Market Overview

Tenneco Reports Second Quarter 2018 Results

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  • Record-high second quarter revenue, outpacing industry production with
    growth in all three reporting segments
  • Strong cash generation driven by working capital improvements
  • CEOs selected for the new aftermarket and ride performance company and
    the powertrain technology company

Tenneco Inc. (NYSE:TEN) reported second quarter net income of $50
million, or 98-cents per diluted share, versus a second quarter net loss
of $3 million, or 5-cents per diluted share in 2017. Second quarter 2018
adjusted net income was $99 million, or $1.92 per diluted share,
compared with $101 million, or $1.88 per diluted share last year.

Revenue

Total revenue in the second quarter was $2.537 billion, up 9%
year-over-year, with revenue growth in Clean Air, Ride Performance and
Aftermarket. On a constant currency basis, total revenue increased 8%
driven by strong commercial truck and off-highway programs and higher
volumes and incremental content on light vehicles.

On a constant currency basis, value-add revenue increased 6% to $1.889
billion, significantly outpacing industry production*. Ride Performance
revenue increased 13%, Clean Air revenue rose 5%, and global Aftermarket
revenue was up 1% compared to last year.

EBIT

Second quarter EBIT (earnings before interest, taxes and noncontrolling
interests) was $113 million, compared to $27 million last year. Adjusted
EBIT was $175 million, versus $178 million last year. Volume increased
in both light vehicle and commercial truck and off-highway applications.
Steel commodity costs, launch costs related to a major truck platform
and aftermarket versus OE revenue mix impacted margins.

   
Q2 2018 Q2 2017
 
EBIT as a percent of revenue 4.5% 1.2%
EBIT as a percent of value-add revenue 5.9% 1.5%
 
Adjusted EBIT as a percent of revenue 6.9% 7.7%
Adjusted EBIT as a percent of value-add revenue 9.1% 10.0%
 

Cash

Cash generated by operations was $75 million, compared with $92 million
a year ago. Improvements in working capital were offset by payments made
during the second quarter 2018 of $17 million for antitrust settlements,
and $11 million for acquisition related payments. During the quarter,
the company returned $12 million to shareholders through a dividend
payment of 25-cents per common share.

"Tenneco's strong organic growth was two times industry production
growth in the second quarter, with higher revenues in all three
reporting segments, led by double-digit growth in intelligent suspension
technologies and commercial truck and off-highway revenue," said Brian
Kesseler, CEO Tenneco. "In line with our guidance last quarter, the
Tenneco team delivered sequential margin improvement in all three
reporting segments as we continue to drive operational improvements and
address higher steel costs through customer recovery mechanisms."

Adjusted second quarter 2018 and 2017 results

               
(millions except per share amounts) Q2 2018 Q2 2017
  Net income

Net income (loss)

attributable attributable to

to Tenneco Inc.

Per Share EBIT

EBITDA(1)(2)

Tenneco Inc. Per Share EBIT

EBITDA(1)(2)

$ 50 $ 0.98 $ 113 $ 172 $ (3 ) $ (0.05 ) $ 27 $ 82
 
Adjustments(2)
Restructuring and related expenses 21 0.41 31 31 16 0.30 17 16
Acquisition advisory costs 14 0.27 18 18 - - - -
Pre-closing structural cost reductions 7 0.12 9 9 - - - -
Environmental charge 3 0.06 4 4 - - - -
Antitrust settlement accrual - - - - 85 1.60 132 132
Warranty settlement - - - - 5 0.08 7 7
Gain on sale of unconsolidated JV - - - - (4 ) (0.08 ) (5 ) (5 )
Costs related to refinancing - - - - 1 0.02 - -
Net tax adjustments 4 0.08 - - 1 0.01 - -
 
               
Adjusted Net income, EPS, EBIT, and EBITDA $ 99 $ 1.92 $ 175 $ 234 $ 101   $ 1.88   $ 178   $ 232  
 
(1) EBITDA including noncontrolling interests

(2) Tables at the end of this press release reconcile
U.S. GAAP to non-GAAP results.

 

OUTLOOK

Third quarter and full year 2018

Tenneco expects constant currency total revenue growth of 5% in the
third quarter 2018, outpacing forecasted light vehicle industry
production growth of 3%*. Tenneco estimates currency to have an impact
on revenue of -2%, based on currency exchange rates as of June 30, 2018.
The company expects organic growth to outpace industry production with
growth in light vehicle, commercial truck and off-highway revenue, and a
steady contribution from the global aftermarket segment. The company
expects third quarter value-add adjusted EBIT margin to be lower than
prior year by about 40 to 50 basis points.

For the full year, the company reaffirmed its 2018 full year revenue
outlook, and expects 5% constant currency revenue growth, outpacing
industry production* by 3 percentage points. Additionally, the company
expects currency to have a positive impact on revenue of 1%, based on
currency exchange rates as of June 30, 2018. The company expects full
year value-add adjusted EBIT margin in the range of 8.5% to 8.7%.

Acquisition of Federal-Mogul LLC

Tenneco signed a definitive agreement on April 10, 2018, to acquire
Federal-Mogul, a leading global supplier to original equipment
manufacturers and the aftermarket. Tenneco intends to separate the
combined businesses into two independent, publicly traded companies
through a tax-free spin-off to shareholders that will establish an
aftermarket and ride performance company and a powertrain technology
company.

The Federal-Mogul acquisition is expected to close early in the fourth
quarter of 2018, subject to regulatory and shareholder approvals and
other customary closing conditions, with the separation expected to
occur in the second half of 2019. The transaction is expected to be
value accretive with run-rate earnings synergies of at least $200
million and one-time working capital synergies of at least $250 million
within 24 months of closing.

On July 23, Tenneco announced that its board of directors has selected
Brian J. Kesseler and Roger J. Wood as the chief executive officers of
the two new companies. Kesseler will become chairman and CEO of the
aftermarket and ride performance company, which will be headquartered in
Lake Forest, Illinois, and Wood will become chairman and CEO of the new
powertrain technology company, which will be headquartered in the
Detroit, Michigan area. Immediately upon closing of the Federal-Mogul
acquisition, and prior to separation, Kesseler and Wood will serve as
co-CEOs of Tenneco Inc., leading their respective businesses, while
preparing each to become a stand-alone entity and helping facilitate a
smooth spin-off. During this period, both CEOs will report to the
Tenneco Board of Directors.

In connection with the Federal-Mogul acquisition, the Tenneco Board of
Directors has scheduled a special meeting of stockholders for Wednesday,
September 12, 2018 at 10:00 a.m. CT. The meeting will be held at the
corporate headquarters, 500 North Field Drive, Lake Forest, Illinois.
The record date for stockholders eligible to vote at the meeting is July
31, 2018.

*Source: IHS Automotive July 2018 global light vehicle production
forecast and Tenneco estimates.

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
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and
Earnings Measures – 6 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures –
Original Equipment Commercial Truck, Off-Highway and other revenues
– 3 Months and 6 months

CONFERENCE CALL

The company will host a conference call on Friday, July 27, 2018 at 9:00
a.m. ET. The dial-in number is 866-807-9684 (domestic) or 412-317-5415
(international). The passcode is Tenneco Inc. call. 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 July 27, 2018 through August 3, 2018. To access this
recording, dial 877-344-7529 (domestic), 855-669-9658 (Canada) or
412-317-0088 (international). The replay access code is 10122424. The
purpose of the call is to discuss the company's operations for the
second fiscal quarter of 2018, 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.

About Tenneco

Tenneco is a $9.3 billion global manufacturing company with headquarters
in Lake Forest, Illinois and approximately 32,000 employees worldwide.
Tenneco is one of the world's largest designers, manufacturers and
marketers of ride performance and clean air products and systems for
automotive and commercial vehicle original equipment markets and the
aftermarket. Tenneco's principal brand names are Monroe®, Walker®, XNOx™
and Clevite®Elastomers.

About the Aftermarket and Ride Performance Company

The aftermarket and ride performance company would have 2017 pro-forma
revenues of $6.4 billion, with 57% of those revenues from aftermarket
and 43% from original equipment customers. Following the Federal-Mogul
acquisition, the aftermarket and ride performance company 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. The
aftermarket and ride performance company's principal product brands will
include Monroe®, Walker®, Clevite®Elastomers, MOOG®, Fel-Pro®, Wagner®,
and Champion®.

About the Powertrain Technology Company

The powertrain technology company would have 2017 pro-forma revenues of
$10.7 billion, serving light vehicle, commercial truck, off-highway and
industrial markets. Following the Federal-Mogul acquisition, the
powertrain technology company 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.

Revenue estimates in this release are based on OE manufacturers'
programs that have been formally awarded to the company; programs where
Tenneco is highly confident that it will be awarded business based on
informal customer indications consistent with past practices; and
Tenneco's status as supplier for the existing program and its
relationship with the customer. These revenue estimates are also based
on anticipated vehicle production levels and pricing, including precious
metals pricing and the impact of material cost changes. Unless otherwise
indicated, our revenue estimate methodology does not attempt to forecast
currency fluctuations, and accordingly, reflects constant currency.
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 forecast
EBIT (and the related margins) on a forward-looking basis 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 July 27, 2018 webcast, which will be available
on the financial section of the Tenneco website at www.investors.tenneco.com.

Safe Harbor

This release contains forward-looking statements. These forward-looking
statements include, but are not limited to, (i) all statements, other
than statements of historical fact, included in this communication that
address activities, events or developments that we expect or anticipate
will or may occur in the future or that depend on future events and (ii)
statements about our future business plans and strategy and other
statements that describe Tenneco's outlook, objectives, plans,
intentions or goals, and any discussion of future operating or financial
performance. These forward-looking statements are included in various
sections of this communication and the words "may," "will," "should,"
"could," "expect," "anticipate," "estimate," and similar expressions
(and variations thereof) are intended to identify forward-looking
statements. Forward-looking statements included in this release concern,
among other things, the proposed acquisition of Federal-Mogul LLC and
related separation transactions, including the expected timing of
completion of the proposed acquisition and spin-off; the benefits of the
proposed acquisition and spin-off; the combined and separated companies'
respective plans, objectives and expectations; future financial and
operating results; and other statements that are not historical facts.
Forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results to materially differ from
those described in the forward-looking statements, including the risk
that the acquisition transaction may not be completed in a timely manner
or at all due to a failure to satisfy certain closing conditions,
including any stockholder or regulatory approval or the failure to
satisfy other conditions to completion of the transaction; the
occurrence of any event, change or other circumstance that could give
rise to the termination of the purchase agreement; the outcome of any
legal proceeding that may be instituted against Tenneco and others
following the announcement of the transactions; the combined company may
not complete the separation of the Aftermarket & Ride Performance
business from the Powertrain Technology business (or achieve some or all
of the anticipated benefits of such a separation); the proposed
transactions may have an adverse impact on existing arrangements with
Tenneco or Federal-Mogul, including those related to transition,
manufacturing and supply services and tax matters; the amount of the
costs, fees, expenses and charges related to the transactions may be
greater than expected; the ability to retain and hire key personnel and
maintain relationships with customers, suppliers or other business
partners; the risk that the benefits of the transactions, including
synergies, may not be fully realized or may take longer to realize than
expected; the risk that the transactions may not advance the combined or
separated companies' respective business strategy; the risk that the
combined company may experience difficulty integrating or separating all
employees or operations; the potential diversion of Tenneco management's
attention resulting from the proposed transactions; as well as the risk
factors and cautionary statements included in Tenneco's periodic and
current reports (Forms 10-K, 10-Q and 8-K) filed from time to time with
the SEC.

In addition, the forward-looking statements contained herein pertaining
to the company's performance are based on the current expectations of
the company (including its subsidiaries). Because these forward-looking
statements involve risks and uncertainties, the company's plans, actions
and actual results could differ materially. Among the factors that could
cause these plans, actions and results to differ materially from current
expectations are:

(i) general economic, business and market conditions;

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

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

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

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

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

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

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

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

(x) risk inherent in operating a multi-national company, including
economic conditions, such as currency exchange and inflation rates, and
political environments 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
disruption of production and/or supply;

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

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

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

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

(xv) product warranty costs;

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

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

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

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

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

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

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

Given these risks and uncertainties, investors should not place undue
reliance on forward-looking statements as a prediction of actual
results. Unless otherwise indicated, the forward-looking statements in
this release are made as of the date of this communication, and, except
as required by law, Tenneco does not undertake any obligation, and
disclaims any obligation, to publicly disclose revisions or updates to
any forward-looking statements. Additional information regarding these
risk factors and uncertainties is detailed from time to time in the
company's SEC filings, including but not limited to its annual report on
Form 10-K for the year ended December 31, 2017.

Additional Information and Where to Find It

In connection with the proposed transaction between Tenneco Inc. (the
"Company") and Federal-Mogul LLC, the Company intends to file relevant
materials with the U.S. Securities and Exchange Commission (the "SEC"),
including a preliminary proxy statement on Schedule 14A. Following the
filing of the definitive proxy statement with the SEC, the Company will
mail the definitive proxy statement and a proxy card to each stockholder
entitled to vote at the special meeting relating to the proposed
transaction. This communication is not a substitute for the proxy
statement or other document(s) that the Company may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS
OF THE COMPANY ARE URGED TO READ CAREFULLY THE PROXY STATEMENT
(INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE COMPANY, FEDERAL-MOGUL AND THE PROPOSED
TRANSACTION. Investors and security holders may obtain free copies of
the proxy statement and other relevant materials (when they become
available), and any and all documents filed by the Company with the SEC
may be obtained for free at the SEC's website at www.sec.gov.
In addition, stockholders may obtain free copies of the documents filed
with the SEC by the Company via the Company's Investor Relations section
of its website at investors.tenneco.com or by contacting Investor
Relations by directing a request to the Company, Attention: Investor
Relations, 500 North Field Drive in Lake Forest, Illinois 60045 or by
calling (847) 482-5162.

Certain Information Regarding Participants

The Company and its respective directors and executive officers may be
deemed participants in the solicitation of proxies in connection with
the proposed transaction. Information about the persons who may, under
the rules of the SEC, be considered to be participants in the
solicitation of the Company's stockholders in connection with the
proposed transaction, and any interest they have in the proposed
transaction, will be set forth in the definitive proxy statement when it
is filed with the SEC. Additional information regarding these
individuals is set forth in the Company's proxy statement for its 2018
Annual Meeting of Stockholders, which was filed with the SEC on April 4,
2018, its Annual Report on Form 10-K for the fiscal year ended December
31, 2017, which was filed with the SEC on February 28, 2018, and its
Current Reports on Form 8-K filed with the SEC on July 23, 2018. You may
obtain these documents (when they become available) free of charge at
the SEC's web site at www.sec.gov
and from Investor Relations at the Company.

No Offers or Solicitations

This document shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of Section 10 of the U.S. Securities Act of 1933, as amended.

 
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited

THREE MONTHS ENDED JUNE 30,
(Millions except per share amounts)
 
 
2018 2017
Net sales and operating revenues
Clean Air - Value-add revenues $ 1,073 $ 998
Clean Air - Substrate sales 621 541
Ride Performance 506 442
Aftermarket   337     336  
Total net sales and operating revenues $ 2,537 $ 2,317
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown
below)
2,159

(a)

1,949

(f) (h) (l)

Engineering, research and development 42

(c)

36
Selling, general and administrative 156

(a) (b) (c) (d)

252

(f) (g) (l)

Depreciation and amortization of other intangibles   59     55  

(f)

Total costs and expenses 2,416 2,292
 
Other income (expense)
Loss on sale of receivables (2 ) (1 )
Other income (expense)   (6 )   3  

(i) (l)

Total other income (expense) (8 ) 2
 

Earnings before interest expense, income taxes, and noncontrolling
interests

Clean Air 105

(a) (c)

106

(f)

Ride Performance 5

(a)

18

(f) (h)

Aftermarket 50

(a) (c)

54

(f)

Other   (47 )

(b) (c) (d)

  (151 )

(f) (g) (i)

Total earnings before interest expense, income taxes, and
noncontrolling interests

113 27
 
Interest expense (net of interest capitalized)   20     20  

(j)

Earnings before income taxes and noncontrolling interests 93 7
 
Income tax expense (benefit)   27  

(e)

  (8 )

(k)

Net income 66 15
 
Less: Net income attributable to noncontrolling interests   16     18  
Net income (loss) attributable to Tenneco Inc. $ 50   $ (3 )
 
 
Weighted average common shares outstanding:
Basic   51.3     53.5  
Diluted   51.6     53.5  
 
Earnings (Loss) per share of common stock:
Basic $ 0.98   $ (0.05 )
Diluted $ 0.98   $ (0.05 )
 
 
(a) Includes restructuring and related charges of $31 million
pre-tax, $21 million after tax and noncontrolling interests or $0.41
per diluted share. Of the amount, $23 million is recorded in cost of
sales and $8 million is recorded in selling, general and
administrative expenses. $11 million is recorded in Clean Air, $18
million is recorded in Ride Performance and $2 million is recorded
in Aftermarket.
 
(b) Includes acquisition advisory costs of $18 million pre-tax, $14
million after tax or $0.27 per diluted share.
 
(c) Includes pre-closing structural cost reductions of $9 million
pre-tax, $7 million after tax or $0.12 per diluted share. Of the
amount, $5 million is recorded in selling, general and
administrative expenses and $4 million is recorded in engineering.
$6 million is recorded in Clean Air, $1 million is recorded in
Aftermarket and $2 million in Other.
 
(d) Includes environmental charge of $4 million pre-tax, $3 million
after tax or $0.06 per diluted share related to an acquired site
whereby an indemnification reverted back to the Company resulting
from a 2009 bankruptcy filing of Mark IV Industries.
 
(e) Includes net tax expense of $4 million or $0.08 per diluted
share for discrete tax adjustments recognized in the period.
 
(f) Includes restructuring and related charges of $17 million
pre-tax, $16 million after tax or $0.30 per diluted share. Of the
amount, $12 million is recorded in cost of sales, $4 million is
recorded in selling, general and administrative expenses and $1
million is recorded in depreciation and amortization. $12 million is
recorded in Clean Air, $2 million is recorded in Ride Performance,
$1 million is recorded in Aftermarket and $2 million is recorded in
Other.
 
(g) Includes antitrust settlement accrual of $132 million pre-tax,
$85 million after tax or $1.60 per diluted share.
 
(h) Includes warranty settlement of $7 million pre-tax, $5 million
after tax or $0.08 per diluted share.
 
(i) Includes gain on sale of an unconsolidated JV of $5 million
pre-tax, $4 million after tax or $0.08 per diluted share.
 
(j) Includes pre-tax expenses of $1 million, $1 million after tax or
$0.02 per diluted share for costs related to refinancing activities.
 
(k) Includes net tax expense of $1 million or $0.01 per diluted
share for discrete tax adjustments recognized in the period.
 
(l) Includes retrospective adjustment of $2 million to reflect the
effects of applying ASU 2017-07 Compensation—Retirement Benefits
(Topic 715): Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost adopted in Q1 2018.
 

 
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME

Unaudited

SIX MONTHS ENDED JUNE 30,
(Millions except per share amounts)
 
 
2018 2017
Net sales and operating revenues
Clean Air - Value-add revenues $ 2,177 $ 2,006
Clean Air - Substrate sales 1,273 1,088
Ride Performance 1,019 870
Aftermarket   642     645  
Total net sales and operating revenues $ 5,111 $ 4,609
 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization shown
below)
4,357

(a) (e)

3,878

(g) (i) (m)

Engineering, research and development 83

(a) (c)

75
Selling, general and administrative 309

(a) (b) (c) (d)

393

(g) (h) (k) (m)

Depreciation and amortization of other intangibles   118     107  

(g)

Total costs and expenses 4,867 4,453
 
Other income (expense)
Loss on sale of receivables (5 ) (2 )
Other income (expense)   (9 )   (6 )

(j) (k) (m)

Total other income (expense) (14 ) (8 )
 

Earnings before interest expense, income taxes, and noncontrolling
interests

Clean Air 224

(a) (c)

200

(g)

Ride Performance 13

(a) (e)

45

(g) (i)

Aftermarket 85

(a) (c)

96

(g)

Other   (92 )

(b) (c) (d)

  (193 )

(g) (h) (j) (k)

Total earnings before interest expense, income taxes, and
noncontrolling interests

230 148
 
Interest expense (net of interest capitalized)   40     35  

(l)

Earnings before income taxes and noncontrolling interests 190 113
 
Income tax expense   52  

(f)

  25  
Net income 138 88
 
Less: Net income attributable to noncontrolling interests   30     32  
Net income attributable to Tenneco Inc. $ 108   $ 56  
 
 
Weighted average common shares outstanding:
Basic   51.2     53.7  
Diluted   51.5     54.0  
 
Earnings per share of common stock:
Basic $ 2.12   $ 1.05  
Diluted $ 2.10   $ 1.05  
 
 
(a) Includes restructuring and related charges of $43 million
pre-tax, $29 million after tax and noncontrolling interests or $0.57
per diluted share. Of the amount, $32 million is recorded in cost of
sales, $10 million is recorded in selling, general and
administrative expenses and $1 million is recorded in engineering.
$12 million is recorded in Clean Air, $27 million is recorded in
Ride Performance and $4 million is recorded in Aftermarket.
 
(b) Includes acquisition advisory costs of $31 million pre-tax, $25
million after tax or $0.48 per diluted share.
 
(c) Includes pre-closing structural cost reductions of $9 million
pre-tax, $7 million after tax or $0.12 per diluted share. Of the
amount, $5 million is recorded in selling, general and
administrative expenses and $4 million is recorded in engineering.
$6 million is recorded in Clean Air, $1 million is recorded in
Aftermarket and $2 million in Other.
 
(d) Includes environmental charge of $4 million pre-tax, $3 million
after tax or $0.06 per diluted share related to an acquired site
whereby an indemnification reverted back to the Company resulting
from a 2009 bankruptcy filing of Mark IV Industries.
 
(e) Includes warranty charge of $5 million pre-tax, $4 million after
tax or $0.08 per diluted share.
 
(f) Includes net tax expense of $4 million or $0.09 per diluted
share for discrete tax adjustments recognized in the period.
 
(g) Includes restructuring and related charges of $32 million
pre-tax, $30 million after tax or $0.55 per diluted share. Of the
amount, $23 million is recorded in cost of sales, $7 million is
recorded in selling, general and administrative expenses and $2
million is recorded in depreciation and amortization. $21 million is
recorded in Clean Air, $5 million is recorded in Ride Performance,
$3 million is recorded in Aftermarket and $3 million is recorded in
Other.
 
(h) Includes antitrust settlement accrual of $132 million pre-tax,
$85 million after tax or $1.59 per diluted share.
 
(i) Includes warranty settlement of $7 million pre-tax, $5 million
after tax or $0.08 per diluted share.
 
(j) Includes gain on sale of an unconsolidated JV of $5 million
pre-tax, $4 million after tax or $0.08 per diluted share.
 
(k) Includes pension and accelerated restricted stock vesting
charges of $11 million pre-tax, $7 million after tax or $0.13 per
diluted share. Of the amount, $5 million is recorded in selling,
general and administrative expense and $6 million is recorded in
other income (expense).
 
(l) Includes pre-tax expenses of $1 million, $1 million after tax or
$0.02 per diluted share for costs related to refinancing activities.
 
(m) Includes retrospective adjustment of $7 million to reflect the
effects of applying ASU 2017-07 Compensation—Retirement Benefits
(Topic 715): Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost adopted in Q1 2018.
 

       
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS

Unaudited

(Millions)
 
June 30, 2018 December 31, 2017
 
Assets
 
Cash and cash equivalents $ 235 $ 315
 
Restricted cash 2 3
 
Receivables, net 1,442 (a) 1,321 (a)
 
Inventories 898 869
 
Other current assets 348 291
 
Investments and other assets 453 428
 
Plant, property, and equipment, net   1,625   1,615
 
Total assets $ 5,003 $ 4,842
 
 
 
 
Liabilities and Shareholders' Equity
 
Short-term debt $ 78 $ 83
 
Accounts payable 1,813 1,705
 
Accrued taxes 42 45
 
Accrued interest 14 14
 
Other current liabilities 451 419
 
Long-term debt 1,381 (b) 1,358

(b)

 
Deferred income taxes 11 11
 
Deferred credits and other liabilities 414 423
 
Redeemable noncontrolling interests 38 42
 
Tenneco Inc. shareholders' equity 717 696
 
Noncontrolling interests   44   46
 

 

Total liabilities, redeemable noncontrolling interests and
shareholders' equity

$ 5,003 $ 4,842
 
 
 
June 30, 2018 December 31, 2017
(a) Accounts receivable net of:
Europe - Accounts receivable factoring programs $ 255 $ 218
North America - Accounts receivable factoring program $ 122 $ 107
 
June 30, 2018 December 31, 2017
(b) Long-term debt composed of:
Borrowings against revolving credit facilities $ 278 $ 244
Term loan A (Due 2022) 378 388
5.000% senior notes (Due 2026) 493 492
5.375% senior notes (Due 2024) 222 222
Other long-term debt   10   12
$ 1,381 $ 1,358
 

   
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS

Unaudited

(Millions)
 
 
 
THREE MONTHS ENDED
JUNE 30,
2018 2017
 
Operating activities:
Net income $ 66 $ 15

Adjustments to reconcile net income to net cash provided by
operating activities -

Depreciation and amortization of other intangibles 59 55
Stock-based compensation 2 2
Deferred income taxes (8 ) (7 )
Loss on sale of assets 2 -
Changes in components of working capital-
(Inc.)/dec. in receivables (16 ) (66 )

(a)

(Inc.)/dec. in inventories (19 ) (15 )
(Inc.)/dec. in prepayments and other current assets (25 ) (11 )
Inc./(dec.) in payables (25 ) (7 )
Inc./(dec.) in accrued taxes - (41 )
Inc./(dec.) in accrued interest 3 3
Inc./(dec.) in other current liabilities 33 160
Changes in long-term assets (5 ) 1
Changes in long-term liabilities 8 2
Other   -     1  
Net cash provided by operating activities 75 92
 
Investing activities:
Proceeds from sale of assets 3 3
Proceeds from sale of equity interest - 9
Cash payments for plant, property and equipment (80 ) (90 )
Cash payments for software-related intangible assets (5 ) (6 )
Proceeds from deferred purchase price of factored receivables 32 27

(a)

Other   2     (4 )
Net cash used by investing activities (48 ) (61 )

(b)

 
Financing activities:
Cash dividends (12 ) (13 )
Issuance of common shares under employee stock plans 1 -
Purchase of common stock under the share repurchase program - (44 )
Issuance of long-term debt - 136
Debt issuance costs on long-term debt (2 ) (8 )
Retirement of long-term debt (6 ) (2 )
Net inc./(dec.) in bank overdrafts - (12 )

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

(29 ) (57 )
Net inc./(dec.) in short-term debt secured by accounts receivable 10 -
Distribution to noncontrolling interest partners   (28 )   (33 )
Net cash used by financing activities (66 ) (33 )
 

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

  (14 )   (7 )
Decrease in cash, cash equivalents and restricted cash (53 ) (9 )
 
Cash, cash equivalents and restricted cash, beginning of period   290     344  

(b)

Cash, cash equivalents and restricted cash, end of period $ 237   $ 335  

(b)

 
Supplemental Cash Flow Information:
Cash paid during the period for interest (net of interest
capitalized)
$ 17 $ 16
Cash paid during the period for income taxes (net of refunds) 31 28
 
Non-cash Investing and Financing Activities:
Period ended balance of payables for plant, property, and equipment $ 54 $ 51
Deferred purchase price of receivables factored in the period 34 27
 
(a) Retrospectively adjusted to reflect the effects of applying ASU
2016-15 on Statement of Cash Flows - Classification of certain cash
receipts and cash payments (Topic 230) adopted in Q1 2018.
 
(b) Retrospectively adjusted to reflect the effects of applying the
ASU 2016-18 on Statement of Cash Flows - Restricted Cash adopted in
Q1 2018.
 

   
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS

Unaudited

(Millions)
 
 
 
SIX MONTHS ENDED
JUNE 30,
2018 2017
 
Operating activities:
Net income $ 138 $ 88

Adjustments to reconcile net income to net cash provided by
operating activities -

Depreciation and amortization of other intangibles 118 107
Stock-based compensation 7 11
Deferred income taxes (9 ) -
Loss on sale of assets 5 1
Changes in components of working capital-
(Inc.)/dec. in receivables (239 ) (225 )

(a)

(Inc.)/dec. in inventories (53 ) (60 )
(Inc.)/dec. in prepayments and other current assets (70 ) (68 )
Inc./(dec.) in payables 164 86
Inc./(dec.) in accrued taxes (3 ) (38 )
Inc./(dec.) in accrued interest - (2 )
Inc./(dec.) in other current liabilities 30 152
Changes in long-term assets (14 ) -
Changes in long-term liabilities 1 7
Other   -     2  
Net cash provided by operating activities 75 61
 
Investing activities:
Proceeds from sale of assets 5 6
Proceeds from sale of equity interest - 9
Cash payments for plant, property and equipment (164 ) (193 )
Cash payments for software-related intangible assets (10 ) (12 )
Proceeds from deferred purchase price of factored receivables 66 49

(a)

Other   2     (4 )
Net cash used by investing activities (101 ) (145 )
 
Financing activities:
Cash dividends (25 ) (26 )
Repurchase of common shares under employee stock plans (1 ) (3 )
Purchase of common stock under the share repurchase program - (60 )
Issuance of long-term debt - 136
Debt issuance costs on long-term debt (2 ) (8 )
Retirement of long-term debt (12 ) (8 )
Net inc./(dec.) in bank overdrafts (4 ) (9 )

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

48 60
Net inc./(dec.) in short-term debt secured by accounts receivable (20 ) 20
Distribution to noncontrolling interest partners   (28 )   (33 )
Net cash provided (used) by financing activities (44 ) 69
 

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

  (11 )   1  
Decrease in cash, cash equivalents and restricted cash (81 ) (14 )
 
Cash, cash equivalents and restricted cash, beginning of period   318     349  

(b)

Cash, cash equivalents and restricted cash, end of period $ 237   $ 335  

(b)

 
Supplemental Cash Flow Information:
Cash paid during the period for interest (net of interest
capitalized)
$ 40 $ 38
Cash paid during the period for income taxes (net of refunds) 56 43
 
Non-cash Investing and Financing Activities:
Period ended balance of payables for plant, property, and equipment $ 54 $ 51
Deferred purchase price of receivables factored in the period 71 53
 
(a) Retrospectively adjusted to reflect the effects of applying ASU
2016-15 on Statement of Cash Flows - Classification of certain cash
receipts and cash payments (Topic 230) adopted in Q1 2018.
 
(b) Retrospectively adjusted to reflect the effects of applying the
ASU 2016-18 on Statement of Cash Flows - Restricted Cash adopted in
Q1 2018.
 

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

Unaudited

(Millions)
   
Q2 2018
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
Net income attributable to Tenneco Inc. $ 50
 
Net income attributable to noncontrolling interests   16  
 
Net income 66
 
Income tax expense 27
 
Interest expense (net of interest capitalized)   20  
 
EBIT, Earnings before interest expense, income taxes and
noncontrolling interests
$ 105 $ 5 $ 50 $ 160 $ (47 ) 113
 
Depreciation and amortization of other intangibles   38   17   4   59   -     59  
 
Total EBITDA including noncontrolling interests (2) $ 143 $ 22 $ 54 $ 219 $ (47 ) $ 172  
 
 
 
Q2 2017
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
Net loss attributable to Tenneco Inc. $ (3 )
 
Net income attributable to noncontrolling interests   18  
 
Net income 15
 
Income tax benefit (8 )
 
Interest expense (net of interest capitalized)   20  
 
EBIT, Earnings before interest expense, income taxes and
noncontrolling interests
$ 106 $ 18 $ 54 $ 178 $ (151 ) 27
 
Depreciation and amortization of other intangibles   35   15   5   55   -     55  
 
Total EBITDA including noncontrolling interests (2) $ 141 $ 33 $ 59 $ 233 $ (151 ) $ 82  
 
 
(1) U.S. Generally Accepted Accounting Principles.
 
(2) EBITDA including noncontrolling interests represents
income before interest expense, income taxes, noncontrolling
interests and depreciation and amortization. EBITDA including
noncontrolling interests is not a calculation based upon generally
accepted accounting principles. The amounts included in the EBITDA
including noncontrolling interests calculation, however, are derived
from amounts included in the historical statements of income data.
In addition, EBITDA including noncontrolling interests should not be
considered as an alternative to net income (loss) attributable to
Tenneco Inc. or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows
as a measure of liquidity. Tenneco has presented EBITDA including
noncontrolling interests because it regularly reviews EBITDA
including noncontrolling interests as a measure of the company's
performance. In addition, Tenneco believes its investors utilize and
analyze the company's EBITDA including noncontrolling interests for
similar purposes. Tenneco also believes EBITDA including
noncontrolling interests assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many
factors. However, the EBITDA including noncontrolling interests
measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the
components of the calculation.

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

Unaudited

(Millions except per share amounts)
 
 
Q2 2018 Q2 2017
Net income
Net income (loss)
attributable

 

attributable to

to Tenneco Inc.

Per Share EBIT

EBITDA(3)

Tenneco Inc.

Per Share EBIT EBITDA ((3))
Earnings (Loss) Measures $ 50 $ 0.98 $ 113 $ 172 $ (3 ) $ (0.05 ) $ 27 $ 82
 
Adjustments:
Restructuring and related expenses 21 0.41 31 31 16 0.30 17 16
Acquisition advisory costs (4) 14 0.27 18 18 - - - -
Pre-closing structural cost reductions (5) 7 0.12 9 9 - - - -
Environmental charge (6) 3 0.06 4 4 - - - -
Antitrust settlement accrual (7) - - - - 85 1.60 132 132
Warranty settlement (8) - - - - 5 0.08 7 7
Gain on sale of unconsolidated JV - - - - (4 ) (0.08 ) (5 ) (5 )
Costs related to refinancing - - - - 1 0.02 - -
Net tax adjustments 4 0.08 - - 1 0.01 - -
               
Adjusted Net income, EPS, EBIT, and EBITDA $ 99 $ 1.92 $ 175 $ 234 $ 101   $ 1.88   $ 178   $ 232  
 
 
 
Q2 2018
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
EBIT $ 105 $ 5 $ 50 $ 160 $ (47 ) $ 113
Restructuring and related expenses 11 18 2 31 - 31
Acquisition advisory costs (4) - - - - 18 18
Pre-closing structural cost reductions (5) 6 - 1 7 2 9
Environmental charge (6)   -   -   -   -   4     4  
Adjusted EBIT $ 122 $ 23 $ 53 $ 198 $ (23 ) $ 175  
 
 
Q2 2017
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
EBIT $ 106 $ 18 $ 54 $ 178 $ (151 ) $ 27
Restructuring and related expenses 12 2 1 15 2 17
Antitrust settlement accrual (7) - - - - 132 132
Warranty settlement (8) - 7 - 7 - 7
Gain on sale of unconsolidated JV   -   -   -   -   (5 )   (5 )
Adjusted EBIT $ 118 $ 27 $ 55 $ 200 $ (22 ) $ 178  
 
(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 generally
accepted accounting principles. The amounts included in the EBITDA
including noncontrolling interests calculation, however, are derived
from amounts included in the historical statements of income data.
In addition, EBITDA including noncontrolling interests should not be
considered as an alternative to net income (loss) attributable to
Tenneco Inc. or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows
as a measure of liquidity. Tenneco has presented EBITDA including
noncontrolling interests because it regularly reviews EBITDA
including noncontrolling interests as a measure of the company's
performance. In addition, Tenneco believes its investors utilize and
analyze the company's EBITDA including noncontrolling interests for
similar purposes. Tenneco also believes EBITDA including
noncontrolling interests assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many
factors. However, the EBITDA including noncontrolling interests
measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the
components of the calculation.
 

(4) Advisory costs related to Federal-Mogul acquisition.

 

(5) Structural cost reductions in advance of closing
Federal-Mogul acquisition.

 

(6) 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.

 

(7) Charges related to establish a reserve for
settlement costs necessary to resolve the company's antitrust
matters globally.

 

(8) Warranty settlement with customer.

 

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

Unaudited

(Millions)
 
 
 
YTD 2018
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
Net income attributable to Tenneco Inc. $ 108
 
Net income attributable to noncontrolling interests   30
 
Net income 138
 
Income tax expense 52
 
Interest expense (net of interest capitalized)   40
 
EBIT, Earnings before interest expense, income taxes and
noncontrolling interests
$ 224 $ 13 $ 85 $ 322 $ (92 ) 230
 
Depreciation and amortization of other intangibles   75   34   9   118   -     118
 
Total EBITDA including noncontrolling interests (2) $ 299 $ 47 $ 94 $ 440 $ (92 ) $ 348
 
 
 
YTD 2017
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
Net income attributable to Tenneco Inc. $ 56
 
Net income attributable to noncontrolling interests   32
 
Net income 88
 
Income tax expense 25
 
Interest expense (net of interest capitalized)   35
 
EBIT, Earnings before interest expense, income taxes and
noncontrolling interests
$ 200 $ 45 $ 96 $ 341 $ (193 ) 148
 
Depreciation and amortization of other intangibles   68   30   9   107   -     107
 
Total EBITDA including noncontrolling interests (2) $ 268 $ 75 $ 105 $ 448 $ (193 ) $ 255
 
 
(1) U.S. Generally Accepted Accounting Principles.
 
(2) EBITDA including noncontrolling interests represents
income before interest expense, income taxes, noncontrolling
interests and depreciation and amortization. EBITDA including
noncontrolling interests is not a calculation based upon generally
accepted accounting principles. The amounts included in the EBITDA
including noncontrolling interests calculation, however, are derived
from amounts included in the historical statements of income data.
In addition, EBITDA including noncontrolling interests should not be
considered as an alternative to net income (loss) attributable to
Tenneco Inc. or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows
as a measure of liquidity. Tenneco has presented EBITDA including
noncontrolling interests because it regularly reviews EBITDA
including noncontrolling interests as a measure of the company's
performance. In addition, Tenneco believes its investors utilize and
analyze the company's EBITDA including noncontrolling interests for
similar purposes. Tenneco also believes EBITDA including
noncontrolling interests assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many
factors. However, the EBITDA including noncontrolling interests
measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the
components of the calculation.
 

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

Unaudited

(Millions except per share amounts)
 
 
YTD 2018 YTD 2017
Net income Net income
attributable attributable

to Tenneco Inc.

Per Share EBIT

EBITDA (3)

to Tenneco Inc.

Per Share EBIT

EBITDA (3)

Earnings Measures $ 108 $ 2.10 $ 230 $ 348 $ 56 $ 1.05 $ 148 $ 255
 
Adjustments:
Restructuring and related expenses 29 0.57 43 43 30 0.55 32 30
Acquisition advisory costs (4) 25 0.48 31 31 - - - -
Pre-closing structural cost reductions (5) 7 0.12 9 9 - - - -
Environmental charge (6) 3 0.06 4 4 - - - -
Warranty charge (7) 4 0.08 5 5 - - - -
Antitrust settlement accrual (8) - - - - 85 1.59 132 132
Warranty settlement (9) - - - - 5 0.08 7 7
Gain on sale of unconsolidated JV - - - - (4 ) (0.08 ) (5 ) (5 )
Pension charges / Stock vesting (10) - - - - 7 0.13 11 11
Costs related to refinancing - - - - 1 0.02 - -
Net tax adjustments 4 0.09 - - - - - -
               
Adjusted Net income, EPS, EBIT, and EBITDA $ 180 $ 3.50 $ 322 $ 440 $ 180   $ 3.34   $ 325   $ 430  
 
 
 
YTD 2018
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
EBIT $ 224 $ 13 $ 85 $ 322 $ (92 ) $ 230
Restructuring and related expenses 12 27 4 43 - 43
Acquisition advisory costs (4) - - - - 31 31
Pre-closing structural cost reductions (5) 6 - 1 7 2 9
Environmental charge (6) - - - - 4 4
Warranty charge (7)   -   5   -   5   -     5  
Adjusted EBIT $ 242 $ 45 $ 90 $ 377 $ (55 ) $ 322  
 
 
YTD 2017
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
EBIT $ 200 $ 45 $ 96 $ 341 $ (193 ) $ 148
Restructuring and related expenses 21 5 3 29 3 32
Antitrust settlement accrual (8) - - - - 132 132
Warranty settlement (9) - 7 - 7 - 7
Gain on sale of unconsolidated JV - - - - (5 ) (5 )
Pension charges / Stock vesting (10)   -   -   -   -   11     11  
Adjusted EBIT $ 221 $ 57 $ 99 $ 377 $ (52 ) $ 325  
 
(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 generally
accepted accounting principles. The amounts included in the EBITDA
including noncontrolling interests calculation, however, are derived
from amounts included in the historical statements of income data.
In addition, EBITDA including noncontrolling interests should not be
considered as an alternative to net income (loss) attributable to
Tenneco Inc. or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows
as a measure of liquidity. Tenneco has presented EBITDA including
noncontrolling interests because it regularly reviews EBITDA
including noncontrolling interests as a measure of the company's
performance. In addition, Tenneco believes its investors utilize and
analyze the company's EBITDA including noncontrolling interests for
similar purposes. Tenneco also believes EBITDA including
noncontrolling interests assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many
factors. However, the EBITDA including noncontrolling interests
measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the
components of the calculation.
 

(4) Advisory costs related to Federal-Mogul acquisition.

 

(5) Structural cost reductions in advance of closing
Federal-Mogul acquisition.

 

(6) 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.

 

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

 

(8) Charges related to establish a reserve for
settlement costs necessary to resolve the company's antitrust
matters globally.

 

(9) Warranty settlement with customer.

 

(10) 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)
 
Q2 2018
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
 
Clean Air $ 1,694 $ 621 $ 1,073 $ 23 $ 1,050
Ride Performance 506 - 506 7 499
Aftermarket 337 - 337 (3 ) 340
         
Total Tenneco Inc. $ 2,537 $ 621 $ 1,916 $ 27   $ 1,889
 
Q2 2017
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
 
Clean Air $ 1,539 $ 541 $ 998 $ - $ 998
Ride Performance 442 - 442 - 442
Aftermarket 336 - 336 - 336
         
Total Tenneco Inc. $ 2,317 $ 541 $ 1,776 $ -   $ 1,776
 
 
(1) U.S. Generally Accepted Accounting Principles.
 
(2) Tenneco presents the above reconciliation of revenues
in order to reflect value-add revenues separately from the effects
of doing business in currencies other than the U.S. dollar.
Additionally, substrate sales include precious metals pricing, which
may be volatile. Substrate sales occur when, at the direction of its
OE customers, Tenneco purchases catalytic converters or components
thereof from suppliers, uses them in its manufacturing processes and
sells them as part of the completed system. While Tenneco original
equipment customers assume the risk of this volatility, it impacts
reported revenue. Excluding substrate sales removes this impact.
Tenneco uses this information to analyze the trend in revenues
before these factors. Tenneco believes investors find this
information useful in understanding period to period comparisons in
the company's revenues.

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

Unaudited

(Millions)
 
YTD 2018
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
 
Clean Air $ 3,450 $ 1,273 $ 2,177 $ 87 $ 2,090
Ride Performance 1,019 - 1,019 38 981
Aftermarket 642 - 642 2 640
         
Total Tenneco Inc. $ 5,111 $ 1,273 $ 3,838 $ 127 $ 3,711
 
YTD 2017
Currency Value-add
Impact on Revenues
Substrate Value-add Value-add excluding
Revenues Sales Revenues Revenues Currency
 
Clean Air $ 3,094 $ 1,088 $ 2,006 $ - $ 2,006
Ride Performance 870 - 870 - 870
Aftermarket 645 - 645 - 645
         
Total Tenneco Inc. $ 4,609 $ 1,088 $ 3,521 $ - $ 3,521
 
 
(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 REVENUE TO NON-GAAP REVENUE MEASURES

Unaudited

(Millions except percents)
 
Q2 2018 vs. Q2 2017 $ Change and % Change Increase (Decrease)
Value-add
Revenues
Excluding
Revenues % Change Currency % Change
 
Clean Air $ 155 10 % $ 52 5 %
Ride Performance 64 14 % 57 13 %
Aftermarket   1   0 %   4   1 %
Total Tenneco Inc. $ 220 9 % $ 113 6 %
 
 
 
YTD Q2 2018 vs. YTD Q2 2017 $ Change and % Change Increase (Decrease)
Value-add
Revenues
Excluding
Revenues % Change Currency % Change
 
Clean Air $ 356 12 % $ 84 4 %
Ride Performance 149 17 % 111 13 %
Aftermarket   (3 ) 0 %   (5 ) (1 %)
Total Tenneco Inc. 502 11 % 190 5 %
 

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

Unaudited

(Millions except ratios)
 
Quarter Ended June 30,
 
2018 2017*
 
Total debt $ 1,459 $ 1,597
 
Total cash, cash equivalents and restricted cash (total cash) 237 335
   
Debt net of total cash balances (1) $ 1,222 $ 1,262
 
 
Adjusted LTM EBITDA including noncontrolling interests (2) (3) $ 878 $ 845
 
Ratio of debt net of total cash balances to adjusted LTM EBITDA
including noncontrolling interests (4)
1.4x 1.5x
 
 
 
 
Q3 17 Q4 17 Q1 18 Q2 18 Q2 18 LTM
 
Net income attributable to Tenneco Inc. $ 83 $ 68 $ 58 $ 50 $ 259
 
Net income attributable to noncontrolling interests 16 19 14 16 $ 65
 
Income tax expense 16 29 25 27 $ 97
 
Interest expense (net of interest capitalized) 19 19 20 20 $ 78
 
EBIT, Earnings before interest expense, income taxes and
noncontrolling interests
134 135 117 113 $ 499
 
Depreciation and amortization of other intangibles 58 59 59 59 $ 235
 
Total EBITDA including noncontrolling interests (2) 192 194 176 172 $ 734
 
Restructuring and related expenses 19 20 12 31 $ 82
 
Goodwill impairment charge (5) - 11 - - $ 11
 
Pension charges (6) - 2 - - $ 2
 
Warranty charge (9) - - 5 - $ 5
 
Acquisition advisory costs (10) - - 13 18 $ 31
 
Pre-closing structural cost reductions (11) - - - 9 $ 9
 
Environmental charge (12) - - - 4 $ 4
         
Total Adjusted EBITDA including noncontrolling interests (3) $ 211   $ 227   $ 206 $ 234   $ 878  
 
 
Q3 16* Q4 16* Q1 17* Q2 17 Q2 17 LTM
 
Net income attributable to Tenneco Inc. $ 179 $ 38 $ 59 $ (3 ) $ 273
 
Net income attributable to noncontrolling interests 17 20 14 18 $ 69
 
Income tax expense (benefit) (70 ) (3 ) 33 (8 ) $ (48 )
 
Interest expense (net of interest capitalized) 24 16 15 20 $ 75
 
EBIT, Earnings before interest expense, income taxes and
noncontrolling interests
150 71 121 27 $ 369
 
Depreciation and amortization of other intangibles 53 53 52 55 $ 213
 
Total EBITDA including noncontrolling interests (2) 203 124 173 82 $ 582
 
Restructuring and related expenses 7 9 14 16 $ 46
 
Pension charges / Stock vesting (6) - 72 11 - $ 83
 
Antitrust settlement accrual (7) - - - 132 $ 132
 
Warranty settlement (8) - - - 7 $ 7
 
Gain on sale of unconsolidated JV - - - (5 ) $ (5 )
         
Total Adjusted EBITDA including noncontrolling interests (3) $ 210   $ 205   $ 198 $ 232   $ 845  
 
 
* Financial results for 2016 and first quarter 2017 have been
revised for certain immaterial adjustments as discussed in Tenneco's
Form 10-K/A for the year ended December 31, 2016 and Form 10-Q/A for
the quarter ended March 31, 2017.
 
(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 generally
accepted accounting principles. The amounts included in the EBITDA
including noncontrolling interests calculation, however, are derived
from amounts included in the historical statements of income data.
In addition, EBITDA including noncontrolling interests should not be
considered as an alternative to net income (loss) attributable to
Tenneco Inc. or operating income as an indicator of the company's
operating performance, or as an alternative to operating cash flows
as a measure of liquidity. Tenneco has presented EBITDA including
noncontrolling interests because it regularly reviews EBITDA
including noncontrolling interests as a measure of the company's
performance. In addition, Tenneco believes its investors utilize and
analyze the company's EBITDA including noncontrolling interests for
similar purposes. Tenneco also believes EBITDA including
noncontrolling interests assists investors in comparing a company's
performance on a consistent basis without regard to depreciation and
amortization, which can vary significantly depending upon many
factors. However, the EBITDA including noncontrolling interests
measure presented may not always be comparable to similarly titled
measures reported by other companies due to differences in the
components of the calculation.
 
(3) Adjusted EBITDA including noncontrolling interests is
presented in order to reflect the results in a manner that allows a
better understanding of operational activities separate from the
financial impact of decisions made for the long term benefit of the
company and other items impacting comparability between the periods.
Similar adjustments to EBITDA including noncontrolling interests
have been recorded in earlier periods, and similar types of
adjustments can reasonably be expected to be recorded in future
periods. The company believes investors find the non-GAAP
information helpful in understanding the ongoing performance of
operations separate from items that may have a disproportionate
positive or negative impact on the company's financial results in
any particular period.
 
(4) Tenneco presents the above reconciliation of the
ratio of debt net of 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, LTM adjusted 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) Goodwill impairment charges recorded in Europe and
South America Ride Performance Division.
 
(6) Charges related to Pension derisking and the
acceleration of restricted stock vesting in accordance with the
long-term incentive plan.
 
(7) Charges related to establish a reserve for settlement
costs necessary to resolve the company's antitrust matters globally.
 
(8) Warranty settlement with customer.
 
(9) Charge related to warranty. Although Tenneco
regularly incurs warranty costs, this specific charge is of an
unusual nature in the period incurred.
 
(10) Advisory costs related to Federal-Mogul acquisition.
 
(11) Structural cost reductions in advance of closing
Federal-Mogul acquisition.
 
(12) 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.
 

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

Unaudited

(Millions)
Q2 2018
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 1,841 $ 37 $ 1,804 $ 509 $ 1,295
Original equipment commercial truck, off-highway and other revenues 359 4 355 101 254
Aftermarket revenues   337   (3 )   340   -   340
Net sales and operating revenues $ 2,537 $ 38 $ 2,499 $ 610 $ 1,889
 
 
Q2 2017
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 1,691 $ - $ 1,691 $ 458 $ 1,233
Original equipment commercial truck, off-highway and other revenues 290 - 290 83 207
Aftermarket revenues   336   -     336   -   336
Net sales and operating revenues $ 2,317 $ - $ 2,317 $ 541 $ 1,776
 
 
 
YTD 2018
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 3,734 $ 148 $ 3,586 $ 1,021 $ 2,565
Original equipment commercial truck, off-highway and other revenues 735 26 709 203 506
Aftermarket revenues   642   2     640   -   640
Net sales and operating revenues $ 5,111 $ 176 $ 4,935 $ 1,224 $ 3,711
 
 
YTD 2017
Substrate Value-add
Revenues Sales Revenues
Excluding Excluding Excluding
Revenues   Currency   Currency   Currency   Currency
 
Original equipment light vehicle revenues $ 3,411 $ - $ 3,411 $ 929 $ 2,482
Original equipment commercial truck, off-highway and other revenues 553 - 553 159 394
Aftermarket revenues   645   -     645   -   645
Net sales and operating revenues $ 4,609 $ - $ 4,609 $ 1,088 $ 3,521
 
 
(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)
 
 
 
Q2 2018
Global Segments
Ride
Clean Air Performance Aftermarket Total Other Total
Net sales and operating revenues $ 1,694 $ 506 $ 337 $ 2,537 $ - $ 2,537
 
Less: Substrate sales 621 - - 621 - 621
           
Value-add revenues $ 1,073   $ 506   $ 337   $ 1,916   $ -   $ 1,916  
 
EBIT $ 105 $ 5 $ 50 $ 160 $ (47 ) $ 113
 
EBIT as a % of revenue 6.2 % 1.0 % 14.8 % 6.3 % 4.5 %
EBIT as a % of value-add revenue 9.8 % 1.0 % 14.8 % 8.4 % 5.9 %
 
Adjusted EBIT $ 122 $ 23 $ 53 $ 198 $ (23 ) $ 175
 
Adjusted EBIT as a % of revenue 7.2 % 4.5 % 15.7 % 7.8 % 6.9 %
Adjusted EBIT as a % of value-add revenue 11.4 % 4.5 % 15.7 %