Feb 20, 2020 SOURCE: PR NewsWire
Tenneco Reports Fourth Quarter And Full-Year 2019 Results
LAKE FOREST, Ill., Feb. 20, 2020 /PRNewswire/ -- Tenneco Inc. (NYSE: TEN) reported fourth quarter 2019 revenue of $4.1 billion, versus $4.3 billion( )a year ago. On a constant currency pro forma basis, total revenue decreased 2% versus last year, while light vehicle industry production* declined 5% in the quarter. Value-add revenue for the fourth quarter was $3.4 billion. Revenue comparisons include a negative $88 million impact due to a work stoppage at the company's largest customer.
Including non-cash, non-recurring items of approximately $230 million, the company reported a net loss for fourth quarter 2019 of $293 million, or $(3.62) per diluted share, compared with a fourth quarter net loss of $109 million, or $(1.35) per diluted share in 2018. Fourth quarter 2019 adjusted net income was $23 million, or $0.28 per diluted share, compared with $105 million, or $1.30 per diluted share last year.
Fourth quarter EBIT (earnings before interest, taxes and noncontrolling interests) was a loss of $117 million, versus a loss of $23 million last year. EBIT as a percent of revenue was -2.8% versus -0.5% last year. Earnings comparisons include a negative $27 million impact due to a work stoppage at the company's largest customer. Fourth quarter adjusted EBITDA was $314 million versus $407 million last year. Adjusted EBITDA as a percent of value-add revenue was 9.3% versus 11.2% last year. Cash generated from operations was $380 million.
"Continued execution on cost reduction initiatives and operating improvements enabled us to deliver on our fourth quarter guidance, despite challenging economic and business conditions," said Brian Kesseler, Tenneco CEO. "We are executing our Accelerate program to drive additional cost savings, strengthen cash flow performance, and reduce leverage to drive value and better position both the DRiV and New Tenneco divisions for the planned separation."
The Accelerate program is modeled after the company's successful approach to capturing acquisition synergies. Compared to year-end 2019, this 2-year program includes opportunities expected to deliver the following:
-- Annual run rate cost savings of $200 million
-- Working capital improvement of $250 million
-- Capital expenditure improvements of $100 million
The company expects to incur approximately $250 million in one-time costs over the 2-year program.
"The Accelerate program is at the core of our operating plans for 2020 and 2021 as we work to improve capital efficiency and reduce leverage to better position both divisions for the planned separation," Kesseler added. "In addition to streamlining our leadership structure, we are working to lower SG&A costs and evaluating multiple strategic options, ranging from the sale of individual product lines to complete divisions. The Board and management team are committed to taking purposeful and proactive action to better position Tenneco to succeed in today's operating environment and enhance value for all shareholders."
Full-Year Results
For the full year, total revenue was a record high $17.45 billion, up 48%, which includes the first full year of Federal-Mogul revenues. Full-year EBIT was $148 million, versus EBIT of $322 million a year ago. Adjusted EBITDA was $1,442 million, versus $1,062 million a year ago. Cash generated by operations for the full year was $444 million, compared with $439 million last year.
OUTLOOK
Full year 2020
We are continuing to monitor the effects of the COVID-19 virus, which is impacting the China automotive industry. The uncertainty of the full impact of the COVID-19 virus results in a wider full year outlook range for revenue and EBITDA than customary. This outlook assumes that the equivalent of four full weeks of production would be lost in China in the first quarter, which would represent a negative impact of approximately $150 million on value add revenue, and $50 million on EBITDA.
2020 revenue is expected in the range of $16.7 billion to $17.1 billion. Global light vehicle production* is forecast to be down 4% in 2020. We anticipate currency to have a 1% unfavorable year-over-year impact on 2020 revenue.
2020 Financial Outlook Summary
Revenue
$16.7 - 17.1B
---
Value-add revenue
$13.7 - 14.1B
---
Adjusted EBITDA
$1,300 - 1,450M
---
Capital expenditures(1)
$610 - 650M
---
Adjusted depreciation and
amortization
~$660M
---
Adjusted interest expense(2)
$310 - 330M
---
Adjusted effective tax rate 29-31%
---
Cash taxes
$160 - 180M
---
Adjusted noncontrolling interest
expense
$60 - 70M
---
Adjusted free cash flow(3)
$100 - 200M
---
(1) Includes expenditures for software, consistent with cash payments for property, plant and equipment on cash flow statement.
(2) Before one-time fees related to the February 2020 covenant amendment.
(3) Adjusted free cash flow is cash from operations plus reclassified factoring proceeds less capital expenditures.
First Quarter 2020
As referenced in the full year outlook, we anticipate the COVID-19 virus to negatively impact value add revenue and EBITDA in the first quarter. The company expects total revenue in the range of $3.95 billion to $4.15 billion, value-add revenue in the range of $3.2 billion to $3.4 billion, and adjusted EBITDA in the range of $240 million to $280 million in the first quarter 2020.
*Source: IHS Markit January 2020 global light vehicle production forecast and Tenneco estimates.
See "About Revenue and Other Guidance" below for further information about revenue guidance and forecasted performance measures.
Attachment 1
Statements of Income - 3 Months
Statements of Income - 12 Months
Balance Sheets
Statements of Cash Flows - 3 Months
Statements of Cash Flows - 12 Months
Attachment 2
Reconciliation of GAAP to Non-GAAP Earnings Measures - 3 Months
Reconciliation of GAAP to Non-GAAP Earnings Measures - 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - 3 Months and 12 Months
Reconciliation of Non-GAAP Measures - Debt Net of Cash/Adjusted LTM and pro forma adjusted LTM EBITDA including noncontrolling interests
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - Original Equipment and Aftermarket Revenue - 3 Months and 12 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures - 3 Months
Reconciliation of GAAP Revenue and Earnings to Non-GAAP Revenue and Earnings Measures - 12 Months
Reconciliation of GAAP Revenue to Non-GAAP Revenue Measures - Original Equipment Commercial Truck, Off-Highway, Industrial and other revenues - quarterly and annual
Reconciliation of GAAP Revenue to pro forma Revenue and Non-GAAP Earnings Measures - 2018 quarterly
Reconciliation of GAAP Revenue to pro forma Revenue and Non-GAAP Earnings Measures - 2018 and 2017 annual
Division Level Full Year 2020 Outlook
CONFERENCE CALL
The company will host a webcast conference call on Thursday, February 20, 2020 at 10:00 a.m. ET. The purpose of the call is to discuss the company's financial results for the fourth quarter and full year 2019, as well as to provide other information regarding matters that may impact the company's outlook, including 2020 guidance and details on its performance acceleration plan. For a "listen only" broadcast and access to the presentation materials, go to the company's website www.investors.tenneco.com. To participate by telephone, please dial: 1-833-366-1121 (domestic) or 1-412-902-6733 (international), using the passcode "Tenneco Inc." A call playback will be available for one week, starting approximately one hour after the conclusion of the call. To connect, please dial 1-877-344-7529 (domestic), 1-412-317-0088 (international), 855-669-9658 (Canada), using the replay access code 10138628.
About Tenneco
Headquartered in Lake Forest, Illinois, Tenneco is one of the world's leading designers, manufacturers and marketers of Aftermarket, Ride Performance, Clean Air and Powertrain products and technology solutions for diversified markets, including light vehicle, commercial truck, off-highway, industrial and the aftermarket, with 2019 revenues of $17.45 billion and approximately 78,000 employees worldwide. On October 1, 2018, Tenneco completed the acquisition of Federal-Mogul, a leading global supplier to original equipment ("OE") manufacturers and the aftermarket. Additionally, the company expects to separate its businesses to form two new, independent companies, an Aftermarket and Ride Performance company as well as a new Powertrain Technology company.
About DRiV(TM) - the future Aftermarket and Ride Performance Company
Following the separation, DRiV will be one of the largest global multi-line, multi-brand aftermarket companies, and one of the largest global OE ride performance and braking companies. DRiV's principal product brands will feature Monroe®, Öhlins®, Walker®, Clevite®Elastomers, MOOG®, Fel-Pro®, Wagner®, Ferodo®, Champion® and others. DRiV would have 2019 revenues of $5.9 billion, with 53% of those revenues from aftermarket and 47% from original equipment customers.
About the new Tenneco - the future Powertrain Technology Company
Following the separation, the new Tenneco will be one of the world's largest pure-play powertrain companies serving OE markets worldwide with engineered solutions addressing fuel economy, power output, and criteria pollution requirements for gasoline, diesel and electrified powertrains. The new Tenneco would have 2019 revenues of $11.5 billion, serving light vehicle, commercial truck, off-highway and industrial markets.
About Revenue and Other Guidance
Revenue estimates and other forecasted information in this release are based on OE manufacturers' programs that have been formally awarded to the company; programs where Tenneco is highly confident that it will be awarded business based on informal customer indications consistent with past practices; and Tenneco's status as supplier for the existing program and its relationship with the customer. This information is also based on anticipated vehicle production levels and pricing, including precious metals pricing and the impact of material cost changes. Unless otherwise indicated, our methodology does not attempt to forecast currency fluctuations, and accordingly, reflects constant currency. Certain elements of the restructuring and related expenses, legal settlements and other unusual charges we incur from time to time cannot be forecasted accurately. In this respect, we are not able to reconcile forecasted EBITDA (and the related margins), effective tax rate, depreciation and amortization, interest expense, noncontrolling interest expense and adjusted free cash flow on a forward-looking basis without unreasonable efforts on account of these factors and other factors not in our control. For certain additional assumptions upon which these estimates are based, see the slides accompanying the February 20, 2020 webcast, which will be available on the financial section of the Tenneco website at www.investors.tenneco.com.
This press release contains forward-looking statements. The words "will," "would," "could," "plan," "expect," "anticipate," "estimate," "opportunities," and similar expressions (and variations thereof), identify these forward-looking statements. These forward-looking statements are based on the current expectations of the company (including its subsidiaries). Because these statements involve risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:
-- general economic, business and market conditions;
-- our ability to successfully execute cost reduction and other performance
improvement plans, including the Accelerate program, and to realize the
anticipated benefits from these plans;
-- our ability to source and procure needed materials, components and other
products and services in accordance with customer demand and at
competitive prices;
-- the cost and outcome of existing and any future claims, legal
proceedings or investigations, including, but not limited to, any of the
foregoing arising in connection with the ongoing global antitrust
investigation, product performance, product safety or intellectual
property rights;
-- changes in consumer demand for our OE or aftermarket products or
aftermarket products, prices and our ability to have our products
included on top selling vehicles, including any shifts in consumer
preferences away from historically higher margin products for our
customers and us, to other lower margin vehicles, for which we may or
may not have supply arrangements;
-- the cyclical nature of the global vehicle industry, including the
performance of the global aftermarket sector and the impact of vehicle
parts' longer product lives;
-- changes in automotive and commercial vehicle manufacturers' production
rates and their actual and forecasted requirements for our products, due
to difficult economic conditions and/or regulatory or legal changes
affecting internal combustion engines and/or aftermarket products;
-- our dependence on certain large customers, including the loss of any of
our large OE manufacturer customers (on whom we depend for a significant
portion of our revenues), or the loss of market shares by these
customers if we are unable to achieve increased sales to other OE
customers or any change in customer demand due to delays in the adoption
or enforcement of worldwide emissions regulations;
-- new technologies that reduce the demand for certain of our products or
otherwise render them obsolete;
-- our ability to introduce new products and technologies that satisfy
customers' needs in a timely fashion;
-- the overall highly competitive nature of the automotive and commercial
vehicle parts industries, and any resultant inability to realize the
sales represented by our awarded book of business (which is based on
anticipated pricing and volumes over the life of the applicable
program);
-- changes in capital availability or costs, including increases in our
cost of borrowing (i.e., interest rate increases), the amount of our
debt, our ability to access capital markets at favorable rates, and the
credit ratings of our debt;
-- our ability to comply with the covenants contained in our debt
instruments;
-- our working capital requirements;
-- risks inherent in operating a multi-national company, including economic
conditions, such as currency exchange and inflation rates, political
conditions in the countries where we operate or sell our products,
adverse changes in trade agreements, tariffs, immigration policies,
political instability, and tax and other laws, and potential disruptions
of production and supply;
-- increasing competition from lower cost, private-label products;
-- damage to the reputation of one or more of our leading brands;
-- the impact of improvements in automotive parts on aftermarket demand for
some of our products;
-- industry-wide strikes, labor disruptions at our facilities or any labor
or other economic disruptions at any of our significant customers or
suppliers or any of our customers' other suppliers;
-- developments relating to our intellectual property, including our
ability to changes in technology;
-- costs related to product warranties and other customer satisfaction
actions;
-- the failure or breach of our information technology systems, including
the consequences of any misappropriation, exposure or corruption of
sensitive information stored on such systems and the interruption to our
business that such failure or breach may cause;
-- the impact of consolidation among vehicle parts suppliers and customers
on our ability to compete in the highly competitive automotive and
commercial vehicle supplier industry;
-- changes in distribution channels or competitive conditions in the
markets and countries where we operate;
-- the evolution towards autonomous vehicles and car and ride sharing;
-- customer acceptance of new products;
-- our ability to successfully integrate, and benefit from, any
acquisitions that we complete;
-- our ability to effectively manage our joint ventures and other
third-party relationships;
-- the potential impairment in the carrying value of our long-lived assets
and goodwill or our deferred tax assets;
-- 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;
-- increases in the costs of raw materials or components, including our
ability to successfully reduce the impact of any such cost increases
through materials substitutions, cost reduction initiatives, customer
recovery and other methods;
-- changes by the Financial Accounting Standards Board ("FASB") or the
Securities and Exchange Commission ("SEC") of generally accepted
accounting principles or other authoritative guidance;
-- changes in accounting estimates and assumptions, including changes based
on additional information;
-- any changes by the International Organization for Standardization
("ISO") or other such committees in their certification protocols for
processes and products, which may have the effect of delaying or
hindering our ability to bring new products to market;
-- the 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 or increased costs or loss
of revenues relating to products subject to changing regulation;
-- potential volatility in our effective tax rate;
-- disasters, local and global public health emergencies or other
catastrophic events, such as fires, earthquakes, and flooding, pandemics
or epidemics, where we or other customers do business, and any resultant
disruptions in the supply or production of goods or services to us or by
us, in demand by our customers or in the operation of our system,
disaster recovery capabilities or business continuity capabilities;
-- acts of war and/or terrorism, as well as actions taken or to be taken by
the United States and other governments as a result of further acts or
threats of terrorism, and the impact of these acts on economic,
financial and social conditions in the countries where we operate;
-- pension obligations and other postretirement benefits;
-- our hedging activities to address commodity price fluctuations; and
-- the timing and occurrence (or non-occurrence) of other transactions,
events and circumstances which may be beyond our control.
In addition, this release includes forward-looking statements regarding the Company's ongoing review of strategic alternatives and the planned separation of the Company into a powertrain technology company and an aftermarket and ride performance company. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements, include:
-- the ability to identify and consummate strategic alternatives that yield
additional value for shareholders;
-- the timing, benefits and outcome of the Company's strategic review
process;
-- the structure, terms and specific risk and uncertainties associated with
any potential strategic alternative;
-- potential disruptions in our business and stock price as a result of our
exploration, review and pursuit of any strategic alternatives;
-- the risk that the company may not complete a separation of its
powertrain technology business and its aftermarket and ride performance
business;
-- the risk that the combined company and each separate company following
the separation will underperform relative to our expectations;
-- the ongoing transaction costs and risk that we may incur greater costs
following the separation of the businesses;
-- the risk the spin-off is determined to be a taxable transaction;
-- the risk the benefits of the separation may not be fully realized or may
take longer to realize than expected;
-- the risk the separation may not advance our business strategy; and
-- the risk the transaction may have an adverse effect on existing
arrangements with us, including those related to transition,
manufacturing and supply services and tax matters; our ability to retain
and hire key personnel; or our ability to maintain relationships with
customers, suppliers or other business partners.
The risks included here are not exhaustive. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. Additional information regarding these risk factors and uncertainties is, and will be, detailed from time to time in the company's SEC filings, including but not limited to its annual report on Form 10-K for the year ended December 31, 2018 and the Form 10-Q for the quarter ended September 30, 2019.
Investor inquiries:
Linae Golla
847-482-5162
lgolla@tenneco.com
Rich Kwas
248-849-1340
rich.kwas@tenneco.com
Media inquiries:
Bill Dawson
847-482-5807
bdawson@tenneco.com
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
---
THREE MONTHS ENDED DECEMBER 31,
(Millions except per share amounts)
2019 2018
Net sales and operating revenues:
Clean Air - Value-add revenues $974 $1,024
Clean Air - Substrate sales 769 631
Powertrain 1,018 1,112
Motorparts 741 827
Ride Performance 641 684
Total net sales and operating revenues $4,143 $4,278
Costs and expenses:
Cost of sales (exclusive of depreciation and
amortization) 3,554 3,673
Selling, general, and administrative 276 309
Depreciation and amortization 170 165
Engineering, research, and development 76 82
Restructuring charges and asset impairments 28 60
Goodwill and intangibles impairment charge 172 3
Total costs and expenses 4,276 4,292
Other income (expense):
Non-service pension and other
postretirement benefit (costs) credits (3) (10)
Equity in earnings (losses) of
nonconsolidated affiliates, net of tax 9 18
Loss on extinguishment of debt (10)
Other income (expense), net 10 (7)
Total other income (expense) 16 (9)
Earnings (loss) before interest expense,
income taxes, and noncontrolling interests (117) (23)
Interest expense (80) (79)
Earnings (loss) before income taxes and
noncontrolling interests (197) (102)
Income tax (expense) benefit (21) 10
Net income (loss) (218) (92)
Less: Net income (loss) attributable to
noncontrolling interests 75 17
Net income (loss) attributable to Tenneco
Inc. $(293) $(109)
Weighted average common shares outstanding:
Basic 80.9 80.7
Diluted 80.9 80.7
Earnings (loss) per share of common stock:
Basic $(3.62) $(1.35)
Diluted $(3.62) $(1.35)
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
Unaudited
---
TWELVE MONTHS ENDED DECEMBER 31,
(Millions except per share amounts)
2019 2018
Net sales and
operating revenues:
Clean Air - Value-
add revenues $4,094 $4,207
Clean Air -
Substrate sales 3,027 2,500
Powertrain 4,408 1,112
Motorparts 3,167 1,780
Ride Performance 2,754 2,164
Total net sales and
operating revenues $17,450 $11,763
Costs and expenses:
Cost of sales
(exclusive of
depreciation and
amortization) 14,885 10,002
Selling, general,
and administrative 1,138 752
Depreciation and
amortization 673 345
Engineering,
research, and
development 324 200
Restructuring
charges and asset
impairments 126 117
Goodwill and
intangibles
impairment charge 241 3
Total costs and
expenses 17,387 11,419
Other income
(expense):
Non-service pension
and postretirement
benefit (costs)
credits (11) (20)
Equity in earnings
(losses) of
nonconsolidated
affiliates, net of
tax 43 18
Loss on
extinguishment of
debt (10)
Other income
(expense), net 53 (10)
Total other income
(expense) 85 (22)
Earnings (loss)
before interest
expense, income
taxes, and
noncontrolling
interests 148 322
Interest expense (322) (148)
Earnings (loss)
before income taxes
and noncontrolling
interests (174) 174
Income tax (expense)
benefit (26) (63)
Net income (loss) (200) 111
Less: Net income
(loss) attributable
to noncontrolling
interests 114 56
Net income (loss)
attributable to
Tenneco Inc. $(314) $55
Weighted average
common shares
outstanding:
Basic 80.9 58.6
Diluted 80.9 58.8
Earnings (loss) per
share of common
stock:
Basic $(3.88) $0.93
Diluted $(3.88) $0.93
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
Unaudited
---
(Millions)
December 31, 2019
December 31, 2018
Assets
Cash and cash equivalents $564 $697
Restricted cash 2 5
Receivables, net 2,538
(a) 2,572
(a)
Inventories 2,026 2,245
Prepayments and other current assets 632 590
Other noncurrent assets 3,857 3,622
Property, plant and equipment, net 3,627 3,501
Total assets $13,246 $13,232
Liabilities and Shareholders' Equity
Short-term debt, including current
maturities of long-term debt $185 $153
Accounts payable 2,647 2,759
Accrued compensation and employee
benefits 325 343
Accrued income taxes 72 64
Accrued expenses and other current
liabilities 1,070 1,001
Long-term debt 5,371
(b) 5,340
(b)
Deferred income taxes 106 88
Pension and postretirement benefits 1,145 1,167
Deferred credits and other
liabilities 490 263
Redeemable noncontrolling interests 196 138
Tenneco Inc. shareholders' equity 1,445 1,726
Noncontrolling interests 194 190
Total liabilities, redeemable
noncontrolling interests, and
equity
$13,246 $13,232
December 31, 2019
December 31, 2018
(a) Accounts
receivable net
of:
Accounts receivable outstanding and
derecognized $1,037 $1,011
December 31, 2019
December 31, 2018
(b) Long-term debt
composed of:
Revolver Borrowings $183
$ -
LIBOR plus 1.75% Term Loan A due
2019 through 2023 1,608 1,691
LIBOR plus 3.00% Term Loan B due
2019 through 2025 1,623 1,629
$225 million of 5.375% Senior Notes due 2024 222 222
$500 million of 5.000% Senior Notes due 2026 494 493
EUR415 million 4.875% Euro Fixed
Rate Notes due 2022 479 496
EUR300 million of Euribor plus
4.875% Euro Floating Rate Notes due
2024 340 349
EUR350 million of 5.000% Euro Fixed
Rate Notes due 2024 413 427
Other Debt, primarily foreign
instruments 13 44
5,375 5,351
Less: maturities classified as
current 4 11
Total long-term debt $5,371 $5,340
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Unaudited
---
(Millions)
Three Months Ended December 31,
2019 2018
Operating Activities
Net income (loss) $(218) $(92)
Adjustments to reconcile net income
(loss) to cash provided (used) by
operating activities:
Goodwill and intangible impairment
charge 172 3
Depreciation and amortization 170 165
Deferred income taxes (29) (44)
Stock-based compensation 5 2
Restructuring charges and asset
impairments, net of cash paid (1) 41
Change in pension and other
postretirement benefit plans (8) (11)
Equity in earnings of nonconsolidated
affiliates (9) (18)
Cash dividends received from
nonconsolidated affiliates 8 2
Changes in operating assets and
liabilities:
Receivables 232 86
Inventories 145 142
Payables and accrued expenses (165) 137
Accrued interest and income taxes 15 (14)
Other assets and liabilities 63 3
Net cash provided (used) by operating
activities 380 402
Investing Activities
Acquisitions, net of cash acquired (2,194)
Proceeds from sale of assets 12 3
Proceeds from sale of investment in
nonconsolidated affiliates 2
Cash payments for property, plant and
equipment (203) (252)
Proceeds from deferred purchase price of
factored receivables 47 72
Other 2 6
Net cash provided (used) by investing
activities (140) (2,365)
Financing Activities
Proceeds from term loans and notes 29 3,414
Repayments of term loans and notes (63) (418)
Borrowings on revolving lines of credit 2,316 1,098
Payments on revolving lines of credit (2,336) (1,331)
Issuance of common shares 1
Cash dividends (20)
Debt issuance cost of long-term debt (95)
Net decrease in bank overdrafts (1)
Acquisition of additional ownership
interest in consolidated affiliates (10)
Distributions to noncontrolling interest
partners (23) (7)
Other (2) (178)
Net cash provided (used) by financing
activities (90) 2,464
Effect of foreign exchange rate changes
on cash, cash equivalents and
restricted cash 21 (2)
Increase (decrease) in cash, cash
equivalents and restricted cash 171 499
Cash, cash equivalents and restricted
cash, beginning of period 395 203
Cash, cash equivalents and restricted
cash, end of period $566 $702
Supplemental Cash Flow Information
Cash paid during the period for interest $54 $78
Cash paid during the period for income
taxes, net of refunds 38 34
Non-cash Investing and Financing
Activities
Period end balance of trade payables for
property, plant and equipment $134 $135
Deferred purchase price of receivables
factored in the period 28 49
Stock issued for acquisition of Federal-
Mogul (1,236)
Stock transferred for acquisition of
Federal-Mogul 1,236
Redeemable noncontrolling interest
transaction with owner 53
ATTACHMENT 1
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Unaudited
(Millions)
Twelve Months Ended December 31,
2019 2018
Operating Activities
Net income (loss) $(200) $111
Adjustments to reconcile net income (loss) to cash
provided (used) by operating activities:
Goodwill and intangible impairment charge 241 3
Depreciation and amortization 673 345
Deferred income taxes (144) (65)
Stock-based compensation 25 14
Restructuring charges and asset impairments, net
of cash paid 11 49
Change in pension and other postretirement benefit
plans (57) (8)
Equity in earnings of nonconsolidated affiliates (43) (18)
Cash dividends received from nonconsolidated
affiliates 53 2
Changes in operating assets and liabilities:
Receivables (225) (174)
Inventories 257 27
Payables and accrued expenses (66) 291
Accrued interest and income taxes 3 (19)
Other assets and liabilities (84) (119)
Net cash provided (used) by operating activities 444 439
Investing Activities
Acquisitions, net of cash acquired (158) (2,194)
Proceeds from sale of assets 20 9
Net proceeds from sale of business 22
Proceeds from sale of investment in
nonconsolidated affiliates 2
Cash payments for property, plant and equipment (744) (507)
Proceeds from deferred purchase price of factored
receivables 250 174
Other 2 4
Net cash provided (used) by investing activities (606) (2,514)
Financing Activities
Proceeds from term loans and notes 200 3,426
Repayments of term loans and notes (341) (453)
Borrowings on revolving lines of credit 9,120 5,149
Payments on revolving lines of credit (8,884) (5,405)
Repurchase of common shares (2) (1)
Cash dividends (20) (59)
Debt issuance cost of long-term debt (95)
Net decrease in bank overdrafts (13) (5)
Acquisition of additional ownership interest in
consolidated affiliates (10)
Distributions to noncontrolling interest partners (43) (51)
Other (4) (30)
Net cash provided (used) by financing activities 3 2,476
Effect of foreign exchange rate changes on cash,
cash equivalents and restricted cash 23 (17)
Increase (decrease) in cash, cash equivalents and
restricted cash (136) 384
Cash, cash equivalents and restricted cash,
beginning of period 702 318
Cash, cash equivalents and restricted cash, end of
period $566 $702
Supplemental Cash Flow Information
Cash paid during the period for interest $284 $143
Cash paid during the period for income taxes, net
of refunds 177 113
Non-cash Investing and Financing Activities
Period end balance of trade payables for property,
plant and equipment $134 $135
Deferred purchase price of receivables factored in
the period in investing 236 154
Stock issued for acquisition of Federal-Mogul (1,236)
Stock transferred for acquisition of Federal-
Mogul 1,236
Redeemable noncontrolling interest transaction
with owner 53
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1)TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
---
(Millions except per share amounts)
Q4 2019
Q4 2018
--- ---
Net income
Per Share
Net income
Income tax
EBIT
EBITDA (3)
Net income
Per Share
Net income
Income tax
EBIT
EBITDA (3)
(loss) (loss) (expense) (loss) (loss) (expense)
attributable attributable to benefit attributable to attributable to benefit
to Tenneco noncontrolling Tenneco Inc. noncontrolling
Inc. interests interests
Earnings (Loss) Measures $(293) $(3.62) $75 $(21) $(117) $53 $(109) $(1.35) $17 $10 $(23) $142
Adjustments:
Restructuring and related expenses(5) 34 0.41 1 (7) 42 36 15 0.18 1 (4) 20 17
Cost reduction initiatives (6) 1 (1) (1) 6 0.08 (2) 8 8
Acquisition and separation costs(7) 28 0.36 (2) 30 30 41 0.50 (12) 53 53
Costs to achieve synergies (8) 7 0.09 (1) 8 8 44 0.54 (5) 49 49
Purchase accounting charges (9) 4 0.05 2 2 2 88 1.09 (18) 106 106
Goodwill and intangible impairment charge (10) 172 2.13 172 172 3 0.04 3 3
Process harmonization (11) 14 0.17 (2) 16 16 -
Noncontrolling interests adjustments (12) 58 0.71 (58) -
Pension charges/adjustments (13) (1) (0.02) 1 (2) (2) 2 0.03 (1) 3 3
Anti-dumping duty charge (14) 12 0.15 (4) 16 16
Loss on debt modification (15) 8 0.10 (2) 10 10
Net tax adjustments (5) (0.06) (5) -
Adjusted Net income, EPS, NCI, Tax, EBIT, and
EBITDA(4) $23 $0.28 $18 $(29) $150 $314 $105 $1.30 $18 $(43) $245 $407
Q4 2019
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net income (loss) attributable to Tenneco Inc. $(293)
Net income (loss) attributable to noncontrolling
interests 75
Net income (loss) (218)
Income tax expense (benefit) (21)
Interest expense (80)
EBIT, Earnings (Loss) before interest expense,
income taxes and noncontrolling interests (117)
Depreciation and amortization 170
Total EBITDA including noncontrolling interests
(3) $130 $60 $(57) $7 $140 $(87) $53
Restructuring and related expenses(5) 3 2 23 28 8 36
Cost reduction initiatives (6) (1) (1)
Acquisition and separation costs(7) 30 30
Costs to achieve synergies (8) 1 2 3 5 8
Purchase accounting charges (9) 2 2 2
Goodwill and intangible impairment charge (10) 18 154 172 172
Process harmonization (11) 8 4 4 16 16
Pension adjustments(13) (2) (2)
Adjusted EBITDA(4) $142 $82 $103 $34 $361 $(47) (16) $314
Q4 2018
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net income (loss) attributable to Tenneco Inc. $(109)
Net income (loss) attributable to noncontrolling
interests 17
Net income (loss) (92)
Income tax expense (benefit) 10
Interest expense (79)
EBIT, Earnings (Loss) before interest expense,
income taxes and noncontrolling interests (23)
Depreciation and amortization 165
Total EBITDA including noncontrolling interests
(3) $156 $93 $8 $11 $268 $(126) $142
Restructuring and related expenses(5) (2) (2) 2 19 17 17
Cost reduction initiatives (6) 8 8
Acquisition and separation costs(7) 53 53
Costs to achieve synergies (8) (3) 35 10 42 7 49
Purchase accounting charges (9) 44 57 5 106 106
Goodwill impairment charge (10) 3 3 3
Pension charges (13) 3 3 3
Anti-dumping duty charge (14) 16 16 16
Loss on debt modification (15) 10 10
Adjusted EBITDA(4) $151 $135 $118 $51 $455 $(48) $407
(1)U.S. Generally Accepted Accounting
Principles.
(2)Tenneco presents the above
reconciliation of GAAP to non-GAAP
earnings measures primarily to reflect
the results in a manner that allows a
better understanding of the results of
operational activities separate from
the financial impact of decisions made
for the long-term benefit of the
company and other items impacting
comparability between the periods.
Adjustments similar to the ones
reflected above have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods.
Using only the non-GAAP earnings
measures to analyze earnings would
have material limitations because its
calculation is based on the subjective
determinations of management regarding
the nature and classification of
events and circumstances that
investors may find material.
Management compensates for these
limitations by utilizing both GAAP and
non-GAAP earnings measures reflected
above to understand and analyze the
results of the business. The company
believes investors find the non-GAAP
information helpful in understanding
the ongoing performance of operations
separate from items that may have a
disproportionate positive or negative
impact on the company's financial
results in any particular period.
(3) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. EBITDA
including noncontrolling interests is
not a calculation based upon GAAP.
The amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests should not be
considered as an alternative to net
income attributable to Tenneco Inc. or
operating income as an indicator of
the company's operating performance,
or as an alternative to operating cash
flows as a measure of liquidity.
Tenneco has presented EBITDA including
noncontrolling interests because it
regularly reviews EBITDA including
noncontrolling interests as a measure
of the company's performance. In
addition, Tenneco believes its
investors utilize and analyze the
company's EBITDA including
noncontrolling interests for similar
purposes. Tenneco also believes
EBITDA including noncontrolling
interests assists investors in
comparing a company's performance on a
consistent basis without regard to
depreciation and amortization, which
can vary significantly depending upon
many factors. However, the EBITDA
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(4) Adjusted results are presented in
order to reflect the results in a
manner that allows a better
understanding of operational
activities separate from the financial
impact of decisions made for the long
term benefit of the company and other
items impacting comparability between
periods. Similar adjustments have
been recorded in earlier periods and
similar types of adjustments can
reasonably be expected to be recorded
in future periods. The company
believes investors find the non-GAAP
information helpful in understanding
the ongoing performance of operations
separate from items that may have a
disproportionate positive or negative
impact on the company's financial
results in any particular period.
(5)Q4 2019 includes $6 million and Q4
2018 includes $3 million of
accelerated depreciation related to
plant closures.
(6)Costs related to cost reduction
initiatives.
(7)Costs related to acquisitions and
costs related to expected separation.
(8)Costs to achieve synergies related
to Federal-Mogul acquisition.
(9)This primarily relates to a non-
cash charge to cost of sales for the
amortization of the inventory fair
value step-up recorded as part of the
Acquisitions.
(10)Non-cash asset impairment charge
related to goodwill and intangibles.
(11)Charge due to process
harmonization.
(12)Amount relates to adjustments made
to mark certain redeemable
noncontrolling interests to their
redemption values.
(13)Charges related to pension
derisking and other adjustments.
(14)Charge due to retroactive
application of anti-dumping duty on a
supplier's products.
(15) Loss on debt modification related
to Federal-Mogul acquisition.
(16)Corporate costs for each division
are $21 million for New Tenneco and
$26 million for DRiV.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1)TO NON-GAAP EARNINGS MEASURES(2)
Unaudited
---
(Millions except per share amounts)
YTD 2019
YTD 2018
--- ---
Net income
Per Share
Net income
Income tax
EBIT
EBITDA (3)
Net income
Per Share
Net income
Income tax
EBIT
EBITDA (3)
(loss) (loss) (expense) (loss) (loss) (expense)
attributable benefit attributable to attributable to benefit
to Tenneco
attributable to Tenneco Inc. noncontrolling
Inc. interests
noncontrolling
interests
Earnings (Loss) Measures $(314) $(3.88) $114 $(26) $148 $821 $55 $0.93 $56 $(63) $322 $667
Adjustments:
Restructuring and related expenses(5) 116 1.43 6 (31) 153 138 46 0.76 8 (11) 65 62
Cost reduction initiatives (6) 12 0.15 (3) 15 15 13 0.24 (5) 18 18
Acquisition and separation costs(7) 102 1.27 (25) 127 127 74 1.26 (22) 96 96
Costs to achieve synergies (8) 23 0.29 (6) 29 29 53 0.90 (9) 62 62
Purchase accounting charges (9) 49 0.61 (8) 57 57 88 1.50 (18) 106 106
Goodwill and intangible impairment charge (10) 241 2.98 241 241 3 0.05 3 3
Process harmonization (11) 21 0.26 (5) 26 26 -
Warranty charge (12) 6 0.07 (2) 8 8 4 0.06 (1) 5 5
Antitrust reserve change in estimate (13) (7) (0.09) 2 (9) (9) -
Brazil tax credit (14) (14) (0.18) 8 (22) (22) -
Out of period adjustment (15) 4 0.05 1 5 5 -
Impairment of assets held for sale 6 0.07 (2) 8 8 -
Noncontrolling interests adjustments(16) 58 0.71 (58) -
Pension charges/adjustments (17) (1) (0.02) 1 (2) (2) 2 0.04 (1) 3 3
Litigation settlement accrual 8 0.13 (2) 10 10
Anti-dumping duty charge (18) 12 0.21 (4) 16 16
Environmental charge (19) 3 0.06 (1) 4 4
Loss on debt modification (20) 8 0.14 (2) 10 10
Net tax adjustments (41) (0.50) (41) -
Adjusted Net income, EPS, NCI, Tax, EBIT, and
EBITDA(4) $261 $3.22 $63 $(138) $784 $1,442 $369 $6.28 $64 $(139) $720 $1,062
YTD 2019
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net income (loss) attributable to Tenneco Inc. $(314)
Net income (loss) attributable to noncontrolling
interests 114
Net income (loss) (200)
Income tax expense (benefit) (26)
Interest expense (322)
EBIT, Earnings (Loss) before interest expense,
income taxes and noncontrolling interests 148
Depreciation and amortization 673
Total EBITDA including noncontrolling interests
(3) $582 $363 $211 $8 $1,164 $(343) $821
Restructuring and related expenses(5) 24 30 4 71 129 9 138
Cost reduction initiatives (6) 15 15
Acquisition and separation costs(7) 1 1 126 127
Costs to achieve synergies (8) 6 2 11 2 21 8 29
Purchase accounting charges (9) 12 41 4 57 57
Goodwill and intangible impairment charge (10) 18 154 69 241 241
Process harmonization (11) 13 9 4 26 26
Warranty charge (12) 8 8 8
Antitrust reserve change in estimate (13) (9) (9) (9)
Brazil tax credit (14) (9) (7) (6) (22) (22)
Out of period adjustment (15) 5 5 5
Impairment of assets held for sale 8 8 8
Pension adjustments (17) (2) (2)
Adjusted EBITDA(4) $607 $425 $440 $157 $1,629 $(187) (21) $1,442
YTD 2018
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net income (loss) attributable to Tenneco Inc. $55
Net income (loss) attributable to noncontrolling
interests 56
Net income (loss) 111
Income tax expense (benefit) (63)
Interest expense (148)
EBIT, Earnings (Loss) before interest expense,
income taxes and noncontrolling interests 322
Depreciation and amortization 345
Total EBITDA including noncontrolling interests
(3) $599 $93 $161 $69 $922 $(255) $667
Restructuring and related expenses(5) 11 (2) 7 46 62 62
Cost reduction initiatives (6) 10 10 8 18
Acquisition and separation costs(7) 96 96
Costs to achieve synergies (8) 3 36 11 50 12 62
Purchase accounting charges (9) 44 57 5 106 106
Goodwill impairment charge (10) 3 3 3
Warranty charge (12) 5 5 5
Pension charges (17) 3 3 3
Litigation settlement accrual 9 9 1 10
Anti-dumping duty charge (18) 16 16 16
Environmental charge (19) 4 4
Loss on debt modification (20) 10 10
Adjusted EBITDA(4) $613 $135 $277 $161 $1,186 $(124) $1,062
(1)U.S. Generally Accepted Accounting
Principles.
(2)Tenneco presents the above
reconciliation of GAAP to non-GAAP
earnings measures primarily to reflect
the results in a manner that allows a
better understanding of the results of
operational activities separate from
the financial impact of decisions made
for the long-term benefit of the
company and other items impacting
comparability between the periods.
Adjustments similar to the ones
reflected above have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods.
Using only the non-GAAP earnings
measures to analyze earnings would
have material limitations because its
calculation is based on the subjective
determinations of management regarding
the nature and classification of
events and circumstances that
investors may find material.
Management compensates for these
limitations by utilizing both GAAP and
non-GAAP earnings measures reflected
above to understand and analyze the
results of the business. The company
believes investors find the non-GAAP
information helpful in understanding
the ongoing performance of operations
separate from items that may have a
disproportionate positive or negative
impact on the company's financial
results in any particular period.
(3) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. EBITDA
including noncontrolling interests is
not a calculation based upon GAAP.
The amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests should not be
considered as an alternative to net
income attributable to Tenneco Inc. or
operating income as an indicator of
the company's operating performance,
or as an alternative to operating cash
flows as a measure of liquidity.
Tenneco has presented EBITDA including
noncontrolling interests because it
regularly reviews EBITDA including
noncontrolling interests as a measure
of the company's performance. In
addition, Tenneco believes its
investors utilize and analyze the
company's EBITDA including
noncontrolling interests for similar
purposes. Tenneco also believes
EBITDA including noncontrolling
interests assists investors in
comparing a company's performance on a
consistent basis without regard to
depreciation and amortization, which
can vary significantly depending upon
many factors. However, the EBITDA
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(4) Adjusted results are presented in
order to reflect the results in a
manner that allows a better
understanding of operational
activities separate from the financial
impact of decisions made for the long
term benefit of the company and other
items impacting comparability between
periods. Similar adjustments have
been recorded in earlier periods and
similar types of adjustments can
reasonably be expected to be recorded
in future periods. The company
believes investors find the non-GAAP
information helpful in understanding
the ongoing performance of operations
separate from items that may have a
disproportionate positive or negative
impact on the company's financial
results in any particular period.
(5)FY 2019 includes $15 million and FY
2018 includes $3 million of
accelerated depreciation related to
plant closures.
(6)Costs related to cost reduction
initiatives.
(7)Costs related to acquisitions and
costs related to expected separation.
(8)Costs to achieve synergies related
to Federal-Mogul acquisition.
(9)This primarily relates to a non-
cash charge to cost of sales for the
amortization of the inventory fair
value step-up recorded as part of the
Acquisitions.
(10)Non-cash asset impairment charge
related to goodwill and intangibles.
(11)Charge due to process
harmonization.
(12)Charge related to warranty.
Although Tenneco regularly incurs
warranty costs, this specific charge
is of an unusual nature in the period
incurred.
(13)Reduction in estimated antitrust
accrual.
(14)Recovery of value-added tax in a
foreign jurisdiction.
(15)Inventory losses attributable to
prior periods.
(16)Amount relates to adjustments made
to mark certain redeemable
noncontrolling interests to their
redemption values.
(17)Charges related to pension
derisking and other adjustments.
(18)Charge due to retroactive
application of anti-dumping duty on a
supplier's products.
(19)Environmental charge related to an
acquired site whereby an
indemnification reverted back to the
Company resulting from a 2009
bankruptcy filing of Mark IV
Industries.
(20) Loss on debt modification related
to Federal-Mogul acquisition.
(21)Corporate costs for each division
are $85 million for New Tenneco and
$102 million for DRiV.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)
Unaudited
---
(Millions)
Q4 2019
Currency
Value-add
Impact on
Revenues
Substrate
Value-add
Value-add
excluding
Revenues
Sales
Revenues
Revenues
Currency
Clean Air $1,743 $769 $974 $(11) $985
Powertrain 1,018 1,018 (12) 1,030
Motorparts 741 741 (9) 750
Ride Performance 641 641 (10) 651
Total Tenneco Inc. $4,143 $769 $3,374 $(42) $3,416
Q4 2018
Currency
Value-add
Impact on
Revenues
Substrate
Value-add
Value-add
excluding
Revenues
Sales
Revenues
Revenues
Currency
Clean Air $1,655 $631 $1,024
$ - $1,024
Powertrain 1,112 1,112 1,112
Motorparts 827 827 827
Ride Performance 684 684 684
Total Tenneco Inc. $4,278 $631 $3,647
$ - $3,647
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect value-add
revenues separately from the
effects of doing business in
currencies other than the U.S.
dollar. Additionally, substrate
sales include precious metals
pricing, which may be volatile.
Substrate sales occur when, at the
direction of its OE customers,
Tenneco purchases catalytic
converters or components thereof
from suppliers, uses them in its
manufacturing processes and sells
them as part of the completed
system. While Tenneco original
equipment customers assume the
risk of this volatility, it
impacts reported revenue.
Excluding substrate sales removes
this impact. Tenneco uses this
information to analyze the trend
in revenues before these factors.
Tenneco believes investors find
this information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)
Unaudited
---
(Millions)
YTD 2019
Currency
Value-add
Impact on
Revenues
Substrate
Value-add
Value-add
excluding
Revenues
Sales
Revenues
Revenues
Currency
Clean Air $7,121 $3,027 $4,094 $(113) $4,207
Powertrain 4,408 4,408 (12) 4,420
Motorparts 3,167 3,167 (42) 3,209
Ride Performance 2,754 2,754 (75) 2,829
Total Tenneco Inc. $17,450 $3,027 $14,423 $(242) $14,665
YTD 2018
Currency
Value-add
Impact on
Revenues
Substrate
Value-add
Value-add
excluding
Revenues
Sales
Revenues
Revenues
Currency
Clean Air $6,707 $2,500 $4,207
$ - $4,207
Powertrain 1,112 1,112 1,112
Motorparts 1,780 1,780 1,780
Ride Performance 2,164 2,164 2,164
Total Tenneco Inc. $11,763 $2,500 $9,263
$ - $9,263
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect value-add
revenues separately from the
effects of doing business in
currencies other than the U.S.
dollar. Additionally, substrate
sales include precious metals
pricing, which may be volatile.
Substrate sales occur when, at the
direction of its OE customers,
Tenneco purchases catalytic
converters or components thereof
from suppliers, uses them in its
manufacturing processes and sells
them as part of the completed
system. While Tenneco original
equipment customers assume the
risk of this volatility, it
impacts reported revenue.
Excluding substrate sales removes
this impact. Tenneco uses this
information to analyze the trend
in revenues before these factors.
Tenneco believes investors find
this information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES
Unaudited
---
(Millions except percents)
Q4 2019 vs. Q4 2018 $ Change and % Change Increase (Decrease)
Revenues
% Change
Value-add
% Change
Revenues
Excluding
Currency
Clean Air $88 5% $(39) (4%)
Powertrain (94) (8%) (82) (7%)
Motorparts (86) (10%) (77) (9%)
Ride
Performance (43) (6%) (33) (5%)
Total Tenneco Inc. $(135) (3%) $(231) (6%)
YTD Q4 2019 vs. YTD Q4 2018 $ Change and % Change Increase
(Decrease)
Revenues
% Change
Value-add
% Change
Revenues
Excluding
Currency
Clean Air $414 6%
$ - -%
Powertrain 3,296 296% 3,308 297%
Motorparts 1,387 78% 1,429 80%
Ride
Performance 590 27% 665 31%
Total Tenneco Inc. $5,687 48% $5,402 58%
(1) U.S. Generally Accepted
Accounting Principles.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF NON-GAAP MEASURES
Debt net of total cash / Adjusted LTM and Pro Forma Adjusted LTM EBITDA including noncontrolling interests
Unaudited
---
(Millions except ratios)
December 31, 2019
December 31, 2018
Total debt $5,556 $5,493
Total cash, cash equivalents and restricted cash (total cash) 566 702
Debt net of total cash balances (1) $4,990 $4,791
Adjusted LTM and Pro forma Adjusted LTM
EBITDA including noncontrolling
interests(2) (3) (5) $1,442 $1,627
Ratio of debt net of total cash balances and Pro forma ratio
of debt net of total cash balances to Adjusted LTM and Pro
forma Adjusted LTM EBITDA including noncontrolling interests
(4) (5)
3.5x
2.9x
Q1 18*
Q2 18*
Q3 18*
Q4 18
Q1 19
Q2 19
Q3 19
Q4 19
Net income (loss) attributable to Tenneco
Inc. $60 $47 $57 $(109) $(117) $26 $70 $(293)
Net income (loss) attributable to
noncontrolling interests 14 16 9 17 12 19 8 75
Net income (loss) 74 63 66 (92) (105) 45 78 (218)
Income tax (expense) benefit (25) (26) (22) 10 (14) 9 (21)
Interest expense (23) (22) (24) (79) (81) (82) (79) (80)
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 122 111 112 (23) (24) 141 148 (117)
Depreciation and amortization 60 60 60 165 169 169 165 170
Total EBITDA including noncontrolling
interests (2) $182 $171 $172 $142 $145 $310 $313 $53
Adjustments:
Restructuring and related expenses 12 21 12 17 17 57 28 36
Cost reduction initiatives (6) 10 8 8 2 6 (1)
Acquisition and separation costs(7) 13 18 12 53 40 27 30 30
Warranty charge (8) 5 7 1
Costs to achieve synergies(9) 9 4 49 7 7 7 8
Purchase accounting charges (10) 106 41 3 11 2
Goodwill and intangible impairment charge
(11) 3 60 9 172
Process harmonization (12) 9 1 16
Anti-dumping duty charge (13) 16
Antitrust reserve change in estimate (14) (9)
Brazil tax credit (15) (22)
Out of period adjustment (16) 5
Impairment of assets held for sale 8
Environmental charge (17) 4
Litigation settlement accrual 10
Loss on debt modification (18) 10
Pension charges/adjustments (19) 3 (2)
Total Adjusted EBITDA including
noncontrolling interests (3) $212 $233 $210 $407 $327 $414 $387 $314
Legacy Federal-Mogul Reconciliation of Non-GAAP earnings measures
---
Q1 18
Q2 18
Q3 18
Net income attributable to Federal-Mogul $26 $25 $35
Net income (loss) attributable to
noncontrolling interests 3 3 1
Net income (loss) 29 28 36
Income tax (expense) benefit (15) (13) (16)
Interest expense (48) (52) (49)
EBIT, Earnings before interest expense,
income taxes and noncontrolling interests 92 93 101
Depreciation and amortization 100 96 99
Total EBITDA including noncontrolling
interests (2) $192 $189 $200
Adjustments:
Restructuring charges and asset
impairments, net 15
Purchase price contingency 5
Transaction related costs 1 13
Cost to exit a multiemployer pension plan 5
Gain (loss) on sale of assets (65)
Charge for extinguishment of dissenting
shareholders shares - 5
Other 2 2 1
Total Adjusted EBITDA including
noncontrolling interests (3) $200 $209 $156
Q1 18*
Q2 18*
Q3 18*
Q4 18
Q1 19
Q2 19
Q3 19
Q4 19
Adjusted EBITDA and Pro forma Adjusted
EBITDA including noncontrolling
interests(2) (3) (5) $412 $442 $366 $407 $327 $414 $387 $314
Q4 2018 Pro forma Adjusted LTM EBITDA
including noncontrolling interests(2) (3)
(5) $1,627
Q4 2019 Adjusted LTM EBITDA including
noncontrolling interests(2) (3) $1,442
* Financial results for the first three
quarters of 2018 have been revised for
certain immaterial adjustments as
discussed in Tenneco's Form 10-K for
the year ended December 31, 2018.
(1) Tenneco presents debt net of total
cash balances because management
believes it is a useful measure of
Tenneco's credit position and progress
toward reducing leverage. The
calculation is limited in that the
company may not always be able to use
cash to repay debt on a dollar-for-
dollar basis.
(2) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. EBITDA
including noncontrolling interests is
not a calculation based upon GAAP.
The amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests should not be
considered as an alternative to net
income (loss) attributable to Tenneco
Inc. or operating income as an
indicator of the company's operating
performance, or as an alternative to
operating cash flows as a measure of
liquidity. Tenneco has presented
EBITDA including noncontrolling
interests because it regularly reviews
EBITDA including noncontrolling
interests as a measure of the
company's performance. In addition,
Tenneco believes its investors utilize
and analyze the company's EBITDA
including noncontrolling interests for
similar purposes. Tenneco also
believes EBITDA including
noncontrolling interests assists
investors in comparing a company's
performance on a consistent basis
without regard to depreciation and
amortization, which can vary
significantly depending upon many
factors. However, the EBITDA
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(3) Adjusted EBITDA including
noncontrolling interests is presented
in order to reflect the results in a
manner that allows a better
understanding of operational
activities separate from the financial
impact of decisions made for the long
term benefit of the company and other
items impacting comparability between
the periods. Similar adjustments to
EBITDA including noncontrolling
interests have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods. The
company believes investors find the
non-GAAP information helpful in
understanding the ongoing performance
of operations separate from items that
may have a disproportionate positive
or negative impact on the company's
financial results in any particular
period.
(4) Tenneco presents the above
reconciliation of the ratio of debt
net of total cash to LTM Adjusted
EBITDA including noncontrolling
interests to show trends that
investors may find useful in
understanding the company's ability to
service its debt. For purposes of
this calculation, Adjusted LTM and Pro
Forma adjusted LTM EBITDA including
noncontrolling interests is used as an
indicator of the company's performance
and debt net of total cash is
presented as an indicator of the
company's credit position and progress
toward reducing the company's
financial leverage. This
reconciliation is provided as
supplemental information and not
intended to replace the company's
existing covenant ratios or any other
financial measures that investors may
find useful in describing the
company's financial position. See
notes (1), (2) and (3) for a
description of the limitations of
using debt net of total cash, EBITDA
including noncontrolling interests and
Adjusted EBITDA including
noncontrolling interests.
(5) Tenneco is providing Pro Forma
Adjusted LTM EBITDA and the ratio of
debt net of cash balances to Pro Forma
Adjusted LTM EBITDA to show the
company's Adjusted LTM EBITDA as if
Federal-Mogul had been consolidated
with Tenneco for the entirety of 2018
(and the resultant impact on the net
debt ratio). Tenneco believes this
supplemental information is useful to
investors who are trying to understand
the results of the entire enterprise,
including Federal-Mogul, for 2018 and
2019 and the ability of the company to
service its debt.
(6)Costs related to cost reduction
initiatives.
(7)Costs related to acquisitions and
costs related to expected separation.
(8)Charge related to warranty. Although
Tenneco regularly incurs warranty
costs, this specific charge is of an
unusual nature in the period incurred.
(9)Costs to achieve synergies related
to Federal-Mogul acquisition.
(10)This primarily relates to a non-
cash charge to cost of goods sold for
the amortization of the inventory fair
value step-up recorded as part of the
Acquisitions.
(11)Non-cash asset impairment charge
related to goodwill and intangibles.
(12)Charge due to process
harmonization.
(13)Charge due to retroactive
application of anti-dumping duty on a
supplier's products.
(14)Reduction in estimated antitrust
accrual.
(15)Recovery of value-added tax in a
foreign jurisdiction.
(16)Inventory losses attributable to
prior periods.
(17)Environmental charge related to an
acquired site whereby an
indemnification reverted back to the
Company resulting from a 2009
bankruptcy filing of Mark IV
Industries.
(18)Loss on debt modification.
(19)Charges related to pension
derisking and other adjustments.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE TO NON-GAAP REVENUE MEASURES(2)
Unaudited
---
(Millions)
Q4 2019
Revenues
Currency
Revenues
Substrate Sales
Value-add
Excluding Excluding Revenues
Currency Currency Excluding
Currency
Original equipment
light vehicle revenues $2,635 $3 $2,632 $663 $1,969
Original equipment
commercial truck, off-
highway, industrial
and other revenues 767 (48) 815 118 697
Aftermarket revenues 741 (9) 750 750
Net sales and operating
revenues $4,143 $(54) $4,197 $781 $3,416
Q4 2018
Revenues
Currency
Revenues
Substrate
Sales
Value-add
Excluding Excluding Revenues
Currency Currency Excluding
Currency
Original equipment
light vehicle revenues $2,647
$ - $2,647 $531 $2,116
Original equipment
commercial truck, off-
highway, industrial
and other revenues 804 804 100 704
Aftermarket revenues 827 827 827
Net sales and operating
revenues $4,278
$ - $4,278 $631 $3,647
YTD 2019
Revenues
Currency
Revenues
Substrate Sales
Value-add
Excluding Excluding Revenues
Currency Currency Excluding
Currency
Original equipment
light vehicle revenues $11,001 $(180) $11,181 $2,644 $8,537
Original equipment
commercial truck, off-
highway, industrial
and other revenues 3,282 (88) 3,370 451 2,919
Aftermarket revenues 3,167 (42) 3,209 3,209
Net sales and operating
revenues $17,450 $(310) $17,760 $3,095 $14,665
YTD 2018
Revenues
Currency
Revenues
Substrate Sales
Value-add
Excluding Excluding Revenues
Currency Currency Excluding
Currency
Original equipment
light vehicle revenues $8,104
$ - $8,104 $2,092 $6,012
Original equipment
commercial truck, off-
highway, industrial
and other revenues 1,879 1,879 408 1,471
Aftermarket revenues 1,780 1,780 1,780
Net sales and operating
revenues $11,763
$ - $11,763 $2,500 $9,263
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect value-add
revenues separately from the
effects of doing business in
currencies other than the U.S.
dollar. Additionally, substrate
sales include precious metals
pricing, which may be volatile.
Substrate sales occur when, at the
direction of its OE customers,
Tenneco purchases catalytic
converters or components thereof
from suppliers, uses them in its
manufacturing processes and sells
them as part of the completed
system. While Tenneco original
equipment customers assume the
risk of this volatility, it
impacts reported revenue.
Excluding substrate sales removes
this impact. Tenneco uses this
information to analyze the trend
in revenues before these factors.
Tenneco believes investors find
this information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE AND EARNINGS TO NON-GAAP REVENUE AND EARNINGS MEASURES(2)
Unaudited
---
(Millions except percents)
Q4 2019
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net sales and
operating revenues $1,743 $1,018 $741 $641 $4,143
$ - $4,143
Less: Substrate sales 769 769 769
Value-add revenues $974 $1,018 $741 $641 $3,374
$ - $3,374
EBITDA $130 $60 $(57) $7 $140 $(87) $53
EBITDA as a % of
revenue 7.5% 5.9% -7.7% 1.1% 3.4% 1.3%
EBITDA as a % of
value-add revenue 13.3% 5.9% -7.7% 1.1% 4.1% 1.6%
Adjusted EBITDA $142 $82 $103 $34 $361 $(47) $314
Adjusted EBITDA as a
% of revenue 8.1% 8.1% 13.9% 5.3% 8.7% 7.6%
Adjusted EBITDA as a
% of value-add
revenue 14.6% 8.1% 13.9% 5.3% 10.7% 9.3%
Q4 2018
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net sales and
operating revenues $1,655 $1,112 $827 $684 $4,278
$ - $4,278
Less: Substrate sales 631 631 631
Value-add revenues $1,024 $1,112 $827 $684 $3,647
$ - $3,647
EBITDA $156 $93 $8 $11 $268 $(126) $142
EBITDA as a % of
revenue 9.4% 8.4% 1.0% 1.6% 6.3% 3.3%
EBITDA as a % of
value-add revenue 15.2% 8.4% 1.0% 1.6% 7.3% 3.9%
Adjusted EBITDA $151 $135 $118 $51 $455 $(48) $407
Adjusted EBITDA as a
% of revenue 9.1% 12.1% 14.3% 7.5% 10.6% 9.5%
Adjusted EBITDA as a
% of value-add
revenue 14.7% 12.1% 14.3% 7.5% 12.5% 11.2%
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect EBITDA and
adjusted EBITDA as a percent of
both total revenues and value-add
revenues. Substrate sales include
precious metals pricing, which may
be volatile. Substrate sales
occur when, at the direction of
its OE customers, Tenneco
purchases catalytic converters or
components thereof from suppliers,
uses them in its manufacturing
processes and sells them as part
of the completed system. While
Tenneco original equipment
customers assume the risk of this
volatility, it impacts reported
revenue. Excluding substrate
sales removes this impact.
Further, presenting EBITDA and
adjusted EBITDA as a percent of
value-add revenue assists
investors in evaluating the
company's operational performance
without the impact of such
substrate sales. See prior pages
for a discussion of EBITDA and
adjusted EBITDA.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP (1)REVENUE AND EARNINGS TO NON-GAAP REVENUE AND EARNINGS MEASURES(2)
Unaudited
---
(Millions except percents)
YTD 2019
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net sales and
operating revenues $7,121 $4,408 $3,167 $2,754 $17,450
$ - $17,450
Less: Substrate sales 3,027 3,027 3,027
Value-add revenues $4,094 $4,408 $3,167 $2,754 $14,423
$ - $14,423
EBITDA $582 $363 $211 $8 $1,164 $(343) $821
EBITDA as a % of
revenue 8.2% 8.2% 6.7% 0.3% 6.7% 4.7%
EBITDA as a % of
value-add revenue 14.2% 8.2% 6.7% 0.3% 8.1% 5.7%
Adjusted EBITDA $607 $425 $440 $157 $1,629 $(187) $1,442
Adjusted EBITDA as a
% of revenue 8.5% 9.6% 13.9% 5.7% 9.3% 8.3%
Adjusted EBITDA as a
% of value-add
revenue 14.8% 9.6% 13.9% 5.7% 11.3% 10.0%
YTD 2018
Global Segments
Clean Air
Powertrain
Motorparts
Ride
Total
Corporate
Total
Performance
Net sales and
operating revenues $6,707 $1,112 $1,780 $2,164 $11,763
$ - $11,763
Less: Substrate sales 2,500 2,500 2,500
Value-add revenues $4,207 $1,112 $1,780 $2,164 $9,263
$ - $9,263
EBITDA $599 $93 $161 $69 $922 $(255) $667
EBITDA as a % of
revenue 8.9% 8.4% 9.0% 3.2% 7.8% 5.7%
EBITDA as a % of
value-add revenue 14.2% 8.4% 9.0% 3.2% 10.0% 7.2%
Adjusted EBITDA $613 $135 $277 $161 $1,186 $(124) $1,062
Adjusted EBITDA as a
% of revenue 9.1% 12.1% 15.6% 7.4% 10.1% 9.0%
Adjusted EBITDA as a
% of value-add
revenue 14.6% 12.1% 15.6% 7.4% 12.8% 11.5%
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect EBITDA and
adjusted EBITDA as a percent of
both total revenues and value-add
revenues. Substrate sales include
precious metals pricing, which may
be volatile. Substrate sales
occur when, at the direction of
its OE customers, Tenneco
purchases catalytic converters or
components thereof from suppliers,
uses them in its manufacturing
processes and sells them as part
of the completed system. While
Tenneco original equipment
customers assume the risk of this
volatility, it impacts reported
revenue. Excluding substrate
sales removes this impact.
Further, presenting EBITDA and
adjusted EBITDA as a percent of
value-add revenue assists
investors in evaluating the
company's operational performance
without the impact of such
substrate sales. See prior pages
for a discussion of EBITDA and
adjusted EBITDA.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1)REVENUE TO NON-GAAP REVENUE MEASURES(2)- Original equipment commercial truck, off-highway, industrial and other revenues
Unaudited
---
(Millions)
2019
---
Q1
Q2
Q3
Q4
YTD
Substrate
Value-add
Substrate
Value-add
Substrate
Value-add
Substrate
Value-add
Substrate
Value-add
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Clean Air $319 $115 $204 $300 $110 $190 $271 $99 $172 $277 $115 $162 $1,167 $439 $728
Powertrain 426 426 401 401 385 385 379 379 1,591 1,591
Ride Performance 150 150 136 136 127 127 111 111 524 524
Total Tenneco Inc. $895 $115 $780 $837 $110 $727 $783 $99 $684 $767 $115 $652 $3,282 $439 $2,843
2018
---
Q1
Q2
Q3
Q4
YTD
Substrate
Value-add
Substrate
Value-add
Substrate
Value-add
Substrate
Value-add
Substrate
Value-add
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Revenues
Sales
Revenues
Clean Air $307 $109 $198 $290 $101 $189 $273 $98 $175 $273 $100 $173 $1,143 $408 $735
Powertrain 420 420 420 420
Ride Performance 69 69 69 69 67 67 111 111 316 316
Total Tenneco Inc. $376 $109 $267 $359 $101 $258 $340 $98 $242 $804 $100 $704 $1,879 $408 $1,471
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents the above
reconciliation of revenues in
order to reflect value-add
revenues separately from substrate
sales which include precious
metals pricing, which may be
volatile. Substrate sales occur
when, at the direction of its OE
customers, Tenneco purchases
catalytic converters or components
thereof from suppliers, uses them
in its manufacturing processes and
sells them as part of the
completed system. While Tenneco
original equipment customers
assume the risk of this
volatility, it impacts reported
revenue. Excluding substrate
sales removes this impact.
Tenneco uses this information to
analyze the trend in revenues
before these factors. Tenneco
believes investors find this
information useful in
understanding period to period
comparisons in the company's
revenues.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) REVENUE TO PRO FORMA(2) REVENUE AND NON-GAAP EARNINGS MEASURES - 2018 Quarterly
Unaudited
---
(Millions except percents)
Q1 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco Tenneco
Net sales and operating revenues $1,756 $1,260
$ - $3,016 $903 $761
$ - $1,664
$ - $4,680
Less: Substrate sales 652 652 652
Value-add revenues (3) 1,104 1,260 2,364 903 761 1,664 4,028
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 119 60 179 96 (18) 78 (51) 206
Depreciation and amortization 37 61 98 24 38 62 160
Total EBITDA including noncontrolling
interests(4) 156 121 277 120 20 140 (51) 366
Financing charges on sale of receivables
reclass 1 1 1 3 5 5 8
Segment change impact 2 12 (16) (2) (19) 17 (32) (34) 36
Total EBITDA including noncontrolling
interests after reclass and segment
change(4) 159 134 (15) 278 106 37 (32) 111 (15) 374
Adjustments:
Restructuring and related expenses 1 1 2 7 9 10
Cost reduction initiatives 2 2 2
Acquisition and separation costs 13 13
Warranty charge 5 5 5
Purchase price contingency 5 5 5
Transaction related costs 1 1
Other 1 1 1 2
Adjusted EBITDA(5) $160 $140 $(15) $285 $108 $51 $(32) $127
$ - $412
Adjusted EBITDA as a percent of value-add
revenue(6) 14.5% 11.1% 12.1% 12.0% 6.7% 7.6% 10.2%
Q2 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco DRiV forma
Tenneco
Performance Tenneco
Net sales and operating revenues $1,694 $1,243
$ - $2,937 $930 $753
$ - $1,683
$ - $4,620
Less: Substrate sales 621 621 621
Value-add revenues (3) 1,073 1,243 2,316 930 753 1,683 3,999
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 103 70 173 109 (19) 90 (65) 198
Depreciation and amortization 39 61 100 21 34 55 1 156
Total EBITDA including noncontrolling
interests(4) 142 131 273 130 15 145 (64) 354
Financing charges on sale of receivables
reclass 1 1 5 5 6
Segment change impact 3 13 (16) (17) 14 (24) (27) 27
Total EBITDA including noncontrolling
interests after reclass and segment
change(4) 145 144 (15) 274 118 29 (24) 123 (37) 360
Adjustments:
Restructuring and related expenses 11 1 12 1 10 11 23
Cost reduction initiatives 8 8 8
Acquisition and separation costs 18 18
Costs to achieve synergies 6 6 1 1 2 9
Environmental charge 4 4
Transaction related costs 13 13
Cost to exit a multiemployer pension
plan 5 5 5
Other (2) (2) 5 (1) 4 2
Adjusted EBITDA(5) $162 $148 $(15) $295 $125 $46 $(24) $147
$ - $442
Adjusted EBITDA as a percent of value-add
revenue(6) 15.1% 11.9% 12.7% 13.4% 6.1% 8.7% 11.1%
Q3 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New Tenneco Performance DRiV forma
Tenneco
Tenneco
Net sales and operating revenues $1,602 $1,122
$ - $2,724 $867 $690
$ - $1,557
$ - $4,281
Less: Substrate sales 596 596 596
Value-add revenues (3) 1,006 1,122 2,128 867 690 1,557 3,685
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 105 21 126 102 28 130 (51) 205
Depreciation and amortization 38 62 100 22 35 57 2 159
Total EBITDA including noncontrolling
interests(4) 143 83 226 124 63 187 (49) 364
Financing charges on sale of receivables
reclass 1 1 1 3 5 5 8
Segment change impact 4 13 (18) (1) (16) 16 (28) (28) 29
Total EBITDA including noncontrolling
interests after reclass and segment
change(4) 148 97 (17) 228 113 79 (28) 164 (20) 372
Adjustments:
Restructuring and related expenses 1 8 9 8 10 18 27
Acquisition and separation costs 12 12
Costs to achieve synergies 1 1 3 4
Litigation settlement accrual 9 9 1 10
Gain (loss) on sale of assets (65) (65) (65)
Charge for extinguishment of
dissenting shareholders shares 5 5
Other 4 4 (3) 1 (2) (1) 1
Adjusted EBITDA(5) $149 $109 $(17) $241 $118 $35 $(28) $125
$ - $366
Adjusted EBITDA as a percent of value-add
revenue(6) 14.8% 9.7% 11.3% 13.6% 5.1% 8.0% 9.9%
Q4 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New
Tenneco
Performance
DRiV
forma
Tenneco
Tenneco
Net sales and operating revenues $1,655 $1,112
$ - $2,767 $827 $684
$ - $1,511
$ - $4,278
Less: Substrate sales 631 631 631
Value-add revenues (3) 1,024 1,112 2,136 827 684 1,511 3,647
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 116 33 149 (31) (47) (78) (102) (31)
Depreciation and amortization 40 59 99 29 37 66 165
Total EBITDA including noncontrolling
interests(4) 156 92 248 (2) (10) (12) (102) 134
Financing charges on sale of receivables
reclass 1 1 6 1 7 8
Segment change impact 3 1 (4) (17) 12 (19) (24) 24
Total EBITDA including noncontrolling
interests after reclass and segment
change(4) 159 93 (3) 249 (13) 3 (19) (29) (78) 142
Adjustments:
Restructuring and related expenses (2) (2) (4) 2 19 21 17
Cost reduction initiatives 8 8
Acquisition and separation costs 53 53
Costs to achieve synergies (3) (3) 35 10 45 7 49
Purchase accounting adjustments 44 44 57 5 62 106
Anti-dumping duty charge 16 16 16
Loss on debt modification 10 10
Pension charges 3 3 3
Goodwill impairment charge 3 3 3
Adjusted EBITDA(5) $154 $135 $(3) $286 $97 $43 $(19) $121
$ - $407
Adjusted EBITDA as a percent of value-add
revenue(6) 15.0% 12.1% 13.4% 11.7% 6.3% 8.0% 11.2%
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents pro forma
revenues and earnings measures to show
what the company's performance would
have been had Federal-Mogul been
consolidated with Tenneco for each
quarter of 2018. We believe this
supplemental information is useful to
investors who are trying to understand
the results of the entire enterprise,
including Federal-Mogul. The
Motorparts segment reflects the
company's historical Aftermarket
segment plus the Motorparts
aftermarket business acquired in the
Federal-Mogul acquisition. The Ride
Performance segment reflects the
company's historical Ride Performance
segment plus the Motorparts OE
business acquired in the Federal-
Mogul acquisition.
(3) Tenneco presents the above
reconciliation of revenues in order to
reflect value-add revenues separately
from substrate sales. Substrate sales
include precious metals pricing, which
may be volatile. Substrate sales
occur when, at the direction of its OE
customers, Tenneco purchases catalytic
converters or components thereof from
suppliers, uses them in its
manufacturing processes and sells them
as part of the completed system. While
Tenneco original equipment customers
assume the risk of this volatility, it
impacts reported revenue. Excluding
substrate sales removes this impact.
Tenneco uses this information to
analyze the trend in revenues before
these factors. Tenneco believes
investors find this information useful
in understanding period to period
comparisons in the company's revenues.
(4) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. We
have also presented EBITDA including
noncontrolling interests to give
effect to the reclassification of
financing charges on sale of
receivables that took place in the
first quarter 2019 and to give
effective to the impact of the segment
changes that occurred in the first
quarter of 2019. EBITDA including
noncontrolling interests is not a
calculation based upon GAAP. The
amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests should not be
considered as an alternative to net
income (loss) attributable to Tenneco
Inc. or operating income as an
indicator of the company's operating
performance, or as an alternative to
operating cash flows as a measure of
liquidity. Tenneco has presented
EBITDA including noncontrolling
interests because it regularly reviews
EBITDA including noncontrolling
interests as a measure of the
company's performance. In addition,
Tenneco believes its investors utilize
and analyze the company's EBITDA
including noncontrolling interests for
similar purposes. Tenneco also
believes EBITDA including
noncontrolling interests assists
investors in comparing a company's
performance on a consistent basis
without regard to depreciation and
amortization, which can vary
significantly depending upon many
factors. However, the EBITDA
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(5)"Adjusted EBITDA" is EBITDA
including noncontrolling interests
(after giving effect to the
reclassification and segment change
described above) and is presented in
order to reflect the results in a
manner that allows a better
understanding of operational
activities separate from the financial
impact of decisions made for the long
term benefit of the company and other
items impacting comparability between
the periods. Similar adjustments to
EBITDA including noncontrolling
interests have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods. The
company believes investors find the
non-GAAP information helpful in
understanding the ongoing performance
of operations separate from items that
may have a disproportionate positive
or negative impact on the company's
financial results in any particular
period.
(6) Tenneco presents the above
reconciliation in order to reflect
Adjusted EBITDA as a percent of both
value-add revenues. Presenting
Adjusted EBITDA as a percent of value-
add revenue assists investors in
evaluating the company's operational
performance without the impact of
substrate sales, which can be
volatile.
ATTACHMENT 2
TENNECO INC.
RECONCILIATION OF GAAP(1) REVENUE TO PRO FORMA(2) REVENUE AND NON-GAAP EARNINGS MEASURES - 2018 and 2017 Annual
Unaudited
---
(Millions except percents)
FY 2018
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New
Tenneco
Performance
DRiV
forma
Tenneco
Tenneco
Net sales and operating revenues $6,707 $4,737
$ - $11,444 $3,527 $2,888
$ - $6,415
$ - $17,859
Less: Substrate sales 2,500 2,500 2,500
Value-add revenues (3) 4,207 4,737 8,944 3,527 2,888 6,415 15,359
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 443 184 627 276 (56) 220 (269) 578
Depreciation and amortization 154 243 397 96 144 240 3 640
Total EBITDA including noncontrolling
interests(4) 597 427 1,024 372 88 460 (266) 1,218
Financing charges on sale of receivables
reclass 2 2 4 8 21 1 22 30
Segment change impact 12 39 (54) (3) (69) 59 (103) (113) 116
Total EBITDA including noncontrolling
interests after reclass and segment
change(4) 611 468 (50) 1,029 324 148 (103) 369 (150) 1,248
Adjustments:
Restructuring and related expenses 11 7 18 13 46 59 77
Cost reduction initiatives 10 10 8 18
Acquisition and separation costs 96 96
Costs to achieve synergies 3 3 36 11 47 12 62
Purchase accounting adjustments 44 44 57 5 62 106
Anti-dumping duty charge 16 16 16
Environmental charge 4 4
Warranty charge 5 5 5
Litigation settlement accrual 9 9 1 10
Loss on debt modification 10 10
Pension charges 3 3 3
Goodwill impairment charge 3 3 3
Purchase price contingency 5 5 5
Transaction related costs 14 14
Cost to exit a multiemployer pension
plan 5 5 5
Gain (loss) on sale of assets (65) (65) (65)
Charge for extinguishment of dissenting
shareholders shares 5 5
Other 3 3 2 2 5
Adjusted EBITDA(5) $625 $532 $(50) $1,107 $448 $175 $(103) $520
$ - $1,627
Adjusted EBITDA as a percent of value-add
revenue(6) 14.9% 11.2% 12.4% 12.7% 6.1% 8.1% 10.6%
FY 2017
---
Pro forma New Tenneco
Pro forma DRiV
Clean Air
Powertrain
Corporate -
New
Motorparts
Ride
Corporate -
DRiV
Other/Elim
Total Pro
New
Tenneco
Performance
DRiV
forma
Tenneco
Tenneco
Net sales and operating revenues $6,216 $4,573
$ - $10,789 $3,678 $2,686
$ - $6,364
$ - $17,153
Less: Substrate sales 2,187 2,187 2,187
Value-add revenues (3) 4,029 4,573 8,602 3,678 2,686 6,364 14,966
EBIT, Earnings (Loss) before interest
expense, income taxes and noncontrolling
interests 420 234 654 394 (42) 352 (272) 734
Depreciation and amortization 142 254 396 92 132 224 4 624
Total EBITDA including noncontrolling
interests(4) 562 488 1,050 486 90 576 (268) 1,358
Financing charges on sale of receivables
reclass 2 2 4 16 1 17 21
Segment change impact 7 54 (71) (10) (67) 75 (114) (106) 116
Total EBITDA including noncontrolling
interests after reclass and segment
change(4) 571 544 (71) 1,044 435 166 (114) 487 (152) 1,379
Adjustments:
Restructuring and related expenses 23 16 39 21 23 44 1 84
Cost reduction initiatives 4 4 3 12 15 3 22
Loss on debt modification 5 5
Pension charges /Stock vesting 13 13
Goodwill impairment charge 11 11 4 7 11 22
Antitrust settlement accrual 132 132
Warranty settlement 7 7 7
Gain on sale of unconsolidated JV (5) (5)
Gain from termination of customer
contract (6) (6) (6)
Warranty release (4) (4) (4)
Release of deferred purchase price
payment (3) (3) (3)
EBITDA contribution of pending asset
sales (2) (2) (2)
Transaction related costs 3 3 1 1 3 7
Gain (loss) on sale of business (3) (3) (3)
Gain (loss) on sale of nonconsolidated
affiliates 2 2 2
Gain (loss) on sale of assets (6) (6) (1) (1) (7)
Adjusted EBITDA(5) $598 $563 $(71) $1,090 $462 $205 $(114) $553
$ - $1,643
Adjusted EBITDA as a percent of value-add
revenue(6) 14.8% 12.3% 12.7% 12.6% 7.6% 8.7% 11.0%
(1) U.S. Generally Accepted
Accounting Principles.
(2) Tenneco presents pro forma
revenues and earnings measures to show
what the company's performance would
have been had Federal-Mogul been
consolidated with Tenneco for the
entirety of 2017 and 2018. We believe
this supplemental information is
useful to investors who are trying to
understand the results of the entire
enterprise, including Federal-Mogul.
The Motorparts segment reflects the
company's historical Aftermarket
segment plus the Motorparts
aftermarket business acquired in the
Federal-Mogul acquisition. The Ride
Performance segment reflects the
company's historical Ride Performance
segment plus the Motorparts OE
business acquired in the Federal-
Mogul acquisition.
(3) Tenneco presents the above
reconciliation of revenues in order to
reflect value-add revenues separately
from substrate sales. Substrate sales
include precious metals pricing, which
may be volatile. Substrate sales
occur when, at the direction of its OE
customers, Tenneco purchases catalytic
converters or components thereof from
suppliers, uses them in its
manufacturing processes and sells them
as part of the completed system. While
Tenneco original equipment customers
assume the risk of this volatility, it
impacts reported revenue. Excluding
substrate sales removes this impact.
Tenneco uses this information to
analyze the trend in revenues before
these factors. Tenneco believes
investors find this information useful
in understanding period to period
comparisons in the company's revenues.
(4) EBITDA including noncontrolling
interests represents income before
interest expense, income taxes,
noncontrolling interests and
depreciation and amortization. We
have also presented EBITDA including
noncontrolling interests to give
effect to the reclassification of
financing charges on sale of
receivables that took place in the
first quarter 2019 and to give
effective to the impact of the segment
changes that occurred in the first
quarter of 2019. EBITDA including
noncontrolling interests is not a
calculation based upon GAAP. The
amounts included in the EBITDA
including noncontrolling interests
calculation, however, are derived from
amounts included in the historical
statements of income data. In
addition, EBITDA including
noncontrolling interests should not be
considered as an alternative to net
income (loss) attributable to Tenneco
Inc. or operating income as an
indicator of the company's operating
performance, or as an alternative to
operating cash flows as a measure of
liquidity. Tenneco has presented
EBITDA including noncontrolling
interests because it regularly reviews
EBITDA including noncontrolling
interests as a measure of the
company's performance. In addition,
Tenneco believes its investors utilize
and analyze the company's EBITDA
including noncontrolling interests for
similar purposes. Tenneco also
believes EBITDA including
noncontrolling interests assists
investors in comparing a company's
performance on a consistent basis
without regard to depreciation and
amortization, which can vary
significantly depending upon many
factors. However, the EBITDA
including noncontrolling interests
measure presented may not always be
comparable to similarly titled
measures reported by other companies
due to differences in the components
of the calculation.
(5) "Adjusted EBITDA" is EBITDA
including noncontrolling interests
(after giving effect to the
reclassification and segment change
described above) and is presented in
order to reflect the results in a
manner that allows a better
understanding of operational
activities separate from the financial
impact of decisions made for the long
term benefit of the company and other
items impacting comparability between
the periods. Similar adjustments to
EBITDA including noncontrolling
interests have been recorded in
earlier periods, and similar types of
adjustments can reasonably be expected
to be recorded in future periods. The
company believes investors find the
non-GAAP information helpful in
understanding the ongoing performance
of operations separate from items that
may have a disproportionate positive
or negative impact on the company's
financial results in any particular
period.
(6) Tenneco presents the above
reconciliation in order to reflect
Adjusted EBITDA as a percent of both
value-add revenues. Presenting
Adjusted EBITDA as a percent of value-
add revenue assists investors in
evaluating the company's operational
performance without the impact of
substrate sales, which can be
volatile.
ATTACHMENT 2
TENNECO INC.
Division Level FY 2020 Outlook
Unaudited
---
New Tenneco 2020 Outlook
---
VA Revenue $8.05 billion to
$8.3 billion
Adjusted EBITDA between $850
million to $915 million
DRiV(TM) 2020 Outlook
---
Revenue $5.65 billion to $5.8
billion
Adjusted EBITDA between $450
million to $535 million
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SOURCE Tenneco Inc.
