates.

Revenue

Total revenue in the quarter increased to $1.920 billion, from $1.888 billion in second quarter 2011. Revenue excluding substrate sales and currency rose 9 percent to $1.587 billion, versus $1.453 billion a year ago. Currency had a negative impact of $119 million in the quarter. The revenue increase was driven primarily by strong OE light vehicle production volumes in North America and China and incremental commercial vehicle revenue globally. In the second quarter, total OE commercial and specialty vehicle revenue increased 36 percent year-over-year to $226 million, which represented 12 percent of total revenues in the quarter, compared with 9 percent a year ago.

EBIT and EBIT Margin

EBIT (earnings before interest, taxes and noncontrolling interests) increased 21% to $137 million from $113 million in second quarter 2011. Adjusted EBIT was $139 million, a $24 million increase from a year ago, despite a negative currency impact of $13 million. EBIT improvement was driven by strong operating performance on higher light vehicle production volumes and incremental commercial vehicle revenue. The year-over-year comparison also includes lower stock-indexed compensation and lower aftermarket customer changeover costs.

The company reported the following EBIT as a percent of revenue and EBIT as a percent of value-add revenue (revenue excluding substrate sales).

       
Q2 2012 Q2 2011
 
EBIT as a percent of revenue 7.1 % 6.0 %
EBIT as a percent of value-add revenue 9.2 % 7.8 %
 
Adjusted EBIT as a percent of revenue 7.2 % 6.1 %
Adjusted EBIT as a percent of value-add revenue 9.3 % 7.9 %
 

“Tenneco delivered another quarter of revenue growth by leveraging higher light vehicle volumes in North America and China, performing well in a challenging production environment in Europe, posting solid results from our North America aftermarket business and benefiting from incremental commercial vehicle revenue,” stated Gregg Sherrill, chairman and CEO, Tenneco. “I’m particularly pleased with our margin improvement driven by strong operational performance, especially considering the significant currency headwinds.”

Cash

Cash generated from operations was $86 million in the quarter, a $19 million year-over-year improvement from the year ago quarter on the strength of higher earnings and effective working capital management.

Tenneco continues to strategically invest in growth with capital expenditures in the quarter of $62 million, up from $47 million the prior year. The majority of spending was in the North America and Europe OE businesses to support new light and commercial vehicle customer program launches, and in Asia to accommodate new programs and new customers.

During the second quarter, Tenneco completed a previously announced stock buyback plan, repurchasing 600,000 shares of its outstanding common stock for $18 million, to offset dilution from shares issued to employees in 2012.

Debt

Tenneco’s net debt at June 30, 2012 was $1.185 billion, versus $1.133 billion the prior year. The leverage ratio (net debt to adjusted LTM EBITDA including noncontrolling interests) was 1.9x, down from 2.0x a year ago.

SECOND QUARTER REPORTING SEGMENTS

NORTH AMERICA
(millions except percents)  

Q2 12Revenues
 

% Change vs.Q2 11
 

Q2 12RevenuesExcludingCurrency &SubstrateSales
 

% Change vs.Q2 11
North America Original Equipment    
  Ride Control $ 173 7 % $ 175 8 %
Emission Control   617   18 %   348   27 %
Total North America Original Equipment 790 16 % 523 20 %
 
North America Aftermarket
Ride Control 152 6 % 152 5 %
Emission Control   54   11 %   54   11 %
Total North America Aftermarket 206 7 % 206 7 %
 
Total North America $ 996 14 % $ 729 16 %
 

North America EBIT increased 39% to $86 million compared with $62 million one year ago. On an adjusted basis, EBIT was $86 million versus $63 million despite the impact of $6 million in currency transaction losses year-over-year. EBIT performance was driven primarily by strong operational performance on higher volumes, particularly in the OE emissions control business including the commercial vehicle segment. EBIT this quarter also included lower aftermarket changeover costs.

EUROPE, SOUTH AMERICA AND INDIA

(millions except percents)  

Q2 12Revenues
 

% Change vs.Q2 11
 

Q2 12RevenuesExcludingCurrency &SubstrateSales
 

% Change vs.Q2 11
Europe Original Equipment    
  Ride Control $ 130 (13 %) $ 149 (1 %)
Emission Control   351   (9 %)   267   6 %
Total Europe Original Equipment 481 (10 %) 416 4 %
 
Europe Aftermarket
Ride Control 57 (19 %) 67 (5 %)
Emission Control   30   (32 %)   34   (22 %)
Total Europe Aftermarket 87 (24 %) 101 (12 %)
 
South America & India 142 (16 %) 151 9 %
 
Total Europe, South America & India $ 710 (13 %) $ 668 2 %
 

Europe, South America and India EBIT was $32 million compared with $37 million a year ago. On an adjusted basis, EBIT was $34 million versus $38 million. Currency had a $9 million unfavorable impact on EBIT. EBIT was driven by strong operational performance in the Europe OE businesses in the face of weak industry volumes, and negatively impacted by lower production volumes in South America and declines in the Europe aftermarket.

ASIA PACIFIC

(millions except percents)  

Q2 12Revenues
 

% Change vs.Q2 11
 

Q2 12RevenuesExcludingCurrency &SubstrateSales
 

% Change vs.Q2 11
Asia $ 177   14 % $ 154   17 %
   
Australia 37 (9 %) 36 (3 %)
           
Total Asia Pacific $ 214 9 % $ 190 13 %
 

Asia Pacific EBIT rose 36% to $19 million compared with $14 million last year. Currency had a $2 million favorable impact on Asia Pacific segment EBIT. EBIT was driven by higher volumes on new light vehicle platforms in China and operating improvements in Australia.

OUTLOOK

IHS Automotive predicts higher year-over-year light vehicle production in most of Tenneco’s markets except Europe. IHS forecasts* indicate that global light vehicle production is expected to rise 2% year-over-year in the second half of 2012, with North America increasing 6%, China up 7%, South America up 13% and India up 2%.

Light vehicle production in Europe is forecasted to decline 7% year-over-year, which the company expects to partially offset with a strong customer and platform mix in its OE emissions control business. As over the last several quarters, economic weakness will continue to drag on the European aftermarket business.

Stronger North America vehicle production, particularly in the company’s OE emission control business, is expected to drive solid year-over-year revenue growth. The company expects its North America aftermarket revenues will be roughly the same as last year’s very strong third quarter.

In China, stronger year-over-year OE volume is expected to continue driving growth for the Asia Pacific segment.

The weakening global economic conditions are having somewhat more of an effect on commercial vehicle production schedules. While Tenneco will experience very strong commercial vehicle revenue growth for 2012, due to these slower production schedules commercial vehicle revenues are now expected to be closer to the first half run rate than the company’s forecast in the beginning of the year. Tenneco continues to successfully launch and grow its commercial vehicle business and today is announcing three new commercial vehicle business wins in Europe and India.

“Our technology-driven emission control strategy continues to drive our business globally, and despite current economic headwinds, Tenneco remains on track for revenue growth, margin improvement and record earnings in 2012 with continued outstanding growth opportunities going forward,” added Sherrill.

*IHS Automotive production forecast as of July 17, 2012.

Attachment 1
Statements of Income – 3 Months
Statements of Income – 6 Months
Balance Sheets
Statements of Cash Flows – 3 Months
Statements of Cash Flows – 6 Months
 

Attachment 2
Reconciliation of GAAP Net Income to EBITDA including noncontrolling interests – 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures – 3 Months
Reconciliation of GAAP Net Income to EBITDA including noncontrolling interests – 6 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures – 6 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 6 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – 3 Months and 6 Months
Reconciliation of Non-GAAP Measures – Debt Net of Cash/Adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures – Original Equipment and Aftermarket Revenue – 3 Months and 6 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures – 3 Months and 6 Months

CONFERENCE CALL

The company will host a conference call on Thursday, July 26, 2012 at 9:00 a.m. ET. The dial-in number is 888-603-9213 (domestic) or 312-470-7158 (international). The passcode is TENNECO. The call and accompanying slides will be available on the financial section of the Tenneco web site at www.tenneco.com. A recording of the call will be available one hour following completion of the call on July 26, 2012 through August 26, 2012. To access this recording, dial 800-841-8609 (domestic) or 402-280-9935 (international). The purpose of the call is to discuss the company’s operations for the quarter, as well as other matters that may impact the company’s outlook. A copy of the press release is available on the financial and news sections of the Tenneco web site.

Tenneco is a $7.2 billion global manufacturing company with headquarters in Lake Forest, Illinois and approximately 24,000 employees worldwide. Tenneco is one of the world’s largest designers, manufacturers and marketers of emission control and ride control products and systems for automotive and commercial vehicle original equipment markets and the aftermarket. Tenneco markets its products principally under the Monroe®, Walker® and Clevite®Elastomer brand names.

This press release contains forward-looking statements. Words such as “may,” “expects,” “anticipate,” ”projects,” “will,” and “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) 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;

(iv) 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;

(v) 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;

(vi) 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;

(vii) 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;

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

(ix) 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;

(x) the negative impact of higher fuel prices on transportation and logistics costs, raw material costs and discretionary purchases of vehicles or aftermarket products;

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

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

(xiii) product warranty costs;

(xiv) the cost and outcome of existing and any future legal proceedings;

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

(xvi) 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;

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

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

(xix) governmental actions, including the ability to receive regulatory approvals and the timing of such approvals, as well as the impact of the enforcement of, changes to or compliance with laws and regulations, including those pertaining to environmental concerns, pensions or other regulated activities;

(xx) 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

(xxi) 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 report on Form 10-K for the year ended December 31, 2011.
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited
THREE MONTHS ENDED JUNE 30,
(Millions except per share amounts)
 
 
2012 2011
Net sales and operating revenues $ 1,920   $ 1,888  
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below) 1,595 (a) 1,565 (d)
Engineering, research and development 28 35
Selling, general and administrative 109 118
Depreciation and amortization of other intangibles   50     54  
Total costs and expenses   1,782     1,772  
 
Loss on sale of receivables (1 ) (2 )
Other income (expense)   -     (1 )
Total other income (expense)   (1 )   (3 )
 
Earnings before interest expense, income taxes,
and noncontrolling interests
North America 86 62 (d)
Europe, South America & India 32 (a) 37 (d)
Asia Pacific   19     14  
137 113
 
Interest expense (net of interest capitalized)   21   (b)   26  
Earnings before income taxes and noncontrolling interests 116 87
 
Income tax expense   21   (c)   30   (e)
Net income 95 57
 
Less: Net income attributable to noncontrolling interests   8     7  
Net income attributable to Tenneco Inc. $ 87   $ 50  
 
 
Weighted average common shares outstanding:
Basic   60.0     60.0  
Diluted   61.3     62.0  
 
Earnings per share of common stock:
Basic $ 1.45   $ 0.84  
Diluted $ 1.42   $ 0.81  
 
(a) Includes restructuring and related charges of $2 million pre-tax, $1 million after tax or $0.02 per diluted share, which is recorded in cost of sales in Europe, South America and India.
 
(b) Includes pre-tax expenses of $1 million, $1 million after tax or $0.01 per share for costs related to refinancing activities.
 
(c) Includes net tax benefits of $19 million or $0.31 per diluted share primarily related to U.S. taxable income with no associated tax expense due to the valuation allowance on the company's net operating loss position and prior year tax adjustments, partially offset by the impact of recording a valuation allowance against the tax benefit for losses in certain foreign jurisdictions.
 
(d) Includes restructuring and related charges of $2 million pre-tax, $1 million after tax or $0.02 per diluted share, which is recorded in cost of sales. Geographically, $1 million is recorded in North America and $1 million in Europe, South America and India.
 
(e) Includes net tax benefits of $1 million or $0.02 per diluted share related to U.S. taxable income with no associated tax expense due to the valuation allowance on the company's net operating loss position, partially offset by the impact of recording a valuation allowance against the tax benefit for losses in certain foreign jurisdictions and adjustments to tax estimates.
 
 
 

ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited
SIX MONTHS ENDED JUNE 30,
(Millions except per share amounts)
 
 
2012 2011
Net sales and operating revenues $ 3,832   $ 3,648  
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown below) 3,202 (a) 3,031 (d)
Engineering, research and development 66 70
Selling, general and administrative 227 227
Depreciation and amortization of other intangibles   99     105  
Total costs and expenses   3,594     3,433  
 
Loss on sale of receivables (2 ) (3 )
Other income (expense)   (3 )   (5 )
Total other income (expense)   (5 )   (8 )
 
Earnings before interest expense, income taxes,
and noncontrolling interests
North America 157 124 (d)
Europe, South America & India 49 (a) 61 (d)
Asia Pacific   27     22  
233 207
 
Interest expense (net of interest capitalized)   63   (b)   54   (e)
Earnings before income taxes and noncontrolling interests 170 153
 
Income tax expense   39   (c)   44   (f)
Net income 131 109
 
Less: Net income attributable to noncontrolling interests   14     12  
Net income attributable to Tenneco Inc. $ 117   $ 97  
 
 
Weighted average common shares outstanding:
Basic   60.1     59.9  
Diluted   61.5     62.0  
 
Earnings per share of common stock:
Basic $ 1.95   $ 1.62  
Diluted $ 1.90   $ 1.56  
 
(a) Includes restructuring and related charges of $3 million pre-tax, $2 million after tax or $0.04 per diluted share, which is recorded in cost of sales in Europe, South America and India.
 
(b) Includes pre-tax expenses of $18 million, $12 million after tax or $0.19 per share for costs related to refinancing activities.
 
(c) Includes net tax benefits of $20 million or $0.33 per diluted share primarily related to U.S. taxable income with no associated tax expense due to the valuation allowance on the company's net operating loss position and prior year tax adjustments, partially offset by the impact of recording a valuation allowance against the tax benefit for losses in certain foreign jurisdictions.
 
(d) Includes restructuring and related charges of $3 million pre-tax, $2 million after tax or $0.03 per diluted share, which is recorded in cost of sales. Geographically, $1 million is recorded in North America and $2 million in Europe, South America and India.
 
(e) Includes pre-tax expenses of $1 million, $1 million after tax or $0.01 per share for costs related to refinancing activities.
 

(f) Includes net tax benefits of $11 million or $0.16 per diluted share primarily related to U.S. taxable income with no associated tax expense due to the valuation allowance on the company's net operating loss position and income generated in lower tax rate jurisdictions, partially offset by adjustments to prior years' tax estimates and the impact of recording a valuation allowance against the tax benefit for losses in certain foreign jurisdictions.
 
 
 

  ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(Unaudited)
(Millions)
 
June 30, 2012 December 31, 2011
 
Assets
 
Cash and cash equivalents $ 181 $ 214
 
Receivables, net 1,181 (a) 980 (a)
 
Inventories 668 592
 
Other current assets 234 193
 
Investments and other assets 303 311
 
Plant, property, and equipment, net   1,060   1,047
 
Total assets $ 3,627 $ 3,337
 
 
 
 
Liabilities and Shareholders' Equity
 
Short-term debt $ 132 $ 66
 
Accounts payable 1,231 1,171
 
Accrued taxes 58 44
 
Accrued interest 10 13
 
Other current liabilities 293 276
 
Long-term debt 1,234 (b) 1,158 (b)
 
Deferred income taxes 44 51
 
Deferred credits and other liabilities 483 503
 
Redeemable noncontrolling interests 9 12
 
Tenneco Inc. shareholders' equity 96 -
 
Noncontrolling interests   37   43
 
Total liabilities, redeemable noncontrolling interests
and shareholders' equity $ 3,627 $ 3,337
 
 
 
June 30, 2012 December 31, 2011
(a) Accounts Receivables net of:
Europe - Accounts receivables securitization programs $ 132 $ 121
 
June 30, 2012 December 31, 2011
(b) Long term debt composed of:
Borrowings against revolving credit facilities $ 252 $ 24
Term loan A (Due 2017) 247 -
Term loan B (Due 2016) - 148
8.125% senior notes (Due 2015) - 250
7.75% senior notes (Due 2018) 225 225
6.875% senior notes (Due 2020) 500 500
Other long term debt 10 11
   
$ 1,234 $ 1,158
 
 
 

ATTACHMENT 1
Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
   
 
 
Three Months Ended
June 30,
2012 2011
 
Operating activities:
Net income $ 95 $ 57
Adjustments to reconcile net income
to net cash provided by operating activities -
Depreciation and amortization of other intangibles 50 54
Stock-based compensation 3 2
Deferred income taxes (2 ) -
Loss on sale of assets 1 1
Changes in components of working capital-
(Inc.)/dec. in receivables (31 ) (39 )
(Inc.)/dec. in inventories (7 ) 17
(Inc.)/dec. in prepayments and other current assets (23 ) (9 )
Inc./(dec.) in payables (2 ) (5 )
Inc./(dec.) in accrued taxes 17 (8 )
Inc./(dec.) in accrued interest (4 ) (8 )
Inc./(dec.) in other current liabilities 2 16
Changes in long-term assets 1 -
Changes in long-term liabilities (17 ) (9 )
Other   3     (2 )
Net cash provided by operating activities 86 67
 
Investing activities:
Cash payments for plant, property & equipment (60 ) (49 )
Cash payments for software-related intangible assets   (3 )   (3 )
Net cash used by investing activities   (63 )   (52 )
 
Financing activities:
Purchase of common stock under the share repurchase program (18 ) (11 )
Issuance of long-term debt - 4
Debt issuance costs on long-term debt (1 ) (1 )
Retirement of long-term debt (22 ) (1 )
Net inc./(dec.) in bank overdrafts (2 ) 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 3 41
Net inc./(dec.) in short-term borrowings secured by accounts receivable 30 (82 )
Capital contribution from noncontrolling interest partner 1 1
Distribution to noncontrolling interest partners   (18 )   (10 )
Net cash used by financing activities   (27 )   (58 )
 
Effect of foreign exchange rate changes on cash and
cash equivalents   (8 )   5  
 
Decrease in cash and cash equivalents (12 ) (38 )
Cash and cash equivalents, April 1   193     199  
Cash and cash equivalents, June 30 $ 181   $ 161  
 
Supplemental Cash Flow Information
Cash paid during the period for interest (net of interest capitalized) $ 24 $ 34
Cash paid during the period for income taxes (net of refunds) 19 23
 
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment $ 30 $ 22
 
 
 

ATTACHMENT 1
Tenneco Inc. and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(Millions)
   
 
 
Six Months Ended
June 30,
2012 2011
 
Operating activities:
Net income $ 131 $ 109
Adjustments to reconcile net income
to net cash provided (used) by operating activities -
Depreciation and amortization of other intangibles 99 105
Stock-based compensation 7 4
Deferred income taxes (7 ) (5 )
Loss on sale of assets 2 1
Changes in components of working capital-
(Inc.)/dec. in receivables (212 ) (290 )
(Inc.)/dec. in inventories (83 ) (60 )
(Inc.)/dec. in prepayments and other current assets (39 ) (24 )
Inc./(dec.) in payables 86 134
Inc./(dec.) in accrued taxes 18 -
Inc./(dec.) in accrued interest (4 ) -
Inc./(dec.) in other current liabilities 15 17
Changes in long-term assets 9 (3 )
Changes in long-term liabilities (22 ) (21 )
Other   1     (3 )
Net cash provided (used) by operating activities 1 (36 )
 
Investing activities:
Proceeds from sale of assets 1 4
Cash payments for plant, property & equipment (125 ) (95 )
Cash payments for software-related intangible assets   (7 )   (6 )
Net cash used by investing activities   (131 )   (97 )
 
Financing activities:
Purchase of common stock under the share repurchase program (18 ) (11 )
Issuance of long-term debt 250 4
Debt issuance costs on long-term debt (13 ) (1 )
Retirement of long-term debt (403 ) (23 )
Net inc./(dec.) in bank overdrafts - 8
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 236 88
Net inc./(dec.) in short-term borrowings secured by accounts receivable 60 -
Capital contribution from noncontrolling interest partner 1 1
Distribution to noncontrolling interest partners   (18 )   (10 )
Net cash provided by financing activities   95     56  
 
Effect of foreign exchange rate changes on cash and
cash equivalents   2     5  
 
Decrease in cash and cash equivalents (33 ) (72 )
Cash and cash equivalents, January 1   214     233  
Cash and cash equivalents, June 30 $ 181   $ 161  
 
Supplemental Cash Flow Information
Cash paid during the period for interest (net of interest capitalized) $ 59 $ 53
Cash paid during the period for income taxes (net of refunds) 36 33
 
Non-cash Investing and Financing Activities
Period ended balance of payables for plant, property, and equipment $ 30 $ 22
 
 
 

ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1) NET INCOME TO EBITDA INCLUDING NONCONTROLLING INTERESTS (2)

Unaudited
(Millions)
         
 
Q2 2012
North Europe, Asia
America SA & India Pacific Total
Net income attributable to Tenneco Inc. $ 87
 
Net income attributable to noncontrolling interests   8
 
Net income 95
 
Income tax expense 21
 
Interest expense (net of interest capitalized)   21
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 86 $ 32 $ 19 137
 
Depreciation and amortization of other intangibles   23   21   6   50
 
Total EBITDA including noncontrolling interests (2) $ 109 $ 53 $ 25 $ 187
 
 
Q2 2011
North Europe, Asia
America SA & India Pacific Total
Net income attributable to Tenneco Inc. $ 50
 
Net income attributable to noncontrolling interests   7
 
Net income 57
 
Income tax expense 30
 
Interest expense (net of interest capitalized)   26
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 62 $ 37 $ 14 113
 
Depreciation and amortization of other intangibles   24   24   6   54
 
Total EBITDA including noncontrolling interests (2) $ 86 $ 61 $ 20 $ 167
 
(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 our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
 
 
 

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

Unaudited
(Millions except per share amounts)
                 
 
Q2 2012 Q2 2011
EBITDA (3) EBIT

Net incomeattributable toTenneco Inc.
Per Share EBITDA (3) EBIT

Net incomeattributable toTenneco Inc.
Per Share
Earnings Measures $ 187 $ 137 $ 87 $ 1.42 $ 167 $ 113 $ 50 $ 0.81
 
Adjustments (reflect non-GAAP measures):
Restructuring and related expenses 2 2 1 0.02 2 2 1 0.02
Costs related to refinancing - - 1 0.01 - - - -
Net tax adjustments - - (19 ) (0.31 ) - - (1 ) (0.02 )
               
Non-GAAP earnings measures $ 189 $ 139 $ 70   $ 1.14   $ 169 $ 115 $ 50   $ 0.81  
 
 
Q2 2012
North Europe, Asia
America SA & India Pacific Total
EBIT $ 86 $ 32 $ 19 $ 137
Restructuring and related expenses   -   2   -     2  
Adjusted EBIT $ 86 $ 34 $ 19   $ 139  
 
 
Q2 2011
North Europe, Asia
America SA & India Pacific Total
EBIT $ 62 37 $ 14 $ 113
Restructuring and related expenses   1   1   -     2  
Adjusted EBIT $ 63 $ 38 $ 14   $ 115  
 
(1) Generally Accepted Accounting Principles
   
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results for the second quarters of 2012 and 2011 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 our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
 
 
 

ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1) NET INCOME TO EBITDA INCLUDING NONCONTROLLING INTERESTS (2)

Unaudited
(Millions)
         
 
YTD 2012
North Europe, Asia
America SA & India Pacific Total
Net income attributable to Tenneco Inc. $ 117
 
Net income attributable to noncontrolling interests 14
 
Net income 131
 
Income tax expense 39
 
Interest expense (net of interest capitalized) 63
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 157 $ 49 $ 27 233
 
Depreciation and amortization of other intangibles 45 42 12 99
 
Total EBITDA including noncontrolling interests (2) $ 202 $ 91 $ 39 $ 332
 
 
YTD 2011
North Europe, Asia
America SA & India Pacific Total
Net income attributable to Tenneco Inc. $ 97
 
Net income attributable to noncontrolling interests 12
 
Net income 109
 
Income tax expense 44
 
Interest expense (net of interest capitalized) 54
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) $ 124 $ 61 $ 22 207
 
Depreciation and amortization of other intangibles 47 46 12 105
 
Total EBITDA including noncontrolling interests (2) $ 171 $ 107 $ 34 $ 312
 
(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 our 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 2012 YTD 2011
EBITDA (3) EBIT

Net incomeattributable toTenneco Inc.
Per Share EBITDA (3) EBIT

Net incomeattributable toTenneco Inc.
Per Share
Earnings Measures $ 332 $ 233 $ 117 $ 1.90 $ 312 $ 207 $ 97 $ 1.56
 
Adjustments (reflect non-GAAP measures):

 
Restructuring and related expenses 3 3 2 0.04 3 3 2 0.03
Costs related to refinancing - - 12 0.19 - - 1 0.01
Net tax adjustments - - (20 ) (0.33 ) - - (11 ) (0.16 )
               
Non-GAAP earnings measures $ 335 $ 236 $ 111   $ 1.80   $ 315 $ 210 $ 89   $ 1.44  
 
 
YTD 2012
North Europe, Asia
America SA & India Pacific Total
EBIT $ 157 $ 49 $ 27 $ 233
Restructuring and related expenses   -   3   -     3  
Adjusted EBIT $ 157 $ 52 $ 27   $ 236  
 
 
YTD 2011
North Europe, Asia
America SA & India Pacific Total
EBIT $ 124 61 $ 22 $ 207
Restructuring and related expenses   1   2   -     3  
Adjusted EBIT $ 125 $ 63 $ 22   $ 210  
 
(1) Generally Accepted Accounting Principles
   
(2) Tenneco presents the above reconciliation of GAAP to non-GAAP earnings measures primarily to reflect the results for the first six months of 2012 and 2011 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 our EBITDA including noncontrolling interests for similar purposes. Tenneco also believes EBITDA including noncontrolling interests assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA including noncontrolling interests measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.
 
 
 

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

Unaudited
(Millions)
           
Q2 2012
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America Original Equipment
Ride Control $ 173 $ (2 ) $ 175 $ - $ 175
Emission Control   617   -     617   269   348
Total North America Original Equipment 790 (2 ) 792 269 523
 
North America Aftermarket
Ride Control 152 - 152 - 152
Emission Control   54   -     54   -   54
Total North America Aftermarket 206 - 206 - 206
 
Total North America 996 (2 ) 998 269 729
 
Europe Original Equipment
Ride Control 130 (19 ) 149 - 149
Emission Control   351   (55 )   406   139   267
Total Europe Original Equipment 481 (74 ) 555 139 416
 
Europe Aftermarket
Ride Control 57 (10 ) 67 - 67
Emission Control   30   (4 )   34   -   34
Total Europe Aftermarket 87 (14 ) 101 - 101
 
South America & India 142 (30 ) 172 21 151
 
Total Europe, South America & India 710 (118 ) 828 160 668
 
Asia 177 3 174 20 154
 
Australia   37   (2 )   39   3   36
 
Total Asia Pacific 214 1 213 23 190
 
Total Tenneco Inc. $ 1,920 $ (119 ) $ 2,039 $ 452 $ 1,587
 
 
Q2 2011
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America Original Equipment
Ride Control $ 161 $ - $ 161 $ - $ 161
Emission Control   520   -     520   246   274
Total North America Original Equipment 681 - 681 246 435
 
North America Aftermarket
Ride Control 145 - 145 - 145
Emission Control   48   -     48   -   48
Total North America Aftermarket 193 - 193 - 193
 
Total North America 874 - 874 246 628
 
Europe Original Equipment
Ride Control 151 - 151 - 151
Emission Control   385   -     385   133   252
Total Europe Original Equipment 536 - 536 133 403
 
Europe Aftermarket
Ride Control 70 - 70 - 70
Emission Control   44   -     44   -   44
Total Europe Aftermarket 114 - 114 - 114
 
South America & India 167 - 167 29 138
 
Total Europe, South America & India 817 - 817 162 655
 
Asia 155 - 155 24 131
 
Australia   42   -     42   3   39
 
Total Asia Pacific 197 - 197 27 170
 
Total Tenneco Inc. $ 1,888 $ -   $ 1,888 $ 435 $ 1,453
 
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect the trend in the company's sales, in various product lines and geographical regions, 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 2012
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America Original Equipment
Ride Control $ 344 $ (2 ) $ 346 $ - $ 346
Emission Control   1,234   -     1,234   546   688
Total North America Original Equipment 1,578 (2 ) 1,580 546 1,034
 
North America Aftermarket
Ride Control 298 - 298 - 298
Emission Control   106   -     106   -   106
Total North America Aftermarket 404 - 404 - 404
 
Total North America 1,982 (2 ) 1,984 546 1,438
 
Europe Original Equipment
Ride Control 269 (26 ) 295 - 295
Emission Control   732   (75 )   807   278   529
Total Europe Original Equipment 1,001 (101 ) 1,102 278 824
 
Europe Aftermarket
Ride Control 100 (13 ) 113 - 113
Emission Control   52   (5 )   57   -   57
Total Europe Aftermarket 152 (18 ) 170 - 170
 
South America & India 289 (43 ) 332 44 288
 
Total Europe, South America & India 1,442 (162 ) 1,604 322 1,282
 
Asia 332 (4 ) 336 42 294
 
Australia   76   (1 )   77   5   72
 
Total Asia Pacific 408 (5 ) 413 47 366
 
Total Tenneco Inc. $ 3,832 $ (169 ) $ 4,001 $ 915 $ 3,086
 
 
YTD 2011
Substrate Revenues
Sales Excluding
Revenues Excluding Currency
Currency Excluding Currency and Substrate
Revenues Impact Currency Impact Sales
North America Original Equipment
Ride Control $ 313 $ - $ 313 $ - $ 313
Emission Control   1,046   -     1,046   495   551
Total North America Original Equipment 1,359 - 1,359 495 864
 
North America Aftermarket
Ride Control 272 - 272 - 272
Emission Control   94   -     94   -   94
Total North America Aftermarket 366 - 366 - 366
 
Total North America 1,725 - 1,725 495 1,230
 
Europe Original Equipment
Ride Control 290 - 290 - 290
Emission Control   761   -     761   257   504
Total Europe Original Equipment 1,051 - 1,051 257 794
 
Europe Aftermarket
Ride Control 114 - 114 - 114
Emission Control   74   -     74   -   74
Total Europe Aftermarket 188 - 188 - 188
 
South America & India 319 - 319 55 264
 
Total Europe, South America & India 1,558 - 1,558 312 1,246
 
Asia 286 - 286 45 241
 
Australia   79   -     79   6   73
 
Total Asia Pacific 365 - 365 51 314
 
Total Tenneco Inc. $ 3,648 $ -   $ 3,648 $ 858 $ 2,790
 
(1) Generally Accepted Accounting Principles
 
(2) Tenneco presents the above reconciliation of revenues in order to reflect the trend in the company's sales, in various product lines and geographical regions, 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 IC.
RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE MEASURES

Unaudited
(Millions except percents)
           
Q2 2012 vs. Q2 2011 $ Change and % Change Increase (Decrease)
Revenues % Change

RevenuesExcludingCurrency andSubstrate Sales
% Change
North America Original Equipment
Ride Control $ 12 7 % $ 14 8 %
Emission Control   97   18 %   74   27 %
Total North America Original Equipment 109 16 % 88 20 %
 
North America Aftermarket
Ride Control 7 6 % 7 5 %
Emission Control   6   11 %   6   11 %
Total North America Aftermarket 13 7 % 13 7 %
 
Total North America 122 14 % 101 16 %
 
Europe Original Equipment
Ride Control (21 ) (13 %) (2 ) (1 %)
Emission Control   (34 ) (9 %)   15   6 %
Total Europe Original Equipment (55 ) (10 %) 13 4 %
 
Europe Aftermarket
Ride Control (13 ) (19 %)

 
(3 ) (5 %)
Emission Control   (14 ) (32 %)   (10 ) (22 %)
Total Europe Aftermarket (27 ) (24 %) (13 ) (12 %)
 
South America & India (25 ) (16 %) 13 9 %
 
Total Europe, South America & India (107 ) (13 %) 13 2 %
 
Asia 22 14 % 23 17 %
 
Australia (5 ) (9 %) (3 ) (3 %)
       
Total Asia Pacific 17 9 % 20 13 %
 
Total Tenneco Inc. $ 32   2 % $ 134   9 %
 
 
 
YTD Q2 2012 vs. YTD Q2 2011 $ Change and % Change Increase (Decrease)
Revenues % Change

RevenuesExcludingCurrency andSubstrate Sales
% Change
North America Original Equipment
Ride Control $ 31 10 % $ 33 10 %
Emission Control   188   18 %   137   25 %
Total North America Original Equipment 219 16 % 170 20 %
 
North America Aftermarket
Ride Control 26 10 % 26 9 %
Emission Control   12   13 %   12   13 %
Total North America Aftermarket 38 10 % 38 10 %
 
Total North America 257 15 % 208 17 %
 
Europe Original Equipment
Ride Control (21 ) (7 %) 5 2 %
Emission Control   (29 ) (4 %)   25   5 %
Total Europe Original Equipment (50 ) (5 %) 30 4 %
 
Europe Aftermarket
Ride Control (14 ) (13 %) (1 ) (2 %)
Emission Control   (22 ) (29 %)   (17 ) (22 %)
Total Europe Aftermarket (36 ) (19 %) (18 ) (10 %)
 
South America & India (30 ) (9 %) 24 9 %
 
Total Europe, South America & India (116 ) (7 %) 36 3 %
 
Asia 46 16 % 53 22 %
 
Australia (3 ) (3 %) (1 ) 0 %
       
Total Asia Pacific 43 12 % 52 17 %
 
Total Tenneco Inc. $ 184   5 % $ 296   11 %
 
 
 

ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
Debt net of cash / Adjusted LTM EBITDA including noncontrolling interests

Unaudited
(Millions except ratios)
         
Quarter Ended June 30,
 
2012 2011
 
Total debt $ 1,366 $ 1,294
 
Cash and cash equivalents 181 161
   
Debt net of cash balances (1) $ 1,185 $ 1,133
 
 
Adjusted LTM EBITDA including noncontrolling interests (2) (3) $ 625 $ 565
 
Ratio of debt net of cash balances to adjusted LTM EBITDA including noncontrolling interests (4) 1.9x 2.0x
 
 
 
 
Q3 11 Q4 11 Q1 12 Q2 12 Q2 12 LTM
 
Net income attributable to Tenneco Inc. $ 30 $ 30 $ 30 $ 87 $ 177
 
Net income attributable to noncontrolling interests 6 8 6 8 28
 
Income tax expense 21 23 18 21 83
 
Interest expense (net of interest capitalized) 27 27 42 21 117
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 84 88 96 137 405
 
Depreciation and amortization of other intangibles 51 51 49 50 201
 
Total EBITDA including noncontrolling interests (2) 135 139 145 187 606
 
Restructuring and related expenses 4 1 1 2 8
 
Goodwill impairment charge (5) 11 - - - 11
         
Total Adjusted EBITDA including noncontrolling interest (3) $ 150 $ 140   $ 146 $ 189 $ 625
 
 
Q3 10 Q4 10 Q1 11 Q2 11 Q2 11 LTM
 
Net income (loss) attributable to Tenneco Inc. $ 10 $ (18 ) $ 47 $ 50 $ 89
 
Net income attributable to noncontrolling interests 6 7 5 7 25
 
Income tax expense 15 24 14 30 83
 
Interest expense (net of interest capitalized) 36 49 28 26 139
 
EBIT, Earnings before interest expense, income taxes and noncontrolling interests (GAAP measure) 67 62 94 113 336
 
Depreciation and amortization of other intangibles 55 53 51 54 213
 
Total EBITDA including noncontrolling interests (2) 122 115 145 167 549
 
Restructuring and related expenses 3 4 1 2 10
 
Pension charges (6) 4 2 - - 6
         
Total Adjusted EBITDA including noncontrolling interest (3) $ 129 $ 121   $ 146 $ 169 $ 565
 
(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 our 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 annual 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, annual 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 our credit position and progress toward reducing our 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.
 
(5) Non-cash asset impairment charge related to goodwill for Australia.
 
(6) Includes charges related to an actuarial loss for lump-sum pension payments.
 
 
 

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

Unaudited
(Millions)
       
Three Months Ended June 30,
 
2012 2011
 
Original equipment revenues $ 1,576 $ 1,525
 
Aftermarket revenues   344   363
 
Net sales and operating revenues $ 1,920 $ 1,888
 
 
Six Months Ended June 30,
 
2012 2011
 
Original equipment revenues $ 3,177 $ 2,988
 
Aftermarket revenues   655   660
 
Net sales and operating revenues $ 3,832 $ 3,648
 
(1) Generally Accepted Accounting Principles
 
 
 

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

Unaudited
(Millions except percents)
                 
 
Q2 2012 Q2 2011
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total
Net sales and operating revenues $ 996 $ 710 $ 214 $ 1,920 $ 874 $ 817 $ 197 $ 1,888
 
Less: Substrate sales 269 137 23 429 246 162 27 435
               
Value-add revenues $ 727 $ 573 $ 191 $ 1,491 $ 628 $ 655 $ 170 $ 1,453
 
EBIT $ 86 $ 32 $ 19 $ 137 $ 62 $ 37 $ 14 $ 113
 
EBIT as a % of revenue 8.6 % 4.5 % 8.9 % 7.1 % 7.1 % 4.5 % 7.1 % 6.0 %
EBIT as a % of value-add revenue 11.8 % 5.6 % 9.9 % 9.2 % 9.9 % 5.6 % 8.2 % 7.8 %
 
Adjusted EBIT $ 86 $ 34 $ 19 $ 139 $ 63 $ 38 $ 14 $ 115
 
Adjusted EBIT as a % of revenue 8.6 % 4.8 % 8.9 % 7.2 % 7.2 % 4.7 % 7.1 % 6.1 %
Adjusted EBIT as a % of value-add revenue 11.8 % 5.9 % 9.9 % 9.3 % 10.0 % 5.8 % 8.2 % 7.9 %
 
YTD 2012 YTD 2011
North Europe, Asia North Europe, Asia
America SA & India Pacific Total America SA & India Pacific Total
Net sales and operating revenues $ 1,982 $ 1,442 $ 408 $ 3,832 $ 1,725 $ 1,558 $ 365 $ 3,648
 
Less: Substrate sales 546 290 49 885 495 312 51 858
               
Value-add revenues $ 1,436 $ 1,152 $ 359 $ 2,947 $ 1,230 $ 1,246 $ 314 $ 2,790
 
EBIT $ 157 $ 49 $ 27 $ 233 $ 124 $ 61 $ 22 $ 207
 
EBIT as a % of revenue 7.9 % 3.4 % 6.6 % 6.1 % 7.2 % 3.9 % 6.0 % 5.7 %
EBIT as a % of value-add revenue 10.9 % 4.3 % 7.5 % 7.9 % 10.1 % 4.9 % 7.0 % 7.4 %
 
Adjusted EBIT $ 157 $ 52 $ 27 $ 236 $ 125 $ 63 $ 22 $ 210
 
Adjusted EBIT as a % of revenue 7.9 % 3.6 % 6.6 % 6.2 % 7.2 % 4.0 % 6.0 % 5.8 %
Adjusted EBIT as a % of value-add revenue 10.9 % 4.5 % 7.5 % 8.0 % 10.2 % 5.1 % 7.0 % 7.5 %
 
(1) Generally Accepted Accounting Principles
   
2) Tenneco presents the above reconciliation of revenues in order to reflect 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 our company's operational performance without the impact of such substrate sales.

Copyright Business Wire 2010